**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      20-F**


**(Amendment
      No. 3)**


**(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
                1934For
                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
                __
            No
                X




Indicate
      by check mark whether the Registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the Registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.




Yes
                __
            No
                X




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 __










**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
            5Item
                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
            F-1Item
                18.
            Financial
                Statements
            56Item
                19
            Exhibits
            57









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 September 29, 2006, the exchange rate was approximately
      Cdn.$1.00 per US$ 0.8966. *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) (4)Linda
                Lemieux
            Director
                (1) (2)Kiyoshi
                Eguchi
            Director
                (1)Mark
                Billings
            Chief
                Financial Officer and Corporate Secretary (1) (5)Adriaan
                Brink
            President
                and Director of Mahjong Systems Ltd. (1)(3)




(1)
      The
      business address for our directors and senior management is 759 Square Victoria,
      Suite 300, Montréal, Québec, Canada H2Y 2J7.


(2)
      Since
      the date of filing of the Registration Statement, Amendment No.2 on Form 20-F
      with the SEC on September 20, 2006, Linda Lemieux resigned as President and
      Secretary of Mahjong Development Inc.


(3)
      Since
      the date of the filing of the Registration Statement on Form 20-F with the
      SEC
      on July 11, 2006, Ian Sherrington resigned as the President and Director of
      Mahjong Development Inc, and Tony Barbusci resigned as Vice President of Finance
      and Secretary of the Company.


(4)
      At
      the Company’s board of directors meeting on October 6, 2006, David Wolk was
      appointed as President and Secretary of Mahjong Development Inc.


(5)
      At
      the Company’s board of directors meeting on October 6, 2006, Mark Billings was
      appointed as Secretary of Dynasty Gaming 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 2PY
            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 17 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
                  
                  $
                  161,700
                  
                  $
                  26,053
                  
                  $
                  -
                  
                  $
                  2,610
                  
                  $
                  3,653(b)
                      Loss from continuing operations
                  
                  
                  ($1,378,923
                  )
                  
                  ($474,698
                  )
                  
                  ($382,071
                  )
                  $
                  (194,547
                  )
                  
                  ($67,495
                  )Total
                  
                  
                  ($1,371,174
                  )
                  
                  ($434,438
                  )
                  
                  ($340,8748
                  )
                  $
                  (194,547
                  )
                  
                  ($67,495
                  )Per
                      Share1
                  
                  
                  ($0.03
                  )
                  
                  ($0.01
                  )
                  
                  ($0.01
                  )
                  
                  ($0.01
                  )
                  
                  ($0.00
                  )(c)
                      Earnings (loss) from discontinued operations
                  
                  
                  186,615
                  
                  
                  ($2,874,136
                  )
                  
                  ($463,890
                  )
                  $
                  238,702
                  
                  
                  ($466,751
                  )Total
                  
                  
                  186,615
                  
                  
                  ($1,770,466
                  )
                  
                  ($362,594
                  )
                  $
                  362,598
                  
                  
                  ($344,223
                  )Per
                      Share1
                  
                  $
                  0.00
                  
                  
                  ($0.05
                  
                  
                  ($0.01
                  )
                  $
                  0.01
                  
                  
                  ($0.01
                  )(d)
                      Total assets
                  
                  $
                  11,286,534
                  
                  $
                  3,023,375
                  
                  $
                  9,535,808
                  
                  $
                  11,581,996
                  
                  $
                  6,787,146(e)
                      Total long-term debt
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -(f)
                      Capital stock
                  
                  $
                  12,405,434
                  
                  $
                  3,589,810
                  
                  $
                  3,831,116
                  
                  $
                  3,831,116
                  
                  $
                  2,336,590(g)
                      Total shareholders’ equity
                  
                  $
                  8,774,587
                  
                  $
                  721,987
                  
                  $
                  3,112,702
                  
                  $
                  3,887,565
                  
                  $
                  2,224,988(h)
                      Cash dividends declared per share
                  
                  
                  n/a
                  
                  
                  n/a
                  
                  
                  n/a
                  
                  
                  n/a
                  
                  
                  n/a(i)
                      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)
                      Earnings (loss) from discontinued 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
                  
                  
                  -
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -(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
                  )






***Exchange
      Rates***





The
      following table sets forth the high and low for each month during the
      previous six months, For purposes of this table, the rate of exchange means
      the noon buying rate in New York City for cable transfers in foreign currencies
      as certified for customs purposes by the Federal Reserve Bank of New York.
      The
      table sets forth the number of Canadian Dollars required under that formula
      to
      buy one U.S. Dollar.





**September**
              **2006**
            **August**
              **2006**
            **July**
              **2006**
            **June**
              **2006**
            **May**
              **2006**
            **April**
              **2006**High
            1.13
            1.13
            1.14
            1.12
            1.13
            1.18Low
            1.11
            1.11
            1.11
            1.10
            1.10
            1.12





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 and July 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.





**Capitalization
                and indebtedness****As
                At**
              **May
                31, 2006**
              **(Unaudited)**
              **(Cdn$)**
            
            **As
                At**
              **Jul
                31, 2006**
              **(Unaudited)**
              **(Cdn$)****Indebtedness**Guaranteed
            
            
            Nil
            
            
            NilUnguaranteed
            
            
            Nil
            
            
            NilSecured
            
            
            Nil
            
            
            NilUnsecured
            
            
            Nil
            
            
            Nil**Shareholders'
                Equity**Common
                Shares, issued and outstanding: May 31, 2006 - 77,321,559; July 31,
                2006 -
                77,464,226
            
            $
            12,534,559
            
            $
            12,594,628unlimited
                number of authorized common shares, with no par valueAccumulated
                deficit
            
            $
            (6,617,765
            )
            $
            (7,163,224
            )Subject
                to escrow agreement (1)
            
            
            14,881,112
            
            
            14,881,112Free
                trading common shares
            
            
            62,440,447
            
            
            62,583,114**Warrants
                (expiring 12/29/07)**
            
            
            7,500,000
            
            
            7,425,000**Brokers'
                options (expiring 12/29/07)**
            
            
            1,350,000
            
            
            1,350,000Options
                to acquire stock
            
            
            5,109,889
            
            
            5,242,222**Fully
                Diluted Shares**
            
            
            91,281,448
            
            
            91,481,448Net
                shareholders' equity
            
            $
            6,574,280
            
            $
            5,979,050Total
                capitalization
            
            $
            6,623,417
            
            $
            5,998,526





(1)
                In connection with the reverse take-over (“RTO”) effected by Events
                International Holding Corporation (the predecessor company to Dynasty
                Gaming Inc.) of Golden Gram Capital Inc., the common shares held
                by the
                directors and officers consequent to the RTO were held in escrow
                and
                released over a six-year period, in accordance with the rules and
                regulations of the TSX Venture Exchange. More specifically, common
                shares
                were to be released from escrow every six months after the listing
                of the
                Company on the TSX Venture Exchange, which was April 25, 2002. These
                escrowed shares include those of Albert Barbusci, President, CEO
                and
                Director of the Company, and Linda Lemieux, Director of the Company.
                An
                escrow agreement dated March 20, 2002 has been provided as an exhibit
                to
                this registration statement. As at July 31, 2006, there were still
                8,131,112 shares held in escrow under this arrangement. The next
                release
                date is October 25, 2006, at which time 2,032,778 common shares will
                be
                released from escrow and become freely tradable. A similar quantum
                of
                shares will be released from escrow every six months thereafter until
                April 25, 2008, the final release date. On September 21, 2005, Dynasty
                Gaming Inc. (Events International Holding Corporation, at the time),
                acquired the Mahjong Mania business from Ian Sherrington and Adriaan
                Brink
                through the issuance of 9,000,000 common shares of the Company at
                a price
                of $0.15 per share. In accordance with the rules of the TSX Venture
                Exchange for a transaction of this nature in which value was being
                given
                to such an acquisition without a demonstrable history of revenues
                or
                earnings, these shares were deemed to be “surplus shares” and are subject
                to a mandatory escrow period of three years. Of the 9,000,000 common
                shares originally issued, 10%, or 900,000 common shares, were freely
                tradable upon consummation of this acquisition on September 21, 2005,
                with
                the remaining 8,100,000 subject to escrow. A further 15% of the original
                total, or 1,350,000 common shares, are released and become freely
                tradable
                every six months until September 21, 2008. This escrow agreement
                was in
                the closing binder for the Company’s acquisition of Mahjong Systems
                Limited and Mahjong Development Inc., which has already been provided.
                As
                at July 31, 2006, there were 6,750,000 common shares still in escrow
                under
                this arrangement. Therefore, as at July 31, 2006, the total number
                of
                common shares held in escrow was
                14,881,112.




**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**





***We
      face risk in connection with our change of business focus, change in source
      of
      Revenue and the limited operating history of Mahjong
      Mania***





Prior
      to
      the acquisition of the Mahjong Mania companies, Dynasty Gaming Inc. previously
      known as Events International Holding Corporation (EIH) and its subsidiaries
      operated in international meeting / convention planning and organizing, which
      was its primary business from October 2001 to September 30, 2004. In August
      2004, the Board of Directors decided to sell Events International Meeting
      Planners Inc. (EIMP), the Company’s principal subsidiary. This decision followed
      management’s analysis and recommendation to redirect its focus from the meeting
      planning business to the potential of on-line businesses. During the first
      half
      of 2004, it became apparent that business relationships developed over the
      years
      with federations in the world of gynecology, urology and pediatrics were not
      producing the expected future revenue-generating contracts for the Company’s
      conference planning subsidiary. The continuing threat of terrorism and global
      health concerns had devastated EIMP's international medical and healthcare
      conference planning and management business. EIMP had no substantial contracts
      in its pipeline and because the lead times are very long in this sector, the
      prospect of any significant revenue in the near to medium term was unlikely.
      These considerations, together with EIMP's accumulated net loss and its high
      debt level, caused the directors to decide that the costs and risks involved
      in
      continuing with this activity were not in the best interests of the Company
      or
      its shareholders. Therefore on August 31, 2004, the Board approved the sale
      of
      EIMP, subject to regulatory and shareholder approval. These approvals were
      received in December 2004 and the sale was completed in January
      2005.





Following
      the sale of EIMP, EIH and its remaining subsidiaries, MedEvents Inc., CPC
      Econometrics, Inc. and Cadence Healthcare Communications Inc., continued to
      operate businesses involved in the marketing and administration of a specialized
      medical portal, e-commerce and management consulting, and an agency handling
      healthcare advertising and communications.





During
      the fiscal year ended December 31, 2005, 79% of DNY’s consolidated revenues were
      derived from its subsidiary, CPC Econometrics. Accordingly, the company’s
      business focus was in the area of women’s health and international convention
      organization, management consulting, e-commerce and advertising and
      communications. However, the Company’s primary focus was on developing its
      Internet portal. 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.





***In
      connection with our change in business focus, our management team has limited
      experience in the area of online gaming***




Our
      Company’s management team has limited experience in the area of online gaming,
      and therefore the likelihood of our success depends upon our management team’s
      ability to identify the online gaming market, understand industry matters,
      and
      fully implement our business plan successfully. With limited training or
      experience in these areas, our management may not
      be
      fully aware of the specific requirements related to working within this
      industry. Although Adriaan Brink, president of MSL, is a known and experienced
      executive in the industry and despite the fact that Mark Billings has obtained
      previous experience with Golden Palace group of companies, their decisions
      and
      choices may not take into account standard gaming market or managerial
      approaches commonly used in the industry. Consequently, our likelihood of
      success, earnings, and ultimate financial success could suffer irreparable
      harm
      due to management's limited experience in this industry.





***Our
      ability to sustain or increase revenues will depend upon establishing a 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.





***Our
      operations may face risks in connection with the joint venture we have
      undertaken with Ho Majiang***





Our
      Company has undertaken a joint venture, to be called Ho Majiang, between Dynasty
      Gaming and the Ho Group. There are risks inherent in this type of arrangement
      with the Ho Group. The success of this joint venture will depend in part on
      the
      financial condition of our co-venturer. Should Newco1, the company to be formed
      as a result of the joint venture, require capital beyond the initial amount,
      our
      Company may be affected by the Ho Group’s inability to provide its share of the
      capital. Additionally, in this arrangement, there is the possibility that the
      liabilities of the venture may exceed the percentage of our investment.
      Moreover, in the event our company does not have majority control of Newco1,
      our
      Company may be bound by the decisions of our co-venturer. We do not currently
      know the percentage ownership the Company will hold in the joint
      venture.





***Our
      operations may face risks if we are unable to enter into definite agreements
      with our co-venturers***





As
      of the
      date of the filing of this registration statement, we do not yet have agreements
      in place with our co-venturers, Newco1 or Newco2. If we are unable to enter
      into
      these two joint ventures with Ho Group, our operations may be impacted as
      follows. Without the participation of the Ho Group in Newco1, there is a risk
      of
      inadequate funding of our prepaid card venture in China, if alternative sources
      of financing cannot be obtained. Without sufficient capital to launch our
      venture in China, our operations in this market could be materially impacted.
      If
      we are unable to enter into a definitive agreement with the Ho Group for Newco2,
      this could materially impact our ability to host the World Cup of Mahjong in
      Macau, as planned. An important point of differentiation for us in the Chinese
      market is the linking of our prepaid card site in China with the World Cup
      of
      Mahjong. Players on our online site in China can only qualify for the World
      Cup
      of Mahjong by playing online. If we are unable to reach a definitive agreement
      with the Ho Group on the World Cup of Mahjong venture (i.e. Newco2), this could
      have a material impact on our operations in China.





***New
      or existing government regulations could prohibit Internet gambling, and
      therefore adversely affect our business***





The
      Company and our licensees are subject to applicable laws in the jurisdictions
      in
      which we operate. 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. Dynasty
      Gaming Inc. is licensed and regulated by the Kahnawake Gaming Commission of
      the
      Mohawk Territory of Kahnawake. Our current licensees are licensed and regulated
      by the Mohawk Territory of Kahnawake, Gibraltar and Malta.





***General
      risk factors regarding government regulation***





Dynasty
      Gaming and its licensees are subject to applicable laws in the jurisdictions
      in
      which they operate. The laws and regulations of these jurisdictions may change
      in the future, or new laws and regulations may be adopted, which could place
      restrictions on our abilities to operate from these jurisdictions or increase
      the costs of doing so.





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.





***Risks
      specific to the Mohawk Territory of Kahnawake***





The
      Mohawk Territory of Kahnawake is located south of the island of Montreal, in
      the
      province of Quebec, Canada. Although the Mohawks of Kahnawake claim that,
      through treaties with the British that have been incorporated into Canada’s
      legal framework, they are a sovereign nation and have the ability to license
      and
      regulate Internet gaming without further approval, such sovereignty is not
      officially recognized by Canada or other nations. It is the view of the
      government of Canada and several provinces in Canada that Internet gaming is
      illegal. If such illegality were deemed to apply to the Mohawk Territory of
      Kahnawake, this could have a material adverse effect on the Company and its
      licensees.





***Risks
      specific to Gibraltar***





Gibraltar
      is located at the southern tip of Spain, which has historically claimed
      Gibraltar as its own territory from the British. If tensions were to rise
      between Great Britain and Spain, it is possible that this could lead to
      interruptions in telecommunications or other services, which could have an
      adverse effect on the operations of our licensees. The Company is not aware
      of
      any specific law in Spain that addresses Internet gaming, although Spain is
      in
      the process of liberalizing its gaming laws. The Basque Country recently became
      the first Spanish region to reform its laws to allow sports betting from
      licensed betting shops.





***Risks
      specific to Malta***





While
      Malta and Gibraltar have adopted a regulated approach to online gaming, opposing
      views have developed within the European Union, of which Malta is a member.
      Some
      EU states, including Germany, Italy and the Netherlands where there are
      state-owned monopolies, are taking action aimed at banning foreign gaming
      operators. Such actions by these EU member states are in contrast with a
      favorably-viewed ruling from the European Court of Justice and have prompted
      the
      European Commission to look at creating new legislation that could harmonize
      online gaming within the EU, in line with the European Commission’s goal to
      encourage a free and open cross-border market.





To
      date,
      we have generated our initial revenues from the Mohawk Territory of Kahnawake
      and Gibraltar. These amounts, however, are not material.




8









***We
      face strong competition in the Internet gaming market
      sector***





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.





***Our
      operations are subject to our system infrastructure and Internet viability,
      which may be interrupted, therefore adversely affecting our
      business***





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






***If
      we consume cash more quickly than expected or are unable to raise additional
      capital, we may be forced to curtail operations***




*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.





***Failure
      to attract and retain key personnel could have a material adverse effect on
      our
      business***





The
      Company depends on a number of key management individuals, consisting of Albert
      Barbusci, Mark Billings, and Adriaan Brink, 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.





***Fluctuations
      in foreign currency exchange could have a negative effect on our reported
      earnings***





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.





***Foreign
      or domestic laws may not afford us sufficient protections of our 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. Currently,
      Mahjong Development Inc., a Canadian software development company which is
      the
      Company’s wholly owned subsidiary, is the owner of the trademark “Mahjong Mania
& Design” issued by the Canadian Intellectual Property Office. In addition,
      the intellectual property for *Mahjong
      Mania* is held
      by Mahjong Systems Ltd., a Turks and Caicos company, and Mahjong Development
      Inc. (formerly, 9143-3250 Quebec Inc.). Our ability to protect our proprietary
      information is crucial to our ability to compete and to the success of our
      business. Despite our efforts to protect our proprietary rights, unauthorized
      parties may attempt to infringe aspects of our products or services or to obtain
      and use information that we regard as proprietary. 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.





***Because
      our officers and directors, as well as most of our subsidiaries are located
      outside the United States, there is 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. 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**  **:**





***Because
      the price of our stock is volatile, you may not be able to resell your shares
      at
      or above your investment price***





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.***




***Though
      our common stock is currently not subject to Penny Stock rules, it may be
      subject to Penny Stock rules in the future, which may make it more difficult
      for
      the stock to trade on the open market***




*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.




Our
      common stock currently falls under exception (iii) (above) to the penny stock
      rules. However, in the event we no longer qualify under exception (iii) and
      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.





On
      September 29, 2006, DNY signed an agreement with CPC Canada Inc. in which the
      latter agreed to purchase CPC Econometrics, Inc., Cadence Healthcare
      Communications Inc. and MedEvents Inc. for $300,000 in cash. On October 6,
      2006,
      the Company received regulatory approval from the TSX Venture Exchange to
      finalize this divestiture. This is a non-arms length transaction, as these
      three
      subsidiaries were purchased by CPC Canada Inc., a company owned and controlled
      by Barry Sheehy, a former director of the Company and president of the CPC
      Econometrics subsidiary.





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




The
      Company and its subsidiaries are solidifying a dual-track 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. Track One, referred to as the Aggregate Strategy, targets
      the international gaming community worldwide, including the 34 million Chinese
      who live overseas. Track Two, referred to as the China Strategy, targets
      mainland China. Under *Track
      One, 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. *Mahjong
      Mania’s* sales
      and marketing strategy will be to pursue licensing contracts with leading
      software houses and online casinos. Under *Track
      Two,* our
      strategy in China is to follow 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
      with one or more prepaid card distributors in China 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.





Prior
      to
      the launch of our *Mahjong
      Mania* software, people could play Mahjong on the Internet, primarily in a solitaire
      version. Our software enables four people to sit at a virtual Mahjong table
      and
      play against one another for cash consideration in a wagering format; this
      is
      what we refer to as our “cash-wager version” of Mahjong. As an example, at a $3
      table, four players would play a hand of Mahjong. The person with the winning
      hand would get $3, or $1 from each of the three losers. We also call this an
      “aggregate player” model because clients of our licensees are aggregated at
      common Mahjong tables on a single gaming server. As an example, at a virtual
      Mahjong table, players from Ladbrokes, Golden Palace, Betex and Microgaming
      -
      four of our licensees - could be competing against one another.





This
      model is significant to our business because, based on our research, we are
      the
      first company to offer such a game in which players wager on Mahjong over the
      Internet. Our revenue model is as follows. As per the $3 example above, Dynasty
      Gaming, the software licensor, collects a rake, or commission, on the winning
      hand; this is equal to 10% of the amount won. In this example, the rake is
      equal
      to $0.30. This rake is then shared between Dynasty Gaming and our licensee,
      from
      where the winning hand came. Our rake share ranges between 12.5% and 50% (with
      an average of 20%), with the remaining 50% to 87.5% going to the licensee.
      In
      this example, and assuming a 20% rake share for Dynasty Gaming, we would receive
      $0.06, and our licensee would receive $0.24. We would recognize the $0.06 as
      revenue.





Our
      revenue model is then based on signing up new licensees, who would in turn
      bring
      more players to the aggregated Mahjong tables. Dynasty Gaming would receive
      approximately 2% of the winnings on every hand of Mahjong played.





In
      connection with our two-phased strategy, 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, 13 licensing agreements have been signed and management of MSL believes
      that a number of additional licensing agreements will be signed this
      year.





The
      13
      licensing agreements, together with the signature dates and initial terms of
      these contracts, are indicated below:





**Licensee**
            **Signature
                Date**
            **Initial
                Term**International
                Gaming and Entertainment Limited
            May
                19, 2004
            10
                yearsApex
                Holdings
            March
                27, 2005
            3
                yearsBetex
                (Group) PLC
            August
                3, 2005
            3
                yearsAction
                Poker Gaming Inc.
            August
                3, 2005
            2
                yearsDr.
                Ho Gambling.com
            October
                11, 2005
            2
                yearsHo
                Casinos.com
            October
                20, 2005
            2
                yearsOrbis
                Technology Inc.
            October
                24, 2005
            2
                yearsAbsolute
                Entertainment SA
            October
                28, 2005
            3
                yearsLadbrokes
                International Limited
            January
                25, 2006
            3
                yearsGolden
                Palace Limited
            March
                8, 2006
            3
                yearsInteractive
                Gaming Holdings PLC
            March
                28, 2006
            3
                yearsFinsoft
                Limited
            April
                24, 2006
            1
                yearMicrogaming
                Software Systems Limited
            August
                24, 2006
            N/A





As
      indicated above, Dynasty Gaming Inc. has signed 13 licensing agreements with
      the
      above parties. It should be noted that the contracts with Orbis Technology
      Inc.,
      Finsoft Limited and Microgaming Software Systems Limited are reseller contracts,
      i.e. they will license this technology to their clients but will not operate
      the
      Mahjong Mania software themselves. As per the contracts above, the rake share
      that will be generated by the Company ranges from 12.5% to 50%.




The
      Company is committed to devoting its management and financial resources to
      the *Mahjong
      Mania* business, following the divestiture of CPC Econometrics, Inc., Cadence
      Healthcare Communications Inc. and MedEvents Inc.





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.





With
      nearly a decade of experience in Internet gaming, MSL’s principals, specifically
      Adriaan Brink, president of MSL who is a known and experienced executive in
      the
      industry, are well positioned to establish partnerships with top level Internet
      gaming operators and leverage existing player bases through its aggregate model.
      Prior to joining MSL, Adriaan Brink served as Chief Executive Officer of Zabadoo
      AG, a company that produced Lottery Software. 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 relationships, primarily via licensing agreements, 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 on
                www.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**
            On
                August 24, 2006, Dynasty Gaming Inc., through its wholly owned subsidiary
                Mahjong Systems (Cyprus) Limited, signed licensing agreements with
                Microgaming Software Systems Limited. Copies of these agreements
                are
                attached separately.


*
      For
      further detail regarding these licensing agreements, please see Item 10.C.
      Material Contracts.





*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 and MDI are wholly owned subsidiaries of the 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





During
      the early development stages of the Mahjong Mania software, MDI’s management, in
      anticipation of commercializing their product, reserved the above-mentioned
      internet domain names. These domains are either specific to our business, such
      as mahjongmania.com and mahjong-systems.com or may form part of licensing
      agreements with future clients.





DNY
      is
      not dependent upon patents or licenses. However, the company maintains
      proprietary software, for use under license by online gaming and sports book
      operators, and generates revenue by developing, marketing, and licensing its
      online software under the trade name of “ *Mahjong
      Mania* .”
The
      Company also maintains an Internet gaming license from the Mohawk Territory
      of
      Kahnawake. As indicated previously, Dynasty Gaming Inc., through its wholly
      owned subsidiary Mahjong Systems Limited, is licensed and regulated by the
      Mohawk Territory of Kahnawake. Our servers, which reside at Kahnawake, host
      the
      games for our aggregate model. Players from our licensees will play hands of
      Mahjong on the Company’s servers located at Kahnawake. For this reason, our
      license from the Kahnawake Gaming Commission (“Gaming Commission”) to host the
      aggregate model is an important element of our business model.





As
      indicated by the Gaming Commission, in order to maintain our license, we have
      to
      abide by three basic principles established by the Gaming
      Commission:





1.
            That
                only suitable persons and entities are permitted to operate within
                Kahnawake;2.
            That
                the games offered are fair to the player; and3.
            That
                winners are paid.





Further
      information on the initial and ongoing licensing requirements can be found
      on
      the Gaming Commission’s web site: http://www.kahnawake.com/gamingcommission/ .





As
      per
      principle (1) above, we have had to provide extensive information on the
      Company, its officers and directors and other people involved in our gaming
      operations. All of this is subject to the Gaming Commission’s due diligence and
      is independently verified. As per principle (2), we have to abide by the
      technical standards of the Gaming Commission and to subject ourselves to
      independent technical audits carried out by qualified firms engaged by the
      Gaming Commission. As per principle (3) above, winners have the right to submit
      complaints to the Gaming Commission about entities licensed by the Gaming
      Commission; all such complaints will be investigated by the Gaming
      Commission.





In
      addition, as part of the ongoing requirements to maintain our license, we are
      subject to operational monitoring and audits on a monthly basis in order to
      ensure that we comply with the Gaming Commission’s rules and
      regulations.





To
      date,
      Dynasty Gaming Inc., through its wholly owned subsidiary, Mahjong Systems
      Limited, has been in full compliance with all rules and regulations of the
      Gaming Commission.





*Ho
      Majiang*





Additionally,
      the Company has undertaken a joint venture, to be called Ho Majiang, between
      Dynasty Gaming and the Ho Group. 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. It is the
      intention of Dynasty Gaming Inc. and the Ho Group to form a new company
      (“Newco1”) that will be the investment vehicle for our play-for-points, prepaid
      card strategy in China, which has been labeled Ho Majiang. Under this model,
      Newco1 will generate revenues through the sale pf prepaid cards in China. The
      prepaid cards will enable individuals to play a certain number of Mahjong games
      online. Players’ accounts can be replenished through online banking or the
      purchase of another card.





At
      the
      time of writing (October 27, 2006), the percentage split between Dynasty Gaming
      Inc. and the Ho Group has not been finalized. As per recent negotiations, it
      is
      our view that we will have a majority share of this venture, with the Ho Group
      having a minority interest.





Both
      Dynasty Gaming Inc. and the Ho Group will provide initial capital to Newco1
      (exact amounts to be determined), which will enable it to launch the prepaid
      card model in China. 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.





Dynasty
      Gaming Inc. will form a separate company in which it and the Ho Group will
      each
      own 50% of the common equity. This company (“Newco2”) will own the rights to the
      World Cup of Mahjong and any other similar events that may take place around
      the
      world. The objective of Newco2 will be to organize, host and promote the World
      Cup of Mahjong. This structure is presently being put together, but should
      be
      finalized sometime in the fourth quarter of 2006.





Newco2
      will derive revenues from the World Cup by enlisting sponsors who will pay
      to
      promote their goods and services. A key element of this strategy is to secure
      television distribution of the World Cup to an audience in Asia (including
      China
      more specifically). Initial discussions have taken place with television, cable
      and satellite operators in Asia to broadcast the World Cup.





From
      the
      sponsorship fees, which will be the primary source of revenues of Newco2,
      expenses to be paid include the cost of television production, costs associated
      with managing the event and prizes to winners of the World Cup of Mahjong.
      Dynasty Gaming Inc. will have a claim to 50% of the net profits derived from
      each event. Once the structure indicated above has been finalized, Dynasty
      Gaming Inc. and the Ho Group will enter into other agreements, including
      shareholders’ agreements, which will address inter alia the distribution of
      dividends to each party. At the time of writing (October 27, 2006), these items
      have yet to be concluded.




The
      Company and Ho Group will contract with an outside party to manage all aspects
      of the project from event production and promotion activities to television
      production and distribution.





From
      an
      accounting perspective, although Dynasty Gaming Inc. will own 50%, the Company
      will have effective control of Newco2, and all of Newco2’s revenues and expenses
      will be consolidated into our consolidated income statement, with the Ho Group’s
      50% claim to the net income recognized as a minority interest on the financial
      statements. 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. 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.
      The Mahjong game consists of a Lobby and many Game Rooms, each game room
      containing a number of tables. At each table there must be 4 players for the
      game to commence. The total winnings from every game are shared with the website
      partners pro-rata.   The winnings are divided by 4 (one portion per
      player) and the website operator is credited a share according to the number
      of
      players it contributed to the game and the agreed percentage.   If
      four different website partners contributed to the game then each will get
      a
      share equal to 1⁄4 of the winnings; if all 4 players came from a single
      partner then that partner will receive 100%.  Our Company retains the
      agreed percentage of each partners’ pro-rata share. 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. Adriaan Brink, through his personal operating company
      Genesis Consulting Anstalt (“Genesis”), who is president of MSL, will play a
      substantial role in marketing and licensing our *Mahjong
      Mania* software. The Company has entered into a management agreement with Genesis
      and
      Adriaan Brink, effective June 10, 2005 effective for a period of five years.
      Per
      the terms of the management agreement, the Company will pay Genesis an annual
      fee of CDN$120,000. In addition, Genesis is entitled to a performance fee equal
      to 20% of the first year license fees payable to the Company under those license
      agreements initiated and closed by Mr. Brink. Genesis is also entitled to a
      further fee of 10% of the first year license fees payable to the Company under
      those license agreements executed by the Company and third parties in the year,
      other than those initiated and closed by Mr. Brink. Genesis further received
      1,000,000 stock options of Events International Holding Corporation, the
      Company’s predecessor name. One-third of the stock options are to be granted on
      the effective date of the agreement, one-third are to be granted on the one
      year
      anniversary date of the agreement, and one-third are to be granted on the second
      anniversary date of the agreement. All of the options are subject to the terms
      and conditions of the Company’s stock option plan. The exercise price under the
      options are to be equal to the trading price of the Company’s shares at the
      close of business on the day immediately preceding the grant of the options
      in
      each of the three years.





License
      fees range from $25,000 to $75,000; below is a table summarizing the range
      of
      durations for our license agreements, as well as whether the license fees are
      paid only once or periodically:




**Contract**
            **License Fee**
            **Contract
                Signed**
            **Termination
                Date**Absolute
                Entertainment SA
            No
                fee
            October 29, 2005
            October
                28, 2008Action
                Poker Gaming Inc.
              (Las
                Vegas from Home)
            One
                time fee
            August
                3, 2005
            August
                2, 2007Betex
            Annual
                fee
            August
                3, 2005
            August
                2, 2008Dr.
                Ho
            No
                fee
            October
                2005
            October
                2007Finsoft
            No
                Fee
            April
                24, 2006
            April
                23, 2007Gambling
                Federation
            One
                time fee
            May
                27, 2005
            May
                26, 2008Golden
                Palace
            One
                time fee
            March
                15, 2006
            March
                14, 2009
              *Subject
                to right of termination - Schedule 2*Ho
                Casinos.com
              Homahjong
            No
                fee
            October
                20, 2005
            October
                19, 2007Interactive
                Gaming Holdings PLC
              (Premier
                Bet)
            Annual
                fee
            March
                28, 2006
            March
                27, 2009Intertops
              Int’l
                Gaming & Entertainment
            One
                time fee
            May
                19, 2004
            May
                18, 2014Ladbrokes
            One
                time fee
            May
                24, 2006
            May
                23, 2009Microgaming
            No
                fee
            August
                24, 2006
            N/AOrbis
            No
                fee
            October
                5, 2005
            October
                4, 2007







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 with one or more prepaid card distributors in China
      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. As mentioned
      above, it is the intention of Dynasty Gaming Inc. and the Ho Group to form
      a new
      company (“Newco1”) that will be the investment vehicle for our play-for-points,
      prepaid card strategy in China, which has been labeled Ho Majiang. Under this
      model, Newco1 will generate revenues through the sale of prepaid cards in China.
      The prepaid cards will enable individuals to play a certain number of Mahjong
      games online. Players’ accounts can be replenished through online banking or the
      purchase of another card. At the time of writing (October 27, 2006), the
      percentage split between Dynasty Gaming Inc. and the Ho Group has not been
      finalized. The Company will not recognize any rake in connection with online
      Mahjong games in China; rather, the Company will generate revenue through the
      sale of prepaid cards in a non-wagering format. As per recent negotiations,
      it
      is our view that we will have a majority share of this venture, with the Ho
      Group having a minority interest. Both Dynasty Gaming Inc. and the Ho Group
      will
      provide initial capital to Newco1 (exact amounts to be determined), which will
      enable it to launch the prepaid card model in China.




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 are presently in negotiations with Junnet
      regarding a definitive or binding agreement and expect to have this finalized,
      signed and announced in the near future. The agreement will be between our
      local
      Chinese operating entity - 95Joy - and Junnet.





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.





The
      United States, until recently the largest Internet gaming market in the world,
      has passed legislation to ban certain aspects of Internet gaming. On September
      30, 2006, the United States Congress passed the Safe Port Act, which was
      subsequently signed into law by President Bush on October 13, 2006. This Act
      includes certain provisions known as the Unlawful Internet Gambling Enforcement
      Act of 2006. More specifically, this law makes unlawful the receipt by a
      gambling business of proceeds or monies in connection with unlawful Internet
      gambling. Although the Act does not clarify the definition of unlawful gambling,
      it does make clear that the United States government intends to stop the flow
      of
      funds from Americans to online gaming operators through criminal sanction.
      Furthermore, the Act asserts that, under US law, a wager must be permitted
      under
      the laws of both the customer’s place of residence and that of the Internet
      gaming operator. Despite the ambiguity contained in the Act, the board of
      directors of Dynasty Gaming Inc. has decided not to accept any real money gaming
      business from United States residents coming through our licensees. Our
      licensees will only be able to allow their non-American residents to play for
      real consideration on our gaming servers. American residents can, however,
      play
      for free. Given that the Company’s primary marketing focus is Asia and Asians
      living outside of Asia, we do not consider that the loss of a real-money
      American player base will have a material impact on our revenues, earnings
      and
      operational results going forward.







17




Most
      countries and jurisdictions within countries have laws or regulations
      restricting gaming activities. 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. With
      this in mind, the Company no longer allows US residents to play for real money
      on its servers.





In
      management’s opinion, if current laws or any future laws in jurisdictions
      outside the United States 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. 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









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**





Following
      the divestiture of the three non-Mahjong subsidiaries on September 29, 2006,
      the
      Company has the following three subsidiaries:





**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.
      Mahjong Systems (Cyprus) Limited:** This
      company was incorporated in June 2006. The licensing activity undertaken by
      this
      subsidiary will be the foundation of the Company’s future revenue. This entity
      will effectively replace MSL as a more effective tax structure for Dynasty
      Gaming.



















20





**D.**  **Property,
      plant 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.


*
            On
                September 29, 2006, the Company divested itself of its MedEvents,
                Cadence
                Healthcare, and CPC Econometrics subsidiaries, as well as all of
                these
                subsidiaries’ 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**





On
      June
      20, 2006, the Board of Directors authorized the Company’s management to proceed
      with the sale of DNY’s three non-Mahjong subsidiaries: CPC Econometrics, Inc.
      (“CPC”); Cadence Healthcare Communications Inc. (“CHCI”) and MedEvents Inc.
      (“MedEvents”). On September 29, 2006, the Company signed an agreement with CPC
      Canada Inc. in which the latter agreed to purchase CPC, CHCI and MedEvents
      Inc.
      for $300,000 in cash. On October 6, 2006, the Company received regulatory
      approval from the TSX Venture Exchange to finalize this divestiture. This
      constitutes a non-arms length transaction, as these three subsidiaries are
      to be  purchased by CPC Canada Inc., a company owned and controlled by
      Barry Sheehy, a former director of the Company and president of the CPC
      subsidiary.  The
      closing of the transaction is scheduled to occur on October 31, 2006. It is
      management's position that since the closing conditions, as outlined in the
      purchase agreement,have
      been
      substantially completed, the Company has essentially divested itself of
      thesesubsidiaries.





The
      financial statements have been prepared by taking into consideration the effect
      of a proposed sale of CPC, CHCI and MedEvents. Accordingly, the results of
      operations, cash flows and financial position of these the non-Mahjong
      subsidiaries are reported as assets held for sale and as discontinued operations
      and are presented for all periods as a single line item on the Company’s
      consolidated financial statements.





**Selected
      Annual Information**





**For
      the three and six months ending June 30, 2006**





Revenue:





In
      the
      second quarter of 2006, the Company’s consolidated revenue declined by 81.0% to
      $30,759, compared to revenue of $161,700 for the second quarter of 2005. Revenue
      generated by Dynasty Gaming in the second quarter of 2006 was comprised of
      rake
      share from its *Mahjong
      Mania* software, which was still in test mode and not in full commercial launch with
      our licensees. We expect our initial licensees to begin commercial operations
      of
      our Mahjong software in the fourth quarter of 2006 or the first quarter of
      2007.
      There were no revenues generated by our play-for-points model in China or from
      our World Cup of Mahjong. We are presently in the process of launching our
      China
      model in the fourth quarter of 2006. In the second quarter of 2005, revenue
      generated by the Company was comprised of management services, and not from
      Mahjong or related technologies, as the acquisition of Mahjong Systems Limited
      (MSL) and Mahjong Development Inc. (MDI) was only effected in September 2005.
      For the six-month period ending June 30, 2006, revenue generated by the Company
      decreased by 71.4% to $46,298, compared to revenue of $161,700 for the six-month
      period ending June 30, 2005.





Operating
      Expenses:





Operating
      expenses include direct costs associated with software development and support,
      marketing and promotional expenses, administrative expenses, amortization and
      other expenses (income). In the second quarter of 2006, operating expenses
      increased significantly by 565.2% to $1,300,135, compared to operating expenses
      of $195,436 in the second quarter of 2005. With the acquisition of MSL and
      MDI
      in September 2005, the focus of the Company shifted towards the development
      and
      commercialization of its Mahjong software in mainland China and in the rest
      of
      the world. Consequently, these expenses increased significantly prior to the
      commercial launch of Dynasty Gaming’s Mahjong products.





For
      the
      three-month period ending June 30, 2006, direct costs were $302,999 and
      marketing and promotion expenses were $281,410; no such expenses were incurred
      in the three-month period ending June 30, 2005. These expenses were incurred
      in
      the development of the Company’s Mahjong software and in the marketing of it to
      potential licensees and clients. In the second quarter of 2006, administrative
      expenses increased by 184.1% to $542,060, compared to $190,827 in the second
      quarter of 2005. This was due to the increased management and related expenses
      resulting from the acquisition of MSL and MDI. Amortization on property and
      equipment and assets under capital leases increased by 367.0% to $11,012 in
      the
      second quarter of 2006, compared to $2,358 in the second quarter of 2005. This
      reflects the increased investment in capital assets associated with the
      development of our Mahjong technology. In the second quarter of 2006,
      amortization of deferred development expenses was $206,805; no such expense
      was
      incurred in the second quarter of 2005. As a result of the acquisition of MDI
      in
      September 2005, the Company is amortizing costs associated with the development
      of its Mahjong software over a three-year period. Dynasty Gaming generated
      other
      income of $44,151 in the second quarter of 2006, compared to other expenses
      of
      $2,251 in the second quarter of 2005. This relates primarily to interest income
      and to foreign currency translation gains.





For
      the
      six-month period ending June 30, 2006, operating expenses significantly
      increased by 760.8% to $2,584,628, compared to $300,257 in the six-month period
      ending June 30, 2005. Direct costs were $681,312 and marketing and promotion
      expenses were $506,762 in the first half of 2006; no such expenses were incurred
      in the first half of 2005. For the first half of 2006, administrative expenses
      increased by 255.7% to $1,044,469, compared to administrative expenses of
      $293,623 in the first half of 2005. For the six-month period ending June 30,
      2006, amortization on property and equipment and assets under capital leases
      increased by 340.5% to $20,769, compared to $4,715 for the six-month period
      ending June 30, 2005. Amortization of deferred development costs was $409,896
      in
      the first half of 2006; no such expense was incurred in the first half of 2005.
      In the first half of 2006, the Company generated other income of $78,580,
      compared to other expenses of $1,919 in the first half of 2005.





Net
      Loss
      from Continuing Operations:





In
      the
      second quarter of 2006, the Company’s net loss from continuing operations
      increased significantly to $1,269,376, compared to a net loss from continuing
      operations of $33,736 in Q2 2005. In the first half of 2006, Dynasty Gaming’s
      net loss from continuing operations increased significantly to $2,538,330,
      compared to a net loss from continuing operations of $138,557 in the first
      half
      of 2005. This is due to the significant increase in operating expenses
      associated with MSL and MDI.





Net
      Earnings (Loss) from Discontinued Operations:





Income
      (loss) from discontinued operations includes the net after-tax earnings of
      CPC,
      CHCI and MedEvents, which are assets held for sale and discontinued operations.
      In accordance with generally accepted accounting principles, the net earnings
      for these non-Mahjong subsidiaries are presented as this line item on the income
      statement, rather than being consolidated with the Company’s operating
      results.





In
      the
      second quarter of 2006, the Company had income of $63,660 from discontinued
      operations, compared to a loss of $68,893 from discontinued operations in the
      second quarter of 2005. For the first half of 2006, Dynasty Gaming generated
      a
      loss of $42,247 from discontinued operations, compared to a loss from
      discontinued operations of $30,042 for the first half of 2005.





Net
      Loss:





In
      the
      second quarter of 2006, Dynasty Gaming’s net loss increased significantly to
      $1,205,716, compared to a net loss of $102,629 in the second quarter of 2005.
      For the first half of 2006, the Company’s net loss increased significantly to
      $2,580,577, compared to a net loss of $168,599 for the first half of
      2005.





**For
      the year ending December 31, 2005**





Revenue:





For
      the
      year ending December 31, 2005, the Company’s consolidated revenue increased by
      520.7% to $161,700, compared to revenue of $26,053 for the year ending December
      31, 2004. Revenue generated by the Company in both 2005 and 2004 was comprised
      of management services, and not from Mahjong or related
      technologies.





Operating
      Expenses:





For
      the
      year ending December 31, 2005, operating expenses increased by 207.7% to
      $1,540,623, compared to operating expenses of $500,751 for the year ending
      December 31, 2004. The increase in operating expenses in 2005 was as a result
      of
      the acquisition of MSL and MDI in September 2005 and impairment in goodwill.
      In
      2005, direct costs were $53,593; there were no direct costs in 2004. For the
      year ending December 31, 2005, marketing and promotional expenses increased
      significantly to $231,567, compared to marketing and promotional expenses of
      $16,988 for the year ending December 31, 2004. In 2005, administrative expenses
      increased by 119.1% to $911,006, compared to administrative expenses of $415,805
      in 2004. For the year ending December 31, 2005, amortization on property and
      equipment and assets under capital leases was $16,109; no amortization expenses
      were recognized for the year ending December 31, 2004. During the third quarter
      of 2005, the Company performed the goodwill impairment test and determined
      an
      impairment of the goodwill associated with the self-sustaining foreign
      subsidiary CPC Econometrics, Inc., which was subsequently sold by the Company
      on
      September 29, 2006. CPC had not signed any new contracts and consequently the
      revenue stream was substantially reduced, whereupon an impairment loss of
      $328,348 was recorded. There was no such impairment of goodwill recorded in
      2004. The Company’s loss from operations increased by 190.5% to $1,378,923 for
      the year ending December 31, 2005, compared to a loss from operations of
      $474,698 for the year ending December 31, 2004.





Net
      Loss
      from Continued Operations:





For
      the
      year ending December 31, 2005, the net loss from continued operations increased
      by 215.6% to $1,371,174, compared to a net loss from continued operations of
      $434,438 for the year ending December 31, 2004. In 2005, the Company generated
      other income of $7,749, which includes interest income and foreign exchange
      gains. In 2004, the Company generated other income of $40,260.





Income
      (Loss) from Discontinued Operations:





In
      2005,
      the Company had net income of $186,615 from discontinued operations, compared
      to
      a net loss of $1,770,466 from discontinued operations in 2004. In 2004, the
      Company had a loss from discontinued operations of $2,784,136, which was
      partially offset by a gain on the sale of discontinued operations of $1,013,670.
      On 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 of which was ratified on
      December 22, 2004 at the annual shareholders’ meeting.





Net
      Loss:





For
      the
      year ending December 31, 2005, Dynasty Gaming’s net loss decreased by 46.3% to
      $1,184,559, compared to a net loss of $2,204,904 for the year ending December
      31, 2004.





**For
      the year ending December 31, 2004**





Revenue:





For
      the
      year ending December 31, 2004, the Company’s consolidated revenue was $26,053;
      the Company generated no revenue for the year ending December 31, 2003. Revenue
      generated by the Company in 2004 was comprised of management services, and
      not
      from Mahjong or related technologies.





Operating
      Expenses:





For
      the
      year ending December 31, 2004, operating expenses increased by 29.4% to
      $500,751, compared to operating expenses of $387,072 for the year ending
      December 31, 2003. The increase in operating expenses in 2004 was as a result
      of
      an increase in administrative expenses. In 2004, marketing and promotional
      expenses decreased by 24.4% to $16,988, compared to marketing and promotional
      expenses of $22,482 in 2003. For the year ending December 31, 2004,
      administrative expenses increased by 425.4% to $415,805, compared to
      administrative expenses of $79,136 for the year ending December 31, 2003. In
      2004, the Company recorded an impairment charge of $67,958; in 2003, the Company
      recorded an impairment charge of $285,454. These impairment charges relate
      to a
      loan to a shareholder, which was secured by 2,072,727 shares of the Company,
      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 of $285,454, 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. The
      Company’s loss from operations increased by 22.6% to $474,698 for the year
      ending December 31, 2004, compared to a loss from operations of $387,072 for
      the
      year ending December 31, 2003.





Net
      Loss
      from Continued Operations:





For
      the
      year ending December 31, 2004, the net loss from continued operations increased
      by 27.4% to $434,438, compared to a net loss from continued operations of
      $340,874 for the year ending December 31, 2003. In 2004, the Company generated
      other income of $40,260, which includes interest income and foreign exchange
      gains. In 2003, the Company generated other income of $46,198.





Income
      (Loss) from Discontinued Operations:





In
      2004,
      the Company had a net loss of $1,770,466 from discontinued operations, compared
      to a net loss of $362,594 from discontinued operations in 2003. In 2004, the
      Company had a loss from discontinued operations of $2,784,136, which was
      partially offset by a gain on the sale of discontinued operations of $1,013,670.
      In 2003, the Company had a loss from discontinued operations of $463,890, which
      was partially offset by a gain on the sale of discontinued operations of
      $101,296. On 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 of which was ratified
      on
      December 22, 2004 at the annual shareholders’ meeting. Effective December 31,
      2003, the Company discontinued its travel agency operations under Voyages
      Caleche Inc. (Caleche) and sold 100% of the issued and outstanding shares of
      Caleche.





Net
      Loss:





For
      the
      year ending December 31, 2004, Dynasty Gaming’s net loss increased by 213.4% to
      $2,204,904, compared to a net loss of $703,468 for the year ending December
      31,
      2003.




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. For the six months ending June 30,
      2006, the Company recorded amortization of deferred development costs of
      $409,896.





Development
      costs of the Internet-based gaming software Mahjong Mania are recorded at cost
      and amortized on a straight-line basis over the three years estimated useful
      life. The Company has performed an impairment review to ensure that unamortized
      deferred development costs remain recoverable from the projected future net
      cash
      flows that they are expected to generate.






Accumulated
            
            June 30, 2006
            
            December 31, 2005Cost
            
            Amortization
            
            Net Book Value
            
            Net Book Value$
            
            $
            
            $
            
            $Deferred Development Costs
            
            
            2,459,363
            
            
            409,896
            
            
            2,049,467
            
            
            2,736,451







In
      March
      2006, research and development tax credits in the amount of $299,348 were
      included as a reduction to the deferred development costs; the amount was based
      on the claims submitted. The actual tax credits received were $277,088;
      therefore, $22,260 has been included as an increase to the deferred development
      costs in this quarter.





**Stock
      Options Expensing**





The
      fair
      value compensation expense recorded for the six months ended June 30, 2006
      in
      respect to the Company’s Stock Option Plan was $214,586, as compared to nil on
      June 30, 2005. The weighted average fair value of options granted during 2006
      was estimated at $0.33 per share option using the Black-Scholes model on the
      date of the grant. The fair value compensation expense recorded for the year
      ending December 31, 2005, in respect of this plan, was $30,257; no options
      were
      granted in the year ending December 31, 2004. The weighted average fair value
      of
      options granted in 2005 was estimated at $0.11 using the Black-Scholes model
      on
      the date of the grant.





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.





**Foreign
      Currency Transactions**





The
      Company generated other income of $44,151 in the second quarter of 2006,
      relating primarily to interest income and to foreign currency translation gains.
      Specifically, the Company incurred foreign exchange gain of $6,168 for the
      three
      months ended June 30, 2006, and other interest income of $38,076 during the
      same
      period. For the six months ending June 30, 2006, the Company incurred foreign
      exchange gain of $436 and other interest income of $78,369 during the same
      period. In 2005, the Company generated other income of $7,749. This included
      $9,267 in foreign exchange gain and $831 in other interest income, which was
      offset by $2,349 paid in interest on liens. In 1004, the Company generated
      other
      income of $40,260. This included $24,979 in foreign exchange gain and $15,281
      in
      other interest income. In 2004, the Company generated other income of $46,198,
      all of which was from other interest income. The decreased foreign currency
      gains experienced in 2005 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.










23











**Summary
      of Quarterly Results**





On
      September 29, 2006, the Company signed an agreement with CPC Canada Inc. in
      which the latter agreed to purchase CPC, CHCI and MedEvents Inc. for $300,000
      in
      cash. On October 6, 2006, the Company received regulatory approval from the
      TSX
      Venture Exchange to finalize this divestiture. This constitutes a non-arms
      length transaction, as these three subsidiaries were purchased by CPC Canada
      Inc., a company owned and controlled by Barry Sheehy, a former director of
      the
      Company and president of the CPC subsidiary.





The
      financial statements have been prepared by taking into consideration the effect
      of a proposed sale of CPC, CHCI and MedEvents. Accordingly, the results of
      operations, cash flows and financial position of these the non-Mahjong
      subsidiaries are reported as assets held for sale and as discontinued operations
      and are presented for all periods as a single line item on the Company’s
      consolidated financial statements.





In
      accordance with the CICA Handbook Section 3475, Disposal of long-lived assets
      and discontinued operations, the assets and liabilities as well as the
      operations and cash flows of the discontinued operations (MED, CHCI and CPC)
      were segregated in the June 30, 2006 unaudited interim consolidated financial
      statements and were reported as distinct items. Correspondingly, comparative
      figures for the prior quarters have been reclassified to conform to this
      presentation.


Consolidated
      results


By
      quarters


**2004**
            
            **2005**
            
            **2006**Q1
            
            
            Q2
            
            
            Q3
            
            
            Q4
            
            
            Q1
            
            
            Q2
            
            
            Q3
            
            
            Q4
            
            
            Q1
            
            
            Q2$
            
            
            $
            
            
            $
            
            
            $
            
            
            $
            
            
            $
            
            
            $
            
            
            $
            
            
            $
            
            
            $Revenues
            
            
            -
            
            
            338
            
            
            -
            
            
            25,715
            
            
            -
            
            
            161,700
            
            
            -
            
            
            -
            
            
            15,539
            
            
            30,759Net
                (loss) earnings from continuing operations
            
            
            (86,356
            )
            
            (11,305
            )
            
            (396,399
            )
            
            59,622
            
            
            (104,821
            )
            
            (33,736
            )
            
            (820,867
            )
            
            (411,750
            )
            
            (1,268,954
            )
            
            (1,269,376
            )Discontinued
                operations
            
            
            (378,987
            )
            
            (473,661
            )
            
            (2,029,926
            )
            
            98,438
            
            
            38,851
            
            
            (68,893
            )
            
            266,570
            
            
            (49,913
            )
            
            (105,907
            )
            
            63,660Gain
                on sale of discontinued operations
            
            
            -
            
            
            -
            
            
            -
            
            
            1,013,670
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -**Net (loss)
                earnings**
            
            
            **(465,343**
            **)**
            
            (484,966
            )
            
            (2,426,325
            )
            
            **1,171,730**
            
            
            (65,970
            )
            
            (102,629
            )
            
            (554,297
            )
            
            (461,663
            )
            
            (1,374,861
            )
            
            (1,205,716
            )**Net
                (loss) earnings per share**Basic
            
            
            (0.012
            )
            
            (0.013
            )
            
            (0.063
            )
            
            0.031
            
            
            (0.002
            )
            
            (0.002
            )
            
            (0.012
            )
            
            (0.008
            )
            
            (0.018
            )
            
            (0.016
            )Fully 
                Diluted
            
            
            (0.012
            )
            
            (0.013
            )
            
            (0.063
            )
            
            0.031
            
            
            (0.002
            )
            
            (0.002
            )
            
            (0.012
            )
            
            (0.008
            )
            
            (0.018
            )
            
            (0.016
            )







The
      summary of quarterly results has 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 2005
      and
      2004 financial statements, are described in note 28 of our consolidated December
      31, 2005 financial statements included elsewhere in this document.  The
      impact of such differences between Canadian GAAP and U.S. GAAP is not
      significant to the above summary of quarterly results for any period
      presented.





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





As
      at
      June 30, 2006, Dynasty Gaming had no debt and $3,784,045 in cash and restricted
      deposits of $41,220, compared with no debt and $5,755,213 in cash and $116,300
      in restricted deposits as at December 31, 2005. This decrease in cash as at
      June
      30, 2006, compared to the cash position as at December 31, 2005, is primarily
      as
      a result of the operating loss of the Company in the first half of 2006. As
      at
      December 31, 2004, the Company had no debt and cash of $303,187 and restricted
      deposits of $120,200. The increase in cash as at December 31, 2005, compared
      to
      the cash position as at December 31, 2004, is primarily attributable to two
      private placements that were closed in April 2005 and December 2005, which
      are
      described in more detail below.





Dynasty
      Gaming had working capital, as defined as current assets less current
      liabilities, of $4,120,259 at June 30, 2006, compared to working capital of
      $5,853,636 at December 31, 2005. At December 31, 2004, the Company had working
      capital of $329,700.










24


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
      were subject to a four (4) month hold period, which expired on April 28,
      2006.




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 for its immediate
      needs and has no long-term debt.





Balance
      Sheet:





As
      at
      June 30, 2006, the Company had total assets of $8,611,528, compared to total
      assets of $11,286,534 as at December 31, 2005; total assets decreased from
      December 31, 2005 to June 30, 2006 primarily because of the decreased cash
      position, which was in turn due to the operating loss in the first half of
      2006,
      and the amortization of deferred development costs. As at December 31, 2004,
      total assets of the Company were $3,023,375; the principal reason for the
      increase in assets from December 31, 2004 to December 31, 2005 relates to the
      two private placements completed in 2005 and the capitalization of deferred
      development expenses associated with the acquisition of MSL and MDI in September
      2005.





In
      addition to cash (as described above), as at June 30, 2006, the Company recorded
      assets held for sale (current assets) of $2,104,415 and assets held for sale
      (long-term assets) of $106,401; the figures as at December 31, 2005 were
      $2,255,006 and $121,007, respectively. As at December 31, 2004, the Company
      had
      assets held for sale (current assets) of $2,081,833 and assets held for sale
      (long-term assets) of $158,258. The Company had capitalized deferred development
      costs in the amount of $2,049,467 as at June 30, 2006; the corresponding figure
      as at December 31, 2005 was $2,736,451. There were no deferred development
      costs
      as at December 31, 2004.





Total
      liabilities as at June 30, 2006 were $2,103,483, compared to total liabilities
      of $2,511,947 as at December 31, 2005 and total liabilities of $2,301,388 as
      at
      December 31, 2004. Liabilities related to assets held for sale (current
      liabilities) were $1,494,182 and liabilities related to assets held for sale
      (long-term liabilities) were $47,476 as at June 30, 2006; the figures as at
      December 31, 2005 were $1,644,387 and $63,561, respectively; the figures as
      at
      December 31, 2004 were $1,740,483 and $94,319, respectively.





Shareholders’
      equity as at June 30, 2006 was $6,508,045 and included capital stock of
      $12,594,628 and a deficit of $6,617,688. As at December 31, 2005, shareholders’
equity was $8,774,587 and included capital stock of $12,405,434 and a deficit
      of
      $4,037,111. The decrease in shareholders’ equity from December 31, 2005 to June
      30, 2006 is principally attributable to the increased deficit as a result of
      the
      operating loss in the first half of 2006. Shareholders’ equity as at December
      31, 2004 was $721,987 and included capital stock of $3,589,810 and a deficit
      of
      $2,852,552. The increase in shareholders’ equity from December 31, 2004 to
      December 31, 2005 is attributable to the two private placements completed in
      April 2005 and December 2005.





**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 (see definition and further description on this
      process below) 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.







25








“MM”
      refers to our Mahjong Mania software. The “back office” refers to that part of
      the software that captures, records and processes all of the various
      transactions that occur during the game. The visible part of the software,
      or
      the front office, is the site that appears on the Internet; the back office
      comprises the logic that enables us to run the games (e.g. random number
      generator) and record each transaction.





The
“game
      functionality” refers to the features of the Mahjong game itself. There are many
      different versions or rule sets of Mahjong, which are principally based on
      geography: there are the Hong Kong rules, the Shanghai rules, the Japanese
      rules, etc. Game functionality encompasses modifications to the core software
      for different rule sets. It also encompasses other features of the game, or
      front office, such as the look, feel and functionality of the avatars (or
      characters on the screen), our ability to incorporate a tournament structure,
      the look of the tiles, etc.





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





The
      increase in Research and Development Expenses for 2005 is primarily due to
      the
      Company’s purchase of MSL and MDI, its wholly owned subsidiaries, as well as
      from software development associated costs. Below is a chart indicating more
      particularly the source of our increases in Research and Development costs
      for
      2005:








**Research
                and Development Expense**
            **Cost
                (CDN$)**Purchased
                the company Mahjong Development Inc. (formerly 9143-3250 Quebec Inc.),
                which had capitalized development costs as of June 10, 2005 (purchase
                date)
            $
            668,995Excess
                of purchase price attributed to software purchased
            $
            1,481,826Additional
                costs June 11 - December 31, 2005
            $
            578,624Computer
                usage costs transferred to deferred development costs
            $
            7,006Total
                Deferred costs December 31, 2005
            $
            7,006








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





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. The recent passing
      of the Unlawful Internet Gambling Enforcement Act, which was signed by President
      Bush on October 13, 2006, will however have a material impact on the size of
      the
      gaming market, by effectively excluding the United States from the worldwide
      Internet gaming market.





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.





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 competitive, with
      a
      large number of gaming and software operators and developers; accordingly,
      the
      industry is subject to rapid technological change. 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. As noted in our Risk Factors, this could have a material
      adverse effect on the Company’s revenues, operating results and financial
      condition. Additionally, given that the Company believes it is one of the first
      to develop an aggregate player, online cash-wager version of Mahjong, our
      Company’s operations face a risk that there is no demonstrated market for online
      Mahjong. Accordingly, 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.





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.





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.





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. It is the intention of Dynasty Gaming Inc.
      and
      the Ho Group to form a new company (“Newco1”) that will be the investment
      vehicle for our play-for-points, prepaid card strategy in China, which has
      been
      labeled Ho Majiang, as discussed above.





In
      Canada, MDI develops interactive gaming software under contract with 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 currently 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. 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.





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. The United States, until recently the largest
      Internet gaming market in the world, has passed legislation to ban certain
      aspects of Internet gaming. On September 30, 2006, the United States Congress
      passed the Safe Port Act, which was subsequently signed into law by President
      Bush on October 13, 2006. This Act includes certain provisions known as the
      Unlawful Internet Gambling Enforcement Act of 2006. More specifically, this
      law
      makes unlawful the receipt by a gambling business of proceeds or monies in
      connection with unlawful Internet gambling. Although the Act does not clarify
      the definition of unlawful gambling, it does make clear that the United States
      government intends to stop the flow of funds from Americans to online gaming
      operators through criminal sanction. Furthermore, the Act asserts that, under
      US
      law, a wager must be permitted under the laws of both the customer’s place of
      residence and that of the Internet gaming operator. Despite the ambiguity
      contained in the Act, the board of directors of Dynasty Gaming has decided
      not
      to accept any real money gaming business from US residents coming through our
      licensees. Our licensees will only be able to allow their non-American residents
      to play for real consideration on our gaming servers. American residents can,
      however, play for free. Given that the Company’s primary marketing focus is Asia
      and Asians living outside of Asia, we do not consider that the loss of a
      real-money American player base will have a material impact on our revenues,
      earnings and operational results going forward.









27










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.





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.





**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.












28




**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 Officer and Corporate SecretaryDavid
                Wolk
            61
            Director,
                President and Secretary of Mahjong Development Inc.Kiyoshi
                Eguchi
            66
            DirectorLinda
                Lemieux
            55
            DirectorAdriaan
                Brink
            43
            President
                and Director of Mahjong Systems
                Ltd.


*
      Since
      the date of the filing of this Registration Statement on Form 20-F with the
      SEC
      on July 11, 2006, Ian Sherrington resigned as the President and Director of
      Mahjong Development Inc. Moreover, Linda Lemieux resigned as President and
      Secretary of Mahjong Development Inc., and Tony Barbusci resigned as Vice
      President of Finance and Corporate Secretary. Subsequently, Mark Billings was
      appointed as Corporate Secretary, and David Wolk was appointed as President
      and
      Secretary 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***





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
      and as Corporate Secretary since October 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.





29





***David
      Wolk***




Mr.
      Wolk
      has served as Director of the Company since August 2003, and sits as Chair
      of
      the Company’s Audit Committee. Additionally, Mr. Wolk has served as President
      and Secretary of Mahjong Development Inc. since October 6, 2006. 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 served as Director and Secretary of Mahjong Development Inc., our
      wholly owned subsidiary, until September 8, 2006. 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 has served as President and Director of Mahjong Systems Ltd., our
      wholly-owned subsidiary, since September 19, 2005. Mr. Brink currently focuses
      his efforts on establishing licensing relationships for the Company’s *Mahjong
      Mania* software. Since January 2003, Mr. Brink has also served as 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 from March 2001 through December 2002., a company that
      produced Lottery Software. From January 1996 until February 2001, Mr. Brink
      served as Chief Executive Officer of International Lottery in Liechtenstein
      Foundation, a company that focused primarily in Charity Lottery.







30




**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 five executive officers and directors: Albert Barbusci,
      David Wolk, Linda Lemieux, Kiyoshi Eguchi and Mark Billings. 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:







31




**Actual
                Annual Compensation**
            **Long-Term
                Compensation Awards****Awards**
            **Payouts****Name
                and Principal Position**
            **Year**
            **Salary**
              **(Cdn.$)**
            **Bonus**
              **($)**
            **Other
                Annual Compens-**
              **ation**
            **Director
                Compens-**
              **ation**
              **($)**
            **Securities
                Under Options Granted**
              **#**
            **Restricted
                Shares or Restricted Share Units**
              **($)**
            **LTIP
                Payouts**
              **($)**
            **All
                Other Compensation**
              **($)**Albert
                Barbusci, President, Chief Executive Officer and Director
                (1)(5)
            2005
            $0
            Nil
            $147,800
            Nil
            Nil
            Nil
            Nil
            NilDavid
                Wolk, Director (5)(6)
            2005
            $0
            Nil
            $34,000
            Nil
            125,000
                shares exercisable at $0.15
            Nil
            Nil
            NilLinda
                Lemieux, Director (2) (5)
            2005
            $0
            Nil
            $65,000
            Nil
            125,000
                shares exercisable at $0.15
            Nil
            Nil
            NilKiyoshi
                Eguchi, Director (5)
            2005
            Nil
            Nil
            Nil
            Nil
            Nil
            Nil
            Nil
            NilAnthony
                Barbusci, Vice President of Finance and Corporate Secretary
                (7)
            2005
            $89,354.49
            Nil
            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
              (Sales
                Commissi-
              ons)
              $65,000
              (Cash
                Compens-ation
              for
                consulting fees
            Nil
            333,333
                shares exercisable at $0.44
            Nil
            Nil
            NilIan
                Sherrington (4)
            2005
            $20,000
            Nil
            $10,000
            Nil
            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 served as Secretary of Mahjong Development Inc. (MDI) until September
      2006. Ms. Lemieux was employed by MDI as a consultant, which provided for
      monthly fees of $10,000 per month. Ms. Lemieux’s fees were paid to her personal
      operating company, Vision 2011, rather then to Ms. Lemieux directly. 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. Mr. Brink’s fees were paid to his personal
      operating company, Genesis Consulting, rather then to Mr. Brink
      directly.


(4)
      Ian
      Sherrington, 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 are paid to
      Sherrington Systems, which is Mr. Sherrington’s personal operating company.
      Since the date of the filing of this Registration Statement on Form 20-F with
      the SEC on July 11, 2006, Ian Sherrington resigned as the President and
      Directors of Mahjong Development Inc.


(5)
      The
      Company’s Directors currently receive compensation of $1,000 per attendance at
      the Company’s Director’s Meetings. However, The Company’s directors did not
      receive director compensation for 2005, since the Company’s compensation of
      $1,000 for director attendance began in February 2006.


(6)
      Mr.
      Wolk’s fees were paid for services rendered as a communications
      consultant.


(7)
      Since
      the date of the filing of the initial Registration Statement with the SEC on
      Form 20-F on July 11, 2006, Anthony Barbusci resigned as Vice President of
      Finance and Corporate Secretary.





32









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 (5)
            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 (4)
            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 (1)
            Common
            Nil
            $0.44
            333,333
            September
                21, 2010Ian
                Sherrington (2)
            Common
            111,111
            $0.44
            222,222
            September
                21, 2010Mark
                Billings (3)
            Common
            Nil
            $0.50
            500,000
            March
                5, 2011




(1)
      Adriaan Brink holds the common stock options through his personal operating
      company, Genesis Consulting Anstalt.


(2)
      Since
      the date of the filing of this Registration Statement on Form 20-F with the
      SEC
      on July 11, 2006, Ian Sherrington resigned as the President and Directors of
      Mahjong Development Inc.


(3)
      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 49,000 shares of DNY common stock.


(4)
      Since
      the date of the filing of the Registration Statement, Amendment No.2, on Form
      20-F with the SEC on September 20, 2006, Anthony Barbusci resigned as Vice
      President of Finance and Corporate Secretary.


(5)
      Since
      the date of filing of the Registration Statement, Amendment No.2, on Form 20-F
      with the SEC on September 20, 2006, Linda Lemieux resigned as President and
      Secretary of Mahjong Development Inc.








33


*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. The employment agreement does not provide for any
      payment of salary or bonus, the circumstances under which the agreement may
      be
      terminated, nor does the agreement contain a non-competition provision. The
      employment agreement does provide for the issuance of 500,000 stock options
      to
      be issued upon the execution of a definitive agreement for an Asia-based joint
      venture with the Ho family (or its nominee), and 500,000 options to be issued
      upon the launch by the Company or its affiliates of Chinese prepaid Mahjong
      cards or Mahjong being introduced in the Chinese province owned lotteries.
      The
      agreement also entitles Mr. Barbusci to full participation in the Company’s
      group health and dental insurance plan and in any other benefit plan available
      to senior officers of the Company. Under the agreement Mr. Barbusci is also
      entitled to reimbursement for all reasonable and necessary business and travel
      expenses incurred by him.





Cadence
      Communications Inc. (“Cadence”), a consulting company of which Mr. Barbusci is
      President and sole owner, is also a party to a consulting agreement with the
      Company. Cadence is a holding company holding shares of subsidiaries that are
      primarily engaged in the business of developing, marketing and licensing
      internet-based gaming software. Per the terms of the consulting agreement,
      Cadence is to provide management services, expert advice and know-how with
      respect to (i) the management, administration and supervision of the Company’s
      business, (ii) financing, (iii) marketing and business promotion, and (iv)
      strategic planning. 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. The
      non-competition provision applies for the duration of the agreement and for
      a
      period of one year thereafter. 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, as described more fully below. The employment agreement
      provides, among other things, for payment of the executive’s salary of $120,000
      annually. In addition, the agreement provides for the issuance of (i) 500,000
      stock options to be issued upon execution of the employment agreement, (ii)
      200,000 stock options to be issued upon the Company having achieved $2,000,000
      of cumulative gross revenues from its Mahjong Mania and any other current or
      future gaming software, (iii) 200,000 options to be issued upon the launch
      of
      the first World Series of Mahjong tournament (or similar tournament) which
      the
      Company will be organizing, and (iv) 200,000 stock options to be issued upon
      the
      successful launch of the Mahjong Club web site (or similar site owned and
      operated by the Company). The employment agreement also provides for certain
      benefits, including an annual bonus equal to 2% of pre-tax profits subject
      to a
      maximum payment of no more than 50% of the Employee’s Base Salary, four weeks
      paid vacation each year, and full participation in the Company’s group health
      and dental insurance each year. Mr. Billings is also entitled to reimbursement
      for all reasonable and necessary business and travel expenses incurred by him
      in
      connection with the performance of his employment duties. The employment
      agreement permits Mr. Billings to act as an advisor, officer or director of
      other entities, provided that such activities do not conflict or compete with
      the Company or do not adversely affect the performance of Mr. Billings’ duties
      under the employment agreement. The non-competition provision applies for the
      duration of the agreement and for a period of one year thereafter. 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,
      mentioned above, 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. Mr. Billings may terminate the employment agreement
      with or without good reason, as defined in the employment agreement, at any
      time
      upon thirty days’ written notice to the Company.





Ian Sherrington is a party to an employment agreement with Mahjong
      Development Inc. (“MDI”), a wholly owned subsidiary of the Company. Pursuant to
      the employment agreement, which is due to terminate on October 31, 2010, Mr.
      Sherrington serves as MDI’s President and Chief Operating Officer, and reports
      directly to Albert Barbusci, who is the President of the Company. The employment
      agreement provides, among other things, for payment of the executive’s salary of
      $120,000 annually, stock options, along with a bonus equal to 2% of the
      Company’s and MSL’s consolidated pre-tax profits, benefits and plans as provided
      and defined in the employment agreement. MDI may terminate the employment
      agreement upon the executive’s death or disability, or upon just cause,
      including breach of the non-competition provisions. Ian Sherrington is also
      a
      party to a consulting agreement with MDI, which also expires on October 31,
      2010. The consulting agreement provides, among other things, for payment of
      the
      executive’s salary of $5,000 monthly, provided that all of the outstanding
      Warrants of the Company have been exercised, and that the exercise price be
      paid
      to the Company. The consulting agreement will terminate immediately in the
      event
      of the termination of the employment agreement. Ian Sherrington resigned as
      the
      President and Directors of Mahjong Development Inc. effective June 24, 2006.
      Per
      the terms of the employment termination agreement between Mr. Sherrington and
      the Company, Mr. Sherrington is entitled to receive his base salary for the
      period up to and ending on the termination date, and as of the termination
      date,
      Mr. Sherrington received $60,000, the portion of his base salary up to and
      ending June 24, 2006. Mr. Sherrington is also entitled to the reimbursement
      of
      any pre-authorized expenses incurred on behalf of the Company prior to the
      termination date. Mr. Sherrington is not entitled to any bonus, incentive or
      other remuneration or benefit under the employment agreement between Mr.
      Sherrington and the Company. The terms of the consulting termination agreement
      do not outline any payments made or owed to Mr. Sherrington as a result of
      the
      termination of his consulting agreement.







34





Adriaan
      Brink, along with Genesis Consulting Anstalt (“Genesis”), of which Mr. Brink is
      the key executive and sole owner, are parties to a management agreement with
      the
      Mahjong Systems Limited (“MSL”), a wholly owned subsidiary of the Company.
      Unless otherwise terminated (as further described below), the term of said
      agreement is to end on September 21, 2010, which is the five year anniversary
      of
      the closing date whereby the Company acquired the shares of MSL and 9143-3250
      Quebec Inc. The management agreement provides, among other things, for payment
      of Genesis’ base fee of $120,000 annually, along with stock options to acquire
      $1 million shares of common stock of the Company. Specifically, one third of
      the
      stock options are to be granted on the date of the management agreement, one
      third are to be granted on the one year anniversary of the signing of the
      management agreement, and one third are to be granted on the two year
      anniversary of the signing of the management agreement. 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 entitled to options to acquire from the Company’s treasury up to
      1,000,000 common shares of the Company. One-third of the Options are to be
      granted on the effective date, one-third are to be granted on the one year
      anniversary date of the agreement, and one-third are to be granted on the two
      year anniversary date of the agreement. Genesis is further entitled to 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 such
      combined consolidated revenues are greater than $4 million but not more than
      $8
      million, Genesis shall be entitled to an additional bonus equal to 5% of the
      excess, and if such combined consolidated revenues are greater than $8 million,
      Genesis is entitled to an additional bonus of 2% of such excess. In the event
      that (i) Genesis or Mr. Brink fail to execute any reasonable, lawful direction
      relating to the business, or (ii) breach the non-competition provisions referred
      to in the management agreement, MSL may terminate the agreement, unless such
      breach is cured within 15 business days of delivery of notice of such breach.
      If
      MSL fails to meet its approved revenue budget for any six month period or if
      MSL
      exceeds its approved expense budget by a material amount, MSL may terminate
      the
      agreement, unless such breach is cured within 30 business days of delivery
      of
      notice of such breach. MSL may terminate the management agreement in its sole
      discretion without notice or payment in lieu of notice if Mr. Brink or Genesis:
      (i) is convicted of any criminal offense which would have a material adverse
      impact on the ability of Mr. Brink or Genesis to perform his/its duties, (ii)
      is
      grossly negligent or acts in a manner constituting material misconduct or
      engages in self-dealing or engages in any criminal or dishonest act, or (iii)
      willfully engages in any act that is materially injurious to MSL or its
      shareholders, monetarily or otherwise. 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. Accordingly, Mr. Brink and Genesis are to assist MSL
      in
      every way to protect its rights and to vest MSL the entire right, title and
      interest, including copyright, in all of the intellectual property rights,
      and
      to refrain from disclosing to any person or company or use any such intellectual
      property rights for personal purposes other than those of MSL.




*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






35





(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 is comprised of Albert Barbusci,
      David Wolk, Linda Lemieux, and Kiyoshi Eguchi. The Audit Committee 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 and its wholly-subsidiaries had 28 full-time
      employees and 6 consultants under contract, 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
              Ownership2
            Percentage
              Of
                Class (10)
              (*
                indicates less than 1%)Albert
                Barbusci3
            13,803,000
            90,000
            14,019,000
            18%David
                Wolk4
            Nil
            158,000
            98,000
            *Linda
                Lemieux5
            180,000
            153,333
            273,333
            *Kiyoshi
                Eguchi6
            Nil
            90,000
            30,000
            *Anthony
                Barbusci7
            84,800
            315,000
            339,800
            *Adriaan
                Brink8
            635,250
            333,333
            801,916
            1%Ian
                Sherrington9
            7,483,788
            222,222
            7,539,343
            10%Total:
            22,186,838
            1,361,888
            23,101,392
                29%




(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.






36









(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. Since the date of filing of this Amended
                Registration Statement on Form 20-F with the SEC on September 20,
                2006,
                Linda Lemieux resigned as President and Secretary of Mahjong Development
                Inc.(6)
                Beneficial ownership includes 30,000 vested stock
                options.(7)
                Beneficial ownership includes 255,000 vested stock options. Since
                the date
                of filing of this Amended Registration Statement on Form 20-F with
                the SEC
                on September 20, 2006, Anthony Barbusci resigned as Vice President
                of
                Finance and Corporate Secretary of Dynasty Gaming Inc.(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. Since the date of
                the
                filing of this Registration Statement on Form 20-F with the SEC on
                July
                11, 2006, Ian Sherrington resigned as the President and Directors
                of
                Mahjong Development Inc.(10)
                Based on 77,464,226 shares outstanding as of September 9,
                2006.


*** Mark
      Billings, Chief Financial Officer, was hired on March 20, 2006. Mr. Billing
      owns
      49,000 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 7,500,000 common 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*




37









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****(1)**
            **Percent
                of Class****(2)**Common
                Shares
            Albert
                Barbusci
            14,019,000
            18.1%Common
                Shares
            Ian
                Sherrington
            7,539,343
            9.8%





(1)
            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.(2)
            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, nor do any major shareholders have different voting
      rights.




**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 indicated
      below.




38




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 $21,337. These amounts were
      paid within 30 days from receipt of the invoices.





Direct
      costs were charged by:





Vision
      2011, a company controlled by Linda Lemieux, a Director of the Company, charged
      direct costs in the amount of $60,000. There is no written agreement or contract
      between Vision 2011 and the Company or any of its subsidiaries. Up until
      September 8, 2006, Ms. Lemieux provided management consulting services to the
      Company’s subsidiary, Mahjong Development Inc. and billed for these services
      through her personal services company, Vision 2011. Ms. Lemieux oversaw the
      operation and managed the software development team. Ms. Lemieux received
      payments of $10,000 per month.





Cadence
      Communications Inc., a company controlled by Albert Barbusci, our President
      and
      CEO, charged direct costs in the amount of $134,651. Mr. Barbusci’s travel,
      entertainment and most other business-related expenses are paid by his personal
      company, Cadence Communications Inc. and are subsequently billed to the Company
      for reimbursement. Dynasty Gaming Inc. and Cadence Communications Inc. entered
      into an agreement on January 1, 2006. The services to be rendered by Cadence
      Communications, as represented by Albert Barbusci, include the management,
      administration and supervision of the Company’s business; financing; marketing
      and business promotion; and strategic planning. This agreement has a term of
      five (5) years, thus terminating on December 31, 2010. It can thereafter be
      renewed upon the mutual consent of the parties on such terms and conditions
      as
      mutually agreed. The parties agree to commence discussions regarding renewal
      one
      (1) year prior to the end of the five-year term.





Lisnacullen
      Farms, a company controlled by Christine Sheehy, wife of Barry Sheehy, the
      president of CPC Econometrics, charged direct costs of $322,738. There is no
      written agreement or contract between Lisnacullen Farms and the Company or
      any
      of its subsidiaries. Lisnacullen Farms provides management, corporate,
      administrative and advisory services to CPC Econometrics.





Administrative
      costs were charged by:





Cadence
      Communications charged administrative costs of $152,800 to the Company for
      the
      management services provided by Albert Barbusci. Mr. Barbusci is not compensated
      directly by the Company but is paid through his personal company, Cadence
      Communications Inc.





David
      Wolk, a director of the Company, provides various communications services,
      including drafting press releases and business plans. There is no written
      agreement or contract between Mr. Wolk and the Company or any of its
      subsidiaries. His fees for the year amounted to $25,050 and were billed to
      the
      Company.





Genesis
      Consulting, a company controlled by Adriaan Brink, the President of our MSL
      subsidiary, charged administrative costs of $15,000 to the Company and $65,000
      to MSL. Genesis Consulting and Mahjong Systems Limited, a wholly-owned
      subsidiary of the Company, entered into an agreement on June 10, 2005. The
      termination date of the agreement is September 20, 2010, unless otherwise
      terminated in accordance with the agreement. Mr. Brink, through his company
      Genesis Consulting, provides management, marketing, business development and
      sales services to the Company and its Mahjong subsidiaries. Genesis’ base fee is
      $120,000 annually, along with stock options to acquire one (1) million shares
      of
      common stock of the Company. 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 entitled to
      options to acquire from the Company’s treasury up to 1,000,000 common shares of
      the Company. Genesis is further entitled to 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 such combined consolidated revenues are
      greater than $4 million but not more than $8 million, Genesis shall be entitled
      to an additional bonus equal to 5% of the excess, and if such combined
      consolidated revenues are greater than $8 million, Genesis is entitled to an
      additional bonus of 2% of such excess.





*Related
      Party Transactions for the period ended December 31, 2004*





As
      at the
      year ended December 31, 2004, the Company’s accounts receivables resulting from
      related party transactions totaled an aggregate of $15,802. The greater portion
      of this amount, that is, $15,413 was payable by Biotonix Inc., a company
      controlled by Albert Barbusci, to the Company’s wholly-owned subsidiary, Events
      International Meeting Planners Inc. (EIMP). There is no written agreement or
      contract between Biotonix and the Company or any of its subsidiaries. The
      Company, through EIMP, provided marketing and advertising services to Biotonix,
      for the amount indicated above. The balance of $389 was due to the Company.
      The
      companies exchanged services in their normal course of business. [NOTE: Do
      we
      even need to put this in here???]





During
      the year ended December 31, 2004, the Company received revenues in the aggregate
      amount of $11,871 from Biotonix, as described above.





The
      Company received revenues from Cadence Communications in the amount of $16,145
      for management and consulting services.





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 Communications in the amount of
      $107,458, for the reimbursement of travel, entertainment and other business
      expenses, primarily incurred by Albert Barbusci. Lisnacullen Farms was paid
      the
      amount of $312,987 for management, administrative and advisory services to
      CPC
      Econometrics. Valu Strat was paid the amount of $427,152. Value Strat is a
      company controlled by Brenda Schone, who served as CFO of the Company. Ms.
      Schone is a senior strategic advisor and consultant and provides her services
      to
      CPC Econometrics. There is no written agreement or contract between Valu Strat
      and the Company or any of its subsidiaries.





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 Communications.





*Related
      Party Transactions for the period ended December 31, 2003* .





As
      at the
      year ended December 31, 2003, the Company’s accounts payable resulting from
      related party transactions totaled an aggregate of $69,806. These amounts were
      paid in the normal course of business, generally within 30 days from the date
      of
      receipt of invoice.




39









During
      the year ended December 31, 2003, the Company received revenues in the aggregate
      amount of $102,242 from Biotonix, Cadence Communications, and Advanced Global
      Tracking, a company controlled by Albert Barbusci and Barry Sheehy.  There
      is no written agreement or contract between Advanced Global Tracking and the
      Company or any of its subsidiaries. Revenues in the amount of $68,211, $441,
      and
      $30,292 were earned from Biotonix, Advanced Global Tracking, and Cadence
      Communications, respectively. These companies exchanged services with several
      of
      the Company’s subsidiaries. Cadence Healthcare, a wholly-owned subsidiary
      provided creative advertising services to Biotonix and received $51,759. Events
      International Meeting Planners, another subsidiary, provided management,
      planning and organizing services to Biotonix for $16,114 and to Cadence
      Communications for $30,292.





Direct
      costs were paid to Biotonix, Cadence Communications, G2 CHILE S.A., Strategies,
      and Value Strat in the amount of $48,819, $199,008, $42,967, $431,436, and
      $335,543, respectively. G2 CHILE S.A. and Strategies are two companies
      controlled by Juan Carlos Fabres, a director of Events International, Chile
      S.A.
      (EICSA), a wholly owned subsidiary of Events International Meeting Planners
      Inc.
      EICSA was the official conference organizer for the FIGO event held in Chile
      in
      November 2003. It generated revenues from registration fees and paid expenses
      to
      suppliers of various services. There is no written agreement or contract between
      G2 CHILE S.A. or Strategies and the Company or any of its
      subsidiaries.




40




Selling
      costs were paid to Cadence Communications in the aggregate amount of $308,209.
      Administrative costs were paid to Cadence Communications and David Wolk in
      the
      amount of $278,026 and $30,183, respectively. Assets were acquired under a
      capital lease by Cadence Communications in the amount of $11,907. Obligations
      under capital leases were attributable to BTX Financial, a company controlled
      by
      Dieter Jahnke, a director of the company in the amount of $116,313. There is
      no
      written agreement or contract between BTX Financial and the Company or any
      of
      its subsidiaries.





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 31st





*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.




41







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





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










42










**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 September
      29, 2006, the stock price on the TSX Venture Exchange was CDN$0.53.





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.













43






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.







44





**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











45










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.***  **** As 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









46












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.









47




**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.






48






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
                August 24, 2006, the Company, through its Mahjong Systems (Cyprus)
                Limited
                subsidiary, entered into a contract with Microgaming Software Systems
                Limited whereby MSL (Cyprus) granted Microgaming an exclusive license
                to
                use and sub-license the use of the Mahjong System.










49





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 this registration statement.
      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;




50




**•**
            
            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.






51




*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.




52









*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.






53









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.






54




**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.


55













**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.








56




**ITEM
      19. EXHIBITS**





Exhibit
      No.  Description





1.1
            Certificate
                of Incorporation of 3059219 Canada Inc. dated August 11, 1994.
                (Incorporated by reference to the Company’s Form 20-F/A filed with the
                Securities and Exchange Commission on July 28,
                2006)





1.2
            Certificate
                of Amendment, dated June 8, 1995. (Incorporated by reference to the
                Company’s Form 20-F/A filed with the Securities and Exchange Commission on
                July 28, 2006)





1.3
            Certificate
                of Amendment, dated March 19, 1996. (Incorporated by reference to
                the
                Company’s Form 20-F/A filed with the Securities and Exchange Commission on
                July 28, 2006)





1.4
            Certificate
                of Amendment, dated October 15, 2001. (Incorporated by reference
                to the
                Company’s Form 20-F/A filed with the Securities and Exchange Commission on
                July 28, 2006)





1.5
            Certificate
                of Amendment, dated December 5, 2005. (Incorporated by reference
                to the
                Company’s Form 20-F/A filed with the Securities and Exchange Commission on
                July 28, 2006)





1.6
            By-laws
                of Dynasty Gaming Inc. (Incorporated by reference to the Company’s Form
                20-F/A filed with the Securities and Exchange Commission on July
                28,
                2006)





2.1
            Form
                of common stock certificate. (Incorporated by reference to the Company’s
                Form 20-F/A filed with the Securities and Exchange Commission on
                July 28,
                2006)


4.
                1
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                International Gaming and Entertainment Limited dated as of May 19,
                2004.
                ** (Incorporated by reference to the Company’s Form 20-F/A filed with the
                Securities and Exchange Commission on September 20,
                2006)





4.2
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                Apex
                Holdings dated as of March 27, 2005. ** (Incorporated by reference
                to the
                Company’s Form 20-F/A filed with the Securities and Exchange Commission on
                September 20, 2006)





4.3
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                Betex
                (Group), Plc. dated as of August 3, 2005. ** (Incorporated by reference
                to
                the Company’s Form 20-F/A filed with the Securities and Exchange
                Commission on September 20, 2006)





4.4
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                Action
                Poker Gaming, Inc. dated as of August 3, 2005. ** (Incorporated by
                reference to the Company’s Form 20-F/A filed with the Securities and
                Exchange Commission on September 20,
                2006)





4.5
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                HO
                Casinos.com dated as of October 20, 2005. ** (Incorporated by reference
                to
                the Company’s Form 20-F/A filed with the Securities and Exchange
                Commission on September 20, 2006)





4.6
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                DRHO
                Casinos.com dated as of October 20, 2005. ** (Incorporated by reference
                to
                the Company’s Form 20-F/A filed with the Securities and Exchange
                Commission on September 20, 2006)





4.7
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                Orbis
                Technology, Inc. dated as of October 5, 2005. ** (Incorporated by
                reference to the Company’s Form 20-F/A filed with the Securities and
                Exchange Commission on September 20,
                2006)





4.8
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                Absolute
                Entertainment SA, dated as of October 29, 2005. ** (Incorporated
                by
                reference to the Company’s Form 20-F/A filed with the Securities and
                Exchange Commission on September 20,
                2006)





4.9
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                Ladbrokes.com dated as of May 24, 2006. ** (Incorporated by reference
                to
                the Company’s Form 20-F/A filed with the Securities and Exchange
                Commission on September 20, 2006)





4.10
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                Golden
                Palace Ltd. dated as of March 15, 2006. ** (Incorporated by reference
                to
                the Company’s Form 20-F/A filed with the Securities and Exchange
                Commission on September 20, 2006)





4.11
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                Interactive Gaming Holdings Plc. dated as of March 28, 2006. **
                (Incorporated by reference to the Company’s Form 20-F/A filed with the
                Securities and Exchange Commission on September 20,
                2006)





4.12
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                Finsoft
                Limited dated as of April 24, 2006. ** (Incorporated by reference
                to the
                Company’s Form 20-F/A filed with the Securities and Exchange Commission on
                September 20, 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.
                (Incorporated by reference to the Company’s Form 20-F/A filed with the
                Securities and Exchange Commission on July 28,
                2006)










57





4.14+
            Employment
                Agreement dated March 6, 2006, between Mark Billings and Dynasty
                Gaming
                Inc. (Incorporated by reference to the Company’s Form 20-F/A filed with
                the Securities and Exchange Commission on July 28,
                2006)





4.15+
            Employment
                Agreement dated March 16, 2006, between Albert Barbusci and Dynasty
                Gaming
                Inc. (Incorporated by reference to the Company’s Form 20-F/A filed with
                the Securities and Exchange Commission on July 28,
                2006)




4.16+
            Consulting
                Agreement dated January 1, 2006, between Cadence Communications Inc.
                and
                Dynasty Gaming Inc. (Incorporated by reference to the Company’s Form
                20-F/A filed with the Securities and Exchange Commission on July
                28,
                2006)





4.17+
            Employment
                Agreement dated June 30, 2005 between 9143-3250 Quebec Inc. and Ian
                Sherrington. (Incorporated by reference to the Company’s Form 20-F/A filed
                with the Securities and Exchange Commission on July 28,
                2006)





4.18+
            Consulting
                Agreement dated June 30, 2005 between 9143-3250 Quebec Inc. and Ian
                Sherrington. (Incorporated by reference to the Company’s Form 20-F/A filed
                with the Securities and Exchange Commission on July 28,
                2006)





4.19+
            Management
                Agreement dated June 10, 2005 between Genesis Consulting Anstalt,
                Adriaan
                Brink, and Mahjong Systems Limited. (Incorporated by reference to
                the
                Company’s Form 20-F/A filed with the Securities and Exchange Commission on
                July 28, 2006)


4.20+
            Memorandum
                of Agreement dated June 24, 2006 between Mahjong Development Inc.
                and Ian
                Sherrington. (Incorporated by reference to the Company’s Form 20-F/A filed
                with the Securities and Exchange Commission on July 28,
                2006)





4.21+
            Termination
                of Consulting Agreement dated June 30, 2006 between Mahjong Development
                Inc. and Ian Sherrington.(Incorporated
                by reference to the Company’s Form 20-F/A filed with the Securities and
                Exchange Commission on July 28,
                2006)





4.22*+
            Termination
                Agreement dated September 12, 2006 between Dynasty Gaming Inc. and
                Anthony
                Barbusci (Filed herewith)





4.23*+
            Consulting
                Agreement dated September 12, 2006 between Dynasty Gaming Inc. and
                Anthony
                Barbusci (Filed herewith)





4.24
            Stock
                Option Plan. (Incorporated by reference to the Company’s Form 20-F/A filed
                with the Securities and Exchange Commission on July 28,
                2006)4.25
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                Microgaming Software Systems Limited, dated as of August 24, 2006.**
                (Incorporated by reference to the Company’s Form 20-F/A filed with the
                Securities and Exchange Commission on September 20,
                2006)4.26
            Clearing
                House Agreement between Mahjong Systems Limited, a subsidiary of
                the
                Company, and Ironbridge Limited, dated as of August 24, 2006.
                (Incorporated by reference to the Company’s Form 20-F/A filed with the
                Securities and Exchange Commission on September 20,
                2006)4.27
            Surplus
                Security Escrow Agreement between Events International Holding Corporation
                and Equity Transfer Services Inc. and The Persons Whose Names Are
                Set Out
                In The First Column Of Schedule “A” Annexed Hereto, dated March 20, 2002.
                (Incorporated by reference to the Company’s Form 20-F/A filed with the
                Securities and Exchange Commission on September 20,
                2006)4.28
            Escrow
                Agreement between Events International Holding Corporation and Sweibel
                Novek, LLP and Ian Sherrington and Adriaan Brink dated September
                2, 2005.
                (Incorporated by reference to the Company’s Form 20-F/A filed with the
                Securities and Exchange Commission on September 20,
                2006)





4.29*
            Agreement
                for the purchase and sale of shares of the MedEvents, Cadence and
                CPC
                Econometrics subsidiaries, between Dynasty Gaming Inc. and CPC Canada
                Inc.
                dated September 30, 2006. (Filed herewith)





8.1*
            List
                of wholly owned subsidiaries. (Filed
                herewith)





15.1*
            Consent
                of Independent Registered Public Accounting
                Firm.


_________________________________





*
      Filed
      herewith.


**
      The
      confidential portions of this exhibit has been omitted and flied separately
      with
      the Securities and Exchange Commission.


+
      Signifies management contract or compensatory arrangement.






58













**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: October
              27, 2006
            By:
            /s/ Mark
              BillingsName:
                Mark BillingsTitle: Chief Financial
              Officer & Corporate Secretary






59











**DYNASTY
                GAMING INC.**
              **DECEMBER
                31, 2005 AND 2004**
              
              **INDEX
                TO CONSOLIDATED FINANCIAL STATEMENTS****Page****DYNASTY
                GAMING INC.**-**Six
                Months Ended June 30, 2006 and 2005 (Unaudited)**Consolidated
                Balance Sheets
            F-2Consolidated
                Statements of Operations and Deficit
            F-3Consolidated
                Statements of Cash Flows
            F-4Notes
                to Consolidated Financial Statements
            F-5
                - F-14**DYNASTY
                GAMING INC.**-**Fiscal
                Years Ended December 31, 2005 and 2004 (Audited)**Auditors'
                Report
            F-15Consolidated
                Balance Sheets
            F-17Consolidated
                Statements of Operations and Deficit
            F-18Consolidated
                Statements of Shareholders' Equity
            F-19Consolidated
                Statements of Cash Flows
            F-20Notes
                to Consolidated Financial Statements
            F-21
                - F-43









F-1




**DYNASTY
                  GAMING INC.****INTERIM
                  CONSOLIDATED BALANCE SHEETS****(unaudited)****June
                  30, 2006**
              
              
              December
                  31, 2005**$**
              
              
              $**ASSETS****Current
                  assets****Cash**
              
              
              **3,784,045**
              
              
              5,755,213**Restricted
                  deposits**
              
              
              **41,220**
              
              
              116,300**Accounts
                  receivable**
              
              
              **116,828**
              
              
              129,482**Prepaid
                  expenses and deposits**
              
              
              **129,758**
              
              
              46,021**Assets
                  held for sale (Note 4)**
              
              
              **2,104,415**
              
              
              2,255,006**6,176,266**
              
              
              8,302,022**Deferred
                  development costs (Note 5)**
              
              
              **2,049,467**
              
              
              2,736,451**Property
                  and equipment**
              
              
              **259,722**
              
              
              104,052**Assets
                  under capital leases**
              
              
              **19,672**
              
              
              23,002**Assets
                  held for sale (Note 4)**
              
              
              **106,401**
              
              
              121,007**8,611,528**
              
              
              11,286,534**LIABILITIES
                  AND SHAREHOLDERS' EQUITY****Current
                  Liabilities****Accounts
                  payable and accrued liabilities**
              
              
              **481,378**
              
              
              750,088**Deferred
                  revenue**
              
              
              **78,108**
              
              
              48,908**Current
                  portion of obligations under capital leases**
              
              
              **2,339**
              
              
              5,003**Liabilities
                  related to assets held for sale (Note 4)**
              
              
              **1,494,182**
              
              
              1,644,387**2,056,007**
              
              
              2,448,386**Liabilities
                  related to assets held for sale (Note 4)**
              
              
              **47,476**
              
              
              63,561**2,103,483**
              
              
              2,511,947**Shareholders'
                  equity****Capital
                  stock (Note 6)**
              
              
              **12,594,628**
              
              
              12,405,434**Contributed
                  surplus**
              
              
              **120,653**
              
              
              120,653**Other
                  capital**
              
              
              **654,111**
              
              
              475,530**Cumulative
                  translation adjustment**
              
              
              **(243,659**
              **)**
              
              (189,919
              )**Deficit**
              
              
              **(6,617,688**
              **)**
              
              (4,037,111
              )**6,508,045**
              
              
              8,774,587**8,611,528**
              
              
              11,286,534**Canadian
                  and United States accounting policies differences (Note****On
                  behalf of the board:****"Albert
                  Barbusci"******,
                  Director****"David
                  Wolk" , Director**
  
 *The
        accompanying notes are an integral part of these interim consolidated financial
        statements*
   F-2
 
 **DYNASTY
                  GAMING INC.****INTERIM
                  CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT****FOR
                  THE SIX MONTHS ENDED****(unaudited)****June
                  30, 2006**
              
              June
                  30, 2005**3
                  months**
              
              **6
                  months**
              
              3
                  months
              
              6
                  months**$**
              
              **$**
              
              $
              
              $**Revenues**
              
              **30,759**
              
              **46,298**
              
              161,700
              
              161,700**Operating
                  expenses****Direct
                  costs**
              
              
              **302,999**
              
              
              **681,312**
              
              
              -
              
              
              -**Marketing
                  and promotion**
              
              
              **281,410**
              
              
              **506,762**
              
              
              -
              
              
              -**Administrative**
              
              
              **542,060**
              
              
              **1,044,469**
              
              
              190,827
              
              
              293,623**Amortization
                  - property and equipment and assets under capital
                  leases**
              
              
              **11,012**
              
              
              **20,769**
              
              
              2,358
              
              
              4,715**Amortization
                  - deferred development costs**
              
              
              **206,805**
              
              
              **409,896**
              
              
              -
              
              
              -**1,344,286**
              
              
              **2,663,208**
              
              
              193,185
              
              
              298,338**Loss
                  from operations**
              
              
              **(1,313,527**
              **)**
              
              **(2,616,910**
              **)**
              
              (31,485
              )
              
              (136,638
              )**Other****Other
                  income (expense) (Note 8)**
              
              
              **44,151**
              
              
              **78,580**
              
              
              (2,251
              )
              
              (1,919
              )**Net
                  loss from continuing operations**
              
              
              **(1,269,376**
              **)**
              
              **(2,538,330**
              **)**
              
              (33,736
              )
              
              (138,557
              )**Net
                  earnings (loss) from discontinued operations**
              
              
              **63,660**
              
              
              **(42,247**
              **)**
              
              (68,893
              )
              
              (30,042
              )**Net
                  loss**
              
              
              **(1,205,716**
              **)**
              
              **(2,580,577**
              **)**
              
              (102,629
              )
              
              (168,599
              )**Deficit,
                  beginning of period**
              
              
              **(5,411,972**
              **)**
              
              **(4,037,111**
              **)**
              
              (2,918,522
              )
              
              (2,852,552
              )**Deficit
                  , end of period**
              
              
              **(6,617,688**
              **)**
              
              **(6,617,688**
              **)**
              
              (3,021,151
              )
              
              (3,021,151
              )**Net
                  loss per share****Basic
                  and diluted****From
                  continuing operations**
              
              
              **(0.016**
              **)**
              
              **(0.033**
              **)**
              
              (0.001
              )
              
              (0.004
              )**From
                  discontinued operations**
              
              
              **0.001**
              
              
              **(0.001**
              **)**
              
              (0.002
              )
              
              (0.001
              )**(0.016**
              **)**
              
              **(0.033**
              **)**
              
              (0.002
              )
              
              (0.004
              )**Weighted
                  average number of common shares****Basic**
              
              
              **77,280,420**
              
              
              **77,106,696**
              
              
              41,726,244
              
              
              38,972,312**Diluted**
              
              
              **77,280,420**
              
              
              **77,106,696**
              
              
              41,726,244
              
              
              38,972,312
 
 
 
 
 *The
        accompanying notes are an integral part of these interim consolidated financial
        statements*
   F-3
 
 
 
 **DYNASTY
                  GAMING INC.****INTERIM
                  CONSOLIDATED STATEMENTS OF CASH FLOWS****FOR
                  THE SIX MONTHS ENDED****(unaudited)**
              
              **June
                  30, 2006**
              
              June
                  30, 2005**3
                  months**
              
              **6
                  months**
              
              3
                  months
              
              6
                  months**$**
              
              
              **$**
              
              
              $
              
              
              $**Cash
                  flows from operating activities****Net
                  loss**
              
              
              **(1,205,716**
              **)**
              
              **(2,580,577**
              **)**
              
              (102,629
              )
              
              (168,599
              )**Items
                  not requiring cash flows:****Amortization
                  of property and equipment and assets under capital
                  leases**
              
              
              **17,646**
              
              
              **42,988**
              
              
              11,921
              
              
              23,340**Amortization
                  of deferred development costs**
              
              
              **206,805**
              
              
              **409,896**
              
              
              -
              
              
              -**Loss
                  on sale of property and equipment**
              
              
              **(199**
              **)**
              
              **(199**
              **)**
              
              -
              
              
              -**Stock
                  based compensation**
              
              
              **129,697**
              
              
              **214,586**
              
              
              4,913
              
              
              4,913**Future
                  tax**
              
              
              **60,455**
              
              
              **-**
              
              
              1,316
              
              
              1,949**Discontinued
                  operations**
              
              
              **(107,104**
              **)**
              
              **(1,514,392**
              **)**
              
              (672,090
              )
              
              (1,437,062
              )**Decrease
                  in receivables**
              
              
              **(278,406**
              **)**
              
              **1,136,120**
              
              
              (186,088
              )
              
              261,791**Decrease
                  in work in progress**
              
              
              **(109,795**
              **)**
              
              **(125,906**
              **)**
              
              (160,385
              )
              
              (221,022
              )**Decrease
                  in prepaid expenses**
              
              
              **90,054**
              
              
              **(363,701**
              **)**
              
              5,916
              
              
              (9,780
              )**Increase
                  in payables and accrued liabilities**
              
              
              **41,008**
              
              
              **223,261**
              
              
              782,938
              
              
              1,267,260**Decrease
                  in deferred revenue**
              
              
              **(3,559**
              **)**
              
              **354,252**
              
              
              164,545
              
              
              43,262**Net
                  change in operating activities of continuing
                  operations**
              
              
              **(1,159,114**
              **)**
              
              **(2,203,672**
              **)**
              
              (149,643
              )
              
              (233,948
              )**Cash
                  flows from investing activities****Acquisition
                  of property, plant and equipment**
              
              
              **(153,713**
              **)**
              
              **(173,109**
              **)**
              
              -
              
              
              -**Tax
                  credits received for development costs**
              
              
              **(22,260**
              **)**
              
              **277,088**
              
              
              -
              
              
              -**Loan
                  receivable**
              
              
              **-**
              
              
              **-**
              
              
              (341,522
              )
              
              (587,625
              )**Net
                  change in investing activities of continuing
                  operations**
              
              
              **(175,973**
              **)**
              
              **103,979**
              
              
              (341,522
              )
              
              (587,625
              )**Cash
                  flows from financing activities****Restricted
                  deposits**
              
              
              **75,580**
              
              
              **75,080**
              
              
              (1,580
              )
              
              (2,340
              )**Repayment
                  of obligations under capital lease**
              
              
              **(1,351**
              **)**
              
              **(2,664**
              **)**
              
              (6,766
              )
              
              (13,359
              )**Issuance
                  of common shares**
              
              
              **122,789**
              
              
              **153,189**
              
              
              1,200,000
              
              
              1,200,000**Share
                  issuance costs - private placements**
              
              
              **-**
              
              
              **-**
              
              
              (157,506
              )
              
              (157,506
              )**Net
                  change in financing activities of continuing
                  operations**
              
              
              **197,018**
              
              
              **225,605**
              
              
              1,034,148
              
              
              1,026,795**Cash
                  flows from discontinued operations****Operating
                  cash flows**
              
              
              **107,104**
              
              
              **1,514,392**
              
              
              672,090
              
              
              1,437,062**Investing
                  cash flows**
              
              
              **(482**
              **)**
              
              **(7,845**
              **)**
              
              (3,333
              )
              
              (5,908
              )**Financing
                  cash flows**
              
              
              **(134,572**
              **)**
              
              **(444,735**
              **)**
              
              58,160
              
              
              (69,826
              )**Effect
                  of exchange rates changes on cash and cash
                  equivalents**
              
              
              **(60,510**
              **)**
              
              **(235,881**
              **)**
              
              6,281
              
              
              9,422**Cash
                  flows from discontinued operations**
              
              
              **(88,460**
              **)**
              
              **825,931**
              
              
              733,198
              
              
              1,370,750**Increase
                  in cash and cash equivalents**
              
              
              **(1,226,529**
              **)**
              
              **(1,048,157**
              **)**
              
              1,276,181
              
              
              1,575,972**Cash
                  and cash equivalents , beginning of period**
              
              
              **6,231,638**
              
              
              **6,053,266**
              
              
              618,836
              
              
              319,045**Cash
                  and cash equivalents , end of period**
              
              
              **5,005,109**
              
              
              **5,005,109**
              
              
              1,895,017
              
              
              1,895,017**Includes
                  cash and cash equivalents related to:****Continuing
                  operations**
              
              
              **3,784,045**
              
              
              **3,784,045**
              
              
              394,086
              
              
              394,086**Discontinued
                  operations**
              
              
              **1,221,064**
              
              
              **1,221,064**
              
              
              1,500,931
              
              
              1,500,931**5,005,109**
              
              
              **5,005,109**
              
              
              1,895,017
              
              
              1,895,017
 
 *The
        accompanying notes are an integral part of these interim consolidated financial
        statements*
  F-4
    **DYNASTY
        GAMING INC.**
 **NOTES
        TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE SECOND QUARTER ENDED JUNE 30, 2006**
 **(IN
        CANADIAN DOLLARS)**
 
   **1.**
              **Basis
                  of Presentation**
  The consolidated interim financial statements included in this report are unaudited
        and have not been the subject of a review by our auditors. These statements
        are
        prepared by management and reflect normal and recurring adjustments which
        are,
        in the opinion of the Company, considered necessary for a fair presentation.
        These consolidated interim financial statements have been prepared in conformity
        with Canadian generally accepted accounting principles and should be read
        in
        conjunction with the consolidated financial statements and the notes as at
        and
        for the year ended December 31, 2005.
  **2.**
              **Statutes
                  of Incorporation and Nature of
                  Activities**
  Dynasty
        Gaming Inc. (“the Company”) 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
        Company is committed to devoting its management and financial resources to
        the
        on-line gaming business; therefore, it has entered into negotiations for
        the
        sale of its subsidiaries: MedEvents (“MED”), Cadence Healthcare Communications
        Inc. (“CHCI”) and CPC Econometrics (“CPC”).
   **3.**
              **Significant
                  Accounting Policies**
   The
        same
        accounting policies and methods were followed as were followed in the
        preparation of the audited annual financial statements for the financial
        year
        ended December 31, 200 5,
        with
        the addition of the following:
  **Government
        assistance**
  Government
        assistance is comprised of investment tax credits and scientific research
        and
        experimental development tax credits. These credits are recognized when there
        is
        reasonable assurance of their recovery using the cost reduction method. Investment
        tax credits are subject to the customary approvals by the pertinent tax
        authorities. Adjustments required, if any, are reflected in the year when
        such
        assessments are received.
 
  **4.**
              **Assets
                  held for sale and discontinued
                  operations**
   The
        Company has committed to a plan to sell the 3 subsidiaries: MedEvents Inc.
        (“MED”), Cadence Healthcare Communications Inc. (“CHCI”) and CPC Econometrics
        Inc. (“CPC”), involved in activities outside of its main business focus. An
        active program to locate a buyer and other actions required to complete the
        sale
        plan have been initiated and the Company expects to complete the sale within
        one
        year. Actions required to complete the plan indicate that it is unlikely
        that
        significant changes to the plan will be made or that the plan will be
        withdrawn.
   F-5
 
 **DYNASTY
          GAMING INC.**
 **NOTES
          TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE SECOND QUARTER ENDED JUNE 30, 2006**
 **(IN
          CANADIAN DOLLARS)**
 
  **4.**
              **Assets
                  held for sale and discontinued operations -
                  cont’d**
  
 The
        results of discontinued operations presented in the accompanying interim
        consolidated statements of income were as follows for the interim period
        ended:
  **JUNE
                    30, 2006**
                
                JUNE
                    30, 2005**3
                    Months**
                
                **6
                    Months**
                
                3
                    Months
                
                6
                    Months$
                
                **$**
                
                $
                
                $**Revenues**
                
                **820,495**
                
                **925,658**
                
                1,964,525
                
                4,239,209**Operating
                    expenses**Direct
                    costs
                
                
                **608,570**
                
                
                **729,375**
                
                
                1,353,917
                
                
                3,062,095Selling
                
                
                **41,920**
                
                
                **83,374**
                
                
                64,361
                
                
                128,102Administrative
                
                
                **53,175**
                
                
                **146,427**
                
                
                482,468
                
                
                929,683Amortization
                    - property and equipment and assets under capital leases
                
                
                **6,634**
                
                
                **22,219**
                
                
                9,563
                
                
                18,625Interest
                    (income) expense
                
                
                **(1,500**
                **)**
                
                **(1,071**
                **)**
                
                (505
                )
                
                1,425Other
                    (income) expenses
                
                
                **(12,220**
                **)**
                
                **(12,220**
                **)**
                
                4,537
                
                
                6,965Gain
                    on sale of equipment
                
                
                **(199**
                **)**
                
                **(199**
                **)**
                
                -
                
                
                -**696,380**
                
                
                **967,905**
                
                
                1,914,341
                
                
                4,146,895Earnings
                    (loss) before income taxes
                
                
                **124,115**
                
                
                **(42,247**
                **)**
                
                50,184
                
                
                92,314Income
                    taxes
                
                
                **60,455**
                
                
                **-**
                
                
                119,077
                
                
                122,356**Net
                    income (loss) from discontinued operation**
                
                
                **63,660**
                
                
                **(42,247**
                **)**
                
                (68,893
                )
                
                (30,042
                )
 **Supplemental
        cash flow information:**
  **June
                    30, 2006**
                
                June
                    30, 2005**3
                    Months**
                
                **6
                    Months**
                
                3
                    Months
                
                6
                    Months$
                
                $
                
                $
                
                $Interest
                    paid
                
                
                2,699
                
                
                4,788
                
                
                820
                
                
                1,947
 
 F-6
 
 **DYNASTY
            GAMING INC.**
 **NOTES
            TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
            THE SECOND QUARTER ENDED JUNE 30, 2006**
 **(IN
            CANADIAN DOLLARS)**
 
  **4.**
              **Assets
                  held for sale and discontinued operations -
                  cont’d**
  
 The
        assets and liabilities of the discontinued operations were segregated in
        the
        accompanying interim consolidated balance sheets and were reported as Assets
        held for sale and Liabilities related to assets held for sale.
 
 The
        assets held for sale and the related liabilities were as follows as
        at:
   **JUNE
                    30, 2006**
                
                DECEMBER
                    31, 2005$
                
                $**Current
                    assets**Cash
                
                
                **1,221,064**
                
                
                298,053Restricted
                    term deposit
                
                
                **111,620**
                
                
                -Accounts
                    receivable
                
                
                **468,697**
                
                
                1,629,089Work-in-process
                
                
                **156,772**
                
                
                30,866Prepaid
                    expenses and deposits
                
                
                **146,262**
                
                
                296,998**2,104,415**
                
                
                2,255,006**Long
                    term assets**Property
                    and equipment
                
                
                **68,799**
                
                
                79,228Asset
                    under capital lease
                
                
                **37,602**
                
                
                41,779**106,401**
                
                
                121,007**2,210,816**
                
                
                2,376,013**Current
                    liabilities**Bank
                    indebtedness
                
                
                **-**
                
                
                85,337Accounts
                    payable and accrued liabilities
                
                
                **966,039**
                
                
                844,317Income
                    taxes payable
                
                
                **12,948**
                
                
                13,491Deferred
                    revenue
                
                
                **235,367**
                
                
                189,721Current
                    portion of obligation under capital lease
                
                
                **14,866**
                
                
                13,959Current
                    portion of long term debt
                
                
                **16,800**
                
                
                249,400Future
                    tax liabilities
                
                
                **248,162**
                
                
                248,162**1,494,182**
                
                
                1,644,387**Long
                    term liabilities**Obligation
                    under capital lease
                
                
                **19,476**
                
                
                27,161Long
                    term debt
                
                
                **28,000**
                
                
                36,400**47,476**
                
                
                63,561**1,541,658**
                
                
                1,707,948
 
  F-7
  **DYNASTY
              GAMING INC.**
 **NOTES
              TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
              THE SECOND QUARTER ENDED JUNE 30, 2006**
 **(IN
              CANADIAN DOLLARS)**
   **5.**
              **Deferred
                  Development Costs**
   Development
        costs of the Internet-based gaming software *MahjongMania* are
        recorded at cost and amortized on a straight-line basis over the three years
        estimated useful life. The Company has performed an impairment review to
        ensure
        that unamortized deferred development costs remain recoverable from the
        projected future net cash flows that they are expected to generate.
  **June
                    30,2006**
                
                December
                    31,2005Cost
                
                Accumulated
                    Amortization
                
                Net
                    Book Value
                
                Net
                    Book Value$
                
                
                $
                
                
                $
                
                
                $Deferred
                    Development Costs
                
                
                2,459,363
                
                
                409,896
                
                
                2,049,467
                
                
                2,736,451
 In
        March
        2006, research and development tax credits in the amount of $299,348 were
        included as a reduction to the deferred development costs; the amount was
        based
        on the claims submitted. The actual tax credits received were $277,088;
        therefore, $22,260 has been included as an increase to the deferred development
        costs in this quarter.
  **6.**
              **Capital
                  Stock**
   a)
              Authorized
  The
        Company is authorized to issue an unlimited number of common
        shares.
  b)
              Warrants,
                  rights and options exercised during the six month interim
                  period
  Number
                
                Average
                    Exercise Price
                
                Proceeds*****#
                
                $
                
                $Warrants
                
                
                75,000
                
                
                0.50
                
                
                41,250Rights
                
                
                257,334
                
                
                0.15
                
                
                46,320Options
                
                
                277,777
                
                
                0.28
                
                
                101,624610,111
                
                
                
                
                
                189,194
 “ Proceeds”
        is comprised of net cash proceeds plus the related stock-based compensation
        costs, brokers issue costs and warrants costs.
 
 Issued
        common shares:
 **June
                  30, 2006**
              
              December
                  31, 2005**Number
                  of shares**
              
              **Book
                  Value**
              
              Number
                  of shares
              
              Book
                  Value**#**
              
              $
              
              #
              
              $Common
                  shares, beginning of period
              
              
              76,854,115
              
              
              12,405,434
              
              
              36,187,782
              
              
              3,589,810Issuance-
                  private placements
              
              
              -
              
              
              -
              
              
              23,000,000
              
              
              5,344,447Issuance-
                  business acquisition
              
              
              -
              
              
              -
              
              
              9,000,000
              
              
              1,350,000Issuance-
                  warrants, rights and options exercised
              
              
              610,111
              
              
              189,194
              
              
              8,666,333
              
              
              2,121,177Common
                  shares, end of period
              
              
              77,464,226
              
              
              12,594,628
              
              
              76,854,115
              
              
              12,405,434
 
   F-8
  **DYNASTY
            GAMING INC.**
 **NOTES
            TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
            THE SECOND QUARTER ENDED JUNE 30, 2006**
 **(IN
            CANADIAN DOLLARS)**
  **7.**
              **Stock
                  - Based Compensation Plan**
   The
        Company maintains a Stock Option Plan for eligible individuals: directors,
        officers, employees and consultants. On February 24, 2006 the aggregate number
        of shares reserved for issuance was increased to 7,500,000 from the previous
        aggregate of 5,500,000. Under the plan, options are periodically granted
        to
        purchase common shares at an exercise price which is equal to the price quoted
        on the exchange on the date on which the grant of the option is approved
        by the
        board, less the maximum discount permitted under the Exchange’s policies
        applicable to options. 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
        fair
        value compensation expense recorded for the six months ended June 30, 2006,
        in
        respect of this plan, was $214,586 (June 30, 2005 - nil). The weighted average
        fair value of options granted during 2006 was estimated at $0.33 per share
        option using the Black-Scholes model on the date of grant. The following
        weighted-average assumptions were used:
  Risk-free
                    interest rate
                
                5.67%Expected
                    life
                
                1.5
                    yearsExpected
                    volatility in the market price of the shares
                
                85%Expected
                    dividend yield
                
                nil
  The
        number of options has varied as follows for the interim period ended June
        30,
        2006:
  
 **June
                  30, 2006**
              
              December
                  31, 2005**Number
                  of options**
              
              **Weighted
                  average exercise price**
              
              Number
                  of options
              
              Weighted
                  average exercise price#
              
              $
              
              #
              
              $Outstanding
                  at beginning of year
              
              
              2,605,749
              
              
              0.44
              
              
              200,000
              
              
              0.73Forfeited
              
              
              1,750
              
              
              0.15
              
              
              107,750
              
              
              0.47Granted
              
              
              2,716,000
              
              
              0.76
              
              
              2,637,166
              
              
              0.41Exercised
              
              
              277,777
              
              
              0.28
              
              
              123,667
              
              
              0.15Outstanding
                  at end of year
              
              
              5,042,222
              
              
              0.62
              
              
              2,605,749
              
              
              0.44Options
                  exercisable at end of year
              
              
              1,243,223
              
              
              0.56
              
              
              561,361
              
              
              0.38
 
  **8.**
              **Other
                  Income (Expenses)**
  **June
                  30, 2006**
              
              June
                  30, 2005**3
                  Months**
              
              
              **6
                  Months**
              
              
              3
                  Months
              
              
              6
                  Months$
              
              
              $
              
              
              $
              
              
              $Interest
                  on capital leases
              
              
              (93
              )
              
              (225
              )
              
              (678
              )
              
              (1,529
              )Other
                  interest income
              
              
              38,076
              
              
              78,369
              
              
              1,474
              
              
              1,407Foreign
                  exchange(gain)
                  loss
              
              
              6,168
              
              
              436
              
              
              (3,047
              )
              
              (1,797
              )44,151
              
              
              78,580
              
              
              (2,251
              )
              
              (1,919
              )
    F-9
 **DYNASTY
          GAMING INC.**
 **NOTES
          TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE SECOND QUARTER ENDED JUNE 30, 2006**
 **(IN
          CANADIAN DOLLARS)**
 **9.**
              **Supplementary
                  Cash Flow Information**
  **June
                  30, 2006**
              
              June
                  30, 2005**3
                  Months**
              
              **6
                  Months**
              
              3
                  Months
              
              6
                  Months$
              
              $
              
              $
              
              $Interest
                  paid
              
              
              2,699
              
              
              4,788
              
              
              820
              
              
              1,947Non-cash
                  investing and financing activitiesAcquisition
                  of assets through capital leases
              
              
              -
              
              
              -
              
              
              -
              
              
              32,432Capital
                  lease obligation
              
              
              -
              
              
              -
              
              
              -
              
              
              (32,432
              )Increase
                  in common stock due to reduction in other capital pursuant to stock
                  warrants, rights and options issued
              
              
              29,765
              
              
              36,005
              
              
              -
              
              
              -
  
  **10.**
              **Related
                  Party Transactions**
  Transactions
        with companies controlled by shareholders and directors are as
        follows:
  
 **June
                  30, 2006**
              
              June
                  30, 2005**3
                  Months**
              
              **6
                  Months**
              
              3
                  Months
              
              6
                  Months$
              
              $
              
              $
              
              $Direct
                  costs paid to
              
              
              37,117
              
              
              71,257
              
              
              166,072
              
              
              360,739Selling
                  costs paid to
              
              
              -
              
              
              -
              
              
              -
              
              
              17,296Administrative
                  costs paid to
              
              
              85,750
              
              
              196,000
              
              
              47,208
              
              
              79,158
  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. As at June 30, 2006, the Company has $23,700 accounts
        payable to related parties (December 31, 2005 - $21,337).
  **11.**
              **Comparative
                  Figures**
  The
        assets and liabilities as well as the operations and cash flows of the
        discontinued operations (see Note 4) were segregated in the accompanying
        interim
        financial statements and were reported as distinct line items. Correspondingly,
        comparative figures for the prior period have been reclassified to conform
        to
        this presentation.
  
  
 F-10
 **DYNASTY
          GAMING INC.**
 **NOTES
          TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE SECOND QUARTER ENDED JUNE 30, 2006**
 **(IN
          CANADIAN DOLLARS)**
 
  **12.**
              **Segmented
                  Information**
  **June
                  30,2006**
              
              **Consolidated**
              
              **Intersegment
                  eliminations**
              
              **Dynasty
                  Gaming Inc**
              
              **Mahjong****3
                  months**
              
              **6
                  months**
              
              **3
                  months**
              
              **6
                  months**
              
              **3
                  months**
              
              **6
                  months**
              
              **3
                  months**
              
              **6
                  months**$
              
              $
              
              $
              
              $
              
              $
              
              $
              
              $
              
              $**Revenues**
              
              **30,759**
              
              **46,298**
              
              **-**
              
              **-**
              
              **-**
              
              **-**
              
              **30,759**
              
              **46,298****Direct
                  cost**
              
              **302,999**
              
              **681,312**
              
              **-**
              
              **-**
              
              **-**
              
              **-**
              
              **302,999**
              
              **681,312****Marketing
                  and promotion**
              
              **281,410**
              
              **506,762**
              
              **-**
              
              **-**
              
              **164,200**
              
              **336,781**
              
              **117,210**
              
              **169,981****Administration**
              
              **542,060**
              
              **1,044,469**
              
              **-**
              
              **-**
              
              **507,812**
              
              **910,084**
              
              **34,248**
              
              **134,385****Amortization**
              
              **217,817**
              
              **430,665**
              
              **123,486**
              
              **246,972**
              
              **2,727**
              
              **5,008**
              
              **91,604**
              
              **178,685****Impairment**
              
              **-**
              
              **-**
              
              **-**
              
              **(565,331)**
              
              **-**
              
              **565,331**
              
              **-**
              
              **-****Interest
                  (income) expense**
              
              
              **(37,983**
              **)**
              
              **(78,144**
              **)**
              
              **-**
              
              
              **-**
              
              
              **(38,802**
              **)**
              
              **(79,694**
              **)**
              
              **819**
              
              
              **1,550****Other
                  (income) expense**
              
              
              **(6,168**
              **)**
              
              **(436**
              **)**
              
              **-**
              
              
              **-**
              
              
              **(8,492**
              **)**
              
              **(2,860**
              **)**
              
              **2,324**
              
              
              **2,424****Net
                  loss from continuing operations**
              
              
              **(1,269,376**
              **)**
              
              **(2,538,330**
              **)**
              
              **(123,486**
              **)**
              
              **318,359**
              
              
              **(627,445**
              **)**
              
              **(1,734,650**
              **)**
              
              **(518,445**
              **)**
              
              **(1,122,039**
              **)****Net
                  earnings (loss) from discontinued operations**
              
              
              **63,660**
              
              
              **(42,247**
              **)****Net
                  Loss**
              
              
              **(1,205,716**
              **)**
              
              **(2,580,577**
              **)****Segment
                  assets****Segment
                  assets excluding under-noted**
              
              **4,351,245**
              
              
              
              
              
              **(3,403,562**
              **)**
              
              
              
              
              **6,963,760**
              
              
              
              
              
              **791,047****Investment**
              
              
              
              
              
              **-**
              
              
              
              
              
              **(1,350,000**
              **)**
              
              
              
              
              **1,350,000**
              
              
              
              
              
              **-****Deferred
                  development costs**
              
              
              
              
              
              **2,049,467**
              
              
              
              
              
              **1,234,854**
              
              
              
              
              
              **-**
              
              
              
              
              
              **814,613****Assets
                  held for sale**
              
              
              
              
              
              **2,210,816**
              
              
              
              
              
              **-**
              
              
              
              
              
              **-**
              
              
              
              
              
              **-****8,611,528**
              
              
              
              
              
              **(3,518,708**
              **)**
              
              
              
              
              **8,313,760**
              
              
              
              
              
              **1,605,660**
 
  
  The
        Company's revenues are generated from the following geographical
        areas:
  **June
                    30, 2006**
                
                June
                    30, 2005**3
                    Months**
                
                **6
                    Months**
                
                3
                    Months
                
                MonthsCanada
                
                -
                
                -
                
                95,700
                
                95,700United
                    Kingdom
                
                -
                
                -
                
                66,000
                
                66,000Other
                    countries
                
                30,759
                
                46,298
                
                -
                
                -Total
                    sales revenues
                
                
                30,759
                
                
                46,298
                
                
                161,700
                
                
                161,700
    F-11
  **DYNASTY
            GAMING INC.**
 **NOTES
            TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
            THE SECOND QUARTER ENDED JUNE 30, 2006**
 **(IN
            CANADIAN DOLLARS)**
 **12.**
              **Segmented
                  Information - cont’d**
   **Consolidated**
              
              
              **Intersegment
                  eliminations**
              
              
              **Dynasty
                  Gaming Inc**
              
              
              **Mahjong****June
                  30,2005**
              
              
              **3
                  months**
              
              
              **6
                  months**
              
              
              **3
                  months**
              
              
              **6
                  months**
              
              
              **3
                  months**
              
              
              **6
                  months**
              
              
              **3
                  months**
              
              
              **6
                  months****$**
              
              
              **$**
              
              
              **$**
              
              
              **$**
              
              
              **$**
              
              
              **$**
              
              
              **$**
              
              
              **$****Revenue****External**
              
              
              **161,700**
              
              
              **161,700**
              
              
              
              
              
              
              
              
              **161,700**
              
              
              **161,700**
              
              
              **-**
              
              
              **-****Intersegment**
              
              
              **-**
              
              
              **-**
              
              
              **(81,900**
              **)**
              
              **(164,500**
              **)**
              
              **81,900**
              
              
              **164,500**
              
              
              **-**
              
              
              **-****Revenues**
              
              
              **161,700**
              
              
              **161,700**
              
              
              **(81,900**
              **)**
              
              **(164,500**
              **)**
              
              **243,600**
              
              
              **326,200**
              
              
              **-**
              
              
              **-****Administration**
              
              
              **190,827**
              
              
              **293,623**
              
              
              **(134,400**
              **)**
              
              **(164,500**
              **)**
              
              **325,227**
              
              
              **458,123**
              
              
              **-**
              
              
              **-****Amortization**
              
              
              **2,358**
              
              
              **4,715**
              
              
              **-**
              
              
              **-**
              
              
              **2,358**
              
              
              **4,715**
              
              
              **-**
              
              
              **-****Interest
                  (income) expense**
              
              
              **(796**
              **)**
              
              **122**
              
              
              **-**
              
              
              **-**
              
              
              **(796**
              **)**
              
              **122**
              
              
              **-**
              
              
              **-****Other
                  expense**
              
              
              **3,047**
              
              
              **1,797**
              
              
              **-**
              
              
              **-**
              
              
              **3,047**
              
              
              **1,797**
              
              
              **-**
              
              
              **-****Net
                  loss from continuing operations**
              
              
              **(33,736**
              **)**
              
              **(138,557**
              **)**
              
              **52,500**
              
              
              **-**
              
              
              **(86,236**
              **)**
              
              **(138,557**
              **)**
              
              **-**
              
              
              **-****Net
                  loss from discontinued operations**
              
              
              **(68,893**
              **)**
              
              **(30,042**
              **)****Net
                  Loss**
              
              
              **(102,629**
              **)**
              
              **(168,599**
              **)****Segment
                  assets - December 31, 2005****Segment
                  assets excluding under-noted**
              
              **6,174,070**
              
              
              
              
              
              **(3,480,476**
              **)**
              
              
              
              
              **9,148,038**
              
              
              
              
              
              **506,508****Investment**
              
              
              
              
              
              **-**
              
              
              
              
              
              **(1,350,000**
              **)**
              
              
              
              
              **1,350,000**
              
              
              
              
              
              **-****Deferred
                  development costs**
              
              
              
              
              
              **2,736,451**
              
              
              
              
              
              **1,481,826**
              
              
              
              
              
              **-**
              
              
              
              
              
              **1,254,625****Assets
                  held for sale**
              
              
              
              
              
              **2,376,013**
              
              
              
              
              
              **2,376,013**
              
              
              
              
              
              **-**
              
              
              
              
              
              **-****11,286,534**
              
              
              
              
              
              **(972,637**
              **)**
              
              
              
              
              **10,498,038**
              
              
              
              
              
              **1,761,133**
 
 
 
 F-12
 
 **DYNASTY
            GAMING INC.**
 **NOTES
            TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
            THE SECOND QUARTER ENDED JUNE 30, 2006**
 **(IN
            CANADIAN DOLLARS)**
  **13.**
              **Canadian
                  and United States Accounting Policies
                  Differences:**
  The interim
        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:
 
 
 *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 June 30**2006**
                
                
                2005**3
                    Months**
                
                
                **6
                    Months**
                
                
                3
                    Months
                
                
                6
                    MonthsNet
                    loss in accordance with U.S. GAAP
                
                $
                (1,205,716
                )
                $
                (2,580,577
                )
                $
                (102,629
                )
                $
                (168,599
                )Foreign
                    currency translation adjustment
                
                $
                (58,343
                )
                $
                (53,740
                )
                $
                6,281
                
                $
                9,422Accumulated
                    other comprehensive loss
                
                $
                (1,264,059
                )
                $
                (2,634,317
                )
                $
                (96,348
                )
                $
                (159,177
                )
 
 *Estimated
        Value of Warrants* :
 
 In
        2005
        the Company allocated the proceeds of the December 28, 2005 private placement
        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 June 30, 2006 and December 31, 2005 on shareholders’
equity is as follows:
  Canadian
                    GAAP
                
                U.S.
                    GAAPJune
                    30, 2006
                
                December
                    31, 2005
                
                June
                    30, 2006
                
                December
                    31,  2005Capital
                  stock
                
                $
                12,594,628
                
                $
                12,405,434
                
                $
                12,331,378
                
                $
                12,139,934Other
                    capital
                
                $
                654,111
                
                $
                475,530
                
                $
                917,361
                
                $
                741,030Total
                    shareholders’ equity
                
                $
                6,508,045
                
                $
                8,774,587
                
                $
                6,508,045
                
                $
                8,774,587
   F-13
  **DYNASTY
              GAMING INC.**
 **NOTES
              TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
              THE SECOND QUARTER ENDED JUNE 30, 2006**
 **(IN
              CANADIAN DOLLARS)**
  **13.**
              **Canadian
                  and United States Accounting Policies Differences: -
                  cont’d**
  *Business
        Acquisition (unaudited)* :
  SFAS
        No.
        141, “Business Combinations”, requires certain unaudited proforma financial
        information to be presented related to business acquisitions.  The
        following unaudited pro forma financial information presents the combined
        results of operations as if the acquisitions in the year 2005 had occurred
        as of
        the beginning of each of the periods reported below. The unaudited pro forma
        interim financial information is not intended to represent or be indicative
        of
        the consolidated results of operations that would have been reported had
        the
        acquisitions been completed as of the beginning of the periods presented,
        and
        should not be taken as representative of our future consolidated results
        of
        operations or financial condition. Unaudited pro forma results were as follows
        for the interim six month period ended June 30, 2005:
  **3
                  Months**
              
              **6
                  Months****(unaudited)**
              
              **(unaudited)**$
              
              $Revenues
              
              161,700
              
              161,700Loss
                  from operations
              
              
              (201,631
              )
              
              (370,277
              )Net
                  loss from continuing operations
              
              
              (178,395
              )
              
              (347,985
              )Net
                  loss from discontinued operations
              
              
              (68,893
              )
              
              (30,042
              )Net
                  loss
              
              
              (247,288
              )
              
              (378,027
              )Loss
                  per share - basic and diluted:From
                  continuing operations
              
              
              (0.004
              )
              
              (0.009
              )From
                  discontinued operations
              
              
              (0.002
              )
              
              (0.001
              )(0.006
              )
              
              (0.010
              )
  
 *New
        Accounting Pronouncements* :
 
 As
        disclosed in the Company’s December 31, 2005 consolidated financial statements,
        there have been no new accounting pronouncements that are expected to have
        a
        significant impact to the Company’s U.S. GAAP financial results.










F-14


**AUDITORS'
      REPORT**





The
      Shareholders of:


Dynasty
      Gaming 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 flaws 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. We believe that our audit provides a
      reasonable basis for our opinion.






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.






Montreal, Quebec
            /s/
              Horwath AppelMarch
              7, 2006
            Horwath AppelChartered Accountants







Continents
      by Auditors for U.S. Readers on Canada-U.S. Reporting Differences




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 26 to the financial
      statements.


Montreal, Quebec
              /s/
                Horwath AppelMarch
                7, 2006
              Horwath AppelChartered Accountants









F-15




**DYNASTY
                  GAMING INC,**
                **DECEMBER
                  31, 2005 AND 2004**
                
                **CONTENTS****Page****AUDITORS'
                  REPORT**
              F-15**CONSOLIDATED
                    FINANCIAL STATEMENTS**Consolidated
                  Balance Sheets
              F-17Consolidated
                  Statements of Operations and Deficit
              F-18Consolidated
                  Statements of Shareholders' Equity
              F-19Consolidated
                  Statements of Cash Flows
              F-20Notes
                  to Consolidated Financial Statements
              F-21
   F-16
   **DYNASTY
                  GAMING INC.**
                **(formerly
                  Events International Holding Corporation)**
                **CONSOLIDATED
                  BALANCE SHEETS**
                **AS
                  AT DECEMBER 31, 2005 AND 2004**
                **(
                  IN CANADIAN DOLLARS)****2005**
              
              2004$
              
              $**ASSETS**
                **Current
                  assets**
                **Cash**
              
              
              **5,755,213**
              
              
              303,187**Restricted
                  term deposit (Note 11)**
              
              
              **116,300**
              
              
              120,200**Accounts
                  receivable**
              
              
              **129,482**
              
              
              389**Prepaid
                  expenses and deposits**
              
              
              **46,021**
              
              
              960**Loans
                  receivable**
              
              
              **-**
              
              
              30,200**Assets
                  held for sale (Notes 3 and 4)**
              
              
              **2,255,006**
              
              
              2,081,833**8,302,022**
              
              
              2,536,769**Deferred
                  development costs**
              
              
              **2,736,451**
              
              
              **-****Property
                  and equipment (Note 7)**
              
              
              **104,052**
              
              
              -**Assets
                  under capital leases (Note 8)**
              
              
              **23,002**
              
              
              -**Goodwill
                  (Note 9)**
              
              
              -
              
              
              328,348**Assets
                  held for sale (Notes 3 and 4)**
              
              
              **121,007**
              
              
              158,258**11,286,534**
              
              
              3,023,375**LIABILITIES
                  AND SHAREHOLDERS****'****EQUITY**
                **Current
                  Liabilities**
                **Accounts
                  payable and accrued liabilities**
              
              
              **750,088**
              
              
              466,586**Deferred
                  revenue**
              
              
              **48,908**
              
              
              -**Current
                  portion of obligations under capital leases (Note
                  12)**
              
              
              **5,003**
              
              
              -**Liabilities
                  related to assets held for sale (Notes 3 and 4)**
              
              
              **1,644,387**
              
              
              1,740,483**2,448,386**
              
              
              2,207,069**Liabilities
                  related to assets held for sale (Notes 3 and 4)**
              
              
              **63,561**
              
              
              94,319**2,511,947**
              
              
              2,301,388**Shareholders****'****equity**
                **Capital
                  stock (Notes 4, 5 and 14)**
              
              
              **12,405,434**
              
              
              3,589,810**Contributed
                  surplus (Note 4)**
              
              
              **120,653**
              
              
              120,653**Other
                  capital (Note 16)**
              
              
              **475,530**
              
              
              **-****Cumulative
                  translation adjustment (Note 17)**
              
              
              (189,919
              )
              
              (135,924
              )**Deficit**
              
              
              (4,037,111
              )
              
              (2,852,552
              )**8,774,587**
              
              
              721,987**11,286,534**
              
              
              3,023,375
  **Commitment,
        subsequent event and Canadian and United States accounting policies
        differences**
 **(Notes
        21, 23 and 26)**
  **On
        behalf of the board:**
  **"Albert
        Barbusci"** **,
        Director**
 **"David
        Wolk"**  **,
        Director**
  
 See
        accompanying Notes to Consolidated Financial statements
 F-17
 
 **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**
                
                
                **161,700**
                
                
                26,053
                
                
                -**Operating
                    expenses****Direct
                    costs**
                
                
                **53,593**
                
                
                -
                
                
                -**Marketing
                    and promotion**
                
                
                **231,567**
                
                
                16,988
                
                
                22,482**Administrative**
                
                
                **911,006**
                
                
                415,805
                
                
                79,136**Amortization
                    - property, and equipment and assets under capital
                    leases**
                
                
                **16,109**
                
                
                -
                
                
                -**Impairment
                    (Note 6)**
                
                
                **-**
                
                
                67,958
                
                
                285,454**Impairment
                    - goodwill (Note 9)**
                
                
                **328,348**
                
                
                -
                
                
                -**1,540,623**
                
                
                500,751
                
                
                387,072**Loss
                    from operations**
                
                
                (1,378,923
                )
                
                (474,698
                )
                
                (387,072
                )**Other**
                  **Other
                    income (Note 18)**
                
                
                **7,749**
                
                
                40,260
                
                
                46,198**Net
                    loss from continued operations**
                
                
                (1,371,174
                )
                
                (434,438
                )
                
                (340,874
                )**Income
                    (loss) from discontinued operations (Notes 3 and
                    4)**
                
                
                **186,615**
                
                
                (2,784,136
                )
                
                (463,890
                )**Gain
                    on sales of discontinued operations (Note 4)**
                
                
                **-**
                
                
                1,013,670
                
                
                101,296**Net
                    income (loss) from discontinuing operations**
                
                
                **186,615**
                
                
                (1,770,466
                )
                
                (362,594
                )**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**
                
                
                (0.030
                )
                
                (0.011
                )
                
                (0.009
                )**From
                    discontinued operations**
                
                
                **0.004**
                
                
                (0.046
                )
                
                (0.009
                )(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
 F-18
 
 **DYNASTY
        GAMING INC.**
 **CONSOLIDATED
        STATEMENTS OF SHAREHOLDERS' EQUITY**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003**
 **(
        IN CANADIAN DOLLARS)**
  **Foreign****Currency****Capital**
                
                **Capital**
                
                **Contributed**
                
                **Other**
                
                **Translation**
                
                
                
                **Total****Stock**
                
                **Stock**
                
                **Surplus**
                
                **Capital**
                
                **Adjustment**
                
                
                
                **Shareholders'****(note
                    14)**
                
                **(note
                    14)**
                
                **(Note
                    4)**
                
                **(Note16)**
                
                **(Note17)**
                
                **Deficit**
                
                **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 4)
                
                
                (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 - Business Acquisition
                
                
                9,000,000
                
                
                1,350,000
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,350,000Shares
                    issued - Brokers' & Agent Warrants
                
                
                8,542,666
                
                
                2,097,680
                
                
                
                
                
                (16,280
                )
                
                
                
                
                
                
                
                2,081,400Shares
                    issued - Stock Option Plan
                
                
                123,667
                
                
                23,497
                
                
                
                
                
                (4,947
                )
                
                
                
                
                
                
                
                18,550Stock-based
                    costs (Note 15)
                
                
                
                
                
                
                
                
                
                
                
                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
 
 
 F-19
 
 **DYNASTY
                  GAMING INC.**
                **(formerly
                  Events International Holding Corporation)**
                **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**
                
                
                (1,184,559
                )
                
                (2,204,904
                )
                
                (703,468
                )**Adjustments
                    to reconcile net loss to net cash used in operating
                    activities****Amortization
                    property and equipment and**
                  **assets
                    under capital leases**
                
                
                **53,360**
                
                
                122,472
                
                
                142,563**Amortization
                    intangible assets**
                
                
                **-**
                
                
                1,266,717
                
                
                95,703**Amortization
                    deferred lease benefits**
                
                
                **-**
                
                
                (3,426
                )
                
                (4,569
                )**Impairment
                    (Note 6)**
                
                
                **-**
                
                
                67,958
                
                
                285,454**Impairment
                    - goodwill (Note 9)**
                
                
                **328,348**
                
                
                1,782,881
                
                
                13,141**Gain
                    on sale of discontinued operations**
                
                
                **-**
                
                
                (1,013,670
                )
                
                -**Gain
                    on settlement of debt (Note 10)**
                
                
                **-**
                
                
                (1,049,580
                )
                
                -**Loss
                    on sale of property and equipment**
                
                
                **-**
                
                
                4,651
                
                
                -**Stock
                    based compensation (Note 15)**
                
                
                **30,257**
                
                
                -
                
                
                -**Future
                    tax**
                
                
                **148,050**
                
                
                88,989
                
                
                33,050**Discontinued
                    operations**
                
                
                (139,358
                )
                
                2,441,131
                
                
                207,614**Decrease
                    (increase) in receivables**
                
                
                **181,226**
                
                
                (2,283,613
                )
                
                997,303**Decrease
                    (increase) in work in progress**
                
                
                **39,698**
                
                
                (673,175
                )
                
                2,192,232**(Increase)
                    decrease prepaid expenses**
                
                
                (267,505
                )
                
                258,671
                
                
                (248,836
                )**(Decrease)
                    increase payables and accrued liabilities**
                
                
                (809,365
                )
                
                1,187,747
                
                
                (2,916,623
                )**(Decrease)
                    increase in deferred revenue**
                
                
                (54,146
                )
                
                201,931
                
                
                (245,813
                )**Net
                    change in operating activities of continuing
                    operations**
                
                
                (1,673,994
                )
                
                194,780
                
                
                (152,249
                )**Cash
                    flows from investing activities**
                  **Acquisition
                    of property and equipment**
                
                
                (29,631
                )
                
                -
                
                
                -**Increase
                    in development costs - gaming software**
                
                
                (578,624
                )
                
                **-**
                
                
                **-****Decrease
                    (increase) in loan receivable - shareholder**
                
                
                **-**
                
                
                346,588
                
                
                -**Decrease
                    (increase) in loan receivable**
                
                
                **30,200**
                
                
                (30,200
                )
                
                -**Cash
                    acquired on acquisition**
                
                
                **6,863**
                
                
                **-**
                
                
                **-****Cash
                    consideration on business acquisition**
                
                
                **-**
                
                
                **-**
                
                
                (125,000
                )**Cash
                    consideration on sale of business**
                
                
                **-**
                
                
                100
                
                
                125,000**Net
                    change in investing activities of continuing
                    operations**
                
                
                (571,192
                )
                
                316,488
                
                
                -**Cash
                    flows from financing activities**
                  **Decrease
                    in restricted term deposit**
                
                
                **3,900**
                
                
                629,800
                
                
                -**Decrease
                    in loan from shareholder**
                
                
                (60,000
                )
                
                -
                
                
                -**Repayment
                    of obligations under capital lease**
                
                
                (27,429
                )
                
                -
                
                
                -**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
                )
                
                **-**
                
                
                **-****Net
                    change in financing activities of continuing
                    operations**
                
                
                **7,827,368**
                
                
                478,275
                
                
                -**Cash
                    flows from discontinued operations (Notes 3 and 4)**
                  **Operating
                    cash flows**
                
                
                **139,358**
                
                
                (2,441,131
                )
                
                (207,614
                )**Investing
                    cash flows**
                
                
                **104,636**
                
                
                (17,565
                )
                
                (1,189,261
                )**Financing
                    cash flows**
                
                
                (74,378
                )
                
                66,622
                
                
                1,802,805**Effect
                    of exchange rates changes on cash and cash
                    equivalents**
                
                
                (17,577
                )
                
                246
                
                
                (4,515
                )**152,039**
                
                
                (2,391,828
                )
                
                401,415**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**
                
                
                **5,755,213**
                
                
                303,187
                
                
                16,035**Discontinued
                    operations**
                
                
                **298,053**
                
                
                15,858
                
                
                1,705,295**6,053,266**
                
                
                319,045
                
                
                1,721,330
  See
        accompanying Notes to Consolidated Financial statements
 
  F-20
  **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 included
        in assets held for sale (Note 3) 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.
 F-21
 **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 availability for general release, will be amortized.
        The annual amortization is the greater of (a) the straight-line amortization
        over the estimated useful life not to exceed three years or (b) the amount
        based
        on the ratio of current revenues to anticipated future revenues. 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
                  and equipment and assets under capital
                  leases**
  Property
        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%
  **(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.
 
 **(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.
  F-22
 
  **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**
  **(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.
  **(m)**
              **Impairment
                  of long-lived assets**
  The
        C ompany
        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.
 F-23
 **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**
  **(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 Notes 3 and 4).
  **(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.**
              **Assets
                  Held for Sale and Discontinued
                  Operations**
 
 Effective
        September 30, 2006 the Company discontinued its management consulting on
        e-commerce and the creation of advertising strategies and programs operations
        and entered into an agreement to sell the shares held by the Company in its
        wholly-owned Montreal based subsidiaries Medevents Inc. (“MED”) and Cadence
        Healthcare Communications Inc. (“CHC”) and its wholly-owned US subsidiary CPC
        Econometrics (“CPC”).
 
 The
        agreement which is expected to close in October 2006 sets the purchase price
        at
        $300,000.
 
 The
        results of operations, cash flows and financial position of MED, CHC and
        CPC
        have been segregated in the accompanying consolidated financial
        statements.
  F-24
 **DYNASTY
          GAMING INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
          AMOUNTS ARE IN CANADIAN DOLLARS)**
 **3.**
              **Assets
                  Held for Sale and Discontinued Operations -
                  cont’d**
 
 The
        results of discontinued operations presented in the accompanying consolidated
        statements of income were as follows:
  **2005**
                $
              
              2004
                $
              
              2003
                $Revenues
              
              
              7,794,457
              
              
              6,212,739
              
              
              3,911,014Operating
                  expensesDirect
                  costs
              
              
              5,241,175
              
              
              4,315,070
              
              
              2,913,250Selling
              
              
              320,267
              
              
              133,169
              
              
              328,480Administrative
              
              
              1,786,179
              
              
              1,502,643
              
              
              478,074Amortization
                  - property and equipment and assets under capital leases
              
              
              37,251
              
              
              49,793
              
              
              33,802Amortization
                  - intangible assets
              
              
              -
              
              
              1,266,717
              
              
              95,703Impairment
                  of assets
              
              
              -
              
              
              234,965
              
              
              -7,384,872
              
              
              7,502,357
              
              
              3,849,309Income
                  (loss) from operations
              
              
              409,585
              
              
              (1,289,618
              )
              
              61,705OtherOther
                  income (expenses)
              
              
              21,757
              
              
              (14,406
              )
              
              68,491Gain
                  on settlement of debt
              
              
              -
              
              
              1,065,803
              
              
              -Loss
                  on sale of property and equipment
              
              
              -
              
              
              (4,651
              )
              
              -21,757
              
              
              1,046,746
              
              
              68,491Income
                  (loss) from discontinued operation before income taxes
              
              
              431,342
              
              
              (242,872
              )
              
              130,196Income
                  taxesCurrent
              
              
              129,791
              
              
              122,021
              
              
              71,834Future
              
              
              114,936
              
              
              88,989
              
              
              -Net
                  income (loss) from discontinued operation
              
              
              186,615
              
              
              (453,882
              )
              
              58,362
 
 
 The
        assets held for sale and the related liabilities were as follows
        as:
 
 **2005**
                **$**
              
              2004
                $**ASSETS**Cash
              
              
              298,053
              
              
              15,858Accounts
                  receivable
              
              
              1,629,089
              
              
              1,863,241Work-in-process
              
              
              30,866
              
              
              70,564Prepaid
                  expenses and deposits
              
              
              296,998
              
              
              28,362Loan
                  receivable
              
              
              -
              
              
              103,8082,255,006
              
              
              2,081,833Property
                  and equipment
              
              
              79,228
              
              
              106,034Assets
                  under capital leases
              
              
              41,779
              
              
              52,224121,007
              
              
              158,2582,376,013
              
              
              2,240,091
   F-25
 **DYNASTY GAMING INC.****NOTES TO CONSOLIDATED FINANCIAL STATEMENTS****AS AT DECEMBER 31, 2005, 2004 AND 2003****(TABULAR AMOUNTS ARE IN CANADIAN DOLLARS)**
 **3.**
              **Assets
                  Held for Sale and Discontinued Operations -
                  cont’d**
 
 **2005**
                **$**
              
              2004
                $**LIABILITIES**Bank
                  indebtedness
              
              
              85,337
              
              
              122,329Accounts
                  payable and accrued liabilities
              
              
              844,317
              
              
              923,000Income
                  taxes payable
              
              
              13,491
              
              
              26,148Deferred
                  income
              
              
              189,721
              
              
              299,255Current
                  portion of obligation under capital lease
              
              
              13,959
              
              
              12,439Current
                  portion of long term debt
              
              
              249,400
              
              
              257,200Future
                  tax liabilities
              
              
              248,162
              
              
              100,1121,644,387
              
              
              1,740,483Obligation
                  under capital lease
              
              
              27,161
              
              
              41,119Long
                  term debt
              
              
              36,400
              
              
              53,2001,707,948
              
              
              1,834,802
 
 
 Supplementary
        cash flow information for discontinued operations:
 
 **2005**
                $
              
              2004
                $
              
              2003
                $Income
                  taxes paid
              
              
              121,160
              
              
              129,230
              
              
              21015Interest
                  paid
              
              
              13,829
              
              
              19,025
              
              
              1,923Non-cash
                  investing and financing activitiesAcquisition
                  of assets through capital lease
              
              
              -
              
              
              -
              
              
              68,716Capital
                  lease obligation
              
              
              -
              
              
              -
              
              
              (68,716
              )Cancellation
                  of debt
              
              
              -
              
              
              278,200
              
              
              -Write-down
                  of intangible asset on cancellation of debt
              
              
              -
              
              
              (278,200
              )
              
              -
 
  **4.**
              **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.
 
 
 F-26
 **DYNASTY
          GAMING INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
          AMOUNTS ARE IN CANADIAN DOLLARS)**
  **4.**
              **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 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.
  F-27
 **DYNASTY
          GAMING INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
          AMOUNTS ARE IN CANADIAN DOLLARS)**
  **4.**
              **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
              
              2003Revenues
              
              $
              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**
              
              2003Net
                  loss from discontinued operations
              
              $
              (2,330,254
              )
              $
              (522,252
              )
 
 
 Supplementary
        cash flow information for discontinued operations:
 
 Discontinued
                  operations EIMP
              
              **2004**
                (273-day
                  period)
              
              2003
                (365-day
                  period)Interest
                  paid
              
              $
              34,276
              
              $
              37,738
 
 F-28
 **DYNASTY
          GAMING INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
          AMOUNTS ARE IN CANADIAN DOLLARS)**
 
 **5.**
              **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.
 
 
 **6.**
              **Impairment**
 
 **200****5**
              2004
              2003**$**
              $
              $Loan
                  to shareholder bearing interest at prime plus 1%, on
                  demand
              -
              67,958
              285,454
 
 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 of
        $285,454 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.
  F-29
 
 **DYNASTY
          GAMING INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
          AMOUNTS ARE IN CANADIAN DOLLARS)**
 **7.**
              **Property
                  and equipment**
 
 **2005**Cost
              Accumulated
                  Amortization
              Net
                  Book Value$
              $
              $Computer
                  hardware and software
              136,518
              34,990
              101,528Furniture
                  and fixtures
              3,500
              976
              2,524140,018
              35,966
              104,052
 
  **8.**
              **Assets
                  Under Capital Leases**
  ****
              
              
              **2005**Cost
              Accumulated
                  Amortization
              Net
                  Book Value$
              $
              $Computer
                  hardware and software
              29,432
              8,830
              20,602Furniture
                  and fixtures
              3,000
              600
              2,40032,432
              9,430
              23,002
  **9.**
              **Goodwill**
  During
        the third quarter of 2005 the Company performed the goodwill impairment test
        and
        determined an
        impairment of the goodwill associated with the self-sustaining foreign
        subsidiary CPC Econometrics Inc. which is held for sale (Note 3). CPC had
        not
        signed new contracts and consequently the revenue stream could be substantially
        reduced, whereupon an impairment loss of $328,348 was recorded.
  A
        subsidiary, which is held for sale by the Company, recorded an impairment
        loss
        of $1,782,881 in 2004 and $13,141 in 2003.
 **10.**
              **Gain
                  on settlement of debt**
  A
        subsidiary, which is held for sale by 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.
  **11.**
              **Bank
                  Indebtedness**
  A
        subsidiary ,
        which
        is held for sale by 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).
  F-30
 
  **DYNASTY
            GAMING INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
            AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
            AMOUNTS ARE IN CANADIAN DOLLARS)**
 **12.**
              **Obligation
                  Under Capital Lease**
 **2005**
              
              2004$
              
              
              $Payable
                  in capital and interest instalments, ending November 2006
              
              
              5,003
              
              
              -Less:
                  current portion
              
              
              5,003
              
              
              --
              
              
              
              
              
              -
  The
        future minimum lease payments with respect to capital leases are as
        follows:
 Principal
                and interest
              
              $
              5,296Less:
                amount representing interest (average
                of 12%)
              
              
              293Present
                value of obligations under capital
                leases
              
              $
              $5,003
  
    **13.**
              **Income
                  Taxes**
  **2005**
              
              2004
              
              2003$
              
              $
              
              $Loss
                  from continuing operationsCanadian
              
              
              (1,178,195
              )
              
              (434,438
              )
              
              (340,874
              )Foreign
              
              
              (192,979
              )
              
              -
              
              
              -(1,371,174
              )
              
              (434,438
              )
              
              (340,874
              )Combined
                  federal and provincial statutory rates
              
              
              31.00
              %
              
              31.02
              %
              
              33.05
              %Computed
                  income tax recovery at statutory rates
              
              
              (425,064
              )
              
              (134,763
              )
              
              (112,659
              )Increase
                  (decrease) resulting from:Impairments
              
              
              101,787
              
              
              10,540
              
              
              47,171Non-deductibleexpenses
              
              
              5,541
              
              
              1,298
              
              
              499Non-recognition
                  offuture
                  income tax assets
              
              
              -
              
              
              10,540
              
              
              47,171Non-recognition
                  of tax benefits
                  related to non-capital losses
              
              
              257,913
              
              
              112,385
              
              
              17,818Other
              
              
              59,823
              
              
              -
              
              
              -Income
                  tax expense
              
              
              -
              
              
              -
              
              
              -
  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
        $ 1,941,400, **** which
        are
        available to be applied against future taxable income. The non-capital losses
        expire as follows:
   Year
                  of Expiry
              Amount2015
              981,0002014
              360,0002010
              54,0002009
              194,0002008
              64,0002007
              1,4002006
              287,000
   The
        potential tax benefits relating to these losses have not been recognized
        in the
        financial statements.
   F-31
 **DYNASTY
          GAMING INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
          AMOUNTS ARE IN CANADIAN DOLLARS)**
  **14.**
              **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.
 
 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
        Company estimated
        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.
  F-32
 
  **DYNASTY
          GAMING INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
          AMOUNTS ARE IN CANADIAN DOLLARS)**
  
 **14.**
              **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.
 
 F-33
  **DYNASTY
        GAMING INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
        AMOUNTS ARE IN CANADIAN DOLLARS)**
 
  **14.**
              **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
  **15.**
              **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.
  F-34
  **DYNASTY
        GAMING INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
        AMOUNTS ARE IN CANADIAN DOLLARS)**
 
  **15.**
              **Stock
                  -Based Compensation Plan
                  -cont’d**
  The
        summarized information on options as at December 31, 2005 is as
        follows:
 Options
                  Outstanding
              Options
                  ExercisableNumber
                  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
  F-35
 **DYNASTY
          GAMING INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
          AMOUNTS ARE IN CANADIAN DOLLARS)**
  **15.**
              **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
              
              2003Loss
                  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
  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
 foll owing assumptions:
  Risk-free interest rate
                3.69%Expected
                    life
                4
                    yearsExpected volatility in the market
                  price
                  of the shares
                162%Expected
                  dividend yield
                nil
  
 F-36
 
  **DYNASTY
            GAMING INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
            AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
            AMOUNTS ARE IN CANADIAN DOLLARS)**
  **16.**
              **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
              
              
              -
  **17.**
              **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 which
        is held for sale (Note 3), 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.
  **18.**
              **Other
                  Income**
   **2005**
              
              2004
              
              2003$
              
              
              $
              
              
              $Interestpaid
                  on liens
              
              
              (2,349
              )
              
              -
              
              
              -Other
                  interest income
              
              
              831
              
              
              15,281
              
              
              46,198Foreign
                  exchange gain
              
              
              9,267
              
              
              24,979
              
              
              -7,749
              
              
              40,260
              
              
              46,198
  **19.**
              **Supplementary
                  Cash Flow Information**
   **2005**
              
              2004
              
              2003$
              
              
              $
              
              
              $Interest
                  paid
              
              
              7,522
              
              
              1,313
              
              
              2,236Non-cash
                  investing and financing activitiesAcquisition
                  of assets through capital leases
              
              
              32,432
              
              
              -
              
              
              -Capital
                  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
              
              
              -Cancellation
                  of stock received
              
              
              -
              
              
              (241,306
              )
              
              -
 
 F-37
  **DYNASTY
            GAMING INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
            AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
            AMOUNTS ARE IN CANADIAN DOLLARS)**
  **19.**
              **Supplementary
                  Cash Flow Information -
                  cont’d**
 
 **2005**
              
              2004
              
              2003$
              
              
              $
              
              
              $Cancellation
                  of debt
              
              
              -
              
              
              278,200
              
              
              -Write-down
                  of intangible asset on cancellation of debt
              
              
              -
              
              
              (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
                  ofstock
                  previously issued for acquisition of subsidiary
              
              
              -
              
              
              -
              
              
              (750,000
              )
  
  **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)  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.
  **21.**
              **Commitment**
  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.
  **22.**
              **Rela****ted
                  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
              
              
              30,183
  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 $21,337 accounts payable to related
        parties as at December 31, 2005; nil in 2004.
  **23.**
              **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.
  **24.**
              **Comparative
                  Figures**
  Certain
        comparative figures for the prior year s
        have
        been reclassified to conform with the presentation adopted in the current
        year.
  **25.**
              **Segmented
                  Information**
  Dynasty
        Gaming Inc.’s reportable segments for
        continuing operations for the fiscal year 2005 are the newly purchased “Mahjong”
entities: Mahjong Systems Limited, based in Turks and Caicos Islands, and
        Mahjong Development Inc., based in Canada. Mahjong Systems Limited and Mahjong
        Development Inc. (“Mahjong”) will generate revenue from software licensing fees
        and a share of winnings from each game played. The other subsidiaries, Cadence
        Healthcare Communications Inc., CPC Econometrics Inc.and MedEvents Inc.,
        are
        being held for sale.
  Dynasty
        Gaming Inc. generates revenues primarily by providing management services
        to
        Mahjong. The services are charged at cost plus mark-up based on proportionate
        usage.
  F-38
 **DYNASTY
            GAMING INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
            AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
            AMOUNTS ARE IN CANADIAN DOLLARS)**
  **25.**
              **Segmented
                  Information - cont’d**
  **2005**
              
              
              **Consolidated**
              
              
              **Intersegment
                  eliminations**
              
              
              **Dynasty**
                **Gaming
                  Inc**
              
              
              **Mahjong**$
              
              
              $
              
              
              $
              
              
              $**Revenue****External**
              
              
              **161,700**
              
              
              **-**
              
              
              **161,700**
              
              
              **-****Intersegment**
              
              
              **-**
              
              
              **(403,698**
              **)**
              
              **403,698**
              
              
              **-****Total
                  revenues**
              
              
              **161,700**
              
              
              **(403,698**
              **)**
              
              **565,398**
              
              
              **-****Direct
                  cost**
              
              
              **53,593**
              
              
              **-**
              
              
              **-**
              
              
              **53,593****Selling
                  and administration**
              
              
              **1,142,573**
              
              
              **(403,698**
              **)**
              
              **1,100,756**
              
              
              **445,515****Amortization**
              
              
              **16,109**
              
              
              **-**
              
              
              **9,550**
              
              
              **6,559****Impairment**
              
              
              **328,348**
              
              
              **(335,652**
              **)**
              
              **664,000**
              
              
              **-****Loss
                  from operations**
              
              
              **(1,378,923**
              **)**
              
              **335,652**
              
              
              **(1,208,908**
              **)**
              
              **(505,667**
              **)****Other****Interest
                  (expense) income**
              
              
              **(1,518**
              **)**
              
              **-**
              
              
              **3,065**
              
              
              **(4,583**
              **)****Foreign
                  exchange gain**
              
              
              **9,267**
              
              
              **-**
              
              
              **6,552**
              
              
              **2,715****Net
                  loss from continuing operations**
              
              
              **(1,371,174**
              **)**
              
              **335,652**
              
              
              **(1,199,291**
              **)**
              
              **(507,535**
              **)****Segment
                  assets****Segment
                  assets excluding under-noted**
              
              
              **6,174,070**
              
              
              **(3,480,476**
              **)**
              
              **9,148,038**
              
              
              **506,508****Investment**
              
              
              **-**
              
              
              **(1,350,000**
              **)**
              
              **1,350,000**
              
              
              **-****Deferred
                  development costs**
              
              
              **2,736,451**
              
              
              **1,481,826**
              
              
              **-**
              
              
              **1,254,625****Assets
                  held for sale**
              
              
              **2,376,013**
              
              
              **2,376,013****11,286,534**
              
              
              **(972,637**
              **)**
              
              **10,498,038**
              
              
              **1,761,133**
   **26.**
              **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 difference s
        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
   F-39
  **26.**
              **Canadian
                  and United States Accounting Policies Differences: -
                  cont’d**
  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...............
                
                $
                (1,371,174
                )
                $
                (434,438
                )
                $
                (340,874
                )Stock
                    based compensation costs
                
                
                -
                
                
                (15,083
                )
                
                (14,650
                )Loss
                    from continuing operations,in
                    accordance with U.S. GAAP
                
                $
                (1,371,174
                )
                $
                (449,521
                )
                $
                (355,524
                )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
                )
 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 312005
                
                2004
                
                2003Net
                    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
                )
  F-40
  **DYNASTY
              GAMING INC.**
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
              AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
              AMOUNTS ARE IN CANADIAN DOLLARS)**
  **26.**
              **Canadian
                  and United States Accounting Policies Differences: -
                  cont’d**
  *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.
                    GAAPCapital
                    stock
                
                $
                12,405,434
                
                $
                12,139,934Other
                    capital
                
                $
                475,530
                
                $
                741,030Total
                    shareholders’ equity
                
                $
                8,774,587
                
                $
                8,774,587
 
 
 *Business
        Acquisition (unaudited)* :
  SFAS
        No.
        141, “Business Combinations”, requires certain unaudited proforma financial
        information to be presented related to business acquisitions.  The
        following unaudited pro forma financial information presents the combined
        results of operations as if the acquisitions described in note 5 above had
        occurred as of the beginning of each of the periods reported below. The
        unaudited pro forma financial information is not intended to represent or
        be
        indicative of the consolidated results of operations that would have been
        reported had the acquisitions been completed as of the beginning of the periods
        presented, and should not be taken as representative of our future consolidated
        results of operations or financial condition. Unaudited pro forma results
        were
        as follows for the years ended December 31, 2005 and 2004:
  **2005**
              
              2004**(unaudited)**
              
              (unaudited)$
              
              $Revenues
              
              
              161,700
              
              
              26,053Loss
                  from operations
              
              
              (1,612,562
              )
              
              (506,368
              )Net
                  loss from continuing operations
              
              
              (1,580,602
              )
              
              (466,108
              )Net
                  income (loss) from discontinued operations
              
              
              186,615
              
              
              (1,770,466
              )Net
                  loss
              
              
              (1,393,987
              )
              
              (2,236,574
              )Loss
                  per share - basic and diluted:From
                  continuing operations
              
              
              (0.034
              )
              
              (0.012
              )From
                  discontinued operations
              
              
              0.004
              
              
              (0.046
              )(0.030
              )
              
              (0.058
              )
  F-41
  **DYNASTY
              GAMING INC.**
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
              AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
              AMOUNTS ARE IN CANADIAN DOLLARS)**
 **26.**
              **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 Non-monetary Assets
        an amendment of APB Opinion No. 29” *.* This
        Statement amends Opinion 29 to eliminate the exception for non-monetary
        exchanges of similar productive assets and replaces it with a general exception
        for exchanges of non-monetary assets that do not have commercial substance.
        A
        non-monetary 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 non-monetary 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.
 
 
 
 F-42
  **DYNASTY
              GAMING INC.**
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
              AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
              AMOUNTS ARE IN CANADIAN DOLLARS)**
  **26.**
              **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.











F-43


**9143-3250
      QUEBEC INC.**





**FINANCIAL
      STATEMENTS**





**AS
      AT DECEMBER 31, 2004**













F-44



















**9143-3250
      QUEBEC INC.**




**DECEMBER
      31, 2004**




**CONTENTS**





Page**AUDITORS’
                REPORT**
            F-46**FINANCIAL
                STATEMENTS**Balance
                Sheet
            F-47Statement
                of Operations and Deficit
            F-48Statement
                of Shareholder’s Equity
            F-49Statement
                of Cash Flow
            F-50Notes
                to Financial Statements
            F-51
                - F-53















F-45









**AUDITORS'
      REPORT**




The
      Shareholder of:


9143-3250
      Quebec Inc.






We
      have
      audited the balance sheet as at December 31, 2004 of 9143-3250 Quebec Inc.
      and
      the statements of operations and deficit and shareholder’s equity from inception
      to December 31, 2004. These financial statements are the responsibility of
      the
      Company's management. Our responsibility is to express an opinion on these
      financial statements based on our audit.




We
      conducted our audit 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 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. We belive that our audit provides a reasonable base for our
      opinion.






In
      our
      opinion, these financial statements present fairly, in all material respects,
      the financial position of the Company as at December 31, 2004 and the results
      of
      its operations and its cash flows from the inception to December 31, 2004 in
      accordance with Canadian generally accepted accounting principles.




Montreal, Quebec
              /s/
                Horwath AppelMarch
                11, 2005
              Horwath AppelChartered Accountants








Comments
      by Auditors for U.S. Readers on Canada—


U.S.
      Reporting Differences





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
      not
      affected results of operations and shareholder’s equity from the inception to
      December 31, 2004 as described in note 7 to the financial
      statements.






Montreal, Quebec
                /s/
                  Horwath AppelSeptember 14,
                  2006
                Horwath AppelChartered Accountants













F-46









**9143-3250
                QUEBEC INC.**
              **BALANCE
                SHEET**
              **AS
                AT DECEMBER 31, 2004**
              **(in
                Canadian Dollars)**
            
            
            **2004****ASSETS****Current
                assets**
              Cash
            
            **$**
            **1,142**Advance
                receivable - company under common control
            
            
            **33,553**Deposits
            
            
            **400****35,095****Deferred
                development costs**
            
            
            **271,085****Property,
                plant and equipment (Note 3)**
            
            
            **61,907****$**
            **368,087****LIABILITIES
                AND SHAREHOLDER'S EQUITY**
              **Current
                liabilities**
              Accounts
                payable and accrued liabilities
            
            **$**
            **35,166**Deductions
                at source payable
            
            
            **37,494**Advance
                payable - shareholder
            
            
            **155,163**Advance
                payable - members of immediate family
              of
                shareholder
            
            
            **32,562**Loan
                payable - other (Note 4)
            
            
            **30,200****290,585****Shareholder's
                equity**
              Capital
                stock (Note 5)
            
            
            **109,172**Deficit
            
            
            (31,670
            )**77,502****$**
            **368,087**







On
      behalf
      of the Board:




Signed */s/ 
      "Ian Sherrington"* ** Director






See
      accompanying Notes to Financial Statements





F-47


















**9143-3250
                QUEBEC INC.**
              **STATEMENT
                OF OPERATIONS AND DEFICIT**
              **FOR
                THE PERIOD FROM INCEPTION TO DECEMBER 31, 2004**
              **(in
                Canadian Dollars)**
            
            **2004****Revenue**
            
            **$****-****Operating
                expenses**
              Administrative
            
            
            **581**Financial
            
            
            **914**Automobile
            
            
            **219**Professional
                fees
            
            
            **17,442**Rent
            
            
            **1,917**Repairs
                and maintenance
            
            
            **270**Light,
                heat, and power
            
            
            **301**Telephone
            
            
            **1,006**Travel
            
            
            **8,363**Office
                and general
            
            
            **617**Shipping
            
            
            **40****Net loss
                and deficit, end of period**
            
            **$**
            (31,670
            )











See
      accompanying Notes to Financial Statements





F-48




**9143-3250
      QUEBEC INC.**


**STATEMENT
      OF SHAREHOLDER'S EQUITY**


**FOR
      THE PERIOD FROM INCEPTION TO DECEMBER 31, 2004**


**(in
      Canadian Dollars)**




**Capital**
              **Stock
                (Note 5)**
              **#**
            
            
            **Capital**
              **Stock
                (Note 5)**
              $
            
            
            **Deficit**
              $
            
            
            **Shareholder’s**
              **Equity**
              $Balance
                - at inception
              Shares
                issued
            
            
            -
              80,100
            
            
            -
              109,172
            
            
            -
              (31,670
            )
            
            -
              77,502Balance
                - December 31, 2004
            
            
            80,100
            
            
            109,172
            
            
            (31,670
            )
            
            77,502








See
      accompanying Notes to Financial Statements







F-49















**9143-3250
                QUEBEC INC.**
              **STATEMENT
                OF CASH FLOW**
              **FOR
                THE PERIOD FROM INCEPTION TO DECEMBER 31, 2004**
              **(in
                Canadian Dollars)**
            
            **2004****Cash
                flows used for operating activities**
              Net
                loss
            
            **$**
            (31,670
            )Net
                change in non-cash assets and liabilities related to
                operations
            
            
            (198,825
            )(230,495
            )**Cash
                flows from investing activities**
              Acquisition
                of property, plant and equipment
            
            
            (61,907
            )**Cash
                flows from financing activities**
              Increase
                in advance receivable - company under common control
              Increase
                in advance payable - shareholder
              Increase
                in advance payable - members of immediate family
              of
                shareholder
              Increase
                in loan payable - other
              Issuance
                of shares
            
            
            **(33,553)**
              **155,163**
              **32,562**
              **30,200**
              **109,172****293,544****Increase
                in cash**
              **Cash,
                beginning of period**
            
            
            **1,142**
              **-****Cash,
                end of period**
            
            **$**
            **1,142****Change
                in assets and liabilities:**
              Increase
                in deposits
              Increase
                in deferred development costs
              Increase
                in accounts payable and accrued liabilities
              Increase
                in deductions at source payable
            
            **$**
            **(400)**
              **(271,085)**
              **35,166**
              **37,494****$**
            (198,825
            )






See
      accompanying Notes to Financial Statements







F-50


**9143-3250
      QUEBEC INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**AS
      AT DECEMBER 31, 2004**


**(tabular
      amounts are in Canadian dollars)**







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




The
                Corporation was incorporated under Part I of the Quebec Companies
                Act on
                June 8, 2004.




The
                Corporation is an internet gaming product developer. As of December
                31,
                the software product had not been
                commercialized.




Subsequent
                to December 31, 2004, the Corporation changed its name from 9143-3250
                Quebec Inc. to Mahjong Development
                Inc.






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






(a)
            Amortization




Amortization
      rates and method adopted by the Corporation are:





On
      the
      declining balance method:


1)
      furniture and fixtures            
            20%


2)
      computer hardware             
              30%





The
      Corporation is in the development stage and therefore no amortization has been
      taken for the period.





(b)
            Use
                of estimates




The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosures of
      contingencies at the date of the financial statements and the reported amounts
      of revenues and expenses during the year. Actual results could differ from
      these
      estimates.




(c)
            Deferred
                development costs




Development
      costs of the Internet-based gaming software *MahjongMania* are
      recorded at cost, and upon availability for general release, will be amortized.
      The annual amortization is the greater of (a) the straight-line amortization
      over the estimated useful life not to exceed three years or (b) the amount
      based
      on the ratio of current revenues to anticipated future revenues. The Corporation
      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-51







**9143-3250
      QUEBEC INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**AS
      AT DECEMBER 31, 2004**


**(tabular
      amounts are in Canadian dollars)**







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






**(d)**
            **Guarantees**




In
      the
      normal course of business, the Corporation 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 Corporation 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 (ii) failure of another party to perform under an obligating
      agreement. Currently, the Corporation has not provided to third parties any
      such
      guarantees, except as disclosed in note 4.




**3.**
            **Property,
                Plant and Equipment**







Property,
      plant and equipment consist of:




2004Accumulated
              
              Net
                  bookCost
              
              Amortization
              
              ValueFurniture
                  and fixtures
              
              $
              3,500
              
              
              
              
              $
              -
              
              $
              3,500Computer
                  equipment
              
              
              58,407
              
              
              
              
              
              -
              
              
              58,407$
              61,907
              
              
              
              
              $
              -
              
              $
              61,907










**4.**
            **Loan
                Payable - Other**




The
      loan
      payable is non-interest bearing and matures March 31, 2005. If the loan is
      not
      repaid at that date it will commence to bear interest at 8%, payable monthly.
      The loan is not to exceed $300,000 and is secured by a moveable hypothec on
      all
      patents, trademarks or any other intellectual property rights and the source
      code of the internet software beneficially owned and developed by the
      Corporation. The moveable hypothec also extends to the sister company Mahjong
      Systems Limited by virtue of their option to acquire the debtor's rights to
      "Mahjong Mania" internet gaming software and includes all proceeds from the
      exploitation thereof, including the source code, accounts, client data base,
      documents of title, intangibles and money.









F-52









**9143-3250
      QUEBEC INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**AS
      AT DECEMBER 31, 2004**


**(tabular
      amounts are in Canadian dollars)**







**5.**
            **Capital
                Stock**






Authorized:


Unlimited
              number
                  of 12% non-cumulative, non-participating, voting, redeemable at
                  the option
                  of the Company or the holder at amount paid thereon, Class "A"
                  preferred
                  shares.Unlimited
              number
                  of 13% non-cumulative, non-participating, non-voting, redeemable
                  at the
                  option of the Company at amount paid thereon, Class "B" preferred
                  shares.Unlimited
              number
                  of voting, participating, common shares.
  2004Issued
                    and fully paid:80,100 common shares
                
                $
                109,172$
                109,172






**6.**
            **Financial
                Instruments**




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 determined
      that the carrying value of its short-term financial assets and liabilities
      approximates their fair values at the balance sheet date because of short-term
      maturity of these instruments.





The
      carrying value of the loan payable - other is not considered to approximate
      fair
      value because it bears no interest. However, due to the short period that the
      loan has been outstanding and the near maturity date, the carrying value would
      approximate the fair value.










**7.**
            **Canadian
                and United States Accounting Policies
                Differences**




The
      financial statements of the Corporation have been prepared in accordance with
      generally accepted accounting principles in Canada (Canadian GAAP). As of and
      from inception through December 31, 2004 there were no differences between
      Canadian GAAP and accounting principles accepted in the United
      States.









F-53




















**MAHJONG
      SYSTEMS LIMITED**





**FINANCIAL
      STATEMENTS**





**AS
      AT DECEMBER 31, 2004**
















F-54













**MAHJONG
      SYSTEMS LIMITED**




**DECEMBER
      31, 2004**














**CONTENTS**











**Page****AUDITORS’
                REPORT**
            
            
            F-56**FINANCIAL
                STATEMENT**Balance
                Sheet
            
            
            F-57Statement
                of Shareholder’s Equity
            
            
            F-58Notes
                to Financial Statements
            
            
            F-59-
                F-60












F-55
















**AUDITORS'
      REPORT**






The
      Shareholder of:


Mahjong
      Systems Limited






We
      have
      audited the balance sheet as of December 31, 2004 of Mahjong Systems Limited
      and
      the statement of shareholder’s equity from inception to December 31, 2004. These
      financial statements are the responsibility of the Company's management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audit.




We
      conducted our audit 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 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. We belive that our audit provides a reasonable base for our
      opinion.




In
      our
      opinion, these financial statements present fairly, in all material respects,
      the financial position of the Company as at December 31, 2004 in accordance
      with
      Canadian generally accepted accounting principles.







/s/
              Horwath AppelMontreal,
                  Quebec
            Horwath AppelMarch
                11,
                2005
            Chartered
              Accountants







Comments
      by Auditors for U.S. Readers on Canada—


U.S.
      Reporting Differences





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 not
      have
      affected results of operations form inception to December 31, 2004 and the
      shareholder’s equity from inception to December 31, 2004 as described in note 6
      to the financial statements.







/s/
                Horwath AppelMontreal,
                  Quebec
            Horwath AppelSeptember
              14,
              2006
            Chartered
                Accountants














F-56







**MAHJONG
      SYSTEMS LIMITED**


**BALANCE
      SHEET**


**AS**  ****  **AT
      DECEMBER 31, 2004**


**(in
      Canadian Dollars)**







**ASSETS**
            
            **2004****Current
                asset**Prepaid
                expenses
            
            $
            33,553**Property,
                plant and equipment (Note 3)**
            
            
            7,72241,275**LIABILITIES
                AND SHAREHOLDER'S EQUITY****Current
                liabilities**Advance
                payable shareholder
            
            $
            7,622Advance
                payable company under common control
            
            
            33,55341,175**Shareholder's
                equity**Capital
                stock (Note 4)
            
            
            100$
            41,275










**Contingent
      liability (Note 5)**






On
      behalf
      of the Board:




*"Ian
      Sherrington"* ,   Director





See
      accompanying Notes to Financial Statements










F-57







**MAHJONG
      SYSTEMS LIMITED**


**STATEMENT
      OF SHAREHOLDER’S EQUITY**


**FOR
      THE PERIOD FROM INCEPTION TO DECEMBER 31, 2004**


**(in
      Canadian Dollars)**











**2004****Capital
                Stock**
              **(Note
                4)**
              **#**
            
            **Capital
                Stock**
              **(Note
                4)**
              **$**
            
            **Retained**
              **Earnings**
              **$**
            
            **Total**
              **Shareholder’s
                Equity**
              **$**Balance
                - at inception
            
            
            -
            
            
            -
            
            
            
            
            
            -
            
            
            
            
            
            -Shares
                issued
            
            
            100
            
            
            100
            
            
            
            
            
            -
            
            
            
            
            
            100Balance
                - December 31, 2004
            
            
            100
            
            
            100
            
            
            
            
            
            -
            
            
            
            
            
            100










See
      accompanying Notes to Financial Statements










F-58


**MAHJONG
      SYSTEMS LIMITED**


**NOTES
      TO FINANCIAL STATEMENTS**


**AS
      AT DECEMBER 31, 2004**


(tabular
      amounts are in Canadian dollars)







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




The
                Corporation was incorporated on April 14, 2004 under the Turks and
                Caicos
                Islands Companies Ordinance 1981.




The
                Corporation is in the process of obtaining an internet gaming software
                license.







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






**(a)**
            **Amortization**




The
      amortization rate adopted by the Corporation for the computer hardware is 30%
      using the declining balance method.





The
      Corporation is currently in the development stage and therefore no amortization
      has been taken for the period.







**(b)**
            **Use
                of estimates**




The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosures of
      contingencies at the date of the financial statements and the reported amounts
      of revenues and expenses during the year. Actual results could differ from
      these
      estimates.




**(c)**
            **Guarantees**




In
      the
      normal course of business, the Corporation 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 (ii) failure of another party to perform under an obligating
      agreement. Currently, the Corporation has not provided to third parties any
      such
      guarantees, except as disclosed in note 5.



















F-59


**MAHJONG
      SYSTEMS LIMITED**


**NOTES
      TO FINANCIAL STATEMENTS**


**AS
      AT DECEMBER 31, 2004**


(tabular
      amounts are in Canadian dollars)









**3.**
            **Property,
                Plant and Equipment**




Property,
      plant and equipment consist of:


**2004**Cost
              
              Accumulated
                  Amortization
              
              Net
                  book ValueComputer
                  hardware
              
              $
              7,722
              
              $
              -
              
              $
              7,722$
              7,722
              
              $
              -
              
              $
              7,722









**4.**
            **Capital
                Stock**






a)
            Authorized:


100 shares




**2004**Issued and fully paid:100
                  shares
              
              
              100$
              100













**5.**
            **Contingent
                Liability**




The
      Corporation has an option to acquire a sister corporation’s rights to “Mahjong
      Mania” an internet gaming software. There is currently a moveable hypothec on
      the rights to “Mahjong Mania” which includes all proceeds from the exploitation
      thereof, including the source code, accounts, client data base, documents of
      titles, intangibles and money as security for a loan payable in the sister
      corporation’s financial statements, which security, would be extended to the
      Corporation in the event of exercising the option. The loan payable is
      non-interest bearing and matures March 31, 2005. If the loan is not repaid
      at
      that date it will commence to bear interest at 8% payable monthly. The loan
      is
      not to exceed $300,000, and the balance of that loan payable in the sister
      corporation’s financial statements as of December 31, 2004 is
      $30,200.







**6.**
            **Canadian
                and United States Accounting Policies
                Differences**




The
      financial statements of the Corporation have been prepared in accordance with
      generally accepted accounting principles in Canada (Canadian GAAP). As of and
      from inception through December 31, 2004 there were no differences between
      Canadian GAAP and accounting principles generally accepted in the United
      States.







F-60





**DYNASTY
                GAMING INC.****(formerly
                EVENTS INTERNATIONAL HOLDING CORPORATION)****UNAUDITED
                PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS****FOR
                THE YEAR ENDED DECEMBER 31,
                2005**




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.





The
      accompanying unaudited pro forma condensed consolidated statement of operations
      gives effect to the acquisition as if it had been consummated on January 1,
      2005. Both Mahjong Systems Limited and Mahjong Development Inc. have a December
      31 year end date, same as Dynasty Gaming Inc.’s year end.





The
      unaudited pro forma condensed consolidated statement of operations should be
      read in conjunction with the historical financial statements of Mahjong Systems
      Limited and Mahjong Development Inc. (included herein) as well as those of
      the
      Company. The unaudited pro forma condensed consolidated statement of operations
      do not purport to be indicative of the operations that would have actually
      been
      obtained had such transactions been completed as of the assumed dates and for
      the periods presented, or which may be obtained in the future.





There
      were no significant accounting policy differences or other items which required
      adjustment in the accompanying unaudited pro forma consolidated statement of
      operations.





**Dynasty**
              **Gaming
                Inc.**
              **Consolidated**
            
            **Mahjong**
              **Systems**
              **Ltd.**
            
            **Mahjong**
              **Developmen**
              **Inc.**
            
            **Proforma****Revenues**
            
            **$**
            **7,956,157**
            
            **$**
            **-**
            
            **$**
            -
            
            **$**
            **7,956,157****Operating
                expenses**
              **Direct
                costs**
            
            
            **5,294,768**
            
            
            **28,016**
            
            
            
            
            
            **5,322,784****Selling**
            
            
            **551,834**
            
            
            
            
            
            **25,661**
            
            
            **577,495****Administrative**
            
            
            **2,697,185**
            
            
            **70,954**
            
            
            **104,437**
            
            
            **2,872,576****Amortization
                - property, plant and equipment and**
              **assets
                under capital leases**
            
            
            **53,360**
            
            
            **4,513**
            
            
            **58**
            
            
            **57,931****Amortization
                - intangible assets**
            
            
            **-**
            
            
            
            
            
            
            
            
            **-****Impairment
                - goodwill**
            
            
            **328,348**
            
            
            
            
            
            
            
            
            **328,348****8,925,495**
            
            
            **103,483**
            
            
            **130,156**
            
            
            **9,159,134****Loss
                from operations**
            
            
            (969,338
            )
            
            (103,483
            )
            
            (130,156
            )
            
            (1,202,977
            )**Other**
              **Other
                (income) expense**
            
            
            (29,506
            )
            
            
            
            
            **8,294**
            
            
            (21,212
            )**Gain
                on settlement of debt**
            
            
            **-**
            
            
            (7,622
            )
            
            (24,883
            )
            
            (32,505
            )(29,506
            )
            
            (7,622
            )
            
            (16,589
            )
            
            (53,717
            )**Loss
                from operations before income taxes**
            
            
            (939,832
            )
            
            (95,861
            )
            
            (113,567
            )
            
            (1,149,260
            )**Income
                taxes**
              **Current**
            
            
            **129,791**
            
            
            **-**
            
            
            **-**
            
            
            **129,791****Future**
            
            
            **114,936**
            
            
            **-**
            
            
            **-**
            
            
            **114,936****Net
                loss**
            
            
            (1,184,559
            )
            
            (95,861
            )
            
            (113,567
            )
            
            (1,393,987
            )**(Deficit)
                retained earnings, beginning of year**
            
            
            (2,852,552
            )
            
            **-**
            
            
            (31,670
            )
            
            (2,884,222
            )**Deficit
                , end of year**
            
            **$**
            (4,037,111
            )
            **$**
            (95,861
            )
            **$**
            (145,237
            )
            **$**
            (4,278,209
            )**Net
                loss per share**
              **Basic
                and diluted**
            
            **$**
            (0.026
            )
            
            
            
            
            
            
            **$**
            (0.030
            )**Weighted
                average number of common shares**
              **Basic**
            
            
            **46,165,603**
            
            
            
            
            
            
            
            
            **46,165,603****Diluted**
            
            
            **46,165,603**
            
            
            
            
            
            
            
            
            **46,165,603**













F-61




**Supplementary
        Information to the Unaudited Pro Forma Consolidated Statement of Operations
        for
        the Year Ended December 31, 2005**
 
 General
 Prior
        to
        the acquisition of Mahjong Systems Limited and Mahjong Development Inc.,
        Dynasty
        Gaming Inc. consisted of the holding company by this name and three wholly-owned
        subsidiaries: CPC Econometrics, Cadence Healthcare Communications and MedEvents.
        For the purposes of the unaudited pro forma consolidated statement of operations
        presented above and the supplementary information provided below, “Dynasty
        Gaming Inc. Consolidated” refers to the 2005 operational results of these four
        entities (i.e. Dynasty Gaming, CPC Econometrics, Cadence Healthcare
        Communications and MedEvents). The following provides additional information
        on
        each of the line items of the unaudited pro forma consolidated statement
        of
        operations (all figures are in Canadian dollars):
 
 Revenues
 In
        2005,
        Dynasty Gaming Inc. Consolidated generated total revenues of $7,956,157.
        Revenues include primarily the consulting and advertising services provided
        by
        the CPC Econometrics and Cadence Healthcare Communications subsidiaries,
        respectively. Neither Mahjong Systems Limited nor Mahjong Development Inc.
        generated any revenues in 2005. On a pro forma basis, as if the acquisition
        of
        Mahjong Systems Limited and Mahjong Development Inc. had occurred on January
        1,
        2005, the pro forma revenues, as presented above, would have been $7,956,157.
        There were no items that required adjustment in determining revenues on a
        pro
        forma basis.
 
 Operating
        Expenses
 
 Direct
        Costs
 Direct
        costs include those costs associated directly with the provision of goods
        and
        services, including salaries. In 2005, Dynasty Gaming Inc. Consolidated incurred
        direct costs of $5,294,768. In 2005, Mahjong Systems Limited incurred direct
        costs of $28,016; there were no direct costs incurred by Mahjong Development
        Inc. in 2005. On a pro forma basis, as if the acquisition of Mahjong Systems
        Limited and Mahjong Development Inc. had occurred on January 1, 2005, the
        pro
        forma direct costs, as presented above, would have been $5,322,784. There
        were
        no items that required adjustment in determining direct costs on a pro forma
        basis.
 
 Selling
        Expenses
 Selling
        expenses include those expenses incurred in the selling and marketing of
        goods
        and services. In 2005, Dynasty Gaming Inc. Consolidated incurred selling
        expenses of $551,834. Mahjong Development Inc. incurred selling expenses
        of
        $25,661 in 2005; there were no selling expenses incurred by Mahjong Systems
        Limited in 2005. On a pro forma basis, as if the acquisition of Mahjong Systems
        Limited and Mahjong Development Inc. had occurred on January 1, 2005, the
        pro
        forma selling expenses, as presented above, would have been $577,495. There
        were
        no items that required adjustment in determining selling expenses on a pro
        forma
        basis.
 
 Administrative
        Expenses
 Administrative
        expenses include salaries and other costs incurred in the administration
        of the
        companies. In 2005, Dynasty Gaming Inc. Consolidated incurred administrative
        expenses of $2,697,185. In 2005, Mahjong Systems Limited incurred administrative
        expenses of $70,954, and Mahjong Development Inc. incurred administrative
        expenses of $104,437. On a pro forma basis, as if the acquisition of Mahjong
        Systems Limited and Mahjong Development Inc. had occurred on January 1, 2005,
        the pro forma administrative expenses, as presented above, would have been
        $2,872,576. There were no items that required adjustment in determining
        administrative expenses on a pro forma basis.
 
 Amortization
        - Property, Plant and Equipment and Assets under Capital Leases
 In
        2005,
        Dynasty Gaming Inc. Consolidated recorded amortization expenses associated
        with
        property, plant and equipment and assets under capital leases of $53,360.
        Mahjong Systems Limited recorded amortization expenses associated with property,
        plant and equipment and assets under capital leases of $4,513 in 2005; Mahjong
        Development Inc., $58. On a pro forma basis, as if the acquisition of Mahjong
        Systems Limited and Mahjong Development Inc. had occurred on January 1, 2005,
        the pro forma amortization expenses associated with property, plant and
        equipment and assets under capital leases, as presented above, would have
        been
        $57,931. There were no items that required adjustment in determining
        amortization expenses associated with property, plant and equipment and assets
        under capital leases on a pro forma basis.
 
 Amortization
        - Intangible Assets
 Amortization
        associated with intangible assets includes the amortization of software
        development expenses. In 2005, neither Dynasty Gaming Inc. Consolidated nor
        Mahjong Systems Limited nor Mahjong Development Inc. recorded any amortization
        expenses associated with intangible assets. On a pro forma basis, as if the
        acquisition of Mahjong Systems Limited and Mahjong Development Inc. had occurred
        on January 1, 2005, the pro forma amortization expenses associated with
        intangible assets, as presented above, would have been $0. There were no
        items
        that required adjustment in determining amortization expenses associated
        with
        intangible assets on a pro forma basis.
 
 Impairment
        - Goodwill
 Impairment
        of goodwill includes the writing down of goodwill associated with the Company’s
        acquisitions. In 2005, Dynasty Gaming Inc. Consolidated recorded an impairment
        of goodwill of $328,348 associated with the CPC Econometrics subsidiary.
        In
        2005, neither Mahjong Systems Limited nor Mahjong Development Inc. recorded
        an
        impairment of goodwill. On a pro forma basis, as if the acquisition of Mahjong
        Systems Limited and Mahjong Development Inc. had occurred on January 1, 2005,
        the pro forma impairment of goodwill, as presented above, would have been
        $328,348. There were no items that required adjustment in determining impairment
        of goodwill on a pro forma basis.
 
 Loss
        from Operations
 In
        2005,
        Dynasty Gaming Inc. Consolidated incurred a loss from operations of $969,338.
        In
        2005, Mahjong Systems Limited incurred a loss from operations of $103,483,
        and
        Mahjong Development Inc. incurred a loss from operations of $130,156. On
        a pro
        forma basis, as if the acquisition of Mahjong Systems Limited and Mahjong
        Development Inc. had occurred on January 1, 2005, the pro forma loss from
        operations, as presented above, would have been $1,202,977. There were no
        items
        that required adjustment in determining the loss from operations on a pro
        forma
        basis.
 
 Other
 
 Other
        Expenses (Income)
 Other
        expenses include interest expense. Other income includes interest income
        and
        foreign exchange gains. In 2005, Dynasty Gaming Inc. Consolidated generated
        other income of $29,506. In 2005, Mahjong Development Inc. generated other
        expenses of $8,294. Mahjong Systems Limited neither generated other income
        nor
        incurred other expenses in 2005. On a pro forma basis, as if the acquisition
        of
        Mahjong Systems Limited and Mahjong Development Inc. had occurred on January
        1,
        2005, the pro forma other income, as presented above, would have been $21,212.
        There were no items that required adjustment in determining other expenses
        or
        other income on a pro forma basis.
 
 Gain
        on Settlement of Debt
 In
        2005,
        Dynasty Gaming Inc. Consolidated did not record any gain on settlement of
        debt.
        In 2005, Mahjong Systems Limited recorded gain on settlement of debt of $7,622,
        and Mahjong Development Inc. recorded gain on settlement of debt of $24,883.
        On
        a pro forma basis, as if the acquisition of Mahjong Systems Limited and Mahjong
        Development Inc. had occurred on January 1, 2005, the pro forma gain on
        settlement of debt, as presented above, would have been $32,505. There were
        no
        items that required adjustment in determining gain on settlement of debt
        on a
        pro forma basis.
 
 Loss
        from Operations before Income Taxes
 In
        2005,
        Dynasty Gaming Inc. Consolidated incurred a loss from operations before income
        taxes of $939,832. In 2005, Mahjong Systems Limited incurred a loss from
        operations before income taxes of $95,861. Mahjong Development Inc. incurred
        a
        loss from operations before income taxes of $113,567 in 2005. On a pro forma
        basis, as if the acquisition of Mahjong Systems Limited and Mahjong Development
        Inc. had occurred on January 1, 2005, the pro forma loss from operations
        before
        incomes taxes, as presented above, would have been $1,149,260. There were
        no
        items that required adjustment in determining the loss from operations before
        income taxes on a pro forma basis.
 
 Income
        Taxes
 
 Current
        Income Taxes
 In
        2005,
        Dynasty Gaming Inc. Consolidated recorded current income taxes of $129,791.
        Neither Mahjong Systems Limited nor Mahjong Development Inc. recorded current
        income taxes in 2005. On a pro forma basis, as if the acquisition of Mahjong
        Systems Limited and Mahjong Development Inc. had occurred on January 1, 2005,
        the pro forma current income taxes, as presented above, would have been
        $129,791. There were no items that required adjustment in determining current
        income taxes on a pro forma basis.
 
 Future
        Income Taxes
 In
        2005,
        Dynasty Gaming Inc. Consolidated recorded future income taxes of $114,936.
        Neither Mahjong Systems Limited nor Mahjong Development Inc. recorded future
        income taxes in 2005. On a pro forma basis, as if the acquisition of Mahjong
        Systems Limited and Mahjong Development Inc. had occurred on January 1, 2005,
        the pro forma future income taxes, as presented above, would have been $114,936.
        There were no items that required adjustment in determining future income
        taxes
        on a pro forma basis.
 
 Net
        Loss
 In
        2005,
        Dynasty Gaming Inc. Consolidated incurred a net loss of $1,184,559. In 2005,
        Mahjong Systems Limited incurred a net loss of $95,861, and Mahjong Development
        Inc. incurred a net loss of $113,567. On a pro forma basis, as if the
        acquisition of Mahjong Systems Limited and Mahjong Development Inc. had occurred
        on January 1, 2005, the pro forma net loss, as presented above, would have
        been
        $1,393,987. There were no items that required adjustment in determining net
        loss
        on a pro forma basis.
 
 (Deficit)
        Retained Earnings, Beginning of Year
 Dynasty
        Gaming Inc. Consolidated had a deficit of $2,852,552 at the beginning of
        2005.
        Mahjong Systems Limited had retained earning of $0 at the beginning of 2005.
        Mahjong Development Inc. had a deficit of $31,670 at the beginning of 2005.
        On a
        pro forma basis, as if the acquisition of Mahjong Systems Limited and Mahjong
        Development Inc. had occurred on January 1, 2005, the pro forma deficit at
        the
        beginning of 2005, as presented above, would have been $2,884,222. There
        were no
        items that required adjustment in determining the deficit at the beginning
        of
        2005 on a pro forma basis.
 
 Deficit,
        End of Year
 Dynasty
        Gaming Inc. Consolidated had a deficit of $4,037,111 at the end of 2005.
        Mahjong
        Systems Limited had a deficit of $95,861 at the end of 2005. Mahjong Development
        Inc. had a deficit of $145,237 at the end of 2005. On a pro forma basis,
        as if
        the acquisition of Mahjong Systems Limited and Mahjong Development Inc. had
        occurred on January 1, 2005, the pro forma deficit at the end of 2005, as
        presented above, would have been $4,278,209. There were no items that required
        adjustment in determining the deficit at the end of 2005 on a pro forma
        basis.
   
  F-62