Filed by Automated Filing Services Inc. (604) 609-0244 - Sungold International Holdings Corp.

20-F 1 form20f.htm ANNUAL REPORT FOR THE PERIOD ENDED AUGUST 31, 2006 Filed by Automated Filing Services Inc. (604) 609-0244 - Sungold International Holdings Corp. - Form 20-F

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

FORM 20-F

(Mark One)

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

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

FOR THE FISCAL YEAR ENDED AUGUST 31, 2006

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

For the transition period from ____________ to ____________

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

Date of Event requiring this shell company report …………

COMMISSION FILE NUMBER No. 000-30006

SUNGOLD INTERNATIONAL HOLDINGS CORP.
(Exact name of Registrant as specified in its charter)

N/A
(Translation of Registrant's name into English)

Canada
(Jurisdiction of incorporation or organization)

300-940 The East Mall
Toronto, Ontario, Canada M9B 6J7
(Address of principal executive offices)

SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

Title of each Class	Name of each exchange on which registered
None	N/A

Securities registered or to be registered pursuant to Section 12(g) of the Act:
Common Shares
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
Not Applicable

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the
period covered by the annual report. COMMON SHARES: 126,375,535

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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ x ]

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange 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 [X] No [ ]

Indicate by check mark which financial statement item the Registrant has elected to follow.
Item 17 [X] Item 18 [ ]

GENERAL

In this Annual Report on Form 20-F, all references to the “Corporation” or “Sungold” refer to Sungold International Holdings Corp. and its subsidiaries.

The Corporation uses the Canadian dollar as its reporting currency. All references in this document to “dollars” or “$” are expressed in Canadian dollars, unless otherwise indicated.

NOTE REGARDING FORWARD LOOKING STATEMENTS

This document contains statements that constitute “forward-looking statements”. Forward looking statements include the words “believes”, “anticipates”, “intends”, “expects”, “estimates”, “projects” and words of similar import, as well as all projections of future results. Such forward-looking statements involved known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Corporation to be materially different from any future results, performance or achievements of the Corporation expressed or implied by such forward-looking statements. Such risks are discussed in Item 3D “Risk Factors.” The statements contained in Item 4B “Business Overview” and Item 5 “Operating and Financial Review and Prospects” are inherently subject to a variety of risks and uncertainties that could cause actual results, performance or achievements to differ significantly. You should carefully review the cautionary statements and risk factors contained herein and in other documents that the Corporation files from time to time with the Securities and Exchange Commission.

TABLE OF CONTENTS

		Page No.

Part I

Item 1.	Identity of Directors, Senior Management and Advisers	1

Item 2.	Offer Statistics and Expected Timetable	1

Item 3.	Key Information	1

Item 4.	Information on the Company	5

Item 5.	Operating and Financial Review and Prospects	15

Item 6.	Directors, Senior Management and Employees	21

Item 7.	Major Shareholders and Related Party Transactions	27

Item 8.	Financial Information	28

Item 9.	The Offer and Listing	28

Item 10.	Additional Information	29

Item 11.	Quantitative and Qualitative Disclosure About Market Risk	46

Item 12.	Description of Securities Other Than Equity Securities	46

Part II

Item 13.	Defaults, Dividends Arrearages and Delinquencies	46

Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	46

Item 15.	Controls and Procedures	46

Item 16.	[Reserved]	46

Item 16A.	Audit Committee Financial Expert	46

Item 16B.	Code of Ethics	47

Item 16C.	Principal Accountant Fees and Services	47

Item 16D.	Exemptions from the Listing Standards for Audit Committees	47

Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	47

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Part III

Item 17.	Financial Statements	48

Item 18.	Financial Statements	48

Item 19.	Exhibits	48

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PART I

ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

	Not Applicable.

ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE

	Not Applicable.

ITEM 3.	KEY INFORMATION

A. SELECTED FINANCIAL DATA

The following table presents selected consolidated financial data of the Corporation for the fiscal years 2002, 2003, 2004, 2005 and 2006. You should read this information in conjunction with the financial statements included elsewhere in this annual report. The Corporation’s 2006 financial statements have been audited by Mintz & Patners LLP, the Corporation’s independent accountants. The prior years were audited by Loewen, Stronach & Co., Chartered Accountants. The financial statements have been prepared in accordance with Canadian Generally Accepted Accounting Principles (“Canadian GAAP”). Note 13 to the Corporation’s financial statements provides a description of the principal differences between Canadian GAAP and United States Generally Accepted Accounting Principles (“US GAAP”), as they relate to the Corporation, and a reconciliation to US GAAP of the Corporation’s net income and stockholders’ equity.

All information provided in the Summary of Financial Information below is in Canadian dollars and has been compiled according to Canadian GAAP and reconciled with U.S. GAAP at Note 13 to the Financial Statements.

	2006	2005	2004	2003	2002
	(Cdn$)	(Cdn$)	(Cdn$)	(Cdn$)	(Cdn$)
OPERATING DATA:
Revenue⁽¹⁾	-	-	-	-	-
General And
Administrative Expenses⁽¹⁾	1,571,934	1,988,897	1,211,718	2,600,538	2,443,823

Net (Loss) from Operations
- Canadian GAAP	(1,571,934)	(1,988,897)	(1,211,718)	(4,617,958)	(2,602,640)
- US GAAP	(1,616,259)	(1,389,886)	(1,274,878)	(2,601,415)	(2,472,205)
Net (Loss) Per Share⁽²⁾
- Canadian GAAP	(0.01)	(0.02)	(0.01)	(0.07)	(0.06)
- US GAAP	(0.01)	(0.01)	(0.01)	(0.04)	(0.05)
Working Capital (Deficiency)	(637,586)	(187,667)	34,395	(157,799)	64,291
Total Assets
- Canadian GAAP	772,557	928,938	1,592,034	1,418,406	3,708,525

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	2006	2005	2004	2003	2002
	(Cdn$)	(Cdn$)	(Cdn$)	(Cdn$)	(Cdn$)
- US GAAP	502,269	704,040	766,880	656,364	940,209
Total Liabilities	662,597	278,214	210,030	209,881	351,687
Shareholders Equity
- Canadian GAAP	109,960	650,724	1,382,004	1,208,525	3,356,838
- US GAAP	(160,328)	425,826	556,850	446,483	588,522
Long-Term Obligations	6,518	14,519	-	17,253	36,676
Capital Stock (number of shares)	126,375,535	119,607,800	103,364,740	79,871,209	50,121,209
Dividends Declared Per Share	-	-	-	-	-

⁽¹⁾	Immaterial revenue received in prior years from the Horsepower® game (2003 - $1,317; 2002 - $19,457) and foreign exchange gains (losses) have been reclassified from revenue to form part of the general and administrative expenses.

CURRENCY AND EXCHANGE RATES

We prepare our financial statements in Canadian dollars. In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian dollars. The following tables set forth, for the periods and dates indicated, information concerning the exchange rates between U.S. dollars and Canadian dollars based on the noon rates of exchange as reported by the Federal Reserve Bank of New York, expressed in U.S. dollars per Canadian dollar. No representation is made that the Canadian dollar amounts, on the one hand, or the U.S. dollar amounts, on the other hand, referred to in this Annual Report could be or could have been converted in U.S. dollars or Canadian dollars, as the case may be, at any particular rate or at all.

Year Ended	Average (US$)	High (US$)	Low (US$)	Period End (US$)
August 31, 2002	0.6358	0.6618	0.6199	0.6415
August 31, 2003	0.6790	0.7495	0.6273	0.7220
August 31, 2004	0.7522	0.7879	0.7159	0.7595
August 31, 2005	0.8163	0.8411	0.7912	0.8411
August 31, 2006	0.8720	0.9100	0.8361	0.9037

Month	Average⁽²⁾ (US$)	High (US$)	Low (US$)	Period End (US$)
August 2006	0.8943	0.9037	0.8840	0.9037
September 2006	0.8960	0.9048	0.8872	0.8968
October 2006	0.8861	0.8965	0.8784	0.8907
November 2006	0.8804	0.8869	0.8715	0.8762
December 2006	0.8672	0.8760	0.8582	0.8582
January 2007	0.8502	0.8586	0.8457	0.8480

Notes:

	(1)	The average of the noon buying rates on the last business day of each month during the period.
	(2)	The average of the lowest and the highest noon buying rates during the month.

The noon rate of exchange on February 20, 2007 as reported by the United States Federal Reserve Bank of New York for the conversion of Canadian dollars into United States dollars was $1.1697 ($1.00 = US$0.8549) .

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B.	CAPITALIZATION AND INDEBTEDNESS

	Not Applicable.

C.	REASONS FOR THE OFFER AND USE OF PROCEEDS

	Not Applicable.

D.	RISK FACTORS

Certain risks are associated with the Corporation’s business including the following:

The Securities of the Corporation are Highly Speculative

In evaluating the Corporation, it is important to consider that the Corporation is in the development stage of its operations as a software supplier of a virtual pari-mutuel wagering entertainment system, and an Internet anonymous payment system. A prospective investor or other person reviewing the Corporation should not consider an investment unless the investor is capable of sustaining an economic loss of the entire investment. All costs have been funded through equity.

Limited History of Operations

The Corporation has a limited history of operations. The Corporation is dependent on receiving jurisdictional approvals to have its Horsepower® pari-mutuel wagering based virtual horse racing game legalized as an alternative form of pari-mutuel wagering. The Corporation does not expect to receive any revenues from operations until the required approvals are received and the projects begin operations in a commercially profitable manner. There can be no assurance that any jurisdictional approvals will be obtained for the proposed pari-mutuel licensed facilities at Authorized Racing Affiliates that the Corporation has entered into five year exclusive license agreements with. Investors should be aware of the delays, expenses and difficulties encountered in an enterprise in this stage, many of which may be beyond the Corporation’s or its affiliates’ control, including, but not limited to, the regulatory environment in which the Corporation expects to operate, problems related to regulatory compliance costs and delay, marketing difficulties and costs that may exceed current estimates. There can be no assurance that the Corporation or its affiliates will be able to implement their business strategies and successfully develop any of the planned development projects or complete their projects according to specifications in a timely manner or on a profitable basis. The Corporation will require additional financing to carry out its business plan and, if financing is unavailable for any reason, the Corporation may be unable to carry out its business plan.

Governmental Regulations; Uncertainty of Obtaining Licenses

Racetrack establishment operations are subject to federal, provincial and local regulations. Federal, provincial and the applicable local authorities will require various licenses, permits and approvals. The local and federal authorities may, among other things, revoke a business license, or the license of any individual or registered entity. No racetrack has yet obtained the government licenses, permits and approvals necessary for the operation of the proposed pari-mutuel wagering activities. Business licenses and related approvals are generally deemed to be privileges under the law and no assurances can be given that any licenses, permits or approvals that may be required will be given or that existing ones will not be revoked. In particular, the Corporation’s Horsepower® World Pool racing system and operations will require various approvals from the applicable authorities, and this approval process can be time consuming and costly with no assurance of success. Moreover, all of the Corporation’s projects are

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subject to risks from political and economic uncertainty, which are beyond the control of the Corporation. The application processes for securing business licenses are complex and time consuming. Each project has specific requirements.

The laws, rules and regulations governing the Corporation’s proposed projects are subject to change and variation prior to the Corporation obtaining the required licenses. To a certain extent, the licensing process is a political process and the Corporation may face delays in obtaining licenses due to political changes or competing political interests.

Need for Additional Financing to Fund Current Commitments

The Corporation requires further financing to continue its daily operations and to fund ongoing project development. The Corporation anticipates it will need to raise approximately US$1,200,000 to meet its current operating budget for the fiscal year ending August 31, 2007. The Corporation has not yet secured all of this required financing, but management is confident in the processes underway and believes it will meet its operating budget requirements through August 31, 2007. If additional financing is not available at all or on acceptable terms, the Corporation may have to substantially reduce or cease its operations.

The development of the Corporation’s business will depend upon increased cash flow from operations and the Corporation’s ability to obtain financing through private placement financing, or other means. The Corporation currently has no significant revenues from operations and is experiencing negative cash flow, accordingly, the only other sources of funds presently available to the Corporation is through the sale of equity and debt capital. While the Corporation has successfully raised such capital in the past there can be no assurance that it will be able to do so in the future. If the Corporation cannot obtain sufficient capital to fund its planned expenditures, its planned operations may be significantly delayed or abandoned. Any such delay or abandonment could result in cost increases and adversely affect the Corporation’s future results which could result in a material adverse effect on an investment in the Corporation’s securities.

The Corporation’s Common Stock is Traded on the OTC Bulletin Board and as a Result May Experience Price and Volume Fluctuations.

The market price of the Corporation’s common stock is subject to fluctuations in response to several factors, such as:

1.	actual or anticipated variations in the Corporation’s results of operations;
2.	the Corporation’s ability or inability to generate new revenues;
3.	competition; and
4.	conditions and trends in the horse racing industry.

Accordingly, the Corporation’s stock price may be adversely impacted by factors that are unrelated or disproportionate to its operating performance. These market fluctuations, as well as general economic, political and market conditions, such as recessions, interest rates or international currency fluctuations may adversely affect the market price of the Corporation’s common stock.

The Corporation’s Audited Financial Statements Contain a Note about the Corporation’s Ability to Continue as a Going Concern

The Corporation’s financial statements have been prepared on the basis of accounting principles applicable to a going concern. As of August 31, 2006, the Corporation had an accumulated deficit of $22,190,315 which increased to $22,413,666 as at November 30, 2006, which, if prepared under US

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GAAP, would have an accumulated deficit of $27,185,209 as at August 31, 2006 and $27,407,307 as at November 30, 2006. The Corporation’s ability to continue as a going concern and the recoverability of the amounts shown for predevelopment costs is primarily dependant on the ability of the Corporation to operate the Horsepower® World Pool, and or the SafeSpending™ system profitably in the future. The Corporation plans to meet anticipated financing needs in connection with its obligations by the exercise of stock options, share purchase warrants and through private placements, public offerings or joint venture participation by others. Failure to continue as a going concern would require a restatement of assets and liabilities on a liquidation basis, which would differ materially from the going concern basis on which the Corporation’s financial statements were prepared. Under U.S. GAAP, the auditor’s report on the consolidated financial statements contains an explanatory paragraph when the financial statements are affected by conditions and events that cast substantial doubt on a company’s ability to continue as a going concern such as those described in Note 2 to the Corporation’s audited financial statements.

It may be difficult for United States investors to effect service of process within the United States upon the Corporation or upon those directors or officers who are not residents of the United States

The Corporation is incorporated under the laws of Canada and a majority of the Corporation’s officers are residents of Canada. Consequently, it may be difficult for United States investors to effect service of process within the United States upon the Corporation or upon those directors or officers who are not residents of the United States, or to realize in the United States upon judgments of United States courts predicated upon civil liabilities under the United States Securities Exchange Act of 1934, as amended. A judgment of a U.S. court predicated solely upon such civil liabilities may not be enforceable in Canada by a Canadian court if the U.S. court in which the judgment was obtained had jurisdiction, as determined by the Canadian court, in the matter. There is substantial doubt whether an original action could be brought successfully in Canada against any of such persons or the Corporation predicated solely upon such civil liabilities.

ITEM 4. INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF THE COMPANY

Name and Incorporation History

The Corporation was incorporated on April 7, 1986 pursuant to the Company Act (British Columbia) under the name “307198 B.C. Ltd.” and commenced trading on the Vancouver Stock Exchange (now the TSX Venture Exchange) (the “Exchange”) on May 3, 1988. The Corporation’s shares were voluntarily de-listed from the Exchange effective at the close of trading December 11, 1997.

On May 14, 1999, the common shares of the Corporation were approved for quotation by the National Association of Securities Dealers on the OTC Bulletin Board.

The Corporation changed its name from “307198 B.C. Ltd.” to “Fircrest Resources Ltd.” on July 9, 1986. On October 30, 1991, the Corporation consolidated its authorized capital from 100,000,000 common shares without par value to 20,000,000 common shares without par value and the name of the Corporation was changed from “Fircrest Resources Ltd.” to “NTC Capital Corporation”.

On March 1, 1994, the Corporation changed its name from “NTC Capital Corporation” to “Sungold Gaming Inc.”, to reflect the nature of its business.

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On May 26, 1997, the Corporation increased its authorized capital from 20,000,000 to 60,000,000 common shares, and changed its name from “Sungold Gaming Inc.” to “Sungold Gaming International Ltd.”, to reflect the nature and location of its business. Subsequently, the authorized share capital was decreased to 58,875,000 due to cancellation of escrow shares in accordance with Section 232 of the Company Act (British Columbia). On March 20, 2000, the Corporation changed its name from “Sungold Gaming International Ltd.” to “Sungold Entertainment Corp.”. Management of the Corporation believed that the name more accurately reflected the future direction and business of the Corporation.

At the Corporation’s Annual General Meeting held on February 22, 2002, the shareholders approved an increase in the Corporation’s authorized capital to 100,000,000 common shares to ensure that there are sufficient shares reserved for future issuance. The shareholders also approved the creation of 100,000,000 Class “A” Preference Shares, and the creation of 100,000,000 Class “B” Preference Shares, to permit future preferred share financings.

On December 12, 2003, the Corporation changed its name to “Sungold International Holdings Corp.” and was continued under the Canada Business Corporations Act, thereby changing from a provincial to a Canadian federally incorporated company, at which time the authorized capital was changed to an unlimited number of common shares.

Offices

The Corporation’s head office and registered office, since February 10, 2006, is located at 300-940 The East Mall, Toronto Ontario Canada, M9B 6J7 (Tel: 416-621-4519).

History and Development of the Corporation

The Corporation is a development stage company focused on the development of a pari-mutuel, virtual, horseracing entertainment software, advertising sales designed to operate in conjunction with this software, plus print and electronic media, and an internet payment system. From 1988 to 1993, the Corporation was engaged in the mineral exploration business. Beginning in 1993, the Corporation decided to refocus its principal business and concentrate its resources on developing the above projects and two others which have since been abandoned.

The first such abandoned project was an agreement in 1994 with the Gun Lake Indian Band in the State of Michigan, to develop and manage a full service casino and gaming operation (the “Gun Lake Agreement”). In 1999, the Gun Lake Band breached the agreement with the Corporation. As a result, the Corporation filed a lawsuit in the Michigan courts against the Gun Lake Band claiming damages for breach of contract. In 2002, the Michigan Court of Appeals court dismissed the appeal on the basis of the Gun Lake Band’s claim of sovereign immunity. In 2003, the Michigan Supreme Court denied the Corporation an application to appeal the Michigan Court of Appeals court decision and in 2003 the Corporation decided not to appeal the decision to the United States Supreme Court. This project was written off in fiscal 2003.

The other abandoned project was a letter of intent dated December 8, 1997, which was subsequently amended and extended, with TAC International Investments LLC (“TAC”), a private investment company, regarding Richmond Thoroughbred Training Centre. Pursuant to the TAC letter of intent, if the Corporation had received authorization to develop the complex from the City of Richmond and the Province of British Columbia prior to October 1, 2005, TAC had agreed to purchase six million common treasury shares of the Corporation at US $4.00 per share by way of private placement. In July 2004, this project was amended when the Corporation obtained an option to purchase 126 acres of land southwest of No. 8 Road and Westminster Highway in Richmond, BC, Canada for the purpose of developing a

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horse training complex, subject to approval of all zoning and regulatory authorities. The agreement gave the Corporation the option to purchase the Westminster Property for $10,500,000 until January 2, 2005, and in July 2004, the Corporation renegotiated to extend the agreement with TAC International Investments LLC (“TAC”) which was interested in both the Vancouver one-mile racecourse and the Corporation’s Richmond Equine Training Center project. The agreement set out the intention of both parties that upon the Corporation receiving the appropriate permission from the Cities of Vancouver and Richmond, British Columbia and from the Province of British Columbia to develop the project, the interested party would purchase 6 million common treasury shares of Sungold at a price of US$4.00 per share. The agreement was extended to October 1, 2005. Zoning approvals were not achieved, the option to purchase the land was allowed to expire on January 2, 2005, and the Corporation expensed the pre-development costs for the project in 2005 in the amount of $628,246.

In September, 1999, the Corporation, through its wholly owned subsidiary, Horsepower Broadcasting Network Inc., acquired computer hardware for developing software and leased a hosting facility that enabled Horsepower to operate the $US based world wagering pool at licensed racetracks and licensed teletheatres worldwide. The Corporation engaged another of its wholly owned subsidiaries Horsepower Broadcasting Network (HBN) International Ltd. (“HBN”) to test run their US$ wagering program through the internet.

In May, 2001, the Corporation acquired the right, title and interest to the internet payment system technology of SafeSpending™ from SafeSpending Services Inc. The SafeSpending™ internet payment system is intended to become a prepaid spending system that uses a unique and personalized PIN number which can be used to make anonymous purchases online from merchants and individuals. The acquisition agreement includes all copyrights, trademarks, source codes and SafeSpending’s intellectual property. Under the terms of agreement the Corporation agreed to pay a 7.5% royalty upon the Corporation or its licensed subsidiary receiving $1,000,000 in net revenue from operation, sale or license of the technology.

In March 2003 the Corporation made a strategic decision to offer the Horsepower® pari-mutuel wagering system and the Horsepower® World Pool, exclusively through licensed, land based racetracks and licensed off track betting centres and to grant long term licenses to operate the Horsepower® pari-mutuel wagering system exclusively to authorized racetrack affiliates (“A.R.A.'S”) worldwide.

In fiscal 2004 the Corporation’s wholly owned subsidiary Horsepower Broadcasting Network (HBN) International Ltd. (“HBN”) entered into five year non-exclusive and non-transferable license agreements for the use of HBN’s Horsepower® pari-mutuel wagering based virtual horse racing game and certain maintenance and support services in relation to the operation and installation of the Horsepower® system, with the following licensees the (“Licensees”):

	(a)	Pompano Park Racing, the license agreement was entered into in March, 2004.
	(b)	Manitoba Jockey Club Inc, the license agreement was entered into in April, 2004.
	(c)	Truro Raceway, the license agreement was entered into in May, 2004.
	(d)	Inverness Raceway, the license agreement was entered into in August, 2004..

In consideration of the grant of license each Licensee agreed to pay 86% of the net revenue received by the Licensee from customers playing the Horsepower® game. Each of the license agreements is subject to termination in the event that: (i) the Licensee fails to make any required payments under the agreement, (ii) the Licensee breaches any of its covenants or commits a breach of its obligations under the agreement that are not cured within 20 days written notice to the Licensee.

In fiscal 2005, the Corporation focused on five strategic objectives: strengthening management, finishing the software development of the Horsepower® World Pool software system, marketing the product to

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licensed pari-mutuel wagering establishments, obtaining requisite legal approvals in the appropriate jurisdictions, and starting the software development of the SafeSpending™ Internet Payment system.

As part of the Corporation’s restructuring of management in fiscal 2005, the Corporation appointed a new Chief Financial Officer and President. The Corporation appointed Keith Blackwell as Chief Financial Officer and Tony Currie as President of Sungold. In addition, Larry Simpson was appointed as CEO of the subsidiary HBN and Nicholas DeSante as Vice President of Operations of HBN.

During fiscal 2005, the Corporation abandoned the Vancouver Race Course project and wrote down $628,246 in pre-development costs related to abandonment of the Vancouver Race Course project. The Coporation was unable to arrange for necessary zoning changes before the option on the land expired and therefore was unable to proceed with the project.

During fiscal 2005, management decided not to pursue the land purchase option on Richmond Equine Training Centre and cancelled the letter of intent to issue six million common shares related to the project at $4.00 per share and expensed the deferred pre-development costs of the project. The Corporation had entered into a letter of intent with TAC for US$24,000,000 in financing for racecourse development in British Columbia.

In June, 2005, the Corporation entered into an agreement with the estate of Kim N. Hart, the former President and CEO of HBN for the purpose of cancelling warrants to purchase 55,150,000 shares of Sungold previously granted to Mr. Hart. Pursuant to the terms of the cancellation agreement Sungold agreed to pay the estate $25,000 and assume the obligations under certain office leases. The Corporation also reached an agreement with two other warrant holders to cancel an additional 550,000 warrants.

As part of the Corporation’s marketing efforts, in July 2005, the Corporation entered into a one year agreement with an industry consulting agency in Ireland, the Web Gaming Consultants, to represent it in Ireland, the U.K., France, South Africa and Israel. The Corporation’s marketing efforts are a continuous process in North America and abroad. In November 2005 the Corporation announced the appointment of Patrick Kearns as Vice President International Operations to coordinate international efforts and develop opportunities in the emerging markets of Europe. With the appointment of Richard Henley, the marketing effort is expected to include the aspect of selling video advertising time between the virtual horse races on the Horsepower® World Pool display.

During fiscal 2005, the Corporation’s wholly owned subsidiary Horsepower Broadcasting Network (HBN) International Ltd. (“HBN”) entered into five year non-exclusive and non-transferable license agreements for the use of HBN’s Horsepower™ pari-mutuel wagering-based virtual horse racing game and certain maintenance and support services in relation to the operation and installation of the Horsepower™ system, with the following licensees the (“Licensees”), bringing the total track and off-track affiliates to approximately 40:

	a.	Fredericton Exhibition Limited, the license agreement was entered into in September, 2004.
	b.	Buffalo Trotting Association, the license agreement was entered into in November, 2004.
	c.	Flagler Greyhound Track, the license agreement was entered into in November, 2004.

In consideration of the grant of license each Licensee agreed to pay 86% of the net revenue received by the Licensee from customers playing the Horsepower™ game. Each of the license agreements is subject to termination in the event that: (i) the Licensee fails to make any required payments under the agreement, (ii) the Licensee breaches any of its covenants or commits a breach of its obligations under the agreement that are not cured within 20 days written notice to the Licensee.

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As part of the Corporation’s decision to streamline and restructure its operations, the Corporation dissolved its wholly owned inactive subsidiary Horsepower Broadcasting Network Inc., in January, 2005.

Recent Corporate Developments

Since the completion of our fiscal year ended August 31, 2005, we have experienced the following significant corporate developments:

Over the past year, the Corporation continued its marketing efforts in North America and abroad. In this regard, Corporation representatives attended the Symposium on Racing and Gaming at the University of Tucson in December 2005, the annual Harness Tracks of America meeting in February 2006 in Las Vegas, and the Association of Racing Commissioners International Inc. annual meeting in New Mexico in March 2006. The Corporation has been widening its sphere of influential contacts including race track owners, racing commissioners, lobbyists and strategic business partners. The Corporation introduced a concept it calls the “Regional HUB”. This idea is to select a significant race track in a particular geographic area and invite them to work with the Corporation in recruiting other tracks in their territory and present a unified lobby to the appropriate legislative process for approving the product.

On November 22, 2005, Horsepower Broadcasting Network (HBN) International Ltd., the Corporation’s subsidiary, signed a Letter of Intent with Clinton Phipps Racetrack to be an Authorized Racetrack Affiliate for a five year exclusive license agreement for the pari-mutuel product Horsepower® World Pool at the U.S. Virgin Island facilities on St. Thomas. The definitive five year licensing agreement will be subject to all mandatory legal approvals. There can be no assurance that the definitive agreement will be completed.

Towards the end of the fiscal period the Corporation began to direct its attention to the Internet and European market because there are no legal barriers to the operation of the Horsepower® World Pool game in these markets. There are over 8,500 licensed betting shops in the United Kingdom where it is legal to operate the game as the Corporation envisions it. The amount of the total Handle (amount bet) for Great Britain and Ireland in 2004 as published by the International Federation of Horseracing Authorities was 18,120,259,542 Euros. This indicates the size of the market that the Corporation is now targeting for the introduction of the Horsepower® World Pool game.

The management made a decision to improve the appearance of the product by adopting more realistically detailed and fluid graphics that are currently available in the market. This decision was precipitated in order to make the product more attractive, particularly for the target market described above. The Corporation has had discussions with a graphic development company in London that is a likely candidate for providing this feature.

Currently the Corporation is also watching developments in the United States resulting from the Internet Gambling Prohibition and Enforcement Act passed in October of 2006. The headlines have concentrated on the point that this Act makes offshore internet gambling illegal for U.S. residents, but at the same time, the Act permits Intrastate gambling where the wager is initiated and received or otherwise made exclusively within a single state, and nothing in the Act prohibits the Interstate transmission of information relating to a state-specific lottery between a state or foreign country where such betting or wagering is permitted under Federal, State, tribal or local law and it does not prevent use of an out-of-state data centre for the purposes of assisting in the operation of such state-specific lottery. The Corporation thinks there are opportunities for the Horsepower® game to participate in the evolution of gaming in the U.S. as states develop their own policies within this Act.

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In January 2007 the Corporation published a press release announcing that it has acquired an exclusive license on patents for the first ever lottery to be based on actual live horse racing. To be launched as Horsepower® World Pool Lottery, the license grants Sungold® the rights to a suite of lottery games that will include live horse racing at participating racetracks. In general the patents cover live and virtual horse, dog and auto races across North America.

In addition, the Corporation announced it will be directing a portion of the takeout on the Horsepower® World Pool Lottery games to recognized North American Horsemen’s Associations for direct purse enhancements for horsemen, and announced the appointment of experienced Thoroughbred breeder and owner, Todd Stinson, as Sungold’s Racing Industry Consultant.

In February 2007, the Corporation announced that it made an agreement with Michael Cichy to act in the capacity of the Corporation’s newly created position of Regulatory Affairs and Simulcast Consultant. Mr. Cichy is very experienced in racing and wagering legislation, having written wagering rules for racing and gaming commissions and testifying at various legislative committees. Mr. Cichy has a well rounded mix of simulcast and legislative process experience that will assist the Corporation in addressing any regulatory questions that might be encountered. This is especially appropriate for the recently announced Horsepower® World Pool Lottery project.

The Corporation’s subsidiary, Racing Unified Network (R.U.N.) Inc. developed and began to implement a plan for marketing print media for a consortium of publications with a combined circulation thought to be large enough to appeal to national advertisers. Consequently, press releases in June and July announced a total of seven contracts with publishers. This project provides the opportunity to generate commission income from advertising sales, and secondly, the opportunity to develop relationships with the same advertisers the Corporation wants to recruit for video advertising during the 45 second intervals between Horsepower® World Pool races.

The Corporation announced on December 21, 2006 that Racing Unified Network (R.U.N.) Inc. signed a Letter of Intent with SportsPageTV, a division of BeepMe Las Vegas Inc., a Nevada-based company that offers up-to-the-minute sports scores and odds using secure Internet technology. The letter of intent assigns Racing Unified Network the exclusive right to place the Scoreboard Sports Ticker system into any facilities in Canada, such as sports bars, restaurants, hotels and all racetracks and casinos in North America, and a non-exclusive right in any other unsigned locations worldwide. RUN also has the right to sell the advertising time to all new facilities. The letter of intent was confirmed in a formal agreement on February 14, 2007.

Through the Internet, the Scoreboard-Sports Ticker system can be sent to television monitors in all these locations. While showing the important score updates, the system will offer local, regional and national advertising along with branding opportunities.

The Corporation’s subsidiary, SafeSpending Inc., is in the business of developing a process to enable e-Commerce companies to access more revenue due to the elimination of current consumer fears and apprehensions surrounding the posting of credit card numbers and personal information on the Internet. The detailed development of this project is being deferred until after completing necessary financing arrangements.

Administrative changes made during the year included designating the Toronto address as the official Head Office of the Corporation, and adding John McDermott, through his company, McDerMedia Inc., to the Investor Relations team. Subsequent to the year end, Nicholas DeSante assumed the position of President of SafeSpending Inc., replacing Troy Griffin, who resigned.

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The Corporation is currently exploring the capital market to source sufficient financing for completing its projects. From now until the Horsepower® product launch the Corporation has budgeted a requirement of $750,000 for the associated costs, including marketing. There are not yet any such funding commitments in place but the Corporation has several Financing Consultants currently working on obtaining additional financing.

The Corporation does not have any principal capital expenditures currently in progress. Planned capital expenditures for the future include:

The Horsepower® based racing system, source codes, patent, trademarks and worldwide license;
The rights, title and all intellectual property rights to the SafeSpending™ anonymous internet payment system;
Certain computer hardware and software for scaleable operation of multi-user wagering systems; and
Investment in research and development related to pari-mutuel wagering systems and online payment processing systems.

The Corporation intends to continue to finance its operations through the issuance of equity and debt financing and through revenues from Horsepower® World Pool system.

During the three year period ended August 31, 2006, the Corporation financed its operations by selling 42,510,795 in equity securities either for cash or in settlement of debt. In the same three year period, the Corporation spent $280,870 in acquisition of capital assets, and $114,438 in pre-development costs for a total of $395,308 spent on development expenditures related to its entertainment projects. See “Business Overview” below.

B. BUSINESS OVERVIEW

The Corporation and its wholly owned subsidiaries, Horsepower Broadcasting Network (HBN) International Ltd., a company incorporated under the laws of Canada, Racing Unified Network (R.U.N.) Inc. a company incorporated under the laws of Canada, and SafeSpending Inc., a company incorporated under the laws of Arizona, are in the business of developing and operating the virtual horse racing software system, developing advertising revenues associated with the virtual horse racing system, developing advertising revenue from the print and electronic media magazine program and the SportsPage TV project, and designing the online internet prepayment system.

1.	HORSEPOWER BROADCASTING NETWORK (HBN) INTERNATIONAL LTD.

	Horsepower Broadcasting Network (HBN) International Ltd (“HBN”) controls the international rights, title and interest in the Horsepower® World Pool, random, virtual horserace and pari- mutuel based wagering system. Horsepower® is a computer generated horse racing jackpot system, which is viewed in real time worldwide. The Horsepower® World Pool Wagering System (“Horsepower®”) was originally designed to operate through licensed, pari-mutuel racetrack locations. Recently, the Corporation decided to apply the design to the internet, betting shops and lotteries. Players can win small prizes or multimillion-dollar payoffs from a $1 base wager.

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	The Corporation believes that the many racetrack facilities worldwide are all opportunities for the Corporation to offer Horsepower® as a pari-mutuel wager worldwide, and now also includes internet sites, betting shops and lotteries. The Corporation owns the exclusive perpetual right and license to market its Horsepower® proprietary system, commercial sponsorships, advertising and other promotional materials in connection with the use of the technology. This includes the rights to all intellectual property including copyrights, patents and trademarks.

	Horsepower® Systems Management and Horsepower® Security are internally managed by Horsepower Broadcasting Network (HBN) International Ltd.

2.	RACING UNIFIED NETWORK (R.U.N.) INC.

	Racing Unified Network (R.U.N.) Inc. (“RUN”) was incorporated to sell and arrange the advertising opportunities associated with the Horsepower® game. The advertising consists of video commercials which are to be broadcast between the Horsepower® races, and background billboard space in the race graphics. During fiscal 2006, the print and electronic media advertising project was announced and launched, and subsequent to the year end, the SportsPage TV project was contracted and announced.

3.	SAFESPENDING INC.

	In May 2001, Sungold® acquired the entire world wide right, title and interest to the internet payment system technology of SafeSpending Services Inc. (“SafeSpending”). The SafeSpending™ internet payment system is a prepaid anonymous cash spending system that uses a unique and personalized PIN number which can be used to make purchases online from merchants and individuals.

	The acquisition agreement includes all copyrights, trademarks, source codes and intellectual property. Under the terms of the agreement the Corporation has agreed to pay a royalty of 7.5% of net revenue relating to the technology upon the Corporation or its subsidiary Horsepower Broadcasting Network Inc. receiving $1,000,000 in net revenue from operation, sales or license of the technology. A patent is pending for the anonymous cash payment system in 105 countries.

All of the Corporation’s projects are still in the development stage and currently produce no revenues. The Corporation’s Horsepower® project is in the pari-mutuel wagering/entertainment industry and may be subject to regulatory requirements.

There can be no assurance that the Corporation will successfully develop all of the Projects currently under development or that such projects, if developed, will generate any revenues or profits from operations.

The Corporation anticipates it will need to raise approximately $1,200,000 during the fiscal year ending August 31, 2007 to meet its minimum projected expenditures for such period. See “Description of Business - Plan of Operation.” There can be no assurance that the Corporation will successfully obtain such financing on acceptable terms.

Principal Markets

The Corporation’s principal markets for the Horsepower® World Pool product include North, Central and South America, the United Kingdom, Europe and Asia at licensed pari-mutuel operations, which

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include the internet, betting shops, casinos and lotteries. The Corporation’s principal market for the multi-media advertising and SportsPage TV product is mainly North America.

Seasonality and Raw Material Availability

The Corporation’s business is not seasonal nor does the Corporation require any raw materials to conduct its business.

Marketing Channels

The Corporation’s marketing channels for the Horsepower® World Pool product are the internet and licensed world pari-mutuel facilities such as betting shops and lotteries. The Corporation’s marketing channels for the SportsPage TV product are entertainment venues in North America, such as sports bars, betting shops, casinos, hotels and race tracks.

PLAN OF OPERATION

Below is a summary of the Corporation’s Plan of Operation and operating budget for each of the Corporation’s projects and for administration and marketing for the fiscal year ending August 31, 2007.

Horsepower® Project

During the fiscal year ending August 31, 2007, the Corporation anticipates that its plan of operation related to the Horsepower® pari-mutuel wagering system will consist of, among other things, (i) preparing the Horsepower® system for introduction and then installation as a United States Lottery result, and on the U. K. internet and in the U.K. betting shops; and (ii) development of an advertising network integrated with the Horsepower® system and create more awareness of the Corporation.

Racing Unified Network (R.U.N.) Inc. Project

During the fiscal year ending August 31, 2007, the Corporation intends to install potentially 500 SportsPage TV locations in North America, and sell advertising time on these locations.

SafeSpending™ Project

During the fiscal year ending August 31, 2007, the Corporation expects to be too busy to begin software development of the internet prepayment system.

Set forth below is the Corporation’s anticipated operating and development budget for the Horsepower® pari-mutuel wagering system, Racing Unified Network, SportsPage TV, and the SafeSpending™ system for the fiscal year ending August 31, 2007.

Horsepower® System

Development Expenses		CDN$
Launch expenses		500,000
Software Development (graphics)		175,000
Hardware Systems		100,000
System Management		100,000
Total Horsepower® System:	$	875,000

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Racing Unified Network (R.U.N.) Inc.

Operating Expenses		CDN$
Salaries		60,000
Travel		20,000
Total Racing Unified Network:	$	80,000

Set forth below are the Corporation’s estimated operating budgets for administrative expenses for the fiscal year ending August 31, 2007:

Administration Expenses		CDN$
Office/Telephone/Supplies		35,000
Office Rent/Services		120,000
Legal/Audit/Trust Corporation		100,000
Management/Consulting Fees		650,000
Investor Relations		100,000
Travel/Entertainment		65,000
Contingency		50,000
Total Administration Expenses		1,120,000

TOTAL OPERATING AND DEVELOPMENT BUDGET:	$	2,075,000

The Corporation’s total operating and development budget for the fiscal year ending August 31, 2007 is estimated to be approximately $2,075,000. There can be no assurance that the Corporation’s actual expenditures for the fiscal year ending August 31, 2007 will not exceed the Corporation’s estimated budgets. Actual expenditures will depend on a number of factors, some of which are beyond the control of the Corporation, including, among other things, timing of regulatory approval of its projects, the availability of financing on acceptable terms, reliability of the assumptions of management in estimating cost and timing, certain economic and political factors, the time expended by consultants and professionals and fees associated with applications related to the Corporation’s projects. If the actual expenditures for such costs exceed the estimated costs or if events occur that require additional expenditures, the Corporation will be required to raise additional financing or to defer certain expenditures to meet other obligations. The failure to meet certain expenditures may cause the Corporation to default on material obligations and such default may have a material adverse effect on the Corporation’s business and results of operations.

C. ORGANIZATIONAL STRUCTURE

The Corporation has three wholly owned subsidiaries: (i) Horsepower Broadcasting Network (HBN) International Ltd., a company incorporated under the laws of Canada; (ii) Racing Unified Network (R.U.N.) Inc., a company incorporated on June 26, 2003, under the laws of Canada; and (iii) SafeSpending Inc. (formerly Sungold Entertainment USA Inc.), a company incorporated under the laws of Arizona. The Corporation wound up its wholly owned subsidiary Horsepower Broadcasting Network Inc. in January, 2005.

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D. PROPERTY PLANTS AND EQUIPMENT

The Corporation’s corporate headquarters are located in Toronto, Ontario, Canada. The Corporation is renting office space in Toronto, from January 1, 2007, under two leases, totaling 5,235 square feet, costing $8,245 per month. Management believes these rates are favourable compared with market rates.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following should be read in conjunction with the Corporation’s financial statements, forming a part of this document, including note 13 to the annual financial statements which provides a reconciliation between US GAAP and Canadian GAAP.

Critical Accounting Policies

The Corporation’s financial statements are prepared in conformity with Canadian generally accepted accounting principles, which require management to make estimates and assumptions which can affect the reported balances. In determining estimates of net recoverable amounts and net realizable values, or whether there has been a permanent impairment in value, for pre-development costs and equipment, the Corporation relies on assumptions regarding applicable industry performance and prospects, as well as general business and economic conditions that prevail and are expected to prevail. Assumptions underlying asset valuations are limited by the availability of reliable comparable data and the uncertainty of predictions concerning future events.

By nature, asset valuations are subjective and do not necessarily result in precise determinations. Should the underlying assumptions change, the estimated net recoverable amounts and net realizable values may change by a material amount. The Corporation’s significant accounting policies are set forth in Note 2 to its consolidated financial statements, which should be read in conjunction with management’s discussion of the Corporation’s critical accounting policies and estimates set forth below.

Translation of Foreign Currencies

Accounts recorded in foreign currency have been converted to Canadian dollars as follows:

Current assets and current liabilities at exchange rates at the end of the year;
Other assets at historical rates; and
Revenues and expenses at the average rate of exchange for the month incurred.
Gains and losses resulting from the fluctuation of foreign exchange rates are included in the determination of income.

Pre-development costs

The Corporation is in the development stage and capitalizes all costs related to its pre-development projects in accordance with Accounting Guideline No. 11, “Enterprises in the Development Stage”, issued by the Canadian Institute of Chartered Accountants. These costs will be amortized on the basis of revenue generated in relation to the project following commencement of operations. When management decides a project is to be abandoned, costs of the abandoned project are written off to operations. As the date of this annual report, there were no projects which commenced operations.

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The costs deferred at any time do not necessarily reflect present or future values. The ultimate recovery of such amounts depends on the Corporation successfully developing and commencing the project.

Overview

To date, the Corporation has not earned significant revenues and is considered to be in a development stage. The recoverability of pre-development costs is primarily dependent on the ability of the Corporation to put its pre-development projects into economically viable products in the future.

The Corporation has funded its business operations, working capital and business development by the issuance of share capital under private placements and by the exercise of accompanying warrants and stock options in the aggregate amount of $16,548,468 for cash and $2,575,737 for debt settlement since inception.

As of August 31, 2006, the Corporation had a cash deficit of $2,919, $17,853 in sundry receivables, $640 in prepaid expenses and $639,532 in accounts payable. As of August 31, 2005, the Corporation had $10,876 cash and $43,065 in sundry receivables, $22,087 in prepaid expenses and $244,075 in accounts payable.

The Corporation's net losses for the fiscal years ended 2006 and 2005 were $1,571,934 and $1,988,897 respectively.

A. OPERATING RESULTS

The following is a summary of selected financial data for the Corporation for its last three completed financial years.

		Year ended
	August 31,	August 31,	August 31,
	2006	2005	2004
Revenue⁽¹⁾	$Nil	$Nil	$Nil
Net Income (Loss)	($1,571,934)	($1,988,897)	($1,211,718)
Earnings (Loss) Per Share	($0.0127)	($0.0178)	($0.0131)
Net Income (Loss) US GAAP	($1,616,259)	($1,389,886)	($1,274,878)
EPS (Loss) US GAAP	($0.0131)	($0.0125)	($0.0138)
Dividends Per Share	$Nil	$Nil	$Nil
Dividends Per Share (US GAAP)	$Nil	$Nil	$Nil
Weighted Average Number of Shares⁽²⁾	123,834,644	111,579,338	92,239,057
Working Capital (Deficiency)	($637,586)	($187,667)	$34,395
Pre-development costs	$270,288	$224,898	$825,154
Long Term Debt	$6,518	$14,519	$Nil
Long Term Debt (US GAAP)	$6,518	$14,519	$Nil
Shareholder’s Equity	$109,960	$650,724	$1,382,004
Total Assets	$772,557	$928,938	$1,592,034
Total Assets (US GAAP)	$502,269	$704,040	$766,880

Notes

⁽¹⁾	Foreign exchange gains (losses) have been reclassified from revenue to form part of the general and administrative expenses.
⁽²⁾	As adjusted to reflect a 21 for 20 stock split effected on September 8, 2003.

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Year Ended August 31, 2006 Compared to August 31, 2005

Revenues. As the Corporation is still in the development stage, the Corporation had no revenue from operations during fiscal 2006 or 2005.

Operating Expenses. Operating expenses for fiscal 2006 decreased to $1,571,934 compared to $1,988,897 for fiscal 2005, primarily due to the Corporation writing off $628,246 of pre-development expenses during fiscal 2005 related to the Vancouver Racecourse / Richmond Equine Training Centre projects. Otherwise, the 2006 operating expenses are 15.5% higher than 2005, primarily resulting from an increase in Management fees and salaries, and Investor Relations.

Financing Expenditures. During the year ended August 31, 2006, the Corporation issued 6,767,735 private placement units to settle debts, pay for services, and provide working capital in total of $967,040. Proceeds from the exercise of share purchase warrants and incentive share purchase options were $113,149 in fiscal 2006.

Pre-development Expenditures.The pre-development expenditures capitalized under Canadian GAAP for the year ended August 31, 2006 were $45,390, being $3,547 related to the SafeSpending™ project and $41,843 related to the Horsepower® project.

Professional and consulting expenditures for fiscal 2006 were $516,911 compared to expenses of $566,803 in fiscal 2005. Investor relations fees increased to $186,063 in fiscal 2006 over $133,306 in fiscal 2005. Office expenses decreased slightly to $33,470 in fiscal 2006 from $43,756 in fiscal 2005.

Net Loss. The Corporation had a net loss of $1,571,934 for fiscal 2006, compared to a net loss of $1,988,897 for fiscal 2005, which included a pre-development write down of $628,246, so other than the write down, the 2006 loss was 15.5% higher. The $0.0127 loss per share for fiscal 2006 compares to $0.0178 loss per share for fiscal 2005 and reflects the Corporation's net loss in the 2006 and 2005 fiscal years under Canadian GAAP.

Year Ended August 31, 2005 Compared to August 31, 2004

Revenues. The Corporation had no revenue from operations during fiscal 2005 or 2004.

Operating Expenses. Operating expenses for fiscal 2005 increased to $1,988,897 compared to $1,211,718 for fiscal 2004, primarily due to the Corporation writing off $628,246 of pre-development expenses related to the Vancouver Racecourse / Richmond Equine Training Centre projects. Otherwise, the results would have been quite similar.

Financing Expenditures. During the year ended August 31, 2005, the Corporation issued 16,243,060 private placement units to settle debts, pay for services, and provide working capital in total of $1,119,082 Proceeds from the exercise of share purchase warrants and incentive share purchase options were NIL in fiscal 2005 the same as in fiscal 2004.

Pre-development Expenditures.The pre-development expenditures capitalized under Canadian GAAP for the year ended August 31, 2005 were $27,990, being $24,155 related to the SafeSpending™ project and $3,835 related to the Horsepower® project minus a write off of $628,246 closing out the Vancouver Racecourse/Richmond Equine Centre project which was abandoned for a net write off of $600,256 compared to an increase of $63,112 in 2004.

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Professional and consulting expenditures for fiscal 2005 were $566,803 compared to expenses of $488,500 in fiscal 2004. Investor relations fees increased to $133,306 in fiscal 2005 over $35,192 in fiscal 2004. Office expenses decreased slightly to $43,756 in fiscal 2005 from $59,673 in fiscal 2004.

Net Loss. The Corporation had a net loss of $1,988,897 for fiscal 2005, which included a pre-development write down of $628,246, compared to a net loss of $1,211,718 for fiscal 2004, so other than the write down the losses were fairly consistent. The $0.0178 loss per share for fiscal 2005 compares to $0.0131 loss per share for fiscal 2004 and reflects the Corporation's net loss in the 2005 and 2004 fiscal years under Canadian GAAP.

As the Corporation is in the development stage, there is no income from operations at this point. However, the Corporation anticipates that revenue will develop before the end of the current fiscal year as the Horsepower® World Pool Racetrack System becomes operational.

B. LIQUIDITY AND CAPITAL RESOURCES

As at August 31, 2006, the Corporation had the following cash deficit:

USD Account (expressed in CDN$)	$	315
CDN Account		(3,234	)
	$	(2,919	)

The Corporation has a planned operating budget of $1,200,000 for the fiscal year ended August 31, 2007. The Corporation currently does not have sufficient funds to fund its operations through the fiscal year ended August 31, 2007, and will be required to raise additional funds from operations or through equity or debt financing. The Corporation anticipates it will raise funds to meet its planned operating budget through private placements of equity and debt financing.

There can be no assurance that the Corporation's actual expenditures for the fiscal year ending August 31, 2007 will not exceed the Corporation's estimated operating budget. If the actual expenditures for such costs exceed the estimated costs or if events occur that require additional expenditures, the Corporation will be required to raise additional financing or defer expenditures to meet other obligations. The failure to meet certain expenditures may cause the Corporation to default on material obligations and such default may have a material adverse effect on the Corporation's business and results of operations. If the Corporation is unable to obtain additional financing on acceptable terms, the Corporation will be unable to meet its obligations and the Corporation may be forced to abandon its interest in some of its projects and write off its investment.

The following is a summary of the Corporation’s financing activities during the fiscal years ending August 31, 2006, 2005 and 2004:

1.	During the year ended August 31, 2006, the Corporation issued 6,767,735 common shares pursuant to private placements to pay for services of $391,712, and provide working capital of $575,328. The exercise of share purchase warrants, and the exercise of incentive share purchase options for cash was $113,149.

2.	During the year ended August 31, 2005, the Corporation issued 16,243,060 common shares pursuant to private placements to settle $607,979 of debts owed by the Corporation, pay for services of $255,771, and provide working capital of $255,332. The exercise of share purchase warrants, and the exercise of incentive share purchase options for cash was $Nil.

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During the year ended August 31, 2004, the Corporation issued 19,500,000 common shares pursuant to private placements to settle $1,385,197 of debts owed by the Corporation. The exercise of share purchase warrants, and the exercise of incentive share purchase options for cash was $Nil. Also, on September 8, 2003 the Corporation issued 3,993,531 common shares pursuant to 21 for 20 stock split.

While the Corporation has been successful in raising the necessary funds in the past, there can be no assurance it can continue to do so. If such funds cannot be secured, the Corporation may be forced to curtail some of its development efforts to a level for which funding can be secured through new investment or joint venturing. If the Corporation cannot raise or arrange to obtain the cash requirements necessary to meet its minimum obligations for the Horsepower® Worldpool Project and the SafeSpending™ Project, some aspects of these projects may be delayed or forfeited. The Corporation believes its minimum financial obligations during the fiscal year ending August 31, 2007, will be approximately $1,200,000. There can be no assurance that such financing will be obtained on acceptable terms. In 2006, the Corporation financed the Horsepower® World Pool system with equity financing. The Corporation anticipates it will finance the Horsepower® World Pool system and the SafeSpending™ Project primarily through additional equity financing and, eventually, revenues from the Horsepower® World Pool system, and the Racing Unified Network advertising and SportsPage TV programs.

The Corporation's liquidity depends largely on the established financing capabilities of its principals and on its ability to access the capital markets or to enter into joint venture agreements. The Corporation does not know of any other trends, demands, commitments, events or uncertainties that will result in, or that are reasonably likely to result in, the Corporation's liquidity either materially increasing or decreasing at present or in the foreseeable future.

The Corporation relies on private placements for the working capital necessary for its operations. It is anticipated that financings will continue to be achieved through these means. The Corporation has received expressions of interest from both private and public investors. There can be no guarantee that the expressions of interest will be sufficient to fund the Corporation's projects.

As at August 31, 2006, the Corporation has obligations under capital leases for computer hardware.

		August 31, 2006		August 31, 2005
	Current	Long Term
Lessor	Portion	Portion	Total	Total
	$	$	$	$
National Leasing, having an original
principal of $20,975, repayable in
monthly payments of $640	6,128	6,518	12,646	17,893

Bodkin Capital	-	-	-	3,746

	6,128	6,518	12,646	21,639

C. RESEARCH AND DEVELOPMENT

The Corporation has not expended any funds over the last three years on "Research and Development" as that term is defined in the CICA Handbook. The Corporation has, however, expended the following amounts directly in connection with software development of the Horsepower® World Pool system over the past three years:

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	Pre-development costs	Computer	Computer
Year	- Consulting and legal	Hardware	Software
2004	$20,120	-	$69,580
2005	$3,835	$26,961	$207,233
2006	$41,843	-	-
TOTAL	$65,798	$26,961	$276,813

The Corporation continues to be in the development stage of its operations. Consequently a significant amount of the Corporation's expenditures have been related to software development. The Corporation's plans for its software research and development expenditures for fiscal 2007 will represent a decreasing percentage of the Corporation's budget as installing the Horsepower® system and commercial advertising sales are expected to begin generating revenues for the Corporation.

D. TREND INFORMATION

The Corporation does not have sufficient history of operations, because it has been in the development stage until the last fiscal year, to be able to ascertain any trends in production, sales or costs. The Corporation is unaware of any trends, uncertainties, demands, commitments or events that are likely to have a material effect on its net sales or revenues, income from operations, profitability, liquidity or capital resources or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition except that the Corporation plans to exploit the trend towards online delivery of wagering systems and focus primarily on the trend towards alternative wagering which the Corporation believes is in the initial stages of a major international expansion.

E. OFF-BALANCE SHEET ARRANGEMENTS

As at the date of this annual report the Corporation does not have any off-balance sheet arrangements.

F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

As of August 31, 2006, the Corporation’s known contractual obligations identified in the following table are:

	Payments Due by Period
Contractual Obligations	Total	Less than 1 year	1- 3 years	3 -5 years	More than 5 years
Capital (Finance) Lease Obligations⁽¹⁾	12,646	6,128	6,518	-	-
Office Lease Obligations⁽²⁾	561,337	80,241	322,999	158,097	-
Total	573,983	86,369	329,517	158,097	-

⁽¹⁾ During the year ended August 31, 2005, the Corporation acquired computer hardware which it financed with two capital leases.
⁽²⁾During 2006 the Corporation sublet its offices in Vancouver and is off covenant, and in Toronto, it began paying $1,570 per month on a month to month basis for offices with no lease commitment for that space until December 31, 2006 when it signed a five year lease for the same space. Beginning in September 2006, the Corporation signed a five year and four month lease for additional office space.

G. SAFE HARBOR

The safe harbor provided in Section 27A of the Securities Act and Section 21E of the Exchange Act applies to forward-looking information provided pursuant to Item 5.E and F above.

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. DIRECTORS AND SENIOR MANAGEMENT

All of the directors of the Corporation are elected annually by the shareholders and hold office until the next annual general meeting of shareholders or until their successors are duly elected and qualified, unless they sooner resign or cease to be directors in accordance with the Corporation’s bylaws. The Corporation’s last annual general meeting was held on February 19, 2007. The Corporation’s executive officers are appointed by and serve at the pleasure of the Board of Directors.

As of February 20, 2007, the following persons are directors of the Corporation:

Name	Position with the Corporation	Number of Common Shares Owned
Art Cowie⁽¹⁾(2)	Director and Vice Chairman	1,863,900 ⁽³⁾
Donald R. Harris⁽¹⁾(2)	Director and Chairman	7,081,250
Dennis Hedtke	Director	2,451,160
Larry Simpson	Director	365,000

⁽¹⁾	Member of the Corporation’s Audit Committee.
⁽²⁾	Member of the Corporation’s Executive Committee.
⁽³⁾	Includes 230,000 shares held in the name of Mr. Cowie’s spouse and 50,000 shares held by Eikos Planning Inc., a company controlled by Mr. Cowie.

Members of the Corporation’s board of directors are elected by the holders of the Corporation’s shares to represent the interests of all shareholders. The board of directors meets periodically to review significant developments affecting the Corporation and to act on matters requiring board approval. Although the board of directors delegates many matters to others, it reserves certain powers and functions to itself. The only standing committees of the Board of Directors of the Corporation are an audit committee and an executive committee. See “Board Practices” below.

None of the Corporation’s directors or executive officers is party to any arrangement or understanding with any other person pursuant to which said individual was elected as a director or officer or member of senior management of the Corporation.

No director or executive officer of the Corporation has any family relationship with any other officer or director of the Corporation.

The following is a brief summary of biographical information on each of the officers and directors listed above:

ART COWIE has served as President and director of the Corporation since January, 2003. Mr. Cowie has been a career community planner as well as a distinguished landscape architect, government affairs consultant and has an extensive public service record including member of the BC Legislature, Alderman for the City of Vancouver, Director of the Pacific National Exhibition, Chairman of Vancouver Board of Parks and Recreation, member of B.C. and Canadian Institutes of Planning, past President of the BC Society of Landscape Architects and a Fellow of the Canadian Society of Landscape Architects.

DONALD R. HARRIS has served as a director of the Corporation since January, 1998 and Chairman of the Board since December, 1999. Mr. Harris is the President and CEO of TAC International Investment LLC, a private investment company, and the Chairman of the Board and CEO of Town’s Edge

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Properties, Inc., a developer of multiple residential and commercial properties, for over 31 years. Town’s Edge is the managing entity for 12 real estate investment general and limited partnerships worth in excess of US $65 million.

DENNIS HEDTKE is presently the Corporate Secretary of the Corporation and has been a director of the Corporation since May, 2003. Mr. Hedtke is President and owner of Hedtke, Inc. a Manufacturer’s Representative firm offering engineered products to the mobile off-highway original equipment manufacturing market in 10 states. Mr. Hedtke is also founder and CEO of Specialty Fittings, Inc. a manufacturer of non-standard hydraulic fittings and Partner/Owner and CEO of Filtration Products Corporation, a manufacturing company with worldwide sales and distribution of hydraulic filters and accessories.

LARRY SIMPSON is President and CEO of the Corporations’s subsidiaries, Horsepower Broadcasting Network (HBN) International Ltd. and Racing Unified Network (R.U.N.) Inc., and was elected as a Director of Sungold International Holdings Corp. at the Annual Meetings in February of 2006 and 2007. Mr. Simpson has over 25 years of administrative, marketing, public relations and sales experience in horseracing, sports and leisure. Mr. Simpson has been a successful publisher, manager and writer for many Thoroughbred and Standardbred publications. His influence within the racing industry has extended to charity work for equine research, and lecturing on a regular basis on marketing racing, successful handicapping and new horse ownership. Mr. Simpson’s background is unique in that his contacts are strong in both Thoroughbred and Standardbred racing.

No director and/or executive officer of the Corporation has been the subject of any order, judgment, or decree of any governmental agency or administrator or of any court of competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any corporation of which he or she is a director and/or executive officer, to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining or enjoining any such person or any corporation of which he or she is an officer or director from engaging in or continuing any conduct, practice, or employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security or any aspect of the securities business or of theft or of any felony.

B. COMPENSATION

The Corporation compensates its directors nominally for their services as directors. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Board of Directors. The Board of Directors makes separate remuneration to any director undertaking services on behalf of the Corporation other than services ordinarily required of a director. Other than indicated below, no director received any compensation for his or her services as a director, including any committee participation or special assignments.

The Corporation grants stock options to directors, executive officers and employees. See “Options to Purchase Securities from the Corporation or Subsidiary”.

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The following table sets forth details of the compensation paid during the Corporation’s fiscal year ended August 31, 2006 to directors and executive officers:

Directors and Officers	Directors Fees	Salary	Consulting Fees	Other Compensation
Art Cowie ⁽³⁾	2,800	-	-	-
Donald Harris ⁽3)	2,800	-	-	-
Dennis Hedtke ⁽3)	2,100	-	-	-
J. Scott Rowe ⁽¹⁾	1,200	-	11,000	22,463 ⁽⁴⁾
Larry R. Simpson ⁽⁵⁾	-	105,841	-	28,505 ⁽⁴⁾
T. Keith Blackwell	-	78,000	50,704	66,601 ⁽⁴⁾
Tony Currie	-	-	12,000	-
Troy Griffin ⁽²⁾	-	76,427	-	28,505 ⁽⁴⁾

Notes

	(1)	Appointed to the Board on January 16, 2006 and resigned in May 2006.
	(2)	Resigned from the company on October 4, 2006.
	(3)	Individuals owning more than 1% of the common shares of the Corporation as of January 19, 2007 are Art Cowie – 1,863,900 (1.4%), Donald Harris – 7,081,250 (5.4%) and Dennis Hedtke – 2,451,160 (1.9%).
	(4)	Compensation paid in shares at market value on date of grant.
	(5)	Salary and Other Compensation paid as compensation for executive position.

The aggregate amount of compensation paid by the Corporation during the fiscal year ended August 31, 2006 to all officers and directors as a group was $488,946.

No amounts have been set aside or accrued by the Corporation during the year ended August 31, 2006 to provide pension retirements or similar benefits for directors or executive officers of the Corporation pursuant to any plan provided for or contributed to by the Corporation.

OPTIONS TO PURCHASE SECURITIES FROM THE CORPORATION OR SUBSIDIARY

Stock Options to purchase shares from the Corporation are granted to directors and employees of the Corporation on terms and conditions acceptable to the applicable securities regulatory authorities. The Corporation has no formal written stock option plan. No stock option granted under the stock option program is transferable by the optionee other than by will or the laws of descent and distribution, and each stock option is exercisable during the lifetime of the optionee only by such optionee. The exercise price of all stock options granted under the stock option program is based on the market price of the Corporation’s securities at the time of the grant of the incentive stock option and the maximum term of each stock option may not exceed five years.

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The names of the directors, executive officers and consultants, past and present, of the Corporation to whom outstanding stock options have been granted and the number of shares subject to such stock options are set forth below as at August 31, 2006 The exercise price of the stock options is stated in U.S. dollars.

Name of Optionees	Options	Exercise Price (US)	Expiration Date	Total Outstanding Options at August 31, 2006
Officers and Directors:
Donald R. Harris	300,000	$0.08	August 10, 2006
	125,000	$0.15	March 31, 2008	425,000
Art Cowie	136,000	$0.11	January 15, 2008
	64,000	$0.05	May 27, 2008	200,000
Larry R. Simpson	200,000	$0.15	October 11, 2007
	500,000	$0.12	March 31, 2007	700,000
Dennis Hedtke	370,000	$0.15	March 31, 2008	370,000
T. Keith Blackwell	1,000,000	$0.12	March 31, 2007	1,000,000
Tony Currie	750,000	$0.12	March 31, 2007	750,000
Troy Griffin (resigned)	500,000	$0.12	March 31, 2007	500,000 ⁽¹⁾
Nicholas DeSante	500,000	$0.12	March 31, 2007	500,000
Paul T. Coulter	500,000	$0.12	March 31, 2007	500,000
Consultants:
Jeff Grant (resigned)	100,000	$0.09	December 20, 2006
	36,000	$0.08	January 04, 2007
	500,000	$0.12	March 31, 2007	636,000 ⁽¹⁾
Patrick Kearns (resigned)	250,000	$0.15	March 31, 2007	250,000 ⁽¹⁾
J. Scott Rowe (resigned)	300,000	$0.65	March 31, 2007	300,000 ⁽¹⁾
Richard Henley	200,000	$0.65	March 31, 2007	200,000
John McDermott	200,000	$0.50	February 28, 2008	200,000
			Total	6,531,000

Note

(1)	Stock options expire if not excercised within two months of resigning; therefore, as of February 20, 2007, these 1,686,000 options have expired, leaving the total outstanding at 4,845,000.

C. BOARD PRACTICES

Directors, Officers and Term of Office

Directors may be appointed at any time in accordance with the Articles and Bylaws of the Corporation and then re-elected annually by the shareholders of the Corporation. Directors may resign at any time and their term of office expires annually at each Annual General Meeting of the shareholders of the Corporation.

Executive officers are appointed from time to time by the Board of Directors. The Board, in its discretion, may remove any officer of the Corporation, otherwise each officer shall hold office until his or her successor is appointed or until his earlier resignation.

Agreements with Senior Management

Pursuant to a management services agreement dated as of April 14, 2005, between Mr. T. Keith Blackwell, of Toronto Ontario, and the Corporation, Mr. Blackwell agreed to act as: the Chief Financial Officer and Treasurer of the Corporation, the Treasurer and Secretary of Horsepower Broadcasting

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Network International Ltd. and to serve on a management committee of the Corporation, in consideration of which the Corporation agreed to the following: (i) to pay a monthly fee to Mr. Blackwell at a rate of $3,500 plus $250 per hour for extra time worked over 14 hours a month (not to exceed 25 hours per month), (ii) to issue to Mr. Blackwell 200,000 Common shares on execution of the agreement, and (iii) issue to Mr. Blackwell an option to purchase 1,000,000 Common shares of the Corporation at a price of $0.12 per share expiring on March 31, 2007. The agreement is for a term of two years and may only be terminated by a majority vote of the Corporation’s management committee and upon payment of three months notice in which case the options granted under the agreement will continue until their expiration date. In the event of a resignation by Mr. Blackwell, his options granted under the agreement shall expire within two months of the resignation notice. This agreement was amended on February 7, 2006, to add the title of Chief Executive Officer of the Corporation and replace the consulting fee with a salary of $10,000 per month. Mr. Blackwell is presently the Chief Executive Officer, Chief Financial Officer, and Treasurer of the Corporation, and the Secretary/Treasurer of HBN, a wholly owned subsidiary of the Corporation.

Pursuant to an employment agreement dated effective June 1, 2005, between the Corporation’s wholly owned subsidiary, HBN and Larry R. Simpson, Mr. Simpson is the President and Chief Executive Officer of HBN, at an annual salary of $90,000 and bonuses of (i) 35,000 Common shares for each installation that becomes operational, to a maximum of 525,000, (ii) 5% of HBN pre-tax income to a maximum of $200,000 and (iii) an option to purchase 500,000 Common shares at US$0.12, expiring on March 31, 2007. The agreement is for a term of two years and may only be terminated by a majority vote of the Corporation’s management committee and upon payment of three months notice in which case the options granted under the agreement will continue until their expiration date. In the event of a resignation by Mr. Simpson, his options granted under the agreement shall expire within two months of the resignation notice. Mr. Simpson was named President and CEO in March, 2005 after serving as Vice President of Corporate Development since October, 2002. Mr. Simpson has over 25 years of administrative, marketing, public relations and sales experience in horseracing, sports and leisure. Mr. Simpson has been a successful publisher, manager and writer for many Thoroughbred and Standardbred publications.

Pursuant to an employment agreement dated effective July 1, 2005, between the Corporation and Troy Griffin, Mr. Griffin was appointed the President and Chief Executive Officer of SafeSpending Inc. and the Vice-President Corporate Development of Sungold International Holdings Corp., at an annual salary of $60,000 and (i) an allocation of 750,000 Common shares, (ii) a bonus of 250,000 Common shares when the first track is fully operational and (iii) an option to purchase 500,000 Common shares at US$0.12, expiring on March 31, 2007. The agreement is for a term of one year and may only be terminated by a majority vote of the Corporation’s management committee and upon payment of three months notice in which case the options granted under the agreement will continue until their expiration date. In the event of a resignation by Mr. Griffin, his options granted under the agreement shall expire within two months of the resignation notice. The contract was not renewed when it expired, but the Corporation was making the same salary payments until Mr. Griffin resigned on October 4, 2006. As he did not exercise his options, they have now expired.

Audit Committee

The members of the Corporation’s audit committee are Donald Harris, Art Cowie, and T. Keith Blackwell. They may be appointed any time by the Corporation’s board of directors. The board, in its discretion may change the membership and fill vacancies in the audit committee, otherwise, audit committee members shall serve until his or her successor is appointed or until his or her earlier resignation.

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The Corporation’s audit committee has the following primary duties, responsibilities and powers, as set out in its charter:

(a)	to serve as an independent and objective party to monitor the Corporation’s financial reporting process and internal control systems;

(b)	to review and appraise the audit activities of the Corporation’s independent auditors;

(c)	to provide open lines of communication among the independent auditors, financial and senior management, and the board of directors for financial reporting and control matters;

(d)	making recommendations to the Corporation’s board of directors regarding the selection, independence, evaluation, fees and, if necessary, the replacement of the independent auditors;

(e)	meeting with the Corporation’s auditors and senior management to review the scope of the proposed audit for the current year, and the audit procedures to be used;

(f)	reviewing the Corporation’s financial statements with the Corporation’s senior management and its independent auditors to ensure that:

	a.	senior management has reviewed the audited financial statements with the Audit Committee, including significant judgments affecting the financial statements;

	b.	the audit committee has received the assurance of both financial management and the Corporation’s independent auditors that its financial statements are fairly presented in conformity with generally accepted accounting principles (GAAP) in all material respects;

	c.	the Corporation’s senior management review the adequacy and effectiveness of the Corporation’s financial and accounting controls;

	d.	Making inquiries of the Corporation’s senior management and the Corporation’s independent auditors to identify significant business, political, financial and control risks and exposures and assess the steps management has taken to minimize such risk to the Corporation;

(g)	Ensuring that the disclosure of the process followed by the Corporation’s board of directors and its committees, in the oversight of the Corporation’s management of principal business risks, is complete and fairly presented; and

(h)	Review and confirmation of compliance with the Corporation’s policies on internal controls, conflicts of interests and other key compliance issues.

Executive Committee

The executive committee of the Corporation’s board of directors currently consists of Art Cowie and Donald Harris. This committee is directed to have and exercise, during the intervals between the meetings of the Corporation’s board of directors, all the powers vested in the Board except the power to fill vacancies and the power to change the membership of, or fill vacancies in, the executive committee or any other committee of the Board.

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D. EMPLOYEES

As of February 20, 2007, the Corporation had three employees. The prior year, the Corporation had five employees. The Corporation also relies on part-time staff, flex-time and consultants to minimize expenses, which on average would amount to four people.

ITEM 7. MAJOR SHAREHOLDER AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS

The Corporation is currently a publicly-held corporation, with its shares held by residents of Canada, the United States and other countries. To the best of its knowledge, the Corporation is not controlled, directly or indirectly, by another corporation or any government or by any natural or legal persons and, as at February 20, 2007, no person or corporation or other entity owns, directly or indirectly, or controls more than 5% of the shares of the Corporation, the only class of securities with voting rights, except for the persons or groups listed below:

Identity of Persons or Group	Number of Shares Owned⁽¹⁾	Percentage of Class
Donald Harris ⁽²⁾	7,081,250	5.43% ⁽¹⁾

(1)	Based on 130,341,314 shares outstanding at February 20, 2007.
(2)	Mr. Harris is the only person, corporation or other entity known by the Corporation to own, directly or indirectly, or to control more than 5% of the shares of the Corporation.

There are no arrangements, known to the Corporation which may at a subsequent date result in a change in control of the Corporation.

The Corporation’s major shareholders do not have different voting rights from other shareholders of the Corporation.

Based on the records of Automated Depository Services Inc., as at February 20, 2007, there were 402 holders of record of the Corporation’s shares with United States addresses who collectively held 48,267,355 shares or approximately 37% of the 130,341,314 issued and outstanding shares.

B. RELATED PARTY TRANSACTIONS

For the three year period ended August 31, 2006, there were no material transactions between the Corporation and its directors, executive officers, holders of ten percent or more of the Corporation’s outstanding shares, or any associate or affiliate of such person, except as follows:

During the 2004 fiscal year, the Corporation signed a $275,825 software development agreement with a consulting company for its Horsepower® program, which was completed in 2005. The owner of the consulting company was also the Chief Technical Officer of the subsidiary, Horsepower Broadcasting Network (HBN) International Ltd. The officer had no influence over obtaining the contract which was a normal transaction in the ordinary course of business, and did not become an officer except as a result of the contract.

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ITEM 8. FINANCIAL INFORMATION

CONSOLIDATED FINANCIAL STATEMENTS

The financial statements required as part of this Annual Report are filed under Item 17 of this Annual Report.

LITIGATION

The Corporation is not aware of any active or pending legal proceedings or claims against it or any of its properties that will have a material effect on the Corporation’s business or results of operations.

DIVIDEND POLICY

Other than as described below, the Corporation has not and does not currently intend to pay any dividends on any of its shares. The Corporation intends to follow a policy of retained earnings to finance the growth of the business. Any future determination to pay dividends will be at the discretion of the Corporation’s board of directors on the basis of earnings, financial requirements and other relevant factors.

SIGNIFICANT CHANGES

The Corporation does not have any significant changes to report since the date of the financial statements included with this Annual Report on Form 20-F.

ITEM 9. THE OFFER AND LISTING

On March 29, 1999, the Corporation became a Reporting Issuer under the Securities Exchange Act of 1934 and on May 14, 1999, the Corporation began trading on the OTC Bulletin Board as “SGGNF.” Effective September 7, 2001, the Corporation’s shares were also listed and posted for trading on the Frankfurt and Berlin Stock Exchanges, but to date, no significant trading has taken place on the Frankfurt or Berlin Stock exchanges. On December 15, 2003, the Corporation changed its trading symbol on the OTC Bulletin Board to “SGIHF” in connection with the Corporation’s name change to “Sungold International Holdings Corp.”.

The following is a summary of trading of Sungold on the OTC Bulletin Board during the first, second, third and fourth quarters of fiscal 2002, 2003, 2004, 2005 and 2006:

OTC Bulletin Board	2002	High (US$)	Low (US$)	Volume
	1st Quarter	0.18	0.07	17,189,600
	2^ndQuarter	0.23	0.06	11,947,300
	3rd Quarter	0.59	0.14	29,207,400
	4th Quarter	0.37	0.10	29,207,400
	2003	High (US$)	Low (US$)	Volume
	1st Quarter	0.20	0.07	15,671,400
	2^ndQuarter	0.13	0.06	16,929,100

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	3rd Quarter	0.13	0.03	27,202,400
	4th Quarter	0.13	0.03	33,562,100
OTC Bulletin Board	2004	High (US$)	Low (US$)	Volume
	1st Quarter	0.12	0.06	21,369,400
	2^ndQuarter	0.11	0.05	23,462,400
	3rd Quarter	0.13	0.07	18,689,600
	4th Quarter	0.11	0.07	13,427,018
	2005	High (US$)	Low (US$)	Volume
	1st Quarter	0.10	0.05	15,470,619
	2nd Quarter	0.11	0.08	14,451,875
	3rd Quarter	0.10	0.07	6,340,071
	4th Quarter	0.10	0.07	7,174,801
	2006	High (US$)	Low (US$)	Volume
	1st Quarter	0.10	0.06	6,535,100
	2nd Quarter	0.42	0.10	20,720,700
	3rd Quarter	0.30	0.11	8,491,500
	4th Quarter	0.16	0.09	5,148,600

The following is a summary of trading, on a monthly basis, in the shares on the OTC Bulletin Board in the United States during the past six months:

Month & Year	High (US$)	Low (US$)	Volume
January 2007	0.11	0.07	2,974,500
December 2006	0.09	0.06	2,358,600
November 2006	0.09	0.06	1,627,800
October 2006	0.08	0.05	2,107,700
September 2006	0.11	0.07	841,600
August 2006	0.14	0.09	1,482,800

The Corporation’s shares were approved for quotation by the National Association of Securities Dealers on the OTC Bulletin Board in the United States on May 14, 1999. The Corporation’s shares were listed and posted for trading on the Frankfurt and Berlin Stock Exchanges on September 7, 2001. Other than described above, the Corporation’s shares are not and have not been listed or quoted on any other exchange or quotation system.

ITEM 10. ADDITIONAL INFORMATION

A. SUMMARY OF SECURITIES TRANSACTIONS

Set forth below are the closed and pending transactions pursuant to which securities of the Corporation have been issued or sold over the Corporation’s last three fiscal years.

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SHARE, OPTION AND WARRANT TRANSACTIONS

*Shares Issued During Fiscal Year Ended August 31, 2004*

			Total Gross
	Number of	Price per Security	Consideration
Transaction	Securities Issued	(Cdn$)/(US$)	(Cdn$)	Date Closed
21 for 20 stocks split	3,993,531	-	-
Private Placement	1,000,000	$0.08/US$0.060	81,792	Sep 2003
Private Placement	1,000,000	$0.08/US$0.060	79,308	Sep 2003
Private Placement	1,000,000	$0.08/US$0.060	79,308	Oct 2003
Private Placement	1,000,000	$0.08/US$0.060	78,756	Oct 2003
Private Placement	4,000,000	$0.05/US$0.040	212,920	Feb 2004
Private Placement	2,500,000	$0.06/US$0.045	151,306	Feb 2004
Private Placement	1,500,000	$0.07/US$0.0525	103,235	Mar 2004
Private Placement	3,000,000	$0.08/US$0.060	244,386	Jun 2004
Private Placement	4,500,000	$0.08/US$0.060	354,186	Aug 2004

*Total (Since Inception)*	103,364,740		$19,959,566

*Shares Issued During Fiscal Year Ended August 31, 2005*

	Number of		Total Gross
	Securities	Price per Security	Consideration
Transaction	Issued	(Cdn$)/(US$)	(Cdn$)	Date Closed
Private Placement	2,500,000	$0.076/US$0.06	189,750	Oct 2004
Private Placement	4,000,000	$0.060/US$0.05	240,720	Dec 2004
Private Placement	3,200,000	$0.056/US$0.05	177,509	Jan 2005
Private Placement	500,000	$0.077/US$0.06	38,750	May 2005
Private Placement	535,000	$0.087/US$0.07	46,622	May 2005
Private Placement	305,000	$0.082/US$0.065	24,949	May 2005
Private Placement	305,000	$0.082/US$0.065	24,949	May 2005
Private Placement	500,000	$0.088/US$0.065	44,000	May 2005
Private Placement	200,000	$0.086/US$0.065	17,200	May 2005
Private Placement	1,393,260	$0.063/US$0.05	87,148	May 2005
Private Placement	100,000	$0.088/US$0.07	8,798	May 2005
Private Placement	100,000	$0.088/US$0.07	8,800	Jun 2005
Private Placement	104,500	$0.0861/US$0.07	9,000	Jun 2005
Private Placement	295,000	$0.0862/US$0.07	25,435	Jun 2005
Private Placement	750,000	$0.0735/US$0.06	55,152	Jul 2005
Private Placement	150,000	$0.0733/US$0.06	10,997	Jul 2005
Private Placement	150,000	$0.0733/US$0.06	10,997	Jul 2005
Private Placement	100,000	$0.0855/US$0.07	8,553	Jul 2005
Private Placement	175,000	$0.0855/US$0.07	14,963	Jul 2005
Private Placement	101,300	$0.0987/US$0.08	10,000	Jul 2005
Private Placement	102,000	$0.0987/US$0.08	10,069	Jul 2005
Private Placement	102,000	$0.0987/US$0.08	10,069	Jul 2005
Private Placement	575,000	$0.0778/US$0.065	44,652	Aug 2005

*Total (Since Inception)*	119,607,800		$21,078,648

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*Shares Issued During Fiscal Year Ended August 31, 2006*

	Number of	Price per	Total Gross
	Securities	Security	Consideration
Transaction	Issued	(Cdn$)/(US$)	(Cdn$)	Date Closed
Private Placement	143,000	$0.071/$0.06	10,027	Sep 2005
Private Placement	100,000	$0.086/$0.07	8,601	Sep 2005
Private Placement	143,000	$0.07/$0.06	10,010	Oct 2005
Private Placement	107,500	$0.0698/$0.06	7,500	Oct 2005
Private Placement	143,500	$0.0697/$0.06	10,005	Oct 2005
Private Placement	122,000	$0.0822/$0.07	10,033	Oct 2005
Private Placement	141,400	$0.0707/$0.06	10,000	Oct 2005
Private Placement	87,900	$0.0803/ $0.068	7,051	Oct 2005
Private Placement	500,000	$0.0755/$0.065	37,736	Oct 2005
Private Placement	212,000	$0.0707/$0.06	15,002	Oct 2005
Private Placement	60,300	$0.083/$0.07	5,006	Nov 2005
Private Placement	107,000	$0.0935/$0.08	10,004	Nov 2005
Private Placement	50,000	$0.0694/$0.06	3,471	Nov 2005
Private Placement	50,000	$0.0702/$0.06	3,508	Nov 2005
Private Placement	100,000	$0.0694/$0.06	6,942	Nov 2005
Private Placement	50,000	$0.0699/$0.06	3,488	Nov 2005
Private Placement	166,665	$0.0702/$0.06	11,695	Nov 2005
Private Placement	800,000	$0.0805/$0.07	64,389	Dec 2005
Private Placement	50,000	$0.1158/$0.10	5,791	Dec 2005
Private Placement	100,000	$0.0957/$0.08	9,569	Dec 2005
Private Placement	22,800	$0.2197/$0.19	5,010	Dec 2005
Private Placement	100,000	$0.3005/$0.26	30,050	Dec 2005
Private Placement	200,000	$0.2998/$0.26	59,966	Dec 2005
Private Placement	90,000	$0.233/$0.20	20,968	Dec 2005
Private Placement	51,500	$0.291/$0.25	14,997	Dec 2005
Private Placement	40,000	$0.2912/$0.25	11,648	Dec 2005
Private Placement	91,900	$0.1256/$0.1075	9,395	Dec 2005
Private Placement	145,000	$0.088/$0.075	12,680	Dec 2005
Private Placement	50,000	$0.243/$0.21	12,150	Dec 2005
Private Placement	220,000	$0.2436/$0.21	53,592	Jan 2006
Private Placement	36,000	$0.0928/$0.08	3,267	Jan 2006
Private Placement	14,500	$0.3465/$0.30	5,024	Jan 2006
Private Placement	15,500	$0.3240/$0.28	5,022	Jan 2006
Private Placement	14,000	$0.3601/$0.31	5,042	Jan 2006
Private Placement	7,000	$0.2436/$0.21	1,705	Jan 2006
Private Placement	16,000	$0.3139/$0.27	5,022	Jan 2006
Private Placement	450,000	$0.2851/$0.25	128,273	Jan 2006
Private Placement	200,000	$0.2403/$0.21	48,070	Jan 2006
Private Placement	152,500	$0.2229/$0.15	33,989	Jan 2006
Private Placement	87,500	$0.1719/$0.15	6,924	Jan 2006
Private Placement	100,000	$0.2369/$0.21	23,690	Jan 2006
Private Placement	167,000	$0.1720/$0.15	28,717	Feb 2006
Private Placement	36,570	$0.3296/$0.287	11,716	Feb 2006
Private Placement	100,000	$0.3070/$0.27	30,696	Mar 2006
Private Placement	108,000	$0.0928/$0.08	10,027	Mar 2006
Private Placement	150,000	$0.0580/$0.05	8,704	Mar 2006
Private Placement	20,000	$0.1605/$0.14	3,210	Mar 2006
Private Placement	71,500	$0.1753/$0.15	12,534	Mar 2006
Private Placement	52,250	$0.1720/$0.15	8,986	Apr 2006
Private Placement	58,600	$0.1706/$0.15	10,000	Apr 2006
Private Placement	64,500	$0.1550/$0.15	10,000	May 2006

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*Shares Issued During Fiscal Year Ended August 31, 2006*

	Number of	Price per	Total Gross
	Securities	Security	Consideration
Transaction	Issued	(Cdn$)/(US$)	(Cdn$)	Date Closed
Private Placement	70,000	$0.1429/$0.13	10,000	May 2006
Private Placement	60,250	$0.1685/$0.15	10,151	May 2006
Private Placement	103,600	$0.2465/$0.217	22,689	May 2006
Private Placement	100,000	$0.1705/$0.15	17,054	Jun 2006
Private Placement	42,000	$0.12/$0.1078	5,040	Jul 2006
Private Placement	100,000	$0.10/$0.09	10,000	Aug 2006
Private Placement	125,000	$0.09/$0.08	11,204	Aug 2006

*Total (Since Inception)*	126,375,535		$22,045,688

*Options Outstanding as of August 31, 2006*

Description	Number of Shares	Exercise Price (US$)	Expiration Date
Option	300,000	$0.12	August 10, 2007
Option	100,000	$0.09	December 20, 2006
Option	36,000	$0.08	January 4, 2007
Option	4,250,000	$0.12	March 31, 2007
Option	200,000	$0.15	October 11, 2007
Option	136,000	$0.11	January 15, 2008
Option	64,000	$0.05	May 27, 2008
Option	500,000	$0.65	March 31, 2007
Option	200,000	$0.50	February 28, 2008
Option	250,000	$0.15	March 31, 2007
Option	495,000	$0.15	March 31, 2008
Total:	6,531,000

*Shares Purchase Warrants Outstanding as of August 31, 2006*

			Exercise Price
Description	Date of Grant	Number of Shares	(US$)	Expiry Date
Warrant⁽¹⁾	May 2, 2005	250,000	$0.15	May 31, 2007
Warrant⁽¹⁾	May 31, 2005	300,000	$0.15	May 31, 2007
Warrant⁽¹⁾	May 31, 2005	300,000	$0.15	May 31, 2007
Warrant⁽¹⁾	May 31, 2005	793,260	$0.15	May 31, 2007
Warrant⁽¹⁾	May 31, 2005	152,500	$0.15	May 31, 2007
Warrant⁽¹⁾	Jun 17, 2005	52,250	$0.15	Jun 30, 2007
Warrant⁽¹⁾	Jun 22, 2005	147,500	$0.15	Jun 30, 2007
Warrant⁽¹⁾	Jul 27, 2005	50,650	$0.15	Jul 31, 2007
Warrant⁽¹⁾	Jul 30, 2005	51,000	$0.15	Jul 31, 2007
Warrant⁽¹⁾	Aug 5, 2005	51,000	$0.15	Jul 31, 2007
Warrant⁽¹⁾	Oct 3, 2005	35,750	$0.15	Sep 30, 2007
Warrant⁽¹⁾	Oct 3, 2005	35,750	$0.15	Sep 30, 2007
Warrant⁽¹⁾	Oct 3, 2005	53,750	$0.15	Oct 31, 2007
Warrant⁽¹⁾	Nov 15, 2005	30,150	$0.15	Nov 30, 2007
Warrant⁽¹⁾	Nov 29, 2005	53,500	$0.15	Nov 30, 2007
Warrant⁽¹⁾	Dec 2, 2005	608,333	$0.15	Nov 30, 2007
Warrant⁽¹⁾	Dec 8, 2005	25,000	$0.15	Dec 31, 2007
Warrant⁽¹⁾	Dec 20, 2005	11,400	$0.35	Dec 31, 2007
Warrant⁽¹⁾	Dec 29, 2005	195,750	$0.50	Dec 31, 2007

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*Shares Purchase Warrants Outstanding as of August 31, 2006*

			Exercise Price
Description	Date of Grant	Number of Shares	(US$)	Expiry Date
Warrant⁽¹⁾	Jan 2, 2006	110,000	$0.45	Dec 31, 2007
Warrant⁽¹⁾	Jan 3, 2006	7,250	$0.50	Jan 31, 2008
Warrant⁽¹⁾	Jan 4, 2006	50,000	$0.42	Dec 31, 2007
Warrant⁽¹⁾	Jan 12, 2006	14,750	$0.60	Jan 31, 2008
Warrant⁽¹⁾	Jan 31, 2006	8,000	$0.55	May 31, 2008
Warrant⁽¹⁾	Apr 26, 2006	29,300	$0.30	Apr 30, 2007
Warrant⁽¹⁾	May 10, 2006	32,250	$0.30	May 31, 2008
Warrant⁽¹⁾	May 31, 2006	35,000	$0.26	May 31, 2008
Warrant⁽¹⁾	Jul 7, 2006	21,000	$0.25	Jul 31, 2008
Warrant⁽¹⁾	Aug 11, 2006	50,000	$0.18	Aug 15, 2008
Warrant⁽¹⁾	Aug 18, 2006	62,500	$0.20	Aug 31, 2008
Total:		3,617,593

(1) Each warrant is exercisable to acquire one common share.

CURRENCY TRANSLATION

The Corporation’s proposed operations will be carried out in United States and Canadian dollars. As a result, the Corporation will be faced with currency fluctuations. The Corporation does not currently engage in currency hedging, however, the Corporation may do so once operations have commenced.

B. MEMORANDUM AND ARTICLES OF ASSOCIATION

The Corporation was continued on December 12, 2003 under the provisions of the Canada Business Corporations Act (the "CBCA"). The Articles of Corporation place no restrictions upon the Corporation's objects and purposes.

Memorandum and Articles of Association

Pursuant to the Articles and the By-laws of Corporation and the requirements of the CBCA, the board of directors must consist of not fewer than five (5) and not more than eleven (11) directors. A majority of the number of directors appointed constitutes a quorum at any meeting of directors, provided, however, that no business may be transacted at a meeting of directors unless at least one-quarter of the directors present are resident Canadians. The duty of the directors is to manage or supervise the management of the business of the Corporation.

There is no provision in the By-laws that imposes a requirement in respect of a director's power to vote on a proposal, arrangement or contract in which the director is materially interested. The CBCA provides that a director must disclose to the Corporation, in writing or by requesting to have it entered in the minutes of meetings of directors or of meetings of committees of directors, the nature and extent of any interest that he or she has in a material contract or material transaction, whether made or proposed, with the Corporation, if the director: (a) is a party to the contract or transaction; (b) is a director, or an individual acting in a similar capacity of a party to the contract or transaction; or (c) has a material interest in a party to the contract or transaction.

The By-laws of the Corporation state that the directors may fix the remuneration of the directors and that the directors shall be paid such remuneration for their services as the board may from time to time determine. The directors are also entitled to be reimbursed for travel and other expenses properly incurred by them in attending meetings of the board or any committee of the board of directors. Nothing

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in the By-laws precludes any director from serving the Corporation in any other capacity and receiving remuneration for such services.

The Articles and By-laws of the Corporation state that without limiting the borrowing powers of the Corporation as set forth in the CBCA, the board may from time to time on behalf of the Corporation without authorization of the shareholders: (a) borrow money upon the credit of the Corporation; (b) issue, reissue, sell or pledge debt obligations of the Corporation; (c) to the extent permitted by the CBCA, give a guarantee on behalf of the Corporation to secure performance of an obligation of any person; and (d) mortgage, hypothecate, pledge or otherwise create a security interest in all or any property of the Corporation owned or subsequently acquired to secure any obligation of the Corporation.

The directors may, by resolution, make, amend or repeal any By-laws that regulate the business or affairs of the Corporation. Any resolution making, amending or repealing any By-laws of the Corporation must be submitted to the next following shareholders meeting for ratification by the shareholders who may by ordinary resolution confirm, reject or amend the By-law, amendment or repeal.

The powers of the directors set out in the Articles of the Corporation may be amended by special resolution. A special resolution is a resolution passed by a majority of not less than two-thirds (2/3) of the votes cast by shareholders of the Corporation who being entitled to do so, vote in person or by proxy at an annual or special meeting of shareholders of the Corporation. Under the CBCA, an ordinary resolution of shareholders requires approval by a majority of the votes cast at a meeting of shareholders, present in person or represented by proxy.

Election and Qualifications of Directors

The directors of the Corporation stand for election at the annual meeting of shareholders and there are no staggered terms. There is no cumulative voting for directors of the Corporation. There is no provision in the Articles or By-laws that imposes a requirement for retirement or non-retirement of directors.

There is no provision in the Corporation's Articles or By-laws that a director be required to hold a share in the capital of the Corporation as a qualification for his office, but he must be qualified to become or act as a director as required by the CBCA. The CBCA provides that no person is qualified to act as a director if that person is less than 18 years of age; is a person who has been found to be a person of unsound mind by a court in Canada; a person who is not an individual; or is a person who has the status of bankrupt.

The CBCA provides that a director of a Company may be removed if the shareholders by ordinary resolution at a special meeting vote to remove a director or directors from office.

Meetings

The CBCA provides that the Corporation must hold an annual meeting of its shareholders not later than 15 months after holding the last preceding annual meeting but no later than six months after the end of the Corporation's preceding financial year. The Corporation must give notice of any meeting to its shareholders entitled to receive notice not more than 60 days prior to and not less than 21 days before the date of meeting. The CBCA requires the directors of a company to provide with the notice of a general meeting a form of proxy for use by every member entitled to vote at such meeting as well as an information circular containing prescribed information regarding the matters to be dealt with and the conduct of the meeting.

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Under the CBCA, the directors of the Corporation may call a meeting of shareholders and one or more shareholders holding not less than 5% of the issued voting shares of the Corporation may give notice to the directors requiring them to call and hold a meeting.

Limitations on Ownership of Securities

Except as described below under "Exchange Controls," there are no limitations on the right to own securities imposed by foreign law to the Corporation's knowledge or by the Articles of the Corporation.

Change in Control of Corporation

There are no provisions in the Corporation's Articles or By-laws that would have the effect of delaying, deferring, or preventing a change in control of the Corporation and that would operate only with respect to a merger, acquisition or corporate restructuring of the Corporation or its subsidiaries.

Rights to Own Securities

There are no limitations under the applicable laws of Canada, except as provided in the Investment Canada Act (the “ICA”) as described below, or by the Corporation’s charter or other constituent documents on the rights of non-resident or foreigners to hold or vote common shares or other securities of the Corporation.

The ICA requires a non-Canadian making an investment to acquire control of a Canadian business, the gross assets of which exceed certain defined threshold levels, as set out below, to file an application for review with Investment Canada, an agency of the Canadian government created by the ICA.

The ICA will prohibit implementation, or if necessary, require divestiture of an investment deemed “reviewable” under the ICA by an investor that is not a “Canadian” as defined in the ICA (a “non-Canadian”), unless after review the Minister responsible for the ICA (“the Minister”) is satisfied that the “reviewable” investment is likely to be of net benefit to Canada. An investment in the Corporation’s common shares by a non-Canadian would be reviewable under the ICA if it was an investment to acquire control of the Corporation and the value of the Corporation’s assets was $5 million or more. A non-Canadian would be deemed to acquire control of the Corporation for the purposes of the ICA if the non-Canadian acquired a majority of the Corporation’s outstanding common shares (or less than a majority but controlled the Corporation in fact through the ownership of one-third or more of the Corporation’s outstanding common shares) unless it could be established that, on the acquisition, the Corporation was not controlled in fact by the acquirer through the ownership of such common shares. Certain transactions in relation to the Corporation’s common shares would be exempt from review under the ICA, including, among others, the following:

acquisition of common shares by a person in the ordinary course of that person’s business as a trader or dealer in securities;
acquisition of control of the Corporation in connection with the realization of security granted for a loan or other financial assistance and not for any purpose related to the provisions of the ICA; and
acquisition of control of the Corporation by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control of the Corporation, through the ownership of voting interests, remains unchanged.

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As a result of the Canada-U.S. Free Trade Agreement, the ICA was amended in January 1989 to provide distinct threshold levels for Americans who acquire control of a Canadian business. The threshold levels for Americans, as described below, gradually rose between 1989 and 1992 to its present level.

The ICA was amended with the World Trade Organization Agreement to provide for special review thresholds for “WTO Investors” of countries belonging to the World Trade Organization, among others, nationals and permanent residents (including “WTO Investor controlled entities” as defined in the ICA). Under the ICA, as amended, an investment in the Corporation’s common shares by WTO Investors would be reviewable only if it was an investment to acquire control of the Corporation and the value of the Corporation’s assets was equal to or greater than a specified amount which is published by the Minister after its determination for any particular year.

A Canadian business is defined in the ICA as a business carried on in Canada that has a place of business in Canada, an individual or individuals in Canada who are employed or self-employed in connection with the business, and assets in Canada used in carrying on the business.

An American, as defined in the ICA, includes: an individual who is an American national or a lawful permanent resident of the U.S.; a government or government agency of the U.S.; an American-controlled entity, corporation or limited partnership; and a corporation, limited partnership or trust of which two-thirds of its board of directors, general partners or trustees, as the case may be, are Canadians or Americans.

The following investments by a non-Canadian are subject to review by Investment Canada:

all direct acquisitions of control of Canadian businesses with assets of $5 million or more;
all indirect acquisitions of control of Canadian businesses with assets of $50 million or more if such assets represent less than 50% of the value of the assets of the entities, the control of which is being acquired; and
all indirect acquisitions of control of Canadian businesses with assets of $5 million or more if such assets represent more than 50% of the value of the assets of the entities, the control of which is being acquired.

Review by Investment Canada is required when investments by Americans exceed $150 million for direct acquisitions of control. No review by Investment Canada is required for indirect acquisitions of control.

For purposes of the ICA:

“direct acquisitions of control” means purchase of the voting interests of a corporation, partnership, joint venture or trust carrying on a Canadian business, or any purchase of all or substantially all of the assets used in carrying on a Canadian business; and
“indirect acquisition of control means” a purchase of the voting interest of a corporation, partnership, joint venture or trust, whether a Canadian or foreign entity, which controls a corporation, partnership, joint venture or trust company on a Canadian business in Canada.

The acquisition of certain Canadian businesses is excluded from the higher thresholds set out for Americans. These excluded businesses are oil, gas, uranium, financial services (except insurance), transportation services and cultural services (i.e., the publication, distribution or sale of books, magazines, periodicals (other than printing or typesetting businesses), music in print or machine readable

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form, radio, television, cable and satellite services; the publication, distribution, sale or exhibition of film or video recordings or audio or video music recordings). Direct or indirect acquisitions of control of these excluded businesses are reviewable at the $5 million and $50 million thresholds.

A non-Canadian shall not implement an investment reviewable under the ICA unless the investment has been reviewed and the Minister responsible for Investment Canada is satisfied or is deemed to be satisfied that the investment is likely to be a net benefit to Canada, the non-Canadian shall not implement the investment or, if the investment has been implemented, shall divest himself of control of the business that is the subject of the investment.

A non-Canadian or American making the following investments:

(a)	an investment to establish a new Canadian business; and
(b)	an investment to acquire control of a Canadian business

which investment is not subject to review under the ICA, must notify Investment Canada, within prescribed time limits, of such investments.

Ownership Threshold Requiring Public Disclosure

There are no provisions in the Corporation’s Articles or By-Laws or in the CBCA governing the threshold above which shareholder ownership must be disclosed. The Securities Act (British Columbia), which is applicable to the Corporation, requires that a shareholder disclose ownership of 10% or more of the shares (and any further increases of 2% or more) of a publicly traded company by issuing a news release and filing a report (both containing prescribed disclosure) with the Securities Commissions in those provinces. They also require that the Corporation disclose, in its proxy circular sent out for an Annual Meeting or Special Meeting, the names of holders known to the Corporation to beneficially own more than 10% of the Corporation’s issued and outstanding shares.

Most state corporation statutes do not contain provisions governing the threshold above which shareholder ownership must be disclosed. United States federal securities laws require a company to disclose, in its Annual Report or Form 20-F, holders who own more than 5% of a corporation’s issued and outstanding shares.

Changes in the Capital of the Corporation

There are no conditions imposed by the Corporation’s Articles or By-Laws which are more stringent than those required by the CBCA.

C. MATERIAL CONTRACTS

On January 9, 2007, the Corporation made an agreement with Todd Stinson as Industry Consultant to:

	(a)	assist in the technical process with particular reference to the further development of the patent application for the Horsepower® World Lottery Pool, completion of the Horsepower® software program, including upgrading the graphics component to current industry standards, and interfacing with the appropriate internet and totalizing applications, and content providers for the live venue; and
	(b)	assist in arranging operating contracts for product installation on all venues, including but not limited to internet, legal betting shops, kiosks, VLTs and satellite simulcast; and
	(c)	assist in arranging corporate financing; and
	(d)	act in a capacity overseeing the implementation and on-going operations.

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The agreement licenses the Corporation the right to market the Lottery products invented by Todd Stinson and registered in the name of the Corporation in exchange for 10% of the gross revenue earned from the Lottery operations.

In addition, Todd Stinson receives a monthly fee of US$2,500.00, a 1% share of the Horsepower® World Pool gross revenues for supervising the live operation of the product, not to exceed 3% of the net income from this operation and allocations of the Corporation’s shares upon achieving operational bench marks in total of 4,250,000.

D. EXCHANGE CONTROLS

Not Applicable.

E. TAXATION

Canadian Federal Income Tax Consequences

The following is a general summary of all material Canadian federal income tax considerations generally applicable to a holder of the Corporation’s common shares who is not a resident of Canada for the purposes of the Income Tax Act (Canada) (the “Act”). The discussion does not address individual consequences to persons subject to special provisions of federal income tax law.

The summary is based on the current provisions of the Act and the regulations thereunder and the Corporation’s understanding of the current administrative practices published by, and press announcements released by Canada Customs and Revenue Agency and the Department of Finance. This summary takes into account proposals to amend the Act announced prior to the date hereof (although no assurances can be given that such changes will be enacted in the form presented or at all), but does not otherwise take into account or anticipate any other changes in law, whether by judicial, governmental or legislative action or decision nor does it take into account any provincial, territorial, local or foreign tax considerations. Accordingly, holders and prospective holders of the Corporation’s shares are urged to consult their own tax advisors about the federal, provincial, territorial, local and foreign tax consequences of purchasing, owning and disposing of such shares.

The Act provides in subsection 212(2) that dividends and other distributions which are deemed to be dividends and which are paid or credited or are deemed to be paid or credited by a Canadian resident Company to a non-resident of Canada shall be subject to non-resident withholding tax equal to 25 percent of the gross amount of the dividend or deemed dividend.

Subsections 2(3) and 115(1) of the Act provide that a non-resident person is subject to tax in Canada at the rates generally applicable to residents of Canada on any “taxable capital gain” arising on the disposition of the shares of a company which are listed on a prescribed stock exchange if such nonresident, together with persons with whom he does not deal at arm’s length, owned 25 percent or more of the issued shares of any class of the capital stock of the Corporation at any time in the five years immediately preceding the date of disposition of the shares. Subsections 2(3) and 115(1) also provide that a non-resident person is subject to tax in Canada on taxable capital gains arising on the disposition of shares that constitute capital property used in carrying on a business in Canada. The taxable portion of a capital gain is equal to one-half of the amount by which the proceeds of disposition of such shares, net of any reasonable costs associated with the disposition, exceeds the adjusted cost base to the holder of the shares.

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Provisions in the Act relating to dividend and deemed dividend payments and gains realized by nonresidents of Canada who are residents of the United States are subject to the Canada-United States Income Tax Convention (1980), as amended (the “1980 Convention”).

Article X of the 1980 Convention provides that for 1997 and subsequent taxation years pursuant to the Third Protocol to the 1980 Convention the rate of Canadian non-resident withholding tax on dividends paid to a U.S. company that beneficially owns at least 10% of the voting stock of the Corporation shall not exceed 5% of the dividends. Otherwise, and except in the case of dividends received by a resident of the United States who carries on business in Canada through a Canadian permanent establishment and the shares in respect of which the dividends are paid are effectively connected with that permanent establishment, the rate of non-resident withholding shall not exceed 15 percent of the dividend. Where the dividends are received by a United States person carrying on business in Canada through a Canadian permanent establishment and the shares in respect of which the dividends are paid are effectively connected with that permanent establishment the dividends are generally subject to Canadian tax as business profits, generally without limitation under the 1980 Convention.

Article XIII of the 1980 Convention provides that gains realized by a United States resident on the disposition of shares of a Canadian company may not generally be taxed in Canada unless the value of those shares is derived principally from real property situated in Canada or the shares form part of the business property of a permanent establishment which the United States shareholder has or had in Canada within the 12 month period preceding the date of disposition. Canada also retains the right to tax gains on property owned at the time of departure from Canada if it is sold by a person who was resident in Canada for 120 months in any 20 consecutive years preceding the sale and who was a resident in Canada at any time in the 10 years preceding sale.

United States Federal Income Tax Consequences

The following is a general discussion of all material United States federal income tax consequences, under current law, generally applicable to a U.S. Holder (as hereinafter defined) of common shares of the Corporation. This discussion does not address individual consequences to persons subject to special provisions of federal income tax law, such as those described below as excluded from the definition of a U.S. Holder. In addition, this discussion does not cover any state, local or foreign tax consequences. (See “Canadian Federal Tax Consequences).

The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time. This discussion does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time. This discussion is for general information only and it is not intended to be, nor should it be construed to be, legal or tax advise to any holder or prospective holder of common shares of the Corporation and no opinion or representation with respect to the United States federal income tax consequences to any such holder or prospective holder is made. Accordingly, holders and prospective holders of common shares of the Corporation are urged to consult their own tax advisors about the federal, state, local, and foreign tax consequences of purchasing, owning and disposing of common shares of the Corporation.

U.S. Holders

As used herein, a “U.S. Holder” means a holder of common shares of the Corporation who is a citizen or individual resident of the United States, a corporation or partnership created or organized in or under the

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laws of the United States or of any political subdivision thereof or a trust whose income is taxable in the United States irrespective of source. This summary does not address the tax consequences to, and U.S. Holder does not include, persons subject to specific provisions of federal income tax law, such as tax-exempt organizations, qualified retirement plans, individual retirement accounts and other tax-deferred accounts, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals, persons or entities that have a “functional currency” other than the U.S. dollar, shareholders who hold common shares as part of a straddle, hedging or a conversion transaction, and shareholders who acquired their common shares through the exercise of employee stock options or otherwise as compensation for services. This summary is limited to U.S. Holders who own common shares as capital assets. This summary does not address the consequences to a person or entity holding an interest in a shareholder or the consequences to a person of the ownership, exercise or disposition of any options, warrants or other rights to acquire common shares.

Distribution on Common Shares of the Corporation

U.S. Holders receiving dividend distributions (including constructive dividends) with respect to common shares of the Corporation are required to include in gross income for United States federal income tax purposes the gross amount of such distributions equal to the U.S. dollar value of such dividends on the date of receipt (based on the exchange rate on such date) to the extent that the Corporation has current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder’s federal income tax liability or, alternatively, may be deducted in computing the U.S. Holder’s federal taxable income by those who itemize deductions. (See more detailed discussion at “Foreign Tax Credit” below). To the extent that distributions exceed current or accumulated earnings and profits of the Corporation, they will be treated first as a return of capital up to the U.S. Holder’s adjusted basis in the common shares and thereafter as gain from the sale or exchange of the common shares. Preferential tax rates for long-term capital gains are applicable to a U.S. Holder which is an individual, estate or trust. There are currently no preferential tax rates for long-term capital gains for a U.S. Holder which is a corporation.

In the case of foreign currency received as a dividend that is not converted by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Generally any gain or loss recognized upon a subsequent sale or other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary income or loss. However, an individual whose realized gain does not exceed $200 will not recognize that gain, to the extent that there are no expenses associated with the transaction that meet the requirement for deductibility as a trade or business expense (other than travel expenses in connection with a business trip) or as an expense for the production of income.

Dividends paid on the common shares of the Corporation will not generally be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations. A U.S. Holder which is a corporation may, under certain circumstances, be entitled to a 70% deduction of the United States source portion of dividends received from the Corporation (unless the Corporation qualifies as a “foreign personal holding company” or a “passive foreign investment company,” as defined below) if such U.S. Holder owns shares representing at least 10% of the voting power and value of the Corporation. The availability of this deduction is subject to several complex limitations which are beyond the scope of this discussion.

Under current temporary Treasury Regulations, dividends paid on the Corporation’s common shares, if any, generally will not be subject to information reporting and generally will not be subject to U.S. backup withholding tax. However, dividends paid, and the proceeds of a sale of the Corporation’s

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common shares, in the U.S. through a U.S. or U.S. related paying agent (including a broker) will be subject to U.S. information reporting requirements and may also be subject to the 31% U.S. backup withholding tax, unless the paying agent is furnished with a duly completed and signed Form W-9. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a refund or a credit against the U.S. Holder’s U.S. federal income tax liability, provided the required information is furnished to the IRS.

Foreign Tax Credit

A U.S. Holder who pays (or has withheld from distributions) Canadian income tax with respect to the ownership of common shares of the Corporation may be entitled, at the option of the U.S. Holder, to either receive a deduction or a tax credit for such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces United States federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject to tax. This election is made on a year-by-year basis and applies to all foreign taxes paid by (or withheld from) the U.S. Holder during that year. There are significant and complex limitations which apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s United States income tax liability that the U.S. Holder’s foreign sources income bears to his or its worldwide taxable income. In the determination of the application of this limitation, the various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process. In addition, this limitation is calculated separately with respect to specific classes of income such as “passive income,” “high withholding tax interest,” “financial services income,” “shipping income,” and certain other classifications of income. Dividends distributed by the Corporation will generally constitute “passive income” or, in the case of certain U.S. Holders, “financial services income” for these purposes. The availability of the foreign tax credit and the application of the limitations on the credit are fact specific, and U.S. Holders of common shares of the Corporation should consult their own tax advisors regarding their individual circumstances.

Disposition of Common Shares of the Corporation

A U.S. Holder will recognize gain or loss upon the sale of common shares of the Corporation equal to the difference, if any, between (i) the amount of cash plus the fair market value of any property received, and (ii) the shareholder’s tax basis in the common shares of the Corporation. Preferential tax rates apply to long-term capital gains of U.S. Holders who are individuals, estates or trusts. This gain or loss will be capital gain or loss if the common shares are a capital asset in the hands of the U.S. Holder, which will be long-term capital gain or loss if the common shares of the Corporation are held for more than one year. Lower long-term capital gain rates will apply if the U.S. Holder is an individual, estate or trust and such U.S. Holder has held the common shares for more than eighteen months. Deductions for net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted. For U.S. Holders that are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted.

Other Considerations

In the following circumstances, the above sections of this discussion may not describe the United States federal income tax consequences resulting from the holding and disposition of common shares:

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Foreign Personal Holding Company

If at any time during a taxable year more than 50% of the total combined voting power or the total value of the Corporation’s outstanding shares is owned, directly or indirectly, by five or fewer individuals who are citizens or residents of the United States and 60% or more of the Corporation’s gross income for such year was derived from certain passive sources (e.g. from dividends received from its subsidiaries), the Corporation may be treated as a “foreign personal holding company.” In that event, U.S. Holders that hold common shares would be required to include in gross income for such year their allocable portions of such passive income to the extent the Corporation does not actually distribute such income.

Foreign Investment Company

If 50% or more of the combined voting power or total value of the Corporation’s outstanding shares are held, directly or indirectly, by citizens or residents of the United States, United States domestic partnerships or corporations, or estates or trusts other than foreign estates or trusts (as defined by the Code Section 7701(a)(31)), and the Corporation is found to be engaged primarily in the business of investing, reinvesting, or trading in securities, commodities, or any interest therein, it is possible that the Corporation may be treated as a “foreign investment company” as defined in Section 1246 of the Code, causing all or part of any gain realized by a U.S. Holder selling or exchanging common shares to be treated as ordinary income rather than capital gain.

Passive Foreign Investment Company

Certain United States income tax legislation contains rules governing “passive foreign investment companies” (“PFIC”) which can have significant tax effects on U.S. Holders of foreign corporations. These rules do not apply to non-U.S. Holders. Section 1296 of the Code defines a PFIC as a corporation that is not formed in the United States and, for any taxable year, either (i) 75% or more of its gross income is “passive income”, which includes interest, dividends and certain rents and royalties or (ii) the average percentage, by fair market value (or, if the Corporation is a controlled foreign corporation or makes an election, adjusted tax basis) of its assets that produce or are held for the production of “passive income” is 50% or more. The Corporation does not believe that it is a PFIC. Each U.S. Holder of the Corporation is urged to consult a tax advisor with respect to how the PFIC rules affect their tax situation.

A U.S. Holder who holds stock in a foreign corporation during any year in which such corporation qualifies as a PFIC is subject to United States federal income taxation under one of two alternative tax regimes at the election of each such U.S. Holder. The following is a discussion of such two alternative tax regimes applied to such U.S. Holders of the Corporation. In addition, special rules apply if a foreign corporation qualifies as both a PFIC and a “controlled foreign corporation” (as defined below) and a U.S. Holder owns, directly or indirectly, ten percent (10%) or more of the total combined voting power of classes of shares of such foreign corporation (See more detailed discussion at “Controlled Foreign Corporation” below).

A U.S. Holder who elects in a timely manner to treat the Corporation as a QEF (an “Electing U.S. Holder”) will be subject, under Section 1293 of the Code, to current federal income tax for any taxable year in which the Corporation qualifies as a PFIC on his pro rata share of the Corporation’s (i) ”net capital gain” (the excess of net long-term capital gain over net short-term capital loss), which will be taxed as long-term capital gain to the Electing U.S. Holder and (ii) ”ordinary earnings” (the excess of earnings and profits over net capital gain), which will be taxed as ordinary income to the Electing U.S. Holder, in each case, for the shareholder’s taxable year in which (or with which) the Corporation’s taxable year ends, regardless of whether such amounts are actually distributed.

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The effective QEF election also allows the Electing U.S. Holder to (i) generally treat any gain realized on the disposition of their common shares of the Corporation (or deemed to be realized on the pledge of their shares) as capital gain; (ii) treat his share of the Corporation’s net capital gain, if any, as long-term capital gain instead of ordinary income; and (iii) either avoid interest charges resulting from PFIC status altogether, or make an annual election, subject to certain limitations, to defer payment of current taxes on his share of the Corporation’s annual realized net capital gain and ordinary earnings subject, however, to an interest charge. If the Electing U.S. Holder is not a corporation, such an interest charge would be treated as “personal interest” that is not deductible.

The procedure a U.S. Holder must comply with in making an effective QEF election will depend on whether the year of the election is the first year in the U.S. Holder’s holding period in which the Corporation is a PFIC. If the U.S. Holder makes a QEF election in such first year, i.e., a timely QEF election, then the U.S. Holder may make the QEF election by simply filing the appropriate documents at the time the U.S. Holder files his tax return for such first year. If, however, the Corporation qualified as a PFIC in a prior year, then in addition to filing documents, the U.S. Holder must elect to recognize (i) under the rules of Section 1291 of the Code (discussed below), any gain that he would otherwise recognize if the U.S. Holder sold his stock on the qualification date or (ii) if the Corporation is a controlled foreign corporation, the U.S. Holder’s pro rata share of the Corporation’s post-1986 earnings and profits as of the qualification date. The qualification date is the first day of the Corporation’s first tax year in which the Corporation qualified as a “qualified electing fund” with respect to such U.S. Holder. The elections to recognize such gain or earnings and profits can only be made if such U.S. Holder’s holding period for the common shares of the Corporation includes the qualification date. By electing to recognize such gain or earnings and profits, the U.S. Holder will be deemed to have made a timely QEF election. A U.S. Holder who made elections to recognize gain or earnings and profits after May 1, 1992 and before January 27, 1997 may, under certain circumstances, elect to change such U.S. Holder’s qualification date to the first day of the first QEF year. U.S. Holders are urged to consult a tax advisor regarding the availability of and procedure for electing to recognize gain or earnings and profits under the foregoing rules. In addition, special rules apply if a foreign corporation qualifies as both a PFIC and a “controlled foreign corporation” (as defined below) and a U.S. Holder owns, directly or indirectly, ten percent (10%) or more of the total combined voting power of classes of shares of such foreign corporation (See more detailed discussion at “Controlled Foreign Corporation” below).

If the Corporation no longer qualifies as a PFIC in a subsequent year, a timely QEF election will remain in effect, although not applicable, during those years that the Corporation is not a PFIC. Therefore, if the Corporation requalifies as a PFIC, the QEF election previously made is still valid, and the U.S. Holder is required to satisfy the requirements of that election. Furthermore, a QEF election remains in effect with respect to a U.S. Holder, although dormant, after a U.S. Holder disposes of its entire interest in the Corporation. Upon the U.S. Holder’s reacquisition of an interest in the Corporation, the QEF election will apply to the newly acquired stock of the Corporation.

Effective for tax years of U.S. Holders beginning after December 31, 1997, U.S. Holders who hold (actually or constructively) marketable stock of a foreign corporation that qualifies as a PFIC, may annually elect to mark such stock to the market (a “mark-to-market election”). If such an election is made, such U.S. Holder will not be subject to the special taxation rules of Section 1291 described below for the taxable year for which the mark-to-market election is made. A U.S. Holder who makes such an election will include in income for the taxable year for which the election was made in an amount equal to the excess, if any, of the fair market value of the common shares of the Corporation as of the close of such tax year over such U.S. Holder’s adjusted basis in such common shares. In addition, the U.S. Holder is allowed a deduction for the lesser of (i) the excess, if any, of such U.S. Holder’s adjusted tax basis in the common shares over the fair market value of such shares as of the close of the tax year, or (ii) the excess, if any, of (A) the mark-to-market gains for the common shares in the Corporation included by

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such U.S. Holder for prior tax years, including any amount which would have been included for any prior tax year but for Section 1291 interest on tax deferral rules discussed below with respect to Non-Electing U.S. Holders, over (B) the mark-to-market losses for shares that were allowed as deductions for prior tax years. U.S. Holder’s adjusted tax basis in the common shares of the Corporation will be increased to reflect the amount included or deducted as a result of a mark-to-market election. A mark-to-market election only applies to the taxable year in which the election was made. A separate election must be made by a U.S. Holder for each subsequent taxable year. Because the Internal Revenue Service has not established procedures for making a mark-to-market election, U.S. Holders should consult their tax advisor regarding the manner of making such an election.

If a U.S. Holder does not make a timely QEF election during a year in which it holds (or is deemed to have held) the shares in question and the Corporation is a PFIC (a “Non-electing U.S. Holder”), then special taxation rules under Section 1291 of the Code will apply to (i) gains realized on the disposition (or deemed to be realized by reasons of a pledge) of his common shares of the Corporation and (ii) certain “excess distributions”, as specifically defined, by the Corporation.

A Non-electing U.S. Holder generally would be required to pro rate all gains realized on the disposition of his common shares of the Corporation and all excess distribution of his common shares and all excess distributions over the entire holding period for the Corporation. All gains or excess distributions allocated to prior years of the U.S. Holder (other than years prior to the first taxable year of the Corporation during such U.S. Holder’s holding period and beginning after January 1, 1987 for which it was a PFIC) would be taxed at the highest tax rate for each such prior year applicable to ordinary income. The Non-electing U.S. Holder also would be liable for interest on the foregoing tax liability for each such prior year calculated as if such liability had been due with respect to each such prior year. A Non-electing U.S. Holder that is not a corporation must treat this interest charge as “personal interest” which, as discussed above, is wholly non-deductible. The balance of the gain of the excess distribution will be treated as ordinary income in the year of the disposition or distribution, and no interest charge will be incurred with respect to such balance.

If the Corporation is a PFIC for any taxable year during which a Non-electing U.S. Holder holds common shares of the Corporation, then the Corporation will continue to be treated as a PFIC with respect to such common shares, even if it is no longer definitionally a PFIC. A Non-electing U.S. Holder may terminate this deemed PFIC status by electing to recognize a gain (which will be taxed under the rules discussed above for Non-electing U.S. Holders) as if such common shares had been sold on the last day of the last taxable year for which it was a PFIC.

Under Section 1291(f) of the Code, the IRS has issued proposed regulations that, subject to certain exceptions, would treat as taxable certain transfers of PFIC stock by Non-Electing U.S. Holders that are generally not otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death. Generally, in such cases the basis of the Corporation common shares in the hands of the transferee and the basis of any property received in the exchange for those common shares would be increased by the amount of gain recognized. An Electing U.S. Holder would not be taxed on certain transfers of PFIC stock, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death. The transferee’s basis in this case will depend on the manner of the transfer. In a transfer at death, for example, the transferee’s basis is equal to (i) the fair market value of the Electing U.S. Holder’s common shares, less (ii) the excess of the fair market value of the Electing U.S. Holder’s common shares reduced by the U.S. Holder’s adjusted basis in these common shares at death. The specific tax effect to the U.S. Holder and the transferee may vary based on the manner in which the common shares are transferred. Each U.S. Holder of the Corporation is urged to consult a tax advisor with respect to how the PFIC rules affect their tax situation.

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Certain special, generally adverse, rules will apply with respect to common shares of the Corporation while the Corporation is a PFIC whether or not it is treated as a QEF. For example under Section 1297(b)(6) of the Code, a U.S. Holder who uses PFIC stock as security for a loan (including a margin loan) will, except as may be provided in regulations, be treated as having made a taxable disposition of such shares.

Controlled Foreign Corporation

If more than 50% of the voting power of all classes of shares or the total value of the shares of the Corporation is owned, directly or indirectly, by citizens or residents of the United States, United States domestic partnerships and corporations or estates or trusts other than foreign estates or trusts, each of whom own 10% or more of the total combined voting power of all classes of shares of the Corporation (“United States shareholder”), the Corporation could be treated as a “controlled foreign corporation” under Subpart F of the Code. This classification would effect many complex results one of which is the inclusion of certain income of a CFC which is subject to current U.S. tax. The United States generally taxes a United States shareholder of a CFC currently on their pro rata shares of the Subpart F income of the CFC. Such U.S. shareholders are generally treated as having received a current distribution out of the CFC’s Subpart F income and are also subject to current U.S. tax on their pro rata shares of the CFC’s earnings invested in U.S. property. The foreign tax credit described above may reduce the U.S. tax on these amounts. In addition, under Section 1248 of the Code, gain from the sale or exchange of shares by a U.S. Holder of common shares of the Corporation who is or was a United States shareholder at any time during the five-year period ending with the sale or exchange is treated as ordinary income to the extent of earnings and profits of the Corporation attributable to the shares sold or exchanged. If a foreign corporation is both a PFIC and a CFC, the foreign corporation generally will not be treated as a PFIC with respect to United States shareholders of the CFC. This rule generally will be effective for taxable years of United States shareholders beginning after 1997 and for taxable years of foreign corporations ending with or within such taxable years of United States shareholders. Special rules apply to United States shareholders who are subject to the special taxation rules under Section 1291 discussed above with respect to a PFIC. Because of the complexity of Subpart F, and because it is not clear that Subpart F would apply to U.S. Holders of common shares of the Corporation, a more detailed review of these rules is outside of the scope of this discussion.

F. DIVIDENDS AND PAYING AGENTS

Not Applicable.

G. STATEMENTS BY EXPERTS

Not Applicable.

H. DOCUMENTS ON DISPLAY

The documents concerning the Corporation may be viewed at Suite 300, 940 The East Mall, Toronto, Ontario, Canada M9B 6J7, during normal business hours.

I. SUBSIDIARY INFORMATION

Not Applicable.

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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not Applicable.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not Applicable.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUINCIES

Not Applicable.

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

Not Applicable.

ITEM 15. CONTROLS AND PROCEDURES

Evaluation Of Disclosure Controls And Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Our disclosure controls and procedures are designed to provide a reasonable level of assurance of achieving our disclosure control objectives. Our Principal Executive Officer and Principal Accounting Officer have concluded that our disclosure controls and procedures are, in fact, effective at this reasonable assurance level as of the period covered.

Changes In Internal Controls Over Financial Reporting

In connection with the evaluation of our internal controls during our last fiscal year, our Principal Executive Officer and Principal Financial Officer have determined that there are no changes to our internal controls over financial reporting that has materially affected, or is reasonably likely to materially effect, our internal controls over financial reporting.

ITEM 16. [RESERVED]

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

The Corporation has no independent financial expert on the audit committee. The Corporation’s management believes that the cost related to retaining a financial expert at this time is prohibitive. T. Keith Blackwell is a Chartered Accountant and CEO and CFO of the Corporation and serves on the audit committee. Mr. Blackwell is the Corporation’s audit committee financial expert as that term is defined in

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paragraph (a) of Item 16A of the instructions to Form 20-F. Further, because of the nature of the Corporation’s start-up operations, the Corporation believes the services of a financial expert are not warranted.

ITEM 16B. CODE OF ETHICS

The Corporation has adopted a Code of Ethics applicable to its officers and directors which is a "code of ethics" as defined by applicable rules of the SEC. Sungold’s Code of Ethics is attached as an exhibit to this Annual Report. If the Corporation makes any amendments to its Code of Ethics other than technical, administrative, or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of our Code of Ethics to its Chief Executive Officer, Chief Financial Officer, or certain other finance executives, the Corporation will disclose the nature of the amendment or waiver, its effective date and to whom it applies in a report on Form 6-K filed with the SEC.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The aggregate fees billed for the two most recently completed fiscal years ended August 31, 2006 for professional services rendered by the principal accountant for the audit of the Corporation’s annual financial statements and review of the financial statements included in the Corporation’s Annual Report on Form 20-F and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:

	Year Ended August 31, 2006	Year Ended August 31, 2005
Audit Fees	$55,000	$20,250
Audit Related Fees	-	$6,150
Tax Fees	-	-
Other Fees	-	-
Total	$55,000	$26,400

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not Applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

None.

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PART III

ITEM 17. FINANCIAL STATEMENTS

The Report and Consolidated Financial Statements for the year ended August 31, 2006, reported on by Mintz & Partners LLP, and the years ended August 31, 2005, and 2004 reported on by Loewen, Stronach & Co., Chartered Accountants were prepared in accordance with Canadian GAAP and are presented in Canadian dollars. There are differences between United States and Canadian GAAP which are set forth in Note 13 of the Report and Consolidated Financial Statements for the years ended August 31, 2006, 2005, and 2004.

ITEM 18. FINANCIAL STATEMENTS

Not applicable.

ITEM 19. EXHIBITS

The following financial statements and related schedules are included in this Item:

(a)	Financial Statements

	Auditors’ Report

	Consolidated Balance Sheets as at August 31, 2006 and 2005.

	Consolidated Statements of Loss and Deficit for the years ended August 31, 2006, 2005, and 2004.

	Consolidated Statements of Cash Flow for the years ended August 31, 2006, 2005, and 2004.

	Notes to Consolidated Financial Statements.

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SUNGOLD INTERNATIONAL HOLDINGS CORP.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

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AUDITORS’ REPORT

To The Shareholders of Sungold International Holdings Corp.:

We have audited the consolidated balance sheet of Sungold International Holdings Corp. (a development stage company) as at August 31, 2006 and the consolidated statements of loss and deficit and cash flows for the year ended August 31, 2006. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our 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.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at August 31, 2006 and the results of its operations and its cash flows for the year ended August 31, 2006 in accordance with Canadian generally accepted accounting principles which differ in certain respects from United States generally accepted accounting principles (refer to Note 13). As required by the Company Act of British Columbia, we report that, in our opinion, these principles have been applied on a consistent basis.

The consolidated financial statements as at August 31, 2005 and the year then ended were audited by other auditors who expressed an opinion without reservation on those statements in their report dated December 28, 2005.

Toronto, Canada
February 13, 2007	Chartered Accountants

Comments by Auditors for U.S. Readers on Canada-U.S. Reporting Conflict

In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Company’s ability to continue as a going concern, such as described in Note 2 a) to the financial statements. Our report to the shareholders dated February 13, 2007, is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the auditors’ report when these are adequately disclosed in the financial statements.

Toronto, Canada
February 13, 2007	Chartered Accountants

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SUNGOLD INTERNATIONAL HOLDINGS CORP.

CONSOLIDATED BALANCE SHEET

AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

	2006		2005
	$		$

ASSETS

CURRENT ASSETS
Cash	-		10,876
Sundry receivables	17,853		43,065
Prepaid expenses and deposits	640		22,087
	18,493		76,028
PRE-DEVELOPMENT COSTS (Note 3)	270,288		224,898
EQUIPMENT (Note 4)	483,776		628,012
	772,557		928,938


LIABILITIES

CURRENT LIABILITIES
Bank indebtedness	2,919		-
Accounts payable and accrued liabilities (Note 7c)	639,532		244,075
Loans payable (Note 7d)	7,500		12,500
Current obligation under capital leases (Note 6)	6,128		7,120
	656,079		263,695

LONG TERM LIABILITIES
Obligation under capital leases (Note 6)	6,518		14,519
	662,597		278,214

SHAREHOLDERS’ EQUITY

SHARE CAPITAL (Note 5)	22,045,688		21,078,648
CONTRIBUTED SURPLUS (Note 5d)	254,587		190,457
DEFICIT	(22,190,315	)	(20,618,381	)
	109,960		650,724
	772,557		928,938

Going concern – Note 2a
Subsequent events – Note 12

APPROVED BY THE DIRECTORS:

“Art Cowie”	Director

“Donald Harris”	Director

(See accompanying notes to consolidated financial statements)

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SUNGOLD INTERNATIONAL HOLDINGS CORP.

CONSOLIDATED STATEMENT OF LOSS AND DEFICIT

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

	April 7, 1986
	(inception) to
	August 31, 2006		2006	2005		2004
	$		$	$		$
REVENUE
Gain on disposition of marketable securities	838,947		-	-		-

EXPENSES
Impairment write-down of pre-development costs	6,460,304		-	628,246		-
Advertising and promotion	3,392,451		75,245	55,443		122,508
Professional and consulting fees	3,539,047		516,911	566,803		488,500
Management fees and salaries	2,328,600		394,306	46,688		58,353
Investor relations	1,355,876		186,063	133,306		35,192
Travel and conference	1,146,892		50,989	75,970		168,116
Office and miscellaneous	872,916		33,470	43,756		59,673
Internet services	826,641		27,067	29,559		23,831
Amortization	929,863		135,305	140,449		126,899
Office rent and services	611,261		30,446	60,896		63,452
Transfer agent and filing fees	399,695		26,430	30,658		50,287
Insurance	263,953		167	833		563
Financing fees	227,433		9,433	-		-
Stock based compensation	254,587		64,130	138,535		-
Finder fees	154,031		-	-		-
Interest and bank charges	131,406		17,738	5,222		12,561
Settlement agreements	71,178		-	31,178		-
Interest on capital leases	32,397		3,169	2,600		1,005
Fees and commissions	29,741		-	-		-
Loss on disposition of equipment	14,858		-	-		826
Foreign exchange loss (gain)	(13,868	)	1,065	(1,245	)	(48	)
	23,029,262		1,571,934	1,988,897		1,211,718
LOSS	22,190,315		1,571,934	1,988,897		1,211,718
DEFICIT– BEGINNING	-		20,618,381	18,629,484		17,417,766
DEFICIT – ENDING	22,190,315		22,190,315	20,618,381		18,629,484

Weighted average number of shares			123,834,644	111,579,338		92,239,057

Loss per share			0.0127	0.0178		0.0131

(See accompanying notes to consolidated financial statements)

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SUNGOLD INTERNATIONAL HOLDINGS CORP.

CONSOLIDATED STATEMENT OF CASH FLOW

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

	April 7, 1986
	(inception) to
	August 31, 2006		2006		2005		2004
	$		$		$		$
OPERATING ACTIVITIES
Loss	(22,190,315	)	(1,571,934	)	(1,988,897	)	(1,211,718	)
Items not involving cash:
Write-down of pre-development costs	6,460,304		-		628,246		-
Amortization	929,863		135,305		140,449		126,899
Stock-based compensation	254,587		64,130		138,535		-
Issuance of private placement units or common
shares for services	625,489		391,712		233,777		-
Gain on disposition of marketable securities	(838,947	)	-		-		-
Loss on disposition of equipment	14,858		-		-		826
	(14,744,161	)	(980,787	)	(847,890	)	(1,083,993	)
Cash provided (used) by changes in non-cash operating items:
Sundry receivables	(17,853	)	25,212		49,181		(48,197	)
Prepaid expenses and deposits	(640	)	21,447		36,681		(54,614	)
Accounts payable and accrued liabilities	650,865		406,790		43,739		25,096
	(14,111,789	)	(527,338	)	(718,289	)	(1,161,708	)
INVESTING ACTIVITIES
Pre-development costs	(5,321,213	)	(45,390	)	(5,996	)	(63,112	)
Proceeds of disposition of equipment	38,028		-		-		23,682
Acquisition of equipment	(1,395,231	)	(2,402	)	(220,221	)	(69,580	)
	(6,678,416	)	(47,792	)	(226,217	)	(109,010	)
FINANCING ACTIVITIES
Loans payable (Note 3 below)	2,583,228		(5,000	)	610,774		1,377,503
Repayment of obligation under capital leases	(70,157	)	(8,993	)	(4,135	)	(17,253	)
Issuance of shares	16,548,468		575,328		255,332		-
Proceeds of disposition of marketable securities	1,725,747		-		-		-
	20,787,286		561,335		861,971		1,360,250

(DECREASE) INCREASE IN CASH	(2,919	)	(13,795	)	(82,535	)	89,532
CASH – beginning	-		10,876		93,411		3,879
CASH – ending	(2,919	)	(2,919	)	10,876		93,411

Notes to statement of cash flow:

1)	Cash consists of balances with banks

Interest paid:

163,803

20,907

7,822

13,566

3)	During 2006, the Company issued 179,264 shares to settle $12,500 of loans payable. In 2005, the Company issued 9,700,000 shares to settle $607,979 of debts. Since April 7, 1986 (inception) to August 31, 2006, the Company issued 41,129,264 shares to settle $2,588,237 of debts.

(See accompanying notes to consolidated financial statements)

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SUNGOLD INTERNATIONAL HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

Note 1	NATURE OF OPERATIONS

	Sungold International Holdings Corp. (the “Company” or “Sungold”) was incorporated under the Canada Business Corporations Act and is a publicly traded company on the OTC bulletin board under the symbol SGIHF. The principal activities are developing and promoting a proprietary pari-mutuel wagering virtual horseracing product, commercial advertising time on the product, and an internet payment system. To date, the Company has not earned significant revenues and is considered to be in a development stage.

Note 2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

	a)	Going concern

		These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles and include the accounts of the Company and its wholly owned legal subsidiaries: SafeSpending Inc., Racing Unified Network (R.U.N.) Inc., and Horsepower Broadcasting Network (HBN) International Ltd.

		These consolidated financial statements have been prepared on a going concern basis in accordance with Canadian generally accepted accounting principles. The going concern basis of presentation assumes that the Company will continue in operation for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business.

		The recoverability of the amounts shown for pre-development costs is primarily dependant on the ability of the Company to put its pre-development projects into economically viable products in the future. The Company plans to meet anticipated financing needs in connection with its obligations by the exercise of stock options, share purchase warrants, and through private placements, public offerings or joint-venture participation by others.

		There is significant doubt about the appropriateness of the use of the going concern assumption because the Company experienced significant recurring losses from operations and has experienced significant negative cash flow from operations over a number of years.

		The ability of the Company to continue as a going concern and to realize the carrying value of its assets and discharge its liabilities when due is dependent on the successful completion of the actions taken or planned, which management believes will mitigate the adverse conditions and events which raise doubt about the validity of the going concern assumption used in preparing these financial statements. There is no assurance that the Company will be successful in its efforts.

		The financial statements do not reflect adjustments that would be necessary if the going concern assumption were not appropriate. If the going concern basis did not prove to be appropriate for these financial statements, then adjustments would be necessary in the carrying value of assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used.

- 54 -

SUNGOLD INTERNATIONAL HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE 2

Note 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

b)	Use of estimates

	The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities at the date of financial statements and revenue and expenses for the year reported. By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in such estimates in future years could be significant. There are significant estimation on the deferred pre- development costs and equipment amortization policy. Actual results may differ from those estimates.

c)	Basis of Consolidation

	These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Horsepower Broadcasting Network (HBN) International Ltd., SafeSpending Inc., and Racing Unified Network (R.U.N.) Inc. All inter-company transactions and balances have been eliminated. In January 2005, the Company wound up a wholly owned subsidiary, Horsepower Broadcasting Network Inc., into the parent.

d)	Translation of Foreign Currencies:

	Accounts recorded in foreign currency have been converted to Canadian dollars as follows:

	•	Monetary assets and liabilities at exchange rates at the end of the year;
	•	Other assets at historical rates;
	•	Revenues and expenses at the average rate of exchange for the month incurred.

	Gains and losses resulting from the fluctuation of foreign exchange rates are included in the determination of income.

e)	Pre-development costs

	The Company is in the development stage and capitalizes all costs related to its pre-development projects in accordance with Accounting Guideline No. 11, “Enterprises in the Development Stage”, issued by the Canadian Institute of Chartered Accountants. These costs will be amortized on the basis of revenue generated in relation to the project following commencement of operations. When management decides a project is to be abandoned, costs of the abandoned project are written off to operations.

	The costs deferred at any time do not necessarily reflect present or future values. The ultimate recovery of such amounts depends on the Company successfully developing the project.

f)	Equipment and Amortization

	Equipment is recorded at cost with amortization provided on a declining balance as follows:

Computer hardware	30%
Computer software	100%
Software – Horsepower®	20%
Leased computer equipment	30%
Office equipment	20%

The above rates have been utilized to reflect the anticipated life expectancy. In the year acquired and put in use, only one-half the normal rate is applied.

SUNGOLD INTERNATIONAL HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE 3

Note 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

	g)	Income Taxes

		Income taxes are provided for in accordance with the liability method. Under this method of tax allocation, future income tax assets and liabilities are determined based on differences between the financial statements carrying values and their respective income tax bases (temporary differences). Future income tax assets and liabilities are measured using the enacted tax rates expected to be in effect when the temporary differences are likely to reverse. The effect on future income tax assets and liabilities of a change in rates is included in operations in the year in which the change is enacted or substantively enacted. The amount of future income tax assets recognized is limited to the amount that is more likely than not to be realized. A valuation allowance is recorded against any future tax asset if it is more likely than not that the asset will not be realized.

	h)	Loss Per Share

		Loss per share is determined using the treasury stock method on the weighted average number of shares outstanding during the year. All outstanding options, purchase warrants and private placement units are anti- dilutive, and therefore have no effect on the determination of loss per share.

	i)	Stock-based Compensation Plans

		The Company follows the fair value method of accounting for its stock-based compensation plans. The fair value of the stock options awarded is determined at the grant date using the Black-Sholes option pricing model. For 2005, the Company recognized all the compensation expenses at the time the options were granted. For 2006, the Company is amortizing the total compensation expense of $169,805 according to the number of months of the option period falling within the fiscal year, resulting in a charge to the expense of $64,130.

		Shares issued for service in lieu of cash are valued according to the market value of the shares at the time the service is provided and the expense is recognized in the income statement at the time of issue.

Note 3

PRE-DEVELOPMENT COSTS

	a)	SafeSpending™ project

		In May 2001, a subsidiary of the Company, SafeSpending Inc., acquired all the rights to an internet payment system technology which is a spending system that can be used to make anonymous purchases online from merchants and individuals. The agreement provides SafeSpending Inc. with all copyrights, trademarks, source codes and intellectual property and the Company has patents pending in 105 countries for the SafeSpending™ anonymous payment system. During 2005, the Company entered into consulting agreements with the two individuals from whom the rights were acquired, to assist in the further development of the project. The contracts were for six months from July 20^th, 2005, and the consultants each received sole compensation of 150,000 shares, having a total value at the time of $10,997 each.

	August 31		Impairment	August 31
	2005	Additions	Write off	2006
	$	$	$	$
Acquisition cost	62,300	-	-	62,300
Legal and consulting fees	79,644	3,547	-	83,191
	141,944	3,547	-	145,491

SUNGOLD INTERNATIONAL HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE 4

Note 3

PRE-DEVELOPMENT COSTS (continued)

	b)	Horsepower® project

		Horsepower® World Pool Virtual Horse Racing System is a proprietary, pari-mutuel wagering product operated by Horsepower Broadcasting Network (HBN) International Ltd., a subsidiary of the Company. The product is being offered to Licensed facilities and Authorized Racetrack Affiliates. Development of this project is largely complete but there are no operating installations as of the date of this statement.

		The hardware and software development costs are capitalized under equipment and amortized annually when put in use, and legal fees for trademark applications for Horsepower® were deferred under its Horsepower® project.

	August 31		Impairment	August 31
	2005	Additions	Write off	2006
	$	$	$	$
Legal and consulting fees	82,954	41,843	-	124,797

			Impairment
	2005	Additions	Write off	2006
	$	$	$	$

TOTAL PRE-DEVELOPMENT COSTS	224,898	45,390	-	270,288

Note 4

EQUIPMENT

		2006		2005
	Cost	Less	Net Book	Net Book
		Accumulated	Value	Value
		Amortization
	$	$	$	$
Software – Horsepower®	1,033,216	601,352	431,864	539,830
Computer hardware	315,784	276,546	39,238	62,672
Computer software	4,701	4,701	-	2,350
Leased computer equipment	20,975	8,495	12,480	22,917
Office equipment	270	76	194	243

	1,374,946	891,170	483,776	628,012

Note 5

SHARE CAPITAL

	2006	2005
	$	$
Authorized:
Unlimited common shares without par value
100,000,000 Class “A” preference shares
without par value
100,000,000 Class “B” preference shares
without par value

Issued and outstanding:
126,375,535 common
(August 31, 2005 – 119,607,800 common)	22,045,688	21,078,648

SUNGOLD INTERNATIONAL HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE 5

Note 5

SHARE CAPITAL (continued)

a)	Shares issued during the year:	2006		2005
		#	$	#	$
	For cash	4,525,516	575,328	3,383,060	255,332
	Non-cash transactions:
	- for services provided	2,242,219	391,712	3,160,000	255,771
	- for debt settlement	-	-	9,700,000	607,979

		6,767,735	967,040	16,243,060	1,119,082

	b)	Stock options and stock based compensation:

		The Company has a fixed stock option plan on the issuance of options of up to 10% of the Company’s issued share capital. The following are incentive share purchase options outstanding:

Date of Grant	Price	Balance Aug 31, 2005	Granted	Exercised / Expired / Cancelled	Balance August 31, 2006	Expiration date
Feb 16, 2001	US$0.1500	100,000	-	100,000	-	Expired
Feb 28, 2001	US$0.0600	1,050,000	-	1,050,000	-	Expired
Mar 5, 2001	US$0.0850	79,900	-	79,900	-	Expired
Aug 10, 2001	US$0.1200	300,000	-	-	300,000	Aug 10, 2007
Dec 20, 2001	US$0.0900	100,000	-	-	100,000	Dec 20, 2006
Jan 4, 2002	US$0.0800	180,000	-	144,000	36,000	Jan 4, 2007
Jan 4, 2002	US$0.0800	550,764	-	550,764	-	Cancelled
Jan 24, 2002	US$0.0725	400,000	-	400 000	-	Cancelled
Oct 11, 2002	US$0.1500	200,000	-	-	200,000	Oct 11, 2007
Oct 16, 2002	US$0.1500	300,000	-	300,000	-	Cancelled
Jan 15, 2003	US$0.1100	136,000	-	-	136,000	Jan 15, 2008
May 27, 2003	US$0.0500	64,000	-	-	64,000	May 27, 2008
May 28,2003	US$0.0500	150,000	-	150,000	-	Exercised
Apr 14, 2005	US$0.1200	1,000,000	-	-	1,000,000	Mar 31, 2007
May 27, 2005	US$0.1200	750,000	-	-	750,000	Mar 31, 2007
Jun 1, 2005	US$0.1200	500,000	-	-	500,000	Mar 31, 2007
Jun 1, 2005	US$0.1200	500,000	-	-	500,000	Mar 31, 2007
Jun 6, 2005	US$0.1200	500,000	-	-	500,000	Mar 31, 2007
Jul 1, 2005	US$0.1200	500,000	-	-	500,000	Mar 31, 2007
Jul 20, 2005	US$0.1200	500,000	-	-	500,000	Mar 31, 2007
Jan 16, 2006	US$0.6500	-	500,000	-	500,000	Mar 31, 2007
Mar 1, 2006	US$0.5000	-	200,000	-	200,000	Feb 28, 2008
Mar 10, 2006	US$0.1500	-	250,000	-	250,000	Mar 31, 2007
Mar 10, 2006	US$0.1500	-	495,000	-	495,000	Mar 31, 2008

		7,860,664	1,445,000	2,774,664	6,531,000

In 2001, the Canadian Institute of Chartered Accountants issued Section 3870 for Stock-based Compensations, which requires the use of fair value based method for fiscal years beginning on or after January 1, 2002, and applied to awards granted on or after the date of adoption. The Company adopted the recommendations prospectively for the fiscal year starting September 1, 2002.

SUNGOLD INTERNATIONAL HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE 6

Note 5

SHARE CAPITAL (continued)

	b)	Stock options and stock based compensation (continued):

		Under this fair value based method, the value of a stock-based compensation plan is the sum of two component parts: its intrinsic value and its time value. The intrinsic value reflects the extent to which it is “in the money” at any date, and the time value is the value of the potential increases to the plan holder at any given time. The estimated time value is added to the intrinsic value to determine the fair value of the plan at any time.

		Since September 1, 2002, the Company granted 6,545,000 share purchase options as follows:

			Exercised
		Granted	Expired or	Exercisable	Compensation
Date of Grant	Price					Expiration date
		#	Cancelled	#
			#

Oct 11, 2002	US$0.1500	200,000	-	200,000	16,600	Oct 11, 2007
Oct 16, 2002	US$0.1500	300,000	300.000	-	24,900	Cancelled 2006
Jan 23, 2003	US$0.1100	136,000	-	136,000	8,282	Jan 15, 2008
May 27, 2003	US$0.0500	64,000	-	64,000	640	May 27, 2008
May 28,2003	US$0.0500	150,000	150,000	-	1,500	Exercised 2006

Total granted:		850,000	450,000	400,000	51,922

Outstanding Aug 31, 2003:		850,000	450,000	400,000
Options granted in fiscal 2004:		-	-	-	-
Outstanding Aug 31, 2004:		850,000	450,000	400,000
Options granted in fiscal 2005:

Apr 14, 2005	US$0.1200	1,000,000	-	1,000,000	32,597	Mar 31, 2007
May 27, 2005	US$0.1200	750,000	-	750,000	24,448	Mar 31, 2007
Jun 1, 2005	US$0.1200	500,000	-	500,000	16,307	Mar 31, 2007
Jun 1, 2005	US$0.1200	500,000	-	500,000	16,307	Mar 31, 2007
Jun 6, 2005	US$0.1200	500,000	-	500,000	16,298	Mar 31, 2007
Jul 1, 2005	US$0.1200	500,000	-	500,000	16,290	Mar 31, 2007
Jul 20, 2005	US$0.1200	500,000	-	500,000	16,288	Mar 31, 2007

Total granted:		4,250,000		4,250,000	138,535

Outstanding Aug 31, 2005:		5,100,000	450,000	4,650,000
Options granted in fiscal 2006:

Jan 16, 2006	US$0.6500	500,000	-	500,000	37,718	Mar 31, 2007
Mar 1, 2006	US$0.5000	200,000	-	200,000	8,848	Feb 28, 2008
Mar 10, 2006	US$0.1500	250,000	-	250,000	6,162	Mar 31, 2007
Mar 10, 2006	US$0.1500	495,000	-	495,000	11,402	Mar 31, 2008

Total granted:		1,445,000		1,445,000	64,130

Outstanding Aug 31, 2006:		6,545,000	450,000	6,095,000

SUNGOLD INTERNATIONAL HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE 7

Note 5

SHARE CAPITAL (continued)

	b)	Stock options and stock based compensation (continued):

		The fair value of each option granted is estimated on the date of the grant using the Black-Sholes option pricing model with the following assumptions:

	Risk-free interest rate	2.82% to 3.00%
	Dividend yield	0
	Estimated hold period prior to exercise (years)	2 to 3 year
	Volatility in the price of the Company’s common shares	120% to 150%

		Between January 1, 2002 and August 31, 2002, the Company granted 946,764 share purchase options to directors at US$0.08 per share until Jan 4, 2007, 136,000 share purchase options to a director at US$0.08 per share until Jan 15, 2007, 400,000 share purchase options to a director at US$0.0725 per share until Jan 24, 2007, 136,000 share purchase options to a director at US$0.23 per share until March 26, 2007, and 272,000 share purchase options to a director at US$0.20 per share until May 17, 2007.

		Had compensation cost of the stock based employee compensation been recorded, based upon the fair value of share options, additional compensation expense for the year ended August 31, 2002, would have been $111,430. The pro forma loss per share, assuming this additional compensation expense would have been ($0.0584). The pro forma results may be materially different than actual results realized.

		The Black-Sholes valuation model was developed for use in estimating the fair value of traded options which are fully transferable and highly traded. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its director stock options.

		Outstanding share purchase options which were issued prior to January 1, 2002, have neither been charged to income nor included in the calculation of the pro forma loss, in accordance with Section 3870 of the CICA Handbook, which is to take effect prospectively.

	c)	Share purchase warrants:

Date of Grant	Price	Balance August 31, 2005	Granted	Exercised	Expired / Cancelled	Balance August 31, 2006	Expiration date
May 2, 2005	US$0.150	250,000	-	-	-	250,000	May 31, 2007
May 31, 2005	US$0.050	300,000	-	-	-	300,000	May 31, 2007
May 31, 2005	US$0.050	300,000	-	-	-	300,000	May 31, 2007
May 31, 2005	US$0.050	793,260	-	-	-	793,260	May 31, 2007
May 31, 2005	US$0.150	152,500	-	152,500	-	-	Exercised
May 31, 2005	US$0.150	152,500	-	-	-	152,500	May 31, 2007
Jun 17, 2005	US$0.150	52,250	-	-	-	52,250	Jun 30, 2007
Jun 22, 2005	US$0.150	147,500	-	-	-	147,500	Jun 30, 2007
Jul 20, 2005	US$0.150	87,500	-	87,500	-	-	Exercised
Jul 27, 2005	US$0.150	50,650	-	-	-	50,650	Jul 31, 2007
Jul 30, 2005	US$0.150	51,000	-	-	-	51,000	Jul 31, 2007
Aug 5, 2005	US$0.150	51,000	-	-	-	51,000	Jul 31, 2007
Sep 20, 2005	US$0.150	-	71,500	71,500	-	-	Exercised

SUNGOLD INTERNATIONAL HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE 8

share purchase warrants: (continued)

Date of Grant	Price	Balance August 31, 2005	Granted	Exercised	Expired / Cancelled	Balance August 31, 2006	Expiration date
Oct 3, 2005	US$0.150	-	35,750	-	-	35,750	Sep 30, 2007
Oct 3, 2005	US$0.150	-	35,750	-	-	35,750	Sep 30, 2007
Oct 3, 2005	US$0.150	-	53,750	-	-	53,750	Oct 31, 2007
Oct 3, 2005	US$0.150	-	71,750	71,750	-	-	Exercised
Oct 11, 2005	US$0.150	-	61,000	61,000	-	-	Exercised
Oct 18, 2005	US$0.150	-	70,700	70,700	-	-	Exercised
Oct 21, 2005	US$0.150	-	106,000	106,000	-	-	Exercised
Nov 15, 2005	US$0.150	-	30,150	-	-	30,150	Nov 30, 2007
Nov 29, 2005	US$0.150	-	53,500	-	-	53,500	Nov 30, 2007
Dec 2, 2005	US$0.150	-	608,333	-	-	608,333	Nov 30, 2007
Dec 8, 2005	US$0.150	-	25,000	-	-	25,000	Dec 31, 2007
Dec 20, 2005	US$0.350	-	11,400	-	-	11,400	Dec 31, 2007
Dec 29, 2005	US$0.500	-	195,750	-	-	195,750	Dec 31, 2007
Jan 2, 2006	US$0.450	-	110,000	-	-	110,000	Dec 31, 2007
Jan 3, 2006	US$0.500	-	7,250	-	-	7,250	Jan 31, 2008
Jan 4, 2006	US$0.420	-	50,000	-	-	50,000	Dec 31, 2007
Jan 12, 2006	US$0.600	-	14,750	-	-	14,750	Jan 31, 2008
Jan 31, 2006	US$0.550	-	8,000	-	-	8,000	May 31, 2008
Apr 25, 2006	US$0.300	-	29,300	-	-	29,300	Apr 30, 2007
May 10, 2006	US$0.300	-	32,250	-	-	32,250	May 31, 2008
May 31, 2006	US$0.260	-	35,000	-	-	35,000	May 31, 2008
Jul 7, 2006	US$0.250	-	21,000	-	-	21,000	Jul 31, 2008
Aug 11, 2006	US$0.180	-	50,000	-	-	50,000	Aug 15, 2008
Aug 18, 2006	US$0.200	-	62,500	-	-	62,500	Aug 31, 2008
		2,388,160	1,850,383	620,950	-	3,617,593

Contributed surplus

	2006	2005
	$	$

Contributed surplus – beginning	190,457	51,922
Addition related to stock options granted under fair values	64,130	138,535
	254,587	190,457
Reduction related to stock options exercised under fair values	-	-
Contributed surplus – ending	254,587	190,457

Note 6	CAPITAL LEASES

	The Company has a lease agreement for computers accounted for as capital leases. Current payments are $640 monthly, expiring July 2008. The following is a schedule of future lease payments.

	2006		2005
	$		$
Total minimum lease payments	14,717		26,879
Less amount representing interest	(2,071	)	(5,240	)
Balance of obligations	12,646		21,639
Less current portion	(6,128	)	(7,120	)
Non-current portion	6,518		14,519

SUNGOLD INTERNATIONAL HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE 9

Note 6	CAPITAL LEASES (continued)

	Future annual principal payments required to retire the lease obligations are as follows:

2007	6,128
2008	6,518
	12,646

Note 7

RELATED PARTY TRANSACTIONS

	a)	During the year, consulting fees and salaries of $579,030 (2005 - $392,386) were paid to directors and officers of the Company and subsidiaries of the Company, of which $387,349 was paid by cash and $191,681 was paid by shares, valued at the closing price before the date of settlement. The fees are in the normal course of business and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

	b)	During the year, the Company paid $18,840 to an officer for rent of office space provided (2005 – $3,435).

	c)	Accounts payable include $193,464 to directors, officers and management for management and consulting services rendered (2005 – $51,751).

	d)	The loans payable of $7,500 is an unsecured advance from a shareholder and has no specified interest rate or repayment terms (2005 – $12,500).

Note 8

COMMITMENTS

	a)	Lease commitments

		The Company is paying month to month rent for office space in Toronto at the rate of $1,570 per month, until December 31, 2006, after which the Company signed a five year lease, beginning January 1, 2007, and ending December 31, 2011, for the same office space. In addition, the Company signed a lease for additional office space, beginning September 1, 2006 for five years and four months, ending December 31, 2011.

		Minimum annual lease payments for the next six years are as follows:

2007	-- $ 80,241
2008	-- $102,431
2009	-- $107,666
2010	-- $112,901
2011	-- $118,136
2012	-- $ 39,960

	b)	Commitments and contingencies

		The Company’s activities are subject to various governmental laws and regulations relating to horseracing, virtual horseracing, copyrights, trademarks and patents. These regulations are continually changing. The Company will require approval under all applicable laws and regulations.

SUNGOLD INTERNATIONAL HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE 10

Note 9	FINANCIAL INSTRUMENTS

	The Company’s financial instruments consist of cash, bank indebtedness, accounts payable and accrued liabilities, loans payable, and leases payable. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial statements. The fair value of these financial instruments approximates their carrying value, unless otherwise noted.

Note 10	INCOME TAXES AND ACCUMULATED LOSSES

	The Company has accumulated non-capital losses for income tax purposes of $11,914,305 which may be carried forward and used to reduce taxable income in future years. Under present tax legislation, these losses will expire as follows:

Year	Amount
	$
2007	1,273,366
2008	1,714,246
2009	2,427,247
2010	2,473,112
2014	1,188,958
2015	1,213,730
2016	1,623,646
	11,914,305

The company also has accumulated capital losses from the pre-development projects written off, for income tax purposes of $3,771,802 that may be carried forward indefinitely and used to reduce capital gains in the future.

The Company follows the asset and liability method of accounting for income taxes. Future income taxes assets and liabilities are determined based on temporary differences between the accounting and tax bases of existing assets and liabilities, and are measured using tax rates expected to apply when these differences reverse. A valuation allowance is recorded against any future tax asset if it is more likely than not that the asset will not be realized.

In assessing the realizability of future income tax assets, management considers whether it is more likely than not that some portion of all of the future tax assets will not be realized. The ultimate realization of future tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of future tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The amount of future tax asset considered realizable could change materially in the near term based on future taxable income during the carry forward period.

The Company’s effective income tax rate differs from the combined Canadian federal and provincial income tax rate. The difference results from the following:

	2006		2005
Combined federal and provincial tax rate	36.12%		35.62%

Income taxes at statutory rate	(586,461	)	(708,445	)
Adjusted for write-down of pre-development costs	-		223,781
Adjusted for stock-based compensation	23,164		49,346
Other adjustments	-		261
Permanent differences for tax and accounting income	1,778		2,726
Unrecognized deductible temporary difference	561,519		432,331
Loss for Income taxes	-		-

SUNGOLD INTERNATIONAL HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE 11

Note 10	INCOME TAXES AND ACCUMULATED LOSSES (continued)

	Future income tax assets and liabilities result from the differences between the carrying amount and the tax basis of the following:

	2006		2005

Tax losses carried forward	4,303,447		3,898,230
Difference in tax and accounting valuations for equipment	-		945
	4,303,447		3,899,175
Valuation allowance	(4,303,447	)	(3,899,175	)
Future income tax asset	-		-

Note 11	COMPARATIVE FIGURES

	The comparative figures have been reclassified where applicable in order to conform to the presentation used in the current year.

Note 12	SUBSEQUENT EVENTS

	Subsequent to the year end, the Company received $170,830 from the issuance of 2,559,091 private placement shares, for an average share priced of $0.067 per share.

	Subsequent to the year end, the Company issued 45,780 shares for services in lieu of payments of $6,179.


Note 13	UNITED STATES ACCOUNTING PRINCIPLES

	These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“CDN GAAP”) which differ in certain respects from those principles that the Company would have followed had its consolidated financial statements been prepared in accordance with generally accepted accounting principles in United States (“US GAAP”). The Company is considered to be a pre-operational Company under US GAAP.

	The significant differences relate principally to the following items and the adjustments necessary to restate the loss and shareholders’ equity in accordance with US GAAP are outlined as follows:

	a)	Pre-Development Costs

		Under CDN GAAP, pre-development expenditures are capitalized and amortized over the benefit period of the deferred expenditures once operations commence or written off if abandoned or impaired. US GAAP requires that pre-development expenditures be expensed as incurred until it is determined that commercially viable operations exist and the expenses then incurred are recoverable.

	b)	Foreign Currency Translation

		Under US GAAP, all monetary asset and liability accounts are translated at the exchange rates in effect at the balance sheet dates. Income statement amounts are translated at the average rate of exchange for the year. The resulting differences are accumulated in a separate component of shareholders’ equity.

SUNGOLD INTERNATIONAL HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE 12

Note 13

UNITED STATES ACCOUNTING PRINCIPLES continued)

	c)	Comprehensive Income

		Under US GAAP, SFAS No. 130 requires that companies report comprehensive income as a measure of overall performance. Comprehensive income includes all changes in equity during a year except those resulting from investments by owners and distribution to owners. There is no similar concept under Canadian GAAP. The Company has determined that it had no comprehensive income other than the loss in any of the years presented.

	d)	The following are balance sheet items under US GAAP that differ from Canadian GAAP:

	2006		2005		2004
	$		$		$

Pre-development costs	-		-		-
Share capital	26,756,426		25,789,386		24,670,304
Foreign currency adjustments	13,868		14,933		13,688
Accumulated Deficit During Development
Stage	(27,185,209	)	(25,568,950	)	(24,179,064	)

The following table summarizes the effect on Deficit of differences between CDN GAAP and US GAAP:

	2006		2005		2004
	$		$		$

Deficit - CDN GAAP	(22,190,315	)	(20,618,381	)	(18,629,484	)
Cumulative effect of previous
years’ adjustments	(4,950,569	)	(5,549,580	)	(5,486,420	)
	(27,140,884	)	(26,167,961	)	(24,115,904	)
US GAAP material adjustments:
- Effect of the write-off of pre-development
costs on net loss	(45,390	)	600,256		(63,112	)
- Foreign currency adjustments	1,065		(1,245	)	(48	)
	(44,325	)	599,011		(63,160	)
Deficit - US GAAP	(27,185,209	)	(25,568,950	)	(24,179,064	)

SUNGOLD INTERNATIONAL HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE 13

Note 13

UNITED STATES ACCOUNTING PRINCIPLES (continued)

The following table summarizes the effect on shareholders’ equity after considering the US GAAP adjustments:

			Deficit		Foreign
	Common	Additional	Accumulated		Currency	Total
	Shares	Paid-in	During		Translation	Shareholders’
	Amount	Capital	Development		Adjustments	Equity(Deficit)
			Stage
	$	$	$		$	$
Common Shares issued /net loss:
August 31, 1986
• Shares for cash	107,501	-	-		-	107,501
• Net loss under US GAAP	-	-	-		-	-
August 31, 1987	107,501	-	-		-	107,501
• Shares for cash	166,971	-	-		-	166,971
• Net loss under US GAAP	-	-	-		-	-
August 31, 1988	274,472	-	-		-	274,472
• Shares for cash	401,667	-	-		-	401,667
• Shares for property	227,000	-	-		-	227,000
• Net loss under US GAAP	-	-	(753,962	)	-	(753,962	)
August 31, 1989	903,139	-	(753,962	)	-	149,177
• Shares for cash	622,215	-	-		-	622,215
• Shares for property	1,897,000	-	-		-	1,897,000
• Net loss under US GAAP	-	-	(575,612	)	-	(575,612	)
August 31, 1990	3,422,354	-	(1,329,574	)	-	2,092,780
• Shares for cash	100,250	-	-		-	100,250
• Net loss under US GAAP	-	-	(350,482	)	-	(350,482	)
August 31, 1991	3,522,604	-	(1,680,056	)	-	1,842,548
• Shares for cash	402,900	-	-		-	402,900
• Net loss under US GAAP	-	-	(1,420,584	)	-	(1,420,584	)
August 31, 1992	3,925,504	-	(3,100,640	)	-	824,864
• Shares for cash	465,875	-	-		-	465,875
• Shares for property	150,000	-	-		-	150,000
• Net loss under US GAAP	-	-	(289,189	)	-	(289,189	)
August 31, 1993	4,541,379	-	(3,389,829	)	-	1,151,550
• Shares for cash	576,500	-	-		-	576,500
• Net loss under US GAAP	-	-	(836,050	)	-	(836,050	)
August 31, 1994	5,117,879	-	(4,225,879	)	-	892,000
• Shares for cash	175,000	-	-		-	175,000
• Foreign currency	-	-	-		3,448	3,448
• Net loss under US GAAP	-	-	(738,384	)	-	(738,384	)
August 31, 1995	5,292,879	-	(4,964,263	)	3,448	332,064
• Shares for cash	255,750	-	-		-	255,750
• Foreign currency	-	-	-		3,329	3,329
• Net loss under US GAAP	-	-	(501,749	)	-	(501,749	)
August 31, 1996	5,548,629	-	(5,466,012	)	6,777	89,394

SUNGOLD INTERNATIONAL HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE 14

Note 13

UNITED STATES ACCOUNTING PRINCIPLES (continued)

Summarizing the effect on shareholders’ equity after considering the US GAAP adjustments (continued):

			Deficit		Foreign
	Common	Additional	Accumulated		Currency		Total
	Shares	Paid-in	During		Translation		Shareholders’
	Amount	Capital	Development		Adjustments		Equity(Deficit)
			Stage
	$	$	$		$		$
Common Shares issued /net loss:
August 31, 1996 – Balance forward	5,548,629	-	(5,466,012	)	6,777		89,394
• Shares for cash	1,250,000	-	-		-		1,250,000
• Share-based compensation	1,345,680	-	(1,345,680	)	-		-
• Foreign currency	-	-	-		(1,646	)	(1,646	)
• Net loss under US GAAP	-	-	(1,046,798	)	-		(1,046,798	)
August 31, 1997	8,144,309	-	(7,858,490	)	5,131		290,950
• Shares for cash	1,351,967	-	-		-		1,351,967
• Share-based compensation	2,078,946	-	(2,078,946	)	-		-
• Foreign currency	-	-	-		11,140		11,140
• Net loss under US GAAP	-	-	(1,297,719	)	-		(1,297,719	)
August 31, 1998	11,575,222	-	(11,235,155	)	16,271		356,338
• Shares for cash	1,044,358	-	-		-		1,044,358
• Share-based compensation	1,286,112	-	(1,286,112	)	-		-
• Foreign currency	-	-	-		(18,372	)	(18,372	)
• Net loss under US GAAP	-	-	(1,300,904	)	-		(1,300,904	)
August 31, 1999	13,905,692	-	(13,822,171	)	(2,101	)	81,420
• Shares for cash	2,182,351	-	-		-		2,182,351
• Foreign currency	-	-	-		18,438		18,438
• Net loss under US GAAP	-	-	(1,956,433	)	-		(1,956,433	)
August 31, 2000	16,088,043	-	(15,778,604	)	16,337		325,776
• Shares for cash	2,391,331	-	-		-		2,391,331
• Foreign currency	-	-	-		12,098		12,098
• Net loss under US GAAP	-	-	(2,051,962	)	-		(2,051,962	)
August 31, 2001	18,479,374	-	(17,830,566	)	28,435		677,243
• Shares for cash	2,388,010	-	-		-		2,388,010
• Foreign currency	-	-	-		(4,526	)	(4,526	)
• Net loss under US GAAP	-	-	(2,472,205	)	-		(2,472,205	)
August 31, 2002	20,867,384	-	(20,302,771	)	23,909		588,522
• Shares issuance	2,417,723	-	-		-		2,417,723
• Share-based compensation	-	51,922	-		-		51,922
• Foreign currency	-	-	-		(10,269	)	(10,269	)
• Net loss under US GAAP	-	-	(2,601,415	)	-		(2,601,415	)
August 31, 2003	23,285,107	51,922	(22,904,186	)	13,640		446,483
• Shares issuance	1,385,197	-	-		-		1,385,197
• Foreign currency	-	-	-		48		48
• Net loss under US GAAP	-	-	(1,274,878	)	-		(1,274,878	)
August 31, 2004	24,670,304	51,922	(24,179,064	)	13,688		556,850

SUNGOLD INTERNATIONAL HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE 15

Note 13

UNITED STATES ACCOUNTING PRINCIPLES (continued)

Summarizing the effect on shareholders’ equity after considering the US GAAP adjustments (continued):

			Deficit		Foreign
	Common	Additional	Accumulated		Currency		Total
	Shares	Paid-in	During		Translation		Shareholders’
	Amount	Capital	Development		Adjustments		Equity(Deficit)
			Stage
	$	$	$		$		$
Common Shares issued /net loss:
August 31, 2004 – Balance forward	24,670,304	51,922	(24,179,064	)	13,688		556,850
• Shares issuance	1,119,082	-	-		-		1,119,082
• Share-based compensation	-	138,535	-		-		138,535
• Foreign currency	-	-	-		1,245		1,245
• Net loss under US GAAP	-	-	(1,389,886	)	-		(1,389,886	)
August 31, 2005	25,789,386	190,457	(25,568,950	)	14,933		425,826
• Shares issuance	967,040				-		967,040
• Share-based compensation	-	64,130	-		-		64,130
• Foreign currency	-	-	-		(1,065	)	(1,065	)
• Net loss under US GAAP	-	-	(1,616,259	)	-		(1,616,259	)
August 31, 2006	26,756,426	254,587	(27,185,209	)	13,868		(160,328	)

The following table summarizes the effect on Net Loss of differences between CDN GAAP and US GAAP:

	Cumulative
	From
	Apr 7/86 to
	Aug 31/06		2006		2005		2004
	$		$		$		$

Net loss under CDN GAAP	(22,190,315	)	(1,571,934	)	(1,988,897	)	(1,211,718	)
US GAAP material adjustments:
• Effect of the write-off of pre-
development costs on net loss	(270,288	)	(45,390	)	600,256		(63,112	)
• Share-based compensation	(4,710,738	)	-		-		-
• Foreign currency adjustments	(13,868	)	1,065		(1,245	)	(48	)
Net loss under US GAAP	(27,185,209	)	(1,616,259	)	(1,389,886	)	(1,274,878	)

Loss per share under US GAAP			0.0131		0.0125		0.0138

Weighted average number of shares			123,834,644		111,579,338		92,239,057

SUNGOLD INTERNATIONAL HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE 16

Note 13

UNITED STATES ACCOUNTING PRINCIPLES (continued)

	h)	New Accounting Standards

		Under the Securities and Exchange Commission’s Staff Accounting Bulletin No.74, the Company is required to disclose certain information related to recently issued accounting standards. The recently issued accounting standards are summarized as follows:

U.S. Standards

In November 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 151, “Inventory Costs – an amendment of ARB No. 43 Chapter 4” (“SFAS 151”). The Statement amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that, "… under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges..." This Statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal." In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company does not expect that adoption of SFAS 151 will have a material impact on its results from operations or financial position.

In December 2004, the FASB issued FASB Interpretations (“FIN”) No. 47, “Accounting for Conditional Asset Retirement Obligations—an interpretation of FASB Statement No. 143”. The Interpretation clarifies that the term conditional asset retirement obligation as used in FASB Statement No. 143, Accounting for Asset Retirement Obligations, 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 obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and (or) method of settlement. Thus, the timing and (or) method of settlement may be conditional on a future event. Accordingly, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. The fair value of a liability for the conditional asset retirement obligation should be recognized when incurred—generally upon acquisition, construction, or development and (or) through the normal operation of the asset. Uncertainty about the timing and (or) method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. Statement 143 acknowledges that in some cases, sufficient information may not be available to reasonably estimate the fair value of an asset retirement obligation. This Interpretation also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. The Company does not expect that adoption of FIN 47 will have a material impact on its results from operations or financial position.

In December 2004, the FASB issued SFAS 152, “Accounting for Real Estate Time-Sharing Transactions—an amendment of FASB Statements No. 66 and 67”. The Statement amends FASB Statement No. 66, Accounting for Sales of Real Estate, to reference the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real Estate Time-Sharing Transactions. This Statement also amends FASB Statement No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, to state that the guidance for (a) incidental operations and (b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is subject to the guidance in SOP 04-2. SFAS 152 is effective for real estate time-sharing transactions occurring in fiscal period beginning after June 15, 2005. The Company does not expect that adoption of SFAS 152 will have a material impact on its results from operations or financial position.

SUNGOLD INTERNATIONAL HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE 17

Note 13

UNITED STATES ACCOUNTING PRINCIPLES (continued)

	h)	New Accounting Standards (continued)

		In December 2004, the FASB issued Statement of Financial Accounting Standards No. 153, “Exchange of Non monetary Assets – an amendment of APB Opinion No. 29” (“SFAS 153”) which amends Accounting Principles Board (“APB”) Opinion No. 29, “Accounting for Non monetary Transactions” 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. SFAS 153 is effective for non-monetary asset exchanges occurring in fiscal period beginning after June 15, 2005. The Company does not expect that adoption of SFAS 153 will have a material impact on its results from operations or financial position.

		In December 2004, FASB issued Statement of Financial Accounting Standards No. 123R, “Share Based Payment” (“SFAS 123R”). SFAS 123R supersedes APB 25 and its related implementation guidance by requiring entities to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards. As the Company is using fair value method to recognize stock-based compensation, the Company does not expect that adoption of SFAS 123R will have a material impact on its results from operations or financial position.

		In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting changes and Error Corrections – a replacement of APB Opinion No. 20 and FASB Statement No. 3” (SFAS 154”) which replaces APB Opinion No. 20, “Accounting Changes” and FASB 3 “Reporting Accounting Changes in Interim Financial Statement”, and changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transaction provisions, those provisions should be followed. SFAS 154 requires to report all voluntary changes in accounting principle via retrospective application, unless impracticable, enhances the consistency of financial information between periods. SFAS 154 shall be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Early adoption is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date that SFAS 154 was issued.

		In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes. This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Interpretation is effective for fiscal years beginning after December 15, 2006. While our analysis of the impact this Interpretation is not yet complete, we do not anticipate it will have a material impact on our retained earnings at the time of adoption.

		In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements, (“FAS 157”). This Standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The adoption of FAS 157 is not expected to have a material impact on our financial position, results of operations or cash flows.

SUNGOLD INTERNATIONAL HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE 18

Note 13

UNITED STATES ACCOUNTING PRINCIPLES (continued)

	h)	New Accounting Standards (continued)

		The FASB also issued in September 2006 Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statement No. 87, 88, 106 and 132(R), (“FAS 158”). This Standard requires recognition of the funded status of a benefit plan in the statement of financial position. The Standard also requires recognition in other comprehensive income of certain gains and losses that arise during the period but are deferred under pension accounting rules, and modifies the timing of reporting and adds certain disclosures. FAS 158 provides recognition and disclosure elements to be effective as of the end of the fiscal year after December 15, 2006 and measurement elements to be effective for fiscal years ending after December 15, 2008. At December 30, 2006, we have reported approximately $6 million of deferred pension losses in accumulated other comprehensive income as a result of this new pronouncement. We do not expect the remaining elements of this Statement to have a material impact on our financial condition, results of operations or cash flows when adopted.

Canadian Standards

In January 2005 and amended in March 2005, the CICA issued EIC-151 “Exchangeable Securities Issued by Subsidiaries of Income Trust”, which provides guidance on how should exchangeable securities representing the retained interest in a subsidiary of an income trust be presented on the consolidated balance sheet of the income trust, the exchangeable securities be measured, the accounting treatment for the conversion of exchangeable securities that are not presented as part of unitholders’ equity, and earnings per shares be calculated. EIC –151 should be applied for financial years beginning on or after June 30, 2005, with earlier adoption encouraged. The Company does not expect that adoption of EIC-151 will have a material impact on its results from operations or financial position.

In March 2005, the CICA issued EIC-152 “Mining Assets – Impairment and Business Combination”, which provides guidance on an issue when testing mining assets for impairment under CICA 3063, some mining entities exclude estimated cash flows associated with the economic value of a mining asset beyond that asset’s proven and probable reserves, and those estimated cash flows may also exclude the effects of anticipated fluctuations in the future market price of minerals over the period of cash flows. EIC–152 should be applied for financial years beginning on or after March 16, 2005. As the Company is a pre-operating stage entity and capitalized deferred exploration cost under AcG-11, the Company does not expect that adoption of EIC-152 will have a material impact on its results from operations or financial position.

In April 2005, the CICA issued EIC-154 “Accounting for Pre-Existing Relationships Between the Parties of a Business Combination”. EIC-154 addresses whether a business combination between two parties that have a pre-existing relationship should be evaluated to determine if a settlement of a pre-existing relationship exists, thus requiring the acquirer to account for the settlement separately from the business combination. EIC-154 shall be effective for a component of an enterprise that is either disposed of or classified as held for sale in fiscal years beginning after April 22, 2005. The Company does not expect that adoption of EIC-154 will have a material impact on its results from operations or financial position.

In April 2005, the CICA issued new Section 1530 “Comprehensive Income”, the new section establishes standards for reporting and display of comprehensive income. The main feature of Section 1530 is a requirement for an enterprise to present comprehensive income and its components, as well as net income, in its financial statements. Section 1530 should be applied for interim and annual financial statements relating to fiscal years beginning on or after October 1, 2006.

SUNGOLD INTERNATIONAL HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2006

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE -19

Note 13

UNITED STATES ACCOUNTING PRINCIPLES (continued)

	h)	New Accounting Standards (continued)

		In April 2005, the CICA issued new Section 3251 “Equity”, the new section, which replaces section 3250 “Surplus”, establishes standards for the presentation of equity and changes in equity during the reporting period. The main feature of Section 3250 is a requirement for an enterprise to present separately each of the changes in equity during the period, including comprehensive income, as well as components of equity at the end of the period. Section 3251 should be applied for interim and annual financial statements relating to fiscal years beginning on or after October 1, 2006.

		In April 2005, the CICA issued new Section 3855 “Financial instruments – recognition and measurement”, the new section establishes standards for recognizing and measuring financial assets, financial liabilities and non- financial derivatives. The main features of Section 3855 are classified financial assets as held for trading, held to maturity, loans and receivables, or available for sales and their measurement. Section 3855 should be applied for interim and annual financial statements relating to fiscal years beginning on or after October 1, 2006.

		In April 2005, the CICA issued new Section 3861 “Financial instruments – disclosure and presentation”, the new section, which replaces section 3860 “Financial instruments – disclosure and presentation”, establishes standards for the presentation of financial instruments and non-financial derivatives, and identifies the information that should be disclosed about them. Section 3861 should be applied for fiscal years beginning on or after November 1, 2004.

		In April 2005, the CICA issued new Section 3865 “Hedges”, the new section establishes standards for when and how hedge accounting may be applied. Section 3865 should be applied for interim and annual financial statements relating to fiscal years beginning on or after October 1, 2006.

		In May 2005, the CICA issued Accounting Guideline (“AcG”) - 19 “Disclosure by entities subject to rate regulation”. The guideline presents the views of the Accounting Standard Board on certain aspects of the disclosure and presentation of information in the financial statements of entities providing services or products for which customer rates are established, or subject to approval, by a regulator or a governing body empowered by status or contract to set rate. The Company does not expect that adoption of AcG-19 will have a material impact on its results from operations or financial position.

		In June 2005, the CICA released new Handbook Section 3831, Non-monetary Transactions, effective for fiscal periods beginning on or after January 1, 2006. This standard requires all non-monetary transactions to be measured at fair value unless they meet one of four very specific criteria. Commercial substance replaces culmination of the earnings process as the test for fair value measurement. A transaction has commercial substance if it causes an identifiable and measurable change in the economic circumstances of the entity. The Company is currently evaluating the impact of this standard on its financial statements.

- 72 -

(b)	Exhibits

Exhibit Number	Description
1.1	Certificate of Incorporation for 307198 B.C. Ltd. dated April 7, 1986.⁽¹⁾
1.2	Certificate for 307198 B.C. Ltd. changing name to Fircrest Resources Ltd. dated July 2, 1986.⁽¹⁾
1.3	Certificate for Fircrest Resources Ltd. changing name to NTC Capital Corporation dated October 30, 1991. ⁽¹⁾
1.4	Certificate of Change of Name for NTC Capital Corporation changing name to Sungold Gaming Inc. dated March 1, 1994.⁽¹⁾
1.5	Certificate of Change of Name for Sungold Gaming Inc. changing name to Sungold Gaming International Ltd. dated May 26, 1997.⁽¹⁾
1.6	Altered Memorandum of the Corporation dated February 22, 2002, effective June 13, 2002, amending share capital.⁽³⁾
1.7	Articles of Continuance.⁽⁴⁾
1.8	Bylaw No. 1 of the Corporation.⁽⁴⁾
4.1	Consulting Agreement between Sungold Gaming International Ltd. and Kim N. Hart dated May 1, 1998.⁽¹⁾
4.2	Consulting Agreement between Sungold Gaming International Ltd. and Anne Kennedy dated July 1, 1998.⁽¹⁾
4.3	Consulting Agreement between Horsepower Network.com Inc. and Kim N. Hart dated May 1, 2000.⁽⁴⁾
4.4	Agreement dated May 2, 2001 between the Corporation and SafeSpending Services Inc.⁽²⁾
4.5	Agreement dated May 2, 2001 between the Corporation and Jerome Nootebos.⁽²⁾
4.6	Consulting Agreement between Horsepower Broadcasting Network (HBN) International Ltd. and Larry Simpson dated October 11, 2002.⁽³⁾
4.7	Amendment to Consulting Agreement dated January 2, 2003, between the Corporation and Kim N. Hart. ⁽³⁾
4.8	Amendment to Consulting Agreement dated January 2, 2003, between the Corporation and Anne Kennedy.⁽³⁾
4.9	Letter of Intent-Extension between TAC International Investments LLC and the Corporation dated September 30, 2003.⁽⁴⁾
4.10	Amendment to Consulting Agreement dated October 1, 2003, between the Corporation and Anne Kennedy.⁽¹⁾
4.11	Amendment to Consulting Agreement dated October 1, 2003, between the Corporation and Kim N. Hart.⁽¹⁾
4.12	Amendment to Consulting Agreement dated January 2, 2004, between the Corporation and Anne Kennedy.⁽⁴⁾
4.13	Amendment to Consulting Agreement dated January 2, 2004, between the Corporation and Kim N. Hart.⁽⁴⁾
4.14	Amendment to Consulting Agreement dated January 2, 2004, between Horsepower Broadcasting Network (HBN) International Ltd. and Kim N. Hart.⁽⁴⁾
4.15	Business Services Agreement dated January 18, 2005, between Sungold International Holdings Corp. and Hart Ventures. ⁽⁵⁾
4.16	Option Agreement dated March, 2004 between the Corporation and A.C. Gilmore & Sons (Farms) Ltd. ⁽⁵⁾
4.17	Consulting Agreement dated June 28, 2004 between the Corporation and T-SWAT Consulting Ltd. ⁽⁵⁾
4.18	License Agreement dated May 12, 2004 between Truro Raceway and Horsepower Broadcasting Network (HBN) International Ltd. ⁽⁵⁾
4.19	License Agreement dated August 13, 2004 between Inverness Raceway and Horsepower Broadcasting Network (HBN) International Ltd. ⁽⁵⁾
4.20	License Agreement dated April 2, 2004 between Manitoba Jockey Club dba as Assinboia Downs and Horsepower Broadcasting Network (HBN) International Ltd. ⁽⁵⁾
4.21	License Agreement dated March 8, 2004 between Pompano Park Racing and Horsepower Broadcasting Network (HBN) International Ltd. ⁽⁵⁾
4.22	License Agreement dated September 28, 2004 between Fredericton Exhibition Limited and Horsepower Broadcasting Network (HBN) International Ltd. ⁽⁵⁾
4.23	License Agreement dated November 15, 2004 between Flagler Greyhound Track and Horsepower Broadcasting Network (HBN) International Ltd. ⁽⁵⁾
4.24	License Agreement dated November 24, 2004 between Buffalo Trotting Association and Horsepower Broadcasting Network (HBN) International Ltd. ⁽⁵⁾

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Exhibit Number	Description
4.25	Letter of Intent-Extension between TAC International Investments LLC and the Corporation dated July 30, 2004. ⁽⁵⁾
4.26	Agency Agreement dated July 15, 2005 between the Corporation, Horsepower Broadcasting Network (HBN) International Ltd. and The Web Gaming Consultants ⁽⁶⁾
4.27	Management Services Agreement dated June 1, 2005 between the Corporation, Horsepower Broadcasting Network (HBN) International Ltd. and Nick DeSante ⁽⁶⁾
4.28	Management Services Agreement dated June 6, 2005 between the Corporation, Horsepower Broadcasting Network (HBN) International Ltd., Jeff Grant and T-Swat Consulting ⁽⁶⁾
4.29	Management Services Agreement dated July 12, 2005 between the Corporation, Horsepower Broadcasting Network (HBN) International Ltd. and Paul T. Coulter ⁽⁶⁾
4.30	Management Services Agreement dated November 14, 2005 between the Corporation, Horsepower Broadcasting Network (HBN) International Ltd. and Patrick Kearns ⁽⁶⁾
4.31	Agreement between the Corporation and Cynthia DeMonte Associates Ltd. dated July 7, 2005 ⁽⁶⁾
4.32	Employment Agreement dated June 1, 2005 between the Corporation, Horsepower Broadcasting Network (HBN) International Ltd. and Larry Simpson ⁽⁶⁾
4.33	Employment Agreement dated January 16, 2006 between the Corporation, Racing Unified Network (R.U.N.), and Richard Henley ⁽⁶⁾
4.34	Employment Agreement dated July 1, 2005 between the Corporation, Safespending Inc., and Troy Griffin ⁽⁶⁾
4.35	Management Services Agreement dated May 27, 2005 between the Corporation, Horsepower Broadcasting Network (HBN) International Ltd. and Tony Currie ⁽⁶⁾
4.36	Letter of Intent dated July 15, 2005 between Traxco and the Corporation ⁽⁶⁾
4.37	Management Services Agreement dated April 14, 2005 between the Corporation and T. Keith Blackwell ⁽⁶⁾
4.38	Amendment to Management Services Agreement between the Corporation and T. Keith Blackwell dated February 7, 2006 ⁽⁶⁾
4.39	Management Services Agreement dated January 16, 2006 between the Corporation, Horsepower Broadcasting Network (HBN) International Ltd. and Scott Rowe ⁽⁶⁾
4.40	Consulting Agreement dated January 29, 2007 between the Corporation and Todd Stinson
6	See Note 13 to the Corporation’s consolidated financial statements included in Item 19 of this Form 20-F for information on how earnings per share information was calculated.
8	List of significant subsidiaries. ⁽⁶⁾
11.1	Code of Ethics ⁽⁶⁾
12.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.
13.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	(1)	Previously filed as an exhibit to the Corporation’s Registration Statement on Form 20-F filed on February 20, 2002.
	(2)	Previously filed as an exhibit to the Corporation’s Annual Report on Form 20-F filed on February 28, 2002.
	(3)	Previously filed as an exhibit to the Corporation’s Annual Report on Form 20-F filed on March 17, 2003.
	(4)	Previously filed as an exhibit to the Corporation’s Annual Report on Form 20-F filed March 19, 2004.
	(5)	Previously filed as an exhibit to the Corporation’s Annual Report on Form 20-F filed March 5, 2005.

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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 Annual Report on its behalf.

	SUNGOLD INTERNATIONAL HOLDINGS CORP.

Date: March 15, 2007	By:	/s/ T. Keith Blackwell

		T. Keith Blackwell
		Chief Executive Officer and
		Chief Financial Officer

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