SECURITIES AND EXCHANGE COMMISSION

FORM 20-F

(MARK ONE)

Commission file number 0-32793

WORLD GAMING PLC

England and Wales
(Jurisdiction of Incorporation or Organization)
Minerva House
5 Montague Close
London SE1 9BB
United Kingdom
(Address of Principal Executive Offices)

     Securities registered pursuant to Section 12(b) of the Act: NONE

     Securities registered pursuant to Section 12(g) of the Act: Ordinary Shares, nominal value £0.002 per share, represented by American Depositary Shares evidenced by American Depositary Receipts.

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

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: As of December 31, 2005, the Registrant had 55,418,630 ordinary shares issued and outstanding, nominal value £0.002 per share.

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.       o Yes      x No

     If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.       o Yes      x No

     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 o

     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)

     Indicate by check mark which financial statement item the registrant has elected to follow.
x    Item 17    o   Item 18

     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).    o Yes    x No

WORLD GAMING PLC

ANNUAL REPORT ON FORM 20-F
For the Fiscal Year Ended December 31, 2005

TABLE OF CONTENTS

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Certain Definitions and Conventions

     In this annual report, references to the “Company”, “Group,” “World Gaming,” “we,” “us” and “our” refer to World Gaming plc and one or more of its operating subsidiaries as the context may require. World Gaming plc and its subsidiary WG International Ltd, are holding companies and they conduct their businesses through their operating subsidiaries. References to “$” and “U.S. dollars” are to United States currency, any references to “£”, “pounds sterling”, “pence” or “p” are to U.K. currency, and any references to “CDN” are references to Canadian currency. Percentages and certain amounts contained herein have been rounded for ease of presentation. Any discrepancies in any table between totals and the sums of amounts listed are due to rounding.

Special Note Regarding Forward-Looking Statements

     We make certain forward looking statements in this Form 20 F within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, relating to our financial condition, profitability, liquidity, resources, business outlook, proposed acquisitions (if any), market forces, corporate strategies, contractual commitments, capital requirements and other matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward looking statements. To comply with the terms of the safe harbor, we note that a variety of factors could cause our actual results and experience to differ substantially from the anticipated results or other expectations expressed in our forward looking statements. When words and expressions such as: “believes,” “expects,” “anticipates,” “estimates,” “plans,” “intends,” “objectives,” “goals,” “aims,” “projects,” “forecasts,” “possible,” “seeks,” “may,” “could,” “should,” “might,” “likely,” “enable” or similar words or expressions are used in this Form 20 F, as well as statements containing phrases such as “in our view,” “there can be no assurance,” “although no assurance can be given” or “there is no way to anticipate with certainty,” forward looking statements are being made. These forward looking statements speak as of the date of this Form 20 F.

     The forward-looking statements are not guarantees of future performance and involve risk and uncertainties. These risks and uncertainties may affect the operation, performance, development and results of our business and could cause future outcomes to differ materially from those set forth in our forward looking statements. These statements are based on our current beliefs as to the outcome and timing of future events, and actual results may differ materially from those projected or implied in the forward looking statements. Further, some forward-looking statements are based upon assumptions of future events which may not prove to be accurate. The forward-looking statements involve risks and uncertainties including, but not limited to, the risks and uncertainties referred to under “Item 3. Key Information - Risk Factors,” and elsewhere within this Form 20-F and in other of our filings with the Securities and Exchange Commission.

     We undertake no obligation to publicly update or revise any forward looking statements as a result of future developments, events and conditions outside of our control. New risk factors emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ significantly from those forecast in any forward looking statements. Given these risks and uncertainties, investors should not overly rely or attach undue weight to our forward looking statements as an indication of our actual future results.

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PART I

Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

     Not applicable.

Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE.

     Not applicable.

Item 3. KEY INFORMATION

Selected Financial Data

     The data below should be read in conjunction with “Item 5. Operating and Financial Review and Prospects” and our audited consolidated financial statements and notes relating thereto appearing elsewhere in this annual report, and which have been audited by our independent auditors, HJ & Associates, LLC, as of and for the years ended December 31, 2005, 2004 and 2003, as of and for the eight months ended December 31, 2001 and as of and for the year ended April 30, 2001; and by Baker Tilly, our prior independent auditors, as of and for the year ended December 31, 2002.

     The data below, except for per share information, is in thousands of U.S. dollars.

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* In connection with our holding company reorganization on May 17, 2001, we changed our fiscal year end from April 30 to December 31. Although we have included financial information for the year ended April 30, 2001 and eight months ended December 31, 2001, we have also included unaudited financial information for the year ended December 31, 2001 for comparative purposes.

** Earnings per share excluding shares with no voting or economic rights refers to the 13,506,204 shares held by Sportingbet PLC and its affiliates that have been set aside as a result of the transaction with Sportingbet PLC and may be repurchased by us for $1 when we have retained earnings to do so. This transaction had no impact on the earnings per share calculations for periods prior to December 31, 2004. (See Item 4: Sportingbet Transaction and Item 10: Material Contracts).

     Selected balance sheet data as at December 31 and April 30 for the years indicated (in thousands of U.S. dollars):

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Risk Factors

     You should carefully consider the following risks in making an investment decision regarding our Company. If any of the following risks actually occur, our business, financial condition or results of operations may suffer. As a result, the trading price of our American Depositary Shares and ordinary shares could decline, and you may lose all or part of your investment.

     This annual report and statements that we may make from time to time may contain forward-looking information. There can be no assurance that actual results will not differ materially from our expectations, statements or projections. Factors that could cause actual results to differ from our expectations, statements or projections include the risks and uncertainties relating to our business described below.

We or our customers may be or become subject to regulation or prohibition of Internet gaming in certain jurisdictions, including the United States, which could have a significant adverse effect on our business.

     We and the licensees of our software products are subject to applicable laws in various jurisdictions. As companies and consumers involved in Internet gaming are located around the globe, including end-users of our product, there is uncertainty regarding exactly which governments may have jurisdiction or authority to regulate or legislate with respect to various aspects of the Internet gaming industry. There is a risk that criminal and civil proceedings could be initiated in various jurisdictions against us or our licensees and such proceedings could involve substantial litigation expense, penalties, fines, diversion of the attention of key executives, injunctions or other prohibitions being invoked against the licensee or us. In addition, as electronic commerce develops further, it may generally be the subject of government regulation including taxation which could impact our financial position. Also, current laws that pre-date or are incompatible with Internet electronic commerce may be enforced in a manner that restricts the electronic commerce market. Any such uncertainty surrounding the regulation of Internet gaming, proceedings or developments could have a material adverse effect on the Company’s business, revenues, operating results and financial condition.

     Over the past few years, authorities in certain jurisdictions, such as the United States, have taken indirect steps to restrict online gaming by seeking to prevent or deter banks, payment processors, media providers and other suppliers from transacting with and providing services to online gaming operators, even though many of these online gaming operators are legally licensed in the jurisdiction in which they operate. The application or enforcement (or threat of enforcement) of restrictive laws or regulations, or a change in sentiment by regulatory authorities or the enactment of new legislation prohibiting or restricting online gaming or services used by online gaming businesses or the taking of certain indirect steps, may severely and adversely impact the business and financial position of online gaming companies such as the Company’s.

     Presently, there are two pieces of proposed legislation being considered in the U.S. House of Representatives (one introduced by Congressman Leach and the other by Congressman Goodlatte), with the likelihood of a third being introduced in the U.S. Senate by U.S. Senator Kyl, as an amendment to other proposed legislation presently being considered or, in the future, as proposed stand-alone legislation. Each of these bills will need, in the ordinary course, to be passed by both Houses of Congress, probably before October 2006 when the 109th Congress is expected to adjourn, ahead of the mid-term 2006 elections. In addition, the proposed bills offer “carve-outs” to certain U.S. domestic groups that undertake U.S. domestic gaming activities and the insertion of such carve-outs by special interests in the past undoubtedly had an impact on the failure of such legislation in the past. Obviously, we will continue to monitor developments closely.

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     In November 2004, the World Trade Organisation (“WTO”) held that the U.S. was in violation of its commitments under international trade laws by not allowing operators of Internet Gaming services licensed in Antigua and Barbuda to access U.S. markets. The decision was appealed and the WTO ruled that the U.S. had shown that its laws prohibiting gambling are “necessary to protect public morals or maintain public order” but had failed to demonstrate, in light of its laws in respect of on line gambling on horseracing, that such prohibitions are applied equally to both foreign and domestic providers of on line gambling services for horseracing. Consequently, the WTO recommended that the U.S. bring its laws into conformity with its obligations under international trade rules. Pursuant to the report of the arbitrator circulated in August 2005, the U.S. was given until April 3, 2006 to clarify its policies on Internet gambling and the purported extraterritorial application of its laws. This date has now passed and the U.S. has not taken action to change the U.S. domestic laws that the WTO panel identified as in violation of the U.S.’s General Agreement on Trade in Service (GATS) commitments. It remains to be seen what effect, if any, will result from this inaction on Internet Gambling policy in the U.S.

     In addition to the above risks under United States federal laws, certain states in the U.S. expressly prohibit online gaming and the prosecuting authorities in several states may argue that online gaming is prohibited by their general gambling laws. The legal status of various other federal or state laws that prohibit or could be argued to prohibit online gaming is uncertain. As a result, we face the risk of federal or state enforcement or other action being taken against us, our licensees or our service providers so as to prevent or seriously impede our ability to offer online gaming services in the United States. To date, the position taken by federal and state law enforcement authorities has affected the Company’s business in various ways. Certain U.S. banks, for example, have agreed with state authorities not to participate in the processing of payments for online gaming and others have been unwilling to do so. Further, some media companies have been dissuaded from carrying out advertising for online gaming businesses as a result of actual or threatened action by federal and state prosecution authorities.

     Furthermore, no guarantee can be given that U.S. authorities will not seek to prosecute offshore gaming operators, or companies, which promote them, and no prediction can be given as to the success of any such prosecutions. Any significant restriction on participation in, or marketing or promotion of, online gaming especially in the U.S. would have a significant adverse effect on our business, financial position and future prospects.

     The Gambling Bill was introduced to the English Parliament on October 18, 2004 and was given Royal Assent in April 2005. The process to implement the Gambling Bill has begun with the first licensing applications likely to become available in late 2006, with the first licenses expected to be granted in 2007. The Gambling Commission will have sweeping powers over the industry, and licensed operators will abide by a code of conduct constructed by the Gambling Commission. The commission will also ensure that criminal activity, such as money laundering, is prevented and that players are protected by harm minimization measures.

     As none of our online global gaming operations are currently run out of the UK, the proposed new licensing system will therefore not apply to us based on our current operations. However, should we in the future decide to conduct any operations from the UK, these provisions would become relevant and a remote operating license would be required. (See Item 4: Government Licensing and Regulation and Related Risks).

     With our acquisition of the business assets of one of our then largest licensees (and a gaming operator), there exists a risk that our activities will face greater scrutiny in respect of the regulatory risks contained above.

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Our current business is subject to significant seasonality, which could make it difficult to meet our obligations.

     Because of the current mix of our products and services, our revenues from licensees decrease significantly during those periods of the year when United States, or U.S., winter sports, including American professional and college football, are not being played. This substantially reduces our operating cash flow and could make it difficult to meet our commitments. We are addressing this risk through promotion of non-event reliant gaming products such as multi-player poker and additional casino games. However, there is no guarantee that the gaming market in which we operate will continue to respond favorably to these products or whether it will mitigate the seasonal impact due to our high reliance of sports betting bettors.

     We may need additional financing and there is no assurance it can be obtained.

     We currently have sufficient capital to meet our planned development objectives and positive cash flow. Should these development objectives change significantly or current revenue streams decline materially, we may require additional financing. There can be no assurance that any such capital or additional financing will be available on terms acceptable to us, or at all. Any such additional financing, if available, could result in further dilution of the equity interests of existing shareholders as a result of possible further issuance and placement of our ordinary shares.

We have been involved in civil and in the past criminal litigation, which has resulted in significant expenses and other consequences.

     Many of the lawsuits that may have been seriously threatening to our future have now been settled, however, there are some remaining lawsuits to which we are party. If we were to lose these pending lawsuits we could be subject to significant damages, although the aggregate of such damages has been substantially reduced. There can be no assurances that we or our will not be subject to similar lawsuits or government actions in the future. (See Item 8. Legal Proceedings).

We face significant competition and if we are unable to successfully compete we may lose customers, marketing affiliates and licensees.

     The Internet gaming industry involves rapid technological change and is characterized by intense and substantial competition. Some of our competitors are well established, substantially larger and have substantially greater resources than we do. It is also likely that other competitors offering gaming software technology will emerge in the future. Additionally, we will have to compete with other companies that have greater market recognition, greater resources and broader distribution capabilities than us. Increased competition by existing and future competitors could materially and adversely affect our business, financial condition and results of operations.

     Internet gaming is a relatively new phenomenon and our success is dependent on the continued popularity of Internet gaming and products such as online poker. We will need to develop other Internet gaming products and services that will continue to attract and retain a broad range of customers. Our competitors are constantly developing innovations in providing online poker and gaming products. As a result, we must continue to invest significant resources in research and development in order to enhance our websites, technology and existing products and services and introduce new high-quality products and services that will appeal to customers. If we are unable to predict user preferences or industry changes, or

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if we are unable to modify our products and services on a timely basis, we may lose customers and marketing affiliates. Our operating results would also suffer if our innovations were not responsive to the needs of our customers or are not appropriately timed with market opportunity or are not effectively brought to market. As gaming technology continues to develop, our competitors may be able to offer games that are, or that are perceived to be, substantially similar to or better than ours. This may force us to compete on bases in addition to quality of gaming products and service and to expend significant resources in order to remain competitive.

Our software and hardware systems may face problems if the volume of usage increases which could harm our reputation and thus our business.

     The performance of our online services is critical to our reputation and to achieving market acceptance. An increase in the volume of usage of online services could strain the capacity of the software or the hardware employed, which could lead to slower response time or system failures, thereby adversely affecting our revenues. Any system failure, including network, software or hardware failure, that causes interruption or an increase in response time of our online services provided to our licensees could result in decreased usage of our services and, if sustained or repeated, could reduce the attractiveness of our online services to our clients.

     The process of managing traffic within large, high traffic Internet online services such as those provided by us is an increasingly important and complex task. Our operations are dependent in part upon our ability to protect our operating systems against physical damage from acts of God, power loss, telecommunications failures, physical break-ins and similar events. The occurrence of any of these events could result in interruptions, delays or cessation in service to users of our online services, which could have a material adverse effect on our business, financial condition and results of operations. A large portion of our network infrastructure is located at a single, leased facility in Antigua, West Indies. Our systems and operations are vulnerable to damage or interruption from fire, flood, power loss, telecommunications failure, Internet failure, break-ins, hurricanes and similar events. We do not presently have redundant facilities at a secondary location in the event of an emergency, but we have a variety of backup servers at our primary site to deal with system failures.

     Services based on sophisticated software and computer systems often encounter development delays and the underlying software may contain undetected errors (“bugs”) that could cause system failures when introduced. We are also dependent upon search engines, web browsers, Internet service providers (“ISPs”) and online service providers (“OSPs”) to provide Internet users access to our web sites. Our clients may experience difficulties accessing or using our web sites due to system failures or delays unrelated to our systems. We do not carry business interruption insurance to compensate us for these types of losses.

If we are unable to successfully protect our computer systems from online security risks including collusion, computer automated players and other fraud, our business could suffer.

     Despite our implementation of security measures, our network may be vulnerable to unauthorized access, computer viruses, denial of service attacks and other disruptive problems. For example, given the content of our web sites, there is an incentive for “hackers” to penetrate our network security. A party that is able to circumvent security measures could misappropriate proprietary information and, perhaps, most critically, cause interruptions in our operations. ISPs and OSPs have in the past experienced, and may in the future experience, interruptions in service as a result of the accidental or intentional actions of Internet users, current and former employees or others. We have been in the past and may be required in the future to expend significant capital or other resources to protect against the threat of security breaches

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or to alleviate problems caused by such breaches. There can be no assurance that any measures implemented will not be circumvented in the future. Eliminating computer viruses and alleviating other security problems may require interruptions, delays or cessation of service to clients accessing our web sites, which could have a material adverse effect on our business, results of operations and financial condition.

     We are aware that certain customers seek to increase their gaming returns by collusion and fraud. Collusion between players and the use of sophisticated computer programmes that play poker automatically (‘bots’) are known methods of Internet gaming fraud. We have implemented detection and prevention controls to minimize the opportunities for fraudulent play, but must continually monitor and develop their effectiveness to counter innovative techniques. If we fail to detect collusion, bots and other fraud, we could lose the confidence of our customers, thereby causing our business to suffer. We continuously monitor collusion and bots and regularly close accounts and block access to offenders. If collusion, bots and other forms of fraud are not detected, the affected players may experience increased losses. This could lead to customers becoming dissatisfied with our Group’s sites, which could have a material adverse effect on our business, revenue and financial position.

We and our licensees rely on credit cards for a substantial portion of the deposits by our and their customers.

     Most of our revenues are directly dependent on the amounts of funds deposited by ours or our licensees’ customers. A substantial portion of these deposits are made by credit cards. Many U.S. issuing banks of major credit cards (e.g., Visa and MasterCard) have announced that they may decline authorization to U.S. persons who try to use their credit cards for online gaming.

     Non-U.S. banks processing online gaming transactions can become targets of U.S. criminal proceedings under the Patriot Act. The jurisdiction of the United States, under the Patriot Act, now extends to all non-U.S. banks that have correspondent accounts in the United States. The United States can freeze the non-U.S. bank’s U.S. correspondent account, if that bank is processing U.S. gaming transactions or holding operating funds or the profits of an operator accepting U.S. wagers, because the U.S. Department of Justice currently views all offshore gaming funds as tainted, and all offshore gaming as illegal. This creates a serious disincentive to the banks to process online gaming transactions and may adversely impact our revenues.

     In addition, we are the subject of chargeback’s by our customers. Chargeback’s occur when customers, card issuers or payment processors seek to void credit card or other payment transactions. Chargeback’s are a cost of most retail based businesses and do not relate just to Internet gaming. Cardholders are supposedly able to reverse card transactions only if there has been unauthorized use of the card or the services contracted for have not been provided. In our business, players occasionally seek to reverse their real money losses through chargeback’s. Should the fraudulent activity behind these chargeback’s remain undetected for a period of time, the chargeback’s may have a material impact on our business and revenues. We place great emphasis on control procedures to protect from chargeback’s. We also seek to provide our customers with a variety of alternative payment processing methods to reduce the risk of chargeback’s.

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The market for Internet services is in a state of rapid technological change and we may not be able to keep up.

     The market for Internet services is characterized by rapid technological developments, frequent new product introductions and evolving industry standards. The emerging character of these products and services and their rapid evolution will require us to effectively use leading technologies, continue to develop our technological expertise, enhance our current services and continue to improve the performance, features and reliability of software. In addition, the widespread adoption of new Internet technologies or standards could require substantial expenditures to modify or adapt our software.

We may become the subject of bad publicity from underage or compulsive gambling.

     We recognize that the attraction of Internet gaming to some minors and players for whom gaming activities assume too great a role in their lives poses a challenge to the industry in which we operate. We are committed to market our products to adult participants only and to following responsible gaming best practices and operating procedures at all times.

     There are examples of individuals bringing a class action against a gaming company as a result of their becoming pathological gamblers. Although we would resist any such claim, if any such claim were brought against us, our board of directors or employees, whether successful or not, we may incur considerable legal and other costs, management’s time and resources may be diverted, and the resulting dispute may damage our reputation and brand image and have a material adverse effect on our business, revenue and financial position.

We must continue to improve and expand our skills and personnel to enhance and expand our business operations, but may not be able to do so.

     In order to enhance and expand our business operations, we must continue to improve and expand the expertise of our personnel and must attract, train and manage qualified managers and employees to oversee and manage our enhanced operations. There can be no assurance that we will be able to manage effectively the expansion of our operations or that our current personnel, systems, procedures and controls will be adequate to support operations. Although management intends to ensure that our internal controls remain adequate to meet the demands of further growth, there can be no assurance that our systems, controls or personnel will be sufficient to meet these demands. Inadequacies in these areas could have a material adverse effect on our business, financial condition and results of operations.

We have limited intellectual property protection and there is risk that parties may be able to misappropriate our technology.

     We regard our proprietary software, trade secrets and similar intellectual property as critical to our success. In that context, we rely on a combination of copyright and trademark laws, trade secret protection, confidentiality and non-disclosure agreements and other contractual provisions. There is no guarantee that these efforts will be adequate, or that third parties will not infringe upon or misappropriate our proprietary rights. In addition, although we obtain copyright and trademark protection, effective copyright and trademark protection may be unenforceable or limited in certain countries, and the global nature of the Internet makes it impossible to control the ultimate destination of our web sites. Since trademark and copyright protections are not “self-enforcing”, future litigation may be necessary to enforce and protect our secrets and other intellectual property rights. We may also be sued for claims of infringement of the rights of others or to determine the scope and validity of the intellectual property rights of others. Such litigation could result in substantial costs. Any litigation regarding proprietary rights could be costly and divert management’s attention, result in the loss of certain of proprietary rights, require us to seek licenses from third parties and prevent us from selling our services, any one of which could have a material adverse effect on our business, results of operations and financial condition.

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We may be held liable for the content of web sites for which we provide content.

     As a distributor of Internet content, we face potential liability for negligence, copyright, patent, trademark infringement, defamation, indecency, disparagement and other claims based on the nature and content of the materials that we transmit. Any imposition of liability that is not covered by insurance, is in excess of insurance coverage or is not covered by an indemnification by a content provider could have a material adverse effect on our business, results of operations and financial condition.

The trading markets for our shares may be illiquid.

     Potential investors should be aware that the value of shares can go down as well as up. Our ordinary shares represented in the United States by American Depositary Shares are presently quoted on the National Association of Securities Dealers’ (“NASD”) Over-The-Counter Bulletin Board (“OTC Bulletin Board”). This quotation system generally supports companies that do not meet the listing requirements of the NASDAQ SmallCap Market. As a result, investors may find it more difficult to dispose of or to obtain accurate quotations of our shares. A lack of volume in the trading of our shares could impact prices for any shareholder wishing to dispose of such shares. In addition, quotations on the OTC Bulletin Board depend on the willingness of broker-dealers to make a market for the shares. Such quotations have been known to have large spreads between bid and offer prices. There can be no assurance that our shares will continue to be quoted on the OTC Bulletin Board or that there will continue to be a market for such shares.

     With respect to the trading of our ordinary shares on the Alternative Investment Market, or AIM, operated by the London Stock Exchange, investors should be aware that an investment in a share which is traded on AIM may be less realizable and may carry a higher degree of risk than an investment in a share quoted on the Official List of the London Stock Exchange. The price which investors may realize upon the sale of their ordinary share holdings, and when such a realization may occur, may be influenced by a large number of factors, some of which are specific to us such as industry trends and others of which are extraneous such as economic trends. It may be difficult for an investor to sell his or her ordinary shares and he or she may receive less than the amount paid by him or her for them. The ordinary shares may not be suitable for short-term investment.

We may be subject to product liability claims, and we lack product liability insurance.

     We face an inherent risk of exposure to product liability claims in the event that the products we develop and license contain errors, “bugs” or defects. There can be no assurance that we will avoid significant product liability exposure. We do not currently have product liability insurance, and there can be no assurance that insurance coverage will be available in the future on commercially reasonable terms, or at all. Further, there can be no assurance that such insurance, if obtained, will be adequate to cover potential product liability claims, or that a loss of insurance coverage or the assertion of a product liability claim or claims would not materially adversely affect our business, financial condition and results of operations.

You may be subject to both United States and United Kingdom taxes.

     We strongly urge you to consult with your tax advisors concerning the consequences of investing in our ordinary shares. Our ordinary shares represented by American Depositary Shares are traded in the United States, but we are incorporated under the laws of England and Wales. In addition we have shares traded on the AIM of the London Stock Exchange, however these shares have not been and will not be

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registered under the Securities Act of 1933, or Securities Act, or under the relevant securities laws of any state of the United States or any other jurisdiction. Subject to certain exceptions, such ordinary shares may not be directly or indirectly offered, sold, resold or otherwise transferred within the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S of the Securities Act), or in any country where to do so may contravene local securities laws or regulations. A U.S. holder of our American Depositary Shares will be treated as the owner of the underlying ordinary shares for purposes of U.S. and U.K. tax laws. Therefore, U.S. federal, state and local tax laws and U.K. tax laws may apply to ownership of our American Depositary Shares and the underlying ordinary shares. Tax laws of other jurisdictions may also apply.

United States civil liabilities may not be enforceable against us.

     Most of our directors and all of our executive officers named in this annual report are not residents of the United States, and virtually all of the assets of these non-U.S. persons, and virtually all of our assets are located outside the United States. As a result, you may be unable to serve summons and complaints within the United States upon these persons. Similarly, it may not be possible to enforce in U.S. courts, against these persons or against us, judgments of the U.S. courts based upon civil liability provisions of the U.S. federal or state securities laws. In addition, it may be difficult for you in original suits or in suits for the enforcement of judgments of U.S. courts to enforce certain civil liabilities based upon U.S. federal or state securities laws in England against us, our directors, executive officers, or our experts.

Our reporting obligations under the U.S. securities laws differ from those of U.S. issuers, and you may find it difficult to evaluate our performance quarterly.

     We are a foreign private issuer for the purposes of reporting to the SEC, and we are not required under the Securities Exchange Act of 1934 to file quarterly reports after the end of each financial quarter. We are exempt from the SEC rules prescribing the solicitation of proxies and content of annual reports and proxy statements to our shareholders. Additionally, major shareholders and insiders are not required to report their transactions in our equity capital. As a result it may not be possible for you to evaluate our financial performance as often as you could for a non-foreign private issuer SEC reporting company. You may not become aware of trading activities of our insiders and major shareholders, and may generally be less informed in making a reasonable decision on how to vote your shares.

Under English law a vote of the holders of 75% or more of our issued ordinary shares represented at a shareholders meeting is required to approve certain corporate matters.

     Under English law, a vote of 75% or more of our issued ordinary shares represented at a shareholders’ meeting is required to complete certain corporate matters. This supermajority requirement may make it more difficult for shareholders to approve certain transactions even though our board of directors recommends and approves such transactions. (See Item 10. Voting Rights of Ordinary Shares and Shareholder Meeting.)

Certain provisions of our Articles of Association and other contractual restrictions to which we are subject may have the effect of deterring any acquisition or sale of the Company not approved by the board or certain other persons.

     We have a “classified” board of directors because our directors must retire by rotation. This means that (if the retiring directors are willing to continue to act and are approved by the board and offer themselves for re-election) only approximately one-third of our directors are eligible for election each year (in addition to any directors appointed by the board since the last annual general meeting).

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     In addition to the shareholders rights not to re-appoint retiring directors who are willing to continue to act and are approved by the board of directors and to re-appoint directors appointed by the board since the last annual general meeting, shareholders can remove directors by ordinary resolution or the holders of 50% of our issued ordinary shares represented at a shareholders meeting.

We may be subject to tax in a number of jurisdictions, for which no provision has been made.

     The Group may be subject to tax in a number of jurisdictions, including jurisdictions in which the Company’s subsidiaries are incorporated, or have a branch or agency or permanent establishment or office. The Group may also be subject to tax in jurisdictions where any of its servers or Internet Service Providers or computers or customers or licensees are situated or operate from. Most laws relating to taxation in most jurisdictions pre-date or are not drafted with the potential of their applying to cross-jurisdictional Internet businesses. Consequently, there is uncertainty as to the jurisdictions in which the Company’s subsidiaries could be subject to tax, the extent to which they could be so subject to tax, and what their overall tax liability in respect of any income, profit or gain could be. Subsequent to the filing date in some jurisdictions, the Group has completed certain material transactions. There can be no guarantee that these transactions will not give rise to further tax obligations. In late 2004 and early 2005, the Company engaged in certain transactions involving both unrelated entities (including its business venture with Sportingbet) and internal restructuring of various entities within the Group. These transactions resulted in the transfer of assets and liabilities outside the Group and shifted the ownership of assets and business operations among companies within the Group. While the Company has worked with its tax advisors to achieve a favorable tax outcome for these transactions, the tax authorities of various jurisdictions may take a different view resulting in certain material negative consequences for the Company and members of the Group.

Significant adverse U.S. federal tax consequences could arise for U.S. Holders under the passive foreign investment company rules.

     If we are a passive foreign investment company, or PFIC, a U.S. Holder of our American Depositary Shares or ordinary shares could be subject to significant adverse U.S. federal tax consequences. Part or all of our distributions, and gain inherent in our American Depositary Shares or ordinary shares at the time of a disposition thereof, whether or not that disposition is a taxable event, could be subject to a special set of rules. In general, those rules would treat the distributions (whether or not they are dividends paid out of our earnings and profits) and any gain inherent in our shares as being realized ratably over the period the U.S. Holder held, or is treated as having held, the American Depositary Shares or ordinary shares. Income or gain allocable to prior years would be taxable at the highest effective rates in effect in those years, regardless of the rate actually applicable to the U.S. Holder. The income or gain would be treated as ordinary income and could not be offset by any losses available in those years, and the foregoing amount would be subject to an interest charge as if the tax on those amounts were due in the prior years. Stock in a PFIC is generally not eligible for a step-up in basis on the death of a U.S. holder.

     Certain elections can be available to change the tax consequences to U.S. Holders described in the preceding paragraph. One of those elections, the “qualified electing fund”, or QEF, election, however, requires the electing U.S. Holder to include in income each year his share of our ordinary earnings and profits and net capital gain, whether or not distributed to him. However, a QEF election

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generally is available to U.S. Holders only if we provide certain information to our U.S. Holders, and we provide no assurance that we will make that information available. Another election, a mark-to-market election, requires the electing U.S. Holder to pay U.S. federal income tax as if he sold his American Depositary Shares or ordinary shares at the end of each year, recognizing gains and, subject to limitations, certain losses. However, a mark-to-market election is available only if our American Depositary Shares or ordinary shares are “marketable stock” as specially defined in Treasury regulations. We believe that our American Depositary Shares and ordinary share are not “marketable stock” at this time within the meaning of those Treasury regulations.

     We have not undertaken any determination of whether we are a PFIC and therefore cannot provide any assurance that we are not. In addition, we can provide no assurance that we will make any determination in the future whether we are a PFIC at that time. In the absence of an analysis of our status as a PFIC performed by us, any assertion by the IRS with respect to a U.S. Holder that we are a PFIC could be upheld against that U.S. Holder, whether or not we are in fact a PFIC.

     Accordingly, U.S. Holders should take into account the risk that they may be subject to the rules described in the second preceding paragraph. You are urged to read the more detailed rules regarding PFICs set forth in the discussion below in Item 10 under the headings “Taxation--United States Federal Income Tax Consequences--Tax Consequences for U.S. Holders--Tax consequences if we are a passive foreign investment company.” In addition, you are strongly urged to consult your tax adviser regarding the risk that our American Depositary Shares and ordinary shares may be treated as stock in a PFIC, whether or not we are a PFIC, the unavailability of various elections regarding the tax treatment of stock in PFICs and the tax consequences to you under the PFIC rules with respect to an investment in our American Depositary Shares or ordinary shares.

Item 4. INFORMATION ON THE COMPANY

History and Development

     World Gaming plc is a public limited company incorporated under the laws of England and Wales, and, as a holding company, we conduct our business through our operating subsidiaries. As a result of a holding company reorganization effected in May 2001, which is described below, we became a successor to the business of LVA Holdings, Inc. (formerly Starnet Communications International, Inc.) which was dissolved with effect on December 28, 2005. We have a number of other subsidiaries, both dormant and operating and these are outlined in Item 4: “Organization Structure”.

     LVA Holdings, Inc., or LVA, was incorporated on June 28, 1996 in the State of Nevada as Creative Sports Marketing Inc., and subsequently its name was changed to Gelato Brats Inc. On February 24, 1997, its name was changed to Starnet Communications International, Inc. In March of 1997, LVA was redomiciled in Delaware and on April 19, 2004 its name was changed to LVA Holdings, Inc.

     On March 25, 1997, LVA entered into a share purchase agreement with Murray Partners (BVI) Inc. (which we also refer to in this annual report as “Murray Partners”), pursuant to which LVA acquired all of the outstanding shares of ESCE Inc. (which we also refer to in this annual report as “ESCE”), a company incorporated in British Columbia. In exchange, Murray Partners received 10,000,000 Class A Common Voting Shares of LVA. Shares held by Murray Partners were subsequently distributed to its constituent members. On March 17, 2000, ESCE sold its business and assets that were not related to the Internet gaming business. On January 1, 2000, LVA transferred its software development business from ESCE to Inphinity Interactive, Inc (which we also refer to in this annual report as “Inphinity”) and its intellectual property comprising the Gaming Software to SSII Limited (which we also refer to in this annual report as “SSII”). The Gaming Software consists of the Company’s full suite of online gaming products and management tools.

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     LVA became a wholly-owned subsidiary through a holding company reorganization completed in May 2001. The reorganization was structured as a merger, in accordance with the laws of the State of Delaware, of LVA with WG Reorganization Sub, Inc., our wholly-owned subsidiary, formed for the purposes of the reorganization, with LVA as the surviving company. The reorganization was approved by the shareholders of LVA who exchanged their shares of LVA common stock for our American Depositary Shares (ADSs), each representing one ordinary share, on a one-for-one basis. Each American Depositary Share issued in connection with the reorganization was evidenced by one American Depositary Receipt (ADR) issued in accordance with a Deposit Agreement with Continental Stock Transfer and Trust Company located in New York, New York, USA.

     Subsequently, all of LVA’s stock was exchanged for shares of WG International Limited, a wholly-owned subsidiary directly owned by the Company. The acquisition by WG International Limited was effected by way of a share for share exchange such that the existing shares held by the Company in WG International Limited were subdivided and re-designated as B shares of £0.002 each. The balance of the authorized share capital was subdivided and re-designated as A shares of £0.002 each, 20,000 of which were issued and allotted to the Company as consideration for the acquisition of LVA’s stock.

     A joint venture agreement (described more fully below) with Sportingbet Plc (which we also refer to in this annual report as “Sportingbet”) was entered into effective October 1, 2004 pursuant to which the Gaming Software was transferred to an equally owned exempt liability partnership with Sportingbet called Bullen Road LP, a Cayman Islands partnership. Initially, SSII was a general partner of the Bullen Road LP holding a 50% as a result of the transaction with Sportingbet. On January 1, 2005 SSII’s interest in Bullen Road LP was transferred to Interactive Systems Inc (which we also refer to in this annual report as “ISI”) a wholly owned Antiguan subsidiary of WG International Limited. At the time of the transaction with Sportingbet, the development business and assets of Inphinity was transferred to a wholly owned Sportingbet subsidiary. The remaining business and assets of Inphinity consisting of administrative functions were transferred to WG Interactive Inc. Since October 1, 2004, the Gaming Software is being jointly developed with Sportingbet. Accordingly, effective January 1, 2005 LVA no longer held an interest in any of our operating subsidiaries and remained dormant. LVA was subsequently dissolved with effect December 28, 2005.

     Effective October 1, 2005 we acquired all of the business and assets of our then largest licensee the SPORTSBETTING.COM group (See Item 4, below: “Acquisition of the SPORTSBETTING.COM group”). All of these assets were acquired by ISI and certain domain names held owned by the SPORTSBETTING.COM group were purchased through a share purchase of DNI Holdings Limited. DNI Holdings Limited is currently a wholly owned subsidiary of World Gaming plc. All of the business activities of the SPORTSBETTING.COM group are now carried out through ISI.

     Through our wholly-owned subsidiaries, we now focus our business on the operation of Internet gaming sites (which we also refer to in this annual report as “Operations” or the “Operating division”). In addition we continue to license and host our software and Internet technologies for gaming applications to licensees (which we also refer to in this annual report as “Licensing” or the “Licensing division”). One of our business strategies is to identify and commercialize leading edge technologies for the online gaming markets.

     On February 11, 2004, we closed two divisions of the business that detracted from our core software development business and had resulted in losses for the Company. These divisions provided a customer service solution and performed transaction processing on behalf of some licensees. The affected licensees now source these functions through another supplier.

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     On May 17, 2005, our ordinary shares were admitted to trading on the AIM of the London Stock Exchange. We raised £2,499,000 before costs by private placement of 4,760,000 new ordinary shares at a placement price of 52.5 pence per share. The new ordinary shares issued rank pari passu with the existing ordinary shares including the right to all dividends and distributions declared, made or paid after the date of their issue (See Item 10: “Private Placement on the AIM of the London Stock Exchange – May 2005”).

     On December 12, 2005 as part of the acquisition of the SPORTSBETTING.COM group, we raised £7,000,000 before costs by private placement of 5,600,000 new ordinary shares at a placement price of 125 pence per share. The new ordinary shares issued rank pari passu with the existing ordinary shares including the right to all dividends and distributions declared, made or paid after the date of their issue (See Item 4, below: “Acquisition of the SPORTSBETTING.COM group” and Item 10: “Private Placement on the AIM of the London Stock Exchange – December 2005”).

Acquisition of the SPORTSBETTING.COM group

     On October 25, 2005, we announced that we had entered into a conditional agreement to acquire certain assets of Real Entertainment Ltd. and the entire issued capital of DNI Holdings Ltd. (together the “SPORTSBETTING.COM group”), which was then our largest licensee. The transaction subsequently completed on December 13, 2005.

     The original terms of the acquisition were for a maximum consideration of up to $96 million payable 75 percent in cash and 25 percent in new ordinary shares of the Company. On completion in December, $54 million was paid in cash to the sellers (or vendors) with the outstanding balance depending on the final agreed profit before tax (“PBT”) for the twelve months ending December 31, 2005.

     In March 2006, we agreed with the vendors of the SPORTSBETTING.COM business that the final PBT for the twelve months ended December 31, 2005 was $13.6 million. Under the terms of the acquisition agreement this meant that total consideration of $81.8 million would be payable, or 6 times the PBT for the period. During the period between completion and agreement of the final PBT, we had paid a further $10.8 million into escrow. On agreement of the final PBT we recovered $3.5 million of these escrow funds and $1.2 million was released to the vendors. The remaining $6.1 million remains in escrow subject to warranty covenants and will be released to the vendors on October 1, 2006 subject to no warranties having been breached.

     In addition, on agreement of the PBT, we issued $20.4 million in new ordinary shares of the Company issued at 125 pence to the vendors subject to agreed lock-up arrangements. $2.0 million of these shares remain in escrow subject to the same warranty covenants mentioned above.

     Financing of the cash portion of the purchase consideration was through our existing cash reserves, plus a $40 million loan facility arranged through Barclays PLC (See Item 10: “Loan facilities with Barclays plc”). The term of the loan is 27 months from the drawdown date of December 12, 2005. Repayments are due quarterly throughout the term of the loan. In addition, World Gaming has an unutilized revolving facility with Barclays for $5 million. Further cash for the purpose of the acquisition was raised through the placing of 4.8 million new ordinary shares of the Company raising £6 million for the acquisition before expenses (See Item 10: “Private Placement on the AIM of the London Stock Exchange – December 2005”).

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     The acquisition had an effective date of October 1, 2005. The effective date, which is earlier than the completion date is the date from which all of SPORTSBETTING.COM’s revenues and costs accrue to World Gaming. The business was acquired on a cash-free, debt-free basis as at the effective date.

Sportingbet Transaction

     Effective October 1, 2004, joint venture arrangements (which we also refer to in this annual report as the “Joint Venture Arrangements” or “Sportingbet Transaction”) with the Company’s then most significant licensee, representing approximately 80% of the Company’s royalty revenues were entered into between World Gaming and Sportingbet. The principle terms of the arrangements are as follows:

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     Our corporate office is located at Minerva House, 5 Montague Close, London, England, with operations managed out of our principal business office in Antigua located at the KFH Building, Liat Rd, Coolidge, Antigua West Indies. The telephone number is 1 (268) 480-1650.

Our Operations

     We are an operator of Internet gaming websites and a licensor of Internet gaming software systems. Through various wholly-owned subsidiaries (See Item 4: Organizational Structure below), we operate our gaming websites and license our software products and online gaming management services to independent licensees. In addition, we host all data transmitted on our software at our wholly owned hosting facility in Antigua, West Indies. Our gaming systems have been designed to:

     Until October 2004, our fully integrated gaming software and systems were developed by our wholly-owned Vancouver-based subsidiary, Inphinity Interactive Inc. and our gaming software was owned by our wholly-owned Antigua-based licensing subsidiary, SSII which licensed the software. Immediately subsequent to the transaction with Sportingbet, SSII held our 50% interest in the Bullen Road Limited Partnership which was then transferred to ISI on January 1, 2005. Bullen Road Limited Partnership owns the Gaming Software effective October 1, 2004.

     Our two revenue streams are:

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     Our Operations division operates under a gaming license from the Government of Antigua and Barbuda. Similarly, our licensees are required to establish a license under this jurisdiction so that they may operate on our online gaming systems. Our first license sale closed in March 1998, and as of December 31, 2005, we had 12 licensees signed and operating.

     We formerly offered fee-based use of our Electronic Financial Services (which we also refer to in this annual report as “EFS”) Internet transaction system until February 11, 2004 when this division was closed.

     Our current suite of gaming products includes over 17 casino games, a variety of “instant play” games and a complete live sports wagering product line, a horse racing pari-mutuel betting system and a third-party supplied multi-player poker product.

     We are able to customize a new licensee’s interactive casino to reflect their intended market segment.

Restructuring of Operations

     In March 2000, our subsidiary, ESCE Holdings, completed the sale of substantially all of the assets and undertakings outside of our core software development business.

     In January 2001, we terminated the employment of 26 employees at Inphinity’s development office in Vancouver, Canada, in order to reduce expenditure levels and increase operational efficiencies. The employees affected were in the areas of management, administration, operational support and production.

     In April 2001, we restructured our operations in St. John’s, Antigua and Vancouver, Canada to decrease our costs by reducing inefficiencies and eliminating duplicated functions. Reductions in staff were made throughout the organization and included management and administration, sales, marketing, software development, production and operations. A total of 29 staff were terminated, 11 in Antigua and 18 in Canada. The combined cost of the terminations both in January and April of 2001 was $1,536,000.

     In June 2002, we closed our Toronto sales office and terminated four employees. This was done as part of the relocation of our administrative functions to London. In May 2003, we closed our London office and terminated three staff members. This was done as part of the relocation of our corporate activity to the Antigua office.

     In February 2004, we closed the transaction processing and customer service divisions in Antigua resulting in the termination of 23 employees. These closures eliminated two non-core business units that the Company could not efficiently administer and which had incurred ongoing losses. The cost of the terminations was $160,000.

     In October 2004, we entered into Joint Venture Arrangements with Sportingbet, our then largest customer. The arrangements transferred the Gaming Software to a limited partnership owned equally by Sportingbet and ISI (effective January 1, 2005) and transferred the development activities and associated costs to a wholly-owned Sportingbet subsidiary through the term of the arrangement. (See Item 4: Sportingbet Transaction and Item 10: Material Contracts)

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     Effective October 1, 2005 we acquired all of the business and assets of our then largest licensee the SPORTSBETTING.COM group (See Item 4: Acqusition of the SPORTSBETTING.COM group). As a result of this acquisition we now offer our Internet gaming services directly to our own database of Internet users in addition to offering these services to licensees who establish then offer our Internet gaming services to their own database of Internet users.

Business Strategy

     We intend to grow our revenues primarily from our newly acquired Operations division in addition to maintaining growth both from existing and new licensees. Both our Operating and Licensing divisions continue to experience strong organic growth. We expect that continued marketing efforts and new products and services will continue to support and maximize future growth opportunities.

     In 2005, we refocused our efforts on licensing the Gaming Software both to additional established Operators and those businesses with existing Internet traffic or databases who are looking to enter the online gaming market through so-called white-label offerings where we generally provide all services except marketing. “Operators” are those businesses in the Internet gaming business that use or may choose to use Gaming Software of, or similar to, that of the Company. These efforts lead to a number of new licensees being launched in the period. Our product and service offerings enable us to provide flexible gaming solutions to a wide variety of Operators.

     We have evolved an operating model which focuses on our core skills and we outsource certain other functions to specialist third parties who can provide high service standards cost effectively. These outsourced services include end user customer service, e-commerce processing for ourselves and certain of our licensees, customer deposits and withdrawals, risk management and fraud monitoring. We have hosting equipment in a secure leased facility in the licensed gaming jurisdiction of Antigua and Barbuda on whose servers all gaming activity takes place. Our board of directors believes that hosting licensee data is critical to maintaining system integrity, enables substantial cost control through maintaining a single site and provides security in the event of default by a licensee.

     In addition, we will continue to examine opportunities which allow us to leverage our existing assets and businesses to further enhance shareholder value. This may include further acquisitions of existing Internet gaming businesses or strategic alliances where it is considered such alliances will add value and profitability.

Marketing

     Our overall marketing efforts are focused on growing our Operating division through targeting end users so that they may begin betting on our websites. These marketing efforts include both online advertising, consisting primarily of banner advertising which creates traffic from another website to one of our websites, and offline advertising such as print and radio advertising. In addition, we further focus our efforts on driving Internet traffic to our websites through brand awareness created by offering free competitions and general information content websites.

     Our marketing strategy for our Licensing division is to build brand awareness of World Gaming and our products and services. We generally achieve this through limited print advertising and attendance at industry trade shows.

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     The underlying marketing strategies used for attracting new licensees focuses on creating an awareness that we offer two basic forms of license. Under both of these licensing models we can adapt to an Operator’s specific requirements with a variety of flexible options.

     Our licensees utilize Internet based marketing activities, such as e-mail broadcasts and affiliate programs, as well as traditional media, such as print in industry publications. In addition to potential licensees, we seek strategic partnerships for content as well as other entertainment and media opportunities.

Competitive Environment

     The competition for our products and services comes from two major sources. These are other Operators of Internet gaming websites in respect of our Operating division and other gaming software companies primarily in respect of our Licensing division. Several of the very largest sports betting Operators have developed their own software, or acquired their software providers, but this option is not usually cost effective for small to mid size Operators.

     The competition faced by our Operating division from other Internet gaming operators is generally characterized through competing for marketing opportunities that are targeting end users. These marketing opportunities are then used to disseminate information about the company’s products and services. Where one website’s products and services are perceived to be inferior to another, then the effectiveness of these marketing opportunities is diminished. Nevertheless, provided the marketing opportunity is successful in targeting end users and effective in its message, it is likely that they will lead to growth opportunities for the operator.

     There are a number of software and service suppliers to the online gaming market. However, we believe that we maintain a differentiated product, primarily because such competitors are generally more product specific and do not offer the full range of products and services that we can provide from a single player account.

     In respect of our Licensing division, our largest competitors for casino and multi-payer poker products – Boss Media, Cryptologic, and Microgaming – do not offer any complementary products such as sportsbook. Because these competitors presently focus on delivering limited products, as opposed to a

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full suite of products as we do, the competition may offer an equivalent or superior single product compared to ours. However, we believe that we currently have a competitive advantage by offering complementary products with the flexibility to be packaged as an entire product suite.

     Other companies compete in the sportsbook product segment, however they are generally not as focused in U.S. sports betting.

     We also face increased competition from other sportsbooks and casinos. Primarily U.S. facing sportsbooks such as Sportsbook.com and BetonSports, already have an online presence and compete for end-users. This is a direct threat to both our Operating division and our licensees’ businesses.

     We expect to compete directly with all the companies discussed above, as well as other established companies that may enter the industry.

Intellectual Property

     The intellectual property relating to the Gaming Software is owned by Bullen Road LP an exempt limited liability partnership formed in the Cayman Islands of which the Company (through a wholly owned subsidiary) has a 50 percent membership interest and Sportingbet (through a wholly owned subsidiary) has a 50 percent membership interest, pursuant to the Joint Venture Arrangements. World Gaming has an unrestricted license to use, sub-license and assign its rights to the Gaming Software and the intellectual property underlying it for all of its current business operations and all currently anticipated developments of its business operations. Software that is completed and in development is protected through a combination of non-disclosure and non-competition agreements with employees, restricted and controlled use of third party developers, a check in/check out system for code, and copyright law (though no software is registered). (See Item 4: Sportingbet Transaction and Item 10: Material Contracts)

Technology

     High-Speed Network

     Our network is connected to the Internet via dual Fast Ethernet connections. This high performance network infrastructure is intended to ensure reliable and responsive game play for our licensees and their end users/players. Most of the critical system components, such as the game servers and web servers, are distributed across multiple machines, which protect the gaming service from failures due to malfunctioning equipment. The highly scalable nature of the design of our system makes provisioning for additional capacity relatively easy. The network monitoring staff tracks the system at all times to maintain constant awareness of the system’s operating parameters. New equipment is installed when necessary to compensate for increased activity or anticipated peak demands for popular events.

     The Internet connection at our network facility in Antigua is provided by an international service provider and contributes to responsive game play. Each gaming transaction is stored on a database that is replicated for redundancy and backed up daily to prevent data loss.

     Our hardware and software platforms are provided by leading suppliers such as Sun Microsystems and Oracle.

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     Security Measures

     We offer four protective security layers of prevention, protection, and response. These components, available 24 hours a day, 7 days a week, 365 days a year consist of:

Software. Our engines are designed to assume that all communication is from “hostile” clients so that only specific message types from a known game client are acknowledged. The software incorporates industry “de facto” security standards such as industry leading firewall protection, 128 bit encryption and SSL. The ‘n-tier’ software architecture has been designed with security at the forefront and is monitored through ‘real-time’ System and Game event monitoring and logging.

The Gaming Client Application is a casino graphical interface. The game server performs gaming calculations, while the client application displays the results and accepts input from the player for further interaction. Communications between the client and server are encrypted using the SSL protocol. The SSL prevents hackers from monitoring a gaming session should they be able to intercept communications.

Fraud Detection and Legal Compliance. Legal compliance and player protection through industry leading financial fraud prevention and address verification software. Address Verification Services (AVS), a basic fraud detection system offered by the financial industry, is incorporated into our fraud detection solution for players.

While no system is 100% secure, we believe that we have the ability to identify attempts and prevent attacks such as Denial of Service and ‘Invasive’ hacks into game payout code or customer information. Specifically, Denial of Service Attacks can be alleviated through our network of close business partnerships with global ISP’s and through utilization of hardware that was acquired in January, 2004 that specifically defuses such attacks. Using a combination of the aforementioned four layers of security i.e. Software, Fraud Detection, Hardware and Vigilance, we offer security protection that reduces the risks that would lead to prolonged periods of irregular game play and access to, and manipulation of, the game code.

We have implemented a leading software-based Random Number Generator to support our game play payouts utilizing a certain Random Number Algorithm.

The machines on which the game server processes run are only accessible from our private network. The database systems are completely shut off from the Internet and can only be accessed by a limited number of applications on a closed network, such as the game servers and report generators.

Any information provided to us is held as strictly confidential, and is used only to support the player’s relationship with us and the licensee.

Products and Services

     Our products and services are offered through our own Internet gaming websites to end users as well as to our licensees so that they may operate their Internet gaming websites.

     Our current software product areas include casino gaming, sportsbook wagering, pari-mutuel wagering, virtual games, multi-player poker and a horse racing product. Virtual games and multi-player poker are provided by third parties.

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     Casino

     Our casino games can be categorized into two types of platforms: Java and Windows Download software.

     Our Java games utilize the Java language to provide quick access online games to the licensees’ web sites. The cross-platform nature of Java makes it possible to play these games on all major operating systems, online, with virtually no downloading required. The Java games are optimized for quick browser loading times.

     We currently have 16 Java casino games (Blackjack, Blackjack Super 7s, Baccarat, Bermuda Poker, Free Ride, Pai Gow Poker, Roulette, Craps, Sic Bo, Red Dog, Battle Royale, two slot machines, and three video poker machines) for players to wager on.

     More than 17 different casino games are available in the Windows Download version of the casino gaming product line. These games are provided for players who are willing to take the time required to download and install the games. However, once downloaded, they are easy and convenient to play and offer a more heightened visual and audio experience. The Windows Download games are also offered by most software licensees via compact disc, which is mailed to players who request this version.

     The Sportsbook

     Our Sportsbook product generates revenues based on booking bets that have fixed payouts. These payouts have a commission that provides revenue for the Sportsbook. There are varying commissions that are dependent on a variety of bet offerings. These include: pointspreads, totals, moneylines, prices, straight wagers, parlays, teasers, futures, propositions, buy points, if bets and others. During 2004, a new version of the Sportsbook software was released focusing on enhanced parlay and teaser bet types as well as upgrading functionality for our operations and those of our licensees.

     Virtual Games

     Virtual Games was integrated into our platform and launched in December 2003 on our system featuring two games: Virtual Derby and Super Hi Lo supplied by a third-party provider. Virtual Derby is an interactive fantasy horse racing game that allows bettors to place wagers on a six-horse field. Bettors can research the standings of jockeys, trainers, horses and track conditions before placing a win and/or exacta wagers. Super Hi Lo is card game that allows bettors to wager on various card combinations. Bettors have the opportunity to win big by attempting to place a number of cumulative wagers as part of the same game.

     Pari-mutuel Gaming

     We fully launched our pari-mutuel horse betting software on July 31, 2001, and upgraded the product in December 2002. The product has been delivered to over thirty gaming sites.

     In developing the proprietary, interactive pari-mutuel software, we employed the cross-platform nature of Java, making it possible to play this game on all major operating systems, online, with virtually no downloading required. This interface is simplified to optimize loading times.

     After signing a simulcast distribution agreement with the host raceway, this system links directly to the host track’s pool, enabling instant access to real-time betting lines and the live host pool.

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     Poker

     We completed development for integration of a third-party supplied multiplayer poker product in 2004. The addition of poker has increased the attractiveness of our product offerings in the marketplace. Our Operating division launched the poker product in 2004 and this has shown strong growth.

     Horse Racing

     During 2004, we completed development of a new Racing product that offers payout at track odds and enhanced horse betting propositions. This product features major tracks and offers an increase to the current offerings by our licensees through the direct pari-mutuel product described above.

     Partners Program

     Our affiliate program provides a powerful marketing tool by creating an advertising vehicle with no up-front costs. The affiliate program transforms webmasters into a sales force, as webmasters earn a commission on the “sales” they make. Webmasters will earn their commission based on the players that they send through their sites. The webmaster is paid only after the casino has generated revenues from webmaster’s players.

     World Gaming Management Console

     World Gaming Management Console (WGMC) is an integrated application that supports operations management for World Gaming and its licensees, with an initial focus on customer service support. WGMC was launched in March 2003. Customer service agents use WGMC to support customers’ inquiries under a single application model using one technology and security model. WGMC’s expandable framework allows for future releases that can complement other operational areas.

Gaming Products Under Development

     Sportsbook

     The Sportsbook product will continue to receive upgrades throughout the year.

     Casino

     The casino product is currently undergoing a major upgrade which is expected to be completed and launched in the third quarter of 2006. This upgrade is focused on enhancing game play for end users.

     WGMC

     WGMC will continually be upgraded throughout the year to incorporate customer support functionality for new products such as poker. In addition, regular software upgrades focused on customer service functions are planned based on the feedback from our licensees.

     Partners Program

     We have recognized the need to further online marketing efforts with affiliate marketing programs to generate incremental revenues. The Partners Program has been evaluated in this respect, and it was determined to enhance the product to include greater functionality to meet the licensees’ marketing expansion efforts.

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Our Online Gaming Operations

     It is anticipated that the majority of our future revenue and earnings growth will continue to come from our newly acquired operating business and further organic or acquisitive growth within our Operating division.

     Our underlying gaming business including the player database is owned and operated by our Antiguan based subsidiary, Interactive Systems Inc. Interactive Systems Inc. holds an Internet gaming license under which it operates its Internet gaming business.

     Our revenues are generated from the net win from a player on our websites as that player uses our Internet gaming software, for example placing a bet on our sportsbook or casino product offering. Where the player wins as a result of a bet placed on one of our product offerings, that players account with us is credited for the amount of the bet plus their winnings. Where the player loses as a result of a bet placed on one of our product offerings, an amount equal to the bet placed is withdrawn from the players account and represents revenue to us.

     The revenue is generally generated through marketing efforts described earlier and these marketing efforts represent a cost to the business. Further costs include those costs associated with processing the deposit and withdrawal of player funds and customer service in respect of maintaining a relationship with the customer. In addition, related finance and administrative functions are required.

Our Licensees

     Our Antigua-based licensing subsidiary, Interactive Systems Inc., licenses the Gaming Software as a fully-integrated systems to prospective licensees. A one-time license fee provides an installed, fully operational system. The licensee’s interactive casino is generally operational within 90-120 days of signing a license agreement. We receive monthly fees and a royalty based on the licensee’s revenues, in exchange for continuing to host and maintain the site. The licensee must obtain a gaming license from the jurisdiction where the gaming servers are located, which currently is Antigua. We modify the new licensee’s interactive casino to reflect its intended market segment. We never modify the random number generator or the game rules and cannot, therefore, affect the odds on games other than the Sportsbook. We also provide continuous support for both software and hardware, 24 hours a day and 7 days a week. We seek a licensee with knowledge of the target market in order to maximize sales potential. Licensees generally establish their marketing efforts from within their target market and are generally expected to be capable of sufficient investment to purchase the software license, apply for the gaming license and invest in marketing.

     Should any licensee become delinquent in payments due to us, we have the technological ability to “shut down” the licensee’s interactive casino(s) remotely. In 2004, the Company set up third-party processing routes for those licensees that choose not to process their own customer deposits and withdrawals. Monthly settlement for these licensees is first paid to ourselves, after which we then deduct our royalty and settle the balance to licensees.

     Revenues from licensees is based on a sliding scale from 25 percent to 10 percent of a licensee’s net revenue (wagers less payouts, less chargebacks (credit card reversals), house bonuses and other compensation). Our primary cost with regard to continuing license income is the cost of upkeep of hosting facilities and direct site operating costs.

     Management emphasizes that the licensees are structured operationally so that a licensee’s prime responsibility, aside from the ownership of the customer data base and the casino web pages, is to market its gaming site to its respective market.

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Organizational Structure

     We are a holding company and conduct our operations worldwide through our operating subsidiaries, which are located in various jurisdictions as described below in this annual report.

—— Other than where indicated, solid line denotes 100% ownership interest.

------ Dashed box indicates dormant entities.

*       Bullen Road LP is an exempt limited partnership formed in the Cayman Islands. As well as the two partners shown above, Gwladys Street Limited, a Company incorporated in the Cayman Islands, acts as a general partner and is itself owned in equal shares by SSII and Internet Opportunity Entertainment Limited.

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Further information on the background and purpose of each member of the WG Group is provided below.

     World Gaming plc

     World Gaming is incorporated within England and Wales. World Gaming acts as a holding company and does not carry on any operations directly. Its operations are carried out world wide through its operating subsidiaries.

     World Gaming’s share capital comprises ordinary shares, which trade on the AIM. It also has American Depositary Shares quoted on the OTC Bulletin Board.

     WG International Limited

     WG International Limited is incorporated in England and Wales and also does not carry out any operations. The company acts as an intermediate holding company.

     DNI Holdings Limited

     DNI Holdings Limited is incorporated in Antigua and also does not carry out any operations. The company was acquired as part of the SPORTSBETTING.COM transaction. Upon acquisition, the company held the domain names of the SPORTSBETTING.COM business. These domain names were transferred with immediate effect to Interactive Systems Inc. The process for effecting the actual transfer of all of the acquired domain names is ongoing.

     WG Interactive Inc.

     WG Interactive is a company incorporated in British Columbia, Canada on September 14, 2004.

     WG Interactive provides a small administration and support function to the Group from sublet premises in Vancouver.

     Interactive Systems, Inc.

     ISI is a company incorporated in Antigua. It was formed in September 2004.

     ISI carries on the SPORTSBETTING.COM business and licenses customized, fully-integrated Internet gaming systems to independent parties wishing to enter the online gaming industry. It provides a complete range of services that the operator needs in order to launch an online gaming website. ISI also carries out hosting activities on behalf of some of its licensees. It owns equipment and maintains systems in Antigua that host all data that is processed on the software in accordance with its licensees gaming licenses. ISI holds an Internet gaming license issued by the Directorate of Offshore Gaming in Antigua and Barbuda.

     Scorecard Media Limited (formerly World Gaming Europe Limited)

     Scorecard Media Limited is incorporated in England and Wales. It initially was formed to provide the WG Group with a European-based company to market the services of its various subsidiaries, however, it has not been used for this or any other purpose. In March 2006, World Gaming Europe Limited changed its name to Scorecard Media Limited with the intention of setting up a marketing services operation within this entity as a result of the SPORTSBETTING.COM transaction. To date, these services have not been transferred to this entity.

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     WG Support Inc.

     WG Support Inc. is incorporated in Antigua. The company is dormant and has never operated.

     TIC, Inc.

     TIC is a company incorporated in Antigua. It was formed in January 2005.

     TIC is part of a planned reorganization of certain entities within the Group, which reorganization was approved in 2004. Under this reorganization, TIC became the holding company of the Company’s dormant entities that are in the process of being dissolved.

     LVA Holdings, Inc.

     LVA is a company incorporated in the state of Nevada and subsequently re-domiciled in the state of Delaware. In April 2004, LVA changed its name from Starnet Communications International, Inc. to LVA Holdings, Inc.

     LVA became a subsidiary of World Gaming through a holding company reorganization completed in May 2001. The reorganization was structured as a merger of LVA with WG Reorganization Sub, Inc. (a wholly owned subsidiary of World Gaming formed for the purposes of the reorganization). The merger was carried out in accordance with the laws of Delaware and following the merger, LVA was the surviving entity and became part of the Group. The reorganization was approved by the shareholders of LVA who exchanged their LVA common stock for ADRs of World Gaming on a one for one basis. Subsequently, all of LVA’s stock was exchanged for shares of WG International Limited, effected by way of a share for share exchange.

     LVA was dissolved in accordance with Delaware law on December 28, 2005 as part of the Company’s reorganization of its dormant subsidiaries approved in 2004.

     SSII Ltd.

     SSII is incorporated in St. John’s, Antigua and is the group’s main operating entity. SSII changed its name from Starnet Systems International, Inc. to SSII Ltd in June, 2004.

     In 2004, the Company migrated licensing activities from SSII to ISI and SSII is now dormant and the Company is in the process of liquidating this entity.

     EFS Caribbean Inc.

     EFS Caribbean Inc., incorporated in Antigua, was dedicated to the electronic transfer of funds and was established in order to facilitate local banking relationships for transaction processing.

     In February 2004, the service offerings of EFS were terminated by the Company as part of certain cost saving measures. The Company has agreed contractual arrangements with Sportingbet and Fincorp, a subsidiary of Sportingbet, through which the Company now provides transaction processing services to its licensees.

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     EFS is currently inactive and is not used for any trading activity. The Company believes that EFS does not have any actual or contingent liabilities or obligations and the Company is in the process of liquidating this entity.

     World Gaming Services, Inc.

     World Gaming Services, Inc. was incorporated in Antigua.

     World Gaming Services, Inc. ran a full service online gaming operation (www.worldgaming.com) and for this purpose, holds a gaming license from the Antiguan authorities. World Gaming Services, Inc. ceased its online gaming operations in June 2003 due to the then decision by the Company to focus on its core activities of developing Internet gaming software and working closely with its licensees. World Gaming Services, Inc. continued to hold the gaming license for the Company’s subsidiary Antiguan operations until October 2005, when Interactive Systems Inc inherited the SPORTSBETTING.COM license as part of that transaction.

     World Gaming Services, Inc. is currently inactive and is not used for any operations and the Company is in the process of liquidating this entity.

     ESCE Holdings Inc.

     ESCE was incorporated in British Columbia, Canada on May 19, 1995. ESCE was acquired by LVA on March 25, 1997 pursuant to a share purchase from Murray Partners (BVI) Inc. In 2004, ESCE changed its name from Starnet Communications Canada, Inc. to ESCE Holdings Inc.

     On January 1, 2000, ESCE transferred its software development business to Inphinity. On March 17, 2000, ESCE sold substantially all of its assets and undertakings comprising the adult entertainment division of ESCE to Chisel Media Inc.

     ESCE is currently inactive and is not used for any trading activity and the Company is in the process of liquidating this entity.

     Inphinity Interactive Inc.

     Inphinity Interactive Inc. was incorporated in British Columbia, Canada on August 19, 1999.

     Up until the Sportingbet Transaction (See Item 4: Sportingbet Transaction and Item 10: Material Contracts), Inphinity provided certain services to SSII. Its primary focus was to maintain, design, create and develop software products for the interactive gaming industry.

     As part of the Sportingbet Transaction, Inphinity transferred its development business to Alea Software Limited (an affiliate of Sportingbet). Alea now provides development services to SSII through contractual arrangements.

     Inphinity also transferred its remaining assets (consisting of administration staff and assets) to WG Interactive.

     Inphinity is currently inactive and is not used for any trading activity and the Company is in the process of liquidating this entity.

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     Bullen Road LP and Gwladys Street Limited

     Bullen Road LP is an exempt limited partnership formed in the Cayman Islands. It is a joint venture between the Company and Sportingbet. Its members are SSII (on behalf of the Company), Internet Opportunity Entertainment Limited, a company incorporated in Antigua and an affiliate of Sportingbet (which we also refer to in this annual report as “IOEL”), and Gwladys Street Limited, a company incorporated in the Cayman Islands (which we also refer to in this annual report as the “General Partner”).

     As required pursuant to Cayman Islands partnership law, the General Partner acts as the general partner of Bullen Road. The General Partner is itself owned in equal shares by SSII and IOEL.

     Bullen Road was formed as part of the Sportingbet Transaction (See Item 4: Sportingbet Transaction and Item 10: Material Contracts) and is the vehicle through which the Company and Sportingbet jointly own the proprietary interest in the Gaming Software. The terms and conditions on which the Company and Sportingbet are to control and run Bullen Road and the General Partner are set out in a Partnership Agreement. (See Item 19: Exhibits). On January 1, 2005, SSII Ltd transferred its interest in the Bullen Road LP to Interactive Systems Inc., a wholly-owned subsidiary of WG International.

Government Licensing and Regulation and Related Risks

     Our subsidiaries have various connections with the online gaming industry. Until October 2004, Inphinity developed interactive gaming software under contract with SSII. Subsequent to this date, such development is carried out through the joint venture arrangements (See Item 4: Sportingbet Transaction and Item 10: Material Contracts) with ISI. ISI owns and operates the Group’s gaming operations and infrastructure and licenses online gaming systems to various licensees and provides hosting services. Our operations and those of our licensees are licensed to operate interactive casinos in the country where their gaming equipment is physically located. Until February 2004, EFS International (Antigua) Inc. and EFS Caribbean Inc. from its offices in Antigua performed various services for our licensees, including financial transaction processing. ISI, from its offices in Antigua, now operates the SPORTSBETTING.COM business and performs various services for the licensees, including, but not limited to, providing licensee support and technical support. The Joint Venture Arrangements provide development support to ISI.

     Our operations and those of our licensees are operated from servers maintained by ISI and located in Antigua.

     A significant debate exists whether the laws of any country other than the country where the computer gaming servers are physically located have jurisdiction over the operations of ISI or those of its licensees. In addition, a significant debate exists whether the laws of any country other than the country where the computer gaming servers are physically located has jurisdiction over the operations of our affiliates, which perform services for the licensees.

     ISI and its licensees each hold a gaming license in the nation of Antigua and Barbuda. Our licensees each have the responsibility to determine from which countries they will accept gaming transactions and ensure that their own gaming license is maintained. Gaming transactions are accepted on servers located in Antigua and are governed by the conditions of those licensees gaming licenses. No gaming transactions are accepted or recorded by any subsidiary of the Company other than those processed on our servers located in Antigua and licensed by the government of Antigua and Barbuda under our subsidiary, ISI.

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     Historically, gaming activities have been subject to extensive statutory and regulatory control by government authorities, and have been very dependant and likely significantly affected by any changes in the political climate and economic and regulatory policies of the countries where gaming facilities are located. These changes may impact our operations in a materially adverse way. Various laws and regulations could have a direct and material effect on the business, and indirectly could have a material effect on the public demand for our gaming software. Most countries and jurisdictions within countries have laws or regulations restricting gaming activities. For example, in the United States, the Wire Act contains provisions which make it a crime for anyone in the business of gaming to use an interstate or international wire communication line to make wagers or to transmit information assisting in the placing of wagers. Other United States laws impacting gaming activities include the Interstate Horse Racing Act, the Interstate Wagering Paraphernalia Act, the Travel Act, the Organized Crime Control Act and the Patriot Act.

     While we believe that the activities of our subsidiaries do not violate or are not subject to such laws and regulations, because there is very little clear statutory and case law authority, this conclusion is not free from doubt. We face the risk of either civil or criminal proceedings brought by governmental or private litigants who disagree with our interpretation of laws and regulations. Because there is little guiding authority, there is a risk that we could lose such lawsuits or actions and be subject to significant damages or civil or criminal penalties and fines. Such proceedings could also involve substantial litigation expense, diversion of the attention of key executives, injunctions or other prohibitions being invoked against our licensees or us and our subsidiaries. The uncertainty surrounding regulation of the Internet gaming could have a material adverse effect on our business, revenues, operating results and financial condition.

     Several countries and governmental authorities, most notably law enforcement agencies in the United States, believe that the laws of their country restrict, and in some instances prohibit, interactive gaming operators from doing business with residents of their countries and, in some instances, prohibit or restrict residents of their respective countries from doing business with interactive gaming operators located in a foreign country. Specifically the United States federal law (18 U.S.C. § 1084), commonly referred to as the Wire Act, is a federal statute that purports to make it illegal for a betting or wagering business to use a wire communication facility to transmit bets or wagers in interstate or foreign commerce.

     Over the past few years, authorities in certain jurisdictions, such as the United States, have taken indirect steps to restrict online gaming by seeking to prevent or deter banks, payment processors, media providers and other suppliers from transacting with and providing services to online gaming operators, even though many of these online gaming operators are legally licensed in the jurisdiction in which they operate. The application or enforcement (or threat of enforcement) of restrictive laws or regulations, or a change in sentiment by regulatory authorities or the enactment of new legislation prohibiting or restricting online gaming or services used by online gaming businesses or the taking of certain indirect steps, may severely and adversely impact the business and financial position of online gaming companies such as the Company’s.

     Presently, there are two pieces of proposed legislation being considered in the U.S. House of Representatives (one introduced by Congressman Leach and the other by Congressman Goodlatte), with the likelihood of a third being introduced in the U.S. Senate by U.S. Senator Kyl, as an amendment to other proposed legislation presently being considered or, in the future, as proposed stand-alone legislation. Each of these bills will need, in the ordinary course, to be passed by both Houses of Congress,

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probably before October 2006 when the 109th Congress is expected to adjourn, ahead of the mid-term 2006 elections. In addition, the proposed bills offer “carve- outs” to certain U.S. domestic groups that undertake U.S. domestic gaming activities and the insertion of such carve-outs by special interests in the past undoubtedly had an impact on the failure of such legislation in the past. Obviously, we will continue to monitor developments closely.

     In November 2004, the World Trade Organisation (“WTO”) held that the U.S. was in violation of its commitments under international trade laws by not allowing operators of Internet Gaming services licensed in Antigua and Barbuda to access U.S. markets. The decision was appealed and the WTO ruled that the U.S. had shown that its laws prohibiting gambling are “necessary to protect public morals or maintain public order” but had failed to demonstrate, in light of its laws in respect of on-line gambling on horseracing, that such prohibitions are applied equally to both foreign and domestic providers of on-line gambling services for horseracing. Consequently, the WTO recommended that the U.S. bring its laws into conformity with its obligations under international trade rules. Pursuant to the report of the arbitrator circulated in August 2005, the U.S. was given until 3 April 2006 to clarify its policies on Internet gambling and the purported extraterritorial application of its laws. This date has now passed and the U.S. has not taken action to change the U.S. domestic laws that the WTO panel identified as in violation of the U.S.’s GATS commitments. It remains to be seen what effect, if any, will result from this inaction on Internet Gambling policy in the U.S.

     In addition to the above risks under United States federal laws, certain states in the U.S. expressly prohibit online gaming and the prosecuting authorities in several states may argue that online gaming is prohibited by their general gambling laws. The legal status of various other federal or state laws that prohibit or could be argued to prohibit online gaming is uncertain. As a result, we face the risk of federal or state enforcement or other action being taken against us, our licensees or our service providers so as to prevent or seriously impede our ability to offer online gaming services in the United States. To date, the position taken by federal and state law enforcement authorities has affected the Company’s business in various ways. Certain U.S. banks, for example, have agreed with state authorities not to participate in the processing of payments for online gaming and others have been unwilling to do so. Further, some media companies have been dissuaded from carrying out advertising for online gaming businesses as a result of actual or threatened action by federal and state prosecution authorities.

     Furthermore, no guarantee can be given that U.S. authorities will not seek to prosecute offshore gaming operators, or companies, which promote them, and no prediction can be given as to the success of any such prosecutions. Any significant restriction on participation in, or marketing or promotion of, online gaming especially in the U.S. would have a significant adverse effect on our business, financial position and future prospects.

     With our acquisition of the business assets of one of our then largest licensees (and a gaming operator), there exists a risk that our activities will face greater scrutiny in respect of the regulatory risks contained above.

     If Internet gambling prohibition legislation is introduced and becomes law, it would have an immediate detrimental effect on the industry and would pose a serious threat to our continued operations.

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Property, Plants and Equipment

     United Kingdom

     Our registered office operates from Minerva House, 5 Montague Close, London. The Company has no physical assets at this location. Corporate activities are managed from our office in Antigua.

     Antigua

     The operations of ISI are located in 2,500 square feet of commercial space at Jasmine Court located at Friar’s Hill Road, St. Johns, Antigua, at an annual cost of approximately $49,000 plus utilities. The lease expires on May 1, 2009.

     Canada

     WG Interactive sub-leases approximately 2,500 square feet for its administrative activities at 1401 West 8^th Avenue, Vancouver, Canada. The sub-lease is from Alea Software (See Item 4: Sportingbet Transaction and Item 10: Material Contracts). The sub-lease expires May 31, 2007 and is terminable on three months written notice to the other party. The annual cost is approximately $50,000.

     Equipment

     During the years ended December 31, 2005, 2004 and 2003, we made capital expenditures of approximately $0.6 million, $1.1 million and $0.4 million, respectively. The expenditures were primarily for computer equipment and related items in order to increase our capacity to process transactions and improve overall system reliability.

Item 4A. UNRESOLVED STAFF COMMENTS

     The Company has received and responded to correspondence from the Division of Corporation Finance of the United States Securities and Exchange Commission in respect of a limited review of the Company’s Form 20-F for fiscal year ended December 31, 2004.

     In respect of the review, the accounting reviewer from the SEC has requested further clarification and suggested certain interpretations of U.S. accounting standards specifically in respect of items disclosed as part of the Sportingbet transaction (See Item 4: Sportingbet Transaction and Item 10: Material Contracts). These remaining interpretations primarily relate to whether the gain on disposal arising from the Company entering into the transaction should be classified as extraordinary or part of continuing business activities and seek further clarification of the 13,506,204 shares that were set aside in the transaction.

     It is the Company’s position that the treatment of both the gain on disposal and the shares that have been set aside is entirely correct according to interpretation of relevant accounting pronouncements.

Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

     You should read the following discussion and analysis in conjunction with “Item 3. Selected Financial Data” and our consolidated financial statements and notes thereto set forth elsewhere in this annual report. In addition to historical information, the following discussion contains certain forward-looking statements that involve known and unknown risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. See “Special Note Regarding Forward-Looking Statements” appearing on page 1 of this annual report. Currency amounts in thousands of U.S. Dollars, unless otherwise specified.

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Change in Fiscal Year

     On May 17, 2001, we changed our fiscal year end from April 30 to December 31.

Results of Operations

     World Gaming plc is a holding company incorporated under the laws of England and Wales that, through its subsidiaries and joint venture arrangements, is an Internet gaming operator and developer, licensor and supplier of online gaming products, including casino, sportsbook and pari-mutuel betting.

     Interactive Systems Inc., a wholly-owned subsidiary of the Company incorporated and operating out of Antigua, operates and licenses gaming software to third parties for an initial licensing fee and monthly royalties. In addition, Interactive Systems Inc. provides hosting and other systems administrative services to its licensees. Effective October 1, 2005, the Company, through acquisition, became an Internet gaming operator offering Internet gaming services including casino, sportsbook and pari-mutuel betting direct to its wholly owned database of customers (See Item 4: “Acquisition of the SPORTSBETTING.COM group”). WG Interactive Inc., a wholly-owned subsidiary of the Company, incorporated and operating out of British Columbia, Canada, provides further administrative services on behalf of Interactive Systems Inc. such as development support.

     The following tables set out selected consolidated information from our statements of operations for the twelve months ended December 31, 2005, 2004 and 2003 and the balance sheets as at December 31, 2005, 2004 and 2003:

     Selected Statement of Operations Information

     Selected Balance Sheet Information

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Operating Results for Fiscal 2005

     Total revenues the twelve months ended December 31, 2005 increased $90,183 to $106,471 compared to $16,288 for the same period last year. The increase in total revenues is wholly attributable to the Sportsbetting.com Transaction effective October 1, 2005 where the Company acquired all of the business and assets of its then largest licensee whose leading brand is SPORTSBETTING.COM. (See Item 4: “Acquisition of the SPORTSBETTING.COM group”).

The Company maintains two key revenue streams:

     Both the Sportsbetting.com Transaction, effective October 1, 2005 and the joint venture transaction with Sportingbet, effective October 1, 2004 have materially changed the composition of revenue streams in the current and comparative periods. Primarily, the Sportsbetting.com Transaction has added a new revenue stream for the fourth quarter and future periods through operations. In addition, royalty revenue from the SPORTSBETTING.COM group is eliminated in the fourth quarter of 2005 and future periods as a result its acquisition by the Company. The transaction with Sportingbet, effective October 1, 2004 and described below as the “Sportingbet Transaction,” eliminated royalty revenue from that date in return for certain consideration and other arrangements.

     For the twelve months ended December 31, 2005 royalty and fee revenue declined by 42.7% or $6,692 to $8,958. Of this decline in royalty and fee revenue, $716 was attributable to no longer receiving royalties from the SPORTSBETTING.COM group as a result of its acquisition by the Company and $7,510 was the full year effect for comparative purposes, of no longer receiving royalties from Sportingbet as a result of the Sportingbet Transaction. This decline was partially offset by increases of $896 to $3,234 derived from new and continuing licensees.

     Revenue from operations, representing gross sports and horse racing wagers and net casino and poker win for the year ended December 31, 2005 was $97,513 from the Operating division compared to $nil for the same periods last year. (“Net win” refers to the difference between the amount wagered (bet placed) by a customer and the amount paid back to (won by) the customer.) For comparative purposes and prior to the Group owning the SPORTSBETTING.COM group, the underlying growth in the Operating division 50.8% or $79,387 for the twelve months ended December 31, 2005.

     For the twelve months ended December 31, 2005, gross profit decreased by $3 to $14,414 from $14,417 in the same 12 month period last year. The change is entirely due to no longer receiving royalties from Sportingbet, mitigated by including gross profit of the Operating division as explained above. For comparative purposes and prior to the Group owning the SPORTSBETTING.COM group, the underlying gross profit contribution from the Operating division for the year ended December 31, 2005 was $27,064 after deducting $1,954 in customer bonuses and jackpot transfers, representing a 55.1% increase in gross profit for the SPORTSBETTING.COM group for the 12 month period.

     For the twelve months ended December 31, 2005 gross margin percentage was 13.5% compared to 88.5% for the same period last year. The decrease resulted from a significant change in revenue mix as a result of the SPORTSBETTING.COM Transaction. For comparative purposes, the

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underlying gross margin percentage for the Operating division for the quarter ended December 31, 2005 was 8.5% compared to 10.1% for the quarter ended December 31, 2004. The lower gross margin percentage in the quarter is attributable to lower than expected win margins on sports in the quarter. The underlying comparative and prior to the Group owning the SPORTSBETTING.COM group, the Operating division gross margin percentage for the 12 months ended December 31, 2005 was 11.5% compared to 11.2% for the 12 months ended December 31, 2004.

     Operating expenses including depreciation in the twelve months to December 31, 2005 decreased 12% to $8,074 compared to $9,172 for the same period last year, primarily as a result of including the cost base of the Operating division in the fourth quarter of 2005 offset by the Company no longer paying for development costs as a result of the Sportingbet Transaction.

     For the twelve months ended December 31, 2005, net income from operations increased by $1,095 to $6,340 compared to net income from operations of $5,245 for the same period last year.

     Other income and expenses including amortization for the twelve months ended December 31, 2005, increased $295 to $233, representing increases in loan cost amortization, interest income and interest expense.

     Net comprehensive income for the twelve months ended December 31, 2005 decreased by $11,102 to $6,436 compared to $17,538 for the same period last year. The decrease in net income is entirely attributable to the extraordinary gain relating to the Sportingbet Transaction included in the twelve months ended December 31, 2004. Participating ordinary shares include those shares that have voting and economic rights and exclude those shares held by Sportingbet in accordance with the Sportingbet Transaction effective October 1, 2004 described below.

     Basic earnings per share before loan cost amortization and exceptional items per participating ordinary share for the year ended December 31, 2005 was 16.8 cents (16.8 cents after loan cost amortization and exceptional items) compared to 15.9 cents (53.4 cents after amortization and exceptional items) in the twelve months ended December 31, 2004. Participating ordinary shares include those shares that have voting and economic rights and exclude those shares held by Sportingbet in accordance with the Sportingbet Transaction effective October 1, 2004.

     On a fully diluted basis earnings per share before loan cost amortization and exceptional items per participating ordinary share for the year ended December 31, 2005 was 11.4 cents (11.4 cents after loan cost amortization and exceptional items) compared to 13.9 cents (46.5 cents after amortisation and exceptional items) in 2004.

Operating Results for Fiscal 2004

     Total revenues for the year ended December 31, 2004 decreased by 8.0% or $1,410 to $16,288 compared to $17,698 for the same period in the twelve months ended December 31, 2003. Net income from operations for the year ended December 31, 2004 was $5,245 or $0.11 per participating ordinary share compared to net income of $2,330 or $0.07 per participating ordinary share in the twelve months ended December 31, 2003. Participating ordinary shares include those shares that have voting and economic rights and exclude those shares held by Sportingbet in accordance with the transaction effective October 1, 2004 (See Item 4: Sportingbet Transaction and Item 10: Material Contracts).

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     In 2004, revenue consists of the following elements:

     Net income for the year ended December 31, 2004 increased by 487.2% or $14,412 to $17,370 compared to $2,958 for the same period in 2003. The significant increase in net income from the twelve months ended December 31, 2003 relates to an extraordinary gain on disposal of assets attributable to the Sportingbet transaction of $12,187 (2003: $Nil) described below.

     Royalty revenue from software licensing decreased 4.0% or $629 to $15,227 for the year ended December 31, 2004 compared to $15,856 for the same period in 2003. The decrease is as a result of the transaction with Sportingbet where, effective October 1, 2004, we no longer received royalty revenues from this customer. For comparative purposes, revenue from continuing licensees excluding Sportingbet grew 41% to $5,574 for the year ended December 31, 2004 when compared to the year ended December 31, 2003.

     In February 2004, we closed our transaction processing and customer service divisions migrating licensees that utilized these services to a third party supplier. For comparative purposes, $1,765 of transaction processing fee revenue was included in total revenues for the year ended December 31, 2003 compared to $423 in the year ended December 31, 2004. Direct costs associated with this division exceeded fee revenue in every quarter up to the date of its closure.

     Despite the exclusion of transaction processing fee income since February 2004, revenues continued to grow due to increases in total wagering volume experienced by licensees. For the twelve months ended December 31, 2004, gross wagering volumes increased 63% to $6.2 billion when compared to $3.8 billion in the prior year. Growth in wagering volume from continuing licensees, excluding Sportingbet, was 73%. Management believes that the growth in wagering volume was attributable to both a continued expansion of the market for Internet gaming. In addition, the growth was partially attributable to increased reliability of our product suite as a result of infrastructure and support services upgrades. Overall net win experienced by licensees exceeded last year. Consequently, continuing licensees’ revenues representing a total of 10 licensees at December 31, 2004 increased 58% over the prior year.

     The gross margin for the year ended December 31, 2004 was 88.5% compared to 87.9% for the same period in 2003. The increase resulted from a more profitable revenue mix due to the closure of the transaction processing division in February 2004 and the recovery of hosting fees attributable to Sportingbet for continuing to host their data on our servers in Antigua. Effective October 1, 2004, Sportingbet commenced paying us for its usage of our hosting facility. The payment is on a cost plus 10% basis and amounted to revenue of $621 in the year ended December 31, 2004 compared to $nil for the year ended December 31, 2003.

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     Operating expenses including depreciation decreased 30.6% to $9,172 during the year ended December 31, 2004 compared to $13,218 for the year ended December 31, 2003. The decrease occurred primarily due to the following:

Liquidity and Capital Resources

     At December 31, 2005, we had $7,605 in cash and cash equivalents compared to $7,944 at December 31, 2004. The decrease in the twelve months was primarily due to net payments made in respect of the acquisition of the SPORTSBETTING.COM group. These payments are described further in cash flows from investing and financing activities below.

     Working capital at December 31, 2005 declined to a deficit of $6,447 from a surplus of $14,866 at December 31, 2004. The deficit has arisen due to the short term loan facilities introduced in the fourth quarter of 2005 to fund our acquisition of the SPORTSBETTING.COM group.

     Consistent with our accounting policies, reserves and deposits held by credit card processors on behalf of our licensees were written off the Company’s balance sheet in the first quarter of 2005. At December 31, 2004, we held as a receivable from transaction processors of $2,234. These amounts relate to reserves and other deposits that were receivable on behalf of the Company’s licensees up to the date of closure of its transaction processing division in February 2004. These funds are held on behalf of licensees and accordingly the associated payable to the licensees in the same amount has also been written off.

     Customer deposits of $5,438 as at December 31, 2005 represent customer accounts in respect of the Operating division held by a third party. An equal balance is held under current liabilities representing the liability due to the customer.

     Accounts receivable decreased by $275 from $4,438 at December 31, 2004 to $4,163 at December 31, 2005. The accounts receivable balance primarily consists of amounts due to us in respect of deposits processed on behalf of the Operating division and our licensees during December 2005. The Company’s policy is to collect all funds processed in the previous month within 30 days of month-end of the preceding month. Where applicable, we then collect our royalties from these funds before distributing to the respective licensees. Royalties due from operating licensees who maintain their own transaction processing function are usually collected within 30 days after the date of invoicing those licensees. Prior to closure of the transaction processing division in February 2004, such amounts would have been disclosed as amounts due from processors.

     Consideration recoverable of $3,481 as at December 31, 2005 relates to cash payments made into an escrow account in accordance with the terms of the Sportsbetting.com Transaction. Upon agreement of the final 2005 profit before tax of the SPORTSBETTING.COM group, any overpayments are recoverable at this time. The full balance was recovered in March 2006.

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     Consideration receivable of $7,000 as at December 31, 2004 represented remaining cash consideration payments due from Sportingbet in respect of the Sportingbet Transaction which took effect October 1, 2004. These payments were received as $3,000 on March 1, 2005 and the balance of $4,000 was received on November 2, 2005.

     Prepaid expenses and deposits increased by $645 to $989 at December 31, 2005 compared to $344 at December 31, 2004. The increase is primarily due to prepaid marketing expenditure for the Operating division. It is common that the majority of marketing spent for the Operating division is prepaid, prior to delivery of marketing services.

     Deferred loan costs of $483 at December 31, 2005 relate to the current portion of loan costs attributable to the loan facilities drawn down on completion of the Sportsbetting.com Transaction. These amounts are being written off over the term of the loan. Deferred loan costs of $604 relate to deferred costs attributable to periods beyond 12 months from the current balance date.

     Goodwill of $86,697 represents acquired goodwill as a result of the Sportsbetting.com Transaction.

     Accounts payable and accrued liabilities balances decreased by $3,450 to $3,630 in the year ended December 31, 2005 compared to $7,080 at December 31, 2004. The reduction relates primarily to the write-off of balances attributable to reserves and deposits described above of $2,234. In addition, amounts managed for jackpot balances of $567 at December 31, 2005 are included in the balance together with general accounts payable. Jackpot balances are amounts held on behalf of the Operating division and some of the Company’s licensees for its gaming products utilized on their websites.

     Bank loans of $15,000 at December 31, 2005 represent the current portion of loans payable that were drawn down in December 2005. The total bank loan facilities including $25,000 attributable to periods beyond 12 months from the current balance date are repayable over 27 months commencing December 2005.

     Consideration payable of $3,600 at December 31, 2005 relates to the final installment of consideration payable into escrow in respect of the Sportsbetting.com Transaction. The amount was paid on January 7, 2006.

     Net cash provided by operating activities for the twelve months ended December 31, 2005 was $5,394 compared to $6,477 for the same period last year. The decrease is primarily due to higher net income from operations in the twelve months ended December 31, 2005 when compared to the same period last year offset by working capital movements. The increase in net income primarily relates to the inclusion of the Operating division effective October 1, 2005.

     Net cash used by investing activities for the twelve months ended December 31, 2005 was $58,846 compared to $1,867 provided by investing activities for the same period last year. This increase is primarily represented by the cash outflows in respect of the acquisition of the SPORTSBETTING.COM group.

     Net cash provided by financing activities for the year ended December 31, 2005 was $53,250 compared to ($3,081) used for financing activities for the same period last year. Cash provided by financing activities was primarily from the issuance of ordinary shares in respect of the bank loan and the placing of shares in respect of the Sportsbetting.com Transaction and the placing of shares in respect of the Company’s initial admission to AIM market of the London Stock Exchange plc in May 2005.

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Recent accounting pronouncements

     In December 2004, the FASB issued SFAS No.153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions”. The amendments made by Statement 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for nonmonetary exchanges of similar productive assets and replace it with a broader exception for exchanges of nonmonetary assets that do not have commercial substance. Previously, Opinion 29 required that the accounting for an exchange of a productive asset for a similar productive asset or an equivalent interest in the same or similar productive asset should be based on the recorded amount of the asset relinquished. Opinion 29 provided an exception to its basic measurement principle (fair value) for exchanges of similar productive assets. The Board believes that exception required that some nonmonetary exchanges, although commercially substantive, be recorded on a carryover basis. By focusing the exception on exchanges that lack commercial substance, the Board believes this Statement produces financial reporting that more faithfully represents the economics of the transactions. The Statement is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges occurring in fiscal periods beginning after the date of issuance. The provisions of this Statement shall be applied prospectively. The Company has evaluated the impact of the adoption of SFAS 153, and does not believe the impact will be significant to the Company’s overall results of operations or financial position.

     In December 2004, the FASB issued SFAS No.123 (revised 2004), "Share-Based Payment". Statement 123(R) will provide investors and other users of financial statements with more complete and neutral financial information by requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. Statement 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. Statement 123(R) replaces FASB Statement No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. Statement 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions with employees. Public entities (other than those filing as small business issuers) will be required to apply Statement 123(R) as of the first interim or annual reporting period that begins after June 15, 2005. The Company adopted Statement 123(R) in January of 2006.

     In December 2004, the Financial Accounting Standards Board issued two FASB Staff Positions - FSP FAS 109-1, Application of FASB Statement 109 “Accounting for Income Taxes” to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004, and FSP FAS 109-2 Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004. Neither of these affected the Company as it does not participate in the related activities.

     In March 2005, the SEC released Staff Accounting Bulletin No. 107, “Share-Based Payment” (“SAB 107”), which provides interpretive guidance related to the interaction between SFAS 123(R) and certain SEC rules and regulations. It also provides the SEC staff’s views regarding valuation of share-based payment arrangements. In April 2005, the SEC amended the compliance dates for SFAS 123(R), to allow companies to implement the standard at the beginning of their next fiscal year, instead of the next reporting period beginning after June 15, 2005. The Company adopted SFAS 123(R) effective January 1, 2006.

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     In March 2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (“FIN 47”). FIN 47 provides guidance relating to the identification of and financial reporting for legal obligations to perform an asset retirement activity. The Interpretation requires recognition of a liability for the fair value of a conditional asset retirement obligation when incurred if the liability’s fair value can be reasonably estimated. FIN 47 also defines when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. The provision is effective no later than the end of fiscal years ending after December 15, 2005. The Company will adopt FIN 47 beginning the first quarter of fiscal year 2006 and does not believe the adoption will have a material impact on its consolidated financial position or results of operations or cash flows.

     In May 2005, the FASB issued FASB Statement No. 154, “Accounting Changes and Error Corrections.” This new standard replaces APB Opinion No. 20, “Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements,” and represents another step in the FASB’s goal to converge its standards with those issued by the IASB. Among other changes, Statement 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. Statement 154 also provides that (1) a change in method of depreciating or amortizing a long-lived non-financial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a “restatement.” The new standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. Early adoption of this standard is permitted for accounting changes and correction of errors made in fiscal years beginning after June 1, 2005. The Company has evaluated the impact of the adoption of Statement 154 and does not believe the impact will be significant to the Company’s overall results of operations or financial position.

     In February of 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments”, which is intended to simplify the accounting and improve the financial reporting of certain hybrid financial instruments (i.e., derivatives embedded in other financial instruments). The statement amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, and SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities—a replacement of FASB Statement No. 125.” SFAS No. 155 is effective for all financial instruments issued or acquired after the beginning of an entity’s first fiscal year that begins after September 15, 2006.. The Company is currently evaluating the impact SFAS No. 155 will have on its consolidated financial statements, if any.

Contractual obligations

     At December 31, 2005, the Company had the following contractual obligations:

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Trend Information

     We have not identified any changes in trends in our operations since the end of the financial period ended December 31, 2005.

Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Directors and Senior Management

     The names, positions and ages of our directors and senior management as of May 31, 2006 are as follows:

     See Item 10 – Additional Information – Board Action and Powers for a discussion on the terms and conditions underlying the appointment to the board of directors.

Background Information Concerning Directors

     James H. Grossman, Chairman of the Board and Director

     James H. Grossman, who became our Chairman of the Board and a member of our board of directors on April 11, 2003, is an attorney with experience in the international business, corporate, and venture capital areas and has an active international commercial arbitration practice. Mr. Grossman was of counsel to Reed Smith Crosby Heafey in San Francisco, California and predecessor entities from January 2000 until August 2003. From 1995 to 1999, he practiced law as a sole practitioner and also acted as a business consultant.

     In 1992, Mr. Grossman was appointed by then President George H.G. Bush to serve as Chairman of the U.S. Foreign Claims Settlement Commission, where he actively participated in quasi-judicial international arbitration relating to expropriation of property by foreign governments. Mr. Grossman has served as a Special Representative for the United Nations Development Program, focusing on the implications upon certain Balkan nations of sanctions imposed on the then former Yugoslavia.

     Mr. Grossman also was the Chief Negotiator for the U.S. in the tariff reduction acceleration round of the US-Canada Free Trade Agreement, which was a precursor to the creation of NAFTA. He obtained his undergraduate degree in International Relations/Political Science/History in 1960 from the University

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of California at Berkeley and a J.D. from Harvard Law School in 1963. Mr. Grossman has also served as a director of Champion Communication Services, Inc., a company based in Houston, Texas, publicly traded on the OTC Bulletin Board and the Canadian Venture Exchange. Information regarding retirement of directors is disclosed in Item 10: Additional Information.

     A. Daniel Moran, Director and Chief Executive Officer

     Daniel Moran, who became our Chief Executive Officer and a member of our board of directors on April 11, 2003, has over 15 years of international business experience, primarily in the technology and Internet sectors. Most recently, he was the Managing Director for Sportingbet Australia, where his duties included strategic planning and automation of the business process, overseeing operations, regulatory compliance, government relations and the management of a 50-person staff.

     Prior to joining Sportingbet in March 2000, Mr. Moran was a consultant in Australia, providing advice to companies seeking to organize and become licensed to conduct Internet gaming operations in a regulated market. Mr. Moran received a BSc in (Computing Science) from Macquarie University, Australia and a Post Graduate Diploma in Management from the Macquarie Graduate School of Management, Australia. Information regarding retirement of directors is disclosed in Item 10: Additional Information.

     David Naismith, Director and Chief Financial Officer

     David Naismith has served as our Chief Financial Officer and a member of our board of directors since August 1, 2003. Mr. Naismith is a qualified chartered accountant with several years experience in Internet gaming, most recently holding a senior finance role with Sportingbet. Prior to this, Mr. Naismith held regional finance directorships at Sportingbet before assuming responsibility for these finance divisions globally based in London. Having qualified as a chartered accountant in audit with BDO, Mr. Naismith progressed to transaction support predominately for international media groups, many of whom have U.S. based parents, working in both Australia, London and within Europe.

     Mr. Naismith’s experience in the online gaming industry includes capital raising, acquisitions and global merchant processing in several locations including Costa Rica, United Kingdom, Austria and Australia. Mr. Naismith holds a Bachelor of Commerce in finance from Bond University in Australia and is a member of the Institute of Chartered Accountants, where he was ranked in the top 5 percent of candidates. Information regarding retirement of directors is disclosed in Item 10: Additional Information.

     Jonathan Moss, Sales and Marketing Director

     Jonathan Moss has served as our Sales and Marketing Director since January 1, 2005. Mr. Moss has eight years senior management experience in the online gaming sector. Immediately prior to his appointment with us, he held the position of Business Development Director at WagerLogic Limited, the licensing and services subsidiary of CryptoLogic Inc., one of the industry’s leading online gaming software providers. Mr. Moss dealt with brand-name clients to CryptoLogic’s casino and poker solutions including Betfair, Littlewoods Gaming, The Ritz Club of London and ukbetting PLC.

     Mr. Moss has also played a key role in industry lobbying efforts related to the forthcoming UK Gambling Bill and is an experienced speaker at international e online gaming conferences. Prior to joining WagerLogic, Mr. Moss was the principal of a leading industry consulting group and a director at Access Systems, who brought the world’s first regulated internet casino, Lasseters.com, to market in 1999.

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     Mr. Moss’ previous international business experience includes international careers with Unisys and Motorola, heading computer and telecommunications business units in Australia and the United States. Mr. Moss holds a BSc Honours Degree in Economics and Psychology from Loughbourogh University and a Postgraduate Degree in Education from York University.

     Clare Kamau Roberts, Non-employee director

     Clare Roberts has served as a member of our board of directors since October 18, 2000 and was Chairman of the board from November 20, 2002 to April 11, 2003. He is a former Attorney General and Minister of Justice and Legal Affairs of Antigua and Barbuda from 1994 to 1997.

     Mr. Roberts has been founder and principal at Roberts & Company, Attorneys at Law, since 1986. He served as a consultant to the government of Antigua from 1986 to 1990 and preceding that, served as Solicitor General for Antigua and Barbuda as well as Parliamentary Counsel. He is a founding member and director of the National Development Foundation of Antigua and Barbuda and Vice President of the Antigua Offshore Association. He is presently a director and chairman of ACB Mortgage and Trust Company Limited, a wholly owned subsidiary of Antigua Commercial Bank, the leading bank in Antigua.

     Mr. Roberts is president of the Inter American Commission on Human Rights, to which he was elected in May 2001. He has served as a consultant to various government agencies throughout the Caribbean region.

     Mr. Roberts received a BA and L.L.B. from the University of West Indies, a Legal Education Certificate from the Caribbean Council of Legal Education, a Diploma in Legislative Drafting from the University of Ottawa in Canada and attended Harvard University for a program of instruction for lawyers in 1995 and 1996. Information regarding retirement of directors is disclosed in Item 10: Additional Information.

     Michael Cumming, Non-employee director

     Michael Cumming has served a member of our board of directors since March 1, 2006. Mr. Cumming has over 35 years of experience in the field of Private Equity. Prior to his retirement in 1996 he was for 14 years the Managing Director of Barclays Private Equity which he expanded from a London base into a company with nine offices worldwide.

     Mr. Cumming is currently Chairman of Mercia Fund Management, Matrix Venture Fund VCT PLC, Private & Commercial Finance Group PLC and UK Smaller Companies Tracker Trust PLC. He is also a non-employee director of Graphite Enterprise Trust PLC and Forelle Estates Holdings Limited. He has degrees from Royal School of Mines, Imperial College, London and the Stanford Graduate School of Business Administration, Palo Alto, California. Information regarding retirement of directors is disclosed in Item 10: Additional Information.

Background Information Concerning Senior Management and Certain Key Employees

     Paul Botelho, Director of Product Development

     Paul Botelho joined us in 1999 and is responsible for overseeing product development of our software. Mr. Botelho has over 12 years of marketing and product development experience in the gaming and packaged goods industries. He began his career with the British Columbia Lottery Corporation (BCLC) where he was responsible for mass marketing, brand management and the development of the BCLC’s first Internet presence.

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     Mr. Botelho holds a Bachelor of Applied Science from Simon Fraser University and is a member of the American Marketing Association and the Canadian Marketing Association.

     Andrew Cochran, Director of Information Technology

     Andrew Cochran joined us in September 2001 and has been in the information technology (IT) field since 1993. Mr Cochran has expertise in designing and managing large scale enterprise networks and systems. As Director of Information Technology, he architects and manages all of our gaming systems and networks for us.

     Prior to joining, us Mr. Cochran has held many lead roles in the telecommunications industry. At Bell Canada he was responsible for the design and operation of Bell’s Sympatico and Advanced Business Internet infrastructure. In Bermuda, he helped Logic Communications establish an island wide DSL service. Previous to these positions he was an independent consultant offering engineer services to a variety of organizations.

Compensation

     Compensation of Non-Employee Board Members

     We have entered into agreements with our three non-employee directors as follows: Messrs. Grossman, Roberts and Cumming each receive an annual fee of £21,600 per year for acting in their capacity of non-employee directors.

     James H. Grossman has served as a Director and Chairman of the Board since April 11, 2003. Effective December 15, 2005 his annual fees for serving as a director are £21,600. Mr. Grossman receives annual remuneration in respect of his services as the Group’s Chairman of £107,000. In addition, Mr. Grossman receives an annual housing allowance and certain other additional benefits where he is required to be relocated. The Company on June 4, 2003 authorized the issuance of options to purchase 150,000 ordinary shares all of which vested only on April 11, 2004 and options to purchase 300,000 ordinary shares all of which were to vest on April 11, 2005. The Company on July 1, 2004 authorized the issuance of options to purchase 500,000 ordinary shares all of which were to vest on April 11, 2006. In accordance with Mr Grossman's contract a deemed change of control took place on the completion of the contract with Sportingbet Plc, effective  October 1, 2004. In accordance with the change of control provisions, all options grants prior to October 1, 2004 vested immediately. The Company on January 3, 2005 authorized the issuance of options to purchase 500,000 ordinary shares all of which vest only on January 3, 2007. Mr. Grossman is entitled under the terms of his service agreement to a deferred bonus of 75% of the total bonuses receivable by him over three years of service with the Company payable on his third anniversary. Mr. Grossman received his entitlement to this deferred bonus in April 2006.

     Clare Roberts has served as a member of our board of directors from October 18, 2000. Effective January 1, 2005 his annual compensation for such service is £21,600. Mr. Roberts has been granted options, of which 100,000 are exercisable and fully vested at an exercise price of $2.13 and 50,000 are exercisable and fully vested at an exercise price of $1.44. In August 2003, Mr. Roberts relinquished options to purchase 200,000 shares at an exercise price of $0.31 granted in July 2001, all of which were vested, as these options were granted below market value and therefore in breach of the current Option Committee policy. As consideration for this relinquishment, he was granted options at the then market price of $0.15 to purchase 200,000 shares of which 100,000 were fully vested at the time of the grant and

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the remaining 100,000 vested in August 2005. The Company on July 1, 2004 authorized the issuance of options to purchase 100,000 ordinary shares all of which vest only on October 18, 2006. The Company on January 3, 2005 authorized the issuance of options to purchase 25,000 ordinary shares all of which vest only on January 3, 2007.

     Michael Cumming was appointed to the board of directors as a non-employee director effective March 1, 2005. His annual compensation is £21,600. On March 1, 2005 Mr. Cumming was granted options to purchase 100,000 ordinary shares all of which vest only on March 1, 2007.

     Any directors who are employees receive no cash compensation for serving on our board of directors. Directors who resigned during the year were paid pro rata up to when they ceased performing duties for us. All directors are reimbursed for their reasonable expenses incurred to attend meetings of the board of directors. We anticipate that our board of directors will hold regularly scheduled meetings at least quarterly in person and monthly by telephonic conference.

     Compensation of Our Senior Management

     The following tables set forth all compensation, in U.S. dollars, we paid to our senior management and directors including stock options grants during the year ended December 31, 2005 and stock options granted as of May 31, 2006. All of the options listed in the table below represent options to purchase our ordinary shares or ADR’s. Options issued and vesting schedules for existing directors are set forth in the chart below. All new options granted to our employees and officers will normally vest over a two or three-year period from the date of the grant. Please see “Item 10. Material Contracts” for a description of employment agreements with our senior management.

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During the year ended December 31, 2005, Messrs. Grossman, Moran and Naismith exercised 250,668, 250,668 and 250,664 share options, respectively, at an exercise price of $0.14 per ordinary share and Mr. Roberts exercised 48,000 share options at an exercise price of $0.15 per ordinary share. These ordinary shares were subsequently sold through a private placement completed in December 2005.

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(2)     David Naismith’s employment as Chief Financial Officer and a Director with World Gaming plc commenced on August 1, 2003. Effective January 1, 2006 his annual base compensation is £155,000, with an annual housing allowance and certain other additional benefits. In addition, the Company on June 4, 2003 authorized the issuance of options to purchase 150,000 ordinary shares all of which vested on June 4, 2004 and options to purchase 500,000 ordinary shares all of which vested on August 1, 2005. The Company on July 1, 2004 authorized the issuance of options to purchase 500,000 ordinary shares all of which were to vest on August 1, 2006. In accordance with Mr. Naismith’s contract a deemed change of control took place on completion of the transaction with Sportingbet Plc. In accordance with the change of control provisions, all option grants prior to October 1, 2004 vested immediately. The Company on January 3, 2005 authorized the issuance of options to purchase 500,000 ordinary shares all of which vest only on January 3, 2007. All option grants are at the then market value on the date of grant. Unvested options will terminate if Mr. Naismith’s directorship is terminated for cause. If Mr. Naismith is terminated for another reason not contemplated by an option agreement then options shall be exercisable for a period of 12 months after the termination period but only to the extent that it is vested and exercisable on the date of termination period, except as permitted in the sole discretion of the board. All options granted to Mr. Naismith otherwise have an exercise period of the shorter of 10 years from the date of grant or at the expiration of the Option Plan in 2011. Mr. Naismith is entitled under the terms of his service agreement to a deferred bonus of 75% of the total bonuses receivable by him over three years of service with the Company payable on his third anniversary. Mr. Naismith will only receive his entitlement to this deferred bonus if he is still employed by the Company on such third year anniversary.

(3)     Jonathan Moss’ employment as Director of Sales and Marketing with World Gaming commenced on January 1, 2005. His annual base compensation is £100,000 with certain other additional benefits. On March 1, 2005, Mr. Moss was appointed to the Board of Directors of World Gaming Plc. No changes were made to Mr. Moss’ compensation as a result of this appointment. The Company on January 3, 2005 authorized the issuance of options to purchase 650,000 ordinary shares, 500,000 of which vest on January 3, 2007 and 150,000 which may vest on January 3, 2007 subject to certain performance related criteria. Mr. Moss is entitled under the terms of his service agreement to a deferred bonus of 75% of the total bonuses receivable by him over three years of service with the Company payable on his third anniversary. Mr. Moss will only receive his entitlement to this deferred bonus if he is still employed by the Company on such third year anniversary.

     Superannuation contributions of $17,013 and $13,799 (2004: $12,987 and $10,553) have been paid on behalf of A. Daniel Moran and David J. Naismith respectively for the year ending December 31, 2005 for nominated pension schemes. The Company does not operate a pension scheme or retirement plan.

     World Gaming plc 2001 Share Option Plan

     The World Gaming plc 2001 Share Option Plan (the “2001 Plan”) provides that eligible persons may acquire options to purchase ordinary shares or ADRs as determined by our board of directors or the Share Option Committee. The board currently serves as the Share Option Committee. The 2001 Plan was adopted by the board on May 17, 2001 and approved by ordinary resolution of our shareholders on May 17, 2001 in substitution of the LVA Stock Option Plans (1997, 1999 and 1999 (No. 2)), which were terminated in the course of our holding company reorganization and options thereunder were exchanged for new options pursuant to the 2001 Plan.

     Number of Ordinary Shares

     The maximum number of the ordinary shares (or ADRs) with respect to which options may be granted under the 2001 Plan is 15,000,000. If any option shall lapse or shall be cancelled, then the shares represented by such option shall become available for new options. An option may be exercised for an ordinary share or an ADR.

     Eligibility

     All employees, officers, directors and all other persons who provide services to us or any of our subsidiaries, as determined by the board, are eligible to participate in the 2001 Plan.

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     Grant of Options

     The board administers the 2001 Plan and has discretion in awarding share options to the eligible participants. (See Item 6. “Committees of the Board of Directors”).

     Option Price

     Options will be granted at exercise prices to be determined by the board, which must be the fair market value of the ordinary shares (or ADSs) on the date of grant. Fair market value for these purposes means the closing price of our American Depositary Shares, as traded on the OTC Bulletin Board or the other principal U.S. market for our securities, on the business day immediately preceding the date of grant.

     Exercise of Options

     Prior to April 2003, the options granted to directors under the 2001 share option agreement vested and became exercisable as to 25% of the original number of option shares on the date of grant and a further 25% upon the expiration of each of the following three periods of three months. Options granted subsequent to April 2003 require a more onerous vesting schedule as determined by the board. Options granted to our employees and officers and directors normally vest over a two-year period from the date of the grant. The board of directors during 2003 affirmed the requirement that the grant price in respect of all options granted must represent the closing market price prevailing on the date of such grant. The exercise of the options for other categories of optionholders may be tied to certain performance conditions. Options will terminate if an optionholder’s employment is terminated for cause, or if an option holder voluntarily resigns without appropriate or agreed notice and termination terms, unless otherwise agreed by the board of directors. If the employee or officer or director is terminated for another reason not contemplated by an option agreement then the option shall be exercisable for a period of 12 months after termination but only to the extent that it is vested and exercisable on the date of termination, except as permitted in the sole discretion of the board of directors. If an optionholder’s employment or office or directorship is terminated due to his or her death or disability, the options will remain exercisable for a period of 12 months after termination but only to the extent that they have vested and are exercisable on the date of termination. Notwithstanding the foregoing, all options lapse at the end of their respective option periods. Options are not transferable and may only be exercised by the persons to whom they are granted, except in the case of the death or disability of the optionholder in which case they would be exercisable by the guardian or personal representative of the optionholder (as the case may be).

     Issues of Ordinary Shares or ADRs

     Ordinary shares or ADRs issued upon the exercise of options will rank equally with ordinary shares or ADRs, as applicable, of the same class, but shall not be entitled to any dividends or other distributions declared prior to the date of the exercise.

     Variation in Share Capital

     Options may be adjusted following certain variations in our share capital, including a capitalization or rights issue.

     Termination of the 2001 Plan

     No options may be granted under the 2001 Plan after the tenth anniversary of its adoption.

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     Amendments

     The board of directors may amend the 2001 Plan with respect to minor amendments relating to administrative matters. Material modifications will require shareholder approval, if such approval is required by applicable law or exchange rules. Additionally, no amendments which would adversely affect the rights of the existing optionholders may be made without their consent.

     On March 18, 2005, one of our former directors relinquished all rights to purchase 2,200,000 ordinary shares that had fully vested.

Board Practices

     In English companies, when a director ceases to be a director, whether voluntarily or otherwise, we say that the director has “retired.” Our directors are subject to retirement by rotation. At every one of our annual general meetings, one third of our directors who are subject to retirement by rotation or, if their number is not three or a multiple of three, the number nearest to one third of our directors, shall retire from office. If there is only one director who is subject to retirement by rotation, that director shall retire. Subject to the provisions of the U.K. Companies Act 1985, the directors to retire by rotation shall be those who have been longest in office since their last appointment or retirement. As between persons who became or were last reappointed directors on the same day, those to retire shall be determined by lot unless they otherwise agree among themselves. If a director retires by rotation and he is not reappointed, the retiring director may retain its office until the meeting appoints someone in his place or until the end of the meeting. However, the director in that situation shall not be deemed to be reappointed, if the shareholders determine not to fill the vacancy or a resolution to reappoint the director is voted upon and defeated. Shareholders holding a majority of the Company’s ordinary shares may remove any director from office at any time, with or without cause, subject to the requirements of the U.K. Companies Act of 1985 and our Articles of Association.

Committees of the Board of Directors

     Our board of directors has appointed an audit committee and a compensation committee.

     The audit committee of the board of directors makes recommendations concerning the engagement of independent public accountants. The audit committee charter mandates that the audit committee approve all audit, audit-related, tax and other services conducted by our independent accountants. In addition, the audit committee reviews the plans, results and fees of the audit engagement with our independent public accountants, and any independence issues with our independent public accountants. The audit committee also reviews the adequacy of our internal accounting controls. The current members of the audit committee are James H. Grossman, Clare Roberts and Michael Cumming.

     We do not have an “audit committee financial expert” serving on our audit committee. The board of directors believes that the appointment of Mr. Cumming to the board of directors, while not meeting specific financial or accounting officer requirements of an audit committee financial expert as defined in Item 16A of Form 20-F, brings a significant amount of experience and relevant financial education to the board of directors. Mr. Cumming has over 35 years experience in private equity, most recently as Managing Director of Barclays Private Equity, a major UK banking group. In addition, Mr. Cumming has an MBA from Stanford Graduate School of Business Administration, Palo Alto, California.

     The compensation committee of the board of directors determines compensation for our executive officers and key employees and administers our equity plan. The compensation committee currently consists of Messrs. Grossman, Roberts and Cumming.

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Employees

     The number of employees by location as of the dates set forth below is as follows:

     Licensing operations take place in our office in Antigua, while limited administrative functions are in Vancouver, Canada. The total number of our employees as of May 31, 2006 is 45.

     Our employees are not represented by a union or other collective bargaining organization and we have never experienced a work stoppage. We believe that our employee relations are good.

Share Ownership of Senior Management and Directors

     The table below sets forth certain information concerning the share ownership of our directors and senior management as of May 31, 2006.

⁽²⁾      Mr. Grossman purchased 10,000 ADR’s on the open market in November 2003 and a further 10,000 ADR’s on the open market in February 2005. Continental Stock and Transfer Company transferred its 2 ordinary shares held in the Company for legal purposes to Mr. Grossman in January 2005.

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Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Major shareholders

     The following table contains information regarding the beneficial ownership of our ordinary shares, including our American Depositary Shares, as of May 31, 2006, for all shareholders known by us to beneficially own 5% or more of our ordinary shares.

     Significant Changes in Ownership of Ordinary Shares

     Prior to the holding company reorganization in 2001, LVA issued 2,000,000 shares of its common stock to AIM Investments Ltd. pursuant to LVA’s agreement with AIM Investments Ltd’s parent Simpson Bay Ltd. described elsewhere in this report. In 2002, as a result of the issuance of the

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class action shares, Cribbage Limited, a wholly-owned subsidiary of Sportingbet, acquired 6,506,204 American Depositary Shares. By way of agreement dated July 11, 2003, AIM Investments Ltd. transferred its entire holding of 2,000,000 shares to Cribbage Ltd.

     With the completion of the financing on April 7, 2003, Goodison Park Limited, another wholly-owned subsidiary of Sportingbet PLC, acquired 5,000,000 ordinary shares of the Company and the right to acquire up to 7,500,000 additional ordinary shares upon the conversion of a certain convertible loan issued by us to Goodison Park Limited. (See Item 7. Related Party Transactions). Effective October 1, 2004 the convertible loan note was cancelled together with the underlying right to acquire 7,500,00 shares in the Company. In addition all holdings by the Sportingbet group companies will be transferred to the Company for a total consideration of $1 when requested to do so by the Company. These shares will be purchased by the Company when there are available distributable profits for $1.00 in aggregate.

     As at May 31, 2006, the vendors of the SPORTSBETTING.COM business, Opunosa Investment Inc. (See Item 4: “Acquisition of the SPORTSBETTING.COM group”) beneficially owned 9,436,636 or 17.0% of the entire issued capital of World Gaming plc. No further shares are due to be issued to Opunosa Limited in respect of this acquisition.

     Securities and Record Holders in the United States

     Based on a Geo-Survey provided by ADP with a record date of May 15, 2006 there were approximately 25,477,033 American Depositary Shares outstanding. We are informed that, based on the Geo-Survey, that approximately 60% of our ADRs were held by record holders with a U.S. address, and 40% of our ADRs were held by record holders with addresses outside the United States. As at May 31, 2005, there are 55,418,630 ordinary shares outstanding. When taken as a whole (ADRS and ordinary shares the percentage of share capital held by record holders with a US address is approximately 27%.

     Change of Control

     We are not aware of any arrangements the operation of which may at any subsequent date result in a change in control of our Company.

Related Party Transactions

     Sportingbet PLC and its affiliates, Goodison Park Limited and Cribbage Limited

     Subsequent to the transaction described below, Sportingbet and its subsidiaries are no longer related parties to the group.

     Goodison Park Limited, a wholly-owned subsidiary of Sportingbet, acquired an interest in World Gaming Plc by way of share acquisition and a convertible loan. Goodison Park purchased 5,000,000 ordinary shares of World Gaming at $0.12 per share or a total of $600,000; and made a convertible loan to the Company (the “Convertible Loan”) in the principal amount of $900,000.

     Cribbage Limited, a wholly-owned subsidiary of Sportingbet, acquired an interest in World Gaming Plc in 2002 by way of acquiring 6,506,204 ADRs issued as a result of the Class Action shares from a third party. Additionally, on July 3, 2003, AIM Investments Ltd., transferred its holding of 2,000,000 ADRs to Cribbage Ltd.

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     As a result of the Transaction with Sportingbet, effective October 1, 2004, the Convertible Loan was forgiven in full and the Company may repurchase shares held by Goodison Park Limited and Cribbage Limited or its affiliates of 13,506,204 for an aggregate payment of $1.00 as soon as it has the retained earnings to do so. All other loan balances were repaid in full during the year. (See Item 4: Sportingbet Transaction and Item 10: Material Contracts)

     Pursuant to an Ancillary Services Agreement, some of the Company’s licensees receive certain transaction processing and related services from Sportingbet or its affiliates. The Company therefore receives balances from Sportingbet or its affiliates and pays these onto affected licensees after deducting the royalty due to the Company.

Item 8. FINANCIAL INFORMATION

Consolidated Statements and Other Financial Information

     The consolidated statements and other financial information required by Item 8 of Form 20-F are included in Item 17, commencing on page F-1, of this Annual Report.

Legal Proceedings

     The following are material existing and pending or recently concluded legal or arbitration proceedings against us and our subsidiaries:

     Mitchell White

     On August 6, 1998, Mitchell White commenced an action against ESCE and SSII Limited for breach of his employment agreement and wrongful termination of him as a director. Mr. White alleges that as a result of his wrongful termination as an employee and director, he was not provided with a severance package in lieu of reasonable notice and he did not receive stock options that he would have otherwise received. Mr. White claims that his losses are in excess of $1.5 million. Our defense is based, among other things, on the claimant’s resignation due to recurring drug related problems and is in the process of vigorously defending this action. The trial of this action was to commence in April 2005, but has been adjourned. A new date for trial has been set for June 2007.

     In February 2004, SSII Limited commenced a third party claim against a former director, Mr. Jack Carley. It is alleged that Mr. Carley was responsible for the termination of Mr. White’s employment in 1998. Mr. Carley is also Mr. White’s father-in-law.

     Thomas A. Kaufmann, Gene C. Geiger and Roy E. Gould

     Thomas A. Kaufmann (“Kaufman”), Gene C. Geiger (“Geiger”) and Roy E. Gould (“Gould”) filed a claim in Colorado against LVA Holdings, Inc. (“LVA”), an indirect subsidiary of the Company. Kaufmann and Geiger were registered representatives associated with securities broker-dealer Spencer Edwards, Inc. in Englewood, Colorado, while Gould was a registered representative with a Canadian broker-dealer, United Capital. On July 18, 2005, an SEC Administrative Law Judge (“ALJ”) issued an Initial Decision finding that Kaufman, Geiger and Gould had “willfully violated” U.S. securities laws. The willful violations of securities laws related to the sale of “Reg S” shares of LVA in 1997 and 1998 without registration or exemption from registration which the ALJ ultimately determined to be an illegal breach of securities laws. Under the ALJ’s Initial Decision, Kaufman, Geiger and Gould were permanently barred from associating with any securities broker or dealer. Kaufman and Geiger were each ordered to disgorge $885,738.62. In addition, Geiger was ordered to pay a civil penalty of $400,000.00, Kaufmann was ordered to pay a civil penalty of $300,000.00. Gould was ordered to disgorge $13,843,650.79 in ill-gotten profits, but that amount was reduced $1,000,000, and monetary penalties were waived in light of Gould’s “demonstrated inability to pay.” Kaufman and Geiger have appealed the ALJ’s findings. Gould has not appealed, and the findings are final as to Gould. LVA was not named as a respondent in the SEC proceedings.

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     Kaufman, Geiger and Gould (collectively “Plaintiffs”) have now sued LVA in Colorado looking to be reimbursed for the fines, penalties and monies ordered disgorged by the ALJ. Their claims are premised on a theory that they did not know the securities transactions identified above were illegal and were misled by LVA and its agents, which is entirely inconsistent with the findings of fact as presented by the ALJ. LVA removed the case to the U.S. District Court for the District of Colorado based on diversity jurisdiction. Discovery is underway and the case will be tried, if trial is required, in 2007. We believe that the Plaintiffs’ claims are wholly without merit and intend to vigorously defend this action. Plaintiffs have also brought a motion seeking to add World Gaming plc as a party, on the grounds that World Gaming plc is liable for LVA’s debts. We believe this motion is without merit and are vigorously opposing the addition of World Gaming plc as a party.

Dividend Policy

     Our Articles of Association provide that dividends are declared by the shareholders upon the recommendation of the board of directors which has the discretion to make any such recommendation. We have never paid cash dividends on our ordinary shares. We review our dividend policy on a regular basis. Currently, we do not anticipate that any cash dividend on our ordinary shares will be paid within twelve months of filing this Form 20-F.

Significant Changes

     We have experienced no significant changes since the date of the annual financial statements other than those disclosed in those financial statements.

Item 9. THE OFFER AND LISTING

Trading Markets

     OTC Bulletin Board

     Our American Depositary Shares are traded on the OTC Bulletin Board. Each American Depositary Share represents one ordinary share of our company. Price quotations for our American Depositary Shares were reported on the OTC Bulletin Board under the symbol “WGMGY” beginning on May 29, 2001. As of May 31, 2006, we had 55,418,630 ordinary shares issued and outstanding, of which 25,615,048 are represented by American Depositary Shares evidenced by American Depositary Receipts issued by Continental Stock Transfer and Trust Company, as depositary.

     On October 25, 2005, the National Association of Securities Dealers, or NASD, acting pursuant to NASD Rule 6545, directed its members to halt trading and quotations in our American Depositary Shares for five business days in the OTC Bulletin Board. We were advised that the NASD took this action based on the trading suspension of our ordinary shares on the Alternative Investment Market, or AIM, of the London Stock Exchange, which suspension was put in place following our announcement of the conditional purchase agreement to acquire the SPORTSBETTING.COM Group (see the discussion under “AIM” below in this Item 9). The NASD trading halt was for five business days and expired on November 1, 2005. Quotations of our American Depositary Shares on the OTC Bulletin Board, however, could resume only after market makers in our American Depositary Shares satisfied applicable requirements under the U.S. Securities Exchange Act of 1934, as amended, and NASD Rules. In particular, market makers were required to comply with SEC Rule 15c2-11 by filing a Form 211 with the NASD. Following the satisfaction of the foregoing conditions, quotations and trading of our American Depositary Shares resumed on December 7, 2005.

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     The following table sets forth the high and low closing sale prices for our American Depositary Shares on the OTC Bulletin Board, from the beginning of trading on May 29, 2001 to May 31, 2006 and for LVA, as our predecessor, for periods prior thereto. Such prices do not reflect retail markup, markdown or commissions and may not necessarily represent actual transactions.

     Alternative Investment Market of the London Stock Exchange

     Our ordinary shares are traded on the Alternative Investment Market of the London Stock Exchange. Price quotations for our ordinary shares were reported on the London Stock Exchange under the symbol “WGP” beginning on May 17, 2005. As of May 31, 2006, we had 55,418,630 ordinary shares issued and outstanding, of which 29,803,582 trade on the AIM market.

     The following table sets forth the high and low closing sale prices for our ordinary shares on the AIM, from the beginning of trading on May 17, 2005 to May 31, 2006. Such prices do not reflect retail markup, markdown or commissions and may not necessarily represent actual transactions.

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