Financial Information

                     VIRTUAL GAMING ENTERPRISES, INC.

                      (A Development Stage Enterprise)


                     AUDITED FINANCIAL STATEMENTS

                For the Quarter Ended August 31, 2001
                   and the year ended May 31, 2001

<PAGE>

INDEX TO FINANCIAL STATEMENTS



Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . F-2

Statements of Operations . . . . . . . . . . . . . . . . . . . . . F-3

Statements of Stockholders' Equity (Deficiency). . . . . . . . . . F-4

Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . F-5

Notes to Financial Statements. . . . . . . . . . . . . . . . . . . F-6
     F-1

<PAGE>


       Virtual Gaming Enterprises, Inc.
       (A Development Stage Enterprise)
              Balance Sheets
       August 31, 2001 and May 31, 2001

<TABLE>
<S>                                      <C>            <C>
                                           August          May
                                         ----------     ----------
ASSETS
CURRENT ASSETS
   Cash                                  $      182     $    2,045
   Advance receivable - related party        24,650         82,198
                                         ----------     ----------
     Total current assets                    24,832         84,243

PROPERTY AND EQUIPMENT
   Equipment                                  5,000          5,000
   Less: accumulated depreciation            (4,583)        (4,167)
                                         ----------     ----------


      Total property and equipment              417            833

OTHER ASSETS
   Intangible assets                      3,375,000      3,375,000
   Less: accumulated amortization                 0              0
                                         ----------     ----------
   Net intangibles                        3,375,000      3,375,000
   Investment - EBB Venture Capital          50,000         50,000
   Investment - Vegas Book, Ltd             320,000        320,000
                                         ----------     ----------
      Total other assets                  3,745,000      3,745,000

Total Assets                             $3,770,249     $3,830,076
                                         ==========     ==========

LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIENCY)

 CURRENT LIABILITIES
   Accrued salaries payable              $  523,132     $  441,882
   Accrued litigation payable               278,125        272,500
   Short-term notes payable               1,754,716      1,711,575
                                         ----------     ----------
     Total current liabilities            2,555,973      2,425,957


Total Liabilities                         2,555,973      2,425,957


STOCKHOLDERS EQUITY (DEFICIENCY)
   Common stock, $0.001 par value,
     authorized 25,000,000 shares;
     40,303,067 and 40,303,067 issued
     and outstanding shares                  40,303         40,303
   Additional paid-in capital             3,930,948      3,930,948
   Stock held in treasury, 20,000,000       (20,000)       (20,000)
   Deficit accumulated during
     the development stage               (2,736,975)    (2,547,132)
                                         ----------     ----------
     Total Stockholders
           Equity (Deficiency)            1,214,276      1,404,119
                                         ----------     ----------
Total Liabilities and Stockholders
           Equity (Deficiency)           $3,770,249     $3,830,076
                                         ==========     ==========
</TABLE>

The accompanying notes are an integral part of the financial statements.

                              F-2

<PAGE>




              Virtual Gaming Enterprises, Inc.
              (A Development Stage Enterprise)
                 Statements of Operations
    For the Three Months Ending August 31, 2001 and 2000
       and Period Since Inception Ended May 31, 2001

<TABLE>
<S>                         <C>             <C>              <C>
                                                             Period from
                                                             November 1997
                                                             (Inception)
				                             through
                                2001            2000         May 31, 2001
                            ------------    ------------    -------------------

Revenues                    $          0    $          0    $           0

Expenses
   Compensation:

      Officers                    81,250          77,500          940,860
      Other                        6,200           5,500           53,073
      Consultants                  9,000           7,500          334,174
   General and
      administrative expenses     44,210          36,760          657,943
   Depreciation                      417             416            4,584
   Research and development            0           4,500          130,500
   Loss due to litigation              0               0          250,000
                            ------------    ------------    -------------------
    Total expenses              (141,077)       (132,176)      (2,371,134)
                            ------------    ------------    -------------------
Interest expense                ( 48,766)        (45,031)        (365,841)
Loss from operations            (141,077)       (132,176)      (2,371,134)
                            ------------    ------------    -------------------
Net loss                    $   (189,843)   $   (177,207)   $  (2,736,975)
                            ============    ============   ===================
Basic net loss per
    weighted average share  $(less than .01)$    (0.02)
                            ============    ============
Weighted average
    number of shares          20,303,067      8,287,701
                            ============    ============
</TABLE>

The accompanying notes are an integral part of the financial statements.

                              F-3

<PAGE>




              Virtual Gaming Enterprises, Inc.
              (A Development Stage Enterprise)
         Statement of Changes in Stockholders' Equity
 For the Years and Period Since Inception through August 31, 2001


<TABLE>
<S>                 <C>           <C>     <C>         <C>          <C>
                                                      Deficit
                                                      Accumulated
                                          Additional  During the   Total
                    Number        Common  Paid-in     Development  Stockholders'
                    Of Shares     Stock   Capital     Stage        Equity
                    ------------  ------  ----------  -----------  -------------

BEGINNING BALANCE,
  November 1997
   (Inception)                 0  $    0  $        0  $         0  $       0

Shares issued
  for cash            13,000,000  46,400           0            0     46,400

Net loss                       0       0           0      (20,506)   (20,506)
                    ------------  ------  ----------  -----------  -------------
BALANCE,
  May 31, 1998        13,000,000  46,400           0      (20,506)    25,894

June 1998 - reverse
  merger              10,209,647 (44,079)     44,109            0         30

February 1999 -
  reverse split	   (22,707,774) (1,819)      1,819            0          0

Shares issued
  for cash             1,679,949   1,680     184,382            0    186,062

Net loss                       0       0           0     (311,214)  (311,214)
                    ------------  ------  ----------  -----------  -------------
BALANCE,
  May 31, 1999         2,181,822   2,182     230,280     (331,720)   (99,228)

Shares issued
  for cash             6,105,879   6,106   3,193,653            0  3,199,759

Net loss                                               (1,185,872)(1,185,872)
                    ------------  ------  ----------  -----------  -------------
BALANCE,
  May 31, 2000         8,287,701 $ 8,288 $ 3,423,963 $ (1,517,592) $1,914,659



Shares issued
  for cash             2,848,700   2,849     448,984                  451,833

Shares issued to
  officers for
  compensation under
  stock option and
  compensation plan    9,166,666   9,166      58,001                   67,167

Shares issued for
  treasury stock      20,000,000  20,000                               20,000

Shares held as
 treasury stock      (20,000,000)(20,000)                             (20,000)

Net loss                                                (1,029,540)(1,029,540)
                   -------------- ------- ----------- ------------ -----------
BALANCE
 May 31, 2001         20,303,067  20,303    3,930,948   (2,547,132) 1,404,119

Net Loss                                                  (189,843)  (189,843)
                   -------------- ------- ----------- ------------ -----------

Balance
 August 31, 2001      20,303,067 $20,303  $ 3,930,948 $ (2,736,975) $1,214,276
                   ============== ======= =========== ============ ===========
</TABLE>

The accompanying notes are an integral part of the financial statements.

                              F-4

<PAGE>


              Virtual Gaming Enterprises, Inc.
              (A Development Stage Enterprise)
                   Statement of Cash Flows
     For the Three Months Ended August 31, 2001 and 2000
          and Period Since Inception Ended May 31,



<TABLE>
<S>                           <C>          <C>              <C>
                                                            Period from
                                                            November 1997
                                                            (Inception)
                                                            through
                                  2001           2000       May 31, 2001
                              ------------   ------------   -------------------

CASH FLOWS FROM OPERATING ACTIVITIES:



Net loss                      $   (189,843)  $   (177,207)  $  (2,736,975)
Adjustments to reconcile net
 loss to net cash used
 for operating activities:
    Depreciation                       417            416           4,583
    Loss due to litigation               0              0         250,000
    Compensation by stock                0              0          67,167
Changes in operating
 assets and liabilities:
    (Increase) decrease advance
      receivable - related party    57,548        (32,257)        (24,650)
    Increase (decrease) accrued
      salaries payable              81,250         64,375         523,132
    Increase (decrease) accrued
      Interest payable              48,765         45,031         365,841
                              ------------   ------------   -------------------
Net cash used by
  operating activities              (1,863)      (817,365)     (1,550,902)
                              ------------   ------------   -------------------

CASH FLOW FROM INVESTING ACTIVITIES:
  Purchase of property
    and equipment                        0             0           (5,000)
  Purchase of investments                0             0         (340,000)
  Acquisition of
    intangible assets                    0             0       (1,958,001)
                              ------------   ------------   -------------------
Net cash (used) provided by
  investing activities                   0             0       (2,303,001)
                              ------------   ------------   -------------------

CASH FLOW FROM FINANCING ACTIVITIES:
     Proceeds from issuance
       of common stock and
       Commissions paid                   0       (48,265)       3,854,085
                              ------------   ------------   -------------------
Net cash provided by
  financing activities                   0       (48,265)       3,854,085
                              ------------   ------------   -------------------

Net increase
  (decrease) in cash                (1,863)      (147,907)            182

CASH, beginning of period            2,045        109,142               0
                              ------------   ------------   -------------------



CASH, end of period           $        182  $      38,765  $          182
                              ============   ============  ===================
</TABLE>

The accompanying notes are an integral part of the financial statements.

                              F-5

<PAGE>


              VIRTUAL GAMING ENTERPRISES, INC.
              (A Development Stage Enterprise)
               NOTES TO FINANCIAL STATEMENTS


(1) SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
      THE COMPANY   Virtual Gaming Enterprises, Inc. is a Nevada
        chartered development stage corporation which conducts
        business from its headquarters in Escondido, California.
        The Company was incorporated on August 9, 1990.  The
        operating company, now dissolved, was established in
        November 1997.

        The Company has not yet engaged in its expected operations.
        The Company's future operations will be to provide casino
        gambling via the Internet.  Current activities include
        raising additional equity and negotiating with potential key
        personnel and facilities.  There is no assurance that any
        benefit will result from such activities.  The Company  will
        not receive any operating revenues until the commencement of
        operations, but will nevertheless continue to incur expenses
        until then.

        The following summarize the more significant accounting and
        reporting policies and practices of the Company:

        A) START-UP COSTS
        Costs of start-up activities, including
        organization costs, are expensed as incurred, in accordance
        with Statement of Position (SOP) 98-5.

        B) NET LOSS PER SHARE
        Basic is computed by dividing the net
        loss by the weighted average number of common shares
        outstanding during the period.

        C) USE OF ESTIMATES
        The financial statements have been
        prepared in conformity with generally accepted accounting
        principles.  In preparing the financial statements,
        management is required to make estimates and assumptions
        that affect the reported amounts of assets and liabilities
        as of the date of the statements of financial condition and


        revenues and expenses for the period then ended.  Actual
        results may differ significantly from those estimates.

        D) PROPERTY AND EQUIPMENT
        All property and equipment are
        recorded at cost and depreciated over their estimated useful
        lives, using the straight-line method.  Upon sale or
        retirement, the costs and related accumulated depreciation
        are eliminated from their respective accounts, and the
        resulting gain or loss is included in the results of
        operations.  Repairs and maintenance charges which do not
        increase the useful lives of the assets are charged to
        operations as incurred.

        E) SIGNIFICANT ACQUISITION
        In June 1998, Interbet, Inc.
        issued 13,136,539 shares of common stock to acquire all of
        the issued and outstanding shares of the common stock of
        Virtual Gaming Enterprises, Inc. (VGEI) in a reverse merger,
        accounted for as a reorganization of VGEI.

(2) ADVANCES RECEIVABLE - RELATED PARTIES   The Company has advanced
        $82,198 to officers of the Company.  These advances are due
        on demand and carry no stated interest rate.

(3) STOCKHOLDERS' EQUITY   The Company has authorized 25,000,000
        shares of $0.001 par value common stock.  The Company had
        40,303,067 shares of common stock issued and outstanding
	at May31, 2001 and 8,287,701 shares of common stock issued
        and outstanding at May 31, 2000.  The Company, in August 1990,
	issued 1,000,000shares for $1,000 in cash.  In August 1996,
	the Company issued 100,000 shares for $50,000 in cash.
	In December 1997, the Company issued 4,973,108 shares in
	conjunction with the acquisition of Interbet, Inc.
	In June 1998, the Company issued 2,000,000 shares in exchange
	for services valued at $313,200.  In June 1998, the Company issued
        600,000 shares in settlement of a loan amounting to $93,957.
        In June 1998, the Company issued 1,400,000 shares for
        $46,400 in cash.  In June 1998, the Company

     F-6

<PAGE>


                   VIRTUAL GAMING ENTERPRISES, INC.
                   (A Development Stage Enterprise)
                    NOTES TO FINANCIAL STATEMENTS


(3) STOCKHOLDERS' EQUITY (CONTINUED) issued 13,136,539 shares for
        the acquisition of Virtual Gaming Enterprises, Inc.  In
        February 1999, the Company completed a reverse split of its
        common stock, leaving 501,873 shares issued and outstanding.


        During the fourth quarter of fiscal 1999, the Company
        issued 1,679,949 shares for $186,062 in cash.  During the
        Year ended May 31, 2000, the Company issued 6,105,879 shares
        for $3,169,759.  During the year ended May 31, 2001, the Company
        issued 2,848,700 shares for $451,833, 9,166,666 shares as compensation
        for $67,167 and 20,000,000 shares as treasury stock for $20,000.

(4) INCOME TAXES  Deferred income taxes (benefits) are provided for
        certain income and expenses which are recognized in
        different periods for tax and financial reporting purposes.
        The Company has net operating loss carry-forwards for income
        tax purposes of approximately $2,547,132, expiring $20,500 at
        May 31, 2018, $311,200 at May 31, 2019, $771,523 at May 31, 2020
	and $154,500 at May 31, 2021.

        The amount recorded as deferred tax assets is approximately
        $382,100 and $227,700 as of May 31, 2001 and May 31, 2000,
        respectively, which represents the amount of tax benefit of
        the loss carryforward.  The Company has established a 100%
        valuation allowance against this deferred tax asset, as the
        Company has no history of profitable operations.

(5) GOING CONCERN As shown in the accompanying financial statements,
        the Company incurred a net loss of $2,547,132 for the period
        from November 1997 (Inception) through May 31, 2001.  The
        ability of the Company to continue as a going concern is
        dependent upon commencing operations and obtaining
        additional capital and financing.  The financial statements
        do not include any adjustments that might be necessary if
        the Company is unable to continue as a going concern.  The
        Company is currently seeking financing to allow it to begin
        its planned operations.

(6) RELATED PARTIES  As discussed in Note 2, the Company extended an
        advance to officers.  Related party balances and amounts
        for the period since inception, (November 1997), ended May
        31, 2001 are as follows:


               Advance receivable - related party       $ 82,198
                                                        ========

(7) INTANGIBLE ASSETS
	During the year ended May 31, 2001, the Company
	has engaged consultants to upgrade operating systems for the
	internet gambling casinos.  During the year ended May 31, 2000,
	the Company Entered into agreements for the development of software
	that Will provide gaming capabilities on the internet.  The
	Company has Invested $1,898,001 during the year 2000 for 17 of
	these programs.The Company plans to lease and/or manage these sites
	for a fee. In May 1999, the Company formed Hung Sai,
        Ltd., a Nevis Corporation.  In May 1999, Hung Sai entered
        into a license agreement with a third party to provide an
        Internet gateway for future Internet casinos to be located
        in St. Kitts, West Indies.  This agreement required a


        $60,000 initial license fee and future revenue sharing from
        the Company's future on-line casinos.  The Company expects
        to amortize the license fee over a five-year period, once
        commercialization has begun.

(8) COMMITMENTS AND CONTINGENCIES  EMPLOYMENT AGREEMENTS
	In July 1998, the Company entered
        into employment agreements with two of its officers.  These
        agreements have three-year terms expiring June 30, 2001.
        The agreements contain base pay amounts of $250,000,
        $280,000 and $325,000, combined.  These contracts also call
        for the issuance of options for 3,000,000 shares of the
        Company's common stock, 1,500,000 of which vested on
        December 1, 1998, and 150,000 per month beginning June 1,
        1999 for a period of ten months.

(9) LEGAL PROCEDINGS
	The Company is currently dealing with questions that the
	U.S. Securities and Exchange Commission (SEC) has about the
        Company and timely filing of the financial reports of the
	Company.The Company and its attorney has disclosed that the
	SEC may have further questions and may bring an enforcement
	action.  The Company intends to defend itself if an action is
	taken.  The Company is involved in a lawsuit with Silicon Valley
	IPO Net work, et all.  The Company and its attorney has
	disclosed that a settlement will be discussed.  On or about
	June 11, 1999, the United States Securities and Exchange
	Commission initiated a proceeding in the United States
	District Court, Southern District of California, against
	the Company seeking to hold the Company in Civil Contempt for
	failure to respond to a Subpoena issued by the Commission.
	The Court granted the Commission's request and issued an Order
	that sanctioned the Company Ten Thousand ($10,000.00) Dollars
	per day until such time as it complied with the Commission's Subpoena.

        Subsequent to the Company's compliance with the Commission's Subpoena,
        the Company and the Commission entered into a Stipulation and Order
        whereby the Company, having purged itself of the civil Contempt
        citation, agreed to pay and did pay Ten Thousand ($10,000.00) Dollars
        as a sanction. The Stipulation and Order was signed by the Court and
        filed on or about November 18, 1999.

        Virtual Gaming Enterprises, Inc., and its President, Virgil Williams,
        in or about May, 2000, submitted Offers of Settlement to the United
        States Securities and Exchange Commission that stemmed from certain
        matters reviewed by the Commission.

  	The Company, without admitting or denying any wrongdoing, consented to
        entry of an Order by the Commission that:

  A)	Orders the Company to cease and desist from committing or causing
        any violation, and any future violation, of Section 13(a) of the
        Exchange Act and Rules 13a-1 and 13a-13 thereunder; and

  B)	 Orders the effectiveness of Virtual Gaming's Form S-8 be suspended.


        On July 24, 2000, the Company and the Commission agreed to modify a
        portion of this Offer of Settlement to reflect that, "as a result of
        Virtual Gaming's failure to meet its reporting obligations, the Form
        S-8 never became effective."

        Virgil Williams, without admitting or denying any wrongdoing,
        consented to entry of an Order by the Commission that:

  A)	Orders him to cease and desist from committing or causing any
        violation, and any future violation, of Section 17(a) of the
        Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5
        thereunder.

      Both of these Offers of Settlement have yet to be acted upon by
      the Commission.

      In a civil proceeding filed in the United States District Court for
      the Eastern District of New York in January 2000, identified by Case
      Number 00 CIV 0276, Platinum I.T. Consulting, Inc., and Edward Marian,
      alleged that Virtual Gaming Enterprises, Inc., Virgil Williams, Brenda
      Williams and others violated Section 12(1) of the Securities Act,
      Violated Section 10(b) of the Exchange Act and Rule 10b-5  thereunder,
      Breached their Contract(s) with Plaintiff(s), Fraudulently Induced
      Plaintiff(s) to purchase The Company's securities, Converted Plaintiff(s)
      funds, and were Unjustly Enriched at Plaintiff's expense. Plaintiffs
      sought damages in excess of Five Million ($5,000,000.00) dollars.

        The Company deemed it in its best interest to resolve this matter, as
        the costs and fees for defense would largely outweigh the costs of
        resolution. Accordingly, without admitting or denying the allegations
        in the Complaint, the Company and Virgil and Brenda Williams entered
        into a Settlement and Consent Judgment whereby they agreed to
        compensate the Plaintiffs in the amount of $170,00.00 within 75 days
        of the effective date of the Settlement and Consent Judgment.

	Due to the hospitalization of the Company's President Virgil Williams,
        the Company did not make payment as required under the Settlement and
        Consent Judgment. As a result, and by the terms and provisions of the
        Settlement and Consent Judgment, the Settlement Obligation has increased
	to $250,000.00. The Company expects to remit this amount to the Plaintiffs,
	in care of Plaintiffs' Attorney, in short order.

	On February 14, 2000, the State of Indiana, Office of the Secretary of
        State, Securities Division, filed an Administrative Complaint against
        Virtual Gaming Enterprises, Inc., Virgil Williams and others, alleging
        that all Respondents sold and/or offered for sale certain securities
        in violation of Indiana State Law. On this same date, the Indiana
        Securities Division requested and received a Cease and Desist Order.



	On March 2, 2000, Virtual Gaming Enterprises, Inc., and Virgil Williams
	filed their Answer and Affirmative Defenses to the Administrative Complaint
	and demanded an immediate administrative hearing pursuant to the terms and
	provision of the Indiana Securities Act that requires a hearing to be
	set within 45 days of the Indiana  Securities Division. Virtual Gaming
	Enterprises, Inc., and Virgil Williams have and do expressly deny any
	and all allegations made against them in the Administrative Complaint.

	Counsel for the Company and Mr. Williams, having not had a response to
        the hearing demand, provided the Indiana Securities Division a second
        copy of the Answer and Affirmative Defenses and Demand for Hearing via
        facsimile on March 17, 2000. Subsequent to March 17, 2000, Counsel for
        the Company made several attempts to contact the Indiana Securities
        Division via telephone, leaving messages for the Deputy Commissioner,
        Enforcement, who apparently is responsible for this proceeding. The
	Indiana Securities Division has never responded to the Demand for
        Hearing or the telephonic inquiries of counsel.

  	Finally, in January or February 2000, Virtual Gaming Enterprises,
        Inc., was named as a Defendant in a Complaint for Interpleader filed
        in the Third Judicial District Court in and for Salt Lake County,
        State of Utah, and identified as Civil No. 000901201. Therein,
        National Stock Transfer, Inc., the transfer agent for the Company's
        Stock, due to competing demands for certain certificates. This action
        remains pending.


     F-7

<PAGE>

<SEQUENCE>2


<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH 10KSB FOR THE YEAR ENDED MAY 31, 2001.
</LEGEND>

Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations

Plan of Operation

The Registrant is continuing its efforts to provide management of, rent
of orsales of casino gambling via the internet.  The casinos are
currently in the testing stage of their development.  It is possible
that the registrant will be successful in this plan of operation;
however, there is no assurance for success.


Results of Operation

The Company did not have any operating income during the quarters ended
August 31, 2001 and 2000.  For the quarter ended August 31, 2001, the
registrant recognized a net loss of $189,843 as compared to $177,207
during the prior year's quarter.   Some compensation expenses, general
and administrative cost were accrued.  All of the interest expense of
$48,766 was accrued during the quarter. Expenses for general and
administrative were comprised of costs mainly associated with office
overhead, trave, legal and accounting fees.


Liquidity and Capital Resources

At August 31, 2001 the Company had not raised capital from the issuance
of stock. At August 31, 2000 the Company spent $48,265 to raise capital.
The Company had no other capital resources other than funding casinos
with notes payable from the creators of those casinos and the possibly
of raising operating capital through the sale of additional common stock.