U.S SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                   FORM 10-KSB

[X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
         OF 1934 [FEE REQUIRED]

         For the fiscal year ended December 31, 2001

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934 [NO FEE REQUIRED]

         For the transition period from January 1, 2001 to December 31, 2001

                         Commission file number 0-27256

                           ONLINE GAMING SYSTEMS, LTD.
                           ---------------------------


           DELAWARE                                      13- 3858917
------------------------------               -----------------------------------
State or Other Jurisdiction of               (I.R.S. Employer Identification No.
Incorporation or Organization)


              3225 McLeod Drive, 1st Floor, Las Vegas, Nevada 89121
              -----------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)


                                 (702) 836-3042
                ------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)


         Securities registered under Section 12(b) of the Exchange Act:
                                      None.

         Securities registered under Section 12(g) of the Exchange Act:

                          COMMON STOCK, $.001 PAR VALUE
                          -----------------------------
                                (Title of Class)

         Check whether the issuer: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
<PAGE>

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.

         State issuer's revenues for its most recent fiscal year: The issuer's
revenues for the fiscal year ended December 31, 2001 were $ 778,847.

         The aggregate market value at April 3, 2002 of shares of the
registrant's Common Stock, $.001 par value per share (based upon the closing
price of $ .06 per share of such stock on the Nasdaq OTC Bulletin Board on such
date), held by non-affiliates of the Registrant was approximately $778,000.
Solely for the purposes of this calculation, shares held by directors and
officers of the Registrant have been excluded. Such exclusion should not be
deemed a determination or an admission by the Registrant that such individuals
are, in fact, affiliates of the Registrant.

         State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: At April 3, 2002 there were
outstanding 95,394,702 shares of the Registrant's Common Stock, $.001 par value.

         Transitional Small Business Disclosure Format (check one):

                           Yes [X]             No [ ]
<PAGE>

                                TABLE OF CONTENTS


                                     PART I

ITEM 1   DESCRIPTION OF BUSINESS........................................       1
           General......................................................       1
           Overview.....................................................       1
           Products and Services........................................       2
           Business Model...............................................       3
           Industry Overview............................................       4
           Regulation...................................................       6
           Marketing....................................................       9
           Trademarks and Patents.......................................       9
           Competition..................................................      10
           Employees....................................................      10
           Recent Developments..........................................      10

ITEM 2   DESCRIPTION OF PROPERTY........................................      14

ITEM 3   LEGAL PROCEEDINGS..............................................      14

ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............      15

                                     PART II

ITEM 5   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.......      16

ITEM 6   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION......      17
           Overview.....................................................      17
           Results of Operations........................................      17
           Liquidity and Capital Resources..............................      18
           Inflation....................................................      18

ITEM 7   FINANCIAL STATEMENTS...........................................      18

                                    PART III

ITEM 8   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURES......................................      19

ITEM 9   EXECUTIVE COMPENSATION.........................................      19

ITEM 10  SESCURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT.....................................................      21

ITEM 11  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................      21

ITEM 12  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
         PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.....      23

                                     PART IV

ITEM 13  EXHIBITS, LIST AND REPORTS ON FROM 10KSB.......................      25

         SIGNATURES.....................................................      27

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                                     PART I

ITEM 1.   DESCRIPTION OF BUSINESS.
          -----------------------

GENERAL

We are making this statement in order to satisfy the "safe harbor" provisions
contained in the Private Securities Litigation Reform Act of 1995. This Annual
Report, on Form 10-KSB, includes forward-looking statements relating to the
business of the Company. Forward-looking statements contained herein, or in
other statements made by the Company are made based on Management's expectations
and beliefs concerning future events impacting the Company and are subject to
uncertainties and factors relating to the Company's operations and business
environment, all of which are difficult to predict and many of which are beyond
the control of the Company, that could cause actual results of the Company to
differ materially from those matters expressed in or implied by forward-looking
statements. The Company believes that the following factors, among others, could
affect its future performance and cause actual results of the Company to differ
materially from those expressed in, or implied by, forward-looking statements
made by, or on behalf of the, Company; (a) general economic, business and market
conditions; (b) competition; (c) the success of advertising and promotional
efforts; (d) trends within the Internet Gaming; (e) the existence or absence of
adverse publicity; (f) changes in relationships with the Company's major
customers or in the financial condition of those customers; and (g) the adequacy
of the Company's financial resources and the availability and terms of any
additional capital. Such forward-looking statements are based on assumptions
that the Company will continue to design, market and provide successful new
services, that competitive conditions will not change materially, that demand
for the Company's services will continue to grow, that the Company will retain
and add qualified personnel, that the Company's forecasts will accurately
anticipate revenue growth and the costs of producing that growth, and that there
will be no material adverse change in the Company's business. In light of the
significant uncertainties inherent in the forward-looking information included
in this Form 10-KSB, actual results could differ materially from the
forward-looking information contained in this Annual Report on Form 10-KSB.

OVERVIEW

We develop and market interactive products and services in the gaming
entertainment and information technology fields. We were incorporated in the
state of Colorado in October 1939 under the name "Pacific Gold, Inc." to explore
and develop gold and silver ore prospects and to operate mining and milling
facilities. Pacific Gold, Inc. conducted limited mining activities until
operations ceased. After we changed our name to The CEEE Group, we then sought
new business opportunities as a development stage entity.

In 1973 we changed our name to Cine-Chrome Laboratories, Inc. and operated a
film-processing lab in California. From 1984 until June 1994, we did not conduct
any operations, transactions or business activities. In June 1994, we began
acting as a corporate advisory operation, which included acting as a "finder"
with respect to U.S. public companies and providing advisory services concerning
corporate structure and raising capital. Beginning in 1996, we have concentrated
our business operations primarily on the manufacturing, marketing and
development of interactive gaming products and services. These products and
services are focused on two major industries; interactive gaming & wagering
products, and information technology services.

Prior to July 16, 1996, we had no operations other than searching for a business
combination. In July 1996, we consummated a share exchange pursuant to an
Exchange of Stock Agreement and Plan of Reorganization with Atlantic
International Capital Ltd., a Delaware corporation and the former stockholders
of Atlantic Capital. As a result, the business of Atlantic Capital became our
business.

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On November 22, 1996, we merged with, and into, a wholly owned Delaware
subsidiary, Atlantic International Entertainment, Ltd. We, among other things:

     o    changed our state of incorporation to Delaware
     o    increased our authorized capital stock to 110,000,000 (100,000,000
          shares of common stock, $.001 per share (the "common stock") and
          10,000,000 shares of preferred stock, $.001 par value per share (the
          "Preferred stock");
     o    Performed a 1 for 3-share exchange.

We acquired the major assets of RAM Associates, Inc. in 1996. The RAM assets we
acquired included

     o    COMMUNITY CASINO
     o    REALSPORTS(TM)

These products formed a part of the foundation of our current gaming software
products. Other products acquired from RAM included

     o    HOTEL HOTLINKS(TM)
     o    CLUB INTERACTIVE.

In March 1997, we acquired the Internet service provider and developer, The
Eminet Domain, Inc. Through the Eminet Domain, Inc. we based our interactive
non-gaming and wagering products and services. The Eminet Domain, Inc. offers
dial-up Internet business and web hosting development services to commercial
markets.

In August 1999 we changed our name to Online Gaming Systems, Ltd. In September
2000 we relocated our corporate offices to Las Vegas, Nevada.

The Company's executive offices are located at 3225 McLeod Drive, 1st Floor, and
Las Vegas, Nevada 89121. The telephone number of the Company is (702) 836-3042.
The Company maintains a home page on the Internet at http://www.ogsltd.com.


Products and Services

Internet

All of the OGS products feature a singularly comprehensive background, allowing
the operator to administer the games simultaneously. Our products offer an
extremely powerful solution, including not only an extensive range of games, but
also a highly sophisticated back-end. The software is flexible and easy to use,
providing state of the art security features, and offering a wide range of
e-commerce solutions.

Interactive Casino Extension(TM) (ICE) - The flagship product, this product has
been licensed to more than 20 licensees throughout the world. ICE offers an
on-line casino with 11 casino games, including five different slots, three video
poker games, video keno, Blackjack, Mini-baccarat, Baccarat, Roulette, Sic Bo,
and three scratch-off games. A comprehensive system allows for the reporting and
accounting of customer transactions. The back end of the casino runs on a
server, which contains information about the casino, staff and customers.
Additionally, the company configures and sells the product to U.S. gaming and
wagering operators, using its "Play for Fun System," which helped launch its
Internet Hosting service.

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webSports(TM) - This product allows bettors to participate in a multitude of
games, including professional and collegiate football, basketball, professional
soccer, hockey, baseball, and rugby wagers. The product also offers a toll-free
800-telephone link through which players can establish accounts, place bets, and
check results of bets.

LottoMagic(TM) - This product involves instant lottery scratch game tickets that
can be purchased on-line and scratched on screen using a mouse. LottoMagic
provides features in Spanish or English. After the player signs in to the site,
they are eligible to play Wheel of Fortune (a game of key numbers), Match 3
(money matching three of six) and High Card (highest score). This product is
currently under development

Bingo Blast(TM) - The play of this pari-mutual game is similar to that of an
actual bingo hall. Each game has a minimum prize that is increased based on the
number of cards purchased and has a progressive price that increases until a
player gets Bingo within a certain number of balls called. The game is played
with multiple bettors using 30 game patterns worldwide. This product is
currently under development.

The ICE product has undergone testing for certification for the Norfolk Island
Gaming Authority. Norfolk Island utilizes the GGS testing agency. The Company
has received confirmation from GGS that the ICE product will conform to
certification requirements of Norfolk Island in the near future. The software
will actually receive certification when a sponsoring Internet Casino receives
certification. This certification will mark only the third such software to be
approved by any Australian authority and the first Microsoft- based software. We
believe that software certified by a leading and highly regulated jurisdiction
will provide a competitive advantage as newly developing Internet gaming
jurisdictions and customers seek software solutions.

The company provides on-going service, support and upgrades via contracts that
are part of the initial sales of products. Generally, these are multi-year
contracts, providing for a monthly service fee, varying depending on the
sophistication of the product.

During the first quarter of 2002, the Company announced the release of the Beta
version of FIRE, its premium casino software that will complement its ICE
product designed for less-intensive users. The product was designed with
security, performance, third party integration and scalability in mind. The FIRE
system has recently gone through initial audit testing for certification in the
Northern Territory of Australia, the world's first regulated jurisdiction.


Business Model

The Company's business model has been based upon software licensing and support
of its software products. Generally, the company licenses the software products
for a fixed price, and also executes software support and maintenance agreements
for an extended period, generally five years. The customer is generally afforded
future upgrades and prices discounted to retail.

This model differs from many of the Company's competitors, as many of them own,
operate and/or manage Internet casinos for their software customers, thereby
providing a "turnkey" approach to these customers. All of Company's leading
competitors are located in foreign countries, and therefore do not have to abide
by U.S. laws. Many of these competitors are operating and/or managing sites that
are actively involved in soliciting U.S. customer business. Since OGS is a U.S.
based company, we have chosen not to operate our business model this way to
date.

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With the potential for Internet gaming being made legal in various jurisdictions
in the United States, the Company believes that many U.S. operators will enter
the business. The Company proposes to manage or co-manage the Internet casinos
with its American customers, thereby allowing its customers to develop new and
proprietary games, develop their in-house management, and enable the Company to
gain additional revenue sources through management fee arrangements, and special
projects related to game development.

The Company is continuing to upgrade its products in anticipation of large-scale
users demanding such products. The Company recently released a new casino
software product, promoting a significantly enhanced database, thereby creating
opportunities for new and different game attachments, and larger load
opportunities, and ensuring the highest level of security, conformity to
regulations and reliability.

The Company continually searches for additional content to enhance the gaming
experience it can provide to the Internet market, entering into strategic
alliances or other ventures to provide unique products and technologies.
Additionally, the Company seeks alliances with multi-media groups to allow for
the broadest, most efficient use of marketing resources to assist customers in
successful marketing of their brands.


Hardware

The Company's Pegasus machines are wireless and portable gaming devices,
designed to make possible gaming opportunities outside the traditional casino
floor. The machines are small, light and mobile, making possible to have gaming
in restaurants, keno/bingo rooms, and spas.

The Company's Mini-Touch has been approved by the Nevada Gaming Commission, and
was being distributed in the U.S. and Canada via an exclusive distribution
agreement with Anchor Gaming. The period of exclusivity has now expired, and the
Company is seeking both direct sales and distribution agreements to further
penetrate the worldwide market.

The Company also produces kiosks for placement of machines in bars, restaurants
and other space-restrained areas, and is developing table games, that will be
sold, via revenue sharing arrangements, to licensed operators in the U.S. and
worldwide.


INDUSTRY OVERVIEW

The Internet is widely regarded as the fastest growing telecommunications medium
in history. Although the Internet only began to become extensively used by
businesses and individuals in 1993, it reached nearly 50 million users within
its first five years of existence. That growth rate far outpaces 38 years for
radio, 13 years for television, and ten years for cable. Jupiter Communications
estimates that nearly 100 million U.S. citizens alone used the Internet in 1999,
which should grow to almost 160 million by 2003. Worldwide, it is estimated that
there were 130 million in 1999, and is expect to grow to 500 million users by
2004.

The Internet is a global network of computers connecting millions of individual
computers and more than 70,000 business, commercial, government and academic
networks. This interconnectivity allows any one of these computers to transmit
information to any other computer. It has become a portal for communications,
games, shopping, and commerce. Chat rooms, streaming on-line video and audio and
downloadable programs are popular items among many on-line users.

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<PAGE>

Internet access within homes is provided mainly by on-line subscriber services,
which link together users of the Internet and provide them with services such as
search engines, e-mail, shopping and a host of other products or a periodic
service charge.

The commodity pricing of powerful computers and the wealth of information
available on the Internet have all contributed to the creation of a vast market
of consumers and business buyers. During the last three years, the number of
Internet service providers ("ISP's") in the United States alone has grown from
roughly zero to over 3,000. Management attributes the influx of ISP's to several
factors that include

     o    an increasing demand for connection to the internet
     o    the internet offers significant marketing opportunities for a variety
          of products and services
     o    Providing internet connections requires minimum expertise and start-up
          costs


E-commerce includes the buying and selling of goods by both consumers and
businesses over the Internet. This new marketplace in cyberspace, which began
with only a few powerful brand names offering consumer goods over the Internet,
has now grown to include all types of goods and services. Transactions are
generally regarded as between one or businesses to another (B2B), or between
business and consumer (B2C).

The growth in e-commerce worldwide has reflected the popularity and success of
the Internet as a medium for financial transactions. There are varying estimates
of the current size and potential of e-commerce, but it is expected that total
online commerce could increase to $1.4 trillion by 2003, from about $100 billion
in 2000.

Currently, the e-commerce and Internet markets are dominated by the United
States, where 40 million U.S. households with PCs have on-line access. According
to Jupiter Communications, by 2002, approximately 57 million U.S. homes will
have PCs with on-line access. Comparatively, 39 percent of homes with on-line
access spent time shopping on the Internet in 2000, whereas close to 70 percent
of on-line households are expected to shop via Internet in 2002.

E-commerce is relatively undeveloped with respect to the rest of the world.
According to the River City Group, nearly 40 percent of U.S. homes have PCs, as
compared to 22 percent in the U.K. and 12 percent in France. As citizens in
these countries gain access to computers within their homes, the Internet usage
will rise significantly, and e-commerce will follow suit.

E-gaming combines the fast-growing Internet media with the lucrative gambling
and wagering market. The global gaming industry began to capitalize on the
rising popularity of Internet commerce in 1997, when legal Internet wagering
began in Australia through NetTAB, an Internet wagering system owned and
operated by the New South Wales government. There were only 40 gaming Web sites
worldwide in 1997; The River City Group estimates that there are now more than
1,400 Internet gaming sites, owned by 250-300 operating companies based
throughout the world.

In order to avoid the unclear legal status of e-gaming in the United States,
while capitalizing on the large gambling community as well as the large Internet
community in North America, many Internet gambling sites have been located
outside of the United States, where it is clearly legal for those companies to
operate.

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<PAGE>

The drivers powering the development of Internet gaming include consumer demand;
ease of entry and the arrival of name brands; product quality advantages;
internal gambling industry pressures; Internet gambling's exceptional
profitability and its consequent attractiveness to sources of investment
capital; tax advantages and the consumer price advantages created by low-or
untaxed e-gambling businesses located in tax havens; the Internet's unique
ability to facilitate communities of interacting individuals centered on shared
interests or activities; and the enabling technology of the Internet itself.

The Internet gaming industry is growing at a dramatic rate. The River City Group
estimates that the number of Internet gamblers will grow from approximately four
million in 1999 to 15 million by 2004. Christiansen Capital Advisors has
estimated that Internet gaming expenditures increased from about $1.1 billion in
1999 to about $2.5 billion in 2001, and will increase to $5 billion in 2003.

Internet gaming sites are rapidly growing in terms of visibility and visitation
rates. According to Jupiter Media Metrix Inc., online casinos are the
fifth-largest industry in terms of online advertising, moving up from the
eleventh largest in one year. Online advertising increased from 911 million ad
viewings in December 2000 to 2.5 billion viewings in December of 2001. According
to Jupiter, gambling sites had 13.6 million unique visitors in December of 2001,
spending a total of 274 million minutes on the sites. Visitors averaged 20.2
minutes per month in the virtual casinos, compared to the average 9.8 minutes
per month spent on health information sites, and 35.8 minutes a month spent on
travel sites.

The share of U.S. Internet gamblers is also expected to change dramatically over
the next few years, from nearly 80 percent of the world market in 1999 to 38
percent by 2004. If these estimates are accurate, then the total expenditures
from U.S. patrons will increase about 60 percent during the 2000-2003 time
frame, whereas the rest of the world is forecast to grow some 700 percent, from
$.5 billion in 2000 to nearly $4 billion.


REGULATION

Gaming activities are stringently regulated in the United States and most
developed countries. The gaming regulations are based on policies that are
concerned with, among other things (i) the prevention of unsavory or unsuitable
persons from having a direct or indirect involvement with gaming; (ii) the
establishment and maintenance of responsible accounting practices and
procedures; (iii) the maintenance of effective controls over the financial
practices of licensees, including the establishment of minimum procedures for
internal fiscal affairs and the safeguarding of assets and revenues, providing
reliable record keeping and requiring the filing of periodic reports with the
governing jurisdictions; (iv) the prevention of cheating and fraudulent
practices; and (v) the provision of a source of government revenue through
taxation and licensing fees.

The company believes that several countries, including several countries in
Europe, the Caribbean, Latin America the Middle East, Africa and Asia have not
prohibited Internet gaming activities. We believe that the number of countries
allowing Internet gaming activities will increase as the regulatory authorities
become more familiar with and comfortable with legitimized Internet gaming.
However, given that Internet gaming is a new and fledging industry, some foreign
jurisdictions may take actions to more severely regulate or restrict Internet
gaming operations in the future.

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The outlook for Internet gaming in the United States remains unclear. Many
federal and state agencies in the United States have taken the position that the
provision of Internet gaming services to residents of the United States are
subject to existing federal and state laws which generally prohibit the
provision of gaming opportunities, except where licensed or subject to
exemption. The U.S. Department of Justice maintains that, technically, there are
not specific U.S. federal provisions against the placing of Internet bets.
However the Justice Department also maintains the position that it is illegal to
operate Internet gaming Web sites and servers from within the United States.

Conversely, many providers of Internet gaming services to citizens and residents
of the United States have taken the position that existing federal and state
laws pertaining to the provisions of gaming opportunities do not apply to the
Internet gaming services. In 1997 and 1999, legislation was introduced to the
United States Senate and House of Representatives which, if enacted, would have
effectively amended the Federal Wire Statute, codified at 18 U.S.C (s) 1084, to
prohibit the provision of Internet gaming operations to residents of the United
States. No action was taken on the bills, known as The Internet Gambling
Prohibition Act prior to the end of the legislative sessions.

On February 12, 2001 Congressman James A. Leach (R-IA) introduced the Unlawful
Internet Gambling Funding Prohibition Act, and on July 20, 2001 an identical
bill was introduced by Congressman John J. LaFalce (D-NY), known as the Internet
Gambling Payments Prohibition Act. Each bill would prohibit all forms of
traditional funding for Internet gambling. Each bill targets the operators of
Internet gambling and specifically excludes financial institutions.

On June 28, 2001 Congressman Cliff Stearns (R-FL) introduced the Jurisdictional
Certainty Over Digital Commerce Act. The legislation, if passed would leave the
Internet the sole domain of Congress to govern, including on-line gaming.

On October 16, 2001, the U.S. House of Representatives removed legislation from
an anti-terrorism bill, HR 3004 that proposed legislation to combat financing of
terrorism and other financial crimes, including money laundering and other
suspicious transactions that may have led to the events of September 11, 2001.
Finally, on November 1, 2001 Congressman Bob Goodlatte (R-VA) introduced the
Combating Illegal Gambling Reform and Modernization Act before the House
Judiciary Committee. The proposed legislation would amend the Wire Act to
include all interstate communications and expand the scope of Section 1084 to
all bets or wagers, including games of chance. On March 12, 2001 the House
Judiciary Committee approved the bill, which if ultimately approved by Congress
would target sites found in violation, allow agents to compel credit-card
companies and other payment services to cut off transactions with targeted sites
if they can not be shut down directly. It is worth noting that a different
Goodlatte-sponsored gambling bill was defeated on the floor of the House in the
summer of 2000.

On June 14, 2001 Governor Kenny Guinn signed Assembly Bill 466 that could make
Nevada the first state to offer legal Internet gambling into law. AB 466 directs
the Nevada Gaming Control Board and the Nevada Gaming Commission to study
Internet gaming systems, and promulgate appropriate regulations. The Nevada
legislation had certain restrictions, including providing assurances that minors
and residents in states where Internet gambling is illegal are blocked from
accessing the sites and that the activity was deemed legal on a federal level.

On March 22, 2002 the Nevada Gaming Control Board announced that it could not
proceed with the regulatory framework, barring guidance form the U.S. Department
of Justice. Generally speaking, the difficulties lie with the merging of
gambling jurisdictional issues generally afforded to individual states, and The
Wire Act, passed in 1961 passed in part of combat organized crime. The Wire Act
forbids an American to utilize phone lines to place a bet, and case law during

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the Clinton Administration said that Internet gambling was prohibited under
federal law, utilizing a narrow interpretation of the law. With the Internet
clearly not contemplated at the time of the law (it specifies sports betting),
the Nevada regulators could not determine that it was not unlawful activity.

It is apparent that the Internet gambling push in Nevada will be prolonged,
until federal guidance can be obtained. The initial gaming companies that expect
to operate Internet casinos appear to be indifferent towards these developments,
as they have already proceeded with plans to operate offshore, in regulated
jurisdictions where they agree to not solicit nor accept wagers from anywhere it
would be deemed illegal, including the Untied States. These companies may view
that the growth for Internet gaming is expected to be much greater outside of
the United States in the future.

In January 2001, New Jersey introduced A-3150, a bill proposed to regulate
Internet Gambling in that State. If passed, it would allow for both land-based
casinos in Atlantic City and online casinos to accept wagers from residents
within the state of New Jersey. This legislation is regarded as one of the most
controversial and most watched in the industry.

Various states, including Oregon and California have introduced bills during
2001 that would ban Internet gambling within their respective borders.

In May of 2000, the Australian federal government announced that it would impose
a 12-month moratorium on the issuing of licenses to operate Internet gambling
services. In September of 2000, a moratorium bill was formally introduced. A tie
vote in the Senate in October 2000 caused the bill to fail; however it was
amended to exempt sports and race wagering, and The Interactive Gambling Act
2000 was introduced in December. This time it passed, and therefore a moratorium
became in effect for one year, retroactive to May 19, 2000. This had an adverse
effect for our sales efforts to Australian operators, although many operators
now are locating offshore in locations such as Vanuatu.

The Interactive Gambling Act 2001 came into effect on July 11, 2001. The Act is
a response by the Australian Federal Government to the concerns that the
Internet will exacerbate problem gambling among Australians, and will increase
further the economic and social costs that are caused by problem gambling. The
Act targets both interactive gambling service providers and Australian Internet
service providers to implement measures to prevent end users in Australia from
being able to access interactive gambling services. Accordingly, it does not
prohibit Internet gambling operations anywhere it is legal to do so in the
country.

The Act only prohibits casino style games; as exemptions were provided to sports
betting, pari-mutual horse betting and lotteries.

Other jurisdictions are moving swiftly toward regulating and encouraging
Internet gaming. The United Kingdom recently released a report that will greatly
enhance its gambling business, including Internet Gaming. Sports betting is
currently regulated by the government, and to be more attractive to operators,
the government scrapped its nine percent tax on wagers, payable by bettors, with
a 15 percent tax on gross profits, to be paid for by the bookmakers, both
Internet and telephonic. The reforms will require primary legislation, and the
Government will bring a Bill before Parliament in the near future.

The UK is in part reacting to development of the Internet gaming in offshore tax
havens including Isle of Mann and Alderney. The Isle of Mann has attracted the
attention of some of the major US and European brands thus far, and has issued
five online gaming licenses. Leading US gaming company has been awarded a
license, and has announced that it expects to be operating within a year. Sun
International was also issued a license, and was the first operator to launch

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its Casino Atlantis Online from the Isle of Mann. Additionally, Station Casinos,
Inc. a Nevada operator has announced that it will participate in SunOnline, the
wholly owned subsidiary of Sun International that it running the site.

The Company believes that the large, land-based operators will continue to seek
out opportunities to develop Internet gaming businesses in regulated
jurisdictions including Europe and Australia, regardless of the outcome in the
United States, and Nevada specifically. If States such as Nevada ultimately
approve Internet gaming legislation, then the operators may choose whether to
establish operations in the United States.

The Internet gaming industry has created self-regulatory organizations,
including the Interactive Gaming Council, The Internet Gaming Commission and the
Fidelity Trust Gaming Association.


MARKETING

We utilize both direct sales and marketing alliances to distribute our products.
We have distributed our software products directly, from our offices in Las
Vegas, Nevada and Sydney, Australia. We believe that direct sale of our software
products is the most efficient way of managing customer relations, if we will be
servicing the customer subsequent to the sale. We do not presently participate
in the operations or licensing of any gaming sites. The operator is responsible
for the purchase and location of servers at their own premises, and to prepare
and maintain appropriate licensing in the relevant jurisdiction. We also do not
participate presently in credit card billing, although our software supports a
selection of e-commerce selections for the operator.

With the potential for Internet gaming being made legal in various jurisdictions
in the United States, the Company believes that many U.S. operators will enter
the business. The Company proposes to manage or co-manage the Internet casinos
with its American customers, thereby allowing its customers to develop new and
proprietary games, develop their in-house management, and enable the Company to
gain additional revenue sources through management fee arrangements, and special
projects related to game development.

We have signed distribution agreements with third parties for our gaming device
products. The Company's Mini-Touch was being distributed in the U.S. and Canada
via an exclusive distribution agreement with Anchor Gaming. The period of
exclusivity has now expired, and the Company is seeking both direct sales and
distribution agreements to further penetrate the worldwide market.

We previous had a distribution agreement with John Huxley covering the United
Kingdom. We elected not to renew this agreement in 2000. We expect to distribute
our gaming devices and other hardware via both direct sales and through third
party contracts.


TRADEMARKS AND PATENTS

We currently provide the market place with four products, all under names that
are trade marked: Bingo Blast(TM), Interactive Casino Extensions (TM), Lotto
Magic(TM) and webSports (TM). All software contains copyright notices
identifying the year and confidentiality. We are in the process of submitting 10
disclosures for patents covering the game engines, money management and back
office architectures and functions.

                                        9
<PAGE>

COMPETITION

There are many private and public companies supplying the Internet gaming
industry and offering interactive gaming services. We estimate that more than 40
companies that consider themselves "turnkey" software suppliers to the industry,
with the leading companies, in terms of market share, believed to be
Cryptologic, Boss Media and Microgaming. These companies are located in Canada,
Sweden and South Africa, respectively.

All of the major companies operate as service bureaus installing and running the
gaming products on their own servers and charging substantial service bureau
fees of upwards to 40%. Our business model is slightly different, as we have
sold our product to owners and expect them to own and run their business. We
take a minimal royalty and provide all new games and enhancements for a fee.

Although there are several large players in Internet gaming software market, it
is our understanding that at this point there is only a handful, which would
qualify as vendors to the land-based casino market. These competitors in our
view are Gaming & Entertainment Technology Systems (GET), Access Games and
possibly, Interactive Solutions Corporation (ISC). These companies have
maintained a similar strategy as OGS when dealing with potential customers.

Many of our competitors in both industry segments have greater financial
resources, sales and marketing expertise and pricing power than us.


EMPLOYEES

As of March 30, 2002, we had 8 full-time employees in the Las Vegas, Nevada,
office and three (3) full-time employees in Australia. We may also employ
full-time and part-time consultants on an as-needed basis. We consider our
relationship with our employees to be satisfactory.


RECENT DEVELOPMENTS

Company Funding
---------------

The Company's operating shortfalls have largely been funded via its largest
shareholder, Hosken Consolidated Investment Limited (HCI). HCI is a South
Africa-based investment holding company that focuses its activities in
telecommunications and information technology, media and broadcasting,
interactive gaming and entertainment and financial services. During 2001, HCI
funded the Company $4,438,642 in the form of convertible notes. These notes bear
an interest rate of 12 percent, have a maturity date of December 31, 2003 and
are collateralized by substantially all of the assets of the Company.

During the fourth quarter of 2001 Hosken Consolidated Investment Limited
announced its intention to convert a portion of its ownership of the Company's
convertible debt into common stock of the Company, and to amend certain terms of
the remaining notes. Additionally, HCI informed the Company of its intention to
provide additional funding of up to $1 million.

HCI converted $3.6 million of its convertible debt into 60,000,000 shares of the
Company's common stock. The conversion price was set at $.06, the closing price
of OGAM common stock on November 27, 2001. Prior to the conversion, HCI owned
18,698,120 shares or about 55 percent of the outstanding common stock of the
Company. Pro forma the conversion of the debt, HCI owns 78,698,120 shares or
about 83 percent of the common stock of the Company.

During the first quarter of 2002, HCI advanced the Company $350,000 in the form
of convertible notes, and has stated its intent on continuing the funding of the
Company through the balance of the year.

                                       10
<PAGE>

Nevada Gaming Approval
----------------------

Our Pegasus portable gaming device was approved for distribution in the State of
Nevada in September of 2000.


Online Gaming Systems Australia Pty Ltd
---------------------------------------

In July 1999 in line with the Company's strategy of having a presence in major
regulated markets an office was established in Sydney, Australia. The Australian
gaming industry is the second largest regulated gaming industry in the world.
Gaming in all forms including horse racing and lotteries turn over in excess of
AUD$100 billion a year and has shown phenomenal growth over the past decade. The
industry employs over 150,000 people and accounts for an average of 12% of the
state and territory government revenues.

Internet gaming is currently legal in three states and three territories.
Australia is looked on by the rest of the world as a leader in the development
of legalizing and regulating Internet gambling. The vast majority of the Pacific
Islands in close proximity to Australia such as Vanuatu, Nauru, Solomon Islands
also issue licenses. Because of this regulated environment Australia has been
able to attract operators from the rest of the world as well as from within
Australia.


Sale of Eminet Domain
---------------------

On March 11, 1999 the Company entered into an agreement to sell its wholly owned
subsidiary, The Eminet Domain, Inc. to Centerline Associates, Inc. The agreement
called for the sale of 81% of its interest in the Eminet Domain, Inc. for
$2,500,000, payable $100,000 in cash and $2,400,000 promissory note payable two
years from closing. The closing date of the transaction was March 31, 1999.
However, on December 10, 1999 the parties reformed the agreement to provide the
sale of the Company's entire interest in Eminet Domain in exchange for
$2,500,000 in convertible preferred stock in Atlantic Internet Holdings, Inc., a
Florida holding company which has as one of its subsidiaries, The Eminet Domain.


Acquisition of Excel Design, Inc.
---------------------------------

In April 1999 Online Gaming Systems, Ltd. acquired certain assets of Excel
Design, Inc. Excel has developed a hand held portable and wireless gaming
device. This product gives gaming operators the flexibility to extend play to
secured areas in the sports book, bar, restaurant pool and bingo areas. The
system runs existing gaming companies programs (e.g. Bally and Sigma) and
requires no bill hopper or coin mechanism. The potential for Online Gaming
Systems, Ltd. is to expand the Excel product in a variety of markets including
the Las Vegas casinos, cruise liners, Australian clubs and South African
casinos.


Australian On-Line Casino Ltd
-----------------------------

On March 30, 2001 we executed a formal agreement with Australian On-Line Casino
Ltd. (AOC) and Casino Australia On-Line Pty Ltd (CAO), its subsidiary for the
licensing and distribution of our products. We expected to receive $250,000 in
cash for the agreement, plus ongoing royalties associated with sales revenue,
service revenue and hosting revenue. Additionally, we were to receive an option
for 5,000,000 shares of AOC stock. AOC was planning a 50,000,000 share offering
to raise $10,000,000 (Australian).

                                       11
<PAGE>

The transaction was subject to a number of conditions, including the successful
public offering of AOC, and the certification of our ICE software by the
appropriate Australian authority. The public offering by the successor company
called Leisure & Gaming Corporation was not successful, and the company has gone
into administration.


Your Move, Inc.
---------------

During the second quarter of 2001 the Company announced its joint venture with
Station Casinos, Inc., formed to develop the technology for the remote play
"eSlot" product, which is licensed to Gamecast Live, a Station Casinos
subsidiary. In exchange for a 22.5 percent interest in the joint venture, the
Company is contributing certain assets, including intellectual property and
services. Station Casinos is in the gaming and entertainment business and will
owns 75 percent of Your Move, Inc.


UnoDosTres.com
--------------

During the third quarter of 2001, the Company announced its Marketing and
Operations Agreement with UnoDosTres.com to develop and operate up to three
online casinos on the popular Internet Television Network targeting the Latin
American marketplace.

The agreement calls for OGS to develop and operate, on an exclusive basis, up to
three online casinos (a Play for Fun and two live casinos) on the Internet
Television Network. UnoDosTres (UDT) will contribute up to $155 million of
bartered television and radio advertising for the promotion and marketing of the
casinos, via its consortium of media and broadcasting partners throughout the
United States, Latin American and the Iberian Peninsula. The casinos will adhere
to strict restrictions regarding age of eligible gamblers, and prohibition of
wagers from residents of or placed from the United States, or any jurisdiction
that prohibits such activities. UDT will receive a portion of the net revenue
generated from the gaming sites.


Internet Casino Contract
------------------------

During the fourth quarter of 2001, the Company announced that it will launch the
first Internet casino linked to the UnoDosTres.com Internet Television Network.
OGS and affiliates of Hoskin Consolidated Investment Limited (HCI) have
completed an operating agreement for the casino, whereby affiliates of HCI will
provide the financing for the casino and be the principal shareholders of the
to-be-formed company, and OGS will provide the management and marketing for the
casino, and contribute certain of its rights attained through the UnoDosTres
agreement.

The Casino will be operated in Australia, currently the most regulated Internet
gaming jurisdiction in the World. It will target the Latin American market
through linkage with the UDT site. UDT will provide $50 million of bartered
television and radio advertising for the casino over a five-year period. OGS
will provide management and marketing services through its Australia and Las
Vegas offices. OGS will receive a minimum management fee of $600,000 annually,
plus incentives of up to $2 million annually if certain operating thresholds are
achieved. Depending upon the length of time to complete the licensing process,
the Casino is expected to go live during the second or third quarter of 2002.

                                       12
<PAGE>

Convertible Debt Conversion
---------------------------

During the fourth quarter of 2001 Hosken Consolidated Investment Limited
announced its intention to convert a portion of its ownership of the Company's
convertible debt into common stock of the Company, and to amend certain terms of
the remaining notes. Additionally, HCI informed the Company of its intention to
provide additional funding of up to $1 million.

HCI converted $3.6 million of its convertible debt into 60,000,000 shares of the
Company's common stock. The conversion price was set at $.06, the closing price
of OGAM common stock on November 27, 2001. Prior to the conversion, HCI owned
18,698,120 shares or about 55 percent of the outstanding common stock of the
Company. Pro forma the conversion of the debt, HCI owns 78,698,120 shares or
about 83 percent of the common stock of the Company.

HCI also agreed amend the terms of its debt, extending the maturity of the
remaining notes to December 31, 2003. The previous maturity date on the notes
was December 31, 2001 and the Company had been in default on the notes. The
Company will no longer be in default on the notes.


New Product Release
-------------------

During the first quarter of 2002, the Company announced the release of the Beta
version of FIRE, its premium casino software that will complement its ICE
product designed for less-intensive users. The product was designed with
security, performance, third party integration and scalability in mind. The FIRE
system has recently gone through initial audit testing for certification in the
Northern Territory of Australia, the world's first regulated jurisdiction.


Executive Management
--------------------

During the first quarter of 2002, we made several appointments to the Company's
management team. Lawrence P. Tombari has been promoted to President of the
Company. Mr. Tombari, who joined the Company in 2001, will retain his position
as Chief Financial Officer. John Copelyn will assume the position of Chief
Executive Officer. Mr. Copelyn is CEO of Hosken Consolidated Investments, Ltd.,
and the largest shareholder of the Company.

Gary Ramos, formerly Chief Executive Officer and President has left the Company
to pursue other business interests. Mr. Ramos had commuted from his home in
Mendocino County, California since he joined the Company in 2000.


Preferred Stock
---------------

During the first quarter of 2001 the Company repurchased 1,610 shares of
preferred stock from the Shaar Fund, and issued 500,000 shares of common stock.

During the second quarter of 2001 HCI converted its 9,000 shares of preferred to
common stock, under formula as provided in the Convertible Preferred Stock Sales
Agreement. The preferred stock converted to 18,610,422 of common stock, which
was issued to affiliates of HCI. The Company has now retired all of its
preferred stock.


Capital Stock
-------------

In the first quarter 2001 the Company issued 500,000 shares of its common stock
to the Shaar fund to repurchase outstanding preferred stock.

                                       13
<PAGE>

During the second quarter of 2001, the Company issued 225,000 shares of common
stock in satisfaction of indebtedness to Wayne Newton, who was previously
employed as a promotional consultant by the Company.

During the second quarter of 2001 HCI converted its 9,000 shares of preferred to
common stock, under formula as provided in the Convertible Preferred Stock Sales
Agreement. The preferred stock converted to 18,610,422 of common stock, which
was issued to affiliates of HCI.

During 2001, executive management personnel purchased a total of 541,667 shares
of common stock from the Company at a price of $.06 per share. During the first
quarter of 2002, the Company issued 561,766 shares of its common stock in
settlement of the former CEO and President's remaining loan balance of $29,319
plus accrued interest of $4,386. During the first quarter of 2002 executive
management purchased a total of 166,667 shares at a price of $.06 per share.

During the fourth quarter of 2001 Hosken Consolidated Investment Limited
announced its intention to convert a portion of its ownership of the Company's
convertible debt into common stock of the Company, and to amend certain terms of
the remaining notes. Additionally, HCI informed the Company of its intention to
provide additional funding of up to $1 million.

HCI converted $3.6 million of its convertible debt into 60,000,000 shares of the
Company's common stock. The conversion price was set at $.06, the closing price
of OGAM common stock on November 27, 2001. Prior to the conversion, HCI owned
18,698,120 shares or about 55 percent of the outstanding common stock of the
Company. Pro forma the conversion of the debt, HCI owns 78,698,120 shares or
about 83 percent of the common stock of the Company.

During the first quarter of 2002, a consultant to the Company has purchased
120,000 shares of stock at $.05 per share.


ITEM 2.   DESCRIPTION OF PROPERTY.
          -----------------------

We lease approximately 9,338 square feet of office space in Las Vegas, Nevada
expiring on July 31, 2005 with current monthly rent of $10,438. The rent
increases to $11,205.60 and $12,606.30 per month, respectively in the second and
third years of the lease. Thereafter, the rent is adjusted via CPI formula.

We also lease approximately 1,740 square feet of office space in Delray Beach,
Florida expiring on September 30, 2003 with current monthly rent of $2,284. The
rent increases five percent annually thereafter.

We lease approximately 1,100 square feet of office space in Sydney, Australia
under a three-year term that expires on July 31, 2002. The current monthly rent
is $5,800 (Australian), increasing three percent annually.


ITEM 3.   LEGAL PROCEEDINGS.
          -----------------

The Company is a party to pending or threatened litigation, both as plaintiff
and defendant.

During the first quarter of 2001, we reached mutually satisfactory resolutions
involving litigation with Kelley and Kelley Advertising, Inc. and Olshan
Grundman Frome Rosenweig & Wolosky LLP. During the second quarter of 2001, we
reach mutually satisfactory resolutions involving litigation with Keane, Inc.,
Actrade Capital and Wayne Newton. We issued 225,000 shares of stock to resolve
the case with Mr. Newton.

                                       14
<PAGE>

Home Broadband Network, Inc.
----------------------------

During the second quarter of 2001, the Company engaged in mediation proceedings
with Home Broadband Network, Inc. On November 8, 1998, we acquired the assets of
Axxsys International in exchange for 200,000 shares of stock. Axxsys and its
affiliates filed suit on November 17, 1998 against Atlantic seeking injunctive
relief based on numerous allegations the essence of which was that the 200,000
shares of Atlantic stock was not adequate consideration for the transfer of the
Axxsys assets. Axxsys now does business as Home Broadband Network, Inc. Since
Axxsys and its affiliates waited until January, 1999 to serve OGS with the
action and since they have an adequate remedy in the form of damages, it is very
likely that this suit will not proceed beyond the pleading stage. However, it is
anticipated that Axxsys will amend their pleadings to seek damages. Counsel
believes that there is no merit to this action. This case is currently not set
for trial.


Cabrero
-------

The Company is suing a former employee for failure to perform his duties and for
inducing the Company to give him $10,000 for software he never delivered. The
Employee has counter sued because he claims the Company did not give him "COBRA"
notice and he incurred approximately $30,000 in medical expenses. This case is
not currently set for trial.


Iamunno
-------

During the second quarter of 2001 the former CEO (Iamunno) threatened to bring
suit against the Company for repayment of loans totaling about 134,000, as
provided for in his termination letter with the Company. The petitioner also
asserts he is owed monies regarding a previous acquisition made by the Company.
The Company has counter-demanded set-off expenses, and damages related to his
conduct during and after his employment with the Company. During the fourth
quarter of 2001, we reached a mutually satisfactory settlement with Iamunno.


Other Litigation
----------------

The Company is involved in various other legal proceedings that arise in the
normal course of business. We could incur significant legal fees in connection
with these matters but based on currently available information, the resolutions
of these cases is not likely to have a material adverse effect on our business,
financial position or future results of operations


ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
          ---------------------------------------------------

On November 12, 2001 the Company provided notice of its Annual Shareholder's
Meeting, which was held on December 20, 2001 in Las Vegas. In the proxy, the
shareholders were asked to vote on the following matters:

     To elect directors to serve for the ensuing year or until their respective
successors are duly elected and qualified. The nominees are Gary Ramos, Gavin
Chamberlain, Lawrence P. Tombari, Marcel Golding and John Copelyn.

     To ratify the appointment of Moore Stephens, P.C. as independent
accountants of the Company for the fiscal year ending December 31, 2001.

The shareholders votes in the affirmative for both matters.

                                       15
<PAGE>

                                     PART II

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
          --------------------------------------------------------

From November 1996 until August, 1999 our common stock has traded on the
electronic bulletin board under the trading symbol AIEE. In August 1999 the
company changed its name to Online Gaming Systems, Ltd, and traded on the
electronic bulletin board under the trading symbol OGAM. The following table
sets forth the high and low closing prices for our common stock as reported by
the electronic bulletin board for each full quarterly period within the two most
recent fiscal years and subsequent interim periods.


Fiscal Year Ending December 31, 2001

By Quarter                                             Common Stock
----------                                             ------------

          Quarter          Date                        High            Low
          -------          ----                        ----            ---

          1st              March 31, 2001              $0.23          $0.05

          2nd              June 30,2001                $0.10          $0.06

          3rd              September 30, 2001          $0.09          $0.04

          4th              December 31, 2001           $0.10          $0.04


Fiscal Year Ending December 31, 2000

By Quarter                                             Common Stock
----------                                             ------------

          Quarter          Date                        High            Low
          -------          ----                        ----            ---

          1st              March 31, 2000              $2.00          $1.09

          2nd              June 30,2000                $1.30          $0.50

          3rd              September 30, 2000          $0.59          $0.16

          4th              December 31, 2000           $0.23          $0.06


Trading transactions in our securities occur in the over-the-counter electronic
bulletin board market. All prices indicated herein are as reported to us by
broker-dealer(s) making a market in our securities. The quotes indicated above
reflect inter-dealer prices, without retail mark-up, markdown or commission, and
may not necessarily represent actual transactions.

As of December 31, 2001 there were approximately 758 Holders of Record of our
Common Stock, including brokerage firms, clearinghouses, and/or depository firms
holding our securities for their respective clients. The exact number of
beneficial owners of our securities is not known.

The Company has not paid any cash dividends on the Common Stock in the past and
the Board of Directors does not anticipate declaring any cash dividends on the
Common Stock in the foreseeable future.

                                       16
<PAGE>

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
          ---------------------------------------------------------

THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH DIFFERENCES INCLUDE, BUT
ARE NOT LIMITED TO, THE COMPANY'S EXPANSION INTO NEW MARKETS, COMPETITION,
TECHNOLOGICAL ADVANCES AND AVAILABILITY OF MANAGERIAL PERSONNEL.


OVERVIEW

We develop and market Internet and private network transaction based products
that it only offers to licensed gaming operators in regulated jurisdictions.
These products include Internet Casino Extension (TM) (ICE), a growing suite of
casino games, webSports (TM), a sports wagering system, Lotto Magic (TM) a
lottery system for private, government and fund raising purposes, and Bingo
Blast (TM) a multi-player system for charity and private organization use. We
also offer wireless and portable gaming devices through Excel Design.


RESULTS OF OPERATIONS

The Company's net loss for 2001 was ($4,283,497) compared to net loss of
($8,884,238) for 2000, a decrease of $4,600,741 or about 52 percent. The Company
recorded a substantial decrease in revenue and operating expenses, but did not
experience losses due to write downs on some of our investments as in 2000.

Net revenues for the Company for 2001 were $778,847 compared to $2,355,576 in
2000, a decrease of 67 percent. The decrease was largely attributable to the
moratorium imposed by the Australian government (since May 2000) on new casino
licenses and the uncertainty regarding the development of Internet gaming in the
United States. We allocated resources to increased product development, as
opposed to marketing and sales, to better position the Company to benefit from
changes occurring in the industry.

We believe that future revenue will likely emanate more from traditional
land-based gaming operators who are entering the Internet Gaming business, as
opposed to the Internet gaming companies who have been the major customers over
the past few years.

Many of the land-based operators appear to be taking a cautious approach upon
entering the Internet gaming market, waiting for the legal and regulatory
framework to become apparent. Accordingly, we expect fewer sales of our software
products for the foreseeable future, but to more significant customers demanding
robust, managed solutions.

Cost of sales and operating expenses decreased by 15 percent, to $4,428,788 in
2001 from $5,217,339 in 2000. Most of this decrease is attributable to enhanced
cost controls and downsizing of the company, as it reduces dependence on
development efforts and initiates more intense levels of sales for its products.
The Company expects to further reduce its operating expense levels by focusing
on core business going forward.

In 2000, the company incurred $4,637,000 in losses due to write-downs on some of
its investments. These write-offs are consistent with our policy of carefully
reviewing asset values on a quarterly basis, making appropriate adjustments to
reflect true asset values. We wrote off $2,500,000 of an investment in
convertible preferred stock in the Company's formerly owned subsidiary (Eminet
Domain), and $2,137,000 of an investment in equity securities. During 2001 we
did not have exposure to these investments.

                                       17
<PAGE>

In 2000, we issued 375,000 shares of stock in connection with obtaining and
negotiating convertible debt financing. The value per share was approximately
$2.00 at the date of issuance. Accordingly, we expensed $750,000 for the year
associated with these services.


LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2001 the Company had negative working capital of (1,129,265)
compared with ($4,362,616) at December 31, 2000. The decrease in working capital
was primarily due negative cash flow from operations.

The Company's operating shortfalls have largely been funded via its largest
shareholder, Hosken Consolidated Investment Limited (HCI). HCI is a South
Africa-based investment holding company that focuses its activities in
telecommunications and information technology, media and broadcasting,
interactive gaming and entertainment and financial services. During 2001, HCI
funded the Company $4,438,642 in the form of convertible notes. These notes bear
an interest rate of 12 percent, have a maturity date of December 31, 2003 and
are collateralized by substantially all of the assets of the Company.

During the fourth quarter of 2001 Hosken Consolidated Investment Limited
announced its intention to convert a portion of its ownership of the Company's
convertible debt into common stock of the Company, and to amend certain terms of
the remaining notes. Additionally, HCI informed the Company of its intention to
provide additional funding of up to $1 million.

HCI converted $3.6 million of its convertible debt into 60,000,000 shares of the
Company's common stock. The conversion price was set at $.06, the closing price
of OGAM common stock on November 27, 2001. Prior to the conversion, HCI owned
18,698,120 shares or about 55 percent of the outstanding common stock of the
Company. Pro forma the conversion of the debt, HCI owns 78,698,120 shares or
about 83 percent of the common stock of the Company.

HCI also agreed amend the terms of its debt, extending the maturity of the
remaining notes to December 31, 2003. The previous maturity date on the notes
was December 31, 2001 and the Company had been in default on the notes. The
Company will no longer be in default on the notes.

During the first quarter of 2002, HCI advanced the Company $350,000 in the form
of convertible notes, and has stated its intent on continuing the funding of the
Company through the balance of the year.

Management believes that existing cash, and the continuing participation of HCI
and, potentially other investors will provide the Company with funds to operate
the Company until it becomes self-sufficient.


INFLATION

In the opinion of management, inflation has not had a material adverse effect on
its results of operations.


ITEM 7.   FINANCIAL STATEMENTS.
          --------------------

               [See page F-1.]

                                       18
<PAGE>

                                    PART III

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          ---------------------------------------------------------------
          FINANCIAL DISCLOSURES
          ---------------------

None


ITEM 9.   EXECUTIVE COMPENSATION
          ----------------------

The following table provides certain summary information concerning the
compensation earned, by the Company's Chief Executive Officer and its Chairman
for services rendered in all capacities to the Company and its subsidiaries for
each of the last three fiscal years. Such individuals will be hereafter referred
to as the Named Executive Officers. No other executive officer that would have
otherwise been included in such table on the basis of salary and bonus earned
for the 2001 fiscal year has resigned or terminated employment during that
fiscal year.


                           SUMMARY COMPENSATION TABLE

NAME AND PRINCIPAL POSITION          YEAR          SALARY ($)          BONUS ($)
---------------------------          ----          ----------          ---------

Lawrence P. Tombari                  2001           $140,000               --
President and Chief
Financial Officer

Gary A. Ramos                        2001           $250,000               --
Former President and Chief           2000             93,000
Executive Officer

Peter Lawson                         2001           $106,000               --
Former Chief Financial               2000             78,000
Officer

Steven Campbell                      2001           $120,000               --
Secretary                            2000            112,000


STOCK OPTIONS

On January 1, 1997, the Company adopted an Incentive Stock Option Plan for
Employees, Directors, Consultants, and Advisors (the "Plan"). The Plan will
expire December 31, 2006 unless further extended by appropriate action of the
Board of Directors. Employees, directors, consultants and advisors of the
Company, or any of its subsidiary corporations, are eligible for participation
in the Plan. The Plan provides for stock to issued pursuant to options granted
and shall be limited to 250,000 shares of Common Stock, $.001 par value. The
shares have been reserved for issuance in accordance with the terms of the Plan.
The exercise of these options may be for all or any portion of the option and
any portion not exercised will remain with the holder until the expiration of
the option period.

                                       19
<PAGE>

     The following table contains information concerning the stock option grants
made to each of the named executive officers and employees for fiscal 2001.

       Name              No. Granted      In F/Y      $/Share      Exp. Date
       ----              -----------      ------      -------      ---------

Lawrence P. Tombari        133,333         2001        $ .03          2006

Gary A. Ramos               83,333         2001        $ .03          2006

Peter Lawson               125,000         1999        $2.50        06/30/07
                            50,000         1999        $2.50        07/13/04


No options were granted during 2000.

The Company applies Accounting Principles Board Option No. 25, Accounting for
Stock Issued to Employees, and related interpretations, for stock options issued
to employees in accounting for its stock option plans. The exercise price of all
options issued was the market price at the date of grant. Accordingly, no
compensation expense has been recognized for the Company's stock-based
compensation plans.


BOARD OF DIRECTORS COMPENSATION

The Company does compensate directors who are also executive officers of the
Company for service on the Board of Directors. Directors receive $1,500 per
meeting and are reimbursed for their expenses incurred in attending meetings of
the Board of Directors.


LONG-TERM INCENTIVE AND PENSION PLANS

The Company does not have any long-term incentive or defined benefit pension
plans.


OTHER

No director or executive officer is involved in any material legal proceeding in
which he is a party adverse to the Company or has a material interest adverse to
the Company.


EMPLOYMENT AGREEMENTS

The Company has entered into employment contracts with Messrs. Lawson, Tombari,
Campbell and Kinsman. Mr. Lawson left the company during 2001, and Mr. Campbell
left the company in March 2002. The contract with Mr. Lawson was terminated, and
the contract with Mr. Campbell terminated in March 2002.

Mr. Tombari's contract is for three years, expiring on January 16, 2004
consisting of a starting base salary of $150,000. He is eligible to receive a
bonus of up to 100 percent of the base salary. Additionally, Mr. Tombari is
granted rights to purchase company stock and receive options at a price based on
formula. The employment contract contains arrangements for severance
compensation.

Mr. Kinsman's contract is for three years, expiring on June 30, 2003 consisting
of a base salary of $150,000 (Australian). The employment contract contains
arrangements for severance compensation.

                                       20
<PAGE>

ITEM 10.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
          --------------------------------------------------------------

The following table sets forth, as of March 31, 2002 information regarding the
beneficial ownership of the Company's Common Stock by each person known by the
Company to own five percent or more of the outstanding shares, by each of the
directors and officers, and by the directors and officers as a group. As of
March 31, 2002, there were outstanding 95,394,702 shares of the Common Stock of
the Company.

Name and Address of Beneficial             Amount of Beneficial      Percent of
------------------------------             --------------------      ----------
           Owner (2)                             Ownership              Class
           ---------                             ---------              -----


Ahead Investments Limited                       78,698,120             82.50%

Lawrence P. Tombari                                500,000              0.05%



All Officers and Directors as a Group           79,198,120             82.55%
(3 persons)


**In July 1999, Ahead Investments Limited, a subsidiary of HCI acquired the
stock of Norman J. Hoskin, the Company's former Chairman. Both Mr. Golding and
Mr. Copelyn are substantial owners and officers of HCI and consequently,
ownership of all of the shares of HCI or by its subsidiaries have been
attributed to both Mr. Golding and Mr. Copelyn for the purpose of this table.

(1)  Beneficial ownership has been determined in accordance with Rule 13d-3 of
     the Securities Exchange Act of 1934. Generally, a person is deemed to be
     the beneficial owner of a security if he has the right to acquire voting or
     investment power within 30 days.
(2)  Unless otherwise stated, the address for the beneficial owner is 3225
     McLeod Drive, 1st Floor, Las Vegas, Nevada 89121


ITEM 11.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
          ----------------------------------------------

CAPITAL STOCK
-------------

In the first quarter 2001 the Company issued 500,000 shares of its common stock
to the Shaar fund to repurchase outstanding preferred stock.

During the second quarter of 2001, the Company issued 225,000 shares of common
stock in satisfaction of indebtedness to Wayne Newton, who was previously
employed as a promotional consultant by the Company.

During the second quarter of 2001 HCI converted its 9,000 shares of preferred to
common stock, under formula as provided in the Convertible Preferred Stock Sales
Agreement. The preferred stock converted to 18,610,422 of common stock, which
was issued to affiliates of HCI.

                                       21
<PAGE>

During 2001, executive management personnel purchased a total of 541,667 shares
of common stock from the Company at a price of $.06 per share.

HCI converted $3.6 million of its convertible debt into 60,000,000 shares of the
Company's common stock. The conversion price was set at $.06, the closing price
of OGAM common stock on November 27, 2001. Prior to the conversion, HCI owned
18,698,120 shares or about 55 percent of the outstanding common stock of the
Company. Pro forma the conversion of the debt, HCI owns 78,698,120 shares or
about 83 percent of the common stock of the Company.

During the first quarter of 2002, the Company issued 561,766 shares of its
common stock in settlement of the former CEO and President's remaining loan
balance of $29,319 plus accrued interest of $4,386. During the first quarter of
2002 executive management purchased a total of 166,667 shares at a price of $.06
per share.

During the first quarter of 2002, a consultant to the Company has purchased
120,000 shares of stock at $.05 per share.


PREFERRED STOCK
---------------

During the first quarter of 2001 the Company repurchased 1,610 shares of
preferred stock from the Shaar Fund, and issued 500,000 shares of common stock.

During the second quarter of 2001 HCI converted its 9,000 shares of preferred to
common stock, under formula as provided in the Convertible Preferred Stock Sales
Agreement. The preferred stock converted to 18,610,422 of common stock, which
was issued to affiliates of HCI. The Company has now retired all of its
preferred stock.


RELATED PARTY TRANSACTIONS
--------------------------

The Company's operating shortfalls have largely been funded via its largest
shareholder, Hosken Consolidated Investment Limited (HCI).

During 2000, HCI funded the Company $2,335,000 in the form of convertible notes.
During 1999, HCI funded the company $500,000 via similar note arrangements.

During 2001, HCI funded the Company $4,438,642 in the form of convertible notes.
These notes bear an interest rate of 12 percent, have a maturity date of
December 31, 2001 and are collateralized by substantially all of the assets of
the Company.

During the fourth quarter of 2001 HCI announced its intention to convert a
portion of its ownership of the Company's convertible debt into common stock of
the Company, and to amend certain terms of the remaining notes. Additionally,
HCI informed the Company of its intention to provide additional funding of up to
$1 million.

HCI converted $3.6 million of its convertible debt into 60,000,000 shares of the
Company's common stock. The conversion price was set at $.06, the closing price
of OGAM common stock on November 27, 2001. Prior to the conversion, HCI owned
18,698,120 shares or about 55 percent of the outstanding common stock of the
Company. Pro forma the conversion of the debt, HCI owns 78,698,120 shares or
about 83 percent of the common stock of the Company.

HCI also agreed amend the terms of its debt, extending the maturity of the
remaining notes to December 31, 2003. The previous maturity date on the notes

                                       22
<PAGE>

was December 31, 2001 and the Company had been in default on the notes. The
Company will no longer be in default on the notes.

During the first quarter of 2002, HCI advanced the Company $350,000 in the form
of convertible notes, and has stated its intent on continuing the funding of the
Company through the balance of the year.


ITEM 12.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          -------------------------------------------------------------
          COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
          -------------------------------------------------


COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "Commission"). Officers, directors and greater than ten percent
shareholders are required by the Commission's regulations to furnish the Company
with copies of all Section 16(a) forms they file.


DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company and their positions with the
Company are set forth below.

                 Name                Age                 Position
                 ----                ---                 --------

          J.A. Copelyn                51        Chief Executive Officer and
                                                Chairman of the Board

          Lawrence P. Tombari         43        President, Chief Financial
                                                Officer and Director

          Gavin Chamberlain           46        Director

          Marcel Golding              41        Director


JOHN COPELYN is Chief Executive Officer and Chairman of the Board. He is also
currently the Chief Executive Officer of the South African Clothing and Textile
Workers Union Investment Group and the Chief Executive Officer of Hosken
Consolidated Investments, Ltd., a company traded on the Johannesburg Stock
Exchange. During 1992-1994, Mr. Copelyn was Chief Executive Officer of Zenzeleni
Clothing. From 1994-1997, Mr. Copelyn served as an elected member of the
democratically elected South African parliament. In addition, he has held
numerous positions with South African trade unions including serving on the
Central Committee of COSATU. Mr. Copelyn is also a licensed attorney in South
Africa. Mr. Copelyn also serves as director for other gaming and non-gaming
companies. He attended both the University of Witwatersrand and University of
South Africa.


LAWRENCE P. TOMBARI is President and Chief Financial Officer of the Company. He
joined the Company in 2001 as its Chief Financial Officer and was appointed
President in 2002. Previously, he was Chief Financial Officer and Senior Vice
President of Lady Luck Gaming Corporation, from its inception in 1993 until the
Company was acquired in 2000. As CFO, Mr. Tombari was responsible for all of the
accounting, budgeting, reporting and investor communications for the NASDAQ

                                       23
<PAGE>

Company. Additionally, as Senior Vice President of Development, he was
responsible for identification and analysis for new gaming projects,
acquisitions and disposals, and presentations to regulatory bodies. Prior to
Lady Luck, Mr. Tombari spent eight years at Ernst & Young, in the Consulting
Division. Mr. Tombari has a Bachelor of Science of Business Administration from
the University of Southern California, and an MBA from Arizona State University.

GAVIN CHAMBERLAIN is Managing Director of Global Payment Technologies Holdings
(Pty) Ltd., the South African affiliate of Global Payment Technologies, Inc., a
leading manufacturer and innovator of currency acceptance systems used in the
worldwide gaming, beverage, and vending industries. Recently, GPTHL agreed to
merge its operations with Vukani Gaming Corporation, a wholly owned subsidiary
of Hosken Consolidated Investments Ltd., the Company's majority stockholder.
Vukani is a South African based company established in 1996 to operate in the
South African route market. Mr. Chamberlain is on the Board of Vukani and also
Managing Director of another South African affiliate of GPTHL, International
Payment Systems, Ptd. Ltd.

MARCEL GOLDING was appointed a Director of the Company in August of 1998. Mr.
Golding is Chairman of Hosken Consolidated Investments (HCI) and Softline
Holdings, as well as being a Director of JCI and Global Capital, which are all
listed companies on the Johannesburg Stock Exchange. In addition, he was the
founding chairman of the Mineworkers Investment Company (linked to the National
Union of Mineworkers), one of the two pioneering trade union investment
companies in South Africa. He was elected the first Deputy General Secretary of
the union in 1987 at the age of 26, and was re-elected on three additional
occasions to this post of the Country's largest trade union. From 1994 to 1997
he served as a Member of Parliament, where he chaired the Minerals and Energy
Committee and the Audited Commission, the oversight committee of the office of
the Auditor-General. Mr. Golding holds a post-graduate degree from the
University of Cape Town.


MEETINGS AND COMMITTEES

The Board held one meeting during the year ended December 31, 2001. In addition,
from time to time during such year, the members of the Board acted by unanimous
written consent. The Company has elected a standing compensation and audit
committees. The entire Board of Directors performs the typical functions of such
committees. The Company's Audit Committee during 2001 was comprised of Lawrence
P. Tombari and Trevor Klein. The Committee recommends engagement of the
Company's independent accountants approves services performed by such
accountants and reviews and evaluates the Company's accounting system and its
system of internal controls.

                                       24
<PAGE>

                                     PART IV

ITEM 13   EXHIBITS, LIST AND REPORTS ON FORM 10KSB.
          ----------------------------------------

          (a)  Exhibits:

          3.1     -     Certificate of Incorporation of the Company,
                        incorporated by reference to Exhibit 3.1 to the
                        Company's Form 10-KSB for the fiscal year ended December
                        31, 1996.

          3.2     -     Bylaws of the Company, incorporated by reference to
                        Exhibit 3.2 to the Company's Form 10-KSB for the fiscal
                        year ended December 31, 1996.

          4.1     -     Specimen Common Stock Certificate, incorporated by
                        reference to Exhibit 4.1 to the Company's Form 10-KSB
                        for the fiscal year ended December 31, 1996.

          10.1    -     Incentive Stock Option Plan for Employees, Directors,
                        Consultants and Advisers, incorporated by reference to
                        Exhibit 10.1 to the Company's Form 10-KSB for the fiscal
                        year ended December 31, 1996.

          10.2    -     Agreement for Purchase and Sale of Stock dated as of
                        January 31, 1997 by and between the Company and Eminet
                        Domain, Inc., incorporated by reference to the Company's
                        Form 8K dated March 7, 1997.

          10.3    -     Securities Purchase Agreement dated April 3, 1998 by and
                        between the Company and The Shaar Fund, which includes
                        (i)the Certificate of Designations of Convertible
                        Preferred Stock as Annex I, and (ii)the form of
                        Registration Rights Agreement as Annex IV. The Company
                        agrees to furnish the disclosure schedules and other
                        Annexes, which have been omitted from this filing, to
                        the Commission upon request.

          10.4    -     Employment Agreement dated as of May 1, 1997 between the
                        Company and Richard Iamunno.

          10.5    -     Employment Agreement dated as of May 1, 1997 between the
                        Company and Norman Hoskin.

          10.6    -     Stock Purchase Agreement dated March 10, 1999 by and
                        between Atlantic International Entertainment, Ltd. and
                        Centerline Associates, Inc.

          10.7    -     Stock Option and Incentive Plan adopted by Board of
                        Directors on March 25, 1999.

          10.8*   -     Stock Purchase Agreement dated December 10, 1999 by and
                        between Atlantic Internet Holdings, Inc.

          11.1*   -     Statement of Computation of Per Share Earnings

          21.1*   -     Subsidiaries of the Company

                                       25
<PAGE>

          23.1    -     Consent to the incorporation by reference in the
                        Company's Registration Statement on Form S-8 of the
                        report of Moore Stephens, P.C. included herein.

          23.2*   -     Consent to the incorporation by reference of the report
                        of Moore Stephens, P.C. included herein.

          27      -     Financial Data Schedule.

-------------------------
* Included herein.

          (b)  Reports on Form 8-K On February 6, 1997, the Company filed two
               reports on Form 8-K dated December 19, 1996 and January 30, 1997,
               respectively. Such reports disclosed changes in the Company's
               independent accountants.

               On April 14, 1997, the Company filed with the Commission a Form
               8-K dated March 7, 1997 disclosing the acquisition of The Eminent
               Domain, Inc.

               On May 29, 1998 the Company filed with the Commission a Form 8-K
               dated May 27, 1998 disclosing the offer to purchase Coms21
               shares.

               On March 29, 2002 the Company filed with the Commission a form
               8-K dated March 28, 2002 disclosing changes to executive
               management.

                                       26
<PAGE>

SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                     ONLINE GAMING SYSTEMS, LTD.


Dated: April 12, 2002                /s/ LAWRENCE P. TOMBARI
                                     ---------------------------------
                                     Lawrence P.Tombari, Chief Financial Officer

     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant in the capacities and on the
dates indicated.

          Signature                          Title                     Date
          ---------                          -----                     ----

/s/ J.A. COPELYN                    Chairman of the Board         April 12, 2002
------------------------------      Chief Executive Officer
    J.A. Copelyn

                                    Director                      April 12, 2002
------------------------------
    Marcel Golding

                                    Director                      April 12, 2002
------------------------------
    Gavin Chamberlain

                                       27
<PAGE>

ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARY
--------------------------------------------------------------------------------

INDEX TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


                                                                         PAGE
                                                                         ----

Independent Auditor's Report......................................    F-2

Consolidated Balance Sheet as of December 31, 2001 ...............    F-3

Consolidated Statements of Operations for the years ended
December 31, 2001 and 2000 .......................................    F-4 - F-5

Consolidated Statements of Changes in Stockholders' [Deficit]
for the years ended December 31, 2001 and 2000 ...................    F-6

Consolidated Statements of Cash Flows for the years ended
December 31, 2001 and 2000 .......................................    F-7 - F-8

Notes to Consolidated Financial Statements .......................    F-9 - F-18







                             . . . . . . . . . . . .

                                       F-1
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT


To the Stockholders and Board of Directors of
   Online Gaming Systems, Ltd. and Subsidiary



         We have audited the accompanying consolidated balance sheet of Online
Gaming Systems, Ltd. and its subsidiary as of December 31, 2001, and the related
consolidated statements of operations and changes in stockholders' [deficit],
and cash flows for each of the two years in the period ended December 31, 2001.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Online Gaming Systems, Ltd. and its subsidiary as of December 31, 2001, and the
consolidated results of their operations and their cash flows for each of the
two years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America.




MOORE STEPHENS, P.C.
Certified Public Accountants.


Cranford, New Jersey
February 22, 2002

                                       F-2
<PAGE>

<TABLE>
<CAPTION>
ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARY
-----------------------------------------------------------------------------------

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2001.
-----------------------------------------------------------------------------------

<S>                                                                    <C>
ASSETS:
CURRENT ASSETS:
   Cash                                                                $    123,097
   Other Current Assets                                                      22,917
                                                                       ------------

   TOTAL CURRENT ASSETS                                                     146,014

PROPERTY AND EQUIPMENT - NET                                                214,394

OTHER ASSETS:
   Intangible Assets - Net                                                  319,333
                                                                       ------------

   TOTAL ASSETS                                                        $    679,741
                                                                       ============

LIABILITIES AND STOCKHOLDERS' [DEFICIT]:
CURRENT LIABILITIES:
   Accounts Payable and Accrued Expenses                               $    379,127
   Accrued Interest - Related Party                                         804,098
   Notes Payable                                                             22,500
   Notes Payable - Related Party                                             34,680
   Capital Lease Obligations                                                 34,874
                                                                       ------------

   TOTAL CURRENT LIABILITIES                                              1,275,279

CONVERTIBLE NOTES PAYABLE - RELATED PARTY                                 3,734,907

COMMITMENTS AND CONTINGENCIES                                                    --
                                                                       ------------

   TOTAL LIABILITIES                                                      5,010,186
                                                                       ------------

STOCKHOLDERS' [DEFICIT]:
   Convertible Preferred Stock - Par Value $.001 Per Share;
     Authorized 10,000,000 Shares, No Shares Issued and Outstanding              --

   Common Stock - Par Value $.001 Per Share; Authorized
     100,000,000 Shares; 94,546,269 Shares Issued                            94,546

   Additional Paid-in Capital                                            18,615,663

   Treasury Stock, 1,125,012 Common Shares - At Cost                     (1,730,485)
   Accumulated [Deficit]                                                (21,310,169)
                                                                       ------------

   TOTAL STOCKHOLDERS' [DEFICIT]                                         (4,330,445)
                                                                       ------------

   TOTAL LIABILITIES AND STOCKHOLDERS' [DEFICIT]                       $    679,741
                                                                       ============
</TABLE>


              The Accompanying Notes are an Integral Part of these
                       Consolidated Financial Statements.

                                       F-3
<PAGE>

<TABLE>
<CAPTION>
ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARY
------------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF OPERATIONS
------------------------------------------------------------------------------------

                                                                 Years ended
                                                                 -----------
                                                                December 31,
                                                                ------------
                                                            2001            2000
                                                        ------------    ------------

<S>                                                     <C>             <C>
REVENUE                                                 $    778,847    $  2,355,576

COST OF SALES                                                     --         205,655
                                                        ------------    ------------

   GROSS PROFIT                                              778,847       2,149,921
                                                        ------------    ------------

OPERATING EXPENSES:
   Salaries and Employee Benefits                          2,436,623       2,607,972
   General and Administrative                              1,696,812       2,150,904
   Depreciation and Amortization                             295,353         252,808
                                                        ------------    ------------

   TOTAL OPERATING EXPENSES                                4,428,788       5,011,684
                                                        ------------    ------------

   [LOSS] FROM OPERATIONS                                 (3,649,941)     (2,861,763)
                                                        ------------    ------------

OTHER [EXPENSES] INCOME:
   Interest Expense - Related Party                         (599,172)       (152,310)
   Interest Expense - Other                                  (34,384)        (83,165)
   Financing Fee Expense                                          --        (750,000)
   Write-Off of Deferred Offering Costs                           --        (400,000)
   Realized Loss on Investment                                    --      (4,637,000)
                                                        ------------    ------------

   OTHER [EXPENSES] - NET                                   (633,556)     (6,022,475)
                                                        ------------    ------------

   [LOSS] FROM OPERATIONS                                 (4,283,497)     (8,884,238)

INCOME TAXES                                                      --              --
                                                        ------------    ------------

   NET [LOSS]                                           $ (4,283,497)   $ (8,884,238)
                                                        ============    ============

   NET [LOSS] PER SHARE - BASIC                         $       (.14)   $       (.63)
                                                        ============    ============

   WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC     31,289,594      14,329,013
                                                        ============    ============
</TABLE>


              The Accompanying Notes are an Integral Part of these
                       Consolidated Financial Statements.

                                       F-4
<PAGE>

<TABLE>
<CAPTION>
ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARY
----------------------------------------------------------------------------------------------------------------------------------

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' [DEFICIT]
----------------------------------------------------------------------------------------------------------------------------------


                                  Preferred Stock                                        Additional
                                  ---------------                                        ----------
                            Stockholders'                        Common Stock             Paid-in            Treasury Stock
                            -------------                        ------------             -------            --------------
                               Shares         Amount         Shares         Amount        Capital         Shares         Amount
                            ------------   ------------   ------------   ------------   ------------   ------------   ------------

<S>                               <C>      <C>              <C>          <C>            <C>              <C>          <C>
  BALANCE - DECEMBER 31,
    1999                          14,050   $         14     13,614,052   $     13,614   $ 13,864,081       (968,767)  $ (1,744,547)

Issuance of Common Stock
  for Consulting Services             --             --        375,000            375        749,625             --             --
Realized Loss on
  Marketable Securities               --             --             --             --             --             --             --
Write-off of Deferred
  Acquisition Costs                   --             --             --             --             --             --             --
Issuance of Common Stock              --             --        225,000            225        249,775             --             --
Conversion of Preferred
  Stock                           (3,440)            (3)       455,128            455           (452)            --             --
Loss from Continuing
  Operations                          --             --             --             --             --             --             --
                            ------------   ------------   ------------   ------------   ------------   ------------   ------------

  BALANCE - DECEMBER 31,
    2000                          10,610             11     14,669,180         14,669     14,863,029       (968,767)    (1,744,547)

Sale of Treasury Stock                --             --             --             --             --       (156,245)        14,062
Conversion of Preferred
  Stock                          (10,610)           (11)    19,110,422         19,110        (19,099)            --             --
Investor Shares Issued                --             --        225,000            225        199,775             --             --
Issuance of Stock -
  Officers                            --             --        541,667            542         31,958             --             --
Conversion of Convertible
  Debt                                --             --     60,000,000         60,000      3,540,000             --             --
Loss from Continuing
  Operations                          --             --             --             --             --             --             --
                            ------------   ------------   ------------   ------------   ------------   ------------   ------------

  BALANCE - DECEMBER 31,
    2001                              --   $         --     94,546,269   $     94,546   $ 18,615,663     (1,125,012)  $ (1,730,485)
                            ============   ============   ============   ============   ============   ============   ============
</TABLE>


<TABLE>
<CAPTION>
                            Accumulated                    Deferred                        Total
                            -----------                    --------                        -----
                               Other         Comprehensive Accumulated Acquisition      Subscription
                               -----         -------------------------------------      ------------
                               [Loss]       [Deficit]        Costs        Receivable     [Deficit]
                            ------------   ------------   ------------   ------------   ------------

<S>                         <C>            <C>            <C>            <C>            <C>
  BALANCE - DECEMBER 31,
    1999                    $ (1,474,500)  $ (8,142,434)  $   (400,000)  $         --   $  2,116,228

Issuance of Common Stock
  for Consulting Services             --             --             --             --        750,000
Realized Loss on
  Marketable Securities        1,474,500             --             --             --      1,474,500
Write-off of Deferred
  Acquisition Costs                   --             --        400,000             --        400,000
Issuance of Common Stock              --             --             --             --        250,000
Conversion of Preferred
  Stock                               --             --             --             --             --
Loss from Continuing
  Operations                          --     (8,884,238)            --             --     (8,884,238)
                            ------------   ------------   ------------   ------------   ------------

  BALANCE - DECEMBER 31,
    2000                              --    (17,026,672)            --             --     (3,893,510)

Sale of Treasury Stock                --             --             --             --         14,062
Conversion of Preferred
  Stock                               --             --             --             --             --
Investor Shares Issued                --             --             --             --        200,000
Issuance of Stock -
  Officers                            --             --             --             --         32,500
Conversion of Convertible
  Debt                                --             --             --             --      3,600,000
Loss from Continuing
  Operations                          --     (4,283,497)            --             --     (4,283,497)
                            ------------   ------------   ------------   ------------   ------------

  BALANCE - DECEMBER 31,
    2001                    $         --   $(21,310,169)  $         --   $         --   $ (4,330,445)
                            ============   ============   ============   ============   ============
</TABLE>


              The Accompanying Notes are an Integral Part of these
                       Consolidated Financial Statements.

                                       F-5
<PAGE>

<TABLE>
<CAPTION>
ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARY
---------------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF CASH FLOWS
---------------------------------------------------------------------------------------

                                                                     Years ended
                                                                     -----------
                                                                    December 31,
                                                                    ------------
                                                                 2001           2000
                                                             -----------    -----------
<S>                                                          <C>            <C>
OPERATING ACTIVITIES:
   Net [Loss]                                                $(4,283,497)   $(8,884,238)
   Adjustments to Reconcile Net [Loss] to
     Net Cash [Used for] Operating Activities:
     Depreciation and Amortization                               295,353        252,808
     Issuance of Common Stock for Services Rendered              200,000        750,000
     Issuance of Common Stock for Compensation                        --         25,000
     Loss on Sale of Investments                                      --      4,637,000
     Write-Off of Deferred Acquisition Costs                          --        400,000
     Debt Settlement                                             (97,350)            --


Changes in Assets and Liabilities:
   [Increase] Decrease in:
     Other Current Assets                                         (1,180)        19,276
     Other Assets                                                     --         15,462

   Increase [Decrease] in:
     Accounts Payable and Accrued Expenses                      (570,968)       283,489
     Accrued Interest - Related Party                            599,172             --
                                                             -----------    -----------

   NET CASH - OPERATING ACTIVITIES                            (3,858,470)    (2,501,203)
                                                             -----------    -----------

INVESTING ACTIVITIES:
   Purchase of Equipment                                              --        (76,658)
   Patents Purchased                                            (245,178)            --
                                                             -----------    -----------

   NET CASH - INVESTING ACTIVITIES                              (245,178)       (76,658)
                                                             -----------    -----------

FINANCING ACTIVITIES:
   Cash Overdraft                                               (128,016)       (45,859)
   Proceeds from Issuance of Common Stock                         32,500        250,000
   [Purchase] of Treasury Stock                                   14,062             --
   Proceeds from Advances - Related Party                             --        298,350
   Payment of Notes Payable/Advances - Related Party            (241,588)      (176,000)
   Proceeds from Short-Term Borrowings                                --        100,000
   Proceeds from Convertible Notes Payable - Related Party     4,438,642      2,396,265
   Payments of Capital Lease Obligations                        (114,800)       (83,950)
   Proceeds from Notes Payable - Related Party                    65,000             --
                                                             -----------    -----------

   NET CASH - FINANCING ACTIVITIES                             4,065,800      2,738,806
                                                             -----------    -----------

   NET [DECREASE] INCREASE IN CASH - FORWARD                 $   (37,848)   $   160,945
</TABLE>


              The Accompanying Notes are an Integral Part of these
                       Consolidated Financial Statements.

                                       F-6
<PAGE>

ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARY
--------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------

                                                                Years ended
                                                                -----------
                                                               December 31,
                                                               ------------
                                                             2001         2000
                                                          ---------    ---------

   NET [DECREASE] INCREASE IN CASH - FORWARDED            $ (37,848)   $ 160,945

CASH - BEGINNING OF YEARS                                   160,945           --
                                                          ---------    ---------

   CASH - END OF YEARS                                    $ 123,097    $ 160,945
                                                          =========    =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the years for:
     Interest                                             $  39,179    $      --
     Income Taxes                                         $      --    $      --


SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

   In connection with a legal settlement, the Company issued an individual
investor 225,000 shares of the Company's common stock in April 2001.

   In June 2001, 10,610 shares of convertible preferred stock was converted into
19,110,422 shares of the Company's common stock.

   In November 2001, $3,600,000 of convertible debt was converted into
60,000,000 shares of the Company's common stock.

              The Accompanying Notes are an Integral Part of these
                       Consolidated Financial Statements.

                                       F-7
<PAGE>

ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


[1]  ORGANIZATION

NATURE OF BUSINESS - Online Gaming Systems, Ltd. [the "Company"] is located in
Las Vegas, Nevada. The Company primarily develops and markets interactive gaming
products and services through the Internet and World Wide Web. The Company
established Online Gaming Systems Australia Pty., as a wholly owned subsidiary,
to offer sports book sales in Australia and the Pacific Island region. The
Company is majority owned by Hosken Consolidated Investments and Subsidiaries
["HCI"], a South African Company.

[2]  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of the Company and its only subsidiary, Online Gaming Systems
Australia, Pty Ltd. All material intercompany accounts and transactions have
been eliminated.

USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS - The Company considers all highly liquid investments,
with a maturity of three months or less when purchased, to be cash equivalents.
At December 31, 2001, the Company did not have any cash equivalents.

PROPERTY AND EQUIPMENT AND DEPRECIATION - Property and equipment are stated at
cost. Depreciation is computed primarily using the straight-line method over the
estimated useful lives of the assets, which range from 5 to 7 years. Leasehold
improvements are amortized using the straight-line method over the lesser of the
term of the related lease or the estimated useful lives of the improvements.

Routine maintenance and repair costs are charged to expense as incurred and
renewals and improvements that extend the useful life of the assets are
capitalized. Upon sale or retirement, the cost and related accumulated
depreciation are eliminated from the respective accounts and any resulting gain
or loss is reported as income or expense.

REVENUE RECOGNITION - Revenue from the sales of computer software licensing
agreements are recognized over the term of the agreement.

INCOME TAXES - Pursuant to Statement of Financial Accounting Standard ["SFAS"]
No. 109, "Accounting for Income Taxes," income tax expense [or benefit] for the
year is the sum of deferred tax expense [or benefit] and income taxes currently
payable [or refundable]. Deferred tax expense [or benefit] is the change during
the year in a company's deferred tax liabilities and assets. Deferred tax
liabilities and assets are determined based on differences between financial
reporting and tax basis of assets and liabilities, and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.

ADVERTISING EXPENSES - The Company expenses advertising costs as incurred. Total
advertising expense for the years ended December 31, 2001 and 2000 amounted to
approximately $-0- and $204,713, respectively.

                                       F-8
<PAGE>

ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #2
--------------------------------------------------------------------------------


[2]  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]

NET INCOME PER SHARE - Basic [loss] per share is computed by dividing the [loss]
available to common stockholders by the weighted average number of common shares
outstanding during the period.

Diluted [loss] per share reflects the amount of earnings for the period
available to each share of common stock outstanding during the reporting period,
while giving effect to all dilutive potential common shares that were
outstanding during the period, such as common shares that could result from the
potential exercise or conversion of securities into common stock

The computation of diluted [loss] per share does not assume conversion,
exercise, or contingent issuance of securities that would have an antidilutive
effect on per share amounts, [i.e. increasing earnings per share or reducing
loss per share]. The dilutive effect of outstanding options and warrants and
their equivalents are reflected in dilutive earnings per share by the
application of the treasury stock method which recognizes the use of proceeds
that could be obtained upon exercise of options and warrants in computing
diluted earnings per share. It assumes that any proceeds should be used to
purchase common stock at the average market price during the period. Options and
warrants will have a dilutive effect only when the average market price of the
common stock during the period exceeds the exercise price of the options or
warrants. At December 31, 2001 and 2000, all outstanding options and warrants
were anti-dilutive for earning per share calculations.

STOCK-BASED COMPENSATION - The Company follows Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ["APB No. 25"] with
regard to the accounting for its employee stock options. Under APB No. 25,
compensation expense is recognized only when the exercise price of options is
below the market price of the underlying stock on the date of grant.
Accordingly, no compensation expense has been recognized for the Company's
stock-based compensation plan for fiscal year 2001 and 2000. The Company applies
the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" to any
non-employee stock-based compensation and the pro forma disclosure provisions of
SFAS No. 123 to employee stock-based compensation.

RESEARCH AND DEVELOPMENT COSTS - Research and development costs incurred in
connection with the development of new software are expensed as incurred during
the year.

INTANGIBLE ASSETS - Patent and intellectual property rights totaling $448,402
were capitalized at December 31, 2001. These costs were incurred in connection
with obtaining patents and filing of related patent applications. Intangible
asset amortization expense amounted to approximately $71,000 and $20,000 for the
years ended December 31, 2001 and 2000, respectively. Amortization is calculated
on a straight-line basis over the patents estimated useful life which ranges
from 3 to 5 years. At December 31, 2001, the Company had recorded $129,069 in
accumulated amortization related to capitalized patent costs.

RECLASSIFICATION - Certain prior year amounts have been reclassified to conform
to current year's financial statement presentation.

[3]  SIGNIFICANT RISKS AND UNCERTAINTIES

CONCENTRATIONS OF CREDIT RISK - The Company places its cash with high credit
quality institutions to limit its credit exposure. At December 31, 2001, the
Company did not have any amounts in a financial institution that is subject to
normal credit risk beyond insured amounts. The Company routinely assesses the
credit worthiness of its customers before a sale takes place and believes its
credit risk exposure is limited. The Company performs ongoing credit evaluations
of its customers but does not require collateral as a condition of service.

                                       F-9
<PAGE>

ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #3
--------------------------------------------------------------------------------


[3]  SIGNIFICANT RISKS AND UNCERTAINTIES [CONTINUED]

CUSTOMER CONCENTRATION - In fiscal 2001 and 2000, the Company had a portion of
its revenues derived from several customers, who individually represent 10
percent or more of revenue, totaling $450,000 and $1,297,500. These customers
comprise approximately 58% and 55% of total revenues for fiscal 2001 and 2000,
respectively.

                                                             Revenues
                                                             --------
                                                            Year Ended
                                                            ----------
                                                           December 31,
                                                           ------------
Customers                                             2001               2000
---------                                          ----------         ----------

Customer A                                         $       --         $  250,000
Customer B                                            450,000            250,000
Customer C                                                 --            250,000
Customer D                                                 --            250,000
Customer E                                                 --            200,000
Customer F (Software Sales)                                --             97,500
                                                   ----------         ----------

   TOTALS                                          $  450,000         $1,297,500
   ------                                          ==========         ==========

Listed below are those geographic regions which comprise 10 percent or more of
revenue for the years ended December 31, 2001 and 2000.

Geographic Information
----------------------

Australia (Pacific Region)                         $       --         $  750,000
Caribbean                                                  --             97,500
Central American                                           --            250,000
United States                                         500,000            200,000
                                                   ----------         ----------

   TOTALS                                          $  500,000         $1,297,500
   ------                                          ==========         ==========

[4]  REALIZED LOSS ON INVESTMENTS

During the year ended December 31, 2000, the Company recorded a realized loss of
investments totaling $4,637,000 related to 500,000 shares of Atlantic Internet
preferred stock and 530,000 shares of Cybergames, Inc., common stock.

[5]  PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31, 2001:

                                                       Accumulated
                                                       -----------
                                              Cost     Depreciation       Net
                                           ---------   ------------    ---------

Computer Hardware                          $ 588,048     $ 482,667     $ 105,381
Equipment and Furniture                       88,182        36,162        52,020
Equipment Under Capital Lease                283,518       237,280        46,238
Leasehold Improvements                        24,763        14,008        10,755
                                           ---------     ---------     ---------

   TOTALS                                  $ 984,511     $ 770,117     $ 214,394
   ------                                  =========     =========     =========

Depreciation expense for the years ended December 31, 2001 and 2000 amounted to
$224,344 and $212,164, respectively.

                                      F-10
<PAGE>

ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #4
--------------------------------------------------------------------------------


[6]  CONVERTIBLE NOTES PAYABLE - RELATED PARTY

At December 31, 2001, the Company had a $3,734,907 convertible note payable
balance due Hosken Consolidated Investments ["HCI"]. As of December 31, 2001,
subsidiaries of HCI owned approximately 86% of the outstanding shares of the
Company's common stock. HCI is a South African investment holding company
involved in various technology industries. Terms of the revised loan agreement
provide for an extension of the maturity to repay all principal outstanding and
related accrued interest by December 31, 2003. The notes payable are secured by
substantially all assets of the Company. In November 2001, HCI converted
$3,600,000 of convertible debt into 60,000,000 shares of the Company's common
stock. The Company recorded interest expense of approximately $598,000 and
$152,000 for the years ended December 31, 2001 and 2000, respectively. As of
December 31, 2001, the Company has accrued $804,698 in interest related to the
convertible debt borrowing. The Company did not repay any or principal during
the years ended December 31, 2001 and 2000. During the year ended December 31,
2001, the Company repaid HCI approximately $16,000 in accrued interest.

[7]  ADVANCES - RELATED PARTY

In fiscal 2001, the Company negotiated the settlement of a principal balance of
$122,350 advanced to the Company by a former officer of the Company. The
provision of the settlement provided for a cash payment of $25,000 and
forgiveness of the remaining $97,350 principal balance.

For the years ended December 31, 2001 and 2000, the Company recorded interest
expense of approximately $-0- and $7,500, respectively.

[8]  NOTES PAYABLE

As of December 31, 2000, the Company had advances of $113,768 outstanding in
connection with a trade acceptance draft program. The liability associated with
this note payable was settled in full during fiscal 2001, including all
applicable accrued interest.

In fiscal 2000, the Company borrowed $100,000 from customer of the Company.
Terms of the note payable provide for a maturity date of August 2002. The
outstanding principal balance is subject to 8.0% interest. At December 31, 2001,
the Company had a $22,500 principal balance outstanding.

[9]  NOTE PAYABLE - RELATED PARTY

In January 2001, the Company borrowed $65,000 from the president of the Company.
The loan agreement provides for interest at 8% per annum but contains no
specific repayment terms on the principal balance. At December 31, 2001, the
principal balance outstanding was $34,680. The Company recorded approximately
$4,000 in interest expense in 2001. In February 2002, the Company issued 561,766
shares of its common stock in settlement of the remaining loan balance of
$29,319 plus accrued interest of $4,386.

[10] CAPITAL LEASE OBLIGATIONS

The Company leases office equipment under capital leases expiring through
December 2002. These leases are collateralized by the related assets. The assets
and liabilities under capital leases are recorded at the present value of the
net future minimum lease payments. The assets are amortized over their estimated
useful lives. Amortization of assets under capital lease obligations totaled
$14,507 and $85,909 for the years ended December 31, 2001 and 2000,
respectively.

                                      F-11
<PAGE>

ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #5
--------------------------------------------------------------------------------


[10] CAPITAL LEASE OBLIGATIONS [CONTINUED]

As of December 31, 2001, assets under capital lease obligations are as follows:

Office Equipment                           $ 283,518
Less: Accumulated Amortization               237,280
                                           ---------

   TOTAL                                   $  46,238
   -----                                   =========

At December 31, 2001, minimum future lease payments under capital lease
obligations are as follows:

2002                                          $  36,787
Thereafter                                           --
                                              ---------

Minimum Lease Payments                           36,787
Less: Amount Representing Interest                1,913
                                              ---------

Present Value of Net Minimum Lease Payments      34,874
Less: Current Portion                            34,874
                                              ---------

   LONG-TERM PORTION                          $      --
   -----------------                          =========

[11] FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company adopted SFAS No. 107, "Disclosure About Fair Value of Financial
Instruments" which requires disclosing fair value to the extent practicable for
financial instruments which are recognized or unrecognized in the balance sheet.
The fair value of the financial instruments disclosed herein is not necessarily
representative of the amount that could be realized or settled, nor does the
fair value amount consider the tax consequences of realization or settlement.

In assessing the fair value of financial instruments, the Company used a variety
of methods and assumptions, which were based on estimates of market conditions
and risks existing at that time. For certain instruments, including capital
lease obligation and notes payables, it was assumed that the carrying amount
approximated fair value for the majority of these instruments because of their
short maturities.

[12] CAPITAL TRANSACTION

In fiscal 2000, HCI acquired 9,000 shares of the Company's convertible preferred
stock from the Shaar Fund.

During fiscal 2000, the Company issued 375,000 shares of its common stock in
connection for consulting services rendered in obtaining and negotiating
convertible debt financing. The value of the 375,000 shares was based on the
market value per common share of approximately $2.00 at the date of issuance.
Accordingly, the Company recorded an expense of $750,000 for the year ended
December 31, 2000 associated with these consulting services [See Note 6].

In February 2000, the Company issued 100,000 shares of its common stock in
exchange for a $150,000 investment [fair value of common stock at date of
issuance] from an individual investor.

                                      F-12
<PAGE>

ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #6
--------------------------------------------------------------------------------


[12] CAPITAL TRANSACTION [CONTINUED]

In March 2000, the Company issued 100,000 shares of its common stock in
connection with a $100,000 investment by a customer of the Company.

In April 2000, the Company issued 25,000 shares of its common stock in exchange
for consulting services which have been recorded as a $25,000 expense in fiscal
2000.

In January 2001, 1,610 shares of the Company's preferred stock was converted
into 500,000 shares of the Company's common stock.

In March 2001, 9,000 shares of preferred stock owned by HCI was converted into
18,610,422 shares of the Company's common stock.

In April 2001, the Company issued 225,000 shares of its common stock as part of
a settlement with a former public relations consultant. The value of the shares
was approximately $13,500 or $.06 per share, and was charged to operations in
fiscal 2001.

During fiscal 2001, both the Chief Executive Officer and Chief Financial Officer
of the Company purchased 208,334 and 333,333 shares of the Company's common
stock, for $.06 per share.

[13] PROVISION FOR INCOME TAXES

Income tax [benefit] expense from continuing operations consists of the
following:

                                                            December 31,
                                                            ------------
                                                         2001            2000
                                                     -----------     -----------
Current:
  Federal                                            $        --     $        --
  State                                                       --              --
                                                     -----------     -----------

  Total Current                                               --              --
                                                     -----------     -----------

Deferred:
  Federal                                                     --              --
  State                                                       --              --
                                                     -----------     -----------

  Total Deferred                                              --              --
                                                     -----------     -----------

  TAX EXPENSE [BENEFIT] - CONTINUING OPERATIONS      $        --     $        --
  ---------------------------------------------      ===========     ===========

Income tax from continuing operations at the federal statutory rate reconciled
to the Company's effective rate is as follows:

                                                           December 31,
                                                           ------------
                                                         2001          2000
                                                     -----------   -----------

Federal Statutory Rate                                      34.0%         34.0%
State Income Taxes                                            --           6.0
Non-Deductible Expenses and NOL Valuation Allowance        (34.0)        (40.0)
                                                     -----------   -----------

   EFFECTIVE RATE                                             --%           --%
   --------------                                    ===========   ===========

                                      F-13
<PAGE>

ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #7
--------------------------------------------------------------------------------


[13] PROVISION FOR INCOME TAXES [CONTINUED]

As of December 31, 2001, the Company had a gross deferred tax asset of
approximately $5,800,000. The deferred tax asset primarily consists of
approximately $14,500,000 of federal net operating loss tax carryforwards
expiring in years 2012 through 2021. The gross deferred tax asset is offset by a
valuation allowance of $5,800,000 at December 31, 2001.

The Company's valuation allowance increased by approximately $1,700,000 and
$3,200,000 for the years ended December 31, 2001 and 2000, respectively.

[14] COMMITMENTS AND CONTINGENCIES

The Company is party to litigation arising from the normal course of business.
In managements' opinion, this litigation will not materially affect the
Company's financial position, results of operations or cash flows. The Company
is currently being in litigation with several a previous creditors for past
amounts outstanding owing.

The Company rents office space under and operating lease expiring in September
2005. The lease grants an option for renewal for an additional 5 years.

Minimum future rental payments under non-cancelable operating leases having
remaining terms in excess of one year as of December 31, 2001.

Year ending                             Operating
-----------                            ----------
December 31,                             Leases
------------                           ----------

  2002                                 $  199,965
  2003                                    184,347
  2004                                    151,272
  2005                                    100,848
  Thereafter                                   --
                                       ----------

  TOTAL                                $  636,432
  -----                                ==========

Rent expense for the years ended December 31, 2001 and 2000 was $176,391 and
$190,706, respectively.

In January 2001, the Company entered into a three year employment agreement with
the Company's Chief Financial Officer. Terms of the agreement provide for a base
salary as follows:

2001                                   $  150,000
2002                                      180,000
2003                                      240,000
                                       ----------

   TOTAL                               $  570,000
   -----                               ==========

A severance of 1.5 years of remaining base salary will be paid upon termination
without cause.

                                      F-14
<PAGE>

ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #8
--------------------------------------------------------------------------------


[15] INCENTIVE STOCK OPTION PLAN

On January 1, 1997, the Company adopted an Incentive Stock Option Plan for
Employees, Directors, Consultants and Advisors [the "Plan"]. The Plan will
expire December 31, 2006 unless further extended by appropriate action of the
Board of Directors. Employees, directors, consultants and advisors of the
Company, or any of its subsidiary corporations, are eligible for participation
in the Plan. The Plan provides for stock to be issued pursuant to options
granted and shall be limited to 250,000 shares of Common Stock, $.001 par value.
The shares have been reserved for issuance in accordance with the terms of the
Plan. No incentive stock options have been issued under the Plan as of December
31, 2001.

The following is a summary of transactions, including the options issued to
employees of the Company.

                                                                Weighted-Average
                                                                ----------------
                                                     Shares      Exercise Price
                                                   ---------     --------------

Outstanding at December 31, 1999                   1,599,000       $    2.25
Granted                                                   --              --
Exercised                                                 --              --
Canceled                                                  --              --
                                                   ---------       ---------

Outstanding at December 31, 2000                   1,599,000            2.25
                                                   ---------       ---------
Exercisable at December 31, 2000                   1,599,000            2.25
Granted                                              216,667              --
Exercised                                                 --             .03
Canceled                                                  --              --
                                                   ---------       ---------

   OUTSTANDING AT DECEMBER 31, 2001                1,815,667            2.25
   --------------------------------                ---------       ---------

   EXERCISABLE AT DECEMBER 31, 2001                1,815,667            2.25
   --------------------------------                ---------       ---------

The following table summarizes information about stock options at December 31,
2001:

<TABLE>
<CAPTION>
                                                                               Exercisable
                                                                               -----------
                                 Outstanding Stock Options                    Stock Options
                                 -------------------------                    -------------
                                Remaining      Weighted-Average             Weighted-Average
                                ---------      ----------------             ----------------
Exercise Prices    Shares   Contractual Life    Exercise Price     Shares    Exercise Price
---------------    ------   ----------------    --------------     ------    --------------

<S>               <C>             <C>                <C>          <C>             <C>
     $3.25        175,000         3.00               $3.25        175,000         $3.25
     $4.13        700,000         3.25               $4.13        700,000         $4.13
     $2.50         88,000         3.75               $2.50         88,000         $2.50
     $1.29        115,000         3.25               $1.29        115,000         $1.29
     $2.50        521,000         3.75               $2.50        521,000         $2.50
     $0.03        283,333         4.50               $0.03        283,333         $0.03
</TABLE>

The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations, for stock options
issued to employees in accounting for its stock option plans. In fiscal 2001,
the Company granted 216,667 incentive stock options with an exercise price of
$.03 per share to two employees. At the grant date, the market price per common
share was $.06 per share. Accordingly, the Company has recorded an expense of
approximately $6,500 for the value of the options.

                                      F-15
<PAGE>

ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #9
--------------------------------------------------------------------------------


[15] INCENTIVE STOCK OPTION PLAN [CONTINUED]

The Black-Scholes option valuation model was developed for use in estimating the
fair value of options. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility. No
options or warrants were issued to employees during the year ended December 31,
2000. Accordingly, no pro forma information is provided for the year ended
December 31, 2000.

Pro forma information regarding net loss and net loss per share has been
determined as if the Company had accounted for its employee stock options under
the fair value method prescribed under SFAS No. 123, "Accounting for Stock Based
Compensation." The fair value of the 216,667 options issued employees was
estimated at the date of grant using the Black-Scholes option-pricing model for
the pro forma amounts with the following weighted average assumptions:

                                                                December 31,
                                                                ------------
                                                                    2001
                                                                    ----

Risk-Free Interest Rate                                               5.5%
Expected Life                                                      3 years
Expected Volatility                                                 63.93%
Expected Dividends                                                     --%

The pro forma amounts are indicated below:

                                                                     Years ended
                                                                     -----------
                                                                    December 31,
                                                                    ------------
                                                                        2001
                                                                        ----
Net [Loss]:
   As Reported                                                      $(4,283,497)
   Pro Forma                                                        $(4,292,997)

Basic Net [Loss] Per Share of Common Stock:
   As Reported                                                      $      (.14)
   Pro Forma                                                        $      (.14)

[16] NEW AUTHORITATIVE ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board ["FASB"] issued Statement
of Financial Accounting Standards ["SFAS"] No. 141, "Business Combinations,"
SFAS No. 142 "Goodwill and Other Intangible Assets and SFAS No. 143, "Accounting
for Asset Retirement Obligations."

SFAS 141 requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001. Use of the
pooling-of-interests method is no longer permitted. SFAS No. 141 also includes
guidance on the initial recognition and measurement of goodwill and other
intangible assets acquired in a business combination that is completed after
June 30, 2001.

                                      F-16
<PAGE>

ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #10
--------------------------------------------------------------------------------


[16] NEW AUTHORITATIVE ACCOUNTING PRONOUNCEMENTS [CONTINUED]

SFAS No. 142 no longer permits the amortization of goodwill and indefinite-lived
intangible assets. Instead, these assets must be reviewed annually [or more
frequently under certain conditions] for impairment in accordance with this
statement. This impairment test uses a fair value approach rather than the
undiscounted cash flows approach previously required by SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed of." Intangible assets that do not have indefinite lives will
continue to be amortized over their useful lives and reviewed for impairment in
accordance with SFAS No. 121.

SFAS No. 143 requires that the fair value of a liability for an asset retirement
legal obligation be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. The associated asset retirement
costs are capitalized as part of the carrying amount of the long-lived asset.
This statement is effective for fiscal years beginning after June 15, 2002.

In August 2001, FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement retains the requirements of SFAS
No. 121 but removes goodwill from its scope and describes a probability-weighted
cash flow estimation approach in evaluating possible future cash flows to be
used in impairment testing. Provisions of this statement are effective for
financial statements issued for fiscal years beginning after December 15, 2001,
and interim periods within those fiscal years.

We do not expect the adoption of SFAS No. 141, 142, 143 and 144 to have a
material impact on our results of operations and financial condition.

[17] GOING CONCERN

The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities and commitments in the normal course of business. As reflected in
the consolidated financial statements, the Company has incurred recurring net
losses from operations, an accumulated deficit, and recurring negative cash
flows from operations. These factors raised substantial doubt about the ability
of the Company to continue as a going concern.

Based on management's plans, cash flow projections, and a firm commitment from
HCI to fund future operations it appears that the Company will continue to
operate on a going concern basis in the near future.

[18] MARKETING AGREEMENT

In September 2001, the Company entered into a marketing and operations agreement
with UnoDosTres.Com ("UDT"). UDT operates a web site primarily catering to the
Latin American Market. The agreement calls for OGS to develop and operate, on an
exclusive basis, up to three online casinos (a Play for Fund and two live
casinos) on the site. UDT will provide up to $155 million of television and
radio advertising in support of the Company's casinos. UDT will receive a
commission of 15 percent of the net revenue from the live casinos from patronage
linking through its website. In exchange for developing the Play for Fun site,
the Company will receive 70% of the first $40,000 of monthly revenue, and UDT
will receive 30% of the first $40,000. The next $40,000 of monthly income is
split in reverse as the initial $40,000 with 30% to the Company and 70% to UDT.
The initial term of the Agreement will be for a period of 5 years from the live
date of each of the casino sites. The agreement will automatically renew for an
additional 5 year period unless cancelled by UDT or the Company. No revenue or
expenses were incurred in connection with this agreement during the year ended
December 31, 2001.

                                      F-17
<PAGE>

ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #11
--------------------------------------------------------------------------------


[19] SUBSEQUENT EVENTS - RELATED PARTIES

MARKETING AND MANAGEMENT AGREEMENT - In February 2002, the Company entered into
a management agreement with Ahead Investments Limited ("AI"), a wholly-owned
subsidiary of HCI. At December 31, 2001, the agreement entails the creation of a
yet unspecified separate entity which will own an internet casino and be managed
by the Company. Ownership of the Company is as follows.

AI                                88.60%
Other                             11.40%

In addition, the agreement provides an option for certain OGS personnel to
purchase an aggregate of an 18.5% ownership of the entity in exchange for a
total of $110,000. AI will provide funding for the project, to be about
$1,100,000. The agreement provides that AI will purchase from the Company a
software license fee of $250,000 plus pay the Company $200,000 for costs related
to obtaining an online casino licensing for the new entity. The purchase of the
license fee and payment of the online casino licensing fee costs will be
financed by the Company. Terms of the financing provisions provide for AI to
incur interest at a rate of 10% per annum, with the $250,000 and $200,000 lump
sums amounts maturing in December 2003. AI reserves the right to offset the
notes payable due them by the Company with the interest and purchase price
incurred in connection with the software license purchase and online casino
licensing costs.

The Company will manage the casino for AI, for a minimum management fee of
$600,000 per annum, plus incentive of up to $2,000,000 annually if certain
operating thresholds are met. Additionally, OGS will receive $12,500 (increasing
to $15,000) per month under a software support and maintenance agreement. In the
event the marketing and operations agreement is terminated, AI may exercise a
"put option" which requires the Company to purchase from AI and the remaining
shareholders all of the shares on the separate company based upon a fair market
value per share. The fair market value shall have a minimum value of $1,300,000.
The agreement also provides that the Company may exercise a "call option" to
require that AI and all remaining shareholders to sell to the Company their
respective shares outstanding for a fair value with a minimum value of
$1,500,000. The Company may not exercise the call option if AI elects to utilize
its put option.

In January 2002, the Company received a money mortgage note from Rogich
Communications Group calling for the purchase of 30,000 shares per month for 12
months at a price of $.05 per share. On January 2, 2002, the Company issued the
initial 30,000 shares of its common stock in exchange for $1,500. On February 7,
2002, the Company issued another 30,000 shares of its common stock in exchange
for $1,500.

In January 2002, the Company issued a former investor 241,251 shares of the
Company's common stock but had not formally issued the common shares of stock.

In February 2002, the Company issued 166,667 shares of its common stock to its
Chief Financial Officer in connection with his employment agreement entered into
in January 2001 [See Note 14].



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                                      F-18