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, 1999

/  /     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, 1999  to December 31, 1999

                         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)

        200 East Palmetto Park Road, Suite 200, Boca Raton, Florida 33432
     -----------------------------------------------------------------------
          (Address of Principal Executive Offices)            (Zip Code)

                                 (561) 393-6685
     -----------------------------------------------------------------------
                (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, 1999 were $ 850,950.

            The  aggregate  market  value at March  31,  2000 of  shares  of the
registrant's  Common  Stock,  $.001 par value per share  (based upon the closing
price of $ 1.25 per share of such stock on the Nasdaq OTC Bulletin Board on such
date), held by  non-affiliates of the Registrant was approximately  $18,305,225.
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 11, 2000
there were outstanding 14,669,166 shares of the Registrant's Common Stock, $.001
par value.

            Transitional Small Business Disclosure Format (check one):

                        Yes    /X/     No    / /



                                      -2-
<PAGE>

                                     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


                                      -3-
<PAGE>
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.

            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. (See page 9 for sale of the Eminet Domain, Inc.)

            The  Company's  executive  offices are located at 200 East  Palmetto
Park Road,  Suite 200, Boca Raton,  Florida 33432.  The telephone  number of the
Company is (561) 393-6685.  The Company maintains a home page on the Internet at
http://www.ogsltd.com.

                                      -4-
<PAGE>
PRODUCTS AND SERVICES

Interactive Gaming, Wagering, Charitable and Fund Raising Products

Interactive Casino Extension(TM)

            The  Company's   flagship   product  is  ICE   (Interactive   Casino
Extension).  In September of 1998, AIE introduced  Version 2.0 which is based on
industry standard  Microsoft(R) and Macromedia(R) tools. This version included a
more robust database and accounting back office, the support for junketeers, and
four games which utilized the Microsoft  crypto-API random number generator.  In
December of 1998, Version 2.1 was shipped which included three new games: Sic-Bo
(a popular Asian game), Baccarat, and Video Keno.  Additionally,  the ability to
download the Casino graphics to the player's  computer was introduced.  In March
of 1999,  Version 2.2 was  released and  included:  Scratch-Off  lottery  cards,
increased voice, a new roulette wheel design, and the ability to download a game
at a time beside the earlier ability to download the entire Casino graphics.  In
September of 1999,  Version 2.3 was released which had  redesigned  graphics for
the Slot machines, Blackjack,  Baccarat, and Roulette table tops; Auto detection
of Shockwave; enhanced Credit Card monitoring,  enhanced administrative security
levels, enhanced email capabilities, enhanced deposit reporting.

            The pricing for ICE(TM) allows the operator to receive new games for
this product with no additional fee. The fee includes  graphic  customization of
the Lobby, Game Lobbies,  card backs and coins.  There is a monthly  maintenance
fee, that entitles the operator to worldwide  customer  service twenty four (24)
hours per day, seven days per week. This includes  maintenance  updates and a 30
day warranty period.  Potential purchasers have a buy-out, option. New games are
made  available for a fee  depending on the cost of developing  the game and the
potential  increased  revenues to the  operator.  The  maintenance  fee is still
required for  maintenance  updates as long as the release is supported.  A third
option was requested  several times which  consisted of the back office purchase
and  games  purchased   individually.   This  option  also  requires  a  monthly
maintenance  fee  for  support  and  maintenance  updates  for  the  games  they
purchased. Hardware costs are excluded from the AIE fees.

WebSports(TM)

            The Company  licenses  webSports  to licensed  bookmakers.  In March
1998, AIE released Version 1.5 and Version 1.6 in the Fall. The release included
support for baseball and the introduction of Tax reporting, to support Australia
and  South  Africa,  along  with  support  for  Australian  Regulators.  AIE has
developed  Version  2.0 of  webSports,  which  will be  integrated  into the ICE
accounting  and  database  back  office,  taking  advantage  of the  development
completed  last year and running in the field since August of 1998.  Version 2.0
was introduced with a focus on International  Sports  Wagering,  supporting such
sports as: Cricket, Rugby, Golf, Football and others. The taxation and regulator
items will be included.  The product is targeted for July 1999,  in time to have
all customers ready for the American Football season.

                                      -5-
<PAGE>

WebSports  is priced  allowing  the  operator  to  receive  all new  Sports  and
enhancements to the product, including a customized Lobby. A monthly maintenance
fee is required which provides for  twenty-four  (24) hours per day seven days a
week worldwide support,  maintenance updates and a 30-day warranty period. As an
alternative, a purchase price is available and new sports will be made available
for a fee  depending  on the  potential  revenue  for the  client.  The  monthly
maintenance  fee is required for support and  maintenance as long as the release
is supported. Hardware costs are excluded from the AIE fees.


Bingo Blast(TM)

            In the  late  fall of  1998,  AIE  entered  into an  agreement  with
Cybergames Inc.  (CYGA:OTC) where jointly they would provide a fund raising game
for the  First  Lady of  Costa  Rica.  The site  will be  called  "Bingo  of the
Americas" and will provide the U.S Red Cross,  and the American  Cancer Society,
with  revenues.  This  agreement  prompted  the  development  of Bingo Blast was
released and developed to the retail market in the second quarter of 1999. Bingo
Blast is a multi-player, pari-mutual progressive prize game. The design is based
on the ICE platform,  lowering  development time and cost. Game play is intended
to simulate the actual experience in a Bingo Hall. Each game has a minimum prize
that is increased  based on the number of cards  purchased and has a progressive
prize that  increases  until a player  calls Bingo in a certain  number of balls
called.  There are thirty (30) different Bingo patterns,  customizable  graphics
and one of the first AIE products to introduce rules and customer information in
Spanish and English.

            Bingo  Blast is priced  similar to the  ICE(TM)  product.  A monthly
maintenance  fee is required  which  provides for twenty four (24) hours per day
seven days a week worldwide support,  maintenance  updates and a 30-day warranty
period. Hardware is not included in the price.


Lotto Magic(TM)

            Lotto Magic was  designed and started  into  development  in January
1999.  The product  utilizes the ICE  database,  accounting  back office and the
standard Microsoft tools and crypto-API. The product consists of Lotto whereby a
player selects six numbers from a field of 49 or can select Auto Pick. The dates
and  times of  drawings  are  posted  on the  site.  Sales  are  divided  into 4
configurable  pools:  those who match all 6 numbers,  those who match 5 numbers,
those who match 4 numbers.  The numbers can be entered after a live drawing,  or
can be randomly  generated.  The product also  includes  three  Instant  Scratch
Games:  Wheel of fortune (a key number game); High Card (a high score game); and
Match 3 (a three of six money match game).  These instant  Lottery  scratch game
tickets are created from a configurable size pool. Lotto Magic will be available
in April and is already  incurring a lot of interest.  This product is the first
that AIE will introduce that provides help and rules in Spanish and English.

                                      -6-
<PAGE>

            Lotto Magic is priced consistent with AIE's other products. Hardware
is not included in the price.

            For  all  AIE  products,   AIE  provides  support  for  credit  card
processing through processing vendors such as: Secure Bank, E-Payment Solutions,
Cybersource(R) and Barclays. AIE also offers custom programming for a fee.

Industry Overview

            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.  Management  believes that there is
tremendous  growth  potential  for  internet  products as consumer  and business
access  becomes  easier  and more cost  efficient.  We  estimate  that there are
already over 50 million  Internet users, and the number of users is growing at a
rate of 10% per month.

            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 which 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

            The interactive gaming and wagering  marketplace has become the next
step in the gaming  industry.  Revenues from the worldwide gaming market exceeds
$50,000,000,000.  We estimate  that gaming  revenues  derived from just internet
gaming  revenues will exceed  $8,000,000,000  by the year 2000.  The  integrated
interactive gaming and wagering (network gaming terminals,  lotteries, internet,
telephone) revenues will far exceed that amount.

            The existing customer base from the established  gaming and wagering
marketplace  will be where the vast  majority of these new revenues are derived.
Building upon the gaming  industry's high customer  loyalty level,  the existing
gaming  operators will be able to launch a new generation of gaming and wagering
products to it's player base.

Growth Strategy

            Our current plan of  operations  is to expand its current  worldwide
account base by offering a complete  interactive gaming & wagering product line.
We will also seek to expand upon  current  information  technology  products and
services  in the form of  international  acquisition  or mergers  into  existing
operations.  Achieving  market  acceptance  for our services  and


                                      -7-

<PAGE>

products  will require  substantial  marketing  efforts and the  expenditure  of
significant funds to create awareness and demand.

Marketing

            Our sales and  marketing  efforts over the past year have stepped up
considerably.  From a base in Boca Raton at the  beginning of the year we opened
sales and marketing  efforts in Sydney and Brisbane in Australia,  as well as in
London, Las Vegas and South Africa. We have formed two marketing alliances,  one
with  Anchor  Gaming in the United  States and the other with John Huxley in the
United Kingdom.


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.

Competition

            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%.

            We sell 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. We also focus our marketing  efforts on established  gaming  entities
such as cruise ships, licensed book makers,  respected charitable  organizations
and land  based  casinos  and other land based  gaming  operations.  We sell the
ability to expand and retain a current customer base.

            Service is provided  twenty four hours per day,  seven days per week
along with the ability to remotely  diagnose  and fix all  problems  and provide
upgrades.  A standard business practice is on-site  installation and a full week
of training of all personnel at no additional fee.

Employees

      As of March 31, 2000, we had twenty eight (28) full-time  employees in the
Boca Raton,  Florida office and four (4) 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.

                                      -8-

<PAGE>

Recent Developments

            On April 3, 1998,  we entered into a Securities  Purchase  Agreement
with The Shaar Fund, an Israeli  venture  fund,  for the sale of 5,000 shares of
the  Convertible  Preferred  stock for $500,000.  The Agreement  also grants the
purchaser the right to purchase up to an additional $2,500,000.00 in Convertible
Preferred  stock, at the same price as the initial 5,000 shares,  of Convertible
Preferred stock by April 2, 2000. The Convertible Preferred stock is convertible
into our common stock at The Shaar Fund's option.  When the Securities  Purchase
Agreement  was  signed,  we  entered  into an  agreement  with The Shaar Fund to
register all of the shares of the purchased securities and the common stock that
may be issued upon the exercise of the The Shaar Fund's  conversion  rights.  We
filed a registration  statement with the Securities and Exchange  Commission for
the registration of the shares of the Convertible Preferred stock and the shares
of common stock  issuable upon exercise of The Shaar Fund's  conversion  rights.
The   registration   statement   became  effective  and  we  will  maintain  the
effectiveness of registration statement for the term of the above Agreement.

            On April 30, 1998, Hosken  Consolidated  Investments,  Ltd., a South
African corporation, purchased 1,250,000 shares of our common stock at $3.20 per
share. We issued the shares to Hosken Consolidated Industries to fund operations
in South Africa and to obtain additional working capital.

            On June 2, 1998 The Shaar Fund advanced  $500,000 of the  additional
$2,500,000  and received an  additional  5,000 shares of  Convertible  Preferred
stock  pursuant  to the above  agreement.  The  parties  also  amended the above
agreement to eliminate the floor amount of $1.50 for the conversion price.

            On August 24, 1998, our  wholly-owned  subsidiary,  AIE,  Australia,
Ltd. submitted an offer for the acquisition of the stock of an Australian listed
company,  Coms21. We offered Coms21  shareholders the equivalent of $.70 AUD per
share in the form of our  U.S.  shares.  We  eventually  accepted  approximately
12,000,000  shares of Coms21,  or approximately  10% of Coms21,  in exchange for
approximately  1,200,000 shares of our common stock and thereafter  withdrew our
offer for the rest of the Coms21 stock.

            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.

            During  1999  the  Company  laid the  infrastructure  to allow it to
market on a global  basis.  Its "go to market"  philosophy  ensured  that Online
Gaming  Systems  would be  represented  in the entire  major gaming and wagering
jurisdictions  in the  world.  To  facilitate  this,  the  Company  widened  its
marketing  area to  include  the United  Kingdom,  Europe,  Australia,  the Asia
Pacific  Region  and South  Africa.  The  Company  also took  steps to widen its



                                      -9-
<PAGE>

product range by acquiring a Las Vegas based manufacturer that has allowed it to
manufacture a complementary product.

            A more detailed description of the Company's strategy as follows: -

            Acquisition of Excel Design, Inc.

            In April 1999 Online Gaming Systems,  Ltd.  acquired the business 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 sportsbook 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.  Online
Gaming  Systems,  Ltd.  also intends to integrate  its existing  Internet  based
product to extend Excels product line.

            In line with the  Company's  policy of  appointing  expert sales and
marketing  organizations,  Anchor Gaming was appointed in September 1999 to sell
and market Excel's  products.  The product is currently lodged for approval with
the Nevada Gaming Commission. Sales are expected in the fourth quarter 2000.

            John Huxley Casino Equipment, Ltd.

            In May 1999 Online  Gaming  Systems,  Ltd.  entered into an alliance
with the London based John Huxley Casino Equipment, Ltd. Huxley is considered to
be the largest casino equipment manufacturer (other than gaming machines) in the
world and currently services 3000 customers,  many with multiple casinos. Huxley
will have exclusive  distribution  rights for all Online Gaming Systems,  Ltd.'s
products  in England  and Europe and  non-exclusive  in all other  areas  except
Australia and the United States.

            It is the intention of Online Gaming Systems,  Ltd. to add marketing
and technical support staff at Huxley's London offices.

            This alliance will allow Online Gaming Systems,  Ltd. through Huxley
to access established casino operators  throughout the United Kingdom and Europe
in a cost effective and creditable manner.

            Online Gaming Systems Australia Pty.

            The Australian  subsidiary was  incorporated in 1998 for the purpose
of  launching a take over for the listed  Australian  company  Coms21,  Ltd. The
takeover was unsuccessful and aborted in December 1998.

            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.  Sydney is the largest  capital  city in  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
                                      -10-

<PAGE>

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.

            Online Gaming Systems  Australia  achieved its first sportsbook sale
in November  1999 and its first casino sale in December  1999.  Since then three
more casino sales and one other sportsbook sale have been announced.

            Global Payment Technology Holdings, Ltd. S.A

            Online  Gaming  Systems,  Ltd.  acquired a 23.9% equity  position in
South  African  based  Global  Payment   Technology   Holdings  Limited,   ("GPT
Limited")on  November 1, 1999.  GPT Limited  currently  markets and  distributes
authentication and validation equipment to South African gaming operators.  GPT,
Limited  plans to enter  the  Interactive  gaming  market  in South  Africa as a
distributor of Online Gaming System's product lines.


Internet Industry Overview

            The  internet  had its origins in 1969 as a project of the  Advanced
Research Project Agency ("ARPA") of the U.S. Department of Defense.  The network
established  by ARPA was  designed  to  provide  efficient  connections  between
different types of computers separated by large geographic areas and to function
even  if  part  of  the  network  became  inoperative.   Historically,  academic
institutions and  governmental  agencies for remote access to host computers and
electronic mail communications used the  infrastructure.  Accordingly,  the U.S.
government historically provided the majority of funding for the infrastructure.
However, as the modern internet developed and became commercial, funding shifted
to the private  sector.  The number of  worldwide  internet  users  continues to
increase significantly. In a recent government study, it was stated that traffic
on the internet  doubles every 100 days.  Business use is growing  faster and as
many as 62 million Americans now have Internet access.

            Improving  Performance  - There  have  been  significant  bandwidth,
communications,  and  price/performance  improvements in communications over the
Internet. These developments make the Internet an increasingly attractive medium
for conducting business, adding convenience, and attracting more users.

            High Speed Modems - As the installed  personal  computer ("PC") base
has  grown,  it has  become  increasingly  common  for those PCs to have a modem
                                      -11-

<PAGE>

connection. Many new computers now have higher speed, pre-installed modems, as a
K56 Flex, allowing connections to be made even more easily.

            Expansion of Local Area Networks and Wide Area Networks - Corporate,
government,  and educational local area networks, and wide area networks used by
businesses,  are expanding and these installed networks enable multiple users to
be connected to the internet through a single point of contact.  Therefore,  the
actual number of internet users connected through these networks greatly exceeds
the number of connection points.

            Extranet - Businesses  can set up a  proprietary  network or Virtual
Private  network using the Internet.  A Virtual  Private network is a secure and
cost effective means of data communication.

            Expectations  for  Electronic  Commerce over the Internet - With the
increased recognition of the Internet's potential, as a medium for marketing and
purchasing,  a growing number of companies are initiating or expanding their use
of the  Internet  for  commercial  purposes.  The United  States  Department  of
Commerce stated that 10 million North Americans made purchases over the Internet
by the end of 1997.

ITEM 2.  DESCRIPTION OF PROPERTY.

            We lease  approximately  5,150  square feet of office  space in Boca
Raton,   Florida  expiring  on  September  30,  2002  with  a  monthly  rent  of
approximately  $9,485. We believe that our existing  facilities are adequate for
our  current  needs  and that  additional  facilities  in its  service  area are
available  to meet future  needs.  ITEM 3. LEGAL  PROCEEDINGS.  The Company is a
party to pending or  threatened  litigation,  both as plaintiff  and  defendant.
However,  the Company  believes that said litigation will not materially  affect
the Company's operations or financial condition.

            a.    Kelley and Kelly  Advertising - Breach of Contract - This case
                  arose from a Settlement  Agreement entered into by the Company
                  with its former advertising company. The Company believed that
                  the  work  performed  by  Kelley  was not in  compliance  with
                  industry  standards and terminated  the Settlement  Agreement.
                  Kelley sued and the Company  settled the claim for $75,000 and
                  100,000 shares of restricted stock.

            b.    Axxsys  International  - Temporary and Permanent  Injunction -
                  Acquisition of Assets of Axxsys

                  On November 8, 1998, Atlantic acquired the assets of Axxsys 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


                                      -12-
<PAGE>

                  which was that the 200,000  shares of  Atlantic  stock was not
                  adequate  consideration for the transfer of the Axxsys assets.
                  Since Axxsys and its affiliates waited until January,  1999 to
                  serve Atlantic 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.  Based on the  allegations  contained  in Axxsys' own
                  complaint it seems clear that Axxsys was not a viable  company
                  and consequently any value assigned to the Atlantic stock will
                  be in excess of any fair market  value for the Axxsys  assets.
                  Counsel  believes that there is no merit to this action.  This
                  case is currently not set for trial

            c.    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. The Company did provide COBRA notice and the
                  medical expenses should be the responsibility of the Insurance
                  company. This case is not currently set for trial.

            d.    Newton - Mr.  Newton was  engaged by the Company in 1996 to be
                  its spokesman. The Company and Mr. Newton signed two identical
                  non-cancelable contracts, one for 215,000 shares and the other
                  for 15,000 shares.  The Company never used the services of Mr.
                  Newton  and the  Company  believes  that both  parties to said
                  contracts   abandoned  them.  Further  it  appears  that  both
                  contracts were not signed at the same time but that the 15,000
                  share  contract was a novation.  In the interest of settlement
                  the  Company  has issued and  delivered  to Mr.  Newton  5,000
                  shares. This case is not currently set for trial. Mr. Newton's
                  deposition is scheduled for April 14, 2000.

            e.    Keane - this is a suit for past due  services  rendered to the
                  Company.  The Company  disputes the amount of the  outstanding
                  invoices and the quality of the work  performed.  This case is
                  not set for trial


                                      -13-
<PAGE>

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

            On  September  24,  1999,  the  Company  held its Annual  Meeting of
Shareholders  to, among other things,  vote on a board of directors.  There were
6,965,882 shares voted for the proposal.

                                     PART II

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

            Since November,  1996, our common stock has traded on the electronic
bulletin board under the trading symbol AIEE. The following table sets forth the
average range of bid and ask  quotations 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, 1998

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

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

      1st            March 31, 1998               $4.80       $3.00

      2nd            June 30,1998                 $4.125      $3.625

      3rd            September 30, 1998           $4.375      $2.990

      4th            December 31, 1998            $3.00       $1.313


Fiscal Year Ending December 31, 1999

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

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

      1st            March 31, 1999               $3.00       $1.1875

      2nd            June 30,1999                 $3.5625     $1.96875

      3rd            September 30, 1999           $3.3125     $2.25

      4th            December 31, 19998           $2.46875    $0.90625


            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,   mark-down  or
commission, and may not necessarily represent actual transactions.



                                      -14-
<PAGE>

            As of December 31,  1999,  there were  approximately  575 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.  The Company currently
intends to utilize  any  earnings  it may  achieve  for the  development  of its
business and working capital purposes.

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

            During  1999,  the  Company   continued  its  business   efforts  in
Interactive Gaming & Wagering. Gaming and Wagering continues to grow in terms of
customer  base and product  line. A market for the gaming and wagering  products
has been  established  whereby  the Company has  entered  into  various  license
agreements.  The Company  expects to expand its account  base with its  existing
product line for the  foreseeable  future.  In late 1999 the Company's  products
began to benefit the  continued  increase in market  acceptance  of  Interactive
gaming  products in the  segments the Company  markets to. The segments  include
global land based  gaming and wagering  operators  and  Internet  media  related
company. The Company anticipates a significant increase in sales and revenues in
the coming year.


                                      -15-
<PAGE>

RESULTS OF OPERATIONS

      The following is a summary of the Company's financial and operating data:

                                          YEAR ENDED DECEMBER 31,
STATEMENTS OF CONTINUING
OPERATIONS DATA:                      1999                     1998
------------------------------        ----                     ----

Revenue                            $   850,950             $ 2,426,230
[Loss] Income from Operations       (6,637,602)             (2,401,793)
Net [Loss] Income                   (6,888,921)             (1,332,400)
Basic and Diluted Net
[Loss] Income Per Common Share     $     (0.55)            $     (0.15)

STATEMENT OF CONTINUING
OPERATIONS DATA                       1999                     1998
-----------------------------         ----                     ----
Working Capital                    $    65,979             $ 4,667,465
Total Assets                         4,898,292              10,406,587
Total Liabilities                    1,354,609               1,427,969
Stockholders' Equity                 3,543,683               8,978,618


STATEMENTS OF DISCONTINUED
OPERATIONS DATA:                      1999                     1998
-------------------                   ----                     ----

Revenue                            $       --             $  544,057
[Loss] Income from Operations         (54,261)              (371,448)
Net [Loss] Income                     (54,261)              (371,448)
Basic and Diluted Net [Loss]
Income per Common Share            $       --             $    (0.04)


BALANCE SHEET DATA -
DISCONTINUED OPERATIONS:              1999                     1998
-------------------                   ----                     ----

Working Capital                    $       --             $  (65,845)
Total Assets                               --              1,546,350
Total Liabilities                          --                195,078
Stockholders' Equity                       --              1,351,272


                                      -16-
<PAGE>

OUTLOOK

RESULTS OF OPERATIONS

            The Company's net loss for 1999 was ($6,888,921)compared to net loss
of ($1,332,400)  for 1998. The substantial  decrease was due to several factors.
Net  revenues  for the Company for 1999  compared  to 1998  decreased  by 65% or
$1,575,280.  The decrease in revenues was the result of the  development  of the
new product version.  The Company stopped promotion of the old version and sales
and marketing efforts did not produce anticipated  results.  The Company intends
to allocate large resources to sales and marketing for 2000 and expects revenues
to substantially increase.

            Cost of sales and operating  expenses increased by 54% or $2,660,529
in 1999  compared  with 1998.  The increase was largely due to global  expansion
efforts, expenses related to product development, increased support staffing and
amortization  of  capitalized  product  development.  Cost  of  revenues  is not
directly related to revenues. Provision for doubtful accounts was $1,222,185 and
$1,435,040  for 1999 and 1998  respectfully.  Going forward the Company does not
anticipate  any  provision  for doubtful  accounts as revenues are recorded when
monies are received.

LIQUIDITY AND CAPITAL RESOURCES

            At December  31,  1999 the  Company  had working  capital of $65,979
compared with  $4,667,465 at December 31, 1998. The decrease in working  capital
was primarily due to negative cash flow from operations.

            Management   believes  that  existing  cash,  cash  equivalents  and
marketable  securities  will be sufficient  to satisfy the  Company's  currently
anticipated cash requirements.

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.]


ITEM 9.  RELATED PARTY TRANSACTIONS.

            The Company has a receivable due from an affiliated  company,  whose
shareholders are also shareholders of the Company. The balance of the receivable
at December 31, 1999 is $56,068.  During the year ended December 31, 1999, there
were no additional advances or repayments. The original advance accrued interest
at a rate of 6% per annum and is due on demand.

                                      -17-

<PAGE>

                                    PART III

ITEM 9.  DIRECTORS,   EXECUTIVE   OFFICERS,   PROMOTERS  AND  CONTROL   PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

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
                ----             ---              --------


          Richard A. Iamunno     42     President, Chief Executive
                                        Officer and Director

          Peter H. Lawson        51     Chief Financial Officer and
                                        Chief Operating Officer

          John Copelyn           51     Chairman of the Board

          Martin V. McCarthy     44     Director

          Marcel Golding         40     Director

          Jeffrey L. Hurwitz     44     Director


            RICHARD A.  IAMUNNO  has served as a Director,  the Chief  Executive
Officer and President  since its  inception on July 16, 1994.  Prior to starting
the  Company,  Mr.  Iamunno  was  President  of  Ameristar   International,   an
investment-banking  firm that  provided  European-based  companies  with  merger
assistance into the U.S. public  marketplace.  Mr. Iamunno's business experience
includes positions as Senior Director of Marketing and Vice President of Western
Union Corporation. Mr. Iamunno is presently a director of Atlantic International
Capital Holdings,  Ltd., a Bermuda based investment  company and has in the past
served as a Director of  Tapistron  International,  as a Director and officer of
Trinitech  Systems,  Inc. Mr. Iamunno  attended Drake  University in Des Moines,
Iowa.

            PETER H. LAWSON has served as a Director of Online  Gaming  Systems,
Ltd. since March 1999. In July 1999, he was appointed  Chief  Financial  Officer
and in January 2000, Chief Operating Officer. He has executive responsibility to
the  Australian  Operation  which was set up in July 1999.  He was  previously a
Director of an Australian Stock broking  operation and has extensive  experience
in the areas of  corporate  finance,  mergers,  acquisitions,  IPO's and capital
raising.  He is also a Director  of the 100% owned  Australian  Subsidiary.  Mr.
Lawson holds a commerce degree and is a certified practicing accountant. He also
holds a post graduate  qualification in finance from the Securities Institute in
Australia.

                                      -18-
<PAGE>

            JOHN COPELYN is 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.

            MARTIN V.  MCCARTHY was appointed a Director of the Company in March
of 1998.  Mr.  McCarthy was the President and CEO of IDD  Enterprises,  L.P. The
Company was  recently  sold to Dow Jones and  Company.  Mr.  McCarthy has been a
pioneer in the online world for almost two decades.  He has led  organization of
scale that have created,  commercialized  and deployed leading edge technologies
in the areas of communications,  information services and transactions. Prior to
joining IDD in 1988, Mr. McCarthy served as Vice President of Office Message and
Information  Services at Western Union and was the youngest corporate officer in
the firm's 130 year history. Mr. McCarthy has an MBA from Harvard University.

            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.

            JEFFREY L. HURWITZ was  appointed a Director of the Company in March
of 1998.  Mr.  Hurwitz had been the  Managing  Director of South  African  based
Clinic  Holdings since 1987.  While at Clinic  Holdings,  the Company grew to 26
Hospitals  with annual  turnover  of over  $370,000,000.  In  November  1997 Mr.
Hurwitz  left  Clinic  Holdings  under  the  terms of  Agreement  of Sale of the
Company.  Prior to Clinic  Holdings  Mr.  Hurwitz  was  employed  as a Chartered
Accountant with Deloitte & Touche.  Mr. Hurwitz graduated from the University of
Witwatersrand in South Africa with degrees in Commerce and Accounting.


MEETINGS AND COMMITTEES

            The Board held four (3) meetings  during the year ended December 31,
1999. In addition,  from time to time during such year, the members of the


                                      -19-

<PAGE>

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.


ITEM 10. 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 who would have
otherwise  been  included in such table on the basis of salary and bonus  earned
for the 1999  fiscal  year has  resigned or  terminated  employment  during that
fiscal year.

                           SUMMARY COMPENSATION TABLE

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

  Richard A. Iamunno            1999        $158,000               --
  President and Chief           1998        $144,000               --
  Executive Officer             1997        $125,000               --

  Peter Lawson                  1999        $150,000(AUD)          --
  Chief Financial Officer

  Norman J. Hoskin              1999        $144,000               --
  Chairman of the Board/        1998        $144,000               --
  Secretary                     1997        $125,000               --

  Karen Welch                   1999        $100,000               --
  Senior Vice President
  Operations and
  General Manager

  Trevor Klein                  1999        $100,000               --
  Vice President Finance

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



                                      -20-
<PAGE>

portion not  exercised  will remain with the holder until the  expiration of the
option period. The options granted in 1998 expire on December 23, 2003.

         The following  table contains  information  concerning the stock option
grants made to each of the named  executive  officers and  employees  for fiscal
1998.

Name               #Granted    in F/Y      $/Sh             Exp. Date

Richard Iamunno     50,000     1999        $2.50            07/13/04
                   100,000     1998        $4.25            04/03/03
                    50,000     1997        $3.25            04/03/02

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

Karen Welch         50,000     1999        $2.50            12/31/02

Trevor Klein        20,000     1999        $2.50            12/31/02
                    30,000     1999        $2.25            12/31/02

            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  currently has an employment  agreement with Mr. Iamunno
pursuant to which they will  continue to serve as the  Company's  President  and
Chief  Executive  Officer.  It is  anticipated  that  as  compensation  for  his


                                      -21-
<PAGE>

services,  the Company will pay Mr.  Iamunno a base salary of $158,400  each per
annum,  which shall be subject to annual  increases of 10%. The  agreement  will
expire in the year 2000. Other than the  aforementioned  agreement,  the Company
has not entered into any other  employment  agreement  with any of its officers,
directors,  or any other persons and no such  agreements are  anticipated in the
immediate future.

 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.

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The  following  table sets  forth,  as of April 11,  2000,  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 April 11, 2000,  there were  outstanding  14,669,166  shares of the
Common Stock of the Company.

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


Richard A. Iamunno                          1,796,270         12.20%

Marcel Golding                              3,189,435*        23.00%

Martin V. McCarthy                            125,000          0.89%

Jeffrey L. Hurwitz                                N/A           N/A

Peter Lawson                                   20,000           .14%

John Copelyn                                3,189,435*        23.00%

All Officers and Directors as a Group       5,018,205         36.23%
(5 persons)

*In July,  1999 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.

                                      -22-
<PAGE>

(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  indicated,  all addresses are at the Company's office
         at 200 East Palmetto Park Rd., Suite 200, Boca Raton, Florida 33432.


ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                        None.


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.

                                      -23-
<PAGE>

          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.  *  Reformation  Agreement
                        dated December 10, 1999

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

          11.1*   -     Statement of Computation of Per Share Earnings

          21.1*   -     Subsidiaries of the Company

          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 EmiNet Domain, Inc.

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


                                      -24-
<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  14, 2000                   /s/ John Copelyn
                                         ---------------------------------------
                                         John Copelyn
                                         Chairman of the Board

            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/ John Copelyn                  Chairman of the Board           April 14, 2000
----------------------------
    John Copelyn
/s/ Richard A. Iamunno            President, Chief Executive      April 14, 2000
----------------------------      Officer and Director
    Richard A. Iamunno

/s/ Peter Lawson                  Chief Financial Officer and     April 14, 2000
----------------------------      Chief Operating Officerr
    Peter Lawson

/s/ Martin V. McCarthy            Director                        April 14, 2000
----------------------------
    Martin V. McCarthy

                                  Director                        April 14, 2000
----------------------------
     Marcel Golding

/s/  Jeffrey Hurwitz              Director                        April 14, 2000
----------------------------
    Jeffrey Hurwitz



                                      -25-
<PAGE>



ONLING GAMING SYSTEMS, LTD. AND SUBSIDIARIES


INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>


                                                                               Page
                                                                               ----

<S>                                                                        <C>
Independent Auditor's Report...............................................F-2

Consolidated Balance Sheet as of December 31, 1999.........................F-3....F-4

Consolidated Statements of Operations and Comprehensive Income for the
years ended December 31, 1999 and 1998.....................................F-5....F-6

Consolidated Statements of Changes in Stockholders' Equity for the
years ended December 31, 1999 and 1998.....................................F-7

Consolidated Statements of Cash Flows for the years ended
December 31, 1999 and 1998.................................................F-8....F-9

Notes to Consolidated Financial Statements ................................F-10...F-24
</TABLE>


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

                                      F-1
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT


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



            We have  audited  the  accompanying  consolidated  balance  sheet of
Online Gaming  Systems,  Ltd. and its  subsidiaries as of December 31, 1999, and
the related  consolidated  statements of operations  and  comprehensive  income,
changes in stockholders' equity, and cash flows for each of the two years in the
period ended December 31, 1999. 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  generally  accepted
auditing  standards.  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 subsidiaries as of December 31,
1999, and the consolidated  results of their operations and their cash flows for
each of the two years in the period ended December 31, 1999, in conformity  with
generally accepted accounting principles.





MOORE STEPHENS, P.C.
                                             Certified Public Accountants.


Cranford, New Jersey
April 14, 2000

                                      F-2
<PAGE>

ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999.



Assets:
Current Assets:
   Investments                                            $   1,060,196
   Deferred Tax Asset                                           123,691
   Prepaid Expenses                                              13,750
   Due from Related Parties                                      56,068
   Other Current Assets                                          27,263
                                                          -------------

   Total Current Assets                                       1,280,968

Property and Equipment - Net                                    358,958
                                                           ------------

Equipment under Capitalized Lease - Net                         226,654
                                                           ------------

Other Assets:
   Other Assets                                                 531,712
   Investments                                                2,500,000
                                                           ------------

   Total Other Assets                                         3,031,712
                                                           ------------
   Total Assets                                            $  4,898,292
                                                           ============


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

                                      F-3
<PAGE>
ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999.

<TABLE>
<CAPTION>

Liabilities and Stockholders' Equity:
Current Liabilities:
<S>                                                                  <C>
   Cash Overdraft                                                    $      173,875
   Accounts Payable and Accrued Expenses                                    822,493
   Current Portion of Long-Term Debt                                        124,618
   Current Portion of Capital Lease Obligations                              94,003
                                                                    ---------------

   Total Current Liabilities                                              1,214,989

Capital Lease Obligations                                                   139,620

   Total Liabilities                                                      1,354,609

Stockholders' Equity:
   Convertible Preferred Stock - Par Value $.001 Per Share;
      Authorized 10,000,000 Shares, Issued and Outstanding,
      130,300 shares [Liquidation Preference $13,030,000]                       130

   Common Stock - Par Value $.001 Per Share;
      Authorized 100,000,000 Shares, Issued - 13,614,052 Shares              13,614

   Additional Paid-in Capital                                            14,363,965

   Treasury Stock, 968,767 Common Shares - At Cost                       (1,744,547)
   Accumulated Other Comprehensive [Loss]                                (1,077,000)
   Accumulated [Deficit]                                                 (7,612,479)

   Deferred Acquisition Costs                                              (400,000)


   Total Stockholders' Equity                                             3,543,683

   Total Liabilities and Stockholders' Equity                       $     4,898,292
                                                                    ===============
</TABLE>


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

                                      F-4
<PAGE>
ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>

                                                                                              Years ended
                                                                                              December 31,
                                                                                  1 9 9 9                  1 9 9 8
                                                                                  -------                  -------

<S>                                                                      <C>                                    <C>
Revenue                                                                  $             850,950                  2,426,230

Cost of Sales                                                                          109,524                    792,789
                                                                         ---------------------      ---------------------

Gross Profit                                                                           741,426                  1,633,441
                                                                         ---------------------      ---------------------

Operating Expenses:
   General and Administrative                                                        5,292,371                  2,510,484
   Provision for Doubtful Accounts and Notes                                         1,222,155                  1,435,040
   Depreciation and Amortization                                                       864,502                     89,710
                                                                         ---------------------      ---------------------

   Total Operating Expenses                                                          7,379,028                  4,035,234
                                                                         ---------------------      ---------------------

   [Loss] Income from Operations                                                    (6,637,602)                (2,401,793)
                                                                         ---------------------      ----------------------

Other [Expenses] Income:
   Interest Income                                                                      30,961                     81,390
   Interest Expense                                                                    (54,648)                    (2,211)
   Interest Expense - Related Party                                                         --                     (8,855)
   Other Income [Expense]                                                              949,419                    538,387
   Asset Impairment                                                                 (1,300,742)                        --
                                                                         ---------------------      ---------------------

   Other [Expenses] Income - Net                                                      (375,010)                   608,711
                                                                         ----------------------     ---------------------

[Loss] Income from Continuing Operations Before
   Income Tax [Benefit] Expense                                                     (7,012,612)                (1,793,082)

Income Tax [Benefit] Expense                                                          (123,691)                  (460,682)
                                                                         ---------------------      ----------------------

   [Loss] Income from Continuing Operations                                         (6,888,921)                (1,332,400)

Discontinued Operations:
    [Loss] from Operations of Discontinued Business
      Segment [Net of Income Tax [Benefit] of $-0- and $(51,243),
      for the years ended December 31, 1999 and 1998, Respectively]                    (54,261)                  (321,448)
   [Loss] on Disposal of Business Segment, including
      Provision of $50,000 for Operating Loss During
      Phase Out Period [Net of Income Tax [Benefit] of $-0-]                                --                    (50,000)
                                                                         ---------------------      ----------------------

   Net [Loss] Income                                                                (6,943,182)                (1,703,848)
                                                                         ---------------------      ----------------------

Other Comprehensive Loss:
   Unrealized Holding Loss arising during period                                      (981,142)                  (104,611)
   Less: Reclassification Adjustment for Loss Included in Net Income                        --                     51,516
                                                                         ---------------------      ---------------------


   Total Other Comprehensive [Loss] Income                               $          (7,924,324)     $          (1,756,943)
                                                                         =====================      ======================
</TABLE>

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

                                      F-5
<PAGE>

ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>

                                                                                         Years ended
                                                                                         December 31,
                                                                               1 9 9 9                  1 9 9 8
                                                                               -------                  -------

<S>                                                                    <C>                        <C>
Net [Loss] Income                                                      $          (6,943,182)     $          (1,703,848)
Deduct:  Imputed Non-cash Preferred Stock Dividend                                        --                    269,443
               Preferred Stock Dividend in Arrears                                    34,525                     33,333
                                                                       ---------------------      ---------------------

   Net [Loss] Income Available to Common Stockholders                  $          (6,977,707)     $          (2,006,624)
                                                                       =====================      ======================

[Loss] Income Per Common Share:
   Continuing Operations                                               $                (.55)     $                (.15)
   Discontinued Operations                                                                --                       (.04)
   Disposal of Discontinued Subsidiary                                                    --                         --
                                                                       ---------------------      ---------------------

   Basic and Diluted Net [Loss] Income Per Share of Common Stock       $                (.55)    $                 (.19)
                                                                       =====================     ======================

   Weighed Average Shares of Common Stock Outstanding                             12,632,422                 10,771,563
                                                                       =====================      =====================
</TABLE>



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

                                      F-6
<PAGE>
ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>


                                                                                                          Additional
                                                 Preferred Stock                Common Stock                Paid-in
                                                 ---------------                ------------                -------
                                             Shares        Amount         Shares            Amount          Capital
                                             ------        ------         ------            ------          -------
<S>                                           <C>       <C>               <C>          <C>              <C>
Balance - December 31, 1997                        --           --         9,590,184            9,590         4,149,906

Sale of Escrow Common Stock                        --           --                --               --           299,900
Unrealized Holding [Loss]
   on Marketable Securities                        --           --                --               --                --
Sale of Common Stock                               --           --         1,250,000            1,250         3,998,750
Issuance of Common Stock                           --           --         9,700,000            9,700                --
Cancellation of Common Stock                       --           --        (9,700,000)          (9,700)               --
Sale of Common Stock                               --           --         1,217,647            1,217         2,285,921
Purchase of Treasury Stock                         --           --                --               --                --
Sale of Preferred Stock                        10,000           10                --               --           906,840
Cancellation of Common Stock                       --           --           (25,000)             (25)               25
Issuance of Common Stock                           --           --            31,106               31            18,720
Conversion of Preferred Stock                  (2,740)          (3)          147,002              147              (144)
Contingent Acquisition                             --           --           200,000              200           399,800
Imputed non-cash Series A
   Convertible Preferred Stock
    Dividend                                       --           --                --               --           269,443
[Loss] From Continuing
   Operations                                      --           --                --               --                --
[Loss] From Discontinued
   Operations                                      --           --                --               --                --
                                            ---------   ----------   ---------------   --------------   ---------------   -

Balance - December 31, 1998                     7,260   $        7        12,410,939   $       12,410   $    12,329,161

Purchase of Treasury Stock                         --           --                --               --                --
Conversion of Preferred Stock                 (27,260)         (27)          861,122              860              (833)
Subsidiary Divested                                --           --                --               --                --
Sale of Preferred Stock                       150,300          150                --               --         1,502,850
Sale of Common Stock                               --           --                --               --                --
Unrealized Holding Gain (Loss) on
Marketable Securities                              --           --                --               --                --
Forgiveness of Debt - Related Party                --           --                --               --          (324,286)
Issuance of Common Stock                           --           --           341,991              344           857,073
Loss From Continuing Operations                    --           --                --               --                --
Loss From Discontinued Operations                  --           --                --               --                --
                                             --------  -----------        ----------    -------------    --------------


Balance - December 31, 1999                   130,300   $      130        13,614,052   $       13,614   $    14,363,965
                                             ========  ===========        ==========    =============    ==============
</TABLE>
<TABLE>
<CAPTION>

                                                              Accumulated
                                                                 Other                      Deferred                        Total
                                     Treasury Stock          Comprehensive    Accumulated  Acquisition  Subscription   Shareholders'
                                     --------------          -------------    -----------  -----------  ------------   -------------
                                   Shares          Amount       [Loss]         [Deficit]      Costs      Receivable       Equity
                                   ------          ------        ----          ---------      -----        ----------     ------

<S>                              <C>       <C>              <C>           <C>             <C>        <C>             <C>
Balance - December 31, 1997            --             --        (42,763)      829,886          --             --          4,946,619

Sale of Escrow Common Stock            --             --             --            --          --             --           299,900
Unrealized Holding [Loss]
   on Marketable Securities            --             --        (53,095)           --           --            --           (53,095)
Sale of Common Stock                   --             --             --            --           --    (1,445,000)        2,555,000
Issuance of Common Stock               --             --             --            --           --            --             9,700
Cancellation of Common Stock           --             --             --            --           --            --            (9,700)
Sale of Common Stock                   --             --             --            --           --            --         2,287,138
Purchase of Treasury Stock       (145,500)      (278,697)            --            --           --            --          (278,697)
Sale of Preferred Stock                --             --             --            --           --            --           906,850
Cancellation of Common Stock           --             --             --            --           --            --                --
Issuance of Common Stock               --             --             --            --           --            --            18,751
Conversion of Preferred Stock          --             --             --            --           --            --                --
Contingent Acquisition                 --             --             --            --     (400,000)           --                --
Imputed non-cash Series A
   Convertible Preferred Stock
    Dividend                           --             --             --      (269,443)          --            --                --
[Loss] From Continuing
   Operations                          --             --             --    (1,332,400)          --            --        (1,332,400)
[Loss] From Discontinued
   Operations                          --             --             --      (371,448)          --            --          (371,448)
                             ------------  -------------  -------------   -----------    ---------   -------------    -------------

Balance - December 31, 1998      (145,500) $    (278,697) $     (95,858)  $(1,143,405)    (400,000)  $ (1,445,000)  $    8,978,618

Purchase of Treasury Stock       (823,267)    (1,465,850)            --            --           --           --       (1,465,850)
Conversion of Preferred Stock          --             --             --            --           --             --               --
Subsidiary Divested                    --             --             --       474,108           --             --          474,108
Sale of Preferred Stock                --             --             --            --           --             --        1,503,000
Sale of Common Stock                   --             --             --            --           --       1,445,000       1,445,000
Unrealized Holding Gain (Loss) on
Marketable Securities                  --             --       (981,142)           --           --              --        (981,142)
Forgiveness of Debt - Related Party    --             --             --            --           --              --        (324,286)
Issuance of Common Stock               --             --             --            --           --              --         857,417
Loss From Continuing Operations        --             --             --    (6,888,921)          --              --      (6,888,921)
Loss From Discontinued Operations      --             --             --       (54,261)          --              --         (54,261)
                              -----------  -------------   ------------    ----------    ---------   -------------   -------------

Balance - December 31, 1999      (968,767) $  (1,744,547)   $(1,077,000)  $(6,977,707)    (400,000)  $          --   $   3,543,683
                              ============ =============   ============    ==========    =========   ==============   =============
</TABLE>


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

                                      F-7
<PAGE>

ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                                     Years ended
                                                                                                    December 31,
                                                                                           1 9 9 9                    1 9 9 8
                                                                                           -------                    -------
Operating Activities:
<S>                                                                             <C>                        <C>
   [Loss] Income from Continuing Operations                                     $          (6,888,921)     $          (1,332,400)
   Adjustments to Reconcile Net [Loss] Income to
      Net Cash [Used for] Operating Activities:
      Depreciation and Amortization                                                           864,502                    473,209
      Deferred Tax Asset                                                                     (123,691)                   176,812
      Provision for Doubtful Accounts                                                       1,222,155                  1,435,040
      Loss on Sale of Assets                                                                       --                        950
      Gain on Sale of Subsidiary                                                           (1,231,750)                        --
      Issuance of Common Stock for Services Rendered                                          140,000                         --
      Issuance of Common Stock for Compensation                                               217,312                         --
      Realized Loss on Carrying Value of Investments                                               --                     51,516
      Loss on Sale of Investments                                                             221,637                         --
      Asset Impairment                                                                      1,300,742                         --

   Changes in Assets and Liabilities:
      [Increase] Decrease in:
         Accounts Receivable                                                                   13,715                    (93,938)
         Prepaid Expenses                                                                      (2,493)                      (494)
         Notes Receivable                                                                      39,211                   (747,062)
         Other Assets                                                                          70,832                   (103,199)

      Increase [Decrease] in:
         Accounts Payable and Accrued Expenses                                               (252,488)                   391,033
         Income Taxes Payable                                                                      --                   (634,336)
         Other Current Liabilities                                                                 --                    (24,917)
         Due to Customer                                                                           --                    (20,721)
                                                                                ---------------------      ----------------------

      Net Cash - Continuing Operations                                                     (4,409,237)                  (428,507)
                                                                                ---------------------      ---------------------

Discontinued Operations:
   [Loss] from Discontinued Operations                                                        (54,261)                  (371,448)
   Adjustments to Reconcile Net [Loss] to Net Cash Operations:
      Depreciation and Amortization                                                            38,220                    144,748
      Provision for Doubtful Accounts                                                          18,915                     27,424
      Loss on Sale of Assets                                                                       --                         50
      Changes in Net Assets and Liabilities                                                   238,577                   (117,751)
                                                                                ---------------------      ----------------------

   Net Cash - Discontinued Operations                                                         241,451                   (316,977)
                                                                                ---------------------      ---------------------

   Net Cash - Operating Activities - Forward                                               (4,167,786)                  (745,484)
                                                                                -----------------------    ---------------------

Investing Activities - Continuing Operations:
   [Decrease] in Due from Related Parties                                                        (828)                    (5,385)
   Purchase of Investments                                                                   (393,092)                (6,451,459)
   Purchase of Patents & Licences                                                            (450,000)                        --
   Purchase of Property, Equipment, and Capitalized Software                                 (105,696)                (1,241,840)
   Sale of Investments                                                                      3,431,823                  1,245,728
                                                                                ---------------------      ---------------------

   Net Cash - Investing Activities - Continuing Operations -
      Forward                                                                   $           2,482,207      $          (6,452,956)
</TABLE>

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

                                      F-8
<PAGE>

ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                                    Years ended
                                                                                                   December 31,
                                                                                          1 9 9 9                  1 9 9 8
                                                                                          -------                  -------

<S>                                                                             <C>                        <C>
   Net Cash - Operating Activities - Forwarded                                  $          (4,167,786)     $            (745,484)
                                                                                ---------------------      ---------------------

   Net Cash - Investing Activities - Continuing Operations -
      Forwarded                                                                             2,482,207                 (6,452,956)
                                                                                ---------------------      ----------------------

Investing Activities - Discontinued Operations:
   Purchase of Property and Equipment                                                         (29,715)                    (6,419)
                                                                                ----------------------     ----------------------

   Net Cash Investing Activities - Discontinued Operations                                    (29,715)                    (6,419)
                                                                                ----------------------     ----------------------

Financing Activities - Continuing Operations:
   Proceeds from Issuance of Common Stock                                                     500,389                  6,597,047
   Proceeds from Issuance of Preferred Stock                                                1,502,714                    906,850
   Increase (Decrease) of Treasury Stock                                                   (1,465,850)                  (278,697)
   [Decrease] Increase in Loan Payable to Officer                                            (150,000)                   (16,636)
   Proceeds from Long-Term Debt                                                               344,000                    153,100
   Payment from Notes Receivable                                                            1,445,000                         --
   Payment of Notes Payable                                                                  (319,382)                   (84,660)
   Payment of Lease Payable                                                                   (61,432)                   (11,286)
   Decrease in Loan Receivable                                                               (324,286)                        --
                                                                                ---------------------      ---------------------

   Net Cash - Financing Activities - Continuing Operations                                  1,471,153                  7,265,718
                                                                                ---------------------      ---------------------

Financing Activities - Discontinued Operations:
   Proceeds from Long-Term Debt                                                                50,000                     40,400
   Payment of Note Payable                                                                    (41,500)                    (6,000)
   Payment of Lease Payable                                                                    (5,769)                   (38,984)
                                                                                ---------------------      ---------------------

   Net Cash - Financing Activities - Discontinued Operations                                    2,731                     (4,584)
                                                                                ---------------------      ----------------------

Net Increase [Decrease] in Cash and Cash Equivalents                                         (241,410)                    56,275

Cash and Cash Equivalents - Beginning of Years                                                 67,535                     11,260
                                                                                ---------------------      ---------------------

   Cash and Cash Equivalents - End of Years                                     $            (173,875)     $              67,535
                                                                                ======================     =====================

Supplemental Disclosures of Cash Flow Information:
   Cash paid during the years for:
      Interest                                                                  $              52,231      $              16,694
      Income Taxes                                                              $                  --      $                  --

Supplemental Schedule of Non-Cash Investing and Financing Activities:
   Conversion of Preferred Stock into Common Stock                              $                 649      $                 147
   Stock Issued in Exchange for Contingent Acquisition                          $                  --      $             400,000
   Purchase of Assets under Capital Lease Financing                             $             192,068      $              91,401
   Sale of Subsidiary for Preferred Stock                                       $           2,400,000      $                  --
</TABLE>

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

                                      F-9
<PAGE>
ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



[1] Organization

Nature of Business - The Company is located in  Southern  Florida and  develops,
sells and services  interactive  products which are offered and operated via the
Internet and World Wide Web.

[2] Summary of Significant Accounting Policies

Principles of Consolidation - The Consolidated  financial statements include the
accounts of the Company and its subsidiaries. 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, 1999, 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 computer  software  licensing  agreements is
recognized  when products are delivered and accepted by the customer and payment
has been received.

Investments - The Company  accounts for investments in accordance with Statement
of Financial  Accounting  Standards  ["SFAS"] No. 115,  "Accounting  for Certain
Investments  in  Debt  and  Equity   Securities."   Management   determines  the
appropriate  classification  of its investments in debt and equity securities at
the time of purchase and reevaluates  such  determination  at each balance sheet
date. Equity  securities,  and debt securities,  which the Company does not have
the intent to hold to maturity, are classified as trading or available for sale.
Securities  available  for sale are carried at fair value,  with any  unrealized
holding  gains and  losses,  net of tax,  reported  in a separate  component  of
shareholders'  equity until  realized.  Trading  securities  are carried at fair
value with any unrealized gains or losses included in earnings.

Held to maturity  securities are carried at amortized cost.  Marketable debt and
equity securities available for current operations are classified in the balance
sheet  as  current  assets  while  securities  held  for  non-current  uses  are
classified  as  long-term  assets.  Realized  gains and  losses  are  calculated
utilizing the specific identification method [See Note 5].

                                      F-10
<PAGE>

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


[2] Summary of Significant Accounting Policies [Continued]

Income Taxes - Pursuant to 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  costs charged to expense for the years ended  December 31, 1999 and
1998 amounted to approximately $186,575 and $29,000, respectively.

Net  Income  Per Share - The  Financial  Accounting  Standards  Board has issued
Statement of Financial  Accounting  Standards  ["SFAS"] No. 128,  "Earnings  per
Share," which is effective for financial  statements  issued for periods  ending
after December 15, 1997.  Accordingly,  earnings per share data in the financial
statements for the year ended December 31, 1999 and 1998,  have been  calculated
in  accordance  with SFAS No.  128.  Potential  common  shares are  included  if
dilutive.

SFAS No. 128 supersedes  Accounting  Principles  Board Opinion No. 15, "Earnings
per  Share,"  and  replaces  its  primary  earnings  per share  with a new basic
earnings per share  representing the amount of earnings for the period available
to each share of common stock  outstanding  during the reporting  period.  Basic
earnings  [loss] per share is computed by dividing  income  [loss]  available to
common  stockholders by the weighted average number of common shares outstanding
during the period.  SFAS No. 128 also requires a dual  presentation of basic and
diluted  earnings per share on the face of the statement of  operations  for all
companies with complex capital structures.

Diluted  earnings  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  earnings  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.  Securities  that could  potentially  dilute earnings per share in the
future are disclosed in Notes 12 and 17.

                                      F-11
<PAGE>
ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


[2] Summary of Significant Accounting Policies [Continued]

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 1999 and 1998. 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.

Asset  Impairment - Certain  long-term  assets of the Company are reviewed  when
changes in  circumstances  require as to whether their carrying value has become
impaired,  pursuant to guidance established in Statement of Financial Accounting
Standards ["SFAS"] No. 121,  "Accounting for the Impairment of Long-Lived Assets
and for Long Lived Assets to be Disposed Of." Management  considers assets to be
impaired if the  carrying  value  exceeds the future  projected  cash flows from
related operations [undiscounted and without interest charges]. If impairment is
deemed to exist,  the assets will be written down to fair value  discounted cash
flows from  related  operations.  Management  also  reevaluates  the  periods of
amortization to determine whether  subsequent  events and circumstances  warrant
revised estimates of useful lives.  Costs related to the conceptual  formulation
and design of licensed programs are expensed as research and development.  Costs
incurred subsequent to establishment of technological feasibility to produce the
finished product are capitalized. Quarterly reviews are performed to ensure that
unamortized  program  costs  remain  recoverable  from  cash  flows.  Management
estimated a  significant  decline in future cash flows  generated  from software
costs capitalized by the Company.  Accordingly,  in the fourth quarter of fiscal
1999, the Company  recorded a charge of $1,300,742 or $.10 per basic and diluted
common  share,  for  the  write-off  of  all  remaining   capitalized   software
development  costs.   Amortization   expense  related  to  software,   prior  to
impairment,  amounted to $662,589  and $84,144 for the years ended  December 31,
1999 and 1998, respectively.

Impairment -
Beneficial  Conversion  Features - The Company has issued convertible  preferred
stock with a beneficial conversion feature. The beneficial conversion feature is
analogous  to a  dividend  and  is  recognized  as a  return  to  the  preferred
shareholders  over the minimum  period in which the preferred  shareholders  can
realize  that  return.  The  resulting  discount is  allocated  from the date of
issuance through the date the security was first convertible.

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


                                      F-12
<PAGE>

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


[3] Significant Risks and Uncertainties

[A]  Concentrations  of Credit Risk - Financial  instruments  which  potentially
subject the Company to concentrations of credit risk consist principally of cash
and cash equivalents and trade accounts and notes receivable  occurring from its
normal  business  activities.  The Company places its cash and cash  equivalents
with high credit quality institutions to limit its credit exposure.  At December
31, 1999, 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 on accounts and notes  receivable is limited.
The Company  performs  ongoing credit  evaluations of its customers but does not
require   collateral  on  accounts  and  notes  receivable  or  other  financial
instruments. The Company maintains allowances for potential credit losses.

[B] Other  Concentration  - All of the Company's  sales from  Internet  software
licensing is from outside the United States. These sales however are not subject
to currency fluctuations as payment is made in U.S. dollars. In 1999 the Company
had a portion of its revenues from four  customers  totaling  $575,000  which is
approximately  68% of total revenues.  The Company had a portion of its revenues
from five customers in 1998 totaling  $2,145,000 which is  approximately  88% of
total revenues. Sales derived from major customers are tabulated.
<TABLE>
<CAPTION>

                                                                Revenues
                                                               Year Ended
                                                              December 31,
Customers                                            1 9 9 9                     1 9 9 8
---------                                            -------                     -------

<S>                                        <C>                         <C>
Customer A (Software Sales)                $              250,000      $                  --
Customer B (Software Sales)                               190,000                         --
Customer C (Software Sales)                                50,000                         --
Customer D (Software Sales)                                85,000                         --
Customer E (Software Sales)                                    --                    675,000
Customer F (Software Sales)                                    --                    220,000
Customer G (Software Sales)                                    --                    350,000
Customer H (Software Sales)                                    --                    450,000
Customer I  (Software Sales)                                   --                    450,000
                                           ----------------------      ---------------------

   Totals                                  $              575,000      $           2,145,000
   ------                                  ======================      =====================

Geographic Information

Canada                                     $                   --      $             450,000
Caribbean                                                 575,000                  1,695,000
                                           ----------------------      ---------------------

   Totals                                  $              575,000      $           2,145,000
                                           ======================      =====================
</TABLE>

The Company purchases software from two vendors.  Management believes that there
is no business vulnerability  regarding this concentration of purchases from the
vendor as the software is available from other sources.


                                      F-13
<PAGE>

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


[4]  Investments in Equity Securities

The  Company  has  investment  securities  available  for sale with of a cost of
$2,137,000 and a fair value at December 31, 1999 of $1,060,000.

Gross proceeds from the sale of available for sale securities was $872,362,  and
$853,856  and gross  realized  loss was $226,305 and $51,516 for the years ended
December 31, 1999 and 1998, respectively.

[5] Other Comprehensive Loss

Unrealized  holding loss on investments  net of income tax benefit of $-0- is as
follows:
                                                                    1 9 9 9

Beginning Balance                                         $            (98,585)
Current Year - Other Comprehensive Loss                               (981,142)
                                                          --------------------

   Total                                                  $         (1,077,000)
   -----                                                  ====================

[6] Property and Equipment

The following details the composition of property and equipment:
<TABLE>
<CAPTION>

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

<S>                                               <C>                        <C>                         <C>
Computer Hardware                                 $              499,084     $              238,132      $             260,952
Equipment, Office Fixtures and Furnishings                       111,285                     31,110                     80,175
Leasehold Improvements                                            24,763                      6,932                     17,831
                                                  ----------------------     ----------------------      ---------------------

   Totals                                         $              635,132     $              276,174      $             358,958
   ------                                         ======================     ======================      =====================
</TABLE>

Depreciation expense for the years ended December 31, 1999 and 1998 was $112,206
and $87,069, respectively.

Other  Assets - Included in other assets is an  investment  at cost in a Limited
Liability Corporation for $100,000.  The Company produces films and is currently
in the  process  of  preparing  the  negative  print of the film for  theatrical
release.  As at December 31, 1999,  there is no income to date. Also included in
other assets is 500,000 shares of preferred stock of Atlantic Internet Holdings,
(the parent company of the Company's former wholly owned subsidiary),  issued to
the Company in lieu of the sale of the wholly owned  subsidiary.  The  preferred
stock is currently valued at $2,500,000.

[7] Deferred Acquisition Costs

In October of 1998,  the Company  entered into a Stock  Purchase  Agreement with
Axxsys  International,  Inc.,  [Seller]  to  purchase  the  assets of Axxsys for
$400,000.00.  Under the agreement  200,000 shares of the Company's  common stock
was delivered and is held in an escrow account for a period of 12 months.

The  purchase  price is  contingent  upon the  current  customers  of the seller
continuing to provide average monthly  revenues to the purchaser during the said
12 months of an amount  agreed  between the  parties.  In the event this average
monthly revenue is less than the agreed amount then the shares  delivered to the
seller shall be reduced by a ratio of the actual  monthly  average  revenues and
the  agreed  amounts.  As the  200,000  shares  are  released,  the  cost of the
Company's  acquisition  will be the  fair  value of the  shares  on the date the
contingency  is met.  Since  the  Company  acquired  is a part  of  discontinued
operations,  the  cost of the  acquisitions  will  be  charged  to  discontinued
operations.

                                      F-14
<PAGE>

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



[8] Leases

Capital  Leases - The Company is the lessee of office  equipment  under  capital
leases  expiring in various years through  December 2002. The various 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  productive  lives.
Amortization of assets under capital leases,  totaling  $54,869,  is included in
depreciation expense.

Following is a summary of property held under capital leases:

Office Equipment                                            $        281,523
Less: Accumulated Amortization                                        54,869
                                                            ----------------

   Total                                                    $        226,654
   -----                                                    ================

Minimum  future lease  payments  under capital  leases for each of the next five
years and in the aggregate are:

2000                                                                 123,621
2001                                                                 123,621
2002                                                                  31,029
2003                                                                      --
                                                             ---------------

Net Minimum Lease Payments                                          278,271
Less:  Amount Representing Interest                                  44,648
                                                             --------------
Present Value of Net Minimum Lease Payments                         233,623
Less:  Current Portion                                               94,003
                                                             --------------
   Long-Term Portion                                         $      139,620
   -----------------                                         ==============

Operating Leases - The Company leases office space and equipment under operating
leases expiring through  September 2002, and has a $10,236 security deposit with
its landlord. 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, 1999.

Year ending                                               Operating
December 31,                                                Leases
   2000                                                    120,142
   2001                                                    123,384
   2002                                                     81,885
   2003                                                         --
   Thereafter                                                   --
                                                         ---------

   Total                                                 $ 325,411
   -----                                                 =========

Rent  expense for the years ended  December  31, 1999 and 1998 was  $141,121 and
$91,690, respectively.


                                      F-15
<PAGE>

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


[9] Fair Value of Financial Instruments

The Company adopted  statement of Financial  Accounting  Standards  ["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 cash and
cash equivalents, short-term notes receivable, related party and trade and notes
payables,  it was assumed that the carrying amount  approximated  fair value for
the majority of these instruments because of their short maturities.

The  long-term  notes  receivable  approximate  fair  value as all  non-interest
bearing notes have been discounted to their present value.

[10] Capital Stock

In the second quarter of 1998, the Company sold 1,250,000  shares for a total of
$4,000,000  pursuant to Regulation D. The Company received $2,000,000 and a note
receivable in foreign currency for the balance.  The note receivable is shown in
the equity section classified as a subscription  receivable.  Subsequently,  the
note has devalued due to foreign currency  exchange.  A foreign currency loss of
$600,000 is included in other income [expense] [See Note 18].

Also in the second quarter of 1998, 9,700,000 shares of common stock were issued
to Atlantic International Entertainment Australia, a wholly owned subsidiary for
use in a proposed  takeover of the Australian  Company,  Coms21. As the proposed
takeover did not happen, the 9,700,000 shares issued were cancelled.

In the second quarter of 1998, 10,000 shares of 5% Convertible  Preferred Stock,
$.001 par value,  were issued for cash.  Each share is  convertible  into common
stock by virtue of a formula contained in the Purchase Agreement which is 78% of
the three day average  closing bid price for the  corporations  common stock for
the  twenty  five (25)  trading  days  prior to the  delivery  of the  notice of
redemption.  The  amount of such  non-cash  discounts  which is  analogous  to a
dividend is $269,443.  Holders of the Series A preferred  stock are entitled to;
(i) quarterly  cumulative  dividends at the rate of 5% per annum of the original
issue price of the Series A preferred stock, (ii) a liquidation preference equal
to the sum of $100 for each outstanding share of Series A preferred stock.

In August  1998,  5,000  shares of the  Company's  common stock were issued to a
consultant for services performed.

The aggregate amount of arrearages in cumulative  preferred dividends is $33,333
and is less than $.01 per share.

In the third quarter of 1998,  1,217,647  shares were exchanged to an Australian
listed company for 12,176,470 shares of the Australian  company in a one for ten
stock swap.

In September  1998,  26,098 shares of the Company's  common stock were issued to
adjust  the  issuance  of  shares  to  certain  individuals  at the  time of the
Company's reverse merger in 1996.

During  the  third and  fourth  quarter  of 1998,  2,740  shares of  convertible
preferred  stock valued at $274,000 was converted  into 147,002 shares of common
stock by virtue of a formula  contained in the Purchase  Agreement which relates
to the average price per share of common stock within the conversion period.


                                      F-16
<PAGE>

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


[10] Capital Stock - Continued

During the first quarter of 1999,  5,000 shares of convertible  preferred  stock
valued at $500,000 was converted  into 395,823  shares of common stock by virtue
of a formula  contained in the purchase  agreement  which results to the average
price per share of common stock within the conversion period.

During the second quarter of 1999,  2,260 shares of convertible  preferred stock
valued at $226,000 was converted  into 253,933  shares of common stock by virtue
of a formula  contained in the purchase  agreement  which results to the average
price per share of common stock within the conversion period.

In the second quarter of 1999,  5,700 shares of 5% Convertible  Preferred Stock,
$.001 par  value,  were  issued to the Shaar  Fund for  $570,000  Each  share is
convertible  into common stock by virtue of a formula  contained in the Purchase
Agreement  which is 78% of the  three  day  average  closing  bid  price for the
corporations  common  stock for the twenty five (25)  trading  days prior to the
delivery  of the notice of  redemption.  The amount of such  non-cash  discounts
which is analogous to a dividend is $53,451 holders of the above preferred stock
are entitled to; (i) quarterly  cumulative dividends at the rate of 5% per annum
of  the  original  issue  price  of the  preferred  stock,  (ii)  a  liquidation
preference equal to the sum of $100 for each outstanding  share of the preferred
stock.

On April 6, 1999 certain  individual  employees  were issued  110,000  shares of
common  stock  of the  company  as a  signing  bonus  pertaining  to  employment
agreements between the company and the individuals.

In the second quarter of 1999,  75,000 shares of the company's common stock were
issued to a consultant for services performed.

On July  1,  1999,  the  Company's  largest  institutional  stockholder,  Hosken
Consolidated Industries, a South African corporation (the investment company for
the Mine Workers Union and South African  Clothing  Workers Union),  consummated
its purchase of  approximately  1,100,000  shares of the Company's  common stock
from Norman J. Hoskin, the Company's  Chairman of the Board of Directors,  which
represents substantially all of Mr. Hoskin's holdings in the Company. Mr. Hoskin
has resigned his  positions as Chairman and  Secretary/Treasurer  and will limit
his  activities  as a  consultant  to the Company  due to his  health.  With its
purchase,  HCI share holdings increases to 2,361,935 shares or approximately 19%
of total shares outstanding.

In the third  quarter of 1999,  52,500 shares of the Common Stock were issued in
lieu of expenses paid on behalf of the Company.

In the fourth quarter of 1999,  9,300 shares of 5% Convertible  Preferred Stock,
$.001 par  value,  were  issued to the Shaar  Fund for  $930,000  Each  share is
convertible  into common stock by virtue of a formula  contained in the Purchase
Agreement  which is 78% of the  three  day  average  closing  bid  price for the
corporations  common  stock for the twenty five (25)  trading  days prior to the
delivery  of the notice of  redemption.  The amount of such  non-cash  discounts
which is  analogous  to a dividend  is $105,430  holders of the above  preferred
stock are entitled to; (i) quarterly  cumulative dividends at the rate of 5% per
annum of the original  issue price of the  preferred  stock,  (ii) a liquidation
preference equal to the sum of $100 for each outstanding  share of the preferred
stock.


                                      F-17
<PAGE>

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


[11] Discontinued Operations

Operating results of EmiNet Domain including net sales of approximately $-0- and
$544,000 are included in discontinued  operations in the statement of operations
for the year ended December 31, 1999 and 1998, respectively.

Assets and  liabilities to be disposed of consisted of the following at December
31, 1998.

Cash                                              $     20,640
Accounts Receivable - Net                                5,272
Property Plant and Equipment - Net                     155,917
Intangible Assets - Net                              1,362,264
Other Assets                                             2,257
                                                  ------------

Total Assets                                         1,546,350
                                                  ------------

Accounts Payable and Accrued Expenses                   91,757
Notes Payable and Lines of Credit                      103,321
                                                  ------------
Total Liabilities                                      195,078
                                                  ------------
   Net Assets to be Disposed Of                   $  1,351,272
   ----------------------------                   ============

Assets are shown at their expected net  realizable  values and  liabilities  are
shown at their face amounts.  Net assets to be disposed of at their expected net
realizable values, have been separately  classified in the accompanying  balance
sheet at December 31, 1998.

[12] Related Party Transactions

The Company has a receivable due from an affiliated company,  whose shareholders
are also shareholders of the Company.  The balance of the receivable at December
31, 1999 is $56,068.  During the year ended  December  31,  1999,  there were no
additional  advances or repayments.  The original  advance accrued interest at a
rate of 6% per annum and is due on demand.

[13] Provision for Income Taxes

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

                                                      December 31,
                                                      ------------
                                             1 9 9 9                   1 9 9 8
                                             -------                   -------
Current:
   Federal                                $      --              $   (443,371)
   State                                         --                   (17,311)
                                          ---------              -------------

   Total Current                                 --                  (460,682)
                                          ---------              -------------

Deferred:
   Federal                                  123,691                        --
   State                                         --                        --
                                          ---------              -------------


   Total Deferred                           123,691                        --
                                          ---------              -------------

   Tax Expense [Benefit] - Continuing
   Operations                             $(123,691)             $   (460,682)
   ----------------------------------     =========              ============


                                      F-18
<PAGE>

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


[13] Provision for Income Taxes [Continued]

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

                                                       December 31,
                                                       ------------
                                            1 9 9 9                 1 9 9 8
                                            -------                 -------

Federal Statutory Rate                      34.0%                      34.0%
State Income Taxes                           2.0                        2.0
Non-Deductible Expenses and Allowances       (34%)                      (10%)
                                          -------                      -----


   Effective Rate                            2.0%                      26.0%
   --------------                         ======                       =====


The major  components of deferred  income tax assets and liabilities at December
31, 1999 is as follows:

Deferred Tax Assets [Liability] - Current:
   Net Operating Loss Carryforward                     $2,663,930
   Depreciation                                           (10,000)
   Unrealized Losses                                      330,000
   Valuation Allowance                                 (2,860,239)
                                                       -----------

   Deferred Tax Asset                                  $  123,691
   ------------------                                  ===========

At December 31, 1999, the Company had approximately  $7,500,000 of operating tax
loss carryforwards expiring in 2012.

The Company's valuation allowance increased by approximately  $2,675,637 for the
year ended December 31, 1999.

[14] Commitments and Contingencies

[A]  Employment  Agreements - The Company has an employment  agreement  with its
CEO,  which  commenced  January 1, 1997 and expire on  December  31,  2000.  The
aggregate  annual  commitment  for future  salaries  at  December  31,  1999 was
$158,400.  Also,  included in the agreement is an incentive bonus based upon net
income and net cash flows.  No bonuses  have been  accrued at December 31, 1999,
due to net losses and negative cash flow.

[B]  Litigation  - 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.


                                      F-19
<PAGE>

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


[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.  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. The options expire on December 23, 2002.

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, 1996                  --           $            --
   Granted                                   175,000                      3.25
   Exercised                                      --                        --
   Canceled                                       --                        --
                                          ----------          ----------------

Outstanding at December 31, 1997             175,000                      3.25
                                          ----------          ----------------

Exercisable at December 31, 1997             175,000                      3.25
                                          ----------          ----------------
   Granted                                   788,000                      3.94
   Exercised                                      --                        --
   Canceled                                       --                        --
                                          ----------          ----------------
Outstanding at December 31, 1998             963,000                      3.83
                                          ----------          ----------------
Exercisable at December 31, 1998             963,000          $           3.83
                                          ----------          ----------------
   Granted                                   636,000                      2.25
   Exercised                                      --                        --
   Canceled                                       --                        --
                                          ----------          ----------------

Outstanding at December 31, 1999           1,599,000                      2.25
                                          ----------          ----------------
Exercisable at December 31, 1999           1,599,000                      2.25
                                          ----------          ----------------

The following table summarizes  information  about stock options at December 31,
1999:
<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>            <C>
    $3.25                175,000          4.00                $3.25         175,000        $3.25
    $4.13                700,000          4.25                $4.13         700,000        $4.13
    $2.50                 88,000          4.75                $2.50          88,000        $2.50
    $1.29                115,000          4.25                $1.29         115,000        $1.29
    $2.50                521,000          4.75                $2.50         521,000        $2.50
</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. The exercise price
of  certain  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 for fiscal year 1999 and 1998.


                                      F-20
<PAGE>

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



[15] Incentive Stock Option Plan [Continued]

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options  which have no vested  restrictions  and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective  assumptions  including  the  expected  stock price  volatility.  The
weighted  average  fair  value of stock  options  granted to  employees  used in
determining  pro forma amounts is estimated at $4.00 and $3.70,  during 1999 and
1998, respectively.

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 these  options  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,
                                                      ------------
                                                 9 9                 1 9 9 8
                                                ----                 -------

Risk-Free Interest Rate                          5.9%                  5.6%
Expected Life                                      4years                5 years
Expected Volatility                            162.1%                153.0%
Expected Dividends                                --%                   --%

The pro forma amounts are indicated below:

                                                      Years ended
                                                      December 31,
                                                      ------------
                                                 1 9 9 8          1 9 9 7
                                                 -------          -------
Net [Loss] Income - Continuing Operations:
   As Reported                                 $(6,888,921)    $(1,332,400)
   Pro Forma                                   $(7,950,643)    $(4,246,891)

Basic Net Income [Loss] Per Share of Common Stock - Continuing Operations:
   As Reported                                 $      (.55)    $     (.15)
   Pro Forma                                   $      (.63)    $      (.39)

Diluted Net Income [Loss] Per Share of Common Stock - Continuing Operations:
   As Reported                                 $      (.55)    $      (.15)
   Pro Forma                                   $      (.63)    $      (.39)

[16] Other Income [Expense]

Included in other income [expense] is a gain on the sale of a former  subsidiary
for $1,231,750.


[17] New Authoritative Accounting Pronouncements

In June 1998, the Financial  Accounting Standards Board ["FASB"] issued SFAS No.
133,  "Accounting for Derivative  Instruments and Hedging  Activities." SFAS No.
133 establishes  accounting and reporting standards for derivative  instruments,
including  certain  derivative  instruments  embedded in other contracts and for
hedging  activities.  SFAS  No.  133  requires  that  an  entity  recognize  all
derivatives  as either  assets or  liabilities  in the  statement  of  financial
position and measure those instruments at fair value. The accounting for changes
in the fair value of a derivative  depends on the intended use of the derivative
and how it is designated, for example, gains or losses related to changes in the
fair value of

                                      F-21
<PAGE>

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


[17] New Authoritative Accounting Pronouncements  - Continued

a derivative not designated as a hedging instrument is recognized in earnings in
the  period  of the  change,  while  certain  types of hedges  may be  initially
reported as a component of other  comprehensive  income [outside earnings] until
the consummation of the underlying transaction.

SFAS No. 133 is  effective  for all fiscal  quarters of fiscal  years  beginning
after June 15,  1999.  Initial  application  of SFAS No. 133 should be as of the
beginning  of a fiscal  quarter;  on that date,  hedging  relationships  must be
designated  anew and  documented  pursuant  to the  provisions  of SFAS No. 133.
Earlier application of all of the provisions of SFAS No. 133 is encouraged,  but
it is permitted only as of the beginning of any fiscal quarter.  SFAS No. 133 is
not to be applied  retroactively to financial  statements of prior periods.  The
Company does not currently have any derivative  instruments and is not currently
engaged in any hedging activities.

On March 31, 1999,  the FASB  released a proposal for public  comment that would
resolve certain practice issues raised when accounting for stock options.  Since
the  issuance of APB Opinion 25,  "Accounting  for Stock  Issued to  Employees,"
questions  have surfaced  about its  application  and differing  practices  have
developed.  The FASB's broad  reconsideration  of the stock  compensation  issue
culminated  in the  issuance  of  SFAS  No.  123,  "Accounting  for  Stock-Based
Compensation,"  in 1995.  SFAS No. 123 permits the continued  application of APB
Opinion 25 for employees. However, questions remain about the proper application
of  APB  Opinion  25  in  a  number  of   circumstances.   The  FASB's  proposed
Interpretation would clarify how to apply APB Opinion 25 in certain situations.

The proposed Interpretation includes the following conclusions:

Once an option is repriced, that option must be accounted for as a variable plan
from the time it is  repriced  to the time it is  exercised.  Consequently,  the
final measurement of compensation expense would occur at the date of exercise.

Employees would be defined as they are under common law for purposes of applying
APB Opinion 25.

APB Opinion 25 does not apply to outside directors  because,  by definition,  an
outside director cannot be an employee.  Accordingly,  the cost of issuing stock
options to outside  board  members  will have to be  determined  on a fair value
basis in accordance  with SFAS No. 123, and recorded as an expense in the period
of the grant [the service period could be prospective, however].

Since APB  Opinion 25 was issued in 1972,  the terms of many  "section  423" tax
plans have changed from those in existence at the time.  Many of those plans now
provide  that  employees  can purchase an  employer's  stock at the lesser of 85
percent  of the stock  price at the date of grant or 85  percent of the price at
the date of exercise. This provision is referred to as a "look-back" option. The
FASB  decided that plans with a look-back  option do not, in and of  themselves,
create a compensatory plan.

A subsidiary may account for parent company stock issued to its employees  under
APB Opinion 25 in their  separately  issued financial  statements,  provided the
subsidiary is part of the parent's consolidated financial statements.

The FASB's proposed  Interpretation  would be effective upon issuance,  which is
expected  in  September   1999,  but  generally  would  cover  plan  grants  and
modifications that occur after December 15, 1998.


                               . . . . . . . . . .

                                      F-22