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, 2002

[ ]      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, 2002 to December 31, 2002

                         Commission file number 0-27256

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


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

                                 (702) 836-3042
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                (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
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                                (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, 2002 were $ 699,905.

         The aggregate market value at April 1, 2003 of shares of the
registrant's Common Stock, $.001 par value per share (based upon the closing
price of $ .01 per share of such stock on the Nasdaq OTC Bulletin Board on such
date), held by non-affiliates of the Registrant was approximately $170,000.
Solely for the purposes of this calculation, shares held by directors and
officers of the Registrant have been excluded. Such exclusion should not be
deemed a determination or an admission by the Registrant that such individuals
are, in fact, affiliates of the Registrant.

         State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: At April 1, 2003 there were
outstanding 96,415,953 shares of the Registrant's Common Stock, $.001 par value.

         Transitional Small Business Disclosure Format (check one):

                               Yes [X]     No [ ]
<PAGE>

                                TABLE OF CONTENTS


                                     PART I

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

ITEM 2   DESCRIPTION OF PROPERTY........................................      13

ITEM 3   LEGAL PROCEEDINGS..............................................      13

ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............      14


                                     PART II

ITEM 5   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.......      14

ITEM 6   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION......      15
           Overview.....................................................      15
           Results of Operations........................................      16
           Liquidity and Capital Resources..............................      16
           Inflation....................................................      17

ITEM 7   FINANCIAL STATEMENTS...........................................      17


                                    PART III

ITEM 8   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURES......................................      17

ITEM 9   EXECUTIVE COMPENSATION.........................................      17

ITEM 10  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT.....................................................      19

ITEM 11  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................      20

ITEM 12  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT..............      21


                                     PART IV

ITEM 13  EXHIBITS, LIST AND REPORTS ON FROM 10KSB.......................      23

         SIGNATURES.....................................................      25

         CERTIFICATIONS.................................................      26

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                                     PART I

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

GENERAL

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

OVERVIEW

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

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

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

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

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


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

In November 2002 we increased our authorized capital stock of common stock from
100,000,000 to 200,000,000

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


Products and Services

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

FIRE - The flagship product, developed for the most demanding and leading
Internet casino operators, was designed with security, performance and third
party integration in mind. The FIRE system has been tested to handle more than
1,000 simultaneous users on a single game server, and can be scaled up to many
times that figure by utilizing additional game servers. The FIRE system was
certified in Northern Territory, Australia in December 2002 and has been
selected by a land-based operator to go live during the second quarter of 2003
in Northern Territory.

Interactive Casino Extension(TM) (ICE) - This product has been licensed to more
than 20 licensees throughout the world. ICE offers an on-line casino with 11
casino games, including five different slots, three video poker games, video
keno, Blackjack, Mini-baccarat, Baccarat, Roulette, Sic Bo, and three
scratch-off games. A comprehensive system allows for the reporting and
accounting of customer transactions. This product received its certification
compliance in 2001 from the Norfolk Island (Australia) Gaming Authority.

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

LottoMagic(TM) - This product involves instant lottery scratch game tickets that
can be purchased on-line and scratched on screen using a mouse. LottoMagic
provides features in Spanish or English. After the player signs in to the site,

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they are eligible to play Wheel of Fortune (a game of key numbers), Match 3
(money matching three of six) and High Card (highest score). This product is
currently under development

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

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


Business Model

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

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

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

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

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


Hardware

The Company's Pegasus machines are wireless and portable gaming devices,
designed to make possible gaming opportunities outside the traditional casino

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floor. The machines are small, light and mobile, making possible to have gaming
in restaurants, keno/bingo rooms, and spas.


Industry Overview

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

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

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

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

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


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

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

E gaming combines the fast-growing Internet media with the lucrative gambling
and wagering market. The global gaming industry began to capitalize on the
rising popularity of Internet commerce in 1997, when legal Internet wagering
began in Australia through NetTAB, an Internet wagering system owned and
operated by the New South Wales government. There were only 40 gaming Web sites
worldwide in 1997; Bear Stearns estimates that there are now more than 1,800
Internet gaming sites, owned by 250-300 operating companies based throughout the
world.

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

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

The Internet gaming industry is growing at a dramatic rate. Christiansen Capital
Advisors estimates that the number of Internet gamblers will grow from
approximately 4.1 in 1999 to 17.4 million by 2004. It has estimated that
Internet gaming expenditures increased from about $1.1 billion in 1999 to $4.1
billion in 2002, and will increase to $6 billion in 2003 and to as much as $10
billion by 2005.

Industry growth rates are anticipated to slow, at least in the near term, as
U.S. credit card issuers increasingly are refusing to process online gaming
transactions. Legal issues, coupled with concerns that some cardholders may
refuse to pay such charges, have led many credit card issues to stop
participating in the area of the business. During 2002 Citibank, which controls
about 12 percent of the U.S. credit card market, indicated that it would stop
processing online gambling transactions, joining others, including Bank of
America, Fleet, MBNA and Chase Manhattan. Additionally, debit processor PayPal,
which was recently purchased by Ebay is also exiting the gambling transaction
business. According to analysis by Bear Stearns, revenue growth rates for the
industry will be cut to 20 percent from 43 percent because of these actions.

Many industry participants believe that other credit card and debit card
processors will eventually fill in this void, as foreign bank card issuers, and
a host of e-cash and smart card systems are available for Internet gambling
transactions. To combat some of these measures, legislation has been proposed to
prohibit any type of financial transaction processing (see below).

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

The share of U.S. Internet gamblers is also expected to change dramatically over
the next few years, from nearly 80 percent of the world market in 1999 to 33
percent by 2004. If these estimates are accurate, then the total expenditures
from U.S. patrons will increase about 60 percent during the 2000-2003 time
frame, whereas the rest of the world is forecast to grow some 700 percent, from
$.5 billion in 2000 to nearly $4 billion.

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Regulation

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

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

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

Conversely, many providers of Internet gaming services to citizens and residents
of the United States have taken the position that existing federal and state
laws pertaining to the provisions of gaming opportunities do not apply to the
Internet gaming services.

In November, 2002 the 5th U.S. Circuit Court of Appeals upheld a lower court
ruling that a federal ban on gambling applies only to sports betting on the
Internet, not casino-style wagering. The plaintiffs in both cases were asking
the court to forgive credit card debts with Internet gambling companies and
seeking damages from Visa and MasterCard for allowing them to gamble online. The
plaintiffs argued that Visa and MasterCard committed violations of the Racketeer
Influenced and Corrupt Organizations Act (RICO).

The U.S. Court of Appeals upheld the dismissal by Judge Stanwood R. Duval in
February 2001, saying that since the Wire Act does not prohibit non-sports
Internet gambling, any debts incurred in connection with such gambling are not
illegal. The Wire Act of 1961 specifically prohibits sports betting via
telephone lines.

These contradicting views and events have led to legislative proposals at the
national level over the past few years, with no definitive conclusions.

On March 13, 2003 the U.S. House Committee on Financial Services approved H.R.
21, introduced by Rep. James Leach. This bill is designed to curtail unlawful
Internet gambling by making it illegal to finance online gambling transactions
with credit cards, electronic fund transfers or any other "bank instruments"
issued by U.S. companies. The bill also calls for U.S. officials to work with

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foreign governments to determine whether offshore Internet gambling sites are
being used for money laundering or other crimes.

The U.S. House of Representatives approved the "Leach Bill" in 2002, but the
Senate did not act. Leach had also introduced a similar bill in 2001.

On the Senate side, Sen. John Kyle is expected to hold hearings on Proposals to
Regulate Illegal Internet Gambling. Similar to Leach, Kyle has previous
sponsored legislation that ultimately did not get passed in the Senate. However,
it is expected to be similar in nature to the newest Leach bill, as it will be a
topic of a Senate Committee on Banking, Housing and Urban Affairs.

Other proposals have sought to regulate and tax the Internet Gaming Industry
from a federal perspective, in much the same fashion that States do presently.
In March 2003 a bill introduced by Rep. John Conyers, called the Internet
Gambling Licensing and Regulation Act was introduced that would create a
five-person federal commission to evaluate how online gambling can be regulated
to protect consumers and provide tax revenue. Conyers has argued it would be
better for states to exercise strict oversight of Internet gambling similar to
state regulation of land based casinos. If Internet gambling were regulated by
the U.S. government, there would be less incentive for underground operators and
"unscrupulous merchants" to offer online gambling servies to Americans. He also
said the industry could generate more tax revenue for the states.

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

On March 22, 2002 the Nevada Gaming Control Board announced that it could not
proceed with the regulatory framework, barring guidance form the U.S. Department
of Justice. Generally speaking, the difficulties lie with the merging of
gambling jurisdictional issues generally afforded to individual states, and The
Wire Act, passed in 1961 passed in part of combat organized crime. The Wire Act
forbids an American to utilize phone lines to place a bet, and case law during
the Clinton Administration said that Internet gambling was prohibited under
federal law, utilizing a narrow interpretation of the law. On August 23, 2002
the Nevada Gaming Control Board was informed by the Justice Department that it
would not reverse the Clinton Administration opinion, indicating that any kind
of betting, whether it is sports or casino-style violates the Wire Act and other
federal laws.

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

In January 2003, New Jersey State Assemblyman Anthony Impreveduto introduced a
bill that would create a 21-member commission to review the feasibility of
legalizaing and regulating Internet gambling in New Jersey. If passed, it would
allow for both land-based casinos in Atlantic City and online casinos to accept
wagers from residents within the state of New Jersey.

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The landscape for other parts of the World is more defined than in the United
States.

Australia is one of just two fully regulated Internet gambling jurisdicitions
and is one of the most prominent global centers for Internet gaming today. It
was the first country to regulated the industry, with some of its states and
territories legalizing the industry in 1997. The licensing process in Australia
is not only tedious and well respected, but also expensive and closely
regulated. The "Aussie Model" has been exported to many of the newly emerging
jurisdictions tha seek a stringent and protected regulatory framework.

In May of 2000, the Australian federal government announced that it would impose
a 12-month moratorium on the issuing of licenses to operate Internet gambling
services, pending a review on its impact on Australia citizens and its gaming
industry generally.

The moratorium was lifted with The Interactive Gambling Act 2001, which came
into effect on July 11, 2001. The Act is a response by the Australian Federal
Government to the concerns that the Internet will exacerbate problem gambling
among Australians, and will increase further the economic and social costs that
are caused by problem gambling. The Act targets both interactive gambling
service providers and Australian Internet service providers to implement
measures to prevent end users in Australia from being able to access interactive
gambling services. However, it does not prohibit Internet gambling operations
anywhere it is legal to do so in the country. The Act only prohibits casino
style games; as exemptions were provided to sports betting, pari-mutual horse
betting and lotteries.

Many of the largest gaming companies in Australia and the world have entered the
e-gaming market and established operations in the Country. Land-based gaming
operators Jupiters and Lasseters operate Internet casinos and sports books in
Australia, and Crown Casinos operates in nearby Vanuatu.

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

The UK is in part reacting to development of the Internet gaming in offshore tax
havens including Isle of Mann and Alderney. The Isle of Mann has attracted the
attention of some of the major US and European brands thus far, and has issued
online gaming licenses to leading companies such as MGMMirage, Rank PLC/Hard
Rock and Sun International, all of which went live during 2002. Recently, Las
Vegas casino company The Venetian announced it was awarded an Internet gaming
license from Alderney.

Significant interest was also afforded to the U.S. Virgin Islands, which passed
legislation legalizing Internet Gambling in December 2002. The Virgin Island's
Attorney Generals office wrote the opinion that the Wire Act does not apply to
casino betting, as supported by the recent Duval ruling by U.S. Federal Appeals
Court. Further, he wrote that as long as no bets are received from jurisdictions
were gambling is prohibited, players are within the lawful age, and limited to
games of chance then their new Internet Gambling Act is consistent with
territorial and federal law.

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

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


Marketing

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

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


Trademarks and Patents

We currently provide the market place with four products 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.


Competition

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

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

Although there are several large players in Internet gaming software market, it
is our understanding that at this point there is only a handful, which would
qualify as vendors to the land-based casino market. These competitors in our
view are Gaming & Entertainment Technology Systems (GET), Access Games,

                                        9
<PAGE>

WagerWorks and possibly, Chartwell Technologies. These companies have maintained
a similar strategy as OGS when dealing with potential customers.

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


Employees

As of March 30, 2003, we had 4 full-time employees in the Las Vegas, Nevada,
office and three (3) full-time employees in Australia. We also employ full-time
and part-time consultants on an as-needed basis. We consider our relationship
with our employees to be satisfactory.


Recent Developments

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

The Company's operating shortfalls have largely been funded via its largest
shareholder, Hosken Consolidated Investment Limited (HCI). HCI is a South
Africa-based investment holding company that focuses its activities in
telecommunications and information technology, media and broadcasting,
interactive gaming and entertainment and financial services. During 2002, HCI
funded the Company $1,590,000 in the form of convertible notes. These notes bear
an interest rate of 12 percent, have a maturity date of December 31, 2003 and
are collateralized by substantially all of the assets of the Company.

During the first quarter of 2003, HCI advanced the Company $400,000 in the form
of convertible notes, and has stated its intent on continuing the funding of the
Company through the balance of the year.


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

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

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


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

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

                                       10
<PAGE>

casinos. During 2002, we substantially reduced our focus in this business
segment and no longer actively are engaged in this area.


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

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

During 2002 Your Move, Inc. elected to curtail further development and marketing
efforts pending resolution of Nevada and federal regulatory issues.


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

During the third quarter of 2001, the Company executed a Marketing and
Operations Agreement with UnoDosTres.com (UDT) whereby it was granted exclusive
rights to market up to three Internet Casinos on the UDT site and UDT agreed to
provide up to $155 million of bartered advertising to promote the Internt
casinos. The Agreement called for the first of the Internet casios to be open
not later than September 19, 2002.

Due to delays in completion of certification for the Internet casino that the
company will be managing for International Gaming & Entertainment Corporation,
an affiliate the casino was not open as of September 19, 2002. On September 25,
2002 UDT informed the Company that the Agreement would be terminated, and
proposed certain changes to various of the business points of the original
Agreement. On December 3, 2002 the Company executed a new Co-Branding Agreement
with similar benefits and obligations as the original Agreement, with the
primary exception being exclusivity.


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

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

The Casino will be operated in Australia, currently the most regulated Internet
gaming jurisdiction in the World. It will target the Latin American market
through linkage with the UDT site. UDT will provide the equivalent of $10
million of bartered television and radio advertising for the casino over a
two-year period. OGS will provide management and marketing services through its
Australia and Las Vegas offices. OGS will receive a minimum management and
support fee of $540,000 annually. Depending upon the length of time to complete
the licensing process, the Casino is expected to go live during the second or
third quarter of 2003.


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

During the first quarter of 2002, the Company announced the release of the Beta
version of FIRE, its premium casino software that will complement its ICE
product designed for less-intensive users. The product was designed with

                                       11
<PAGE>

security, performance, third party integration and scalability in mind. The FIRE
product was certified compliant in December 2002 for Northern Territory,
Australia, and has been selected for development of an Internet Casino by an
existing land-based operator. The Company expects that Internet casino to go
live during the second quarter of 2003.


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

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

HCI converted $3.6 million of its convertible debt into 60,000,000 shares of the
Company's common stock. The conversion price was set at $.06, the closing price
of OGAM common stock on November 27, 2001. Prior to the conversion, HCI owned
18,698,120 shares or about 55 percent of the outstanding common stock of the
Company. After conversion of the debt, HCI owns 78,698,120 shares or about 82
percent of the common stock of the Company.

HCI also agreed amend the terms of its debt, extending the maturity of the
remaining notes to December 31, 2003. The previous maturity date on the notes
was December 31, 2001 and the Company had been in default on the notes.


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

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


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

During 2002, executive management personnel purchased a total of 350,000 shares
of common stock from the Company at a price of $.06 per share. During the first
quarter of 2002, the Company issued 561,766 shares of its common stock in
settlement of the former CEO and President's remaining loan balance of $29,319
plus accrued interest of $4,386.

During 2002, a consultant to the Company purchased 150,000 shares of stock at
$.05 per share. During the third quarter of 2002, the Company issued 25,000
shares of stock in lieu of consulting services provided by a former employee of
the Company.

During the second quarter of 2002, 241,251 shares of the Company's common stock
were issued to a previous customer in satisfaction of an investment made in the
Company. During the third quarter of 2002, 541,667 shares of the Company's
common stock with a fair market value of $.06 per share were issued as
consideration for rent in arrears. Additionally, the Company issued 25,000
shares of common stock with a fair market value of $.06 per share to a
consultant for services rendered.

During the fourth quarter of 2001 Hosken Consolidated Investment Limited
announced its intention to convert a portion of its ownership of the Company's
convertible debt into common stock of the Company, and to amend certain terms of
the remaining notes.

                                       12
<PAGE>

HCI converted $3.6 million of its convertible debt into 60,000,000 shares of the
Company's common stock. The conversion price was set at $.06, the closing price
of OGAM common stock on November 27, 2001. Prior to the conversion, HCI owned
18,698,120 shares or about 55 percent of the outstanding common stock of the
Company. After conversion of the debt, HCI owns 78,698,120 shares or about 82
percent of the common stock of the Company.

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

During the second quarter of 2001, the Company issued 225,000 shares of common
stock in satisfaction of indebtedness to Wayne Newton, who was previously
employed as a promotional consultant by the Company. During the second quarter
of 2001, HCI converted its 9,000 shares of preferred stock to common stock,
under formula as provided in the Convertible Preferred Stock Sales Agreement.
The preferred stock converted to 18,610,422 of common stock, which was issued to
affiliates of HCI.

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


ITEM 2.  DESCRIPTION OF PROPERTY.
         -----------------------
We lease approximately 9,338 square feet of office space in Las Vegas, Nevada
expiring on July 31, 2005 with current monthly rent of $5,000.

We lease approximately 1,100 square feet of office space in Sydney, Australia
under a two-year term that expires on August 30, 2004. The current monthly rent
is $6,305 (Australian), increasing three percent annually.


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

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


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

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


Cabrero
-------

The Company is suing a former employee for failure to perform his duties and for
inducing the Company to give him $10,000 for software he never delivered. The

                                       13
<PAGE>

Employee has counter sued because he claims the Company did not give him "COBRA"
notice and he incurred approximately $30,000 in medical expenses. This case is
not currently set for trial.


RCS Financial Services
----------------------

During the second quarter of 2002 RCS Financial Services, Ltd filed suit against
the Company for repayment of a loan, alleging a remaining balance of $47,500.
The Company is investigating the matter, has complied with plaintiffs request
for information and has retained counsel to defend the claim.


Chipstead Consultants
---------------------

During the third quarter of 2002, counsel for Chipstead Consultants Limited, an
Australian company threatened litigation against the Company, alleging a
software purchase transaction in January of 2000 whereby the Company failed to
deliver the software in exchange for deposits totaling $112,500. The Company has
responded to Chipstead's counsel, asserting that it provided software and
support to Chipstead that included the alleged amount. The Company has not
retained counsel at this point in time.


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

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


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

On October 14, 2002 the Company provided notice of its Annual Shareholder's
Meeting, which was held on November 21, 2002 in Las Vegas. In the Schedule 14C
Information Statement, the shareholders were asked to vote on the following
matters:

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

To approve an amendment to the Company's articles of incorporation to increase
the number of shares of common stock which the Company is authorized to issue
from 100,000,000 to 200,000,000.

To approve amendments to the Company's 1999 Stock Option Plan.

To ratify the appointment of Moore Stephens, P.C. as independent accountants of
the Company for the fiscal year ending December 31, 2002.

The shareholders voted in the affirmative for all matters.



                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
         --------------------------------------------------------
From November 1996 until August, 1999 our common stock has traded on the
electronic bulletin board under the trading symbol AIEE. In August 1999 the

                                       14
<PAGE>

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


Fiscal Year Ending December 31, 2002

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

   ---------------------------------------------------------------------------
            Quarter               Date               High         Low
   ---------------------------------------------------------------------------
              1st          March 31, 2002            $.08        $.05
   ---------------------------------------------------------------------------
              2nd          June 30, 2002             $.06        $.03
   ---------------------------------------------------------------------------
              3rd          September 30, 2002        $.06        $.01
   ---------------------------------------------------------------------------
              4th          December 31, 2002         $.02        $.01
   ---------------------------------------------------------------------------


Fiscal Year Ending December 31, 2001

   ---------------------------------------------------------------------------
            Quarter               Date               High         Low
   ---------------------------------------------------------------------------
              1st          March 31, 2001            $.23        $.05
   ---------------------------------------------------------------------------
              2nd          June 30, 2001             $.10        $.06
   ---------------------------------------------------------------------------
              3rd          September 30, 2001        $.09        $.04
   ---------------------------------------------------------------------------
              4th          December 31, 2001         $.10        $.04
   ---------------------------------------------------------------------------



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

As of December 31, 2002 there were approximately 758 Holders of Record of our
Common Stock, including brokerage firms, clearinghouses, and/or depository firms
holding our securities for their respective clients. The exact number of
beneficial owners of our securities is not known.

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


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

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


Overview

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

                                       15
<PAGE>

Results of Operations

The Company's net loss for 2002 was ($2,312,227) compared to net loss of
($4,283,497,) for 2001, a decrease of $1,971,270 or about 46 percent. The
Company had a substantial decrease in operating expenses.

Net revenues for the Company for 2002 were $699,905 compared to $778,847 in
2001, a decrease of 10 percent. The source of revenue changed during the period,
as the Company developed and began selling a new software product, whereas
during 2001 a significant portion of our revenue emanated from project work and
software support fees.

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

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

Operating expenses decreased by 43,8 percent, to $2,488,355 in 2002 from
$4,428,788 in 2001. Most of this decrease is attributable to enhanced cost
controls and downsizing of the company, as it reduced dependence on development
efforts and initiated more intense levels of sales for its products.


Liquidity and Capital Resources

At December 31, 2002 the Company had negative working capital of ($6,942,093)
compared with ($1,129,265) at December 31, 2001. The decrease in working capital
was primarily due negative cash flow from operations and convertible notes
payable due to related party for $5,074,907.

The Company's operating shortfalls have largely been funded via its largest
shareholder, Hosken Consolidated Investment Limited (HCI). HCI is a South
Africa-based investment holding company that focuses its activities in
telecommunications and information technology, media and broadcasting,
interactive gaming and entertainment and financial services. During 2002, HCI
funded the Company $1,590,000 in the form of convertible notes. These notes bear
an interest rate of 12 percent, have a maturity date of December 31, 2003 and
are collateralized by substantially all of the assets of the Company. At
December 31, 2002 the Company had $5,074,907 of convertible notes payable due
HCI.

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

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

                                       16
<PAGE>

Company. Pro forma the conversion of the debt, HCI owns 78,698,120 shares or
about 82 percent of the common stock of the Company.

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

During the first quarter of 2003, HCI advanced the Company $400,000 in the form
of convertible notes. Management believes that existing cash, and the continuing
participation of HCI and, potentially other investors will provide the Company
with funds to operate the Company until it becomes self-sufficient.


Inflation

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


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

         [See page F-1.]


                                    PART III

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

None


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

The following table provides certain summary information concerning the
compensation earned, by the Company's Chief Executive Officer and its Chairman
for services rendered in all capacities to the Company and its subsidiaries for
each of the last three fiscal years. Such individuals will be hereafter referred
to as the Named Executive Officers. No other executive officer that would have
otherwise been included in such table on the basis of salary and bonus earned
for the 2002 fiscal year has resigned or terminated employment during that
fiscal year.


                           SUMMARY COMPENSATION TABLE

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

Lawrence P. Tombari                 2002          $180,000              --
President and Chief                 2001           140,000
Financial Officer

Gary A. Ramos (1)                   2002          $ 89,000              --
Former President and Chief          2001           250,000
Executive Officer                   2000            93,000

(1)  Resigned March 2002

                                       17
<PAGE>

Stock Options

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

During 2002 the Board of Directors and shareholders approved amendments to the
Plan that, among other things, increased the number of shares available under
the Plan to 10,000,000.

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


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

Lawrence P. Tombari        2,000,000         2002        $   .06          2007
                             139,999         2002        $   .03          2007
                             133,333         2001        $   .03          2006

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

J.A. Copelyn               2,000,000         2002        $   .06          2007

Herman Suarez                500,000         2002        $   .06          2007

David Kinsman                500,000         2002        $   .06          2007

Syed Hussain                 300,000         2002        $   .06          2007



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.

                                       18
<PAGE>

OTHER

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


EMPLOYMENT AGREEMENTS

The Company has entered into employment contracts with Messrs. Tombari, Campbell
and Kinsman. Mr. Campbell left the company in March 2002.

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

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


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

The following table sets forth, as of March 31, 2003 information regarding the
beneficial ownership of the Company's Common Stock by each person known by the
Company to own five percent or more of the outstanding shares, by each of the
directors and officers, and by the directors and officers as a group. As of
March 31, 2003, there were outstanding 96,415,953 shares of the Common Stock of
the Company.


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

Ahead Investments Limited                       78,698,120             81.60%

Lawrence P. Tombari                                733,333              0.08%

All Officers and Directors as a Group           79,431,453             82.38%
(2 Persons)


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

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

                                       19
<PAGE>

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


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

During 2002, executive management personnel purchased a total of 350,000 shares
of common stock from the Company at a price of $.06 per share. During the first
quarter of 2002, the Company issued 561,766 shares of its common stock in
settlement of the former CEO and President's remaining loan balance of $29,319
plus accrued interest of $4,386.

During 2002, a consultant to the Company purchased 150,000 shares of stock at
$.05 per share. During the third quarter of 2002, the Company issued 25,000
shares of stock in lieu of consulting services provided by a former employee of
the Company.

During the second quarter of 2002, 241,251 shares of the Company's common stock
were issued to a previous customer in satisfaction of an investment made in the
Company.

During 2001 HCI converted $3.6 million of its convertible debt into 60,000,000
shares of the Company's common stock. The conversion price was set at $.06, the
closing price of OGAM common stock on November 27, 2001. Prior to the
conversion, HCI owned 18,698,120 shares or about 55 percent of the outstanding
common stock of the Company. After conversion of the debt, HCI owns 78,698,120
shares or about 82 percent of the common stock of the Company.


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

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

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


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

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

During 2002, HCI funded the Company $1,590,000 in the form of convertible notes.
During 2001, HCI funded the Company $4,438,642 in the form of convertible notes.
During 2000, HCI funded the Company $2,335,000 in the form of convertible notes.
During 1999, HCI funded the company $500,000 via similar note arrangements.

These notes bear an interest rate of 12 percent, have a maturity date of
December 31, 2003 and are collateralized by substantially all of the assets of
the Company.

During the fourth quarter of 2001 HCI announced its intention to convert a
portion of its ownership of the Company's convertible debt into common stock of
the Company, and to amend certain terms of the remaining notes. HCI converted
$3.6 million of its convertible debt into 60,000,000 shares of the Company's
common stock. The conversion price was set at $.06, the closing price of OGAM

                                       20
<PAGE>

common stock on November 27, 2001. Prior to the conversion, HCI owned 18,698,120
shares or about 55 percent of the outstanding common stock of the Company. After
conversion of the debt, HCI owns 78,698,120 shares or about 82 percent of the
common stock of the Company.

HCI also agreed amend the terms of its debt, extending the maturity of the
remaining notes to December 31, 2003. The previous maturity date on the notes
was December 31, 2001 and the Company had been in default on the notes.

During the first quarter of 2003, HCI advanced the Company $400,000 in the form
of convertible notes.


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

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

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


DIRECTORS AND EXECUTIVE OFFICERS

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


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

         J.A. Copelyn                52        Chief Executive Officer and
                                               Chairman of the Board

         Lawrence P. Tombari         44        President, Chief Financial
                                               Officer and Director

         Gavin Chamberlain           47        Director

         Marcel Golding              42        Director


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


LAWRENCE P. TOMBARI is President and Chief Financial Officer of the Company. He
joined the Company in 2001 as its Chief Financial Officer and was appointed

                                       21
<PAGE>

President in 2002. Previously, he was Chief Financial Officer and Senior Vice
President of Lady Luck Gaming Corporation, from its inception in 1993 until the
Company was acquired in 2000. As CFO, Mr. Tombari was responsible for all of the
accounting, budgeting, reporting and investor communications for the NASDAQ
Company. Additionally, as Senior Vice President of Development, he was
responsible for identification and analysis for new gaming projects,
acquisitions and disposals, and presentations to regulatory bodies. Prior to
Lady Luck, Mr. Tombari spent eight years at Ernst & Young, in the Consulting
Division. Mr. Tombari has a Bachelor of Science of Business Administration from
the University of Southern California, and an MBA from Arizona State University.

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

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


MEETINGS AND COMMITTEES

The Board held three meetings during the year ended December 31, 2002. In
addition, from time to time during such year, the members of the Board acted by
unanimous written consent. The Company has elected a standing compensation and
audit committees. The entire Board of Directors performs the typical functions
of such committees. The Company's Audit Committee during 2002 was comprised of
Lawrence P. Tombari. The Committee recommends engagement of the Company's
independent accountants approves services performed by such accountants and
reviews and evaluates the Company's accounting system and its system of internal
controls.

                                       22
<PAGE>

                                     PART IV


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

         (a)      Exhibits:

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

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

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

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

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

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

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

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

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

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

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


         11.1*    -        Statement of Computation of Per Share Earnings

         21.1*    -        Subsidiaries of the Company

                                       23
<PAGE>

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

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

         27       -        Financial Data Schedule.

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

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

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

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

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

                                       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 8, 2003                 /s/ LAWRENCE P. TOMBARI
                                     -------------------------------------------
                                     Lawrence P.Tombari, Chief Financial Officer

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

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


/s/ J.A. COPELYN                     Chairman of the Board         April 8, 2003
------------------------------       Chief Executive Officer
J.A. Copelyn



/s/ MARCEL GOLDING                   Director                      April 8, 2003
------------------------------
Marcel Golding



/s/ GAVIN CHAMBERLAIN                Director                      April 8, 2003
------------------------------
Gavin Chamberlain


                                       25
<PAGE>

                      CHIEF EXECUTIVE OFFICER CERTIFICATION

I, J.A. Copelyn, Chief Executive Officer of Online Gaming Systems, Ltd. (the
"Company") do hereby certify that:

     (1)  I have reviewed this annual report on Form 10-K of the Company for the
          year ended December 31, 2002;

     (2)  Based on my knowledge, this annual report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary in order to make the statements made, in light of the
          circumstances under which such statements were made, not misleading
          with respect to the period covered by this quarterly report;

     (3)  Based on my knowledge, the financials statements and other financial
          information included in this annual report, fairly present in all
          material respects, the financial condition, results of operations and
          cash flows of the Company, as of, and for, the period presented in
          this annual report;

     (4)  The Company's other certifying officer and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and
          we have:

               (a)  designed such disclosure controls and procedures to ensure
                    that material information relating to the Company, including
                    its consolidated subsidiaries, is made known to us by others
                    within those entities, particularly during the period in
                    which this quarterly report was being prepared;

               (b)  evaluated the effectiveness of the Company's disclosure
                    controls and procedures as of a date within 90 days prior to
                    the filing date of this quarter report (the "Evaluation
                    Date"); and

               (c)  presented in this annual report our conclusions about the
                    effectiveness of the disclosure controls and procedures
                    based on our evaluation as of the Evaluation Date;

     (5)  The Company's other certifying officer and I have disclosed, based on
          our most recent evaluation, to the Company's auditors and the
          Company's board of directors:

               (a)  all significant deficiencies in the design or operation of
                    internal controls which could have adversely affect the
                    Company's ability to record, process, summarize and report
                    financial data and have identified for the Company's
                    auditors any material weaknesses in internal controls; and
                    (b) any fraud, whether or not material, that involves
                    management or other employees who have a significant role in
                    the Company's internal controls; and

     (6)  The Company's other certifying officer and I have indicated in this
          annual report whether or not there were significant changes in
          internal controls or in other factors that could significantly affect
          internal controls subsequent to the date of our most recent
          evaluation, including any corrective actions with regard to
          significant deficiencies and material weaknesses.



Dated: April 8, 2003                   By: /s/ J.A. COPELYN
                                           -------------------------------------
                                           J.A. Copelyn
                                           Chief Executive Officer

                                       26
<PAGE>

                      CHIEF FINANCIAL OFFICER CERTIFICATION

I, Lawrence P. Tombari, Chief Financial Officer of Online Gaming Systems, Ltd.
(the "Company") do hereby certify that:

     (1)  I have reviewed this annual report on Form 10-K of the Company for the
          year ended December 31, 2002;

     (2)  Based on my knowledge, this annual report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary in order to make the statements made, in light of the
          circumstances under which such statements were made, not misleading
          with respect to the period covered by this quarterly report;

     (3)  Based on my knowledge, the financials statements and other financial
          information included in this annual report, fairly present in all
          material respects, the financial condition, results of operations and
          cash flows of the Company, as of, and for, the period presented in
          this annual report;

     (4)  The Company's other certifying officer and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and
          we have:

               a.   designed such disclosure controls and procedures to ensure
                    that material information relating to the Company, including
                    its consolidated subsidiaries, is made known to us by others
                    within those entities, particularly during the period in
                    which this annual report was being prepared;

               b.   evaluated the effectiveness of the Company's disclosure
                    controls and procedures as of a date within 90 days prior to
                    the filing date of this quarter report (the "Evaluation
                    Date"); and

               c.   presented in this annual report our conclusions about the
                    effectiveness of the disclosure controls and procedures
                    based on our evaluation as of the Evaluation Date;

     (5)  The Company's other certifying officer and I have disclosed, based on
          our most recent evaluation, to the Company's auditors and the
          Company's board of directors:

               a.   all significant deficiencies in the design or operation of
                    internal controls which could have adversely affect the
                    Company's ability to record, process, summarize and report
                    financial data and have identified for the Company's
                    auditors any material weaknesses in internal controls; and
                    b. any fraud, whether or not material, that involves
                    management or other employees who have a significant role in
                    the Company's internal controls; and

     (6)  The Company's other certifying officer and I have indicated in this
          quarterly report whether or not there were significant changes in
          internal controls or in other factors that could significantly affect
          internal controls subsequent to the date of our most recent
          evaluation, including any corrective actions with regard to
          significant deficiencies and material weaknesses.



Dated: April 8, 2003                    By: /s/ LAWRENCE P. TOMBARI
                                            ------------------------------------
                                            Lawrence P. Tombari
                                            Chief Financial Officer

                                       27
<PAGE>

     CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I, J.A. Copelyn, Chief Executive Officer of Online Gaming Systems, Ltd. (the
"Company") do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


          (a)  the Annual Report on Form 10-K of the Company for the year ended
               December 31, 2002, which this certification accompanies (the
               "Periodic Report") fully complies with the requirements of
               Section 13(a) fo the Securities Exchange Act of 1934; and

          (b)  that information contained in the Periodic Report fairly
               presents, in all material respect, the financial condition and
               results of operations of the Company.




Date: April 8, 2003                    By: /s/ J.A. COPELYN
                                           -------------------------------------
                                           J.A. Copelyn
                                           Chief Executive Officer
                                           Online Gaming Systems, Ltd.





     CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I, Lawrence P. Tombari, Chief Financial Officer of Online Gaming Systems, Ltd.
(the "Company") do hereby certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


          (c)  the Annual Report on Form 10-K of the Company for the year ended
               December 31, 2002, which this certification accompanies (the
               "Periodic Report") fully complies with the requirements of
               Section 13(a) fo the Securities Exchange Act of 1934; and

          (d)  that information contained in the Periodic Report fairly
               presents, in all material respect, the financial condition and
               results of operations of the Company.




Date: April 8, 2002                    By: /s/ LAWRENCE P. TOMBARI
                                           -------------------------------------
                                           Lawrence P. Tombari
                                           Chief Financial Officer
                                           Online Gaming Systems, Ltd.

                                       28
<PAGE>


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

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


                                                                         Page
                                                                         ----


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

Consolidated Balance Sheet as of December 31, 2002 .................  F-3

Consolidated Statements of Operations for the years ended
December 31, 2002 and 2001 .........................................  F-4

Consolidated Statements of Changes in Stockholders' [Deficit]
for the years ended December 31, 2002 and 2001 .....................  F-5

Consolidated Statements of Cash Flows for the years ended
December 31, 2002 and 2001 .........................................  F-6 - F-7

Notes to Consolidated Financial Statements .........................  F-8 - F-18







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

                                       F-1
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT


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


We have audited the accompanying consolidated balance sheet of Online Gaming
Systems, Ltd. and its subsidiary as of December 31, 2002, and the related
consolidated statements of operations and changes in stockholders' [deficit],
and cash flows for each of the two years in the period ended December 31, 2002.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Online
Gaming Systems, Ltd. and its subsidiary as of December 31, 2002, and the
consolidated results of their operations and their cash flows for each of the
two years in the period ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
Online Gaming Systems, Ltd. will continue as a going concern. As discussed in
Note 17 to the consolidated financial statements, the Company's recurring losses
from operations, accumulated deficit, and recurring negative cash flows from
operations raise substantial doubt about Online Gaming Systems, Ltd.'s ability
to continue as a going concern. Management's plans in regard to the matters are
also described in Note 17. These consolidated financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.



                                       MOORE STEPHENS, P.C.
                                       Certified Public Accountants.


Cranford, New Jersey
February 28, 2003


                                       F-2
<PAGE>

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

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2002.
--------------------------------------------------------------------------------


Assets:
Current Assets:
  Cash                                                             $      8,916
  Prepaid and Other Assets                                               21,321
                                                                   ------------

  Total Current Assets                                                   30,237
                                                                   ------------

Property and Equipment - Net                                             55,023
                                                                   ------------

Other Assets:
  Deposit                                                                18,016
  Intangible Assets - Net                                               323,565
                                                                   ------------

  Total Other Assets                                                    341,581
                                                                   ------------

  Total Assets                                                     $    426,841
                                                                   ============

Liabilities and Stockholders' [Deficit]:
Current Liabilities:
  Cash Overdraft                                                   $     18,989
  Accounts Payable and Accrued Expenses                                 366,903
  Accrued Interest - Related Party                                    1,323,878
  Advances - Related Party                                              187,653
  Convertible Notes Payable - Related Party                           5,074,907
                                                                   ------------

  Total Current Liabilities                                           6,972,330
                                                                   ------------

Commitments and Contingencies                                                --
                                                                   ------------

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

  Common Stock - Par Value $.001 Per Share; Authorized
    200,000,000 Shares; 96,415,953 Shares Issued                         96,416

  Additional Paid-in Capital                                         18,710,976

  Accumulated [Deficit]                                             (23,622,396)

  Treasury Stock, 1,125,012 Common Shares - At Cost                  (1,730,485)
                                                                   ------------

  Total Stockholders' [Deficit]                                      (6,545,489)
                                                                   ------------

  Total Liabilities and Stockholders' [Deficit]                    $    426,841
                                                                   ============


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

                                       F-3
<PAGE>

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

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

<TABLE>
<CAPTION>
                                                               Years ended
                                                               -----------
                                                               December 31,
                                                               ------------
                                                          2 0 0 2         2 0 0 1
                                                       ------------    ------------

<S>                                                    <C>             <C>
Revenue                                                $    449,905    $    778,847

Revenue - Related Party                                     250,000              --
                                                       ------------    ------------

  Gross Profit                                              699,905         778,847
                                                       ------------    ------------

Operating Expenses:
  Salaries and Employee Benefits                            992,940       2,436,623
  General and Administrative                              1,125,816       1,696,812
  Depreciation and Amortization                             329,599         295,353
                                                       ------------    ------------

  Total Operating Expenses                                2,488,355       4,428,788
                                                       ------------    ------------

  [Loss] from Operations                                 (1,748,450)     (3,649,941)
                                                       ------------    ------------

Other [Expenses]:
  Interest Expense - Related Party                         (539,238)       (599,172)
  Interest Expense - Other                                  (24,539)        (34,384)
                                                       ------------    ------------

  Other [Expenses] - Net                                   (563,777)       (633,556)
                                                       ------------    ------------

  [Loss] from Operations                                 (2,312,227)     (4,283,497)

Income Taxes                                                     --              --
                                                       ------------    ------------

  Net [Loss]                                           $ (2,312,227)   $ (4,283,497)
                                                       ============    ============

  Net [Loss] Per Share - Basic                         $       (.02)   $       (.14)
                                                       ============    ============

  Weighted Average Common Shares Outstanding - Basic     95,529,371      31,289,594
                                                       ============    ============
</TABLE>


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

                                       F-4
<PAGE>

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

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


<TABLE>
<CAPTION>
                                                                                                     Additional
                                                                                                     ----------
                                            Preferred Stock                  Common Stock              Paid-in
                                            ---------------                  ------------              -------
                                         Shares          Amount          Shares         Amount         Capital
                                      ------------    ------------    ------------   ------------   ------------

<S>                                         <C>       <C>               <C>          <C>            <C>
   Balance - December 31, 2000              10,610    $         11      14,669,180   $     14,669   $ 14,863,029

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

   Balance - December 31, 2001                  --              --      94,546,269         94,546     18,615,663

Issuance of Stock - Consultant                  --              --         150,000            150          7,350
Issuance of Stock - Customer                    --              --         241,251            241           (241)
Issuance of Stock - Officer                     --              --         350,000            350         20,650
Issuance of Stock - Debt Settlement             --              --         561,766            562         34,121
Issuance of Stock - Settlement                  --              --         541,667            542         31,958
Issuance of Stock - Services                    --              --          25,000             25          1,475
Net Loss                                        --              --              --             --             --
                                      ------------    ------------    ------------   ------------   ------------

   Balance - December 31, 2002                  --    $         --      96,415,953   $     96,416   $ 18,710,976
                                      ============    ============    ============   ============   ============
</TABLE>



<TABLE>
<CAPTION>
                                                                                          Total
                                                                                          -----
                                             Treasury Stock           Accumulated     Stockholders'
                                             --------------           ------------    ------------
                                         Shares          Amount        [Deficit]       [Deficit]
                                      ------------    ------------    ------------    ------------

<S>                                      <C>          <C>             <C>             <C>
   Balance - December 31, 2000            (968,767)   $ (1,744,547)   $(17,026,672)   $ (3,893,510)

Sale of Treasury Stock                    (156,245)         14,062              --          14,062
Conversion of Preferred Stock                   --              --              --              --
Investor Shares Issued                          --              --              --         200,000
Issuance of Stock - Officers                    --              --              --          32,500
Conversion of Convertible Debt                  --              --              --       3,600,000
Net Loss                                        --              --      (4,283,497)     (4,283,497)
                                      ------------    ------------    ------------    ------------

   Balance - December 31, 2001          (1,125,012)     (1,730,485)    (21,310,169)     (4,330,445)

Issuance of Stock - Consultant                  --              --              --           7,500
Issuance of Stock - Customer                    --              --              --              --
Issuance of Stock - Officer                     --              --              --          21,000
Issuance of Stock - Debt Settlement             --              --              --          34,683
Issuance of Stock - Settlement                  --              --              --          32,500
Issuance of Stock - Services                    --              --              --           1,500
Net Loss                                        --              --      (2,312,227)     (2,312,227)
                                      ------------    ------------    ------------    ------------

   Balance - December 31, 2002          (1,125,012)   $ (1,730,485)   $(23,622,396)   $ (6,545,489)
                                      ============    ============    ============    ============
</TABLE>


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

                                       F-5
<PAGE>

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

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


<TABLE>
<CAPTION>
                                                                   Years ended
                                                                   -----------
                                                                   December 31,
                                                                   ------------
                                                              2 0 0 2        2 0 0 1
                                                            -----------    -----------
<S>                                                         <C>            <C>
Operating Activities:
  Net [Loss]                                                $(2,312,227)   $(4,283,497)
  Adjustments to Reconcile Net [Loss] to Net Cash
    [Used for] Operating Activities:
    Convertible Debt Exchanged for Services                    (250,000)            --
    Depreciation and Amortization                               327,561        295,353
    Issuance of Common Stock for Services Rendered               34,000        200,000
    Debt Settlement                                                  --        (97,350)

Changes in Assets and Liabilities:
  [Increase] Decrease in:
    Other Current Assets                                         (7,742)        (1,180)
    Deposits                                                     (8,678)            --

  Increase [Decrease] in:
    Accounts Payable and Accrued Expenses                       (32,221)      (570,968)
    Accrued Interest - Related Party                            519,780        599,172
                                                            -----------    -----------

  Net Cash - Operating Activities                            (1,729,527)    (3,858,470)
                                                            -----------    -----------

Investing Activities:
  Purchase of Equipment                                         (14,422)            --
  Patents Purchased                                                  --       (245,178)
  Capitalized Software Development Costs                       (158,000)            --
                                                            -----------    -----------

  Net Cash - Investing Activities                              (172,422)      (245,178)
                                                            -----------    -----------

Financing Activities:
  Cash Overdraft                                                 18,989       (128,016)
  Proceeds from Issuance of Common Stock                         28,500         32,500
  [Purchase] of Treasury Stock                                       --         14,062
  Proceeds from Advances - Related Party                        187,653             --
  Payment of Notes Payable                                       (2,500)      (241,588)
  Proceeds from Convertible Notes Payable - Related Party     1,590,000      4,438,642
  Payments of Capital Lease Obligations                         (34,874)      (114,800)
  Proceeds from Notes Payable - Related Party                        --         65,000
                                                            -----------    -----------

  Net Cash - Financing Activities                             1,787,768      4,065,800
                                                            -----------    -----------

  Net [Decrease] in Cash - Forward                          $  (114,181)   $   (37,848)
</TABLE>


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

                                       F-6
<PAGE>

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

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


<TABLE>
<CAPTION>
                                                                   Years ended
                                                                   -----------
                                                                   December 31,
                                                                   ------------
                                                              2 0 0 2        2 0 0 1
                                                            -----------    -----------
<S>                                                         <C>            <C>
  Net [Decrease] in Cash - Forwarded                        $  (114,181)   $   (37,848)

Cash - Beginning of Years                                       123,097        160,945
                                                            -----------    -----------

  Cash - End of Years                                       $     8,916    $   123,097
                                                            ===========    ===========

Supplemental Disclosures of Cash Flow Information:
  Cash paid during the years for:
    Interest                                                $    33,796    $    39,179
    Income Taxes                                            $        --    $        --
</TABLE>


Supplemental Schedule of Non-Cash Investing and Financing Activities:

     In January 2002, the Company issued 561,766 shares of its common stock in
settlement of approximately $34,683 of a note payable principal balance and
accrued interest owed the former president of the Company.

     In fiscal 2002, the Company issued 541,667 of its common stock in
settlement of approximately $32,500 of past due rent on the Company's corporate
office.

     The Company issued 25,000 shares of its common stock in exchange for
services with an approximate value of $1,500.

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

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

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


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

                                       F-7
<PAGE>

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


[1]  Organization

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

[2]  Summary of Significant Accounting Policies

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

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

Cash and Cash Equivalents - The Company considers all highly liquid investments,
with a maturity of three months or less when purchased, to be cash equivalents.
At December 31, 2002, the Company did not have any cash equivalents.

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

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

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

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

                                       F-8
<PAGE>

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


[2]  Summary of Significant Accounting Policies [Continued]

Net Income Per Share - Basic [loss] per share is computed by dividing the [loss]
available to common stockholders by the weighted average number of common shares
outstanding during the period.

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

The computation of diluted [loss] per share does not assume conversion,
exercise, or contingent issuance of securities that would have an antidilutive
effect on per share amounts, [i.e. increasing earnings per share or reducing
loss per share]. The dilutive effect of outstanding options and warrants and
their equivalents are reflected in dilutive earnings per share by the
application of the treasury stock method which recognizes the use of proceeds
that could be obtained upon exercise of options and warrants in computing
diluted earnings per share. It assumes that any proceeds should be used to
purchase common stock at the average market price during the period. Options and
warrants will have a dilutive effect only when the average market price of the
common stock during the period exceeds the exercise price of the options or
warrants. At December 31, 2002 and 2001, all outstanding options and warrants
were anti-dilutive for earning per share calculations.

Stock-Based Compensation - The Company follows Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ["APB No. 25"] with
regard to the accounting for its employee stock options. Under APB No. 25,
compensation expense is recognized only when the exercise price of options is
below the market price of the underlying stock on the date of grant.
Accordingly, no compensation expense has been recognized for the Company's
stock-based compensation plan for fiscal year 2002 and 2001. 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.

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

[3]  Significant Risks and Uncertainties

Concentrations of Credit Risk - The Company places its cash with high credit
quality institutions to limit its credit exposure. At December 31, 2002, the
Company did not have any amounts in a financial institution that is subject to
normal credit risk beyond insured amounts. The Company routinely assesses the
credit worthiness of its customers before a sale takes place and believes its
credit risk exposure is limited. The Company performs ongoing credit evaluations
of its customers but does not require collateral as a condition of service.

                                       F-9
<PAGE>

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


[3]  Significant Risks and Uncertainties [Continued]

Customer Concentration - In fiscal 2002 and 2001, the Company had a portion of
its revenues derived from several non-related customers, who individually
represent 10 percent or more of revenue, totaling approximately $445,000 and
$450,000, respectively. These customers comprise approximately 66% and 58% of
total revenues for fiscal 2002 and 2001, respectively.

                                                             Revenues
                                                             --------
                                                            Years ended
                                                            -----------
                                                            December 31,
                                                            ------------
Customers                                           2 0 0 2             2 0 0 1
---------                                          ---------           ---------

Customer A                                         $ 125,000           $      --
Customer B                                           125,000             450,000
Customer C                                            46,000                  --
                                                   ---------           ---------

  Totals                                           $ 296,000           $ 450,000
  ------                                           =========           =========

Listed below are those geographic regions which comprise 10 percent or more of
revenue for the years ended December 31, 2002 and 2001.

                                                             Revenues
                                                             --------
                                                            Years ended
                                                            -----------
                                                            December 31,
                                                            ------------
Geographic Information                              2 0 0 2             2 0 0 1
----------------------                             ---------           ---------

Australia (Pacific Region)                         $ 490,905           $ 150,000
United States                                        209,000             500,000
                                                   ---------           ---------

  Totals                                           $ 699,905           $ 650,000
  ------                                           =========           =========


[4]  Related Party - Revenue

During fiscal 2002, the Company provided management services in connection with
developing an Internet casino and securing requisite licensing to International
Gaming & Entertainment Ltd. ["IGEC"] for a fee of $250,000. Ahead Investments
["AI"] is the majority shareholder of IGEC. AI is a wholly owned subsidiary of
HCI and majority stockholder of the Company. Per the agreement, IGEC exercised
its right to pay for the license fee and management services by offsetting
$250,000 of convertible debt due HCI.

[5]  Property and Equipment

Property and equipment consist of the following at December 31, 2002:

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

Computer Hardware                       $  600,021     $  576,291     $   23,730
Equipment and Furniture                     94,855         70,779         24,076
Equipment Under Capital Lease              283,518        283,518             --
Leasehold Improvements                      24,763         17,546          7,217
                                        ----------     ----------     ----------

  Totals                                $1,003,157     $  948,134     $   55,023
  ------                                ==========     ==========     ==========

Depreciation expense for the years ended December 31, 2002 and 2001 amounted to
$175,831 and $224,344, respectively.

                                      F-10
<PAGE>

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


[6]  Intangible Assets

Intangible assets which are amortized using the straight-line method consist of
the following at December 31, 2002:

                                Weighted
                                --------
                                Average
                                -------
                              Amortization              Accumulated
                              ------------              -----------
                                 Period        Cost     Amortization      Net
                                 ------        ----     ------------      ---

Organization Costs                  --      $    3,225   $    3,225   $       --
Patent Costs                         5         200,000      134,996       65,004
Rights Purchase                      3         125,000       62,501       62,499
Development Costs                    3         278,177       82,115      196,062
                                            ----------   ----------   ----------

  Totals                           3.5      $  606,402   $  282,837   $  323,565
  ------                                    ==========   ==========   ==========


The estimated amortization expense related to intangible assets for each of the
five succeeding fiscal years and thereafter as of December 31, 2002 is as
follows:

Years ended
-----------
December 31,
------------
  2003                               $  174,392
  2004                                  138,561
  2005                                   10,612
  2006                                       --
  2007                                       --
  Thereafter                                 --
                                     ----------

   Total                             $  323,565
   -----                             ==========

Amortization expense for the years ended December 31, 2002 and 2001 amounted to
$153,768 and $71,009, respectively, of which $72,101 and $10,014 related to
software development costs.

[7]  Convertible Notes Payable - Related Party

At December 31, 2002, the Company had $5,074,907 of convertible notes payable
balances due HCI [See Note 1]. Terms of the notes payable agreements provide for
repayment of all principal outstanding and related accrued interest, accrued at
a rate of 12% annually, by December 31, 2003. Upon failure of the Company to pay
the principal balance by the maturity date, interest on the principal balance
will become subject to interest at 15% per annum. The notes payable are secured
by substantially all assets of the Company. The Company recorded interest
expense of $539,238 and $599,172 for the years ended December 31, 2002 and 2001,
respectively. As of December 31, 2002, the Company has accrued $1,323,878 of
interest related to the convertible debt borrowings. The Company did not repay
any of the principal balance outstanding during the years ended December 31,
2002 and 2001. During the years ended December 31, 2002 and 2001, the Company
repaid HCI approximately $19,000 and $16,000 of accrued interest, respectively.
Terms of the conversion feature provide for the principal balance to be
converted into shares of the Company's common stock at a rate equal to the fair
value per share at the date of conversion.

[8]  Advances - Related Party

At December 31, 2002, the Company had advances of $161,319 from IGEC and $26,334
from AI. These advances are not subject to interest and have no defined
repayment terms. The proceeds from these advances were used to assist in funding
the operations of the Company.

                                      F-11
<PAGE>

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


[9]  Accrued Settlement

In fiscal 2000, the Company borrowed $100,000 from a customer of the Company.
Terms of the note payable provide for a maturity date of August 2002 for all
principal and accrued interest to be repaid. Upon default of repayment, the
customer initiated legal action against the Company. While the outcome of
litigation is uncertain, legal counsel has advised the Company that a total of
$52,000 will be a reasonable amount due the customer. At December 31, 2002, the
Company accrued a balance of $52,000 including past due interest related to the
settlement of this matter.

[10] Note Payable - Related Party

In January 2001, the Company borrowed $65,000 from the former president of the
Company. The loan agreement provides for interest at 8% per annum but contains
no specific repayment terms on the principal balance. At December 31, 2001, the
principal balance and related accrued interest outstanding was $34,683. The
Company recorded approximately $4,000 in interest expense in 2001 related to
this borrowing. In fiscal 2002, the Company issued 561,766 shares of its common
stock in settlement of the remaining loan balance of $29,319 plus accrued
interest of $5,364.

[11] Fair Value of Financial Instruments

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

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

[12] Capital Transaction

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

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

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

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

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

In January 2002, the Company received a purchase money mortgage note from a
consultant calling for the purchase of 30,000 shares per month for 12 months at
a price of $.05 per share, the closing price on the date when the agreement was
negotiated. In January 2002, the Company issued the initial 30,000 shares of its
common stock in exchange for $1,500. In February 2002, the Company issued
another 90,000 shares of its common stock in exchange for $4,500. In August
2002, the Company issued another 30,000 shares of its common stock in exchange
for $1,500.

                                      F-12
<PAGE>

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


[12] Capital Transaction [Continued]

A total of 241,251 shares of the Company's common stock were issued to a
previous customer in satisfaction of an investment made in the Company.

During fiscal 2002, the Chief Financial Officer of the Company purchased 350,000
shares of the Company's common stock at $.06 per share.

During fiscal 2002, the former Chief Executive Officer of the Company was issued
561,766 shares of the Company's common stock in settlement of a loan amount and
interest payable due to the Company's former Chief Executive Officer of $34,683.

In connection with a settlement in fiscal 2002, the Company issued 541,667
shares of common stock with a fair market value of $0.06 per share as
consideration for rent in arrears on its corporate office space. Additionally,
the Company issued 25,000 shares of common stock with a fair market value of
$0.06 per share to a consultant for services rendered.

At the November 2002 shareholders meeting, the shareholders approved an
amendment to the Company's articles of incorporation to increase the number of
shares of common stock which the Company is authorized to issue from 100,000,000
to 200,000,000.

[13] Provision for Income Taxes

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

                                                               December 31,
                                                               ------------
                                                           2 0 0 2     2 0 0 1
                                                          ---------   ---------
Current:
  Federal                                                 $      --   $      --
  State                                                          --          --
                                                          ---------   ---------

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

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

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

  Tax Expense [Benefit] - Continuing Operations           $      --   $      --
  ---------------------------------------------           =========   =========

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

                                                               December 31,
                                                               ------------
                                                           2 0 0 2     2 0 0 1
                                                          ---------   ---------

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

  Effective Rate                                                 --%         --%
  --------------                                          =========   =========

                                      F-13
<PAGE>

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


[13] Provision for Income Taxes [Continued]

As of December 31, 2002, the Company had a gross deferred tax asset of
approximately $6,700,000. The deferred tax asset primarily consists of
approximately $16,700,000 of federal net operating loss tax carryforwards
expiring in years 2012 through 2022. The gross deferred tax asset is offset by a
valuation allowance of $6,700,000 at December 31, 2002.

The Company's valuation allowance increased by approximately $900,000 and
$1,700,000 for the years ended December 31, 2002 and 2001, respectively.

[14] Commitments and Contingencies

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

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

Minimum future rental payments under non-cancelable operating leases having
remaining terms in excess of one year as of December 31, 2002.

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

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

  Total                              $  436,467
  -----                              ==========

Rent expense for the years ended December 31, 2002 and 2001 was approximately
$113,000 and $176,000, respectively.

In January 2001, the Company entered into a three year employment agreement with
the Company's Chief Financial Officer. Terms of the agreement provide for a base
salary of $240,000 per annum for fiscal year ended December 31, 2003. A
severance of 1.5 times the annual base salary will be paid upon termination
without cause.

[15] Stock Options

[A] 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. At the November 2002 stockholder meeting, the shareholders approved an
amendment to the plan to increase the maximum number of shares of common stock
issuable upon exercise of options granted under the plan to 10,000,000. In
December 2002, the Board of Directors authorized the issuance of 5,300,000
incentive stock options under the plan to five members of management. A total of
1,250,000 of these options will vest immediately with the remaining 4,050,000
vesting equally over a three year period through December 2005. As of December
31, 2002, a total of 5,308,500 options were outstanding under the plan.

                                      F-14
<PAGE>

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


[15] Stock Options [Continued]

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

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

Outstanding at December 31, 2000                      157,500      $     1.72
Granted                                                    --              --
Exercised                                                  --              --
Canceled                                                   --              --


Outstanding at December 31, 2001                      157,500            1.72
                                                   ----------      ----------
Exercisable at December 31, 2001                      141,200            2.25
Granted                                             5,300,000             .06
Exercised                                                  --              --
Canceled                                             (149,000)           1.72


  Outstanding at December 31, 2002                  5,308,500             .06
  --------------------------------                 ----------      ----------

  Exercisable at December 31, 2002                  1,258,500             .06
  --------------------------------                 ----------      ----------


The following table summarizes information about stock options issued under the
plan at December 31, 2002:

<TABLE>
<CAPTION>
                                                                                     Exercisable
                                                                                     -----------
                                   Outstanding Stock Options                        Stock Options
                                   -------------------------                        -------------
                                 Remaining       Weighted-Average   Exercisable   Weighted-Average
                                 ---------       ----------------   -----------   ----------------
Exercise Prices    Shares     Contractual Life    Exercise Price       Shares      Exercise Price
---------------    ------     ----------------    --------------       ------      --------------
<S>               <C>               <C>                <C>           <C>                <C>
     $1.19            8,500         2.00               $1.19             8,500          $1.19
     $0.06        5,300,000         5.00               $0.06         1,250,000          $0.06
</TABLE>

[B] Non-incentive stock options and warrants may be granted to employees or
non-employees at fair market value or at a price less than fair market value of
the common stock at the date of grant. The following is a summary of
non-incentive stock options and warrants transactions for the two years ended
December 31, 2002:

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

Outstanding at December 31, 2000                    1,441,500      $     2.25
Granted                                               216,667            0.03
Exercised                                                  --              --
Canceled                                                   --              --
                                                   ----------      ----------

Outstanding at December 31, 2001                    1,658,167            2.25
                                                   ----------      ----------
Exercisable at December 31, 2001                    1,815,667            2.25
Granted                                                    --              --
Exercised                                                  --              --
Canceled                                             (208,333)           2.01
                                                   ----------      ----------

  Outstanding at December 31, 2002                  1,607,334            2.25
  --------------------------------                 ----------      ----------

  Exercisable at December 31, 2002                  1,607,334            2.25
  --------------------------------                 ----------      ----------


                                      F-15
<PAGE>

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


[15] Stock Options [Continued]

The following table summarizes information about non-incentive stock options at
December 31, 2002:

<TABLE>
<CAPTION>
                                                                                     Exercisable
                                                                                     -----------
                                                                                    Stock Options
                                                                                    -------------
                                 Remaining       Weighted-Average   Exercisable   Weighted-Average
                                 ---------       ----------------   -----------   ----------------
Exercise Prices    Shares     Contractual Life    Exercise Price       Shares      Exercise Price
---------------    ------     ----------------    --------------       ------      --------------
<S>               <C>               <C>                <C>           <C>                <C>
     $3.25           50,000         2.00               $3.25            50,000          $3.25
     $4.13          700,000         2.25               $4.13           700,000          $4.13
     $2.50           88,000         2.75               $2.50            88,000          $2.50
     $1.29          115,000         2.25               $1.29           115,000          $1.29
     $2.50          521,000         2.75               $2.50           521,000          $2.50
     $0.03          133,334         3.50               $0.03           133,334          $0.03
</TABLE>


These options have a weighted average remaining contractual life of 2.5 years at
December 31, 2002.

The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations, for stock options
issued to employees in accounting for its stock option plans. In fiscal 2001,
the Company granted 216,667 stock options with an exercise price of $.03 per
share to two employees. In fiscal 2002, the Company issued 5,300,000 incentive
stock options with an exercise price of $.06 per share to five employees.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of options. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.

Pro forma information regarding net loss and net loss per share has been
determined as if the Company had accounted for its employee stock options under
the fair value method prescribed under SFAS No. 123, "Accounting for Stock Based
Compensation." The fair value of the 5,300,000 and 216,667 options issued
employees in fiscal 2002 and 2001 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,
                                                           ------------
                                                     2 0 0 2          2 0 0 1
                                                     -------          -------

Risk-Free Interest Rate                                 5.0%             5.5%
Expected Life                                        5 Years          3 years
Expected Volatility                                  117.68%           63.93%
Expected Dividends                                       --%              --%


The pro forma amounts are indicated below:

                                                           Years ended
                                                           -----------
                                                           December 31,
                                                           ------------
                                                     2 0 0 2          2 0 0 1
                                                     -------          -------
Net [Loss]:
  As Reported                                     $ (2,312,227)    $ (4,283,497)
  Pro Forma                                       $ (2,395,227)    $ (4,292,997)

Basic Net [Loss] Per Share of Common Stock:
  As Reported                                     $       (.02)    $       (.14)
  Pro Forma                                       $       (.03)    $       (.14)


                                      F-16
<PAGE>

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


[16] New Authoritative Accounting Pronouncements

The Financial Accounting Standards Board ["FASB"] has issued Statement No. 143
"Accounting for Asset Retirement Obligations" in June 2001, which requires that
the fair value of a liability for an asset retirement legal obligation be
recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made. The associated asset retirement costs are capitalized as
part of the carrying amount of the long-lived asset. This statement is effective
for fiscal years beginning after June 15, 2002.

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

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
14, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections"
["ASFAS 145"]. SFAS 145 among other things rescinds SFAS No. 4, "Reporting Gains
and Losses from Extinguishment of Debt" ["SFAS 4"], and SFAS No. 64,
"Extinguishments of Debt Made to Satisfy Sinking - Fund Requirements" ["SFAS
64"] and amends SFAS No. 13, "Accounting for Leases" ["SFAS 13"]. This statement
updates, clarifies and simplifies existing accounting pronouncements. As a
result of rescinding SFAS 4 and SFAS 64, the criteria in APB No. 30, "Reporting
the Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Event and
Transactions," will be used to classify gains and losses from extinguishment of
debt. SFAS 13 was amended to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions and makes technical corrections to existing
pronouncements. The provisions of SFAS 145 are effective for fiscal years
beginning after May 15, 2002, with earlier application encouraged. The Company
adopted SFAS 145 effective January 1, 2003 and made the necessary
reclassifications in its consolidated statements of operations.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities" ["SFAS 146"], which addresses the recognition,
measurement, and reporting of costs associated with exit or disposal activities,
and supercedes Emerging Issues Task Force ["EITF"] Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and other Costs to Exit an
Activity [including Certain Costs Incurred in a Restructuring]" ["EITF 94-3"].
The principal difference between SFAS 146 and EITF 94-3 relates to the
requirements for recognition of a liability for a cost associated with an exit
or disposal activity. SFAS 146 requires that a liability for a cost associated
with an exit or disposal activity, including those related to employee
termination benefits and obligations under operating leases and other contracts,
be recognized when the liability is incurred, and not necessarily the date of an
entity's commitment to an exit plan, as under EITF 94-3. SFAS 146 also
establishes that the initial measurement of a liability recognized under SFAS
146 be based on fair value. The provisions of SFAS 146 are effective for exit or
disposal activities that are initiated after December 31, 2002, with early
application encouraged.

                                      F-17
<PAGE>

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


[16] New Authoritative Accounting Pronouncements [Continued]

In December 2002, FASB Statement No. 148 "Accounting for Stock-Based
Compensation - Transition and Disclosure" was issued as an amendment of FASB
Statement No. 123. Provisions of Statement No. 148 provide for alternate methods
of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, Statement No. 148
amends the disclosure requirements of Statement No. 123 to require prominent
disclosure in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reporting results. Statement No. 148 is effective for entities with a
fiscal year ending after December 15, 2002. Certain disclosure requirement under
Statement No. 148 are effective for financial reports containing condensed
financial statements for interim periods beginning after December 15, 2002.

We do not expect the adoption of SFAS No. 143, 144, 145, 146 and 148 to have a
material impact on our results of operations and financial condition.

[17] Going Concern

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

Management is currently negotiating for several significant software contracts.
If these contract negotiations are successful, management of the Company
estimates it will have sufficient cash flows to continue to operate on a going
concern basis in the near future. There can be no assurance that management's
plans to reduce operating losses and have the Company generate sufficient
operating cash flows will be successful. The financial statements do not include
any adjustments relating to the recoverability and classification of recorded
assets, or the amounts and classification of liabilities that might be necessary
in the event the Company cannot continue in existence.

[18] Subsequent Events

During January and February 2003, the Company borrowed a total of approximately
$301,000 in additional convertible debt from HCI.




                               . . . . . . . . . .


                                      F-18