UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB/A
                               (Amendment No. 1)

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

For the fiscal year ended December 31, 1999

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

For the transition period from  January 1, 1999  to December 31, 1999

                         Commission file number 0-27256

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

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

                                 (561) 393-6685
     -----------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

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

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

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

            Check whether the issuer:  (1) has filed all reports  required to be
filed by Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or
for such shorter  period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.

                Yes   / X /     No /  /


<PAGE>

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

            State  issuer's  revenues  for its  most  recent  fiscal  year:  The
issuer's revenues for the fiscal year ended December 31, 1999 were $ 850,950.

            The  aggregate  market  value at March  31,  2000 of  shares  of the
registrant's  Common  Stock,  $.001 par value per share  (based upon the closing
price of $ 1.25 per share of such stock on the Nasdaq OTC Bulletin Board on such
date), held by  non-affiliates of the Registrant was approximately  $18,305,225.
Solely for the  purposes  of this  calculation,  shares  held by  directors  and
officers of the  Registrant  have been excluded.  Such  exclusion  should not be
deemed a determination  or an admission by the Registrant that such  individuals
are, in fact, affiliates of the Registrant.

            State  the  number  of shares  outstanding  of each of the  issuer's
classes of common equity,  as of the latest  practicable date: At April 11, 2000
there were outstanding 14,669,166 shares of the Registrant's Common Stock, $.001
par value.

            Transitional Small Business Disclosure Format (check one):

                        Yes    /X/     No    / /



                                      -2-
<PAGE>
                                Explanatory Note

         This Amendment No. 1 on Form 10-KSB/A (this "Amendment") is being filed
in order to amend Item 8 of Part II of the  Registrant's  Annual  Report on Form
10-K filed with the  Securities  and Exchange  Commission on April 14, 2000. The
purpose  of  this  Amendment  is  to  correct  the  disclosure  arising  from  a
miscommunication.



Part II Item 8.     Financial Statements and Supplementary Data.
---------------     --------------------------------------------

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>


                                                                               Page
                                                                               ----

<S>                                                                        <C>
Consolidated Balance Sheet as of December 31, 1999.........................F-2....F-3

Consolidated Statements of Operations and Comprehensive Income for the
years ended December 31, 1999 and 1998.....................................F-4....F-5

Consolidated Statements of Changes in Stockholders' Equity for the
years ended December 31, 1999 and 1998.....................................F-6

Consolidated Statements of Cash Flows for the years ended
December 31, 1999 and 1998.................................................F-7....F-8

Notes to Consolidated Financial Statements ................................F-9 ...F-21
</TABLE>


                                       -3-
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT


                                    (Deleted)



                                      F-1
<PAGE>

ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999 (UNAUDITED).



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

   Total Current Assets                                       1,280,968

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

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

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

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


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

                                      F-2
<PAGE>
ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999 (UNAUDITED).

<TABLE>
<CAPTION>

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

   Total Current Liabilities                                              1,214,989

Capital Lease Obligations                                                   139,620

   Total Liabilities                                                      1,354,609

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

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

   Additional Paid-in Capital                                            14,363,965

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

   Deferred Acquisition Costs                                              (400,000)


   Total Stockholders' Equity                                             3,543,683

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

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

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

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                              Years ended
                                                                                              December 31,
                                                                                  1 9 9 9                  1 9 9 8
                                                                                  -------                  -------

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

                                      F-4
<PAGE>

ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

<TABLE>
<CAPTION>

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

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

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

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

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

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



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

                                      F-5
<PAGE>
ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)

<TABLE>
<CAPTION>

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

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

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

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

Balance - December 31, 1999                   130,300   $      130        13,614,052   $       13,614   $    14,363,965
                                             ========  ===========        ==========    =============    ==============
</TABLE>
<TABLE>
<CAPTION>
                                                              Accumulated
                                                                 Other                      Deferred                        Total
                                     Treasury Stock          Comprehensive    Accumulated  Acquisition  Subscription   Shareholders'
                                     --------------          -------------    -----------  -----------  ------------   -------------
                                   Shares          Amount       [Loss]         [Deficit]      Costs      Receivable       Equity
                                   ------          ------        ----          ---------      -----        ----------     ------

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

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

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

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

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

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

                                      F-6
<PAGE>

ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>

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

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

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

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

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

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

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

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

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

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

                                      F-7
<PAGE>

ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                      F-8
<PAGE>
ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



[1] Organization

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

[2] Summary of Significant Accounting Policies

Principles of Consolidation - The Consolidated  financial statements include the
accounts of the Company and its subsidiaries. All material intercompany accounts
and transactions have been eliminated.

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

Cash and Cash Equivalents - The Company considers all highly liquid investments,
with a maturity of three months or less when purchased,  to be cash equivalents.
At December 31, 1999, the Company did not have any cash equivalents.

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

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

Revenue  Recognition - Revenue from computer  software  licensing  agreements is
recognized  when products are delivered and accepted by the customer and payment
has been received.

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

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

                                      F-9
<PAGE>

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


[2] Summary of Significant Accounting Policies [Continued]

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

Advertising Expenses - The Company expenses advertising costs as incurred. Total
advertising  costs charged to expense for the years ended  December 31, 1999 and
1998 amounted to approximately $186,575 and $29,000, respectively.

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

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

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

The  computation  of diluted  earnings  per share  does not  assume  conversion,
exercise,  or contingent  issuance of securities that would have an antidilutive
effect on per share  amounts,  [i.e.  increasing  earnings per share or reducing
loss per share].  The dilutive  effect of  outstanding  options and warrants and
their   equivalents  are  reflected  in  dilutive  earnings  per  share  by  the
application  of the treasury  stock method which  recognizes the use of proceeds
that could be  obtained  upon  exercise of options  and  warrants  in  computing
diluted  earnings  per share.  It assumes  that any  proceeds  should be used to
purchase common stock at the average market price during the period. Options and
warrants will have a dilutive  effect only when the average  market price of the
common  stock  during the period  exceeds the  exercise  price of the options or
warrants.  Securities  that could  potentially  dilute earnings per share in the
future are disclosed in Notes 12 and 17.

                                      F-10
<PAGE>
ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


[2] Summary of Significant Accounting Policies [Continued]

Stock-Based  Compensation  - The Company  follows  Accounting  Principles  Board
Opinion No. 25,  "Accounting for Stock Issued to Employees"  ["APB No. 25"] with
regard to the  accounting  for its  employee  stock  options.  Under APB No. 25,
compensation  expense is recognized  only when the exercise  price of options is
below  the  market  price  of  the  underlying  stock  on  the  date  of  grant.
Accordingly,  no  compensation  expense has been  recognized  for the  Company's
stock-based compensation plan for fiscal year 1999 and 1998. The Company applies
the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" to any
non-employee stock-based compensation and the pro forma disclosure provisions of
SFAS No. 123 to employee stock-based compensation.

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

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

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


                                      F-11
<PAGE>

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


[3] Significant Risks and Uncertainties

[A]  Concentrations  of Credit Risk - Financial  instruments  which  potentially
subject the Company to concentrations of credit risk consist principally of cash
and cash equivalents and trade accounts and notes receivable  occurring from its
normal  business  activities.  The Company places its cash and cash  equivalents
with high credit quality institutions to limit its credit exposure.  At December
31, 1999, the Company did not have any amounts in a financial  institution  that
is subject to normal credit risk beyond insured amounts.  The Company  routinely
assesses the credit  worthiness of its  customers  before a sale takes place and
believes its credit risk  exposure on accounts and notes  receivable is limited.
The Company  performs  ongoing credit  evaluations of its customers but does not
require   collateral  on  accounts  and  notes  receivable  or  other  financial
instruments. The Company maintains allowances for potential credit losses.

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

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

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

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

Geographic Information

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

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

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


                                      F-12
<PAGE>

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


[4]  Investments in Equity Securities

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

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

[5] Other Comprehensive Loss

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

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

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

[6] Property and Equipment

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

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

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

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

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

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

[7] Deferred Acquisition Costs

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

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

                                      F-13
<PAGE>

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



[8] Leases

Capital  Leases - The Company is the lessee of office  equipment  under  capital
leases  expiring in various years through  December 2002. The various leases are
collateralized  by the related assets.  The assets and liabilities under capital
leases  are  recorded  at the  present  value of the net  future  minimum  lease
payments.  The  assets are  amortized  over their  estimated  productive  lives.
Amortization of assets under capital leases,  totaling  $54,869,  is included in
depreciation expense.

Following is a summary of property held under capital leases:

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

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

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

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

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

Operating Leases - The Company leases office space and equipment under operating
leases expiring through  September 2002, and has a $10,236 security deposit with
its landlord. The lease grants an option for renewal for an additional 5 years.

Minimum future rental  payments  under  non-cancelable  operating  leases having
remaining terms in excess of one year as of December 31, 1999.

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

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

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


                                      F-14
<PAGE>

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


[9] Fair Value of Financial Instruments

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

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

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

[10] Capital Stock

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

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

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

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

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

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

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

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


                                      F-15
<PAGE>

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


[10] Capital Stock - Continued

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

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

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

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

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

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

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

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


                                      F-16
<PAGE>

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


[11] Discontinued Operations

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

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

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

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

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

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

[12] Related Party Transactions

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

[13] Provision for Income Taxes

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

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

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

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


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

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


                                      F-17
<PAGE>

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


[13] Provision for Income Taxes [Continued]

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

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

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


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


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

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

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

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

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

[14] Commitments and Contingencies

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

[B]  Litigation  - The Company is party to  litigation  arising  from the normal
course of business. In managements' opinion, this litigation will not materially
affect the Company's financial position, results of operations or cash flows.


                                      F-18
<PAGE>

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

[15] Incentive Stock Option Plan

On January 1, 1997,  the  Company  adopted an  Incentive  Stock  Option Plan for
Employees,  Directors,  Consultants  and Advisors  [the  "Plan"].  The Plan will
expire  December 31, 2006 unless further  extended by appropriate  action of the
Board of  Directors.  Employees,  directors,  consultants  and  advisors  of the
Company, or any of its subsidiary  corporations,  are eligible for participation
in the  Plan.  The Plan  provides  for stock to be issued  pursuant  to  options
granted and shall be limited to 250,000 shares of Common Stock, $.001 par value.
The shares have been reserved for issuance in  accordance  with the terms of the
Plan.  The exercise of these options may be for all or any portion of the option
and any portion not exercised  will remain with the holder until the  expiration
of the option period. The options expire on December 23, 2002.

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

                                                                Weighted-Average
                                              Shares              Exercise Price
Outstanding at December 31, 1996                  --           $            --
   Granted                                   175,000                      3.25
   Exercised                                      --                        --
   Canceled                                       --                        --
                                          ----------          ----------------

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

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

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

The following table summarizes  information  about stock options at December 31,
1999:
<TABLE>
<CAPTION>
                                                                                         Exercisable
                                             Outstanding Stock Options                  Stock Options
                                          Remaining    Weighted-Average                Weighted-Average
Exercise Prices           Shares      Contractual Life   Exercise Price      Shares     Exercise Price
---------------           ------      ----------------   --------------      ------     --------------

<S> <C>                  <C>              <C>                 <C>           <C>            <C>
    $3.25                175,000          4.00                $3.25         175,000        $3.25
    $4.13                700,000          4.25                $4.13         700,000        $4.13
    $2.50                 88,000          4.75                $2.50          88,000        $2.50
    $1.29                115,000          4.25                $1.29         115,000        $1.29
    $2.50                521,000          4.75                $2.50         521,000        $2.50
</TABLE>

The Company applies Accounting  Principles Board Opinion No. 25, "Accounting for
Stock  Issued to  Employees,"  and related  interpretations,  for stock  options
issued to employees in accounting for its stock option plans. The exercise price
of  certain  options  issued  was  the  market  price  at  the  date  of  grant.
Accordingly,  no  compensation  expense has been  recognized  for the  Company's
stock-based compensation plans for fiscal year 1999 and 1998.

                                      F-19
<PAGE>

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

[15] Incentive Stock Option Plan [Continued]

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

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

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

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

The pro forma amounts are indicated below:

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

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

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

[16] Other Income [Expense]

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


[17] New Authoritative Accounting Pronouncements

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

                                      F-20
<PAGE>

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


[17] New Authoritative Accounting Pronouncements  - Continued

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

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

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

The proposed Interpretation includes the following conclusions:

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

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

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

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

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

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


                               . . . . . . . . . .

                                      F-21
<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: May 31, 2000                      /s/ Peter Lawson
                                         ---------------------------------------
                                         Peter Lawson
                                         Chief Financial Officer