FILER:

COMPANY DATA:

COMPANY CONFORMED NAME: DOT COM ENTERTAINMENT GROUP

CENTRAL INDEX KEY: 0001079279

STANDARD INDUSTRIAL CLASSIFICATION SERVICES-BUSINESS SERVICES

IRS NUMBER: 582466312

STATE OF INCORPORATION FL

FISCAL YEAR END 1231



FILING VALUES:

FORM TYPE 10QSB

SEC ACT:

SEC FILE NUMBER 000-26597

FILM NUMBER:



BUSINESS ADDRESS:

STREET 1: 300 DELAWARE AVENUE

STREET 2:

CITY: BUFFALO

STATE: NY

ZIP: 14202

BUSINESS PHONE 716-853-1964



MAIL ADDRESS:

STREET 1: 300 DELAWARE AVENUE

STREET 2:

CITY: BUFFALO

STATE: NY

ZIP: 14202





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-QSB





(Mark One)
[X]          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended:         June 30, 2003

Or

[ ]            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from             to

Commission file number: 0 - 26597

DOT COM ENTERTAINMENT GROUP, INC.
(Exact name of small business issuer as specified in its
charter)

Florida                                                                                                    58-2466312
(State or other jurisdiction of                                                                     (I.R.S. Employer Identification
incorporation or organization)                                                                                 Number)

150 Randall St., 
                Oakville, Ontario, Canada, L6J 1P4
                (Address of principal executive offices)

(905) 337-8524
Issuer's telephone number



Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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_____

As of August 4, 2003, the registrant had 10,870,500 shares of Common Stock
outstanding.

Transitional Small Business Disclosure Format (check one);
                                                                     Yes_____ No__X__





This quarterly report contains forward-looking statements that involve
substantial risks and uncertainties. Any statement in this quarterly report and
any documents incorporated by reference into this quarterly report that is not a
statement of an historical fact constitutes a forward-looking statement within
the meaning of the Private Securities Litigation Reform Act of 1995. Further,
when we use the words "may", "expect", "anticipate", "plan", "believe", "seek",
"estimate" and similar words, we intend to identify statements and expressions
that may be forward-looking statements. We believe it is important to
communicate certain of our expectations to our investors. Forward-looking
statements are not guarantees of future performance. They involve risks,
uncertainties and assumptions that could cause dot com's future results to
differ materially from those expressed in any forward-looking statements. Many
factors are beyond our ability to control or predict. You are accordingly
cautioned not to place undue reliance on such forward-looking statements. We
have no obligation or intent to update publicly any forward-looking statements
whether in response to new information, future events or otherwise. Important
factors that may cause our actual results to differ from such forward-looking
statements include, but are not limited to, the risk factors discussed below
under Item 2 "MANAGEMENT'S DISCUSSION AND ANALYSIS", "RISKS AND UNCERTAINTIES"
and in dot com's Annual Report on Form 10-KSB.

Part I - Financial Information

Item 1. - Financial Statements.



|dot com
    ENTERTAINMENT GROUP, INC.
    AND SUBSIDIARIES
    CONSOLIDATED
    BALANCE SHEETS
|----------------------------------------------------------------------------------------------
|ASSETS                                                                                        
|Current assets:                                                                               
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Deferred software
    development costs                                                       
|Fixed assets - net                                                                            
|Patents - net                                                                                 
|                                                                                              
|                                                                                              
|                                                                                              
|LIABILITIES AND
    STOCKHOLDERS' EQUITY                                                      
|                                                                                              
|Current
    liabilities:                                                                      
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Long-term
    liabilities:                                                                    
|                                                                                              
|                                                                                              
|Total liabilities:                                                                            
|                                                                                              
|Stockholders'
    equity:                                                                     
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|(see accompanying
    notes)                                                                  



|dot com
    ENTERTAINMENT GROUP, INC.
    AND SUBSIDIARIES
    CONSOLIDATED
    STATEMENTS OF INCOME (LOSS) AND RETAINED EARNINGS (ACCUMULATED DEFICIT)
    (Unaudited)
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                       
|                                                                                                                                                                       
|                                                                                                                                                                       
|Revenues:                                                                                                                                                              
|                                                                                                                                                                       
|                                                                                                                                                                       
|                                                                                                                                                                       
|                                                                                                                                                                       
|                                                                                                                                                                       
|                                                                                                                                                                       
|Expenses:                                                                                                                                                              
|                                                                                                                                                                       
|                                                                                                                                                                       
|                                                                                                                                                                       
|                                                                                                                                                                       
|                                                                                                                                                                       
|                                                                                                                                                                       
|                                                                                                                                                                       
|                                                                                                                                                                       
|Income (loss) before income taxes                                                                                                                                      
|                                                                                                                                                                       
|Income tax provision
    (benefit)                                                                                                                                     
|                                                                                                                                                                       
|                                                                                                                                                                       
|                                                                                                                                                                       
|                                                                                                                                                                       
|Net income (loss)                                                                                                                                                      
|                                                                                                                                                                       
|Retained earnings
    (accumulated deficit),beginning of period                                                                                                        
|                                                                                                                                                                       
|                                                                                                                                                                       
|Retained earnings
    (accumulated deficit),end of period                                                                                                              
|$                                                                                                                                                                      
|                                                                                                                                                                       
|Net income (loss)
    per share:                                                                                                                                       
|                                                                                                                                                                       
|                                                                                                                                                                       
|                                                                                                                                                                       
|                                                                                                                                                                       
|Weighted average
    number of commonshares outstanding:                                                                                                               
|                                                                                                                                                                       
|                                                                                                                                                                       
|                                                                                                                                                                       
|                                                                                                                                                                       
|(see accompanying
    notes)                                                                                                                                           



|                                                                                                  |                                                               |                                      |         |           |                    |           |                  |           |         |           |     
|------------------------------------------------------------------------------------------------- | ------------------------------------------------------------- | ------------------------------------ | ------- | --------- | ------------------ | --------- | ---------------- | --------- | ------- | --------- | ----
|dot com ENTERTAINMENT GROUP, INC.AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)
|                                                                                                  |                                                               |                                      |         |           | Three-Months Ended |           | Six-Months Ended
|                                                                                                  |                                                               |                                      |         |           | June 30            |           | June 30         
|                                                                                                  |                                                               |                                      |         |           | 2003               |           | 2002             |           | 2003    |           | 2002
|Cash flows from operating activities:                                                             |                                                               |                                      |         |           |                    |           |                  |          
|Net income
    (loss)                                                                             |                                                               | $                                    | 5,713   | $         | (202,861)          | $         | 50,262           | $         | 26,643 
|Adjustments to reconcile net income (loss) to                                                     |                                                               |                                      |         |           |                    |           |                  |          
|net cash provided (used) by operating activities:                                                 |                                                               |                                      |         |           |                    |           |                  |          
|                                                                                                  | Expenses satisfied by the issuance ofcommon stock and options |                                      |         |           |                    |           |                  |           |        
|                                                                                                  |                                                               | 12,149                               |         | -         |                    | 21,634    |                  | -        
|                                                                                                  | Depreciation                                                  |                                      |         | 23,840    |                    | 11,164    |                  | 44,704    |         | 20,974   
|                                                                                                  | Loss on contractual settlement                                |                                      | -       |           | 345,207            |           | -                |           | 345,207
|                                                                                                  | Deferred income tax expense                                   |                                      | 44,173  |           | -                  |           | 66,489           |           | -      
|                                                                                                  | Changes in non-cash
    working capitalitems:                 |                                      |         |           |                    |           |                  |           |        
|                                                                                                  |                                                               | Accounts receivable                  |         | (106,310) |                    | 190,291   |                  | (302,094) |         | 162,243  
|                                                                                                  |                                                               | Prepaid expenses anddeposits         |         | (319)     |                    | 14,793    |                  | (32,216)  |         | 16,122   
|                                                                                                  |                                                               | Accounts payable andaccrued expenses |         | 62        |                    | (13,499)  |                  | (23,758)  |         | 8,207    
|                                                                                                  |                                                               | Accounts payable -
    
  officers   |         | -         |                    | (27,200)  |                  | -         |         | (49,700) 
|                                                                                                  |                                                               | Restructuring reserve                |         | -         |                    | -         |                  | (67,500)  |         | -        
|                                                                                                  |                                                               | Legal settlement reserve             |         | -         |                    | -         |                  | (16,344)  |         | -        
|                                                                                                  |                                                               | Income taxes 
  recoverable/payable  |         | (41,514)  |                    | (261,328) |                  | 84,672    |         | (484,262)
|                                                                                                  |                                                               | Deferred revenue                     |         | (56,485)  |                    | (7,571)   |                  | (65,393)  |         | (8,197)  
|                                                                                                  |                                                               |                                      |         |           |                    |           |                  |          
|Net cash provided (used) by operating activities                                                  |                                                               | (118,691)                            |         | 48,996    |                    | (239,544) |                  | 37,237   
|                                                                                                  |                                                               |                                      |         |           |                    |           |                  |           |         |           |     
|Cash flows from investing activities:                                                             |                                                               |                                      |         |           |                    |           |                  |          
|Purchases of fixed assets and patents                                                             |                                                               | (18,146)                             |         | (13,342)  |                    | (76,698)  |                  | (22,822) 
|Deferred software development costs                                                               |                                                               | (110,431)                            |         | -         |                    | (166,222) |                  | -        
|Net cash used in investing activities                                                             |                                                               | (128,577)                            |         | (13,342)  |                    | (242,920) |                  | (22,822) 
|                                                                                                  |                                                               |                                      |         |           |                    |           |                  |           |         |           |     
|Cash flows from financing activities:                                                             |                                                               |                                      |         |           |                    |           |                  |          
|Proceeds from issuance of common stock                                                            |                                                               | -                                    |         | 93,751    |                    | -         |                  | 93,751   
|Net cash provided by financing activities                                                         |                                                               | -                                    |         | 93,751    |                    | -         |                  | 93,751   
|                                                                                                  |                                                               |                                      |         |           |                    |           |                  |           |         |           |     
|Net increase (decrease) in cash and cashequivalents during the period                             |                                                               |                                      |         |           |                    |           |                  |          
|                                                                                                  | (247,268)                                                     |                                      | 129,405 |           | (482,464)          |           | 108,166         
|                                                                                                  |                                                               |                                      |         |           |                    |           |                  |           |         |           |     
|Cash and cash equivalents, beginning of period                                                    |                                                               | 703,509                              |         | 943,802   |                    | 938,705   |                  | 965,041  
|                                                                                                  |                                                               |                                      |         |           |                    |           |                  |           |         |           |     
|Cash and cash equivalents, end of period                                                          | $                                                             | 456,241                              | $       | 1,073,207 | $                  | 456,241   | $                | 1,073,207
|                                                                                                  |                                                               |                                      |         |           |                    |           |                  |           |         |           |     
|Supplemental cash flow activities                                                                 |                                                               |                                      |         |           |                    |           |                  |          
|Income taxes paid / (received)                                                                    | $                                                             | 1,150                                | $       | 152,995   | $                  | (117,654) | $                | 528,931  
|Interest paid                                                                                     | $                                                             | -                                    | $       | -         | $                  | -         | $                | -        



dot com Entertainment Group, Inc.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - SIX-MONTH PERIOD
ENDED JUNE 30, 2003



NOTE 1. - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of dot com
Entertainment Group, Inc. and its Subsidiaries (the "Company") have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. In the
opinion of management, all adjustments considered necessary for fair
presentation have been included. Operating results for the six-month period
ended June 30, 2003 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2003. For further information, refer to
the Company's consolidated financial statements and footnotes as at and for the
years ended December 31, 2002 and 2001 as filed with the Securities and Exchange
Commission on Form 8K on July 9, 2003. Those financial statements, which had
been prepared in conformity with accounting principles generally accepted in the
Unites States of America, contain a new note regarding the differences with
accounting principles generally accepted in Canada. The information set forth in
those financial statements was otherwise unchanged from the original financial
statements contained in the Company's Form 10-KSB for the year ended December
31, 2002 as filed with the Securities and Exchange Commission on March 31, 2003.
Those new financial statements were prepared in connection with the Company's
application to list its common shares on the TSX Venture Exchange in Toronto,
Ontario, Canada.

As discussed in note 9, these consolidated financial statements comply, in
all material respects, with accounting principles generally accepted in Canada.



NOTE 2. - DEFERRED SOFTWARE DEVELOPMENT COSTS



Software development costs are accounted for in accordance with Statement of
Financial Accounting Standard ("SFAS") 86, "Accounting for the Costs of Computer
Software to Be Sold, Leased, or Otherwise Marketed". All costs incurred to
establish the technological feasibility of a computer software product are
expensed as incurred. Software development costs, incurred subsequent to the
determination that the project is technically feasible, in the amount $166,222
have been deferred for the six-month period ended June 30, 2003 on three
specific software product development projects. No software development costs
were deferred for the six-month period ended June 30, 2002. No amortization of
deferred software development costs was recorded in the six-month periods ended
June 30, 2003 or 2002. Commencing July 1, 2003, software development costs for
one software product development project are to be amortized as the project has
achieved commercial release. The aggregate costs related to the completed
project of $121,456 are to be amortized over 36 months on a straight-line basis.





NOTE 3. - STOCK OPTIONS



During the six-month period ended June 30, 2003, 313,750 options were granted
with exercise prices ranging from $0.15 to $0.21 per share. These options were
granted to directors and employees. These options vested immediately. During the
six-month period ended June 30, 2003, 5,000 options issued to an employee were
forfeited. During the six-month period ended June 30, 2002, 670,000 options were
granted with exercise prices ranging from $0.48 to $1.08 per share. These
options were granted to directors and employees. During the six-month period
ended June 30, 2002, 150,000 stock options were forfeited. During the
three-month period ended June 30, 2002, 125,000 employee stock options were
exercised for proceeds of $93,751.

Exercise prices for the options outstanding at June 30, 2003 fall into the
following ranges:

| |               | Number

of Shares
Under Option
| | ------------- | ------------------------------
| |               |                               
| | $0.01 - $0.20 | 413,750                       
| | $0.21 - $0.50 | 1,275,000                     
| | $0.51 - $1.00 | 1,542,500                     
| | $1.01 - $2.00 | 132,500                       
| | $2.01 - $3.00 | 432,500                       
| |               |                               
| |               | 3,796,250                     

During the three-month period ended March 31, 2003, 25,000 non-qualified
stock options were issued to a consultant for services to be rendered throughout
fiscal 2003. Pursuant to the provisions of SFAS 123, the fair value of these
options has been determined in the amount of $4,344 using the Black-Scholes
pricing model following the assumptions noted below. This amount is being
included in the determination of income on a straight-line basis throughout
fiscal 2003. The excess of the value ascribed to the consultant's services over
the amount included in the determination of income for the period is included as
a component of "Unearned common stock and option compensation" included in
Stockholders' Equity (see Note 6). No non-qualified options were issued to
consultants during 2002 or 2001. In years prior to 2001, 810,000 non-qualified
options had been issued to consultants.

Accordingly as at June 30, 2003, there are 835,000 non-qualified options
outstanding. 25,000 options are exercisable at $0.23 per share and expire in
2008, 50,000 options are exercisable at $2.50 per share and expire in 2005 and
760,000 options are exercisable at $3.00 per share and expire in 2004.

For stock options issued to employees, including directors and officers, the
Company has adopted the disclosure-only provisions of SFAS 123 and, accordingly,
does not recognize compensation cost for stock option grants under fixed awards.
SFAS 148, "Accounting for Stock Based Compensation - Transition and Disclosure,"
requires the Company to disclose in its interim consolidated financial
statements the impact if the Company had elected to recognize compensation cost
based on the fair value of the options granted at the grant date as prescribed
by SFAS 123. The impact on net income (loss) and income (loss) per share for the
three-month and six month periods ended June 30, 2003 and 2002 would have been
as follows:







|                                                                                                                              | Three Months Ended
    June 30, | Six Months Ended
    June 30,
|----------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | -----------------------------
|                                                                                                                              | 2003                            | 2002                         
|                                                                                                                              |                                 |                              
|Net income (loss) - as reported                                                                                               | $ 5,713                         | $ (202,861)                  
|                                                                                                                              |                                 |                              
|Total stock based employee
    compensation expense determined
    under the fair value method for all
    awards, net of tax | (3,448)                         | (190,300)                    
|                                                                                                                              |                                 |                              
|Net income (loss) - pro forma                                                                                                 | $2,265                          | $(393,161)                   
|                                                                                                                              |                                 |                              
|Income (loss) per share - as reported,
    basic and diluted                                                                  | $ 0.00                          | $(0.02)                      
|                                                                                                                              |                                 |                              
|Income (loss) per share - pro forma,
    basic and diluted                                                                    | $ 0.00                          | $(0.04)                      





No compensation expense was recorded in the six-month period ended June 30,
2003 or 2002 for stock options granted to employees, directors or officers.

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model based on the following weighted-average
assumptions:





|                                | 2003    |  | 2002   
|------------------------------- | ------- |  | -------
|                                |         |  |        
|Expected dividend yield         | 0%      |  | 0%     
|Expected stock price volatility | 100%    |  | 100%   
|Risk-free interest rate         | 3.0%    |  | 3.0%   
|Expected life of options        | 5 years |  | 5 years





NOTE 4. - EARNINGS PER SHARE



In accordance with SFAS 128, "Earnings Per Share," the Company has reported
basic earnings per share and diluted earnings per share. The Company determines
the weighted average number of diluted common shares outstanding by applying the
treasury stock method. For the three-month period ended June 30, 2003, under
this method, the diluted weighted average number of common shares outstanding
includes the impact of the assumed exercise of 1,138,750 stock options with
exercise prices ranging from $0.15 to $0.24 per share. All other securities,
consisting of 3,712,500 stock options and warrants with exercise prices ranging
from $0.46 to $4.00, are anti-dilutive and have not been included in the
calculation. For the six-month period ended June 30, 2003, the diluted weighted
average number of common shares outstanding includes the impact of the assumed
exercise of 438,750 stock options with exercise prices ranging from $0.15 to
$0.21 per share. All other securities, consisting of 4,412,500 stock options and
warrants with exercise prices ranging from $0.23 to $4.00, are anti-dilutive and
have not been included in the calculation. The diluted weighted average number
of common shares outstanding for the six-month period ended June 30, 2002
includes the impact of the assumed exercise of 2,335,000 stock options with
exercise prices ranging from $0.48 to $0.88 per share. All other securities,
consisting of 1,995,000 stock options and warrants with exercise prices ranging
from $0.89 to $4.00, are anti-dilutive and have not been included in the
calculation. For the three-month period ended June 30, 2002 all outstanding
stock options and warrants have not been considered common stock equivalents
because their assume exercise would be anti-dilutive for that period.

NOTE 5. - CONCENTRATION OF CREDIT RISKS



At June 30, 2003 and December 31, 2002 the Company had four customers,
which either represented in excess of 10% of trade accounts receivable at those
dates or represented in excess of 10% of revenue for the six-month period ended
June 30, 2003 or the year ended December 31, 2002. The percentage of period-end
trade accounts receivable is computed based on trade accounts receivable net of
any allowances for doubtful accounts:







|           |                                           | June 30,
    2003 | December 31,
    2002
|---------- | ----------------------------------------- | ----------------- | ---------------------
|           |                                           |                   |                      
|Customer 1 | % of period end trade accounts receivable |                   | 24%                  
|           |                                           |                   |                      
|           | % of period revenue                       |                   | 16%                  
|           |                                           |                   |                      
|Customer 2 | % of period end trade accounts receivable |                   | 14%                  
|           |                                           |                   |                      
|           | % of period revenue                       |                   | 14%                  
|           |                                           |                   |                      
|Customer 3 | % of period end trade accounts receivable |                   | Less than 10%        
|           |                                           |                   |                      
|           | % of period revenue                       |                   | Less than 10%        
|           |                                           |                   |                      
|Customer 4 | % of period end trade accounts receivable |                   | Less than 10%        
|           |                                           |                   |                      
|           | % of period revenue                       |                   | 13%                  





NOTE 6. - CAPITAL STOCK



On February 4, 2003, the Company issued 160,000 common shares to directors
for services rendered and to be rendered as part of the directors' compensation
package for 2003. The Company's common shares were trading at $0.21 per share on
that day and, accordingly, a value of $33,600 has been ascribed to this aspect
of the directors' compensation package for fiscal 2003. This amount is being
included in the determination of income on a straight-line basis throughout
fiscal 2003. The excess of the value ascribed to the directors' services over
the amount included in the determination of income for the period is included as
a component of "Unearned common stock and option compensation" included in
Stockholders' Equity. On May 7, 2003, a further 15,000 common shares were issued
to a new director for services to be rendered as part of the directors'
compensation package for 2003. The Company's common shares were trading at $0.15
per share on that day and, accordingly, a value of $2,250 has been ascribed to
this aspect of the directors' compensation package for fiscal 2003. This amount
is being included in the determination of income on a straight-line basis for
the balance of fiscal 2003. The excess of the value ascribed to the directors'
services over the amount included in the determination of income for the period
is included as a component of "Unearned common stock and option compensation"
included in Stockholders' Equity".







NOTE 7. - PATENT



Subsequent to June 30, 2003, the Company received the final documentation
on the granting of a patent that the Company had been anticipating receiving
since the fourth quarter of fiscal 2002. This U.S. patent, # 6,585,590, relates
to a "new method and system of operating a bingo game on the Internet". The
patent was filed, and is therefore effective from, March 12, 2001 and has a term
of 20 years. The Company is presently in the process of identifying parties that
may have infringed, and may be continuing to infringe, on this patent and the
Company may take action to affirm its intellectual property rights. It is,
however, premature to predict the amount of any compensation that the Company
may be entitled to for any unauthorized past use of this patent or any
authorized continuing use of this patent. The Company would also be in no
position presently to estimate any recoverable portion of any such compensation.

NOTE 8. - TSX VENTURE EXCHANGE LISTING



During the three-month period ended June 30, 2003, the Company
substantially completed the process of submitting an application to obtain a
listing on the TSX Venture Exchange. Third party costs incurred through June 30,
2003 approximated $61,000 and represented sponsorship fees together with legal
and accounting fees. The Company's common shares will continue to trade on the
OTCBB.



NOTE 9. - DIFFERENCES BETWEEN U.S. AND CANADIAN GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES

These interim consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United States of
America ("U.S. GAAP"). Reference should be made to note 11 of the Company's
annual consolidated financial statements filed with the Securities and Exchange
Commission under cover of Form 8K for a description of the differences between
U.S. GAAP and accounting principles generally accepted in Canada. No additional
reconciling items have been identified in the three-month and six-month periods
ended June 30, 2003 and 2002.

Item 2. - Management's Discussion and Analysis

Management's Discussion and Analysis of Financial Condition and Results of
Operations

General

dot com Entertainment Group, Inc. ("dot com" or the "Company") is an Internet
software development company specializing in the creation and support of
Internet gaming products and related services.

dot com is not an Internet gaming company, in that it does not directly
accept wagers used to play games of chance on the Internet. Rather, it develops
and licenses the use of its commercial software products and other intellectual
property to independent third parties located in jurisdictions where Internet
gaming is regulated or tolerated.



The Company derives its revenues from several sources, including its
assessment of installation fees and royalties from the use of its software.
Additionally, the Company generates revenue on a fee for service basis by
providing licensees with e-digital and support services (such services include
web site design and integration, custom products, corporate branding, systems
consulting services and technical support, maintenance and software upgrades).

The United States dollar is the principal currency of the Company and
accordingly the financial statements of the Company are expressed in United
States dollars. The Company derives all of its revenues in United States
dollars. Certain of the Company's expenses are incurred in Canadian dollars and
these expenses are converted into United States dollars at the exchange rates on
the transaction dates. The Canadian dollar has increased in value against the
U.S. dollar by approximately 6.3% between December 31, 2002 and March 31, 2003
and a further 8.8% between April 1, 2003 and June 30, 2003. As a consequence,
the Company has incurred additional cost from those expenses denominated in
Canadian dollars, which are higher when recorded in U.S. dollars during the
three-month periods ended March 31, 2003 and June 30, 2003. However, the Company
maintains certain monetary assets denominated in Canadian dollars. The Company
has recorded a gain on the conversion of these monetary assets to U.S. dollars
as at March 31, 2003 and as at June 30, 2003. The net impact of these foreign
exchange effects in the three-month period ended March 31, 2003 has not been
material. The net impact of these foreign exchange effects in the three-month
period ended June 30, 2003 is estimated as net additional expenses of
approximately $50,000 (compensation costs of approximately $44,500 and overhead
costs of approximately $5,500). Further increases in the value of the Canadian
dollar will adversely impact on the results of operations of the Company. For
the three-month period ended June 30, 2003, the average exchange rate was Cdn. $
1.00 equal to U.S. $0.72. For the three-month period ended June 30, 2002, the
average exchange rate was Cdn. $ 1.00 equal to U.S. $0.64. Quarter over quarter,
this represents a 12.5% strengthening in the average value of the Canadian
dollar. For the six-month period ended June 30, 2003, the average exchange rate
was Cdn. $ 1.00 equal to U.S. $0.69. For the six-month period ended June 30,
2002, the average exchange rate was Cdn. $ 1.00 equal to U.S. $0.64. Year over
year, this represents a 7.8% strengthening in the average value of the Canadian
dollar. Since June 30, 2003, the Canadian dollar has weakened against the U.S.
dollar and is 5.3% weaker as of July 31, 2003.

Critical Accounting Policies

The consolidated financial statements of the Company are prepared in
accordance with accounting principles generally accepted in the United States of
America ("U.S. GAAP"). These accounting principles require that management make
certain estimates, judgments and assumptions. These estimates, judgments and
assumptions are subject to periodic evaluation. Management believes that the
estimates, judgments and assumptions upon which management relies are reasonable
based upon information available to management at the time these estimates,
judgments and assumptions are made. These estimates, judgments and assumptions
can affect the reported amounts of assets and liabilities as of the date of the
financial statements, as well as the reported amounts of revenue and expenses
during the periods presented. To the extent that there are material differences
between these estimates, judgments or assumptions and actual results, the
Company's consolidated financial statements will be affected. The significant
accounting policies that management believes are the most critical to aid in
fully understanding and evaluating the reported financial results include the
following:

| | · | Revenue Recognition                          
| | - | ---------------------------------------------
| | · | Accounting for Research and Development Costs
| | · | Accounts Receivable                          

Revenue Recognition

Revenue recognition rules for software development companies are very
complex. The Company follows very specific and detailed guidance in measuring
revenue. The Company's revenue recognition policies are in compliance with all
applicable accounting regulations, including the American Institute of Certified
Public Accountants (AICPA) Statement of Position (SOP) 97-2, "Software Revenue
Recognition," and SOP 98-9, "Modification of SOP 97-2 Software Revenue
Recognition" The Company's intention in complying with these accounting
regulations is to minimize the application of estimates, judgments and
assumptions in the revenue recognition process. The Company generates several
types of revenue in its operations.

Installation fees are recognized when the Company has delivered, installed
and integrated its software at the licensee's place of operation and collection
is assured. Delivery, installation and integration are confirmed by the receipt
of a Confirmation of Software Delivery certificate from the licensee.  The
Company uses the standard of assurance of cash collection as there is limited
history on which to base credit assessments with new licensees and the Company
generally has limited ability to pursue the non-payment of amounts owed given
that the Company's customers operate in foreign jurisdictions. The assessment
that cash collection is assured at the financial reporting date is based on the
receipt of cash by the Company within the period subsequent to the financial
reporting date through the date that the Company takes to complete its
period-end financial reporting process. If collection is not assured, amounts
billed are classified as deferred revenue until they are subsequently collected.
Revenue attributable to undelivered elements, including the commitment for
technical support and future upgrades, is based on the average sales price of
those elements and is recognized ratably on a straight-line basis over the
license term. If the average sales price of the undelivered item is not readily
determinable, based on vendor specific objective evidence, the entire payment
received in advance is deferred and recognized ratably on a straight-line basis
over the license term.

Royalty fees are collected from licensees who license the Company's Internet
entertainment software. Royalty revenue is recognized as licensees earn revenues
from providing Internet services to their customers.

e-digital and support services revenue is recognized when the service has
been provided.

Deposits received from customers prior to revenue recognition are classified
as deferred revenue in the balance sheet.

Accounting for Research and Development Costs

The Company invests significant resources in the ongoing improvement of its
existing software products and the development of new and enhanced software
products. Based on the present maturity of the Company's software products, all
software development efforts would be considered product enhancements rather
than the creation of new software products. The Company has carefully reviewed
the provisions of Statement of Financial Accounting Standard ("SFAS") 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed," and had concluded through December 31, 2002 that no material amounts
would qualify for deferral under this pronouncement and accordingly, all
computer software development costs through December 31, 2002 have been expensed
as incurred. The Company had previously noted that it expected that the
requirements for computer software development costs to be deferred could be met
in fiscal 2003. This expectation was based on two concurrent developments.
Firstly, the Company has enhanced its management processes with respect to
software development projects. Second, the Company has implemented a third-party
software tool to facilitate the tracking and assessment of development projects.
Accordingly, the Company commenced deferring certain software development costs
during the three-month period ended March 31, 2003. Such deferral of costs
begins with the attainment of technical feasibility of development projects and
ends upon the completion of development projects. With respect to the definition
of the technical feasibility of development projects, the Company has adopted a
definition that reflects its internal management processes as follows. A
development project is considered technically feasible when the Requirements
Document has been completed and when the Product Steering Committee of the
Company has approved the Requirements Document. The Requirements Document
specifies the functionality required from the software product and provides the
detail that the software engineers require to develop the final software
product. The Product Steering Committee of the Company is the highest level of
management approval for software development projects. Its role is to ensure
that the Company's development processes have been followed, that the
development project is feasible and that the Company can expect an acceptable
economic return from the execution of the development project. Once the project
is approved by the Product Steering Committee, the Company has committed to
complete the project and to allocate sufficient resources to it. With respect to
the definition of the completion of development projects, a project is
considered complete when the software product has been beta tested and is
available for release to customers. Once software development projects are
complete, the aggregate costs are to be amortized on a straight-line basis over
36 months. Three-years is the Company's assessment of the life-cycle of its
software products.

In addition, it will be necessary to undertake a periodic review of the
recoverability of deferred amounts against the net realizable value of such
deferred costs, which will include an estimate of future revenues from certain
products. Aggregate anticipated software development project costs are compared
to anticipated marginal revenues from the software product over a three-year
period which is the anticipated life-cycle of the software product. With respect
to the calculation of anticipated marginal revenues, certain estimates have to
be derived resulting from the application of judgments and assumptions.
Estimates include the activity level to be generated by customers and the
enhancement to the Company's revenue from higher levels of customer activity.
Further, additional revenue from new customers is included in the estimate of
future revenue. Such customers must at least be at a letter of intent stage in
the sales process to be included in the revenue projections from the software
products under development. In deriving these estimates, management has adopted
an initial prudent approach with respect to anticipated revenue enhancements.

Accounts Receivable

The Company carries its accounts receivable at cost less an allowance for
doubtful accounts. On a periodic basis, the Company evaluates its accounts
receivable and establishes an allowance for doubtful accounts. The allowance is
based on the circumstances of each customer relationship, as direct
communication takes place with each customer where accounts are past due,
together with an assessment of the history of past write-offs and collections.
Typically under the Company's license agreements, amounts are due 15 days after
the invoice date. The Company generally has limited ability to pursue
non-payment of amounts owed given that the Company's customers operate in
foreign jurisdictions. The allowance for doubtful accounts generally relates to
unpaid royalty amounts, including amounts that may be owed under minimum royalty
obligations pursuant to the Company's license arrangements. The financial
condition of customers can deteriorate and, for that reason and others, cash
collections can be delayed. In such circumstances, additional allowances for
doubtful accounts may be required.

In addition to the matters discussed under Critical Accounting Policies
above, the Company has chosen to account for its stock option plans utilizing
the intrinsic value method specified under APB Opinion No. 25, "Accounting for
Stock Issued to Employees." As required under SFAS 123, "Accounting for
Stock-Based Compensation," and SFAS 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure", the pro-forma effects on reported net
income had the Company elected to recognize compensation costs based on the fair
value of the stock options at the grant date are disclosed in Note 3 to the
consolidated interim financial statements along with the assumptions used in the
determination of the fair value of the options granted. The Company does not
presently intend to adopt the fair value method of accounting for stock options
granted to employees.

In many cases, the accounting treatment of a particular transaction is
prescribed by U.S. GAAP and, accordingly, management does not apply judgment in
the application of U.S. GAAP. There are also areas in which management's
judgment in selecting amongst available alternatives would not produce a
materially different result. The Company's senior management has reviewed these
critical accounting policies and related disclosures with the audit committee of
the board of directors of the Company. See Note 1 to the consolidated financial
statements of the Company included with the Company's Annual Report on Form
10-KSB for the year ended December 31, 2002 which contains further information
regarding the Company's accounting policies and other disclosures required by
U.S. GAAP.

Selected Financial Information

The following tables set forth selected information from the statements of
income (loss) for the three-months and six-months ended June 30, 2003 and 2002
and the balance sheets as at June 30, 2003 and December 31, 2002.

Selected Statement of Income (Loss) Information



|                  | Three-Months Ended 
    June 30, |              | Six-Months Ended
    June 30,
|----------------- | -------------------------------- | ------------ | -----------------------------
|                  | 2003                             | 2002         |                              
|                  |                                  |              |                              
|Revenues          | $ 989,236                        | $    829,289 |                              
|Expenses          | 979,714                          | 1,140,483    |                              
|Net income (loss) | 5,713                            | (202,861)    |                              

Selected Balance Sheet Information

|                     | As at
    June 20,
 2003 |  | As at
    December 31, 2002
|-------------------- | ------------------------ |  | ---------------------------
|                     |                          |  |                            
|Current assets       | $ 1,420,201              |  |                            
|Current liabilities  | 217,194                  |  |                            
|Stockholders' equity | 1,455,712                |  |                            

Review of the three-month period ended June 30, 2003, compared with the
three-month period ended June 30, 2002

Revenues increased to $989,236 for the three-month period ended June 30,
2003, from $829,289 for the comparable 2002 quarter.

Royalty revenue increased to $894,464 for the three-month period ended June
30, 2003, from $684,193 for the comparable 2002 quarter reflecting the increased
number and revenue activity of the Company's licensees. The increase was
achieved notwithstanding that the royalty rates in effect for the three-month
period ended June 30, 2003 were lower than those in place for the comparable
2002 quarter. In mid fiscal 2002, the Company reduced the royalty rates for a
number of licensees. The objective of these royalty rate amendments was the
standardization of royalty rates to market rates across the Company's customer
base. A consequence of this competitive action was a general reduction in
royalty revenue by licensee and in aggregate. Despite the royalty rate
amendments, the increased activity of existing customers and the activity of new
customers was sufficient for royalty revenue for the three-month period ended
June 30, 2003 to establish a new record for quarterly royalty revenue for the
Company. The prior record was $766,977, which was earned in the three-month
period ended December 31, 2001.

Installation fees were $56,272, compared to $84,771 for the comparable
quarter in 2002. This represents fees recognized on the delivery of the
Company's software to one licensee site during the three-month period ended June
30, 2003 and recognition of the balance of installation fees on two customer
sites where the full installation fees could not be recognized in the quarter of
the installation. The new customer site installation during the three-month
period ended June 30, 2003 did not contribute to royalty revenue during the
three-month period ended June 30, 2003 and is expected to contribute to
royalties in the third quarter.

e-digital and support services revenue decreased to $38,500 for the
three-month period ended June 30, 2003 from $60,325 for the comparable 2002
quarter. As the Company no longer actively markets e-digital services, revenue
from this source has fallen as expected and as discussed in prior quarters.

During the three-month period ended June 30, 2003, three customers
represented revenues of 23%, 15% and 14%, respectively. For the three-month
period ended June 30, 2002, these customers represented the following
percentages of revenue, respectively, 13%, 34% and 8%. If the Company lost any
of these customers or any of them became insolvent and could not pay the
balances owed to the Company it would have a material negative impact on the
financial condition and results of operations of the Company.

Total expenses decreased to $979,714 for the three-month period ended June
30, 2003 from $1,140,483 for the comparable 2002 quarter. While there has been a
decrease in the average staffing complement of approximately two employees for
the three-month period ended June 30, 2003 compared to the equivalent quarter in
fiscal 2002, there have been a number of mix changes within the headcount pool.
As a consequence, overall compensation costs have increased by approximately
$164,000, including an estimated $44,500 for foreign exchange effects. This
increase reflects the appointment by the Company of several new members of
management and staff and compensation increases for existing members of
management and staff. At June 30, 2003, there were 44 full-time employees and
consultants, unchanged from the figure at June 30, 2002. Other cost components
decreased, on a net basis, by approximately $325,000. Although approximately
$61,000 was incurred in the quarter relating to costs associated with the
Company's TSX Venture Exchange listing application, there was a reduction in
expenses of approximately $110,000 from the deferral of certain software
development costs discussed below. In addition, during the three-month period
ended June 30, 2002 a non-recurring loss on contractual settlement was incurred
in the amount of $345,207. On June 28, 2002, the Company entered into an interim
agreement with its principal customer which resulted in aggregate accounts
receivable owed as at May 31, 2002 in the amount of $345,207 not being
collected.

Sales, marketing and services to licensees expenses decreased to $176,083 for
the three-month period ended June 30, 2003 from $205,346 for the comparable 2002
quarter. The decrease reflects the Company's decision in the third quarter of
fiscal 2002 to curtail e-digital and systems consulting service activities to
reflect marketplace opportunities. As a consequence, compensation costs for
these activities have decreased by approximately $3,000, net of a $6,000
increase for exchange effects, for the three-month period ended June 30, 2003
compared to the equivalent quarter in fiscal 2002 following the reduction in
headcount in this area. In addition, costs incurred for attendance at trade
shows were $19,000 less in the three-month period ended June 30, 2003 than in
the comparable 2002 quarter. Sales, marketing and services to licensees expenses
represented 18% of revenues for the three-month period ended June 30, 2003 and
25% for the comparable 2002 quarter.

Gross research, software development and support service expenses, before the
deferral of certain software development costs under the provisions of SFAS 86
as discussed in the next paragraph, increased to $454,566 for the three-month
period ended June 30, 2003, from $371,405 for the comparable 2002 quarter. This
increase resulted from the consequence of continuing to hire additional software
developers to improve and diversify the Company's products and services to
reflect the growing demand realized, and anticipated, for these products and
services. Compensation costs increased by approximately $95,000, including an
estimated $31,000 for exchange effects, in the three-month period ended June 30,
2003 compared to the equivalent 2002 quarter. Gross research, software
development and support service expenses represented 46% of revenues for the
three-month period ended June 30, 2003, compared to 45% for the comparable 2002
quarter.

For the three-month period ended June 30, 2003, $110,431 of software
development costs have been deferred under the provisions of SFAS 86 related to
the continuing development of downloadable Flash versions of the Company's suite
of casino games and the commencement of the development of new and/or enhanced
Keno and Slots games. It is anticipated that the Company will incur no further
costs on the development of downloadable Flash versions of the Company's suite
of casino games and that the aggregate development costs on this project of
approximately $121,000 will be amortized commencing in the third quarter of
fiscal 2003. It is anticipated that the Company will incur a further $340,000 of
expenses in developing Keno and Slots software products prior to their
commercialization. The release date for these products is anticipated to be late
in the third quarter of fiscal 2003, and the Company anticipates earning
marginal revenue from the licensing of these software products to existing
clients late in the third quarter of fiscal 2003. Deferred software development
costs are to be amortized over a 36-month period, which is the Company's general
assessment of the economic life of its software products. Accordingly, net
research, software development and support services expenses for the three-month
period ended June 30, 2003 were $344,135 or 35% of revenue for the period.

General and administrative expenses increased to $398,718 for the three-month
period ended June 30, 2003, from $218,525 for the comparable 2002 quarter. The
increase primarily results from increased remuneration to employees and
consultants of approximately $72,000, including an estimated $7,500 for exchange
effects, and an increase in premises costs of approximately $23,000, following
an increase in the amount of rented space used by the Company in late fiscal
2002. Professional fees for strategic marketing services, compliance services,
directors' fees and other advisory fees were higher by approximately $65,000
during the quarter and depreciation was higher by approximately $13,000. As a
partial offset, there was a $34,000 decrease in legal fees for the three-month
period ended June 30, 2003 compared to the same quarter in the prior year.
General and administrative expenses represented 40% of revenue for the
three-month period ended June 30, 2003 compared to 26% for the equivalent 2002
quarter.

Loss on contractual settlement in the three-month period ended June 30, 2002
was $345,207. On June 28, 2002, the Company entered into an interim agreement
with its principal customer which resulted in aggregate accounts receivable owed
as at May 31, 2002 in the amount of $345,207 not being collected. This item is
described as loss on contractual settlement in the statement of income (loss).

Net income increased to $5,713 for the three-month period ended June 30,
2003, from a net loss of $202,861 for the comparable 2002 quarter. As the
Company increases the number of its licensees and introduces new products it is
anticipated that profitability will continue to improve. The income tax
provision for the three-month period ended June 30, 2003 increased to $3,809
from an income tax benefit of $108,333 for the comparable 2002 quarter.

Review of the six-month period ended June 30, 2003 compared with the
six-month period ended June 30, 2002

Revenues decreased to $1,916,956 for the six-month period ended June 30,
2003, compared to $2,063,324 for the comparable period in 2002.

Royalty revenue increased to $1,627,714 for the six-month period ended June
30, 2003 compared to $1,347,738 for the comparable period in 2002 reflecting the
increased number and activity of the Company's licensees. The increase was
achieved notwithstanding that the royalty rates in effect for the six-month
period ended June 30, 2003 were lower than those in place for the comparable
2002 period. As discussed above, the Company reduced the royalty rates for a
number of licensees in mid fiscal 2002. A consequence of this competitive action
was a general reduction in royalty revenue by licensee and in aggregate. During
the six-month period ended June 30, 2003, the offset to this royalty revenue
reduction from the increased contribution from both the increased activity of
existing customers and the activity of new customers was sufficient for royalty
revenue for the six-month period ended June 30, 2003 to be 21% higher than in
the prior year.

Installation fees, representing fees recognized on the delivery of the
Company's software to licensees, decreased to $212,042 during the six-month
period ended June 30, 2003 compared to $490,996 for the comparable period in
2002. These installation fees represented the installation of the Company's
software to five licensee sites during the six-month period ended June 30, 2003.
During the six-month period ended June 30, 2002, seven new client sites were
installed. For those sites installed in 2003, four of these sites derived
royalty income in the six-month period ended June 30, 2003. Royalty revenue from
the remaining site is expected to commence in the third quarter of 2003.

e-digital and support services revenue decreased to $69,700 for the six-month
period ended June 30, 2003 compared to $224,590 for the comparable period in
2002. As the Company no longer actively markets e-digital services, revenue from
this source has fallen as expected and as discussed in prior quarters.

During the six-month period ended June 30, 2003, three customers represented
revenues of 17%, 14% and 13%, respectively. For the six-month period ended June
30, 2002, these customers represented the following percentages of revenue,
respectively, 10%, 30% and 7%. If the Company lost any of these customers or any
of them became insolvent and could not pay the balances owed to the Company it
would have a material negative impact on the financial condition and results of
operations of the Company.

Total expenses decreased to $1,833,187 for the six-month period ended June
30, 2003 compared to $1,992,012 for the comparable period in 2002. While there
has been a decrease in the average staffing complement of approximately three
employees for the six-month period ended June 30, 2003 compared to the
equivalent period in fiscal 2002, there have been a number of mix changes within
the headcount pool. As a consequence, overall compensation costs have increased
by approximately $296,000, including an estimated $44,500 for foreign exchange
effects. This increase reflects the appointment by the Company of several new
members of management and staff and compensation increases for existing members
of management and staff. At June 30, 2003, there were 44 full-time employees and
consultants, unchanged from the figure at June 30, 2002. Other cost components
decreased, on a net basis, by approximately $455,000. Although approximately
$61,000 was incurred in the period relating to costs associated with the
Company's TSX Venture Exchange listing application, there was a reduction in
expenses of approximately $166,000 from the deferral of certain software
development costs discussed further below. In addition, during the three-month
period ended June 30, 2002, a one-time charge of approximately $345,000 was
incurred pursuant to a contractual settlement.

Sales, marketing and services to licensees expenses decreased to $326,088 for
the six-month period ended June 30, 2003 from $421,927 for the comparable period
in 2002. The decrease reflects the Company's decision in the third quarter of
fiscal 2002 to curtail e-digital and systems consulting service activities to
reflect marketplace opportunities. As a consequence, compensation costs for
these activities have decreased by approximately $37,000, net of a $6,000
increase for exchange effects, for the six-month period ended June 30, 2003,
compared to the comparable quarter in fiscal 2002 following the reduction in
headcount in this area. In addition, costs incurred for attendance at trade
shows were $19,000 less in the six-month period ended June 30, 2003 than in the
equivalent 2002 quarter. Sales, marketing and services to licensees expenses
represented 17% of revenues for the three-month period ended June 30, 2003 and
20% for the comparable 2002 period.

Gross research, software development and support services expenses increased
to $837,054 for the six-month period ended June 30, 2003 compared to $744,507
for the comparable period in 2002. This increase resulted from the consequence
of continuing to hire additional software developers to improve and diversify
the Company's products and services to reflect the growing demand realized, and
anticipated, for these products and services. Compensation costs increased by
approximately $199,000, including an estimated $31,000 for exchange effects, in
the six-month period ended June 30, 2003 compared to the equivalent2002 quarter.
As an offset, in the six-month period ended June 30, 2002, research, software
development and support service expenses costs included a charge in the amount
of $90,000 for a one-time non-recurring buyout of an existing management
contract which would have otherwise have expired in December 2002. Gross
research, software development and support service expenses represented 44% of
revenues for the six-month period ended June 30, 2003, compared to 36% for the
comparable 2002 period.

For the six-month period ended June 30, 2003, $166,222 of software
development costs have been deferred under the provisions of SFAS 86 related to
the development of downloadable Flash versions of the Company's suite of casino
games and the development of new and/or enhanced Keno and Slots games. It is
anticipated that the Company will incur no further costs on the development of
downloadable Flash versions of the Company's suite of casino games, and that the
aggregate development costs on this project of approximately $121,000 will be
amortized commencing in the third quarter of fiscal 2003. It is anticipated that
the Company will incur a further $340,000 of expenses in developing the Keno and
Slots projects software products prior to the commercialization of these
software products. The release date for these products is anticipated to be late
in the third quarter of fiscal 2003 and the Company anticipates earning marginal
revenue from the licensing of these software products from existing clients late
in the third quarter of fiscal 2003. Deferred software development costs are to
be amortized over a 36-month period, which is the Company's general assessment
of the economic life of its software products. Accordingly, net research,
software development and support services expenses for the six-month period
ended June 30, 2003 were $670,832 or 35% of revenue for the period.

General and administrative expenses increased to $775,489 for the six-month
period ended June 30, 2003, from $480,371 for the comparable period in 2002. The
increase primarily results from increased remuneration to employees and
consultants of approximately $134,000, including an estimated $7,500 for
exchange effects, and an increase in premises costs, following an increase in
the amount of rented space used by the Company in late fiscal 2002, of
approximately $43,000. Professional fees for strategic marketing services,
compliance services, directors' fees and other advisory fees were higher by
approximately $108,000 during the quarter and depreciation was higher by
approximately $23,000. As a partial offset, there was a $34,000 decrease in
legal fees for the six-month period ended June 30, 2003 compared to the same
period in the prior year. General and administrative expenses represented 40% of
revenue for the six-month period ended June 30, 2003, compared to 23% for the
equivalent 2002 period.

Loss on contractual settlement in the six-month period ended June 30, 2002
was $345,207. On June 28, 2002, the Company entered into an interim agreement
with its principal customer which resulted in aggregate accounts receivable owed
as at May 31, 2002 in the amount of $345,207 not being collected. This item is
described as loss on contractual settlement in the statement of income (loss).

Net income for the six-month period ended June 30, 2003 increased to $50,262
from $26,643 for the comparable period in 2002. The income tax provision for the
six-month period ended June 30, 2003 decreased to $33,507 from $44,669 for the
comparable period in 2002. The effective tax rate for the six-month period ended
June 30, 2003 was 40% compared to 63% for the comparable period in the prior
year. In 2002, certain adjustments were recorded on filing the Company's 2001
income tax returns which increased the effective income tax rate during the
three-month period ended June 30, 2002. These adjustments did not recur in 2003.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2003, the Company had cash and cash equivalents of $456,241,
compared with $938,705 at December 31, 2002.

At June 30, 2003, the Company had working capital of $1,203,007 compared with
$1,262,838 at December 31, 2002. There was a decrease in net income taxes
recoverable following the receipt of refunds with respect to the Company's 2002
and 2001 taxation years from the Internal Revenue Service in the amount of
$118,878, offset by a payment to the Canadian taxation authorities of $1,224 and
by the current income tax provision for the six-month period ended June 30, 2003
of $32,981. Trade accounts receivable increased by $305,732 between December 31,
2002 and June 30, 2003. Of this increase, approximately $125,000 reflects the
increase in accounts receivable from increases in revenue, and approximately
$180,000 reflects deterioration in the ageing of accounts receivable. This
deterioration relates to a number of certain specific accounts. Management is
pursuing payment in all cases and does not believe that there is any present
need to increase the allowance for doubtful accounts for any of these specific
accounts. At June 30, 2003, there were two customers which represented in excess
of 10% of net trade accounts receivable at 24%, and 14%, respectively. At June
30, 2002, these customers represented 12% and 59% of net trade accounts
receivable, respectively. If the Company lost any of these customers or any of
them became insolvent and could not pay the balances owed to the Company it
would have a material negative impact on the financial condition and results of
operations of the Company.

As discussed above, the Company deferred $110,431 of software development
costs during three-month period ended June 30, 2003.



At June 30, 2003, total assets decreased to $1,739,395 from $1,777,409 at
December 31, 2002.

At June 30, 2003, total liabilities decreased to $283,683 from $393,592 at
December 31, 2002. The decrease primarily represent the settlement during the
period of remaining obligations as at December 31, 2002 on the Company's
restructuring reserve and the Company's legal settlement reserve, offset by the
increase in the deferred income tax liability. The Company anticipates that it
will continue to be able to deduct software development costs currently for
income tax return purposes. Accordingly, the deferral of costs of software
development projects as at June 30, 2003 has resulted in the recognition of a
deferred income tax liability of $66,489.

Net cash used in operating activities was $239,544 for the six-month period
ended June 30, 2003 compared with net cash provided by operating activities of
$37,237 for the comparable 2002 period. The use of cash in the period results
primarily from the increase in trade accounts receivable balances, the
settlement of certain reserves in place at December 31, 2002 and the decrease in
deferred revenue, offset by the income tax refunds referred to above.

Cash of $76,698 was used during the six-month period ended June 30, 2003 to
acquire fixed assets including $38,010 paid on the purchase of a specific
software tool to assist with the management of the Company's software
development projects. The balance represents ongoing expenditures on
enhancements to the Company's computer hardware and software. In addition, as
discussed above, the Company deferred $166,222 of software development costs
during the six-month period.

On February 4, 2003, the Company issued 160,000 common shares to directors
for services rendered and to be rendered as part of the directors' compensation
package for 2003. The Company's common shares were trading at $0.21 per share on
that day and, accordingly, a value of $33,600 has been ascribed to this aspect
of the directors' compensation package for fiscal 2003.



Management believes that the Company will have sufficient resources to
support its growth through continued revenue improvements, the collection of its
trade accounts receivable in the ordinary course of business and by continuing
to monitor its expenses in light of the cash resources of the Company.
Notwithstanding the above, there can be no assurance that management's plans can
be met.

There are presently no material commitments for capital expenditures. Due to
the nature of its business, the Company does not require significant outlays for
capital expenditures and, as a result, is not planning for any material capital
expenditures for the foreseeable future. However, the Company is committed to
providing its developers with the most current tools to assist in their efforts.
Accordingly, the Company will continue to enhance and upgrade its computer
hardware and software.



RISKS AND UNCERTAINTIES

The Company has identified that there is uncertainty in North America
relating to the lawfulness of Internet gaming. As such, notwithstanding the fact
that its licensees operate from countries where such business is lawful if
licensed, governments elsewhere, including the federal, state or any local
governments in the United States, may take the position that the Company's
software and support systems are being played and or used unlawfully in their
jurisdiction. Accordingly, the Company may face criminal prosecution in any
number of jurisdictions for aiding and abetting others, such as its licensees,
in operating an illegal gaming operation. The Company has devoted only limited
resources to investigating the legal climate in which it operates. Many of the
issues facing the Company are the same as those facing all other e-commerce and
other Internet software providers and traditional software providers, as current
laws are not clear as to who, if anyone, has jurisdiction over Internet-based
commerce. A number of bills have been introduced in the United States House of
Representatives to expressly ban Internet gaming. To date all of these proposals
have been defeated. Although the Company intends to do business worldwide, any
enforceable ban on Internet gaming in the United States would have a material
adverse effect on the operations of the Company's licensees and, as a
consequence, could have a short-term and long-term impact on the scope and
growth of the Company's business including both its liquidity and its revenues
from operations.

IMPACT OF INFLATION

The Company believes that inflation has not had a material effect on its
business.

Item 3. - Controls and Procedures

As of the date of this report, the Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including our Chief Executive Officer
and our Chief Financial Officer, of the effectiveness of the design and
operation of our "disclosure controls and procedures" (as defined in Rule
13a-15(e) under the Securities Exchange Act of 1934, as amended).  Based
upon that evaluation, our Chief Executive Officer and the Chief Financial
Officer concluded that the Company's disclosure
controls and procedures are effective to ensure that material information
relating to us and our consolidated subsidiaries is recorded, processed,
summarized and reported in a timely manner. Management will continue to review
this matter with particular emphasis on the documentation of the Company's
disclosure controls and procedures. There has been no change in the Company's
internal control over financial reporting that occurred during the last fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting.

Part II - Other Information

Item 2. - Changes in Securities and Use of Proceeds

(a) On May 7, 2003, the Company issued 15,000 shares of common stock
        to a director in compensation for services rendered as a director. The
        issuance of such shares was exempt from registration pursuant to Section
        4(2) as a transaction not involving a public offering.

Item 6. - Exhibits and Reports on Form 8-K

| | (a) | Exhibits.                                                                                                                                                                                                                                                                                                                          
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | Exhibit No. 31.1 Certification of Chief
    Executive Officer pursuant to Section 302 of
    Sarbanes-Oxley Act of 2002.Exhibit No. 31.2 Certification of Chief
    Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                    
| |     | Exhibit No. 32.1 Certification of Chief
    Executive Officer Pursuant to 18 U.S.C. 1350 As Adopted Pursuant to Section
    906 of the Sarbanes-Oxley Act of 2002.Exhibit No. 32.2 Certification of
    Chief Financial Officer Pursuant to 18 U.S.C. 1350 As Adopted Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002
| |     |                                                                                                                                                                                                                                                                                                                                    
| | (b) | Reports on Form 8-K.                                                                                                                                                                                                                                                                                                               
| |     | On May 12, 2003, the Company filed Form 8-K
    to supply its May 8, 2003 earnings release for the three-month period ended
    March 31, 2003.                                                                                                                                                                                    



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

DOT COM ENTERTAINMENT GROUP, INC.
(Registrant)



|Date: August 14, 2003 | /s/ DAVID OUTHWAITE    
|--------------------- | -----------------------
|                      | David Outhwaite        
|                      | Chief Executive Officer
|Date: August 14, 2003 | /s/ DAVID CALLANDER    
|                      | David Callander        
|                      | Chief Financial Officer



|EXHIBIT INDEX                                                                                                                                                                                                                                                                                                                      
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. 31.1 Certification of Chief
    Executive Officer pursuant to Section 302 of
    Sarbanes-Oxley Act of 2002.Exhibit No. 31.2 Certification of Chief
    Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002                                                                                        
|                                                                                                                                                                                                                                                                                                                                   
|Exhibit No. 32.1 Certification of Chief
    Executive Officer Pursuant to 18 U.S.C. 1350 As Adopted Pursuant to Section
    906 of the Sarbanes-Oxley Act of 2002.Exhibit No. 32.2 Certification of
    Chief Financial Officer Pursuant to 18 U.S.C. 1350 As Adopted Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002