| Texas                                                         | 93-1207631                       |
|---------------------------------------------------------------|----------------------------------|
| (Stateor other jurisdiction of incorporation or organization) | (IRSEmployer Identification No.) |

| 440 NorthCenter, Arlington, TX          | 76011     |
|-----------------------------------------|-----------|
| (Addressof principal executive offices) | (ZipCode) |

###### **Item 1. Description ofBusiness**

##### **BUSINESS OVERVIEW**

#### *Entertainment/amusement*

- SixFlags, 
- ParamountParks, 
- BuschGardens, and
- CarnivalCruise Lines.  

#### *Advertising/Promotion*

- avirtual reality bi-plane experience for Red Baron® Pizza,  
- avirtual reality ski jump experience for Chevrolet in conjunction with the“Olympic Torch City Celebration Tour,”
- arecently–completed interactive virtual reality promotional project forShell Oil Product’s Pennzoil® division, and
- acurrent project to build a 3-D immersive theatre for Red Baron®Pizza’s “3-D Flying AdventureTM.”

#### *Training/Simulation*

#### *Internet-Enabled Gaming*

## **Virtual RealityProducts**

- VRSensory TheaterTM, a 3-seat, sit-down, multi-sensory system designed toallow a large number of entertainment center customers to experience virtualreality in a short period of time.  Users seated in the theater put on aheadset, suspended from a neutralization arm which allows their heads to rotatea full 360 degrees. The system integrates headset video, audio, and smell forthe user.  The system comes standard with 3 seats, but can link together formuch larger throughput. It is approximately 84 inches long, 36 inches wide, 72inches high, and weighs  approximately 420 lbs.
- TheVR-360TM, a stand-up interactive system.  The user has freedom of movementand is tracked in 360 degrees.  The system incorporates state-of-the-artcomputer equipment, gyro headtracking, audio, microphone communication, andjoystick interaction.  The system comes standard for one user. The user wears aheadset suspended from a support cable on an illuminated neutralization arm. Theentire system is approximately 54 inches long, 60 inches wide, 102 inches high,and weighs approximately 490 lbs.
- TheVR-720TM, a sit-down interactive system designed primarily for use in thecompany’s VR Zones. The user, while seated, is tracked in 360 degrees.The system incorporates state-of-the-art computer equipment, gyro headtrackingfrom an illuminated neutralization arm, audio, microphone communication, windsimulation, smell integration, and joystick interaction.  The system comesstandard for two users. The system is approximately 54 inches long, 60 incheswide, 102 inches high, and weighs approximately 490 lbs.
- TheIVR-pTM, a portable 360-degree, video-based, multi-user judgmental use offorce training system capable of training with “real”guns.

## **Competition**

- Straylight --since1992, Straylight has focused on the exploitation of virtual reality in thepromotions and conventions market, basing its original customized systems onexpensive Silicon Graphics computers.  Most recently, it launched the stand-up3DXTC system, offering a headset-based, lightweight system utilized within theadvertising/promotional market.  We believe Straylight’s installed base(under ten units) is insignificant, and that Straylight only sells its productand service to others rather than exploiting the product and serviceitself.
- VirtualWorld Entertainment --since 1995, VWE has built single high-end enclosed gamecapsules, commencing with its own center in Chicago around 1995.  We understandthat VWE's products can be found in only a handful of international high-endlocations.  VWE uses a proprietary system, and thus must develop each gameitself, and we believe it has released only two games in six years and has aninstalled base of fewer than 60 units.
- Dynavision --since1996, Dynavision has focused on building a single stand-up headset-based virtualreality entertainment product.  Dynavision’s Orion system uses PCsoftware, in which the third-party’s source code is modified for the Orionsystem.  We have been informed that this company was sold in 2000, and since1999, it has not been seen at any industry tradeshows.  We do not know whetherDynavision is still in business.
- GlobalVR --since 1997, Global VR has focused on VR Vortek, a single stand-upvirtual reality entertainment product utilizing a large viewing device mountedto a steel arm.  Global VR recently added products to its line from thebankruptcy purchase of the former Interactive Light company.  We believe GlobalVR’s installed base is less than ours.
- IMAXCorporation --since 1964, IMAX has developed specialized educational andentertaining large-screen movies and theaters, with over 225 locationsworld-wide.  IMAX is recognized as a leader of unique large-screen theaters.  Itis our opinion that IMAX’s products and movies do not directly compete orexclude any of our products, though it may be regarded as an indirect competitorsince customers seeking a virtual reality experiences may instead choose thelarge-screen theater. 
- HamOn Rye Technologies --introduced its first system for entertainment use atIAAPA 2000, but had rented equipment for corporate rentals prior to this.  Thecompany sells one product -- a 16-seat interactive theater which utilizes aheadset for each participant.  The system requires a live actor for each‘showing,’ who asks the users to press buttons on a small remotecontrol and perform other activities during the show (like patting the topsof their heads).  The system uses 2D video composting technology, andhas no traditional virtual reality capabilities (i.e., headtracking, usercontrol of movement or view, etc.).  While the system can accommodate largethroughput of guests, a single system costs over $100,000, and we believe thisproduct’s repeat level of use is low.  Because of cost and marketconstraints for this type of product, we expect Ham on Rye to have fewer than 25systems installed worldwide.
- AdvancedInteractive Systems, Inc.-- has been a provider of interactive simulationsystems designed to provide training for law enforcement, military, and securityagencies since 1993. Its line of products uses primarily video production injudgmental training scenarios. AIS also markets to anti-terrorist and otherspecial application training facilities for military and special operationsgroups. Their systems are all based using flat screen technology and do notaddress issues in a 360-degree world. Although AIS is a player in the firearmstraining simulator space, we believe our technology and the more real world,life-like scenarios we create are far superior to their systems.
- FirearmsTraining Systems, Inc. --has over 4,000 FATS training systems installedworldwide by military, law enforcement, and commercial customers.  FATS, Inc. isa full service training simulation company that also utilizes video scenariosand flat screen technology with an optional video-training scenario authoringsystem. AIS and FATS are similar in many respects, although FATS has been arounda while longer. As with other competitors in this field, we feel our 360-degreetechnology is far superior to FATS and their systems.
- L-3Communications, Inc.  -- a supplier of Intelligence, Surveillance andReconnaissance (ISR) products, secure communications systems and products,avionics and ocean products, training products, microwave components andtelemetry, instrumentation, space and wireless products. Its customers includethe Department of Defense, selected US government intelligence agencies,aerospace prime contractors and commercial telecommunications, and wirelesscustomers. L-3’s product mix includes; secure communication systems,training systems, microwave components, avionics and ocean systems, telemetry,instrumentation, space and wireless products. L-3 is a 2 plus billion dollarcompany with a very diverse range of products and services geared towardsdefense related activities. It has a division for simulation and training withseveral products currently deployed. One of these simulators projects images onmultiple screens using computer generated graphics. L-3 systems consist ofcomputer generated graphics and currently do not use video or film for theircontent, to the best of our knowledge, nor do they produce complete 360-degreeprojected or head-mount display systems. Due to the size and strength of L-3within the defense industry and other governmental agencies, it can possibly bea very formidable competitor if it chooses to enter the 360-degree,photorealistic, virtual reality simulationmarket.

## **Marketing**

## **Employees**

## **Trademarks/Patents**

|      |                | BID PRICES |
|------|----------------|------------|
| YEAR | PERIOD         | HIGH       | LOW |
| 2000 |                |            |  |
|      | First Quarter  | 1.38       | 0.27 |
|      | Second Quarter | 1.13       | 0.31 |
|      | Third Quarter  | 0.63       | 0.31 |
|      | Fourth Quarter | 0.47       | 0.15 |
| 2001 |                |            |  |
|      | First Quarter  | 0.76       | 0.20 |
|      | Second Quarter | 0.55       | 0.14 |
|      | Third Quarter  | 0.51       | 0.19 |
|      | Fourth Quarter | 0.33       | 0.13 |
| 2002 |                |            |  |
|      | First Quarter  | 0.20       | 0.32 |
|      | Second Quarter | 0.18       | 0.45 |
|      | Third Quarter  | 0.12       | 0.45 |
|      | Fourth Quarter | 0.09       | 0.18 |

**TABLE OF CONTENTS**

| ASSETS                                                                     |          |
|----------------------------------------------------------------------------|----------|
|                                                                            |          |
| Current assets:                                                            |          |
| Cash and cashequivalents                                                   | $98,442  |
| Accounts receivable                                                        | 93,929   |
| Costs and estimated earnings inexcess of billings on uncompleted contracts | 17,342   |
|                                                                            |          |
| Total current assets                                                       | 209,713  |
|                                                                            |          |
| Property and equipment, net                                                | 346,114  |
| Note receivable-related party                                              | 67,885   |
| Intangible assets, net                                                     | 36,261   |
|                                                                            |          |
| Total assets                                                               | $659,973 |

| **LIABILITIES AND STOCKHOLDERS’DEFICIT**                                                       |              |
|------------------------------------------------------------------------------------------------------|--------------|
|                                                                                                      |              |
| Current liabilities:                                                                                 |              |
| Notes payable                                                                                        | $889,324     |
| Obligations under productfinancing arrangements                                                      | 5,240,418    |
| Notespayable-stockholders                                                                            | 910,031      |
| Convertible debentures                                                                               | 308,262      |
| Accounts payable                                                                                     | 1,201,849    |
| Accrued liabilities                                                                                  | 643,879      |
| Billings in excess of costs andestimated earnings on uncompleted contracts                           | 82,613       |
|                                                                                                      |              |
| Total currentliabilities                                                                             | 9,276,376    |
|                                                                                                      |              |
| Redeemable common stock, 778,291 shares at $.005 parvalue                                            | 3,891        |
|                                                                                                      |              |
| Stockholders’ deficit:                                                                         |              |
| Common stock,$.005 par value, 100,000,000 shares authorized, 37,331,448 shares issued andoutstanding | 186,658      |
| Additional paid-incapital                                                                            | 2,922,833    |
| Accumulated deficit                                                                                  | (11,729,785) |
|                                                                                                      |              |
| Total stockholders’deficit                                                                     | (8,620,294)  |
|                                                                                                      |              |
| Total liabilities andstockholders’ deficit                                                     | $659,973     |

|                                             | **2002**                                                | **2001**                                                |
|---------------------------------------------|---------------------------------------------------------|---------------------------------------------------------|
|                                             |                                                         |                                                         |
| Revenue:                                    |                                                         |                                                         |
| Theme parks andarcades                      | $1,216,283                                              | $1,763,280                                              |
| Custom applications andother                | 1,064,201                                               |       699,784             |
|                                             |                                                         |                                                         |
| Total revenue                               | 2,280,484                                               | 2,463,064                                               |
|                                             |                                                         |                                                         |
| Cost of sales and services                  |    1,318,119                             |    1,574,399                             |
|                                             |                                                         |                                                         |
| Gross margin                                | 962,365                                                 | 888,665                                                 |
|                                             |                                                         |                                                         |
| General and administrative expenses         |    2,119,229                             |    2,443,692                             |
|                                             |                                                         |                                                         |
| Loss from operations                        | (1,156,864)                                             | (1,555,027)                                             |
|                                             |                                                         |                                                         |
| Other income (expenses):                    |                                                         |                                                         |
| Interest income                             | 130                                                     | 1,338                                                   |
| Interest expense and financecharges         | (1,549,142)                                             | (1,456,647)                                             |
| Other income                                |        13,121        |        55,760        |
|                                             |                                                         |                                                         |
| Total other income(expenses)                | (1,535,891)                                             | (1,399,549)                                             |
|                                             |                                                         |                                                         |
| Net loss                                    | $(2,692,755)                                            | $(2,954,576)                                            |
|                                             |                                                         |                                                         |
|                                             |                                                         |                                                         |
| Weighted average shares outstanding         |  35,358,153                                        |  31,758,516                                        |
|                                             |                                                         |                                                         |
| Basic and diluted net loss per common share | $        (0.08) | $        (0.09) |

|                                                                                      | **2002**                                                                              | **2001**                                                                                           |
|--------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------|
| Cash flows from operatingactivities:                                                 |                                                                                       |                                                                                                    |
| Netloss                                                                              | $(2,692,755)                                                                          | $(2,954,576)                                                                                       |
| Adjustments toreconcile net loss to net cash used in operating activities:           |                                                                                       |                                                                                                    |
| Depreciationand amortization                                                         | 547,190                                                                               | 610,246                                                                                            |
| Accrued costof product financing arrangements and amortization of debt issuancecosts | 916,068                                                                               | 517,034                                                                                            |
| Effect ofbeneficial conversion feature and warrant costs                             | 156,900                                                                               | -                                                                                                  |
| Bad debtexpense                                                                      | 16,967                                                                                | 33,471                                                                                             |
| Common stockissued for services                                                      | 279,775                                                                               | 88,225                                                                                             |
| Common stockissued for interest and finance charges                                  | 236,830                                                                               | 225,900                                                                                            |
| Changes inoperating assets and liabilities:                                          |                                                                                       |                                                                                                    |
| Accountsreceivable and other                                                         | (112,569)                                                                             | 144,253                                                                                            |
| Prepaid andother assets                                                              | -                                                                                     | 38,887                                                                                             |
| Accountspayable                                                                      | 181,275                                                                               | 283,517                                                                                            |
| Accruedliabilities and other                                                         |    224,786                                                             |    323,766                                                                          |
|                                                                                      |                                                                                       |                                                                                                    |
| Net cash usedin operating activities                                                 | (245,533)                                                                             | (689,277)                                                                                          |
|                                                                                      |                                                                                       |                                                                                                    |
| Cash flows from investingactivities:                                                 |                                                                                       |                                                                                                    |
| Capitalexpenditures                                                                  | (52,212)                                                                              | (88,656)                                                                                           |
| Paymentreceived on note receivable-related party                                     |              -       |      34,897                                                               |
|                                                                                      |                                                                                       |                                                                                                    |
| Net cash usedin investing activities                                                 | (52,212)                                                                              |  (53,759)                                                                                     |
|                                                                                      |                                                                                       |                                                                                                    |
| Cash flows from financingactivities:                                                 |                                                                                       |                                                                                                    |
| Proceeds fromissuance of notes payable                                               | 60,000                                                                                | 79,990                                                                                             |
| Proceeds fromissuance of notes payable-stockholders                                  | 199,500                                                                               | 152,500                                                                                            |
| Proceeds fromconvertible debentures                                                  | 450,000                                                                               | -                                                                                                  |
| Proceeds fromobligations under product financing arrangements                        | -                                                                                     | 563,860                                                                                            |
| Payments onnotes payable                                                             | (250,141)                                                                             | (68,326)                                                                                           |
| Payments onobligations under product financing arrangements                          | (30,000)                                                                              | (101,000)                                                                                          |
| Increase(decrease) in book overdraft                                                 | (33,172)                                                                              | 27,598                                                                                             |
| Proceeds fromissuance of common stock                                                |               - |     82,279                                                                     |
|                                                                                      |                                                                                       |                                                                                                    |
| Net cashprovided by financing activities                                             |    396,187                                                             |   736,901                                                                                |
|                                                                                      |                                                                                       |                                                                                                    |
| Increase (decrease) in cash andcash equivalents                                      | 98,442                                                                                | (6,135)                                                                                            |
|                                                                                      |                                                                                       |                                                                                                    |
| Cash and cash equivalents,beginning of year                                          |              -       |       6,135                                                          |
|                                                                                      |                                                                                       |                                                                                                    |
| Cash and cash equivalents, endof year                                                | $   98,442                                                             | $          -_                                    |
|                                                                                      |                                                                                       |                                                                                                    |
|                                                                                      |                                                                                       |                                                                                                    |
| Supplemental disclosure of cashflow information:                                     |                                                                                       |                                                                                                    |
| Cash paid forinterest expense                                                        | $   75,761                                                             |     657,312                                                                    |
|                                                                                      |                                                                                       |                                                                                                    |
| Cash paid forincome taxes                                                            | $            -            | $          -_                                    |
|                                                                                      |                                                                                       |                                                                                                    |
| Non-cashactivity:                                                                    |                                                                                       |                                                                                                    |
| Conversion ofnotes payable to a stockholder into common stock                        | $           -                  | $      50,000                                                        |
|                                                                                      |                                                                                       |                                                                                                    |
| Common stockissued upon conversion of debentures                                     | $141,737                                                                              | $                - |

|                                                                  | **CommonStock**                                                                                   | **AdditionalPaid-In**                                                                                   | **Accumulated**                                                                                   |               |
|------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|---------------|
|                                                                  | **Shares**                                                                                        | **Amount**                                                                                              | **Capital**                                                                                       | **Deficit**   | **Total** |
| Balance at December 31, 2000                                     | 30,462,380                                                                                        | $152,312                                                                                                | $1,695,533                                                                                        | $(6,082,454)  | $(4,234,609) |
|                                                                  |                                                                                                   |                                                                                                         |                                                                                                   |               |  |
| Common stock issued for services                                 | 333,661                                                                                           | 1,668                                                                                                   | 86,557                                                                                            | -             | 88,225 |
|                                                                  |                                                                                                   |                                                                                                         |                                                                                                   |               |  |
| Common stockissued for interest and finance charges              | 1,400,492                                                                                         | 7,003                                                                                                   | 218,897                                                                                           | -             | 225,900 |
|                                                                  |                                                                                                   |                                                                                                         |                                                                                                   |               |  |
| Common stock issued for cash                                     | 485,309                                                                                           | 2,427                                                                                                   | 79,852                                                                                            | -             | 82,279 |
|                                                                  |                                                                                                   |                                                                                                         |                                                                                                   |               |  |
| Common stockissued as repayment of notes to stockholders         | 250,000                                                                                           | 1,250                                                                                                   | 48,750                                                                                            | -             | 50,000 |
|                                                                  |                                                                                                   |                                                                                                         |                                                                                                   |               |  |
| Net loss                                                         |                 - |              -                         |                -       | (2,954,576)   | (2,954,576) |
|                                                                  |                                                                                                   |                                                                                                         |                                                                                                   |               |  |
| Balance at December 31, 2001                                     | 32,931,842                                                                                        | 164,660                                                                                                 | 2,129,589                                                                                         | (9,037,030)   | (6,742,781) |
|                                                                  |                                                                                                   |                                                                                                         |                                                                                                   |               |  |
| Common stock issued for services                                 | 1,080,000                                                                                         | 5,400                                                                                                   | 274,375                                                                                           | -             | 279,775 |
|                                                                  |                                                                                                   |                                                                                                         |                                                                                                   |               |  |
| Common stockissued for interest and finance charges              | 1,805,135                                                                                         | 9,025                                                                                                   | 227,805                                                                                           | -             | 236,830 |
|                                                                  |                                                                                                   |                                                                                                         |                                                                                                   |               |  |
| Effect ofbeneficial conversion feature of convertible debentures | -                                                                                                 | -                                                                                                       | 67,500                                                                                            | -             | 67,500 |
|                                                                  |                                                                                                   |                                                                                                         |                                                                                                   |               |  |
| Issue ofstock warrants with convertible debentures               | -                                                                                                 | -                                                                                                       | 89,400                                                                                            | -             | 89,400 |
|                                                                  |                                                                                                   |                                                                                                         |                                                                                                   |               |  |
| Common stockissued upon conversion of debentures                 | 1,514,471                                                                                         | 7,573                                                                                                   | 134,164                                                                                           | -             | 141,737 |
|                                                                  |                                                                                                   |                                                                                                         |                                                                                                   |               |  |
| Net loss                                                         |                 - |                  - |                 - | (2,692,755)   | (2,692,755) |
|                                                                  |                                                                                                   |                                                                                                         |                                                                                                   |               |  |
| Balance at December 31, 2002                                     | 37,331,448                                                                                        | $     186,658                                                                  | $2,922,833                                                                                        | $(11,729,785) | $(8,620,294) |

|                                    | **2002**     | **2001**     |
|------------------------------------|--------------|--------------|
|                                    |              |              |
| Netloss                            | $(2,692,755) | $(2,954,576) |
|                                    |              |              |
| Negativecash flows from operations | (245,533)    | (689,277)    |
|                                    |              |              |
| Negativeworking capital            | (9,066,663)  | (5,170,214)  |
|                                    |              |              |
| Accumulateddeficit                 | (11,729,785) | (9,037,030)  |
|                                    |              |              |
| Stockholders’deficit         | (8,620,294)  | (6,742,781)  |

- CustomApplication Contracts

| Costs incurred on uncompletedcontracts | $341,668  |
|----------------------------------------|-----------|
|                                        |           |
| Estimated earnings                     | 537,821   |
|                                        |           |
|                                        | 879,489   |
|                                        |           |
| Billings to date                       | 944,760   |
|                                        |           |
|                                        | $(65,271) |

| Costs and estimated earnings inexcess of billings on uncompleted contracts | $17,342                                |
|----------------------------------------------------------------------------|----------------------------------------|
|                                                                            |                                        |
| Billings in excess of costs andestimated earnings on uncompleted contracts |      (82,613) |
|                                                                            |                                        |
|                                                                            | $(65,271)                              |

| Arcadeequipment               | $1,903,725                 |
|-------------------------------|----------------------------|
| Furnitureand equipment        | 223,206                    |
|                               |                            |
|                               | 2,126,931                  |
|                               |                            |
| Less:accumulated depreciation | (1,780,817)                |
|                               |                            |
| Propertyand equipment, net    | $   346,114 |

| Notes payableto a bank, bearing interest ranging from  the prime rate (4.75% at December 31,2002) to the  prime rate plus 2% per year and due in average monthly  paymentsof approximately $31,000, including interest,  through November 2002.  Thesenotes are collateralized  by certain equipment, licensing rights and by thepersonal guarantees of officers/stockholders of the  Company.                                                                                                                                                                                                                                                                                                                                                              | $427,980 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |          |
| Notespayable to banks, bearing interest from 6.75% to  9.5% per year, interest duemonthly and principal due  on demand.  These notes are not collateralized butare  guaranteed by officers/stockholders of the Company.  Effective January 17,2002, certain of these notes   were refinanced into a single note which bearsinterest  at the prime rate (4.75% at December 31, 2002) plus  1.5%, due in 36monthly installments of $8,824 and  collateralized by an office building ownedby an  officer/stockholder of the Company.                                                                                                                                                                                                                           | 191,354  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |          |
| Notes payableto third party entities and individuals  bearing interest at a stated rate of10% payable semi-annually with principal due three years after issuance  of thenote, which ranges from October 2001 to March  2002.  These notes are notcollateralized.  In connection with the funding of these notes, Ferris issued atotal of 412,500 shares of its common stock as equity  attachments to the noteholders and to pay debt issuance costs.  Accordingly, the actual weightedaverage  interest rate on these notes, including the effect of  the issuance ofcommon stock and the payment of debt  issuance costs, was approximately 16%.  Nointerest or  principal has been paid on these notes during the year  endedDecember 31, 2002. 250,000 | 250,000  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |          |
| Note payableto a financing entity, due on demand, non-interest bearing.  This note is notcollateralized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 19,990   |
| Total notespayable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | $889,324 |

| Convertiblenotes payable to stockholders, principal and interest due on demand, accruinginterest at 12% per year.  These notes are collateralized by certain equipmentand contain a provision to convert the note to common stock. | $100,000 |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                                                                                                                                                                                                                                    |          |
| Notepayable to a stockholder, principal and interest due on demand, interest accruesat 10% per year.  This note is not collateralized.                                                                                             | 194,031  |
|                                                                                                                                                                                                                                    |          |
| Notespayable to stockholders, non-interest bearing with principal due on demand.These notes are not collateralized.                                                                                                                | 616,000  |
|                                                                                                                                                                                                                                    |          |
| Totalnotes payable to stockholders                                                                                                                                                                                                 | $910,031 |

| Contractual balance includingaccrued interest | $5,165,213                                 |
|-----------------------------------------------|--------------------------------------------|
| Less: unamortized debt issuancecosts          |       75,205 |
|                                               |                                            |
| Total obligation                              | $5,240,418                                 |

| Deferredtax assets:               |                                                                                              |
|-----------------------------------|----------------------------------------------------------------------------------------------|
| Netoperating losses               | $3,639,890                                                                                   |
| Intangibleassets                  | 12,328                                                                                       |
| Valuationallowance                | (3,634,483)                                                                                  |
|                                   |                                                                                              |
| Totaldeferred tax assets          | 17,735                                                                                       |
|                                   |                                                                                              |
| Deferredtax liabilities:          |                                                                                              |
| Propertyand equipment             |     (17,735)                                                             |
|                                   |                                                                                              |
| Totaldeferred tax liability       |     (17,735)                                                             |
|                                   |                                                                                              |
| Netdeferred tax asset (liability) | $               - |

|                                                 | **2002**                                                       | **2001**                          |
|-------------------------------------------------|----------------------------------------------------------------|-----------------------------------|
|                                                 | **Amount**                                                     | **%**                             | **Amount** | **%** |
|                                                 |                                                                |                                   |  |  |
| Benefitfor income tax at federal statutory rate | $(915,537)                                                     | (34.0)%                           | $(1,004,556) | (34.0)% |
| Increasein valuation allowance                  | 814,371                                                        | 30.3                              | 995,233 | 34.0 |
| Other                                           | 101,166                                                        |      3.7 |           9,323 | 0.0 |
|                                                 |                                                                |                                   |  |  |
|                                                 | $          - |   0.0%                  | $              -_ | 0.0% |

|                                             | **2002**                                                | **2001**                                                |
|---------------------------------------------|---------------------------------------------------------|---------------------------------------------------------|
|                                             |                                                         |                                                         |
| Netloss–as reported                   | $(2,692,755)                                            | $(2,954,576)                                            |
|                                             |                                                         |                                                         |
| Netloss–proforma                      | $(2,721,480)                                            | $(2,982,396)                                            |
|                                             |                                                         |                                                         |
|                                             |                                                         |                                                         |
| Basic anddiluted loss per share-as reported | $        (0.08) | $        (0.09) |
|                                             |                                                         |                                                         |
| Basic anddiluted loss per share-proforma    | $        (0.08) | $        (0.09) |

|                                       | **Number ofShares Under Options** | **Weighted-AverageExercise Price** |
|---------------------------------------|-----------------------------------|------------------------------------|
|                                       |                                   |                                    |
| Outstanding - December 31, 2000       | 1,624,000                         | $0.04                              |
|                                       |                                   |                                    |
| Granted                               | 1,749,000                         | $0.10                              |
| Exercised                             | -                                 | -                                  |
| Forfeited                             | -                                 | -                                  |
|                                       |                                   |                                    |
| Outstanding – December 31, 2001 | 3,373,000                         | $0.12                              |
|                                       |                                   |                                    |
| Granted                               | 150,000                           | $0.21                              |
| Exercised                             | -                                 |                                    |
| Forfeited                             | -                                 |                                    |
|                                       |                                   |                                    |
| Outstanding – December 31, 2002 | 3,523,000                         | $0.12                              |
|                                       |                                   |                                    |
| Exercisable – December 31, 2002 |    825,000         | $0.28                              |

| **Number of****Shares** | **Vested** | **Expiration****Date** | **WeightedAverage Exercise Price** |
|-------------------------|------------|------------------------|------------------------------------|
|                         | **-**      | **-**                  |                                    |
|                         |            |                        |                                    |
| 2,698,000               | -          | -                      | $0.005                             |
| 350,000                 | 350,000    | 2003                   | $0.15                              |
| 150,000                 | 150,000    | 2006                   | $0.81                              |
| 100,000                 | 100,000    | -                      | $0.49                              |
| 75,000                  | 75,000     | -                      | $0.005                             |
| 150,000                 | 150,000    | 2012                   | $0.21                              |
|                         |            |                        |                                    |
| 3,523,000               | 825,000    |                        |                                    |

|                                 | **Numberof Shares**                                                                   | **WeightedAverage Exercise****Price** |
|---------------------------------|---------------------------------------------------------------------------------------|---------------------------------------|
|                                 |                                                                                       |                                       |
| Outstanding at December 31,2000 | 493,933                                                                               | $0.81                                 |
|                                 |                                                                                       |                                       |
| Granted                         | 2,770                                                                                 | $0.21                                 |
| Exercised                       | -                                                                                     | -                                     |
| Forfeited                       |               - | -                                     |
|                                 |                                                                                       |                                       |
| Outstanding at December 31,2001 | 496,703                                                                               | $0.81                                 |
|                                 |                                                                                       |                                       |
| Granted                         | 500,000                                                                               | $0.71                                 |
| Exercised                       | -                                                                                     | -                                     |
| Forfeited                       |             -             | -                                     |
|                                 |                                                                                       |                                       |
| Outstanding at December 31,2002 | 996,703                                                                               | $0.76                                 |

|                     |                 |
|---------------------|-----------------|
| 2003                | $185,074        |
| 2004                | 107,410         |
| 2005                | 107,410         |
| 2006                | 107,410         |
| 2007 and thereafter |  2,110,750 |
|                     |                 |
|                     | $2,618,054      |

|                                  | **ThemeParks****and Arcades** | **CustomApplications** | **Other**   | **Total**   |
|----------------------------------|-------------------------------|------------------------|-------------|-------------|
|                                  |                               |                        |             |             |
| **Year ended December 31,2002:** |                               |                        |             |             |
|                                  |                               |                        |             |             |
| Revenues                         | $1,216,283                    | $1,064,021             | $180        | $2,280,484  |
| Income (loss) fromoperations     | (306,878)                     | 255,373                | (1,105,359) | (1,156,864) |
| Total assets                     | 393,707                       | 158,483                | 107,783     | 659,973     |
| Interest expense                 | 856,068                       | -                      | 693,074     | 1,549,142   |
| Depreciation expense             | 463,075                       | 5,000                  | 60,987      | 529,062     |
| Capital expenditures             | -                             | 52,212                 | -           | 52,212      |
|                                  |                               |                        |             |             |
| **Year ended December 31,2001:** |                               |                        |             |             |
|                                  |                               |                        |             |             |
| Revenues                         | $1,763,280                    | $699,599               | $185        | $2,463,064  |
| Income (loss) fromoperations     | (421,253)                     | 62,358                 | (1,216,132) | (1,555,027) |
| Total assets                     | 845,558                       | -                      | 115,349     | 960,907     |
| Interest expense                 | 1,053,097                     | -                      | 403,550     | 1,456,647   |
| Depreciation expense             | 514,926                       | -                      | 67,091      | 582,017     |
| Capital expenditures             | 88,656                        | -                      | -           | 88,656      |

| Name                  | Age | Positions                                                     | Date became director or executive officer |
|-----------------------|-----|---------------------------------------------------------------|-------------------------------------------|
| L. Kelly Jones        | 49  | chief executive officer and chairman of the board ofdirectors | March 26, 1997                            |
| Bob Ferris            | 31  | president and director                                        | September 21, 2001                        |
| Lance Loesberg        | 47  | executive vice-president and director                         | September 21, 2001                        |
| John F. Aleckner, Jr. | 57  | director                                                      | March 26, 1997                            |
| L. Andrew Wells       | 34  | director                                                      | September 21, 2001                        |
| Kimberly Biggs        | 36  | secretary and treasurer                                       | March 26, 1997                            |

| Date    | Recipient             | Number ofshares |
|---------|-----------------------|-----------------|
| 1/7/02  | John F. Aleckner, Jr. | 238,095         |
| 1/15/02 | John F. Aleckner, Jr. | 400,000         |
| 2/15/02 | John F. Aleckner, Jr. | 78,125          |
| 2/27/02 | John F. Aleckner, Jr. | 172,414         |
| 2/28/02 | John F. Aleckner, Jr. | 151,724         |
| 3/27/02 | John F. Aleckner, Jr. | 318,182         |
| 3/29/02 | John F. Aleckner, Jr. | 136,364         |
| 4/12/02 | John F. Aleckner, Jr. | 185,185         |

| Name and Principal Position                                                   | Year | Salary  | Bonus | Other Annual Compensation | Restricted Stock Awards | Securities Underlying Options/SARs |
|-------------------------------------------------------------------------------|------|---------|-------|---------------------------|-------------------------|------------------------------------|
| L. Kelly Jones, chief executive officer and chairman of theboard of directors | 2002 | -       | -     | -                         | -                       | -                                  |
|                                                                               | 2001 | -       | -     | -                         | -                       | -                                  |
|                                                                               | 2000 | -       | -     | -                         | -                       | -                                  |
| Bob Ferris, president and director                                            | 2002 | $60,000 | -     | -                         | -                       |                                    |
|                                                                               | 2001 | $60,000 |       |                           |                         | 687,000(1)                         |
|                                                                               | 2000 | $60,000 | -     | -                         | -                       | 75,000(2)                          |
|                                                                               |      |         |       |                           |                         |                                    |
| Lance Loesberg, executive vice-president anddirector                          | 2002 | $85,000 | -     | -                         | -                       |                                    |
|                                                                               | 2001 | 75,833  |       |                           |                         | 225,000(3)                         |
|                                                                               | 2000 | $75,000 | -     | -                         | -                       | 75,000(4)                          |
|                                                                               |      |         | -     | -                         | -                       | -                                  |
| John F. Aleckner, Jr.,director                                                | 2002 |         |       |                           |                         |                                    |
|                                                                               | 2001 | -       | -     | -                         | -                       | -                                  |
|                                                                               | 2000 | -       | -     | -                         | -                       | -                                  |
|                                                                               |      |         |       |                           |                         |                                    |
| L. Andrew Wells, director                                                     | 2002 | -       | -     | -                         | -                       |                                    |
|                                                                               | 2001 | -       | -     | -                         | -                       | 687,000(5)                         |
|                                                                               | 2000 | -       | -     | -                         | -                       | -                                  |
|                                                                               |      |         |       |                           |                         |                                    |
| Kimberly Biggs, secretary and treasurer                                       | 2002 | $7500   | -     | -                         |                         | 100,000(6)                         |
|                                                                               | 2001 | -       | -     | -                         | -                       | -                                  |
|                                                                               | 2000 | -       | -     | -                         | -                       | -                                  |

- eachof our directors; 
- eachperson who owns beneficially more than 5% of any class of our outstanding equitysecurities; and 
- allof our directors and executive officers as agroup.

| Shareholders'Name and Address                                    | Number of Shares Owned       | Percent |
|------------------------------------------------------------------|------------------------------|---------|
| L. Kelly Jones440 North CenterArlington, Texas 76011             | 3,088,752(1)                 | 8.1%    |
| Bob Ferris1941 South BrightonCircleMesa, Arizona 85208           | 5,060,240(2)                 | 13.3%   |
| Lance Loesberg7700 Heather RidgeCourtIrving, Texas 75063         | 542,169(3)                   | 1.4%    |
| John F. Aleckner, Jr.2905 Forestwood DriveArlington, Texas 76006 | 2,172,076(4)                 | 6.2%    |
| L. Andrew Wells1011 Compass CoveCircleSpring, Texas 77379        | 2,530,120(5)                 | 6.6%    |
| Kimberly Biggs2414 Green WillowCourtArlington, Texas 76001       | 42,460(6)                    | *       |
| Dave and Nancy Ferris(7)719 Misty LeaHouston, Texas 77090        | 5,286,556                    | 13.9%   |
| All officers and directors as agroup (6 persons)                 | 18,907,558(1)(2)(3)(4)(5)(6) | 49.55%  |

#### **Item 14. Controls and Procedures.**

| Signature                                                                                                     | Title                                                        | Date            |
|---------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------|-----------------|
| /s/ L. KellyJones                                           | chief executive officer, chief financial officer anddirector | April 15, 2003  |
| L. Kelly Jones                                                                                                |                                                              |                 |
| /s/ BobFerris                 | president and director                                       | April 15, 2003  |
| Bob Ferris                                                                                                    |                                                              |                 |
| /s/ LanceLoesberg                                                     | executive vice-president and director                        | April 15, 2003  |
| Lance Loesberg                                                                                                |                                                              |                 |
| /s/ John F. Aleckner, Jr.                                                                                     | director                                                     | April 15, 2003  |
| John F. Aleckner, Jr.                                                                                         |                                                              |                 |
| /s/ L. Andrew Wells                                                   | director                                                     | April  15, 2003 |
| Andrew Wells                                                                                                  |                                                              |                 |