<PAGE>

                    U.S. SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                  FORM 10-KSB
(Mark One)

[X]  Annual report under section 13 or 15(d) of the Securities Exchange Act of
     1934 for the fiscal year ended December 31, 1999.

[_]  Transition report under section 13 or 15(d) of the Securities Exchange Act
     of 1934 for the transition period from _____________ to ______________

COMMISSION FILE NUMBER 000-29800

                              Virtgame.com Corp.
                              ------------------
            (Exact name of registrant as specified in its charter)


                Delaware                                    33-0716247
     -------------------------------                    -------------------
     (State or other jurisdiction of                    (I.R.S. Employer
      incorporation or organization)                    Identification No.)

          12625 High Bluff Drive
                Suite 205A
           San Diego, California                            92130-2053
    ---------------------------------------                 ----------
    (Address of principal executive offices)                 (Zip Code)

       Registrant's telephone number, including area code  858-259-5015
                                                              ---------

Securities registered pursuant to section 12(g) of the Act:

                               (Title of Class)
                                 Common Shares

Check whether the issuer (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  [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.[X]

Virtual Gaming Technologies, Inc.'s revenues for the most recent fiscal year
were $ 465,327.

The aggregate market value of the voting stock of the Registrant held by non-
affiliates of the Registrant, based upon the closing price of the Common Stock
on the OTC Bulletin Board on March 24, 2000 was approximately $ 18,812,500.  The
number of shares outstanding of the registrant's Common Stock, as of March 24,
2000 was 10,750,293.


                      DOCUMENTS INCORPORATED BY REFERENCE

Document of the Registrant                       Form 10-KSB Reference Location
None                                                         N/A
<PAGE>

                               Virtgam.com Corp.

                       Table of contents for Form 10K-SB
                          Year Ended December 31, 1999

<TABLE>
<CAPTION>
                                    PART I
                                    ------
<S>                                                                                                       <C>
Item 1.   Business

            Business Developments                                                                          3
            Business of Company                                                                            4
            Products and Services                                                                          5
            Customers                                                                                      6
            New Industry and Competition                                                                   6
            Regulation                                                                                     7
            Employees                                                                                      7
            Research and Development                                                                       7
            Proprietary Technology                                                                         7
            Marketing and Sales                                                                            8
Item 2.   Description of Property                                                                          8
Item 3.   Legal Proceedings                                                                                8
Item 4.   Submission of Matters to a Vote of Security Holders                                              8

                                    PART II
                                    -------

Item 5.   Market for Common Equity and Related Stockholders Matters                                        8
Item 6.   Management's Discussion and Analysis or Plan of Operation                                        9
Item 7.   Audited Financial Statements                                                                    11
Item 8.   Changes In and Disagreement With Accountants on Accounting and Financial Disclosure             12

                                   PART III
                                   --------

Item 9.   Directors, Executive Officers, Promoters and Control Persons                                    12
Item 10.  Executive Compensation                                                                          14
Item 11.  Security Ownership of Certain Beneficial Owners and Management                                  16
Item 12.  Certain Relationships and Related Transactions                                                  16
Item 13.  Exhibits and Reports on Form 8-K                                                                17
</TABLE>

                                       2
<PAGE>

                                    PART I
                                    ------

     This Report contains forms of forward-looking statements that are based on
the Company's beliefs as well as assumptions made by and information currently
available to the Company. When used in this Report, the words "believe,"
"expect," "anticipate," "estimate" and similar expressions are intended to
identify forward-looking statements. Such statements are subject to certain
risks, uncertainties and assumptions, including without limitations, material
risk factors such as inadequate working capital, auditors qualification as to
going concern, recent commencement of operations, lack of market acceptance to
date for the Company's products and services, nominal revenues to date,
continuing losses from operations, future growth of revenue and threat of
regulation of company's business. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results will vary materially from those anticipated, estimated, or
projected and the variations may be material. The Company cautions potential
investors not to place undue reliance on any such forward-looking statements all
of which speak only as of the date made.

Item 1.   Business

Business Developments
---------------------

     The Company is engaged in the business of offering over the Internet
casino-style gaming operations, including baccarat, blackjack and video poker,
and a pari-mutuel sports wagering service. The Company's gaming operations are
offered in certain international jurisdictions, located in Europe, the
Caribbean, Latin America, the Middle East, Australia, Asia and Africa supported
by a server site and hardware located in Antigua. The Company commenced its
gaming operations in September 1997.

     The Company was formed under the laws of the State of Delaware on October
24, 1995 under the name MBA Licensing Corp. The Company's initial operations
included the development of CD-ROM and video game cartridges that incorporated
certain patented virtual reality technology. In November 1995, the Company
conducted a private placement of its $.00001 par value common stock ("Common
Stock") at $0.25 per share pursuant to Rule 504 under the Securities Act of 1933
("1933 Act"). In that offering, the Company sold 1,160,000 shares of Common
Stock in consideration of cash proceeds of $60,000, net of $5,000 of offering
costs, and the cancellation of $225,000 of licensing and consulting fees due and
payable. In May 1996, the Company chose to suspend all operations relating to
the development of the virtual reality CD-ROMs and video game cartridges in
favor of pursuing the development of casino-style gaming operations over the
Internet. On June 20, 1996, the Company changed its corporate name to Internet
Gaming Technologies, Inc. On January 22, 1997, the Company changed its corporate
name to Virtual Gaming Technologies, Inc. In August 1999, the Company changed
its name to Virtgame.com Corp.

     Pursuant to a Securities Purchase Agreement dated September 5, 1996, as
amended, eLOT, Inc. ("eLOT") agreed to purchase 233,333 shares of Common Stock
at $3.00 per share. In addition, the Company granted eLOT a common stock
purchase warrant entitling eLOT to purchase 200,000 shares of Common Stock at an
exercise price of $3.45 per share. The warrant is immediately exercisable and
expires on March 6, 2002. eLOT was formerly known as eLottery and prior to that
as Unistar Entertainment, Inc.

     Between April 1997 and August 1997, the Company conducted a private
placement of shares of Common Stock, at a price of $2.00 per share, pursuant to
Rule 506 under the 1933 Act. In that offering, the Company sold 1,018,250 shares
of Common Stock for the gross proceeds of $2,036,500. Proceeds from the sale of
the shares were applied towards the development and implementation of the
Company's Internet gaming operations and working capital.

     Between January 1998 and December 1998, the Company conducted a private
placement of 1,400,000 shares of

                                       3
<PAGE>

Common Stock, at a price of $3.00 per share, pursuant to Rule 506 under the 1933
Act. In that offering, the Company sold 1,387,238 shares of Common Stock for the
gross proceeds of $4,161,703. Proceeds from the sale of the shares were applied
towards the development and implementation of the Company's Internet gaming
operations and working capital.

     Between February 1999 and June 1999, the Company conducted a private
placement of 700,000 shares of Common Stock at an offering price of $3.00 per
share, pursuant to Rule 506 under the 1933 Act. In that offering, the Company
sold a total of 181,358 shares of Common Stock for the gross proceeds of
$544,074. Proceeds from the sale of the shares were applied towards the
development and implementation of the Company's Internet gaming operations and
working capital.

     Between August 1999 and January 2000, the Company conducted a private
placement of 2,100,000 shares of Common Stock at an offering price of $1.50 per
share, pursuant to Rule 506 under the 1933 Act. In that offering, the Company
sold a total of 1,301,600 shares of Common Stock for the gross proceeds of
$1,952,400. Proceeds from the sale of the shares were applied towards the
development and implementation of the Company's Internet gaming operations and
working capital.

     In February 2000, the Company started a private placement of 1,000,000
shares of common Stock, at a price of $1.50 per share. At the time of this 10-
KSB report, 213,333 shares have been sold for the gross proceeds of $320,000.
The placement is being conducted pursuant to rule 506 under the 1933 Act.

     On December 21, 1999, the Company acquired all of the issued and
outstanding common shares of Primeline Technologies, Inc. in consideration of
Virtgame's issuance of 447,208 shares of its common stock to Primeline
stockholders.

     In February 2000 the company signed a letter of intent to merge into eLOT,
Inc.  The merger will be conducted as a tax-free reorganization in pursuant to
section 368 of the Internal Revenue Code. The letter of intent calls for the
close, sale or spin off of the Company's existing gaming operations in Antigua.
The merger will be effected by eLOT issuing one share of its common stock in
exchange for every three shares of common stock of VGTI issued and outstanding
on the closing date. Micahel Yacenda, a director of Virtgame.com is president of
eLottery, Inc. a subsidiary of eLOT, Inc.

     Unless the context otherwise requires, all references to the Company
includes its wholly-owned subsidiaries Internet Gaming Technologies, Inc., a
Nevada corporation, Emerald Riviera Ltd., an Irish corporation, Virtual Gaming
Technologies Argentina, S.A., an Argentinean corporation and Virtual Gaming
Technologies (Antigua) Ltd., an Antiguan corporation. The Company's executive
offices are located at 12625 High Bluff Drive, Suite 205A, San Diego, California
92130; telephone number (619) 259-5015.

Business of Company
-------------------

     The Company has established an Internet web site at which it offers
interactive gaming service and a virtual casino under the service name
"Constellation." The web site is located on the Internet at www.virtcasino.com
and is accessible by the general public, however; only established subscribers
will be permitted to play the gaming opportunities for money. The web site is
accessible by a minimum hardware configuration consisting of a 486 personal
computer with Windows 95 or greater, with 16 MB RAM, 32 MB free hard disk space,
a 14,400 modem and a direct PPP Internet connection. All games are provided in a
Windows-based, menu driven format with "point and click" interactivity. Persons
who wish to conduct gaming operations at Constellation are able to subscribe
over the Internet by completing an application appearing at the web site. Part
of the application process requires that the subscriber opens an account, and
make a minimum deposit with the Company. The Company accepts subscriptions only
from persons over the age of 21 known or believed to reside in jurisdictions
that do not prohibit Internet gaming. Subscriptions will not be accepted from
persons believed to be citizens or residents of the United States.

                                       4
<PAGE>

     The Company has internally developed proprietary software applications,
based on the Java programming language, which allows for interactive gaming,
including simulated casino motion and sound, on a real-time basis. The Company
offers its gaming operations in certain international jurisdictions located in
Asia, the Caribbean, Latin America, the Middle East, Australia, Europe and
Africa. The Company's gaming operations are conducted by its wholly-owned
subsidiary, Virtual Gaming Technologies (Antigua) Ltd., pursuant to a non-
exclusive license from the Company and supported by a server site, hardware and
banking relations located in St. Johns, Antigua, West Indies.

     From the inception of operations in September 1997 through December 31,
1999 the Company has generated $731,607 of gross revenue from gaming operations.
At the time of this 10K-SB Report, the Company had accepted 42,871 subscriptions
for its Internet gaming operations and has had 1,381 active players. As of the
same date, customer cash deposits which are used by customers for wagering, from
inception of gaming operations totaled approximately $1,307,000.

     The Company has signed a letter of intent with the province of Chaco,
Argentina to provide technology for internet lotteries in that province, and the
Company intends to pursue similar arrangements with other provinces in South
America under its web site www.OfficialGames.com or www.juegosoficiales.com.
                           ---------------------    -----------------------

Products and Services
---------------------

     The Company has established a web-site, located on the Internet at
www.virtcasino.com, at which it offers an interactive gaming service and a
virtual casino under the service name "Constellation."  The Company has
established a second web-site, located at www.virtsports.com, at which it offers
a pari-mutuel sports wagering service under the service name International
Sports Market. The web-sites are accessible by the general public, however, only
established customers will be permitted to play the gaming opportunities for
money.

     The Company's web-sites are accessible by a minimum hardware configuration
consisting of a 486 personal computer with Windows 95 or greater, with 16 MB
RAM, 20 MB free hard disk space, a 14,400 modem and a direct PPP Internet
connection. All games are provided in a Windows-based, menu driven format with
"point and click" interactivity. Persons who wish to conduct gaming operations
at Constellation or Internet Sports Market are able to subscribe over the
Internet by completing an application appearing at the web-site. Part of the
application process requires that the subscriber open an account and make a
minimum deposit with the Company of $20.

     The web-sites are controlled by the Company and are designed to invite the
customer to sign up and apply for casino and sports-wagering membership. After
their membership application is reviewed, it is either accepted or rejected
based on criteria including, but not limited to, age and geographic location of
the customer. The Company's policy is to accept subscriptions only from persons
over the age of 21 and believed to reside in jurisdictions that are not known to
expressly prohibit Internet gaming. Subscriptions will not be accepted from
persons believed to be citizens or residents of the United States. The Company
uses, among other techniques, Internet databases that publish the local
addresses of most Internet domain names in order to verify that the subscriber
resides in a jurisdiction that is not known to prohibit Internet gaming. Upon
acceptance, the approved customer is then allowed to download the gaming
software over the Internet for installation on their personal computer. The
customer is then given a username and password and is thereby able to access the
Company's gaming servers over the Internet through their Internet service
provider.

     The Company's web-sites allow the customers to review all terms, rules and
conditions applicable to gaming and other uses at the site. All gaming winnings
and losses are debited and credited to the customer's account on a real-time
basis. All games are conducted pursuant to house rules and advantages that are
published at the web-site and which have similar odds and house rules as to
those offered by the major Las Vegas casinos.

     Customer's conduct deposits to their gaming accounts by way of credit card
or wire payment. In August 1998, the Company began accepting Visa and MasterCard
transactions over a secure platform through Barclays Bank PLC. The

                                       5
<PAGE>

Company's agreement with Barclays enables the Company to process credit cards
for the customers of its Constellation casino service.

     The Company internally developed the Constellation casino and tested it at
beta test sites for three months prior to the commencement of commercial
operations in September 1997. The gaming opportunities offered at the
Constellation web-site have been designed to evoke the sights and sounds similar
to a Las Vegas style casino. Computer graphics present the "lobby" of the
Constellation, consisting of several menu items which the customer can choose to
enter. Included among those menu items are the various gaming rooms, including
baccarat, blackjack and video poker. The customers use the Windows format of
commands to carry out gaming activities. The web-site offers audio features,
including the sound of shuffling cards, video poker machine payouts and general
casino background sounds. The Constellation web-site is presently written in
English, Spanish, Japanese, Chinese, Korean and Portuguese.

     On April 1, 1998, the Company commenced offering a pari-mutuel sports
wagering service at its International Sports Market web-site. The Company offers
at this web-site the opportunity to bet on a variety of sporting events played
in the United States, Central and South America, Europe and Asia. The sports
wagering service is conducted by way of proprietary software internally
developed by the Company. Management of the Company believes that its sports
wagering service is currently unique on the Internet and that it provides the
Company certain advantages including limited exposure to sports wagering risk.

     On December 16, 1999, the Company announced the creation of a state
Internet lottery site for Argentina. OfficialGames.com (JuegosOficiales.com)
will serve as the official gaming portal for state of Chaco in Argentina. The
soft launch of the site was conducted in January 2000 with instant lottery and
instant bingo games. The Company intends to expand its Internet lottery sites to
additional states in Argentina. Non-Internet lotteries are currently a $2.8
billion industry in Argentina.

     On December 21, 1999, the Company acquired Primeline Technologies, Inc., a
producer of sports wagering software that already has been approved by the
Nevada Gaming Control Board. The Company bought Primeline Technologies in order
to improve Primeline's over-the-counter software work on the Internet and to
create a seamless system for online and on-site sportsbetting. The Company
intends to make its on-line betting service available both as an Internet
version as well as an Intranet version (i.e. via a closed loop system within a
state).

     On January 25, 2000 the Company completed an agreement to provide Coast
Resorts with a Nevada Intranet Sports Book System. The system will be presented
to the Nevada Gaming Control Board in March 2000 for formal review and it is
expected to be approved and operational by Coast Resort in second quarter of
year 2000.

Customers
---------

     The Company's policy is to accept subscriptions only from persons over the
age of 21 and believed to reside in jurisdictions that are not known to
expressly prohibit Internet gaming. Subscriptions will not be accepted from
persons believed to be citizens or residents of the United States. The Company
uses, among other techniques, Internet databases that publish the local
addresses of most Internet domain names in order to verify that the subscriber
resides in a jurisdiction that is not known to prohibit Internet gaming

New Industry and Competition
-----------------------------

     The Company offers an interactive gaming service and virtual casino on the
Internet. Although the gaming industry is well established and has recently
experienced significant growth and profitability, gaming on the Internet is a
recent development and an unproven segment of the gaming industry and the
Company expects that there will be intense competition in Internet gaming. The
barrier to entry in Internet markets is generally low. In addition, several
providers are offering wagering on sporting events and lottery tickets from
international lotteries.

                                       6
<PAGE>

Regulation
----------

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

     At the present time the Company believes that several developed countries,
including Australia and several countries in Europe, the Caribbean, Latin
America, the Middle East, Asia, and Africa have not prohibited Internet gaming
activities. However, gaming over the Internet is a new industry and some or all
of these foreign jurisdictions may take action to more severely regulate or even
prohibit Internet gaming operations in their jurisdictions. The Company intends
to adopt a proactive policy of lobbying international jurisdictions, where
appropriate, for purposes of seeking approval of Internet gambling and the
regulation of those activities on a basis that is favorable to the Company.

     The Company believes that as of the date of this 10-KSB Report, many
federal and state prosecutorial  agencies in the United States have taken the
position that the provision of Internet gaming services to residents of the
United States are subject to existing federal and state laws which generally
prohibit the provision of gaming opportunities, except where licensed or subject
to exemption. On the other hand, it is the Company's understanding that many
providers of Internet gaming services to citizens and residents of the United
States have taken the position that existing federal and state laws pertaining
to the provision of gaming opportunities do not apply to Internet gaming
services. In 1997 and 1999, legislation was introduced to the United States
Senate and House of Representatives which, if enacted, would have effectively
amended the Federal Wire Statute, codified at 18 U.S.C. (S) 1084, to prohibit
the provision of Internet gaming operations to residents of the United States.
No action was taken on the bills prior to the end of the legislative session,
however there can be no assurance that similar legislation will not be
introduced in future legislative sessions. (Internet Gambling Prohibition Act of
1997; S. 474 and H.R. 2380).

     At the present time, it is the Company's policy not to offer its Internet
gaming services to citizens or residents of the United States and to otherwise
endeavor to comply with federal and state laws in the United States pertaining
to gaming.

Employees
---------
     As of the date of this 10-KSB Report, the Company employs 24 people on a
full and part time basis, 3 of which are based in Antigua.

Research and Development
------------------------

     The Company spent approximately $706,000 in research and development in
1999 all of which were written off during the year. The Company intends to
conduct continuing development and innovation of its products in accordance with
changing consumer preferences, demographics, and the evolution of new
technologies. The Company's development strategy is to leverage its technology
and the technology of other software developers, with the goal of providing
applications that are competitive and innovative in the Internet gaming
industry.

Proprietary Technology
----------------------

     The Company has internally developed proprietary software applications,
based on the Java programming language that allows for interactive gaming,
including simulated casino motion and sound, on a real-time basis. The Company
has also developed a web-site called Virtpartners, at the site address
www.virtpartners.com. The site enables the Company to establish strategic
--------------------
alliances and joint ventures with agents around the world. The agent or the

                                       7
<PAGE>

marketing partner can track, on the Internet and on a real time basis, the share
of his or her customer's gaming activity and the corresponding commission earned
in the win of the casino and the sports wagering system. The Virtpartners
software assigns agent codes automatically, identifies the site or e-mail
campaign the customer is associated with, provides full reporting capability for
the agent and has multi-level functionality to permit regional agents or joint
venture partners to receive an override commission on other agents they recruit.

     The Company has also developed a Web based String Translator technology
that allows any language to be added to the casino game, sports-wagering, web-
sites, and administrative tools and customer service system in a fast and
seamless manner. This translation technology can be applied to any HTML web-
site.

Marketing and Sales
-------------------

     The Company's primarily marketing strategy is to sign up agents as part of
a marketing partnership program under Virtpartners. Recently several such
partnership agreements were signed and some of the programs have started
producing revenues in 1999. These alliances include a variety of sources ranging
from individuals to established international companies in different businesses
such as web sites, search engines, for fun casinos as well as Internet service
providers, hotel room pay per view and interactive service providers.

     Virtpartners, with site address www.virtpartners.com, enables the Company
                                     --------------------
to leverage its marketing influence worldwide through a network of partner Web-
sites, individual agents and strategic alliances and joint ventures. The agent
tracking system enables joint venture partners, referring web-sites,
professional gaming agents, individual full time and part time agents to bring
in customers; identifies which site or e-mail campaign refers a prospect. The
system then assigns the agents code to the customer indefinitely; tracks the
customer net win and allows the agent to see real time reports of the customer's
gaming activity and their corresponding commission earned. The system also
provides full reporting capability for the web-site agents including usernames
of customers, net win by game, net commission per customer, time period,
language and country.

Item 2.   Description  of Property

     The Company's executive offices are located in San Diego, California and
consist of approximately 4,000 square feet for a monthly rent of approximately
$10,600. The Company's Antigua subsidiary is located in Antigua where the
Company's servers and games are operated and managed.

Item 3.   Legal Proceedings

     The Company is not a party in any litigation and has no knowledge of any
pending legal proceedings in any court or agency of government, or government
authorities.

Item 4.   Submission of Matters to a Vote of Security Holders

     No matters were submitted during the fourth quarter of fiscal 1999 to a
vote of security holders, through the solicitation of proxies, or otherwise.

                                    PART II
                                    -------

Item 5.   Market for Common Equity and  Related Stockholders Matters

     The Company's Common Stock is listed on the Over the Counter Bulletin Board
under the symbol "VGTI." The following table sets forth the high and low closing
prices of the Company's Common Stock for each calendar

                                       8
<PAGE>

quarter since commencement of trading. These quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not represent
actual transactions.

                                     High       Low
                                     ----       ---
Mar 31, 1998                         5.63      2.81
June 30, 1998                       11.25      3.75
September 30, 1998                  11.25      2.88
December 31, 1998                    5.00      3.38
March 31, 1998                       4.43      3.38
June 30, 1999                        4.87      2.70
September 30, 1999                   3.72      1.75
December 31, 1999                    4.12      1.50

     On December 31, 1999, the closing price for the Company's Common Stock was
$ 1.56 per share. As of that date, the Company had 168 stockholders of record
and approximately 797 beneficial holders of stock.

     The Company has not paid any dividends on its Common Stock and currently
intends to retain any future earnings for use in its business; therefore, the
Company does not anticipate paying cash dividends in the foreseeable future

     During the year the Company sold unregistered shares of its Common Stock in
the following transactions:

A. In April 1999, the Company issued to one of its officers and one of its
   employees options to purchase an aggregate of 185,000 shares of Common Stock
   at an exercise price of $3.25 per share. Options to purchase 85,000 shares of
   Common Stock were issued to an officer of the Company, of which options to
   purchase 45,000 shares of Common Stock were immediately exercisable upon
   grant, options to purchase 40,000 shares of Common Stock vest and first
   become exercisable on April 29, 2000. All options issued to the employees
   were immediately exercisable upon grant. All of the foregoing options expire
   on April 29, 2002. There was no underwriter involved in the issuances. The
   issuances were conducted pursuant to Section 4(2) of the 1933 Act.

B. In July 1999, the Company issued to two of its officers and one of its
   employees options to purchase an aggregate of 1,100,000 shares of Common
   Stock at exercise price ranging between $2.16 and $1.62 per share. Options to
   purchase 800,000 shares of Common Stock were issued to two officers of the
   Company, of which options to purchase 650,000 shares of Common Stock were
   immediately exercisable upon grant, options to purchase 150,000 shares of
   Common Stock vest and first become exercisable on July 26, 2000. Option to
   purchase 100,000 Common Stock issued to the employee were immediately
   exercisable upon grant, and options to purchase 100,000 shares vests and
   first becomes exercisable on July 26, 2000 and the remainder 100,000 options
   first become exercisable on July 26, 2001. Options to purchase 900,000 Common
   Stock expire on July 25, 2004, options to purchase 100,000 Common Stock will
   expire on July 25, 2005 and the remainder 100,000 expires on July 25, 2006.
   There was no underwriter involved in the issuances. The issuances were
   conducted pursuant to Section 4(2) of the 1933 Act.

C. In September 1999, the Company issued to two of its officers options to
   purchase an aggregate of 690,000 shares of Common Stock at exercise price
   ranging between $0.10 and $3.00 per share. All of these options were
   immediately exercisable upon grant. There was no underwriter involved in the
   issuances. Options to purchase 600,000 Common Stock expire on September 1,
   2002; options to purchase 90,000 Common Stock will expire on September 1,
   2004. The issuances were conducted pursuant to Section 4(2) of the 1933 Act.

D. In December 1999, the Company issued to sixteen of its employees options to
   purchase an aggregate of 116,500, shares of Common Stock at exercise price of
   $2.00 per share. Options to purchase 65,000 Common Stock were immediately
   exercisable upon grant and 45,5000 vest and first become exercisable on
   December 16, 2000, options for 3,000 first becomes exercisable on December
   16, 2001 and 3,000 on December 16, 2002. Options to purchase 110,5000 Common
   stock expire on December 14, 2003, options to purchase 3,000 Common Stock
   expire on December 14, 2004 and options to purchase 3,000 Common Stock
   expires on December 14,2005. There was no underwriter involved in the
   issuances. The issuances were conducted pursuant to Section 4(2) of the 1933
   Act.

E. In February 1999, the Company issued to four investment bankers warrants to
   purchase an aggregate of 100,000 shares of Common Stock at exercise price of
   $5.00 per share. All the foregoing options are immediate exercisable and
   expire on February

                                       9
<PAGE>

     20, 2004. There was no underwriter involved in the issuances. The issuances
     were conducted pursuant to Section 4(2) of the 1933 Act.

F.   Between January 1999 and June 1999, the Company conducted a private
     placement of 700,000 shares of Common Stock at an offering price of $3.00
     per share, pursuant to Rule 506 under the 1933 Act. In that offering, the
     Company sold a total of 181,359 shares of Common Stock for the gross
     proceeds of $544,080. Proceeds from the sale of the shares were applied
     towards the development and implementation of the Company's Internet gaming
     operations and working capital.

G.   Between August 1999 and December 1999, the Company conducted a private
     placement of 2,100,000 shares of Common Stock at an offering price of $1.50
     per share, pursuant to Rule 506 under the 1933 Act.  In that offering, the
     Company sold a total of 1,271,600 shares of Common Stock for the gross
     proceeds of $1,907,400.  Proceeds from the sale of the shares were applied
     towards the development and implementation of the Company's Internet gaming
     operations and working capital.

Item 6.        Management's Discussion and Analysis or Plan of Operation

          The Company has derived all its revenues from Internet casino-style
gaming, including baccarat, blackjack and video poker, and a pari-mutuel sports
wagering service. The Company's internally developed proprietary software
applications allow for interactive gaming, including simulated casino motion and
sound, on a real-time basis. The Company offers its gaming operations in several
languages in certain international jurisdictions located in Asia, the Caribbean,
Latin America, the Middle East, Australia, Europe and Africa. The Company's
gaming operations are conducted by its wholly-owned subsidiary, Virtual Gaming
Technologies (Antigua) Ltd., pursuant to a non-exclusive license from the
Company and supported by a server site and hardware located in St. Johns,
Antigua, West Indies.

          The Company's policy is to accept subscriptions only from persons over
the age of 21 and believed to reside in jurisdictions that are not known to
expressly prohibit Internet gaming. Subscriptions will not be accepted from
persons believed to be citizens or residents of the United States.

          Between January 1999 and June 1999, the Company conducted a private
placement of 700,000 shares of Common Stock at an offering price of $3.00 per
share, pursuant to Rule 506 under the 1933 Act.  In that offering, the Company
sold a total of 181,359 shares of Common Stock for the gross proceeds of
$544,080.  Proceeds from the sale of the shares were applied towards the
development and implementation of the Company's Internet gaming operations and
working capital.

          Between August 1999 and January 2000, the Company conducted a private
placement of 2,100,000 shares of Common Stock at an offering price of $1.50 per
share, pursuant to Rule 506 under the 1933 Act.  In that offering, the Company
sold a total of 1,301,600 shares of Common Stock for the gross proceeds of
$1,952,400.  Proceeds from the sale of the shares were applied towards the
development and implementation of the Company's Internet gaming operations and
working capital.

          In February 2000, the Company started a private placement of 1,000,000
shares of common Stock, at a price of $1.50 per share.  At the time of this
10-KSB report, 213,333 shares have been sold for the gross proceeds of $320,000.
The placement is being conducted pursuant to rule 506 under the 1933 Act.

Results of Operations

          Year Ended December 31, 1999 Compared to Year Ended December 31, 1998.
The Company's net revenues increased from $221,192 to $384,673 for the year
ended December 31, 1999 compared to the prior year period. The growth in
revenues was caused by increase in the Company's higher marketing and
advertising campaigns causing higher number of active players and gaming
operations. Operating expenses decreased by 19.3% for the year ended December
31, 1999 to $3,402,652 compared to $4,214,722 in the prior year period.

          Interest income decreased to $11,454 for the year ended December 31,
1999 compared to $26,217 for the prior year period. The decrease was due to the
Company's lower cash position in 1999. Interest expense increased to

                                       10
<PAGE>

$35,635 for the year ended December 31, 1999 compared to $20,360 for the prior
year period, due to higher note payable balances.

Liquidity and Capital Resources

          The Company had working capital of $206,003 at December 31, 1999,
however since that date, the Company's working capital position has been further
depleted through losses from operations. In order to obtain the necessary
working capital to fund continued operations; the Company has undertaken a new
private placement offering. The private placement is for 1,000,000 shares at
$1.50 per share with sales commission of approximately 10% to fund the full
scale roll out of its Internet gambling operations and to fund the continuing
losses from operations as the Company endeavors to build revenues and reach
profitable operations. The Shares are being offered on a straight best effort
basis by the Company, which means that there is no minimum offering amount and
no escrow of proceeds. The Company believes it needs at least the net proceeds
of $1,350,000 from the sale of the 1,000,000 Shares of the Private Placement
before it starts generating cash flow from its operations. If the Company is
unable to raise this capital, it will endeavor to raise the additional required
funds through alternative sources, of which there can be no assurance. Failure
to obtain the required funds from any source would severely impact the Company's
financial condition and would jeopardize the Company's ability to continue as a
going concern. The Company's Independent Auditor's report includes an emphasis
of matter as to the Company's ability to continue as a going concern.

Inflation

          The Company believes that inflation does not have a material effect on
its business.

Impact of Year 2000

          The Company utilizes computer software programs and operating systems,
including applications used in operating the gaming services, the Company's
proprietary software, network access, and various administrative and billing
functions. To the extent the Company's software applications contain source
codes that are unable to appropriately interpret the upcoming calendar year
2000, some level of modification, or even possibly replacement of such
applications, may be necessary.

          As of the date of this memorandum, nothing has come to the Company's
attention that would indicate that any of its computer software applications, or
those of its information suppliers and software licensers, are unable to operate
accurately after January 1, 2000.  However, the Company has been advised that
the consequences of a Year 2000 failure may not become apparent for several
weeks following January 1, 2000.  The Company previously has appointed a Year
2000 Committee to assess the scope of our risks in this regard and adopt
appropriate measures to bring its applications into compliance. To date, the
costs associated with this project have been insignificant.  However, no
definitive assurance can be given that all of the Company's systems are Year
2000 compliant or that the impact of the Company's failure to achieve
substantial Year 2000 compliance will not have a material adverse effect on its
business, financial condition or results of operations.

Item 7.        Financial Statements

          The Independent Auditors' Reports for the years ended December 31,
1999 and 1998 are included in this report commencing on page F-1.

                                       11
<PAGE>

Item 8.        Changes In and Disagreement With Accountants on Accounting and
               Financial Disclosure

          Not applicable.

                                   PART III
                                   --------

Item 9.        Directors, Executive Officers, Promoters and Control Persons

<TABLE>
<CAPTION>
Name                                    Age                  Position
-----                                   ---                  --------
<S>                                     <C>                  <C>
Leo I. George                            63                  Chairman of the Board

Joseph R. Paravia                        48                  President, Chief Executive Officer and Director

John Van Rhyn                            63                  Vice President of Gaming Operations

Bruce Merati                             42                  Chief Financial Officer

Michael W. Yacenda                       48                  Director

Dick L. Rottman                          62                  Director

Kim A. Nathanson                         43                  Director

Scott A. Walker                          41                  Director
</TABLE>

          Mr. George has served as Chairman of the Board of the Company since
September 1999.  Since 1995, Mr. George has served as Vice-President for
Regulatory Affairs of WinStar Communications, a provider of wireless
communications services.  From 1992 to 1995, Mr. George served as Chairman of
Avant-Garde Telecommunications Corp., a provider of nationwide wireless bypass
services to long distance carriers.  From 1989 to 1992, Mr. George served as the
general counsel to the Goeken Group, the founder of MCI.  During that time, Mr.
George and John Goeken collaborated to launch Airfone, the first commercial
telephone service with U.S. airline carriers.

          Mr. Paravia has served as President and a director of the Company
since July 1996 and as Chief Executive Officer of the Company since July 1997.
Mr. Paravia has over 20 years of experience in the gaming industry. From October
1995 through May 1996, Mr. Paravia served as the Vice President of the Tropicana
Hotel in Las Vegas, Nevada, where he was responsible for all casino operations.
From 1991 to February 1995, Mr. Paravia served as a member of the Board of
Directors and as Senior Director of Casino Operations for Caesars Palace in Las
Vegas, Nevada, where he was responsible for all casino operations.

          Mr. Van Rhyn has served as Vice President of Gaming Operations since
June 1997. Mr. Van Rhyn has over 20 years of experience in the gaming industry,
including positions of primary responsibility in the areas of sports book and
racing, finance and accounting, and general casino operations. From 1993 to
1997, Mr. Van Rhyn was a self-employed consultant to the gaming industry. From
1989 to 1992, Mr. Van Rhyn was director of all race, sports book, poker and Keno
operations at the Desert Inn Hotel & Casino in Las Vegas, Nevada. From 1988 to
1989, Mr. Van Rhyn was director of all race, sports book, poker and Keno
operations at the Sands Hotel & Casino in Las Vegas.

          Mr. Merati has served as Chief Financial Officer of the Company since
July 27, 1998. From July 1997 to July 1998, Mr. Merati served as the Controller
of The Weekend Exercise Company, Inc., an apparel manufacturer. From 1995 to
1997, Mr. Merati served as the Controller of Airline Interiors, Inc., an airline
seat manufacturer. From 1993 to 1995, Mr. Merati served as the Controller of
First Affiliated Securities, a securities broker-dealer and investment banker.
Mr. Merati is a Certified Public Accountant and a Chartered Accountant in
England & Wales and spent seven years as auditor with the London office of
PricewaterhouseCoopers.

          Mr. Yacenda has served as a director of the Company since March 1997.
Mr. Yacenda has served as President of eLottery, a subsidiary of eLOT since 1996
and as Executive Vice President of eLOT, Inc. since 1990.

                                       12
<PAGE>

          Mr. Rottman has served as director of the Company since April 1998.
Since 1994, Mr. Rottman has served as Chairman of the Board and Chief Executive
Officer of Western Insurance Company. In addition, Mr. Rottman has served as
Chief Executive Officer of Bell United Insurance Company since 1986. Mr. Rottman
served as the Insurance Commissioner for the State of Nevada from 1971 to 1978.

          Ms. Nathanson has served as a director of the Company since October
1998. Ms. Nathanson currently serves as the Senior Vice President of Product
Management at ENTEX Information Services. From 1996 to 1998, Ms. Nathanson
served as the Vice President of Paragon Initiatives at ENTEX, a provider of PC
networks and support services. From 1990 to 1996, she served as the Chairman and
Chief Operating Officer of FCP Technologies, Inc., a systems integrator and
reseller of computers, software and networking products.

          Mr. Walker has served as a director of the Company since October 1998.
From January 1996 to the present, Mr. Walker has served as a partner and as
General Counsel of MCOM Management Corp.  From June 1995 to the present, Mr.
Walker served as a principal of Walker Worldwide Ltd., an international trading
company.  From 1986 to 1995, Mr. Walker practiced law with the firm of Walker &
Corsa.

          Compliance With Section 16(a) of the Exchange Act

          Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires each director and executive officer of the Company, and
each person who owns more than ten percent (10%) of a registered class of the
Company's equity securities to file by specific dates with the Securities and
Exchange Commission (the "SEC") reports of ownership and reports of change of
ownership of equity securities of the Company. Officers, directors, and
10%stockholders are required by the SEC to furnish the Company with copies of
all Section 16(a) forms they file. The Company is required to state in this
report any failure of its directors and executive officers to file by the
relevant due date any of these reports during the Company's fiscal year. To the
Company's knowledge, all Section 16(a) filing requirements were complied with
during the fiscal year ended December 31, 1999.

                                       13
<PAGE>

Item 10.       Executive Compensation

          Cash Compensation of Executive Officers. The following table sets
forth the cash compensation paid by the Company to its Chief Executive Officer
and to all other executive officers for services rendered during the fiscal
years ended December 31, 1999, 1998 and 1997.

<TABLE>
<CAPTION>
                                                Annual Compensation                     Long-Term Compensation
                                    -------------------------------------------    -------------------------------
                                                                                     Restricted    Common Shares
                                                                                       Stock         Underlying
                                                                   Other Annual        Awards     Options  Granted      All Other
       Name and Position            Year     Salary     Bonus      Compensation         ($)          (# Shares)       Compensation
----------------------------        ----    --------    ------    --------------   -------------- ----------------   --------------
<S>                                 <C>     <C>         <C>      <C>               <C>            <C>                <C>
Joseph R. Paravia, President        1999    $130,577      -0-           -0-                    -0-          500,000        -0-
 and CEO(1)                         1998    $133,213      -0-           -0-                    -0-               -0-       -0-
                                    1997    $111,076      -0-           -0-               $50,000                -0-       -0-


John Van Rhyn,                      1999    $ 43,750      -0-           -0-                    -0-               -0-       -0-
Vice President -  Gaming            1998    $ 46,331      -0-           -0-                    -0-           45,000        -0-
 Operations(2)                      1997    $ 39,846      -0-           -0-                    -0-           45,000        -0-


Bruce Merati,                       1999    $ 90,000      -0-           -0-                    -0-          385,000        -0-
Chief Financial Officer(3)          1998    $ 31,875      -0-           -0-                    -0-           40,000        -0-
                                    1997          -0-     -0-           -0-                    -0-               -0-       -0-
</TABLE>

_______________

(1)  Commencing June 1, 1996, the Company began paying Mr. Paravia a salary at
     the rate of $100,000 per annum.  Mr. Paravia's salary was reduced to $8,000
     per month effective as of November 11, 1997.  Mr. Paravia's salary was
     reinstated to $120,000 per annum effective April 25, 1998 and was increased
     to $150,000 per annum effective August 1, 1999.

(2)  Commencing June 6, 1997, the Company began paying Mr. Van Rhyn a salary at
     the rate of $70,000 per annum.  Mr. Van Rhyn's salary was reduced to $3,000
     per month effective as of February 9, 1998, and was reinstated to $70,000
     per annum effective October 9, 1998.  Effective February 15, 2000, Mr. Van
     Rhyn's salary was reduced to $5,200 per year.

(3)  Commencing July 27, 1998, the Company began paying Mr. Merati a salary at
     the rate of $85,000 per annum  Effective August 1, 1999, Mr. Merati's
     salary was increased to $100,000 per annum.

                                       14
<PAGE>

                     Option/SAR Grants in Last Fiscal Year
                               Individual Grants

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
                               Number of Securities         % of Total Options/SARs
                              Underlying Options/SARs       Granted to Employees in        Exercise or Base
           Name                     Granted (#)                   Fiscal Year                Price ($/Sh)        Expiration Date
--------------------------  --------------------------     ---------------------------  ----------------------   ----------------
<S>                         <C>                            <C>                          <C>                      <C>
Joseph Paravia, President             500,000                          25.3%                     $1.625            July 25, 2004

Bruce Merati - Chief                   85,000                           4.3%                     $ 3.25            April 29, 2002
 Financial Officer                    300,000                          15.2%                     $1.625             July 25, 2004
</TABLE>


              Aggregated Option/SAR Exercises in Last Fiscal Year
                         and FY-End Option/SAR Values


<TABLE>
<CAPTION>
                                                                             Number of
                                                                            Securities             Value of
                                                                            Underlying            Unexercised
                                                                            Unexercised          In-the-Money
                                                                           Options (SARs         Options (SARs
                                                                           at FY-End (#)         at FY-End($)
                          Shares Acquired                                  Exercisable/          Exercisable/
       Name                 on Exercise            Value Received          Unexercisable       Unexercisable(1)
-------------------      -----------------    ----------------------    -----------------    ----------------
<S>                      <C>                  <C>                       <C>                  <C>
Joseph R. Paravia,                                                              980,000/0         $628,800/$0
  President & CEO

John Van Rhyn
Vice President - Gaming
  Operations                                                                     90,000/0         $     0/$0

Bruce Merati - Chief
Financial Officer                                                         235,000/190,000         $      0/$0
</TABLE>

     (1)  Calculated based upon a last reported sale price of $1.56 per share of
Common Stock, as reported on the OTC Bulletin Board on December 31, 1999.

          Employment Agreements:

          (a)  In September 1999, the Company entered into an employment
agreement with its Chairman, Leo I. George, pursuant to which Mr. George
received three-year options to purchase up to 100,000 shares of Common Stock at
an exercise price of $0.10 per share. These options contain a buy-back provision
in favor of the Company which enables the Company to buy-back these options and
the shares underlying the options at a price of $3.50 per share. In addition,
Mr. George received three-year options to purchase up to 700,000 shares of
Common Stock, of which options to purchase 500,000 shares are fully vested and
immediately exercisable and options to purchase 200,000 shares vest and first
become exercisable on September 2, 2000. The exercise price for the 500,000
fully vested options is $2.44 per share. The exercise price for the 200,000
options that vest on September 2, 2000 shall be equal to the fair market value
of the Common Stock on that date. Finally, in the event the Company obtains debt
or equity financing in excess of $10,000,000, Mr. George shall be entitled to
three-year options to purchase up to 200,000 shares of Common Stock at an
exercise price equal to the fair market value of the Common Stock on the date of
grant.

          (b)  In November 1999, the Company entered into a two year employment
agreement with the Chief Executive Officer of the Company, Joseph R. Paravia.
The agreement provided for a base salary of $150,000, and an annual cash bonus
equal to 2% of the Company's annual gross revenues in excess of $1 million.  The
agreement also provides for a cash bonus of $100,000 upon the anticipated public
offering of the Company and a payment of $250,000 upon the sale or merger of the
Company.

          Compensation of Directors.  All non-officer directors of the Company
receive an attendance fee of $1,000 per meeting of the Board of Directors.  All
directors receive reimbursement for out-of-pocket expenses in attending Board of
Directors meetings.  From time to time the Company may engage certain members of
the Board of Directors to perform services on behalf of the Company and will
compensate such persons for the services which they perform.

                                       15
<PAGE>

Item 11.       Security Ownership of Certain Beneficial Owners and Management

          The following table sets forth certain information regarding the
beneficial ownership of the shares of Common Stock as of the date of March 24,
1999 by (i) each person who is known by the Company to be the beneficial owner
of more than five percent (5%) of the issued and outstanding shares of Common
Stock, (ii) each of the Company's directors and executive officers and (iii) all
directors and executive officers as a group.

<TABLE>
<CAPTION>
                   Name and Address                                          Number of Shares                     Percentage Owned
-------------------------------------------------------       ---------------------------------------------       -----------------
<S>                                                           <C>                                                 <C>
Leo I. George(2)(3)(4)                                                                            2,982,000            26.3%
Daniel B. Najor (2)(4)                                                                            3,462,500            32.2%
Joseph R. Paravia (2)(5)                                                                          1,180,000             9.9%
John Van Rhyn (2)(6)                                                                                104,000              (7)
Bruce Merati (2)(8)                                                                                 235,000             2.1%
Michael Yacenda (1)(9)                                                                               90,000              --
Dick L. Rottman (2)(10)                                                                              73,665              (7)
Kim A. Nathanson (2)(11)                                                                             36,667              (7)
Scott A. Walker (2)(12)                                                                             160,429             1.4%
All officers and directors                                                                        4,861,761            38.0%
as a group
</TABLE>

(1)       President of eLottery, Inc. a subsidiary of eLOT, Inc.

(2)       Address is 12625 High Bluff Drive, Suite 205A, San Diego, California
          92130.

(3)       Includes options granted to Mr. George to purchase 500,000 shares of
          Common Stock at an exercise price of $2.46 per share and options to
          purchase 100,000 shares of Common Stock at an exercise price of $0.10
          per share.

(4)       Includes 2,382,000 shares of Common Stock owned by Daniel Najor for
          which Mr. Najor has granted Mr. George a limited irrevocable proxy to
          vote these shares in connection with certain matters. See "Certain
          Relationships and Related Transactions."

(5)       Includes options granted to Mr. Paravia to purchase 480,000 shares of
          Common Stock at an exercise price of $.25 per share and options to
          purchase 500,000 shares of Common Stock at an exercise price of $1.625
          per share.

(6)       Includes options granted to Mr. Van Rhyn to purchase 45,000 shares at
          $2.00 per share and options to purchase 45,000 shares at $2.875 per
          share.

(7)       Less than one percent.

(8)       Represents options granted to Mr. Merati to purchase 40,000 shares of
          Common Stock at an exercise price of $2.875 per share, options to
          purchase 45,000 shares of Common Stock at an exercise price of $3.25
          per share and options to purchase 150,000 shares of Common Stock at an
          exercise price of $1.625 per share. Does not include options to
          purchase 40,000 shares of Common Stock at an exercise price of $3.25
          per share and options to purchase 150,000 shares of Common Stock at an
          exercise price of $1.625 per share.

(9)       Includes options to purchase 90,000 shares of Common Stock at an
          exercise price of $3.00 per share. Does not include securities of the
          Company held by eLOTtery Inc., of which Mr. Yacenda is President. See
          Item 1: "Description of Business - Business Development."

(10)      Includes options granted to Mr. Rottman to purchase 20,000 shares of
          Common Stock at an exercise price of $4.50 per share.

(11)      Includes options granted to Ms. Nathanson to purchase 20,000 shares of
          common stock at an exercise price of $4.50 per share.

(12)      Includes 121,196 shares of common stock owned by MCOM Management
          Corp., with which Mr. Walker is affiliated. Also includes options
          granted to Mr. Walker to purchase 20,000 shares of common stock at an
          exercise price of $4.50 per share.

Item 12.       Certain Relationships and Related Transactions

          In September 1999, the Company, Leo I. George and Daniel B. Najor
entered into a Stock Restriction Agreement pursuant to which Mr. Najor agreed to
a restriction on 2,382,000 of his shares ("Restricted Shares") of Common Stock.
Pursuant to that agreement, Mr. Najor is prohibited from selling, pledging or
otherwise transferring or disposing the

                                       16
<PAGE>

Restricted Shares without the consent of the Company. In addition, Mr. Najor
granted Mr. George a limited irrevocable proxy that enables Mr. George to vote
the Restricted Shares on any matter submitted to the stockholders for their
approval either at a meeting duly convened or by a written consent. However,
Mr. Najor retains the right to vote the Restricted Shares in connection with a
request for stockholder approval on any matter concerning the merger or
dissolution of the Company or the sale of substantially all of its assets. The
Stock Restriction Agreement and the proxy terminate on the earlier of: (i) the
termination of George's position as Chairman of the Company, (ii) the sale by
Mr. George of any of shares of Common Stock beneficially owned by him, (iii) the
sale of the Common Stock in a registered public offering, or (iv) September 2,
2001.

Item 13.       Exhibits and Reports on Form 8-K

     a)   Exhibits - The following exhibits were filed on December 10, 1998 as
          exhibits to the Company's 10-SB/A.

     3.1  Certificate of Incorporation of the Company; filed as exhibit to the
          Company's 10-SB/A dated December 21, 1998
     3.2  Bylaws of the Company; filed as exhibit to the Company's 10-SB/A dated
          December 21, 1998
     3.3  Certificate of amendment to Certificate of incorporation of the
          Company; filed on Definitive Information Statement dated July 7, 1999
     4.1  Specimen of Common Stock Certificate; filed as exhibit to the
          Company's 10-SB/A dated December 21, 1998
    10.1  Securities Purchase Agreement dated September 5, 1996 between the
          Company and Unistar Entertainment, Inc.; filed as exhibit to the
          Company's 10-SB/A dated December 21, 1998
    10.2  Settlement Agreement and Mutual General Release between the Company
          and CasinoWorld Holdings, Ltd, dated February 26, 1997; filed as
          exhibit to the Company's 10-SB/A dated December 21, 1998
    10.3  Settlement Agreement and Mutual General Release between the Company
          and Unistar Entertainment, Inc. dated March 6, 1997; filed as exhibit
          to the Company's 10-SB/A dated December 21, 1998
    10.4  Employment Agreement dated September 1, 1997 between the Company and
          Joseph R. Paravia; filed as exhibit to the Company's 10-SB/A dated
          December 21, 1998
    10.5  Virtual Gaming Technologies, Inc. 1997 Stock Option Plan; filed as
          exhibit to the Company's 10-SB/A dated December 21, 1998
    10.6  Employment agreement dated September 2 1999, between the Company and
          Leo I. George; filed with this report
    10.7  Employment agreement dated November 2 1999, between the Company and
          Joseph R. Paravia; filed with this report
    10.8  Securities Acquisition Agreement dated December 20, 1999 between the
          Company and Primeline Technologies, Inc.; filed with this report
    10.9  Software development agreement dated January 20, 2000 between the
          Company and Coast Resort; filed with this report
    21.1  List of Subsidiaries; filed as exhibit to the Company's 10-SB/A dated
          December 21, 1998

     b)   Reports on Form 8-K. The Company filed a report of Form 8-K on January
          19, 1999 relating to the change of the Registrant's independent
          auditors for the fiscal year ended December 31, 1998. Reports on From
          8-K. The Company filed a report of From 8-K on March 29,2000 relating
          to acquisition of Primeline Gaming Technologies, Inc.

    27.1  Financial Data Schedule

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

Virtual Gaming Technologies, Inc.
--------------------------------
(Registrant)


Date: March 29, 2000                 By: /s/ Joseph R. Paravia
                                     -----------------------------------------

                                       17
<PAGE>

                                        President, Chief Executive Officer and
                                        Director

Date:  March 29, 2000                   By: /s/ Bruce Merati
                                        ---------------------------------------
                                        Chief Financial Officer

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

Date:  March 29, 2000                   By: /s/ Leo I. George
                                        ---------------------------------------
                                        Chairman of the Board

Date:  March 29, 2000                   By: /s/ Michael W. Yacenda
                                        ---------------------------------------
                                        Director

Date:  March 29, 2000                   By: /s/ Dick L. Rottman
                                        ---------------------------------------
                                        Director

Date:  March 29, 2000                   By: /s/ Kim A. Nathanson
                                        ---------------------------------------
                                        Director

Date:  March 29, 2000                   By: /s/ Scott A. Walker
                                        ---------------------------------------
                                        Director

                                       18
<PAGE>

                              VIRTGAME.COM CORP.
                               AND SUBSIDIARIES

                       CONSOLIDATED FINANCIAL STATEMENTS
                       AND INDEPENDENT AUDITOR'S REPORT

                For the years ended December 31, 1999 and 1998
<PAGE>

                               VIRTGAME.COM CORP.
                                AND SUBSIDIARIES



                               TABLE OF CONTENTS
                               -----------------
<TABLE>
<CAPTION>

<S>                                                   <C>
INDEPENDENT AUDITOR'S REPORT........................          F-1

FINANCIAL STATEMENTS

   Consolidated Balance Sheets......................   F-2 to F-3

   Consolidated Statements of Operations............          F-4

   Consolidated Statements of Shareholders' Equity..   F-5 to F-6

   Consolidated Statements of Cash Flows............   F-7 to F-8

   Notes to Consolidated Financial Statements.......   F-9 to F-22
</TABLE>
<PAGE>

                         INDEPENDENT AUDITOR'S REPORT
                         ----------------------------



To the Board of Directors and Shareholders
Virtgame.com Corp.
San Diego, California

We have audited the consolidated balance sheets of Virtgame.com Corp. (formerly
Virtual Gaming Technologies, Inc.) and Subsidiaries (the "Company") as of
December 31, 1999 and 1998 and the related consolidated statements of
operations, shareholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Virtgame.com Corp. and Subsidiaries as of December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for the years then
ended, in conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company has suffered recurring losses from operations
since inception, has limited operating revenue and  limited capital resources.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note 7. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.




San Diego, California                             PANNELL KERR FORSTER
January 27, 2000, except Note 9, as to which      Certified Public Accountants
 the date is February 27, 2000                    A Professional Corporation

                                      F-1
<PAGE>

                               VIRTGAME.COM CORP.
                                AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                           December 31, 1999 and 1998



                                     ASSETS
                                     ------
<TABLE>
<CAPTION>

                                                                1999                    1998
                                                              --------               ----------
<S>                                                     <C>                        <C>
Current assets:
     Cash and cash equivalents                             $  498,923                $  523,512
     Restricted cash                                                                    150,000
                                                                                        300,000
     Gaming license                                            53,699                    53,151
     Prepaid expenses and other current assets                 32,315                    32,740
                                                           ----------                ----------

     Total current assets                                     734,937                   909,403
                                                           ----------                ----------


Noncurrent assets
     Deposits                                                  18,930                    94,820
     Property and equipment, net                            1,298,231                   449,059
                                                           ----------                ----------

     Total noncurrent assets                                1,317,161                   543,879
                                                           ----------                ----------

     Total assets                                          $2,052,098                $1,453,282
                                                           ==========                ==========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

                                      F-2
<PAGE>

                               VIRTGAME.COM CORP.
                                AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                           December 31, 1999 and 1998



                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------
<TABLE>
<CAPTION>

                                                                  1999           1998
                                                              -------------  -------------
<S>                                                           <C>            <C>
Current liabilities:
    Accounts payable                                          $    126,287        209,895
    Accrued expenses                                               143,081        120,947
    Funds held on deposit                                           52,762         25,968
    Current portion of capital lease obligation                      7,928         11,519
    Notes payable                                                  198,876        150,000
                                                              ------------   ------------

    Total current liabilities                                      528,934        518,329

Long-term portion of capital lease obligation                            -          7,928
                                                              ------------   ------------
    Total liabilities                                              528,934        526,257
                                                              ------------   ------------

Commitments and contingencies (Notes 3, 4, 5 and 7)

Shareholders' equity:
    Preferred stock, $ .00001 par value, 10,000,000 shares
     authorized, none issued or outstanding                              -              -
    Common stock, $ .00001 par value, 30,000,000 shares
     authorized, 10,369,292 and 8,331,196 shares issued
     and outstanding in 1999 and 1998, respectively;
     144,334 and 180,763 shares issuable in 1999 and 1998,
     respectively                                                      105             85
    Additional paid-in capital                                  14,726,388     11,079,550
    Accumulated deficit                                        (13,203,329)   (10,152,610)
                                                              ------------   ------------

    Total shareholders' equity                                   1,523,164        927,025
                                                              ------------   ------------

     Total liabilities and shareholders' equity               $  2,052,098   $  1,453,282
                                                              ============   ============
</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements.

                                      F-3
<PAGE>

                               VIRTGAME.COM CORP.
                                AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                 For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>


                                                               1999                          1998
                                                            ---------                     ------------
<S>                                                  <C>                           <C>
Revenue:
    Gaming revenue                                      $   465,327                      $   262,599
    Less promotional discounts                              (80,654)                         (41,407)
                                                        -----------                      -----------

    Net gaming revenue                                      384,673                          221,192
                                                        -----------                      -----------

Operating expenses:
    Salaries and payroll expenses                         1,651,571                        1,682,674
    Other operating expenses                              1,751,081                        2,532,048
                                                        -----------                      -----------

    Total operating expenses                              3,402,652                        4,214,722
                                                        -----------                      -----------

       Loss from operations                              (3,017,979)                      (3,993,530)

Financial income (expense):
    Interest income                                          11,454                           26,217
    Interest expense                                        (35,635)                         (20,360)
    Loss on sale of securities available for sale                 -                           (1,103)
    Foreign exchange loss                                    (5,672)                          (2,157)
                                                        -----------                      -----------

    Total financial income (expense)                        (29,853)                           2,597
                                                        -----------                      -----------

       Loss before income taxes                          (3,047,832)                      (3,990,933)

Income tax expense                                            2,887                            1,220
                                                        -----------                      -----------

       Net Loss                                         $(3,050,719)                     $(3,992,153)
                                                        ===========                      ===========

Basic and diluted net loss per share                    $     (0.34)                     $     (0.58)
                                                        ===========                      ===========

Shares used to compute basic and diluted net
      loss per share                                      9,024,792                        6,880,834
                                                        ===========                      ===========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

                                      F-4
<PAGE>

                              VIRTGAME.COM CORP.
                               AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                For the years ended December 31, 1999 and 1998



<TABLE>
<CAPTION>
                                                                           Unrealized
                                                                             Gain on
                                            Common Stock                   Securities
                                      --------------------- Additional       Paid-In      Available    Accumulated
                                         Shares     Amount     Capital       for Sale       Deficit        Total
                                      ------------  -------  ------------  ------------  -------------  ------------
<S>                                   <C>           <C>      <C>           <C>           <C>            <C>

Balance, December 31, 1997               7,047,958      $70    $ 6,651,558       $ 120   $ (6,160,457)   $   491,291

Issuances of common stock for
   cash, net of issuance costs:
   January 1998 through
       December 1998                     1,399,905       14      3,967,011           -              -      3,967,025

Issuable common stock per
   commission agreement                     64,096        1             (1)          -              -              -

Issuance of employee stock
   options (Note 5)                              -        -        307,399           -              -        307,399

Issuance of stock purchase
   warrants (Note 5)                             -        -        153,583           -              -        153,583

Elimination of unrealized gain due
   to sale of securities                         -        -              -        (120)             -           (120)

Net (loss) for the year ended
   December 31, 1998                             -        -              -           -     (3,992,153)    (3,992,153)
                                      ------------  -------     -----------   --------   ------------    -----------

Balance, December 31, 1998               8,511,959      $85    $11,079,550       $   -   $(10,152,610)   $   927,025
                                      ------------  -------    ----------- -----------   ------------    -----------
</TABLE>

                                      F-5
<PAGE>

                              VIRTGAME.COM CORP.
                               AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY(continued)
                For the years ended December 31, 1999 and 1998

<TABLE>
<CAPTION>
                                             Common Stock
                                   ---------------------     Additional     Paid-In      Accumulated
                                      Shares     Amount        Capital       Deficit        Total
                                   ------------  -------     -----------  -------------  ------------
<S>                                <C>           <C>         <C>          <C>            <C>

Balance forwarded,
   December 31, 1998                  8,511,959     $ 85     $11,079,550  $(10,152,610)  $   927,025

Issuance of common stock
   on exercise of employee
   stock option                           1,500        -           4,305             -         4,305

Issuances of common stock for
   cash, net of issuance costs:
   January 1999 through
       June 1999                        181,359        2         435,548             -       435,550

Issuance of common stock on
   conversion of notes payable
   (Note 4)                             100,000        1         299,999             -       300,000

Issuances of common stock for
   cash, net of issuance costs:
   August 1999 through
       December 1999                  1,271,600       13       1,752,890             -     1,752,903

Issuance of common stock on
   acquisition of subsidiary            447,208        4         899,996             -       900,000

Issuance of employee stock
   options (Note 5)                           -        -         254,100             -       254,100

Net (loss) for the year ended
   December 31, 1999                          -        -               -    (3,050,719)   (3,050,719)
                                   ------------  -------     -----------  ------------   -----------

Balance, December 31, 1999           10,513,626     $105     $14,726,388  $(13,203,329)  $ 1,523,164
                                   ============  =======     ===========  ============   ===========
</TABLE>

                                      F-6
<PAGE>

                               VIRTGAME.COM CORP.
                                AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                 For the years ended December 31, 1999 and 1998

<TABLE>
<CAPTION>

                                                                     1999          1998
                                                                 ------------  ------------
<S>                                                              <C>           <C>
Cash flows from operating activities:
    Net loss                                                     $(3,050,719)  $(3,992,153)
    Adjustments to reconcile net loss to net
     cash flows used in operating activities:
       Depreciation                                                  125,116        99,140
       Loss on sale of securities available for sale                       -         1,103
       Issuance of common stock options and warrants for
         licensing and consulting fees and compensation              254,100       460,982
       Changes in operating assets and liabilities:
         Decrease (increase) in:
          Restricted cash                                            150,000      (300,000)
          Prepaid expenses and other current assets                      425         1,372
          Gaming license                                                (548)        1,016
         (Decrease) increase in:
          Accounts payable and accrued expenses                      (61,474)      245,184
          Funds held on deposit                                       26,794        20,380
                                                                 -----------   -----------

    Net cash flows used in operating activities                   (2,556,306)   (3,462,976)
                                                                 -----------   -----------

Cash flows from investing activities:
    Decrease (increase) in deposits                                   75,890       (81,075)
    Purchase of equipment                                            (74,288)     (235,086)
    Proceeds from sale of investments                                      -        53,967
                                                                 -----------   -----------

    Net cash flows provided by (used in) investing activities          1,602      (262,194)
                                                                 -----------   -----------

Cash flows from financing activities:
    Net proceeds from the issuance of common stock                 2,192,758     3,967,025
    Borrowings on notes payable                                      475,000             -
    Payments on notes payable                                       (126,124)            -
    Principal payments under capital lease                           (11,519)       (9,334)
                                                                 -----------   -----------

    Net cash flows provided by financing activities                2,530,115     3,957,691
                                                                 -----------   -----------


Net (decrease) increase in cash and cash equivalents                 (24,589)      232,521

Cash and cash equivalents at beginning of year                       523,512       290,991
                                                                 -----------   -----------

Cash and cash equivalents at end of year                         $   498,923   $   523,512
                                                                 ===========   ===========
</TABLE>

  The accompanying notes are an integral part of the consolidated finanacial
  statements.
                                      F-7
<PAGE>

                               VIRTGAME.COM CORP.
                                AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                 For the years ended December 31, 1999 and 1998



SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>

                                                                            1999       1998
                                                                          ---------  --------
<S>                                                                       <C>        <C>

Cash paid during the year for:

    Interest                                                              $ 38,532   $25,647
                                                                          ========   =======

    Income taxes                                                          $  2,887   $ 1,220
                                                                          ========   =======

Supplemental disclosure of noncash investing and financing activities:

    Foreign exchange loss                                                 $ (5,672)  $(2,157)
                                                                          ========   =======

    Notes payable converted into shares of common stock                   $300,000   $     -
                                                                          ========   =======
</TABLE>

    On December 21, 1999, the Company acquired 100% of the outstanding capital
    stock of Primeline Gaming Technologies, Inc. in return for the issuance of
    447,208 shares of its common stock. The value of the assets and liabilities
    acquired was approximately $912,000 and $12,000, respectively.

    The accompanying notes are an integral part of the consolidated finanacial
    statements.

                                      F-8
<PAGE>

                              VIRTGAME.COM CORP.
                               AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          December 31, 1999 and 1998

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------------

     Organization and Business

     Virtgame.com Corp. (the "Company") was incorporated in the State of
     Delaware on October 24, 1995, under the name MBA Licensing Corp. On June
     20, 1996, the Board of Directors approved the change of the Company's name
     to Internet Gaming Technologies, Inc., on January 22, 1997, to Virtual
     Gaming Technologies, Inc., and on May 20, 1999, to Virtgame.com Corp.

     The Company is establishing casino-style operations over the Internet
     focused on the international marketplace outside the United States. If the
     demand for this service decreased or if the Company's ability to continue
     to provide this service was impaired, the Company's revenue source would be
     impacted. The Company has suffered recurring losses from operations since
     inception and has generated limited operating revenue. Proceeds from the
     Company's private placements of shares of its common stock are used to fund
     its operations.

     On December 21, 1999, the Company entered into a securities acquisition
     agreement and plan of reorganization (the "Primeline Acquisition") with
     Primeline Gaming Technologies, Inc. ("Primeline"). The Primeline
     Acquisition resulted in the Company acquiring 100% of the outstanding
     capital stock of Primeline in return for the issuance of 447,208 shares of
     its common stock. The Primeline Acquisition has been accounted for as a
     purchase at historical cost.

     Had the Primeline Acquisition occurred on January 1, 1999, the proforma net
     property and equipment at December 31, 1999 would have been $1,118,231, a
     decrease of $180,000, and the proforma net loss and basic and diluted net
     loss per share for the year ended December 31, 1999 would have been
     $(3,230,719) and $(0.34), respectively, an increase of $180,000 and no
     change, respectively. As Primeline was incorporated on October 6, 1999,
     with limited activity for the period from October 6, 1999 (inception) to
     December 31, 1999, depreciation of the acquired assets is the only proforma
     adjustment.

     Principles of Consolidation

     The accompanying financial statements consolidate the accounts of the
     Company and its wholly-owned subsidiaries, Emerald Riviera Limited, an
     Irish Corporation, Internet Gaming Technologies, Inc., a Nevada
     Corporation, Virtual Gaming Technologies Argentina S.A., an Argentinian
     Corporation, Virtual Gaming Technologies (Antigua) Ltd., an Antiguan
     Corporation, and Primeline Gaming Technologies, Inc., a California
     Corporation. All significant intercompany accounts and transactions have
     been eliminated in consolidation.

     Foreign Operations and Concentrations

     The U.S. Dollar is considered the functional currency for Emerald Riviera
     Limited, Virtual Gaming Technologies Argentina S.A. and Virtual Gaming
     Technologies (Antigua) Ltd. Accordingly, the monetary assets and
     liabilities of these entities have been remeasured using the current rates
     of exchange and nonmonetary assets have been remeasured using the
     appropriate historical rates of exchange.


                                      F-9
<PAGE>

                              VIRTGAME.COM CORP.
                               AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          December 31, 1999 and 1998

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
---------------------------------------------------------

     Foreign Operations and Concentrations (Continued)

     Foreign exchange loss arises on the transfer of customers' foreign currency
     credit card deposits into the Company's U.S. Dollar-denominated bank
     accounts during the year and on the translation of the Company's cash held
     in foreign banks to U.S. Dollars at year end.

     The Company is licensed and authorized to establish and operate its gaming
     operations in Antigua. The Company has a five year gaming license which
     requires an annual fee of $100,000. Upon the Company offering its pari-
     mutuel sports betting service, the annual fee will be increased to
     $175,000.

     All of the Company's gaming activities are conducted in Antigua, and its
     server site and certain gaming related hardware are located in Antigua. As
     such, all of the Company's net gaming revenue of $384,673 and $221,192 for
     the years ended December 31, 1999 and 1998, respectively, was incurred in
     Antigua. As of December 31, 1999 and 1998, approximately 75% and 73%,
     respectively, of the Company's customers are located in Asia.

     As of December 31, 1999 and 1998, the Company maintained approximately
     $420,000 and $780,000, respectively, in total assets in Antigua, net of
     inter-company receivables of $840,000 and $90,000, respectively. Included
     in total assets in Antigua as of December 31, 1999 and 1998,was
     approximately $230,000 and $420,000, respectively, in cash held in foreign
     banks.

     Regulation Risk

     The Company intends to provide its services in jurisdictions that do not
     prohibit gaming over the Internet. There can be no assurance that the
     Company will be able to comply with future government regulations that will
     affect gaming operations in a significant number of international
     jurisdictions. The United States has laws prohibiting gaming operations
     except by licensed persons. Currently, the effect of these laws on Internet
     gaming is uncertain. As a result the Company does not intend to accept
     subscribers from the United States.

     Financial Instruments

     The carrying amounts reported in the consolidated balance sheets for cash
     and cash equivalents, prepaid expenses and other current assets, deposits,
     accounts payable, accrued expenses, and funds held on deposit approximate
     fair value due to the immediate short-term maturity of these financial
     instruments.

     The fair value of the Company's capital lease obligation and notes payable
     approximates the carrying amount based on the current rates offered to the
     Company for debt of the same remaining maturities with similar collateral
     requirements.

                                      F-10
<PAGE>

                              VIRTGAME.COM CORP.
                               AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          December 31, 1999 and 1998


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
---------------------------------------------------------

     Cash and Cash Equivalents

     The Company considers all cash accounts, which are not subject to
     withdrawal restrictions or penalties, and certificates of deposit and money
     market funds purchased with an original maturity of three months or less to
     be cash equivalents.

     The Company maintains its cash accounts at financial institutions located
     in California and abroad. Accounts at the financial institutions located in
     California are insured by the Federal Deposit Insurance Corporation (FDIC)
     up to $100,000. At December 31, 1999 and 1998, the Company's uninsured cash
     balances, including cash held in foreign banks and restricted cash, totaled
     $454,011 and $651,169, respectively. The Company has not experienced any
     losses in such accounts and management believes it places its cash on
     deposit with financial institutions which are financially stable.

     Restricted Cash

     The Company was considering an arrangement to offer credit card processing
     services to other Internet based businesses, and in June 1998, deposited
     $300,000 with a major foreign bank relative to a contemplated arrangement.
     The Company decided not to proceed with the above arrangement and during
     the year ended December 31, 1999, $150,000 of this amount was returned to
     the Company. The remaining $150,000 is classified as a current asset in the
     accompanying consolidated balance sheet.

     Property and Equipment

     Property and equipment is recorded at cost. Depreciation is calculated on
     the straight-line basis over the estimated useful life of five years, or
     related lease life, if shorter.

     Funds Held on Deposit

     The Company requires customers to advance cash or credit card deposits
     prior to participating in gaming activities.

     Revenue Recognition

     Gaming revenue is the net win from gaming activities, which is the
     difference between gaming wins and losses, and is recognized when the
     result of each game is known.

                                      F-11
<PAGE>

                              VIRTGAME.COM CORP.
                               AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          December 31, 1999 and 1998

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
---------------------------------------------------------

     Stock Based Compensation

     The Financial Accounting Standards Board (FASB) issued Statement of
     Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
     Compensation." This statement encourages, but does not require, companies
     to recognize compensation expense for grants of stock, stock options, and
     other equity instruments based on a fair-value method of accounting.

     Companies that do not choose to adopt the expense recognition rules of SFAS
     No. 123 will continue to apply the existing accounting rules contained in
     Accounting Principles Board Opinion (APB) No. 25, but will be required to
     provide proforma disclosures of the compensation expense determined under
     the fair-value provisions of SFAS No. 123, if material. APB No. 25 requires
     no recognition of compensation expense for most of the stock-based
     compensation arrangements provided by the Company, namely, broad-based
     employee stock purchase plans and option grants where the exercise price is
     equal to the market price at the date of the grant.

     The Company has adopted the disclosure provisions of SFAS No. 123 effective
     January 1, 1996. The Company has opted to follow the accounting provisions
     of APB No. 25 for stock-based compensation and to furnish the pro forma
     disclosures required under SFAS No. 123 (see Note 5).

     Advertising Costs

     The Company charges the cost of advertising to expense as incurred.
     Advertising costs for the year ended December 31, 1999 and 1998, were
     approximately $161,000 and $611,000, respectively.

     Software Development Costs

     The American Institute of Certified Public Accountants issued Statement of
     Position (SOP) 98-1, "Accounting for the Costs of Computer Software
     Developed or Obtained for Internal Use" in March 1998. The SOP provides
     guidance with respect to accounting for the various types of costs incurred
     for computer software developed or obtained for the Company's use. The
     Company adopted SOP 98-1 effective January 1, 1999. Software development
     costs incurred in the research and development of new software products and
     enhancements to existing software products for internal use are expensed as
     incurred. Software development costs for the years ended December 31, 1999
     and 1998, were approximately $706,000 and $859,000, respectively.

                                      F-12
<PAGE>

                              VIRTGAME.COM CORP.
                               AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          December 31, 1999 and 1998

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
---------------------------------------------------------

     Income Taxes

     The Company accounts for income taxes using the asset and liability method.
     Under the asset and liability method, deferred income taxes are recognized
     for the tax consequences of "temporary differences" by applying enacted
     statutory tax rates applicable to future years to differences between the
     financial statement carrying amounts and the tax bases of existing assets
     and liabilities. Deferred tax assets are reduced by a valuation allowance
     when, in the opinion of management, it is more likely than not that some
     portion or all of the deferred tax assets will not be realized.

     Net Loss Per Share

     Basic net loss per share excludes dilution and is computed by dividing net
     loss by the weighted average number of common shares outstanding during the
     reported periods. Diluted net loss per share reflects the potential
     dilution that could occur if stock options and other commitments to issue
     common stock were exercised. During the years ended December 31, 1999 and
     1998, options and warrants to purchase 3,575,300 and 1,122,000 common
     shares, respectively, were anti-dilutive and have been excluded from the
     weighted average share computation.

     Comprehensive Income

     The Financial Accounting Standards Board (FASB) issued Statement of
     Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
     Income." This statement establishes standards for reporting and display of
     comprehensive income and its components. The Company adopted this statement
     effective January 1, 1998. For the years ended December 31, 1999 and 1998,
     the Company had no items that were required to be recognized as components
     of comprehensive income.
     Use of Estimates

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

                                      F-13
<PAGE>

                              VIRTGAME.COM CORP.
                               AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          December 31, 1999 and 1998

NOTE 2 - PROPERTY AND EQUIPMENT
-------------------------------

    Property and equipment consists of the following at December 31:

<TABLE>
<CAPTION>

                                               1999       1998
                                            ----------  --------
          <S>                               <C>         <C>
          Computer hardware                 $  405,148  $366,901
          Computer software                  1,051,707   119,795
          Office furniture and equipment        72,715    70,061
          Capital lease - automobile            34,815    33,340
                                            ----------  --------

                                             1,564,385   590,097

          Less: accumulated depreciation       266,154   141,038
                                            ----------  --------

                                            $1,298,231  $449,059
                                            ==========  ========
</TABLE>

NOTE 3 - COMMITMENTS AND CONTINGENCIES
--------------------------------------

     Operating Leases

     The Company leases its office facilities under three noncancellable
     operating lease agreements expiring at various times through June 2001. The
     leases call for aggregate monthly payments of approximately $10,600.

     In addition, the Company leases certain office equipment under
     noncancellable operating lease agreements expiring at various times through
     December 2002. The leases call for aggregate monthly payments of
     approximately $2,800.

     Capital Lease

     The Company leases an automobile under a capital lease agreement, with an
     imputed interest rate of 21.22%, due in monthly installments of $1,214
     through July 2000. The automobile that collateralizes the lease had a net
     book value of $6,770 and $18,375 at December 31, 1999 and 1998,
     respectively.

                                      F-14
<PAGE>

                              VIRTGAME.COM CORP.
                               AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          December 31, 1999 and 1998

NOTE 3 - COMMITMENTS AND CONTINGENCIES (Continued)
--------------------------------------

     At December 31, 1999, the annual future minimum lease payments under
     operating and capital leases are as follows:

<TABLE>
<CAPTION>

                                                      Operating  Capital
                                                       Leases     Lease
                                                      ---------  -------
       <S>                                            <C>        <C>
       2000                                            $144,467  $ 8,499
       2001                                              42,064        -
       2002                                              12,693        -
                                                       --------  -------

       Total minimum lease payments                    $199,224    8,499
                                                       ========

       Less amount representing interest                             571
                                                                 -------

       Present value of net minimum lease payments                 7,928

       Less current maturities                                     7,928
                                                                 -------

       Long-term lease obligations                               $     -
                                                                 =======
</TABLE>

     Rental expense for office facilities for the years ended December 31, 1999
     and 1998 totaled $146,918 and $122,010, respectively.

     Employment Agreements

     During September 1999, the Company entered into a two year employment
     agreement with the Chairman of the Board of Directors. The agreement
     provides for the grant of options to purchase: 100,000 shares of common
     stock at $.10 per share; 500,000 shares of common stock at an exercise
     price equal to the fair market value on the date of the agreement, 200,000
     shares of common stock at an exercise price equal to the fair market value
     on the one-year anniversary date of the agreement; and 300,000 shares at an
     exercise price equal to the fair market value on the date of grant if,
     prior to termination of the agreement, the Company has secured debt or
     equity financing, or a combination thereof, in the aggregate amount of $10
     million, after deducting for all associated costs. Compensation cost in the
     amount of $236,000 has been recognized on the grant of options to purchase
     100,000 shares of common stock at $.10 per share (see Note 5).

     During November 1999, the Company entered into a two year and nine month
     employment agreement with the Chief Executive Officer (the "CEO"). The
     agreement provides for a base salary of $150,000, and an annual cash bonus
     equal to 2% of the Company's annual gross revenues in excess of $1 million.
     In conjunction with this agreement the CEO has agreed not to solicit any
     person employed full-time by the Company during the term of his employment
     and for one year after termination. The agreement also provides for a cash
     bonus of $100,000 upon the anticipated public offering of the Company and a
     payment of $250,000 upon the sale or merger of the Company.

                                      F-15
<PAGE>

                              VIRTGAME.COM CORP.
                               AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          December 31, 1999 and 1998

NOTE 4 - RELATED PARTY TRANSACTIONS
-----------------------------------

    Note Payable to Stockholder and Affiliate

    During the year ended December 31, 1999, the Company received advances of
    $475,000 in the form of notes payable from its then Chairman of the Board of
    Directors and his affiliated company. During the year ended December 31,
    1999, $300,000 of this amount was converted into 100,000 shares of common
    stock. The notes payable are unsecured, due on demand and provide for
    interest at a fixed rate of 12% per annum. The principal balance outstanding
    at December 31, 1999 was $75,000 and total interest expense incurred by the
    Company on these related party notes payable for the year ended December 31,
    1999 was approximately $17,000.

    Note Payable - Licensing Agreement

    In May 1996, the Company entered into a non-exclusive licensing agreement
    with CasinoWorld Holdings, Ltd. (CasinoWorld) for the use of certain
    computer software and hardware (the CasinoWorld Agreement).  Under the terms
    of the CasinoWorld Agreement, the Company agree to transfer 385,000 shares
    of its common stock to CasinoWorld as a licensing fee.  As additional
    consideration, the Company agreed to pay a royalty in the amount of 33 1/3%
    of net gaming revenue derived through Internet operations.  The 385,000
    shares of common stock had been presented as additional shares of common
    stock issued in the consolidated financial statements for the year ended
    December 31, 1996.  The shares were actually transferred to CasinoWorld
    through the Company's majority stockholder.

    Effective February 1997, the Company and CasinoWorld agreed to terminate the
    CasinoWorld Agreement.  Under the termination agreement, CasinoWorld
    returned to the Company 385,000 shares of the Company's common stock in
    exchange for a $150,000 promissory note and all 385,000 shares were retired.
    The promissory note is unsecured and bears interest at a fixed rate of 10%.
    Principal and interest are due in quarterly installments equal to 10% of the
    Company's net gaming revenue, as defined in the promissory note. The Company
    recorded a charge to operations of $133,711 to reflect the effect of the
    settlement during 1997. All remaining principal and accrued interest was due
    in September 1999. The note was not repaid on maturity and at December 31,
    1999, had a balance of $123,876 which is due on demand.

    Stock Agreements

    In September 1996, the Company entered into an agreement with Unistar
    Entertainment, Inc. (Unistar) whereby Unistar agreed to purchase up to
    600,000 shares of the Company's stock at a price of $5.00 per share (the
    Securities Purchase Agreement), subject to certain antidilution provisions.
    The Securities Purchase Agreement was executed in contemplation of
    CasinoWorld providing or developing an internet gaming system. Concurrent
    with the execution of the Securities Purchase Agreement, the Company issued
    140,000 shares of its common stock to Unistar for $700,000.

                                     F-16

<PAGE>

                              VIRTGAME.COM CORP.
                               AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          December 31, 1999 and 1998


NOTE 4 - RELATED PARTY TRANSACTIONS (Continued)
-----------------------------------

    Stock Agreements (Continued)

    As a result of the termination of the Company's license agreement with
    CasinoWorld, in March 1997 the Company and Unistar entered into a settlement
    agreement (the Settlement Agreement). Under the terms of the Settlement
    Agreement, the Company agreed to issue an additional 93,333 shares to
    Unistar without consideration as required under the antidilution provisions.
    Additionally, as a result of a private placement of shares of its common
    stock conducted by the Company in 1997, the Company is required to issue an
    additional 116,667 shares to Unistar under the antidilution provisions. The
    Company also issued to Unistar a common stock warrant valued at $772,492
    entitling Unistar to purchase up to 200,000 shares of common stock, pursuant
    to the Settlement Agreement. The warrants are immediately exercisable at
    $3.45 per share, subject to certain adjustments as provided for in the
    warrant, and expire five years from the date of issuance.

    The Company has also granted to Unistar, for no additional consideration, a
    non-exclusive, nonassignable royalty-free license to the Company's software
    applications relating to state or Indian bingo or lottery games for use by
    Unistar, provided that Unistar shall not use such software technology to
    compete with a preexisting gaming operation of the Company.

NOTE 5 - SHAREHOLDERS' EQUITY
-----------------------------

    Stock and Warrants Issued for Services

    During the year ended December 31, 1997, pursuant to a consulting agreement,
    the Company issued a stock warrant to purchase 30,000 shares of its common
    stock as consideration for services provided. The warrants carry an exercise
    price of $2.25 per share. The warrant has been valued at $45,634. As part of
    an extension of the consulting agreement effective January 1, 1998, the
    holder of the warrant is entitled to a warrant to purchase an additional
    35,000 shares of common stock at an exercise price of $3.00 per share when
    the stock price reaches $6.00 per share and another 35,000 shares when the
    stock price reaches $7.50 per share. All of the warrants are immediately
    exercisable and expire five years from the date of issuance. During the year
    ended December 31, 1998, the Company recorded a charge totaling $153,583 for
    the value of these warrants.

    During the year ended December 31, 1999, the Company issued warrants to
    purchase 223,300 shares of its common stock as consideration for services
    provided in connection with the Company's stock issuances for cash. All of
    the warrants are immediately exercisable and expire five years from the date
    of issuance. The warrants have been valued at $509,635 and have been
    recorded as an increase and a decrease to additional paid-in capital, with
    no net effect on shareholders' equity.

                                     F-17

<PAGE>

                              VIRTGAME.COM CORP.
                               AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          December 31, 1999 and 1998

NOTE 5 - SHAREHOLDERS' EQUITY (Continued)
-----------------------------

    Stock and Warrants Issued for Cash

    During the year ended December 31, 1998, the Company issued shares of common
    stock relative to a 1,400,000 share private placement offering under Rule
    506 of Regulation D promulgated under the Securities Act of 1933. Total net
    proceeds from the offering at December 31, 1998 were $3,967,025, net of
    issuance costs of $194,676.

    During the year ended December 31, 1999, the Company issued shares of common
    stock relative to a 700,000 share private placement offering under Rule 506
    of Regulation D promulgated under the Securities Act of 1933. Total net
    proceeds from the offering at December 31, 1999 were $435,550, net of
    issuance costs of $108,530.

    During the year ended December 31, 1999, the Company also issued shares of
    common stock relative to a 1,400,000 share private placement offering under
    Rule 506 of Regulation D promulgated under the Securities Act of 1933. Total
    net proceeds from the offering at December 31, 1999 were $1,752,903, net of
    issuance costs of $154,500. In conjunction with this offering, the Company
    issued warrants to purchase 30,000 shares of its common stock in August
    1999. The warrants are immediately exercisable and expire five years from
    the date of issuance.

    Stock Options

    In 1997, the Company adopted a stock option plan (the "Plan") under which
    options to purchase up to 500,000 shares of common stock may be granted to
    officers, employees or directors of the Company, as well as consultants,
    independent contractors or other service providers of the Company. Both
    "incentive" and "nonqualified" options may be granted under the Plan.
    Incentive options may be granted at an exercise price equal to the fair
    market value of the shares at the date of grant while nonqualified options
    may granted at an exercise price determined by the Board of Directors.
    Individual option agreements will contain such additional terms as may be
    determined by the Board of Directors at the time of the grant. The Plan
    provides for grants of options with a term of up to 10 years. Incentive
    options must be granted with exercise prices equal to the fair market value
    on the date of grant, except that incentive options granted to persons
    owning stock possessing more than 10% of the total combined voting power of
    all classes of stock of the Company may not be granted at less than 110% of
    the fair market value on the date of grant.

    The Company has elected to account for nonqualified grants and grants under
    its Plan following APB No. 25 and related interpretations. Accordingly,
    compensation costs of approximately $254,000 and $307,000 have been
    recognized for nonqualified options for the years ended December 31, 1999
    and 1998, respectively. In November 1999, the Company extended the
    expiration date on options previously granted to the CEO to purchase 480,000
    shares of common stock. The expiration date was extended by five years to
    December 31, 2005. No additional compensation cost has been recognized on

                                     F-18

<PAGE>

                              VIRTGAME.COM CORP.
                               AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          December 31, 1999 and 1998

    the extension of the expiration date as there was no change in the intrinsic
    value of the options.

                                     F-19

<PAGE>

                              VIRTGAME.COM CORP.
                               AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          December 31, 1999 and 1998

NOTE 5 - SHAREHOLDER'S EQUITY (Continued)
-----------------------------

    Stock Options (Continued)

    Under SFAS No.123, the fair value of each option granted during the years
    ended December 31, 1999 and 1998 was estimated on the measurement date
    utilizing the then current fair value of the underlying shares less the
    exercise price discounted over the average expected life of the options of
    three to five years, with an average risk free interest rate of 4.4% to
    6.27%, price volatility of 1.0 and no dividends. Had compensation cost for
    all awards been determined based on the fair value method as prescribed by
    FASB Statement No.123, reported net (loss) and (loss) per common share would
    have been as follows:

                                                   December 31,   December 31,
                                                       1999           1998
                                                   -----------    ------------
    Net (loss):
       As reported                               $(3,050,719)     $(3,992,153)
       Proforma                                  $(5,636,127)     $(4,608,688)
    Basic and diluted net (loss) per share:
       As reported                                     (0.34)     $     (0.58)
       Proforma                                        (0.63)     $     (0.67)

    A summary of the activity of the stock options for the years ended December
    31, 1999 and 1998 is as follows:

<TABLE>
<CAPTION>
                                                             Year ended                   Year ended
                                                           December 31, 1999            December 31, 1998
                                                           -----------------            -----------------
                                                                Weighted                     Weighted
                                                                Average                      Average
                                                                Exercise                     Exercise
                                                Shares            Price        Shares          Price
                                               ----------------------------------------------------------
<S>                                            <C>              <C>            <C>           <C>
Outstanding at beginning of period               932,000             1.45       640,000         $0.59

Granted                                        2,091,500             2.06       292,000          3.33
Exercised                                         (1,500)            2.87             -             -
Expired                                                -                -             -             -
                                               ----------------------------------------------------------
Outstanding at end of period                   3,022,000             1.88       932,000         $1.45
                                               ==========================================================
 </TABLE>

                                     F-20

<PAGE>

                             VIRTGAME.COM CORP.
                               AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          December 31, 1999 and 1998

<TABLE>
<S>                                            <C>                 <C>          <C>             <C>
Exercisable at end of period                   2,495,500             1.82       822,000         $1.19
                                               ======================================================

Weighted-average fair value of options
  granted during the period                                        $ 1.54                       $2.28
                                                                   ======                       =====

Weighted-average remaining contractual
life of options outstanding at end of period                          3.9 years                     4 years
                                                                   ======                       =====
</TABLE>

                                     F-21

<PAGE>

                             VIRTGAME.COM CORP.
                               AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          December 31, 1999 and 1998

NOTE 6 - INCOME TAXES
---------------------

    Deferred income taxes reflect the net tax effects of the temporary
    differences between the carrying amounts of assets and liabilities for
    financial reporting and the amounts used for income tax purposes.  The tax
    effect of temporary differences consisted of the following as of December
    31:
<TABLE>
<CAPTION>
                                                               1999             1998
                                                           -----------       ----------
<S>                                                        <C>               <C>
    Deferred tax assets:
      Net operating loss carryforwards                     $ 2,819,000       $1,631,000
      Compensation element of stock options issued             948,000          848,000
      Startup costs capitalized for income tax purposes        312,000          683,000
      Other                                                     83,000           86,000
                                                           -----------       ----------

        Gross deferred tax assets                            4,162,000        3,248,000

    Less valuation allowance                                (4,105,000)       3,223,000
                                                           -----------       ----------

                                                                57,000           25,000

    Deferred tax liabilities, equipment                        (57,000)         (25,000)
                                                           -----------       ----------
                                                           $         -                -
                                                           ===========       ==========
</TABLE>

    Realization of deferred tax assets is dependant upon sufficient future
    taxable income during the period that deductible temporary differences and
    carryforward are expected to be available to reduce taxable income. As the
    achievement of required future taxable income is uncertain, the Company
    recorded a valuation allowance. The valuation allowance increased by
    $882,000 from 1998.

    As of December 31, 1999, the Company has net operating loss carryforwards
    for both federal and state income tax purposes. Federal net operating loss
    carryforwards totaling approximately $7,078,000 expire as follows: $194,000
    in 2011, $322,000 in 2012, $3,609,000 in 2018 and $2,953,000 in 2109. State
    net operating loss carryforwards totaling approximately $7,075,000 expire as
    follows: $4,123,000 in 2003 and $2,952,000 in 2004. Due to Internal Revenue
    Service regulations, the availability of the operating loss carryforwards
    may be limited upon a substantial change in ownership.

                                     F-22

<PAGE>

                             VIRTGAME.COM CORP.
                               AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          December 31, 1999 and 1998

 NOTE 6 - INCOME TAXES (Continued)
 ---------------------

    A reconciliation of the effective tax rates with the federal statutory rate
    is as follows as of December 31:

                                                           1999          1998
                                                           ----          ----

    Income tax benefit at 35% statutory rate          $(1,068,000)  $(1,397,000)
    Change in valuation allowance                         882,000     1,248,000
    Nondeductible expenses                                214,000        79,000
    Adjustment to net operating loss carryforwards              -       140,000
    State income taxes, net                              (175,113)     (217,780)
    Other                                                 150,000       149,000
                                                      -----------   -----------

                                                      $     2,887   $     1,220
                                                      ===========   ===========

NOTE 7 - MANAGEMENT'S PLANS FOR FUTURE OPERATIONS AND FINANCING
---------------------------------------------------------------

    The accompanying consolidated financial statements have been prepared
    assuming that the Company will continue as a going concern. However, the
    Company has experienced cumulative losses since its inception of
    approximately $13,203,300, inclusive of noncash charges for capital stock,
    options and warrant issuance-related activity of approximately $4,256,000.
    The cumulative losses have reduced net stockholders' equity to approximately
    $1,523,200 as of December 31, 1999. At present, the Company's working
    capital plus limited revenue from gaming will not be sufficient to meet the
    Company's objectives as structured. Although these conditions indicate that
    the Company may be unable to continue as a going concern, management did
    anticipate that considerable losses would be incurred before the Company
    became self-sustaining. The consolidated financial statements do not include
    any adjustments that might result from the outcome of this uncertainty.

    The Company estimates it needs substantial new capital to achieve meaningful
    revenue producing operations and plans to seek up to $3 million in equity
    financing via a Form SB-2 offering pursuant to the Securities Act of 1933.
    In the event financing is not obtained, management's plans include
    consideration of joint venture arrangements with other companies in
    strategic locations in order to target customers within these specified
    foreign countries and licensing of the Company's software to other
    companies.

    The Company has signed a letter of intent with the Province of Chaco,
    Argentina, to provide technology for internet lotteries in that province,
    and the Company intends to pursue similar arrangements with other provinces
    and countries in South America.

                                     F-23

<PAGE>

                            VIRTGAME.COM CORP.
                               AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          December 31, 1999 and 1998

NOTE 7 - MANAGEMENT'S PLANS FOR FUTURE OPERATIONS AND FINANCING (Continued)
---------------------------------------------------------------

    As discussed in Note 1, the Company acquired 100% of the outstanding capital
    stock of Primeline. Primeline has developed software that will provide an
    online closed-loop sportsbook system. The Company has finalized an
    installation and maintenance agreement with a land-based gaming corporation
    in Nevada and intends to market this software to other land-based casinos in
    the United States.

NOTE 8 - RECLASSIFICATION
-------------------------

    Gaming license has been reclassified in the financial statements at December
    31, 1998 from noncurrent assets to current assets in order to more fairly
    present the financial position of the Company. The result of this
    reclassification increased total current assets at December 31, 1998 from
    $856,252 to $909,403, an increase of $53,151.

NOTE 9 - SUBSEQUENT EVENT
-------------------------

    In February 2000, the Company signed a letter of intent to merge into eLOT,
    Inc. The merger will be conducted as a tax free reorganization pursuant to
    Section 368 of the Internal Revenue Code. The letter of intent calls for the
    close, sale or spin-off of the Company's existing gaming operations in
    Antigua.

                                     F-24