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

                                   FORM 10-KSB

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

                    For the fiscal year ended March 31, 2002

                                NBO SYSTEMS, INC.
                (Formerly known as NBO, Inc., a Utah Corporation)

             STATE OF MARYLAND                          87-0527348
      (State or Other Jurisdiction of          (IRS Employer Identification
       Incorporation or Organization)                     Number)

  3676 West California Avenue, Building D                  84104
            Salt Lake City, Utah                        (Zip code)
  (Address of Principal Executive Offices)

                                 (801) 887-7000
              (Registrant's Telephone Number, Including Area Code)

              Securities registered under Section 12(b) of the Act:
       Title Of Each Class               Name Of Each Exchange On Which
       To Be So Registered               Each Class Is To Be Registered
         None                                         N/A

              Securities registered under Section 12(g) of the Act:
                         Common Stock, Par Value $.0005
                                (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes __X__  No _____

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 ]

State issuer's revenues for its most recent fiscal year:  $5,467,716

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days.  (See definition of affiliate in Rule
12b-2 of the Exchange Act.)

Voting: 13,395,174 non-affiliate common shares at $5.50 = $73,673,457
Non-Voting:  zero

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

State the number of shares outstanding of each of the issuer's classes of common
equity.  16,569,887 common shares as of March 31, 2002.

                       DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference, briefly describe them
and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated: (1) any annual report to security holders;
NONE. (2) any proxy or information statement; NONE. and (3) any prospectus filed
pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act").
NONE.

Transitional Small Business Disclosure Format (check one):

Yes ____    No __X__

<PAGE>

                                TABLE OF CONTENTS
PART I                                                                Page

ITEM 1. DESCRIPTION OF BUSINESS                                        1

ITEM 2. DESCRIPTION OF PROPERTY                                       11

ITEM 3. LEGAL PROCEEDINGS                                             11

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS           12

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS      12

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS                           15

ITEM 7. FINANCIAL STATEMENTS                                          27

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
        AND FINANCIAL DISCLOSURE                                      27

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
        PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT    27

ITEM 10. EXECUTIVE COMPENSATION                                       31


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT                                                    4

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                6

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K                              7

SIGNATURES                                                             8

PART F/S                                                            F -1

Forward-looking Statements

All statements made herein, other than statements of historical fact, which
address activities, actions, goals, prospects, or new developments that the
Company expects or anticipates will occur in the future, including such things
as expansion and growth of operations and other such matters, are forward-
looking statements.  Any one or a combination of factors could materially affect
the Company's results operations and financial position.  These factors include
competitive pressures, success or failure of marketing programs, changes in
pricing, creditor actions, and conditions in the capital markets.  Forward-
looking statements made by the Company are based on knowledge of the Company's
business and the environment in which the Company currently operates.  Because
of the factors listed above, as well as factors beyond the Company's control,
actual results may differ from those in the forward-looking statements.

<PAGE>

                                     PART I

Item 1.  Description of Business.

  (a)  Business Development

     NBO Systems, Inc. ("NBO" or the "Company" or "we") began operations in June
     1994.  From inception through March 31, 1999, NBO was considered a
     development stage company.

     Beginning in the fall of 1998, NBO entered into long-term exclusive
     agreements with certain mall property and retail owners in an effort to
     build a larger national presence in selling gift certificates.  As a result
     of these contracts, the Company started significant gift certificate
     operations in October of 1998 and therefore, was no longer considered a
     development stage company as of the fiscal year ended March 31, 1999.

     The Company changed its name from Neighborhood Box Office, Inc. to NBO,
     Inc. on July 17, 2000.  In January of 2002, NBO, Inc., merged into its
     wholly-owned subsidiary, NBO Systems, Inc., which was incorporated in the
     State of Maryland and thereafter filed a dba as The Gift Certificate
     Company.  The effect of this transaction was to reincorporate the Company
     in the State of Maryland.

     The Company was created for the purpose of developing a state-of the-art
     event and entertainment ticket distribution system.  The first two years of
     operations were spent primarily on the development of software, along with
     the design and integration of hardware components in a kiosk.  Kiosks were
     installed in Lansing, Michigan as the initial beta test site for the
     Company.  Additional markets were installed in several geographic areas,
     demonstrating the technology and capabilities of the Company to the
     industry.

     In late 1997 and early 1998, the Company decided to pursue opportunities
     distributing gift certificates using technology similar to that already
     developed for the ticketing business.  In 1998 the Company was successful
     in finalizing an agreement with Urban Retail Properties, Inc., one of the
     nation's largest mall owner/operators, to distribute gift certificates on
     an exclusive basis for 14 of its properties.  As a result of this contract,
     the Company generated sales in excess of $4.3 million in the face value of
     gift certificates in the year ended March 31, 1999, resulting in fees and
     interest income to the Company of $387,054.  In the fall of 1999, the
     Company's exclusive agreement with Urban was expanded to include eight
     additional mall properties.  Together with additional expansion, the number
     of Urban properties totaled 22 malls, and as of March 31, 2002, a total of
     24 Urban malls are installed and operational.

     During the fall of 1999, the Company entered into exclusive agreements with
     The Rouse Company to manage gift certificate programs for five of its 44
     mall properties as a test.  As of March 31, 2002 a total of 40 Rouse malls
     are installed and operational.

     In 1999, the Company entered into an agreement with JP Realty Inc. to
     manage gift certificate programs for its entire portfolio of 18 properties.
     As of March 31, 2002 all 18 properties are still fully operational.

                                        1
<PAGE>

     From 1999 through March 2002, the Company has entered into agreements to
     manage gift certificate/gift card programs with 8 additional independent
     malls located across the USA.

     In the spring of 2000, the Company entered into an exclusive agreement with
     Konover Properties to manage gift certificate programs for 31 of its
     Factory Stores of America outlets.

     In the fall of 2001, the Company entered into an agreement with Bayer
     Properties to manage gift card programs in two mall properties.

     In summary, the Company expanded its presence in mall gift certificate/card
     programs in operation from 14 in 1998 to 47 in 1999, 88 in 2000 and
     approximately 120 in 2001, which includes Internet fulfillment for 31
     factory outlets malls. The face value of gift certificate sales volume
     through the Company's system increased from approximately $4.3 million for
     fiscal year ending March 31, 1999, to approximately $21 million in face
     value of gift certificates in fiscal year ending March 31, 2000, to over
     $43 million in face value of gift certificates for fiscal year ending March
     31, 2001 and nearly $58 million in face value of gift certificates for
     fiscal year ending March 31, 2002. This represents a 388% increase in
     volume from 1999 to 2000, a 105% increase from 2000 to 2001 and a 35%
     increase from 2001 to 2002.

     In April 2000, the Company signed an agreement with Smith's Food and Drug
     Stores, the leading supermarket chain in Salt Lake City, Utah to distribute
     gift certificates from 37 Smith's store locations along the Wasatch front
     in Utah.  To date the Company has signed agreements with approximately 282
     local retail businesses, with more than 500 retail outlets. The Salt Lake
     City market will be used as a beta test for roll-outs in additional markets
     across the country if successful.

     In April 2000, the Company entered into an exclusive three-year agreement
     with Darden Restaurants, Inc. (the largest casual dining restaurant chain
     in the world) to sell gift cards via the Internet for all Olive Garden, Red
     Lobster, Bahama Breeze and Smokey Bones restaurants.  For the year ended
     March 31, 2001, the total face value of gift cards sold was $906,480,
     resulting in revenue to the Company of approximately $91,000. For the year
     ended March 31, 2002, the total face value of gift cards sold exceeded
     $1,950,000 an approximate increase of 115% over the previous year's sales.

     In July 2001, NBO entered into an Advertising and Promotional Agreement
     with eBay, Inc.  Under this Agreement, the Company is obligated to pay eBay
     a percentage of the sales of gift certificates or gift cards sold through
     eBay. The agreement may be terminated by either party upon 30 days notice.
     The Company began selling gift certificates through eBay in the 3rd Quarter
     of 2001. As of March 31, 2002, the Company is unable to forecast its
     expected revenues from this agreement.

     As of December 31, 2001, NBO had also contracted to re-sell gift
     certificates for more than 65 national retailers whereby the Company
     purchases their gift certificates and then re-sells them on the Company's
     Internet site.

                                        2

<PAGE>

     The Company operates a call center for inbound and outbound orders of mall
     gift certificates and gift cards, national retailer gift certificates and
     gift cards, and local Salt Lake City merchant gift certificates with a
     capacity of 192 seats.  Five seats are currently used by the Company, with
     the remainder of seats sub-leased to another non-affiliated company.
     Fulfillment of all Internet orders and corporate orders taken through the
     call center are processed and shipped from the Company's corporate
     headquarters in Salt Lake City, Utah.

     The Company's revenue model is predicated on five principal sources: (i)
     interest income on purchased but unredeemed certificates and gift cards,
     (ii) convenience fees charged to customers, and merchant fees (third party
     discounts, supplies, etc.) charged to merchants in connection with the
     purchase and use of certificates and gift cards,  (iii) administration fees
     on gift cards, (iv) funds claimed as abandoned property (breakage)
     remaining on account on unused gift certificates, and (v) shipping and
     fulfillment fees.

     The accounting treatment for recognition of revenues from the sale of gift
     cards and gift certificates is complex. In cases where the Company's sale
     of gift certificates and gift cards are similar to the activities of an
     agent that receives commissions, then the revenues from the sale of gift
     certificates and gift cards would not be included in the revenues of the
     Company in the financial statements. However, in cases where the Company
     bears financial risk and other indicators of control over the product or
     service, then the Company would include the revenues from the sale of gift
     certificates and gift cards. The accounting treatment in each case will
     depend on the facts and circumstances, including the terms of the contracts
     relating to the sale of the gift certificates or gift cards. In cases where
     the face value from the sale of gift certificates and gift cards are not
     included in revenues of the Company, the amount of such revenues will be
     disclosed either as a memorandum item on the statement of operations or in
     footnotes to the financial statements. Revenues from convenience fees,
     merchant fees, interest on the proceeds from the purchase of gift
     certificates in the restricted accounts, administration fees on expired
     unredeemed gift cards, and advertising revenues is recognized by the
     Company as earned.

  (b)  Business of the Company

     (1)  NBO's primary business is to provide comprehensive gift certificate
          programs to shopping mall managers, non-mall retailers and consumers.
          The Company provides shopping mall managers with a gift certificate
          product that is accepted and redeemable at all mall stores and
          administers the entire program including accounting, banking, and
          complying with escheatment regulations (handling of non-redeemed
          certificates).

     (2)  The Company manages or sells gift certificates/gift cards through the
          following channels:

          Counter Top Units (CTUs):  These units are located at Customer Service
          counters in malls and other retail locations where mall employees sell
          gift certificates by credit/debit card, cash or check.  Transactions
          conducted in this manner result in
          e-commerce with immediate order fulfillment; that is, a transaction
          completed with the gift certificate delivered immediately to the
          customer by a mall or retail distribution center employee.
                                        3

<PAGE>

          Electronic Kiosks (Kiosks):  The Company has developed user-friendly,
          computer-enabled kiosks to make purchasing gift certificates as easy
          as using an ATM machine.  The difficulties facing customers when
          purchasing gift certificates through sales clerks, such as long lines
          and hard to find distribution points, may be ameliorated using the
          Company's Kiosk System.  The Kiosks are generally located at
          convenient locations in shopping malls, supermarkets, airports, office
          buildings and other desirable high-traffic areas.  The Kiosks are
          strategically placed for maximum exposure to the general public.  The
          relatively small footprint of the Kiosk allows it to be positioned in
          heavily traveled areas to give customers easy access.

          Business to Business ("B2B") Sales:  The Company has a dedicated sales
          force to market gift certificate programs to corporations for holiday
          gifts to employees and clients, and for incentive/reward programs
          throughout the year.  These programs are an important complement to
          the Company's other sales efforts.  Direct corporate sales accounted
          for approximately 10% of the Company's 2002 sales volume measured by
          the face amount of the gift certificates/gift cards.

          E-Commerce:  The Company's Internet sites
          www.thegiftcertificatecompany.com, www.thegiftcardcompany.com and
          www.nbo.com  allow individual shoppers or corporate clients to
          purchase mall certificates or retail certificates for any mall or
          merchant in the Company's network.  Specifically, an individual can
          purchase a number of gift certificates from malls or retail stores in
          different geographic regions by engaging in one e-commerce
          transaction.  Consumers that have purchased a stored value gift card,
          or recipients of a stored value gift card can access
          www.giftcardbalance.com to check balances of remaining funds
          available.

     (3)  Competition.

          There are inherent difficulties for any business seeking to introduce
          new methods or approaches in a developing industry. The Company will
          encounter competition from alternative methods of distributing and
          delivering gift certificates.  The gift certificate/gift card program
          will be faced with competition from other purveyors of gift
          certificates and potentially from much larger financial services
          companies that may choose to enter the gift certificate marketplace.

          Mall Distribution Channel

          The Company made a strategic business decision in the first quarter of
          1998 to develop and implement a turnkey gift certificate distribution
          system for the United States Shopping Center Industry. This program
          was introduced at the International Council of Shopping Centers
          Convention in Las Vegas, Nevada in May of 1998.  At the time of
          introduction, there were two types of formidable competitors.  The
          first type consists of the actual mall developers that currently
          manage their own gift certificate/gift card programs in-house.  The
          Company's challenge is to convert these in-house competitors into
          customers by demonstrating to mall owners why they should become
          customers.  With the availability of stored value gift cards, and the
          complexities of administering such a complex program, mall developers
          who have

                                        4

<PAGE>

          chosen in the past to manage their own paper gift certificate programs
          may see the benefits of outsourcing this service if they want to
          convert from paper to plastic expeditiously and with a lower
          administrative burden.  NBO's stored value gift card solution also
          provides a revenue sharing opportunity for the mall developer that
          does not exist with a paper gift certificate, providing another
          incentive for the mall developer to become customers of NBO.  The
          Company has already established four long-term contracts with
          significant mall developers that previously managed their programs in-
          house. NBO will solicit other major developers to become customers
          based upon the results of these relationships with NBO.

          The Company's primary non-mall developer competitor is Mid-America
          Gift Certificate Company ("Mid-America"), a subsidiary of Mid-America
          Bank.  MidAmerica currently has programs with approximately 225 malls
          in the United States representing approximately $200,000,000 in face
          value of gross gift certificate sales.  This company acquired market
          share in the mall industry because it was first to market.  Mid-
          America offers a software program with hardware designed to dispense
          gift certificates from Customer Service Centers only.  NBO believes
          that Mid-America does not offer any Kiosk technology, corporate
          fulfillment or Internet capabilities.  With the Mid America program,
          malls must facilitate large corporate orders at the malls creating
          administrative burdens and tying up the system for individual orders.
          Mid-America's revenue sources appear to be interest income earned on
          unredeemed certificates and the breakage of unredeemed gift
          certificates.

          There are other less significant competitors, none of which NBO
          believes will materially compete with the Company's in securing market
          share in all areas of this industry.

          National Retail Merchant Distribution Channel

          This category can be segregated into three areas of distribution with
          corresponding competition associated with each of the following areas:

          a.   Internet - The primary competitors are as follows:

               Giftcertificates.com ("GCC"): Based in New York City, New York,
               GCC's initial penetration into the market has focused on
               reselling and distributing gift certificates for national retail
               chains.  NBO believes the vast majority of its merchants
               represented on its system are national retailers, and it makes
               some corporate gift certificate sales. GCC takes orders for
               certificates and then purchases the certificates from the
               appropriate retailer and forwards them to the purchaser via mail
               or other expedited delivery methods.  GCC's revenue sources
               appear to be derived from the difference between the discounted
               prices paid by Giftcertificates.com and the face value its
               customers pay, and from margin earned from add-on items such as
               greeting cards and packaging, shipping and handling, and perhaps
               advertising on its web pages.  In addition to receiving an order
               for a specific retailer and then fulfilling it, GCC also offers a
               Super Certificate that may be redeemed by the consumer at any of
               the participating merchants.
                                        5

<PAGE>

               Webcertificates.com: Based in Philadelphia, Pennsylvania, this
               company sells online gift certificates that are redeemable at any
               online merchant that accepts credit cards.  The certificates are
               distributed via portals and other sites and sent via e-mail and
               are also sold to corporations and consumers.

               800 Giftcertificates:  Based in Patterson, New Jersey, 800
               Giftcertificates has adopted the purchase and resale model that
               Giftcertificates.com has used.  It has approximately 100 national
               retailers on its web site.

               CertifiChecks.com:  Based in Dayton, Ohio, this company offers
               consumers the ability to purchase gift certificates from local
               and national retailers offline. CertifiChecks.com then sends them
               to the customers via mail. Retailers pay a small annual fee to
               participate and the consumer pays a processing fee of $0.95 per
               transaction.

               A number of other companies have attempted to enter the gift
               certificate and gift card field. Some have failed and others are
               still in existence.  The Company faces the risk that it will be
               no more successful than other companies.

          b.   Retail Distribution Points - After significant research the
               Company has been unable to identify any other company in the
               United States that proposes to, or is currently selling gift
               certificates through Kiosks or through a national network of
               point of sales terminals consisting of Kiosks and CTUs.  NBO
               believes it was the first to market with the initial beta test
               site in Salt Lake City, Utah.  If this test proves successful,
               NBO plans to expand the concept into other markets.

          c.   Telephone Call Center - Some of the Internet gift certificate
               companies listed above have developed small call centers. Their
               centers are primarily set up to administer inbound order taking
               calls only.  None of them have established any sizable outbound
               sales efforts.

     (4)  Dependence on major customers.

          At the present time, the Company has long-term exclusive agreements (3
          to 5 years) with Urban Properties, The Rouse Company, JP Realty, Bayer
          Properties, Prime Retail, Konover Property Trust and Independent mall
          operators as well as a three year contract with Darden Restaurants to
          provide Internet fulfillment of its cards. The Company's strategy is
          to diversify the customer base so that NBO is less dependent on a
          small group of customers.

     (5)  Technology Employed by the Company.

          (a)  Magnetic Stripe Stored Value Gift Cards.


                                        6

<PAGE>

               Magnetic stripe cards are most commonly used as credit cards and
               debit/ATM cards.  This technology has an application in the gift
               certificate industry as a "stored value" or debit card.  The
               magnetic stripe card can be pre-loaded in fixed denominations or
               loaded at the time of purchase for any amount the customer
               chooses.  While the magnetic stripe card is not as powerful or
               versatile as the latest smart card technology, magnetic stripe
               technology is widely accepted in the U.S. market, and is less
               costly than smart card technology.  Accordingly, magnetic stripe
               technology will continue to replace paper and be the preferred
               technology in many applications until smart cards are more widely
               accepted.

               Stored value systems can track usage information of location,
               time and amount for both card funding and card debiting
               transactions.  Unlike paper certificates, when less than the full
               face value of the card is used, no cash is given back, thus
               encouraging the cardholder to visit the store again to use the
               balance remaining on the card.  Industry watchers believe that by
               2005, plastic stored value cards will represent 80% of the gift
               certificate market, for a total of approximately 850 million gift
               cards.  Prepaid stored value cards are becoming more popular
               because 23% of Americans don't have bank accounts, 28% of
               households can't obtain credit cards, 50% of households have web
               access, and teens spend approximately $153 billion a year, mostly
               in cash.  Stored value cards eliminate the need to carry cash,
               and facilitate keeping sales in the stores because no change has
               to be given. (Source: Total Systems Services Inc., Columbus, GA).

          (b)  Strategic Alliance - WildCard Systems, Inc.

               In March 2001, NBO entered into an agreement with WildCard
               Systems, Inc. ("WildCard"), a global leader in delivering high
               quality electronic stored value e-payment solutions involving
               complex financial transaction processing, web-based applications
               and custom software development.  Stored value (prepaid) type
               products, particularly those designed to make purchases on the
               Internet, represent the biggest untapped market for consumer
               payments.  WildCard's secure e-transaction platform is supported
               by a full range of services to deliver complete host-based stored
               value solutions for a wide range of vertical markets.  WildCard
               was selected by Visa USA as a Preferred Processor for stored
               value payment systems.

               NBO's agreement with WildCard allows the Company to offer branded
               or non-branded cards, enabling signature-based debit services in
               an open or closed transaction environment, to be sold, activated
               and funded at NBO's distribution locations.  Cards are a
               variation of the bankcard association designations Visa or
               MasterCard.  Because this works in an open environment, no
               special hardware is required, and will work on any point-of-sale
               terminal currently accepting Visa or MasterCard.  NBO entered
               into agreements with three mall operators representing five
               individual mall properties as a test pilot project using stored
               value cards.  The pilot program

                                        7

<PAGE>

               was implemented using a Master Card branded card.  The pilot
               program was successfully implemented prior to the 2001 holiday
               season.  Sales and redemption trends are currently being
               evaluated.  Master Card, Wild Card and NBO are in the process of
               assessing the program prior to any future deployment of gift
               cards into malls.

               Upon acceptance of the program by all parties, NBO will be
               allowed to deploy gift cards  with other major mall developers
               and offer the services of stored value gift cards.  In addition,
               this relationship opens the door for NBO to offer turnkey stored
               value services to a variety of business opportunities outside of
               the mall category, providing the Company with a financial
               opportunity not available from paper gift certificate programs.
               With paper programs, there is no solution available for the
               retailer to debit a portion of the gift certificate if the
               transaction is less than the full face, thus requiring the
               retailer to give cash back, which could be spent elsewhere.
               Paper gift certificates also require NBO to send 100% of the face
               value amount to the retailer, terminating the Company's ability
               to earn future interest income on the unredeemed balance.  Stored
               value gift cards require only the purchase amount to be debited,
               leaving the balance in the Company's accounts to earn interest
               income, and also allows NBO to generate additional revenue from
               administration fees not available with paper programs.

          (c)  Onsite Systems.

               NBO's Onsite Systems consist mainly of multiprocessor Dell severs
               running Windows 2000 Advanced Server and are used to provide
               services for MS-SQL databases, credit card processing, a modem
               pool offering a secured redundant connection method for point-of-
               sale devices, web services, credit card processing, anti-virus
               software management, accounting software and e-mail services.
               Servers running a UNIX operating system are used for security and
               twenty-four hour network monitoring.  NBO's network utilizes a
               network-attached storage (NAS), a reliable tape backup system,
               multiple Cisco frame relay routers, a secure firewall and a
               virtual private network (VPN) gateway.  Many of the Company's
               systems utilize redundant servers and equipment to enhance
               reliability.  NBO utilizes two T1 Internet connections from two
               separate providers for redundant network services.  Failure on
               either T1 link is automatically detected and resolved.

          (d)  Software Methodology.

               NBO's software design methodology allows several modular
               applications to run on outlet computer systems (outlets)
               comprised of electronic kiosks and point-of-sale systems
               simultaneously.  This modular design approach allows NBO to
               develop custom kiosk and point-of-sale solutions and can be
               configured to accept a variety of payment methods.  For example,
               one kiosk can be configured to accept cash only while another,
               running the same software modules, can be configured to accept
               cash, credit and debit cards.

                                        8

<PAGE>

               NBO's software uses industry standards for both client-server
               deployment and for host-based systems.  Additionally, where
               applicable, NBO interfaces to 3rd party systems using application
               program interfaces (APIs). API's are used for real-time
               communication with software systems of strategic partners and
               credit card processors.

               Furthermore, software has been developed to connect with various
               networks using dial-up, DSL, frame relay and Ethernet.  Because
               of the Company's flexible design strategy, NBO can configure
               outlets to suit the needs of our partners and clients.
               Additionally, many of NBO's outlets contain local databases,
               allowing for off-line operation in the event a network connection
               interruption occurs.

          (e)  Point-of-Sale Systems.

               NBO's Point-of-Sale Systems deployed in the field consist of
               manned systems residing on a desk or counter top known as Counter
               Top Units (CTU) and free standing unmanned electronic touch-
               screen Kiosks.

               (1)  Counter Top Units (CTU's)

                 CTU's are point-of-sale devices used for issuing gift
                 certificates or gift cards in the field.  NBO's latest model
                 of CTU, the Dual Advantage System, can issue both gift cards
                 and gift certificates.  This system allows clients to move
                 from paper to gift-cards with little effort.  This design has
                 the added benefit of reducing the number of configurations
                 deployed in the field.  This reduces technical support
                 training and manpower costs for computer integration.

                 CTU components are selected to provide a reliable, cost
                 effective solution for clients.  CTU's are configured to
                 either use NBO's credit card processing services or free
                 standing Verifones.  The minimum system configuration consists
                 of:

                 *    Pentium II (PII) Computer
                 *    Monitor, Keyboard and Mouse
                 *    MICR Laser Printer (Optional - paper certificate programs
                      only)
                 *    Magstripe enabled Keyboard (Optional - plastic programs
                      only)
                 *    Uninterruptible Power Supply
                 *    Various Connectivity Options
                 *    Verifone Credit Card Terminal (Optional)

                 New systems being deployed use Pentium III computers with 64 M
                 RAM.
                                        9

<PAGE>

                (2)  Electronic Kiosks

                 Kiosks are automated dispensing systems used for dispensing
                 gift certificates.  The technology exists for developing gift
                 card dispensing kiosks; however, the Company's marketplace
                 does not warrant such development at this time.  The internal
                 hardware components of NBO's Kiosk are carefully selected to
                 provide a reliable and cost effective solution for
                 establishing information centers and revenue sources while
                 minimizing employee involvement.

                 *    MICR Laser Printer.
                 *    ELO 17" touch-screen VGA monitor.
                 *    American Magnetic single swipe card reader.
                 *    Verifone compatible PIN Pad for debit card processing.
                 *    Cash Code bill validator.
                 *    APC programmable battery backup power supply providing up
                      to 30 minutes of power and allows a programmable shut down
                      and restart.
                 *    Intel Pentium based processor with 32MB RAM Minimum, hard
                      drive, sound and video cards, rocket port and Windows NT
                      or Windows 2000.
                 *    Kiosks are designed and engineered by NBO and outside
                      manufacturing firms. NBO assembles and integrates all
                      Kiosk components, which are fully tested prior to
                      assembly.  Production time to manufacture the Kiosk
                      enclosures and integrate internal equipment varies
                      depending on customization, but the time required to
                      produce a Kiosk is typically between six to eight weeks.
                      Delivery and installation time takes an additional two
                      weeks. Attractively designed to complement the decor of
                      a mall or retail outlet, Kiosks are built to withstand
                      customer use and abuse in high-traffic areas, requiring
                      only periodic maintenance and upkeep.

     (8)  Employees.

          As of March 31, 2002, NBO had 46 total employees including 43 full-
          time employees and 3 part-time employees.  NBO has entered into
          confidential non-disclosure and/or employment agreements with its
          officers, directors and employees.  None of the Company's employees
          are represented by a labor union.  The Company believes that its
          relationship with its employees is good.

  (c)  Reports to Security Holders

     As of October 2, 2001 the Company is required to file with the SEC all
     reports required by the SEC under the Securities Exchange Act of 1934, as
     amended.  These reports include quarterly reports, annual reports, and
     other interim reports concerning items material to the Company.  Annual
     reports and proxy statements are sent to the shareholders annually in
     accordance with Federal laws and regulations.  Officers of the Company are
     required to file reports disclosing their ownership and changes in
     ownership of the Company's securities.

                                       10

<PAGE>

     The public may read and copy any materials filed by the Company with the
     SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
     Washington, D.C. 20549. The public may obtain information on the operation
     of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The
     Company files its reports electronically. The SEC maintains an Internet
     site that contains reports, proxy and information statements, and other
     information regarding issuers that file electronically with the SEC.  The
     address of the Internet web site is: http://www.sec.gov . The Company's
     Internet web site is located at http://www.nbo.com.

Item 2.  Description of Property.

     Facilities

     Salt Lake City Headquarters.   The Company's headquarters are currently
     located at 3676 West California Avenue, Building D, Salt Lake City, Utah.
     This facility consists of approximately 28,800 square feet of leased space,
     which is comprised of 22,820 square feet of office space and 5,980 square
     feet of warehouse facilities.  Included in the office space is a 9,120
     square foot call center that can accommodate up to approximately 200
     employees. The term of the lease is five years, which will expire on
     February 1, 2005, with one three-year renewal option, that the Company must
     exercise 120 days prior to the expiration of the lease.  The facility is
     leased from 5B Bangerter LLC at a base monthly rent of $24,545.

     California Office.  The Company also rents a sales office facility in
     Irvine, California.  This facility consists of approximately 500 square
     feet of rented office space under a one- year lease that is renewable
     annually.  This facility is leased from American Office Center at a base
     monthly rent of $1,127. The Company is required to pay as additional rent a
     proportionate share of the building's operating costs for telephone
     service, including local and long distance telephone charges, telecopy
     service, photocopies, and postage.  The office in Irvine, California is
     staffed by Frank E. Layton, the Company's Vice President of Financial
     Relations.

Item 3.  Legal Proceedings.

On February 27, 2001 the Company received a letter from a law firm representing
a former employee, Ricardo Miranda, alleging a violation of termination of Mr.
Miranda according to language in an Employment Agreement (the Agreement) between
the former employee and the Company.  Mr. Miranda was an employee and Chief
Financial Officer for NBO from October 18, 1999 until his termination date of
February 2, 2001.  The letter states that the Agreement provides
an initial three-year term and alleges that the termination of Mr. Miranda prior
to this date is a breach of the Agreement.  Accordingly, Mr. Miranda is
asserting he is owed in excess of $180,000, which is a combination of
compensation through the term of the Agreement and other miscellaneous benefits
such as medical/dental insurance, etc.  According to conditions in the
Agreement, a resolution to this complaint would be handled by arbitration by the
American Arbitration Association.  The arbitration hearing was completed in
January 2002.  On June 14, 2002, the Company received notice from the
Arbitration Panel of an Interim Award in the above matter.  Among other things,
the arbitration panel found cause for termination of Mr. Miranda under the
Agreement.  The arbitration panel held that Mr. Miranda was entitled to "his
contractually

                                       11

<PAGE>

established compensation" for the period from his termination until discovery of
events relating to his termination, several months later.  Thus, Mr. Miranda was
denied compensation for many months of his contract term due to there being
cause for termination.  The panel held that an offset against the compensation
should be what Mr. Miranda had already been paid in severance plus "any amounts
earned in mitigation."  The Company was assessed the costs of arbitration but
Mr. Miranda's request for attorneys fees was denied.  The Company has challenged
the authority of the panel in awarding the fees of the arbitrators, arguing that
said fees should be split 50-50, and an additional hearing is scheduled for
August 22, 2002.  It appears likely that the liability of the Company will be
less than $70,000.

In the opinion of management, other than the threatened litigation by Mr.
Miranda, the Company is not a party to any other threatened or pending legal
proceedings which, if adversely determined, would have an adverse material
effect on the financial condition or results of operations of the Company.

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

In accordance with the requirements of Section 16-10a-704(2)(a) of the Utah
Revised Business Corporation Act, as amended, on August 14, 2001 notice was
given to all shareholders of NBO, Inc. via Action by Unanimous Written Consent
of the Board of Directors, and by Action by Written Consent of Shareholders
Holding a Majority of Outstanding Shares of Common Stock of NBO, Inc., that
effective August 14, 2001 the Company's Board of Directors adopted resolutions
as follows: (i) to amend the Company's Articles of Incorporation to provide for
a five-for-four forward split of the Company's Common Stock; and (ii) to
increase the conversion rate by which each outstanding share of the Company's
Preferred Stock is convertible into shares of Common Stock to a rate of 4.6875
shares of Common Stock for each share of Preferred Stock.

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.

  (a)  Market Information.

     There has been no public trading of the Company's Common Stock. There can
     be no assurance that a public trading market for the Common Stock of the
     Company will develop.  The Company does not meet the listing criteria for
     any of the NASDAQ markets, nor for the NASDAQ Bulletin Board ("OTCBB").
     The OTCBB is not an issuer listing service, market or exchange. Although
     the OTCBB does not have any listing requirements per se, to be eligible for
     quotation on the OTCBB, issuers must remain current in their filings with
     the SEC or applicable regulatory authority.  Market makers will not be
     permitted to begin quotation of a security whose issuer does not meet this
     filing requirement.  The Company is current in its filings with the SEC.

     If a public trading market develops, the public trading price could be
     lower than the most recent Private Offering price.  Ninety days after the
     effective date of the October 2, 2001 registration statement, a substantial
     portion of the Company's outstanding common shares became eligible to be
     freely traded under the federal securities laws.  It is possible that the

                                       12

<PAGE>

     trading in the Company's shares will be thin.  It is also possible that the
     Company's shares will not attract market makers or other buyers in the
     market place.  There is no assurance that the shares will be traded on any
     securities exchange or through any NASDAQ facility, such as the Nasdaq
     Bulletin Board, the Nasdaq Small Cap Market, or the Nasdaq National Market
     System. These factors and other factors could result in a low trading
     price.

     The Company's shares of Common Stock are subject to the Penny Stock Rules.
     The Company's Common Stock is classified as "penny stock" under rules
     adopted by the Securities and Exchange Commission.  Accordingly,
     transactions in the Company's Common Stock effected through a broker-dealer
     will be subject to the Penny Stock Rules adopted by the SEC.  The SEC has
     adopted regulations that generally define a penny stock to be any equity
     security that has a market price of less than $5.00 per share, subject to
     certain exceptions.  The exceptions include exchange-listed equity
     securities and any equity security issued by an issuer that has:

     *    net tangible assets of at least $2,000,000, if the issuer has been in
          continuous operation for at least three years;
     *    net tangible assets of at least $5,000,000, if the issuer has been in
          continuous operation for less than three years; or
     *    average annual revenue of at least $6,000,000 for the last three
          years.

     Unless an exception is available, the regulations require the delivery,
     prior to any transaction involving a penny stock, of a disclosure schedule
     explaining the penny stock market and the associated risks.  The Company's
     financial condition does not meet the above tests.  Thus, trading in the
     common stock will be covered by Rules 15g-1 through 15g-6 and 15g-9
     promulgated under the Securities Exchange Act.  Under those rules, broker-
     dealers who
     recommend such securities to persons other than their established customers
     and institutional accredited investors must make a special written
     suitability determination for the purchaser and must have received the
     purchaser's written agreement to a transaction prior to sale.  These
     regulations would likely limit the ability of broker-dealers to trade in
     the Company's Common Stock and thus would make it more difficult for
     purchasers of Common Stock to sell their securities in the secondary
     market.  The market liquidity for the Common Stock could be severely
     affected.

  (b)  Holders.

     As of March 31, 2002 there are approximately 701 holders of record of the
     Company's Common Stock.

  (c)  Dividends.

     The Company has not declared nor paid cash dividends on the Common Stock in
     the past two fiscal years or in any subsequent period. The Company does not
     anticipate paying dividends on the Common Stock in the foreseeable future.

  (d)  Securities Authorized for Issuance under Equity Compensation Plans.

     See Part III, Item 11 of this Form 10-KSB.
                                       13

<PAGE>

  Recent Sales of Unregistered Securities.

  Within the fiscal year ended March 31, 2002, the Company has issued the
  following securities without registering the securities under the Securities
  Act.  All figures are adjusted to reflect the 5 for 4 stock split effective
  August 14, 2001.

  November 1, 2000 through July 30, 2001.  The Company issued 497,896 shares of
  common stock at $4.40 per share.  The gross proceeds of the offering amounted
  to $2,010,569.  The Company did not pay commissions in connection with the
  sale of these securities.  The Company issued 40,949 shares of common stock,
  and issued warrants to purchase 2,159 shares of common stock as a finders
  fee.  The Company sold the securities, including stock and warrants, to
  accredited investors as that term is defined in Regulation D promulgated by
  the Securities and Exchange Commission.  The Company relied upon the
  exemption from registration provided by Section 4(2) of the Securities Act of
  1933, as amended, and Regulation D.  The Company complied with all the
  requirements of Regulation D pertaining to Rule 506,
  including, without limitation, the following: ascertaining the accredited
  status of each purchaser; placing restrictive legends on the securities;
  giving stop transfer instructions to the transfer agent to prevent the
  transfer of restricted securities; assuring that no public solicitation
  occurred; restricting the use of a Private Placement Memorandum; and
  prominently disclosing on all offering materials that the Company offered the
  securities only in a private offering under Regulation D, Rule 506.

  August 16, 2001 through March 8, 2002.  The Company issued 41,226 shares of
  common stock at $5.50 per share.  The gross proceeds of the offering were
  $226,743.  In addition, as part of an incentive rights offering to
  shareholders only, the Company issued 55,636 shares of common stock at $2.75
  per share for a total of $152,999.  An equivalent number of shares were
  redeemed from the president, Keith A. Guevara, the Company's chairman and
  single largest stockholder for the same price per share, in accordance with
  Supplement 1 of the August 16, 2001 private placement memorandum.  However,
  Mr. Guevara did not receive any payment from the Company.  In lieu of
  payment, the Company issued an unsecured note in the amount of $152,999 to
  pay the redemption amount at a time determined in the future by the Board of
  Directors when the Company is in a financial position to pay the redemption
  price without adversely affecting the Company.  The purpose of the redemption
  from Mr. Guevara and subsequent issue of shares at $2.75 per share was to
  provide the Company liquidity without diluting other shareholders of the
  Company who had paid a higher price per share.  The Company did not pay
  commissions in connection with the sale of these securities.  The Company
  sold the securities, including stock and warrants, to 7 accredited investors
  as that term is defined in Regulation D promulgated by the Securities and
  Exchange Commission.  The Company relied upon the exemption from registration
  provided by Section 4(2) of the Securities Act of 1933, as amended, and
  Regulation D.  The Company complied with all the requirements of Regulation D
  pertaining to Rule 506, including, without limitation, the following:
  ascertaining the accredited status of each purchaser; placing restrictive
  legends on the securities; giving stop transfer instructions to the transfer
  agent to prevent the transfer of restricted securities; assuring that no
  public solicitation occurred; restricting the use of a Private Placement
  Memorandum; and prominently disclosing on all offering materials that the
  Company offered the securities only in a private offering under Regulation D,
  Rule 506.

                                       14

<PAGE>

  July 27, 1998 through March 31, 2002.  The Company issued incentive stock
  options that have been fully exercised to purchase 437,091 shares of common
  stock to various employees and consultants who are natural persons in
  connection with bona fide services rendered to the Company. The services
  rendered were not in connection with the offer or sale of securities in a
  capital raising transaction and were not for the purpose of directly or
  indirectly promoting or maintaining a market for the shares.  These options
  and the underlying shares had a total value at the time of issuance of less
  than $1,000,000.  The shares were issued pursuant to written compensation
  agreements or written stock option plan.  Each share certificate bears a
  legend indicating that the shares are restricted securities and that the
  transfer of the shares is restricted and may only be resold in accordance
  with applicable laws and regulations.  The Company gave stop transfer
  instructions to the transfer agent to prevent the transfer of restricted
  securities.  The Company provided to the employees and consultants a written
  description of the compensation or benefit plan.  The Company relied on the
  exemption from registration provided by Section 4(2) of the Securities Act of
  1933, as amended, and on Rule 701 promulgated by the Securities and Exchange
  Commission.

  April 1, 1999 through March 31, 2002.  The Company borrowed money from
  existing shareholders, all of whom are accredited investors.  The total
  amount of the borrowed funds totaled $1,980,750.  In connection with these
  loans, the Company issued 417,769 shares of common stock, and warrants to
  purchase 303,750 shares of common stock.  As of March 31, 2002 loans to
  stockholders of $1,283,055 remain outstanding.  The Company relied upon the
  exemption from registration provided by Section 4(2) of the Securities Act of
  1933, as amended, and Regulation D.  The Company complied with all the
  requirements of Regulation D pertaining to Rule 506, including, without
  limitation, the following: ascertaining the accredited status of each
  purchaser; placing restrictive legends on the securities; giving stop
  transfer instructions to the transfer agent to prevent the transfer of
  restricted securities; assuring that no public solicitation occurred;
  providing the information and the opportunity for obtaining information to
  the accredited investors; and prominently disclosing on all offering
  materials that the Company offered the securities only in a private offering
  under Regulation D, Rule 506.

  July 31, 1997 through March 31, 2002.  The Company issued 20,097 shares of
  preferred stock as stock dividends on previously issued preferred stock.
  This issuance did not constitute a sale because the recipients did not pay
  any consideration and did not make any election either to receive the shares
  or to receive other payment.

Item 6.   Management's Discussion and Analysis of Financial Condition and
     Results of Operations.

Forward Looking Statements

This Item contains forward-looking statements. Please review the information in
light of the risk factors and other cautionary statements identifying important
factors that could cause actual results to differ materially from those in the
forward looking statements.

                                      15

<PAGE>

Company Risks

Going Concern.  To date, the Company has not generated sufficient revenue to
meet the Company's on-going expenses of operation.  These factors raise
substantial doubts about the Company's ability to continue as a going concern
and the Company's audit report contains an explanatory paragraph with respect to
this matter.  The report of the Company's independent auditors on the Company's
audited financial statements for the fiscal years ended March 31, 2002 and 2001,
respectively, included herein, contains information that states that the Company
has incurred consolidated cumulative losses of $23,580,082 since inception of
operations, and as of  March 31, 2002, the Company's current liabilities
exceeded its current assets by  $2,961,555 and it had a stockholders' deficit of
$1,161,720.  These factors, among others, raise substantial doubt about the
Company's ability to continue as a going concern.  The Company's financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

Future Capital Needs.  The Company depends on new investments to help fund
ongoing operations. If insufficient capital is invested, the results of the
business development as it is disclosed herein could be materially adversely
impacted.  The Company's future capital requirements will depend on many
factors, including cash flow from operations, technological and market
developments and the Company's ability to successfully market the Gift
Certificate ("GC") Program and its proposed services. Unanticipated problems,
expenses and delays are frequently encountered in establishing a new approach to
business in a developing industry, and in developing software products. These
include, but are not limited to, competition, the need to develop customer
support capabilities, market expertise, setbacks in product development, market
acceptance and sales and marketing activities. The failure of the Company to
meet any of these conditions could have a material adverse effect on the Company
and may force the Company to reduce or cease its proposed operations.  The
Company must raise additional funds through equity or debt financing.  Any
equity financing could result in dilution to the Company's stockholders.  Debt
financing would result in increased interest expense.  Any financing, if
available, may be on terms unfavorable or unacceptable to the Company.  If
adequate funds are not obtained, the Company may be required to reduce or
curtail its proposed operations.

Loans to the Company from Stockholders Remain Unpaid.  As described in Item 5
above, the Company borrowed money from existing shareholders, all of whom are
accredited investors.  The total amount of the borrowed funds totaled
$1,980,750.  As of March 31, 2002 loans to stockholders of $1,283,055 remain
outstanding.

Loans to the Company by Its President and Private Placements to Pay Current
Expense; Inability of Company to Continue Operations Without Additional
Financing.  Between May 16, 1996 and December 31, 1998, Keith A. Guevara,
Chairman of the Board, President and Chief Executive Officer of the Company,
loaned the Company funds in order for the Company to meet its payroll and other
operating expenses.  In January 2002, the Company issued 312,500 shares of
common stock to Mr. Guevara upon exercise of 312,500 stock options at $0.35 per
option in exchange for a decrease of $109,375 in notes payable to an officer.
As of March 31, 2002, the remaining unpaid balance is  $273,625.  Without
further loans from Mr. Guevara (of which there is no assurance such loans will
be made in the future) or immediate funds from investors, it is possible the
Company will be unable to continue its operations.


                                       16

<PAGE>

Dependence Upon Key Personnel.  The Company's success depends, to a significant
extent, upon a number of key employees.  The loss of services of one or more of
these employees could have a material adverse effect on the proposed business
and operations of the Company and the GC Program.  The Company is especially
dependent on the efforts and abilities of certain of its senior management,
particularly Keith A. Guevara, the Company's President and Chief Executive
Officer.  Mr. Guevara is employed by the Company under a three year employment
agreement expiring in year 2002.  The loss of any of the Company's key
executives could have a material adverse effect on the Company and its
operations and prospects, although the loss of Mr. Guevara would have a more
significant adverse effect on the Company.  The Company has $2,000,000 in key
man life insurance on Mr. Guevara.  The Company believes that its future success
will also depend, in part, upon its ability to attract, retain and motivate
qualified personnel.  There is and can be no assurance, however, that the
Company will be successful in attracting and retaining such personnel.

Lack of Profits.  The Company reduced its net loss 22.4% or $1,207,932 to
($4,193,560) from ($5,401,492) in the fiscal years ended March 31, 2002 and 2001
respectively.  Profits in future years will depend on the success of the Company
in carrying out its business plan.  As of March 31, 2002 the Company has
incurred cumulative losses of  $23,580,082 since inception of operations June
23, 1994.

Lack of Dividends.  The Company has never paid any cash dividends on its Common
Stock and does not anticipate paying any cash dividends in the foreseeable
future.  The Company currently intends to retain future earnings, if any, to
fund the development and growth of its proposed business and operations.

Control by Existing Officers and Directors.  The Company's officers and
directors beneficially own approximately 28.6% of the outstanding shares of the
Company's Common Stock, which includes stock options granted under the 1997
Stock Option Plan.  Because cumulative voting rights are not provided for in the
Company's Second Amended and Restated Articles of Incorporation, these
individuals will be in a position to significantly influence the election of the
members of the Board of Directors and control most corporate actions, including
decisions to dissolve, merge or sell the Company's assets.

Lack of Management Expertise.  Prior to 1998, no member of the Company's
management team had extensive experience in the gift certificate/gift card
industry.  In addition, no member of the Company's management has held similar
positions in SEC reporting companies.  Accordingly, this lack of experience
might result in bad business decisions and bad management practices, and it
might discourage subsequent investors from investing in the Company.

Uncontrollable Factors.  The expansion of the GC Program within acceptable time
and cost limitations will be dependent upon a number of conditions and factors
outside the control of the Company or its management.  These conditions and
factors include, but are not limited to, the availability and ability of
contractors and subcontractors to perform services, the absence of disputes,
delays or cost increases resulting from such factors as strikes, technical
difficulties or failure of the kiosks or the GC Program to operate as designed,
and shortages in materials and labor, any of which conditions or factors could
delay or prevent expansion of the GC Program and/or significantly increase the
cost of a given GC Program above expected levels.


                                       17

<PAGE>

New Business Model.  The Company is attempting to implement a new business model
by converting paper gift certificates to magnetic stripe stored value gift
cards.  The model involves employing new technology to be used in this process
by contracting with shopping mall owners and other retailers to outsource their
gift card programs.  Many questions are inherent in this new business model.
These questions include (i) whether the margins are large enough to allow the
Company to make sufficient money to make the Company successful, and (ii)
whether other sources of revenue, such as interest on funds held pending payment
as gift certificates are redeemed, merchant fees earned from retailers,
convenience fees earned from customers, administrative fees from magnetic stored
value gift cards, abandoned property revenue and other potential sources are
enough to sustain a successful company.

Results of Operations - Comparison of Fiscal Years Ended March 31, 2002 and 2001

Sale of Gift Certificates and Gift Cards

The following is included because the Company derives the majority of its
revenue from the sale of gift certificates.  The following figures are included
for informational purposes only and are not included in the Company's
Statements of Operations.

The Company experienced a 35.8% increase, or $15,247,684 in the face amount of
gift certificates sold for the fiscal year ended March 31, 2002 to $57,882,342
from $42,634,658 for the fiscal year ended March 31, 2001.

Revenues

The Company experienced an increase in total revenues of 300.6% or $4,102,836
to $5,467,716 for the fiscal year ended March 31, 2002 from $1,364,880 for the
fiscal year ended March 31, 2001.  See NOTE A - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, Item 11 in the Company's financial statements.

Sale of third party gift certificates increased $2,001,027 to $2,057,964 for
the fiscal year ended March 31, 2002 from $56,937 for the fiscal year ended
March 31, 2001. This increase is due to implementation of the agreement with
Darden, whereby the Company began purchasing and selling gift certificates of
third party retailers and providing Call Center and Internet fulfillment of
Darden's gift certificate orders.

Abandoned gift certificate revenue was recognized for the first time for the
fiscal year ended March 31, 2002 totaling $1,830,477.  Of this total, $615,428
is included which would have been recognized prior to fiscal 2002 if sufficient
historical information had been available to make reliable estimates in prior
years.

Merchant fees earned from retailers increased 57.8% or $488,325 to $1,333,433
for the fiscal year ended March 31, 2002 from $845,108 for the fiscal year
ended March 31, 2001.  This increase is due primarily to an increase in the
amount of gift certificates sold for these retailers, and the subsequent
redemption of those gift certificates, which is when the Company is paid the
fee.

                                       18

<PAGE>

Cost of Revenues

The Company experienced an increase in the total cost of revenues of 154.5% or
$2,007,017 to $3,305,844 for the fiscal year ended March 31, 2002 from
$1,298,827 for the fiscal year ended March 31, 2001.  This increase is due
primarily to the increase in cost of third party certificates as described
below.

The Company experienced an increase in the cost of third party gift
certificates of $1,801,593 to $1,855,270 for the fiscal year ended March 31,
2002 from $53,677 for the fiscal year ended March 31, 2001.  This increase in
cost is due primarily to the implementation of the agreement with Darden,
whereby the Company began purchasing and selling gift certificates of third
party retailers and providing Call Center and Internet fulfillment of Darden's
gift certificate orders.

The Company experienced an increase in merchant fees and charges of 45.9% or
$348,192 to $1,107,184 for the fiscal year ended March 31, 2002 from $758,992
for the fiscal year ended March 31, 2001.  This increase in cost is related
primarily to the increase in the number of gift certificates sold.

The Company experienced a decrease in other cost of revenues of 29.4% or
$142,768 to $343,390 for the fiscal year ended March 31, 2002 from $486,158 for
the fiscal year ended March 31, 2001.  This decrease is due primarily to the
Company increasing margins on services provided, and initiating fees for
services previously absorbed completely by the Company.  The increased margins
and fees helped to offset the costs associated with the sale of gift
certificates other than third party gift certificates, merchant fees and
charges.

The Company experienced an increase in gross profit of $2,095,819 to $2,161,872
for the fiscal year ended March 31, 2002 from $66,053 for the fiscal year ended
March 31, 2001.  This increase is due primarily to the recognition of revenue
from abandoned gift certificates.  See NOTE A - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES, Item 11 in the Company's financial statements.

Operating Expenses

The Company experienced an increase in total operating expenses of 8.1% or
$342,500 to $4,569,801 for the fiscal year ended March 31, 2002 from $4,227,301
for the fiscal year ended March 31, 2001.  The increase (decrease) during the
year ended March 31, 2002 compared to the fiscal year ended March 31, 2001 is
attributable mainly to the following:

     Personnel

     For the fiscal year ended March 31, 2002 compared to the fiscal year ended
     March 31, 2001 respectively, personnel costs increased 7.0% or $192,027 to
     $2,941,271 from $2,749,244.  The total number of employees decreased from
     53 to 46 respectively, with the number of full time salaried employees
     decreasing from 49 to 43, and the number of part-time employees decreasing
     from 4 to 3.  The Company employed 12 temporary employees for the Christmas
     holiday season.  Personnel costs increased due to the increased cost of
     full time employees and an increase in the wages paid to temporary
     employees.

                                       19

<PAGE>

     Legal and accounting

    In the fiscal year ended March 31, 2002 compared to the fiscal year ended
    March 31, 2001 respectively, legal and accounting expenses increased 149.8%
    or $159,440 to $265,892 from $106,452 due to costs incurred for auditing
    and legal document review associated with Private Placement Offerings and
    the costs associated with filings with the SEC as a reporting company.

    Depreciation and amortization

    For the fiscal year ended March 31, 2002 compared to the fiscal year ended
    March 31, 2001 respectively, depreciation and amortization expense
    increased 40.4% or $103,281 to $358,800 from $255,519 due to an increase in
    the amount of equipment installed in various mall properties the Company
    has under contract.

    Other Expenses

    The Company experienced a decrease in other expenses of 44.6% or $159,684
    to $198,420 from $358,104 for the fiscal year ended March 31, 2002 compared
    to the fiscal year ended March 31, 2001 respectively.  The decreases are
    primarily from an increased effort by the company to prevent fraud and
    chargebacks, thereby reducing bad debt expense, a reduced marketing budget,
    more business being conducted by telephone or facsimile, and the
    elimination of outside consultants.

The Company's total operating expenses exceeded gross profit in the fiscal years
ended March 31, 2002 and 2001 respectively.  However, the Company experienced a
decrease in operating losses of 42.1% or $1,753,319 to $2,407,929 from
$4,161,248 in the fiscal year ended March 31, 2002 compared to the fiscal year
ended March 31, 2001 respectively.

Other Income (Expense)

The Company experienced an increase in other expense, net of 44.0% or $545,387
to $1,785,631 from $1,240,244 in the fiscal year ended March 31, 2002 compared
to the fiscal year ended March 31, 2001 respectively.  The increase is primarily
from an increase in interest expense, including $111,225 associated with the
beneficial conversion feature of debt incurred by the Company.  The beneficial
conversion feature is the difference between the market value of the common
stock and the conversion rate of the debt limited to the amount of debt.  The
beneficial conversion feature is recognized as interest expense over the period
from the date of the note to the date of maturity when the conversion of the
debt into stock may take place.

New Business Developments

Magnetic Stored Value Gift Card Pilot

On October 4, 2001 the Company signed a three year agreement with Bayer
Properties, Inc. located in Birmingham, Alabama to provide, implement, and
manage a stored-value mall gift card program in two properties, The Summit
Birmingham, Alabama and The Summit Louisville, Kentucky, with

                                       20

<PAGE>

further program details described below.  The Company anticipates the two
properties combined annual gift card face value sales of approximately
$1,000,000 and annual revenues to the Company of approximately $150,000.

On October 8, 2001, the Company signed an agreement with, JP Realty, Inc.,
located in Salt Lake City, Utah to provide, implement, and manage a stored-value
mall gift card program in two properties, Provo Towne Centre, located in Provo,
Utah, and Boise Towne Square, located in Boise, Idaho, with further program
details described below.  This agreement is in addition to the agreements
already in place for the Company to provide paper gift certificates.  The
Company anticipates the two properties combined annual gift card face value
sales of approximately $2,300,000 and annual revenues to the Company of
approximately $345,000.

On October 15, 2001, the Company signed an agreement with, Prime Retail, Inc.,
located in Baltimore, Maryland to provide, implement, and manage a stored-value
mall gift card program in Grove City Factory Shops, located in Grove City,
Pennsylvania, with further program details described below.  This agreement is
in addition to the agreement already in place for the Company to provide paper
gift certificates.  The Company anticipates Grove City Factory Shops annual gift
card face value sales of approximately $300,000 and annual revenues to the
Company of approximately $45,000.

The Company's gift card program offers a solution to many mall environment
challenges. The customized plastic cards, with a magnetic stripe, enables
signature-based debit services in an open
transaction environment.  Magnetic stored value gift cards will be sold,
activated, and funded at Customer Service Centers within the above listed mall
properties, and at the Company's corporate facilities for Corporate and Internet
transactions. Gift cards offered in this program are branded with the center's
name on the face of the card, and can be redeemed at any retailer in the center.
The gift cards are co-branded with the MasterCard logo on the face of the card.
Bank of America is the MasterCard issuing member.  The gift card is not
personalized with the cardholder's name, but is embossed with the generic "Mall
GiftCard Holder" instead.  The program does not permit cash access (e.g. ATM).
Gift card processing is performed by WildCard Systems, Inc.  Gift card balances
can be obtained at www.GiftCardBalance.com or by calling 866-261-3597, which are
both listed on the back of the gift card.   After ninety (90) days from the date
of purchase, the Company reserves the right to charge an administration fee not
to exceed $2.50 per month.  The most current business practice is to charge a
$2.50 administration fee per month beginning on the first day of the sixth month
from the date of purchase.  Terms and conditions are provided with the purchase
of each gift card that details where the card may be used, fees, expired funds,
etc.  The agreements listed above do not preclude the sale of paper gift
certificates as a back-up to the magnetic stored value gift cards.

The Company sold 44,203 magnetic stored value gift cards with a face value of
$2,353,177 in the five pilot properties from October 29, 2001 through March 31,
2002.  This represents 4.1% of the Company's sale of gift certificates/cards in
the fiscal year ended March 31, 2002.  The average face value of the gift cards
sold was $53.24 which is a 52.1% increase, or $18.24 more per card than the $35
average face value of paper gift certificates sold by the Company.

The gift card program provides the Company with a new revenue source.  The
Company will charge a non-use administration fee (as described above) on gift
cards that retain a balance after a specified

                                       21

<PAGE>

period of time from the date of purchase, and continue to assess the fee until
the gift card expires, or the card balance is reduced to zero.  The non-use fee
will continue if the card is reissued (unless otherwise prohibited by law).  The
non-use fees are deducted from the balance of the gift card in accordance with
the Terms and Conditions provided with the gift card at the time of purchase.
The mall property or mall property owner shares in both the revenues and the
costs of the gift card program.  Interest income is the property of the Company.

The Company anticipates the revenues from the magnetic stored value gift card in
the form of administration fees will be in excess of revenues generated from the
current paper gift certificate programs.  The Company will support both paper
gift certificate and plastic gift card programs going forward, as some mall
developers will transition to the gift card program from gift certificates at
different paces.  The Company anticipates there will be some properties who may
not wish to
convert to a gift card program for some time, until the concept is completely
proven.

The items described above will not require the purchase or sale of any property
or significant equipment. The Company expects no significant changes in the
number of employees in the next fiscal quarter and for the remainder of the 2002
fiscal year.

Liquidity and Capital Resources

The Company's expenses are currently greater than it's revenues.  The Company to
date has had a history of losses and the accumulated deficit (since inception
June 23, 1994) as of March 31, 2002 was ($23,580,082), an increase of 22.4% or
$4,319,758 from ($19,260,324) on March 31, 2001.

The Company's net losses decreased by 22.4% or $1,207,932 to $4,193,560 from
$5,401,492 for the fiscal year ended March 31, 2002 compared to the fiscal year
ended March 31, 2001, respectively.  The Company's current liabilities exceed
its current assets by $2,961,555 as of March 31, 2002.

The Company's continuation as a going concern is dependent on its ability to
meet its obligations, to obtain additional financing as may be required and
ultimately to attain profitability.  The Company will continue to attempt to
raise capital through private equity offerings until internally generated
profitability is achieved.  The Company is taking steps to improve profitability
by restructuring contracts to increase the amount of revenue generated by each
contract, and to pass along certain costs to the operator previously absorbed by
the Company; increasing sales efforts to obtain contracts with mall developers
and national retailers not currently under contract; and reducing expenses by
implementing a hiring freeze unless absolutely essential to the Company's
operations, along with a reduction in workforce through normal attrition.  The
Company currently has excess square footage in its headquarters and has  sub-
leased this space as an additional revenue source.

     Cash

     The Company's cash position was $456,295, and checks written in excess of
     cash in other banks totaled $811,785 at March 31, 2002, due primarily to
     timing of receipts and payments at March 31, 2002, compared to $7,866 and
     $0 respectively at March 31, 2001.  Additional operating funds were
     obtained by the recognition as revenue of abandoned gift certificates

                                       22

<PAGE>

     for the first time in the Company's history during the fiscal year ended
     March 31, 2002.  The Company made offsetting reductions to restricted cash
     and gift certificates payable to correspond with the revenue recognized
     from abandoned gift certificates.  See NOTE C - RESTRICTED CASH in the
     Company's financial statements.

     Restricted Cash

     Restricted cash and the related offsetting gift certificates payable
     representing the amount of unredeemed gift certificates increased 22.6% or
     $2,363,570 to $12,802,496 at March 31, 2002 from $10,438,926 at March 31,
     2001 due to increased gift certificate sales.

     Accounts Receivable

     Accounts Receivable increased 105.5% or $140,645 to $273,903 at March 31,
     2002 from $133,258 at March 31, 2001, primarily due to an increase in days
     outstanding from the Company's debtors.

     Accounts Payable

     Accounts Payable increased 71.7% or $330,932 to $792,516 at March 31, 2002
     from $461,584 at March 31, 2001 primarily due to the Company's decision to
     better maximize the use of it's cash balances.

     Accrued Liabilities

     Accrued Liabilities increased 64.9% or $218,228 to $554,615 at March 31,
     2002 from $336,387 at March 31, 2001 primarily due to increases in accrued
     payroll and paid time off to officers and employees, as well as interest on
     various notes to shareholders.

     Liquidity and Financing Arrangements

     Effective August 14, 2001, the Company approved a 5 for 4 forward stock
     split for all outstanding shares of common stock.  All classes of equity
     securities referenced in this submission have been appropriately restated
     to reflect the stock split.

     From April 2001 through March 31, 2002, the Company received $1,260,325
     before offering costs of $62,340 for the sale of 276,285 shares of common
     stock.  In addition, as part of an incentive rights offering to
     shareholders only, the Company issued 55,636 shares of common stock at
     $2.75 per share totaling $152,999.  An equivalent number of shares were
     redeemed from the president and chairman of the Company, Keith A. Guevara,
     the single largest stockholder for the same price per share in accordance
     with Supplement 1 of the August 16, 2001 private placement offering at
     $2.75 per share.  However, Mr. Guevara did not receive any payment from the
     Company.  In lieu of payment, the Company issued an unsecured note in the
     amount of $152,999 to pay the redemption amount at a time determined in the
     future by the Board of Directors when the Company is in a financial
     position to pay the redemption price without adversely affecting the
     Company.  The Company did not pay commissions in connection with the sale
     of these securities.

                                       23

<PAGE>

     The Company recognized charges related to the beneficial conversion feature
     of the notes payable to stockholders issued during the fiscal year ended
     March 31, 2002.  The beneficial conversion feature is the difference
     between the market value of the common stock and the conversion rate of the
     debt limited to the amount of debt.  The beneficial conversion feature is
     recognized as interest expense over the period from the date of the note to
     the date of maturity when the conversion of the debt into stock may take
     place.

     For the fiscal year ended March 31, 2002, the beneficial conversion
     resulted in a non-cash charge recorded as additional interest expense of
     $903,620.

     The Company issued 312,500 shares of common stock to the Company's
     president upon exercise of 312,500 stock options at $0.35 per option in
     exchange for a decrease of $109,375 in notes payable to an officer.

     During the fiscal year ended March 31, 2002, the Company issued 53,614
     shares of common stock at the fair market price for a total of $215,136 for
     interest according to terms of a note payable which matured and was not
     paid.

     During the fiscal year ended March 31, 2002, the Company issued 6,274
     shares of common stock to referring agents as compensation for services
     received for a total value of $30,729.

     During the fiscal year ended March 31, 2002, the Company granted 2,159
     stock warrants to a referring agent as compensation for services received
     for a total value of $1,305.

     During the fiscal year ended March 31, 2002, stockholders converted notes
     payable of $496,750 to 295,788 shares of common stock according to terms of
     the notes.

     During the fiscal year ended March 31, 2002, the Company issued 16,915
     shares of common stock for office equipment with a fair market value of
     $50,532.

     During the fiscal year ended March 31, 2002, the Company began recognizing
     revenue on abandoned gift certificates.  Paper gift certificates that are
     not redeemed by the holder due to destruction, loss or other reason are
     subject to claim by the Company as abandoned property. Gift certificates
     that are not redeemed are referred to as "breakage" in the industry.  The
     Company recognizes revenue on breakage at the end of the term of the period
     in which the Company is obligated to honor paper gift certificates which
     ranges from one to three years and is based on either the expiration date
     on the gift certificate or applicable legal statute of limitation
     (applicable where state law prohibits expiration dates).  The amount of
     breakage recognized is based on historical experience since the Company
     began selling paper gift certificates in October 1998.  The Company
     monitors historical breakage experience and records adjustments in the
     amount of revenue recognized for abandoned gift certificates on a
     retrospective basis.  Breakage revenue is recognized on paper gift
     certificates during the month following the expiration date.  Breakage
     revenue is recognized during the thirty-seventh month on paper gift
     certificates with no expiration date based on the applicable legal statute
     of limitation.  During the fourth quarter of fiscal 2002, the Company
     completed procedures relative to the extinguishment of gift certificates
     payable as it relates to escheatment law requirements for abandoned
     property.  The Company had

                                       24

<PAGE>

     accumulated sufficient historical information relative to breakage to make
     reliable estimates for purposes of recognizing such revenue.  The Company
     recognized $1,830,477 of revenue during the fourth quarter of fiscal 2002,
     including $615,428, which would have been recognized prior to fiscal 2002
     if sufficient historical information had been available to make reliable
     estimates in prior years.  As of March 31, 2002, approximately $2,490,000
     of estimated breakage is included in gift certificates payable and will be
     recognized over remaining terms ranging from one month to three years.

     During the fiscal year ended March 31, 2002, the Company began leasing
     operations related to a sublease of office space at the Company's corporate
     headquarters in Salt Lake City, UT.
     The leasing income was $10,750 for the fiscal year ended March 31, 2002.
     The future minimum rental income for the fiscal 2003 lease is $42,625 which
     does not include contingent lease income, which may be received on the
     basis of additional office space required by the tenant.

     The Company further supplemented its operating capital through loans from
     shareholders. In the fiscal year ended March 31, 2002, the Company borrowed
     from its shareholders a total of $859,252. Of this amount, $47,500 was
     borrowed from the Company's President, Keith A. Guevara.  These loan
     proceeds were used in part to repay three outstanding loans to other
     nonaffiliated shareholders in the amount of $300,000.  No other related
     party transactions took place.

The Company currently operates without a line of credit and occasionally enters
into short-term promissory notes with accredited investors, normally existing
stockholders.  These promissory notes often have conversion privileges into the
Company's common stock, easing debt service requirements.  Despite these
efforts, significant amounts of additional cash will be needed to reduce the
Company's debt and losses until such time as the Company becomes profitable.  In
conjunction with efforts to improve results of operations, the Company is
currently in the process of attempting to raise approximately $5.5 million in
equity funding from institutional/accredited investors to meet on-going capital
requirements.  Concurrently, the Company is in preliminary discussions with
strategic partners that could result in the merger or acquisition of the
Company.  In that event, the full $5.5 million equity investment may not be
required and will be adjusted as discussions continue.  Due to cash flow
constraints, the Company will rely on equity financing to meet anticipated
capital needs.  There can be no assurances that the Company will be successful
in obtaining any such capital.  Additional issuance of shares for debt and/or
equity will serve to dilute the value of the Company's Common Stock and existing
shareholder positions.  If the Company fails to obtain financing and/or fails to
improve results from operations, the Company will be unable to meet obligations
as they become due.  This could raise substantial doubt about the Company's
ability to continue as a going concern.

Subsequent Events

During April 2002, the Company and Smith's Food and Drug Stores agreed to remove
the gift certificate kiosks located in the 37 outlets throughout the Salt Lake
valley.  The Company will continue to provide Internet and Corporate fulfillment
for the approximate 282 retailers and approximate 500 retail locations currently
under contract with the Company.  The financial impact of the kiosk removal is
not material.   The Company intends to re-deploy these kiosks in existing

                                       25

<PAGE>

malls under contract, or with new mall relationships.  The revenue generated
from leasing these kiosks to existing or new mall relationships is not material.

During April, 2002, Hickory Ridge Mall in Memphis, TN, an Urban property,
entered into receivership and discontinued their gift certificate program with
the Company.  The face amount of gift certificate sales for the fiscal year
ended March 31, 2002 were approximately $388,800 and the lost annual revenue to
the Company is estimated at approximately $15,600.

During April 2002, the Company began the process of applying with the state of
Texas to conduct gift certificate operations.  The Company has received requests
from several mall developers and owners to manage gift certificate programs in
malls located in Texas.  There are approximately 180 covered malls in Texas
which represents a significant sales and revenue opportunity for the Company.
The Company cannot anticipate when the license from the state of Texas will be
received, if at all.

On May 3, 2002 a sale of certain Rodamco North America, N.V. ("Rodamco" or
"Urban Retail Properties" or "Urban") malls to The Rouse Company ("Rouse"),
Simon Properties ("Simon") and Westfield America Trust ("Westfield") was
completed.  Urban Retail Properties Co. has been re-organized to continue the
third party management of the mall business of Rodamco and intends to continue
to acquire malls and expand their presence across the U.S.  The Company will
retain 7 Urban mall relationships currently in place, and will pursue
relationships with Urban's remaining 30 mall properties.  The Company will
continue to manage existing gift certificate programs until the post-transaction
owner provides notice to the Company otherwise.  The Company anticipates gift
certificate programs at all Urban properties transferred to Rouse will remain in
place.  The Company anticipates gift certificate programs in all properties
(excluding Valencia) transferring from Urban to Westfield (9 properties) will be
discontinued by the Company at Westfield's request, due to Westfield's in-house
program, within several months of the closing of the transaction.  The Company
anticipates gift certificate programs in all properties transferring from Urban
to Simon (4 properties) will be discontinued by the Company at Simon's request,
due to Simon's in-house program, within several months of the closing of the
transaction.  The net potential lost annual revenue to the Company of the entire
transaction is approximately $720,000.

On June 5, 2002 a shareholder meeting was conducted by JP Realty ("JPR") to
consider and vote upon a proposal to approve the merger of JP Realty, Inc. with
and into GGP Acquisition, L.L.C., a Delaware limited liability company and an
indirect subsidiary of General Growth Properties, Inc., substantially on the
terms set forth in the Agreement and Plan of Merger, dated as of March 3, 2002,
among General Growth Properties, Inc., GGP Limited Partnership, GGP Acquisition,
L.L.C., GGP Acquisition II, L.L.C., JP Realty, Inc., and Price Development
Company, Limited Partnership.  The Company has been informed by GGP that
existing gift certificate programs at JPR properties will
remain in place through the end of the contract term in September 2004.  The
transaction is anticipated to close on July 10, 2002.

During June 2002, Urban sold Stratford Square Mall to GGP, and the gift
certificate program was subsequently terminated by GGP.  The face value of gift
certificate sales for the fiscal year ended March 31, 2002 were approximately
$1,765,200 and the lost annual revenue to the Company is estimated at
approximately $70,600.


                                       26

<PAGE>

On July 2, 2002 the Company entered into a 90-day agreement to evaluate and
collect data relating to the implementation, operation and acceptance of a gift
card program in two of CBL and Associates Properties, Inc. ("CBL") mall
properties.  CBL currently owns and operates 53 mall properties with gift
certificate sales of approximately $43 million annually, and their corporate
headquarters are located in Chattanooga, TN.   The two test properties are St.
Clair Square located in Fairview Heights, IL and Walnut Square located in
Dalton, GA which represent combined annual gift certificate sales of
approximately $2 million.  Upon completion of this 90-day pilot test, it is the
intent of the Company and CBL to continue the gift card program, providing all
test issues are completely satisfactory to both parties, and in that case, all
terms and conditions are to be mutually agreed upon in a new agreement.  Both
parties have agreed to use best efforts to achieve an August 1, 2002
installation date.  The potential additional annual revenue to the Company for
the two properties is approximately $250,000.  The Company anticipates
implementing additional CBL properties prior to the end of the fiscal year upon
successful completion of this pilot.

Item 7.   Financial Statements.

     See PART F/S at the conclusion of this Form 10-KSB.

     Report of Independent Certified Public Accountants             F -1
     Balance Sheets as of March 31, 2002 and 2001                   F -3
     Statements of Operations for the years ended
     March 31, 2002 and 2001                                         F-5
     Statement of Stockholders Deficit for the years
     ended March 31, 2002 and 2001                                   F-6
     Statements of Cash Flows for the years ended
     March 31, 2002 and 2001                                         F-7
     Notes to Financial Statements                                  F-11

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

     None.

                                    PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
     Compliance With Section 16(a) of the Exchange Act.

As of March 31, 2002, the Company had 43 full time and 3 part time employees,
and is managed by a Board of Directors consisting of three directors, two of
which are employees of NBO.  In addition, independent consultants sometimes
perform services for NBO on as "as needed" basis. All officers, key employees
and consultants have entered into employment and confidential non-disclosure
agreements with the Company.  All directors hold office until the next annual
meeting of stockholders and the election and qualification of their successors,
or until death, resignation or removal.  Officers serve at the discretion of the
Board of Directors and under the terms of any employment agreement.  Per the
Bylaws of the Company, the Board of Directors makes decisions in lieu of a
Compensation Committee or an Audit Committee, as the Board members are the same
individuals that would comprise the Compensation Committee and the Audit
Committee.  All directors, officers and beneficial owners of more than ten
percent of any class of equity securities of the Company registered pursuant to
Section 12 of the Exchange Act and in compliance with Section 16(a) Beneficial
Ownership Reporting Compliance have completed and filed the prescribed Forms

                                       27

<PAGE>

(Forms 3, 4 and 5) on a timely basis as disclosed in the prescribed Forms
required by Section 16(a) of the Exchange Act during the fiscal year ended March
31, 2002.  The following table sets forth certain information concerning the
directors and executive officers, and key employees of the Company:

<TABLE>
                              Director,
                           Officer or Key
       Name          Age   Employee Since                Position
<S>                <C>   <C>              <C>
Keith A. Guevara     52   June 1994          Chairman of the Board, President
                                             and Chief Executive Officer,
                                             Director
Christopher Foley    39   March 2001         Chief Financial Officer &
                                             Director*
Andrew Boyd-Jones    49   May 2001           Director
D. Kent Jasperson    53   July 1994          Chief Accounting Officer,
                                             Secretary and Treasurer
Randy J. Steck       46   March 2000         Chief Operating and Technology
                                             Officer*
Frank E. Layton      51   June 1994          Vice President of Financial
                                             Relations
John J. Arego        43   September 1995     Director of Engineering
Hayden Felt          44   October 1999       Vice President-Sales and
                                             Marketing
</TABLE>

*On June 10, 2002, by unanimous consent of the Board of Directors, a resolution
was passed  appointing Christopher Foley as a member of the Board, and accepting
the resignation of Randy J. Steck as a member of the Board.

Keith A. Guevara is the Company's founder and has been Chairman of the Board,
President and Chief Executive Officer of the Company since its incorporation in
June 1994.  Mr. Guevara devotes his full-time efforts to the Company's business
activities.   He has over 24 years of combined sales, marketing and management
experience.  From October 1988 to the present, Mr. Guevara also has served as
the President of Financial Capital Management, Inc. ("FCM"), an investment firm
primarily in the business of trading commodities.  FCM was incorporated in 1988
but has been inactive since June 1994, when Mr. Guevara decided to devote his
full-time efforts to the Company's business activities.  From April 15, 1994 to
the present, Mr. Guevara has additionally served as the President of Internet
Marketing Group, Inc. ("Internet"), a marketing firm of which
he is the sole stockholder.  Internet was incorporated in April 1994, but has
been inactive since June 1994 when Mr. Guevara decided to devote his full-time
efforts to the Company's business activities.  In addition, Mr. Guevara owns FCM
Trading Group, Ltd., a commodity trading advisory firm registered with the
National Futures Association.  Mr. Guevara is the registered and licensed
principal of that company.

Christopher Foley joined the Company in March 2001 as Vice President of Finance,
and at that time had 16 years of financial analysis and securities industry
experience. He has since been named Chief Financial Officer and appointed to the
Board of Directors.  Mr. Foley most recently owned his own investment management
firm through an independent broker dealer catering to high net worth
individuals, corporations, retirement plans and charitable endowments, serving
as Chief Investment Officer and Portfolio Manager for two years.  Prior
portfolio management experience includes the positions of Vice President of
Trust & Investment Management at Zion's First National Bank for three years, and
Assistant Vice President at PNC Bank for three years. Mr. Foley has

                                       28

<PAGE>

worked for several Fortune 100 companies in the financial analysis arena
including General Electric, Johnson & Johnson, and American Express, and is also
a US Navy veteran. Mr. Foley earned his Masters of Business Administration from
Westminster College in Salt Lake City, and a Bachelor's degree in Business
Management from the University of Cincinnati, coupled with an Associates degree
in Information Systems.

Andrew Boyd-Jones has been a consultant with the Company since August 2000 and a
member of the Company's Board of Directors since May 2001.  Mr. Boyd-Jones has
26 years of investment banking and equity investment experience.  Mr. Boyd-Jones
founded and was CEO of Trenwith Securities, one of the premier middle market
investment banking companies in the U.S. where he led over 300 mergers and
acquisitions and corporate finance assignments resulting in combined transaction
values of over $10 billion.  Prior to his founding Trenwith Securities, Mr. Boyd
Jones led the leveraged buy-out team at Bankers Trust.  Mr. Boyd-Jones received
his BA from the University of Virginia and his MSc in Economics from the London
School of Economics.

Randy J. Steck joined the Company in March 2000 as Chief Operating and
Technology Officer. Mr. Steck brings 20 years of high tech engineering and
management experience to the Company. Prior to NBO, Mr. Steck served as
President of Racore Technology Corporation for two years, a privately owned
designer and manufacturer of fiber optic Local Area Network equipment.  Mr.
Steck was one of the founding partners of Racore, where he held several
positions in hardware/software product design, engineering management, and as
director of its Salt Lake City operations.  In addition, Mr. Steck brings
experience from his positions at IBM, as a military contractor, as a private
consultant, and as one of the first 30 employees of Iomega during its start-up
phase.  Mr. Steck has a B.S. degree in Applied Physics, an M.S. degree in
Electrical Engineering and an M.B.A. degree from Brigham Young University.

Kent Jasperson has served as the Chief Accounting Officer of the Company since
July 1994.  On January 17, 1995, he was appointed as the Company's Secretary and
Treasurer.  Mr. Jasperson has over 16 years of experience as a financial officer
in various business entities.  From June 1990 to July 1994, he served as the
Controller of KUTV, Inc.  From March 1987 to June 1990, Mr. Jasperson was the
corporate tax specialist for KUTV, Inc., where he was responsible for preparing
federal and state tax returns in six states.  From May 1981 to November 1986,
Mr. Jasperson was the tax manager and internal auditor for Gibbons and Reed
Construction Company.  From June 1973 to December 1978, he was an accountant
with the regional accounting firm of Whitaker, Lipp & Healea in Seattle,
Washington.  From January 1979 to May 1981, he was a partner in that accounting
firm.  He received his CPA certificate in 1974 and is a member of the American
Institute of Certified Public Accountants and the Utah Association of Certified
Public Accountants.  Mr. Jasperson holds a B.S. degree in Accounting from
Brigham Young University.

Frank E. Layton has been the Vice President of Financial Relations of the
Company since its incorporation in June 1994.  Mr. Layton devotes his full-time
efforts to the Company's business activities from the Company's California
office.  He has been involved in the securities, real estate syndication and
venture capital industries for more than ten years.  In February 1986, he became
Regional Vice President of Fox Capital Corp., a large real estate developer.  In
that capacity he was responsible for the capital formation and securities
marketing for 10 western states.  He also has experience in consulting in the
venture capital industry and successfully arranged for the initial
capitalization of $10 million for a start-up company in the quick lube industry.
From 1988 to 1994,

                                       29

<PAGE>

Mr. Layton, while employed by various broker dealers, consulted in the real
estate and telecommunications industries through his firm, Frank Layton &
Associates.  His consulting centered on capital formation for start up companies
and sales training to regional sales firms that participated in this capital
raising process.

John J. Arego is currently the Company's Director of Engineering.  Mr. Arego
joined NBO in September 1995 as the Company's Senior Software Engineer. He has
worked in software development for the Company since that time.  Mr. Arego is
skilled in systems development, database design, C and C++ programming and
communications protocols.  He began programming professionally in 1983 and has
over 10 years of management experience.  Mr. Arego holds a B.S. degree in
computer science from the University of Utah.

Hayden Felt joined the Company in October of 1999 as Director of Sales and
Marketing. He has been Vice President of Sales and Marketing since June 2000.
He has 20 plus years of retail experience, first starting his career with Carter
Hawley Hale, a chain of department stores headquartered in California under the
names of Broadway, Emporium and Weinstocks.  While there, Mr. Felt was
responsible for the sale of Women's Soft Goods in the western U.S.  Mr. Felt
also was Director of Retail Sales for the Utah Jazz for two years, overseeing
all 21 retail outlets and in addition all arena/event venues.  Mr. Felt also
served as a Director for Healthrider, Inc./Nordic Track USA for three years,
where his responsibilities included sales, marketing, and retail brand
development.  He has also served in a number of Utah/California merchant
associations including President of Logan City Merchant Association, located in
Logan, Utah. Mr. Felt received a Bachelor of Science degree from Utah State
University in 1984.

                                       30

<PAGE>
<TABLE>
Item 10. Executive Compensation.

The following tables set forth certain summary information concerning the
compensation paid or accrued for the Company's chief executive officer and each
of its other executive officers for the fiscal years ended March 31, 2002, 2001,
and 2000 respectively.


                                           Annual Compensation
                                                              Other Annual
 Name and Principal Position      Year       Salary    Bonus  Compensation
<S>                            <C>         <C>        <C>     <C>
Keith A. Guevara                31 Mar 02   $250,000    -0-        -0-
Chairman/CEO/President
                                31 Mar 01    250,000    -0-        -0-
                                31 Mar 00    187,477    -0-        -0-


Christopher P. Foley            31 Mar 02    120,000    -0-        -0-
Chief Financial Officer
                                31 Mar 01     2,308     -0-        -0-


Frank E. Layton                 31 Mar 02    120,000    -0-        -0-
Vice President of Financial
Relations
                                31 Mar 01    120,000    -0-        -0-
                                31 Mar 00    104,746    -0-        -0-


Randy J. Steck                  31 Mar 02    115,200    -0-        -0-
Chief Operating Officer/
Chief Technology Officer
                                31 Mar 01    115,200    -0-        -0-


D. Kent Jasperson               31 Mar 02    96,000     -0-        -0-
Chief Accounting Officer
                                31 Mar 01    96,000     -0-        -0-
                                31 Mar 00    86,000     -0-        -0-
</TABLE>
<PAGE>
<TABLE>

                                          Long Term Compensation
                                      Awards         Payouts
                               Restricted Securities            All Other
                                 Stock    Underlying   LTIP   Compensation
                                 Awards    Options   Payouts
<S>                            <C>        <C>        <C>      <C>
Keith A. Guevara                  -0-        -0-       -0-         -0-
Chairman/CEO/President
                                  -0-        -0-       -0-         -0-
                                  -0-        -0-       -0-         -0-


Christopher P. Foley              -0-        -0-       -0-         -0-
Chief Financial Officer
                                  -0-       62,500     -0-         -0-


Frank E. Layton                   -0-        -0-       -0-         -0-
Vice President of Financial
Relations
                                  -0-        -0-       -0-         -0-
                                  -0-       62,500     -0-         -0-


Randy J. Steck                    -0-       15,625     -0-         -0-
Chief Operating Officer/
Chief Technology Officer
                                  -0-       46,875     -0-         -0-


D. Kent Jasperson                 -0-        -0-       -0-         -0-
Chief Accounting Officer
                                  -0-        -0-       -0-         -0-
                                  -0-        -0-       -0-         -0-

</TABLE>
                                       31

<PAGE>

The following table describes the stock options granted to employees and
directors during the fiscal year ended March 31, 2002.
<TABLE>
                     Options/SAR Grants In Last Fiscal Year
                               (Individual Grants)

     Name        Number Of     Percent Of   Exercise Of   Expiration Date
                 Securities      Total      Base Price
                 Underlying   Options/SARs    ($/Sh)
                Options/SARs   Granted To
                  Granted     Employees In
                              Fiscal Year
<S>             <C>           <C>           <C>         <C>
Randy J. Steck     15,625         9.0          4.40      March 31, 2012
</TABLE>

The following table sets forth information concerning the exercise of options to
acquire shares of the Company's Common Stock by the executive officers  during
the fiscal year ended March 31, 2002 as well as the aggregate number and value
of unexercised options held by the executive officers on March 31, 2002.  The
value of exercisable unexercised in-the-money options is calculated by
multiplying the number of exercisable unexercised options by the latest Private
Placement Memorandum offering price of $5.50, less the cost basis of the option,
which is the exercise price times the number of exercisable unexercised options.

                                       32

<PAGE>
<TABLE>
    Aggregated Options/SAR Exercises in Last Fiscal Year and Fiscal Year-End
                               Options/SAR Values


                                            Shares Acquired   Value Realized
Name                                        on Exercise (#)         ($)
<S>                                         <C>               <C>
Keith A. Guevara                                312,500          1,609,375
                                                  -0-               -0-

Christopher Foley                                 -0-               -0-

D. Kent Jasperson                                 -0-               -0-
                                                  -0-               -0-
                                                  -0-               -0-

Randy J. Steck                                    -0-               -0-
                                                  -0-               -0-

Andrew Boyd-Jones                                 -0-               -0-

Frank E. Layton                                   -0-               -0-
                                                  -0-               -0-

John J. Arego                                     -0-               -0-
                                                  -0-               -0-

Hayden Felt                                       -0-               -0-
                                                  -0-               -0-
</TABLE>
<PAGE>
<TABLE>


                          Number of Securities       Value of Unexercised In-
                         Underlying Unexercised       the-Money Options/SARs
                        Options/SARs at March 31,      at March 31, 2002(#)
                                 2002($)
                     Exer-
                      cise   Exercis-    Unexercis-                Unexercis-
Name                 Price     able         able     Exercisable      able
<S>                 <C>      <C>         <C>         <C>          <C>
Keith A. Guevara     $0.35      -0-          -0-         -0-           -0-
                      $0.88   2,812,500      -0-      $12,993,750      -0-

Christopher Foley     $4.40      62,500      -0-          $68,750      -0-

D. Kent Jasperson     $0.32      78,125      -0-         $404,688      -0-
                      $0.80      78,125      -0-         $367,188      -0-
                      $2.80      62,500      -0-         $168,750      -0-

Randy J. Steck        $2.40      46,875      -0-         $145,313      -0-
                      $4.40      15,625      -0-          $17,188      -0-

Andrew Boyd-Jones       -0-         -0-      -0-         -0-           -0-

Frank E. Layton       $0.32     312,500      -0-       $1,618,750      -0-
                      $2.40      62,500      -0-         $193,750      -0-

John J. Arego         $0.32      25,409      -0-         $131,619      -0-
                      $2.80      15,625      -0-          $42,188      -0-

Hayden Felt           $2.40      12,500      -0-          $38,750      -0-
                      $4.40      12,500      -0-          $13,750      -0-

</TABLE>
                                       33

<PAGE>

Item 11.    Security Ownership of Certain Beneficial Owners and Management.

Securities Authorized for Issuance under Equity Compensation Plans

On January 22, 1997 pursuant to Section 16-10a-704(2)(a) of the Utah Act, by
Action by Written Consent of the Majority of Outstanding Shares of Stock of
Neighborhood Box Office, Inc., resolved to approve and adopt the 1997 Stock
Option Plan, which is an exempt employee benefit plan under Rule 16b-3
promulgated under Section 16 of the Securities and Exchange Act of 1934, as
amended.  The 1997 Stock Option Plan is the Company's only equity compensation
plan.
<TABLE>
          (a)                 (b)                (c)               (d)

                                         Number of
                                         securities
                                         remaining available
                         Weighted-       for future issuance
                         average         under equity
                         exercise price  compensation plans   Adopted
Number of securities to  of outstanding  [excluding           without the
be issued upon exercise  options,        securities           approval of
of outstanding options,  warrants and    reflected in column  security
warrants and rights      rights          (a)]                 holders
<S>                     <C>             <C>                  <C>
       4,055,410             $1.27             194,999             None
</TABLE>


Security Ownership of Certain Beneficial Owners and Management

The table below sets forth information as to each person owning of record, or
who was known by the Company to own beneficially more than 5% of the Company's
outstanding Common Stock as of March 31, 2002, and information as to the
ownership of the Company's Common Stock, Preferred Stock and Options by each
director and named executive officer, and by the directors and executive
officers as a group.  Except as otherwise indicated, all shares are owned
directly, and the persons named in the table have sole voting and investment
power with respect to shares shown as beneficially owned by them.



                                       34

<PAGE>
<TABLE>
                                                         Number of
Name and Address                                           Shares    Percent
Of Benneficial Owners (1)              Title of Class      Owned       (2)
<S>                                <C>                 <C>          <C>
Keith A. Guevara                     Common Stock         3,034,131    12.78%
Chairman, President, CEO             Options              2,812,500    11.85%
                                     Total                5,846,631    24.63%

Frank E. Layton                      Common Stock            97,822     0.41%
Vice President, Financial            Common Stock(3)         23,181     0.10%
Relations                            Preferred Stock          4,027     0.02%
                                     Options                375,000     1.58%
                                     Total                  500,030     2.11%

D. Kent Jasperson                    Common Stock             5,542     0.02%
Chief Accounting Officer             Options                218,750     0.92%
                                     Total                  224,292     0.94%

Christopher Foley                    Common Stock             4,287     0.02%
Chief Financial Officer              Options                 62,500     0.26%
                                     Total                   66,787     0.28%

Randy J. Steck                       Common Stock                 0     0.00%
Chief Operating Officer              Options                 62,500     0.26%
Chief Technology Officer             Total                   62,500     0.26%

John J. Arego                        Common Stock             9,750     0.04%
Director, Engineering                Options                 41,034     0.17%
                                     Total                   50,784     0.21%

Hayden Felt                          Common Stock                 0     0.00%
Vice President, Sales                Options                 25,000     0.11%
                                     Total                   25,000     0.11%

Andrew Boyd-Jones                    Common Stock                 0     0.00%
Director, Board of                   Options                      0     0.00%
Directors                            Total                        0     0.00%


All Executive Officers               Common Stock         3,151,532    13.28%
and Directors as a                   Common Stock(4)         23,181     0.10%
Group (8 persons)                    Preferred Stock          4,027     0.02%
                                     Options              3,597,284    15.15%
                                     Warrants                     0     0.00%
                                                         ----------  --------
                                     Total                6,776,024    28.55%
                                                         ==========  ========

Principal Shareholder:

Neil D. Wright(5)                    Common Stock         1,569,887     6.61%
                                     Warrants - Class A      19,528     0.08%
                                     Warrants - Class B      39,502     0.17%
                                                         ----------  --------
                                     Total                1,628,917     6.86%
                                                         ==========  ========

</TABLE>

                                       35

<PAGE>

   (1)  Except as otherwise indicated, to the best knowledge of the Company, all
stock is owned beneficially and of record by the indicated person, and each
shareholder has sole voting and investment power.  Unless otherwise indicated in
these footnotes, the mailing address of each beneficial owner listed is 3676 W.
California Ave., Bldg D., Salt Lake City, UT  84104.

  (2)  The percentages shown are based on:

(a.) 16,569,887 shares of Common stock of the Company issued and outstanding as
     of March 31, 2002.
(b.) 4,080,415 Options for shares of Common stock of the Company issued and
outstanding as of March 31, 2002.  The percentages shown for options assume the
exercise of all options held solely by that individual and a corresponding
increase in the issued and outstanding common stock.  3,773,915 options of the
Company are currently exercisable.
(c.) 53,847 shares of Preferred stock of the Company issued and outstanding as
of March 31, 2002 convertible at the rate of 4.6875 shares common, totaling
252,408 common shares.
(d.) 2,834,909 warrants (all classes) of the Company issued and outstanding as
of March 31, 2002.  The conversion rate is one common share per warrant.
(e.) The percentage shown for total holdings assumes the exercise of all options
and warrants, and the conversion of all shares of Preferred stock held by the
individual and a corresponding increase in the issued and outstanding Common
stock, which totals 23,737,619.
(f.) All calculations reflect the 5 for 4 stock split effective August 14, 2001.

(3)  Mr. Layton has an indirect beneficial interest in 23,181 shares of Common
stock of the Company for his daughter Emily Layton, a minor.  The mailing
address for Emily Layton is 462 Cliff Drive #6, Laguna Beach, California 92651.

(4)  The total number of shares of Common stock of the Company owned by officers
and directors of the Company with an indirect beneficial interest as described
in (3) above.

(5)  Mr. Wright is an accredited investor with beneficial interest as detailed
above.  His mailing address of record is PO Box 92035, Nashville, Tennessee
37209.


Item 12.    Certain Relationships and Related Transactions.

During May 1996, the Company entered into a promissory note with its president
for $250,000 which the president advanced to the Company for payment of the
Company's general and administrative expenses.  The note bears 10 percent
interest, payable (including interest) on the earlier of July 10, 1996 or upon
the Company obtaining $750,000 of debt or equity financing.  The note is not
collateralized and remains outstanding as of March 31, 2002.

During January 2002, the Company entered into a non-interest bearing demand note
with its president for $40,000.  During February 2002, the Company repaid
$20,000 of the note.

The Company issued 312,500 shares of common stock to the Company's president
upon exercise of 312,500 stock options at $0.35 per option in exchange for a
decrease of $109,375 in notes payable to an officer.

                                       36

<PAGE>

Item 13.    Exhibits and Reports on Form 8-K.

All Exhibits listed below are incorporated by reference to Form 10SB12G/A filed
April 26, 2002.  There have been no Form 8-K filings as of March 31, 2002.

EXHIBIT INDEX

Numbe       Description                                         Date
r
(2)    a.   Articles of Incorporation in the State of         1/30/02
            Maryland.
       b.   Articles of Merger.                               1/29/02
       c.   Bylaws of NBO Systems, Inc.
(6)    a.   Services Agreement between Wildcard Systems,      3/20/01
            Inc., a Florida corporation, and NBO, Inc.
       b.   Internet Gift Card(s) Agreement                   8/4/00

            between NBO, Inc., and GMRI, Inc.
       c.   Warrant Agreement                                 11/8/95
       d.   Stock Option Plan and Agreement                   1/22/97
       e.   The Rouse Company Standard Mall Agreement         2000
       f.   Urban Retail Properties Standard Mall Agreement   2000
       g.   JP Realty Inc. Standard Mall Agreement            1999
       h.   Independent Malls Standard Mall Agreement         8/21/00
       i.   Value-Added Reseller Agreement between Gemplus    1998
            Corporation and NBO, INC.
       j.   Standard Gift Certificate Participation           1999
            Agreement
       k.   Contract Services Agreement between Neighborhood  4/11/00
            Box Office, Inc., and Smith's Food and Drug
            Centers, Inc.
       l.   Advertising and Promotions Agreement between      6/2001
            eBay Inc., and Neighborhood Box Office
       m.   Bayer Properties Standard Mall Agreement          2001
       n.   Prime Retail Standard Mall Agreement              2001


                                       37

<PAGE>
                                   SIGNATURES

     In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this Form 10-KSB to be signed on its behalf by the
undersigned, thereunto duly authorized.

NBO Systems, Inc.

By /s/ Keith A. Guevara
     Keith A. Guevara                             July 12, 2002
     Chairman/President/CEO


By /s/D. Kent Jasperson
     D. Kent Jasperson                            July 12, 2002
     Chief Accounting Officer


By /s/Christopher Foley
     Christopher Foley                            July 12, 2002
     Chief Financial Officer

                                       38

<PAGE>




                                    PART F/S

                              REPORT OF INDEPENDENT
                          CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors and Stockholders of
NBO Systems, Inc.

We have audited the accompanying balance sheets of NBO Systems, Inc., as of
March 31, 2002 and 2001, and the related statements of operations, stockholders'
deficit, 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 auditing standards generally accepted
in the United States of America. 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 financial statements referred to above present fairly, in
all material respects, the financial position of NBO Systems, Inc., as of March
31, 2002 and 2001, and the results of its operations and its cash flows for the
years then ended, in conformity with accounting principles generally accepted in
the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.  As discussed in Note B, conditions
exist which raise substantial doubt about the Company's ability to continue as a
going concern.  The Company's continuation is dependent on its ability to
generate sufficient cash flows to meet its obligations and sustain its
operations.  Management's plans in regard to these matters are also described in
Note B.  The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


     /s/ GRANT THORNTON LLP

Salt Lake City, Utah
June 7, 2002



                                       F-1

<PAGE>

                              FINANCIAL STATEMENTS

                                       F-2

<PAGE>
<TABLE>
                                NBO Systems, Inc.

                                 BALANCE SHEETS

                                    March 31,

                                     ASSETS

                                                    2002           2001
<S>                                             <C>           <C>
CURRENT ASSETS
Cash                                            $    456,295   $      7,866
Restricted cash (Note C)                          12,802,496     10,438,926
Accounts receivable, net of allowance for
uncollectible accounts of $5,014 in 2002 and
$5,000 in 2001                                       273,903        133,258
Employee advances                                          -          1,667
Inventory                                             17,534         19,141
Prepaid expenses                                       6,309         59,231
                                                  ----------     ----------
Total current assets                              13,556,537     10,660,089




PROPERTY AND EQUIPMENT, NET (Notes D and J)        1,413,937      1,646,380


OTHER ASSETS
Trademarks, net                                        9,107          9,431
Other assets and deposits (Notes E and J)            376,791        536,968
                                                  ----------     ----------
                                                     385,898        546,399
                                                  ----------     ----------
                                               $  15,356,372 $   12,852,868
                                                  ==========     ==========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       F-3

<PAGE>
<TABLE>
                                NBO Systems, Inc.

                           BALANCE SHEETS - CONTINUED

                                    March 31,

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

                                                    2002           2001
<S>                                            <C>            <C>
CURRENT LIABILITIES
  Checks written in excess of cash             $      811,785 $            -
  Gift certificates payable (Note C)               12,802,496     10,438,926
  Accounts payable                                    792,516        461,584
  Accrued liabilities (Note H)                        554,615        336,387
  Notes to stockholders (Note I)                    1,283,055      1,554,065
  Notes to officer (Note O)                           273,625        250,000
  Current maturities of long-term obligations
  (Note J)                                                  -         66,138
                                                  -----------    -----------
    Total current liabilities                      16,518,092     13,107,100

LONG-TERM LIABILITIES
  Deferred gain (Note J)                                    -          5,000
                                                  -----------    -----------
    Total liabilities                              16,518,092     13,112,100
COMMITMENTS AND CONTINGENCIES (Note P)                      -              -
STOCKHOLDERS' DEFICIT (Notes I, L and N)
  Capital stock
  Convertible redeemable preferred stock, par
value $1.00; authorized 1,000,000 shares;
issued and outstanding 53,847 and 48,952
shares at 2002 and 2001, respectively;
liquidation value $1.00 per share                      53,847         48,952
  Common stock, par value $0.0005; authorized
20,000,000 shares, 16,569,887 and 15,608,511
shares issued and outstanding at 2002 and
2001, respectively                                      8,285          7,804
                                                  -----------    -----------
                                                       62,132         56,756

  Subscriptions receivable                           (17,900)       (17,900)
  Additional paid-in capital                       22,374,130     18,962,236
  Accumulated deficit                            (23,580,082)   (19,260,324)
                                                  -----------    -----------
    Total stockholders' deficit                   (1,161,720)      (259,232)
                                                  -----------    -----------
                                               $   15,356,372 $   12,852,868
                                                  ===========    ===========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       F-4

<PAGE>
<TABLE>
                                NBO Systems, Inc.

                            STATEMENTS OF OPERATIONS

                              Year ended March 31,
                                                       2002           2001
<S>                                               <C>           <C>
Revenues (Notes B, P and Q)
Sale of third party gift certificates             $   2,057,964 $       56,937
Abandoned gift certificates (Note C)                  1,830,477              -
Convenience fees earned from customers                   10,322         56,955
Merchant fees earned from retailers                   1,333,433        845,108
Equipment and software income                            38,298         32,900
Interest on restricted cash (Note C)                    186,472        372,980
Lease income (Note F)                                    10,750              -
                                                    -----------    -----------
                                                      5,467,716      1,364,880
Cost of revenues
Third party gift certificates                         1,855,270         53,677
Merchant fees and charges                             1,107,184        758,992
Other                                                   343,390        486,158
                                                    -----------    -----------
                                                      3,305,844      1,298,827
                                                    -----------    -----------
Gross profit                                          2,161,872         66,053
Operating expenses
Personnel                                             2,941,271      2,749,244
Legal and accounting                                    265,892        106,452
Rent                                                    340,569        301,428
Office                                                  464,849        456,554
Depreciation and amortization                           358,800        255,519
Other                                                   198,420        358,104
                                                    -----------    -----------
                                                      4,569,801      4,227,301
                                                    -----------    -----------
Operating loss                                      (2,407,929)    (4,161,248)
                                                    -----------    -----------
Other income (expense)
Interest expense (Note I)                           (1,691,212)    (1,210,854)
Interest income                                          17,215         34,160
Loss on disposal of other assets and property
and equipment                                         (111,669)       (94,508)
Other income                                                 35         30,958
                                                    -----------    -----------
                                                    (1,785,631)    (1,240,244)
                                                    -----------    -----------
NET LOSS                                          $ (4,193,560) $  (5,401,492)
                                                    ===========    ===========
Net loss per common share - basic and diluted     $             $
(Note M)                                                (0.27)         (0.36)
                                                    ===========    ===========
Weighted-average number of common shares
outstanding - basic and diluted (Note M)            16,004,363     15,114,060
                                                    ===========    ===========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       F-5
<PAGE>
<TABLE>
                                NBO SYSTEMS, Inc.

                       STATEMENT OF STOCKHOLDERS' DEFICIT

                   For the years ended March 31, 2002 and 2001
                                     Preferred stock       Common stock
                                     Number
                                       of                Number
                                     shares    Amount  of shares     Amount
<S>                                 <C>      <C>       <C>        <C>
Balance at April 1, 2000             44,500  $ 44,500  14,623,643 $    7,312
Preferred stock dividends (Note L)    4,452     4,452           -          -
Common stock issued for (Notes I, L
and N)
Note payable                              -         -     104,545         52
Services                                  -         -      40,949         20
Payment of interest                       -         -      11,830          6
Cash (net of issuance costs of            -         -     827,544        414
$458,431)
Interest expense recognized on
beneficial conversion features on
notes payable (Note I)                    -         -           -          -
Common stock options and warrants
issued for services and compensation
(Note N)                                  -         -           -          -
Common stock warrants issued for
interest (Notes G, I and N)               -         -           -          -
Net loss                                  -         -           -          -
                                     ------    ------  ----------    -------
Balance at March 31, 2001            48,952    48,952  15,608,511      7,804
Preferred stock dividends (Note L)    4,895     4,895           -          -
Common stock issued for (Notes I, L,
N and O)
Note payable                              -         -     295,788        135
Notes to officer (Note L)                 -         -     312,500        156
Services                                  -         -       6,274          3
Equipment                                 -         -      16,915          8
Payment of interest                       -         -      53,614         25
Cash (net of issuance costs of
$62,340)                                  -         -     331,921        182
Common stock redeemed (Notes L and                                      (28)
O)                                        -         -    (55,636)
Interest expense recognized on
beneficial conversion features on
notes payable (Note I)                    -         -           -          -
Common stock options and warrants
issued for services and compensation
(Note N)                                  -         -           -          -
Common stock warrants issued for
interest (Notes G, I and N)               -         -           -          -
Net loss                                  -         -           -          -
                                     ------    ------  ----------    -------
Balance at March 31, 2002            53,847  $ 53,847  16,569,887 $    8,285
                                     ======    ======  ==========    =======
</TABLE>
         The accompanying notes are an integral part of this statement.
                                       F-6
<PAGE>
<TABLE>
                                NBO SYSTEMS, Inc.

                       STATEMENT OF STOCKHOLDERS' DEFICIT

                   For the years ended March 31, 2002 and 2001

                    Subscrip-     Additional
                      tions        paid-in       Accumulated
                    Receivable     capital         deficit          Total
<S>              <C>           <C>            <C>             <C>
Balance at April
1, 2000          $    (17,900) $   14,227,814 $  (13,767,009) $      494,717
Preferred stock              -         87,371        (91,823)              -
dividends (Note
L)
Common stock
issued for
(Notes I, L and
N)
Note payable                 -        219,948               -        220,000
Services                     -        180,155               -        180,175
Payment of
interest                     -         52,044               -         52,050
Cash (net of
issuance costs
of $458,431)                 -      3,217,836               -      3,218,250
Interest expense
recognized on
beneficial
conversion
features on
notes payable
(Note I)                     -        792,395               -        792,395
Common stock
options and
warrants issued
for services and
compensation
(Note N)                     -         82,498               -         82,498
Common stock
warrants issued
for interest
(Notes G, I and
N)                           -        102,175               -        102,175
Net loss                     -              -     (5,401,492)    (5,401,492)
                     ---------    -----------    ------------    -----------
Balance at March
31, 2001              (17,900)     18,962,236    (19,260,324)      (259,232)
Preferred stock
dividends (Note
L)                           -        121,303       (126,198)              -
Common stock
issued for
(Notes I, L, N
and O)
Note payable                 -        496,615               -        496,750
Notes to officer
(Note L)                     -        109,219               -        109,375
Services                     -         30,726               -         30,729
Equipment                    -         50,524               -         50,532
Payment of
interest                     -        215,111               -        215,136
Cash (net of
issuance costs
of $62,340)                  -      1,350,802               -      1,350,984
Common stock
redeemed (Notes
L and O)                     -      (152,971)               -      (152,999)
Interest expense
recognized on
beneficial
conversion
features on
notes payable
(Note I)                     -        903,620               -        903,620
Common stock
options and
warrants issued
for services and
compensation
(Note N)                     -          6,127               -          6,127
Common stock
warrants issued
for interest
(Notes G, I and
N)                           -        280,818               -        280,818
Net loss                     -              -     (4,193,560)    (4,193,560)
                    ----------    -----------    ------------    -----------
Balance at March
31, 2002         $    (17,900) $   22,374,130 $  (23,580,082) $  (1,161,720)
                    ==========    ===========    ============    ===========
</TABLE>
         The accompanying notes are an integral part of this statement.
<PAGE>
<TABLE>

                                NBO SYSTEMS, Inc.

                            STATEMENTS OF CASH FLOWS

                              Year ended March 31,


                                                    2002           2001
<S>                                           <C>            <C>
Increase (decrease) in cash
 Cash flows from operating activities
  Net loss                                    $  (4,193,560) $  (5,401,492)
  Adjustments to reconcile net loss to net cash
used in operating activities
   Depreciation and amortization                     358,800        255,519
   Loss on disposal of other assets, and
property and equipment                               111,669         94,508
   Bad debt expense                                   44,215         22,036
   Common stock options and warrants issued for
services and compensation                              6,127         82,498
   Common stock warrants issued for interest         280,818        102,175
   Interest expense recognized on beneficial
conversion features on notes payable                 903,620        792,395
   Common stock issued for services                   30,729        180,175
   Common stock issued for interest                  215,136         52,050
   Amortization of prepaid interest on loans          36,470         96,720
   Changes in assets and liabilities
    Accounts receivable                            (184,860)        (5,395)
    Employee advances                                  1,667         20,854
    Inventory                                          1,607       (11,107)
    Prepaid expenses, other assets and deposits
                                                       5,547      (493,627)
    Accounts payable                                 330,932        163,637
    Accrued liabilities                              215,115        135,130
                                                 -----------    -----------
     Total adjustments                             2,357,592      1,487,568
                                                 -----------    -----------
     Net cash used in operating activities       (1,835,968)    (3,913,924)
                                                 -----------    -----------
Cash flows from investing activities
  Purchase of property and equipment                (60,919)      (655,015)
  Proceeds from sale of property, equipment,
and other assets                                      46,442              -
     Net cash used in investing activities          (14,477)      (655,015)

</TABLE>
                                   (Continued)

        The accompanying notes are an integral part of these statements.

                                       F-7

<PAGE>
<TABLE>
                                NBO SYSTEMS, Inc.

                      STATEMENTS OF CASH FLOWS - CONTINUED

                              Year ended March 31,


                                                       2002          2001
<S>                                                  <C>          <C>
Cash flows from financing activities
  Increase in checks written in excess of cash         811,785             -
  Principal payments on unsecured loan                       -      (30,000)
  Principal payments on long-term obligations         (66,138)      (86,930)
  Proceeds from sale of common stock                 1,350,984     3,218,250
  Proceeds from notes to officer                        47,500        20,000
  Payments on notes to officer                        (67,499)      (20,000)
  Proceeds from loans to stockholders                  811,752     1,035,450
  Principal payments on notes to stockholders        (589,510)      (22,326)
                                                    ----------    ----------
    Net cash provided by financing activities        2,298,874     4,114,444
                                                    ----------    ----------
    Net increase (decrease) in cash                    448,429     (454,495)
Cash at beginning of year                                7,866       462,361
                                                    ----------    ----------
Cash at end of year                               $    456,295  $      7,866
                                                    ==========    ==========
Supplemental disclosures of cash flow
information
Cash paid during the year for
  Interest                                        $    178,340  $     90,658
  Income taxes                                           2,536         2,946
</TABLE>

Noncash investing and financing activities

Year ended March 31, 2002

For the year ended March 31, 2002, the Company had net transfers of $19,942 from
other assets to property and equipment.

Beneficial conversion feature of convertible debt

As discussed in Note I, the Company recognized charges related to the beneficial
conversion feature of the notes payable to stockholders issued during  the  year
ended  March  31,  2002.  The beneficial conversion feature  is  the  difference
between the market value of the common stock and the conversion rate of the debt
limited  to the amount of debt.  The beneficial conversion feature is recognized
as  interest  expense over the period from the date of the note to the  date  of
maturity  when  the conversion of the debt into stock may take place.   For  the
year  ended  March  31, 2002, the beneficial conversion resulted  in  a  noncash
charge recorded as additional interest expense of $903,620.
(Continued)

        The accompanying notes are an integral part of these statements.
                                       F-8

<PAGE>
                                NBO SYSTEMS, Inc.

                      STATEMENTS OF CASH FLOWS - CONTINUED

                       Years ended March 31, 2002 and 2001


Year ended March 31, 2002 - continued

Stock and stock options issued for services, assets, notes payable and interest

The  Company  issued  312,500 shares of common stock to the Company's  president
upon  exercise  of 312,500 stock options at $0.35 per option in exchange  for  a
decrease of $109,375 in notes payable to an officer.

The  Company  issued  6,274  shares  of common  stock  to  referring  agents  as
compensation for services received for a total value of $30,729 (Note L).

The  Company  granted 2,159 stock warrants to a referring agent as  compensation
for services received for a total value of $1,305 (Note N).

During 2002, the Company issued 53,614 shares of common stock at the fair market
price  for a total of $215,136 for interest according to terms of notes payable,
which matured and were not paid (Notes I and L).

During  2002, stockholders converted notes payable of $496,750 to 295,788 shares
of common stock according to terms of the notes (Notes I and L).

During  2002,  the  Company  issued 16,915 shares of  common  stock  for  office
equipment with a fair market value of $50,532 (Note L).

Year ended March 31, 2001

For  the  year  ended  March  31, 2001, the Company  disposed  of  property  and
equipment  and  other assets resulting in a $94,508 loss, a $5,917  decrease  in
property  and  equipment,  a $474 decrease in accumulated  depreciation,  and  a
$89,065 decrease in other assets.

For  the  year ended March 31, 2001, the Company had net transfers  of  $449,132
from other assets to property and equipment.

During 2001, the Company signed a settlement agreement on an unsecured loan  for
consideration including $30,000 cash and 5,000 shares of common stock valued  at
$4.40  per share for a total of $22,000, of which $2,000 was considered interest
expense  and expiration on 39,063 existing warrants was extended two  additional
years.  The Company recorded interest expense of $58,121 in 2001 related to  the
extension of these warrants (Notes G and N).


                                   (Continued)

        The accompanying notes are an integral part of these statements.

                                       F-9

<PAGE>

                                NBO SYSTEMS, Inc.

                      STATEMENTS OF CASH FLOWS - CONTINUED

                       Years ended March 31, 2002 and 2001


Year ended March 31, 2001 - continued

Beneficial conversion feature of convertible debt

As discussed in Note I, the Company recognized charges related to the beneficial
conversion feature of the notes payable to stockholders issued during  the  year
ended  March  31,  2001.  The beneficial conversion feature  is  the  difference
between the market value of the common stock and the conversion rate of the debt
limited  to the amount of debt.  The beneficial conversion feature is recognized
as  interest  expense over the period from the date of the note to the  date  of
maturity when the conversion of the debt into stock may take place. For the year
ended  March  31, 2001, the beneficial conversion resulted in a  noncash  charge
recorded as additional interest expense of $792,395.

Stock  and  stock options issued for compensation, services, notes  payable  and
interest

The  Company issued 40,949 shares of common stock to consultants as compensation
for  services received for a total value of $180,175.  The value of the  expense
recognized was based on the market value of the stock issued (Note L).

During  2001,  the  Company granted 25,005 stock options to a  board  member  in
connection  with an agreement for services received.  Expense related  to  these
options totaled $4,822 for 2002 and 2001 (Note N).

During  2001, NBO issued 11,375 shares of common stock at the fair market  price
of  $4.40 per share for a total of $50,050 for interest according to terms of  a
note payable which matured and was not paid
(Notes I and L).

During  2001, stockholders converted notes payable of $200,000 to 100,000 shares
of common stock according to terms of the notes (Notes I and L).

        The accompanying notes are an integral part of these statements.

                                      F-10

<PAGE>

                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   A summary of the significant accounting policies applied in the
   preparation of the accompanying financial statements follows.

     1.   Organization and business activity

   NBO  Systems, Inc. (NBO or the "Company") began operations in  June  1994.
   From  inception through March 31, 1999, NBO was considered  a  development
   stage  company  as its activities had principally been related  to  market
   analysis,  capital  raising, research and development and  other  business
   planning  activities  and as such the Company had no  significant  revenue
   from  its  planned  principal operations.  Prior to  April  of  1999,  the
   Company  had  derived some limited revenue from the  sale  of  kiosks  and
   licensing of software.

   Beginning  in  the  fall  of  1998, NBO entered into  long-term  exclusive
   agreements  with certain mall property and retail owners in an  effort  to
   build  a  larger  national presence in selling gift  certificates.   As  a
   result   of   these  contracts,  the  Company  started  significant   gift
   certificate  operations in October of 1998 and therefore,  was  no  longer
   considered  a development stage company as of the fiscal year ended  March
   31, 1999.

   The  Company changed its name from Neighborhood Box Office, Inc.  to  NBO,
   Inc.  on  July 17, 2000.  In January of 2002, NBO, Inc., merged  into  its
   wholly-owned subsidiary, NBO Systems, Inc., which was incorporated in  the
   State  of  Maryland  and thereafter filed a dba as  The  Gift  Certificate
   Company.  The effect of this transaction was to reincorporate the  Company
   in the State of Maryland.

   2.   Use of estimates

   In  preparing  the  Company's  financial  statements  in  accordance  with
   accounting principles generally accepted in the United States of  America,
   management  is required to make estimates and assumptions that affect  the
   reported  amounts of assets and liabilities, the disclosure of  contingent
   assets  and liabilities at the date of the financial statements,  and  the
   reported  amounts  of revenues and expenses during the  reported  periods.
   Actual results could differ from those estimates.

   3.   Other assets and prepaid expenses

   Other assets are recorded at cost, less accumulated amortization when
   applicable.  Amortization is provided principally on the straight-line
   method over the estimated useful life of the asset.


                                      F-11

<PAGE>
                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

      4.   Accounts receivable and allowance for doubtful accounts

   Accounts receivable are stated at the amount of unpaid principal, reduced
   by an allowance for doubtful accounts.  The allowance for doubtful
   accounts is established through a provision for losses charged to
   expense.  Accounts receivable are charged against the allowance for
   doubtful accounts when management believes that collectibility of the
   principal is unlikely.

   The  allowance for doubtful accounts is an amount management believes will
   be  adequate  to  absorb possible losses on existing  accounts  receivable
   that  may become uncollectible, based on evaluations of the collectibility
   of  accounts  receivable and prior loss experience.  The evaluations  take
   into  consideration such factors as changes in the nature  and  volume  of
   the  accounts receivable portfolio, overall portfolio quality,  review  of
   specific  problem  receivables, and current economic conditions  that  may
   affect the customer's ability to pay.

   5.   Debt issuance costs

   The  costs  related  to  the issuance of debt are  amortized  to  interest
   expense  using the effective-interest method over the life of the  related
   debt.

   6.   Inventory

   Inventory  consists  of  gift  certificates  purchased  from  third  party
   retailers.    Gift   certificates   are   recorded   at   cost   (specific
   identification method).

   7.   Property and equipment

   Property   and   equipment   are  recorded  at  cost,   less   accumulated
   depreciation.   Depreciation is calculated using the straight-line  method
   over  the  estimated useful lives of the assets.  Estimated  useful  lives
   are as follows:
                                              Years
   Furniture and fixtures                            10
   Kiosks                                             5
   Support equipment                               5-10
   Office equipment and vehicles                    4-5
   Software                                           5
   Leasehold improvements                             5


                                      F-12

<PAGE>

                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

   8.   Income taxes

   The  Company utilizes the liability method of accounting for income taxes.
   Under  the  liability  method  deferred tax  assets  and  liabilities  are
   determined  based  on the difference between the financial  statement  and
   tax  bases  of assets and liabilities and are measured using  enacted  tax
   rates  and  laws that will be in effect when the differences are  expected
   to  reverse.  Deferred tax expense or benefit is the result of changes  in
   deferred  tax  assets and liabilities.  An allowance against deferred  tax
   assets  is recorded when it is more likely than not that such tax benefits
   will not be realized.

   9.   Trademarks

   The  Company  capitalizes trademarks at cost and amortizes them  over  the
   periods expected to be benefited, not to exceed 15 years.

   10.  Loss per share

   Basic  earnings (loss) per share (EPS) is calculated using  income  (loss)
   available  to  common stockholders divided by the weighted-average  number
   of  common  shares outstanding during the period.  Diluted EPS is  similar
   to  Basic  EPS  except that the weighted-average number of  common  shares
   outstanding  is  increased  to  include the number  of  additional  common
   shares  that would have been outstanding if the dilutive potential  common
   shares  had been issued.  Such potentially dilutive common shares  include
   stock  options and warrants granted or sold and convertible debt.   Shares
   having  an  antidilutive effect on periods presented are not  included  in
   the computation of dilutive EPS (Note M).

     11.  Revenue recognition
   During  2001,  the Company began purchasing and selling gift  certificates
   of  third  party  retailers.  The Company records as  revenue  the  amount
   received  from the customer at the time of the sale.  The amount that  the
   Company  pays the retailer is recorded as a cost of revenue.  The  Company
   recognizes convenience fee revenue earned from customers from the sale  of
   gift  certificates  upon occurrence of the event.   Merchant  fee  revenue
   earned  from retailers is recognized when gift certificates are  redeemed.
   On  gift  certificate service contracts, reimbursable merchant fee revenue
   is  recognized as costs are incurred, and includes applicable fees  earned
   through  the date services are provided.  Revenue from the sale of  kiosks
   is  recognized upon shipment or installation if the Company is required to
   install the kiosks.  Interest income is recognized when earned.
                                      F-13

<PAGE>

                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

11.  Revenue recognition - continued

   During  2002,  the  Company began recognizing revenue  on  abandoned  gift
   certificates.   Paper  gift certificates that  are  not  redeemed  by  the
   holder  due to destruction, loss or other reason are subject to  claim  by
   the  Company  as  abandoned  property.  Gift  certificates  that  are  not
   redeemed are referred to as "breakage" in the industry.

   The  Company recognizes revenue on breakage at the end of the term of  the
   period  in which the Company is obligated to honor paper gift certificates
   which  ranges  from  one  to  three years  and  is  based  on  either  the
   expiration  date on the gift certificate or the applicable  legal  statute
   of limitation (applicable where state law prohibits expiration dates).

   The  amount of breakage recognized is based on historical experience since
   the  Company began selling paper gift certificates in October  1998.   The
   Company  monitors  historical breakage experience and records  adjustments
   in  the amount of revenue recognized for abandoned gift certificates on  a
   retrospective basis.

   Breakage  revenue  is  recognized on paper gift  certificates  during  the
   month  following  the  expiration date.  Breakage  revenue  is  recognized
   during  the  thirty-seventh  month  on paper  gift  certificates  with  no
   expiration date based on the applicable legal statute of limitation.

   During   the  fourth  quarter  of  fiscal  2002,  the  Company   completed
   procedures relative to the extinguishment of gift certificates payable  as
   it  relates  to escheatment law requirements for abandoned property.   The
   Company  had  accumulated  sufficient historical information  relative  to
   breakage  to  make  reliable estimates for purposes  of  recognizing  such
   revenue.   The Company recognized $1,830,477 of revenue during the  fourth
   quarter  of  fiscal  2002,  including  $615,428,  which  would  have  been
   recognized  prior to fiscal 2002 if sufficient historical information  had
   been available to make reliable estimates in prior years.

     12.  Stock options and warrants

   In  accordance  with Statement of Financial Accounting Standards  No.  123
   (SFAS  No.  123)  "Accounting for Stock-Based  Compensation",  expense  is
   recognized  in connection with the grant of stock options when  issued  to
   nonemployees using the fair-market-value method.  The expense is equal  to
   the  fair value of the options at the grant dates and is expensed  ratably
   over  the  vesting  periods.   Disclosure  requirements  were  adopted  to
   reflect  the  pro forma adjusted net income (loss) calculated by  applying
   the   fair   value  requirement  for  options  issued  to  employees   for
   recognition of expense.

                                      F-14

<PAGE>

                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

     13.  New accounting pronouncement

   During  2002,  the  Financial Accounting Standards Board  ("FASB")  issued
   Statement  of Financial Accounting Standards ("SFAS") No. 144,  SFAS  144,
   Accounting  for  the  Impairment  or Disposal  of  Long-Lived  Assets   to
   address  significant implementation issues related to SFAS 121, Accounting
   for  the Impairment of Long-Lived Assets and for Long-Lived Assets  to  Be
   Disposed Of, and to develop a single accounting model to account for long-
   lived  assets  to  be  disposed of.  SFAS 144  supersedes  SFAS  121.  The
   Company  does  not believe the adoption of SFAS 144 will have  a  material
   effect on the financial position or results of operations of the Company.

   During  2002, the FASB issued SFAS No. 145, Rescission of FASB  Statements
   4,  44  and 64, Amendment of FASB Statement 13, and Technical Corrections.
   Among  other  changes, SFAS 145 states that a gain or  loss  from  a  debt
   extinguishment  should not be classified as an extraordinary  item  unless
   it  meets specific criteria.  The Company does not believe the adoption of
   SFAS  145 will have a material effect on the financial position or results
   of operations of the Company.

   14.  Advertising

     Advertising costs are expensed as incurred.

     15.  Certain reclassifications

   Certain  reclassifications have been made to the 2001 financial statements
   to  conform  to the presentation for fiscal year 2002.  Specifically,  the
   financial results for the year ended within this report, as reported,  are
   adjusted  to  reflect the Financial Accounting Standards Board  guidelines
   on  revenue recognition pursuant to Emerging Issues Task Force  No.  00-10
   ("EITF  00-10")  and Emerging Issues Task Force No.01-14  ("EITF  01-14").
   Under  EITF  00-10 guidelines, historical and future revenue  relating  to
   amounts  billed  to  a  customer  for  shipping  and  handling  should  be
   classified  as revenue.  The corresponding expenses are reported  as  cost
   of  sales.   Historically,  the  Company reported  shipping  and  handling
   expenses  as  a  net  amount  within selling expense.   Under  EITF  01-14
   guidelines,  reimbursements  received for certain  out-of-pocket  expenses
   incurred should be classified as revenue.  The corresponding expenses  are
   reported as cost of sales.



                                      F-15

<PAGE>

                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE B - GOING CONCERN

   The  accompanying  financial statements have been prepared  assuming  that
   the  Company will continue as a going concern.  The Company generated  net
   losses  of  $4,193,560 and $5,401,492 in 2002 and 2001, respectively,  and
   net  losses since inception (June 23, 1994) of $23,580,082.  The Company's
   current  liabilities exceed its current assets by $2,961,555 as  of  March
   31,  2002.  The Company's continuation as a going concern is dependent  on
   its  ability  to meet its obligations, to obtain additional  financing  as
   may be required and ultimately to attain profitability.

   The  Company  is  currently in the process of securing approximately  $5.5
   million in equity funding from institutional/accredited investors to  meet
   on-going   capital  requirements.   Concurrently,  the   Company   is   in
   preliminary discussions with strategic partners that could result  in  the
   merger  or  acquisition  of the Company.  In that  event,  the  full  $5.5
   million  equity  investment may not be required and will  be  adjusted  as
   discussions  continue.   The  Company  also  has  the  ability  to   raise
   additional funding through debt offerings to existing shareholders as  has
   been done in the past.

   There  can  be  no  assurance that the Company will be successful  in  its
   attempt to consummate any of its strategic alternatives.


NOTE C - RESTRICTED CASH

   Restricted  cash  consists of funds held for the  payment  of  issued  and
   outstanding  gift certificates to customers.  These funds  are  maintained
   at   several  financial  institutions  in  depository  bank  accounts  and
   associated  sweep  accounts  held  by  NBO.   In  the  case  of   merchant
   retailers,  including Urban Retail Properties, The Rouse  Company  and  JP
   Realty,  these  accounts  are  held jointly  by  NBO  and  the  merchants.
   Accounts  at each institution are secured by the Federal Deposit Insurance
   Corporation   up   to   $100,000.    Uninsured   balances   aggregate   to
   approximately $10,981,000 at March 31, 2002 and $9,446,000  at  March  31,
   2001.   Withdrawals of the funds are restricted to the redemption  payment
   of  issued  and  outstanding gift certificates and may not be  transferred
   into  operating accounts.  Amounts recorded as abandoned gift  certificate
   revenue  is  removed  from  gift certificates  payable.   A  corresponding
   amount is removed from restricted cash and recorded as unrestricted cash.





                                      F-16

<PAGE>

                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE D - PROPERTY AND EQUIPMENT
<TABLE>

   Property and equipment, at cost, are as follows:
                                                 2002          2001
<S>                                         <C>          <C>
   Furniture and fixtures                   $    270,805  $      265,336
   Kiosks                                        617,474        622,660
   Support equipment                             271,924        244,894
   Office equipment and vehicles                 619,719        547,982
   Software                                      221,090        201,569
   Leasehold improvements                        145,186        142,936
                                               2,146,198      2,025,377
   Less accumulated depreciation and
    amortization                                 732,261        378,997
                                              ----------     ----------
                                            $  1,413,937  $   1,646,380
                                              ==========     ==========
</TABLE>

NOTE E - OTHER ASSETS AND DEPOSITS
<TABLE>
                                                  2002          2001
<S>                                          <C>          <C>
   Gift certificate stock                    $     23,490 $       14,164
   Kiosk components                               119,095        232,953
   Deposits                                        23,878         24,178
   Letter of credit - lease deposit               210,328        265,673
                                               ----------    -----------
                                             $    376,791 $      536,968
                                               ==========    ===========
</TABLE>

   Kiosk  components in other assets includes gift certificate  kiosks  taken
   out  of service and disassembled for use in the assembly of future kiosks.
   Each  component is assigned a proportionate share of the assets book value
   net  of accumulated depreciation when it is transferred from property  and
   equipment.   These components are used to assemble new kiosks,  that  when
   placed in service, are transferred back to property and equipment.

   During  2002, the Company recorded a loss of disposal of other  assets  of
   $163,811 for kiosk components that were determined to be impaired.


                                      F-17

<PAGE>

                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE F - LESSOR LEASING

   The  Company's  leasing operations relate to a sublease of  office  space.
   The  leasing  income  was $10,750 for the year 2002.  The  future  minimum
   rental income for the lease as of March 31, 2002 is as follows:
<TABLE>
    Year ending March 31,
<S>                                   <C>
   2003                                 $  42,625
   Thereafter                                   -
                                          -------
                                        $  42,625
                                          =======
</TABLE>

   Minimum  rental  income  shown  above does not  include  contingent  lease
   income,  which  may  be received on the basis of additional  office  space
   required by the tenant.

NOTE G - CUSTOMER DEPOSIT AND UNSECURED LOAN

   In  April  1997,  the Company received a deposit from  CLG,  Inc.  in  the
   amount  of $30,000 as financing for Skyline Multimedia Entertainment  Inc.
   ("SME").  The deposit was for a sales agreement NBO made with SME for  the
   sale of two ticket kiosks.

   On  April  30, 1997, the Company obtained a noninterest-bearing  unsecured
   loan  from  CLG  Inc. in the amount of $50,000. In addition,  the  Company
   provided  CLG Inc. a warrant to purchase 39,063 shares of common stock  at
   an  exercise  price  of $2.40 per share.  The exercise  period  is  for  a
   period of 48 months from the date of the loan.   This loan was settled  in
   August  2000 for $30,000 cash, 5,000 shares of stock valued at  $4.40  per
   share  and  expiration on the existing 39,063 warrants  was  extended  two
   additional  years.  The Company recognized the $30,000  deposit  as  other
   income  during  August  2000.  The Company recorded  interest  expense  of
   $58,121 in 2001 related to the extension of these warrants.

NOTE H - ACCRUED LIABILITIES
<TABLE>
   Accrued liabilities consist of the following:

                                                      2002        2001
<S>                                           <C>          <C>
    Payroll and paid time off                  $   339,354 $   202,588
    Accrued interest                               207,947     131,119
    Other                                            7,314       2,680
                                                  --------    --------
                                               $   554,615 $   336,387
                                                  ========    ========
</TABLE>
                                      F-18

<PAGE>

                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE I - NOTES TO STOCKHOLDERS
<TABLE>
               Notes due to stockholders consist of the following:
                                                        2002          2001
<S>                                              <C>           <C>
10%  notes  to  stockholders, net of  financing
 costs  of $444,036 at March 31, 1996,  payable
 in full (including interest) on the earlier of
 June  30,  1996 or upon the Company  obtaining
 $3,000,000  of  debt or equity  financing.  At
 June 30, 1996, the notes were not paid and the
 interest  rate increased to 20%.  Because  the
 notes were in default, the notes provided  for
 the  stockholders  to  receive  an  additional
 5,208  shares of common stock for each $25,000
 note  payable  at  September  30,  1996,   not
 collateralized, past due.                          $  497,555  $    518,565

Noninterest-bearing  note  to  a   stockholder,
 payable  on  July  14, 1997.  Holder  received
 12,500  shares  of common stock  at  $.80  per
 share  at  time of issuance of the note.  Upon
 default,   issuances  of  common  stock   were
 stipulated  at specific dates if  the  balance
 remained  unpaid.  The Company  issued  31,250
 common  shares at $.80 per share in  July  and
 August 1997 and 15,625 common shares at  $2.80
 per  share in September 1997 for default,  not
 collateralized, past due.                              50,000        50,000

Noninterest-bearing  note  to  a   stockholder,
 payable  on  July  15, 1997.  Holder  received
 2,500 shares of common stock of the Company at
 time  of  issuance of the note. Upon  default,
 issuances  of common stock were stipulated  at
 specific dates if the balance remained unpaid.
 The Company issued 6,250 common shares at $.80
 per  share  in July and August 1997 and  3,125
 common  shares at $2.80 per share in September
 1997  for  default,  not collateralized,  past
 due.                                                   10,000        10,000
</TABLE>



                                      F-19
<PAGE>
<TABLE>



                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE I - NOTES TO STOCKHOLDERS - CONTINUED

                                                         2002         2001
<S>                                                <C>         <C>
Non  interest-bearing  note  to  a  stockholder,
 payable  on  July  23, 1997.   Holder  received
 2,500 shares of common stock of the Company  at
 time  of  issuance of the note.  Upon  default,
 issuances  of  common stock were stipulated  at
 specific dates if the balance remained  unpaid.
 The  Company issued 6,250 common shares at $.80
 per  share  in July and August 1997  and  3,125
 common  shares at $2.80 per share in  September
 1997 for default, not collateralized, past due.        10,000        10,000

12% note to stockholder, payable on January 6, 2001.
Holder has received 168,750 warrants at an exercise
price  of  $4.40 per share and will  receive  9,375
warrants  on  the  7th of each month  at  the  same
exercise price as long as the note remains  unpaid,
not collateralized, past due.                           75,000        75,000

12%  note to stockholder, payable on July 30,  2001.
Holder has received 135,000 warrants at an exercise
price  of  $4.40 per share and will receive  11,250
warrants at the same exercise price on the 30th  of
each month as long as the note remains unpaid,  not
collateralized, past due.
                                                        90,000        90,000

Convertible note to a stockholder, payable  on  July
29,  2001.  Holder received 2,273 shares of  common
stock of the Company at $4.40 per share at the time
of   issuance  of  the  note,  which  the   Company
recognized  as  prepaid interest (effective  annual
interest  rate of 20%).  Upon maturity, the  holder
converted the note to common stock at the  rate  of
$2.20  per  share or a total of 45,454 shares,  not
collateralized (1).                                          -       100,000
</TABLE>


                                      F-20
<PAGE>
<TABLE>

                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE I - NOTES TO STOCKHOLDERS - CONTINUED
                                                        2002         2001
<S>                                                 <C>        <C>
Convertible  note  to  a stockholder,  payable  on
March 15, 2001.  Holder received 11,375 shares  of
common stock of the Company at $4.40 per share  at
the  time  of  issuance of  the  note,  which  the
Company  recognized as prepaid interest (effective
annual interest rate of 40%).  Upon maturity,  the
holder  elected not to convert the note to  common
stock at the rate of $2.20 per share or a total of
227,500  shares.   At the default  date  the  note
remained  unpaid  and based on the  terms  of  the
note,  an additional 11,375 shares of common stock
was  paid  to the holder at $4.40 per share.   The
stockholder  has  received  an  additional  11,375
shares  of  common stock at $4.40  per  share  and
27,300  shares of common stock at $5.50 per share.
For  each  90  day  period that the  note  remains
unpaid, an additional 9,100 shares of common stock
will  be  paid  to the holder, not collateralized,
past due. (1)                                           500,500      500,500
Convertible note to a stockholder, payable on July
22,  2001.  Holder received 4,545 shares of common
stock  of  the Company at $4.40 per share  at  the
time  of  issuance of the note, which the  Company
recognized  as prepaid interest (effective  annual
interest  rate of 40%).  Upon maturity,  the  note
was converted to common stock at the rate of $2.40
per  share  or  a  total  of  41,666  shares,  not
collateralized. (1)                                           -      100,000
Convertible note to a stockholder, payable on July
22,  2001.  Holder received 4,545 shares of common
stock  of  the Company at $4.40 per share  at  the
time  of  issuance of the note, which the  Company
recognized  as prepaid interest (effective  annual
interest  rate of 40%).  Upon maturity,  the  note
was converted to common stock at the rate of $2.40
per  share  or  a  total  of  41,666  shares,  not
collateralized. (1)                                           -      100,000
Convertible  note  to  a stockholder,  payable  on
April  1,  2002.   Upon notice of  repayment,  the
holder may convert the note to common stock at the
rate  of $5 per share or a total of 10,000 shares,
not collateralized. (1)                                  50,000            -
                                                      ---------    ---------
                                                   $  1,283,055  $ 1,554,065
                                                      =========    =========
</TABLE>

                                      F-21

<PAGE>

                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE I - NOTES TO STOCKHOLDERS - CONTINUED

     Beneficial conversion features

  The difference between the price to convert notes to common stock and the
  market price of the common stock, limited to the amount of debt, is considered
  a beneficial conversion feature and is recognized as additional interest
  expense.  Interest from beneficial conversion features of notes that convert
  to common stock is recognized at the inception of the note and is amortized
  over the life of the note.  Where conversion of the note to common stock is at
  the option of the holder, the interest from the beneficial conversion feature
  is recognized at the date of default, if the Company has not repaid the note
  in cash.

  (1)  The Company has one note currently outstanding that is convertible into
common stock based on the terms of the note.  The note is convertible at $5 per
share.  The Company had three notes outstanding at March 31, 2001 of $100,000
each that were converted to common stock during 2002. The Company has a $500,500
convertible note payable that the holder elected not to convert into common
stock, as explained above.  Other notes to stockholders with convertible
features are outlined below.
<TABLE>

  Company transactions concerning convertible notes to stockholders are as
  follows:
             Number                                    Beneficial conversion
               of                                      feature recognized as
             shares                                      interest expense
               of
             common
              stock                                         Year ended
                                             Conve           March 31,
                                    Marke    rsion
            The note    Note was      t      price
               was       paid at    price     per
   Amount   converte    maturity     per     share
  of note     d to       in cash    share


                                                         2002        2001
<S>        <C>        <C>          <C>      <C>     <C>         <C>
    200,000   100,000 $         -  $  4.40  $  2.00  $         - $   200,000
    500,500         -           -     4.40     2.20            -     500,500
    100,000    45,454           -     4.40     2.20       67,415      32,584
    100,000    41,666           -     4.40     2.40       52,607      30,726
    100,000    41,666           -     4.40     2.40       54,748      28,585
    250,000         -     250,000     5.50     1.00      250,000           -
    250,000         -     250,000     5.50     1.00      250,000           -
    100,000   100,000           -     5.50     1.00      100,000           -
     50,000    27,500      22,500     5.50     1.00       50,000           -
     50,000         -      50,000     5.50     1.00       50,000           -
     19,250    19,250           -     5.50     2.75       19,250           -
     35,000         -      35,000     5.50     5.00        3,500           -
     11,000         -      11,000     5.50     5.00        1,100           -
     50,000         -         N/A     5.50     5.00        5,000           -
                                                      $   903,620 $   792,395
</TABLE>
                                      F-22
<PAGE>

                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE I - NOTES TO STOCKHOLDERS - CONTINUED

   Amounts  from  the beneficial conversion features of these  notes  have  been
   recorded  during  2002  and 2001 as additional noncash  charges  to  interest
   expense,  which  is  included  in  interest  expense  in  the  statements  of
   operations.


NOTE J - LONG-TERM OBLIGATIONS

   Effective  January  1999,  the Company entered  into  a  sale  and  leaseback
   agreement  for  24 gift certificate kiosks, resulting in a deferred  gain  of
   $22,499  (which is to be amortized over the 36 month life of the  lease)  and
   an  increase  in  long-term  obligations of  $242,699.  Amortization  of  the
   deferred gain for 2002 was $5,000 ($7,500 for 2001).

   Included  in  property and equipment and other assets at March 31,  2001  was
   $233,699  of  kiosks  under capital leases with accumulated  amortization  of
   $105,615.  The capital leases expired during 2002.


NOTE K - INCOME TAXES

   The  (provision for) benefit from income taxes for the years ended March  31,
   2002 and 2001, consisted of the following:
<TABLE>
                                         2002     2001
       <C>                            <C>      <C>
       Current
       Federal                        $     -  $     -
       State                                -        -
       Deferred                             -        -

                                        -----    -----

        Total                         $     -  $     -

                                        =====    =====
</TABLE>


                                      F-23

<PAGE>

                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE K - INCOME TAXES - CONTINUED

   The  reported (provision for) benefit from income taxes is different than the
   amount  computed  by applying the statutory Federal income  tax  rate  of  34
   percent to the loss before income taxes as follows:
<TABLE>
                                                   2002            2001
<S>                                          <C>              <C>
Benefit at statutory rates                    $ (1,425,810)   $  (1,836,507)
Increase in valuation allowance                   1,578,264        2,001,063
State income tax benefit                          (137,895)        (177,583)
Credit for increasing research activities          (19,630)         (16,439)
Nondeductible items                                   5,071           29,466
                                               -----------       ----------
Total                                        $           -   $            -
                                               ===========       ==========
</TABLE>
   In  accordance with SFAS No. 109, the deferred tax assets and liabilities  as
   of  March  31,  2002  and  2001, are comprised of the  estimated  future  tax
   benefit  (provision)  due  to different financial reporting  and  income  tax
   basis related to:
<TABLE>
                                                       2002             2001
<S>                                           <C>             <C>
Deferred tax assets
Net operating loss carryforward               $    8,356,833  $     6,683,827
Research and development credit carryforwards
                                                     99,883           80,253
Asset reserves and accrued liabilities                53,394           39,291
Start-up expenditures                                      -          168,671
Depreciation                                          10,423            8,947
Impaired assets                                       38,720                -
Non-employee stock options                           120,629          120,629
                                                 -----------      -----------
Total deferred tax assets                          8,679,882        7,101,618
Valuation allowance                              (8,679,882)      (7,101,618)
                                                -----------      -----------
Net deferred tax asset                       $            -  $             -
                                                ===========      ===========
</TABLE>
   The  Company has concluded that since it is uncertain as to whether  it  will
   be  able  to  recognize the benefit of its operating loss  and  research  and
   development  credit  carryforwards,  a full  valuation  allowance  should  be
   provided.    At   March  31,  2002,  the  Company  had  net  operating   loss
   carryforwards  of  approximately $22,404,000  and  research  and  development
   credit  carryforwards of $99,883.  The net operating loss  carryforwards  and
   the research and development credits expire from 2010 to 2022.
                                      F-24
<PAGE>

                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE L - EQUITY

   Subscriptions receivable

   The  Company  has  received promissory notes from three  stockholders,  which
   bear 10 percent interest and are collateralized by shares of common stock  of
   the  Company.  Upon a public offering, the shares of stock may  be  sold  and
   the proceeds could be used to repay the notes to the Company.

   Common Stock

   Year ended March 31, 2002

   Effective  August 14, 2001, the Company approved a 5 for 4  stock  split  for
   all  outstanding shares of common stock. All shares of common stock in  these
   financial  statements and footnotes have been restated to reflect  the  stock
   split.

   On  August 16, 2001, the Company authorized 1,400,000 shares of common  stock
   to  be sold in a private placement offering. The common stock was offered  at
   $5.50 per share.

   During  fiscal  year  2002, the Company received $1,260,323  before  offering
   costs of $62,340 for the sale of 276,285 shares of common stock.

   The  Company  issued  53,614  shares  of common  stock  to  stockholders  for
   interest  in the amount of $215,136 according to terms of notes payable.  The
   note holders are also shareholders and accredited investors.

   The Company converted notes to stockholders of $496,750 to 295,788 shares  of
   common stock according to the terms of the notes.

   The  Company  issued  6,274  shares of common stock  valued  at  $30,729  for
   services.

   The  Company issued 16,915 shares of common stock for the purchase of  office
   equipment.   The  Company valued the assets at $50,532 based on  fair  market
   prices of similar assets.

   The  Company issued 312,500 shares of common stock to the Company's president
   upon exercise of 312,500 stock options at $0.35 per option in exchange for  a
   decrease of $109,375 in notes payable to an officer.
                                      F-25

<PAGE>

                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE L - EQUITY - CONTINUED

   During  2002,  as part of an incentive rights offering to shareholders  only,
   the  Company issued 55,636 shares of common stock at $2.75 per share totaling
   $152,999.   An  equivalent number of shares were redeemed from the  president
   and   chairman  of  the  Company,  Keith  A.  Guevara,  the  single   largest
   stockholder for the same price per share in accordance with Supplement  1  of
   the  August 16, 2001 private placement offering at $2.75 per share.  However,
   Mr.  Guevara  did  not  receive any payment from the  Company.   In  lieu  of
   payment,  the Company issued an unsecured note in the amount of  $152,999  to
   pay  the  redemption amount at a time to be determined in the future  by  the
   Board  of  Directors when the Company is in a financial position to  pay  the
   redemption  price without adversely affecting the Company.  The  Company  did
   not pay commissions in connection with the sale of these securities.

   Year ended March 31, 2001

   From  April 2001 through March 31, 2001, the Company received $3,218,250  net
   of  issuance costs of $458,431 for the sale of 827,544 shares of common stock
   at  $4.40  per share, which includes the exercise of 49,591 options at  $0.32
   per share.

   The  Company  issued 100,000 shares of common stock at  $2  per  share  to  a
   stockholder  who  converted a $200,000 note payable  to  stock  according  to
   terms of the note (Note I).

   The  Company  issued 11,375 shares of common stock at the fair  market  value
   price of $4.40 per share to a stockholder for interest according to terms  of
   a note payable (Note I).

   During  2001,  NBO  signed a settlement agreement on an  unsecured  loan  for
   consideration including $30,000 cash and 5,000 shares of common stock  valued
   at  $4.40  per  share for a total of $22,000, of which $2,000 was  considered
   interest expense.  (Note G).


                                      F-26

<PAGE>

                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE L - EQUITY - CONTINUED

   Preferred stock

   Each  outstanding share of preferred stock is convertible at  any  time  into
   shares  of common stock at a rate of 4.6875 shares of common stock  for  each
   share  of preferred stock.  The shares shall be automatically converted  into
   common  stock, however, upon the initial closing of a public offering of  the
   Company's  common stock.  The Company may, at its sole option, at  any  time,
   redeem  all  of the then outstanding shares of preferred stock  at  any  time
   after  August 21, 1997, upon 30 days notice, at a price of $2.20  per  share,
   plus  accrued  and  unissued stock dividends, if  any.   If  the  Company  is
   successful  in  completing a public offering, the Company will  register  the
   shares  of common stock the holders will receive upon the exercise  of  their
   conversion rights.  The holders of shares of preferred stock are entitled  to
   preferred  stock dividends at the rate of 10 percent per share  of  preferred
   stock  per  annum, issuable on or before August 31st of each year, commencing
   August  31, 1997.  In the event of any liquidation, dissolution or winding-up
   of  the  Company,  the holders of shares of preferred stock are  entitled  to
   receive,  prior and in preference to, any distribution of any of  the  assets
   or  surplus funds of the Company to the holders of shares of common stock  or
   any  other  stock of the Company ranking on liquidation junior or subordinate
   of  the preferred stock, an amount equal to $1.00 per share, plus accrued and
   unissued stock dividends, if any.  Holders of shares of preferred stock  have
   no voting rights.

   The  Company  declared 10 percent stock dividends on the Company's  preferred
   stock, which was paid to stockholders of record on August 31, 2002 and  2001.
   The  dividend  was  charged  to the accumulated deficit  in  the  amounts  of
   $126,198 and $91,823, respectively, which was based on the fair value of  the
   Company's  common stock converted at a rate of 4.6875 shares of common  stock
   for each share of preferred stock.

                                      F-27

<PAGE>
<TABLE>
                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE M - LOSS PER COMMON SHARE

                                                  Year ended March 31,
                                                   2002            2001
<S>                                         <C>             <C>
Net loss per common share - basic and
diluted
Net loss                                     $   (4,193,560) $   (5,401,492)
Dividends on preferred stock                       (126,198)        (91,823)
                                                ------------     -----------
Net loss available to common shareholders    $   (4,319,758) $   (5,493,315)
                                                ============     ===========
Common shares outstanding during the entire
period                                            15,608,511      14,623,643
Weighted average common shares issued
during the period                                    395,852         490,417
                                                ------------     -----------
Weighted average number of common shares
used in basic EPS                                 16,004,363      15,114,060
                                                ------------     -----------
Dilutive effect of stock options, warrants,
and convertible preferred stock                            -               -
                                                ------------     -----------
Weighted average number of common shares
and dilutive potential common stock used in
diluted EPS                                       16,004,363      15,114,060
                                                ============     ===========
</TABLE>

   The  average number of shares of all stock options and warrants granted,  all
   convertible  notes to stockholders, and convertible preferred stock  included
   in  Notes  I, L and N have been omitted from the computation of diluted  loss
   per  share  because  their inclusion would have been  anti-dilutive  for  the
   years ended March 31, 2002 and 2001.

                                      F-28
<PAGE>
                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE N - STOCK OPTIONS AND WARRANTS

     Common stock options

   During  1997,  the Company adopted the 1997 Stock Option Plan  (the  "Plan"),
   which  became  effective on January 22, 1997.  The Plan  was  amended  during
   1998  to  increase the number of shares of common stock reserved for issuance
   to an aggregate of 4,687,500 shares.

   The  term  of each stock option shall not be more than 10 years (5  years  in
   the  case  of stock options granted to holders of 10 percent or more  of  the
   voting  power  of the Company's stock).  The exercise price  of  the  options
   shall  not  be less than the fair market value per share of common  stock  on
   the  date of grant (110 percent of the fair market value in the case of stock
   options granted to holders of 10 percent or more of the voting power  of  the
   Company's stock).

   The  Company  has  options  outstanding to acquire  4,080,415  and  4,426,351
   shares  of  common  stock as of March 31, 2002 and 2001,  respectively.   The
   options vest periodically through January 2006.

   As  of March 31, 2002, the Company has 4,055,410 stock options outstanding to
   employees  with a range of exercise prices from $.32 to $5.50.   The  options
   generally   vest  evenly  over  five  years  from  the  employee's  beginning
   employment  date  regardless of the date of grant.  Also at March  31,  2002,
   the  Company  has  25,005  stock options outstanding  to  a  non-employee  to
   purchase one share of common stock per option at $4.40 per share.

   The  Company  has adopted the disclosure provisions and accounting  for  non-
   employee   stock  compensation  of  the  Statement  of  Financial  Accounting
   Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS  123)  and
   Accounting  Principles Board Opinion No. 25 for stock based  compensation  to
   employees. No compensation cost has been recognized under SFAS 123 for  stock
   options  issued  to  employees.  Had compensation cost for  the  stock  based
   compensation been determined consistent with SFAS 123 for options  issued  to
   employees,  the Company's net loss would have been changed to  the  following
   pro forma amounts:
<TABLE>

                                                     2002            2001
<S>                         <C>             <C>              <C>
Net loss                    As reported      $  (4,193,560)  $  (5,401,492)
                             Pro forma           (4,493,619)     (5,548,137)
Loss per share               As reported              (0.27)          (0.36)
                             Pro forma                (0.28)          (0.37)

</TABLE>
                                      F-29
<PAGE>
                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE N - STOCK OPTIONS AND WARRANTS - CONTINUED

   The  fair value of these options was estimated at the date of grant using the
   Black-Scholes   option-pricing  model  with  the  following  weighted-average
   assumptions; risk-free interest rate of 4.70 and 5.78 percent (for the  years
   ended  March  31,  2002  and  2001, respectively)  for  outstanding  options;
   average  expected life is equal to the actual life.  Dividends  were  assumed
   not  to be paid on common stock during the period of calculation.  Volatility
   of  30  percent was estimated for the year ended March 31, 2002.   Volatility
   was  not a factor in 2001 as the Company's common stock was not public.   The
   weighted-average  fair value per option was $2.09 and  $1.30  for  the  years
   ended  March 31, 2002 and 2001, respectively.  Option pricing models  require
   the  input  of highly subjective assumptions.  Management believes the  best-
   input  assumptions available were used to value the options and believes  the
   resulting option values are reasonable.

   In  December  1997,  the  Company entered into a  nonqualified  stock  option
   agreement   with  Nicholas  Group  Enterprises,  Inc.  ("Consultant").    The
   Consultant  had extensive experience in the ticketing industry, and  provided
   assistance  to  the Company to expand its operations in that  industry.   The
   agreement  provided the Consultant options to purchase a maximum  of  312,500
   shares  of  the  Company's common stock at a price  of  $2  per  share.   The
   Company  recognized compensation cost of $77,676 in 2001 under SFAS  123  for
   these  stock  options issued to nonemployees.  The nonqualified stock  option
   agreement  was  terminated  on April 28, 2000.  According  to  terms  of  the
   agreement, the options expired 90 days later as they were not exercised.

   Common stock warrants

   The  Company has the following types of common stock warrants outstanding  at
   March 31, 2002:

   Class A Warrants

   Beginning in November 1995 and concluding in March 1996, the Company  offered
   for  sale 66 Units at a price of $25,000 per Unit, in a private placement for
   bridge  financing.  Each Unit consisted of a $25,000 promissory  note,  5,208
   shares  of the Company's common stock and Class A Warrants to purchase  5,208
   shares of the Company's common stock at $2.40 per share.





                                      F-30

<PAGE>
                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE N - STOCK OPTIONS AND WARRANTS - CONTINUED

   Class A Warrants - continued

   Each  Class A Warrant entitles the registered holder thereof to purchase  one
   share  of the Company's common stock at an exercise price of $2.40 per  share
   during  the  period between the end of the 12th month and before the  end  of
   the  24th  month after the completion date of an initial public  offering  of
   the   Company's  common  stock.   Unless  extended  by  the  Company  at  its
   discretion,  all Class A Warrants will expire at the end of  the  24th  month
   after the completion of an initial public offering. The Class A Warrants  are
   callable by the Company at any time the common shares have been trading at  a
   price equal to or above $2.40 for a period of 30 consecutive trading days  on
   an   established  exchange.   Holders  of  these  warrants  have  no  rights,
   privileges or liabilities as a stockholder of the Company prior to  exercise.
   The Company has 1,010,672 of these warrants outstanding at March 31, 2002.

   Class B Warrants

   The  Class  B  warrants were issued in connection with  a  private  placement
   started  in  December of 1997.  Each Class B Warrant entitles the  registered
   holder  thereof  to purchase one share of the Company's common  stock  at  an
   exercise  price  of $4.00 per share expiring four years from  the  completion
   date  of the issuance, March 1999. The Class B Warrants are callable  by  the
   Company  at any time the common shares have been trading at a price equal  to
   or  above $4.00 for a period of 30 consecutive trading days on an established
   exchange  ending within 15 days of the date of redemption.  Holders of  these
   warrants  have no rights, privileges or liabilities as a stockholder  of  the
   Company  prior  to  exercise.   The Company has  734,075  of  these  warrants
   outstanding at March 31, 2002.

   Other warrants

   In   April  1999,  the  Company  entered  into  an  agreement  with  Tradeway
   Securities  Group, Inc. (Agent) in which the Agent acted as a  selling  agent
   for  the  Company  for  a private placement offering.   In  March  2001,  the
   Company  ended  its  relationship with the  Agent.   The  Company  issued  an
   aggregate  amount of 649,913 warrants to the Agent to purchase  common  stock
   at  an  exercise  price of $2.64 per share, exercisable until February  2005.
   The  Company  recorded issuance costs of $237,821 in 2001 in connection  with
   these warrants.

   Common  stock warrants at $2.40 per share were issued to a referring attorney
   in  connection  with the same private placement offering.   The  Company  has
   95,277  of  these warrants outstanding at March 31, 2002.  The  warrants  are
   exercisable until April 2004.
                                      F-31

<PAGE>

                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE N - STOCK OPTIONS AND WARRANTS - CONTINUED

     Other warrants - continued
  Common  stock warrants were issued to a stockholder and recorded as additional
  interest  expense of $280,818 for the year ended March 31, 2002  ($44,054  for
  the  year  ended  March  31, 2001) in connection with  two  outstanding  notes
  payable.   Each  warrant entitles the holder to purchase one share  of  common
  stock  at  $4.40  per  share.   The  Company has  303,750  of  these  warrants
  outstanding at March 31, 2002.  168,750 of the warrants are exercisable  until
  July  2005, and 135,000 of the warrants are exercisable until July 2006  (Note
  I).
  Common  stock  warrants  were issued to a company for  settlement  of  a  note
  payable.   Each  warrant entitles the holder to purchase one share  of  common
  stock  at  $2.40  per  share.   The  Company  has  39,063  of  these  warrants
  outstanding at March 31, 2002.  The warrants are exercisable until April  2003
  (Note G).
  Common stock warrants were issued to a referring agent who was a selling agent
  for  the  Company for a private placement offering.  The Company issued  2,159
  warrants  to  purchase common stock at an exercise price of $4.40  per  share,
  exercisable during the period between the end of the 12th month and before the
  end  of the 24th month after the completion date of an initial public offering
  of  the Company's common stock.  The Company recorded issuance costs of $1,305
  in 2002 in connection with these warrants.
  Changes in the Company's stock options and warrants are as follows:
<TABLE>
                     Warrants                        Stock options
                                Weighted-                          Weighted-
          Number                 average                            average
        of shares    Exercise    exercise    Number     Exercise    exercise
                       price      price    of shares      price      price
<S>     <C>        <C>          <C>        <C>         <C>        <C>
Outstan
ding at
April                    2.40-
1, 2000  2,355,474  $     4.00 $      2.96  4,651,562  $ .32-2.80 $      1.06
                         2.64-                              2.40-
Granted    252,276        4.40        3.19    380,630        4.40        4.15
Exercis
ed               -           -           -   (49,591)         .32         .32
Cancele
d or
expired          -           -           -  (556,250)    .32-4.40        2.20
        ----------                          ---------
Outstan
ding at
March
31,                      2.40-
2001     2,607,750        4.40        2.99  4,426,351    .32-4.40        1.16
                                                            4.40-
Granted    227,159        4.40        4.40    174,064        5.50        4.87
Exercis                                                       .35
ed               -           -           -  (312,500)                     .35
Cancele
d or                                                        2.40-        2.83
expired          -           -           -  (207,500)        4.40
        ----------                         ----------
Outstan
ding at
March
31,                      2.40-
2002     2,834,909        4.40        3.09  4,080,415    .32-5.50        1.29
        ==========                          =========
Exercis
able at
March
31,                      2.40-
2002     1,822,078        4.40        3.48  3,773,915    .32-5.50        1.07
        ==========                         ==========
Exercis
able at
March
31,                      2.40-
2001     1,597,078        4.40        3.35  3,973,476    .32-2.80         .91
`       ==========                         ==========
</TABLE>
                                      F-32
<PAGE>
                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE N - STOCK OPTIONS AND WARRANTS - CONTINUED

   A  summary  of  the status of the options outstanding at March  31,  2002  is
   presented below:
<TABLE>
                         Outstanding                      Exercisable
                           Weighted-
                            average
                           remaining    Weighted-                 Weighted-
 Range of     Number      contractual    average      Number       average
 exercise    of shares       life        exercise    of shares     exercise
  prices    outstanding     (years)       price     exercisable     price
<S>        <C>            <C>          <C>          <C>          <C>
$.32            455,097          4.82     $    .32      455,097     $    .32
..80-0.88      2,921,875            .5          .88    2,918,750          .88
2.40-2.80       321,875          7.10         2.57      238,750         2.60
4.40            306,568          8.83         4.40      156,318         4.40
5.50             75,000          9.79         5.50        5,000         5.50
            -----------                             -----------
              4,080,415          2.30         1.29    3,773,915         1.07
            ===========                             ===========
</TABLE>


   A  summary of the status of the stock warrants outstanding at March 31,  2002
   is presented below:
<TABLE>

                         Outstanding                      Exercisable
                           Weighted-
                            average
                           remaining    Weighted-                 Weighted-
 Range of                 contractual    average                   average
 exercise     Number         life        exercise     Number       exercise
  prices    outstanding     (years)       price     exercisable     price
<S>         <C>           <C>           <C>        <C>           <C>
$2.40         1,049,735           n/a    $    2.40       39,063    $    2.40
2.64            745,190          2.78         2.64      745,190         2.64
4.00            734,075          1.00         4.00      734,075         4.00
4.40            305,909          3.72         4.40      303,750         4.40
            -----------                             -----------
              2,834,909                       3.09    1,822,078         3.48
            ===========                             ===========

</TABLE>
                                      F-33

<PAGE>

                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE O - RELATED PARTY TRANSACTIONS

   In  addition  to  matters disclosed in Notes I, L and N the  Company  entered
   into the following transactions with related parties.

   During  May  1996,  the  Company entered into  a  promissory  note  with  its
   president  for  $250,000  which the president advanced  to  the  Company  for
   payment  of  the  Company's general and administrative  expenses.   The  note
   bears  10  percent interest, payable (including interest) on the  earlier  of
   July  10,  1996  or  upon the Company obtaining $750,000 of  debt  or  equity
   financing.   The  note is not collateralized and remains  outstanding  as  of
   March 31, 2002.

   During  January 2002, the Company entered into a non-interest bearing  demand
   note  with  its  president for $40,000.  During February  2002,  the  Company
   repaid $20,000 of the note.

   The  Company issued 312,500 shares of common stock to the Company's president
   upon exercise of 312,500 stock options at $0.35 per option in exchange for  a
   decrease of $109,375 in notes payable to an officer.


NOTE P - COMMITMENTS AND CONTINGENCIES

   1.   Employment agreements

   The  Company  has  entered into employment agreements with officers  and  key
   employees.  The agreements provide for terms of one to three years and  total
   monthly  salaries  of  approximately $38,333 in 2002 and  $121,000  in  2001.
   Total  future salaries payable under these agreements for years ending  March
   31, are approximately as follows:
<TABLE>
Year ending March 31,                               Amount
<S>                                           <C>
2003                                           $      460,000
2004                                                  210,333
Thereafter                                                  -
                                                  -----------
                                               $      670,333
                                                  ===========
</TABLE>
   2.   Lease

   Effective  March  2001, the Company entered into a five-year operating  lease
   expiring  February  2005, for the Company's headquarters at  a  monthly  base
   rent which includes all taxes on the property.  The rental expense under  all
   operating leases was $304,141 for the year 2002 ($246,241 in 2001).

                                      F-34
<PAGE>

                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE P - COMMITMENTS AND CONTINGENCIES - CONTINUED

     2.   Lease - continued

   Future  minimum payments for all operating leases at March 31,  2002  are  as
   follows:
<TABLE>
Year ending March 31,                               Amount
<S>                                           <C>
2003                                           $      302,779
2004                                                  310,610
2005                                                  291,482
Thereafter                                                  -
                                                  -----------
                                               $      904,871
                                                  ===========
</TABLE>
     3.   Gift certificate contracts

   The  Company  has entered into significant contracts as noted  below.   Under
   these  contracts,  NBO  fulfills  the  customer's  gift  certificate  program
   requirements  which typically includes providing equipment that  records  the
   transaction  and  issues the gift certificate to the  consumer;  listing  the
   merchant  on the Company's Internet site enabling consumers to purchase  gift
   certificates  online  that NBO fulfills; providing  gift  certificate  stock;
   managing  the  flow  of  funds  including  escheatment  considerations;   and
   providing reporting to each customer.

   In  certain  cases, a customer contract may include only one or some  of  the
   components  listed  above such as Internet order fulfillment  solely  in  the
   case  of  Darden  Restaurant's,  Inc.  or  placing  Kiosks  in  each  Smith's
   Supermarket   with  no  countertop  unit  at  the  customer   service   desk.
   Irrespective  of  contracts  that  may  not  include  all  of  the  Company's
   distribution components, all contracts do require the Company to provide  the
   stock, manage the funds and provide reporting as mentioned above.

   On  August 10, 1998, the Company signed an exclusive five-year agreement with
   Urban  Retail Properties, the third largest owner of mall properties  in  the
   country,  to  place kiosks in 14 of their mall properties to sell  mall  gift
   certificates.   These kiosks were installed in October and November  1998  in
   order  to  be  available  for  the holiday season.   Initially,  the  Company
   received  customer convenience fees ranging from 5 percent to 10  percent  of
   the  certificate  amount. Beginning in the latter part of February  1999,  it
   was agreed that customer convenience fees would no longer be charged.

                                      F-35

<PAGE>

                                NBO SYSTEMS, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                             March 31, 2002 and 2001

NOTE P - COMMITMENTS AND CONTINGENCIES - CONTINUED

   3.   Gift certificate contracts - continued

   On  September  1,  1999, the Company renegotiated its  contracts  with  Urban
   Retail  Properties.  The  revised contracts  extend  terms  three  additional
   years.   Eight  additional contracts with malls were entered into  under  the
   same  terms  as  other  malls associated with Urban Retail  Properties.   The
   terms  of  the  new contracts call for counter top units to be  used  at  the
   customer service desks at most of the malls.

   In September 1999, the Company entered into contracts to sell gift
   certificates in malls owned by The Rouse Company ("Rouse"), of Columbia,
   Maryland, JP Realty, Inc. ("JP Realty"), of Salt Lake City, Utah, and
   American Mall of Memphis LLC ("American Mall"), of Memphis, Tennessee.  The
   JP Realty and American Mall agreements are for terms of five years and three
   years, respectively. The Company entered into 38 additional contracts with
   Rouse during June, July and August of 2000 and February of 2001 with terms
   up to three years.

   In  April  2000, the Company entered into a contract to sell  gift  cards  of
   restaurants owned by Darden Restaurant's, Inc. from the restaurant  websites.
   The  restaurants include Olive Garden, Red Lobster, Bahama Breeze and  Smokey
   Bones.  For the year ended March 31, 2002, revenue from the sale of the  gift
   cards sold was approximately $1,797,000.

   In  March 2001, the Company entered into a three-year agreement with WildCard
   Systems, Inc. to provide services relating to stored value gift cards.

   The Company entered into various other agreements with malls, outlet
   companies, and shopping centers during 2002 and 2001 with terms from three
   to five years.

     4.   Litigation

   The  Company  is  party to litigation and claims in the  ordinary  course  of
   business.   After consultation with legal counsel, management  believes  that
   the  liabilities, if any, arising from such litigation and  claims  will  not
   have a material effect on the financial position or results of operations  of
   the Company.

NOTE Q - MAJOR SOURCES OF REVENUE

   Fee  income from the largest customer of the Company for the year ended March
   31,  2002,  accounted  for approximately 37 percent of  the  Company's  total
   revenue.  Loss of this key customer could result in significant decreases  in
   Company revenues and income.

                                      F-36