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

FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

DOT COM ENTERTAINMENT GROUP, INC.
(Name of Small Business Issuer in its Charter)

Florida
(State or other jurisdiction of
incorporation or organization)

58-2466312
(I.R.S. Employer Identification No.)
150 Randall St.
Oakville, Ontario, Canada
(Address of principal executive offices)
L6J 1P3
(Zip Code)
Issuer's telephone number: (905) 337-8524

SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT:
None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock
(Title of Class)

Check whether the issuer

(1)  filed all reports 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 amendments to this Form 10-KSB. [X]

The issuer's revenues for the fiscal year ended December 31, 2002 were
$3,505,771.

The aggregate market value of the voting and non-voting common equity (which
consists solely of shares of Common Stock) held by non-affiliates of the issuer
as of March 21, 2003, computed by reference to the close price as at March 21,
2003 of $0.15 of the registrant's Common Stock as quoted on the OTC Bulletin
Board service on such dates, was approximately $1,267,740.

As at March 21, 2003, there were 10,855,500 shares of the issuer's Common
Stock outstanding.

Transitional Small Business Disclosure Format (check one)

Yes    No X

PART 1

This annual report contains forward-looking statements that involve
substantial risks and uncertainties. Any statement in this annual report and in
the documents incorporated by reference into this annual report that is not a
statement of an historical fact constitutes a forward-looking statement within
the meaning of the Private Securities Litigation Reform Act of 1995. Further,
when we use the words "may", "expect", "anticipate", "plan", "believe", "seek",
"estimate" and similar words, we intend to identify statements and expressions
that may be forward-looking statements. We believe it is important to
communicate certain of our expectations to our investors. Forward-looking
statements are not guarantees of future performance. They involve risks,
uncertainties and assumptions that could cause dot com Entertainment Group,
Inc.'s future results to differ materially from those expressed in any
forward-looking statements. Many factors are beyond our ability to control or
predict. You are accordingly cautioned not to place undue reliance on such
forward-looking statements. We have no obligation or intent to update publicly
any forward-looking statements whether in response to new information, future
events or otherwise. Important factors that may cause our actual results to
differ from such forward-looking statements include, but are not limited to, the
risk factors discussed below under "OTHER FACTORS THAT MAY AFFECT FUTURE
RESULTS", "BUSINESS" andItem 6 "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION" and
elsewhere in this annual report generally. You should be aware that the matters
described under "GOVERNMENT LICENSING AND REGULATION" and "OTHER FACTORS THAT
MAY AFFECT FUTURE RESULTS" in this annual report, could have a material adverse
effect on our business, financial condition and results of operation.

ITEM 1.   DESCRIPTION OF BUSINESS

A.    CORPORATE HISTORY

dot com Entertainment Group, Inc. (the "Company" or "DCEG"), formerly
operating under the name of Affiliated Adjusters, Inc. (hereinafter
"Affiliated") was incorporated on December 11, 1981 in the State of Florida. On
January 27, 1999, Affiliated acquired 100% of the shares of the Precyse
Corporation of Oakville, Canada (hereinafter "Precyse"). Prior to its
acquisition of Precyse, Affiliated conducted no business and had only nominal
assets and liabilities. On February 2, 1999, Affiliated changed its name to dot
com Entertainment Group, Inc.

B.    BUSINESS OF ISSUER

ORGANIZATIONAL STRUCTURE

DOT COM ENTERTAINMENT CORPORATE ORGANIZATIONAL CHART

|dot com Entertainment Group, Inc.
    (Florida, U.S.A.)
|-------------------------------------------------------
|/
    /                                                
|dot com (Antigua) Ltd.  
    (Antigua)                 
|                                                       
|                                                       

Overview of DCEG Group:

DCEG, through its affiliated companies, is in the business of developing and
supporting Internet entertainment software, including games such as 75 and 90
ball bingo; casino-style games such as slots, video poker and roulette;
lottery-style games such as pull-tabs and scratch & win; and other similar
games. In most cases, original game concepts are created by DCEG.

DCEG licenses the use of its software, through its wholly-owned affiliate
Parlay Entertainment Limited, of Barbados (hereinafter "Parlay"), in
consideration for the payment of an initial up-front implementation fee and a
flat fee per concurrent user or a percentage of the net revenues generated by a
licensee. DCEG also generates revenue through support and maintenance fees,
software upgrade fees, product enhancement and custom design fees and fees
charged for marketing and general management consulting services.

DCEG's strategic focus is to increase the quality and number of its
licensees, while also increasing the scope of its products and services. The
Company's expenses are based in part on product development, marketing and
administration. As of December 31, 2002, all costs associated with development
have been expensed as they were incurred which often is before a product is
released or licensed. A significant portion of DCEG's expenses are wages to
employees and therefore not variable. As the Company increases its production
and licensing activities, expenses will increase and, if revenues do not improve
proportionally, net income is likely to be disproportionately affected.

DCEG CORPORATE STRUCTURE, DESCRIPTION OF LEGAL ENTITIES:

dot com Entertainment Group, Inc.

dot com Entertainment Group, Inc. is the group's parent company, incorporated
in Florida with its shares listed for trading on the OTC Bulletin Board. dot com
Entertainment Group, Inc. carries on its business through the activities of its
subsidiary corporations and affiliates. It owns directly 100% of the issued and
outstanding shares of Precyse, DCEG Inc. and dot com (Antigua) Ltd.

DCEG Inc.

DCEG Inc. is based in Oakville, Ontario and is a wholly-owned subsidiary of
dot com Entertainment Group, Inc. DCEG Inc. operates as the Canadian holding
company for DCEG, which in turn owns and controls the shares of Parlay. DCEG
Inc. also performs treasury, management, corporate marketing and other services
for DCEG and affiliated companies.

Precyse Corporation

Precyse Corporation (hereinafter "Precyse") is based in Oakville, Ontario.
Precyse is DCEG's software development company, employing the majority of DCEG's
employees. Precyse develops DCEG's core software technologies pursuant to an
agreement with Parlay. In addition to the development of DCEG's core
technologies, Precyse is responsible for research and development, creative
development and the development of related (and/or third party) applications.

Precyse (Barbados) Limited

Precyse (Barbados) Limited (hereinafter "PrecyseB") is based in Christ
Church, Barbados. PrecyseB is DCEG's non-core software development company,
employing a small number of DCEG's employees. PrecyseB develops software
technologies, including game monitors, testing tools, simulators, emulators,
custom projects, client specific applications, product enhancements, graphic
support and fringe products. PrecyseB has a board of directors that is
constituted by a majority of Barbados residents.

Parlay Entertainment Limited

Parlay maintains both a registered and corporate office in Christ Church,
Barbados. Parlay owns and licenses DCEG's intellectual property and has full-
and part-time employees, who perform services in group sales, licensing,
business administration, business operations or contract support. Parlay has its
own board of directors, which is constituted by a majority of Barbados
residents.

dot com (Antigua) Ltd.

dot com (Antigua) Ltd. (hereinafter "Antiguaco") is based in St. John's,
Antigua. Until the constitution of Parlay in February of 2002, Antiguaco was
DCEG's licensing subsidiary. Antiguaco does not have any full or part-time
employees and no longer licenses DCEG software technologies. Antiguaco conducted
minimal business in 2002 and has only nominal assets and liabilities. The
business operations of Antiguaco will cease in 2003.

dot com Management Ltd.

dot com Management Ltd. (hereinafter "DCM") is based in Oakville, Ontario and
is a wholly-owned subsidiary of Precyse. DCM operates as a leasing company,
performing lease management services for the DCEG group.

PRODUCTS AND SERVICES

DCEG, through its affiliated companies, develops and licenses its software
products and support services to customers who operate their businesses from
jurisdictions where Internet gaming is lawful or tolerated. Parlay also licenses
the Company's software products to land-based operators in North America, who
use its gaming technologies for entertainment or play-for-fun purposes.

Parlay Bingo Games

Parlay's Internet Bingo client software is available as a Windows download
and/or server based Flash and Java versions. The Bingo software provides a full
multi-media interface including chat and dynamic graphics, with all versions
maintaining a recognized Parlay-look and feel across each platform. Parlay's
Bingo software provides Internet Bingo players with the flexibility to choose
the platform that best suits their computer, bandwidth or desktop situation. The
software provides customization of the environment allowing for the use of a
variety of Bingo announcers, callers, patterns, backgrounds and graphics.

Parlay Casino Games

Parlay's Casino games use server-based Java and Flash platforms to provide
easily accessible on-line games for use by the Company's licensees and their
players. The cross-platform nature of Java and Flash makes it possible to play
these games on all major operating systems, online, with minimal downloading
required. Parlay presently has a variety of Java Casino Games including
Videopoker, Blackjack, Slots, Caribbean Poker, Craps and Roulette. Parlay's
Flash Casino Games utilize the Flash programming language, which also provides
easily accessible on-line games for use by licensees. The cross-platform nature
of Flash also makes it possible to play these games on all major operating
systems, online, with virtually no downloading required.

Parlay Lottery Games

Parlay's lottery games are based on Flash technology and are fully
customizable. The games offered include scratch bingo, keno, pick 3,
match-n-win, pull tabs and other lottery style games. These games are attractive
additions to bingo and casino offerings for both operators and players.

LICENSEES

Parlay owns and licenses DCEG's integrated technology systems. Parlay earns
installation and implementation fees by providing and supporting its software.
Parlay receives a continuing percentage of the licensee's net revenues (the
"Royalty") or alternatively a flat software license fee based on the number of
concurrent users ("Software Licensing Fees"), depending on the terms of the
license agreement. License agreements vary in length from one to ten years.

As the Royalty is calculated based on a percentage interest in a licensee's
net revenue, it will vary depending on the technology licensed, the performance
of the licensee, the licensee's projected growth and the scope of the technology
and support services purchased from the Company. As the Software Licensing Fees
are calculated based on the number of concurrent users of the Parlay software,
they will vary depending on the concurrent use of the software by licensee
players from time to time. After the initial installation of the software,
Parlay provides technical support to licensees, on terms set out in a support
and maintenance agreement. Licensees are not obliged to enter into a support and
maintenance agreement, and each arrangement depends on the licensee's
requirements.

As at January 31, 2003, the Company had 23 licensees, providing for the
deployment of 25 Internet Bingo Halls and 12 Internet Casinos.

At December 31, 2002, one customer represented 36% (less than 10% in 2001) of
DCEG's trade accounts receivable (hereinafter "Customer 1"). DCEG derived 13%
(less than 10% in 2001) of its revenue for fiscal 2002 from Customer 1. At
December 31, 2002, a second customer represented 17% (77% in 2001) of trade
accounts receivable (hereinafter "Customer 2"). DCEG derived 27% (66% in 2001)
of its revenue for fiscal 2002 from Customer 2. At December 31, 2002, a third
customer represented 13% (less than 10% in 2001) of trade accounts receivable
(hereinafter "Customer 3"). DCEG derived less than 10% (less than 10% in 2001)
of its revenue for fiscal 2002 from Customer 3. The loss of any one of these
customers could have a material adverse effect on the Company.

It is anticipated that the majority of DCEG's future revenue and earnings
growth will come from royalty income, software licensing fees, software
implementation fees, support and maintenance fees, and fees associated with
providing additional services to licensees.

COMPANY MISSION AND VISION

Mission Statement

DCEG intends to enrich the global entertainment market
through the creation of great software solutions.

Vision Statement

| |  | DCEG will strive to innovate and/or enable
    quality entertainment technologies globally: in communities, in homes and in
    regulated environments.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | DCEG will strive to ensure that its software
    products are regarded as the "best in class" by the industry, clients and
    end users.              
| |  | DCEG will strive to garner accolades from our
    industry with respect to our reputation and integrity.                                               

GROWTH STRATEGY

DCEG is moving to transition itself from a "product centric"
value discipline to an "operational excellence model." This will give DCEG the
opportunity to provide for systematic methodology and continuous improvement.
DCEG will position itself so that its industry and its customer-base will see
the Company as a provider of value, through a well-organized team. DCEG will
strive to not over-promise and under deliver, making customer relationships a
positive experience with seamless "end to end" product delivery.

DCEG, through its subsidiaries, will strive to produce, license and support a
reliable, flexible, standard technology product, which is easy to install and
use and which creates and improves efficiencies for clients. Parlay will strive
to provide dependable, responsive support services, which train licensees to
make use of easy to use software technologies. This will allow customers to
become self-sufficient, by making use of standard processes incorporated in the
software.

DCEG intends to capitalize on its experience in the on-line Bingo sector and
its expertise in the analysis of licensee data to become a world leader in the
development of online Bingo, Casino, Lottery and related gaming technologies.

MARKETING STRATEGY

DCEG has positioned its "Parlay" brand as its sales,
marketing and services group, which supplies all software and services to its
customers. Parlay has commenced the process to position itself "front-of-mind"
to the on-line entertainment industry through the promotion of its expanding and
diversified product suite.

By focusing on its product suite, Parlay will promote its
customizable game technologies to offer licensees a realistic gaming experience.
As a "first mover" in Internet Bingo, Parlay will make use of its multi-faceted
back office management utilities, leading edge platforms, upcoming designs, open
architecture and easy integration of third-party delivery options to increase
market share in Bingo and other gaming verticals.

The Company will commit to adhering to industry standards in
areas of software development and regulatory compliance and adopt software
lifecycle "best practices" which will continue to improve software quality and
productivity.

DCEG's "soft-gaming" focus also allows it to explore relationships with
governments, not-for-profit organizations and North American based entertainment
companies, which will license the Company's technologies in free-play and
play-for-points environments. DCEG may continue to develop such relationships
with land-based and "cyber" brands, as the use of free-play Bingo and related
games will generate goodwill for the Company and demand for its technology by
players.

SALES STRATEGY

The on-line entertainment industry is changing from a licensee-base that is
entrepreneurial in nature, to one comprised of large and established land-based
gaming entities, media companies, governments and charities. With the
development of highly regulated e-gaming jurisdictions worldwide, non-North
American markets present the greatest near-term opportunity. Parlay's sales
strategy will be to expand the product base with new games, multi-lingual
support, added platforms and delivery systems, multi-currency support and other
features that will increase appeal in international markets.

Product distribution is primarily accomplished through a direct sales
approach. In addition to direct sales channels, DCEG may develop associations
with other software providers where it will license and customize its technology
on a generic basis to enhance other providers' technology offerings ("white
label" distribution). A third sales channel is the sub-licensing of products by
existing licensees.

The sales strategy will focus on land brands and key "cyber" brands over the
next five years. DCEG has shifted its pricing model to a single license fee and
ongoing monthly maintenance fee. The objective is to detach ongoing license
revenue from the gaming deposits of licensees.

The Company will make its technology offering more attractive to all
operators and move from a heavy dependency on Bingo to a complete product suite
with a downloadable Casino product and a full and robust Lottery product. DCEG
will have a three-pronged to-market thrust, which will include:

| |  | Strong marketing depth led by seasoned industry
    veterans to build brand and marketing capabilities;
| |  | -------------------------------------------------------------------------------------------------------
| |  | Complementing existing sales teams with a
    dedicated European/UK presence; and                      
| |  | Complementing the above with new sales channels
    and partners as appropriate.                       

COMPETITIVE ENVIRONMENT

DCEG experiences competition from the following types of organizations:

| |  | Traditional land-based Bingo and/or gaming
    properties;
| |  | ----------------------------------------------------------
| |  | "Cyber" brands (owner/operator/developers);               
| |  | Software suppliers;                                       
| |  | Electronic gaming companies; and,                         
| |  | Other entertainment/media companies.                      

There are a growing list of software companies engaged in the licensing of
Internet gaming software including Access Gaming Systems, Bet and Chat, Global
Entertainment, iCrystal Inc., iGlobeMedia, Innoco, Max Skyweb, Microgaming,
OddsOn Inc., Q-Seven Systems, Radiate Software, Random Logic, Realtime Gaming,
World Gaming, Chartwell Technology, Inc., First Multimedia Group, Cryptologic,
Inc., Boss Media AB, Net Entertainment, Unified Gaming, Bingoworkz and other
private and public companies.

The Internet gaming and wagering industry is becoming increasingly
competitive. With relatively low barriers to entry, new competitors are entering
segments such as the development and licensing of Casino games, sports betting
software, pari-mutuel wagering and lottery and Bingo products. In each of these
segments, there currently exist several major competitors. Because many of these
competitors focus on delivering Internet Casino and Sportsbook products, as
opposed to focusing on Internet Bingo, the Company believes that it still has a
competitive advantage in the Internet Bingo category.

DCEG expects the number of companies offering products and services directed
at supporting Internet Bingo and Casino technologies to increase. As such, the
Company expects to compete directly with these companies, as well as other
established companies that may enter the Internet gaming industry. Many of
DCEG's current and potential competitors have far greater resources than the
Company.

RESEARCH AND PRODUCT DEVELOPMENT

In 2002, the Company developed a new software version (Parlay version 1.0)
and enhanced its current software technologies. In 2003, the primary focus for
Parlay will be the continued enhancement and improvement of its technologies and
the development of new systems architectures that will enable it to embrace new
delivery methods for e-gaming.

As the traditional Casino and Bingo gaming markets converge with similar
interactive online gaming markets, new games or versions of old games that
redefine the online gaming market will emerge. DCEG intends to continue in the
development of new inventories of different types, styles and themes of games.

Fiscal 2002 expenses related to research and software development amounted to
approximately $501,000 ($340,000 - 2001), which comprised approximately 14% (9%
in 2001) of total revenues.

For the fiscal year 2003, the Company plans to spend approximately $900,000
on development of new software products and services. The Company plans to fund
these activities from the available cash flow from the operations of the
Company's business.

NUMBER OF EMPLOYEES

At December 31, 2002, the Company had 35 employees, compared with 39
employees at December 31, 2001. Subsequent to December 31, 2002, DCEG hired an
additional 2 employees and the Company is still in the process of hiring
additional full-time technical, marketing, administrative and operational
support staff to fill positions required by the Company.

PATENTS AND TRADEMARKS

Patents

On March 9, 2001, the Company filed a Canadian patent application with the
Canadian Intellectual Property Office to protect the uniqueness of its Internet
gaming technologies. The application, "METHOD AND SYSTEM FOR OPERATING A BINGO
GAME ON THE INTERNET" has been assessed with application number 2,340,152.

Patent application number 2,340,152 is defined by the
following claims:

"The method of operating the game includes the steps of
providing game cards for purchase by game participants, wherein at least one of
the game cards is a winning card. A sequence of calls is generated and applied
to each of the game cards for determining the winning card. The generated
sequence of calls is then transmitted to the game participants, where it is
repeated for playing the game. The advantage of this method is the ability to
determine the correct game winner even in the event that a network connect is
lost during the game.

The system for implementing the game according to the above method includes
several components. A processor is provided for processing game card purchase
orders. A generator provides the sequence of calls. A processor applies the
sequence of calls to the game cards for determining the winner. A network
distributes the sequence of calls to each of the game participants at the same
time."

On March 12, 2001, the Company filed a patent application with the United
States Patent and Trademark Office. The application, "METHOD AND SYSTEM FOR
OPERATING A BINGO GAME ON THE INTERNET" has been assessed under serial number
09/802,876 and will proceed to issue upon payment of the issuance fees in the
amount of US$940.00. On December 19, 2002 the Company forwarded the issuance
fees to its patent and trademark attorneys and the patent should be issued in
early 2003.

The Patent serial number 09/802,876 is defined by the
following claims:

"The method of operating the game includes the steps of
providing game cards for purchase by game participants, wherein at least one of
the game cards is a winning card. A sequence of calls is generated and applied
to each of the game cards for determining the winning card. The generated
sequence of calls is then transmitted to the game participants, where it is
repeated for playing the game. The advantage of this method is the ability to
determine the correct game winner even in the event that a network connect is
lost during the game.

The system for implementing the game according to the above method includes
several components. A processor is provided for processing game card purchase
orders. A generator provides the sequence of calls. A processor applies the
sequence of calls to the game cards for determining the winner. A network
distributes the sequence of calls to each of the game participants at the same
time."

Trademarks

CYBERBINGO

Precyse filed an application in Canada to register its trademark CYBERBINGO.
The trademark was registered on October 10, 2000 as registration number
TMA534205.

The wares set out in the application are as follows:

| | "Computer software for use in playing bingo on
    a computer for use only as authorized pursuant to the Criminal Code."
| | ------------------------------------------------------------------------------------------------------------------------

On May 5, 2000, Precyse applied to register the CYBERBINGO trademark in the
United States. The wares set out in the application are as follows:

| | "Computer software for use in playing bingo on
    a computer."
| | ---------------------------------------------------------------

On May 28, 2002, the trademark was registered as registration number
2,572,839.

On September 30, 2002, DCEG entered into an agreement to, amongst other
things, assign the above trademarks to The Cyberbingo Corporation of St. John's,
Antigua for valuable consideration.

WHERE THE WORLD PLAYS BINGO

Precyse applied to register its trademark "WHERE THE WORLD PLAYS BINGO" in
Canada. On December 27, 2002, this trademark was registered under trademark
number TMA572.407. The wares set out in the application are as follows:

| | "Downloadable computer software for use in
    playing the game of bingo on a computer."
| | ----------------------------------------------------------------------------------------

Precyse applied to register its trademark "WHERE THE WORLD PLAYS BINGO" in
the United States. On February 5, 2002, this trademark was registered under
trademark registration number 2,537,308. The wares set out in the application
are as follows:

| | "Downloadable computer software for use in
    playing the game of bingo on a computer."
| | ----------------------------------------------------------------------------------------

DOT COM ENTERTAINMENT GROUP, INC. - ARROW & GLOBE Design ("e")

On September 21, 2000, DCEG applied to register its trademark "e" for the
Arrow & Globe design in Canada. The application was approved by the Canadian
Trade Marks office on March 8, 2002. The trademark should be registered in early
2003 and can be found under the following application number (No. 1,076,014).
The wares that are set out in the application are as follows:

| | "Computer software for allowing a user to play
    interactive games over the internet, computer software allowing an operator
    to host and manage interactive games over the internet; computer software
    for use in managing and administering on-line transactions."
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On October 4, 2000, DCEG applied to register its trademark "e" for the Arrow
& Globe design in the United States. The application has been assigned with
application number No. 76/140,545 and is currently pending. On June 22, 2001,
the Company filed an amendment to this application and is awaiting a response to
that filing. The wares that are set out in the application are as follows:

| | "Computer software for allowing a user to play
    interactive games over the internet, computer software allowing an operator
    to host and manage interactive games over the internet; computer software
    for use in managing and administering on-line transactions."
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

HOUSE EDGE

On May 22, 2002, Precyse applied to register its trademark HOUSE EDGE. The
Canadian Trade Marks office has assigned the application with Application Number
1,141,504. The wares that are set out in the application are as follows:

| | "Web-based management and reporting system
    software."
| | ---------------------------------------------------------

CYBERBINGO NETWORK

On June 28, 2002, Precyse applied to register its trademark CYBERBINGO
NETWORK. The Canadian Trade Marks office has assigned the application with
Application Number 1,145,458. The wares that are set out in the application are
as follows:

| | "Member referral program services, on-line
    bingo hall services."
| | --------------------------------------------------------------------

PARLAY ENTERTAINMENT (& Design)

On December 31, 2002, Parlay applied to register its trademark PARLAY
ENTERTAINMENT. The Canadian Trade Marks office has assigned the application with
Application Number 1,163,665. The wares that are set out in the application are
as follows:

| | "Computer software for allowing a user to play
    interactive games over the Internet; computer software allowing an operator
    to host and manage interactive games over the Internet; computer software
    for use in on-line purchasing; and computer software for use in managing and
    administering on-line transactions."
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company applies for and maintains its patents and trademarks to protect
the proprietary nature of its products, to protect its corporate branding marks
and to protect certain names and phrases that are unique to the Company. By
protecting its products, marks, names and phrases, the Company plans to maintain
a competitive edge and to differentiate itself in its market.

GOVERNMENT REGULATION

Regulatory Environment

To the best of the Company's knowledge, all licensees operate their
interactive Casinos and Bingo Halls from jurisdictions where Internet gaming is
regulated or tolerated. All licensees provide a representation to the effect
that "the Licensee will assume responsibility for determining the legality of
using the software, including, without limitation, accepting wagers in whichever
jurisdictions they choose to market to and receive wagers from" in their license
agreements with DCEG.

As has been the case for several years, a significant debate exists whether
the laws of any country other than the country where the computer gaming servers
are physically located has jurisdiction over the operations of a Parlay
licensee. Many of the Company's licensees believe that they are not subject to
the laws of any country other than the laws of the country where they are
licensed or alternatively operate their business. As a result, they accept
customers from any country.

Some licensees may not directly accept wagers from residents of some
countries and may implement procedures that prevent customers from entering the
game or collecting on winnings from wagers from the residents of such countries.
While such procedures, as with most precautions, may be susceptible to
circumvention, the Company requires that licensees operate their businesses in
accordance with the laws of the jurisdiction in which they are located. It is in
the licensee's discretion to determine from which jurisdictions its players will
play.

Historically, gaming activities have been subject to extensive statutory and
regulatory control by government authorities, and have been very dependent on,
and likely significantly affected by, any changes in the political climate and
economic and regulatory policies of the countries where gaming facilities are
located. Future changes may impact the operations of the Company in a materially
adverse way. Various laws and regulations could have a direct and material
effect on the business, and indirectly could have a material effect on the
demand for the software of DCEG.

Most countries and jurisdictions within countries have laws or regulations
restricting gaming activities. For example, in the United States, the Federal
Interstate Wire Act contains provisions which make it a crime for anyone in the
business of gaming to use an interstate or international wire communication line
to make wagers or to transmit information assisting in the placing of wagers,
except, with respect to transmitting information, if the wagering is legal in
the jurisdictions from which and into which the transmission is made. Other
United States laws impacting gaming activities include The Interstate Horse
Racing Act, the Interstate Wagering Paraphernalia Act, the Travel Act and the
Organized Crime Control Act.

The Company believes that its activities and the activities of its
subsidiaries do not violate, or are not subject to, such laws and regulations.
However, because there is very little clear statutory and case law authority,
this conclusion is not free from doubt. The Company faces the risk of either
civil or criminal proceedings brought by governmental or private litigants who
disagree with the Company's interpretation of laws and regulations. Because
there is little guiding authority, there is a risk that the Company could lose
such lawsuits or actions and be subject to significant damages or civil or
criminal penalties and fines. Such proceedings could also involve substantial
litigation expense; diversion of the attention of key executives; or injunctions
or other prohibitions being invoked against the Company, its licensees and its
subsidiaries. The uncertainty surrounding the regulation of Internet gaming
could have a material adverse effect on the Company's business, revenues,
operating results and financial condition.

Several countries, most notably law enforcement agencies in the United
States, believe that the laws of their country restrict, and in some instances
prohibit, interactive gaming operators from doing business with residents of
their countries and, in some instances, prohibit or restrict residents of their
respective countries from doing business with interactive gaming operators
located in a foreign country.

The U.S. Department of Justice has taken the position that the federal
criminal laws of the United States do, in fact, address interactive gaming
operators that accept wagers from residents of the United States. They have
taken this position on previously pending legislation and they have pursued
various criminal prosecutions.

In late 2002, the U.S. Fifth Circuit Court of Appeals upheld a previous
ruling by a lower court that the Federal Interstate Wire Act does not extend to
casino-style gaming over the Internet, setting a precedent opposing the U.S.
Department of Justice's position.

The Company believes that if such laws prohibiting were found to be
applicable to its business, the business of its affiliates or the activities of
its licensees, such laws would have a material adverse effect on the Company's
business, revenues, operating results and financial condition. If it was
determined that such laws were applicable to the activities of licensees and
affiliates of the Company, the licensees may have to change the types of
wagering provided to residents of the United States. This would affect their
current operations, and there may be a delay in offering acceptable wagering
products to such customers. There would be no assurance that the wagering
products offered to such customers would be as profitable to the licensees or to
affiliates of the Company as the wagering products currently offered to such
customers by the licensees.

Governments around the world are increasingly supporting the view that the
regulation of on-line gaming is preferable to prohibition. Currently, more than
60 governments regulate some form of Internet gaming.

In 2002, the U.K. government announced its intention to become a world leader
in the licensing and regulation of on-line gaming. These new measures are
expected to be implemented during 2004. In addition, both Alderney and the Isle
of Man, have implemented strict regulatory regimes for on-line gaming consistent
with standards applicable to land-based gaming.

However, dating back to 1996, there have been federal legislative efforts to
prohibit certain types of interactive gaming in the United States, primarily by
Senator Kyl and Congressmen Leach, LaFalce and Goodlatte. All of these efforts
have failed to date.

Most recently, in 2002, Bill H.R. 556, entitled the Unlawful Internet
Gambling Funding Prohibition Act, a piece of legislation attempting to restrict
Internet gaming, passed the U.S. House of Representatives. H.R. 556, however,
failed to move any further before the end of that session of Congress.

In response to H.R. 556, Congressman John Conyers introduced legislation to
create a commission to evaluate and recommend how U.S. governments at the
federal and state levels should best regulate, rather than prohibit, Internet
gaming.

Both of these Bills have been re-introduced in 2003, and are currently under
consideration by Congress.

If passed in the United States, legislation banning or restricting Internet
gaming could have a material adverse effect on the Company's business, revenues,
operating results and financial condition.

In addition, as electronic commerce further develops, it may generally be the
subject of government regulation. As well, present laws, which pre-date or are
incompatible with Internet electronic commerce, may be enforced in a manner that
restricts the electronic commerce market. Any such developments could have a
material adverse effect on the Company's business, revenues, operating results
and financial condition.

OTHER FACTORS THAT MAY AFFECT FUTURE RESULTS.

You should be aware that the factors described above, under "Government
Regulation" and elsewhere in this annual report generally, could have a material
adverse effect on the Company's business, financial condition and results of
operation.

THE COMPANY COULD REQUIRE FINANCING WHICH MAY NOT BE AVAILABLE.

In the event that the Company desires to expand quickly, it would be required
to use a substantial amount of its assets to fund operations. There can be no
assurance that the Company possesses sufficient assets for these purposes and,
therefore, as is true for other companies contemplating significant growth, DCEG
may require debt or equity financing. Such additional financing may not be
available, may not be available on terms acceptable to the Company and, if
available, may result in substantial dilution of the equity interests of
existing shareholders.

If additional financing is not available, the Company would reduce its
expansion plans to the point where it has, and will likely continue to have,
sufficient cash flow and expense flexibility to fund the expanded operations.

THE COMPANY FACES SIGNIFICANT INCREASED COMPETITION.

The Internet gaming industry involves rapid technological change and is
characterized by intense and substantial competition. Many of the companies,
both domestic and foreign, with which the Company competes are well established,
substantially larger and have substantially greater resources. As new
competitors emerge, the Company will have to compete with other companies that
may have greater market recognition, greater resources and/or broader
distribution capabilities. Increased competition by existing and future
competitors could materially and adversely affect the Company's business,
financial condition and results of operations.

THE COMPANY HAS A LIMITED OPERATING HISTORY, THEREFORE THERE IS A DEGREE OF
UNCERTAINTY WHETHER ITS BUSINESS PLANS WILL BE SUCCESSFUL.

DCEG has only a limited history of operations. To the extent that the Company
implements its business plan, its business will be subject to all of the
problems, expenses, delays and risks inherent in a young business enterprise,
including, without limitation, limited capital, delays in program development,
possible cost overruns, uncertain market acceptance and a limited operating
history.

THE GAMING INDUSTRY IS A VOLATILE INDUSTRY.

The gaming industry is a volatile industry, which is sensitive to economic
conditions. When economic conditions are prosperous, gaming industry revenues
increase. Conversely, when economic conditions are unfavorable, gaming industry
revenues decline. Any significant decline in general corporate conditions or the
economy that affect consumer spending could have a material adverse affect on
the Company's business, financial condition and results of operations.

THE COMPANY DEPENDS ON KEY PERSONNEL.

The loss of key personnel could have a material adverse effect on the
business of the Company, including its financial condition and results of
operations. Although the Company maintains key person life insurance on certain
of its key employees, it may not be able to secure or maintain key person life
insurance on all of its key personnel.

In addition, the Company's future operating results depend in part upon its
ability to attract and retain other qualified key personnel for its operations.
Competition for such personnel is intense, and there can be no assurance that
the Company will be successful in attracting these personnel. The failure to
attract or retain such persons could materially adversely affect DCEG's
business, financial condition and results of operations.

DCEG'S SOFTWARE AND/OR COMPUTER NETWORK INFRASTRUCTURE MAY FAIL.

The performance of the Company's software is critical to its reputation and
to achieving market acceptance. Any system failure, including network, software
or hardware failure that causes interruption or an increase in response time of
its services, will reduce the attractiveness of the Company's services to its
clients. An increase in the volume of usage of online services could also strain
the capacity of the software or the hardware employed, which could lead to
system failures, thereby adversely affecting the Company's revenues.

The occurrence of technical failure, whether caused by DCEG's software or
not, could result in interruptions, delays or cessation in service to users,
which could have a material adverse affect on the Company's business, financial
condition and results of operations.

A large portion of DCEG's computer network infrastructure is located at a
leased facility in Oakville, Ontario. The Company's systems and operations are
vulnerable to damage or interruption from fire, flood, power loss,
telecommunications failure, Internet breakdowns, break-ins, and similar events.
While DCEG does have redundant facilities through a secondary system employed by
its telecommunication provider, in the event of an emergency, these systems
could also fail. Services based on sophisticated software and computer systems
often encounter development delays and the underlying software may contain
undetected errors that could cause system failures when introduced.

DCEG's licensees are also dependent upon search engines, web browsers,
Internet service providers and other on-line service providers to provide
Internet users access to their web sites. Players may experience difficulties
accessing or using licensee web sites due to system failures or delays unrelated
to the Company's systems. It is unlikely that any of DCEG's licensees carry
business interruption insurance to compensate them, or DCEG, for lost royalties
in the event of these types of losses.

DCEG'S FUTURE GROWTH DEPENDS ON CONTINUED GROWTH IN THE USE OF THE INTERNET.

The Company's future success is substantially dependent upon continued growth
in the use of the Internet and, as it relates to the Company's business, in the
acceptance and volume of commercial transactions on the Internet. There can be
no assurance that the number of Internet users will continue to grow, or that
commerce over the Internet will become more widespread.

The Internet may not prove to be a viable commercial marketplace for a number
of reasons, including: lack of acceptable security technologies; lack of access
and ease of use; congestion of traffic; inconsistent quality of service and lack
of availability of cost-effective, high-speed service; potentially inadequate
development of the necessary infrastructure; excessive governmental regulation;
uncertainty regarding intellectual property ownership; and timely development
and commercialization of performance improvements, including high-speed modems.

DCEG's success also depends upon, among other things, the continued
development and maintenance of a viable Internet infrastructure to support the
continued growth in the use of the Internet. The maintenance and improvement of
this infrastructure will require timely development of products, such as
high-speed modems and communications equipment, to continue to provide reliable
Internet access and improved content. The current Internet infrastructure may
not be able to support an increased number of users or the increased bandwidth
requirements of users and, as such, the performance or reliability of the
Internet may be adversely affected.

Furthermore, the Internet has experienced certain outages and delays as a
result of damage to portions of its infrastructure. Similar outages and delays
in the future could adversely affect the level of traffic on licensee web sites.
The effectiveness of the Internet may decline due to delays in the development
or adoption of new standards and next-generation Internet protocols designed to
support increased levels of activity. There can be no assurance that the
infrastructure, products or services necessary to ensure the continued expansion
of the Internet will be developed, or that the Internet will become a viable
commercial medium. If the necessary infrastructure, standards, protocols,
products, services or facilities are not developed, or if the Internet does not
become a viable commercial medium, the Company's results of operations and
financial condition could be materially and adversely affected.

Even if such infrastructure, standards or protocols or complementary
products, services or facilities are developed, there can be no assurance that
DCEG will not be required to incur substantial expenditures in order to adapt
its services to changing or emerging technologies, which could have a material
adverse effect on the Company's business, results of operations and financial
condition. Moreover, it is anticipated that additional domain levels may be
created (such as ".zip"). To the extent additional domain levels are added,
their existence may greatly increase the level of competition for the Company's
licensees.

THE MARKET FOR INTERNET SERVICES IS IN A STATE OF RAPID TECHNOLOGICAL CHANGE
AND THE COMPANY MAY NOT BE ABLE TO KEEP UP.

The market for Internet services is characterized by rapid technological
developments, frequent new product introductions and evolving industry
standards. The emerging character of these products and services and their rapid
evolution will require the Company to effectively use leading technologies,
continue to develop its technological expertise, enhance its current services
and continue to improve the performance, features and reliability of its
software.

Changes in network infrastructure, transmission and content delivery methods
and underlying software platforms and the emergence of new broadband
technologies, such as DSL and cable modems, could dramatically change the
structure and competitive dynamic of the market. In particular, technological
developments or strategic partnerships that accelerate the adoption of broadband
access technologies may require the Company to expend resources to address these
developments.

There can be no assurance that DCEG will be successful in responding quickly,
cost effectively and sufficiently to these or other such developments. In
addition, the widespread adoption of new Internet technologies or standards
could require substantial expenditures to modify or adapt the Company's web
sites. A failure to respond rapidly to technological developments could have a
material adverse effect on the Company's business, results of operations and
financial condition.

DCEG MUST CONTINUE TO IMPROVE AND EXPAND ITS SKILLS AND PERSONNEL, BUT MAY
NOT BE ABLE TO DO SO.

In order to expand its business operations, the Company must continue to
improve and expand the expertise of its personnel and must attract, train and
manage qualified senior executives and employees to oversee and manage its
contemplated expanded operations.

There can be no assurance that DCEG will be able to manage effectively the
expansion of its operations or that its current personnel, systems, procedures
and controls will be adequate to support operations. Any failure of management
to manage effectively the Company's growth could have a material adverse effect
on DCEG's business, results of operations and financial condition.

Although management intends to ensure that its internal controls remain
adequate to meet the demands of further growth, there can be no assurance that
its systems, controls or personnel will be sufficient to meet these demands.
Inadequacies in these areas could have a material adverse effect on the
Company's business, financial condition and results of operations.

THE COMPANY HAS LIMITED INTELLECTUAL PROPERTY PROTECTION AND COMPETITORS MAY
BE ABLE TO APPROPRIATE ITS TECHNOLOGY.

DCEG regards its trade secrets and similar intellectual property as critical
to its success. In that context, the Company will rely on a combination of
copyright and trademark laws, trade secret protection, confidentiality and
non-disclosure agreements and contractual provisions.

There is no guarantee that these efforts will be adequate that the Company
will be able to secure trademark registrations for all of its marks in the
United States or other countries or that third parties will not infringe upon or
misappropriate its copyrights, trademarks, service marks and similar proprietary
rights.

In addition, effective copyright and trademark protection may be
unenforceable or limited in certain countries and the global nature of the
Internet makes it impossible to control the ultimate jurisdiction of the
Company's licensee web sites. Since trademark and copyright protections are not
"self-enforcing," future litigation may be necessary to enforce and protect
DCEG's secrets, copyrights and other intellectual property rights.

DCEG may also be subject to litigation to defend against claims of
infringement of the rights of others or to determine the scope and validity of
the intellectual property rights of others. Such litigation could result in
substantial costs. An adverse outcome could require the Company to cease using
such intellectual property.

Further, licensees may appropriate or reverse engineer DCEG's Internet
technologies and offer them for sale as a competitor. Any litigation regarding
proprietary rights could be costly, unavailable or unenforceable, will divert
management's attention, and result in the loss of certain of the Company's
proprietary rights and/or competitive advantage. As a violation of DCEG's
proprietary rights could prevent the Company from selling its services, it may
have a material adverse effect on DCEG's business, results of operations and
financial condition.

DCEG'S SYSTEM FACES ON-LINE SECURITY RISKS.

DCEG's networks and software technologies may be vulnerable to unauthorized
access, computer viruses and other disruptive problems. A party that is able to
circumvent security measures could misappropriate proprietary information and,
perhaps at least as critically, cause interruptions in licensee operations or
the operations of the Company.

Other software and Internet companies have in the past experienced, or may in
the future experience, interruptions in service as a result of the accidental or
intentional actions of Internet users, current and former employees or others.
DCEG may be required to expend significant capital or other resources to protect
against the threat of security breaches or to alleviate problems caused by such
breaches.

There can be no assurance that any measures implemented will not be
circumvented in the future.

Eliminating computer viruses and alleviating other security problems may
require interruptions, delays or cessation of service to clients accessing the
licensee web sites, which could have a material adverse effect on Company
business, results of operations and financial condition.

THE COMPANY MAY BE HELD LIABLE FOR THE CONTENT OF WEB SITES.

As a distributor of Internet enabling software, DCEG faces potential
liability for negligence, copyright, patent, trademark infringement, defamation,
disparagement and other claims based on the nature and content of the materials
that it transmits. Such claims have been brought, and sometimes successfully
pressed, against Internet content distributors.

The Company may not have the resources to secure adequate insurance to cover
such potential claims of this type or such insurance if available may not be
adequate to indemnify the Company for all liability that may be imposed. In
addition, although DCEG generally requires its content providers to indemnify
the Company for such liability, such indemnification may be inadequate or
unenforceable.

Any imposition of liability that is not covered by insurance, is in excess of
insurance coverage or is not covered by an indemnification by a content provider
could have a material adverse effect on the Company's business, results of
operations and financial condition.

THE TRADING MARKET FOR DCEG'S STOCK IS ILLIQUID.

The shares of DCEG's common stock are quoted on the National Association of
Securities Dealers' Over-The-Counter Bulletin Board ("OTC Bulletin Board"). This
quotation system generally supports companies that do not meet the listing
requirements of the NASDAQ Market or the U.S. exchanges. As a result, investors
may find it more difficult to dispose of or to obtain accurate quotations of the
Company's common stock.

In addition, quotations on the OTC Bulletin Board depend on the willingness
of broker-dealers to make a market for the stock. There can be no assurance that
DCEG's common stock will continue to be quoted on the OTC Bulletin Board or that
there will continue to be a market for such stock.

THE COMPANY MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS AND IT LACKS PRODUCT
LIABILITY INSURANCE.

DCEG faces substantial risk of exposure to product liability claims in the
event that the products it develops and licenses contain errors, "bugs" or
defects. DCEG does not presently have product liability insurance and there can
be no assurance that insurance coverage will be available in the future on
commercially reasonable terms, or at all.

Further, there can be no assurance that such insurance, if obtained, will be
adequate to cover potential product liability claims, or that a loss of
insurance coverage or the assertion of a product liability claim or claims would
not materially adversely affect the Company's business, financial condition and
results of operations.

DCEG MAY BE SUBJECT TO REGULATION OF INTERNET GAMING.

DCEG and its licensees are subject to applicable laws in the jurisdictions in
which they are located. As companies and consumers involved in Internet gaming
are located around the globe, including the end-users of DCEG's systems, there
is uncertainty regarding exactly which governments have jurisdiction or
authority to regulate or legislate with respect to various aspects of the
industry. The uncertainty surrounding the regulation of Internet gaming could
have a material adverse effect on DCEG's business, revenues, operating results
and financial condition.

In addition, legislation designed to restrict or prohibit Internet gaming may
be adopted in the future in the United States or other jurisdictions. Also,
existing legislation around the world, including the United States and its
individual state statutes, could be construed to prohibit or restrict gaming
through the use of the Internet and there is a risk governmental authorities may
view DCEG's systems or the Company as having violated such statutes.

There is a risk that criminal and civil proceedings could be initiated in
such jurisdictions against DCEG's licensees or the Company and such proceedings
could involve substantial litigation expense, penalties, fines, diversion of the
attention of key executives, injunctions or other prohibitions being invoked
against DCEG's licensees or the Company. Such proceedings could have a material
adverse effect on the Company's business, revenues, operating results and
financial condition.

In addition, as electronic commerce develops further, it may generally be the
subject of government regulation. Also, present laws that pre-date or are
incompatible with Internet electronic commerce may be enforced in a manner that
restricts the electronic commerce market. Any such developments could have a
material adverse effect on DCEG's business, revenues, operating results and
financial condition.

DCEG'S LICENSEES MAY WITHHOLD PAYMENT OR BECOME INSOLVENT WITHOUT LEGAL
RECOURSE.

DCEG's licensees are constituted in jurisdictions where it may not be
possible to collect royalty or other income or enforce its license agreements
effectively. Because licensees do not provide a performance bond, it is possible
that some of the Company's licensees will become insolvent or judgment-proof.
The uncertainty surrounding the collection of Royalty payments or other amounts
owed to the Company could have a material adverse effect on DCEG's business,
revenues, operating results and financial condition.

DCEG IS AT RISK OF CURRENCY FLUCTUATIONS AND CONTROLS.

The Company's costs are generally incurred in U.S. and Canadian currencies
while its revenues are generally received in U.S. dollars. Therefore, the
Company's operating results may be affected by relative fluctuations in the
exchange rates applicable to the currencies in which it transacts business.
Currency exchange rates are determined by market factors beyond the Company's
control, and may vary substantially during the course of a period. Further, the
Company's ability to repatriate to Canada funds arising in connection with
foreign licensees may be adversely affected by currency and exchange control
regulations, money-laundering controls other controls imposed by the country in
which the Company's software is exploited.

CREDIT CARD COMPANIES MAY LIMIT CREDIT CARD USE IN INTERNET GAMING.

Licensees' revenues are generally collected through on-line credit card
processing. Recently some credit card companies, such as MasterCard, and certain
credit card issuing banks in the United States, have stopped processing
transactions from on-line gaming customers. Such further action by credit card
companies or issuers could have a material adverse effect on the Company's
business, revenues, operating results and financial condition.

ITEM 2. DESCRIPTION OF PROPERTY

The Company leases its premises, which are located at 150 Randall St.,
Oakville, Ontario, under a lease agreement. During the year ended December 31,
2002, the Company renegotiated its premises lease agreement coincident with
increasing the overall square footage leased. The new agreement extends to
December 31, 2005 and provides the Company with one five-year renewal period
based on market rental rates in effect in December 2005. Rent expense under
these agreements for the year ended December 31, 2002 was approximately $91,000
($84,000 - 2001).

The Company's United States offices are located at 300 Delaware Ave.,
Buffalo, NY 14203. The Company has use of this space through a lease
arrangement, which lease is on a month-to-month basis. This is a shared office
facility with a total lease obligation of approximately $3,600 per annum.

The Company's Barbados offices are leased by Parlay and are located at Mistle
Cove, St. Lawrence Gap, Christ Church, Barbados. The lease has a 6-month term,
with a total lease obligation of approximately $25,000 over the term.

There are currently no proposed programs for the renovation, improvement or
development of the properties currently leased by the Company.

The approximate future minimum payments required under the Company's property
lease agreements are as follows:





2003
      $
      123,0002004
      
      98,0002005
      
      98,000$
      319,000




ITEM 3.LEGAL PROCEEDINGS

None

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

There were no matters submitted to a vote of security holders through the
solicitation of proxies or otherwise during the last quarter of the fiscal year covered by this
report.

PART II

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

The Company's common stock is reported by the NASD Over-The-Counter Bulletin
Board under the symbol "DCEG," and on the Third Market Segment of the Frankfurt
Stock Exchange under the symbol "DOZ."

The following table sets forth the range of high and low bid quotations for
the Company's common stock for each of the periods indicated as reported by the
NASD Over-The-Counter Bulletin Board. Bid quotations reflect inter-dealer
prices, without retail mark-up, markdown or commission, and may not necessarily
represent actual transactions.

|Quarter Ended      | High   | Low   
|------------------ | ------ | ------
|March 31 , 2002    | $ 1.35 | $0 .82
|June 30 , 2002     | $ 1.05 | $ 0.46
|September 30, 2002 | $ 0.65 | $0.24 
|December 31 , 2002 | $ 0.27 | $ 0.16
|                   |        |       
|March 31, 2001     | $1.22  | $0.41 
|June 30, 2001      | $2.09  | $0.91 
|September 30, 2001 | $2.85  | $1.12 
|December 31, 2001  | $1.65  | $0.98 

At December 31, 2002, the Company had outstanding options to employees,
officers, directors and consultants to purchase up to 3,487,500 shares, at
exercise prices ranging from $0.20 to $3.00 per share.

During the year ended December 31, 2002, 125,000 (57,500 in
2001) stock options with exercise prices of $0.75 ($0.75 in 2001) were exercised
by employees of the Company for proceeds to the Company of $93,751 ($43,125 in
2001). The shares delivered on exercise of the options were covered under a
Registration Statement on Form S-8.  The plan, which has been adopted by the Board
of Directors,
provides that the total number of common shares for which options may be granted
annually shall be limited to 20% of the issued and outstanding common shares of
the Company. These options may be granted to directors, officers, employees and
consultants at the discretion of the Board of Directors. Under the plan, the
options granted will either qualify as incentive stock options ("ISO's") in
accordance with IRC Section 422 or options which are not intended to be ISO's
("non-qualified options"). Upon grant of the option, management will determine
the exercise price, which shall not be less than the fair value of the Company's
common stock at the date of grant, the vesting period and the term, which shall
not exceed five years.

During the year ended December 31, 2002, the Company issued
20,000 warrants. Each warrant provides the holder with the opportunity to
purchase a share of common stock at a price of $0.50 per share. These warrants
expire at the end of October 2004. These warrants were issued in satisfaction of
an obligation, and have been recorded as an expense in accordance with the
provisions of SFAS 123, using the Black-Scholes pricing model. Total expense
recorded on these warrants was $1,750. As at December 31, 2002 and 2001, there
are a further 200,000 warrants outstanding and each of these warrants provides
the holder with the opportunity to purchase a share of common stock at a price
of $4.00 per share. These warrants expire in February 2004.

In addition, on December 16, 2002 the Company issued 250,000
shares of common stock at $0.25 per share on a private placement basis to Mr.
Anthony De Werth, who is a member of the board of directors, for proceeds of
$62,500.

On August 13, 2002, the Company announced a share-repurchase
program under which up to $500,000 could be spent to repurchase up to 1 million
shares of the Company's common stock. This repurchase program is available until
August 8, 2003. To December 31, 2002, 467,000 shares of common stock had been
repurchased, for aggregate consideration of $117,984, including transaction
fees. In December of 2002, it was determined that these shares would be
cancelled; accordingly, these shares are reflected as retired in the financial
statements.

In February 2003, the Company issued 160,000 common shares to
directors in return for services rendered as part of the directors' compensation
package for 2003.

SECURITY HOLDERS

The approximate number of shareholders of record of the common stock of the
Company at December 31, 2002 was 31.

DIVIDENDS

No dividends have been declared or paid on the Company's common stock and the
Company has no plans to pay dividends for the foreseeable future.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS.

Equity Compensation Plan information is as follows:

Equity Compensation Plan Informationa
      b
      cPlan Category
      Number of securities to be issued upon exercise of
      outstanding options and warrants
      Weighted average exercise price of outstanding options
      and warrants
      Number of securities remaining available for future
      issuance under equity compensation 
      plans (excludingcolumn (a))Equity compensation plans approved by
      security holdersEquity compensation plans not approved by
      security holders
      3,487,500
      _______________
      $0.90
      _______________
      *
      ___Total
      3,487,500
      $0.90
      *


* The Company's Stock Option Plan provides that up to 20% of the issued and
outstanding shares of the Common Stock of the Company may be granted in any
given calendar year.

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

GENERAL

DCEG is an Internet software development company, specializing in the
creation and support of Internet entertainment products and related services.

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

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

For the 2002 fiscal year, all revenues were generated from foreign customers
located in jurisdictions where on-line gaming is regulated or tolerated. The
total cash requirements for the Company for 2003 are estimated to be
approximately $3.9 million. Funding for these cash requirements is anticipated
to be earned from normal business operations. Of the $3.9 million in cash
requirements, approximately $0.9 million is expected to be spent on the
development of enhanced and new software products. The Company is not planning
to significantly add to its headcount in 2003 but is planning to add up to three
new employees to enhance its sales and marketing efforts.

The United States dollar is the principal currency of the Company and
accordingly the financial statements of the Company are expressed in United
States dollars. The Company derives all of its revenues in United States
dollars. Certain of the Company's expenses are incurred in Canadian dollars and
these expenses are converted into United States dollars at the exchange rates on
the transaction dates. The average exchange rate to convert Canadian dollars to
United States dollars was $0.6364 in 2002 and $0.6570 in 2001.

CRITICAL ACCOUNTING POLICIES

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

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

Revenue Recognition

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

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

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

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

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

Accounting for Research and Development Costs

The Company invests significant resources in the ongoing improvement of its
existing software products and the development of new and enhanced software
products. The Company has carefully reviewed the provisions of SFAS 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed" and has concluded that, to date, no material amounts would qualify for
deferral under this pronouncement and accordingly, all computer software
developments costs have been expensed as incurred. The Company expects, however,
that the requirements for computer software costs to be deferred may be met in
fiscal 2003. Such deferral of costs will require the definition of the
attainment of technical feasibility of development projects and the definition
of the completion of development projects. In addition, it will be necessary to
undertake a periodic review of the recoverability of deferred amounts against
the net realizable value of such deferred costs which will include an estimate
of future gross revenues from certain products.

Accounts Receivable

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

In addition, the Company has chosen to account for its stock option plans
utilizing the intrinsic value method specified under APB Opinion No. 25,
"Accounting for Stock Issued to Employees". As required under SFAS 123,
"Accounting for Stock-Based Compensation", the pro-forma effects on reported net
income (loss) had the Company elected to recognize compensation costs based on
the fair value of the employee options at the grant date are disclosed in note 9
to the consolidated financial statements along with the assumptions used in the
determination of the fair value of the options granted. The Company does not
presently intend to adopt the fair value method of accounting for stock options
granted to employees.

In many cases, the accounting treatment of a particular transaction is
prescribed by GAAP and, accordingly, management does not require judgment in the
application of GAAP. There are also areas in which management's judgment in
selecting amongst available alternatives would not produce a materially
different result. The Company's senior management has reviewed these critical
accounting policies and related disclosures with the audit committee of the
board of directors of the Company. See Note 1 to the consolidated financial
statements which contain further information regarding the Company's accounting
policies and other disclosures required by GAAP.

The following tables set forth selected information from the statements of
income (loss) for the years ended December 31, 2002 and 2001 and the balance
sheets as at December 31, 2002 and 2001.

SELECTED STATEMENT OF INCOME (LOSS) INFORMATION

|                  | Years Ended
    December 31,
|----------------- | ----------------------------
|                 
|                  | 2002                        
|Revenues          | $3,505,771                  
|Expenses          | 3,866,737                   
|Net income (loss) | (514,466)                   

SELECTED BALANCE SHEET INFORMATION



|                     | At December 31,
|-------------------- | ---------------
|                     | 2002           
|Current assets       | $1,656,430     
|Current liabilities  | 393,592        
|Stockholders' equity | 1,383,817      

RESULTS OF OPERATIONS

Revenues decreased to $3,505,771 for the year ended December 31, 2002 from
$3,802,815 for the year ended December 31, 2001. Royalty revenue decreased to
$2,551,541 in 2002, compared to $2,687,134 in 2001. The decrease reflects the
impact in fiscal 2002 of the royalty rate adjustments that were announced by the
Company in the second quarter of fiscal 2002. As previously announced, the
royalty rate for the Company's principal customer was reduced effective June 1,
2002 and the royalty rates for a number of other licensees were reduced
effective July 1, 2002. The objective of these royalty rate amendments was the
standardization of royalty rates to market rates across the Company's customers.
The aggregate impact of these amendments to the royalty structure resulted in
royalty revenue decreasing by approximately $1,371,000 for fiscal 2002 compared
to fiscal 2001. A substantial offset to this reduction was the new royalty
revenue generated by the increase in the number of the Company's licensees and
from the overall increase in the activity level of licensees.

Installation fees, representing fees recognized on the delivery of the
Company's software to licensees decreased to $585,538 in fiscal 2002 from
$713,566 in fiscal 2001. The fees earned in fiscal 2002 represented both new
installations and fees earned on providing licensees with a new upgrade of the
Company's software. At December 31, 2002, $60,000 of installation fees pursuant
to delivered software could not be recognized pursuant the Company's revenue
recognition practices.

e-digital and support service revenue decreased to $308,692 for fiscal 2002
from $402,115 for fiscal 2001. e-digital and support service revenue will likely
decrease further in the future as a result of the restructuring actions
discussed below. Other income of $60,000 for fiscal 2002 principally represented
the transfer, on September 30, 2002, of certain trademarks and domain names to
the Company's principal customer.

During fiscal 2002, 27% (66% - 2001) of the Company's revenue was provided by
one customer. This customer represents 17% of trade accounts receivable at
December 31, 2002 (77% - 2001). In addition, during fiscal 2002, 13% (7% - 2001)
of the Company's revenue was provided by an additional customer. This customer
represents 36% of trade accounts receivable at December 31, 2002 (5% - 2001).
Further, one additional customer, which represented less than 10% of revenue for
each of fiscal 2002 and 2001 and which represented less than 10% of trade
accounts receivable at December 31, 2001, represents 13% of trade accounts
receivable at December 31, 2002. If the Company lost any of these customers, or
any of them became insolvent and could not pay the balances owing to the
Company, it would have a material adverse impact on the financial condition and
results of operations of the Company. For fiscal 2002, no other individual
customer represented in excess of 10% of annual revenue or represented more than
10% of December 31, 2002 trade accounts receivable.

Total expenses increased to $3,866,737 for the year ended December 31, 2002,
compared to $2,619,226 for the year ended December 31, 2001. The increase
primarily relates to the loss on contractual settlement, the restructuring
provision and the legal settlement provision, discussed below, and the higher
level of activity at the Company which includes an increase in the average
staffing complement of approximately seven employees for fiscal 2002 compared to
fiscal 2001. At December 31, 2002, the Company had 35 employees and consultants
compared to 39 at December 31, 2001.

Research, software development and support services expenses increased to
$1,387,376 in fiscal 2002, compared with $965,064 in 2001. The primary reason
for the increase in research, software development and support services expenses
came from the hiring of additional software developers to continue the
improvement of the Company's product together with increases in software costs
to facilitate their efforts. Research, software development and support services
expenses represented 40% of revenue for fiscal 2002 compared to 25% for fiscal
2001.

General and administrative expenses increased to $1,185,614 compared with
$960,500 in fiscal 2001. The primary reason for the increase in general and
administrative expenses is the increase in compensation costs to employees and
consultants amounting to approximately $88,000 along with additional premises
costs following an increase in the amount of rented space used by the Company in
2002 of approximately $18,000. Also contributing to the increase in general and
administrative costs were higher charges for depreciation of approximately
$26,000 and increased bad debt expense of approximately $77,000. General and
administrative expenses represented 34% of revenue for fiscal 2002 compared to
25% for fiscal 2001.

Sales, marketing and services to licensees expenses increased to $739,220
from $693,662 in fiscal 2001. The reason for the increase in sales, marketing
and services to licensees expenses were higher compensation costs to employees
and consultants and increased bad debt expense. Sales, marketing and services to
licensees expenses represented 21% of revenue for fiscal 2002 compared to 18%
for fiscal 2001.

During the year ended December 31, 2002, the Company recorded a loss on
contractual settlement in the amount of $345,207. During fiscal 2001, the
Company signed a new license agreement with its principal customer which
provided for a base royalty of $645,000 for fiscal 2001 together with a
reduction in the royalty rate for the term of the new license agreement. This
new license agreement had a term through 2011. During the three-month period
ended March 31, 2002, the Company entered into an agreement with this customer
whereby certain amounts owed under the new license agreement would be paid
pursuant to a deferred payment arrangement with all amounts owed paid by
September 30, 2002. The customer did not conform to this deferred payment
arrangement. On June 28, 2002, the Company entered into an interim agreement
with this customer which established the principles for amending the license
agreement entered into in 2001. Under the terms of this interim agreement,
aggregate accounts receivable owed as at May 31, 2002 in the amount of $345,207
were not collected. This item is described as loss on contractual settlement in
the statement of income (loss). In addition, the royalty rate on this customer's
net sales has been further reduced commencing June 1, 2002. Under this interim
agreement, amounts aggregating to $411,405 were required to be paid and these
payments were all received prior to December 31, 2002, in conformity with the
agreed payment schedule.

During the year ended December 31, 2002, the Company recorded a restructuring
provision of $125,681 following a review by management of the Company's scope of
service. It was determined that the Company would curtail e-digital and systems
consulting service activities to reflect marketplace opportunities. While the
Company will still offer these services, they will no longer be actively
marketed. The restructuring provision recorded during the three-month period
ended September 30, 2002, represents the severance costs, including benefit
costs, for the seven individuals involved in these activities all of whom left
the Company's employment by September 30, 2002. $58,181 of the provision was
paid out prior to December 31, 2002 and the balance of $67,500 was paid in early
January 2003.

During the three-month period ended September 30, 2002, the Company recorded
a legal settlement provision of $96,222. This provision related to an action
commenced by the Company on January 15, 2002 against a third party for damages in
the amount of $10,000,000 (Canadian) and punitive damages in the amount of
$500,000 (Canadian), alleging unauthorized use of the Company's software. On
February 19, 2002, the third party filed a counterclaim against the Company for
damages in the amount of $10,000,000 (Canadian) and exemplary damages in the
amount of $5,000,000 (Canadian). Discussions between the parties ensued and this
matter was settled on December 17, 2002 by the payment by the company of
$83,639, including legal fees incurred pursuant to the settlement. At December
31, 2002 the outstanding component of this reserve, of $16,344, related to
outstanding legal fees.

The income tax provision recorded for the year ended December 31, 2002 was
$153,500 compared to $473,436 recorded in fiscal 2001. The deferred tax
provision recorded for the year ended December 31, 2002 was $122,000 compared to
a deferred tax provision of $138,000 in fiscal 2001. The deferred tax provision
for 2002 related to the recorded deferred tax asset in the amount of $122,000 at
December 31, 2001 which represented the anticipated tax deduction in the U.S.
for non-qualified stock option expense related to stock options issued in 1999.
These stock options were granted to consultants for services rendered and
accordingly, were reflected as consulting expense in 1999. The tax deduction
would be available if and when the stock options were exercised. These stock
options expire in February 2004 and are all exercisable at $3.00 per share. In
addition, the Company had also reduced income taxes payable in Canada by
approximately $138,000 with respect to this item. Following an assessment of all
the available evidence as at September 30, 2002, including such factors as the
Company's internal forecasts, the volatility in the Company's marketplaces, the
Company's prevailing share price and the general stock market opportunities for
micro-cap companies, management has determined that it is now more likely than
not that the stock options will not be exercised and, accordingly, the
previously recorded Canadian income tax deduction has been reversed and a
valuation allowance against the deferred tax asset in the amount of $122,000 has
been established as at September 30, 2002. Management considers the valuation
allowance appropriate as at December 31, 2002. Management will continue to
monitor this matter quarterly and assess whether any adjustment to the valuation
reserve is appropriate.

The net loss of $514,466 recorded for the year ended December 31, 2002
compares to net income of $710,153 in fiscal 2001.

At December 31, 2002, the Company had 23 licensees with installed Internet
websites of which three licensees were not contributing to royalty revenues as
at December 31, 2002. At December 31, 2001, the Company had 15 licensees
operating sites of which four were not contributing to royalty revenues at
December 31, 2001. The 23 licensees at December 31, 2002 represent 37 Internet
gaming sites.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2002 the Company had cash and cash equivalents of $938,705
compared with $965,041 at December 31, 2001.

At December 31, 2002 the Company had working capital of $1,262,838 compared
with $1,607,301 at December 31, 2001. The decrease reflects the lower level of
accounts receivable balances offset by an increase in income taxes recoverable.
As discussed below, the aggregate income tax recoverable of the Company at
December 31, 2002 is $178,163.

At December 31, 2002, total assets decreased to $1,777,409 from $2,534,628 at
December 31, 2001. The decrease is due primarily to the decrease in working
capital discussed above and the creation of the valuation allowance against the
Company's deferred tax asset as also discussed above. The increase in fixed
assets and patents of $65,535, principally for computer and computer support
equipment and office equipment, was substantially offset by the depreciation
expense for the year of $49,670.

Total liabilities decreased to $393,592 at December 31, 2002 compared to
$700,213 at December 31, 2001. This decrease in liabilities is primarily due to
the cash installments made in 2002 for the Company's 2001 income tax obligations
and installments made by the Company on account of its 2002 income taxes. As a
result of the loss recorded in fiscal 2002, all of the installments made on
account of the Company's 2002 taxation year are now refundable to the Company
and a portion of the income taxes paid on account of the 2001 taxation year will
be refunded to the Company following the filing of the Company's 2002 income tax
returns. Aggregate payments of $529,503 were made by the Company on account of
income taxes in fiscal 2002. Also contributing to the decrease was the decrease
in deferred revenue to $138,463 at December 31, 2002 from $214,701 at the end of
fiscal 2001. The balance represents up-front payments from new licensees for the
installation of the Company's software. A significant portion of this deferred
revenue will be recognized in income during 2003 when the installations are
completed. A partial offset to these decreases are the remaining obligations at
December 31, 2002 pursuant to the restructuring action the Company took in
fiscal 2002 and the fiscal 2002 legal settlement.

The Company generated cash of $932 from operating activities in fiscal 2002
compared to $348,242 in fiscal 2001. The decrease primarily represents the net
loss recorded for the year offset by the net impact of the collection of
accounts receivable, non-cash charges recorded during the year and the
remittances to the taxation authorities of required tax installments.

During fiscal 2002, the Company received $62,500 from the issuance of 250,000
shares of common stock on a private placement basis at $0.25 per share to a
member of the board of directors. In addition, the Company received $93,751 from
the issuance of 125,000 shares of common stock on the exercise 125,000 stock
options at $0.75 per share.

On August 13, 2002, the Company announced a share-repurchase
program under which up to $500,000 could be spent to repurchase up to 1 million
shares of the Company's common stock. This repurchase program is available until
August 8, 2003. To December 31, 2002, 467,000 shares of common stock have been
repurchased for aggregate consideration of $117,984, including transaction fees.
In December of 2002 it was determined that these shares would be cancelled.
Accordingly, these shares are reflected as retired in the financial statements.

The Company intends to continue its growth in 2003 and beyond. Management
believes that the Company will have sufficient resources to support this growth
through continued revenue improvements, the collection of its trade accounts
receivable in the ordinary course of business and by continuing to monitor its
expenses with consideration of its cash resources. As noted under "Other Factors
that May Affect Future Results", there can be no assurance that management's
plans can be met.

At December 31, 2002, the Company was committed to purchase a license for a
computer software application, which will assist it in the creation of
management efficiencies in software development and in client technical support.
The license commitment is for $38,010. In addition, the license of this software
application will be subject to ongoing annual maintenance fees estimated to be
$8,000 per annum. There are presently no other material commitments for capital
expenditures. Due to the nature of its business, the Company does not require
significant outlays for capital expenditures and, as a result, is not planning
for any additional material capital expenditures for the foreseeable future.

IMPACT OF INFLATION

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

ITEM 7.  FINANCIAL STATEMENTS

| | (a) | Financial Statements:
| | --- | ---------------------
| |     |                      
| |     |                      
| |     |                      
| |     |                      
| |     |                      
| |     |                      



INDEPENDENT AUDITOR'S REPORT





To the Shareholders of
dot com Entertainment Group, Inc.

We have
audited the consolidated balance sheets of dot com Entertainment Group, Inc. and
subsidiaries as of December 31, 2002 and 2001, and the consolidated statements
of income (loss), stockholders' equity and cash flows for the years then ended.
These consolidated 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 consolidated financial statements referred
to above present fairly, in all material respects, the financial position of dot
com Entertainment Group, Inc. and subsidiaries as of December 31, 2002 and 2001,
and the results of their operations and changes in their cash flows for the
years then ended in accordance with accounting principles generally accepted in
United States of America.



Freed Maxick & Battaglia, CPAs, P.C.
Buffalo, New York
February 5, 2003



dot com ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS
December 31,






|ASSETS                                         |   | 2002      |   | 2001     
|---------------------------------------------- | - | --------- | - | ---------
|                                               |   |           |   |          
|Current assets:                                |   |           |   |          
|Cash and cash equivalents                      | $ | 938,705   | $ | 965,041  
|Accounts receivable:                           |   |           |   |          
|Trade, less allowance of approximately $63,000 |   | 461,449   |   | 1,306,931
|($25,000 - 2001)                               |   |           |   |          
|Other                                          |   | 21,042    |   | 8,964    
|Income taxes recoverable                       |   | 181,566   |   | -        
|Prepaid expenses and deposits                  |   | 53,668    |   | 26,578   
|Total current assets                           |   | 1,656,430 |   | 2,307,514
|                                               |   |           |   |          
|Fixed assets - net (Note 2)                    |   | 118,814   |   | 105,114  
|                                               |   |           |   |          
|Patents - net (Note 2)                         |   | 2,165     |   | -        
|                                               |   |           |   |          
|Deferred tax asset (Note 3)                    |   | -         |   | 122,000  
|                                               |   |           |   |          
|                                               | $ | 1,777,409 | $ | 2,534,628
|                                               |   |           |   |          
|LIABILITIES AND STOCKHOLDERS' EQUITY           |   |           |  
|                                               |   |           |   |          
|Current liabilities:                           |   |           |   |          
|Accounts payable and accrued liabilities       | $ | 167,882   | $ | 96,544   
|Accounts payable - officers                    |   | -         |   | 50,000   
|Restructuring reserve (Note 4)                 |   | 67,500    |   | -        
|Legal settlement reserve (Note 5)              |   | 16,344    |   | -        
|Income taxes payable                           |   | 3,403     |   | 338,968  
|Deferred revenue                               |   | 138,463   |   | 214,701  
|Total current liabilities                      |   | 393,592   |   | 700,213  
|                                               |   |           |   |          
|Commitments (Note 6)                           |   | -         |   | -        
|                                               |   |           |   |          
|Stockholders' equity (Note 7):                 |   |           |   |          
|                                               |   |           |   |          
|Common stock, $.001 par value, 50,000,000      |   |           |   |          
|shares authorized, 10,695,500 shares issued    |   |           |   |          
|and outstanding (10,787,500 - 2001)            |   | 10,696    |   | 10,788   
|Additional paid in capital                     |   | 1,518,847 |   | 1,454,887
|Retained earnings (accumulated deficit)        |   | (145,726  | ) | 368,740  
|Total stockholders' equity                     |   | 1,383,817 |   | 1,834,415
|                                               |   |           |   |          
|                                               | $ | 1,777,409 | $ | 2,534,628
|                                               |   |           |   |          
|See notes to financial statements.            





dot com ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF INCOME (LOSS)








|                                            |   | 2002       |   | 2001      
|------------------------------------------- | - | ---------- | - | ----------
|                                            |   |            |   |           
|Revenues:                                   |   |            |   |           
|Royalties                                   | $ | 2,551,541  | $ | 2,687,134 
|Installation fees                           |   | 585,538    |   | 713,566   
|e-digital and support services              |   | 308,692    |   | 402,115   
|Other income (Note 8)                       |   | 60,000     |   | -         
|                                            |   | 3,505,771  |   | 3,802,815 
|                                            |   |            |   |           
|Expenses:                                   |   |            |   |           
|Research, software development and          |   |            |   |           
|support services                            |   | 1,387,376  |   | 965,064   
|General and administrative                  |   | 1,185,614  |   | 960,500   
|Sales, marketing and services to licensees  |   | 739,220    |   | 693,662   
|                                            |   | 3,312,210  |   | 2,619,226 
|Loss on contractual settlement
    (Note 8) |   | 345,207    |   | -         
|Restructuring provision (Note
    4)        |   | 125,681    |   | -         
|Legal settlement provision (Note 5)         |   | 83,639     |   | -         
|                                            |   | 3,866,737  |   | 2,619,226 
|                                            |   |            |   |           
|Income (loss) before income tax expense     |   | (360,966   | ) | 1,183,589 
|                                            |   |            |   |           
|Income tax provision (Note 3)               |   |            |   |           
|Current                                     |   | 31,500     |   | 335,436   
|Deferred                                    |   | 122,000    |   | 138,000   
|                                            |   | 153,500    |   | 473,436   
|                                            |   |            |   |           
|Net income (loss)                           | $ | (514,466   | ) | 710,153   
|                                            |   |            |   |           
|                                            |   |            |   |           
|Net income (loss) per share (Note 1):       |   |            |   |           
|Basic                                       | $ | (0.05      | ) | $         
|                                            |   |            |   |           
|Diluted                                     | $ | (0.05      | ) | $         
|                                            |   |            |   |           
|Weighted average number of common           |   |            |   |           
|shares outstanding (Note 1):                |   |            |   |           
|Basic                                       |   | 10,788,833 |   | 10,764,375
|                                            |   |            |   |           
|Diluted                                     |   | 10,788,833 |   | 11,702,331
|                                            |   |            |   |           
|See notes to financial statements.         



dot com ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY








|                                                   | Common Stock |   | Additional
    Paid-in
    Capital |   | Retained
    Earnings
    (Accumulated
    Deficit) |   | Total   
|-------------------------------------------------- | ------------ | - | ---------------------------------- | - | --------------------------------------------------- | - | --------
|                                                   | Shares       |   | Amount                             |   |                                                     |  
|                                                   |              |   |                                    |   |                                                     |   |         
|Balance at December 31, 2000                       | 10,730,000   | $ | 10,730                             | $ | 1,411,820                                           | $ | (341,413
|                                                   |              |   |                                    |   |                                                     |   |         
|Issuance of common stock (Note 7)                  | 57,500       |   | 58                                 |   | 43,067                                              |   | -       
|Net income - 2001                                  | -            |   | -                                  |   | -                                                   |   | 710,153 
|                                                   |              |   |                                    |   |                                                     |   |         
|Balance at December 31, 2001                       | 10,787,500   |   | 10,788                             |   | 1,454,887                                           |   | 368,740 
|                                                   |              |   |                                    |   |                                                     |   |         
|Issuance of common stock (Note 7)                  | 375,000      |   | 375                                |   | 155,876                                             |   | -       
|                                                   |              |   |                                    |   |                                                     |   |         
|Income tax recovery on exercise of stock options   | -            |   | -                                  |   | 23,851                                              |   | -       
|                                                   |              |   |                                    |   |                                                     |   |         
|Repurchase and cancellation of shares (Note 7)     | (467,000     | ) | (467                               | ) | (117,517                                            | ) | -       
|                                                   |              |   |                                    |   |                                                     |   |         
|Issuance of warrants to settle obligation (Note 7) | -            |   | -                                  |   | 1,750                                               |   | -       
|                                                   |              |   |                                    |   |                                                     |   |         
|Net loss - 2002                                    | -            |   | -                                  |   | -                                                   |   | (514,466
|                                                   |              |   |                                    |   |                                                     |   |         
|Balance at December 31, 2002                       | 10,695,500   | $ | 10,696                             | $ | 1,518,847                                           | $ | (145,726
|                                                   |              |   |                                    |   |                                                     |   |         
|See Notes to financial statements.                





dot com ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,








|                                                           |   | 2002     |   |   | 2001     |  
|---------------------------------------------------------- | - | -------- | - | - | -------- | -
|                                                           |   |          |   |   |          |  
|Cash flows from operating activities:                      |   |          |   |   |          |  
|Net income (loss)                                          | $ | (514,466 | ) | $ | 710,153  |  
|Adjustments to reconcile net income (loss) to net
    cash |   |          |   |   |          |  
|provided by operating activities:                          |   |          |   |   |          |  
|Expense satisfied by the issuance of warrants              |   | 1,750    |   |   | -        |  
|Depreciation                                               |   | 49,670   |   |   | 23,039   |  
|Loss on contractual settlement                             |   | 345,207  |   |   | -        |  
|Restructuring provision                                    |   | 124,644  |   |   | -        |  
|Legal settlement provision                                 |   | 83,639   |   |   | -        |  
|Deferred income tax expense                                |   | 122,000  |   |   | 138,000  |  
|                                                           |   |          |   |   |          |  
|Changes in non-cash working capital items:                 |   |          |   |   |          |  
|Accounts receivable                                        |   | 488,197  |   |   | (835,560 | )
|Prepaid expenses and deposits                              |   | (27,090  | ) |   | (26,578  | )
|Accounts payable and accrued liabilities                   |   | 71,338   |   |   | (8,977   | )
|Accounts payable - officers                                |   | (50,000  | ) |   | (25,805  | )
|Restructuring reserve                                      |   | (57,144  | ) |   | -        |  
|Legal settlement reserve                                   |   | (67,295  | ) |   | -        |  
|Income taxes
    recoverable/payable                       |   | (493,280 | ) |   | 323,436  |  
|Deferred
    revenue                                       |   | (76,238  | ) |   | 50,534   |  
|Net cash
    provided by operating activities              |   | 932      |   |   | 348,242  |  
|                                                           |   |          |   |   |          |  
|Cash flows from investing activities:                      |   |          |   |   |          |  
|Purchases of fixed assets and patents                      |   | (65,535  | ) |   | (81,735  | )
|Net cash used in investing activities                      |   | (65,535  | ) |   | (81,735  | )
|                                                           |   |          |   |   |          |  
|Cash flows from financing activities:                      |   |          |   |   |          |  
|Proceeds from issuance of common stock                     |   | 156,251  |   |   | 43,125   |  
|Repurchase of common stock                                 |   | (117,984 | ) |   | -        |  
|Net cash provided by financing activities                  |   | 38,267   |   |   | 43,125   |  
|                                                           |   |          |   |   |          |  
|Net increase (decrease) in cash                            |   | (26,336  | ) |   | 309,632  |  
|                                                           |   |          |   |   |          |  
|Cash and cash equivalents, beginning of year               |   | 965,041  |   |   | 655,409  |  
|                                                           |   |          |   |   |          |  
|Cash and cash equivalents, end of year                     | $ | 938,705  |   | $ | 965,041  |  
|                                                           |   |          |   |   |          |  
|Supplemental cash flow activities:                         |   |          |   |   |          |  
|Income taxes paid                                          | $ | 529,503  |   | $ | 12,000   |  
|Interest paid                                              | $ | 4,722    |   | $ | -        |  
|                                                           |   |          |   |   |          |  
|See notes to financial statements.                        



NOTE 1. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation - The consolidated financial
statements include the accounts of dot com Entertainment Group, Inc. ("dot com")
and its wholly owned subsidiaries, Precyse Corporation ("Precyse"), DCEG INC. ("DCEG"),
dot com Antigua Ltd. ("Antigua"), Parlay Entertainment Limited ("Parlay") and
dot com Management Ltd. ("dcM") (collectively the "Company"). All intercompany
balances and transactions have been eliminated. dot com is incorporated under
the laws of the State of Florida. Precyse, DCEG and dcM are incorporated under
the laws of the Province of Ontario. Antigua is incorporated under the laws of
Antigua and Barbuda and Parlay is incorporated under the laws of Barbados.

Nature of Business - The Company is a software
development company, specializing in developing and supporting internet
entertainment and related software. The software is marketed worldwide through
Antigua and Parlay. All revenues are generated from customers located outside
the United States of America.



Foreign Currency Transactions



Estimates - The preparation of the financial
statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, and receipts and
expenditures during the reporting period. Actual results could differ from
amounts estimated.



Revenue Recognition - The Company's revenue
recognition policies are in compliance with all applicable accounting
regulations, including American Institute of Certified Public Accountants (AICPA)
Statement of Position (SOP) 97-2, "Software Revenue Recognition", and SOP 98-9,
"Modification of SOP 97-2 With Respect to Certain Transactions". The Company
generates several types of revenue in its operations. Royalty fees are collected
from licensees who license the Company's internet entertainment software.
Royalty revenue is recognized as licensees earn revenues from providing internet
services to their customers. e-digital and support services revenue is
recognized when the service has been provided. Installation fees are recognized
when the Company has delivered, installed and integrated its software at the
licensee's place of operation and collection is assured. Revenue attributable to
undelivered elements, including technical support and future upgrades, is based
on the average sales price of those elements and is recognized ratably on a
straight-line basis over the license term. If the average sales price of the
undelivered item is not readily determinable, the entire payment received in
advance is deferred and recognized ratably on a straight-line basis over the
license term. Deposits received from customers prior to revenue recognition are
classified as deferred revenue in the accompanying balance sheet.

NOTE 1. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



Royalty Agreements - The Company has entered into
cancelable royalty agreements with its licensees which provide for royalty
payments based upon a stated percentage of licensee revenues with certain
contracts providing for fixed minimum monthly royalty payments. The contract
terms are generally from three to five years with renewal options. The
agreements also provide for support services and products at stated prices.



Research and Software Development Costs - Software development
costs are accounted for in accordance with SFAS 86, "Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed". All costs incurred
to establish the technological feasibility of a computer software product are
expensed as incurred. Research and development costs for the year ended December
31, 2002 amounted to approximately $501,000 ($340,000 - 2001). No costs were
capitalized under the provisions of SFAS 86 for either of the years ended
December 31, 2002 and 2001.

Advertising - The Company expenses advertising costs as
incurred. Advertising expense was approximately $9,000 for the year ended
December 31, 2002 ($17,000 - 2001).

Accounting for Stock Based Compensation - The Company
accounts for its stock option plans utilizing the intrinsic value method
specified under APB Opinion No. 25, "Accounting for Stock Issued to Employees."
Accordingly, no compensation expense is recognized for stock options issued to
employees as long as the exercise price is greater than or equal to the market
value of the common stock at the date of grant. In accordance with SFAS 123,
"Accounting for Stock-Based Compensation," the Company discloses the summary of
proforma effects to reported net income (loss) and earnings per share for 2002
and 2001, as if the Company had elected to recognize compensation costs based on
the fair value of the employee options at the grant date. Nonqualified stock
options and warrants issued to non-employees are recognized as compensation
expense based upon the fair value of the consideration received or the fair
value of the equity instruments issued, which ever is more reliably measurable
(see Note 9).



Income Taxes - Income taxes are computed in
accordance with SFAS 109, "Accounting for Income Taxes". Deferred taxes are
provided on temporary differences arising from assets and liabilities whose
bases are different for financial reporting and income tax purposes.



Net Income (Loss) Per Common Share -In
accordance with SFAS 128, "Earnings Per Share", dual presentation of basic and
diluted earnings per share is required on the face of the statement of income
(loss). Basic earnings per share is based upon the weighted average number of
common shares outstanding during the periods presented. With respect to fully
diluted earnings per share, for the year ended December 31, 2002, all
outstanding stock options and warrants have not been considered common stock
equivalents as their assumed exercise would be anti-dilutive given that the
Company has recorded a net loss for the year. There are 125,000 stock options
outstanding as of December 31, 2002, with an exercise price of $0.20, which
would have been considered dilutive using the treasury stock method had the
Company recorded net income for the year. As at December 31, 2001, there were
1,975,000 outstanding stock options and warrants with exercise prices ranging
from $0.75 to $1.64 whose assumed exercise would have been dilutive using the
treasury stock method and accordingly, these common stock equivalents were
included in the calculation of fully diluted earnings per share for the year
ended December 31, 2001.



NOTE 1. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cash Equivalents - Money market funds and commercial paper
investments have been considered cash equivalents in the accompanying financial
statements. Such investments are either liquid investments or have a maturity
term of less than three months.

Accounts Receivable - Statement of Position 01-6
"Accounting by Certain Entities (Including Entities with Trade Receivables) That
Lend to or Finance the Activities of Others" requires certain disclosures with
respect to the Company's accounts receivable. The Company carries its accounts
receivable at cost less an allowance for doubtful accounts. On a periodic basis,
the Company evaluates its accounts receivable and establishes an allowance for
doubtful accounts. The allowance is based on the circumstances of each customer
relationship, as direct communication takes place with each customer where
accounts are past due, together with an assessment of the history of past
write-offs and collections. It is not generally the practice of the Company to
charge interest on delinquent accounts receivable. If interest is charged on
delinquent accounts receivable, it would only be recognized in income when it is
collected.



Concentration of Credit Risks - At December 31, 2002,
the Company had three customers, which represented in excess of 10% of sales or
trade accounts receivable as follows:



|           |                                             | December 31,
    2002 | December 31,2001
|---------- | ------------------------------------------- | --------------------- | ----------------
|           |                                             |                       |                 
|Customer 1 | % of year end trade accounts
    receivable | 36%                   | Less than 10%   
|           | % of fiscal year
    revenue                | 13%                   | Less than 10%   
|Customer 2 | % of year end trade accounts
    receivable | 17%                   | 77%             
|           | % of fiscal year revenue                    | 27%                   | 66%             
|Customer 3 | % of year end trade accounts
    receivable | 13%                   | Less than 10%   
|           | % of fiscal year revenue                    | Less than 10%         | Less than 10%   





The Company's cash and cash equivalents are on deposit with
two financial institutions. Only certain of the Company's cash and cash
equivalents amounts would be covered by deposit insurance and these amounts are
substantially in excess of the amounts that would be covered by deposit
insurance should such insurance coverage become required. Although cash and cash
equivalent accounts exceed insured deposit amounts, management does not
anticipate non-performance by the financial institutions.



NOTE 1. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



Fixed Assets and Patents - Fixed assets are
recorded at cost. Depreciation is generally charged to operations over the three
to five year period representing the estimated useful lives of the assets using
the straight-line method. Depreciation on purchased computer software is charged
to operations over either twelve or twenty-four months. Depreciation for the
year ended December 31, 2002 amounted to $49,670 ($23,039 - 2001). All fixed
assets are located in Canada at Precyse. Third party costs incurred in
registering patents are recorded at cost and are amortized to income on a
straight-line basis over the life of the patent.



Fair Value of Financial Instruments - The carrying
amounts of the current assets and liabilities reported in the balance sheets
approximate fair value due to their short-term maturity.



Segment Reporting - In applying the provisions of
Statement of Financial Accounting Standard ("SFAS") 131 "Segment Reporting", the
Company is currently organized, managed and internally reported as one segment.



NOTE 2. - FIXED ASSETS AND PATENTS

Fixed assets consist of the following at December 31:





|                                                                                | 2002 |         | 2001
|------------------------------------------------------------------------------- | ---- | ------- | ----
|                                                                                |      |         |     
|Office furniture, computer equipment and
    software and building improvements | $    | 197,766 | $   
|Less: accumulated depreciation                                                  |      | 78,952  |     
|                                                                                |      |         |     
|                                                                                | $    | 118,814 | $   



In December of 2002, the Company was awarded a patent. Legal and patent
registration fees to December 31, 2002 amounted to $2,165.



NOTE 3. - INCOME TAXES

At December 31, 2001, the Company had a recorded deferred tax asset in the
amount of $122,000 which represented the anticipated future income tax deduction
in the U.S. for non-qualified stock option expense related to stock options
issued in 1999. These stock options were granted to consultants for services
rendered and accordingly, were reflected as consulting expense in 1999.The tax
deduction would be available if and when the stock options were exercised. These
stock options expire in February 2004 and are all-exercisable at $3.00 per
share. In addition, the Company had also reduced income taxes payable in Canada
by approximately $138,000 with respect to this item. Following an assessment of
all the available evidence as at September 30, 2002, including such factors as
the Company's internal forecasts, the volatility in the Company's marketplaces,
the Company's prevailing share price and the general stock market opportunities
for micro-cap companies, management determined that it is now more likely than
not that the stock options will not be exercised and, accordingly, a valuation
allowance against the deferred tax asset in the amount of $122,000 has been
established as at September 30, 2002 and the previously recorded Canadian income
tax deduction has been reversed. Management considers the valuation allowance
appropriate as at December 31, 2002. Management will continue to monitor this
matter quarterly and assess whether any adjustment to the valuation allowance is
appropriate.



The components of income (loss) before income taxes are as
follows:





|        |   | 2002     |   | 2001
|------- | - | -------- | - | ----
|        |   |          |   |     
|U.S.    | $ | (180,483 | ) | $   
|Foreign |   | (180,483 | ) |     
|        |   |          |   |     
|        | $ | (360,966 | ) | $   





The components of income tax provision (benefit) by taxing jurisdiction
consists of the following:



|             |   | 2002    |   |   | 2001   
|------------ | - | ------- | - | - | -------
|Current:     |   |         |   |   |        
|U.S. Federal | $ | (53,705 | ) | $ | 207,151
|Foreign      |   | 85,205  |   |   | 128,285
|             |   | 31,500  |   |   | 335,436
|Deferred:    |   |         |   |   |        
|U.S. Federal |   | 122,000 |   |   | -      
|Foreign      |   | -       |   |   | 138,000
|             |   | 122,000 |   |   | 138,000
|             |   |         |   |   |        
|             | $ | 153,500 |   | $ | 473,436
|             |   |         |   |   |        



The net deferred tax asset consists of the following:





|                                        |   | 2002     |   |   | 2001     
|--------------------------------------- | - | -------- | - | - | ---------
|                                        |   |          |   |   |          
|Non-qualified stock option compensation | $ | 122,000  |   | $ | 122,000  
|Less valuation allowance                |   | (122,000 | ) |   | -        
|                                        |   |          |   |   |          
|                                        | $ | -        |   |   | $ 122,000
|                                        |   |          |   |   |          



The differences between the U.S. statutory federal income
    tax rate and the effective income tax rate as reflected in the accompanying
    Consolidated Statements of Income (Loss) are:





|                                                                            |  | 2002 |   | 2001
|--------------------------------------------------------------------------- |  | ---- | - | ----
|                                                                            |  |      |   |     
|Statutory U.S. federal rate                                                 |  | (34) | % |     
|Foreign income taxed at different rates                                     |  | (4)  |   |     
|Permanent differences and other                                             |  | 8    |   |     
|Effect of stock option adjustment in the U.S. and Canada as described above |  | 72   |   |     
|                                                                            |  | 43   | % |     







NOTE 4. - RESTRUCTURING RESERVE

During the three-month period ended September 30, 2002, management undertook
a review of the Company's scope of service and determined that the Company would
curtail e-digital and systems consulting service activities to reflect present
marketplace opportunities. The restructuring provision recorded during the
three-month period ended September 30, 2002, represented severance costs,
including benefit costs, for seven individuals involved in these activities all
of whom left the Company's employment by September 30, 2002. The remaining
component of this reserve was paid in January 2003.



NOTE 5. - LEGAL SETTLEMENT RESERVE

On January 15, 2002, the Company commenced a legal action
against a third party for damages in the amount of $10,000,000 (Canadian) and
punitive damages in the amount of $500,000 (Canadian), alleging unauthorized use
of the Company's software. On February 19, 2002, the third party filed
counterclaim against the Company for damages in the amount of $10,000,000
(Canadian) and exemplary damages in the amount of $5,000,000 (Canadian).
Discussions between the parties ensued during the third quarter of fiscal 2002
and management recorded a provision of approximately $96,000 as an estimate of
the settlement amount as of September 30, 2002. This matter was settled between
the parties on December 17, 2002 in the amount of approximately $84,000,
including legal fees incurred pursuant to the settlement. At December 31, 2002,
the remaining component of this reserve related to outstanding legal fees.





NOTE 6. - COMMITMENTS



A. Lease Commitments



The Company leases its premises and certain computer
      equipment under operating leases. During the year ended December 31, 2002,
      the Company renegotiated its premises lease agreement coincident with
      increasing the overall premises leased. The new agreement extends to
      December 31, 2005 and provides the Company with one five-year renewal
      period based on market rental rates in effect in December 2005. The
      computer equipment leases expire in 2004. Rent expense under these
      agreements for the year ended December 31, 2002 was approximately $91,000
      ($84,000 - 2001). In addition, in January of 2003 the Company committed to
      lease premises in Barbados for a six-month period. This commitment is
      included in the summary of minimum payments below.

The approximate future minimum payments required under the Company's lease
  agreements are as follows:



|2003 | $ | 133,000
|---- | - | -------
|2004 |   | 98,000 
|2005 |   | 98,000 
|     | $ | 329,000
|     |  



NOTE 6. - COMMITMENTS (CONTINUED)



B. Consulting and Employment Contracts



The Company has certain obligations under various
      consulting and employment agreements with officers and members of senior
      management. Certain agreements in place at December 31, 2001 were extended
      and amended through January 2003 and certain agreements in place at
      December 31, 2001 were terminated during the year. Certain new agreements
      were entered into during the year ended December 31, 2002. These
      agreements generally have terms of one to three years with the one-year
      agreements providing for an unlimited automatic renewal option for one to
      two year terms unless the Company or the consultant or the employee
      terminates the agreement. These consulting and employment agreements
      represent the minimum compensation to be paid to the officers and members
      of senior management for their services to the Company. The consultants
      are categorized as common law employees for the purposes of various
      Company sponsored benefit programs. The agreements provide for minimum
      aggregate annual payments of approximately $883,000 in 2003. All
      agreements have buyout provisions that require a stated payment to the
      consultants or the employees in the event that there is a more than a 50%
      change in ownership of the Company and, as a consequence, the agreements
      are terminated. Certain of the agreements provide for stated payments as a
      consequence of other causes of termination of the agreements. Aggregate
      consulting and employment expense under these agreements for the year
      ended December 31, 2002 amounted to approximately $908,000 ($570,000 -
      2001).



C. Fixed Asset Commitment



The Company signed a Software License Agreement
      on January 23, 2003 in the amount of $38,010 for the perpetual use of
      certain software to assist in the Company's development efforts. To
      December 31, 2002, $7,256 had been incurred as incidental costs pursuant
      to this acquisition and these costs will be included in the acquisition
      cost of the software. Annual support and maintenance fees for this
      software will be approximately $8,000.



NOTE 7. - STOCKHOLDERS' EQUITY

During the year ended December 31, 2002, the Company issued 125,000 shares of
common stock on the exercise of employee stock options with an exercise price of
$0.75 per share for proceeds of $93,751. In addition, the Company also issued
250,000 shares of common stock at $0.25 per share on a private placement basis
to a member of the board of directors for proceeds of $62,500. During fiscal
2001, the Company issued 57,500 shares of common stock on the exercise of
employee stock options with an exercise price of $0.75 per share for proceeds of
$43,125.



NOTE 7. - STOCKHOLDERS' EQUITY (CONTINUED)

During the year ended December 31, 2002, the Company also issued 20,000
warrants and each warrant provides the holder with the opportunity to purchase a
share of common stock at a price of $0.50 per share. These warrants expire at
the end of October 2004. These warrants were issued in satisfaction of an
obligation and have been recorded as an expense in accordance with the
provisions of SFAS 123, using the Black-Scholes pricing model. Total expense
recorded on these warrants was $1,750. As at December 31, 2002 and 2001, there
are a further 200,000 warrants outstanding and each of these warrants provides
the holder with the opportunity to purchase a share of common stock at a price
of $4.00 per share. These warrants expire in February 2004.

On August 13, 2002, the Company announced a share-repurchase
program under which up to $500,000 may be spent to repurchase up to 1 million
shares of the Company's common stock. This repurchase program is available until
August 8, 2003. To December 31, 2002, 467,000 shares of common stock have been
repurchased for aggregate consideration of $117,984, including transaction fees.
In December of 2002 it was determined that these shares would be cancelled;
accordingly, these shares are reflected as retired in these financial
statements.



In February 2003, the Company issued 160,000 common shares to
directors for no consideration as part of the directors' compensation package
for 2003.





NOTE 8. - LOSS ON CONTRACTUAL SETTLEMENT

During fiscal 2001, the Company signed a new license
agreement with its then principal customer, which provided for a base royalty of
$645,000 for fiscal 2001 together with a reduction in the royalty rate for the
term of the new license agreement. This new license agreement had a term through
2011. During the three-month period ended March 31, 2002, the Company entered
into an agreement with this customer whereby certain amounts owed under the new
license agreement would be paid pursuant to a deferred payment arrangement with
all amounts owed paid by September 30, 2002. The customer did not conform to
this deferred payment arrangement and, accordingly, negotiations commenced. On
June 28, 2002, the Company entered into an interim agreement with this customer
which established the principles for amending the license agreement entered into
with this customer in 2001. Under the terms of this interim agreement, aggregate
accounts receivable owed as at May 31, 2002 in the amount of $345,207 were not
collected. This item is described as loss on contractual settlement in the
statements of income (loss). In addition, the royalty rate on this customer's
net sales was further reduced commencing June 1, 2002. Under this interim
agreement, amounts aggregating to $411,405 were required to be paid and these
payments were all received prior to December 31, 2002, in conformity with the
agreed payment schedule.

In addition, on September 30, 2002, the Company completed the transfer of
certain trademarks and domain names to this customer and, as a consequence,
recognized revenue of $50,000 which is included in other income.





NOTE 9. - STOCK OPTION PLANS



The Board of Directors has adopted a stock option plan under which up to
1,500,000 new, net, options to purchase shares of the Company's common stock are
available on an annual basis. The plan provides that the total number of common
shares for which options may be granted annually shall be limited to 20% of the
issued and outstanding common shares of the Company. These options may be
granted to directors, officers, employees and consultants at the discretion of
the Board of Directors. Under the plan, the options granted will either qualify
as incentive stock options ("ISO's") in accordance with IRC Section 422 or
options which are not intended to be ISO's ("non-qualified options"). Upon grant
of the option, management will determine the exercise price, which shall not be
less than the fair value of the Company's common stock at the date of grant, the
vesting period and the term, which shall not exceed five years.



During the year ended December 31, 2002, 1,620,000 options
were granted under this plan with exercise prices ranging from $0.20 to $1.08
per share. The options were granted to officers, directors and employees.
Generally these options vested immediately with a number of options vesting up
to one year from the date of the grant. During the year ended December 31, 2002,
125,000 employee stock options were exercised and 867,500 options held by
officers, directors and employees were forfeited.



During the year ended December 31, 2001, 1,137,500 options
were granted under this plan with exercise prices ranging from $0.75 to $2.66
per share. The options were granted to officers, directors, and employees.
Generally these options vested immediately with a number of options vesting up
to one year from the date of grant. During the year ended December 31, 2001,
57,500 employee stock options were exercised and 5,000 employee stock options
were forfeited.



In January and February 2003, the Company issued a further
280,000 stock options to directors and employees and a further 25,000 stock
options to a consultant at exercise prices ranging from $0.20 to $0.23 per
share.



The following is a summary of stock option activity under
this plan for the past two years:



|                                 | Number
      of Shares
      Under Option |   |   | Weighted
      Average
      Exercise Price
|-------------------------------- | ----------------------------------------- | - | - | -------------------------------------------
|                                 |                                           |  
|                                 |                                           |  
|                                 |                                           |   |   |                                            
|Outstanding at December 31, 2000 | 1,780,000                                 |   | $ | 1.76                                       
|Granted                          | 1,137,500                                 |   | $ | 0.85                                       
|Exercised                        | (57,500                                   | ) | $ | 0.75                                       
|Forfeited                        | (5,000                                    | ) | $ | 2.66                                       
|                                 |                                           |   |   |                                            
|Outstanding at December 31, 2001 | 2,855,000                                 |   | $ | 1.41                                       
|Granted                          | 1,625,000                                 |   | $ | 0.41                                       
|Exercised                        | (125,000                                  | ) | $ | .75                                        
|Forfeited                        | (867,500                                  | ) | $ | 1.69                                       
|                                 |                                           |   |   |                                            
|Outstanding at December 31, 2002 | 3,487,500                                 |   | $ | .90                                        
|                                 |                                           |   |   |                                            
|Exercisable at December 31, 2002 | 3,387,500                                 |   | $ | .92                                        





NOTE 9. - STOCK OPTION PLANS (CONTINUED)



The weighted average fair value of options granted under this
plan were $0.31 and $0.62 per share for the years ended December 31, 2002 and
2001, respectively. The weighted average remaining contractual life on the
options outstanding at December 31, 2002 was 3.5 years (2.9 years - 2001).



Exercise prices for the options outstanding at December 31,
2002 fall into the following ranges:





|              | Number
    of SharesUnder Option
|------------- | --------------------------------
|              |                                 
|$0.20 - $0.50 | 1,375,000                       
|$0.51 - $1.00 | 1,547,500                       
|$1.01 - $2.00 | 135,000                         
|$2.01 - $3.00 | 430,000                         
|              |                                 
|              | 3,487,500                       





Non-Qualified Options - No non-qualified options were
issued to consultants during 2002 or 2001.



As of December 31, 2002 and 2001 there are 810,000 non-qualified options
outstanding, of which 760,000 and 50,000 options are exercisable at $3.00 and
$2.50 per share, respectively, and expire in 2004 and 2005, respectively.



Incentive Stock Options- For ISO's issued to
employees, including directors and officers, the Company has adopted the
disclosure-only provisions of SFAS 123 and, accordingly, does not recognize
compensation cost for stock option grants under fixed awards. If the Company had
elected to recognize compensation cost based on the fair value of the options
granted at grant date as prescribed by SFAS 123, net income (loss) and income
(loss) per share for the years ended December 31, 2002 and 2001 would have been
as follows:





|                                                                                                                      |   | 2002       |   |   | 2001    
|--------------------------------------------------------------------------------------------------------------------- | - | ---------- | - | - | --------
|                                                                                                                      |   |            |   |   |         
|Net income (loss) - as reported                                                                                       | $ | (514,466   | ) | $ | 710,153 
|                                                                                                                      |   |            |   |   |         
|Total stock based employee compensation expense
    determined under the fair value method for all awards, net of tax |   | (500,182   | ) |   | (709,587
|                                                                                                                      |   |            |   |   |         
|Net income (loss) - pro forma                                                                                         | $ | (1,014,648 | ) | $ | 566     
|                                                                                                                      |   |            |   |   |         
|Income (loss) per share - as reported                                                                                 | $ | (0.05      | ) | $ | 0.07    
|                                                                                                                      |   |            |   |   |         
|Income (loss) per share - pro forma                                                                                   | $ | (0.09      | ) | $ | 0.00    





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





2002
    2001Expected dividend yield
    0%
    0%Expected stock price volatility
    100%
    100%Risk-free interest rate
    3.0%
    3.4%Expected life of options
    5 years
    5 years




NOTE 10. - RELATED PARTY TRANSACTIONS

During the year ended December 31, 2002, the Company
purchased legal services amounting to approximately $62,000 from firms where
partners in these firms served the Company as either an officer or a director or
as a director of a subsidiary of the Company. During the year ended December 31,
2001, the Company purchased legal services amounting to approximately $24,000
from a firm where a partner in this firm served the Company as an officer. As at
December 31, 2002 and 2001, no amounts were owed to related parties under these
arrangements.



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.

DIRECTORS AND EXECUTIVE OFFICERS

Name
      Age
      Position
      Period Served as DirectorDavid Outhwaite
      49
      Director and CEO
      11/2002 to presentScott White
      40
      Director, President & COO
      02/1999 to presentPerry Malone
      40
      Director and Chief Technology Officer
      02/1999 to presentDavid Callander
      47
      Chief Financial Officer and Corporate
      SecretaryAndrew Branscombe
      33
      Director of SalesChristopher Smith
      55
      Vice President MarketingMike Lipton
      61
      Director
      08/2002 to presentRobert Olsen
      40
      Director
      07/2002 to presentAnthony DeWerth
      60
      Director
      12/2002 to presentJohn Reilly
      42
      Director
      02/1999 to presentFrank Ricciuti
      60
      Acting Chair and Director
      07/2000 to present


David Outhwaitehas held executive management positions at Informix
Software (Canada), Sybase Canada, Control Data Systems, and Philips Information
Systems. He has had an extensive career managing growing technology companies
with upwards of several hundred employees, and has led international expansion
into European and Pacific markets. From January 1998 through February 2000, Mr.
Outhwaite was President of Maves International Software and from April 2000
through August 2002. Mr. Outhwaite was Vice-President and Chief Operating
Officer of CryptoLogic Inc. a provider of Internet casino and ecommerce software
to the global marketplace. Mr. Outhwaite brings extensive executive and
operational management experience garnered from 28 years in the IT industry. As
Chief Executive Officer, David will play a vital role in advancing DCEG as a
recognized player in the supply of on-line gaming technologies to an
international client base.

Scott Whiteis a lawyer, called to the bar in the Province of Ontario in
1989. He is a graduate from the University of Toronto with a Bachelor of Arts
degree and the University of Windsor with a bachelor of laws degree. Until
serving with DCEG on a full-time basis in 2002, Mr. White provided legal
services to a multinational corporate client-base in corporate/commercial law,
administrative law and business law. In addition to serving at the managing
partner of Bush, Frankel & White, Barristers & Solicitors (1990-2000), Mr. White
served as a corporate director with Vista International Petroleums Ltd.
(1993-1996) and as a corporate officer for Nova Continental Development
Corporation (1994-1997). Mr. White has served as the Company's President & CEO
(1996-2002), and as its President & COO since 2002.

Perry Malonegraduated from Ryerson University in Toronto with a
bachelor's degree in Engineering in 1985. He has acquired extensive experience
as a computer systems architect and engineer, providing consulting services to
some of Canada's leading corporations. From February 1988 to January 1999,
through his wholly-owned consulting company Pericom Systems Corporation, Mr.
Malone provided IT consulting services as a Senior Systems Analyst to Canadian
Pacific Limited, Bell Canada, IBM Canada and Toronto Dominion Securities. Mr.
Malone has served as the Company's Chief Technology Officer since its inception,
in which position he is still incumbent.

David Callanderprior to joining DCEG in 2002, served as a partner with
Ernst & Young LLP from 1991 to 2001. Mr. Callander has worked closely with many
public and private companies in the hi-tech and manufacturing industries on
audit and risk management programs. Through these relationships, Mr. Callander
has developed expertise in U.S. and Canadian regulatory affairs and in the
financial reporting, taxation, treasury and governance affairs of public
companies. Mr. Callander has a Bachelor of Arts (Honours) degree in Accountancy
& Business Law and Economics from the University of Stirling in the U.K., and is
a member of the Institute of Chartered Accountants of Ontario and of Scotland.
Mr. Callander is also a member of the Financial Executives Institute.

Andrew Branscombegraduated from the University of Western Ontario with
an Honours degree in Urban Development in 1993. Since then, Mr. Branscombe
worked with a national commercial real estate firm as Senior Negotiator,
responsible for commercial lease negotiations and institutional sales
transactions from 1993 to 2000. His client list included Condisco, Inc., Sprott
Securities, Gentra and Thompson Newspapers. Mr. Branscombe has served as DCEG's
Director of Sales since 2000.

Christopher Smithhas over 25 years of senior marketing experience in the
gaming, high technology, entertainment and consumer sectors in both Las Vegas
and Toronto. Mr. Smith has most recently served as the Director of Corporate
Marketing with CryptoLogic Inc. (1999-2002) where he managed all aspects of
licensee relations including strategic consultation, project implementation and
training. Mr. Smith was also involved with development and release of
Cryptologic's Casino, Bingo and Poker products. From 1998 to 1999, Mr. Smith
served Naylor Publications and from 1995 to 1998 Mr. Smith provided marketing
consulting services to a number of organizations. Prior business experience also
includes Boyd Gaming Corporation, Hospitality Network/ Sun Teleguide of Las
Vegas, Nevada and Infomart of Toronto, Ontario. Mr. Smith has also served on the
Board of the Las Vegas Chamber of Commerce and the Nevada Council on Problem
Gambling.

Michael Liptonis a senior partner with Elkind, Lipton & Jacobs LLP where
he has practiced since 1970. He joins the Board of Directors with a considerable
record in advising both public and private sector clients on a wide range of
land-based and Internet gaming industry issues across North America. He has also
been engaged as counsel by the Ontario Provincial government and various
provincial regulatory authorities on numerous administrative and public law
matters. Mr. Lipton graduated from Osgoode Hall Law School and was called to the
Bar of the Law Society of Upper Canada with honors in 1967. Mr. Lipton was
appointed Queen's Counsel in 1979, and was called to the Bar of New York State
in 1985. He is a member of the editorial board of the Gaming Law Review and the
International Travel Law Journal, and has authored and co-authored several
papers in the areas of bankruptcy law, consumer law, gaming law, human resources
law, hospitality law and anti-money laundering legislation. He is a founding
member of the International Masters of Gaming Law Association, is a member of
the International Association of Gaming Attorneys and participates with many
groups in his areas of interest. Mr. Lipton was awarded the Medal of Service by
the City of Toronto and was awarded the Commemorative Medal for the 125th
Anniversary of the Confederation of Canada by the Government of Canada.

Robert Olsenhas acquired more than
eighteen years experience in merchant
banking, corporate finance and lending to medium-sized companies. Subsequent to
completing two University degrees, in 1988 Mr. Olsen joined the Royal Bank of
Canada to pursue a career in commercial and corporate lending and corporate
finance. In 1990, he accepted a senior position with CCFL and became Managing
Director of CCFL Mezzanine Partners in 1994, and Co-President in 1999. Mr. Olsen
holds a degree in Economics from the University of Manitoba and a Masters of
Business Administration from the University of Western Ontario. He is a frequent
guest speaker at conferences on corporate finance and merchant banking, and sits
on the board and is Lead Director of Coretec Inc.  Mr. Olsen also sits on
the board or serves as an observer for several companies including ALFresh Juice
(Canada) Ltd., Destination Products International, Ltd., Huntingdon Mills
Limited and Madacy Entertainment Group Ltd.  In
addition to his vocational success, Mr. Olsen also sits on the board of
governors of the Shaw Festival, acts as the Chairman of the Shaw's successful
black tie Boxing Fundraiser held in April of each year and sits on the
Entrepreneurship Advisory Board for the University of Western Ontario's Ivey
School of Business. In his early 20s, Mr. Olsen was a member of Canada's
national boxing team, and successfully represented Canada in several
international boxing tournaments throughout the world.

Anthony De Werthhas a proven business track record in Canada's public
and financial markets. Prior to his retirement in 1995, Mr. De Werth served as
the Chairman and Chief Executive Officer of CIBC Wood Gundy Private Client
Investments Inc. CIBC Wood Gundy is recognized as one of Canada's pre-eminent
investment and banking firms. Mr. De Werth acquired more than thirty years of
experience with CIBC Wood Gundy and Merrill Lynch Canada, where he was incumbent
in an executive capacity for some 22 years. At his retirement, Mr. De Werth had
overall responsibility for approximately 400 registered, licensed investment
advisors, providing advice to some 150,000 clients across Canada with invested
assets exceeding $4.0 billion (Canadian).

John Reilly,since 2000, he has served as the Vice President of Global
Equities for RBC Dominion Securities at its Toronto, Ontario office. Prior to
that, from 1998-2000, he served as the Managing Director for State Street
Brokerage Services (Canada) Inc. State Street is one of the world's largest
financial institutions specializing in custody, trust, investment management and
brokerage. Prior to joining State Street, in 1992, Mr. Reilly became the CEO of
Versus Brokerage Services, President of Versus Brokerage Services (US), and
Managing Director CEO of Versus Technologies. He was primarily responsible for
bringing E*Trade, the Internet securities dealer, to Canada and launching it
under Versus Brokerage Services. Prior to co-founding Versus, Mr. Reilly was
Vice President Electronic Trading at RBC Dominion Securities. Mr. Reilly
obtained a Bachelor of Business Administration, Finance from Wilfred Laurier in
1981 and has taken numerous industry-related courses and qualifications
including the Partners, Officer and Directors Exam.

Frank Ricciutiwas, from 1996 to 2000, a senior executive with a
Canadian-based international holding company with investments in both
manufacturing and aerospace. His responsibilities were primarily related to
corporate development and all matters relating to the financial and investment
community. Additionally, Mr. Ricciuti was a member of the board of directors of
the parent company and of two of its investment holdings. Prior to that, from
1991 to 1996, Mr. Ricciuti was a senior executive and board member of a Canadian
investment firm with overall responsibility for institutional sales, trading,
and research. He brings international business experience and the ability to
help grow the company and provide advice and input resulting in enhanced
shareholder value. Mr. Ricciuti is a graduate of Ryerson University in Toronto
and he holds an engineering degree from Michigan Technological University. Mr.
Ricciuti also has a Masters of Business Administration degree from York
University in Toronto, Ontario.

FAMILY RELATIONSHIPS.

There are no family relationships among the Company's directors, executive
officers or other persons nominated or chosen by the Company to become officers
or executive officers.

INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

The Company is not aware of any material legal proceedings involving any
director, director nominee, promoter or control person including criminal
convictions, pending criminal matters, pending or concluded administrative or
civil proceedings limiting one's participation in the securities or banking
industries, or findings of securities or commodities law violations.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.

Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that, during the fiscal year ended December 31, 2002, all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with.

ITEM 10.  EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table summarizes the total compensation of the Chief Executive
Officer and the other most highly compensated executive officers (collectively,
the "Named Executive Officers") of the Company earning in excess of $100,000 for
the year ended December 31, 2002, as well as the total compensation paid to each
such individual for the Company's two previous fiscal years:

|                                                      | Annual Compensation | Long Term Compensation
    Awards
|----------------------------------------------------- | ------------------- | ---------------------------------
|Name and Principal Compensation Position              | Year                | Salary                           
|                                                      |                     |                                  
|David Outhwaite
    Chief Executive Officer           | 2002                | $75,568                          
|                                                      |                     |                                  
|Scott White                                           | 2002                | $150,000                         
|President and Chief Operating                         | 2001                | $150,000                         
|Officer                                               | 2000                | $70,000                          
|                                                      |                     |                                  
|Perry Malone                                          | 2002                | $150,000                         
|Chief Technology Officer                              | 2001                | $150,000                         
|                                                      | 2000                | $120,000                         
|                                                      |                     |                                  
|Glenn Scott*
    Director of Business
    Development | 2002                | $67,500                          

* Effective September 30, 2002 Mr. Scott left the Company to pursue other
interests. Pursuant to his contract an award of $90,000 was made which is
included in the column entitled "All Other."

|                | OPTION/SAR GRANTS IN LAST FISCAL YEAR
    (INDIVIDUAL GRANTS) |                                                                          
|--------------- | ------------------------------------------------------------- | -------------------------------------------------------------------------
|(a)             | (b)                                                           | (c)                                                                      
|Name            | Number of Securities Underlying Options/SARsGranted (#)       | % of Total 
    Options/SARs 
    Granted to 
    Employees inFiscal Year
|David Outhwaite | 225,000                                                       |                                                                          
|Scott White     | 170,000                                                       |                                                                          
|Perry Malone    | 170,000                                                       |                                                                          
|Glenn Scott     | 0                                                             |                                                                          

For the above granted options, the options have fully vested.



|AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
    FY-END
    OPTION/SAR VALUES
|----------------------------------------------------------------------------------------
|                                                                                        
|Name                                                                                    
|David Outhwaite                                                                         
|Scott White                                                                             
|Perry Malone                                                                            
|Glenn Scott                                                                             

COMPENSATION OF DIRECTORS

With the exception of David Outhwaite, Scott White and Perry Malone, for the
fiscal year ended December 31, 2002, the members of the Company's Board of
Directors were paid a $500 fee for each meeting. Directors are reimbursed for
actual expenses incurred in attending Board meetings.

For the 2003 fiscal year, the Company has changed its director compensation
package to include the issuance of shares, share options and cash. For the 2003
fiscal period, directors receive the following remuneration: 20,000 common
shares, issued for no consideration; an annual directors' fee in the amount of
$5,000 per annum; a $500 fee for each directors meeting or committee meeting
attended; 10,000 stock options if the director serves as chairman of the board
of directors or a committee thereof; 5,000 stock options if the director serves
on a committee.

Directors who are also members of management do not receive the cash
compensation described above.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT, AND CHANGE-IN CONTROL
ARRANGEMENTS

The Company has certain obligations under various consulting and employment
agreements with the following officers and members of senior management: David
Outhwaite, Scott White, Perry Malone, David Callander, Andrew Branscombe and
Christopher Smith. Certain agreements in place at December 31, 2001 were
extended and/or amended through January 2003, and certain agreements in place at
December 31, 2001 were terminated during the year. Certain new agreements were
entered into during the year ended December 31, 2002.

These agreements generally have terms of one to three years, with the
one-year agreements providing for an unlimited automatic renewal option for one-
to two-year terms, unless the Company or the consultant/employee terminates the
agreement. These consulting and employment agreements also provide minimum
compensation that will be paid to officers and members of senior management for
their services to the Company, or should the agreements be terminated. The
consultants are categorized as common law employees for the purposes of various
Company sponsored benefit programs.

The agreements provide for minimum aggregate annual payments of approximately
$883,000 in 2003. All agreements have buyout provisions that require a stated
payment to the consultants or the employees in the event that there is a more
than a 50% change in ownership of the Company and, as a consequence, the
agreements are terminated. Certain of the agreements provide for stated payments
as a consequence of other causes of termination. The contracts for Messrs. White
and Malone provide for a payment of two years' annual compensation, including
the continuation of benefit coverage for a two-year period, following a more
than 50% change in ownership of the Company. The contracts for Messrs.
Outhwaite, Callander, Branscombe and Smith provide for a payment of one year's
annual compensation in such circumstances. Termination of the agreements without
cause would result in similar amounts being owed to the consultants or the
employees, with the caveat that the contracts of Mr. Callander and Mr. Smith
provide that termination without cause would result in payments of six-month's
compensation in 2003 rising to one-year's compensation in 2005. The contracts
for Messrs. Callander and Smith also provide for payments of one year's annual
compensation should their agreements be terminated as a result of a change in
office location or a change in the Company's Chief Executive Officer.

Aggregate consulting and employment expense under these agreements for the
year ended December 31, 2002 amounted to approximately $908,000 ($570,000 -
2001).

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The table below sets forth information, as of December 31, 2002, with respect
to beneficial ownership of the Company's common stock by each person known by
the Company to be the beneficial owner of more than 5% of its outstanding common
stock, by each director of the Company, by each Named Executive Officer and by
all officers and directors of the Company as a group. Unless otherwise noted,
each shareholder has sole investment and voting power over the shares owned.

|Name And Address of Beneficial
    Owner(1)                                                       | Amount and Nature 
    of Ownership (2) | Options Held | Percent of Class
|------------------------------------------------------------------------------------------------- | --------------------------------------- | ------------ | ----------------
|Scott White                                                                                       | 1,590,000                               |              | 520,000         
|David Outhwaite                                                                                   | 270,000                                 |              | 250,000         
|Perry Malone                                                                                      | 1,417,000                               |              | 495,000         
|David Callander                                                                                   | 125,000                                 |              | 125,000         
|John Reilly                                                                                       | 355,000                                 |              | 335,000         
|Michael Lipton                                                                                    | 130,000                                 |              | 110,000         
|Robert Olsen                                                                                      | 135,000                                 |              | 115,000         
|Frank Ricciuti                                                                                    | 390,000                                 |              | 370,000         
|Anthony De Werth                                                                                  | 336,900                                 |              | 25,000          
|All officers and directors as a 
    group ten persons)                                           | 4,748,900                               |              | 2,345,000       
|Ted Colivas                                                                                       | 912,000                                 |              | nil             
|Ken Lusk                                                                                          | 1,028,000                               |              | nil             
|Austin W. Marxe and
    David M. Greenhouse(3) 
    153 E. 53rd Street, New York, New York, 10022 | 1,061,350                               |              | nil             

(1) Unless otherwise noted, all persons have an address c/o the Company, 300
Delaware Ave., Buffalo, NY 14202.

(2) Includes shares of common stock and options owned at March 21, 2003 and
any shares as to which the holder may become the owner within 60 days.

(3) Based upon a Schedule 13G filed by entities controlled by Messrs. Marxe
and Greenhouse with the SEC on February 11, 2003.

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During the year ended December 31, 2002, the Company purchased legal services
amounting to approximately $62,000 from firms where partners in these firms
served the Company as either an officer or a director or as a director of a
subsidiary of the Company. In fiscal 2002, the individuals were, respectively,
Howard Rubinoff, who served the Company as Corporate Secretary for part of 2002,
Michael Lipton, who serves the Company as a director and Trevor Carmichael, who
serves on the board of Parlay Entertainment Limited.

During the year ended December 31, 2001, the Company purchased legal services
amounting to approximately $24,000 from a firm where a partner in this firm
served the Company as an officer. In fiscal 2001, the individual was Howard
Rubinoff who served the Company as Corporate Secretary.

As at December 31, 2002 and 2001, no amounts were owed to related parties
under these arrangements.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

|(a)   | Exhibits                                                                                                                                         
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------
|1.1   | Memorandum of Agreement among Affiliated
    Adjusters, Inc. and the stockholders of The Precyse Corporation dated
    January 27, 1999*         
|      |                                                                                                                                                  
|3.1   | Articles of Incorporation, as amended*                                                                                                           
|      |                                                                                                                                                  
|3.2   | Bylaws, as amended on December 12, 2002                                                                                                          
|      |                                                                                                                                                  
|10.1  | Technology License and Maintenance Agreement
    between The Precyse Corporation and The CyberBingo Corporation dated
    December 4,1997*       
|      |                                                                                                                                                  
|10.2  | Consulting Agreement between dot com
    Entertainment Group, Inc. and Scott F. White Financial Limited dated July 1,
    2002 #                 
|      |                                                                                                                                                  
|10.3  | Consulting Agreement between dot com
    Entertainment Group, Inc. and Pericom Systems Corporation dated July 1,
    2002#                       
|      |                                                                                                                                                  
|10.4  | Transaction Processing Agreement between
    Precyse Corporation and First Atlantic Commerce Ltd. dated January 29, 1999*                        
|      |                                                                                                                                                  
|10.5  | Stock Option Plan (previously filed with
    Form S-8 in April 2001, re-filed to correct minor typographical errors)# *                          
|      |                                                                                                                                                  
|10.6  | Software License Agreement between DCEG
    (Antigua) Ltd. and Cyberbingo Corporation dated June 15, 2001 *                                      
|      |                                                                                                                                                  
|10.7  | Consulting Agreement between dot com
    Entertainment Inc. and Piranha Holdings Limited dated February 1, 2002#                                 
|      |                                                                                                                                                  
|10.8  | Employment Agreement between DCEG INC. and
    David Outhwaite dated December 12, 2002#                                                          
|      |                                                                                                                                                  
|10.9  | Employment Agreement between Precyse
    Corporation and David Callander dated March 25, 2002#                                                   
|      |                                                                                                                                                  
|10.10 | Employment Agreement between DCEG INC. and
    Christopher Smith dated December 1, 2002#                                                         
|      |                                                                                                                                                  
|21.1  | Subsidiaries of Registrant                                                                                                                       
|      |                                                                                                                                                  
|23.1  | Consent of Freed Maxick & Battaglia, CPAs, P.C.                                                                                                  
|      |                                                                                                                                                  
|99.1  | Certification of Chief Executive Officer
    Pursuant to 18 U.S.C. 1350 As Adopted Pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.
|      |                                                                                                                                                  
|99.2  | Certification of Chief Financial Officer
    Pursuant to 18 U.S.C. 1350 As Adopted Pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.
|     
|*     | Previously filed and incorporated by reference
    herein.                                                                                       
|#     | Represents a management contract or
    compensatory plan or arrangement.                                                                        
|     

(b)

Reports on Form 8-K

None

ITEM 14. - CONTROLS AND PROCEDURES

Within 90 days before the filing date of this annual report (the "Evaluation
Date") the Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including our Chief Executive Officer
and our Chief Financial Officer, of the effectiveness of the design and
operation of our "disclosure controls and procedures" (as defined in the
Securities Exchange Act of 1934 Rules 13a-14(c)).  Based upon that evaluation,
our Chief Executive Officer and the Chief Financial Officer concluded that, as
of the Evaluation Date, the Company's disclosure controls and procedures are
effective to ensure that material information relating to us and our
consolidated subsidiaries is recorded, processed, summarized and reported in a
timely manner. Management will continue to review this matter with particular
emphasis on the documentation of the Company's disclosure controls and
procedures. There have been no changes in the system of internal control or in
other factors that could significantly affect such controls since the Evaluation
Date.

SIGNATURES

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

|(Registrant) | dot com Entertainment Group, Inc.
|------------ | ---------------------------------
|By:          | /s/ David Outhwaite              
|             | Chief Executive Officer          
|             |                                  
|DATE         | MARCH 28, 2003                   
|             |                                  
|By:          | /s/ David Callander              
|             | Chief Financial Officer          
|             |                                  
|DATE         | MARCH 28, 2003                   

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

|By   | /s/ David
    Outhwaite |  | Chief Operating Officer and Director                  
|---- | ----------------------- |  | ------------------------------------------------------
|Date | March 28, 2003         
|     |                         |  |                                                       
|By   | /s/ Scott
    White     |  | President and Chief Operating Officer and
    Director
|    
|Date | March 28, 2003         
|     |                        
|By   | /s/ Rob
    Olsen       |  | Director                                              
|Date | March 28, 2003         
|     |                        
|By   | /s/ Perry
    Malone    |  | Chief Technology Officer and Director                 
|Date | March 28, 2003         
|     |                        
|By   | /s/ Michael
    Lipton  |  | Director                                              
|Date | March 28, 2003         
|     |                        
|By   | /s/ John
    Reilly     |  | Director                                              
|Date | March 28, 2003         
|     |                        
|By   | /s/ Frank
    Ricciuti  |  | Acting Chair and Director                             
|Date | March 28, 2003         
|     |                        
|By   | /s/ Anthony De Werth    |  | Director                                              
|Date | March 28, 2003         

CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David C. Outhwaite, certify that:



|1. | I have reviewed this
    annual on Form 10-KSB for dot com Entertainment Group, Inc.;                                                                                                                                                                                                                                                                                                                    
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                          
|2. | Based on my
    knowledge, this annual report does not contain any untrue statement of a
    material fact, or omit to state a material fact necessary to make the
    statements made, in light of the circumstances under which such statements
    were made, not misleading with respect to the period covered by this annual
    report;                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                          
|3. | Based on my
    knowledge, the financial statements, and other financial information
    included in this annual report, fairly present in all material respects the
    financial condition, results of operations and cash flows of the registrant
    as of, and for, the periods presented in this annual report;                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                          
|4. | The registrant's
    other certifying officer and I are responsible for establishing and
    maintaining disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant, and have:                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                          
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                       
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                       
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                          
|5. | The registrant's
    other certifying officer and I have disclosed, based on our most recent
    evaluation, to the registrant's auditors and the audit committee of
    registrant's board of directors:                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                          
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                       
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                          
|6. | The registrant's
    other certifying officer and I have indicated in this annual report whether
    or not there were significant changes in internal controls or in other
    factors that could significantly affect internal controls subsequent to the
    date of our most recent evaluation, including any corrective actions with
    regard to significant deficiencies and material weaknesses.



/s/ David C. Outhwaite
David C. Outhwaite
Chief Executive Officer
March 28, 2003

I, David Callander, certify that:



|1. | I have reviewed this annual
    report on Form 10-KSB of dot com Entertainment Group, Inc.;                                                                                                                                                                                                                                                                                                              
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                          
|2. | Based on my knowledge, this
    annual report does not contain any untrue statement of a material fact or
    omit to state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were made, not
    misleading with respect to the period covered by this annual report;                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                          
|3. | Based on my knowledge, the
    financial statements, and other financial information included in this
    annual report, fairly present in all material respects the financial
    condition, results of operations and cash flows of the registrant as of, and
    for, the periods presented in this annual report;                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                          
|4. | The registrant's
    other certifying officer and I are responsible for establishing and
    maintaining disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant, and have:                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                          
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                       
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                       
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                          
|5. | The registrant's
    other certifying officer and I have disclosed, based on our most recent
    evaluation, to the registrant's auditors and the audit committee of
    registrant's board of directors:                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                          
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                       
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                          
|6. | The registrant's other
    certifying officer and I have indicated in this annual report whether or not
    there were significant changes in internal controls or in other factors that
    could significantly affect internal controls subsequent to the date of our
    most recent evaluation, including any corrective actions with regard to
    significant deficiencies and material weaknesses.



/s/ David Callander
David Callander
Chief Financial Officer
March 28, 2003



EXHIBIT INDEX

|(a)   | Exhibits                                                                                                                                         
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------
|1.1   | Memorandum of Agreement among Affiliated
    Adjusters, Inc. and the stockholders of The Precyse Corporation dated
    January 27, 1999*         
|      |                                                                                                                                                  
|3.1   | Articles of Incorporation, as amended*                                                                                                           
|      |                                                                                                                                                  
|3.2   | Bylaws, as amended on December 12, 2002                                                                                                          
|      |                                                                                                                                                  
|10.1  | Technology License and Maintenance Agreement
    between The Precyse Corporation and The CyberBingo Corporation dated
    December 4,1997*       
|      |                                                                                                                                                  
|10.2  | Consulting Agreement between dot com
    Entertainment Group, Inc. and Scott F. White Financial Limited dated July 1,
    2002 1#                
|      |                                                                                                                                                  
|10.3  | Consulting Agreement between dot com
    Entertainment Group, Inc. and Pericom Systems Corporation dated July 1,
    2002#                       
|      |                                                                                                                                                  
|10.4  | Transaction Processing Agreement between
    Precyse Corporation and First Atlantic Commerce Ltd. dated January 29, 1999*                        
|      |                                                                                                                                                  
|10.5  | Stock Option Plan (previously filed with
    Form S-8 in April 2001, re-filed to correct minor typographical errors)# *                          
|      |                                                                                                                                                  
|10.6  | Software License Agreement between DCEG
    (Antigua) Ltd. and Cyberbingo Corporation dated June 15, 2001 *                                      
|      |                                                                                                                                                  
|10.7  | Consulting Agreement between dot com
    Entertainment Inc. and Piranha Holdings Limited dated February 1, 2002#                                 
|      |                                                                                                                                                  
|10.8  | Employment Agreement between DCEG INC. and
    David Outhwaite dated December 12, 2002#                                                          
|      |                                                                                                                                                  
|10.9  | Employment Agreement between Precyse
    Corporation and David Callander dated March 25, 2002#                                                   
|      |                                                                                                                                                  
|10.10 | Employment Agreement between DCEG INC. and
    Christopher Smith dated December 1, 2002#                                                         
|      |                                                                                                                                                  
|21.1  | Subsidiaries of Registrant                                                                                                                       
|      |                                                                                                                                                  
|23.1  | Consent of Freed Maxick & Battaglia, CPAs, P.C.                                                                                                  
|      |                                                                                                                                                  
|99.1  | Certification of Chief Executive Officer
    Pursuant to 18 U.S.C. 1350 As Adopted Pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.
|      |                                                                                                                                                  
|99.2  | Certification of Chief Financial Officer
    Pursuant to 18 U.S.C. 1350 As Adopted Pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.
|     
|*     | Previously filed and incorporated by reference
    herein.                                                                                       
|#     | Represents a management contract or
    compensatory plan or arrangement.