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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             -----------------------

                                   FORM 10-KSB

                     ANNUAL REPORT UNDER SECTION 13 OR 15 (d
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                  For the fiscal year ended: December 31, 2002

                         Commission File Number: 0-22057
                             -----------------------

                          GK INTELLIGENT SYSTEMS, INC.
                  --------------------------------------------
                 (Name of Small Business Issuer in Its charter)

         Delaware                                                76-0513297
 ------------------------------                              ------------------
(State or Other Jurisdiction of                              (I.R.S. Employer
 Incorporation or Organization)                             Identification No.)

                    2602 Yorktown Place, Houston, Texas 77056
                -------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

                                 (713) 626-1504
                  ---------------------------------------------
                (Issuer's Telephone Number, including Area Code)

     Securities registered under Section 12(b) of the Exchange Act:

                                      None

     Securities registered under Section 12(g) of the Exchange Act:

                         Common Stock, $0.001 Per Value

     Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that a
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 disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

     The Issuer's revenues for the most recent fiscal year ended December 31,
2002, were approximately $-0-. The aggregate market value of the voting and
non-voting common equity held by non-affiliates of the Registrant on April 5,
2003 based upon the average bid and ask price of the common stock on the Over
the Counter Bulletin Board for such date, was approximately $0.12. The number of
shares of the Registrant's common stock issued and outstanding on April 5, 2003,
was 22,178,273 (post-reverse split adjusted).

     Transitional Small Business Disclosure Format. Yes [ ] No [X]

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                                TABLE OF CONTENTS


ITEMS                                                                      PAGE
                                     PART I

Item 1.       Description of Business ....................................   4
Item 2.       Description of Property ....................................  14
Item 3.       Legal Proceedings ..........................................  14
Item 4.       Submission of Matters to a Vote of Security Holders ........  14

                                     PART II

Item 5.       Market For Common Equity and Related Stockholder Matters ...  15
Item 6.       Management's Discussion and Analysis or Plan of Operation ..  16
Item 7.       Financial Statements .......................................  17
Item 8.       Changes in and Disagreements With Accountants on
                 Accounting and Financial Disclosure .....................  17

                                    PART III

Item 9.       Directors, Executive Officers, Promoters and Control Persons;
                 Compliance With Section 16(a) of the Exchange Act .......  18
Item 10.      Executive Compensation .....................................  20
Item 11.      Security Ownership of Certain Beneficial Owners and
                Management and Related Stockholder Matters ...............  23
Item 12.      Certain Relationships and Related Transactions .............  25
Item 13.      Exhibits and Reports on Form 8-K ...........................  28
Item 14.      Controls and Procedures ....................................  29
Item 15.      Principal Accountant Fees and Services .....................  29


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                              CAUTIONARY STATEMENT
                              --------------------

     Some of the statements contained in this Form 10-KSB for GK Intelligent
Systems, Inc. ("Company") discuss future expectations, contain projections of
results of operation or financial condition or state other "forward-looking"
information. These statements are subject to known and unknown risks,
uncertainties, and other factors that could cause the actual results to differ
materially from those contemplated by the statements. The forward-looking
information is based on various factors and is derived using numerous
assumptions. Important factors that may cause actual results to differ from
projections include, for example:

     o    the success or failure of management's efforts to implement their
          business strategy;

     o    the ability of the Company to raise sufficient capital to meet
          operating requirements;

     o    the uncertainty of consumer demand for our product;

     o    the ability of the Company to protect its intellectual property
          rights;

     o    the ability of the Company to compete with major established
          companies;

     o    the effect of changing economic conditions;

     o    the ability of the Company to attract and retain quality employees;
          and

     o    other risks which may be described in future filings with the SEC.

     Words such as "anticipates," "expects," "intends," "plans," "believes,"
"seeks," "estimates," and variations of such words and similar expressions are
intended to identify such forward-looking statements. These statements are not
guarantees of future performance and are subject to certain risks, uncertainties
and assumptions that are difficult to predict. Therefore, actual results and
outcomes may differ materially from what is expressed or forecasted in any such
forward-looking statements. Such risks and uncertainties include those set forth
herein under "Risk Factors" as well as those noted in the documents incorporated
herein by reference. Unless required by law, the Company undertakes no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.

                                       3
<PAGE>
                                     PART I

Item 1.       Description of Business.

     Business Development

     GK Intelligent Systems, Inc. was formed in Delaware on February 26 1988
under the name "Technicraft Financial, Ltd." In October 1991, its name was
changed to LBM-US, Inc. ("LBM"). Pursuant to an agreement effective August 1994,
GK Intelligent Systems, Inc., a Texas corporation ("GK-Texas"), transferred all
of its assets and liabilities to LBM, a Delaware shell corporation with no
significant assets or liabilities, in exchange for 675,892 (post reverse-split
adjusted) shares of LBM common stock. The remaining 96,327 (post reverse-split
adjusted) shares of LBM common stock out of a total of 772,219 (post
reverse-split adjusted) shares outstanding were retained by the former owners of
LBM in a transaction treated for accounting purposes as a purchase of the
Company by GK-Texas, referred to as a "reverse merger", thus making GK-Texas a
wholly owned subsidiary of LBM. Of the LBM shares of common stock issued to
GK-Texas, a total of 637,500 (post reverse-split adjusted) shares were issued to
Gary F. Kimmons and his family partnership. Mr. Kimmons had formed GK-Texas, a
Texas corporation, in February 1994 to produce and market multimedia,
skill-oriented training and performance support systems using artificial
intelligence. Mr. Kimmons had formed I-Net Intelligent Systems, Inc., a Delaware
corporation ("I-NET (Delaware)"), prior to forming GK-Texas. In October 1993,
I-NET (Delaware) had contracted with AT&T to develop the SMART ONE(R) training
program template pursuant to an industrial design services agreement ("AT&T
Agreement"). In February 1994, the intellectual property and all rights and
obligations under the AT&T Agreement were assigned by I-NET (Delaware) to
GK-Texas. In August 1994, after acquiring all of the technology of GK-Texas in
the reverse merger, the Company changed its name to GK Intelligent Systems, Inc.

     In November 1995, the Company acquired from Microelectronics and Computer
Technology Corporation ("MCC") the non-exclusive, worldwide, perpetual right and
license to use various computer software tools and languages (referred to as
"CARNOT" technology) through the issuance to MCC of 88,333 (post reverse-split
adjusted) shares of the Company's preferred stock, which was subsequently
converted into 88,333 (post reverse-split adjusted)shares of Company common
stock. MCC is a consortium of corporations, public and non-profit agencies and
universities who are cooperating and sharing information and technology in order
to gain competitive business advantages for its members. The Company is not a
member of MCC. To date, no final products have been developed using the CARNOT
technology, and there can be no assurance that any products will be developed
using the CARNOT technology.

     In August 1995, the stockholders of the Company amended and restated its
Certificate of Incorporation in its entirety primarily to increase the number of
shares of capital stock and to adopt more favorable officers and director's
indemnification and limitation of liability provisions available under Delaware
law. In September 1997, after approval by the boards of directors and majority
stockholders of both companies, the wholly owned subsidiary GK-Texas was merged
into the Company. In May 1998, the stockholders of the Company amended the
Certificate of Incorporation to increase the number of shares of common stock
("Common Stock"). In August 1998, the Company adopted a calendar year end that
became effective December 31, 1998.

     The Company has never filed for bankruptcy, receivership or similar
proceeding nor has the Company been a party to any reclassifications, mergers,
consolidations, or purchased or sold a significant amount of assets not in the
ordinary course of business other than those mentioned above.

     Business of Issuer

     GK Intelligent Systems, Inc., with its headquarters currently at 2602
Yorktown Place, Houston, Texas 77056, develops intelligent training software
that adapts to the learning styles and abilities of individual users. Around the
Web in 80 Minutes was the Company's first consumer product based on the

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Company's Smart One technology, which combines artificial intelligence,
multimedia technology and advanced instructional techniques to deliver training
more efficiently and cost-effectively than traditional computer-based training.

     Now resurrecting its operations after a period of dormancy, the Company has
the opportunity to become a key player in a new and emerging "intelligent
performance support" ("IPS") market, with the development of advanced learning
products/services as its initial focus. The Company is developing and marketing
intelligent training software to move into additional IPS markets. IPS promises
to deliver relevant expert assistance to those desiring timely guidance and
support as they perform their daily activities. In addition to expanding its
focus to new areas of the IPS market other than education/learning, the Company
will shift its emphasis to the licensure of its technology and the acquisition
of key service entities with potential IPS clientele to derive revenues rather
than the production and marketing of products. Management believes that by
pursuing this strategy, the Company will be able to enhance its revenues in a
shorter period of time.

     The Company was formed in 1994 and became an AMEX company in 1998. During
its operation, the company has affiliated itself with internationally known
entities such as AT&T, the US Dept of Transportation, NCR Corporation,
Microelectronics Computer Consortium, Radio Shack, National Geographic, The
Smithsonian, AOL, and other notable entities.

     Early in 1998, it's learning technology, Smart OneSM, was designated as an
official flagship (software) technology of the United Nations. The Director of
Global Technology for the UN, Dr. Joseph Ben Dak, joined the Board to facilitate
a global implementation. In the summer of 1998, a co-founder of Compaq Computer
Corporation, Rod Canion, joined the Company and shifted its emphasis to the
consumer marketplace. Mr. Canion departed prematurely in August of 1998. Shortly
thereafter, in early 1999, the Company developed its first product, Around the
Web in 80 Minutes, targeting the vast market of those desiring to learn how to
use the Internet.

     Approximately thirty thousand copies of the product were sold retail. The
retailers of America selected the Company and its product as "best new
technology", "best retail marketing strategy" and "best overall for show" at
their Retail XChange conference in February 1999. Around the Web In 80 Minutes
was distributed internationally by three large software distributors in America.
In April and May of 1999, the Company worked on an Internet Explorer version of
the product in conjunction with AOL, and had completed a beta version of the new
product ready for AOL market testing.

     However, the Company, suffering from a precipitous drop in its stock price
linked to Mr. Canion's premature departure, encountered difficulty in securing
the capital necessary to sustain its growth and brand its product. The Company
closed its doors in June 1999 with approximately $4 million in outstanding debt.

     The Company terminated all of its employees, except its President by
December 1999. All of the Company's tangible assets were lost to the landlord's
of the abandoned offices. The Company's receivables were uncollectible and
written off. The inventory was liquidated or abandoned. Only the Company's
intangible technology rights remained, however they were written down to a $-0-
book value because the Company is unable to establish its ability to
successfully market the products.

     During its dormancy, the Company received numerous inquiries from other
entities inquiring about the possibility of a restructuring and/or merger
opportunities.

     Products and Services

     The Company has developed an interactive software for use by companies to
better serve their customers needs. The software gathers data from interacting
with individuals in various settings. The data is used to develop a profile of
the individual's preferences and interests. Using this profile the company is
able to offer to the customer tailored services and products. The Company
believes that this software will be particularly useful to Internet based
marketers because they interact with their customers using computers. The
Company has identified several markets where it intends to commence its
services. These include the music and sports markets.

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<PAGE>
     Marketing and Distribution

        None.

     Recent Developments

        None.

     Strategic Alliances

        None.

     Competitive Business Conditions

     The Company intends to offer its services to internet marketers of services
and products. Most of these companies accumulate data on their customers however
the Company does not believe that any other company has interactive technology,
which determines the customer's interests and preferences.

     Raw Materials and Supplies

     The Company does not utilize any specialized raw materials. All necessary
required materials, if any, are readily available. The Company is not aware of
any existing or future problem that will materially affect the source and
availability of any such materials, which would be required by the Company.

     Dependence On One or a Few Major Customers

     The Company believes that the diversity of the products and services it
offers helps alleviate the dependence on any one customer or limited group of
customers. Through the widespread use of the Company's subsidiaries products and
services, in multimedia, e-commerce, publishing, Internet and other developing
industries, the Company will continue to increase its customer. The Company had
no customers in 2001.

     Intellectual Property and Proprietary Rights

     The Company currently holds two registered U.S. trademarks. The mark "SMART
ONE," Trademark Registration 2095594, was registered on September 9, 1997. The
mark "SMART ENTERPRISE," Trademark Registration 2267846, was registered on
August 3, 1999.

     Need for Government Approval

     With the exception of the requirement that the Company and its subsidiaries
be registered or qualified to do business in the States and foreign countries in
which they will be doing business, the software products developed and sold by
the Company are not subject to approval of any government regulation.

     Effect of Existing or Probable Governmental Regulations

     The Company's common stock is registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934. As a result of such registration, the Company
is subject to Regulation 14A of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), which regulates proxy solicitations. Section 14(a) requires
all companies with securities registered pursuant to Section 12(g) thereof to
comply with the rules and regulations of the Commission regarding proxy
solicitations, as outlined in Regulation 14A. Matters submitted to stockholders

                                       6
<PAGE>
of the Company at a special or annual meeting thereof or pursuant to a written
consent will require the Company to provide its stockholders with the
information outlined in Schedules 14A or 14C of Regulation 14; preliminary
copies of this information must be submitted to the Commission at least 10 days
prior to the date that definitive copies of this information are forwarded to
stockholders.

     The Company is also required to file annual reports on Form 10-KSB and
annual reports on Form 10-QSB with the Commission on a regular basis, and will
be required to disclose certain events in a timely manner, (e.g. changes in
corporate control; acquisitions or dispositions of a significant amount of
assets other than in the ordinary course of business; and bankruptcy) in a
Current Report on Form 8-K.

     The Company is not aware of any other governmental regulations now in
existence or that may arise in the future that would have an effect on the
business of the Company.

     Research and Development

     The Company has not performed any research or development of its technology
in either of the last two fiscal years. The Company will need to raise
additional capital to fund the research and development needed to make the
technology fully functional and marketable.

     Environmental Regulations

     The Company does not plan to manufacture the products that are derived from
the application and use of its technology. The Company does not believe that it
is affected by any rules, which have been enacted or adopted regulating the
discharge of material into the environment. However, environmental laws, rules
and regulations may have an adverse effect on any business venture viewed by the
Company as an attractive acquisition, reorganization or merger candidate, and
these factors may further limit the number of potential candidates available to
the Company for acquisition, reorganization or merger.

     Employees

         As of December 31, 2002, the Company had one employee, Mr. Gary
Kimmons. No union or any other form of collective bargaining unit represents any
employee. All employees are subject to employment agreements with the Company.
The Company believes its relations with its employees are excellent. The
Company's success will depend in large part upon its ability to retain its
current employee and secure additional employees.

                             CERTAIN BUSINESS RISKS

     The risks and uncertainties described below are not the only ones facing
the Company and there may be additional risks that are not presently known or
are currently deemed immaterial. All of these risks may impair business
operations.

     The Company's present and proposed business operations will be highly
speculative and subject to the same types of risks inherent in any new or
unproven venture, as well as risk factors particular to the industries in which
it will operate, and will include, among other things, those types of risk
factors outlined below.

     Risk that the Company's Common Stock may be deemed a "Penny Stock."

     The Company's common stock may be deemed to be a "penny stock" as that term
is defined in Rule 3a51-1 of the Exchange Act of 1934. Penny stocks are stocks
(i) with a price of less than five dollars per share; (ii) that are not traded
on a "recognized" national exchange; (iii) whose prices are not quoted on the
NASDAQ automated quotation system (NASDAQ-listed stocks must still meet
requirement (i) above); or (iv) of an issuer with net tangible assets of less
than US$2,000,000 (if the issuer has been in continuous operation for at least
three years) or US$5,000,000 (if in continuous operation for less than three
years), or with average annual revenues of less than US$6,000,000 for the last
three years.

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<PAGE>

     A principal exclusion from the definition of a penny stock is an equity
security that has a price of five dollars ($5.00) of more, excluding any broker
or dealer commissions, markups or markdowns. As of the date of this report the
Company's common stock has a price less than $5.00.

     If the Company's Common Stock is at any time deemed a penny stock, section
15(g) and Rule 3a51-1 of the Exchange Act of 1934 would require broker-dealers
dealing in the Company's Common Stock to provide potential investors with a
document disclosing the risks of penny stocks and to obtain a manually signed
and dated written receipt of the document before effecting any transaction in a
penny stock for the investor's account. Potential investors in the Company's
common stock are urged to obtain and read such disclosure carefully before
purchasing any shares that are deemed to be "penny stock."

     Moreover, Rule 15g-9 of the Exchange Act of 1934 requires broker-dealers in
penny stocks to approve the account of any investor for transactions in such
stocks before selling any penny stock to that investor This procedure requires
the broker-dealer to (i) obtain from the investor information concerning his or
her financial situation, investment experience and investment objectives; (ii)
reasonably determine, based on that information, that transactions in penny
stocks are suitable for the investor and that the investor has sufficient
knowledge and experience as to be reasonably capable of evaluating the risks of
penny stock transactions; (iii) provide the investor with a written statement
setting forth the basis on which the broker-dealer made the determination in
(ii) above; and (iv) receive a signed and dated copy of such statement from the
investor, confirming that it accurately reflects the investor's financial
situation, investment experience and investment objectives. Compliance with
these requirements may make it more difficult for investors in the Company's
common stock to resell their shares to third parties or to otherwise dispose of
them.

     Competition.

     There are several corporations, firms and individuals engaged in the type
of business activities in which the Company is presently engaged. Many of those
entities are more experienced and possess substantially greater financial
wherewithal, and technical and personnel resources than the Company or its
subsidiaries. Some of the Company's competitors have longer operating histories.
In addition, certain of the Company's competitors offer a wider range of
products than the Company, and thus may be able to respond more quickly to new
or changing opportunities, technologies and customer requirements. Certain of
the Company's competitors also have greater name recognition and larger customer
bases that could be leveraged, thereby making it difficult for the Company to
gain market share. Such competitors could conduct more extensive promotional
activities and offer better terms and lower prices to customers than the Company
can.

     In certain instances, the Company is competing with such organizations for
the same customers. In addition, competition among software developers exists
for experienced technical and other personnel. There can be no assurance that
the Company will be able to compete effectively with current or future
competitors or that such competition will not have a material adverse effect on
the Company's business, financial condition and operating results. While the
Company hopes to be competitive with other companies, there can be no assurance
that such will be the case.

     Volatile and Limited Market for Common Stock.

     As of December 31, 2002, the Company's common stock was quoted on the "Pink
Sheets" under the symbol "GKIG.PK." OTC, or "Over The Counter," securities are
issued by companies that either choose not to, or are unable to, meet the
standards for listing on the NASDAQ or a national stock exchange. OTC equity
securities can be quoted on the Pink Sheets Electronic Quotation Service, or, if
the companies meet the SEC reporting requirements and eligibility requirements
established by the NASD, such equity securities may be quoted on the NASD OTC
Bulletin Board Service.

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<PAGE>

     The market price of the Company's Common Stock has been and is likely to
continue to be highly volatile and subject to wide fluctuations due to various
factors, many of which may be beyond the Company's control, including: annual
variations in operating results; announcements of technological innovations or
new software, services or products by the Company or its competitors; and
changes in financial estimates and recommendations by securities analysts. In
addition, there have been large price and volume fluctuations in the stock
market, which have affected the market prices of securities of many technology
and services companies, often unrelated to the operating performance of such
companies. These broad market fluctuations, as well as general economic and
political conditions, may adversely affect the market price of the Company's
common stock. In the past, volatility in the market price of a company's
securities has often led to securities class action litigation. Such litigation
could result in substantial costs and diversion of the Company's attention and
resources, which could have a material adverse effect on the Company's business,
financial condition and operating results.

     Dependence on Key Employees and Need for Additional Management and
Personnel.

     Historically, the Company has been heavily dependent on the ability of Gary
F. Kimmons who has contributed essential technical and management experience.
The loss of Mr. Kimmons services would have a material adverse effect on the
Company's business. However, Mr. Kimmons interests are closely aligned with
those of the Company due to his large ownership interest in the Company. There
can be no assurance that it will be able to employ qualified persons on
acceptable terms to replace Mr. Kimmons should he become unavailable.

     In the event of future growth in administration, marketing, manufacturing
and customer support functions, the Company may have to increase the depth and
experience of its management team by adding new members. The Company's success
will depend to a large degree upon the active participation of its key officers
and employees, as well as, the continued service of its key technology and
management personnel and its ability to identify, hire and retain additional
qualified personnel, particularly those in the field of computer programming.
There can be no assurance that the Company will be able to recruit such
qualified personnel to enable it to conduct its proposed business successfully.

     Unascertainable Risks Associated with Potential Future Acquired Businesses.

     To the extent that the Company may acquire a business in a highly risky
industry, the Company will become subject to those risks. Similarly, if the
Company acquires a financially unstable business or a business that is in the
early stages of development, the Company will become subject to the numerous
risks to which such businesses are subject. Although management intends to
consider the risks inherent in any industry and business in which it may become
involved, there can be no assurance that it will correctly assess such risks.

     Risks Associated with Acquisitions and Strategic Relationships.

     The Company may acquire other companies or technologies and regularly
evaluates such opportunities. Acquisitions entail numerous risks, including
difficulties in the assimilation of acquired operations and products, diversion
of management's attention from other business concerns, amortization of acquired
intangible assets; and potential loss of key employees of acquired companies.
The Company has limited experience in assimilating acquired organizations into
our operations.

     No assurance can be given as to the Company's ability to integrate
successfully any operations, personnel, services or products that might be
acquired in the future. Failure to successfully assimilate acquired
organizations could have a material adverse effect on the Company's business,
financial condition and operating results. The Company has established a number
of strategic relationships with online and Internet service providers and
software and information service providers. Additionally, there can be no
assurance that any such relationships will be maintained, or that if they are
maintained, they will be successful or profitable. The Company may not develop
any new such relationships in the future.

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<PAGE>

     Due to the foregoing factors, annual revenues and operating results are
difficult to forecast. The Company believes that period-to-period comparisons of
the Company's operating results will not necessarily be meaningful and they
should not be relied on as any indication of future performance. The Company's
future annual operating results may not consistently meet the expectations of
securities analysts or investors, which in turn may have an adverse effect on
the market price of the Company's Common Stock. Additionally, to the extent that
the Company may acquire a business in a highly risky industry, the Company will
become subject to those risks.

     Conflicts of Interest; Related Party Transactions.

     The possibility exists that the Company may acquire or merge with a
business or company in which the Company's executive officers, directors,
beneficial owners or their affiliates may have an ownership interest. Although
there is no formal bylaw, stockholder resolution or agreement authorizing any
such transaction, corporate policy does not forbid it and such a transaction may
occur if management deems it to be in the best interests of the Company and its
stockholders, after consideration of all factors. A transaction of this nature
would present a conflict of interest to those parties with a managerial position
and/or an ownership interest in both the Company and the acquired entity, and
may compromise management's fiduciary duties to the Company's stockholders. An
independent appraisal of the acquired company may or may not be obtained in the
event a related party transaction is contemplated. Furthermore, because
management and/or beneficial owners of the Company's common stock may be
eligible for finder's fees or other compensation related to potential
acquisitions by the Company, such compensation may become a factor in
negotiations regarding such potential acquisitions. It is the Company's
intention that all future transactions be entered into on such terms as if
negotiated at arms length, unless the Company is able to receive more favorable
terms from a related party.

     Risks Associated with Significant Fluctuations in Annual Operating Results.

     The Company expects to experience large fluctuations in future annual
operating results that may be caused by many factors, including the timing of
introductions or enhancements to its software products by the Company or its
competitors; market acceptance of such newly introduced or upgraded products;
the pace of development of the market for the Company's software products;
changes in strategy; the success of or costs associated with acquisitions, joint
ventures or other strategic relationships; changes in key personnel; seasonal
trends; changes in the level of operating expenses to support projected growth;
and general economic conditions.

     Risks Associated with Management of a Changing Business.

     The Company expects operating expenses and staffing levels to increase
substantially in the future. In particular, the Company intends to hire a
significant number of additional skilled personnel, including persons with
experience in software development, marketing and sales. Competition for such
personnel is intense, and there can be no assurance that the Company will be
able to find or keep additional suitable persons in the future. The Company
expects that future expansion will continue to challenge the Company's ability
to successfully hire and retain associates.

     If the Company's revenues do not keep up with operating expenses, the
Company's production and release of new and upgraded products do not meet
increasing demands, the Company fails to attract, assimilate and retain
qualified personnel, or the Company fails to manage the Company's expansion
effectively, there could be a material adverse effect on the Company's business,
financial condition and operating results. The rapid growth in the use and
demand for the Company's software products may strain the Company's ability to
adequately expand.

     Risks Associated with Delays in Introduction of New Services and Products.

     The Company's future success depends in part on the Company's ability to
develop and enhance the Company's software products. There are significant
technical risks in the development of new products or enhanced versions of
existing products. There can be no assurance that the Company will be successful
in achieving any of the following: effectively using new technologies; adapting
the Company's products to emerging industry standards; developing, introducing
and marketing product enhancements; or developing, introducing and marketing new

                                       10
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products. The Company may also experience difficulties that could delay or
prevent the development, introduction or marketing of these products.
Additionally, these new products may not adequately meet the requirements of the
marketplace or achieve market acceptance. If the Company is unable to develop
and introduce enhanced or new products quickly enough to respond to market or
customer requirements, or if they do not achieve market acceptance, the
Company's business, financial condition and operating results will be materially
adversely affected.

     Risks Associated with Dependence on Intellectual Property Rights.

     The Company does not presently hold any patents, but does hold registered
copyrights for the marks "Smart One" and "Smart Enterprise." The Company intends
to seek additional copyright and trademark protection of its trade names and
products. The Company's success and ability to compete are dependent to a degree
on the Company's name and product recognition. Accordingly, the Company will
primarily rely on copyright, trade secret and trademark law to protect its
product and brand names of products or under which the Company conducts its
business. Effective trademark protection may not be available for the Company's
trademarks. There can be no assurance that the Company will be able to secure
significant protection for the Company's trademarks.

     The Company's competitors or others may adopt product or service names
similar to the Company's, thereby impeding the Company's ability to build brand
identity and possibly leading to customer confusion. The Company's inability to
adequately protect its product, brand, trade names and trademarks would have a
material adverse effect on the Company's business, financial condition and
operating results. Despite any precautions the Company takes, a third party may
be able to copy or otherwise obtain and use the Company's software or other
proprietary information without authorization or to develop similar software
independently.

     Policing unauthorized use of the Company's technology is made especially
difficult by the global nature of the Internet and the difficulty in controlling
the ultimate destination or security of software or other data. The laws of
other countries may afford the Company little or no effective protection for the
Company's intellectual property.

     There can be no assurance that the steps the Company takes will prevent
misappropriation of the Company's technology or that agreements entered into for
that purpose will be enforceable. In addition, litigation may be necessary in
the future to enforce the Company's intellectual property rights; protect the
Company's trade secrets; determine the validity and scope of the proprietary
rights of others; or defend against claims of infringement or invalidity. Such
litigation, whether successful or unsuccessful, could result in substantial
costs and diversions of resources, either of which could have a material adverse
effect on the Company's business, financial condition and operating results.

     Risks Associated with Infringement.

     The Company may in the future receive notices of claims of infringement on
other parties' proprietary rights. There can be no assurance that claims for
infringement or invalidity (or any indemnification claims based on such claims)
will not be asserted or prosecuted against the Company. Any such claims, with or
without merit, could be time consuming and costly to defend or litigate, divert
the Company's attention and resources or require the Company to enter into
royalty or licensing agreements. There can be no assurance that such licenses
would be available on reasonable terms, if at all, and the assertion or
prosecution of any such claims could have a material adverse effect on the
Company's business, financial condition and operating results.

                                       11
<PAGE>
     Risks Associated with Entering New Markets.

     One element of the Company's strategy is to leverage the Company's brand
names of products that the Company provides. No assurance can be given that the
Company will be able to compete successfully in any such new markets. There can
be no assurance that the Company's marketing efforts or the Company's pursuit of
any new opportunities will be successful. If the Company's efforts are not
successful, the Company could realize less than expected earnings, which in turn
could result in a decrease in the market value of the Company's Common Stock.
Furthermore, such efforts may divert management attention or inefficiently
utilize the Company's resources.

     Substantial Doubt that the Company Can Continue as a Going Concern.

     The Company expects to continue to incur significant capital expenses in
pursuing its business plan to market its product and expanding its product line
and obtaining additional financing through stock offerings or other feasible
financing alternatives. In order for the Company to continue its operations at
its existing levels, the Company will require significant additional funds over
the next twelve months. Therefore, the Company is dependent on funds raised
through equity or debt offerings. Additional financing may not be available on
terms favorable to the Company, or at all. If these funds are not available the
Company may not be able to execute its business plan or take advantage of
business opportunities. The ability of the Company to obtain such additional
financing and to achieve its operating goals is uncertain. In the event that the
Company does not obtain additional capital or is not able to increase cash flow
through the increase of sales, there is a substantial doubt of its being able to
continue as a going concern.

     New and Uncertain Markets and Technology; Unproven Market Acceptance.

     Factors that may adversely affect the Company's operating results include,
but are not limited to, the Company's ability to attract consumers/users at a
steady rate and maintain consumer/user satisfaction, the Company's ability to
maintain or increase sales productivity, the introduction of new or enhanced
sites and services, the amount of expenditures for online advertising by
businesses, the level of use of online services and consumer acceptance of the
Internet for services such as those the Company offers, the Company's ability to
upgrade and develop its systems and the amount and timing of operating costs and
capital expenditures relating to expansion of the Company's business and
infrastructure and general economic conditions. The markets for the Company's
products and services have only recently begun to develop, are rapidly changing
and are characterized by low barriers to entry. There can be no assurance that
the markets for the Company's products and services will develop at the pace
anticipated and even if the market emerges that it will become economically
sustainable. Additionally, it is becoming increasingly important that strategic
relationships with larger, more financially sound, and well-known entities be
entered into to obtain exposure to a large number of users, sponsors and
advertisers. There is no assurance that these strategic relationships can be
developed and agreements entered into.

     Future Capital Needs; Uncertainty of Additional Funding.

     No assurance can be given that the Company will be able to conduct its
marketing and product development programs as planned, or that changes in the
Company's marketing and product development plans or other changes affecting the
Company's operating expenses will not result in the expenditure of such proceeds
before such time. Contingencies may arise that require the Company to obtain
additional funding before that time. The Company's future capital requirements
will depend on many factors, including continued product development programs,
the magnitude of these programs, the time and expense involved in obtaining new
customers, competing technological and market developments, the establishment of
additional collaborative arrangements, the costs involved in filing and
prosecuting and enforcing copyright and trademark claims, establishing marketing
programs and conducting commercialization activities and arrangements for new
products and services.

     Substantial Future Sales of Stock; Dilution.

     There may be substantial sales of the Company stock, common or preferred.
Sales of substantial amounts of stock could have a material dilutive effect on
shareholders. Additionally, it may be necessary to offer warrants or options to
obtain strategic relationships or to raise additional capital. All of these
issuances will dilute the holdings of existing shareholders thereby reducing
such holder's percentage ownership.

                                       12
<PAGE>

     No Dividends.

     The Company anticipates that it will use any funds available to finance its
growth and that it will not pay cash dividends to stockholders in the
foreseeable future.

     Risk of Technical Obsolescence.

     The Company operates in an ever-evolving field. Developments are expected
to continue at a rapid pace in the industry in general. Competition from other
producers, large companies, joint ventures, research and academic institutions
and others is intense and expected to increase. Many of these companies and
institutions have substantially greater capital resources, research and
development staffs and facilities than the Company, and many have substantially
greater experience in conducting testing, manufacturing and marketing of
products. These entities represent significant long-term competition for the
Company. There can be no assurance that developments by others will not render
the Company's technologies and future products obsolete or noncompetitive. In
addition, the Company's competitors might succeed in developing technologies and
products that are more effective than those that are being developed by the
Company or that would render the Company's technology and products obsolete or
noncompetitive. See "Business - Competitive Business Conditions."

     Decreasing Prices for Software.

     In the last few years the average price for some categories of software
have fallen tremendously. If this trend should affect software that licenses the
Company's technology the traditionally high margins will be eroded which will be
passed on to the Company in the form of lower revenues. There can be no
guarantee that the price of the software utilizing the Company's technology will
not decline over the short-term future. Further, competition may cause the
Company or those who utilize its technologies to lower prices in the future. It
is difficult to raise prices in the industry even if internal costs increase.

     Technology Changes in the Software Industry are Rapid.

     In the past few years software has been produced on different media and in
a matter of a few short years the industry has seen its software go from floppy
disk to CD-ROM to being offered online. It cannot be known if the Company will
be able to rapidly and effectively make the necessary adjustment with its
business practices to keep pace and stay competitive in the marketplace.

     Limited Current Sales and Marketing Capability.

     The Company has limited experience in sales, marketing and distribution. To
market its products, the Company must both hire and retain the necessary
personnel to distribute and market the product or enter into collaborative
arrangement or distribution agreements with third parties who will market such
products or develop its own marketing and sales force with technical expertise
and supporting distribution capability. There can be no assurance that the
Company will be able to hire or retain the personnel with sufficient experience
and knowledge to distribute and market its products or be able to enter into
collaborative or distribution arrangements or develop its own sales force, or
that such sales and marketing efforts, including the efforts of the companies
with which the Company will enter into agreements will be successful.

     No Guarantee of Continued Listing on OTC Bulletin Board.

     There is no guarantee that the Company's common stock will continue to be
listed on the pink sheets or on any other published medium including but not
limited to the OTC Bulletin Board or any publication by the National Quotation
Bureau, Incorporated or any by similar successor organizations, or by any member
firm of the New York Stock Exchange, or other American Exchange, NASDAQ, or NASD
related entity.

                                       13
<PAGE>
     History of Losses; Uncertainty of Future Profitability.

     As of December 31, 2002, the Company had accumulated significant net
losses. The development of the Company's products will require the commitment of
substantial resources to increase its advertising, marketing and distribution of
its existing products and to complete the testing manufacturing, marketing and
distribution of said new products. These expenditures are expected to result in
substantial and increasing losses over the next six months. There can be no
assurance that the Company will not incur substantial and continuing net losses
beyond the next six months or that the Company will ever reach profitability.
Furthermore, there can be no assurance the Company's products will meet the
expectations and effectiveness required to be competitive in the market place,
that the Company will enter into arrangements for product development and
commercialization, successfully market its software products, or achieve
customer acceptance.

     Reports to Security Holders

     Copies of the Company's reports, as filed with the Securities and Exchange
Commission, are available and can be accessed and downloaded via the internet at
http://www.sec.gov/cgi-bin/srch-edgar, and simply typing in "GK Intelligent
Systems."

Item 2. Description of Property.

     The Company has no property, leased or owned at December 31, 2002.

Item 3. Legal Proceedings.

     Texas Workforce Commission. On February 10, 2000, the Texas Workforce
Commission placed an administrative lien on the Company in the amount of
$109,024.

     Claim of The Hermann Group. May 14, 2002 the Company received demanding a
payment pursuant to the May 1, 2001 Consulting Agreement and threatening a
lawsuit for the Company's breach of contract and demanding payment of $180,000
as fees due under the contract for services performed by the Hermann Group. The
Company believes The Hermann Group's claim is without merit as no services were
provided and has responded to the demand letter.

     The Company is not aware of pending claims or assessments, other than as
described above, which may have a material adverse impact on the Company's
financial position or results of operations.

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

     No matter was submitted to a vote of our shareholders during the fourth
quarter of 2002.

                                       14
<PAGE>
                             PART II

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

     During the period covered by this report, the Company's Common Stock was
listed and traded on the Over the Counter Bulletin Board under the symbol "GKIS"
and "GKIG.PK". There has been relatively limited trading activity in the
Company's stock since inception. The following table represents the high and low
closing prices for the Company's Common Stock for each quarter of the calendar
years ended December 31, 2002 and 2001.

<TABLE>
<CAPTION>

         Fiscal 2002                                 High                       Low
---------------------------------------------------------------------------------------------
        <S>                                          <C>                        <C>

         First Quarter(1)                           $0.04                      $0.01
         Second Quarter(1)                          $0.64                      $0.01
         Third Quarter(1)                           $0.17                      $0.04
         Fourth Quarter(1)                          $0.16                      $0.03

         Fiscal 2001                                 High                       Low
---------------------------------------------------------------------------------------------
         First Quarter(1)                           $0.03                      $0.02
         Second Quarter(1)                          $0.035                     $0.015
         Third Quarter(1)                           $0.23                      $0.03
         Fourth Quarter(1)                          $0.07                      $0.02
</TABLE>
-------------------
     (1)  This represents the closing bid information for the stock on the
          Non-Nasdaq OTC. The bid and ask quotations represent prices between
          dealers and do not include retail markup, markdown or commission. They
          do not represent actual transactions and have not been adjusted for
          stock dividends or splits.

     All of the above information was listed as reported by the National
Association of Securities Dealers Composite feed or other qualified interdealer
quotation medium.

     Holders
     --------

     There were approximately 143 holders of record of the Company's Common
Stock as of December 31, 2002.

     Dividends
     ---------

     The Company has not declared any cash dividends with respect to its common
stock, and does not intend to declare dividends in the foreseeable future. There
are no material restrictions limiting, or that are likely to limit, the
Company's ability to pay dividends on its securities.


     Recent Sale of Unregistered Securities
     --------------------------------------
     On October 18, 2002 the Company undertook the Private Placement to
accredited investors of 40 Units (the "Units") at a price of $25,000 per Unit.
Each Unit consists of 100,000 restricted shares of Common Stock and a warrant to
purchase up to 200,000 restricted shares of Common Stock. Each warrant vests
immediately, will be exercisable for a period of two years from date of issuance
at am exercise price of $0.35 per share. As of December 31, 2002, the Company
had sold 7 Units to 5 investors under which it issued 700,000 restricted shares
and warrants to purchase 1,400,000 shares of common stock.

     On December 4, 2002, the Company authorized the issuance of 25,000
restricted shares of common stock to Wenthur & Chachas, LLP in payment of $5,606
of legal fees owing.

                                       15
<PAGE>

     On December 17, 2002, the Company authorized the issuance of 200,000
restricted shares of common stock to After Play Entertainment, Inc. pursuant to
the terms of the Consulting Agreement dated December 12, 2002.

     On December 17, 2002, the Company authorized the issuance of 100,000
restricted shares of common stock to Suns Associates Group pursuant to the terms
of the Consulting Agreement dated December 13, 2002.

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

     Cautionary Forward - Looking Statement

     This section and other parts of this Form 10-KSB contain forward-looking
statements that involve risks and uncertainties. The Company's actual results
may differ significantly from the results discussed in the forward-looking
statements. Certain matters discussed herein may contain forward-looking
statements that are subject to risks and uncertainties. Such risks and
uncertainties include, but are not limited to, the following:

          -    the volatile and competitive nature of the software business,

          -    the uncertainties surrounding the rapidly evolving markets in
               which the Company competes,

          -    the uncertainties surrounding technological change and the
               Company's dependence on computer systems,

          -    the Company's dependence on its intellectual property rights,

          -    the success of marketing efforts by third parties,

          -    the changing demands of customers and

          -    the arrangements with present and future customers and third
               parties.

     Should one or more of these risks or uncertainties materialize or should
any of the underlying assumptions prove incorrect, actual results of current and
future operations may vary materially from those anticipated.

     The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto included in Item 7 of this
Form 10-KSB. All information presented herein is based on the Company's fiscal
calendar.

     Results of Operations
     ---------------------

     Net revenues for the years ended December 31, 2002 and 2001 were $-0- and
$-0-, respectively. The Company had operating expenses of $835,321 for the year
ending December 31, 2002 compared to $355,828 for 2001. The increase of $479,493
was due to the Company engaging various consultants as it attempts to
reestablish its business. The consultants were paid primarily in shares of the
Company's common stock. The value of the shares issued in 2002 was $573,607
compared to $12,000 in 2001.

     The Company unsuccessfully launched its product sales in the first six
months of 1999. The Company was unable to raise sufficient capital to sustain
its marketing effort and closed its offices and terminated most of the personnel
in June of 1999. In 2001, the Company's general and administrative expenses were
primarily the accrual of officer wages and other expenses incurred in winding
down the failed operations. In 2002, the Company began to rebuild the business
and to complete the accounting and legal work necessary to become current in its
securities filings.

     The Company had interest expense of $343,414 for the year ended December
31, 2002 compared to $421,982 for 2001. The interest is accrued on the Company's
unpaid accounts payable and accrued expenses. The decrease in interest expense
was the result of the Company converting $877,073 of its debt to 6,521,980
shares of common stock. The Company also recorded at gain of $2,250 on the
release of debt.

     Liquidity
     ---------

     During the year ended December 31, 2002, the Company used cash of $159,434
in its operations compared to $50,000 in 2001. The Company received $175,000
cash from the sale of its common stock in 2002 compared to none in 2001. The
Company received $50,000 in shareholder loans in 2001 compared to $-0- in 2002.
The Company had cash on hand of $15,566 as of December 31, 2002 and none at
December 31, 2001. The Company ceased operations in 1999 and was inactive until
the second quarter of 2002. Management believes that it will require
approximately $3,000,000 of additional operating capital in order for the
Company to revive its operations. The Company is seeking additional capital
through placements of its common stock or debt. The is no guarantee that such
capital will be available or that if available will be on terms acceptable to
the Company.

Item 7. Financial Statements.

     The financial statements filed as a part of this report include:
<TABLE>
<CAPTION>

        <S>                                                                             <C>
         Index to Financial Statements ...............................................  F-1
         Report of Independent Certified Public Accountants ..........................  F-2
         Balance Sheet as of December 31, 2002 .......................................  F-3
         Statements of Operations for the years ended December 31, 2002 and 2001,
           and the period from inception (October 4, 1993) through December 31, 2002 .  F-4
         Statements of Stockholders' Equity for the period from
           inception (October 4, 1993) through December 31, 2002 .....................  F-5
         Statements of Cash Flows for the years ended December 31, 2002 and 2001,
           and the period from inception (October 4, 1993) through December 31, 2002 .  F-10
         Notes to Financial Statements ...............................................  F-12
</TABLE>

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

     (a)Previous Independent Accountants.

          (i) On or about June 15, 1999, BDO Seidman, LLP, resigned as the
     Company's independent accountants.

          (ii) None of the reports of BDO Seidman, LLP on the financial
     statements for the fiscal year ended December 1998 and May 31,1998,
     contained an adverse opinion or disclaimer of opinion or were qualified or
     modified as to uncertainty, audit scope or accounting principles.

          (iii) During the fiscal year prior to the date of resignation by BDO
     Seidman, LLP, there were no disagreements with BDO Seidman, LLP on any
     matter of accounting principles or practices, financial statement
     disclosure, or auditing scope or procedure which disagreements, if not
     resolved to the satisfaction of BDO Seidman, LLP, would have caused BDO
     Seidman, LLP to make reference to the subject matter of the disagreement(s)
     in their reports on the consolidated financial statements for such years.

                                       16
<PAGE>
          (iv) During the Company's two most recent fiscal years for which
     annual reports on Form 10-K, were filed by the Company, through the quarter
     ended September 30, 2002, there have been no reportable events (as defined
     in Regulation S-K Item 304(a)(1)(v)).

          (v) The Company provided BDO Seidman, LLP, with a copy of the
     disclosure contained herein, made in response to Item 304 (a) of Regulation
     S-K. The Company requested BDO Seidman, LLP, to furnish, and BDO Seidman,
     LLP, furnished to, the Company a letter addressed to the Commission stating
     that it agreed with the statements made by the Company.

     (b)Newly Engaged Independent Accountants.

     On September 6, 2002, the Company engaged HJ & Associates, LLC, as its new
independent accountants. Through September 6, 2002, neither the Company nor
anyone on its behalf consulted HJ & Associates, LLC, regarding (i) the
application of accounting principles to any transaction, either completed or
proposed, or (ii) the type of audit opinion that might be rendered by HJ &
Associates, LLC, on the Company's financial statements.

                                    PART III

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

     See Item 11 for information on the beneficial ownership of the Company's
securities.

     (a) Identity of Directors and Executive Officers.
<TABLE>
<CAPTION>

         Name                           Age      Position
        --------------------------------------------------------------------------------------------------
        <S>                             <C>      <C>
         Gary F. Kimmons                52       Chairman of the Board, President
                                                 and Chief Executive Officer and Chief Financial Officer
         Dick Meador                    53       Director
         Kathryn Kimmons                49       Director and Secretary
</TABLE>

     There are no arrangements or understandings between any of the directors or
executive officers, or any other person or person pursuant to which they were
selected as directors and/or officers.

     GARY F. KIMMONS, Age 52, has served as chairman of the board of the Company
since August 1998, and from 1993 until April 1998. Mr. Kimmons has also served
as president and chief executive officer of the Company since 1993 and secretary
since September 1998. Mr. Kimmons has extensive experience in the design,
development and implementation of business management and technical training
systems. Mr. Kimmons received a bachelor of science degree in psychology,
anthropology, and behavioral science from Rice University in 1973 and a masters
degree in applied industrial psychology and management science from Stevens
Institute of Technology in 1975.

     DICK MEADOR, age 53, currently serves as Director of Operations for
Whataburger, Inc., a large regional service provider in the food and beverage
industry. Mr. Meador has been an employee there for 16 years, during which time
he has distinguished himself as a top performer. Mr. Meador brings to the Board
significant expertise in the management of corporate operations. Prior to his
tenure with Whataburger, Inc., Meador worked with several other large food
service providers in a similar capacity.

     KATHRYN KIMMONS, age 49, currently serves as the Secretary and a Director
to the Company. Mrs. Kimmons has over 20 years of experience in the
entertainment industry as well as 10 years in retail sales and operations. A
business entrepreneur who has founded her own successful entertainment business
as well as a retail business selling antiques and collectibles, Mrs. Kimmons is
uniquely talented in small business management, merchandising presentation,
creative retail project implementation, interior design and display, retail
buying, and effective sales and marketing.

                                       17
<PAGE>

     Directorships
     -------------

     No Director of the Company or person nominated or chosen to become a
Director holds any other directorship in any company with a class of securities
registered pursuant to section 12 of the Exchange Act or subject to the
requirements of section 15(d) of such Act or any other company registered as an
investment company under the Investment Company Act of 1940.

     Family Relationships
     --------------------

     Gary Kimmons and Kathryn Kimmons, both directors and officers of the
Company, are husband and wife.

     Involvement in Certain Legal Proceedings
     ----------------------------------------

     During the past five years, no present or former director, executive
officer or person nominated to become a director or an executive officer of the
Company:

     (1) was a general partner or executive officer of any business against
     which any bankruptcy petition was filed, either at the time of the
     bankruptcy or two years prior to that time;

     (2) was convicted in a criminal proceeding or named subject to a pending
     criminal proceeding (excluding traffic violations and other minor
     offenses);

     (3) was subject to any order, judgment or decree, not subsequently
     reversed, suspended or vacated, of any court of competent jurisdiction,
     permanently or temporarily enjoining, barring, suspending or otherwise
     limiting his involvement in any type of business, securities or banking
     activities; or

     (4) was found by a court of competent jurisdiction (in a civil action), the
     Securities and Exchange Commission or the Commodity Futures Trading
     Commission to have violated a Federal or state securities or commodities
     law, and the judgment has not been reversed, suspended or vacated.

     Section 16 (a) Beneficial Ownership Compliance
     ----------------------------------------------

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than ten percent of the
Company's Common Stock, to file initial reports of beneficial ownership on Form
3, changes in beneficial ownership on Form 4 and an annual statement of
beneficial ownership on Form 5, with the SEC. Such executive officers, directors
and greater than ten percent shareholders are required by SEC rules to furnish
the Company with copies of all such forms that they have filed.

     Based solely on its review of the copies of such forms filed with the SEC
electronically, received by the Company and representations from certain
reporting persons, the Company believes that for the fiscal year ended December
31, 2002, all the officers, directors and more than 10% beneficial owners
complied with the above described filing requirements, although the initial
Forms 3 and 4 of each officer and director was filed late.


                                       18
<PAGE>
Item 10.      Executive Compensation.

     The following table sets forth the aggregate compensation paid by the
Company for services rendered during the periods indicated:

<TABLE>
<CAPTION>

                           SUMMARY COMPENSATION TABLE
                           --------------------------
                                                                                Long Term Compensation
                                    Annual Compensation                         Awards
                                    Payouts
-------------------------------------------------------------------------------------------------------------------
                                                                                    Securities              All
                                                          Other                     Underlying              Other
                                                          Annual       Restricted   Options/     LTIP      Compen-
Name and                 Year or                          Compen-      Stock        SAR's        Payouts    sation
Principal                Period  Salary     Bonus         sation)      Awards       (#)          ($)        ($)
Position                 Ended   ($)        ($)           ($)
(a)                      (b)     (c)        (d)           (e)          (f)          (g)          (h)        (i)
-------------------------------------------------------------------------------------------------------------------
<S>                      <C>     <C>         <C>          <C>          <C>         <C>           <C>        <C>
Gary F. Kimmons(1)(2)    2002    $240,000    0            $0           0            0            0          0
President, CEO and       2001    $240,000    0            $0           0            0            0          0
Director                 2000    $240,000    0            $0           0            0            0          0

Kathryn Kimmons          2002    $0          0            $0           0            0            0          0
Director and Secretary   2001    $0          0            $0           0            0            0          0
                         2000    $0          0            $0           0            0            0          0

Dick Meador(3)           2002    $0          0            $0           175,000      0            0          0
Director                 2001    $0          0            $0           0            0            0          0
                         2000    $0          0            $0           0            0            0          0

Renee Ethridge(4)        2002    $0          0            $0           100,000      0            0          0
Former Director          2001    $0          0            $0           0            0            0          0
                         2000    $0          0            $0           0            0            0          0

Lance Kimmons(5)         2002    $0          0            $0           0            0            0          0
Former Director          2001    $0          0            $0           0            0            0          0
                         2000    $0          0            $0           0            0            0          0
---------------------
</TABLE>

     (1)  Mr. Kimmons, the President and CEO of the Company is currently subject
          to an Employment Agreement with the Company. See "Employment
          Contracts" below.

     (2)  In 2002, Mr. Kimmons was to received a base salary of $240,000,
          $130,000 of which was paid through the issuance of 1,300,000
          post-reverse split adjusted restricted shares of common stock and
          $110,000 of which was paid in 2003 in the form of a warrant entitling
          Mr. Kimmons to purchase 520,000 shares of common stock at a price of
          $0.35 per share. In 2001 Mr. Kimmons received a base salary of
          $240,000, which was accrued and paid in 2002 in the form of 2,400,000
          restricted shares of common stock. In 2000 Mr. Kimmons received a base
          salary of $240,000 that was accrued and paid in 2002 in the form of
          2,400,000 restricted shares of common stock.

     (3)  In 2002, Mr. Meador a Director of the Company received 175,000
          post-reverse split adjusted restricted shares of common stock in
          consideration of director services valued at $17,500. Mr. Meador was
          not an officer or director of the Company in 2001 and 2000 and did not
          receive any form of compensation during these periods.

     (4)  Ms. Ethridge who resigned as a director of the Company effective as of
          July 15, 2002 received 100,000 post-reverse split adjusted restricted
          shares of common stock in consideration of director and consulting
          services provided to the Company valued at $10,000. Ms. Ethridge was
          not an officer or director of the Company in 2001 and 2002 and did not
          receive any form of compensation during these periods.

                                       19
<PAGE>

     (5)  Mr. Lance Kimmons was appointed as a director on March 18, 2002 and
          resigned effective as of April 1, 2002, and did not receive any
          compensation during 2002, 2001 or 2000.

     Employment Contracts
     --------------------

     In March 1998, the Company amended and restated its employment agreement
with Mr. Kimmons. The amended agreement provided for a three-year term that
automatically renewed at the end of the term for consecutive one-year terms, and
which provides for an annual base compensation of $240,000 and a warrant to
purchase 400,000 (post reverse split adjusted) shares of Company Common Stock
exercisable at a purchase price of $3.125 (post reverse split adjusted) per
share (post-reverse split adjusted closing market price on the date of grant).
All of said warrants were fully vested as of December 31, 2002. None of the
warrants have been exercised and expired as of March 13, 2003.

     Mr. Kimmons also held a warrant to purchase 170,909 (post reverse split
adjusted) shares of Company Common Stock exercisable at a purchase price of
$3.125 (post reverse split adjusted) per share (post-reverse split adjusted
closing market price on the date of grant). All of said warrants were fully
vested as of December 31, 2002. None of the warrants have been exercised and
expired as of March 13, 2003.

     On March 20, 2002, the Company entered into an Interim Compensation
Agreement with Mr. Kimmons under which the Company agreed to and issued 600,000
post-reverse split adjusted shares of common stock to Mr. Kimmons in full
satisfaction of the accrued and unpaid salary of $60,000 due and owing to Mr.
Kimmons for the period April 15, 2002 through July 15, 2002.

     On February 1, 2003, subsequent to the period covered by this report, the
Company entered into a new employment agreement with Mr. Kimmons. The agreement
provides for a three-year term that automatically renews at the end of the term
for consecutive one-year terms, and which provides for an annual base
compensation of $240,000 and non-qualified stock options to 3,000,000 shares of
Common Stock under the Company's 2003 Stock Option Plan, at a purchase price of
$0.18 per share (110% of the closing market price on the date of grant). Options
to purchase 1,000,000 shares are exercisable immediately, options to purchase
1,000,000 shares vest and shall be exercisable at such time as the Company is
current and filed its annual and quarterly reports for the years 2000, 2001 and
2002 and any reports then due for the fiscal year 2003, and options to purchase
1,000,000 shares vest and shall be exercisable at such time as the Company has
raised a minimum of $500,000 in investment capital. Upon Mr. Kimmon's death or
disability all unvested warrants will become immediately vested and exercisable.
or involuntary termination (other than for cause). The Company may terminate the
agreement for cause, or upon the extended disability or death of Mr. Kimmons.
Mr. Kimmons may terminate the agreement for good reason, which is defined as (1)
diminution of duties, (2) failure by the Company to comply with the agreement,
(3) a requirement by the Company for Mr. Kimmons to move locations, (4) any
purported termination other than as permitted in the agreement, (5) a change of
control, or (6) failure to have a successor corporation assume the agreement. If
the agreement is terminated in connection with a change of control, (1) the
Company must pay Mr. Kimmons an amount equal to approximately three times the
sum of his annual base salary and the average of the last annual incentive
bonuses actually paid, (2) all outstanding warrants immediately vest, (3)
welfare and fringe benefits are provided for one year, (4) the Company must pay
the sum of any earned salary not yet paid, deferred compensation and an amount
equal to 150% of the value of Mr. Kimmons accrued benefits in any Company long
term incentive plan times a fraction equal to the months worked in the
performance period before termination divided by the total performance period.
If the agreement is terminated for cause or Mr. Kimmons terminates for other
than good reason, the Company shall pay earned but unpaid salary and any vested
benefits payable to him under a plan or policy. In the event of a change of
control, Mr. Kimmons will remain with the Company until the later of: (1) 15
days after the one year anniversary of the change of control, (2) 15 days after
the anniversary date of any merger, or (3) January 31, 2006. The agreement
defines a change of control as: (1) any person acquiring 30% of the Company or
if Mr. Kimmons' voting rights are reduced to less than 30% of the outstanding
shares, (2) if during a two year period, individuals who were on the board of
directors (and any new directors elected by two-thirds of directors in office at
the beginning of the period or whose election or nomination was so approved)
cease to be a majority of the board of directors, (3) if the shareholders
approve a merger or consolidation (other than a merger in which company
shareholders own at least 50% of surviving entity), or (4) a complete
liquidation.

                                       20
<PAGE>
     Stock Options and Warrants
     --------------------------

     During 1996 the Company adopted, and the board of directors approved, the
1995 Incentive Stock Option Plan ("Plan"). Pursuant to the Plan, options to
purchase shares of Common Stock may be granted to employees, officers, and
directors of the Company. In June 1998, the board of directors approved an
increase in the number of authorized options from 100,000 (post reverse-split
adjusted) shares to 500,000 (post reverse-split adjusted) shares. Options
granted under the Plan generally expire five to ten years after the date of
grant.

     As December 31, 2002, there were non-qualified stock options outstanding to
purchase 116,650 (post reverse split adjusted) shares of common stock of which
116,650 were exercisable. As of December 31, 2002 there were also outstanding
warrants to purchase 2,109,909 (post reverse-split shares). For the fiscal year
ended December 31, 2002, the Company did not maintain any long-term retirement
or other benefit plan.

     On March 19, 2002, the Company reverse split its common stock on a 1 for 10
basis and accordingly, all references above to common stock have been restated
to show the effect of the reverse split.

Option Grants Table
-------------------

     The following tables reflect certain information, with respect to stock
options granted under the Company's stock option plans to certain executive
officers and directors during fiscal 2002.

<TABLE>
<CAPTION>

                     OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
                     --------------------------------------

                            Number Of           % Of Total
                            Securities          Options
                            Underlying          Granted To      Exercise
                            Options             Employees       Or Base
                            Granted             In Fiscal       Price           Expiration
Name                        (#)                 Year(%)         ($/Sh)(1)       Date
--------------------------------------------------------------------------------------------
<S>                         <C>                 <C>             <C>             <C>
Gary Kimmons                0                   0               0               0
Kathyrn Kimmons             0                   0               0               0
Dick Meador                 0                   0               0               0

</TABLE>

                                       21
<PAGE>

Option Exercise and Year End-Value Table
----------------------------------------

     The following tables reflect certain information, with respect to the
exercise of stock options by certain executive officers during fiscal 2002, on a
post-reverse split adjusted basis:


             AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR
                          AND YEAR-END OPTION/SAR VALUE
<TABLE>
<CAPTION>

                                                              Number Of
                                                              Securities                Value Of
                                                              Underlying                Unexercised
                                                              Unexercised               In-The-Money
                                                              Options At                Options At
                                                              Fy-End(#)                 Fy-End($)(1)
                                                            ------------------------------------------------------
                                Shares        Value
                                Acquired On   Realized       Exercisable (E)/           Exercisable (E) /
Name                            Exercise(#)      ($)          Unexercisable (U)         Unexercisable (U)*
-------------------------------------------------------------------------------------------------------------------
<S>                             <C>            <C>          <C>                         <C>
Gary Kimmons(1                    0             0           570,909(E)  / 0 (U)         0 (E) /  0 (U)
Dick Meador                       0             0                0 (E)  / 0 (U)         0 (E) /  0 (U)
Kathryn Kimmons                   0             0                0 (E)  / 0 (U)         0 (E) /  0 (U)
</TABLE>
--------------------
     *    The Computed based on the differences between the closing market price
          and aggregate exercise prices as of December 31, 2002. (1) Includes a
          warrants to purchase 400,000 (post reverse split adjusted) shares of
          Company Common Stock exercisable at a purchase price of $3.125 (post
          reverse split adjusted), all of which warrants were fully vested as of
          December 31, 2002. None of the warrants have been exercised and have
          expired as of March 13, 2003.

Item 11. Security Ownership of Certain Beneficial Owners and Management and
         Related Stockholder Matters.

     (a) Security Ownership of Certain Beneficial Owners

     The following table sets forth security ownership information as of the
close of business on April 53, 2003, for any person or group, known by the
Company to own more than five percent (5%) of the Company's voting securities.
<TABLE>
<CAPTION>

                                                                           Number of
                                                                           Shares                Percent of
                                                                           Beneficially          Outstanding
Name of Beneficial Owner                                                   Owned(1)              Shares
-------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                   <C>
Kimmons Family Partnership, Ltd.(2) .....................................  7,522,860              33.92%
Gary F. Kimmons(2)(3)  ..................................................  9,850,878              44.42%
Kathryn Kimmons(4)  .....................................................  9,850,878              44.42%
</TABLE>
------------------
     1.   All amounts shown in this column include shares obtainable upon
          exercise of stock options or warrants currently exercisable or
          exercisable within 60 days of t the date of this table.

     2.   Mr. Kimmons is a general partner of a the Kimmons Family Partnership,
          Ltd., and as such has the sole voting, investment and disposition
          power over the 7,522,860 (post reverse-split adjusted) shares of
          Common Stock owned by the partnership.

     3.   Mr. Kimmons is deemed to own (a) 7,522,860 of these shares owned of
          record by the Kimmons Family Partnership, Ltd., by virtue of Mr.
          Kimmons being the General Partner of the Kimmons Family Partnership,
          Ltd., (b) 520,000 of these shares by virtue of a warrant to purchase
          these shares, and (c) 1,000,000 of these shares by virtue of vested
          options to purchase these shares.

                                       22
<PAGE>
     4.   Mrs. Kimmons is deemed to have indirect beneficial ownership of these
          shares, as the spouse of Gary F. Kimmons.

     The address of all persons listed above is 2602 Yorktown Place, Houston,
Texas 77056

         On March 19, 2002, the Company reverse split its common stock on a 1
for 10 basis. All references to common stock have been restated to show the
effect of the reverse split.

     (b) Security Ownership of Management

     The following table sets forth security ownership information as of the
close of business on April 5, 2003, of all directors, executive officer listed
in the "Summary Compensation Table" set forth herein, and all directors and
executive officers as a group.

<TABLE>
<CAPTION>

                                                                           Number of
                                                                           Shares                Percent of
                                                                           Beneficially          Outstanding
Name of Beneficial Owner                                                   Owned(1)              Shares
-------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                   <C>
Gary F. Kimmons(2)(3)  ..................................................  9,850,878             44.42%
Kathryn Kimmons(4)  .....................................................  9,850,878             44.42%
Dick Meador .............................................................    352,000              1.59%
Renee Ethridge ..........................................................    100,000                **
</TABLE>
------------------

     **   Less than 1%

     1.   All amounts shown in this column include shares obtainable upon
          exercise of stock options or warrants currently exercisable or
          exercisable within 60 days of t the date of this table.

     2.   Mr. Kimmons is a general partner of a the Kimmons Family Partnership,
          Ltd., and as such has the sole voting, investment and disposition
          power over the 7,522,860 (post reverse-split adjusted) shares of
          Common Stock owned by the partnership.

     3.   Mr. Kimmons is deemed to own (a) 7,522,860 of these shares owned of
          record by the Kimmons Family Partnership, Ltd., by virtue of Mr.
          Kimmons being the General Partner of the Kimmons Family Partnership,
          Ltd., (b) 520,000 of these shares by virtue of a warrant to purchase
          these shares, and (c) 1,000,000 of these shares by virtue of vested
          options to purchase these shares.

     4.   Mrs. Kimmons is deemed to have indirect beneficial ownership of these
          shares, as the spouse of Gary F. Kimmons.

     5.   Ms. Ethridge is a former director having resigned on July 15, 2002.

     6.   Mr. Lance Kimmons is a former director having resigned on April 1,
          2002.

     On March 19, 2002, the Company reverse split its common stock on a 1 for 10
basis. All references to common stock have been restated to show the effect of
the reverse split.

     (c) Changes in Control.

     To the best of the Company's knowledge there are no present arrangements or
pledges of the Company's securities, which may result in a change in control of
the Company.

                                       23
<PAGE>
     (d) Securities Authorized for Issuance Under Equity Compensation Plans.

<TABLE>
<CAPTION>
                                                                             Weighted-average   Number of securities
                                                          Number of           exercise price of    remaining available
                                                       Securities to be       outstanding       for future issuance
                                                         issued upon       options, warrants       under equity
                                                         exercise of           and rights       compensation plans
                                                         outstanding                                (excluding
                                                      options, warrants                        securities reflected
                                                          and rights                              in column (a))
                  ---------------------------------- --------------------- ------------------- ----------------------
                                                     (a)                   (b)                 (c)
                  ---------------------------------- --------------------- ------------------- ----------------------
                  <S>                                <C>                    <C>                <C>
                  Equity compensation plans                 116,650                 $4.74                 0
                  approved by security holders(1)
                  ---------------------------------- --------------------- ------------------- ----------------------
                  Equity compensation plans               2,109,907                 $1.30                 0
                  Not approved by security
                  holders(2)
                  ---------------------------------- --------------------- ------------------- ----------------------
                  Total                                   2,226,559                 $1.48                 0
                  ---------------------------------- --------------------- ------------------- ----------------------
</TABLE>

     (1)  Includes 116,560 shares issuable upon exercise of Non-Qualified Stock
          Options held by 7 individuals.

     (2)  Includes 570,909 shares issuable upon exercise of warrants held by
          officers and directors and 1,539,000 shares issuable upon exercise of
          the warrants held by 8 individuals.

Item 12. Certain Relationships and Related Transactions.

     Private Placement
     -----------------

     On October 18, 2002 the Company undertook the Private Placement to
accredited investors of 40 Units (the "Units") at a price of $25,000 per Unit.
Each Unit consists of 100,000 restricted shares of Common Stock and a warrant to
purchase up to 200,000 restricted shares of Common Stock. Each warrant vests
immediately, will be exercisable for a period of two years from date of issuance
at am exercise price of $0.35 per share. The Units and underlying securities
offered hereunder have not been registered with the Securities and Exchange
Commission or any State securities commission and are being offered in reliance
on an exemption from such registration pursuant to Section 4(2) or Section 4(6)
of the Securities Act of 1933.

     Resolution of Company Debt
     --------------------------

     On October 18, 2002 the Company issued an aggregate of 46,980 shares of its
common stock to fourteen (14) entities in satisfaction of debt owed by the
Company in the amount of $74,429.01.

     On December 12, 2002, the Company entered into a consulting agreement with
AfterPlay Entertainment, Inc. ("AfterPlay") whereby AfterPlay would provide
general corporate and growth strategy to the Company. In compensation for
AfterPlay's services, the Company was to pay a monthly retainer fee of $20,000
and a monthly share fee of 160,000 shares of its unregistered common stock after
an initial issuance of 200,000 shares for the first month's services.

     On December 13, 2002, the Company entered into a consulting agreement with
Suns Associates Group ("Suns Associates") whereby Suns Associates would provide
general corporate and growth strategy to the Company. In compensation for Suns
Associate's services, the Company was to pay a monthly retainer fee of $10,000
and a monthly share fee of 80,000 shares of its unregistered common stock after
an initial issuance of 100,000 shares for the first month's services.

                                       24
<PAGE>
     Subsequent Events
     -----------------

     Subsequent to the Company's fiscal year ended December 31, 2002, the
Company entered into the following transactions.

     On January 31, 2003, the Company authorized the issuance of a common stock
purchase warrant to Gary F. Kimmons. This warrant is for the purchase of up to
520,000 shares of common stock at an exercise price of $0.35 per share as full
and complete satisfaction of his accrued and unpaid salary totaling $110,000
($20,000 a month, from July 15, 2002 through December 31, 2002). The warrant is
immediately exercisable for a period of five (5) years and shall expire on
December 31, 2007.

     On January 31, 2003, the Company authorized the issuance of a common stock
purchase warrant to Gary F. Kimmons. This warrant is for the purchase of up to
80,000 shares of common stock at an exercise price of $0.35 per share as full
and complete satisfaction of the accrued and unpaid salary totaling $20,000
($20,000 a month, from January 1, 2003 through January 31, 2003). The warrant is
immediately exercisable for a period of five (5) years and shall expire on
December 31, 2007.

     On February 1, 2003, the Company authorized the formation of four (4)
subsidiaries to be utilized in the licensing, marketing, and exploitation of the
Company's software. As of the date of this annual report, the Company has formed
(a) The Baseball Club, Inc., a Nevada corporation, (b) Smart One Learning
Systems, Inc., a Nevada corporation, and (c) Human Achievement Foundation.

     On February 1, 2002, the Board of Directors approved and adopted the GK
Intelligent Systems, Inc., 2003 Stock Option Plan. The plan was established in
order to provide a method whereby chosen key employees and persons providing
services to the Company who are primarily responsible for the management and
growth of the Company and who are expected to continue to make substantial
contributions to the Company's future can be offered incentives. The number of
common shares authorized under the plan are ten million (10,000,000) and said
shares will be granted either as Incentive Stock Options as defined in Section
422 of the Internal Revenue Code or Non-Qualified Stock Options for those
options which do not meet the conditions of Section 422 of the Internal Revenue
Code.

     On February 1, 2003, the Company entered into a new employment agreement
with Mr. Kimmons. The agreement provides for a three-year term that
automatically renews at the end of the term for consecutive one-year terms, and
which provides for an annual base compensation of $240,000 and non-qualified
stock options to 3,000,000 shares of Common Stock under the Company's 2003 Stock
Option Plan, at a purchase price of $0.18 per share (110% of the closing market
price on the date of grant). Options to purchase 1,000,000 shares are
exercisable immediately, options to purchase 1,000,000 shares vest and shall be
exercisable at such time as the Company is current and filed its annual and
quarterly reports for the years 2000, 2001 and 2002 and any reports then due for
the fiscal year 2003, and options to purchase 1,000,000 shares vest and shall be
exercisable at such time as the Company has raised a minimum of $500,000 in
investment capital. Upon Mr. Kimmon's death or disability all unvested warrants
will become immediately vested and exercisable. or involuntary termination
(other than for cause). The Company may terminate the agreement for cause, or
upon the extended disability or death of Mr. Kimmons. Mr. Kimmons may terminate
the agreement for good reason, which is defined as (1) diminution of duties, (2)
failure by the Company to comply with the agreement, (3) a requirement by the
Company for Mr. Kimmons to move locations, (4) any purported termination other
than as permitted in the agreement, (5) a change of control, or (6) failure to
have a successor corporation assume the agreement. If the agreement is
terminated in connection with a change of control, (1) the Company must pay Mr.
Kimmons an amount equal to approximately three times the sum of his annual base
salary and the average of the last annual incentive bonuses actually paid, (2)
all outstanding warrants immediately vest, (3) welfare and fringe benefits are
provided for one year, (4) the Company must pay the sum of any earned salary not
yet paid, deferred compensation and an amount equal to 150% of the value of Mr.
Kimmons accrued benefits in any Company long term incentive plan times a
fraction equal to the months worked in the performance period before termination
divided by the total performance period. If the agreement is terminated for
cause or Mr. Kimmons terminates for other than good reason, the Company shall
pay earned but unpaid salary and any vested benefits payable to him under a plan
or policy. In the event of a change of control, Mr. Kimmons will remain with the

                                       25
<PAGE>
Company until the later of: (1) 15 days after the one year anniversary of the
change of control, (2) 15 days after the anniversary date of any merger, or (3)
January 31, 2006. The agreement defines a change of control as: (1) any person
acquiring 30% of the Company or if Mr. Kimmons' voting rights are reduced to
less than 30% of the outstanding shares, (2) if during a two year period,
individuals who were on the board of directors (and any new directors elected by
two-thirds of directors in office at the beginning of the period or whose
election or nomination was so approved) cease to be a majority of the board of
directors, (3) if the shareholders approve a merger or consolidation (other than
a merger in which company shareholders own at least 50% of surviving entity), or
(4) a complete liquidation.

     On February 11, 2003, the Board of Directors authorized the issuance of
75,000 unregistered common shares of the Company to Dick Meador in consideration
for his director services to the Company through March 31, 2003.

     On February 17, 2003, the Company issued 588,235 unregistered shares of
common stock to Gary F. Kimmons in consideration of the conversion of $100,000
of the unpaid balance due under the promissory note dated September 26, 2002 in
the principal amount of $170,041.

     On March 31, 2003 the Board of Director's authorized the termination of the
consulting agreement with AfterPlay Entertainment, Inc.

     On March 31, 2003 the Board of Director's authorized the termination of the
consulting agreement with Suns Associates Group.

     On March 31, 2003 the Company entered into a Director's Agreement to retain
the services of Dick Meador as a member of the Board of Directors. Under the
Agreement Mr. Meador will serve as a Director of the Company from April 1, 2003
through March 31, 2004 and will receive compensation of 300,000 restricted
shares of common shares or options to purchase 300,000 restricted shares of
common shares.

     On April 1, 2003 the Board of Directors approved and adopted the Non
Employee-Directors and Consultants Retainer Stock Plan for the Year 2003. The
plan was established in order to provide a method whereby chosen directors and
persons providing services to the Company may be offered incentives in addition
to those presently available, and may be stimulated by increased personal
involvement in the fortunes and success of the Company, thereby advancing the
interests of the Company and its shareholders. The number of common shares
authorized under the plan is two million (2,000,000).


                                       26
<PAGE>
Item 13. Exhibits and Reports on Form 8-K.

     (a) List of Exhibits attached or incorporated by referenced pursuant to
Item 601 of Regulation S-B.

<TABLE>
<CAPTION>

        Exhibit         Description
        --------        ---------------------------------------------------------------
        <S>             <C>
        3.1(1)          Certificate of Incorporation of the Company and Amendments thereto.
        3.2(1)          By-laws of the Company;
        3.3(2)          Amendment to Certificate of Incorporation
        3.4(4)          Certificate of Amendment to Certificate of Incorporation
        10.11(3)        Consulting Agreement with Berkshire Capital Management Co., Inc.
        10.12(3)        Consulting and Finder's Fee Agreement with The Herman Group, L.P.
        10.13(3)        Engagement Letter with Petty International Development Corp.
        10.14(3)        Consulting Agreement with Ron Sparkman.
        10.15(3)        Consulting Agreement with Rockne J. Horvath.
        10.16(3)        Consulting Agreement with Stephen K. Carper.
        10.17(3)        Consulting Agreement with Renee H. Ethridge.
        10.18(3)        Consulting Agreement with Technical Objective, Inc.
        10.19(3)        Debt Resolution Agreement with Gary F. Kimmons.
        10.20(3)        Interim Compensation Agreement with Gary F. Kimmons.
        10.21(3)        Amended and Restated Consulting Agreement with Dick Meador.
        10.22(3)        Promissory Note to BDO Seidman LLP.
        10.23(3)        Consulting Agreement with Alan S. Litvak.
        10.24(3)        Promissory Note to Gary Kimmons.
        10.25(5)        Marketing Agreement with BTH2
        10.26**         Consulting Agreement with AfterpPlay Entertainment Inc. dated 12/12/02
        10.27**         Consulting Agreement with Suns Associates Group dated 12/13/02
        10.28**         Non-Employee Director Agreement with Dick Mead dated 3/31/03
        10.29**         Employment Agreement with Gary F. Kimmons dated 2/1/03
        21**            Subsidiaries
        99.1**          Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
        99.2**          Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
</TABLE>
------------------------
          (1)  Filed as an exhibit to the Company's registration statement on
               Form 10-SB filed on January 24, 1997, and incorporated by
               reference herein.

          (2)  Filed as an exhibit to the Company's Annual Report for fiscal
               year ended May 31, 1998 on Form 10-KSB filed on September 14,
               1998, and incorporated by reference herein.

          (3)  Filed as an exhibit to the Company's Current Report on Form 8-K
               filed November 6, 2002 and incorporated by reference herein.

          (4)  Filed as an exhibit to the Company's Quarterly Report on Form
               10-QSB for the Quarter Ended March 31, 2002, and incorporated by
               reference herein.

          (5)  Filed as an exhibit to the Company's Quarterly Report on Form
               10-QSB for the Quarter Ended June 30, 2002, and incorporated by
               reference herein. ** Filed herewith.

     (b) Reports on Form 8-K.

     On November 5, 2002, we filed a Current Report on Form 8-K regarding our
resurrection or the company and re-commence of business operations. We did not
file any other current reports on Form 8-K during the quarter ended December 31,
2002.

                                       27
<PAGE>
Item 14. Controls and Procedures

     (a) Evaluation of disclosure controls and procedures. Our principal
executive officer and principal financial officer have evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rules
13a-14(c) and 15d-14(c) under the Exchange Act), as of a date within 90 days of
the filing date of this Annual Report on Form 1K-QSB. Based on such evaluation,
they have concluded that as of such date, our disclosure controls and procedures
are effective and designed to ensure that information required to be disclosed
by us in reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in
applicable SEC rules and forms.

     (b) Changes in internal controls. There were no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of evaluation by our principal executive officer
and principal financial officer.

Item 15. Principal Accountant Fees and Services.

     Independent Public Accountants
     ------------------------------

     The Company's independent accountants for the fiscal years ended December
31, 2002 and 2001 was HJ & Associates, LLC of Salt Lake City, Utah.

     (a) Audit Fees. During the fiscal years ended December 31, 2002 and 2001,
the aggregate fees billed by HJ & Associates LLC, for services rendered for the
audit of our annual financial statements and the review of the financial
statements included in our quarterly reports on Form 10-QSB or services provided
in connection with the statutory and regulatory filings or engagements for those
fiscal years, was $16,838 and 0, respectively.

     (b) Audit-Related Fees. During the fiscal years ended December 31, 2002 and
2001our auditors, HJ & Associates LLC, did not receive any fees for any
audit-related services other than as set forth in paragraph (a) above.

     (c) Tax Fees. Our auditors did not provide tax compliance or tax planning
advice during the fiscal years ended December 31, 2002 and 2001.

                                       28
<PAGE>
                                    SIGNATURE

     In accordance with 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.

                                                GK Intelligent Systems, Inc.

Dated: May 5, 2003                              /S/ Gary F. Kimmons
                                                -------------------------------
                                                By: Gary F. Kimmons
                                                Its: Chief Executive Officer and
                                                     Chief Financial Officer


                                       29
<PAGE>
                          INDEX TO FINANCIAL STATEMENTS


Independent Auditors' Reports...........................................  F-2
Balance Sheet ..........................................................  F-3
Statements of Operations ...............................................  F-4
Statements of Stockholders' Equity (Deficit)............................  F-5
Statements of Cash Flows................................................  F-9
Notes to the Financial Statements.......................................  F-11

                                      F-1

<PAGE>
                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors
GK Intelligent Systems, Inc.
Houston, Texas


We have audited the accompanying balance sheet of GK Intelligent Systems, Inc.
(a development stage company) as of December 31, 2002, and the related
statements of operations, stockholders' equity (deficit) and cash flows for the
years ended December 31, 2002 and 2001 and for the period from inception on
October 4, 1993, through December 31, 2002. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. The financial
statements for the period from inception on October 4, 1993 through December 31,
1998 were audited by other auditors whose report dated September 10, 1999
expressed an unqualified opinion on those statements with an explanatory
paragraph that expressed substantial doubt about the Company's ability to
continue as a going concern. Our opinion on the statements of operations,
stockholders' equity (deficit) and cash flows for the period October 4, 1993
(inception) through December 31, 2002, insofar as it relates to amounts for
prior periods through December 31, 1998, is based solely on the report of other
auditors.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of GK Intelligent Systems, Inc. (a
development stage company) as of December 31, 2002 and the results of its
operations and its cash flows for the years ended December 31, 2002 and 2001 and
for the period from inception on October 4, 1993, through December 31, 2002, in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company's deficit in working capital, recurring losses
and lack of operations raises substantial doubt about its ability to continue as
a going concern. Management's plans concerning these matters are also described
in Note 9. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


HJ & Associates, LLC
Salt Lake City, Utah
April 17, 2003

                                      F-1
<PAGE>
                          GK INTELLIGENT SYSTEMS, INC.
                          (A Development Stage Company)
                                  Balance Sheet

                                     ASSETS

<TABLE>
<CAPTION>

                                                                   December 31,
                                                                       2002
                                                                ----------------
<S>                                                             <C>
CURRENT ASSETS

   Cash                                                         $        15,566
                                                                ----------------

    Total Current Assets                                                 15,566
                                                                ----------------

COMPUTER SOFTWARE (Note 2)                                                    -
                                                                ----------------

     TOTAL ASSETS                                               $        15,566
                                                                ================

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES

   Accounts payable (Note 5)                                    $     1,305,583
   Accrued liabilities (Note 6)                                       2,255,269
   Accrued liabilities - related parties (Note 7)                       186,452
   Notes payable (Note 3)                                               382,500
   Notes payable - related parties (Note 4)                             370,042
                                                                ----------------

     Total Current Liabilities                                        4,499,846
                                                                ----------------

     TOTAL LIABILITIES                                                4,499,846
                                                                ----------------

COMMITMENTS AND CONTINGENCIES (Note 10)                                       -

STOCKHOLDERS' EQUITY (DEFICIT)

   Preferred stock authorized: 10,000,000 preferred shares
    at $0.001 par value; -0- issued and outstanding                           -
   Common stock authorized: 275,000,000 common shares
    at $0.001 par value; 20,795,039 shares issued and outstanding        20,795
   Additional paid-in capital                                        39,136,730
   Unearned compensation                                                (46,900)
   Deficit accumulated during the development stage                 (43,594,905)
                                                                ----------------

    Total Stockholders' Equity (Deficit)                             (4,484,280)
                                                                ----------------

    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)        $        15,566
                                                                ================
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-3
<PAGE>
                          GK INTELLIGENT SYSTEMS, INC.
                          (A Development Stage Company)
                            Statements of Operations

<TABLE>
<CAPTION>

                                                                                                         From
                                                                                                       Inception
                                                                            For the                  on October 4,
                                                                           Years Ended               1993 through
                                                                          December 31,               December 31,
                                                               ---------------------------------
                                                                      2002              2001             2002
                                                               ---------------   ---------------  -----------------
<S>                                                            <C>               <C>              <C>
REVENUES                                                       $             -   $            -   $        100,156

Cost of sales                                                                -                -             29,961
                                                               ---------------   ---------------  -----------------

   Gross margin                                                              -                -             70,195
                                                               ---------------   ---------------  -----------------

EXPENSES

   Depreciation and amortization                                             -                -          3,458,369
   Loss on disposal of fixed assets                                          -                -          1,385,199
   Impairment loss on software                                               -                -          1,308,520
   General and administrative                                          835,321          355,828         36,014,663
                                                              ----------------   ---------------  -----------------

     Total Costs and Expenses                                          835,321          355,828         42,166,751
                                                               ---------------   ---------------  -----------------

LOSS BEFORE OTHER EXPENSE                                             (835,321)        (355,828)       (42,096,556)
                                                               ---------------   ---------------  -----------------

OTHER INCOME (EXPENSE)

   Interest expense and loan discount fees                            (343,414)        (421,982)        (1,393,950)
   Gain on release of debt                                               2,250                -             75,253
   Interest income                                                           -                -              7,663
                                                               ---------------   ---------------  -----------------

     Total Other Income (Expense)                                     (341,164)        (421,982)        (1,311,034)
                                                               ---------------   ---------------  -----------------

LOSS BEFORE INCOME TAX EXPENSE                                      (1,176,485)        (777,810)       (43,407,590)

INCOME TAX EXPENSE                                                           -                -                  -
                                                               ---------------   ---------------  -----------------

NET LOSS                                                            (1,176,485)        (777,810)       (43,407,590)

DIVIDENDS ON PREFERRED STOCK                                                 -                -           (187,315)
                                                               ---------------   ---------------  -----------------

NET LOSS APPLICABLE TO COMMON
 SHAREHOLDERS                                                  $    (1,176,485)  $     (777,810)  $     (43,594,905)
                                                               ===============   ===============  =================

BASIC LOSS PER SHARE                                           $         (0.07)  $        (0.10)
                                                               ===============   ===============

WEIGHTED AVERAGE NUMBER OF
   SHARES OUTSTANDING                                               16,458,471        7,910,730
                                                               ===============   ===============
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                      F-4
<PAGE>
                          GK INTELLIGENT SYSTEMS, INC.
                          (A Development Stage Company)
                  Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>


                                  Preferred Stock      Common Stock        Additional
                              --------------------   ------------------     Paid-in       Subscription    Unearned      Accumulated
                               Shares       Amount   Shares      Amount     Capital        Receivable    Compensation   Deficit
                              -------   ----------   -------  ---------   -----------     ------------   ------------   ------------
<S>                           <C>           <C>      <C>         <C>      <C>             <C>            <C>            <C>
Initial capitalization by
Company president                   -    $       -   637,500   $    638   $     5,737     $          -   $          -   $          -

Shares issued in connection
 with reverse merger                -            -    96,328         96           (96)               -              -              -

Series A preferred shares
 issued in connection with
 acquisition of software      883,333    3,389,432         -          -             -                -              -              -

Shares issued in private
 placement at prices ranging
 from $5.00 to $30.00 per
 share (net of commissions
 of $95,180)                        -            -    90,880         91     1,124,504                -               -             -

Shares issued to Company president
 for services rendered              -            -    33,258         33       236,721                -               -             -

Shares issued for professional
 services rendered                  -            -    28,396         28       339,246                -               -             -

Shares issued in
 settlement of debt                 -            -    25,000         25       471,232                -               -             -

Net loss from inception on
 October 4, 1993 through
 May 31, 1996                       -            -         -          -             -                -               -   (2,672,906)
                              -------   ----------   -------  ---------   -----------     ------------   ------------   ------------

Balance May 31, 1996          883,333    3,389,432   911,362        911     2,177,344                -               -   (2,672,906)

Shares issued in private placements
 at $8.75 and $10.00 per share
 (net of commissions of $61,306)    -            -   237,164        237     1,804,269                -               -             -

Shares issued to Company
 president and employees
 for services rendered              -            -    29,611         30       706,982                -               -             -

Shares issued for professional
 services rendered and operating
 expenses                           -            -    50,865         51       941,123                -               -             -
                              -------   ----------   -------  ---------   -----------     ------------   ------------   ------------

Balance Forward               883,333   $3,389,432 1,229,002    $ 1,229   $ 5,629,718     $          -   $           -  $(2,672,906)
                              -------   ----------   -------  ---------   -----------     ------------   ------------   ------------

   The accompanying notes are an integral part of these financial statements.
</TABLE>

                                      F-5
<PAGE>

                          GK INTELLIGENT SYSTEMS, INC.
                          (A Development Stage Company)
            Statements of Stockholders' Equity (Deficit) (Continued)

<TABLE>
<CAPTION>

                                  Preferred Stock      Common Stock        Additional
                              --------------------   ------------------     Paid-in       Subscription    Unearned      Accumulated
                               Shares       Amount   Shares      Amount     Capital        Receivable    Compensation   Deficit
                              -------   ----------   -------  ---------   -----------     ------------   ------------   ------------
<S>                           <C>           <C>      <C>         <C>      <C>             <C>            <C>            <C>
Balance Forward               883,333   $3,389,432   1,229,002   $ 1,229  $ 5,629,718     $          -   $          -  $ (2,672,906)

Warrants issued to employees        -            -           -         -       56,040                -              -              -

Warrants issued for professional
 services rendered                  -            -           -         -      290,596                -              -              -

Net loss for the year ended
May 31, 1997                        -            -           -         -            -                -              -    (9,528,473)
                              -------   ----------   -------  ---------   -----------     ------------   ------------   ------------

Balance, May 31, 1997         883,333    3,389,432   1,229,002     1,229    5,976,354                -              -   (12,201,379)

Shares issued in private
 placements at prices ranging
 from $4.00 to $15.00
 per share                          -            -     813,629       814    7,536,188                -              -              -

Shares issued for exercise
 warrants at $10.00 per share       -            -      15,850        16      158,484                -              -              -

Shares issued to Company
 president and employees
 for services rendered              -            -     197,614       197    2,818,899                -              -              -

Shares issued for professional
 services rendered                  -            -     561,836       562    4,999,242                -              -              -

Warrants and options issued to
 Company president and employees
 for services rendered              -            -           -         -      102,349                -              -              -

Warrants and options issued for
 professional services rendered     -            -           -         -      576,313                -              -              -

Dividends on Series A preferred
 stock                              -      132,500           -         -            -                -              -      (132,500)

Net loss for the year ended May 31,
 1998                               -            -           -         -            -                -              -    (5,881,798)
                              -------   ----------   -------  ---------   -----------     ------------   ------------   ------------

Balance, May 31, 1998         883,333   $3,521,932   2,817,931   $ 2,818  $22,167,829     $          -   $          -  $(18,215,677)
                              -------   ----------   -------  ---------   -----------     ------------   ------------   ------------


     The accompanying notes are an integral part of these financial statements.
</TABLE>

                                      F-6
<PAGE>
                       GK INTELLIGENT SYSTEMS, INC.
                          (A Development Stage Company)
            Statements of Stockholders' Equity (Deficit) (Continued)

<TABLE>
<CAPTION>


                                  Preferred Stock      Common Stock        Additional
                              --------------------   ------------------     Paid-in       Subscription    Unearned      Accumulated
                               Shares       Amount   Shares      Amount     Capital        Receivable    Compensation   Deficit
                              -------   ----------   -------  ---------   -----------     ------------   ------------   ------------
<S>                           <C>           <C>      <C>         <C>      <C>             <C>            <C>            <C>
Balance May 31, 1998          883,333   $3,521,932   2,817,931   $ 2,818  $22,167,829     $          -   $          -  $(18,215,677)

Shares issued in private placement
 at $20.00 per share (net of
 commissions of $93,090)            -            -     155,151       155    3,009,760         (779,900)             -              -

Shares issued for exercise of
 warrants and options at $-0-,
 $3.10, $9.40, and $10.00 per share -            -      88,496        88      319,010                -              -              -

Shares issued to director for
 professional services              -            -     100,000       100    1,624,900                -     (1,001,096)             -

Warrants and options issued for
 professional services              -            -           -         -    5,682,999                -     (4,483,435)             -

Dividends on Series A preferred
 stock                              -       54,815           -         -            -                -              -       (54,815)

Shares issued to convert preferred
 stock                       (883,333)  (3,576,747)     91,456        92    3,576,655                -              -              -

Net loss for the seven months
 ended December 31, 1998            -            -           -         -            -                -              -    (7,926,000)
                              -------   ----------   -------  ---------   -----------     ------------   ------------   ------------

Balance, December 31, 1998          -            -   3,253,034     3,253    36,381,153        (779,900)    (5,484,531)  (26,196,492)

Shares issued at $20.00 per share
 for cash on March 31, 1999         -            -      12,500        12       249,988                -             -              -

Shares issued at $20.00 per share
 for cash on March 31, 1999         -            -       1,000         1        19,999                -             -              -

Shares issued for exercise of
 warrants on April 1, 1999          -            -       6,025         6           596                -             -              -
                              -------   ----------   -------  ---------   -----------     ------------   ------------   ------------

Balance Forward                     -   $       -    3,272,559   $ 3,272   $36,651,736     $   (779,900) $ (5,484,531) $(26,196,492)
                              -------   ----------   -------  ---------   -----------     ------------   ------------   ------------
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-7

<PAGE>
                       GK INTELLIGENT SYSTEMS, INC.
                          (A Development Stage Company)
            Statements of Stockholders' Equity (Deficit) (Continued)

<TABLE>
<CAPTION>


                                  Preferred Stock      Common Stock        Additional
                              --------------------   ------------------     Paid-in       Subscription    Unearned      Accumulated
                               Shares       Amount   Shares      Amount     Capital        Receivable    Compensation   Deficit
                              -------   ----------   -------  ---------   -----------     ------------   ------------   ------------
<S>                           <C>           <C>      <C>         <C>      <C>             <C>            <C>            <C>
Balance Forward                     -   $        -   3,272,559   $ 3,272  $36,651,736     $   (779,900)  $ (5,484,531) $(26,196,492)

Shares issued for conversion of debt
 at $0.13 per share on
 December 10, 1999                  -            -   3,750,000     3,750      495,582                -              -              -

Amortization of deferred
professional fees                   -            -           -         -            -                -      5,484,531              -

Payment received on common stock
 subscription                       -            -           -         -            -          779,900              -              -

Additional shares issued to reconcile
 to transfer agent                  -            -         500         1           (1)               -              -              -

Warrant and options issued for
 professional services rendered     -            -           -         -      217,124                -              -              -

Debt issued with beneficial
 conversion features                -            -           -         -      103,068                -              -              -

Additional paid-in-capital
 contributed to the Company         -            -           -         -       45,314                -              -              -

Net loss for the year ended
 December 31, 1999                  -            -           -         -            -                -              -   (14,526,409)
                              -------   ----------   -------  ---------   -----------     ------------   ------------   ------------

Balance, December 31, 1999          -            -   7,023,059     7,023   37,512,823                -              -   (40,722,901)

Net loss for the year ended
 December 31, 2000                  -            -           -         -            -                -              -      (917,709)
                              -------   ----------   -------  ---------   -----------     ------------   ------------   ------------

Balance, December 31, 2000          -    $       -   7,023,059   $ 7,023  $37,512,823     $          -   $          -  $(41,640,610)


Shares issued for deferred
 Professional fees                  -            -   1,200,000     1,200       10,800                -        (12,000)             -

Amortization of deferred
 professional fees                  -            -           -         -            -                -          9,000              -

Net loss for the year ended
 December 31, 2001                  -            -           -         -            -                -              -      (777,810)
                              -------   ----------   -------  ---------   -----------     ------------   ------------   ------------

Balance, December 31, 2001          -    $       -   8,223,059   $ 8,223  $37,523,623     $          -   $     (3,000) $(42,418,420)
                              =======   ==========   =======  =========   ===========     ============   ============   ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-8

<PAGE>
<TABLE>
<CAPTION>


                                  Preferred Stock      Common Stock        Additional
                              --------------------   ------------------     Paid-in       Subscription    Unearned      Accumulated
                               Shares       Amount   Shares      Amount     Capital        Receivable    Compensation   Deficit
                              -------   ----------   -------  ---------   -----------     ------------   ------------   ------------
<S>                           <C>           <C>      <C>         <C>      <C>             <C>            <C>            <C>
Balance, December 31, 2001         -    $        -   8,223,059   $ 8,223  $37,523,623     $          -   $     (3,000) $(42,418,420)

Common stock issued in April 2002
 for conversion of debt at $0.10 to
 $0.50 per share                   -              -  6,475,000     6,475      796,168                -              -             -

Common stock issued in March and
 April 2002 for services at $0.005 to
 $0.10 per share                   -              -  2,775,000     2,775      265,225                -        (268,000)           -

Common stock issued in June 2002
 for services at $0.10 per share   -              -  2,250,000     2,250      222,750                -        (165,000)           -

Common stock issued October 2002
 for conversion of debt at $1.58 per
 share                             -              -     46,980        47       74,382                -              -             -

Common stock issued in December
 2002 for services at $0.22 to $0.25
 per share                         -              -    325,000       325       80,282                -              -             -

Common stock issued for cash in
 December 2002 at $0.25 per share  -              -    700,000       700      174,300                -              -             -

Amortization of deferred
 compensation                      -              -          -         -            -                -         389,100            -

Net loss for the year ended
 December 31, 2002                 -              -          -         -            -                -              -    (1,176,485)
                              -------   ----------   -------  ---------   -----------     ------------   ------------   ------------

Balance, December 31, 2002         -   $          -  20,795,039  $20,795  $39,136,730     $          -   $    (46,900) $(43,594,905)
                              =======   ==========   =======  =========   ===========     ============   ============   ============

</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-9
<PAGE>

                          GK INTELLIGENT SYSTEMS, INC.
                          (A Development Stage Company)
                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                                                Since
                                                                                                              Inception
                                                                              For the Years                 on October 4,
                                                                                  Ended                     1993 through
                                                                              December 31,                  December 31,
                                                                 --------------------------------------
                                                                         2002                2001               2002
                                                                 ------------------  ------------------  -----------------
   <S>                                                           <C>                 <C>                 <C>
   CASH FLOWS FROM OPERATING ACTIVITIES

   Net loss                                                      $       (1,176,485) $         (777,810) $    (43,407,590)
   Adjustments to reconcile net loss to net cash
     used by operating activities:
       Depreciation and amortization                                              -                   -         3,458,369
       Loss on disposal of fixed assets                                           -                   -         1,385,199
       Impairment loss on software                                                -                   -         1,308,520
       Gain on release of debt                                               (2,250)                  -           (75,253)
       Beneficial conversion on issuance of debt                                  -                   -           103,068
       Amortization of unearned compensation                                389,100               9,000         5,882,631
       Issuance of common stock, options and warrants
        for services                                                        140,607                   -        13,061,413
   Changes in assets and liabilities:
     (Increase) decrease in current assets                                        -              28,622                 -
     Increase in accounts payable and accrued expenses                      380,726             330,993         4,034,699
     Increase in accrued liabilities - related parties                      108,868             359,195         1,097,804
                                                                 ------------------  ------------------  ----------------

       Net Cash Used by Operating Activities                               (159,434)            (50,000)      (13,005,134)
                                                                 ------------------  ------------------  ----------------

CASH FLOWS FROM INVESTING ACTIVITIES

     Purchase of software                                                         -                   -          (915,742)
     Purchase of fixed assets                                                     -                   -        (1,651,988)
     Organization costs                                                           -                   -           (78,745)
                                                                 ------------------  ------------------  ----------------

       Net Cash Used by Investing Activities                                      -                   -        (2,646,475)
                                                                 ------------------  ------------------  ----------------

CASH FLOWS FROM FINANCING ACTIVITIES

   Common stock issued for cash                                             175,000                   -        13,799,829
   Proceeds from issuance of note payable                                         -                   -         1,098,769
   Proceeds from issuance of notes payable - related parties                      -              50,000           250,000
   Payments on notes payable                                                      -                   -          (306,637)
   Receipt of subscription receivable                                             -                   -           779,900
   Capital contributed by the Company's president                                 -                   -            45,314
                                                                 ------------------  ------------------  ----------------

       Net Cash Provided by Financing Activities                            175,000              50,000        15,667,175
                                                                 ------------------  ------------------  ----------------

NET DECREASE IN CASH                                                         15,566                   -            15,566

CASH AT BEGINNING OF PERIOD                                                       -                   -                 -
                                                                 ------------------  ------------------  ----------------

CASH AT END OF PERIOD                                            $           15,566  $                -  $         15,566
                                                                 ==================  ==================  ================
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-10
<PAGE>
                          GK INTELLIGENT SYSTEMS, INC.
                          (A Development Stage Company)
                      Statements of Cash Flows (Continued)

<TABLE>
<CAPTION>
                                                                                                                Since
                                                                                                              Inception
                                                                              For the Years                 on October 4,
                                                                                  Ended                     1993 through
                                                                              December 31,                  December 31,
                                                                 --------------------------------------
                                                                         2002                2001               2002
                                                                 ------------------  ------------------  -----------------
   <S>                                                           <C>                 <C>                 <C>
SUPPLEMENTAL SCHEDULE OF CASH FLOW
   ACTIVITIES:

Cash Paid For:

   Income taxes                                                  $                -  $                -  $              -
   Interest                                                      $           37,000  $                -  $         37,000


SCHEDULE OF NON-CASH FINANCING ACTIVITIES:

   Common stock issued for debt                                  $           88,011  $                -  $        698,685
   Common stock issued for debt-related parties                  $          789,062  $                -  $        789,062
   Common stock issued for services - related party              $           60,000  $                -  $      4,609,123
   Options and warrants issued for services                      $                -  $                -  $      2,441,986
   Common stock issued for services                              $           80,607  $           12,000  $      6,010,304
   Fixed assets distributed for debt                             $                -  $                -  $         42,783

</TABLE>



   The accompanying notes are an integral part of these financial statements.

                                      F-11
<PAGE>
                          GK INTELLIGENT SYSTEMS, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                           December 31, 2002 and 2001


NOTE 1 -  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     a. Business

     GK Intelligent Systems, Inc. (the "Company"), is a development stage
     enterprise incorporated in Delaware in 1988. The Company is principally
     engaged in the development and marketing of software products capable of
     interaction with, and adaptation to, the needs of software users (referred
     to as "intelligent" software) and sophisticated real-time access to and
     interpretation of data. To date, the Company has realized minimal revenues
     and its activities have been limited primarily to the acquisition of
     software assets used to develop future products and applications, research
     and development of software products and initial marketing activities. All
     revenues to-date are derived from sales of the Company's first product,
     "Around the Web in 80 Minutes."

     The Company's software technology is capable of evaluating a users'
     competence level and adapting training programs to the user's specific
     learning styles and abilities, and is referred to as Smart One technology.
     The Company is using this technology to develop specific training software
     products (e.g., Internet training).

     The Company's proprietary Carnot technology is capable of accessing and
     evaluating large amounts of data on network systems, such as the Internet.
     The Company is developing specific business applications utilizing this
     technology in another technology called Smart Enterprise.

     To fund its operations, the Company commenced a private placement in
     November 1998, which was closed in May 1999. The funds raised by this
     private placement were not enough to cover the increased marketing costs
     associated with product rollout. The Company attempted another private
     placement in May 1999. No funds were secured from the May 1999 private
     placement. Due to the increase in costs and the lack of financial funding,
     the Company suspended operations in June 1999.

     In June 2002, the Company, which had been dormant for 3 years, commenced
     the process of reestablishing business operations. The Company is pursuing
     the further development of its software technology and adapting the
     software to current market needs.

     Stock Split
     -----------

     On March 19, 2002, the Company reverse split its common stock on a 1 for 10
     basis. All references to common stock have been restated to show the effect
     of the reverse split. On the same date the Company approved the filing of
     Amended Articles of Incorporation to increase the number of authorized
     shares of common stock from 250,000,000 shares to 275,000,000 shares with a
     par value of $0.001 per share.

                                      F-12
<PAGE>
                          GK INTELLIGENT SYSTEMS, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                           December 31, 2002 and 2001

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     a. Business (Continued)

     Reverse Merger
     -------------

     Pursuant to an agreement effective August 15, 1994, LBM-US, Inc. (LBM)
     issued 675,892 shares of its common stock in exchange for all of the assets
     and liabilities of GK Intelligent Systems, Inc., a Texas corporation (GKIS-
     Texas). The remaining 96,328 common shares out of a total of 772,220 common
     shares were retained by the former owners of LBM. Prior to, and in
     conjunction with the transaction, LBM authorized a stock split of three and
     one-half shares to one for its existing shareholders. On August 18, 1994,
     LBM changed its name to GK Intelligent Systems, Inc.

     This transaction resulted in the former stockholders of GKIS-Texas
     acquiring approximately 88% of the Company. Accordingly, the transaction
     has been treated for accounting purposes as a purchase of the Company by
     GKIS-Texas, referred to as a "reverse merger". As GKIS-Texas is deemed to
     be the acquirer for accounting purposes, (i) its assets and liabilities are
     included in the financial statements of the continuing entity at their
     carrying values, (ii) its operations are presented for all periods prior to
     August 15, 1994 and (iii) its outstanding shares for periods prior to
     August 15, 1994 have been retroactively restated giving effect to the
     reverse merger transaction.

     b. Accounting Method

     The Company has adopted a calendar year end effective December 31, 1998.
     The Company's financial statements are prepared using the accrual method of
     accounting.

     c. Basic Loss Per Share

     The computation of basic loss per share of common stock is based on the
     weighted average number of shares outstanding during the period of the
     financial statements. Fully diluted loss per share calculations are not
     presented as any stock equivalents are antidilutive in nature. The Company
     has excluded 2,226,559 common stock equivalents at December 31, 2002.

<TABLE>
<CAPTION>

                                                                             For the Year Ended
                                                                                     December 31, 2002
                                                        -----------------------------------------------------------
<S>                                                     <C>                 <C>                 <C>
                                                               Loss               Shares           Per Share
(Numerator) (Denominator) Amount

                                                        $       (1,176,485)         16,458,471  $            (0.07)
                                                        ==================  ==================  ==================

                                                                             For the Year Ended
                                                                              December 31, 2001
                                                        ----------------------------------------------------------
                                                               Loss               Shares           Per Share
(Numerator) (Denominator) Amount

                                                        $         (777,810)          7,910,730  $            (0.10)
                                                        ==================  ==================  ==================
</TABLE>

                                      F-13
<PAGE>
                          GK INTELLIGENT SYSTEMS, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                           December 31, 2002 and 2001

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     d. Estimates

     The preparation of 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 disclosure of contingent assets and
     liabilities at the date of the financial statements and the reported
     amounts of revenues and expenses during the reporting period. Actual
     results could differ from those estimates.

     e. Revenue Recognition

     Revenues from the sale of software products to retail customers will be
     recognized upon shipment, provided that no significant obligations remain
     outstanding and collection of the receivable is probable. Revenues from the
     sale of software products to distributors or other resellers where right of
     return exists will be deferred until shipped products are sold to retail
     consumers. Allowances for estimated returns are provided at the time of
     sale and charged against revenues.

     f. New Accounting Pronouncements

     The Company adopted the provisions of FASB Statement No. 145 "Rescission of
     FASB Statement No. 4, 44, and 62, Amendment of FASB Statement No. 13 and
     technical corrections", and FASB Statement No. 146, "Accounting for Costs
     Associated with Exit or Disposal Activities", FASB Statement No. 147,
     "Acquisitions of Certain Financial Institutions - and amendment of FASB
     Statement No. 148, " Accounting for Stock-Based Compensation-Transition and
     Disclosure -an amendment of FASB Statement No. 123 (SFAS 148)". Management
     does not believe these pronouncements will have a material effect on the
     Company's financial statements.

     g. Provision for Taxes

     Deferred taxes are provided on a liability method whereby deferred tax
     assets are recognized for deductible temporary differences and operating
     loss and tax credit carryforwards and deferred tax liabilities are
     recognized for taxable temporary differences. Temporary differences are the
     differences between the reported amounts of assets and liabilities and
     their tax bases. Deferred tax assets are reduced by a valuation allowance
     when, in the opinion of management, it is more likely than not that some
     portion or all of the deferred tax assets will not be realized. Deferred
     tax assets and liabilities are adjusted for the effects of changes in tax
     laws and rates on the date of enactment.

                                      F-14

<PAGE>
                          GK INTELLIGENT SYSTEMS, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                           December 31, 2002 and 2001

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     g. Provision for Taxes (Continued)

     Net deferred tax assets consist of the following components as of December
     31, 2002 and 2001:
<TABLE>
<CAPTION>


                                                                                   2002                2001
                                                                            ------------------  ----------------
              <S>                                                           <C>                 <C>
              Deferred tax assets:
                NOL Carryover                                               $       13,424,757  $       12,501,715
                Accrued compensation                                                         -             473,451
                                                                            ------------------  ------------------

                                                                                    13,424,757          12,975,166

              Deferred tax liabilities:
                Deferred compensation                                                 (480,610)           (311,094)
                Related party                                                         (110,045)                  -


              Valuation allowance                                                  (12,834,102)        (12,664,072)
                                                                            ------------------  ------------------

              Net deferred tax asset                                        $                -  $                -
                                                                            ==================  ==================

     The income tax provision differs from the amount of income tax determined
     by applying the U.S. federal and state income tax rates of 39% to pretax
     income from continuing operations for the years ended December 31, 2002 and
     2001 due to the following:


                                                                                   2002                2001
                                                                            ------------------  ------------------

              Book loss                                                     $         (458,975) $         (303,346)
              Accrued compensation                                                       7,200              56,350
              Related party accruals                                                  (201,880)             98,829
              Stock for services                                                       191,950                   -
              Valuation allowance                                                      461,705             148,167
                                                                            ------------------  ------------------

                                                                            $                -  $                -
                                                                            ==================  ==================
</TABLE>

     At December 31, 2002, the Company had net operating loss carryforwards of
     approximately $32,910,000 that may be offset against future taxable income
     from the year 2002 through 2022. No tax benefit has been reported in the
     December 31, 2002 financial statements since the potential tax benefit is
     offset by a valuation allowance of the same amount.

     Due to the change in ownership provisions of the Tax Reform Act of 1986,
     net operating loss carryforwards for Federal income tax reporting purposes
     are subject to annual limitations. Should a change in ownership occur, net
     operating loss carryforwards may be limited as to use in future years.

                                      F-15

<PAGE>
                          GK INTELLIGENT SYSTEMS, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                           December 31, 2002 and 2001

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     h. Long-Lived Assets

     In accordance with SFAS No. 121, Accounting for the Impairment of
     Long-Lived Assets and for Long-Lived Assets to Be Disposed of, long-lived
     assets, including goodwill associated with other long-lived assets, are
     evaluated for impairment whenever events or changes in circumstances
     indicate that the carrying amount of an asset may not be recoverable.

     The amount of any impairment considered necessary would be determined by
     comparing the book value of the net assets in the applicable line of
     business to fair value using methods such as the present-value of estimated
     future cash flows, sale value or other valuation methodologies available at
     the time, depending on the stage of development of the line of business and
     the Company's intentions at the time an impairment adjustment were
     considered necessary.

     i. Advertising

     The Company follows the policy of charging the costs of advertising to
     expense as incurred. Advertising expense for the years ended December 31,
     2002 and 2001 was $-0- and $-0-, respectively.

     j. Cost of Revenues

     Cost of revenues include materials such as diskettes, packaging and
     documentation as well as labor required to assemble the product.

     k. Inventories

     Inventories are stated at the lower of cost (average cost) or net
     realizable value and consist principally of CD-ROM diskettes, jewel cases
     and product boxes. Net realizable value is the estimated selling price less
     all applicable selling costs. Inventory on hand at December 31, 2002
     amounted to $-0-.

     l. Computer Software Costs

     The Company follows the accounting and disclosure requirements of SFAS No.
     86, "Accounting for the costs of computer software to be sold, leased, or
     otherwise marketed", as such, costs of purchased software having
     alternative future uses in developing other software products are (i)
     capitalized when acquired, (ii) amortized on a straight-line basis over
     their expected useful life of five years and (iii) reported at the lower of
     unamortized cost or net realizable value.

                                      F-16

<PAGE>
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     l. Computer Software Costs (Continued)

     Costs of internally created computer software products are charged to
     expense when incurred as research and development until technological
     feasibility has been established for the product. Technological feasibility
     is considered established upon completion of a detailed program design or,
     in its absence, completion of a working model. Thereafter, all software
     production costs are capitalized and subsequently reported at the lower of
     unamortized cost or net realizable value. Capitalized costs are amortized
     based on the ratio of current revenue to current and future revenue for
     each product with an annual minimum equal to the straight-line amortization
     over the remaining estimated economic life of the product.

     m. Fair Value of Financial Instruments

     The carrying amounts of the Company's financial instruments, including cash
     and cash equivalents, accounts payable, and accrued liabilities,
     approximate fair value due to their short maturities.

     n. Stock-Based Compensation

     The Company has chosen to continue to account for stock-based compensation
     using the intrinsic value method prescribed in Accounting Principles Board
     Opinion No. 25, "Accounting for Stock Issued to Employees", and related
     Interpretations and to elect the disclosure option of SFAS No. 123,
     "Accounting for Stock-Based Compensation". Accordingly, compensation cost
     for stock options issued to employees is measured as the excess, if any, of
     the quoted market price of the Company's stock at the date of the grant
     over the amount an employee must pay to acquire the stock.

                                      F-17
<PAGE>
                      GK INTELLIGENT SYSTEMS, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                           December 31, 2002 and 2001
NOTE 2 -  COMPUTER SOFTWARE

     Computer software costs were comprised of the following at December 31,
     2002:

     Cost of purchased software used to develop other software products:

     Training software technology                               $       444,833
     Carnot software technology                                       3,389,432
     Other tools and product costs                                      470,909
                                                                ----------------

                                                                      4,305,174
     Less accumulated amortization                                   (2,996,655)
                                                                ----------------

                                                                      1,308,519
     Less impairment loss                                            (1,308,519)
                                                                ----------------

     Net Book Value                                             $             -
                                                                 ===============

     The Carnot software tools and languages were acquired on November 2, 1995
     in exchange for the issuance of 883,333 shares of the Company's Series A
     preferred stock. The cost basis of the software was determined using the
     estimated fair market value of the preferred shares at the date the
     agreement was signed.

     During 1999, the Company was unable to secure funding to continue marketing
     it's software. The Company suspended operations in June 1999. Because of
     minimal sales in 1999 and no sales through January 2003 the Company
     determined that the software value has been fully impaired. The impairment
     loss recognized for the year ended December 31, 1999 was $1,308,520.

NOTE 3 - NOTES PAYABLE

     At December 31, 2002, the Company had various unsecured notes payable
     totaling $382,500, bearing an imputed interest rate of 10% per annum. These
     notes payable are due on demand.

     Interest expense related to these notes payable for the years ended
     December 31, 2002 and 2001 was $38,250 and $38,250, respectively,

NOTE 4 - NOTES PAYABLE - RELATED PARTIES

     At December 31, 2002, the Company had three unsecured notes payable -
     related parties totaling $370,042 payable to an officer and directors of
     the Company bearing interest at rates from 6% to 10% per annum. These notes
     payable-related parties are due on demand.

     Interest expense related to these note payable - related parties for the
     years ended December 31, 2002 and 2001 was $30,132 and $21,000,
     respectively.

                                       F-18

<PAGE>
                          GK INTELLIGENT SYSTEMS, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                           December 31, 2002 and 2001

NOTE 5 - ACCOUNTS PAYABLE

     Accounts payable consists of normal trade and operating liabilities
     incurred prior to the Company ceasing its operations in June 1999. Due to
     the age of the payables, the Company has imputed interest on all balances
     at the rate of 10% per annum. The imputed interest is included in accrued
     liabilities and totals $400,085 at December 31, 2002. Related interest
     expense for the years ended December 31, 2002 and 2001, was $129,912 and
     $134,326, respectively.

NOTE 6 - ACCRUED LIABILITIES

     Accrued liabilities as of December 31, 2002 consists of the following:

     Professional fees                                           $      548,000
     Payroll and payroll taxes                                          216,267
     Accrued interest                                                 1,022,930
     Judgments                                                          468,072
                                                                 ---------------
                                                                 $    2,255,269

NOTE 7 - ACCRUED LIABILITIES - RELATED PARTIES

     Accrued liabilities due to related parties consists of accrued salary of
     $110,000 to the Company's President and CEO, accrued fees to a board member
     of $2,125, and accrued interest on notes payable - related parties of
     $74,327.

NOTE 8 - SERIES A PREFERRED STOCK

     Effective November 2, 1995, the Company issued 883,333 shares of Series A
     convertible, redeemable preferred stock to Microelectronics and Computer
     Technology Corporation ("MCC") in exchange for a perpetual non-exclusive
     worldwide right and license to use and commercialize certain computer
     software technology developed by MCC under its Carnot Project. The Series A
     preferred stock had a stated value of $6.00 per share, a par value of $.001
     per share, accrues dividends at 6% per annum beginning January 1, 1998 and,
     along with unpaid dividends, were convertible into shares of the Company's
     common stock beginning January 1, 1998 at the rate of $6.00 per common
     share as adjusted for certain events. Also beginning January 1, 1998, the
     Company had the right to redeem the shares at their stated value of $6.00
     per share, plus any accrued and unpaid dividends. However, once notified of
     the Company's intention to redeem, MCC had the option to convert the
     preferred shares to common prior to the Company exercising its redemption
     rights. In addition, the preferred shares were entitled to vote the
     applicable common shares beginning January 1, 1998 even if not converted.
     No redemption rights were held by the Series A preferred stockholders.

     During the seven months ended December 31, 1998 and the year ended May 31,
     1998, the Company declared cumulative dividends on the Series A preferred
     stock totalling $54,815, $132,500, respectively.

     During the seven months ended December 31, 1998, MCC converted the
     preferred stock and accrued dividends into 883,333 and 31,219 shares of the
     Company's common stock, respectively.

                                      F-19

<PAGE>
                          GK INTELLIGENT SYSTEMS, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                           December 31, 2002 and 2001

NOTE 9 - GOING CONCERN

     The Company's financial statements are prepared using generally accepted
     accounting principles applicable to a going concern which contemplates the
     realization of assets and liquidation of liabilities in the normal course
     of business. However, the Company does not have cash or other material
     assets, nor does it have an established source of revenues to cover its
     operating costs and to allow it to continue as a going concern. The
     financial statements do not reflect any adjustments that might result from
     the outcome of this uncertainty. It is the intent of the Company to obtain
     additional financing through equity offerings or other feasible financing
     alternatives to fund its ongoing operations. The Company also continues to
     pursue the development and marketing of its software to generate sales to
     cover the Company's working capital needs and software development
     expenditures. There is no assurance that the Company will be successful in
     raising the needed capital or that there will be sales of its software.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

     In May 2001, the Company entered into a Consulting and Finder's Fee
     Agreement with The Herman Group pursuant to which the Herman Group was to
     provide services to the Company in connection with the clean-up, strategic
     planning, location and procurement of investors and financing for the
     Company and identification of potential buyer's and/or merger candidates
     for the Company. Despite not having rendered any substantive services to
     the Company, nor procuring any investment or identification of any buyer or
     strategic alliances, on May 14, 2002 the Company received a letter
     threatening a lawsuit for the Company's breach of contract and demanding
     payment of $180,000 as fees due under the contract for services performed
     by the Herman Group. The Company believes The Herman Group's claim is
     without merit as no substantive services were provided and has responded to
     the demand letter. The Company has not accrued any amounts as it cannot
     estimate the amount of potential loss, if any, relating to this agreement.

     On April 24, 2001, GK Intelligent Systems and Berkshire Capital Management
     Co., Inc. ("Berkshire Capital") entered into a Consulting Agreement. Under
     the terms of the Agreement, Berkshire Capital was to provide assistance in
     the development of the corporate strategy and recommend an effective growth
     strategy. This includes mentoring and assistance in forming the structure
     of the functional components of the Company as well as providing technical
     guidance in the establishing of business alliances and relationships.
     Further, Berkshire Capital would aid in the acquisition of administrative
     personnel for the Company. In consideration for their efforts the Company
     issued 1,000,000 unregistered and restricted shares of its common stock on
     the effective date of the agreement. These shares were fully earned and
     non-cancelable at time of issuance. Under the terms of the Agreement,
     Berkshire Capital will be entitled to receive additional shares, pro rata,
     in the event of a reverse stock split within 3 years from the effective
     date. The amount of pro rata shares to be issued will be proportional to
     the shares exchanged in the reverse stock split.

     On February 10, 2000, the Texas Workforce Commission placed an
     administrative lien on the Company in the amount of $109,024. As of the
     date of this filing the Company has no evidence to show that this lien has
     been released. This amount is included in accrued liabilities at December
     31, 2002.

                                      F-20
<PAGE>
                          GK INTELLIGENT SYSTEMS, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                           December 31, 2002 and 2001

NOTE 10 - COMMITMENTS AND CONTINGENCIES (Continued)

     On February 1, 2002, a default judgment was entered on behalf of Imperial
     Business Credit, Inc. for $23,200. Subsequent to the judgment, the two
     parties agreed to settle for $10,000. The Company has included in accrued
     liabilities the amount settled upon plus applicable costs.

     On March 3, 2002, a judgment was filed in the matter of Fidelity Leasing,
     Inc. v. GK Intelligent Systems, Inc. The judgment was in favor of Fidelity
     Leasing in the amount of $29,854 in damages, fees and costs and is subject
     to interest at various rates. The Company has accrued the judgment and
     applicable costs in accrued liabilities.

     On June 14, 2002, a judgment was entered on behalf of Lyon Financial
     Services d.b.a., The Manifest Group. It was ordered that GK Intelligent
     Systems, Inc. and Gary Kimmons, individually as guarantor, pay to Lyon
     Financial Services d.b.a., The Manifest Group the sum of $20,000 with
     interest at eight percent per annum from September 20, 2001 to the above
     date of judgment, as well as $1,500 in attorney's fees. Subsequent to the
     judgment, the two parties agreed to settle for $12,750. The Company has
     paid $5,750 subsequently and has accrued the balance plus applicable costs.

     In July 1999, the Company was named as a defendant in a lawsuit, Marathon
     Oil Company v. GK Intelligent Systems, Inc. The plaintiff alleged that the
     Company failed to pay rent under a lease for office space and was seeking
     to recover rental payments in the amount of $78,554. Additionally, the
     plaintiff was seeking future rental payments, court costs as well as
     attorney's fees. On August 31, 1999, a default judgment was entered against
     the Company in the amount of $326,943 plus attorney's fees of $7,500. The
     plaintiff subsequently took possession of the Company's assets and sold
     them for approximately $28,000. The Company has accrued $306,444 for the
     judgment and applicable costs in accrued liabilities.

     On October 10, 2002, the Company and its President, Gary F. Kimmons entered
     in a Settlement Agreement with an unrelated individual. In this action, the
     individual alleged violations of the securities laws, common law fraud,
     conspiracy, negligence, and negligent misrepresentation and was seeking
     unspecified damages. The individual also alleged that certain officers
     and/or directors may have engaged in insider trading. The parties to this
     matter have released each other from any and all claims or actions they may
     have against each other.

                                      F-21
<PAGE>
                          GK INTELLIGENT SYSTEMS, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                           December 31, 2002 and 2001

NOTE 10 - COMMITMENTS AND CONTINGENCIES (Continued)

     Consulting Agreements
     ---------------------

     On March 6, 2002, GK Intelligent Systems and Petty International
     Development, Corp. signed an Engagement Letter memorializing an Agreement
     under which Petty International will act as the Company's non-exclusive
     U.S. consulting, marketing, public offering, mergers and acquisition agent,
     for the purpose of rendering financial advice and other such services. The
     engagement is effective as of April 5, 2001. In consideration for the
     services provided by Petty International the Company issued 1,200,000 post
     reverse split shares of its unregistered and restricted stock. The term of
     this Agreement is for two years from the effective date. In the event that
     the Company determines not to proceed with any transactions after such has
     been accepted in writing, then there is a $50,000 dollar "break-up" fee,
     which is also payable in Company common stock.

     On June 1, 2002, GK Intelligent Systems entered into a Marketing Agreement
     with BTH2, Inc. The terms of the Agreement state that BTH2 is to provide
     its services as a marketing agency for the Company's products for a period
     of 12 months commencing June 1, 2002. In consideration for BTH2's efforts,
     the Company shall compensate BTH2 in the form of a non-refundable monthly
     retainer of $25,000 per month, with the first payment starting 60 days from
     the execution of the Agreement. Additionally as compensation, the Company
     issued 500,000 post-reverse split adjusted shares of its unregistered and
     restricted common stock valued at $0.10 per share.

     On September 13, 2002 GK Intelligent Systems and Alan S. Litvak ("Litvak")
     entered into a Consulting Agreement. The terms of the Agreement set forth
     that Litvak will assist in the identification and procurement of qualified
     investors for the Company. As compensation for the services rendered under
     this Agreement the Company will pay a commission amounting to 10% of the
     total dollars raised in the private placement. Payment to Litvak shall be
     made according to the following formula: 50% of the total amount shall be
     in cash and the remaining 50% shall be in the form of unregistered and
     restricted Common Stock of the Company.

     During 2002, the Company entered into a number of additional consulting
     agreement with various individuals and companies wherein they are to
     provide a variety of current and future services to the Company in exchange
     for compensation in the form of cash payments and issuance of common stock.
     Under the provisions of these agreements, the Company is obligated to issue
     a minimum of 1,200,000 shares of common stock plus additional cash payments
     or common stock in lieu of cash as services are performed in accordance
     with terms of the various agreements.


                                      F-22
<PAGE>
                          GK INTELLIGENT SYSTEMS, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                           December 31, 2002 and 2001

NOTE 11 - STOCK OPTIONS

     During 1998, the Company established the "1998 stock option plan (the plan)
     to promote the Interest of the Company and its shareholders by attracting
     and retaining exceptional employees and directors. Any employee, of the
     Company is eligible to be designated a participant. The Board of the
     Company has sole and complete authority to determine the employees to whom
     options shall be granted, the number of each grant and any additional
     conditions and limitations. The exercise price shall not be less than the
     fair market value of the underlying shares.

     A summary of the status of the Company's outstanding stock options as of
     December 31, 2002 and 2001 and changes during the years ended December 31,
     2002 and 2001 is presented below:

<TABLE>
<CAPTION>


                                                              2002                             2001
                                                   -------------------------------  ------------------------------
                                                                      Weighted                         Weighted
                                                                       Average                          Average
                                                                      Exercise                         Exercise
                                                       Shares           Price          Shares            Price
                                                   -------------  ----------------  -------------  ---------------
              <S>                                  <C>            <C>               <C>            <C>
              Outstanding, beginning of year             830,309  $           0.34        842,309  $          0.37
              Granted                                          0              0.00              -             0.00
              Expired/Cancelled                          (3,750)              1.25        (12,000)            2.50
              Exercised                                        -                 -              -             0.00
                                                   -------------  ----------------  -------------  ---------------

              Outstanding end of year                    826,559  $           0.34        830,309  $          0.34
                                                   =============  ================  =============  ===============

              Exercisable                                826,559  $           0.34        830,309  $          0.34
                                                   =============  ================  =============  ===============

                                                    Outstanding                              Exercisable
                                      --------------------------------------------  ------------------------------
                                                        Weighted
                                         Number          Average        Weighted        Number          Weighted
                                       Outstanding    Remaining         Average      Exercisable   Average
                      Range of         at Dec 31,     Contractual       Exercise      at Dec 31,        Exercise
                   Exercise Prices        2002            Life           Price          2002             Price
              ----------------------  -------------  -------------   -------------  -------------  ---------------
              $      0.10-9.99              809,909           1.62   $   0.10-9.99      1,329,909  $          1.84
                    1.00-39.99               10,050           0.75      1.00-39.99         10,050            13.32
                    40.00-50.00               6,600           1.00     40.00-50.00          6,600            40.91
              ----------------------  -------------  -------------   -------------  -------------  ---------------

              $     0.10-50.00              826,559           2.60   $   0.01-5.00      1,346,559  $          3.57
              ======================  =============  =============   =============  =============  ===============
</TABLE>

NOTE 12 - WARRANTS

     On October 18, 2002, the Company issued a Private Placement Memorandum
     (PPM) to accredited investors as defined in Rule 501 of Regulation 1 of the
     Securities Act of 1933. This PPM was for 40 units with each unit consisting
     of 100,000 shares of common stock and a warrant to purchase up to 200,000
     shares of common stock. Each warrant vests immediately and will be
     exercisable for a period of two years from the date of issuance. Each unit
     is being offered for $25,000 or $0.25 per share. Each warrant is
     exercisable at $0.35 per share.

     The Company has sold 7 units or 700,000 shares of common stock and
     1,400,000 warrants for stock subscription receivable for $175,000.

                                      F-23
<PAGE>
                          GK INTELLIGENT SYSTEMS, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                           December 31, 2002 and 2001

NOTE 13 - GAIN ON RELEASE OF DEBT

     During 1999, the Company defaulted on various liabilities. Subsequently the
     Company and the vendors settled for amounts less than the original
     liabilities. The original amount of the liabilities were $97,340. The
     amount of the liabilities after the settlement was $24,337. The difference
     of $73,003 was recognized as a gain on release of debt for the year ended
     December 31, 1999.

     During 2002, the Company converted a note payable to equity for $50,000. On
     the date of conversion the note payable had accrued interest in the amount
     of $2,250. Only the principal balance was converted to equity with the
     accrued interest being forgiven. The $2,250 is recognized as a gain on
     release of debt for the year ended December 31, 2002.

NOTE 14 -  SUBSEQUENT EVENTS

     On January 31, 2003, the Company authorized the issuance of a common stock
     purchase warrant to Gary F. Kimmons. This warrant is for the purchase of up
     to 520,000 shares of common stock at an exercise price of $0.35 per share
     as full and complete satisfaction of his accrued and unpaid salary totaling
     $110,000 ($20,000 a month, from July 15, 2002 through December 31, 2002).
     The warrant is immediately exercisable for a period of five (5) years and
     shall expire on December 31, 2007.

     On January 31, 2003, the Company authorized the issuance of a common stock
     purchase warrant to Gary F. Kimmons. This warrant is for the purchase of up
     to 80,000 shares of common stock at an exercise price of $0.35 per share as
     full and complete satisfaction of the accrued and unpaid salary totaling
     $20,000 ($20,000 a month, from January 1, 2003 through January 31, 2003).
     The warrant is immediately exercisable for a period of five (5) years and
     shall expire on December 31, 2007.

     On February 1, 2003, the Company authorized the formation of several
     subsidiaries to be utilized in the licensing, marketing, and exploitation
     of the Company's software. As of the date of this annual report, the
     Company has formed (a) The Baseball Club, Inc., a Nevada corporation and
     (b) Smart One Learning Systems, Inc., a Nevada corporation.

     On February 1, 2003, the Board of Directors approved and adopted the GK
     Intelligent Systems, Inc., 2003 Stock Option Plan. The plan was established
     in order to provide a method whereby chosen key employees and persons
     providing services to the Company who are primarily responsible for the
     management and growth of the Company and who are expected to continue to
     make substantial contributions to the Company's future can be offered
     incentives. The number of common shares authorized under the plan are ten
     million (10,000,000) and said shares will be granted either as Incentive
     Stock Options as defined in Section 422 of the Internal Revenue Code or
     Non-Qualified Stock Options for those options which do not meet the
     conditions of Section 422 of the Internal Revenue Code.

     On February 1, 2003, the Company entered into a new employment agreement
     with Mr. Kimmons. Among other things, the agreement provides for an initial
     three-year term that automatically renews at the end of the term for
     consecutive additional one-year terms. The employment agreement provides
     for an annual base compensation of $240,000 and non-qualified stock options
     to 3,000,000 shares of Common Stock under the Company's 2003 Stock Option
     Plan, at a purchase price of $0.18 per share (110% of the closing market
     price on the date of grant). Options to purchase 1,000,000 shares are
     exercisable immediately, options to purchase 1,000,000 shares vest and
     shall be exercisable at such time as the Company is current and filed its
     annual and quarterly reports for the years 2000, 2001 and 2002 and any
     reports then due for the fiscal year 2003, and options to purchase
     1,000,000 shares vest and shall be exercisable at such time as the Company
     has raised a minimum of $500,000 in investment capital.

                                      F-24

<PAGE>
                          GK INTELLIGENT SYSTEMS, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                           December 31, 2002 and 2001
NOTE 14 -  SUBSEQUENT EVENTS (Continued)

     On February 11, 2003, the Board of Directors authorized the issuance of
     75,000 unregistered common shares of the Company to Dick Meador in
     consideration for his director services to the Company through March 31,
     2003.

     On February 11, 2003, the Company issued 75,000 shares of common stock to
     Dick Meador a Director of the Company, for services performed.

     On February 11, 2003, the Company issued 120,000 shares of common stock to
     Afterplay Entertainment for services performed.

     On February 11, 2003, the Company issued 80,000 shares of common stock to
     Suns Associates Group for services performed.

     On February 17, 2003, the Company issued 588,235 shares of common stock to
     Gary F. Kimmons to convert $100,000 of a note payable with an original
     principal balance of $170,041.

     On March 31, 2003 the Board of Director's authorized the termination of the
     consulting agreement with AfterPlay Entertainment, Inc.

     On March 31, 2003 the Board of Director's authorized the termination of the
     consulting agreement with Suns Associates Group.

     On March 31, 2003 the Company entered into a Director's Agreement to retain
     the services of Dick Meador as a member of the Board of Directors. Under
     the Agreement Mr. Meador will serve as a Director of the Company from April
     1, 2003 through March 31, 2004 and will receive compensation of 300,000
     restricted shares of common shares or options to purchase 300,000
     restricted shares of common shares.

     On April 1, 2003 the Board of Directors approved and adopted the Non
     Employee-Directors and Consultants Retainer Stock Plan for the Year 2003.
     The plan was established in order to provide a method whereby chosen
     directors and persons providing services to the Company may be offered
     incentives in addition to those presently available, and may be stimulated
     by increased personal involvement in the fortunes and success of the
     Company, thereby advancing the interests of the Company and its
     shareholders. The number of common shares authorized under the plan is two
     million (2,000,000).

                                      F-25