SB-2/A

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AMENDMENT NO. 2 TO

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FORM SB-2/A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

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GAMES, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware                                               7372                               75-2926440

(State or jurisdiction of                 (Primary Standard Industrial        (I.R.S. Employer

incorporation or organization)             Classification Code Number)        Identification No.)

425 Walnut Street, Suite 2300

Cincinnati, Ohio 45202

(513) 721-3900

(Address and telephone number of principal executive offices)

425 Walnut Street, Suite 2300

Cincinnati, Ohio 45202

(513) 721-3900

(Address of principal place of business or intended principal place of business)

--------------------

Roger W. Ach, II

Chief Executive Officer

Games, Inc.

425 Walnut Street, Suite 2300

Cincinnati, Ohio 45202

(513) 721-3900

(Name, address and telephone number of agent for service)

Please send copies of all communications to:

Myles S. Cairns, Chief Financial Officer

Games, Inc.

425 Walnut Street, Suite 2300

Cincinnati, Ohio 45202

(513) 721-3900

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Approximate date of proposed sale to the public: From time to

time after the registration statement becomes effective.

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If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. [X]

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same

offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]

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                  CALCULATION OF REGISTRATION FEE

     --------------------------------------------------------------------------------------------------------------

Title of each class of   Amount to be    Proposed Maximum   Proposed Maximum      Amount of

  Securities to be          registered (1)    Offering Price             aggregate                       registration

    registered                                           per share (2)               offering price                 fee

    ---------------------------------------------------------------------------------------------------------------

Common Stock, $0.001
per share……	25,407,741	$1.375	$34,935,643.88	$4,426.35
Preferred Stock, 30,250 shares $0.001 convertible to Common Stock
per share……	715,554	$4.2275	$3,025,004.54	$244.87
	26,123,295		$37,960,648.41	$4,809.61

(1) Total represents 26,123,295 shares of common stock to be offered by selling security holders of the Registrant, including 1,623,000 shares of common stock issuable on the exercise of options under the 2002 Long Term Incentive Plan filed previously as Exhibit 10.6 and 2,537,000 stock options of the subsidiary Gamebanc, and 30,250 preferred shares that are redeemable and  callable these preferred shares are convertible as follows:, 10250 shares of preferred stock are convertible into 410,000 shares common stock at $2.50 per share, after March 30, 2004 until December 30, 2004, on December 31, 2004 until December 30, 2005, an additional 10,000 shares of preferred become eligible for conversion into 166,666 shares of Common Stock at $6.00 per share and on December 31, 2006 10,000 shares of preferred stock become eligible to convert into 138,888 shares of Common Stock at $7.20 per share as per the certificate of designati on filed as Exhibit 10.12 with this prospectus, any fractional shares will be paid in cash at the time of conversion.  In the event of a stock split, stock dividend or similar transaction involving the common stock of the Registrant, the number of shares registered shall be automatically increased to cover additional shares in accordance with Rule 416(a) under the Securities Act.

(2) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933 based upon the average high and low price of our common stock on March 15, 2004.

REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON DATES AS THE COMMISSION, ACTING UNDER SAID SECTION 8(a), MAY DETERMINE.

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PROSPECTUS

The information contained in this prospectus is not complete and may be changed.  We cannot sell these securities until the registration statement that we have filed with the SEC is effective. This prospectus is not an offer to sell, nor does it solicit offers to buy, these securities in any state where the offer or sale is not permitted.

Games, Inc.

26,123,295 SHARES OF COMMON STOCK

Common Stock issued at March 15, 2004	21,654,950
30,250 shares of Preferred Stock series AA convertible to common stock	715,544
Gamebanc stock options	2,537,000
Games 2002 Long Term Incentive Plan	1,623,000
Less Previously Registered stock	(447,209)
Total Common Stock for SB-2 filing	26,123,295

This prospectus covers the resale of 26,123,295 shares of our common stock which may be sold, from time to time, by the following shareholders (the “Selling Shareholders”).

o

3,926,740 shares may be offered and sold by Roger W. Ach, II, our President, CEO and the Chairman of our Board of Directors

o

3,290,878 shares may be offered and sold by Chicago West Pullman, LLC

o

1,625,000 shares may be offered and sold by Carol A. Meinhardt, our Executive Vice President and Chief  Operating Officer and member of our Board of Directors

o

250,000 shares may be offered and sold by Myles S. Cairns, our Executive Vice President and Chief Financial Officer

o

2,537,000 shares may be offered and sold by employees and directors of the company as options vest and are exercised in the Gamebanc Stock Option Plan

o

4,623,000 shares may be offered and sold by employees and directors of the company as options vest and are exercised in Games 2002 Long Term Incentive Plan

o

715,554 shares may be offered and sold by Atari, Inc. (“Atari”) has the right to convert 30,250 share of Preferred Series AA as follows:

Preferred Stock Series AA	Conversion date	Shares	Price	Common stock
	March 30, 2004	10,250	$2.50	410,000
	December 31, 2004	10,000	$6.00	166,666
	December 31, 2005	10,000	$7.20	138,888
				715,554

o

9,618,123 shares may be offered and sold by the remaining Selling Shareholders identified herein on page 60.

We will not receive any money from the Selling Shareholders when they sell the shares. We will pay substantially all of the costs and expenses relating to this offering. The Selling Shareholders may offer the shares for resale in accordance with the "Plan of Distribution" set forth herein.

Games Common Stock is listed on the NASDAQ OTC BB under the symbol "GMSI". On March 15, 2004, the high and low prices for the Common Stock as reported by NASDAQ were $1.40 and $1.35, respectively and the last reported sales price was $1.35.

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD ONLY PURCHASE SHARES IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING ON PAGE 5.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS DECLARED EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

<R>SUBJECT TO COMPLETION, DATED MARCH 30, 2004 </R>

NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF ANY OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION SET FORTH HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

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SELLING SECURITY HOLDER OFFERING PROSPECTUS

TABLE OF CONTENTS

Section

PROSPECTUS SUMMARY

8

THE OFFERING

11

RISK FACTORS

13

FORWARD-LOOKING STATEMENTS

32

USE OF PROCEEDS

32

MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

32

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

35

CRITICAL ACCOUNTING POLICIES

43

NEW AUTHORITATIVE ACCOUNTING PRONOUNCEMENTS

44

DECRIPTION OF PROPERTY

35

LEGAL PROCEEDINGS

35

THE COMPANY

46

OUR CORPORATE HISTORY

46

DESCRIPTION OF THE BUSINESS

49

INDUSTRY BACKGROUND

50

COMPETITION

52

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

54

EXECUTIVE COMPENSATION

55

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

57

SELLING SECURITY HOLDERS

60

PLAN OF DISTRIBUTION

69

DESCRIPTION OF SECURITIES

71

LIMITATION OF LIABILITY AND INDEMNIFICATION

75

LEGAL MATTERS

76

EXPERTS

77

CHANGE AND DISAGREEMENT WITH ACCOUNTANTS

75

IF YOU WOULD LIKE MORE INFORMATION

77

PART II INFORMATION NOT REQUIRED IN PROSPECTUS

79

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

79

ITEM 25.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

80

ITEM 26.  RECENT SALES OF UNREGEGISTERED SECURITIES

80

ITEM 27.  EXHIBITS

87

ITEM 28.  UNDERTAKINGS

89

SIGNATURES

91

INDEX TO FINANCIAL STATEMENTS

F1

PROSPECTUS SUMMARY

This prospectus is part of a registration statement filed with the U.S. Securities and Exchange Commission.  You should rely on the information provided in this prospectus. Neither we nor the selling security holders listed in this prospectus have authorized anyone to provide you with information different from that contained in this prospectus.  The selling security holders are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of common stock. Applicable SEC rules may require us to update this prospectus in the future.

The following summary is qualified in its entirety by the more detailed information, including "Risk Factors" and the Financial Statements of the Company and Notes thereto, appearing elsewhere in this Prospectus. The discussion in this Prospectus contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "The Company" as well as those discussed elsewhere in this Prospectus.

The Company

Games, Inc. (“Company” or “Games”) is a leading online media and value-added information service providing subscribers with access to entertaining proprietary content via the Internet. Games and its subsidiaries operate a branded network of web sites targeting three allied areas of interactive entertainment: government sponsored lotteries, internet games, and digital greetings. In addition, we continue to develop and manage a large opt-in e-mail database of over 12 million subscribers.  We currently own and operate leading games and entertainment sites that include:

www.Games.com   www.Lottery.com  www.GameLand.com

   www.SkillMoney.com  www.Cards.com  

We have traditionally derived its revenues from advertising sources. Advertising revenues are derived principally from online advertising arrangements under which we receive revenues on fixed payment over a contract period, a cost-per-thousand impression basis and design of advertising campaigns to be placed on our network. We have developed an online lottery ticket system to work with www.Lottery.com which is ready to implement and is currently waiting for authorization to proceed with an online retailer’s license. We are currently developing programs to expand our revenue generating sources through non-advertising revenues. These non-advertising revenues will be primarily derived from subscription fee-based services. We also offer database management for lottery customers.

Acquisition of Games.com

[LOGOS ATTACHED IN PDF FORMAT]

On December 31, Games, Inc. the Registrant has entered into an asset purchase agreement, license and royalty agreement to purchase from Atari, Inc. or an affiliate thereof the URL www.Games.com  domain name and certain related assets for a purchase price of $1,125,000 payable in 10,250 shares of convertible, redeemable and callable preferred stock issued December 31, 2003 and $100,000 in cash paid by January 12, 2004.  The purchase is scheduled to close on or about March 31, 2004 upon Atari’s redemption of the preferred stock.  

As part of this transaction, Games, Inc. will also be granted digital licenses and sublicenses with exclusive digital rights with respect to certain formats to a number of popular games including MONOPOLY, SCRABBLE, RISK, BATTLESHIP, BOGGLE and YAHTZEE and the classic Atari games. On December 31, 2003 Games, Inc issued 20,000 shares of convertible, redeemable and callable preferred stock in partial payment for the licenses and royalties associated with the intellectual property associated with Games.com. On or about March 31, 2004 Games, Inc will enter to a license agreement that has a five year term and a renewal option by Games, Inc for an additional five years.

Games, Inc. has begun to upgrade graphics, security, chat features and functionality of the www.Games.com  site to allow for enhanced play within the current play pattern and to allow for skill-based tournament play for merchandise prizes.  Re-launch of the upgraded site is scheduled for spring 2004.

At its re-launch, Games.com will allow visitors to play more than 30 online games based on the classic branded properties, some of which include MONOPOLY, CLUE, SCRABBLE, ASTEROIDS, and RISK. In addition, visitors to the site can find news, information, tips and hints about games featured on Games.com.

We will also create a premium service on a subscription basis which will include a revamped and upgraded ability to chat with other players, maintain scores, ranks, and to participate in tournaments based on widely recognized Hasbro catalog of games for prizes. Our revenue strategy for Games.com includes on demand play for pay games, skill based and tournament play, sponsorships, downloaded software and individual subscriptions.

We own and operate a website called www.GameLand.com. Gameland.com has a portfolio of over 120 proprietary shockwave game engines that we can reface and use for our own sites as well as providing game packages for other major websites.

We own and operate a website called www.SkillMoney.com skill-based games are legal in the majority of states.  In the United .States, rules governing Tournaments with entry fees and/or prizes are set up by each individual state, not by the federal government. Based on these 50 sets of laws, players cannot participate in fee-based Tournaments with prizes if they reside in the following 11 states:

Arizona, Arkansas, Connecticut, Delaware, Florida, Iowa, Louisiana, Maryland, Nevada, Tennessee and Vermont

Visitors to SkillMoney.com enter a game that has between 4 and, in the case of tournaments, 100 players.

We also operate a digital greeting card site, which offers both free and subscription based greeting cards from www.Cards.com.  

.    

THE OFFERING

     Shares of common stock offered by the Company...........  None

     Shares of common stock which may be sold by

     the Selling Shareholders...............................……...........   26,123,295

     Use of proceeds..................…………………….............   We will not receive any

 proceeds from the resales

                                                 of shares offered hereby,

             all of which proceeds

                                                                         will be paid to the

                         Selling Shareholders.

     Risk Factors....................………………………............    The purchase of our common

                                                             stock involves a high degree of

             risk. You should carefully

                                                 review and consider “Risk

             Factors."

     NASDAQ OTCBB Trading Symbol....................................  GMSI

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SUMMARY FINANCIAL DATA

The following summary of our financial information has been derived from our financial statements that are included elsewhere in this prospectus. The information for the years ended June 30, 2003 and 2002 is derived from our audited financial statements. The information for the three months ended September 30, 2003 and 2002 is derived from our unaudited financial statements and is not necessarily indicative of the results that may be expected for the entire fiscal year ending June 30, 2004.

Statements of Operations
	Six months ended		Years ended
	December 31,		June 30,
	2003	2002	2003	2002
	(unaudited)	(unaudited)
Revenues	$      190,152	$      101,508	$    218,049	$  466,995
Cost of goods sold	$        40,025	$        26,332	$      73,460	$    70,233
Gross profit	$      150,127	$        75,176	$    144,589	$  396,762
Net loss	$ (1,341,230)	$(1,400,686)	$(2,519,839)	$(4,038,759)
Net loss per share - basic and diluted	$         0.08)	$        (0.10)	$          (0.16)	$         (0.54)
Weighted average shares outstanding	17,024,541	14,605,495	16,200,358	7,434,476
Balance Sheet Data
	December 31,		June 30,
	2003		2003
	(unaudited)
Working capital deficit	$      129,440		$2,615,853
Total assets	$   3,834,459		$1,164,678
Current assets	$   2,214,208		$     11,625
Long-term debt	$        93,678		$   702,246
Stockholders’ deficiency	$  (2,315,567)		$(2,165,046)

RISK FACTORS

Investment in our common stock is highly speculative and involves risk.  You should carefully consider the following factors, among others, before making an investment decision. The risks and uncertainties described below are not the only ones we face. There may be additional risks and uncertainties that are not known to us or that we do not consider to be material at this time. If the events described in these risks occur, our business, financial condition and results of operations could be adversely affected. This prospectus contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from the results discussed in the forward-looking statements. This section discusses the business risk factors that might cause those differences.

RISKS PARTICULAR TO GAMES, INC.

OUR WEAK FINANCIAL CONDITION HAS RAISED, AND WILL LIKELY CONTINUE TO RAISE, SUBSTANTIAL DOUBT REGARDING OUR ABILITY TO CONTINUE AS A GOING CONCERN.

We have a history of losses and negative cash flows from operations. Recent net losses and negative cash flows are as follows:

       Net Losses      Negative Cash Flows

from Operations

     For the year ended June 30, 2001..............................  ($3,355,010)         ($3,017,781)

     For the year ended June 30, 2002..............................  ($4,038,759)         ($2,150,878)

     For the year ended June 30, 2003..............................  ($2,519,839)         ($1,254,993)

     For the six months ended December 31, 2003……..   ($1,341,230)         ($1,400,686)

We have experienced net losses and negative cash flows since the business began implementing our business plan. We expect that the ongoing implementation of our current business plan will decrease our net losses and decrease our negative cash flows but there can be no assurance that this will happen. We may never generate sufficient revenues to achieve profitability, and if we are unable to make a profit, then we may not be able to continue to operate the business.  Even if we become profitable, we may not be able to sustain or increase profitability on a quarterly or annual basis.

We believe that we will need approximately $2,500,000 to fund operations during the next 12 months.  The shareholders of Games have contributed in excess of $20 million to the Company over time and are committed to seeing our business plan come to fruition and as such will continue to support the business through capital investments until we reach profitability. We are focused on attempting to obtain the necessary capital to maintain its operations however; additional financing will be necessary to sustain operations and achieve our business plan. Games is attempting to obtain such additional financing. Management is also actively seeking one or more strategic investors to complete an acquisition and a strategic line extension in the games business.  However, there can be no assurance that we will be successful in our attempts to generate positive cash flows or raise sufficient capital essential to its survival. &n bsp;To the extent that we are unable to generate or raise the necessary operating capital, it will become necessary to curtail operations.  Additionally, even if we do raise operating capital, there can be no assurance that the net proceeds will be sufficient to enable it to develop our business to a level where it will generate profits and positive cash flows.

OUR WEAK FINANCIAL CONDITION HAS RAISED, AND WILL LIKELY CONTINUE TO RAISE SUBSTANTIAL DOUBT REGARDING OUR ABILITY TO CONTINUE AS A GOING CONCERN.

In its audit report dated September 12, 2003, our auditors indicated that there was substantial doubt as to our ability to continue as a going concern and that the ability to continue as a going concern was dependent upon us obtaining additional financing for our operations.  There can be no assurance that we will be able to achieve this.

THE COMPANY’S LIMITED OPERATING HISTORY MAKES EVALUATING ITS BUSINESS DIFFICULT.

Games Inc.’s operating subsidiary, commenced operations in 1997. Accordingly, our operating history is very limited upon which makes evaluating our business and prospects more difficult. We face the risks, expenses and difficulties frequently encountered by early-stage companies in new and rapidly evolving markets, including on-line companies which host hardware and software applications for other companies. Our past financial results may not be representative of our future financial results.

THE COMPANY IS DELINQUENT IN THE PAYMENT OF CERTAIN TRADE PAYABLES. FAILURE TO MAKE ARRANGEMENTS OR TO MAKE TIMELY PAYMENTS COULD NEGATIVELY IMPACT THE COMPANY’S BUSINESS.

As of the date of this filing, we are late in payment of certain creditor trade payables. We have initiated contact with these vendors and have offered payment plans.  If we are unable to negotiate payment plans with the vendors, or if we are unable to execute such negotiated payment plans with those who accept such plans, we could experience a severe negative impact on its business resources, although we currently do not expect any interruption of services provided.

THE COMPANY’S QUARTERLY RESULTS OF OPERATIONS FLUCTUATE, WHICH COULD RESULT IN A LOWER PRICE FOR THE COMPANY’S COMMON STOCK.

Our revenue and operating results do not vary significantly from quarter to quarter, but the Company is subject to variable accounting on certain stock options that could vary our results from quarter to quarter. These fluctuations could cause our stock price to fluctuate or decline. Additional factors that cause our quarterly results to materially fluctuate that are within our control include the following:

º

Difficulty managing growth;

º

Increases in necessary operating expenses;

º

Problems with technology;

º

The amount and timing of costs associated with the development and maintenance of new products; and

º

Costs and risks associated with potential acquisitions.

Important factors that could cause our quarterly results to materially fluctuate that are not within our control include the following:

º

Introduction of new products or pricing programs by our competitors;

º

Changes in pricing for, and changes in the gross profit of, certain products, services, or lines of business may be detrimental to our business plan;

º

Variations in spending patterns by companies and consumers;

º

Technical difficulties or systems downtime affecting our services and products;

º

Business interruptions due to outside causes and forces;

º

Differences with the business practices of third parties with whom we do business;

º

Economic conditions specific to the Internet or to the digital greetings, Internet games, or Lottery businesses, as well as general economic conditions;

º

Inability to frame additional bandwidth to adequately service customer growth;

º

Customer acceptance of our products, services and business model; and

º

Inability to acquire or lack of availability of necessary hardware or software components.

Our current and future levels of operating expenses and capital expenditures are based largely on our growth plans and estimates of future revenue. These expenses and expenditure levels are, to a large extent, fixed in the short term. We may not be able to adjust spending in a timely manner to compensate for any unexpected revenue shortfall, and any significant shortfall in revenue relative to planned expenditures could negatively impact our business and results of operations. In addition, if our customer base expands rapidly or unpredictably, we may not be able to efficiently utilize our infrastructure or we may not have sufficient capacity to satisfy our customers' requirements, which could harm the operating results of our business.

THE COMPANY’S SHARES ARE SUBJECT TO RULES REGULATING BROKER-DEALER ACTIVITY WITH RESPECT TO PENNY STOCKS, WHICH COULD HAVE A NEGATIVE EFFECT ON THE MARKET FOR THE COMPANY’S SHARES AND THE COMPANY’S SHARE PRICE.

Broker-dealers who effect trades in our common stock are subject to SEC rules that regulate trading in penny stocks. Such rules require broker-dealers to provide additional warnings and risk factors pertaining to an investment in penny stocks. Such additional warnings may act to inhibit investment in our common stock, which could have a depressive effect on both the market for Games, Inc.’s shares and the trading price of those shares.

IF WE CANNOT TIMELY SECURE NECESSARY FINANCING, WE WILL BE UNABLE TO CONTINUE TO GROW OUR SALES, IN WHICH EVENT WE WILL LIKELY BE REQUIRED TO CURTAIL OR CEASE OPERATIONS.

We need to raise additional funds through public or private debt or equity financings to be able to fully execute our business plan. Any additional capital raised through the sale of equity may dilute ownership interest. We may not be able to raise additional funds on favorable terms, or at all. If we are unable to obtain additional funds, then we will be unable to execute our business plan and shareholders could lose their investment.

We have realized limited sales revenues to date that we primarily attribute to our continuing inability to fund the marketing activities we believe necessary to develop broad market awareness and acceptance of our total website. Our inability to leverage our operating costs with sales has resulted in continuing significant operating and net losses, as well as negative operating cash flows. For the years ended June 30, 2003 and 2002, we incurred losses of $2,519,839 and $4,038,759, respectively, and for the three months ended September 30, 2003 and 2002, we incurred a net loss of $686,849 and $820,973. Our continuing losses adversely affect our ability to secure funding.

We continue to actively seek substantial investment capital to enable us to fully execute the balance of our business plan, that primarily being the conducting of those marketing activities we believe necessary to achieve meaningful sales growth. Our ability to effectively promote our websites, implement our business plan to sell Lottery tickets online, support and sustain our existing customer relationships, cultivate, support and sustain additional customer relationships, and thereby realize meaningful sales growth, remains dependent upon our timely receipt of substantial additional investment capital. Absent meaningful sales growth, our ability to achieve net profitability and positive operating cash flow remains highly unlikely.

Our future capital requirements will depend upon many factors, including the following:

º

Costs to develop and maintain our on-line hosting of hardware and software;

º

The rate at which we expand our business operations;

º

The extent to which we develop and upgrade our technology;

º

The occurrence, timing, size and success of acquisitions; and

º

The response of competitors to our service offerings.

THE COMPANY MAY REQUIRE VENDOR CREDIT IN THE FUTURE, WHICH MAY NOT BE AVAILABLE TO US.

In order to execute our short-term and long-term strategic plans, we need to continue to obtain credit from our vendors. If we are unable to maintain or obtain vendor credit on favorable terms, or at all, then we may not be able to execute our business plan, develop or enhance the products or services, take advantage of business opportunities or respond to competitive pressures, any of which could harm the our business.

We recently negotiated with many of our vendors to reduce the amounts owed or to extend more favorable payment terms. While these negotiated terms have reduced cash out-lays and expenditures, we cannot rely on future relationships with these vendors, which could result in limiting our purchasing and credit abilities.

FUTURE DEMAND FOR DIGITAL GREETINGS, INTERNET GAMES AND LOTTERY SERVICES IS HIGHLY UNCERTAIN.

The markets for Digital Greetings, Internet Games and Lottery Services have only recently begun to develop and are evolving rapidly. Future demand for these services is highly uncertain. We believe that many of its potential customers are not fully aware of the benefits of its services. The market for our services may never become viable or grow further. If the market for our services doesn’t grow or grows more slowly than we currently anticipate, our business, financial condition and operating results will be materially adversely affected.

IF THE COMPANY IS UNABLE TO OBTAIN KEY SOFTWARE APPLICATIONS AND HARDWARE COMPONENTS FROM CERTAIN VENDORS, THE COMPANY WILL BE UNABLE TO DELIVER ITS SERVICES.

We rely on third-party suppliers, including Microsoft and various hardware providers to provide us with key software applications and hardware components for its infrastructure. Certain components or applications are only available from limited sources. If we are unable to obtain these products or other services, including connectivity services, in a timely manner at an acceptable cost or at all, may substantially inhibit its ability to deliver its services.

Any significant increase in the volume of users of our products and services could strain the capacity of its software or hardware, which could lead to slower response times or system failures. Any future growth may require us, among other things, to:

º

Expand and upgrade our hardware and software systems;

º

Expand and improve our operational and financial procedures, systems and controls;

º

Improve tour financial and management information systems;

º

Expand, train and manage a larger workforce; and

º

Improve the coordination among our product development, sales and marketing, financial, accounting and management personnel.

We cannot assure you that its current level of personnel, systems, and controls will be adequate to support future growth. Our inability to manage growth effectively or to maintain the quality of its products and services could cause us to lose customers and could materially increase our operating expenses.

IF THE COMPANY DOES NOT INCREASE AWARENESS OF ITS PRODUCTS AND SERVICES, ITS ABILITY TO REACH NEW CUSTOMERS WILL BE LIMITED.

Our future success will depend, in part, on its ability to increase awareness of its products and services. To do so, we must succeed in our marketing efforts, provide high-quality products and services, and increase traffic to our Websites. If our marketing efforts are unsuccessful, or if we cannot increase our brand awareness, then we may not be able to attract new customers and increase our revenues.

WE REMAIN DEPENDENT UPON THREE KEY MANAGEMENT PERSONNEL AND IF WE ARE UNABLE TO RETAIN THEM, OUR OPERATIONS WILL SUFFER.

Our success depends, to a significant extent, upon the efforts and abilities of Roger W. Ach, II, President, Chairman of the Board and Chief Executive Officer, and to a lesser extent, Myles S. Cairns, our Executive Vice President, Chief Financial Officer, and Carol A. Meinhardt, our Executive Vice President, Chief Operating Officer. Loss of the services of any or all of its executive management team could materially adversely affect its business, results of operations and financial condition, and could cause us to fail to successfully implement its business plan.

THERE IS INTENSE COMPETITION FOR QUALIFIED INDUSTRY PROFESSIONALS THE COMPANY’S FAILURE TO ATTRACT AND RETAIN QUALIFIED PEOPLE COULD ADVERSELY AFFECT ITS ABILITY TO OPERATE.

Our future success also depends upon its ability to attract and retain qualified technical professionals and sales and marketing personnel. Competition for talented personnel, particularly technical professionals, is intense. This competition could increase the costs of hiring and retaining personnel. We may not be able to attract, retain, and adequately motivate our personnel or to integrate new personnel into our operations successfully.

THE COMPANY MAY NOT BE ABLE TO PROTECT ITS PATENTS, COPYRIGHTS, TRADEMARKS AND PROPRIETARY TECHNOLOGY, OR IF WE INFRINGE UPON THE RIGHTS OF OTHERS, WE COULD EXPOSE OURSELVES TO CLAIMS FOR DAMAGES.

Our services are highly dependent upon proprietary technology. In addition, we rely on contracts, confidentiality agreements, and copyright, patent, trademark, and trade-secrecy laws to protect its proprietary rights in our technology. We have also obtained, or are pursuing, several trademark, copyright, and patent registrations for our various product names. The protective steps we have taken may not be adequate to deter misappropriation of our proprietary information. In addition, some end-user license provisions protecting against unauthorized use, copying, transfer and disclosure of a licensed program may be unenforceable under the laws of certain jurisdictions and foreign countries. In addition, the laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States.  Failure to adequately protect our intellectual property could harm our brand name, devalue its propr ietary content, and affect its ability to compete effectively. Furthermore, defending our intellectual property rights could result in the expenditure of significant financial and managerial resources, which could materially adversely affect its business, results of operations and financial condition. Also, it is possible that our competitors or others will adopt product or service brands similar to ours possibly leading to customer confusion.

DISRUPTIONS TO THE DATA CENTERS OR TO THE OFFSITE BACKUP STORAGE FACILITIES SERVING THE COMPANY, COULD MATERIALLY AFFECT THE COMPANY’S BUSINESS.

The continued and uninterrupted performances of our computer systems, and of the backup storage facilities of third parties with whom we do business, are critical to our success. Any system failure that causes interruptions in our ability to deliver our services to its customers, including failures that affect its customers' abilities to access its hosted hardware, software, and stored data, could reduce customer satisfaction and, if sustained or repeated, would reduce the attractiveness of our services or result in material liabilities or costs.

Our hardware and software hosting business strategy, includes data backup and storage, depends on the consistent performance of the data centers and those of third parties. Our data center has offsite back-up storage of data for all customers. Our current data center, and those of third parties, may be vulnerable to interruption from fire, earthquake, flood, power loss, connectivity failures, vandalism and other malicious acts, and other events beyond our control, including natural disasters. If the data centers are damaged in any way, a customer whose data is stored there may lose some or all data, despite routine backup procedures. Our operations are dependent on our ability to protect our computer system, and customer systems, applications and data against damages, including, but not limited to those from computer viruses, fire, earthquake, flood, power loss, connectivity failures, vandalism and other malicious acts, and other events beyond our control, including natural disasters. Damage to our computer system or to the systems, applications, or data of our customers, could delay or prevent delivery of our services and result in the loss of our customers or in material liabilities. In addition, a failure of our telecommunication providers to provide the data communications capacity in the time frame required by us for any reason could cause interruptions in the delivery of our services. Substantially all of our computer and communications hardware is located at one facility and the loss of this hardware or the data it contains would cause severe business interruptions. In the event that we experience significant disruptions that affect the data centers, we may lose customers or fail to attract new customers.

THE COMPANY COULD EXPERIENCE BREACHES OF SECURITY TRANSMITTING DATA TO OR FROM THE COMPANY’S CUSTOMERS, INCLUDING THE USE OF THIRD PARTY VENDOR SECURITY TECHNOLOGIES AND METHODOLOGIES.

Our business depends upon its ability to securely transmit confidential information between the data centers, third-party backup locations, and the servers of its customers, including the use of third-party vendor security technologies and methodologies. Despite our physical design and setup, and the implementation of a variety of security measures, there exists the risk that certain unauthorized access, computer viruses, accidental or intentional disturbances could occur. We may need to devote substantial capital and personnel resources to protect against the threat of unauthorized penetration of our delivery system or to remedy any problems that such penetration might cause.  The occurrence of any of these events could cause us to lose customers, cause harm to our business or brand reputation, and expose us to material liability.

THE COMPANY DEPENDS ON LICENSED SOFTWARE APPLICATIONS.

We depend on contracts with third-party software manufacturers to allow their software applications to be hosted or run at the data centers and provided to our customers. We have entered into non-exclusive agreements with third-party companies, including, but not limited to, Microsoft, that allow us to host some of their software applications or re-license their software applications to our customers. Under most of these agreements, the software manufacturer can terminate its relationship with us for any reason by giving us as little as 30 days notice. In these instances, the software manufacturer is not liable to us, or to our customers, for any damages resulting from termination. If our relationships with these software manufacturers are terminated, or if these or other software manufacturers do not allow our customers to obtain a license to operate the software application on the data centers, our ability to do business w ould be severely inhibited.

THE HARDWARE AND SOFTWARE THE COMPANY USES IS COMPLEX AND MAY CONTAIN DEFECTS.

Our service offerings depend on complex hardware and software that may contain defects, particularly when initially introduced or when new versions are released. Although we test internal and third party software applications prior to deployment, we may not discover software defects that could affect our new or current services or enhancements until deployed. These defects could cause service interruptions or the loss of data, which could damage our reputation, increase our operating costs, impair our ability to generate or collect revenue, delay market acceptance or divert our management and technical resources. Any software modifications we perform as part of our integration services could cause problems in application delivery. Also, if we offer an open-source software solution to our customers, they are likely to hold us accountable for any problems associated with their software, even if the manufacturer caused the prob lem or defect. Typically, software manufacturers disclaim liability for any damages suffered as a result of software defects and provide only limited warranties. As a result, we may have no recourse against the providers of defective software applications.

PROFIT MARGINS ON CERTAIN PRODUCTS OR SERVICES MAY DECLINE OVER TIME.

Profit margins may be adversely affected by increases in labor or other costs, heightened price competition, changes in channels of distribution, or in the mix of products and services sold. We have recently introduced several new services, and we plan to release additional new services in the future. If costs associated with new services are greater than we have experienced historically, gross profit may be adversely affected.  We continue to expand third party and indirect distribution channels, which generally result in reduced profit margins.

THE COMPANY HAS BEEN INVOLVED IN LEGAL PROCEEDINGS WITH THIRD PARTIES; ANY FUTURE LEGAL PROCEEDINGS COULD MATERIALLY ADVERSELY AFFECT THE COMPANY’S FINANCIAL CONDITION AND ABILITY TO ACHIEVE ITS BUSINESS PLAN.

We have been and may in the future be involved in litigation incidental to our business and this may or may not have a material impact on our financial condition.  See "Legal Proceedings."

WE PLAN TO GROW, IN PART, THROUGH ACQUISITIONS, HOWEVER; THERE CAN BE NO ASSURANCE WE WILL BE ABLE TO IDENTIFY, ACQUIRE AND SUCCESSFULLY INTEGRATE FUTURE ACQUISITIONS INTO OUR BUSINESS.

Our business strategy contemplates that we will seek a number of significant acquisitions within the next few years. While we have initiated discussions with certain acquisition targets, and have recently concluded an agreement with Atari, Inc. there is no assurance that we will complete any other such acquisitions, or, if we do complete acquisitions, whether we will successfully integrate these acquisitions into our business. In addition, there is no assurance that if we acquire any businesses, that we will achieve anticipated revenue and earnings. Our failure to acquire suitable companies or to successfully integrate any acquired companies into our operations could materially affect its ability to maintain our business.

WE MAY NOT BE ABLE TO PROTECT THE USE COMPANY NAMES, DOMAIN NAMES.

We are aware that other companies have claimed use of names similar to "Games, Inc." and our domain names for products or services similar to our own. We are attempting to register "Games, Inc." as a trademark in the United States, Europe, and Canada. However, we may not be able to obtain proprietary rights to the use of this name. We will incur expenses if called to defend our use of the "Games, Inc." name. Any such litigation, even if without merit, may be time consuming and expensive to defend. It also could divert our management’s attention and resources and require us to enter into costly royalty or licensing agreements.  In addition, if any company in this industry is able to establish a use of the "Games, Inc." name that is prior to our use, we could be liable for damages and could be forced to stop using the name unless we are able to buy the right to use the name. If we are unable to buy the right to use its name after we lose an infringement claim, we would have to change our name, which may require us to spend money to build new brand recognition and incur other costs. Third parties may assert other infringement claims against us. Any of these events could divert management attention and complicate our ability to do business.

OTHERS MAY SEIZE THE MARKET OPPORTUNITY WE HAVE IDENTIFIED BECAUSE WE MAY NOT EFFICIENTLY EXECUTE OUR STRATEGY.

If we fail to execute our strategy in a timely or effective manner, our competitors may be able to seize the marketing opportunities we have identified.  Our business strategy is complex and requires that we successfully and simultaneously complete many tasks. In order to be successful, we will need to:

º

Negotiate effective strategic alliances and develop economically attractive service offerings;

º

Attract and retain customers;

º

Attract and retain highly skilled employees;

º

Integrate acquired companies into our operations; and

º

Evolve our business to gain advantages in an increasingly competitive environment.

In addition, although some of our management team has worked together in the past, there can be no assurance that we will be able to successfully execute all elements of its strategy.

WE MAY NOT BE ABLE TO PROTECT THE USE OF OUR INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS.

We regard our service marks, trademarks, domain names, and similar intellectual property as critical to our success. We have or have applied for federal trademark or service mark registration of a number of names and terms, including Lottery.com, GameLand.com, SkillMoney.com and Cards.com all of which are now owned by us. We have also applied for and been granted certain patents covering some of our software.

We rely on trademark, unfair competition and copyright law, trade secret protection and contracts such as confidentiality and license agreements with our employees, customers, partners, and others to protect our proprietary rights.  Despite precautions, it may be possible for competitors to obtain and/or use the proprietary information without authorization, or to develop technologies similar to ours and independently create a similarly functioning infrastructure.  Furthermore, the protection of the proprietary rights in Internet-related industries is uncertain and still evolving.  The laws of some foreign countries do not protect proprietary rights to the same extent, as do the laws of the United States.  Protection for the proprietary rights in the United States or abroad may not be adequate.

We intend to continue to license certain technology from third parties such as Microsoft and others, for our technologies that support business systems.  The market is evolving and we may need to license additional technologies to remain competitive.  We may not be able to license these technologies on commercially reasonable terms or at all.  In addition, we may fail to successfully integrate licensed technology into our operations.

Although we are not aware of any infringement or misappropriation of our intellectual property or similar proprietary rights, it may be anticipated that infringements and misappropriations will occur as our business grows and there is more brand loyalty attaching to our trade names and domain names.  We intend to police against infringement or misappropriation.  However, we cannot guarantee that we will be able to enforce our rights and enjoin the alleged infringers from their use of confusingly similar trademarks, service marks, telephone numbers, and domain names.

In addition, third parties may assert infringement claims against us.  We cannot be certain that our technologies or trademarks do not infringe valid patents, trademarks, copyrights, or other proprietary rights held by third parties.  We may be subject to legal proceedings and claims from time to time relating to the intellectual property of others in the ordinary course of our business.  Intellectual property litigation is expensive and time-consuming and could divert management resources away from running the business.

OUR INDUSTRY IS CHARACTERIZED BY RAPIDLY CHANGING TECHNOLOGY WITH CONTINUOUS IMPROVEMENTS IN BOTH COMPUTER HARDWARE AND SOFTWARE, AND RAPID OBSOLESCENCE OF CURRENT SYSTEMS.

We must continually buy new computer hardware and license new computer software systems to effectively compete in our industry. Our software delivery methodologies must be able to support changes in the underlying software applications that are delivered to our customers. The rapid development of new technologies increases the risk that current or new competitors could develop products or services that would reduce the competitiveness of our products or services. We rely on software providers to produce software applications that keep pace with our customers' demands.

There is no assurance that we will successfully develop or adopt new technologies, introduce new services or enhance its existing services on a timely basis, or those new technologies, new services or enhancements we use or develop will achieve market acceptance. If we fail to address these developments, we will lose sales to our competitors.

ANY PURCHASE OF THE COMPANY’S SECURITIES BASED ON FINANCIAL ESTIMATES PROVIDED BY ANALYSTS OR THIRD PARTIES IS DONE ENTIRELY AT THE RISK OF THE PURCHASER.

We do not currently make financial forecasts or projections, nor do we endorse the financial forecasts or projections of third parties or comment on the accuracy of third party reports. We do not currently participate in the preparation of the reports or the estimates given by analysts. Analysts who issue financial reports are not privy to non-public financial information. Any purchase of our securities based on financial estimates provided by analysts or third parties is done entirely at the risk of the purchaser.

We periodically issues press releases to update stockholders on new developments relating to Games, Inc. and our business. These releases may contain certain statements of a forward-looking nature relating to future events or our future financial performance. Readers are cautioned that such statements are only predictions, and actual events or results may materially differ with those statements. In evaluating such statements, readers should specifically review the various risk factors described herein, among others we identify in documents we file with the SEC, which could cause actual results to differ materially from those indicated by such forward-looking statements.

THE COMPANY FACES VARIOUS BUSINESS UNCERTAINTIES AS TO THE CLOSING OF THE ATARI TRANSACTION.

We have entered into a transaction with Atari, Inc. (“Atari”) that does not transfer operating rights to the site until March 31, 2004. The Company faces various business uncertainties as to the closing of this transaction. If we are unable to close this transaction we will incur large expenditures relating to the $100,000 in cash and re-development costs that may not be recoverable by us should the transaction not complete as anticipated.

WE EXPERIENCE COMPETITION FROM MANY PARTICIPANTS IN THE INTERNET GAMES, LOTTERY AND DIGITAL GREETINGS AND OUR ABILITY TO COMPETE IN THE MARKETPLACE REMAINS UNCERTAIN.

The markets for our services are rapidly evolving and intensely competitive. In addition to internally built and supported operations, our primary current and prospective competitors include:

º

Lottery Software Companies

º

Greeting Card Companies

º

Game Companies

º

Companies that intend to offer some of the services that we offer currently to a portion of our targeted customer base.

Many of our competitors have been in business longer than us, have significantly greater financial, technical, and other resources, or greater name recognition. Our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements. Competition could negatively impact our ability to sell additional services on terms favorable to us. Competitive pressures could cause us to lose market share or to reduce the price of our services, either of which could harm our business, financial condition and operating results.

We believe that the principal competitive factors in our market include:

º

quality and reliability of services offered;

º

scope of supported applications and technology platforms;

º

ability to expand the operational environments supported;

º

extent to which the services offered provide a complete solution to a potential customer's operations requirements;

º

technical expertise and development;

º

rapid deployment of services; quality of customer service and support;

and price.

GOVERNMENT REGULATION MAY DELAY OR PREVENT US FROM SUCCESSFULLY MARKETING OUR PRODUCTS.

There are currently few laws or regulations directly governing access to, or commerce upon, the Internet. Due to the increasing popularity and use of the Internet, it is possible that a number of laws and regulations may be adopted with respect to the Internet, covering issues such as user privacy, pricing and characteristics and quality of products and services.  Such legislation could dampen the growth in the use of the Internet generally and decrease the acceptance of the Internet as a communications and commercial medium, and could, thereby, have a material adverse effect on our business, results of operations and financial condition. Other nations, including Germany, have taken actions to restrict the free flow of material deemed to be objectionable on the Internet. In addition, several connectivity carriers are seeking to have connectivity over the Internet regulated by the Federal Communic ations Commission in the same manner as other connectivity services. For example, America's Carriers Connectivity Association has filed a petition with the Commission for this purpose. In addition, because the growing popularity and use of the Internet has burdened the existing connectivity infrastructure and many areas with high Internet use have begun to experience interruptions in phone service, local telephone carriers, such as Pacific Bell, have petitioned the Commission to regulate Internet service providers and online service providers, in a manner similar to long distance telephone carriers and to impose access fees on these service providers. If either of these petitions is granted, or the relief sought therein is otherwise granted, the costs of communicating on the Internet could increase substantially, potentially slowing the growth in use of the Internet, which could in turn decrease the demand for our products and services.

Also it is possible that laws will be adopted or current laws interpreted in a manner to impose liability on online service providers, such as us, for linking to third party content providers and other Internet sites that include materials that infringe copyrights or other rights of others. Such laws and regulations if enacted could have an adverse effect on our business, operating results and financial condition. Moreover, the applicability to the Internet upon the existing laws governing issues such as property ownership, copyright defamation, obscenity and personal privacy is uncertain, and we may be subject to claims that our services violate such laws. Any such new legislation or regulation or the application of existing laws and regulations to the Internet could have a material adverse effect on our business, operating results and financial condition.

In addition, as our products and services are available over the Internet in multiple states and foreign countries, such jurisdictions may claim that we are required to qualify to do business as a foreign corporation in each such state or foreign country. We are qualified to do business only in the states of Delaware, Florida, Ohio, Iowa and Virginia, and our failure to qualify as a foreign corporation in a jurisdiction where we are required to do so could subject us to taxes and penalties and could result in the our inability to enforce contracts in such jurisdictions. We will pursue authorization to do business in other jurisdictions in the normal course of business. Any such new legislation or regulation, the application of laws and regulations from jurisdictions whose laws do not currently apply to our business, or the application of existing laws and regulations to the Internet and other online s ervices may severely restrict the sale of new contracts and materially affect our ability to maintain our current customers.

At present, we do not collect sales or other similar taxes in respect of sales of our services through Internet purchases. However, various states have sought to impose state sales tax collection obligations on out-of-state companies similar to us. A successful assertion by one or more of these states that we should have collected or be collecting sales tax on the sale of our services could result in additional costs and corresponding price increases to our customers. The U.S. Congress has passed legislation limiting for three years the ability of states to impose taxes on Internet-based transactions. Failure to renew this legislation could result in the broad imposition of state taxes on e-commerce.

Many states have allowed their citizens to access every state agency, from licenses to lawsuits through the Internet. We expect to be able offer access to the state lotteries through the Internet.

THE EFFECT OF GOVERNMENT REGULATION AND LAWS ON OUR BUSINESS.

Government regulation and legal uncertainties could increase our costs and risks in the future as government’s change or as legislation is passed regarding the Internet and the e-commerce activities that are associated with our business. Moreover, it may take years to determine the extent to which existing laws relating to issues, such as property ownership, libel, taxation and personal privacy are applicable to the Internet. Any new laws or regulations relating to access to or use of the Internet could harm our business.

ADDITIONAL FACTORS THAT MAY AFFECT OUR FUTURE RESULTS.

An investment in our stock involves a high degree of risk. The following information discusses the material risk factors which are unique to our business and Company and that make an investment in Games, Inc.’s common stock risky or speculative. If any of the risks discussed below actually occur, our business, financial condition, operating results or cash flows could be materially adversely affected, which could cause the trading price of the our common stock to decline.

RISKS RELATED TO THE COMPANY’S INDUSTRY.

THE FAILURE OF THE INTERNET TO GROW OR REMAIN A COMMERCIALLY VIABLE COULD HARM OUR GROWTH.

Our success depends in large part on the maintenance of the Internet infrastructure as a reliable network frame that provides adequate speed, data capacity, and security. Our success also depends on the timely development of products and services that enable reliable Internet access and services. The Internet may continue to experience significant growth in the number of users, frequency of use and amount of data transmitted. The Internet infrastructure may not be able to support the demands placed on it and the performance or reliability of the Internet may be adversely affected by this continued growth. In addition, the Internet could lose its commercial viability if the number of people who use the Internet does not continue to grow. A number of factors, including unreliable service, unavailability of cost-effective, high-speed access to the Internet or concerns about security, could impede this growth. The infrastructure or complementary products and services necessary to maintain the Internet, as a viable commercial medium may not be developed, and, as a result, the Internet may not continue to be a viable commercial medium for us.

IF THE GOVERNMENT ADOPTS REGULATIONS THAT CHARGE INTERNET ACCESS FEES OR IMPOSE TAXES ON SUBSCRIPTIONS TO OUR WEB-BASED PRODUCTS WILL NEGATIVELY IMPACT OUR BUSINESS.

Currently there are few laws or regulations that specifically regulate communications or commerce on the Internet. However, laws and regulations may be adopted that address issues such as pricing and the characteristics of products and services. In addition, several connectivity companies have petitioned the Federal Communications Commission to regulate Internet and on-line service providers in a manner similar to long-distance telephone carriers and to impose access fees on them. This regulation, if imposed, could increase the cost of transmitting data over the Internet. Moreover, it may take years to determine the extent to which existing laws relating to issues such as intellectual property ownership and infringement, libel, obscenity and personal privacy are applicable to the Internet. Finally, state tax laws and regulations relating to the provision of products and services over the Internet are still developing. A few states have tried to impose taxes on services provided over the Internet. If additional states try to do so, our operating costs may increase and we may not be able to increase the price that we charges for its services to cover these costs. Any new laws or regulations or new interpretations of existing laws and regulations relating to the Internet could decrease the growth in the use of the Internet, decrease the demand for traffic on its Website, increase its operating expenses, or otherwise adversely affect its business.

OUR INDUSTRY IS RAPIDLY CHANGING AND IF WE DO NOT RESPOND EFFECTIVELY AND ON A TIMELY BASIS TO RAPID TECHNOLOGICAL CHANGE IN ITS INDUSTRY, WE MAY NOT BE ABLE TO EFFECTIVELY SELL OUR SERVICES AND SALES MAY DECLINE.

The games industry is characterized by rapidly changing technology with continuous improvements in both computer hardware and software. If we do not respond effectively and on a timely basis to rapid technological change in its industry, we will not be able to effectively sell its services and its sales will materially decline. We must continually purchase new computer hardware and license new computer software systems to effectively compete in its industry. In addition, its software delivery methodologies must be able to support changes in the software applications that are delivered to its customers. The rapid development of new technologies increases the risk that current or new competitors could develop products or services that would reduce the competitiveness of our products or services. And moreover, we rely on software providers to produce software that keeps pace with its customers' demands.

We may not successfully develop or adopt new technologies, introduce new services or enhance its existing services on a timely basis; in addition, new technologies, services, or enhancements the Company uses may never achieve market acceptance. If the Company fails to address these developments, then we may lose sales to our competitors.

RISKS RELATED TO THE COMPANY’S COMMON STOCK

CONTROL EXERCISED BY OFFICERS AND DIRECTORS COULD HAVE AN ADVERSE EFFECT ON THE COMPANY’S STOCKHOLDERS.

As of October 10, 2003, Games directors, executive officers, and their affiliates beneficially owned approximately 45.74% of its outstanding common stock. Roger W. Ach, II, Games chairman of the board, chief executive officer and president, beneficially owns approximately 38.04% Games outstanding common stock. Carol A. Meinhardt, our chief operating officer, secretary and treasurer, beneficially owns approximately 7.02% of Games outstanding common stock. As a result, these stockholders, acting together and with others, have the ability to potentially control substantially all matters submitted to the Company’s stockholders for approval, including the election and removal of directors and any merger, consolidation, takeover or other business combination involving us, and to control the Company’s management and affairs. This may discourage a potential acquirer from making a tender offer or otherwise attempting to obt ain control of us, which could materially adversely affect the market price of Games common stock.

THE VOLATILITY OF THE COMPANY’S STOCK PRICE COULD ADVERSELY AFFECT THE COMPANY’S STOCKHOLDERS.

There currently is a public market for our common stock, but there is no assurance that there will always be such a market. The trading price of our common stock is highly volatile and could be subject to wide fluctuations in response to factors such as:

Actual or anticipated variations in quarterly operating results;

º

Announcements of technological innovations;

º

New sales methodologies, contracts, products or services by us or our competitors;

º

Changes in financial estimates by securities analysts;

º

Announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

º

Additions or departures of key personnel;

º

Sales of common stock; and/or

º

Other general economic or stock market conditions, many of which are beyond our control.

In addition, the stock market, in general, and the market for Internet-related companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies. The trading prices of many Internet-related technology companies' stock were at or near unprecedented levels in the past two years; however, such levels have recently given way to a depressed stock price for these companies, and there can be no assurance that these trading prices will increase again. Such fluctuation may materially adversely affect the market price of our common stock, regardless of our operating performance. Historically, following periods of volatility in the market price of a company's securities, securities class action litigation has often been instituted against that company. The institution of similar litigation against us could result in substanti al costs and a diversion of our management's attention and resources.

FORWARD-LOOKING STATEMENTS

Certain of the statements contained in this prospectus, including, without limitation, those described under the sections entitled "Risk Factors", "Use of Proceeds" and  "Management  Discussion  and Analysis of Financial  Condition and Results of Operations" constitute "forward looking statements". These statements can be  identified by  forward-looking  words such as  "believes", "could", "possibly", "probably", "anticipates", "estimates", "projects", expects", "may", "will", "should", "goal", "plan", "intend", or other variations thereon or similar words are not historical facts but are statements of future expectations and other forward-looking statements that are based on our current views and assumptions and involve known and unknown risks that may differ materially from those expressed or implied in such statements.  Actual results, performance or events may differ materially from those in such statements due to various factors beyond our control which include, without limitation:

     (a)  general economic conditions;

     (b)  performance of financial markets;

     (c)  changes in laws and regulations;

     (d)  changes in political environment;

     (e)  competition; and

     (f)  sabotage to the Internet.

USE OF PROCEEDS

All shares offered by this Prospectus are being resold by the Selling Shareholders and all proceeds from the sales of such shares will go to the Selling Shareholders.  We will receive no proceeds from this offering other than the exercise of stock options. Our stock option plan provides for a cashless exercise so no proceeds are assumed from the exercise of stock options.

MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

During 2001, we filed a request for clearance for quotation on the OTC Bulletin Board under SEC Rule 15c2-11, Subsection (a)(5) with NASD Regulation Inc.  A Clearance Letter was issued to Colley Corporation to allow the Company’s common stock to trade under the symbol “COLY” on February 1, 2002. Effective on September 16, 2002 our symbol changed to GMSI.

The following table sets forth for the periods indicated the high and low bid and ask prices for the common stock as reported on OTC Bulletin Board.

The quotations reflect inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions:

--------------------------

High

Low

---------------------------

2002

First quarter........…..

September 30, 2001

-0-

-0-

----------------------------------------------------------------------------------------

Second quarter...…...

December 31, 2001

-0-

-0-

----------------------------------------------------------------------------------------

Third quarter………

March 31, 2002

$0.02

$0.02

----------------------------------------------------------------------------------------

Fourth quarter…..…

June 30, 2002

$4.75

$0.02

----------------------------------------------------------------------------------------

2003

First quarter..........

September 30, 2002

$4.75

$3.50

----------------------------------------------------------------------------------------

Second quarter......

December 31, 2002

$4.75

$1.70

----------------------------------------------------------------------------------------

Third quarter…….

March 31, 2003

$3.00

$1.00

----------------------------------------------------------------------------------------

Fourth quarter……

June 30, 2003

$2.50

$0.24

----------------------------------------------------------------------------------------

2004

First quarter..........

September 30, 2003

$0.90

$0.24

----------------------------------------------------------------------------------------

Second quarter......

December 31, 2003

$0.90

$0.15

OUR DIVIDEND POLICY

We have approximately 1,200 holders of record of its common stock. Our Board of Directors has not declared or paid cash dividends since our inception on our Common Stock. We have never paid a cash dividend on its Common Stock. The Company does not anticipate paying any cash dividends in the foreseeable future and intends to retain future earnings, if any, for the development of our business.

We do not anticipate paying any cash dividends in the foreseeable future because:

     o   we have experienced losses since inception;

     o   we have significant capital requirements in the future; and

     o   we presently intend to retain future earnings, if any, to finance the expansion of our business.

Future dividend policy will depend on:

     o   our earnings, if any;

     o   capital requirements;

     o   expansion plans;

     o   financial condition; and

     o   other relevant factors.

The resale of our securities not covered in this prospectus is subject to Rule 144. Under Rule 144, if certain conditions are satisfied, a person (including any of our affiliates) who has beneficially owned restricted shares of common stock for at least one year is entitled to sell within any three-month period a number of shares up to the greater of 1% of the total number of outstanding shares of common stock, or if the common stock is quoted on NASDAQ, the average weekly trading volume during the four calendar weeks preceding the sale. A person who has not been an affiliate of ours for at least three months immediately preceding the sale, and who has beneficially owned the shares of common stock for at least two years is entitled to sell the shares under Rule 144 without regard to any of the volume limitations described above. As of the date of this offering, no shares of our common stock are eligible for resale under Rule 144. An additional 3,487,500 common shares are subject to issuance upon conversion of convertible notes payable and would be eligible for resale under Rule 144.

The Securities and Exchange Commission has adopted regulations which generally define a "penny stock" to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Currently, our common stock is a "penny stock". A penny stock is subject to rules that impose additional sales practice requirements on broker/dealers who sell these securities to persons other than established customers and accredited investors. For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of these securities. In addition he must receive the purchaser's written consent to the transaction prior to the purchase. He must also provide certain written disclosures to the purchaser. Consequently, the "penny stock" rules may restrict the ability of broker/dealers to sell our securities, and may negatively affect the a bility of holders of shares of our common stock to resell them.

DESCRIPTION OF PROPERTY

We have leased, through March 31, 2006, facilities, which consist of approximately 5,397 square feet and are located in Cincinnati, Ohio. We currently pay an annual base rent of $135,990 for the use of these facilities. These facilities house all of our departments, such as, sales, customer, technical and administrative services.

LEGAL PROCEEDINGS

We are not currently involved in any legal proceedings at the present time.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Except for the historical information contained herein, the following discussion and analysis in this Form 10SB-2 contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from anticipated results, including those set forth under “Cautionary Statement” under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report.  The following discussion should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and notes thereto included elsewhere in this report.

OVERVIEW

Games, Inc.  (or the “Company or Games”) is a value-added information service providing subscribers with access to entertaining proprietary content via the Internet. Games and its subsidiaries operate a branded network of web sites targeting three allied areas of interactive entertainment: government sponsored lotteries, internet games, and digital greetings. We currently own and operate leading games and entertainment sites that include:

-Games.com   -Lottery.com

 -GameLand.com   -SkillMoney.com  -Cards.com  

The following discussion and analysis should be read in conjunction with the financial statements and notes thereto included elsewhere in this Registration Statement. The statements contained in this report that are not historical facts, including, without limitation, statements containing the words "believes," "anticipates," "estimates," "expects," and words of similar import, constitute "forward-looking statements." Forward-looking statements are made based upon our management's current expectations and beliefs concerning future developments and their potential effects upon us. Our actual results could differ materially from those anticipated for many reasons, including risks faced by us described in this prospectus under "Risk Factors."

RESULTS OF OPERATIONS

RESULTS OF OPERATIONS – THREE MONTHS ENDED DECEMBER 31, 2003 COMPARED TO THREE MONTHS ENDED DECEMBER 31, 2002

OVERVIEW AND RECENT DEVELOPMENTS

We own and operate the leading brands in online media and value-added information service providing subscribers with access to entertaining proprietary content via the Internet. Games and its subsidiaries operate a branded network of web sites targeting three allied areas of interactive entertainment: government sponsored lotteries, Internet games, and digital greetings. We currently own and operate leading games and entertainment sites that include:

-Games.com  -Lottery.com  -GameLand.com  -SkillMoney.com   -Cards.com  

We have traditionally derived our revenues from advertising sources. Advertising revenues are derived principally from online advertising arrangements under which we receive revenues on fixed payment over a contract period, a cost-per-thousand impression basis and design of advertising campaigns to be placed on our network. We are currently developing programs to expand our revenue generating sources through non-advertising revenues. These non-advertising revenues will be primarily derived from subscription fee-based services and software sales.

REVENUE

Revenue of $98,979 for the three months ended December 31, 2003 was $44,053 or approximately 80% more than the same period in the prior year.  The increase is due to $56,670 earned from the sale of lottery subscriptions and services and decreased advertising revenues of approximately $12,717.

COSTS AND EXPENSES

During the three months ended December 31, 2003, the cost of revenues of $18,145 was approximately 54% more than the $11,771 for the three months ended December 31, 2002. The cost of revenues increased due to increased hosting and bandwidth cost, gross margins increased by approximately 87% due primarily to increased sales of lottery subscriptions.

The Company incurred operating expenses of $705,332 for the three months ended December 31, 2003. This represents an increase of $97,489 or approximately 16% compared to the operating expenses in the three months ended December 31, 2002 of $607,843. The increase of approximately $100,000 was attributed to professional and legal fees incurred in acquisitions and in our efforts to initiate the sale of lottery tickets on the Internet. The balance relating to payroll related costs and increased health insurance.

Depreciation and amortization decreased approximately $13,652 or 5% during the three months ended December 31, 2003 compared to the three months ended December 31, 2002. This increase was primarily due to reclassifying some assets to a shorter expected useful life of some assets.

Interest expense increased from $15,926 to $29,883 or approximately 88% due to increased debt, principally due to the addition of notes payable and convertible notes payable.

RESULTS OF OPERATIONS – SIX MONTHS ENDED DECEMBER 31, 2003 COMPARED TO SIX MONTHS ENDED DECEMBER 31, 2002

REVENUE

Revenue of $190,152 for the six months ended December 31, 2002 was $88,644 or 87% higher than the same period in the prior year.  The increase is due to increased sales of Lottery subscriptions and Lottery related revenues which accounted for approximately $95,916 of the increased revenues, with advertising revenues being down approximately $7,272 from the same period in the prior year.

COSTS AND EXPENSES

During the six months ended December 31, 2003, the cost of revenues of $40,025 was $13,693 or 52% more than the six months ended December 31, 2002. The increase in cost of sales was primarily attributable to increased bandwidth cost relating to increased activity on the web sites. The Company incurred operating expenses of $1,431,695 for the six months ended December 31, 2003.  This represents a decrease of $15,260 or approximately 1% compared to the operating expenses of $1,446,955 during the six months ended December 31, 2002. The decrease was primarily attributed to a reduction in employee related costs.

Depreciation and amortization decreased $20,743 during the six months ended December 31, 2003 compared to the six months ended December 31, 2002. The decrease is due primarily to a change in amortization periods for intangible assets from 20 to 5 years to reflect the decrease in the lives of such assets and reduced impairment of intangibles compared to the prior period.

Interest expense increased from $28,907 to $59,662 or approximately 106% due to increased debt, principally due to note payable in connection with cards.com.

RESULTS OF OPERATIONS - FISCAL 2003 COMPARED TO FISCAL 2002

We incurred a net loss of $2,519,839 and $4,038,759 for the years ended June 30, 2003 and 2002, respectively. The respective annual losses resulted primarily from:

º

providing discounted or free services as the Company marketed the Company’s products and services,

º

initial and continuing network, infrastructure, and research and development costs associated with both operational and the start-up of operations,

º

salaries, deferred compensation and other employee related benefits, and

º

professional and consulting fees

º

write-off of software and intangibles

Total revenue for the years ended June 30, 2003 and June 30, 2002 was $218,049 and $466,995, respectively.

	Year Ended June 30, 2003		Year Ended June 30, 2002
Revenue Source	Amount	Percent of Total	Amount	Percent of Total
1.  Internet advertising	$166,559	76.4%	$343,732	73.6%
2.  Digital Greetings	2,559	1.2%	77,545	16.6%
3.  Lotteries	48,931	22.4%	45,718	9.8%
Total	$218,049	100.0%	$466,995	100.00%

The decrease in revenue can be directly attributed to the drop in advertising revenue on our websites.  Advertising rates on our websites remained constant at $1 per CPM (cost per 1000 impressions) but the volume of advertising slowed during the year.  Prior growth rates should not be considered as necessarily indicative of future growth rates or operating results for the fiscal ending June 30, 2003. We expect that future revenue from all sources will trend away from the practice of providing discounts and free offerings experienced in the fiscal years 2003 and fiscal 2002, as we continue to develop our products and services, implement our sales and marketing strategies, increase consumer understanding and awareness of our services, and prove our business model.  

Our continued growth is significantly dependent upon its ability to generate sales relating to its subscription and skill-based game services. Our main priorities relating to revenue are:

º

as we build traffic to our websites we will also be able increase market awareness of the products and services we offer and to increase the rates we are able charge,

º

as we build traffic to our websites we are able to increase the number of customers we can serve each month,

º

continue to accomplish technological economies of scale, and continue to streamline and maximize efficiencies in our operations.

COSTS AND EXPENSES

During the year ended June 30, 2003, we incurred operating expenses of $3,085,112.  This represents a decrease over the prior year of $3,010,270.  The decrease is primarily attributed to a decrease in impairment of software and websites in the amount of $1,598,639.  In addition, we had a decrease in Selling, General and Administrative expenses by $1,296,139 as a result of fewer offices and reduced travel and reduced employee related costs working in those functions.  We had a decrease in amortization expenses of $284,688 due to a reduced asset base as a result of the impairment charge of $324,914.  Interest income decreased from $71,375 to zero due to a reduction in the note receivable from the President and CEO of Games that was settled through the return of common stock during fiscal year 2002.  Interest expense decreased from $158,817 to $62,216 due to $765,000 in notes converted to common stock in 2002. We recorded a $482,900 gain in settlement of law suits in 2003.  During the year ended June 30, 2002, we removed $472,991 of accounts payables on the books at the end of fiscal 2001 that we believed were not bona fide.  These amounts were removed as we no longer believed that they represent liabilities of the Company.  These amounts were removed primarily because the services were not provided to our satisfaction or the provider is no longer in business.

LIQUIDITY AND CAPITAL RESOURCES

Our success is highly dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to obtain additional financing from related parties as may be required, and ultimately to attain profitability.  Management expects to need and be able to attract additional capital for its operations.  However, there can be no assurance that management’s plans will be executed as anticipated.

At December 31, 2003, the Company had a cash balance of $155,645 compared to $9,563 at December 31, 2002. Current liabilities at December 31, 2003 were $2,343,648 with current assets of $2,214,208. Total assets at December 31, 2003 were $3,834,459 with total liabilities of $3,125,026.

Net cash used by operating activities was $491,632 for the six months period ended December 31, 2003 compared to $521,676 net cash used for the six month period ended December 31, 2002, a decrease of $.30,045. The cash used by operating activities during the six months ended December 31, 2003 was primarily related to a net loss of $1,341,230. This partially offset by depreciation and amortization of $533,102, amortization of interest and debt discount of $36,791. The cash used by operating activities during the six months ended December 31, 2002 was primarily related to a net loss of $1,400,686, partially offset by depreciation and amortization of $532,081, an increase in accounts payable and accrued liabilities of $192,821 and common stock issued for services of $85,643.

Cash used by investing activities for the period ended December 31, 2003 was $300 compared to $3,930 for the six months ended December 31, 2002.

Cash provided by financing activities of $647,577 for the six months ended December 31, 2003 included proceeds from the issuance of common stock of $583,500, issuance of $71,810 convertible notes and issuance of notes payable of $175,000. This was offset by a decrease of capital lease obligation of $87,541 and repayment to related party of $60,192.  

Under the asset purchase agreement and license and royalty agreement Games is committed to paying Atari, Inc. $3,000,000 in cash for prepaid royalties on or before March 31, 2004. We are seeking investment from outside the Company to complete this transaction. Chicago West Pullman, LLC has given Atari their guarantee to complete the funding if Games is unsuccessful in finding a suitable investor prior to March 31, 2004.

Unless and until its revenue stream matures, we recognize that we will likely not have sufficient cash resources to fund its operations through the end of fiscal 2004.  The Company must be able to close on additional financing transactions to fund ongoing operations.  We might be required to obtain financing on terms that are not favorable to us and our shareholders.  The Company received a going concern opinion from its independent Auditor on its June 30, 2003 audited financial statements.

Unless and until its revenue stream matures, we recognize that we will likely not have sufficient cash resources to fund its operations through the end of fiscal 2004.  The Company must be able to close on additional financing transactions to fund ongoing operations.  We might be required to obtain financing on terms that are not favorable to us and our shareholders.  The Company received a modified opinion concerning the substantial doubt about the Company’s ability to continue as a going concern on its June 30, 2003 audited financial statements.

If the Company is unable to obtain additional financing when needed, it may be required to shutdown, delay or scale back product development and marketing programs in order to meet its short-term cash requirements, which could have a material adverse effect on its business, financial condition and results of operations.

Our Outstanding Convertible Notes

From March 2003 through June 2003, the Company issued $662,500 5% and 6% convertible promissory notes (the “Promissory Notes”) in varying amounts due October 31, 2004. A portion of the proceeds raised from the placement has been used to fund the Company's working capital and capital expenditure requirements.

During March 2003, the Company issued $175,000 in Promissory Notes (the “March Notes”).  The fair value of the Company’s common stock exceeded the conversion price of the March Notes at the date of issuance.  Accordingly, the Company recorded a beneficial conversion feature on the promissory notes of $88,000.  The beneficial conversion feature and deferred debt discount accrete to interest expense over the life of the promissory notes.  During the year ended June 30, 2003 the Company recorded a charge to interest relating to the beneficial conversion feature in the amount of $16,000.

From July 2003 through September 2003, the Company issued $35,000 5% and 6% convertible promissory notes (the “Promissory Notes”) in varying amounts due October 31, 2004. A portion of the proceeds raised from the placement has been used to fund the Company's working capital and capital expenditure requirements. We did not issue any convertible promissory notes in the three month period ended December 31, 2003.

The Promissory Notes including accrued interest are convertible into five (1) shares of Common Stock for each dollar of debt, at the option of the holder, subject to certain adjustments and conditions.

Our Off-Balance Sheet Obligations

Our off-balance sheet liabilities principally consist of lease payment obligations incurred under operating leases, which are required to be excluded from our consolidated balance sheet by generally accepted accounting principles in the United States of America. Our most significant operating leases pertain to our corporate facilities. All of our other operating leases pertain to various equipment and technology. Certain of these operating leases are non-cancelable and contain rent escalation clauses.

The future aggregate minimum lease payments under operating lease agreements in existence at December 31, 2003 are as follows:

FISCAL YEARS ENDING JUNE 30,
2004 (six month balance thereof)	$  68,403
2005	$136,774
2006 (Through March 2006)	$100,182
	$305,359

Our Planned Capital Expenditures

Our only significant planned capital expenditure for fiscal 2004 is the purchase or lease of additional web servers for the Games.com acquisition, with an estimated cost of $150,000. However, our ultimate need for these machines is dependent upon us procuring the significant additional equity or debt financing we currently seek, as previously discussed. To a significantly lesser extent, we currently anticipate the need to perform certain telecommunications and computer technology upgrades during fiscal 2004 with an estimated aggregate cost of $10,000.

The Company operates in a highly competitive environment that involves a number of risks, some of which are beyond our control.  The following statement highlights some of these risks.

Statements contained in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” which are not historical facts are or might constitute forward-looking statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Although we believe the expectations reflected in such forward-looking statements are based on reasonable assumptions, our expectations might not be attained.  Forward-looking statements involve known and unknown risks that could cause our actual results to differ materially from expected results. Factors that could cause actual results to differ materially from our expectations include, among others: we have incurred significant operating losses and we cannot predict whether we will become profitable; we have changed our business focus and we may not achieve our plan; we have capital requirement s to fund our operations, and if we do not obtain sufficient additional funds our ability to grow may be limited; our growth strategy, including acquisitions, may not succeed and may adversely affect our financial condition, results of operations and cash flows; if we are unable to introduce new products and services and incorporate rapidly developing technologies into our products and services, our business may be adversely affected; we depend on the continued growth in use of the Internet; intense competition may adversely affect our operating results; and other risks.  We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this report to reflect any change in our expectations or any changes in events, conditions or circumstances upon which any forward-looking statement is based.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Consolidated Financial Statements have been prepared in accordance accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Consolidated Financial Statements, and revenues and expenses during the periods reported.  Actual results could differ from those estimates.  We believe the following are the critical accounting policies and estimates which could have the most significant effect on our reported results and require the most difficult, subjective or complex judgments by management.

Capitalized Game Development Costs

We capitalize game development costs when technological feasibility has been established.  Costs not qualifying for capitalization are expensed as incurred.  At each balance sheet date we evaluate the estimated net realizable value of each product and when required, records write-downs of net book value to net realizable value of any products for which the net book value is in excess of net realizable value.

Long-Lived Assets

In accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, we review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and exceed its fair value.  If conditions indicate an asset might be impaired, we estimate the future cash flows expected to result from the use of the asset and its eventual disposition.  The impairment would be measured by the amount by which the assets exceed its fair value typically represented by the future discounted cash flow associated with the asset.

Revenue Recognition

Our revenues are derived principally from advertising and are recognized as "impressions", or times an advertisement appears in pages viewed by users of our online properties, are delivered.

NEW AUTHORITATIVE ACCOUNTING PRONOUNCEMENTS

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure an amendment of FASB Statement No. 123” which is effective for financial statements issued for fiscal years ending after December 15, 2002.  This statement amends FASB Statement No. 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation.  In addition, this statement amends the disclosure requirements of Statement 123 to require prominent disclosure in both annual and interim financial statements about the method of accounting for stock-based compensation and the effect of the method used on reported results.  The Company continues to follow the pro-forma disclosures for stock-based compensation as permitted in SFAS 123.

In January 2003, the FASB issued Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities, and an Interpretation of ARB No. 51.”  FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional financial support from other parties.  FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003.  For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after December 31, 2004.  The Company is currently evaluating the effect that the adoption of FIN 46 will have on its consolidated financial position and results of operations.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.”  SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS No. 133).  Except for the provisions of SFAS No. 149 that relate to SFAS No. 133 implementation issues that have been effective for fiscal quarters that began prior to June 15, 2003 and for hedging relationships designated after June 30, 2003.  The adoption of SFAS No. 149 did not have a material effect on the Company’s consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.”  SFAS No. 150 establishes standards for classification and measurement in the statement of financial position of certain financial instruments with characteristics of both liabilities and equity.  It requires classification of a financial instrument that is within its scope as a liability (or an asset in some circumstances).  SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003.  The adoption of SFAS No. 150 did not have a material effect on the Company’s consolidated financial statements.

THE COMPANY

OUR CORPORATE HISTORY

Games, Inc. (formerly Colley Corporation) (the “Company”) operates in three allied areas of interactive entertainment: Government Sponsored Lotteries, Internet Games and Digital Greetings.

On September 19, 1997, Colley Corporation  (an Arizona Corporation) (“Colley”) filed for protection under Chapter 11 of the Federal Bankruptcy Act in the United States Bankruptcy Court, Central District of California - Los Angeles Division (Bankruptcy Court).  Colley's bankruptcy action was consolidated into a single action with other related Entities - Super Shops, Inc. (a California corporation); Super Shops, Inc. (a Kansas corporation); Super Shops, Inc. (a Michigan corporation); Super Shops, Inc. (a Texas corporation) and Mallory Corporation (a Nevada corporation).  All assets, liabilities and other claims against Colley were combined with those of its affiliates for the purpose of distribution to creditors. Each of the six entities otherwise remained separate corporate entities.  During the period from September 17, 1997 through July 31, 2000 (the entered date of the Debtors' Amended Joint Plan of Reorganization dated as of July 31, 2000), all secured claims and/or administrative claims during this period were satisfied through either direct payment or negotiation.

The Debtors' Amended Joint Plan of Reorganization was confirmed by the United States Bankruptcy Court, Central District of California - Los Angeles Division on July 27, 2000 and entered on July 31, 2000.  The Amended Joint Plan of Reorganization, which contemplated Colley entering into a reverse merger transaction, provided that all unsecured creditors and Halter Financial Group, Inc. would receive "new" shares of Colley's post- reorganization Common Stock, pursuant to Section 1145(a) of the Bankruptcy Code. As a result of the Plan's approval, all liens, security interests, encumbrances and other interests, as defined in the Amended Joint Plan of Reorganization, attach to the creditor's trust. Specific injunctions prohibit any of these claims from being asserted against Colley prior to the contemplated reverse merger. Final Discharge occurred on October 19, 2001 with the filing of a Certificate of Completion with the Bankruptcy Court.

The cancellation of all existing shares of common stock at the date of the bankruptcy filing and the issuance of "new" shares of the reorganized entity caused an issuance of shares of common stock and a related change of control of Colley with more than 50.0% of the "new" shares being held by persons and/or entities which were not pre-bankruptcy shareholders. Accordingly, per American Institute of Certified Public Accountants' Statement of Position 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code", Colley adopted "fresh- start" accounting as of the bankruptcy discharge date whereby all continuing assets and liabilities of Colley were restated to the fair market value.  As of July 31, 2000, by virtue of the confirmed Plan of Reorganization, the only post-bankruptcy assets of Colley were approximately $2,500 in cash due from the Bankruptcy Estate.

In October 2000, Colley changed its State of Incorporation from Arizona to Delaware by means of a merger with and into a Delaware corporation formed on October 13, 2000 solely for the purpose of effecting the re-incorporation. The Certificate of Incorporation and Bylaws of the Delaware Corporation is the Certificate of Incorporation of the surviving corporation.  Such Certificate of Incorporation changed Colley's name to AZ Acquisition Corp. and modified Colley's capital structure to allow for the issuance of 50,000,000 total equity shares consisting of 10,000,000 shares of preferred stock and 40,000,000 shares of common stock.  Both classes of stock have a par value of $0.001 per share.

On September 30, 2001, AZ Acquisition Corp. issued 525,000 shares of restricted, unregistered common stock in exchange for 100% of the issued and outstanding stock of Colley, a Delaware corporation formed on August 27, 2001. Colley DE and AZ Acquisition Corp. then merged with AZ Acquisition Corp. being the legal surviving corporation and the Company's corporate name was changed to Colley Corporation. Colley Corporation was incorporated on August 27, 2001 under the laws of the State of Delaware to engage in the acquisition and sale of thoroughbred racing stock.

The acquisition of Colley DE, on September 30, 2001, by Colley effected a change in control and was accounted for as a "reverse acquisition" whereby Colley DE was the accounting acquirer for financial statement purposes.

On June 3, 2002, Chicago West Pullman, LLC, an Ohio limited liability company (CWP), acquired from controlling shareholders of Colley DE the 525,000 shares or 51.19% (issued on September 30, 2001) of the outstanding common stock of Colley DE in exchange for a cash payment of $25,000. CWP then became the sole member of the Board of Directors of Colley immediately following this transaction. On June 25, 2002, the Board of Directors of Colley DE agreed to exchange shares of Colley DE for shares of common stock of Gamebanc Corporation ("Gamebanc") on a one share for one share basis (the “First Exchange”).  Participants in the First Exchange, i.e., the controlling shareholders of Gamebanc, exchanged 7,417,618 shares of Gamebanc common stock for 7,417,618 newly issued shares of Colley DE common stock, effecting a change in control.  Colley DE acquired a majority interest in Gamebanc Corporation as a result of the First exchange.  The Colley DE shares exchanged were restricted shares and will not be transferable unless they have been registered under the laws and regulations administered by the Securities Exchange Commission or any applicable state, or unless an exemption from the registration requirements exist.

On July 23, 2002, Colley DE offered to exchange up to 8,906,866 shares of its common stock for shares of common stock and of preferred stock of Gamebanc Corporation (the “Second Exchange”).  The Second Exchange was conducted on the basis of one share of Colley common stock for one share of Gamebanc common stock, and 50 shares of Colley common stock for one share of preferred stock of Gamebanc.  The Second Exchange remained open until August 6, 2002.  Through August 12, 2002, 7,539,582 shares of additional stock were issued through the exchange.  The total issued and outstanding shares of Colley DE were 15,982,709 shares following the consummation of the exchange.

During the period from July 31, 2002 through December 31, 2002 Gamebanc sold an aggregate of 3,665 shares of Preferred Stock for $366,500 ($100 per share) in cash proceeds. Immediately upon the issuance of Gamebanc preferred stock, the preferred stock was exchanged for 50 shares of common stock of Games, Inc. pursuant to the terms of the Second Exchange.

For accounting purposes, the First and Second Exchanges discussed above have been treated as a recapitalization of Gamebanc with Gamebanc as the acquirer (a reverse acquisition).  The historical financial statements included herein are those of Gamebanc.  As of June 30, 2003, Games, Inc. owned 97.9% of the outstanding common stock of Gamebanc.

On September 16, 2002, Colley DE changed its name to Games, Inc.

Gamebanc was incorporated in Delaware in 1996 under the name of The Lottery Channel, Inc.  It was originally created to develop cable television programming for state-sponsored lotteries.  Our mission was to make lottery play more entertaining by creating interactive games that people could play along with as they watch the lottery game show on television.

As use of the Internet became more ubiquitous, we shifted our focus to developing lottery games that could be played over the Internet and to developing an on-line ticket sales system.

As an outgrowth of our work in the game development arena, in 1999 we purchased a website called www.GameLand.com from iXL Corp. in Atlanta.  Gameland.com has a portfolio of over 120 proprietary shockwave game engines that we have refaced and use for its own sites as well as providing game packages for other major websites.

As it became evident the Internet Lottery ticket sales were going to be adopted more slowly than we had anticipated, we focused more of our attention on the games business in general, never losing sight of its ultimate goal of being an electronic lottery retailer.

In July 2001, The Lottery Channel, Inc. changed its name to Gamebanc Corporation to more accurately reflect its expansion into the Internet game business.  In August 2001 we signed a database management contract with Maryland Lottery.

In November 2001, we launched our digital greeting card site, www.Cards.com. In May 2002, we launched a website called www.SkillMoney.com. Skill-based games are legal in the majority of states.  In the United .States, rules governing Tournaments with entry fees and/or prizes are set up by each individual state, not by the federal government. Based on these 50 sets of laws, players cannot participate in fee-based Tournaments with prizes if they reside in the following 11 states:

Arizona, Arkansas, Connecticut, Delaware, Florida, Iowa, Louisiana, Maryland, Nevada, Tennessee and Vermont

Visitors to SkillMoney.com enter a game that has between 4 and, in the case of tournaments, 100 players.

In June 2002, we signed a database management contract with Ohio Lottery.

On September 16, 2002, Colley Corporation changed its name to Games, Inc.

We follow the accrual basis of accounting in accordance with generally accepted accounting principles and changed its year-end to June 30 as announced in an 8-K dated September 27, 2002.

DESCRIPTION OF THE BUSINESS

Games, Inc. (or the “Company or Games”) operates in three allied areas of interactive entertainment:  Government Sponsored Lotteries, Internet Games and Digital Greetings.  We have developed an online Lottery ticket sales system that is ready to deploy when the state Lotteries allow for the purchase of Lottery tickets online.

Our principal business is providing subscribers with access to entertaining proprietary content via the Internet. Over its four websites, the Company has over 25,800,000 page views and 3,800,000 user sessions per month.

We currently own and operate leading games and entertainment sites that include:

-Games.com

-Lottery.com

-GameLand.com

-SkillMoney.com

-Cards.com

Our focus is as a software developer creating online lottery games and skill based games that can be played over the Internet and has developed an on-line Lottery ticket sales system. State Lotteries have been slow adopters of Internet Lottery ticket sales, although recent state budget deficits are providing an opening to re-visit on-line Lottery ticket sales. Management estimates that online Lottery ticket sales will create an additional 12 to 15% incremental Lottery sales through expanded markets and additional marketing opportunities. We have focused more of our attention on the games business in general, while never losing sight of our ultimate goal of being an electronic Lottery retailer. We have Lottery Online database management contracts with Maryland and Ohio Lotteries. Our online Lottery ticket sales and management system will allow the subscriber to automate and manage the purchase of onlin e tickets based on their personal criteria. We have recently started using some features of the on-line Lottery ticket software to offer Lottery Ticket Clubs to our subscribers.

As it became evident the Internet Lottery ticket sales were not going to happen as rapidly as we had anticipated, we focused more of our attention on the games business in general, never losing sight of our ultimate goal of being an electronic lottery retailer.

We continue to expand into the Online Gaming market with the acquisition of Games.com. This acquisition will place us in the top ten of games entertainment sites as well as enhance the visibility of its two existing premier properties in their respective online gaming categories, Gameland.com and SkillMoney. Games.com, combined with our other gaming related properties, have over 7 million registered users. The online gaming market has become one of the hottest and fastest growing areas of Internet commerce. Online gaming revenue is projected to increase at a rate of 138% between 2000 and 2005, and online gaming revenue is projected to exceed $5.5 billion by 2005 according to the research firm Datamonitor. Research firm DFC Intelligence predicts that there will be 114 million online gamers by 2006, and the total number of online games played will reflect a six-fold increase over current activity levels .

We currently have an expanding portfolio of over 100 proprietary shockwave game engines that we use for our own sites as well as providing game packages for other major websites such as MSNBC. Games.com adds approximately 40 branded games bring the total games portfolio to over 140 games.

We operate a digital greeting card site, which offers both free and subscription based cards from www.Cards.com.  We also operate a website called www.SkillMoney.com. Skill-based games are legal in the majority of states.  In the United .States, rules governing Tournaments with entry fees and/or prizes are set up by each individual state, not by the federal government. Based on these 50 sets of laws, players cannot participate in fee-based Tournaments with prizes if they reside in the following 11 states:

Arizona, Arkansas, Connecticut, Delaware, Florida, Iowa, Louisiana, Maryland, Nevada, Tennessee and Vermont

Visitors to SkillMoney.com enter a game that has between 4 and, in the case of tournaments, 100 players.

INDUSTRY BACKGROUND

INTERNET GAMES/ DIGITAL GREETINGS/ LOTTERIES

This demand for online gaming has led major portals, broadcasters and publishers to include a suite of games as a means of driving traffic to, and keeping viewers on, their web sites. As reported in the IDC Interactive Consumer Services Report, Interactive Gaming Section, December 2001, "The revenue growth potential for the online gaming market is truly impressive.  Over the next five years, the industry will grow to annual revenues of $1.8 billion in 2005, representing a five-year compound annual growth rate (CAGR) of 71.69%."

Digital greetings are continuing to replace printed and mailed greetings cards with extremely impressive growth rates.  Users also are using digital greeting sites to register and record important personal dates so that they are automatically reminded and offered a wide variety of greetings to forward to friends, associates and loved ones.  Corporations also utilize digital greetings as a means of distributing coupons, advertisements, and sweepstakes entries to their customers.

The international lottery industry has reached $130 billion, $42 billion of which is attributed to domestic lottery play.  Governments are becoming increasingly dependent upon lottery revenues to fund budgets and endowments.  Internationally, a trend towards the online promotion and sale of government sponsored lottery tickets is growing and has become a generally accepted practice in many major international markets.

In the new report, The Online Game Market 2003, DFC Intelligence forecasts that the worldwide online game market will grow from $875 million in 2002 to over $5 billion in 2008.  It is expected that this growth will be driven not only by PC-based subscription services, but also the rapidly growing number of video game console systems that can go online.  By 2008, DFC Intelligence forecasts that the installed base of online-capable video game systems will be over 100 million worldwide.

The other major factor driving online game growth will be increasing broadband penetration.  According to David Cole, president of DFC Intelligence, “the year 2002 saw solid growth for broadband in the home.  This has been especially true in markets like South Korea and Japan where the growing base of broadband users is really driving online game usage.  It appears online games may be the ‘killer application’ for bringing broadband to the home.”

The report forecasts that the usage of online games will reach 35 billion hours by 2008, an increase of 450% from 2002.  By 2008, DFC Intelligence forecasts that there will be 198 million people playing online.  These users should be divided fairly equally between North America, Asia and Europe.

However, growing consumer usage does not always translating into more revenue and profits.  According to Cole, “while it has been proven that individual online games can generate in excess of $100 million a year with a 50% operating margin, that is the exception not the rule.  Many services build a large user base that does not generate revenue.  On top of that, there is a serious glut of products on the market.” 

Fast Forward 2014: In a blue-sky analysis conducted via Delphi survey, Themis Group predicts that by 2014, there will be 15 million online gamers in the U.S. paying an average subscription fee of $23.50 per month. Fantasy RPGs, online sports games, and casual “second life” games will capture the majority of consumer dollars. Virtual property will emerge as a major driver for gamers and game companies. The market as a whole will be sized at $9 billion.

Industry Leaders, December 2003:

(In descending order by total gross revenue generated from online games, including subscriptions, advertising and sponsorships)

1.

NCSoft

2.

Sony Online Entertainment

3.

Electronic Arts

4.

Mythic Entertainment

5.

Microsoft Corporation

COMPETITION

The markets for our services are rapidly evolving and intensely competitive. In addition to internally built and supported operations, our primary current and prospective competitors include:

Lottery Software Companies

Greeting Card Companies

Game Companies

Family Oriented Game Sites. A number of sites such as Station.com, Uproar.com and iWin.com, have driven significant amounts of traffic to their sites by offering unique games and entertainment content. In addition, several of the sites offer frequent prizes with easy to play games. These sites are typically monetizing their traffic by selling advertising.

Aggregators. Aggregators, such as Microsoft Gaming Zone ("MGZ"), provide an aggregation of various types of online games, including aggregation of games developed by independent third parties. While these sites have been primarily focused on serving the gaming community, they have since adjusted their strategy to include games, such as parlor games, that reach a broader audience.

MGZ covers both competitive categories, as it is a portal, an aggregator, and a publisher of game products. MGZ currently offers both family games and games directed towards the more serious gamer and, at the same time, has the opportunity to leverage these experiences with games sold at retail.

Greeting cards. The Corporation’s principal competitors is American Greetings BlueMountian.com. Based upon its general familiarity with the greeting card and online greeting cards, the Corporation believes that Blue Mountain is the largest online greeting company in the industry.

Lottery. Currently no state Lottery allows the sale of online Lottery tickets. The instant ticket and lottery business is highly competitive, and our business faces competition from a number of content providers, online media publishing business and other competitors.

Some of our current competitors have larger user bases, longer operating histories, higher brand recognition, and greater financial resources than Games. As we expand the scope of our offerings, we may have to compete with a larger number of Internet websites as well as media companies. In addition, as the Internet becomes increasingly ubiquitous, larger, more well-financed or well-established entities may expand into, acquire, invest or continue to consolidate, thus increasing the competitive pressures that Games faces.

We believe we differentiate ourselves from our competitors through our origins as a multi-channel entertainment and destination network, as opposed to being more of a pass-through portal. Accordingly, Games users are more accustomed to interacting with the content and offerings on the network of websites. Additionally, the company believes its various brand offerings are superior to, or at least competitive with, other similar competitive products and services.

EMPLOYEES

We currently have approximately 16 management, technical, customer support, marketing and sales, and clerical personnel. We may, from to time, review its staffing requirements.

WEBSITE ACCESS TO SEC REPORTS

Our Corporate Internet website can be found at http://www.gamesinc.net. Information contained on our Internet websites are not part of this report. Under Investor Relations the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the Section 16 filings of its officers, directors, and shareholders beneficially owning 10% or more of Games, Inc.’s common stock are available on the our website, free of charge, as soon as reasonably practicable after such reports are filed with or furnished to the SEC. Alternatively, you may access these reports at the SEC’s Internet website: http://www.sec.gov.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

Roger W. Ach, II, Chairman, President and CEO, age 60.  Mr. Ach, II has been a Director and Chairman of the Board since 1996. Mr. Ach currently does not have an expiration term as Director. Prior to founding the Company in 1995, Mr. Ach was the Chairman of American Steel & Wire Corp., Chicago West Pullman Transportation Corporation and Vortec Corporation.  Prior to that, he spent 20 years in the investment banking and brokerage industries, including serving as Managing Director at Prudential Bache Securities and as Partner at Oppenheimer & Co.  Mr. Ach is also the Managing Member of Chicago West Pullman, LLC, a Cincinnati-based investment holding company.

Carol A. Meinhardt, Director since 1996, Executive Vice President and Chief Operating Officer, age 56.  Ms. Meinhardt has been an officer and director of GameBanc Corporation since its founding in 1995. Ms. Meinhardt currently does not have an expiration term as Director. Prior to joining the Company, Ms. Meinhardt was Assistant Vice President of Chicago West Pullman Corporation, an investment holding company based in Cincinnati, Ohio.  From 1970-1989 Ms. Meinhardt was employed at DuBois Chemicals, a Cincinnati-based specialty chemical company, where she served in various administrative and management capacities.

Myles S. Cairns, Age 48, Senior Vice President - Chief Financial Officer. Mr. Cairns joined the Company on February 1, 2003 and was elected an officer of the Company by the board of directors on February 7, 2003. Prior to joining the Company, he served as President, Chief Operating Officer and Chief Financial Officer of eCall Central, Inc. where he worked from 2000 - 2003. Prior to that, Mr. Cairns served as Senior VP of Accounting and Administration at Corporex Companies from 1999-2000. Prior to that, Mr. Cairns held various accounting, finance and operations positions with The Loewen Group from 1984-1999.

George R. Blake age 57, Director since September 2003. Mr. Blake was appointed to fill a vacancy on the Board and will be nominated to a slate of Directors at the Company’s annual meeting in March 2004. Mr. Blake is Vice President, Business Development for Premier Financial Solutions. Mr. Blake is the former editor of the Cincinnati Enquirer, Kentucky Enquirer, Fort Myers News Press, and the Pacific Daily News in Guam.

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Richard O. Coleman, age 42, Director since February 5th 2004, President, Chief Executive Officer and Chairman of the Board of NextGen Fiber Optics, LLC. He incorporates his extensive knowledge of supplier diversity issues and over 20 years of finance, management, sales and marketing experience to oversee the day-to-day operations of the company and to spearhead its sales and marketing strategies. NextGen Fiber Optics, LLC manufactures a full line of passive fiber optic cables that service the Telecommunications, MSO’s, Distribution, Military/Specialty and OEM markets. NextGen is the only minority owned fiber optic cable manufacturer with manufacturing operations in the USA.   

Thomas C. Joseph, age 58 Director since July 2002, and currently does not have an expiration term as Director. Mr. Joseph has been the CEO of MAN-O Products, Inc. since 1996.  Previously he was in the home furnishing industry involved in sales and marketing.

Edward J. VonderBrink, age 59 Director since March 2004, is Director of the Xavier Entrepreneurial Center at Xavier University since 2000. Mr. VonderBrink joined Grant Thornton in 1967, a national accounting and consulting firm. He was named Cincinnati managing partner in 1990 and later named regional managing partner. He retired at the end of 1999 as the Cincinnati and regional managing partner for Grant Thornton. Mr. VonderBrink brings a wealth of financial and entrepreneurial experience to the Company.

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EMPLOYMENT AGREEMENTS AND EXECUTIVE COMPENSATION

On July 1, 2002, the Company entered into a three-year employment agreement with its President and Chief Executive Officer. The agreement provides for annual compensation of $375,000.  In addition, the agreement provide for bonus compensation up to a maximum of 50% of his annual compensation, which is determined by the Compensation Committee of the Board of Directors.  Pursuant to the employment agreement, the employee is entitled to receive a severance payment up to 2.99 times their annual compensation based upon the occurrence of certain events as defined.

On July 1, 2002, the Company entered into a three-year employment agreement with its Executive Vice President and Chief Operating Officer. The agreement provides for annual compensation of $150,000.  In addition, the agreement provide for bonus compensation up to a maximum of 50% of his annual compensation, which is determined by the Compensation Committee of the Board of Directors.  Pursuant to the employment agreement, the employee is entitled to receive a severance payment up to 2.99 times their annual compensation based upon the occurrence of certain events as defined.

On October 1, 2003, the Company entered into a three-year employment agreement with its Executive Vice President and Chief Financial Officer. The agreement provides for annual compensation of $175,000.  In addition, the agreement provide for bonus compensation up to a maximum of 50% of his annual compensation, which is determined by the Compensation Committee of the Board of Directors.  Pursuant to the employment agreement, the employee is entitled to receive a severance payment up to 2.99 times their annual compensation based upon the occurrence of certain events as defined.

Minimum annual payments, excluding bonuses, incentives and cost of living increases under these contracts are as follows:

For the
Year Ended
June 30,	Amount
2004	$656,000
2005	700,000
2006	700,000
Total	$2,056,000

The following table summarizes, for the fiscal years indicated, all annual compensation earned by or granted to the Chief Executive Offer and the other executive officers whose compensation exceeded $100,000 during the last fiscal year.  This table reflects the amounts such persons earned or received as employees of Games during the fiscal years indicated.  The fiscal year is from July 1 through June 30.

Summary Compensation Table

		Annual Compensation -----------------------------			Long-Term Compensation Awards ------------------
Name and Principal Position	Year	Salary	Bonus	Other Annual Comp.	Rest. Stock Award	Securities Underlying Options/ SAR (#)8	All Other Compensation
Roger W. Ach, II President, Chief Executive Officer	2003 2002 2001	$145,833 $250,000 $250,000	$0 $0 $0	$229,1679 $150,0259 0 0	0 0 0	0 50,000 25,000	$0 $0 $0
Carol A. Meinhardt Executive Vice President/Chief Operating Officer	2003 2002 2001	$60,000 $90,000 $82,500	$0 $0 $0	$90,0009 $190,6259 $0	0 0 0	0 50,000 25,000	$0 $0 $0

⁸These numbers represent options to purchase shares of Gamebanc common stock. These options will become options to purchase shares of Games, Inc. common stock following the adoption of the 2002 Long-Term Stock Incentive Plan discussed in the Information Statement pursuant to Section 14(c) of the Securities Exchange Act of 1934, filed on August 26, 2002, and following an anticipated conversion or exchange of such options at a future date on the same basis as all other Gamebanc option holders.

⁹Deferred compensation.

#

EQUITY COMPENSATION PLANS APPROVED BY SECURITY HOLDERS AND RELATED STOCK OPTION GRANTS

LONG-TERM STOCK INCENTIVE PLAN

Following the adoption of the 2002 Long-Term Stock Incentive Plan discussed in the Information Statement pursuant to Section 14(c) of the Securities Exchange Act of 1934, filed on August 26, 2002, each of the independent directors will receive options to purchase 10,000 shares of Games, Inc. upon election or appointment to the Board of Directors and additional options to purchase 10,000 shares for each year of service on the Board of Directors. There are no other standard arrangements pursuant to which the directors of Games, Inc. will be compensated for services provided as a director.

DEFERRED COMPENSATION PLAN

We adopted the Deferred Compensation Plan filed with this filing that allows employees, including executive officers, with a base salary of $100,000 or more, to defer receipt of salary and annual incentive awards in either common stock of the Company or in cash accounts that mirror the gains and/or losses of a number of different investment funds selected by the Company. Under the Deferred Compensation Plan, participants may defer up to 75% of their base salary and up to 100% of their annual incentive awards, until the date or dates specified by the participant.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table and notes set forth certain information with respect to the beneficial ownership of our common stock as of March 15, 2004, for the following:

º

Each of our directors and executive officers

º

All directors and executive officers as a group, and

º

Each person who is known by us to be the beneficial owner of more than 5% of our outstanding common stock who is not an officer or director

Name and Address of Beneficial Owner	Title of Class	Amount and Nature of Ownership as of Record Date	Percent of Class as of Record Date
Roger W. Ach, II 425 Walnut Street, Suite 2300 Cincinnati, Ohio	Common Stock	8,908,11824	42.04%
Carol A. Meinhardt 425 Walnut Street, Suite 2300 Cincinnati, Ohio 45202	Common Stock	1,970,50034	9.30%
Chicago West Pullman LLC 425 Walnut Street, Suite 2300 Cincinnati, Ohio 45202	Common Stock	3,690,878	17.42%
Roger W. Ach, II Family Trust U/t/a/dated May 31, 2002 425 Walnut Street, Suite 2300 Cincinnati, Ohio 45202	Common Stock	1,000,000	4.72%
Myles S. Cairns 826 Riverwatch Drive Crescent Springs, KY	Common Stock	255,0004	1.18%

¹ The total issued and outstanding shares of Games, Inc. is 21,190,950 shares as March 15, 2004.

² Includes 3,076,740 shares owned directly by Mr. Ach, 600,000 shares held in Games, Inc. Deferred Compensation Plan, 3,290,878 shares owned by Chicago West Pullman, LLC of which Mr. Ach is the managing member and majority owner, and 100,000 shares owned by Mr. Ach as the trustee of the Janice M. Meinhardt Irrevocable Trust. Following the adoption of the 2002 Long-Term Stock Incentive Plan discussed herein and upon a subsequent conversion or exchange of Mr. Ach's existing options to acquire shares of common stock of The Lottery Channel, Inc. d/b/a Gamebanc Corporation, Mr. Ach will possess options to purchase 1,690,500 additional shares of common stock of Games, Inc. with in the next 60 days. Mr. Ach also has options to purchase 400,000 additional shares of common stock of Games, Inc. that are not currently vested.

³ Includes 75,000 shares owned by Ms. Meinhardt directly, 280,000 shares held in Games, Inc. Deferred Compensation Plan, 1,000,000 shares owned by Ms. Meinhardt as the Trustee of the Roger W. Ach, II Family Trust and 400,000 shares owned by Ms. Meinhardt as the Trustee of four separate irrevocable trusts established for the benefit of Mr. Ach's adult children. Following the adoption of the 2002 Long-Term Stock Incentive Plan discussed in the Information Statement pursuant to Section 14(c) of the Securities Exchange Act of 1934, filed on August 26, 2002, and upon a subsequent conversion or exchange of Meinhardt's existing options to acquire shares of common stock of The Lottery Channel, Inc. d/b/a Gamebanc Corporation, Ms. Meinhardt will possess options to purchase 345,500 additional shares of common stock of Games, Inc. with in the next 60 days. Ms. Meinhardt also has options to purchase 192,000 additional shar es of common stock of Games, Inc. that are not currently vested.

4 Roger W. Ach, II has beneficial ownership of 600,000 shares held in Games, Inc. Deferred Compensation Plan. Carol A. Meinhardt has beneficial ownership of 150,000 shares held in Games, Inc. Deferred Compensation Plan. Myles S. Cairns has beneficial ownership of 250,000 shares held in Games, Inc. Deferred Compensation Plan. Mr. Cairns also has options to purchase 222,000 shares of common stock of Games, Inc. that are not currently vested.

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Name and Address of Beneficial Owner	Title of Class	Amount and Nature of Ownership as of Record Date	Percent of Class as of Record Date
Thomas C. Joseph 3437 Mooney Avenue Cincinnati, Ohio 45208	Common Stock	20,0005	0.09%
George Blake 79 W. Belle Lake Atlanta, GA 30342	Common Stock	289,4505	1.37%
Richard O. Coleman 720 East Pete Rose Way, Suite 410 Cincinnati, OH 45202	Common Stock	90,0005	0.42%
Edward J. VonderBrink 3800 Victoria Pkwy. Cincinnati, Ohio 45208	Common Stock	20,0005	0.09%

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⁵ Following the adoption of the 2002 Long-Term Stock Incentive Plan discussed in the notes to the financial statements Mr. Joseph, Mr. Blake and Mr. Coleman will each receive stock options to purchase 10,000 shares of common stock of Games, Inc per year of service on Games, Inc.’s Board of Directors.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Our President and CEO, Roger W. Ach, II, and its Chief Operating Officer, Carol A. Meinhardt, are also members of Chicago West Pullman, LLC ("CWP"), an Ohio limited liability company.  

Pursuant to a letter agreement dated January 12, 2004 the Board authorized a payment of $200,000 to CWP that was paid with 400,000 shares of Games, Inc. Common Stock.

Pursuant to an agreement between Games and CWP, dated September 6, 2001, CWP advances funds to us to cover operating expenses.  As of December 31, 2003, the Company had a liability of $78,925 to CWP.  The agreement is filed as Exhibit 10.4 to Form 10-KSB.  We also had a receivable from Mr. Ach for $11,874 in connection with funds advanced.

Additionally, as part of an agreement reached during fiscal year 2001, CWP returned 1,000 shares of preferred stock during fiscal year 2002.

During fiscal year 2001, the President and controlling shareholder of GameBanc purchased 3,568,750 shares of common stock at $1 per share in exchange for a $3,568,750 note receivable.  The note bears interest at 6% and did not have a specified due date.  During fiscal year 2002 and 2001, various other transactions with the President, principally deferred compensation and accrued interest, were included in this note.  The net amount of the note was classified as a component of stockholders' equity at June 30, 2001.  In November 2001, the President returned 1,271,410 shares of common stock to the Company to retire the outstanding balance of the note, $1,271,410.

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SELLING SECURITY HOLDERS

The following table sets forth certain information regarding the beneficial ownership of common stock by the selling shareholders as of March 15, 2004, and the number of shares of common stock covered by this prospectus.  Only shareholders named as selling shareholders in this table may use this prospectus.  We will file a post-effective amendment to this registration statement if we wish to add any additional selling shareholders.  We will file a supplement to this prospectus in the event it becomes necessary to substitute a pledge, transferee or donee for one of the selling shareholders specifically listed below.

	Shares
	Beneficially		Shares	Percentage
	Owned		Beneficially	Owned
	Prior to	Shares	After	After
	Offering (1)	Offered (1)	Offering	Offering (2)
Name
Security Holder
Roger W. Ach, II	3,326,740	--	3,326,740	15.70%
Chicago West Pullman, Inc. (3)	3,690,878	--	3,690,878	17.42%
James A. Stern	1,426,075	--	1,426,075	6.73%
Roger W. Ach, II Family Trust (4)	1,000,000	--	1,000,000	4.72%
Myles S. Cairns	250,000	--	250,000	1.18%
Carol A. Meinhardt	225,000	--	225,000	1.06%
Janet Ach	100,000	--	100,000	0.47%
Lela M. Ach IRREV TR (4)	100,000	--	100,000	0.47%
Christian A.B. Ach IRREV TR (4)	100,000	--	100,000	0.47%
Roger W. Ach III IRREV TR (4)	100,000	--	100,000	0.47%
Pauline W. Ach, Childs IRREV TR (4)	100,000	--	100,000	0.47%
Janice M Meinhardt IRREV TR (5)	100,000	--	100,000	0.47%
George R. Blake	289,450	--	289,450	1.37%
Richard O. Coleman	90,000	--	90,000	0.42%
Thomas C. Joseph	20,000	--	20,000	0.09%
Gamebanc stock options (6)	2,537,000	--	2,537,000	11.97%
Games 2002 Long Term Incentive Plan (6)	1,623,000	--	1,623,000	7.66%
Atari, Inc. (7)	715,554	715,554	--	--
500 Investment Co. LLC (8)	500,000	500,000	--	--
Ed Rigaud	25,000	25,000	--	--
Lela Ach	10,000	10,000	--	--
Chip Ach	10,000	10,000	--	--
Christian Ach	10,000	10,000	--	--
David Ach	93,000	93,000	--	--
Sam Ach	40,000	40,000	--	--
Wick Ach	40,000	40,000	--	--
Thomas Aley	5,000	5,000	--	--
David Alpert	95,000	95,000	--	--
Stanley J. Aronoff	28,750	28,750	--	--
Stanley J. Aronoff, Trust (9)	250,000	250,000	--	--
Leslie Schaufert	25,000	25,000	--	--
Boy Scouts (10)	500	500	--	--
Provident Bank (11)	95,000	95,000	--	--
Laura Banks	15,000	15,000	--	--
Krissy Barr	31,250	31,250	--	--
Joan Bartholomew	1,500	1,500	--	--
Walter Bartlett	25,000	25,000	--	--
Donald Bell	50,000	50,000	--	--
Robert Bennett	50,000	50,000	--	--
Lewis Bettman	11,666	11,666	--	--
Bingo Inc. (12)	175,000	175,000	--	--
Mary Kay Blake	14,500	14,500	--	--
Wm. Bonn	17,500	17,500	--	--
Brooke Brady	15,000	15,000	--	--
Sherry Bucolo	3,000	3,000	--	--
Jerry Burns	30,000	30,000	--	--
Jeff Busche	3,000	3,000	--	--
CAC (13)	3,150	3,150	--	--
Robert Capps	1,500	1,500	--	--
CBK (14)	40,000	40,000	--	--
Janet Chaikind	5,000	5,000	--	--
Carl Chaleff	14,500	14,500	--	--
Pauline Childs	10,000	10,000	--	--
Pauline & Barry Childs	10,000	10,000	--	--
John Christopher	27,846	27,846	--	--
Cincinnati Symphony (15)	22,500	22,500	--	--
Susan Craner	1,500	1,500	--	--
George Stanley Cutter	400	400	--	--
PIPS Family Partnership (16)	22,500	22,500	--	--
Greg Delev	2,500	2,500	--	--
Britttney Delev	2,500	2,500	--	--
Issac Delev	2,500	2,500	--	--
John Dowlin	16,167	16,167	--	--
Nielsen Enterprises (17)	8333	8333	--	--
Mercury Enterprises (18)	10,000	10,000	--	--
David Erce	135,846	135,846	--	--
Gregory Eynon	5,750	5,750	--	--
Molly Eynon	5,750	5,750	--	--
Lawrence Eynon	15,000	15,000	--	--
Ellen Fabe	2,850	2,850	--	--
Rocco Fazzalaro	5,000	5,000	--	--
Jewish Federation (19)	5,000	5,000	--	--
Fine Arts Fund (20)	23,400	23,400	--	--
James Fitzgerald	17,500	17,500	--	--
Ed Flash	12,500	12,500	--	--
Adolph Frazier	5,000	5,000	--	--
Martin Fritzhand	15,500	15,500	--	--
Janet Ganim	10,000	10,000	--	--
Joseph Ganim	12,100	12,100	--	--
Nate Gantcher	184,999	184,999	--	--
Todd Garrett	27,000	27,000	--	--
Al Gerhardstein	25,000	25,000	--	--
Brian Gillan	75,000	75,000	--	--
Gene Gottfried	10,000	10,000	--	--
Gr. Cinti Foundation (21)	5,700	5,700	--	--
Greer First Family (22)	26,667	26,667	--	--
Daniel Gregorie	4,666	4,666	--	--
Tom Guenther	14,000	14,000	--	--
G. Halik	8,400	8,400	--	--
Hain Hain & Chaikind (23)	5,000	5,000	--	--
Halter Financial (24)	53,300	53,300	--	--
Tammy Harrison	6,000	6,000	--	--
Donna Hartman	3,000	3,000	--	--
Isaac Hazen	17,250	17,250	--	--
Brian Hicks	65,000	65,000	--	--
David Hill	15,000	15,000	--	--
George Hirsch	20,000	20,000	--	--
Hoeweler Capital Partners (25)	25,000	25,000	--	--
R. Lawrence Hughes	39,000	39,000	--	--
Elizabeth Hurwit	1,100	1,100	--	--
Jeffrey Hurwit	1,100	1,100	--	--
Susan Hurwit	1,100	1,100	--	--
Robert Hurwit	2,400	2,400	--	--
AlbertHurwit	12,000	12,000	--	--
Jay Hyman	3,000	3,000	--	--
Michael Hyzdu	4,000	4,000	--	--
Joan Ingalls	11,000	11,000	--	--
Heimlich Institute (26)	550	550	--	--
Isaac Wise Temple (27)	6,100	6,100	--	--
iXL Ventures Fund II, LLC (28)	520,000	520,000	--	--
Randall and Joanne Jacklin	2,300	2,300	--	--
Randall Jacklin	8,829	8,829	--	--
Tom Juda	139,833	139,833	--	--
Jujamcyn	40,000	40,000	--	--
Jane Kalmes	10,000	10,000	--	--
Deborah King	12,500	12,500	--	--
K Kircher	134,146	134,146	--	--
Howard Kleiger	2,000	2,000	--	--
Klondike	67,000	67,000	--	--
Patrick Kriner	5,000	5,000	--	--
Tom Kuelbs	300,000	300,000	--	--
Larry S. LaDouceur	8,000	8,000	--	--
John Lauder	22,165	22,165	--	--
Annette LeBold	18,750	18,750	--	--
Steve Lenn	50,000	50,000	--	--
Richard Levy	18,750	18,750	--	--
David Lickerman	11,700	11,700	--	--
Howard Lickerman	24,233	24,233	--	--
Carl H. Lindner Amended and Restated Family Trust (29)	250,000	250,000	--	--
The Macreport.net Inc. (30)	30,000	30,000	--	--
Glenn Magala	2,500	2,500	--	--
Anton Paul Magyar	5,000	5,000	--	--
Scott Maier	10,000	10,000	--	--
Jerry Markowitz	36,500	36,500	--	--
John Marshall	2,500	2,500	--	--
Rick Mathews	12,000	12,000	--	--
Dale Mayhew	11,129	11,129	--	--
William Mayhew	170,871	170,871	--	--
Carol McDaniel	3,333	3,333	--	--
Pat McInally	152,000	152,000	--	--
MacKenzie McMillan	100	100	--	--
Frank McWilliams	15,600	15,600	--	--
Steven Medvin	3,450	3,450	--	--
Janice Meinhardt	4,500	4,500	--	--
Charlie Melville	22,792	22,792	--	--
Mike Metz	63,000	63,000	--	--
Charlie Mintz	95,000	95,000	--	--
David Morad	27,750	27,750	--	--
Derek Morran	8,000	8,000	--	--
MWA, LLC (31)	10,000	10,000	--	--
Kathy Nardiello	8,750	8,750	--	--
Tom Noe	440,000	440,000	--	--
Thomas Norton	14,350	14,350	--	--
Oak Tree Montesorri (32)	6,000	6,000	--	--
Thomas O'Connell	17,656	17,656	--	--
Odds/Even (33)	346,800	346,800	--	--
Julie Orben	200	200	--	--
Virginia Orben	800	800	--	--
Chris Orben	2,000	2,000	--	--
William Orben	3,000	3,000	--	--
Mary Orben	5,000	5,000	--	--
Robert Orben	78,000	78,000	--	--
Mark Painter	10,000	10,000	--	--
Marsha Perlman	20,000	20,000	--	--
J Pickard	100,000	100,000	--	--
Sally & Joseph Perz	12,500	12,500	--	--
Mitchell Peskin	33,597	33,597	--	--
Duck Pond (33)	222,000	222,000	--	--
Dennis Preston	30,000	30,000	--	--
Robert Price	889	889	--	--
Raco Industries (34)	10,000	10,000	--	--
Susanne Rentschler	15,000	15,000	--	--
Fred Rentschler	118,333	118,333	--	--
James Reynolds	7,000	7,000	--	--
Patricia Richardson	2,000	2,000	--	--
Jane Rollinson	4,099	4,099	--	--
Rosenbaum & Chaikind (35)	5,000	5,000	--	--
Frank Russell	2,850	2,850	--	--
Ray Schneider	70,000	70,000	--	--
Rob Schoder	57,793	57,793	--	--
Steve Schott	12,500	12,500	--	--
John Segall	50,000	50,000	--	--
James Shad	11,500	11,500	--	--
Elizabeth Shaffer	3,000	3,000	--	--
Larry Sheakley	30,500	30,500	--	--
Charles Sheedy	40,334	40,334	--	--
Murray Sinclaire	15,000	15,000	--	--
Monique Smith	550	550	--	--
Jerry Springer	50,000	50,000	--	--
Ace Steiner	500	500	--	--
Corky Steiner	2,000	2,000	--	--
Rick Steiner	4,100	4,100	--	--
Ellen Steiner	4,500	4,500	--	--
George Strike	41,500	41,500	--	--
Wm. & Mary Sweeney	4,472	4,472	--	--
James Sweeney	158,675	158,675	--	--
Michael Taylor	25,000	25,000	--	--
Marilyn Terrizzi	30,000	30,000	--	--
Frank Terrizzi	220,000	220,000	--	--
Ken Tracy	12,500	12,500	--	--
Mark Vanderlaan	5,000	5,000	--	--
Lon Vennard	5,000	5,000	--	--
Anthony Vitale	15,000	15,000	--	--
Don Volland	5,000	5,000	--	--
Jonathan Vreeland	2,500	2,500	--	--
Martin Wade	125,000	125,000	--	--
Walnut Hills High School (36)	4,400	4,400	--	--
Frederick L Warner	41,000	41,000	--	--
Greg Waugh	5,000	5,000	--	--
Darrin Weber	41,993	41,993	--	--
I&B Weinberg	30,000	30,000	--	--
Alice Weston	42,750	42,750	--	--
Don Weston	27,500	27,500	--	--
Harris Weston	82,750	82,750	--	--
Paul Weston	27,500	27,500	--	--
Wheeler Family Ptnrshp (37)	25,000	25,000	--	--
Ty Whitaker	4,500	4,500	--	--
Karl E. Wiedamann	372,633	372,633	--	--
C. J. Wolf	12,500	12,500	--	--
Frank Wood	472,173	472,173	--	--
Frank Woodside	36,667	36,667	--	--
Nicolina Workum	12,500	12,500	--	--
Carolyn Wright	400	400	--	--
Creighton Wright	4,400	4,400	--	--
Benson Wright	3,400	3,400	--	--
Elizabeth Wright	3,400	3,400	--	--
Kathryn Wright	3,400	3,400	--	--
Creighton Wright, Jr	9,400	9,400	--	--
Stephen & Griselda Zeigle	11,501	11,501	--	--
S Ziegle	46,292	46,292	--	--
Tom Ziegler	60,000	60,000	--	--
J Zinnecker	30,898	30,898	--	--
Michael Kennedy	10,000	10,000	--	--
Michael Pearsall	10,000	10,000	--	--
Westport Strategic Partners (38)	75,000	75,000	--	--
Capital Coin Fund Limited (39)	103,537	103,537	--	--
Vintage Coins & Collectibles (39)	51,769	51,769	--	--
Thomas Noe Inc. Profit Sharing Plan (39)	51,769	51,769	--	--
Dennis Barrie	21,060	21,060	--	--
Dennis Eckert	40,000	40,000	--	--
George Vredeveld	25,000	25,000	--	--
Fertile Mind Fund I (40)	750,000	750,000	--	--
Jerry Montopoli	31,437	31,437	--	--
Jerry McCarthy	15,000	15,000	--	--
Ed Vonderbrink	20,000	20,000	--	--
Joseph Junod	10,000	10,000	--	--
Charles Eberle	20,000	20,000	--	--
James Turner	20,000	20,000	--	--
TOTALS	26,123,295	26,123,295	15,078,143	71.15%

(1)

Unless otherwise indicated, the address for each named individual or group is in care of Games, Inc. 425 Walnut Street, Suite 2300, Cincinnati, OH 45202

(2)

Percentage of ownership includes 21,150,950 actual shares of common stock outstanding on March 15, 2004. Shares of common stock subject to stock options that are currently exercisable or will become exercisable after 60 days after March 15, 2004, and shares of common stock subject to convertible term notes that are currently convertible or will become convertible within 60 days of March 15, 2004, are deemed outstanding for computing the beneficial ownership percentage of the person or group holding such options, warrants and notes, but are not deemed outstanding for computing the percentage of any other person or group.

(3)

Privately owned corporation whose principal shareholder is Roger W. Ach, II, 425 Walnut Street, Cincinnati, OH 45202.  Mr. Ach has sole voting and investment power over our shares owned by this entity included in this registration statement.

(4)

The trustee of each of these trusts is Carol A. Meinhardt, 425 Walnut Street, Cincinnati, OH 45202.  As trustee, Ms. Meinhardt has sole voting and investment power over our shares owned by these trusts included in this registration statement.

(5)

The trustee of this trust is Roger W. Ach, II, 425 Walnut Street, Cincinnati, OH 45202.  As trustee, Mr. Ach has sole voting and investment power over our shares owned by the trust included in this registration statement.

(6)

These shares have been or will be issued to participants in the indicated stock compensation plans.  If and when such persons are identified and wish to sell such shares, we will file a post-effective amendment to this registration statement identifying such persons.

(7)

A publicly-traded corporation with offices at 417 Fifth Avenue, New York, NY 10016.  We believe its Chairman and Chief Executive Officer, Bruno Bonnell, may exercise sole voting and invesment power with respect to our shares owned by Atari included in this registration statement.

(8)

Privately held investment fund.  We believe Joseph Weber, 159 South Main Street, Akron, OH 44308 may exercise sole voting and investment power with respect to our shares owned by this fund included in this registration statement.

(9)

Personal trust of which Stanley Aronoff, 2200 U.S. Bank Tower, Cincinnati, OH, is the trustee having sole voting and investment power over our shares owned by the trust included in this registration statement.

(10)

Nonprofit corporation.  We believe its Executive Director, Tracy Techau, 2336 Victory Parkway, Cincinnati, OH 45206, has sole voting and investment power over our shares owned by this entity included in this registration statement.

(11)

Wholly-owned subsidiary of Provident Financial Corporation, One East Fourth Street, Cincinnati, OH 45202.  We believe an officer of such holder, James Gertie at the same address, may exercise sole voting and investment power over such shares included in this registration statement.

(12)

A publicly-traded corporation with offices at P.O. Box 727, The Valley TV102P, British West Indies.  We believe Don Curtis at the same address may exercise sole voting and investment power over such shares included in this registration statement.

(13)

A nonprofit corporation with offices at 44 East Sixth Street, Cincinnati, OH 45202.  We believe its Executive Director, Charles Desmarais, may exercise sole voting and investment power over such shares included in this registration statement.

(14)

Privately-held entity.  We believe Alan Kessman, 912 Rock Rimmon Road, Stanford, CT 06903 may exercise sole voting and investment power over our shares owned by this entity included in this registration statement.

(15)

Non-profit corporation.  We believe its Executive Director, Donald C. Augberger, Jr., 1241 Elm Street, Cincinnati, OH 45202 may exercise sole voting and investment power over our shares by this corporation included in this registration statement.

(16)

Privately-held family limited partnership.  We believe Howard Lickerman, 880 Baywood Court, Columbus, IN 47201 may exercise sole voting and investment power over our shares owned by this corporation included in this registration statement.

(17)

Privately-held entity.  We believe Michael and Angela Nielson, 13903 Shadow Fox Court, Gainesville, VA 20155 may exercise shared voting and investment power over our shares owned by this entity included in this registration statement.

(18)

Privately-held entity.  We believe Kieran Mahoney, 37 Fifth Avenue, 3rd Floor, New York, NY 10010 may exercise sole voting and investment power over our shares owned by this entity included in this registration statement.

(19)

Nonprofit Corporation.  We believe its Executive Director, Christine Budynkiewicz, 4380 Malsbary Road, Suite 200, Cincinnati, OH 45208, may exercise sole voting and investment power over our shares owned by this entity included in this registration statement.

(20)

Nonprofit corporation.  We believe its Executive Director, Mary McCulloreg-Hudson, 2649 Erie Avenue, Cincinnati, OH 45208, may exercise sole voting and investment power over our shares owned by this entity included in this registration statement.

(21)

Nonprofit foundation.  We believe its Executive Director, Kathryn E. Merchant, 200 West Fourth Street, Cincinnati, OH 45202, may exercise sole voting and investment power over our shares owned by this entity included in this registration statement.

(22)

Privately-held entity with offices at 318 Grange Hall road, Beavercreek, OH 45430.  We believe Dr. Stephen Greer, at the same address, may exercise sole voting and investment power over such shares included in this registration statement.

(23)

Privately-held entity.  We believe Sanders Hain and Janet Chaikkind, 2470 Ross Road, Palo Alto, CA 94303, may exercise shared voting and investment power over our shares owned by this entity included in this registration statement.

(24)

Privately-held entity.  We believe Timothy Halter, 14160 Dallas Parkway, Dallas, TX 75240 may exercise sole voting and investment power over our shares owned by this entity included in this registration statement.

(25)

Privately-held entity.  We believe Robert Hoeweler, 10549 Reading Road, Cincinnati, OH 45245, may exercise sole voting and investment power over our shares owned by this entity included in this registration statement.

(26)

Privately-held entity.  We believe Dr. Henry Heimlich, 311 Straight Street, Cincinnati, OH 45202 may exercise sole voting and investment power over our shares owned by this entity included in this registration statement.

(27)

Nonprofit religious community.  We believe Barry Finestone, 8329 Ridge Road, Cincinnati, OH 45230, may exercise sole voting and investment power over our shares owned by this organization included in this registration statement.

(28)

Privately-held investment fund.  We believe Gerard Dorsey, 79 Fifth Avenue, New York, NY 10003, may exercise sole voting and investment power over our share owned by this entity included in this registration statement.

(29)

Family trust.  We believe its trustee, Carl E. Lindner, One East Fourth Street, Cincinnati, OH 45202, may exercise sole voting and investment power over our shares owned by this trust included in this registration statement.

(30)

Privately-held corporation.  We believe Adam Resnikoff, 200 Broadhollow, Melville, NY 11747, may exercise sole voting and investment power over our shares owned by this entity and included in this registration statement.

(31)

Privately-held limited liability company.  We believe Marc Wilson, 8359 U.S. Route 42, Box 161, Florence, KY 41041, may exercise sole voting and investment power over our shares owned by this entity and included in this registration statement.

(32)

Private school.  We believe Pauline Ach Childs, 20 East Central Parkway, Cincinnati, OH 45202, may exercise sole voting and investment power over our shares owned by this entity included in this registration statement.

(33)

Privately-held entities.  We believe Charles Becker, 270 South Service Road, Suite 45, Melville, NY 11747, may exercise sole voting and investment power over our shares owned by these entities included in this registration statement.

(34)

Privately-held entity.  We believe Robert Adams, 5480 Creek Road, Cincinnati, OH 45242, may exercise sole voting and investment power over our shares owned by this entity included in this registration statement.

(35)

Privately-held entity.  We believe Michael Chaikind and Faye Rosenbaum, 1892 Virginia Avenue, McLean, VA 22101, may exercise shared voting and investment power over our shares owned by this entity included in this registration statement.

(36)

Public school endowment.  We believe Deborah Heldman, 3250 Victory Parkway, Cincinnati, OH 45202, may hold sole voting and investment power over our shares owned by this organization included in this registration statement.

(37)

Family limited partnership.  We believe Cameron Van Orman, 314 Marmot Place, Lafayette, CO 80026, may exercise sole voting and investment power over our shares owned by this partnership included in this registration statement.

(38)

Privately-held entity.  We believe Joseph Safina, 110 E. Broward Blvd., Suite 1700, Ft. Lauderdale, FL 33301, may exercise sole voting and investment power over our shares owned by this entity included in this registration statement.

(39)

Privately-held entities.  We believe Thomas Noe, 3509 Briarfield Boulevard, Maumee, OH 43537, may exercise sole voting and investment power over our shares owned by these entities included in this registration statement.

(40)

Privately-held entity.  We believe Aram Fuchs, 48 Wall Street, 10th Floor, New York, NY 10015, may exercise sole voting and investment power over our shares owned by this entity included in this registration statement.

</R>

PLAN OF DISTRIBUTION

The shares of common stock (the "Shares") being offered by the Selling Shareholders or in some cases their respective pledgees, donees, transferees or other successors in interest, will be sold from time to time in one or more transactions (which may involve block transactions) on the NASDAQ OTCBB Market or on such other market on which the common stock may from time to time be trading, in privately- negotiated transactions, through the writing of options on the Shares, short sales or any combination thereof. The sale price to the public may be the market price prevailing at the time of sale, a price related to such prevailing market price, at negotiated prices or such other price as the Selling Shareholders determine from time to time. The Shares may also be sold pursuant to Rule 144. Any Selling Shareholder shall have the sole and absolute discretion not to accept any purchase offer or mak e any sale of Shares if it deems the purchase price to be unsatisfactory at any particular time.

The Selling Shareholders or in some cases their respective pledgees, donees, transferees or other successors in interest, may also sell the Shares directly to market makers acting as principals and/or broker-dealers acting as agents for themselves or their customers. Such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the Selling Shareholders and/or the purchasers of Shares for whom such broker-dealers may act as agents or to whom they sell as principal or both (which compensation as to a particular broker- dealer might be in excess of customary commissions). Market makers and block purchasers purchasing the Shares will do so for their own account and at their own risk. It is possible that a Selling Shareholder will attempt to sell shares of common stock in block transactions to market makers or other purchasers at a price per share which may be below the then market price. There can be no assurance that all or any of the Shares offered hereby will be issued to, or sold by, the Selling Shareholders.  The Selling Shareholder and any brokers, dealers or agents, upon effecting the sale of any of the Shares offered hereby, may be deemed "underwriters" as that term is defined under the Securities Act or the Exchange Act, or the rules and regulations there under.

The Selling Shareholders, alternatively, may sell all or any part of the Shares offered hereby through an underwriter. The Selling Shareholders have not entered into any agreement with a prospective underwriter and there is no assurance that any such agreement will be entered into. If the Selling Shareholders enter into such an agreement or agreements, the relevant details will be set forth in a supplement or revisions to this Prospectus.

The Selling Shareholders and any other persons participating in the sale or distribution of the Shares will be subject to applicable provisions of the Exchange Act and the rules and regulations there under, including, without limitation, Regulation M, which provisions may restrict certain activities of, and limit the timing of purchases and sales of any of the Shares by the Selling Shareholders or any other such person. Furthermore, under Regulation M, persons engaged in a distribution of securities are prohibited from simultaneously engaging in market making and certain other activities with respect to such securities for a specified period of time prior to the commencement of such distributions, subject to specified exceptions or exemptions. The foregoing may affect the marketability of the Shares.

The Company has agreed to indemnify the Selling Shareholders, or their transferees or assignees, against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the Selling Shareholders or their respective pledgees, donees, transferees or other successors in interest, may be required to make in respect thereof.

Upon being notified by a selling shareholder that any material arrangement has been entered into with an underwriter, broker, dealer or agent regarding the sale of shares covered by this prospectus, a revised prospectus or prospectus supplement, if required, will be distributed which will set forth the aggregate amount of shares being offered and the terms of the offering, including the name or names of any underwriters, dealers or agents, any discounts, commissions and other items constituting compensation from the selling shareholders or the transfer agent, and any discounts, commissions or concessions allowed or paid to dealers. The prospectus supplement and, if necessary, a post-effective amendment to the registration statement of which this prospectus forms a part, will be filed with the SEC to reflect the disclosure of additional information with respect to the distribution of the shares.

To our knowledge, there are currently no agreements, arrangements or understandings between any selling shareholder and any broker, dealer, agent or underwriter regarding the sale by any selling shareholder of shares of common stock covered by this prospectus.

DESCRIPTION OF SECURITIES

Common Stock

As of the date of this Prospectus, the Company has authorized 40,000,000 shares of Common Stock, $.001 par value per share. As of the date of this Prospectus, 21,150,950 shares of Common Stock were issued and outstanding and held of record by approximately 1,200 shareholders. We estimate that we have approximately 1,200 beneficial shareholders. Holders of Common Stock are entitled to one vote for each share held on matters which are submitted to a vote of shareholders and are not entitled to cumulative voting in the election of directors. Subject to any preferential rights of holders of Preferred Stock that may from time to time be issued, holders of Common Stock are entitled to receive dividends, if any, as declared from time to time by the Board of Directors out of assets legally available for such purpose. On liquidation, holders of Common Stock are entitled to a pro rata portion of all assets avai lable for distribution after payment of creditors and the liquidation preference of any outstanding shares of Preferred Stock, if any. Holders of Common Stock have no preemptive rights or other rights to subscribe for additional shares. All outstanding shares of Common Stock are, and the shares offered hereby will be, upon issuance, validly issued, fully paid and non-assessable.

Preferred Stock

As of the date of this Prospectus, Games has authorized 10,000,000 shares of Preferred Stock, $.001 par value per share. The company has 1,100 issued and outstanding Series A preferred shares and 30,250 Series AA preferred shares issued and outstanding.

We may issue additional shares of Preferred Stock in one or more series as may be determined by our Board of Directors, who may establish, from time to time, the number of shares to be included in each series, may fix the designation, powers, preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereof, and may increase or decrease the number of shares of any such series without any further vote or action by the shareholders. Any Preferred Stock so issued by the Board of Directors may rank senior to the Common Stock with respect to the payment of dividends or upon liquidation, dissolution or winding up of the Company, or both. In addition, any such shares of Preferred Stock may have class or series voting rights. Under certain circumstances, the issuance of Preferred Stock or the existence of the unissued Preferred Stock may tend to discourage or render more difficult a merger or other change in control of the Company.

Warrants

As of March 15, 2004, the Company has no warrants outstanding.

Certain Articles of Incorporation and Bylaws Provisions Having Potential Anti-Takeover Effects

General

A number of provisions of the Company's Articles of Incorporation and Bylaws address matters of corporate governance and the rights of shareholders.  The following summary of such provisions is not intended to be complete and is qualified in all respects by the Company's Articles of Incorporation and Bylaws.  Certain of these provisions, as well as the ability of the Board of Directors to issue shares of Preferred Stock and to set the voting rights, preferences and other terms thereof, may delay or prevent takeover attempts not first approved by the Board of Directors (including takeovers which certain shareholders may deem to be in their best interests). These provisions also could delay or frustrate the removal of incumbent directors or the assumption of control by shareholders.

Classification of Board of Directors

The Board of Directors currently consists of five members. The Articles of Incorporation provide that the number of Directors of the Corporation will be at least one and not more than nine. The number of Directors  authorized will be fixed as the Board of Directors may from time to time  designate, or if no such designation has been  made, the number of Directors will be the same as the number of members of the initial Board of Directors as set forth in the Certificate of Incorporation.

Nomination and Removal of Directors; Filling Vacancies

Any Director may be removed, only for cause, at any special meeting of stockholders by the affirmative vote of the holders of a majority in number of all outstanding voting stock entitled to vote; provided that notice of the intention to act upon such matter has been  given in the notice calling such meeting. Newly created directorships resulting from any increase in the authorized  number of Directors and any vacancies occurring in the Board of Directors caused by death, resignation, retirement, disqualification or removal from office of any Directors or otherwise, may be filled by the vote of a majority of the Directors then in office, though less than a quorum, or a successor or successors may be chosen at a special meeting of the stockholders called for that purpose, and each successor Director so chosen will hold office until the next election of the class for which such Director has be en chosen or until whichever of the following occurs first:  his successor is elected and qualified, his resignation, his removal from office by the stockholders or his death.

The Company's Bylaws provide that nominations to the Board of Directors may only be made by the Board of Directors, a nominating committee of the Board or by any shareholder entitled to vote in elections of directors who comply with certain notice procedures.  

Amendment of Articles of Incorporation

The Articles of Incorporation of the Company provide that amendments to the Articles of Incorporation may be amended by the affirmative vote of the stockholders.

Amendment of Bylaws

Subject to certain restrictions described in the Bylaws the Board of Directors of the Company may amend the Company's Bylaws at any meeting of the Board of Directors at which a quorum is present, by the affirmative vote of a majority of the Directors present at such meeting.

Special Meetings of Shareholders

The Company's Bylaws provide that Special meetings of the Board of Directors may be called by the Chairman of the Board,  the Chief Executive  Officer or the President on oral or written notice to each Director, given either  personally, by telephone, by telegram or by mail; special meetings will be called by the Chairman of the Board, Chief Executive Officer, President or secretary in like manner and on like notice on the written request of at least three Directors.  The purpose or purposes of any special meeting will be specified in the notice relating thereto.

Shareholder Proposals

The Company's Bylaws provide that shareholders who desire to bring any business before a meeting of shareholders must follow specified procedures, including advance written notice to the Company. The shareholder proposal provision may make it more difficult for shareholder proposals to be considered at shareholder meetings.

LIMITATION OF LIABILITY AND INDEMNIFICATION

As permitted by Delaware law, Article X of the Company's Articles of Incorporation provides for the limitation of the personal liability of directors for monetary damages for breach of duty as a director provided that the limitation of liability does not apply to (i) acts or omissions not made in good faith that the director at the time of such breach knew or believed were in conflict with the best interests of the corporation; (ii) any liability under the Delaware Business Corporation Act for unlawful distributions; (iii) any transaction from which the director derived an improper personal benefit or (iv) acts or omissions occurring prior to the date the provision became effective.

The Delaware Business Corporation Act also contains provisions prescribing the extent to which present or former directors, officers, or employees of a corporation shall or may be indemnified against liabilities, which they may incur in those capacities. Under those provisions, the availability or requirement of indemnification or reimbursement of expenses is dependent upon numerous factors, including whether the action is brought by the corporation or by outsiders and the extent to which the potential indemnitee is successful in his defense. The statute also permits a corporation to purchase and maintain insurance on behalf of its directors and officers against liabilities which they may incur in their capacities as such, whether or not the corporation would have the power to indemnify them under other provisions of the statute.

As permitted by Delaware law, Article VII of the Bylaws of the Company provides for the indemnification of directors and officers, employees or agents of the Company within the limitations permitted by Delaware law.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and persons controlling the Company pursuant to the foregoing provision, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.

CHANGE AND DISAGREEMENT WITH ACCOUNTANTS

On September 24, 2002 the Board of Directors retained the KGA Group accounting firm (King Griffin & Adamson PC) to serve as our principal independent accounting firm to audit its financial statements for the year ended June 30, 2002.  Prior to this engagement, we did not consult with such firm on any accounting, auditing or financial reporting issue.

The Audit Committee of the board of directors of Games, Inc. (“Games”) annually considers the selection of Games’ independent public accountants.  As such, Games’ Audit Committee, on May 8, 2003, decided to do a request for proposal for audit services specifically to find an independent public accountant that would be located geographically closer to Games corporate office. Games auditors King Griffin & Adamson P.C. declined to participate and resigned as Games’ independent public accountants effective May 14, 2003.  

The Audit Committee made the determination as part of its responsibility under the Sarbanes-Oxley Act of 2002 and related regulations adopted and proposed by the SEC and the New York Stock Exchange, which formally charge audit committees of public companies with the responsibility of evaluating, retaining and discharging a company’s independent auditor.

The report issued by King Griffin & Adamson P.C. on the financial statements for the past fiscal year of the Registrant did not contain an adverse opinion nor a disclaimer of opinion, and were not qualified or modified as to audit scope or accounting principles. The report issued by King Griffin & Adamson P.C. on the financial statements for the most recent fiscal year of the Registrant was modified to include an explanatory paragraph describing conditions that raised substantial doubt about the Registrant’s ability to continue as a going concern.  

During Games’ fiscal year ended June 30, 2002 and through the date of this Form 8-K, there were no disagreements with King Griffin & Adamson P.C. on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.

On August 8, 2003, the Audit Committee of the Board of Directors of the Company notified Marcum & Kliegman LLP  (“M&K”) that the Company intends to engage M&K as the Company’s independent auditors effective August 15, 2003.

The decision to change accountants was made by the Audit Committee of the Board of Directors of the Company.

During our two most recent fiscal years and the subsequent interim period, neither the Company nor anyone on its behalf consulted M&K regarding the application of accounting principles to a specified transaction, either completed or proposed; regarding the type of audit opinion that might be rendered on the Company’s financial statements or regarding ‘disagreements’ (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K) or any ‘reportable events’ (as that term is defined in Item 304(a)(1)(v) of Regulation S-K).

LEGAL MATTERS

The validity of the common stock offered hereby and certain other legal matters will be passed upon for us by Dinsmore & Shohl LLP, Cincinnati, Ohio.  Certain partners in such firm personally own a total of 41,667 shares of our common stock and a retired partner of such firm owns 82,750 shares of our common stock.

EXPERTS

Our consolidated financial statements as of June 30, 2003, and for the year then ended, have been included herein and in the registration statement in reliance upon the report of Marcum & Kliegman LLP, independent certified public accountants, included herein, and upon the authority of said firm as experts in accounting and auditing. The report of Marcum & Kliegman LLP covering the June 30, 2003 financial statements contains an explanatory paragraph that states that our recurring losses and net operating cash outflows from operations raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of that uncertainty.

Our consolidated financial statements as June 30, 2002, and for the year then ended, have been included herein and in the registration statement in reliance upon the report King Griffin & Adamson PC, independent certified public accountants, included herein, and upon the authority of said firm as experts in accounting and auditing. The report of King Griffin & Adamson PC covering the June 30, 2002 financial statements contains an explanatory paragraph that states that the company's recurring losses and negative cash flows from operations raise substantial doubt about the company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of that uncertainty.

ADDITIONAL INFORMATION

We have filed with the SEC the registration statement on Form SB-2 under the Securities Act for the common stock offered by this prospectus. This prospectus, which is a part of the registration statement, does not contain all of the information in the registration statement and the exhibits filed with it, portions of which have been omitted as permitted by SEC rules and regulations. For further information concerning us and the securities offered by this prospectus, we refer to the registration statement and to the exhibits filed with it. Statements contained in this prospectus as to the content of any contract or other document referred to are not necessarily complete. In each instance, we refer you to the copy of the contracts and/or other documents filed as exhibits to the registration statement, and these statements are qualified in their entirety by reference to the contract or document.

The registration statement, including all exhibits, may be inspected without charge at the SEC's Public Reference Room at 450 Fifth Street, N.W. Washington, D.C. 20549, and at the SEC's regional offices located at New York, New York and Chicago, Illinois. You may request copies of these documents by writing to the Securities and Exchange Commission and paying the required fee for copying. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for more information about the operation of their public reference rooms. Copies of our filings are also available at the Securities and Exchange Commission website at http://www.sec.gov.

The registration statement, including all exhibits and schedules and amendments, has been filed with the SEC through the Electronic Data Gathering, Analysis and Retrieval system. Following the effective date of the registration statement relating to this prospectus, we will continue to be subject to the reporting requirements of the Exchange Act and in accordance with these requirements, will continue to file annual, quarterly and special reports, and other information with the SEC. We also intend to furnish our stockholders with annual reports containing audited financial statements and other periodic reports as we think appropriate or as may be required by law.

We file annual, quarterly and special reports, proxy statements and other information with the Commission. You may read and copy any document we file at the Commission's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the Commission at 1-800-SEC 0330 for further information on the public reference rooms. Our Commission filings are also available to the public from the SEC's website at http://www.sec.gov. Our common stock is traded on the NASDAQ Stock market under the symbol "GMSI."

Copies of our SEC filings and other information about us are also available on our website www.gamesinc.net . The information on our website is neither incorporated into, nor a part of, this prospectus.

We will provide to you, without charge, a copy of any and all of the documents or information referred to above. You may make a request in writing or by telephone.  Requests for such copies should be directed to the following address:

Games, Inc.

425 Walnut Street, Suite 2300

Cincinnati, Ohio 4520

Attn:  Myles S. Cairns, Chief Financial Officer

            Telephone: (513) 721-3900

This prospectus is part of a registration statement that we filed with the SEC. You should rely only on the information incorporated by reference or provided in this prospectus or any supplement. We have not authorized anyone else to provide you with different information. You should not assume that the information in this prospectus or any supplement is accurate as of any date other than the date on the front of that document.

------------------

PART II INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

In accordance with Delaware General Corporation Law, Section 145, Article XI of our certificate of incorporation, filed as Exhibit 3.1 hereto, provides that the Company will indemnify its directors to the full extent  permitted by applicable corporate law, except that such indemnity will not apply if the director did not (a) act in good faith and in a manner the director  reasonably believed to be in or not opposed to the best interests of the Company, and (b) with respect to any criminal action or proceeding,  have reasonable  cause to believe the director's conduct was unlawful. The certificate of incorporation also provides that the Company will advance expenses for such persons pursuant to the terms set forth in the Company's bylaws, or in a separate board of director’s resolution or contract.  Delaware law requires a corporation to indemnify any such person who is successful on the merits o r defense of such action against costs and expenses actually and reasonably incurred in connection with the action.

Article VII of our bylaws, filed as Exhibit 3.4 hereto, provides that the Company will indemnify its officers and directors for costs and expenses incurred in connection with the defense of actions,  suits, or proceedings against them on account of their being or having been directors or officers of the company, absent a finding of negligence or misconduct in office. Section 9 of our bylaws, as well as Section 10 of our certificate of incorporation, also permits the Company to maintain insurance on behalf of our officers, directors, employees and agents against any liability asserted against and incurred by that person whether or not the company has the power to indemnify such person against liability for any of those acts.

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Securities Act"), may be permitted to directors, officers and  controlling  persons of Games, Inc. pursuant  to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

ITEM 25.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The estimated expenses of the Company payable in connection with the issuance and distribution of the Common Stock being registered hereby are as follows:

SEC Registration Fee	$     4,664
Printing Expenses(1)	2,000
Transfer Agent Fees and Expenses(1)	4,000
Accounting Fees and Expenses	18,000
Legal Fees and Expenses	30,000
Total	$   58,664

          (1) Estimated

ITEM 26.  RECENT SALES OF UNREGISTERED SECURITIES

In the three years preceding the filing of this Registration Statement, the Company issued the following securities, which were not registered pursuant to the Securities Act:

On January 12, 2001, Gamebanc issued 50,000 shares of its common stock to one accredited investor at an aggregate purchase price of $50,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On February 15, 2001, Gamebanc issued 100,000 shares of its common stock to one accredited investor at an aggregate purchase price of $100,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On March 12, 2001, Gamebanc issued 50,000 shares of its common stock to one accredited investor at an aggregate purchase price of $50,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On March 13, 2001, Gamebanc issued 638,298 shares of its common stock to the 19 member of Lottoballs, LLC in partial consideration for software at an aggregate purchase price of $1,500,000. No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On March 29, 2001, Gamebanc issued 90,000 shares of its common stock to one accredited investor in payment of $1,999,700 principal and interest on a note made by Gamebanc.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On June 29, 2001, Gamebanc issued 250,000 shares of its common stock to one accredited investor at an aggregate purchase price of $225,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On June 30, 2001, Chicago West Pullman, LLC exercised an option issued in November 1999 to acquire 2,975,333 shares of its common stock at an aggregate purchase price of $2,975,333.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

Between May and July 2001, Gamebanc issued 3,630 shares of its convertible preferred stock to seven accredited investors at an aggregate purchase price of $363,000.  In August 2002 these seven investors converted their preferred stock to 181,500 shares of common stock. No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On September 10, 2001, Gamebanc issued 5,000 shares of its common stock to one sophisticated investor in exchange for a release on a contract. The agreed settlement value was $5,000. No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On October 2, 2001, Gamebanc issued 36,500 shares of its common stock to one accredited investor at an aggregate purchase price of $161,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On February 15, 2002, an accredited investor converted a note payable to Gamebanc in exchange for 900,000 shares of its common stock to one accredited investor at an aggregate exchange price of $900,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On June 27, 2002, Gamebanc issued 899 shares of its common stock to one accredited investor in consideration for a URL at an aggregate purchase price of $2,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On July 2, 2002, a former employee and associate of Gamebanc exercised an option to acquire 299,000 shares of its common stock at an aggregate purchase price of $299.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On August 5, 2002, Gamebanc issued 6,067 shares of its common stock to one accredited investor in exchange for legal services. The agreed value of the services was $15,898.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

Between December of 2001 and August 2002, Gamebanc issued 28,585 shares of its convertible preferred stock to twenty accredited and one sophisticated investors at an aggregate purchase price of $1,266,500.  In August 2002 seventeen accredited investors converted 6,591 shares of their preferred stock to 347,875 shares of Games, Inc., common stock. No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On December 4, 2002, Games, Inc. issued 15,000 shares of its common stock to one sophisticated investor at an aggregate purchase price of $30,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On December 6, 2002, Games, Inc. issued 30,000 shares of its common stock to one sophisticated investor at an aggregate purchase price of $60,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On December 20, 2002, Games, Inc. issued 50,000 shares of its common stock to two accredited investors at an aggregate purchase price of $100,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On December 30, 2002, Games, Inc. issued 15,000 shares of its common stock to one sophisticated investor at an aggregate purchase price of $30,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On December 30, 2002, Games, Inc. issued 32,331 shares of its common stock to one accredited investor in exchange for legal services. The agreed value of the services was $45,000. In October of 2003 this investor converted 32,331 shares of common stock for 1,110 share of Games, Inc. preferred stock. No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

Between July and November 2002, Gamebanc issued 3,200 shares of its convertible preferred stock to eight accredited and six sophisticated investors at an aggregate purchase price of $320,000.  These investors immediately converted 3,200 shares of their preferred stock to 16,000 shares of common stock. No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On January 9, 2003, Games, Inc. issued 25,000 shares of its common stock to one accredited investor at an aggregate purchase price of $50,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On January 21, 2003, Games, Inc. issued 8,333 shares of its common stock to one accredited investor at an aggregate purchase price of $25,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On January 22, 2003, Games, Inc. issued 57,500 shares of its common stock to three accredited investor at an aggregate purchase price of $115,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On August 15, 2003, Games, Inc issued 190,000 shares of its common stock to settle litigation with two Promo Travel shareholders at an aggregate settlement value $296,100.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On August 18, 2003, Games, Inc issued 406,648 shares of its common stock to settle litigation with fourteen members of Lottoballs, LLC at an aggregate settlement value $165,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On August 26, 2003, Bingo, Inc. a shareholder exchanged 850,000 warrants to acquire Games, Inc stock for 175,000 shares of its common stock.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On October 1, 2003, Games, Inc. issued 100 shares of common stock of one of its subsidiaries to one accredited investor at an aggregate purchase price of $50,000.  This investor elected to exchange these shares for 100,000 shares of Games, Inc. common stock on February 23, 2003.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On October 16, 2003, Games, Inc. issued 50 shares of common stock of one of its subsidiaries to one accredited investor at an aggregate purchase price of $25,000.  This investor elected to exchange these shares for 50,000 shares of games, Inc. common stock on December 31, 2003. No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On October 29, 2003, Games, Inc. issued 400,000 shares of its common stock to one accredited investor at an aggregate purchase price of $100,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On November 17, 2003, Games, Inc. issued 40,000 shares of its common stock to one accredited investor at an aggregate purchase price of $20,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On December 2, 2003, Games, Inc. issued 10,000 shares of its common stock to one sophisticated investor in exchange for consulting services, the agreed value of the services was $5,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On December 7, 2003, Games, Inc issued 4,472 shares of its common stock to settle and outstanding note of $5,500 with a member of Lottoballs, LLC. No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On December 10, 2003, Games, Inc. issued 267,000 shares of its common stock to one accredited investor at an aggregate purchase price of $133,500.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On December 19, 2003, Games, Inc. issued 5,000 shares of its common stock to one an accredited investor in exchange for consulting services, the agreed value of the services was $2,500.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On December 22, 2003, Games, Inc. issued 600,000 shares of its common stock to Games, Inc. CEO who contributed the stock into Games, Inc. Deferred Compensation Plan. The CEO agreed to purchase the stock in exchange for $300,000 in deferred salary owed to the executive.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On December 22, 2003, Games, Inc. issued 250,000 shares of its common stock to Games, Inc. CFO who contributed the stock into Games, Inc. Deferred Compensation Plan. The CFO agreed to purchase the stock in exchange for $40,000 in deferred salary owed to the executive and $85,000 through payroll deduction.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On December 22, 2003, Games, Inc. issued 150,000 shares of its common stock to Games, Inc. COO who contributed the stock into Games, Inc. Deferred Compensation Plan. The COO agreed to purchase the stock in exchange for $75,000 in deferred salary owed to the executive.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On December 23, 2003, Games, Inc. issued 65,000 shares of its common stock to one an accredited investor in exchange for consulting services, the agreed value of the services was $18,850.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On December 30, 2003, Games, Inc. issued 500,000 shares of its common stock to one accredited investor at an aggregate purchase price of $250,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On December 30, 2003, Games, Inc. issued 50,000 shares of its common stock to one accredited investor at an aggregate purchase price of $25,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On January 2, 2004 Games, Inc. issued 30,000 shares of its common stock to one accredited investor at an aggregate purchase price of $15,000 for services.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On January 12, 2004 Games, Inc. issued 25,000 shares of its common stock to an accredited investor settle an outstanding balance on contract for services rendered, at an aggregate settlement price of $10,000 for services. No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On January 12, 2004 Games, Inc. issued 400,000 shares of its common stock to Chicago West Pullman, LLC a related party for their participation in concluding the deal with Atari. See Exhibit 10.13 files with this prospectus. The agreed on amount for services was $200,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On February 6, 2004, Games, Inc. issued 10,000 shares of its common stock to one accredited investor at an aggregate purchase price of $5,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On February 9, 2004, Games, Inc. issued 20,000 shares of its common stock to two accredited investors at an aggregate purchase price of $10,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On February 23, 2004 Games, Inc. issued 65,000 shares of its common stock to two accredited investors at an aggregate purchase price of $32,500.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On February 23, 2004 Games, Inc. issued 750,000 shares of its common stock to an accredited investor at an aggregate purchase price of $375,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On March 8, 2004 Games, Inc. issued 200,000 shares to three of its directors at an aggregate purchase price of $100,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

From February 20 through March 8^th, 2004 six accredited shareholders exchanged $510,454 in convertible notes and accrued interest for 510,454 shares of Games, Inc. common stock.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On March 8, 2004 Games, Inc. issued 85,000 shares of its common stock to five accredited investors at an aggregate purchase price of $42,500.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

On March 12, 2004 Games, Inc. issued 100,000 shares to one of its directors at an aggregate purchase price of $50,000.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.  

No underwriter was engaged in connection with the foregoing sales of securities.

------------------------

1.

Sales of Common Stock and the issuance of warrants were made in reliance upon Section 4(2) of the Securities Act or Regulation D promulgated there under as transactions not involving any public offering. Each of the purchasers was sophisticated investors or qualified under the exemption of up to 35 non-accredited investors.

2.

In the view of the Company, the options and stock granted pursuant to the 2002 Long-Term Stock Incentive Plan of the Company were issued but not sold and, therefore, registration thereof was not required. Any sales of Common Stock were made in reliance upon Rule 701 promulgated under the Securities Act as transactions not involving a public offering.

ITEM 27.  EXHIBITS

The following documents (unless indicated) are filed herewith and made a part of this Registration Statement.

(a)

Exhibits

3.1*

Registrant's Certificate of Incorporation

3.2*

Certificate of Merger of AZ Acquisition and Colley Corporation (which certificate effected amendments of the Certificate of Incorporation of AZ Acquisition Corp.)

3.3*

Certificate of Amendment of Certificate of Incorporation dated September 16, 2002 (changing name to Games, Inc.)

3.4*

Registrant's Bylaws

5

Opinion and Consent of Dinsmore & Shohl LLP, Cincinnati, OH

10.1*

Purchase Agreement dated June 1, 2001 between the Registrant's subsidiary Gamebanc Corporation (formerly Lottery Channel, Inc.) and Nielsen Enterprises

10.2*

Employment Agreement dated September 30, 1998 between the Registrant and Carol Meinhardt

10.3*

Employment Agreement dated September 30, 1998 between the Registrant and Roger W. Ach

10.4*

$1,000,000 Promissory Note issued by Registrant to Chicago West Pullman Corporation

10.5*

Qualified Retirement Plan and Trust of Registrant

10.6*

2002 Long-Term Stock Incentive Plan of Games, Inc.

10.7*

Revised Employment Agreement dated July 1, 2002 between Colley Corporation and Carol A. Meinhardt

10.8*

Employment Agreement dated October 1, 2003 between Games, Inc. and Myles S. Cairns

10.9*

Revised Employment Agreement dated July 1, 2002 between Games, Inc. and Roger W. Ach II

10.10   Deferred Compensation Plan dated December 15, 2003.

1.1

Asset Purchase Agreement for Games.com dated December 31, 2003.

1.2

Certificate of Designation dated December 31, 2003 for Games, Inc. Preferred Sock series AA.

10.13

Chicago West Pullman, LLC letter Agreement.

23.1

Consent of Marcum & Kliegman LLP

23.2

Consent of King Griffin & Adamson P.C.

23.3

Consent of Dinsmore & Shohl LLP, Cincinnati, OH, included in Exhibit 5

*Incorporated by reference to the Company's Form 10-SB filed November 6, 2003.

ITEM 28.  UNDERTAKINGS

     The small business issuer hereby undertakes:

     1. To file, during any period in which offers or sales of the securities are being made, a post-effective amendment to this registration statement to:

             (i)   Include any prospectus required by Section 10(a)(3) of the Securities Act;

             (ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered may be reflected in the form of prospectus filed with the Commission under Rule 424(b) if, in aggregate, the changes in the volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement;

             (iii) Include any additional or changed material information on the plan of distribution.

     2. That, for the purpose of determining liability under the Securities Act, it shall treat each post-effective amendment as a new registration statement of the securities offered, and treat the offering of the securities at that time as an initial bona fide offering.

     3. To remove from registration by means of a post-effective amendment any of the securities being registered which remains unsold at the termination of the offering.

To the extent that indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the provisions described in Item 15, or otherwise, the Company has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.

In the event a claim for indemnification against such liabilities, other than the payment by the Company of expenses incurred or paid by a director, officer of controlling person of the Company in the successful defense of any action, suit or proceeding, is asserted by such director, officer or controlling person in connection with the shares being registered hereby, the company will, unless, in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question as to whether such indemnification by the Company is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

<R>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and has duly caused this registration statement on its behalf by the undersigned, thereunto duly authorized, in the City of Cincinnati, State of Ohio, on the 30th day of March, 2004.

GAMES, INC.

                             By:  /s/ Roger W. Ach, II

                                 Name:   Roger W. Ach, II

                                 Title:  Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature                                    Title                                                          Date

---------                                       -----                                                            ----

/s/ Roger W. Ach II

      Chief Executive Officer, Director          March 30, 2004

----------------------------------      (Principal Executive Officer)

Roger W. Ach II

/s/ Myles S. Cairns

      Chief Financial Officer                           March 30, 2004

----------------------------------      (Principal Financial and Accounting Officer)

Myles S. Cairns

    Executive Vice-President

       March 30, 2004

    Chief Operating Officer,

    Secretary, Treasurer and

/s/ Carol A. Meinhardt

      Director                  

----------------------------------

Carol A. Meinhardt

/s/ Thomas C. Joseph

       Director                                                 March 30, 2004

----------------------------------

Thomas C. Joseph

       Director                                                March 30, 2004

----------------------------------

Richard O. Coleman

/s/ George R. Blake

       Director                                                 March 30, 2004

----------------------------------

George R. Blake

</R>

INDEX TO FINANCIAL STATEMENTS

Financial Statements for the year ended June 30, 2003 and 2002

Independent Auditors' Report	F-2
Independent Auditors' Report	F-3
Consolidated Balance Sheets	F-4
Consolidated Statements of Operations	F-5
Consolidated Statements of Stockholders' Equity (Deficiency)	F-6-7
Consolidated Statements of Cash Flows	F-8-9
Notes to Consolidated Financial Statements	F-10-23
For the three months ended December 31, 2003 & 2002	F-27

INDEPENDENT AUDITORS' REPORT

Board of Directors

Games, Inc.

Cincinnati, OH

We have audited the accompanying consolidated balance sheet of Games, Inc. and Subsidiary as of June 30, 2003, and the related consolidated statements of operations, stockholders’ deficit and cash flows for the year then ended.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit 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 audit provides 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 Games, Inc. and Subsidiary as of June 30, 2003, and the results of their operations and their cash flows for the year ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note B to the financial statements, the Company has a working capital deficit of approximately $2,616,000 and has suffered recurring losses from operations and net operating cash outflows that raise substantial doubt about its ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note B.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Marcum & Kliegman LLP

September 12, 2003, except for the last

paragraph of Note R, which is dated October 8, 2003

New York, New York

INDEPENDENT AUDITORS' REPORT

Board of Directors

Games, Inc.

Cincinnati, OH

We have audited the accompanying consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the year ended June 30, 2002 of Games, Inc. (formerly Colley Corporation) and Subsidiary.  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 audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements.  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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of Games, Inc. and Subsidiary for the year ended June 30, 2002 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  The Company has suffered recurring losses from operations and negative cash flows from operations and has a working capital deficit and a stockholders’ deficit at June 30, 2002.  These matters raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plan in regards to these matters is also described in Note B.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ KING GRIFFIN & ADAMSON P.C.

Dallas, Texas

October 21, 2002

GAMES, INC. AND SUBSIDIARY
(formerly Colley Corporation)
Consolidated Balance Sheet
June 30, 2003
Assets
Current assets
Accounts receivable – trade	$11,625
Total current assets		$11,625
Property, equipment and software, net		703,715
Intangibles, net		449,337
Total assets		$1,164,677
Liabilities and Stockholders' Deficiency
Current liabilities
Current maturities of notes payable	$349,641
Accounts payable and accrued liabilities	1,038,324
Accrued litigation and judgments	346,942
Capital lease obligation	100,515
Accrued officers salaries	664,813
Due to related parties	127,243
Total current liabilities		2,627,478
Notes payable, net of current maturities		111,746
Convertible promissory note		590,500
Total Liabilities		3,329,724
Commitments and contingencies
Stockholders' deficiency
Preferred stock, $0.001, 10,000,000 shares
authorized, none issued and outstanding	--
Common stock, $0.001, 40,000,000 shares authorized,
16,347,707 issued and 16,333,207 shares outstanding	16,347
Additional paid-in capital	32,081,249
Accumulated deficit	(34,219,339)
Less treasury stock, at cost 14,500 shares	(43,304)
Stockholders' deficiency		(2,165,047)
Total liabilities and stockholders’ equity (deficit)		$1,164,677

The accompanying notes are an integral part of these consolidated financial statement.

Games, Inc. and Subsidiary
(formerly Colley Corporation)
Consolidated Statements of Operations
For the years ended June 30, 2003 and 2002
	2003	2002
Revenues	$218,049	$466,995
Cost of revenues	73,460	70,233
Gross profit	144,589	396,762
Operating expenses
Selling, general and administrative expenses	2,760,198	4,056,337
Impairment of software and intangibles	324,914	1,923,553
Total operating expenses	3,085,112	5,979,890
Operating loss	(2,940,523)	(5,583,128)
Interest income – related party	--	71,375
Interest expense	(62,216)	(158,817)
Removal of accounts payable	--	472,991
Legal settlements	482,900	(115,492)
Other, net	--	34,837
Net loss before non-controlling interest	(2,519,839)	(5,278,234)
Non-controlling interest	--	1,239,475
Net loss	$(2,519,839)	$(4,038,759)
Per Share Information:
Weighted average common stock outstanding -
basic and diluted	16,200,358	7,434,476
Net loss per share - basic and diluted	$(.16)	$(.54)

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

Games, Inc. and Subsidiary (formerly Colley Corporation)
Consolidated Statements of Stockholders’ Equity (Deficit)
For the years ended June 30, 2003 and 2002
					Additional	Stockholder
	Preferred		Common		Paid-In	Notes	Accumulated	Treasury
	Stock	Amount	Stock	Amount	Capital	Receivable	Deficit	Stock	Amount	Total
Balance at July 1, 2001	-	$-	7,417,618	$ 7,418	$30,208,242	$(1,197,004)	$(27,660,741)		$-	$1,357,915
Common stock issued in connection  with legal settlement			31,083	31	31,052					31,083
Common stock returned in exchange  for return of assets with no carrying  value			(207,500)	(208)	208					-
Additions to stockholder note receivable						(74,406)				(74,406)
Common stock returned to settle note  receivable			(1,271,410)	(1,271)	(1,270,139)	1,271,410				-
Common and preferred stock sold for cash	10,700	11	400,000	400	1,469,589					1,470,000
Common and preferred stock issued in exchange for  note payable	5,433	5	500,000	500	764,495					765,000
Common stock issued in exchange for  Services			889	1	888					889
Dividends paid on Gamebanc, preferred  Stock					(7,500)					(7,500)
Return of Gamebanc preferred stock by  controlling shareholder	(1,000)	(1)			1					-
Issuance of common stock and  recapitalization in reverse acquisition  transaction			1,025,509	1,026	(1,026)					-
Gamebanc Corporation common and preferred stock  not yet exchanged for Games, Inc.  Common stock and effect of non-  controlling interest	(15,133)	(15)	546,938	546	12,731					13,262
Net loss during the year							(4,038,759)			(4,038,759)
Balance at June 30, 2002	-	$ -	8,443,127	$ 8,443	$31,208,541	$-	$(31,699,500)		$-	$ (482,516)

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

Games, Inc. and Subsidiary (formerly Colley Corporation)
Consolidated Statements of Stockholders’ Equity (Deficit) – Continued
For the years ended June 30, 2003 and 2002
					Additional
	Preferred		Common		Paid-In	Accumulated	Treasury
	Stock	Amount	Stock	Amount	Capital	Deficit	Stock	Amount	Total
Balance at June 30, 2002	-	$-	8,443,127	$8,443	$31,208,541	$(31,699,500)		$-	$ (482,516)
Common stock issued in share exchange with Gamebanc			7,539,582	7,540	(7,540)				-
Common stock issued in connection with the sale and exchange of Gamebanc preferred stock for cash			183,250	183	366,317				366,500
Sale of common stock			143,350	143	394,857				395,000
Common stock issued in exchange for legal services			38,398	38	111,104				111,142
Stock based compensation					75,000				75,000
Compensation for variable stock Options					(155,030)				(155,030)
Beneficial Conversion Feature on Convertible Notes					88,000				88,000
Treasury stock, at cost							(14,500)	(43,304)	(43,304)
Net loss during the year						(2,519,839)			(2,519,839)
Balance at June 30, 2003	-	$-	16,347,707	$16,347	$32,081,249	$(34,219,439)	(14,500)	$(43,304)	$ (2,165,047)

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

Games, Inc. and Subsidiary (formerly Colley Corporation)
Consolidated Statements of Cash Flows
For the years ended June 30, 2003 and 2002
	2003	2002
Net cash flows used in operating activities:
Net loss	$(2,519,839)	$(4,038,759)
Adjustments to reconcile net loss to net cash  used in operating activities:
Depreciation and amortization	749,829	1,106,090
Amortization of debt discount	27,034	17,888
(Income) expense on litigation settlement	(482,900)	200,000
Impairment of software and intangibles	324,914	1,923,553
Stock based compensation	31,112	--
Interest expense – beneficial conversion feature	16,000	--
Non-controlling interest	--	(1,226,213)
Removal of accounts payable	--	(472,991)
Common stock issued in legal settlement	--	31,083
Common stock issued for services	--	889
Addition of interest income to shareholder note receivable	--	(74,406)
Changes in assets and liabilities:
Accounts receivable – trade	18,158	9,013
Accounts receivable – related party	--	22,401
Prepaid expenses and other assets	1,222	25,750
Accounts payable and accrued liabilities	254,643	324,824
Accrued officers salaries	324,834	--
Net cash used in operating activities	(1,254,993)	(2,150,878)
Cash flows used in investing activities:
Acquisition of property and equipment	(10,484)	(3,696)
Net cash used in investing activities	(10,484)	(3,696)
Cash flows provided by financing activities:
Repayment of capital lease obligation	(50,260)	(22,744)
Advances from related party	--	343,068
Repayment of advances from related party	(80,825)	--
Proceeds from issuance of note payable	125,000	--
Repayments on notes payable	(125,647)	(45,000)
Purchase of treasury stock	(43,304)	--
Proceeds from issuance of stock and warrants	761,500	1,470,000
Proceeds from issuance of convertible notes	662,500	430,000
Payment of preferred stock dividends	--	(7,500)
Net cash provided by financing activities	1,248,964	2,167,824
Net increase (decrease) in cash	(16,513)	13,250
Cash at beginning of year	16,513	3,263
Cash at end of year	$--	$16,513
Cash paid for:
Income taxes	$--	$--
Interest	$2,319	$37,484

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

#

Games, Inc. and Subsidiary (formerly Colley Corporation)
Consolidated Statements of Cash Flows - Continued
For the years ended June 30, 2003 and 2002
	2003	2002
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued in connection with the second exchange (see Note A)	$7,540	$--
Recorded beneficial conversion feature with the issuance of convertible promissory notes	$88,000	$--
Conversion of notes payable to common and preferred stock	$--	$765,000
Common stock issued to settle accounts payable	$25,499	$--
Intangibles acquired through the issuance of debt, net of debt discount	$--	$406,465
Common stock returned in exchange for stockholder note receivable	$--	$(1,271,410)

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

#

Games, Inc. and Subsidiary

(formerly Colley Corporation)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2003 and 2002

NOTE A - ORGANIZATION AND NATURE OF OPERATIONS

Games, Inc. formerly Colley Corporation, (Colley), ("the Company") was initially incorporated as Super Shops, Inc. under the laws of the State of Arizona.  In October 2000, the Company changed its State of Incorporation from Arizona to Delaware by means of a merger with and into a Delaware corporation formed on October 13, 2000 solely for the purpose of effecting a re-incorporation.

On June 3, 2002, Chicago West Pullman, LLC ("CWP"), an Ohio limited liability company, purchased the 525,000 unregistered common stock or 51.19% of the outstanding common stock of Colley for cash payment of $25,000.  On June 25, 2002, the Board of Directors approved an exchange of shares of Colley for shares of common stock of Gamebanc Corporation ("Gamebanc"), formerly The Lottery Channel, Inc., held by CWP and its members on a one share for one share basis, (the First Exchange”).  On the date of this exchange Colley had no assets or liabilities.  As of June 30, 2002, shareholders of Gamebanc had exchanged 7,417,618 shares of Gamebanc common stock for 7,417,618 newly issued common stock of Colley.  Colley acquired a majority interest in Gamebanc as a result of this First Exchange.

On July 23, 2002, Colley offered to exchange up to 8,906,866 shares of its common stock for the remaining outstanding shares of common stock and preferred stock of Gamebanc, (the Second Exchange).  The Second Exchange offer was conducted on the basis of one share of Colley's common stock for one share of Gamebanc common stock, and 50 shares of Colley's common stock for one share of preferred stock of Gamebanc.  The Second Exchange offer remained open until August 6, 2002.  Colley issued 7,539,582 shares of its common stock issued through the Second Exchange.  Additionally, all holders of Gamebanc stock options and warrants were offered to exchange their stock options and warrants for Colley stock options and warrants with identical terms.  Effective September 16, 2002, the Company changed its name from Colley Corporation to Games, Inc.

As a result of the First and Second Exchanges Gamebanc became a majority-owned subsidiary of the Company and Gamebanc’s directors and officers became the directors and officers of the Company.  The stockholders of Gamebanc were issued 14,957,200 of the Company’s shares of common stock, in exchange for their shares, or 97.9% of the Company’s total outstanding common stock.  Accordingly, a change in control of the Company occurred in connection with the acquisition, and the acquisition was deemed a "reverse   acquisition” for accounting purposes.   At the acquisition, Colley had no assets or liabilities.  The reverse acquisition was accounted for as a recapitalization of Gamebanc and the stockholders' equity was retroactively restated to July 1, 2001.  The financial statements are those of Gamebanc prior to June 23, 2002.

The Company operates in three allied areas of interactive entertainment: government sponsored lotteries, internet games, and digital greetings.  The Company's principal business is providing subscribers with access to entertaining proprietary content via the internet.

NOTE B – GOING CONCERN UNCERTAINTY

As shown in the accompanying consolidated financial statements, the Company incurred a net loss of $2,519,839 and $4,038,759 for the year ended June 30, 2003 and June 30, 2002 respectively.  In addition at June 30, 2003 the Company’s current liabilities exceeded its current assets by approximately $2,616,000.  Management of the Company is developing a plan to license the sale of lottery tickets online.  In addition, the Company is seeking to raise equity capital to fund and expand its operations in addition to fund acquisitions.

Management believes that by obtaining a license to sell lottery tickets online and if they are successful in obtaining additional equity capital to fund acquisitions, the cash flows would be sufficient to fund operations through June 30, 2004.  However, there can be no assurance that the Company will be successful in its attempts to obtain a license to sell lottery tickets online, or to generate positive cash flows or raise sufficient capital essential to its survival.  To the extent that the Company is unable to generate or raise the necessary operating capital, it will become necessary to curtail operations.  Additionally, even if the Company does raise operating capital, there can be no assurance that the net proceeds will be sufficient to enable it to develop its business to a level where it will generate profits and positive cash flows.

These matters raise substantial doubt about the Company’s ability to continue as a going concern.  However, the accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

The accompanying consolidated financial statements include the accounts of Games, Inc. and its subsidiary Gamebanc Corporation, collectively "the Company".  All significant intercompany transactions and balances have been eliminated in consolidation.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with original maturities of three months or less to be cash equivalents.

Property, Equipment and Software

Depreciation of property, equipment and software is computed using the straight-line method over the estimated asset life.  Amortization of leasehold improvements is computed using the straight-line method over the shorter of the estimated useful life of the assets or the remaining lease term.

Software

5 years

Furniture, fixtures and equipment

3-7 years

Leasehold improvements

7 years

Intangibles

Intangibles consist of website domain names (“URL”) purchased by the Company.  The intangibles are being amortized over their useful lives (5 years) on the greater of the income forecasted method or straight line method which ever is greater. Amortization expense for the years ended June 30, 2003 and 2002 was $123,332 and $407,881, respectively.

Game and Web Site Development Costs

The Company follows the provisions of Emerging Issues Task Force ("EITF") Issue No. 00-2, "Accounting for Website Development Costs", which provides guidance in accounting for costs incurred to develop a website.  Capitalized game development costs are capitalized from the point in time when technological feasibility has been established until the game is available for use. The annual amortization of the capitalized amounts will be the greater of the ratio of the current revenue to total projected revenue for a game, or the straight-line method, and is applied over periods ranging up to 5 years. The Company performs periodic reviews to ensure that unamortized costs remain recoverable through the generation of future revenues.

Long-Lived Assets

In accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and exceeds its fair value.  If conditions indicate an asset might be impaired, the Company estimates the future cash flows expected to result from the use of the asset and its eventual disposition.  The impairment would be measured by the amount by which the assets exceed its fair value typically represented by the future discounted cash flow associated with the asset.

Income Taxes

The Company accounts for income taxes using the liability method, which requires the determination of deferred tax assets and liabilities based on the differences between the financial and tax bases of assets and liabilities using enacted tax rates in effect for the year in which differences are expected to reverse.  Deferred tax assets are adjusted by a valuation allowance, if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

At December 31, 2002, the Company has net operating loss carry forwards of approximately $5,000,000, which expire through 2022.  Pursuant to Section 382 of the Internal Revenue Code regarding substantial changes in ownership, utilization of these losses may be limited.  Based on this and the fact that the Company has generated operating losses through June 30, 2003, the deferred tax asset of approximately $1,700,000 has been offset by a valuation allowance of $1,700,000.

Non-Controlling Interest in Consolidated Subsidiary

Non-controlling interest in results of operations of consolidated subsidiary represents the non-controlling shareholders' portion of the loss of Gamebanc for the year ended June 30, 2002.  As a result of the Second Exchange (See Note A) the non controlling interest was reduced to 2.1% of Gamebanc. The non controlling interest in the net assets of Gamebanc has been reduced to zero.  Therefore, in accordance with generally accepted accounting principles, the non controlling interest in Gamebanc’s net losses has not been recorded in the accompanying financial statements.

Advertising

Advertising costs are charged to operations as incurred.  Advertising expense was approximately $6,800 and $53,000 for the years ended June 30, 2003 and 2002, respectively.

Revenue Recognition

In accordance with generally accepted accounting principles (“GAAP”), revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed, and collectibility of the resulting receivable is reasonably assured. Noted below are brief descriptions of the product or service revenues that the Company recognizes in the financial statements contained herein.

Advertising Revenue. Advertising revenue is derived from the sale of banner and button advertisements, pop-up and other Web-based advertising. The Company recognizes revenue from the sale of its banner and button advertisements, pop-up and other Web-based advertising in the period in which the advertisements are delivered. The arrangements are evidenced either by an insertion order or contract that stipulates the types of advertising to be delivered and pricing. Agreements are primarily short-term and revenues are recognized as services are delivered provided that the Company has no significant remaining obligations and collection of the resulting receivable is probable. In certain arrangements, the Company sells banner advertising, click-through programs to customers as part of a bundled arrangement. For these arrangements, the Company allocates revenue to each deliverable based on the relative fair value of each delivera ble. Revenue is recognized in these arrangements as the Company delivers on our obligation.

Shared revenue arrangements. Revenues earned from advertising services are based upon a percentage of revenue earned from the advertisement. In accordance with Emerging Issues Task Force (EITF) 99-19, the Company will recognize revenues shared with third-party network partners and E-mail list owners on a net basis.

Revenues for memberships and subscriptions to its Internet websites and services are recognized ratably as earned over the term of the membership or subscription. Upon commencement of the membership or subscription, the Company will record deferred revenue for the fee charged. This deferred revenue is then recognized ratably over the period of the contract.

Service and lottery management fee revenues, including fees from the sale of lottery data feed contracts are recognized in the period the consumer receives the data feed information or the service has been delivered.

Skillmoney games. Skillmoney games generate a facilitation fee that is charged at the end of a game and the revenue is recognized at the conclusion of the game.

#

Total revenues for the years ended June 30, 2003 and June 30, 2002 are as follows.

	Year Ended June 30, 2003		Year Ended June 30, 2002
Revenue Source	Amount	Percent of Total	Amount	Percent of Total
1.  Internet advertising	$166,559	76.4%	$343,732	73.6%
2.  Digital Greetings	2,558	1.2%	77,545	16.6%
3.  Lotteries	48,931	22.4%	45,718	9.8%
Total	$218,048	100.0%	$466,995	100.00%

Loss Per Share

Basic and diluted loss per share is computed by dividing consolidated net loss by the weighted average number of shares of common stock outstanding during the year.  The weighted average number of shares outstanding has been computed using the shares of Gamebanc exchanged as of June 30, 2002 plus the outstanding shares of Colley from the date of the reverse acquisition.  Common stock equivalents totaling 5,228,773 and 5,139,673 at June 30, 2003 and 2002, respectively, are not included in the diluted loss per share for the years ended June 30, 2003 and 2002 as they are anti-dilutive.

Fair Value of Financial Instruments

The recorded amounts of financial assets and liabilities at June 30, 2003 and 2002 approximate fair value based on the Company's incremental borrowing rate or due to the relatively short period of time between origination of the instruments and their expected realization.

Concentration of Credit Risk

Cash in bank accounts is at risk to the extent that it exceeds Federal Deposit Insurance Corporation insured amounts. To minimize risk, the Company places its cash with high credit quality institutions.

Change in Accounting Estimate

During the year ended June 30, 2002, the Company decreased its estimate of the useful lives of certain intangibles to reflect the decrease in the current lives of such assets.  This change had the effect of increasing net loss before non-controlling interest for 2002 by approximately $187,000 ($0.03 per share).

Use of Estimates in Financial Statements

In preparing financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Reclassifications

Certain accounts in the prior years’ financial statements have been reclassified for comparative purposes to conform with the presentation in the current year’s financial statements.  These reclassifications had no effect on previously reported net loss.

New Accounting Pronouncements

SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections” is effective for transactions occurring after May 15, 2002. SFAS No. 145 eliminates the requirement that gains and losses from the extinguishment of debt be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect and eliminates an inconsistency between the accounting for sale-leaseback transactions and certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The adoption of SFAS No. 145 did not have material effect on its consolidated financial position or results of operations.

SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” provides guidance on the recognition and measurement of liabilities for costs associated with exit or disposal activities. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of SFAS No.146 did not have a material effect on its consolidated financial statements.

In November 2002, the FASB issued Interpretation No. 45, (“FIN 45”), “Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” FIN 45 requires a company, at the time it issues a guarantee, to recognize an initial liability for the fair value of obligations assumed under the guarantee and elaborates on existing disclosure requirements related to guarantees and warranties. The initial recognition requirements of FIN 45 are effective for guarantees issued or modified after December 31, 2002 and adoption of the disclosure requirements are effective for the Company as of December 31, 2002. The adoption of the recognition requirements of FIN 45 did not have a material effect on its consolidated financial statements.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure-an amendment of FASB Statement No. 123” which is effective for financial statements issued for fiscal years ending after December 15, 2002.  This Statement amends FASB Statement No. 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation.  In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based compensation and the effect of the method used on reported results.  The Company continues to follow the pro-forma disclosures for stock-based compensation as permitted in SFAS 123.  The fol lowing table illustrates the effect on net (loss) and earnings per share if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation:

	June 30,
	2003	2002
Net loss as reported	$2,519,839	$4,038,759
Less: stock-based employee compensation expense determined under the intrinsic value method	(75,000)	--
Add:  stock-based employee compensation expense determined under fair value-based methods for all awards	141,900	38,970
Compensation for variable stock options	155,030	--
Pro forma loss	$2,741,769	$4,077,729
Pro forma loss per share- Basic and diluted	$(0.17)	$(0.55)

#

Pro forma Information

The fair value for the 2003 and 2002 options issued was estimated at the date of grant using a Black-Scholes option-pricing model to be $0.36 and $0.00 respectively per share with the following weighted-average assumptions:

Assumptions	2003	2002
Risk-free rate	4.5%	4.8%
Dividend yield	0.0%	0.0%
Volatility factor of the expected market price of the Company's Common Stock	176.7%	0.0%
Average life	1.2 years	2.5 years

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. The Company's employee stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimate.

In January 2003, the FASB issued Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities, and an Interpretation of ARB No. 51.” FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional financial support from other parties. FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after June 15, 2003. The Company does not expect the adoption of FIN 46 to have a material effect on its consolidated financial statements.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.”  SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS No. 133).  Except for the provisions of SFAS No. 149 that relate to SFAS No. 133 implementation issues that have been effective for fiscal quarters that began prior to June 15, 2003 and for hedging relationships designated after June 30, 2003.  The adoption of SFAS No. 149 is not expected to have a material effect on the Company’s consolidated financial statements.  

In May 2003, the FASB issued SFAS No. 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.”  SFAS No. 150 establishes standards for classification and measurement in the statement of financial position of certain financial instruments with characteristics of both liabilities and equity.  It requires classification of a financial instrument that is within its scope as a liability (or an asset in some circumstances).  SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003.  The Company has not yet determined the impact of the adoption of SFAS No. 150 on its consolidated financial statements.

NOTE D – PROPERTY, EQUIPMENT, AND SOFTWARE

Property, equipment and software at June 30, 2003 consist of the following:

	Amount	Estimated Useful Lives
Software	$2,916,122	5 years
Equipment	294,248	3-7 years
Furniture and fixtures	77,075	7 years
Leasehold improvements	____2,137	life of lease
	3,289,582
Less accumulated depreciation and amortization	2,585,867
Property and Equipment, Net	$703,715

Depreciation and amortization expense for the year ended June 30, 2003 and 2002 was $626,496 and $698,209, respectively.

NOTE E - STOCKHOLDER NOTES RECEIVABLE

During fiscal year 2001, the President and controlling shareholder of Gamebanc purchased 3,568,750 shares of common stock at $1 per share in exchange for a $3,568,750 note receivable.  The note bears interest at 6% and did not have a specified due date.  During fiscal year 2002 and 2001, various other transactions with the President, principally deferred compensation and accrued interest, were applied against this note.  The net amount of the note was classified as a component of stockholders’ equity at June 30, 2001.  In November 2001, the President returned 1,271,410 shares of common stock to the Company to retire the $1,271,410 outstanding balance of the note.

NOTE F - RELATED PARTY TRANSACTIONS

Gamebanc's President and CEO and its Chief Operating Officer are also members of Chicago West Pullman, LLC.  Pursuant to an agreement between Gamebanc and CWP, dated September 6, 2001, CWP advances funds to Gamebanc for various operating expenses.  This agreement allows for borrowings of up to $1,000,000, bears interest at 4%, and expires June 30, 2004.  As of June 30, 2003, the Company has a liability of $127,243 payable to CWP.  

Additionally, as part of an agreement reached during fiscal year 2001, CWP returned 1,000 shares of preferred stock during fiscal year 2002.

See Note E, which discusses the notes receivable from the President and controlling shareholder.

NOTE G – CAPITAL LEASE OBLIGATION

The Company has equipment leased under a capital lease, which expires January 28, 2004.  The assets and liabilities are recorded and the lower of the present value of minimum lease payments or the fair value of the assets.  These assets consist of equipment.  

As of June 30, 2003, the minimum lease payments under this capital lease is:

For the Year Ending	Amount
2004	$103,248
Amount representing interest	(2,733)
Total	$100,515

NOTE H - CONVERTIBLE PROMISSORY NOTES

From March 2003 through June 2003, the Company issued $662,500 5% and 6% convertible promissory notes (the “Promissory Notes”) in varying amounts due October 31, 2004. A portion of the proceeds raised from the placement has been used to fund the Company's working capital and capital expenditure requirements.

The Promissory Notes including accrued interest are convertible into five (1) shares of Common Stock for each dollar of debt, at the option of the holder, subject to certain adjustments and conditions.

During March 2003, the Company issued $175,000 in Promissory Notes (the “March Notes”).  The fair value of the Company’s common stock exceeded the conversion price of the March Notes at the date of issuance.  Accordingly, the Company recorded a beneficial conversion feature on the promissory notes of $88,000.  The beneficial conversion feature and deferred debt discount accrete to interest expense over the life of the promissory notes.  During the year ended June 30, 2003 the Company recorded a charge to interest relating to the beneficial conversion feature in the amount of $16,000.

During July 2003 the Company issued a $10,000 6% convertible promissory note. The promissory note including accrued interest is convertible into one (1) shares of Common Stock for each dollar of debt, at the option of the holder, subject to certain adjustments and conditions.  Since the fair value of the Company’s common stock was less than one dollar the promissory note did not have any beneficial conversion feature.

#

NOTE I – NOTES PAYABLE

Loans payable at June 30, 2003 are as follows:

The Company issued a non-interest bearing note payable in connections with the acquisition of Cards.com; interest is imputed at 6%; quarterly payments of $15,000 through March 2004, a payment of $165,000 in June 2004, and then quarterly payments of $18,750 through June 2006: includes debt discount of $28,613 at June 30, 2003	$336,387
On March 24, 2003, the Company issued a 5% note payable, due September 24, 2003.  On January 13, 2004, the due date on note payable was extended to July 1, 2004.	125,000
Total loans payable	461,387
Less: current maturities	(349,641)
Loans payable, less current maturities	$111,746

The future commitments as of June 30, 2003 for the periods ending June 30 of the following years are as follows:

For the Year Ending	Amount
2004	$349,641
2005	68,112
2006	72,247
	490,000
Less: imputed interest expense	(28,613)
Total	$461,387

NOTE J – COMMITMENTS

The Company leases various office space, autos and other equipment under operating leases.  Rent expense totaled approximately $116,000 and $182,000 for the years ended June 30, 2003 and 2002, respectively.  

The future minimum rental commitments as of June 30, 2003 for the periods ending June 30 of the following years are:

2004	$135,990
2005	136,774
2006	100,182
	$372,946

Employment Agreements

On July 1, 2002, the Company entered into a three-year employment agreement with its President and Chief Executive Officer. The agreement provides for annual compensation of $375,000.  In addition, the agreement provide for bonus compensation up to a maximum of 50% of his annual compensation, which is determined by the Compensation Committee of the Board of Directors.  Pursuant to the employment agreement, the employee is entitled to receive a severance payment up to 2.99 times their annual compensation based upon the occurrence of certain events as defined.

On July 1, 2002, the Company entered into a three-year employment agreement with its Executive Vice President and Chief Operating Officer. The agreement provides for annual compensation of $150,000.  In addition, the agreement provide for bonus compensation up to a maximum of 50% of his annual compensation, which is determined by the Compensation Committee of the Board of Directors.  Pursuant to the employment agreement, the employee is entitled to receive a severance payment up to 2.99 times their annual compensation based upon the occurrence of certain events as defined.

On October 1, 2003, the Company entered into a three-year employment agreement with its Executive Vice President and Chief Financial Officer. The agreement provides for annual compensation of $175,000.  In addition, the agreement provide for bonus compensation up to a maximum of 50% of his annual compensation, which is determined by the Compensation Committee of the Board of Directors.  Pursuant to the employment agreement, the employee is entitled to receive a severance payment up to 2.99 times their annual compensation based upon the occurrence of certain events as defined.

Minimum annual payments, excluding bonuses, incentives and cost of living increases under these contracts are as follows:

For the
Year Ended
June 30,	Amount
2004	$656,000
2005	700,000
2006	700,000
Total	$2,056,000

NOTE K – STOCKHOLDERS DEFICIENCY

During the period from July 31, 2002 through December 31, 2002 Gamebanc sold an aggregate of 3,665 shares of Preferred Stock for $366,500 ($100 per share) in cash proceeds. Immediately upon the issuance of the preferred stock, the preferred stock was exchanged for 50 (183,250 in aggregate) shares of common stock of Games, Inc. pursuant to the terms of the Second Exchange.

During the period from December 31, 2002 through March 2003 the Company sold an aggregate of 142,350 shares of its common stock for $284,700 ($2 per share) in cash proceeds.

During the year ended June 30, 2003 the Company issued 38,398 shares of its common stock in settlement of $111,142 of accounts payable.

On December 31, 2002, the Company acquired 14,500 shares of its common stock for a purchase price of $43,304.

NOTE L - STOCK OPTIONS

During the year ended June 30, 2002, Gamebanc extended the expiration date of 430,600 stock options from dates ranging from April 2002 through November 2002 to January 2004.  These options expired unexercised on January 1, 2004. In December 2000, the Company re-priced options to purchase approximately 2,800,000 shares of the Company’s common stock from an exercised price of $10 per share to $1.00 per share.  Pursuant to FIN 44 such options became subject to variable accounting treatment.  At June 30, 2003, the fair value of the Company’s common stock was less than the exercise price and accordingly the Company recognized a reduction of stock based compensation in the amount of $155,030.

The following summarizes the Gamebanc stock option transactions for the fiscal years ended June 30, 2003 and 2002:

		Weighted
		Average
		Exercise
	Options	Price
Options outstanding June 30, 2001	3,150,600	0.91
Granted	174,500	2.25
Exercised	--	--
Terminated	(30,000)	1.00
Options outstanding at June 30, 2002	3,295,100	$ 1.08
Granted	130,000	$2.54
Exercised	--
Terminated	(134,000)	$2.53
Options outstanding at June 30, 2003	3,291,100	$0.98

	Options Outstanding		Options Exercisable
		Weighted
		Average		Weighted
Range of		Remaining		Average
Exercise	Number	Contractual	Number	Exercise
Prices	Outstanding	Life	Exercisable	Price
$1.00 - $2.25	3,291,100	1.9 years	2,967,600	$0.98

NOTE M - STOCK WARRANTS

Gamebanc issued 1,231,173 warrants associated with various acquisitions during fiscal year 2001.  The warrants have exercise prices ranging from $1.25 to $2.35 and expire at various dates through 2011.  

NOTE N – ASSET IMPAIRMENT

During the years ended June 30, 2003 and 2002, the Company determined that certain software and websites were no longer being used.  Management believed that there would be no future cash flows generated from the software or websites.  Accordingly, the Company recorded impairment charge of $324,914 and $1,923,553 for the years ended June 30, 2003 and 2002, respectively.

NOTE O – REMOVAL OF ACCOUNTS PAYABLE

During fiscal year 2002, the Company wrote off certain accounts payable totaling $472,991.  These amounts were written off; as the Company believes that they are not liabilities of the Company.  These amounts were reversed primarily because the services were not provided to the satisfaction of the Company or the provider is no longer in business.

NOTE P - LITIGATION AND CONTINGENCIES

The Company was involved in litigation resulting from an attempted merger in 2001 between Gamebanc and Promo-Travel International, Inc.  Following certain disagreements, both parties agreed to unwind the merger and that Gamebanc would pay the plaintiffs $300,000 and that the plaintiffs would return approximately 1.3 million shares of Gamebanc common stock they had received under the merger agreement.  The plaintiffs failed to return the stock certificates and therefore Gamebanc refused to pay $300,000. The plaintiffs sued in Georgia District Court for this amount plus an additional $400,000 they claim was due under the unwinding agreement.  Gamebanc has asserted a counterclaim seeking to recover the proceeds of certain contracts and other damages incurred prior to the unwinding.  This litigation was settled effective June 30, 2003 with the Company exchanging shares of Gamebanc stock for 190,000 shares of Games, Inc. common stock. The 190,000 shares of common stock were included as part of the Second Exchange, therefore no additional consideration was deemed to have been issued as part of the settlement agreement.  Pursuant to the settlement agreement the Company did not have to make any cash payments and accordingly removed the liability in the amount of $300,000 that had been recorded in connection with the suit and recognized a gain on litigation settlement.

Gamebanc was also involved in litigation stemming from its attempted merger with Bingo.com.  Company has entered into a settlement agreement with Bingo on October 8, 2003, whereby Bingo has agreed to relinquish all of its rights and ownership of the domain name Lottery.com in exchange for a fifty (50) year royalty agreement whereby the Company will pay Bingo a 4% royalty on gross revenue (as defined) on online lottery ticket sales. Pursuant to the royalty agreement the Company must pay minimum royalties of $72,000 per annum. Bingo, Inc. has relinquished 850,000 warrants to purchase Gamebanc stock in exchange for 175,000 shares of Games, Inc. common stock. (See Note R).

Gamebanc is involved in litigation resulting from its asset purchase of the website Lottoballs.com ("Lottoballs").  This website was purchased for stock and for promissory notes to the principals of Lottoballs.  The promissory notes were due and payable one year after signing the purchase agreement.  During that year, Lottoballs was obligated to provide to the Company certain financial information and to pay Gamebanc for certain amounts.  Those amounts were never paid and the financial information was not provided in a timely fashion.  Furthermore, the website, the major asset acquired, did not function properly.  The plaintiffs refused to repair it and Gamebanc was forced to take the site down in July 2001.  The plaintiffs filed suit against Gamebanc for failure to make the payment on the promissory notes.  Gamebanc's counterclaims seek to recover costs it incurred in repair ing the software and damages arising from the plaintiff's misrepresentations and breach of contract.  This action was settled effective June 30, 2003 with Games, Inc. agreeing to issue stock in the amount of $165,000 to settle the claim. The liability recorded was reduced from $347,900 to $165,000. The Company recorded a gain on settlement of $182,900.  Subsequent to June 30, 2003 the Company issued 406,648 shares of Games, Inc. common stock in settlement of this obligation. Pursuant to the settlement agreement the stock was to be issued based upon the closing price of the Company’s common stock on July 31, 2003 which was $0.41 per share.

A former employee and manager of Gamebanc's Gameland.com site sued Gamebanc in Virginia District Court for bonus payments under his employment agreement.  The employee obtained a default judgment against Gamebanc in the amount $99,000.  This amount was recorded in accrued liabilities at June 30, 2002 and remains in accrued liabilities in the accompanying consolidated balance sheet at June 30, 2003. On August 27, 2003 the Company filed a law suit against Toadgames, Inc. case number A0304323 a company incorporated by Chris Hunter. The Company alleges Toadgames, Inc. has misappropriated the Company’s trade secrets, including its games, data codes, designs, gameplay, format, scoring systems, instructions, marketing and promotional strategies.  

In the ordinary course of conducting its business, the Company has become subject to additional litigation and claims regarding various matters.  There exists a reasonable possibility that the Company will not prevail in all cases.  However, sufficient uncertainty exists in these cases to prevent the Company from determining the amount of its liability, if any.

NOTE Q - SIGNIFICANT CUSTOMERS

During the years ended June 30, 2003, a significant portion of the Company's revenues were generated from two major customers.  Revenues to these customers represented approximately $27,000 (12.4%) and $23,000 (10.6%).  As of June 30, 2003, the amounts due from these customers included in accounts receivable were $5,268 and $-0-, respectively

During the year ended June 30, 2002, a significant portion of the Company's revenues were generated from three major customers.  Revenues to these customers represented approximately $97,000 (20.9%), 63,000 (13.5%), and $58,000 (12.4%).  

NOTE R – SUBSEQUENT EVENTS

On September 23, 2003, the Company issued a $175,000 5% note payable to a shareholder for working capital, due January 31, 2004.

As discussed in Note P, on October 8, 2003, the Company has entered into a settlement agreement with Bingo.com, whereby Bingo.com has agreed to relinquish all of its rights and ownership of the domain name Lottery.com in exchange for a fifty (50) year royalty agreement whereby the Company will pay Bingo.com a 4% royalty on gross revenue (as defined) on online lottery ticket sales. Bingo, Inc. relinquished 850,000 warrants to purchase Gamebanc stock in exchange for 175,000 shares of Games, Inc. common stock. Pursuant to the royalty agreement the Company must pay minimum royalties of $72,000 per annum.

We issued approximately 2.3 million shares of Common Stock for cash proceeds of $1,056,000.

We issued to 1 million shares to the officers of the Games in exchange for deferred salary owed of $490,000 and future payroll deduction from the CFO of $85,000.

We issued 610,000 shares for the settlement of approximately $287,500 in accrued liabilities and services.

We issued 180,000 shares to Directors of the Company on a subscription note receivable due June 30, 2004.

We converted approximately $510,000 of convertible notes to approximately 510,000 shares of Games, Inc. Common Stock.

#

INDEX TO FINANCIAL STATEMENTS

For the six months ended December 31, 2003 and 2002 (unaudited)

Condensed Consolidated Balance Sheets

F- 2

Condensed Consolidated Statements of Operations

F- 4

Condensed Consolidated Statements of Cash Flows

F- 5

Notes to Condensed Consolidated Financial Statements

F-10

Games, Inc. and Subsidiary
Condensed Consolidated Balance Sheet
December 31, 2003
(unaudited)
Assets
Current assets
Cash	$     155,645
Accounts receivable – trade	14,213
Prepaid expenses and other current assets	19,350
Prepaid royalties	1,000,000
Deposit on asset purchase	1,025,000
Total current assets	2,214,208
Property, equipment and software, net	368,199
Prepaid royalties - long-term portion	1,000,000
Intangibles, net of amortization	252,052
Total assets	$ 3,834,459 =========

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

Games, Inc. and Subsidiary
Condensed Consolidated Balance Sheet
December 31, 2003
(unaudited)
Liabilities and Stockholders' Deficiency
Current liabilities
Current maturities of long-term debt	$517,500
Accounts payable and accrued liabilities	1,108,643
Accrued litigation settlements	153,500
Capital lease obligations	12,974
Accrued officer salaries	483,980
Due to related parties	67,051
Total current liabilities	2,343,648
Long term debt, net current maturities	93,678
Convertible promissory notes	687,700
	3,125,026
Commitments and contingencies
Series AA Convertible Redeemable Preferred stock,
$100 stated value; 30,250 shares authorized issued and outstanding (liquidation
Preference of $3,025,000)	3,025,000
Stockholders' deficiency
Series A Preferred stock, $.001 par value, 10,000,000 shares
Authorized; 1,110 issued and outstanding	1
Common stock, $.001 par value; 40,000,000 shares authorized;
19,324,496 shares issued  and 19,140,496 outstanding	19,324
Additional paid-in capital	33,268,981
Accumulated deficit	(35,560,569)
Less treasury stock, at cost, 14,500 shares	(43,304)
Total stockholders’ deficiency	(2,315,567)
Total liabilities and stockholders’ deficiency	$ 3,834,459 ==========

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

Games, Inc. and Subsidiary

Condensed Consolidated Statements of Operations

(unaudited)

	Three months ended		Six months ended
	December 31,		December 31,
	2003	2002	2003	2002
Revenues	$   98,979	$54,926	$190,152	$101,508
Cost of revenues sold	18,145	11,771	40,025	26,332
Gross profit	80,834	43,155	150,127	75,176
Operating expenses
Sales, general and administrative	455,679	344,537	898,593	914,874
Depreciation of property, equipment
and software	159,711	156,501	335,817	314,053
Amortization of intangibles	89,942	106,805	197,285	218,028
Total operating expenses	705,332	607,843	1,431,695	1,446,955
Operating loss	(624,498)	(564,688)	(1,281,568)	(1,371,779)
Interest expense	(29,883)	(15,926)	(59,662)	(28,907)
Net loss	($654,381) ==========	($580,614) ==========	($1,341,230) ==========	($1,400,686) ==========
Weighted average common shares
outstanding-basic and diluted	17,509,902 ==========	16,194,331 ==========	17,024,541 ==========	14,605,495 ==========
Net loss per share - basic and diluted	($0.04) ==========	($0.04) ==========	($0.08) ==========	($0.10) ==========

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

Games, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows
(unaudited)
	Six months ended	Six months ended
	December 31, 2003	December 31, 2002
Net cash flows from operating activities:
Net cash used in operating activities	($491,632)	($521,676)
Cash flows from investing activities:
Acquisition of property and equipment	(300)	(3,930)
Cash flows from financing activities:
Capital lease obligations	(87,541)	--
Borrowings (repayments) on long-term debt	175,000	(53,667)
Repayment of long term debt	(35,000)	--
(Decrease) increase in due to related parties	(60,192)	29,127
Proceeds from issuance of convertible notes	71,810	586,500
Proceeds from issuance of common stock	583,500	--
Purchase of treasury stock	--	(43,304)
Net cash provided by financing activities	647,577	518,656
Net increase (decrease) in cash	155,645	(6,950)
Cash at beginning of period	--	16,513
Cash at end of period	$   155,645	$          9,563

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

Games, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows – continued
(unaudited)
	Six months ended	Six months ended
	December 31, 2003	December 31, 2002
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued to settle litigation	$    165,000 ========	$               -- =========
Common stock issued to settle note payable	$        1,610 ========
Common stock issued for services	$      25,350 ========	$               -- =========
Common stock issued to settle accounts payable	$              -- ========	$      25,499 =========
Common stock issued for deferred compensation plan	$    415,250 ========	$              -- =========
Preferred stock issued for prepaid royalties	$ 2,000,000 ========	$              -- =========
Preferred stock issued for deposit on acquisition	$  1,025,00 ========	$              -- =========

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

Games, Inc. and Subsidiary

ARTICLE I

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Games, Inc. (“Games” or the “Company”) along with its majority owed subsidiary GameBanc, Inc., (“GameBanc”) operates in three allied areas of interactive entertainment: government sponsored lotteries, internet games, and digital greetings.  

The accompanying interim condensed consolidated financial statements and notes to the financial statements for the interim periods as of December 31, 2003 and for the three and six months ended December 31, 2003 and 2002, are unaudited.  The accompanying interim unaudited financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States for interim financial statements and Item 310(b) of Regulation S-B.  Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.  Operating results for the three and six periods ended December 31, 2003, are not necessarily indicative of the results that may be expected for the year ending June 30, 2004.  The condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Form 10-KSB of the Company as of and for the year ended June 30, 2003.  

NOTE B – GOING CONCERN UNCERTAINTY

As shown in the accompanying condensed consolidated financial statements, the Company incurred a net loss of $1,341,230 for the six months ended December 31, 2003. Current liabilities of $2,343,648 at December 31, 2003 exceed current assets of $2,214,208 at by $129,440. Total assets at December 31, 2003 of $3,834,459 exceed total liabilities of $3,125,026.

Management of the Company is developing a plan to license the sale of lottery tickets online and to further develop its internet games web sites.  In addition, the Company is seeking to raise equity capital to fund and expand its operations in addition to fund acquisitions.

Management believes that by (i) integrating the Games.com assets, see Note F and (ii) by obtaining a license to sell lottery tickets online and (iii) if they are successful in obtaining additional equity capital to fund acquisitions, the cash flows would be sufficient to fund operations through the near term.  However, there can be no assurance that the Company will be successful in its attempts to obtain a license to sell lottery tickets online, integrate the Games.com assets, to generate positive cash flows or raise sufficient capital essential to its survival.  To the extent that the Company is unable to generate or raise the necessary operating capital, it will become necessary to curtail operations.  Additionally, even if the Company does raise operating capital, there can be no assurance that the net proceeds will be sufficient to enable it to develop its business to a level where it will generate profit s and positive cash flows.

These matters raise substantial doubt about our ability to continue as a going concern.  However, the accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE C – SELECTED SIGNIFICANT ACCOUNTING POLICIES

Revenue Source

Total revenues for the three and six months ended December 31, 2003 and 2002 are as follows:

	Three Months Ended December 31, 2003		Three Months Ended  December 31, 2002
Revenue Source	Amount	Percent of Total	Amount	Percent of Total
1.  Internet advertising	$38,468	39%	$51,185	93%
2.  Lotteries	60,411	61%	3,741	7%
Total	$98,879	100%	$54,926	100%

	Six Months Ended December 31, 2003		Six Months Ended December 31, 2002
Revenue Source	Amount	Percent of Total	Amount	Percent of Total
1.  Internet advertising	$90,495	48%	$97,767	96%
2.  Lotteries	99,657	52%	3,741	4%
Total	$190,152	100%	$101,508	100%

Loss Per Share

The Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS No. 128 requires the presentation of basic and diluted earnings per share ("EPS"). Basic EPS is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution that could occur if options or other contracts to issue common stock were exercised or converted. The Company’s outstanding stock options and warrants are not reflected in diluted earnings per share because their effects would be anti-dilutive. Accordingly, basic and diluted earnings per share are identical.

Reclassifications

Certain accounts in the prior years’ financial statements have been reclassified for comparative purposes to conform to the presentation in the current year’s financial statements.  These reclassifications had no effect on previously reported net loss.

Stock Based Compensation

SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure-an amendment of FASB Statement No. 123”. This Statement amends FASB Statement No. 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation.  In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based compensation and the effect of the method used on reported results.  The Company continues to follow the pro-forma disclosures for stock-based compensation as permitted in SFAS 123.  The following table illustrates the effect on net loss per share if the Company had applied the fair value recognition provisions of SFAS 123 to s tock-based employee compensation:

	Six Months Ended
	December 31,
	2003	2002
Net loss as reported	$1,341,230	$1,400,686
Less: stock-based employee compensation expense determined under the intrinsic value method	--	(22,500)
Add:  stock-based employee compensation expense determined under fair value-based methods for all awards	32,750	30,417
Compensation for variable stock options	--	--
Pro forma loss	$1,373,980	$1,408,603
Pro forma loss per share- Basic and diluted	$(0.08)	$(0.06)

Pro forma Information

The fair value for the fiscal 2004 and 2003 options issued was estimated at the date of grant using a Black-Scholes option-pricing model to be $0.36 and $0.00 respectively per share with the following weighted-average assumptions.

Assumptions	2004	2003
Risk-free rate	4.0%	4.5%
Dividend yield	0.0%	0.0%
Volatility factor of the expected market price of the Company's Common Stock	314.4%	176.7%
Average life	1.4 years	1.2 years

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Our employee stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimate.

In December 2000 Gamebanc extended the expiration date of 430,600 stock options from dates ranging from April 2002 through November 2002 to January 2004.  In December 2000, the Company re-priced options to purchase approximately 2,800,000 shares of our common stock from an exercised price of $10 per share to $1.00 per share.  Pursuant to FASB Interpretation No. 44 (“FIN 44”) such options became subject to variable accounting treatment.  At December 31, 2003, the fair value of our common stock was less than the exercise price and accordingly the Company recognized no stock based compensation for variable accounting treatment.

The following summarizes the stock option transactions for the six months ended December 31, 2003 and 2002:

		Weighted
		Average
		Exercise
	Options	Price
Options outstanding at June 30, 2002	3,295,100	$ 1.08
Granted	110,000	$2.54
Exercised	--
Terminated	--
Options outstanding at December 31, 2002	3,405,100	$1.13
Options outstanding at June 30, 2003	3,291,100	$ 0.98
Granted	316,500	$0.75
Exercised	--
Terminated	309,000	$.08
Options outstanding at December 31, 2003	3,298,600	$1.04

	Options Outstanding		Options Exercisable
		Weighted
		Average		Weighted
Range of		Remaining		Average
Exercise	Number	Contractual	Number	Exercise
Prices	Outstanding	Life	Exercisable	Price
$1.00 - $2.25	3,298,600	1.4 years	2,958,600	$0.98

New Accounting Pronouncements

In January 2003, Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), an interpretation of Accounting Research Bulletin No. 51. FIN 46 expands upon and strengthens existing accounting guidance that addresses when a company should include in its financial statements the assets, liabilities and activities of another entity. A variable interest entity is any legal structure used for business purposes that either does not have equity investors with voting rights or has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majori ty of the entity’s residual returns or both. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period beginning after June 15, 2003. However, on October 8, 2003, FASB deferred the latest date by which all public entities must apply FIN 46 to the first reporting period ended after December 15, 2003. The effect of the adoption of this new accounting pronouncement on the Company financial statements has not been significant.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (“SFAS 149”), which is effective for contracts entered into or modified after June 30, 2003. SFAS 149 amends FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities,” to clarify financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts. The effect of the adoption of this new accounting pronouncement on Company’s financial statements has not been significant.

In May 2003, FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“SFAS 150”), which is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the begriming of the first interim period beginning after June 15, 2003. SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability. The adoption of SFAS 150 did not have a material effect on the Company’s financial statements.

NOTE D - CONVERTIBLE PROMISSORY NOTES

From March 2003 through June 2003, the Company issued $662,500 5% and 6% convertible promissory notes (the “Promissory Notes”) in varying amounts due October 31, 2004. A portion of the proceeds raised from the placement has been used to fund the Company's working capital and capital expenditure requirements.

The Promissory Notes including accrued interest are convertible into one (1) shares of common stock for each dollar of debt, at the option of the holder, subject to certain adjustments and conditions.

During March 2003, the Company issued $175,000 in Promissory Notes (the “March Notes”).  The fair value of the Company’s common stock exceeded the conversion price of the March Notes at the date of issuance.  Accordingly, the Company recorded a beneficial conversion feature on the promissory notes of $88,000.  The beneficial conversion feature and deferred debt discount accrete to interest expense over the life of the promissory notes.  During the six months ended December 31, 2003 the Company recorded a charge to interest relating to the beneficial conversion feature in the amount of $27,000.

During July 2003 the Company issued a $10,000 6% convertible promissory note. The promissory note including accrued interest is convertible into one (1) shares of common stock for each dollar of debt, at the option of the holder, subject to certain adjustments and conditions.  Since the fair value of the Company’s common stock was less than one dollar the promissory note did not have any beneficial conversion feature.

NOTE E- LITIGATION AND CONTINGENCIES

The Company entered into a settlement agreement with Bingo, Inc. (“Bingo”) on October 8, 2003, whereby Bingo has agreed to relinquish all of its rights and ownership of the domain name Lottery.com in exchange for a fifty (50) year royalty agreement whereby the Company will pay Bingo a 4% royalty on gross revenue (as defined) on online lottery ticket sales. Pursuant to the royalty agreement the Company must pay minimum royalties of $72,000 per annum.

A former employee and manager of Gamebanc's Gameland.com site sued Gamebanc in Virginia District Court for bonus payments under his employment agreement.  The employee obtained a default judgment against Gamebanc in the amount $99,000.  Such amount is included accrued litigation settlement at December 31, 2003. On August 27, 2003 the Company filed a law suit against Toadgames, Inc. case number A0304323 a company incorporated by Chris Hunter. The Company alleges Toadgames, Inc. has misappropriated the Company’s trade secrets, including its games, data codes, designs, gameplay, format, scoring systems, instructions, marketing and promotional strategies.  

In the ordinary course of conducting its business, the Company may become subject to additional litigation and claims regarding various matters.  There exists a reasonable possibility that the Company will not prevail in all cases.  However, sufficient uncertainty exists in these cases to prevent the Company from determining the amount of its liability, if any.

NOTE F – STOCKHOLDERS’ EQUITY

On August 26, 2003, Bingo, Inc. a shareholder exchanged 850,000 warrants to acquire GameBanc stock for 175,000 shares of Games, Inc. common stock.  No sales commissions were paid in connection with this transaction.  The shares were issued in reliance upon the exemption from registration provided by Section 4 (2) of the Securities Act.

During the six months ended December 31, 2003 the Company issued 406,648 shares of Games, Inc. common stock in settlement of the Lottoballs obligation. Pursuant to the settlement agreement the stock was to be issued based upon the closing price of the Company’s common stock on July 31, 2003 which was $0.41 per share.

During the six months ended December 31, 2003 Games, Inc. issued 1,367,000 shares of common stock for $583,500 in cash proceeds.

During the six months ended December 31, 2003 Games, Inc. issued 1,000,000 shares of common stock to the Company’s Executive Deferred Compensation plan in exchanged for $500,000 in deferred and accrued salary to the officers of the Company. As of December 31, 2003 169,500 are not outstanding until they are earned by the Executive.

During the six months ended December 31, 2003 Games, Inc. issued 4,472 shares of common stock for $1,610 in payment of a note payable.

During the six months ended December 31, 2003 Games, Inc. issued 80,000 shares of common stock for consulting services to the Company with an estimated fair value of $25,350.

On January 12, 2004 Games, Inc. issued 400,000 shares of its common stock to Chicago West Pullman, LLC (“CWP”) a related party and stockholder for their participation in concluding the deal with Atari, (See Note G). The estimated fair value of the services was $200,000.  

On October 20, 2003 Games, Inc. issued 1,100 (valued at $110,000) shares of series A preferred shares in exchange for 32,331 shares of Games, Inc. common stock. The stock is redeemable at the Company’s option.

On December 31, 2003, the Company issued 30,250 shares of Series AA Convertible Redeemable Preferred Stock (“Series AA”) to Atari, Inc. in connection with an asset purchase agreement, license and royalty agreement (See Note G).  The Series AA become redeemable on March 29, 2004 at the option of the holder at a redemption price of $100 per share (“Redemption Price”). On December 31, 2004 and 2005 10,000 shares of Series AA become redeemable at the Redemption Price. In addition the holder may at any time after March 29, 2004 through December 31, 2004 convert 10,250 shares of the Series AA into shares of the Company’s common stock at a conversion price of $2.50 per share.  On December 31, 2004 through December 31, 2005 an additional 10,000 shares of Series AA become convertible into shares of the Company’s common stock at a conversion price of $6.00 per share. &nbs p;On December 31, 2005 through December 31, 2006 an additional 10,000 shares of Series AA become convertible into shares of the Company’s common stock at a conversion price of $7.20 per share.  In addition the Company may call the Series AA preferred stock at any time after March 29, 2004 at the redemption price.

No underwriter was engaged in connection with the foregoing sales of securities.

NOTE G – ASSET PURCHASE, LICENSE AND ROYALTY AGREEMENT

On December 31, Games entered into an asset purchase agreement, license and royalty agreement to (i) purchase from Atari, Inc. or an affiliate thereof the www.Games.com domain name and certain related assets for a purchase price of $1,125,000 payable in $100,000 cash and 10,250 shares of Series AA preferred stock. (ii) five (5) year royalty agreement payable in 20,000 (valued at $2,000,000) shares of Series AA Preferred Stock and the Company is committed to minimum royalty payments over the five year term of the agreement of $5 million dollars. Royalties are subdivided into two types:  (a) royalties against which the Company may recoup against the prepaid royalty and (b) royalties that the Company pay, throughout the 5 year term of the agreement, beginning with the first dollar of net sales against which the Company may not recoup any prepaid royalty.  On net sales of Licensed Products developed by Licensee, Licensee shall pay an 8% recoupment-eligible royalty and, in addition, a 2% recoupment-ineligible royalty.  On Net Sales of Licensor-provided Licensed Products, Licensee shall pay an 18% recoupment-eligible royalty and, in addition, a 2% recoupment-ineligible royalty.

The purchase is scheduled to close on or before March 31, 2004 upon Atari’s redemption of or conversion of the 10,250 Series AA Preferred Stock for $1,025,000 into 410,000 shares of Games, Inc. common stock at $2.50 per share. Games is committed to paying to Atari, Inc. $3,000,000 in additional pre-paid royalties on or before March 31, 2004. Such Payments have been guaranteed by CWP. However there can be no assurance the above transaction will be completed.

As part of this transaction, Games, Inc. will also be granted digital licenses and sublicenses with exclusive digital rights with respect to certain formats to a number of popular games including MONOPOLY, SCRABBLE, RISK, BATTLESHIP, BOGGLE and YAHTZEE and the classic Atari games.

Games.com has begun to upgrade graphics, security, chat features and functionality of the www.Games.com site to allow for enhanced play within the current play pattern and to allow for skill-based tournament play for merchandise prizes.  Re-launch of the upgraded site is scheduled for spring 2004.

Games will also create a premium service on a subscription basis which will include a revamped ability to chat with other players, maintain scores, ranks, and to participate in tournaments based on widely recognized Hasbro catalog of games which include MONOPOLY, CLUE, SCRABBLE, and RISK, for prizes. The revenue strategy for Games.com includes pay for play on demand gaming, e-commerce, sponsorships and individual subscriptions.

NOTE H - SUBSEQUENT EVENTS

In February and March 2004 six convertible note holders exchanged approximately $510,000 in convertible notes and accrued interest for approximately 510,000 shares of Games, Inc. common stock.

EX-5

Exhibit 5 and 23.3

March 9, 2004

Games, Inc.

2300 U.S. Bancorp Center

Cincinnati, OH  45202

Ladies and Gentlemen:

This opinion is rendered for use in connection with the Registration Statement on Form SB-2, prescribed pursuant to the Securities Act of 1933, 333-112170 filed by Games, Inc. (the "Company") with the Securities and Exchange Commission on or about this date under which up to 28,202,741 shares of the Company's Common Stock, $.001 par value ("Common Stock") are to be registered.

We hereby consent to the filing of this opinion as Exhibits 5 and 23.3 to the Registration Statement and to the reference to our name in the Registration Statement.

As counsel to the Company, we have examined and are familiar with originals or copies, certified or otherwise identified to our satisfaction, of such statutes, documents, corporate records, certificates of public officials, and other instruments as we have deemed necessary for the purpose of this opinion, including the Company's certificate of incorporation, as amended, and bylaws, as amended, and the record of proceedings of the stockholders and directors of the Company.

Based upon the foregoing, we are of the opinion that:

1.

The Company has been duly incorporated and is validly existing and in good standing as a corporation under the laws of the State of Delaware.

2.

When the Registration Statement shall have been declared effective by order of the Securities and Exchange Commission and such 28,202,741 shares of Company Common Stock shall have been issued in accordance with the terms set forth in the Registration Statement, such shares of Company Common Stock will be legally and validly issued and outstanding, fully-paid and nonassessable.

Very truly yours,

DINSMORE & SHOHL, LLP

/s/Dinsmore & Shohl LLP

/s/ Charles F. Hertlein, Jr.

Charles F. Hertlein, Jr.

EX-10

Exhibit 10.10

GAMES, INC.

EXECUTIVE DEFERRED COMPENSATION PLAN

Effective as of December 15, 2003

FOREWORD

3

ARTICLE I Definitions

4

Section 1.1 "Accounts"

4

Section 1.2 "Annual Open Enrollment Period"

4

Section 1.3 "Base Salary"

4

Section 1.4 "Board of Directors"

4

Section 1.5 "Bonus"

4

Section 1.6 "Change in Control"

4

Section 1.7 "Code"

4

Section 1.8 "Committee"

5

Section 1.9 "Common Stock"

5

Section 1.10 "Company"

6

Section 1.11 "Company Discretionary Credits"

6

Section 1.12 "Company Discretionary Credit Account"

6

Section 1.13 "Company Matching Credits"

6

Section 1.14 "Company Matching Credit Account"

6

Section 1.15 "Deferral Election"

6

Section 1.16 "Deferred Bonus"

6

Section 1.17 "Deferred Bonus Account"

6

Section 1.18 "Deferred Bonus Election"

6

Section 1.19 "Deferred Salary"

6

Section 1.20 "Deferred Salary Account"

7

Section 1.21 "Deferred Salary Election"

7

Section 1.22 "Deferred Stock Account"

7

Section 1.23 "Deferred Stock Election"

7

Section 1.24 "Disabled"

7

Section 1.25 "Dividend Reinvestment Return"

7

Section 1.26 "ERISA"

7

Section 1.27 "Fiscal Year"

7

Section 1.28 "Investment Election"

7

Section 1.29 "Investment Options"

7

Section 1.30 "NASDAQ"

7

Section 1.31 "Participant"

7

Section 1.32 "Plan"

7

Section 1.33 "Plan Year"

8

Section 1.34 "Stock Trust"

8

ARTICLE II Eligibility and Participation

8

Section 2.1  Eligibility

8

Section 2.2  Participation

9

ARTICLE III Deferral Elections and Deferral Periods

10

Section 3.1 Deferred Salary Election

10

Section 3.3 Company Matching Credits

11

Section 3.4 Company Discretionary Credits

11

Section 3.5 Deferral Period

11

Section 3.6 Modification of Deferral Period

12

ARTICLE IV Participants' Accounts

12

Section 4.1 Crediting of Employee Deferrals and Company Matching

12

Section 4.2 Investment Election

12

Section 4.3 Hypothetical Earnings

13

Section 4.4 Vesting

15

Section 4.5 Account Statements

15

ARTICLE V Distributions and Withdrawals

15

Section 5.1 Timing of Distribution

15

Section 5.2 Form of Distribution

18

ARTICLE VI General Provisions

20

Section 6.1 Unsecured Promise to Pay

20

Section 6.2 Plan Unfunded

20

Section 6.3 Designation of Beneficiary

20

Section 6.4 Expenses

20

Section 6.5 Voting Common Stock

21

Section 6.6 Non-Assignability

21

Section 6.7 Mandatory Deferral

21

Section 6.8 Employment/Participation Rights

21

Section 6.9 Severability

21

Section 6.10 No Individual Liability

22

Section 6.11 Tax Withholding

22

Section 6.12 Applicable Law

22

Section 6.13 Incompetency

22

Section 6.14 Notice of Address

22

ARTICLE VII Administration

23

Section 7.1 Committee

23

Section 7.2 Claims Procedure

23

ARTICLE VIII Amendment, Termination and Effective Date

23

Section 8.1 Amendment of the Plan

23

Section 8.2 Termination of the Plan

23

GAMES, INC.

DEFERRED COMPENSATION PLAN

Effective as of December 15, 2003

FOREWORD

Effective as of December 15, 2003(the "Effective Date"), Games, Inc. the "Company") adopted the Games, Inc. Salary and Bonus Deferral Plan (the "Plan") for the benefit of certain of its employees. The Plan is intended to be an unfunded plan of deferred compensation primarily for the benefit of a select group of management and highly compensated employees.

The purpose of the Plan is to permit those employees of the Company who are part of a select group of management or highly compensated employees to voluntarily defer, pursuant to the provisions of the Plan, a portion of the salaries, bonuses and other remuneration otherwise payable to them.

Effective as of December 15, 2003, the Board of Directors of the Company adopted the Plan to permit Participants to have their deferred salaries or deferred bonuses considered to be invested in Common Stock of the Company, to permit those Participants to vote a number of shares of Common Stock equal to the number considered to be held for their benefit under the Plan, and for certain other purposes.

Effective as of December 15, 2003, the Plan is effective and to name the Plan as the Games, Inc. Deferred Compensation Plan, and to adopt the deferral opportunities and the distribution and withdrawal options

under the Plan.

ARTICLE I Definitions

Section 1.1 "Accounts" means the bookkeeping accounts established under the Plan, if any, on behalf of a Participant and includes earnings credited thereon or losses charged thereto.

Section 1.2 "Annual Open Enrollment Period" means the annual period designated by the Committee, which ends not later than the December 31 of a Plan Year, during which a Participant may make or change elections to defer annual Base Salary, Bonuses and any other remuneration otherwise due them. Notwithstanding the foregoing, the Annual Open Enrollment Period for 2004 shall be the period designated by the Committee which ends not later than December 31, 2003.

Section 1.3 "Base Salary" means the base salary or wages otherwise taken into account under the Games, Inc. Savings Incentive

Plan, determined in accordance with the provisions of such plan, but without regard to the limitation on compensation otherwise required under Code section 401(a)(17), and without regard to any deferrals of the foregoing of compensation under this or any other plan of deferred compensation maintained by the Company.

Section 1.4 "Board of Directors" means the Board of Directors of the Company.

Section 1.5 "Bonus" means the annual bonus payable under the Company's Performance Incentive Plan, or any successor thereto.

Section 1.6 "Change in Control" of the Company means any of the following events:

                  (1) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either (A) the then-outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the  "Outstanding Company Voting Securities"); provided, however, that, for purposes of this Section 1.6, the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company, (iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 1.6(3)(A), 1.6(3)(B) and 1.6(3)(C), or (v) any acquisition that the Board determines, in good faith, was inadvertent, if the acquiring Person divests as promptly as practicable a sufficient amount of the Outstanding Company Common Stock and/or the Outstanding Company Voting Securities, as applicable, to reverse such acquisition of 25% or more thereof.

                  (2) Individuals who, as of December 15, 2003, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to December 15, 2003 whose election, or nomination for election as a director by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board.

                  (3) Consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a re sult of such transaction, owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of  the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 25% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

                  (4) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

Section 1.7 "Code" means the Internal Revenue Code of 1986, as amended, or any successor statute.

Section 1.8 "Committee" means the committee that is responsible for administering the Plan. The Committee shall consist of three or more employees of the Company as determined by, and appointed by, the Board of Directors. The Committee may delegate pursuant to a written authorization (including, by way of illustration, through a contract, memorandum, or other written delegation document) any or all of its responsibilities involving ongoing day-to-day administration or ministerial acts, as set forth in this Plan to one or more individuals or service-providers. In any case where this Plan refers to the Committee, such reference is deemed to be a reference to any delegate of the Committee appointed for such purpose.

Section 1.9 "Common Stock" means the common stock ($0.001 par value) of the Company, including any shares into which it may be split, subdivided or combined.

Section 1.10 "Company" means Games, Inc. and any successor to such corporation by merger, purchase or otherwise.

Section 1.11 "Company Discretionary Credits" means the amounts credited to a Participant's Company Discretionary Credit Account, if any, pursuant to Section 3.5.

Section 1.12 "Company Discretionary Credit Account" means the bookkeeping account established under Section 3.5, if any, on behalf of a Participant and includes any earnings credited thereon or losses charged thereto pursuant to Article IV.

Section 1.13 "Company Matching Credits" means the amounts credited to a Participant's Company Matching Credit Account, if any, pursuant to Section 3.4.

Section 1.14 "Company Matching Credit Account" means the bookkeeping account established under Section 3.4, if any, on behalf of a Participant and includes any earnings credited thereon or losses charged thereto pursuant to Article IV.

Section 1.15 "Deferral Election" means the Participant's election to participate in this Plan and defer amounts eligible for deferral in accordance with the Plan terms. Except as the context otherwise requires, references herein to Deferral Elections include any subsequent modifications of a prior Deferral Election.

 Section 1.16 "Deferred Bonus" means the amount of a Participant's Bonus that such Participant has elected to defer until a later year pursuant to an election under Section 3.2.

Section 1.17 "Deferred Bonus Account" means the bookkeeping account established under Section 3.2 on behalf of a Participant, and includes any earnings credited thereon or losses charged thereto pursuant to Article IV.

Section 1.18 "Deferred Bonus Election" means the election by a

Participant under Section 3.2 to defer a portion of the Participant's Bonus until a later year.

Section 1.19 "Deferred Salary" means the amount of a Participant's Base Salary that such Participant has elected to defer until a later year pursuant to an election under Section 3.1.

Section 1.20 "Deferred Salary Account" means the bookkeeping account established under Section 3.1 on behalf of a Participant, and includes any earnings credited thereon or losses charged thereto pursuant to Article IV.

Section 1.21 "Deferred Salary Election" means the election by a Participant under Section 3.1 to defer until a later year a portion of his or her Base Salary.

Section 1.22 "Deferred Stock Account" means the bookkeeping account established under Section 4.3(b) on behalf of a Participant and includes, in addition to amounts stated in that Section, any Dividend Reinvestment Return credited thereon.

Section 1.23 "Deferred Stock Election" means the election by a

Participant under Section 4.3(b) to have applicable deferred amounts credited in the form of Common Stock to the Participant's Deferred Stock Account.

Section 1.24 "Disabled" means that a Participant is totally and permanently disabled as defined in the Company's Long-Term Disability Plan.

Section 1.25 "Dividend Reinvestment Return" means the amounts which are credited to each Participant's Deferred Stock Account pursuant to Section 4.3(b)to reflect dividends declared by the Company on its Common Stock.

Section 1.26 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute.

Section 1.27 "Fiscal Year" means the fiscal year of the Company, which currently is the twelve month period commencing on the first day of July and ending on the last day of June of the following calendar year.

Section 1.28 "Investment Election" means the Participant's election to have deferred amounts credited with hypothetical earnings credits (or losses)that track the investment performance of the Investment Options and/or Company Common Stock in accordance with Article IV.

Section 1.29 "Investment Options" means those hypothetical targeted investment options designated by the Committee as measurements of the rate of return to be credited to (or charged against) amounts deferred to Participants'Accounts.

Section 1.30 "NASDAQ" means The NASDAQ Stock Market (OTCBB).

Section 1.31 "Participant" means a common law employee of the Company who meets the eligibility requirements for a deferral under this Plan as set forth in Article II and who is eligible to elect to defer amounts under this Plan in accordance with Article III.

Section 1.32 "Plan" means the Games, Inc. Executive Deferred Compensation Plan (previously the Games, Inc. Salary and Bonus Deferral Plan) as from time to time in effect.

Section 1.33 "Plan Year" means the calendar year.

Section 1.34 "Stock Trust" means the Games, Inc.

Deferred Salary and Bonus Trust established as of December 31 between the Company and Trustee, as amended from time to time thereafter.

ARTICLE II Eligibility and Participation

Section 2.1  Eligibility

         (a) An individual shall be eligible to become a Participant in this Plan if the individual meets the following requirements:

             (i)  the individual is a common law employee of a unit of the Company (or of one of its subsidiaries) to which the Plan has been adopted pursuant to a decision by, or with the approval of, the Board of Directors;

             (ii) the individual is not a nonresident alien of the United States receiving no United States source income within the meaning of sections 861(a)(3) or 911(d)(2) of the Code; and

                         (iii) the employee:

  (A) has a Base Salary of $100,000 or more effective as of July 1 of the calendar year before the calendar year in which compensation otherwise to be paid to the employee may be deferred hereunder; or

                 (B) is a newly-hired employee and has a projected Base Salary of $100,000 as of the employee's date of hire.

         (b) The Committee shall have the ability to adjust, prospectively for any Plan Year, the dollar limitations in Section 2.1(a)(iii).

         (c) The Committee may also:

             (i)  designate as ineligible particular individuals, groups of individuals or employees of business units who otherwise could be eligible under Section 2.1(a); or

             (ii) designate as eligible particular individuals, groups of individuals or employees of business units who otherwise would be ineligible under Section 2.1(a).

         (d) An employee who, at any time, ceases to meet the foregoing eligibility requirements, as determined in the sole discretion of the Committee, shall thereafter cease to be a Participant eligible to continue making deferrals under the Plan, and any deferral elections then in effect shall cease to be effective. In such case, the individual may remain a Participant in the Plan with respect to amounts already deferred prior to the date such individual ceased to be an active Participant.

Section 2.2  Participation

         (a) Deferral Election. As soon as practicable after the Committee determines that an employee is eligible to become a Participant, the Committee shall provide the Participant with the appropriate election forms with which a Participant may make a Deferral Election. In the case of an employee who first becomes eligible during a Plan Year, such Deferral Election may be made within the first thirty (30) days of eligibility with respect to any Deferred Salary to be earned thereafter for the remainder of the Plan Year. If the Participant does not return the completed forms to the Committee at such time as required by the Committee, the Participant will not be allowed to participate in the Plan until the next Annual Open enrollment Period. All Deferral Elections hereunder (including any modifications of prior Deferral Elections otherwise permitted under the Plan) may be made in accordanc e with written, electronic or telephonic procedures prescribed by the Committee.

         (b) Contents of Deferral Election. A Participant's Deferral Election must be made in the manner designated by the Committee and must be accompanied by:

(i)

an election to defer Base Salary, Bonus, and/or Company Matching Credits and, with respect to deferrals made on or after January 1, 2004, a single deferral election and distribution option election with respect to all such amounts deferred for any Plan Year (all such amounts deferred with respect to any Plan Year shall be treated as a single category  of deferral for purposes of determining deferral periods and distribution options);

(ii)

an Investment Election;

(iii)

a designation of a beneficiary or beneficiaries to receive any deferred amounts owed upon the Participant's death;

(iv)

a designation as to the form of distribution for each separate year's deferral and each separate category of deferral; provided, however, that if no specific election is made with respect to any deferred amount, the Participant will be deemed to have elected to receive such amounts in the form of a lump sum distribution (in cash and, solely to the extent distributable amounts are credited to the Participant's Deferred Stock Account at the time of the distribution, shares of Common Stock);

(v)

an application for a policy of life insurance under which the Participant is the insured and the Company is the sole owner                   of and beneficiary under such policy; and

(vi)

such additional information as the Committee deems necessary or appropriate.

ARTICLE III Deferral Elections and Deferral Periods

Section 3.1 Deferred Salary Election

(a)

Each Participant who has elected to defer the maximum pre-tax elective deferral that is permitted for a calendar year under the Games, Inc. Savings Incentive Plan and under Code section 402(g) may make a Deferred Salary Election with respect to Base Salary otherwise to be paid in such calendar year, provided that a valid Deferred Salary Election is made by the date specified in Section 3.1(b). A Participant may elect to defer from 1% to 75% of the Participant's Base Salary (in increments of 1%); provided, however, that the Participant must elect a Deferred Salary amount of at least $5,000. Notwithstanding the foregoing, any Deferred Salary Election must be made in a manner that will ensure that the Participant is paid a sufficient amount of Base Salary that will allow adequate amounts available for: (i) any tax required to be withheld from the Participant's Base Salary (including tax attributable to amounts deferred under this Plan ) under the Code or  any state or local statute; (ii) any pre-tax elective deferrals under the Games, Inc. Savings Incentive Plan; (iii) any amounts to be deferred by the Participant in order to participate in any other benefit programs maintained by the Company; and (iv) any other amounts required to be paid to the Participant or withheld from the Participant's compensation by law or due to such other requirements as determined by the Committee.

(b)       Except with respect to Deferred Salary Elections made by Participants who first

become eligible to participate during a Plan Year (which elections must be made as specified in Section 2.2(a)), a Deferred Salary Election with respect to Base Salary for a particular calendar year must be made on or before December 31 (January 9, 2004 with respect to salary earned during the 2004 year) preceding the commencement of such calendar year. Once a Deferred Salary Election is made, it shall be irrevocable for the applicable calendar year and apply only to Base Salary otherwise to be paid during the applicable calendar year. Such Deferred Salary shall be credited to the Participant's Deferred Salary Account as of the first business day after the last day of each payroll period.

Section 3.2 Deferred Bonus Election

       (a)  Each Participant may elect to make a Deferred Bonus election with respect to a Bonus otherwise to be paid in the calendar year immediately following the year of the Participant's Deferred Bonus  Election. A Participant may elect to defer from 1% to 100% of the Participant's Bonus (in increments of 1%); provided, however, that the Participant's Deferred Bonus Election must result in a deferral of at least $5,000.

        (b) A Deferred Bonus Election with respect to any Bonus to be paid in a particular calendar year must be made on or before the December 31 preceding the commencement of such calendar year (June 30, 2004 with respect to Bonus amounts to be paid in 2004). Once made, a Deferred Bonus Election cannot be changed or revoked except as provided herein. Such Deferred Bonus shall be credited to the Participant's Deferred Bonus Account as of the first business day in January of the year that the Bonus otherwise would have been paid to the Participant in the absence of any deferral hereunder.

Section 3.3 Company Matching Credits

            If a Participant has made a Deferred Salary Election in accordance with Section 3.1 and, as a result of such Deferred Salary Election, the Participant is entitled to a lower matching contribution amount under the SIP, then the Participant shall be eligible to have Company Matching Credits credited to the Participant's Company Matching Credit Account. The amount of such Company Matching Credits  shall equal the amount of the matching contribution to which the Participant would have been entitled under the SIP had the Participant not made any Deferred Salary Election for the Plan Year under this Plan (taking into account all applicable Code limitations that limit the amount of matching contributions under the SIP) less an amount equal to the actual matching contribution to which the Participant is entitled under the SIP for the Plan Year. Such amounts shall be credited to the Participant's Comp any Matching Credit Account as soon as practicable after the end of the Plan Year and shall be subject to the vesting schedule described in Article IV.

Section 3.4 Company Discretionary Credits

            The Company may, in its sole discretion, provide for additional credits to all or some Participants' Accounts at any time. Such amounts shall be credited to the Participant's Company Discretionary Credit Account and shall be subject to the vesting schedule established by the Company at the time such amounts are credited.

Section 3.5 Deferral Period

            With respect to amounts deferred in accordance with Sections 3.1 through 3.4, each Participant must elect the deferral period for each separate deferral and each compensation type. Subject to the additional deferral provisions of Section 3.6 and the acceleration provisions of Article V, a Participant's deferral period may be for a specified number of years or until a specified date, subject to any limitations that the Committee in its discretion may choose to apply, provided that, in all events, a deferral period must be for at least two (2) years from the first day of the Plan Year in which the deferred amounts would otherwise be payable (or, in the case of amounts described in Section 3.3 or Section 3.4, credited to the Participant's Account). However, notwithstanding the deferral period  otherwise specified, payments shall be paid or begin to be paid under the Plan in accordance with the mandatory distribution provisions in Article V.

Section 3.6 Modification of Deferral Period

        (a) With respect to any previously deferred amount credited to a Participant's Accounts, a Participant may request that the Committee approve an additional deferral period of at least two (2) years from the date the previously deferred amounts were otherwise payable. Any such request must be made by written notice to the Committee at

least twelve (12) months before the expiration of the deferral period for any previously deferred amount with respect to which an additional deferral election is requested. Such additional deferral election may apply to each separate deferral previously made (and each compensation type previously deferred). Each such additional deferral election request shall include a newly designated manner of payment election in accordance with the provision of Section 5.2 below. No more than two such extensions may be elected by a Participant with respect to any specific deferred amount (or compensation type) previously deferred.

        (b) With respect to any previously deferred amount (and compensation type) credited to a Participant's Accounts, a Participant may request that the Committee approve an accelerated deferral date with respect to amounts that are not otherwise payable for at least three (3) years from the date of such request, provided that the resulting accelerated deferral date may not be any earlier than two (2) years from the date of such Participant election. Such deferral modification election may be made for each separate deferral previously made (and each compensation type). Each such modified deferral period request shall include a newly designated manner of payment election in accordance with the provisions of Section 5.2 below. No more than two such modifications may be elected by a Participant with respect to any specific deferred amount (or compensation type) previously deferred.

ARTICLE IV Participants' Accounts

Section 4.1 Crediting of Employee Deferrals and Company Matching and Discretionary Credits Deferrals to this Plan that are made under Article III shall be credited to the Participant's Accounts in accordance with such rules established by the Committee from time to time. Each Participant's Accounts shall be administered in a way to permit separate Deferral Elections, deferral periods, and Investment Elections with respect to various Plan Year deferrals and compensation types as the Committee determines, in its sole discretion, are necessary or appropriate.

Section 4.2 Investment Election

            Effective January 1, 2004, all balances reflected through December 31, 2003 credited to the Accounts of Participants who are not actively employed on January 1, 2004 shall continue to be credited with earnings (or charged with losses) to reflect the income (or loss) that would have been earned had the deferred amounts been invested in the Investment Options then in effect with respect to such Participants. Notwithstanding the provisions of this Article IV that allow Participants the ability to make and modify Investment Elections, no modifications of Investment Elections shall be allowed with respect to amounts credited to such Participants' Accounts as of December 31, 2003 and all hypothetical earnings (or losses) attributable to such balances thereafter. With respect to amounts credited to all other Participants' Accounts under the Plan (other than amounts credited to Deferred Stock Accounts, wh ich may not be transferred out of such Accounts), Participants' Investment Elections with respect to deferred amounts hereunder shall be made pursuant to the written, telephonic or electronic methods prescribed  by the Committee and subject to such rules on Investment Elections and Investment Options as established by the Committee from time to time. Upon receipt by the Committee, and in accordance with rules established by the Committee, an Investment Election shall be effective as soon as practicable after receipt and processing of the election by the Committee. Investment Elections will continue in effect until changed by the Participant. An eligible Participant (including a Participant who terminates employment on or after January 1, 2004) may change a prior Investment Election (or default Investment Election) with respect to deferred amounts on a monthly basis, by notifying the Committee, at such time and in such manner as approved by the Committee. Any such changed Investment Election may result i n amending Investment Elections for prior deferrals or for future deferrals or both. Notwithstanding the foregoing, in all events, a Participant may not reallocate any deferrals out of a Deferred Stock Account so that the deferrals will track targeted rates of return measured by the Investment Options.

Section 4.3 Hypothetical Earnings

        (a) General. Subject to Section 4.2, additional hypothetical bookkeeping amounts shall be credited to (or deducted from) a Participant's Accounts to reflect the earnings (or losses) that would have been experienced had the deferred amounts been invested in the Investment Options selected by the Participant as targeted rates of return, net of all fees and expenses otherwise associated with the Investment Options. The Committee may add or delete Investment Options, on a prospective basis, by notifying all Participants whose Accounts are hypothetically invested in such Options, in advance, and soliciting elections to transfer deferred amounts so that they track investments in other Investment Options then available.

        (b) Company Stock Investment Option. Instead of having deferred amounts credited with hypothetical earnings (or losses) in accordance with Section 4.3(a), and subject to Section 4.2, a Participant may elect (as a part of the Participant's Deferral Election) to have all or part of the Participant's future deferred amounts (in whole percentage increments) credited in the form of Common Stock to a Deferred Stock Account. In addition, any amounts credited to a Participant's Accounts other than the Participant's Deferred Stock Account may be transferred for hypothetical investment tracking purposes to the Participant's Deferred Stock Account. A Deferred Stock Election to have any deferrals hereunder credited to the Participant's Deferred Stock Account shall be made in accordance with the procedures established by the Committee. Once amounts are credited to the Participant's Deferred Stock Account, the Participant may not real locate those amounts to have them reflect the hypothetical earnings (or losses) of any other targeted rate of return Investment Option. All distributions of amounts credited to a Participant's Deferred Stock Account may only be distributed in whole shares of Common Stock (with cash for fractional shares). A Participant's Deferred Stock Account will be credited:

            (i)   as of the first business day after the last day of each monthly payroll period, with the number of shares of Common Stock (in whole shares and fractional shares, as determined by the committee) determined by dividing the Participant's deferred amounts attributable to Deferred Salary for such monthly payroll period subject to the Deferred Stock Election by the price for shares of Common Stock, determined by the Committee, as of the day such deferred amounts are credited to the Participant's Account; and

            (ii)  annually, as of the first business day in January of each calendar year, with the number of shares of Common Stock (in whole shares and fractional shares, as determined by the Committee) determined by dividing the portion of the Participant's Deferred Bonus and Company Matching Credits subject to the Deferred Stock Election by the price for shares of Common Stock, determined by the Committee, as of the day such deferred amounts are credited to the Participant's Accounts; and

            (iii) at such other times as the Committee determines with respect to all other deferred amounts under the Plan, with the number of shares of Common Stock (in whole shares and fractional shares, as determined by the Committee) determined by dividing the portion of the Participant's deferred amounts to be credited in the Deferred Stock Account by the price for shares of Common Stock, determined by the Committee, as of the day such deferred amounts are credited to the Participant's Account.

            If the Company enters into transactions involving stock splits, stock dividends, reverse splits or any other recapitalization transactions, the number of shares of Common Stock credited to a Participant's Deferred Stock Account will be adjusted (in whole shares and fractional shares, as determined by the Committee) so that the Participant's Deferred Stock Account reflects the same equity percentage interest in the Company after the recapitalization as was the case before such transaction.

            If at least a majority of the Company's stock is sold or exchanged by its shareholders pursuant to an integrated plan for cash or property (including stock of another corporation) or if substantially all of the assets of the Company are disposed of and, as a consequence thereof, cash or property is distributed to the Company's shareholders, each Participant's Deferred Stock Account will, to the extent not already so credited under this Section  4.3(b), be (i) credited with the amount of cash or property receivable by a Company shareholder directly holding the same number of shares of Common Stock as is credited to such Participant's Deferred Stock Account and (ii) debited by that number of shares of Common Stock surrendered by such equivalent Company shareholder.

            Each time the Company declares a dividend on its Common Stock, each Participant's Deferred Stock Account will be credited with a Dividend Reinvestment Return equal to that number of shares of  Common Stock (in whole shares and fractional shares, as determined by the Committee) determined by dividing (i) the amount that would have been paid (or the fair market value thereof, if the dividend is not paid in cash) to the Participant on the total number of shares of Common Stock credited to the Participant's Deferred Stock Account had that number of shares of Common Stock been held by such Participant by (ii) the price for shares of Common Stock, determined by the Committee, as of the dividend payment date.

Section 4.4 Vesting

            At all times a Participant shall be fully vested in his Deferred Salary and Deferred Bonus, including any earnings or losses and Dividend Reinvestment Return thereon). A Participant shall become vested in any Company Matching Credits in the same manner and to the same extent as the Participant is vested in matching contributions otherwise credited to the Participant under the Games, Inc. Savings Incentive Plan. A Participant shall become vested in any Company Discretionary Credits pursuant to the vesting schedule established by the Company at the time such Credits, if any, are made. Except as otherwise provided in Section 5.1(b) (death) or Section 5.1(c) (disability), if a Participant terminates employment at any time prior to becoming fully vested in amounts credited to the Participant's Accounts hereunder, the non-vested amounts credited to the Participant's Acc ounts shall be immediately forfeited and the Participant shall have no right or interest in such non-vested deferred amounts.

Section 4.5 Account Statements

            Within 60 days following the end of each Plan Year (or at such more frequent times determined by the Committee), the Committee shall furnish each Participant with a statement of Account which shall set forth the balances of the individual's Accounts as of the end of  such Plan Year (or as of such time determined by the Committee), inclusive of tracked earnings (or losses) and any Dividend Reinvestment Return. In addition, the Committee shall maintain records reflecting each year's deferrals separately by type of compensation.

ARTICLE V Distributions and Withdrawals

Section 5.1 Timing of Distribution

        (a) Time of Distribution - Distributions Other than Death, Disability, or Scheduled Distributions. Except as otherwise provided herein in the case of a Participant who retires and subject to Section 5.1(d), a Participant's vested Accounts shall be paid or commence to be paid, in the form of distribution elected in a particular Deferral Election (subject to Section 5.2), at such date as determined in the sole discretion of the Committee following the earlier of:

(i)

the Participant's termination of employment, or

(ii)

the date otherwise specified in the Participant's Deferral Election. In the case of a Participant who retires from employment hereunder (as defined below), and subject to Section 5.1(d), a Participant's vested Accounts shall be paid or commence to be paid, in the form of distribution elected in a particular Deferral Election (subject to Section 5.2), at such date as determined in the sole discretion of the Committee following the later of: (i) the Participant's retirement from active employment, or (ii) the date otherwise specified in the Participant's Deferral Election; provided however that, in all events distributions to such a retired Participant must be made (or commence to be paid) as of the earlier of the Participant's attainment of age 70 or death. For purposes of this Section 5.1(a), a Participant has "retired" from active employment if:

            (i)   the Participant terminates from active employment after having attained age 65 with five years of service with the Company or an affiliate;

            (ii)  the Participant terminates from active employment after having attained age 55 with ten years of service with the Company or an affiliate; or

            (iii) the Committee, in its sole discretion, otherwise determines that the Participant has retired for this purpose.

        (b) Timing of Distributions - Participant's Death. If a Participant dies before the full distribution of the Participant's Accounts under this Article V, any deferred amounts that are not vested and have not previously been forfeited shall become 100% vested. Unless the Participant had commenced receiving installment payments, as soon as practicable after the Participant's death, all remaining amounts credited to the Participant's Accounts shall be paid in a single lump sum payment to the Participant's named beneficiary (or beneficiaries). In the absence of any beneficiary designation, payment shall be made to the personal representative, executor or administrator of the Participant's estate. Beneficiary designations may be changed by a Participant at any time without the consent of the Participant's spouse or any prior beneficiary. If the Participant dies after having commenced to receive installment payments, the Parti cipant's beneficiary may accelerate the payment of any remaining installment payments as follows:

            (i)   The beneficiary may request (within a reasonable time after the Participant's death, as specified by the Committee) that all remaining installment payments that are otherwise to be paid to the beneficiary at least twelve (12) months after the date of the request be accelerated and paid in a single lump sum payment as of a date specified by the Committee that is at least twelve (12) months after the date of the request; or

            (ii)  The beneficiary may request (within a reasonable time after Participant's death, as specified by the Committee) that all remaining installment payments that are otherwise to be paid to the beneficiary be accelerated and paid in the form of an immediate lump sum payment, subject to the requirement that ten percent (10%) of the remaining amounts be permanently forfeited.

        (c) Timing of Distributions - Participant's Disability. Notwithstanding anything in the Plan to the contrary, if a Participant becomes Disabled, the Participant will be treated as having terminated employment and any deferred amounts that are not vested and have not previously been forfeited shall become 100% vested. Notwithstanding anything in a Participant's Deferral Election to the contrary with respect to payment commencement, as soon as practicable after the Participant becomes Disabled, all remaining amounts credited to the Participant's Accounts shall be paid or commence to be paid to the Participant in the form of distribution elected by the Participant in the Participant's Deferral Election. In addition, as soon as practicable after the Participant becomes Disabled, the Participant may request that the Committee change any installment distribution election so that amounts subjec t to the election are accelerated and paid in the form of a single lump sum distribution. Such distribution shall be made only if the Committee, taking into account the type of factors taken into account in the event of a hardship under Section 5.1(f), in its sole discretion, approves such request.

        (d) Scheduled Distribution. As a part of the Participant's Deferral Election, a Participant may elect to receive a lump sum distribution or annual installments (over 2, 3, 4 or 5 years, as elected by the Participant) equal to all or any part of the vested balance of the Participant's Accounts to be paid (or commence to be paid) at a scheduled distribution date, subject to the timing requirements in Section 5.1(a). For these purposes, the amount of each installment payment shall be determined by multiplying the value of the Participant's remaining vested Accounts subject to the scheduled distribution election by a fraction, the numerator of which is one (1) and the denominator of which is the number of calendar years remaining in the installment period. These scheduled distributions are generally available only for distributions that are scheduled to commence to be paid while a Participant is employed by the Company. If a Participant terminates employment before commencing receipt of scheduled distributions, the timing requirements of Section 5.1(a)  shall apply (which requirements provide for payment upon termination of employment, unless the Participant has attained retirement age, in which case a later distribution date may apply). If a Participant terminates employment while receiving scheduled installment payments, such installment payments shall continue to be paid in the same form of distribution, subject to the Participant's right to accelerate the remaining payments in accordance with Section 5.1(e) or Section 5.1(f). Notwithstanding the foregoing, if a Participant's employment is terminated for cause, as determined by the Company, full payment of all remaining amounts in such Participant's Account shall be paid in the form of a single lump sum payment as soon as practicable after such termination.

        (e) Early Distribution. Notwithstanding any other provision of the Plan, a Participant or beneficiary may, at any time prior to or subsequent to commencement of payments, request in writing to the Committee to have any or all vested amounts in his or her Accounts paid in an immediate lump sum distribution, provided that an amount equal to ten percent (10%) of the requested distribution shall be permanently forfeited from the Participant's Accounts prior to such distribution. Any such lump sum distribution shall be paid as soon as practicable After the Committee's receipt of the Participant's (or beneficiary's) request. The minimum permitted early distribution under this Section 5.1(e) shall be $3,000.

        (f) Hardship Distribution. At any time prior to the time an amount is otherwise payable hereunder, an active Participant may request a distribution of all or a portion of any vested amounts credited to the Participant's Accounts on account of the Participant's financial hardship, subject to the following requirements:

            (i) Such distribution shall be made, in the sole discretion of the Committee, if the Participant has incurred an unforeseeable emergency.

           (ii) For purposes of this Plan, an "unforeseeable emergency" shall mean an unanticipated emergency that is caused by an event beyond the control of the Participant and that would result in severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of a Participant's dependent (as defined in Code section 152(a)), loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant's control. The circumstances that will constitute an unforeseeable emergency will depend upon the facts of each case and be based on the information supplied by the Participant, in writing, pursuant to the procedure prescribed by the Committee. In addition to the foregoing, distributions under this subsection shall not be allowed for purposes of sending a child to college or the Participant's desire to purchase a home or other residence. In all events, distributions made on account of an unforeseeable emergency are limited to the extent reasonably needed to satisfy the emergency need.

          (iii) Notwithstanding the foregoing, payment under this subsection may not be made to the extent that such hardship is or may be relieved:

                (A) through reimbursement or compensation by insurance or otherwise,

                (B) by liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship, or

                (C) by cessation of deferrals under the Plan.

           (iv) All distributions under this subsection shall be made in cash as soon as practicable after the Committee has approved the distribution and that the requirements of this subsection have been met.

            (v) The minimum permitted hardship withdrawal shall be $3,000.

Section 5.2 Form of Distribution

        (a) General. Except as otherwise provided in this Article V, all amounts payable from a Participant's Accounts shall be paid in one of the forms of distribution described in Subsections (b) and (c) below, as elected by the Participant in a Deferral Election or as modified by the Participant in accordance with Subsection (d) below. Any Participant who fails to elect a form of distribution with respect to any deferral amount (or any compensation type) shall be deemed to have elected to receive such amounts in the form of a lump sum distribution in cash and, to the extent distributable amounts are credited to the Participant's Deferred Stock Account, in shares of Common Stock (with any fractional share interest therein paid in cash to the extent of the then fair market value thereof).

        (b) Lump Sum Distribution. A Participant may elect, in accordance with such procedures established by the Committee, to have any vested deferral amounts credited to his Accounts paid in the form of a single lump sum distribution at the time otherwise required or permitted under the Plan.

        (c) Annual Installment Distributions. A Participant may elect, in accordance with such procedures established by the Committee, to have any vested deferral amounts credited to his Accounts paid at the time otherwise required or permitted in the form of annual installments over a 5, 10 or 15-year period commencing at the time otherwise required or permitted under the Plan and paid annually thereafter for the remainder of the installment period (subject to Section 5.1(b)). For these purposes, the amount of each installment payment shall be determined by multiplying the value of the Participant's remaining vested Accounts by a fraction, the numerator of which is one (1) and the denominator of which is the number of calendar years remaining in the installment period. Notwithstanding the foregoing, if a Participant's employment is terminated for cause, as determined by the Company, full payme nt of all remaining amounts in such Participant's Account shall be paid in the form of a single lump sum payment as soon as practicable after such termination.

        (d) Change in Form

            (i) Notwithstanding the foregoing, in accordance with the written, telephonic or electronic procedures prescribed by the Committee, a Participant may elect to change the form applicable to a particular deferral (or deferred compensation type) at any time, provided that such election must be made at least twelve (12) consecutive months before the date on which such distribution otherwise would have been made or commenced. Any such change that is not in effect for at least the applicable twelve (12) month period shall be disregarded and the last valid election shall be substituted in its place. In the absence of such a valid election, distribution shall be made in the form of a single lump sum distribution in cash and, to the extent distributable amounts are credited to the articipant's Deferred Stock Account, in shares of Common Stock (with any fractional share interest therein paid in cash to the extent of the then fair market value thereof).

           (ii) In addition, with respect to a Participant who has commenced receiving installment payments, such Participant may elect, pursuant to the written, telephonic or electronic method prescribed by the Committee (or its delegate), to have all remaining installment payments that are otherwise to be paid to the Participant at least twelve (12) months after the date of the election be accelerated and paid in a single lump sum payment as of a date specified by the Committee that is at least twelve (12) months after the date of the election.

ARTICLE VI General Provisions

Section 6.1 Unsecured Promise to Pay

        The Company shall make no provision for the funding of any amounts payable hereunder that (i) would cause the Plan to be a funded plan for purposes of section 404(a)(5) of the Code, or Title I of ERISA, or (ii) would cause the Plan to be other than an "unfunded and unsecured promise to pay money or other property in the future" under Treasury Regulations ss. 1.83-3(e); and, except to the extent specified in the Stock Trust following a "change of control" (as defined in the Stock Trust) of the Company, the Company shall have no obligation to make any arrangement for the accumulation of funds to pay any amounts under this Plan. Subject to the restrictions of the preceding sentence and in Section 4.3, the Company, in its sole discretion, may establish one or more grantor trusts described in Treasury Regulations ss. 1.677(a)-1(d) to accumulate funds and/or shares of Commo n Stock to pay amounts under this Plan, provided that the assets of such trust(s) shall be required to be used to satisfy the claims of the Company's general creditors in the event of the Company's bankruptcy or insolvency.

Section 6.2 Plan Unfunded

        In the event that the Company (or one of its subsidiaries) shall decide to establish an advance accrual reserve on its books against the future expense of payments hereunder, such reserve shall not under any circumstances be deemed to be an asset of this Plan but, at all times, shall remain a part of the general assets of the Company (or such subsidiary), subject to claims of the Company's (or such subsidiary's) creditors. A person entitled to any amount under this Plan shall be a general unsecured creditor of the Company (or the Participant's employer subsidiary) with respect to such amount. Furthermore, a person entitled to a payment or distribution with respect to any amounts credited to Participant Accounts shall have a claim upon the Company (or the Participant's employer subsidiary) only to the extent of the vested balance(s) credited to such Accounts.

Section 6.3 Designation of Beneficiary

        The Participant's beneficiary under this Plan with respect to amounts credited to the Participant's Accounts hereunder shall be the person designated to receive benefits on account of the Participant's death on a form provided by the Committee.

Section 6.4 Expenses

        All commissions, fees and expenses that may be incurred in operating the Plan and any related trust(s) established in accordance with the Plan (including the Stock Trust) will be paid by the Company.

Section 6.5 Voting Common Stock

        Each Participant who has a Deferred Stock Account shall be entitled to provide directions to the Committee to cause the Committee to similarly direct the Trustee of the Stock Trust to vote, on any matter presented for a vote to the shareholders of the Company, that number of shares of Common Stock held by the Stock Trust equivalent to the number of shares of Common Stock credited to the Participant's Deferred Stock Account. The Committee shall arrange for distribution to all such Participants in a timely manner all communications directed generally to the shareholders of the Company as to which their votes are solicited.

Section 6.6 Non-Assignability

        Participants, their legal representatives and their beneficiaries shall have no right to anticipate, alienate, sell, assign, transfer, pledge or encumber their interests in the Plan, nor shall such interests be subject to attachment, garnishment, levy or execution by or on behalf of creditors of the Participants or of their beneficiaries.

Section 6.7 Mandatory Deferral

        Notwithstanding any other provision of this Plan, the Compensation and Benefits Committee of the Company's Board of Directors may require an employee to defer: (i) the portion of any Base Salary, Bonus amount or (ii) the portion of any payment from any Account hereunder, in any case where the Company anticipates that such portion otherwise would be nondeductible pursuant to section 162(m) of the Code.

Section 6.8 Employment/Participation Rights

        (a) Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company.

    (b) Nothing in the Plan shall be construed to be evidence of any agreement or understanding, express or implied, that the Company will continue to employ a Participant in any particular position or at any particular rate of remuneration.

    (c) No employee shall have a right to be selected as a Participant, or, having been so selected, to be continued as a Participant.

        (d) Nothing in this Plan shall affect the right of a recipient to participate in and receive benefits under and in accordance with any pension, profit-sharing, deferred compensation or other benefit plan or program of the Company.

Section 6.9 Severability

        If any particular provision of the Plan shall be found to be illegal or unenforceable for any reason, the illegality or lack of enforceability of such provision shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if the illegal or unenforceable provision had not been included.

Section 6.10 No Individual Liability

        It is declared to be the express purpose and intention of the Plan that no liability whatsoever shall attach to or be incurred by the shareholders, officers, or directors of the Company (or any affiliate) or any representative appointed hereunder by the Company (or any affiliate), under or by reason of any of the terms or conditions of the Plan.

Section 6.11 Tax Withholding

        The Company shall have the right to deduct from all payments made from the Plan any federal, state, or local taxes required by law to be withheld with respect to such payments.

Section 6.12 Applicable Law

        This Plan shall be governed by and construed in accordance with the laws of the State of Ohio except to the extent governed by applicable federal law.

Section 6.13 Incompetency

        Any person receiving or claiming benefits under the Plan shall be conclusively presumed to be mentally competent and of age until the Committee receives written notice, in a form and manner acceptable to it, that such person is incompetent or a minor, and that a guardian, conservator, or other person legally vested with the care of his estate has been appointed. If the Committee finds that any person to whom a benefit is payable under the Plan is unable to properly care for his or her affairs, or is a minor, then any payment due (unless a prior claim therefor shall have been made by a duly appointed legal representative) may be paid to the spouse, a child, a parent, or a brother or sister, or to any person deemed by the Committee to have incurred expense for the care of such person otherwise entitled to payment. If a guardian or conservator of the estate of any person receiving or claimi ng benefits under the Plan shall be appointed by a court of competent jurisdiction, payments shall be made to such guardian or conservator provided that proper proof of appointment is furnished in a form and manner suitable to the Committee. Any payment made under the provisions of this Section shall be a complete discharge of liability therefor under the Plan.

Section 6.14 Notice of Address

        Any payment made to a Participant or a designated beneficiary at the last known post office address of the distributee on file with the Committee, shall constitute a complete acquittance and discharge of any obligations of the Company under this Plan, unless the Committee shall have received prior written notice of any change in the condition or status of the distributee. Neither the Committee, the Company nor any director, officer, or employee of the Company shall have any duty or obligation to search for or ascertain the whereabouts of a Participant or a designated beneficiary.

ARTICLE VII Administration

Section 7.1 Committee

        Prior to a Change in Control, the Plan shall be administered by the Committee. The Committee shall have the exclusive right to interpret the Plan (including questions of construction and interpretation) and the decisions, actions and records of the Committee shall be conclusive and binding upon the Company and all persons having or claiming to have any right or interest in or under the Plan. The Committee may delegate to such officers, employees or departments of the Company, or to service-providers or other persons, such authority, duties, and responsibilities of the Committee as it, in its sole discretion, considers necessary or appropriate for the proper and efficient operation of the Plan, including, without limitation, (i) interpretation of the Plan, (ii) approval and payment of claims, and (iii) establishment of procedures for administration of the Plan. Notwithstanding the foregoi ng, after a Change in Control, the trustee of any grantor trust established for the purpose of accumulating funds to satisfy the obligations incurred by the Company under this Plan shall administer the Plan and shall have the same privileges and rights as given to the Committee prior to a Change in Control.

Section 7.2 Claims Procedure

        Any person dissatisfied with the Committee's determination of a claim for benefits (or claim for eligibility for participation) hereunder must file a written request for reconsideration with the Committee. This request must include a written explanation setting forth the specific reasons for such reconsideration. The Committee shall review its determination promptly and render a written decision with respect to the claim, setting forth the specific reasons for such denial written in a manner calculated to be understood by the claimant. Such claimant shall be given a reasonable time within which to comment, in writing, to the Committee with respect to such explanation. The Committee shall review its determination promptly and render a written decision with respect to the claim. Such decision of the Committee shall be conclusive, binding, and final upon all claimants under this Plan.

ARTICLE VIII Amendment, Termination and Effective Date

Section 8.1 Amendment of the Plan

        Subject to Section 8.3, the Plan may be wholly or partially amended or otherwise modified at any time by written action of the Board of Directors.

Section 8.2 Termination of the Plan

        Subject to the provisions of Section 8.3, the Plan may be terminated at any time by written action of the Board of Directors.

Section 8.3 No Impairment of Benefits

        Notwithstanding the provisions of Sections 8.1 and 8.2, no amendment to or termination of the Plan shall reduce the amount credited to any Participant's Accounts hereunder.

Section 8.4 Effective Date

        The Plan was effective as of December 15, 2003.

EX-10

Exhibit 10.11

ASSET PURCHASE, ASSIGNMENT AND LICENSE AGREEMENT

1.

Effective Date:  “Effective Date” means the date upon which this Agreement is fully signed by both parties and Licensor has received the Asset Purchase Fee.

2.

Licensor:

Atari, Inc. (“Licensor”)

417 Fifth Avenue

New York, NY 10016

Attention: General Counsel

Phone: (212) 726-6913; Fax: (212) 726-4214

Address for Minimum Installment and Royalty payments due hereunder:

417 Fifth Avenue

New York, NY 10016

Attention: Francis McEnery, with a copy to the address above.

3.

Licensee:

Games, Inc. (“Licensee”)

425 Walnut Street

Suite 2300

Cincinnati, Ohio 45202

Attention: Roger Ach

Phone: (513) 721-3900; Fax: (513) 721-6035

4.

Property: “Property” means the original versions of the classic board or arcade games specified in Schedule A to this Agreement.  For the avoidance of doubt, the rights licensed under this Agreement shall exclude downloadable or retail PC versions, sequels, ports, and other derivative works of the original version of the classic board or arcade games set forth in Schedule A that are not available on Games.com as of the Effective Date, without the approval of Licensor and/or Hasbro, Inc.  Property owned or licensed by Hasbro, Inc. is listed on Schedule A and referred to herein as “Hasbro Property”.  Property owned by Licensor under the Atari brand is listed on Schedule A and referred to herein as “Atari Property”.  The parties agree to discuss in good faith the addition to the Property of three (3) games from Licensor’s Microprose catalogue, subject to third p arty rights. Such Property shall be listed on an addendum to Schedule A and referred to herein as “Microprose Property”

5.

Proprietary Subject Matter: "Proprietary Subject Matter" means all right, title, and interest in and to the title, symbols, trademarks, copyrights, designs, artwork, game play, icons and logos of the applicable Property, including to the extent reasonably available, html, gif, jpg files and .wav files relating to the existing online versions of the Property that are available on www.games.com as of the Effective Date, but excluding property owned by InfoSpace, Inc. or its successor in interest.

6.

Licensed Format: “Licensed Format” means the method for access to and operation of a Licensed Product only on a Licensee Website resident only on the World Wide Web as a client server application through a dial up, cable, DSL, or wireless connection from an Internet browser, including Netscape or Internet Explorer or other Internet browser which becomes available as a public standard, to the Licensee Website, excluding any electronic delivery that results in playability of the Licensed Product on a standalone basis or the user otherwise having a permanent copy of the Licensed Product.  

7.

Licensed Product:  “Licensed Product” means online games based on or incorporating the Proprietary Subject Matter in the Licensed Format whose look and feel and scope of rule set and game play closely resemble the online versions of the Property on the Games.com website existing immediately prior to the execution of this Agreement and whose primary play pattern provides users with free or subscription based activities involving skill (mental or physical), strategy, role-playing, competition, or children’s education, except as otherwise set forth herein. Licensee shall create not more than a single composite version of any Licensed Product to operate with any and all Internet-enabled devices used by the end user to access the Licensed Products.  It is expressly acknowledged and agreed that Licensed Products will not include (i) any game product that includes gambling which results in cash payment to the player as part of the play pattern; (ii) any physical product, including without limitation, any board or LCD game that may utilize an Internet, computer or network connection to enhance its functionality or content; (iii) any product playable on a stand-alone basis or otherwise operable independent of a Licensee Web Site; or (iv) any online game playable via a proprietary network (except such Internet access networks as Licensor may approve from time to time).  For purposes of clarity, Licensee may distribute the Licensed Products through Licensee Web Sites described on Schedule C to this Agreement in accordance with the terms and conditions of this Agreement.  Licensee may promote its service through other Web Sites as long as no reference to or use of the Proprietary Subject Matter is made on that Website and Licensee otherwise complies with the terms and conditions of this Agreement.  If Licensee would like to use any the Proprietary Subject Matter on any Web Site, then Lice nsee shall obtain the prior approval of Licensor, such approval not to be unreasonably withheld.  In no event shall Licensed Products include any product which can result in the user competing for, being entered to win, or winning, whether as a consequence of skill, chance, or some combination thereof, cash payments or credits or any other prize, award, or reward of cash, credit, or merchandise.  Notwithstanding the foregoing, Licensee may use certain of the Licensed Products in connection with bona fide skill-based tournaments with non-cash prizes, subject to the limitations and requirements as discussed between Licensor and Hasbro.  Guidelines for use of certain of the Licensed Products in connection with bona fide skill-based tournaments with non-cash prizes are set forth on Schedule E to this Agreement. All such tournaments shall be subject to the prior written approval of Licensor (including Hasbro), and Licensee recognizes that, without implied limitation on the rights of Licensor and Ha sbro to deny approval on other grounds, Licensor and Hasbro may deny approval to a so-called tournament that is essentially gaming or gambling.  During the Term, in the event that Hasbro, Inc. grants Licensor the right to sublicense Licensed Products based on or incorporating the Hasbro Property for skill based gaming or lottery play which results in cash payment to the user, Licensor agrees to engage in good faith negotiations with Licensee regarding such sublicense for a reasonable period not to exceed fifteen (15) days; provided however that Licensee acknowledges that Licensor makes no representation or warranty and assumes no obligation hereunder, express or implied, with respect to the availability of such rights from Hasbro, Inc.

8.

Licensee Web Site: “Licensee Web Site” means web sites owned or controlled by Licensee and operated in the United States, throughout the Term, namely www.games.com, play.games.com, and such other web sites now owned or operated or to be owned or operated by Licensee in the future, which feature online gameplay, provided that such other web sites shall be described on Schedule C to this Agreement, as may be amended from time to time.  

9.

Territory: “Territory" means all the countries of the world except (i) countries to which distribution of the Licensed Product is prohibited by law and (ii) countries that are excluded for a particular Licensed Product, as indicated on Schedule A to this Agreement, which list of excluded countries may be expanded from time to time by Licensor effective upon fifteen (15) days prior written notice to Licensee to the extent necessary to reflect any territorial restriction upon which the rights to the Proprietary Subject Matter are licensed by a third party to Licensor.

10.

Term: “Original Term” means the period commencing on the Effective Date and expiring on the fifth (5^th) anniversary of the Effective Date, unless sooner terminated as provided herein.  Licensor and Licensee may, at their option, renew this License Agreement for an additional five year renewal term upon the expiration of the Original Term (the “First Renewal Term”) and further renew this License Agreement for such additional renewal terms as coincide with the term of the license of the Proprietary Subject Matter by a third party to Licensor (“Additional Renewal Term”), subject to Licensor and Licensee entering into a separate written agreement.

11.

Exclusivity:  The license hereunder shall be (i) non-exclusive for the period from the Effective Date to the Transfer Date (as defined in Section 20.1); (ii) exclusive with respect to the Licensed Product for the three (3) year period from the Transfer Date, subject to the terms and conditions of this Agreement, including Licensor’s reservation of rights and the rights of InfoSpace, Inc. or its successor in interest under a pre-existing Distribution Agreement; and (iii) non-exclusive for the remaining period of the Original Term. Licensor shall notify Licensee in writing, not earlier than two and one half (2 ½) years from the Transfer Date, that Licensor is prepared to commence negotiations in good faith regarding the possibility of extending the exclusivity period. If Licensee declines, in writing, to commence such negotiations after its receipt of Licensor’s written notice, or if the parties shall not have agreed in principle to the material terms of such a renewal within thirty (30) days after Licensee’s receipt of Licensor’s written notice, then Licensor shall have the right to discuss the possibility of granting a license to an unaffiliated third party for the use of the Proprietary Subject Matter in connection with the development, promotion, and distribution of Licensed Products in the Territory after the expiration of the exclusive period of the Term.  Prior to granting any such exclusive license, Licensor shall notify Licensee in writing and Licensee shall have fifteen (15) business days following receipt of such notice in which to exercise a right of first refusal for such exclusive license by entering into a written amendment requiring Licensee to pay Licensor the higher of the amount offered by the unaffiliated third party or Five Million United States Dollars (U.S. $5,000,000) in cash as an additional Minimum Installment for an exclusive period of three (3) years, or t he equivalent on a prorated basis, which amount shall be payable as follows: fifty percent (50%) shall be due upon signing such written amendment and the balance shall be payable in equal installments on each anniversary of the exclusive period of the Term.   

Notwithstanding anything to the contrary contained herein, exclusivity to any Licensed Products associated with the Atari Property as set forth in Schedule A shall be exclusive only with respect to Licensed Products playable solely when connected to a Licensee Web Site resident only on the World Wide Web as a client server application through a dial up, cable, DSL, or wireless connection from a Netscape or Internet Explorer browser from a PC only, and excludes PDAs, consoles, set-top boxes, cellular phones, wireless and other platforms.

12.

Royalty Rate:  Royalties shall be subdivided into two types:  (i) royalties against which Licensee may recoup Minimum Installment payments (“Recoupment-Eligible Royalties”) and (ii) royalties that Licensee shall pay, throughout the Term, beginning with the first dollar of Net Sales generated hereunder and against which Licensee may not recoup any Minimum Installment payment (“Recoupment-Ineligible Royalties”) (Recoupment-Eligible Royalties and Recoupment-Ineligible Royalties, together “Royalties”).  On Net Sales of Licensed Products developed by Licensee, Licensee shall pay an 8% Recoupment-Eligible Royalty and, in addition, a 2% Recoupment-Ineligible Royalty.  On Net Sales of Licensor-provided Licensed Products, Licensee shall pay an 18% Recoupment-Eligible Royalty and, in addition, a 2% Recoupment-Ineligible Royalty.  Royalties shall not apply with respect to Net Sales of Licensed Products utilizing, based upon or otherwise involving the Property identified as non-royalty bearing in  Schedule A hereto.

13.

Net Sales:  "Net Sales" shall mean (i) all gross amounts paid by customers (whether in the form of sales, rental, subscription, or other revenues) by Licensee or any of its affiliates and other cash and non-cash consideration of any kind received by or on behalf of Licensee for distribution of or otherwise in connection with Licensed Products utilizing, based upon or otherwise involving the Property identified as royalty bearing in Schedule A attached hereto(collectively, “Gross Sales”), less only any credit card processing and, to the extent applicable, actual customer allowances and credits, not to exceed 20% of Gross Sales plus (ii) Net Advertising Revenues.  “Net Advertising Revenues” means all cash and non-cash consideration actually received by or on behalf or Licensee directly or through any of its affiliates in the referenced calendar quarter from adve rtising (including any banner, click-through or other advertising) that (i) are displayed on any web page or screen (whether on the Internet or otherwise) controlled by Licensee or one of its affiliates that displays the name of a Licensed Product or Licensed Products, or the Licensed Product or Licensed Products themselves, and promotes, makes accessible, or that enables or facilitates use of a Licensed Product, or (ii) are otherwise featured in connection with a Licensed Product, less only any advertising sales commissions paid to non-affiliates of Licensee and, to the extent applicable, actual advertiser credits (for any viewer shortfalls).  For purposes of determining Net Advertising Revenue, if Licensee or its affiliate receives an indivisible price for advertising in connection with Licensed Products in combination with third party games, then the indivisible price shall be allocated among the games involved (including the Licensed Products) proportionately on the basis of the number of Licensed P roducts displayed on the web page or screen carrying such advertisement in relation to third party games displayed on such web page or screen. No other deductions shall be taken from Net Sales including, without limitation, deductions for cash or other discounts or uncollectible accounts, including amounts uncollected by Licensee.  For purposes of determining Net Sales, if Licensee receives an indivisible price for a subscription service that includes Licensed Products in combination with games that are not licensed hereunder, then the indivisible price or the price for all games featured in the service shall be allocated among the games involved proportionately on the basis of the number of minutes used.  In addition, any cash and non-cash consideration actually received by Licensee directly or through any of its Affiliates from any transfer or other usage of information pertaining to specific end users of any Licensed Product, including Licensed Products utilizing, based upon or otherwise involvi ng the Property identified as non-royalty bearing in Schedule A hereto, shall be treated as Net Sales hereunder.

14.

Asset Purchase Fee:  One Million One Hundred Twenty Five Thousand United States Dollars (US $1,125,000) nonrefundable, non-recoupable fee paid as One Hundred Thousand United States Dollars (US $100,000) due in cash by Friday, January 2, 2004 (approximately 9% of the “Asset Purchase Fee”) and One Million Twenty Five Thousand United States Dollars (US $1,025,000) paid by the delivery of 10,250 shares of Series G Preferred Stock of Licensee (the “Initial Shares”) that will be redeemable for One Million Twenty Five Thousand United States Dollars (US $1,025,000) cash in whole or in part at the sole option of Atari, Inc. at any time 90 days after the filing date of the Games Inc. Registration Statement (balance or approximately 91% of the “Asset Purchase Fee”). Additionally, Licensee shall file a registration statement on the proper form registering the shares of Common Stock underlyi ng the Initial Shares (the “Registration Statement”).  The Registration Statement shall be filed by the Licensee with the SEC on or before but no later than January 10, 2004. Failure by Licensee to file the Registration Statement by January 10, 2004 will be deemed a material breach of this agreement.  The Licensee shall use its best efforts to have the Registration Statement declared effective within forty-five (45) days of filing same.  The terms of the Series G Preferred Stock are more specifically set forth in the form of Certificate of Designation of Series G Preferred Stock of Games, Inc. attached as Schedule D, (the "Certificate of Designation"), due upon execution of this Agreement.  The Certificate of Designation will allow for redemption of Initial Shares within 90 days of filing Registration Statement and immediate conversion upon effectiveness of Registration Statement.  The Initial Shares shall not be included in any 10,000 per year cap on redemption o r conversion.  The parties acknowledge and agree that the valuation of the Games.com Assets shall be One Million United States Dollars (US $1,000,000).  For the avoidance of doubt, Licensee shall be required to make full payment to Licensor of the Asset Purchase Fee and the portion of the Minimum Installment set forth in Section 15(a) as a condition of the assignment of the Games.com Assets.

15.

Minimum Installment:  During the Original Term, Five Million United States Dollars (U.S. $5,000,000) (the “Minimum Installment”), payable as follows:  

(a) Three Million United States Dollars (US $3,000,000) due in cash within ninety (90) days of the Effective Date, provided however that if Licensee fails to make such payment in a timely manner despite diligent good faith efforts, then Licensee shall be entitled to a five (5) day extension to remedy such monetary default; and

(b) Two Million United States Dollars (US $2,000,000) paid by the delivery of 20,000 shares of Series G Preferred Stock of Licensee (the “Shares”), the terms of which are more specifically set forth in the form of Certificate of Designation of Series G Preferred Stock of Games, Inc. attached as Schedule D, (the "Certificate of Designation"), due upon execution of this Agreement.

If Licensor and Licensee agree to renew these licenses, the Minimum Installment during any First Renewal Term or Additional Renewal Term will be mutually agreed upon by the parties; provided, however, that in no event shall the Minimum Installment be less in any Additional Renewal Term than the immediately preceding Term.

The Minimum Installment shall be prorated for each year of the Original Term for recoupment purposes. The prorated portion of the Minimum Installment in respect of any year of the Original Term, First Renewal Term or any Additional Renewal Term may only be recouped against Recoupment-Eligible Royalties in respect of Net Sales generated during such year and may not be cross-collateralized against Recoupment-Eligible Royalties payable in respect of different years.  In no event will any Minimum Installment amount be refunded to Licensee.

16.

Copyright and Trademark Notices:  Licensed Products shall bear the following copyright and trademark notices, as may be updated from time to time and as may be modified in the course of the approval process by Licensor:

©[year] [Atari, Inc.] All Rights Reserved.

Battleship, Boggle Jr., Candy Land, Chutes and Ladders, Clue, Clue logo, Game of Life, Hasbro, Hasbro logo, Hi-Ho Cherry O,  Milton Bradley, Milton Bradley logo, Mr. Potato Head, Parker Brothers, Parker Brothers logo, Pay Day, Pit, Risk, Rook, Scattergories, Silly Six Pins,  Sorry!, and Yahtzee are trademarks of Hasbro, Inc. © [year] Hasbro, Inc. All Rights Reserved.  Used with permission.

Monopoly:  MONOPOLY®, the distinctive design of the game board, the four corner squares, the MR. MONOPOLY™ name and character, as well as each of the distinctive elements of the board and the playing pieces are trademarks of Hasbro, Inc. for its property trading game and game equipment.  © [year] Hasbro, Inc. All Rights Reserved.  Used with permission.

SCRABBLE® is a registered trademark. All intellectual property rights in and to the game are owned in the U.S.A. by Hasbro Inc., in Canada by Hasbro Canada Inc. and throughout the rest of the world by J.W. Spear & Sons, PLC of Enfield, Middlesex, England, a subsidiary of Mattel Inc. Mattel and Spear are not affiliated with Hasbro or Hasbro Canada. © [year] Hasbro, Inc. All Rights Reserved.  Used with permission.

All other trademarks are the property of the respective trademark owners.

17.

Approvals: All Licensed Products and any related advertising and other materials based on or incorporating any Proprietary Subject Matter that differs in form, usage, or any other respect from the Licensed Product, related materials or other materials based on or incorporating any Proprietary Subject matter used on the Games.com website existing immediately prior to the execution of this Agreement must be approved by Licensor and its licensors in writing before distribution by Licensee.  Such approvals or disapprovals are within Licensor’s sole and absolute discretion, and any submission not approved in writing is deemed disapproved.  Any submission to Licensor under this Section shall be approved or disapproved by Licensor in accordance with Section 28.

18.

Insurance Amount:  One Million United States Dollars ($1,000,000) per occurrence per year and Two Million United States dollars ($2,000,000) aggregate.

19.

Additional Terms:

A.

It is understood by both parties that this Agreement shall supersede the terms and conditions of any and all prior written or oral agreements, commitments, or understandings of the parties relating to the subject matter hereof.

B.

The attached Exhibit "A" (Terms and Conditions) is incorporated herein by this reference.

EXHIBIT “A”

TERMS AND CONDITIONS

20.

ASSIGNMENT.

20.1 Upon written request from Licensee given at any time following full payment of the Asset Purchase Fee and the portion of the Minimum Installment set forth in Section 15 (a) (“Transfer Date”), Licensor or its affilates will assign to Licensee all rights in and to the following assets (“Games.com Assets”):  

(a)

the domain names “games.com” and “play.games.com”;

(b)

the hardware and servers noted in Schedule B to this Agreement;

(c)

the Games.com logo, provided however that Licensor shall have the right to complete and use any materials displaying the Games.com logo that are in process and to use its inventory of completed materials displaying the Games.com logo; and

(d)

the database of all registered users of the Games.com web site.

20.2 Licensor or its affiliates will continue to own the Games.com Assets until the Transfer Date.  Licensor will continue to operate and control the Games.com web site using the Games.com Assets until the earlier of February 29, 2004 or thirty (30) days following written notice from Licensee instructing Licensor to cease operation of the Games.com web site. Licensor will update portions of the Games.com web site to allow Scrabble, Yahtzee, Battleship, Boggle, Sorry, and Monopoly to be played without technology known as Go2Net technology by February 29, 2004. During the period from the conveyance of the Asset Purchase Fee until the Transfer Date, Licensor may request that Licensor install advertising on the site, at Games’ expense.  Any such advertising shall be subject to Licensor’s approval in its sole discretion which shall not be unreasonably withheld.  For the avoidance of doubt, such advertising shall be subject to the terms and conditions of this Agreement, including provisions regarding Net Advertising Revenues as defined in Section 13, usage guidelines as set forth in 25.8, and indemnification by Licensee as set firth in Section 26.2.  For the period commencing on the Effective Date and expiring on the date Licensor ceases operation of the Games.com web site, Licensee shall pay Licensor, an amount equal to $35,500 per month pro-rated on a daily basis  for operation of the Games.com web site.  Licensee shall pay Licensor such amounts within 10 days of Licensee’s receipt of any invoice from Licensor or its vendors.  For the avoidance of doubt, if Licensor makes any payments in advance to any such vendor for the applicable period, Licensee shall promptly reimburse Licensor.  

20.3

 At the time of the Transfer Date, Licensee shall assume, and become liable to pay, perform and discharge when due any and all obligations, liabilities and commitments arising out of or related to the Games.com Assets incurred at any time after the Transfer Date.

20.4 Nothing in this Agreement shall be construed as an attempt or agreement to assign any contract or other asset that is not capable of being validly assigned, conveyed and transferred without an approval or the consent of a third party unless such approval or consent shall have been obtained and remains in full force and effect at the Transfer Date.  If such an approval or consent in respect of a contract or other asset is not obtained prior to the Transfer Date or does not remain in full force and effect at the Transfer Date, Licensee and Licensor will use reasonable efforts to enter into a mutually agreeable, reasonable and lawful arrangement under which Licensee obtains the benefit and assumes the obligations in respect thereto from and after the Transfer Date in accordance with this Agreement.  Notwithstanding the foregoing, Licensor shall not be required to pay consideration to any third party to obtain any consent or approval.

20.5Licensee shall pay all sales, use, value-added, business, goods and services, transfer, recording, documentary, registration, conveyancing or similar taxes or expenses that may be imposed as a result of the sale and transfer of Games.com Assets (including, without limitation, any stamp duty or other tax chargeable in respect of any instrument transferring property), together with any and all penalties, interest and additions to tax with respect thereto, and Licensor and Licensee shall cooperate in timely making all filings, returns, reports and forms as may be required to comply with the provisions of such tax laws. Atari does not have any knowledge of any taxes due and owing or payable by Licensee as a result the execution of this Agreement, but Licensee shall be responsible for complying with applicable tax laws, rules and regulations.

20.6 After the Transfer Date and, for a period of three years following the Transfer Date, upon reasonable notice, Licensee and Licensor agree to furnish or cause to be furnished to each other and their representatives, employees, counsel and accountants access, during normal business hours, to such information (including records pertinent to Licensor’s Assets) and assistance relating to the Games.com Assets as are reasonably necessary for (A) financial reporting and accounting matters, (B) the defense of any third-party action, and (C) the preparation and filing of any tax returns, reports or forms or the defense of any tax claim or assessment; provided, however, that such access and assistance do not unreasonably disrupt the normal operations of Licensee or Licensor; provided, further, that the party requesting cooperation shall pay the reasonable out-of-pocket costs incurred by the party fu rnishing cooperation; provided, further, that with respect to any tax returns or other records relating to tax matters, Licensor shall have reasonable access until the applicable statute of limitations shall have expired.

21.

GRANTS OF RIGHTS.

21.1.(a) Licensor  grants to Licensee, and Licensee accepts, the right and license to utilize the Proprietary Subject Matter  solely on or in connection with the development, promotion, and distribution of Licensed Products in the Territory commencing upon the Effective Date and expiring ninety (90) days thereafter, subject to the terms and conditions hereunder.  If Licensee has not paid the Minimum Installment within such ninety (90) day period, then the license and related rights herein granted shall immediately revert to Licensor automatically, without any requirement for notice or other obligation by Licensor.

(b) Following receipt of the Minimum Installment in accordance with Section 15, Licensor  grants to Licensee, and Licensee accepts, the right and license to utilize the Proprietary Subject Matter  solely on or in connection with the development, promotion, and distribution of Licensed Products in the Territory during the remainder of the Term, subject to the terms and conditions hereunder.

21.2.

Licensee’s rights and obligations hereunder are personal to Licensee and shall not be sublicensed, assigned, mortgaged or otherwise transferred or encumbered by Licensee or by operation of law, unless agreed to herein or otherwise previously agreed in writing by Licensor in its sole and absolute discretion.

21.3. With Licensor’s prior written consent, which shall not be unreasonably withheld, Licensee may hire at its sole expense a third party developer (“Developer”) to develop the Licensed Products, in whole or in part.  Licensee represents and warrants that it shall familiarize such Developer with the terms and conditions of this Agreement as they apply to such Developer.  In addition, Licensee acknowledges and agrees that Licensee’s use of any such Developer shall in no way derogate from or relieve Licensee of any of its obligations under this Agreement.  Licensee further acknowledges and agrees that it shall be responsible and primarily liable for all activities and obligations of such Developer with respect to the Licensed Products.

21.4.

All Licensed Products distributed hereunder shall utilize Digital Rights Management.  All electronic copies of Licensed Products shall reside and all distribution hereunder shall take place and or be recorded on a Licensee Website.  Licensee represents and warrants that it has and during the Term shall have direct ownership or control of the Licensee Websites on which the Licensed Products are utilized.  Licensee shall place or shall cause to be placed the appropriate copyright and any other legal notices, as may be provided to Licensee by Licensor, on the Licensee Websites in a reasonably conspicuous location related to the distribution of the Licensed Product such as but not limited to an index page or sub-page where the Licensed Product may be selected directly by an end user.  “Digital Rights Management” means a system or method for providing encryption or other copy protection and related services in conjunction with the Licensed Products which prevents the unauthorized duplication or distribution or other piracy of the Licensed Products, subject to the approval of Licensor.

22.

LIMITATION OF RIGHTS; RESERVATION OF RIGHTS.

22.1.

Licensee shall not make use of any of the Proprietary Subject Matter (or any portion thereof) licensed hereunder except in strict compliance with the provisions of this Agreement or as may be otherwise expressly authorized in writing by Licensor.  No right, license or privilege has been granted to Licensee hereunder concerning the development of any collateral product or any after-market use or other such use or purpose which displays or depicts any of the Proprietary Subject Matter.  Licensor expressly reserves unto itself or its designees, the right to distribute, advertise, promote, display and otherwise exploit without limitation and throughout the Licensed Products for use in connection with premium sales, promotional tie-ins, giveaways, educational sales or in any other secondary use.  No promotional or novelty items or premium products displaying or depicting any of the Proprietary Subject Matter shall be developed, manufactured, marketed, sold, and/or distributed by Licensee or on its behalf without the prior written consent of Licensor.  

22.2.

It is agreed and understood that the license granted to Licensee herein is subject to the terms and conditions upon which the rights to the Proprietary Subject Matter are owned or controlled by Licensor or its licensors.  In this regard, Licensee acknowledges that some or all of the Proprietary Subject Matter may not be available for exploitation as a Licensed Product in all countries of the Territory during the entire Term hereunder as a result of third party rights.  Licensee agrees that it will comply with all disclosed terms of third party agreements set forth on Schedule A to this Agreement to the extent they relate to the exercise of rights conveyed to Licensee hereunder.  Licensor may modify Schedule A from time to time effective upon fifteen (15) days prior written notice to Licensee to the extent that such modification is necessary as a result of restrictions on rights to the Proprietary Subjec t Matter imposed by third parties, provided that Licensor agrees to use commercially reasonable efforts to avoid expanding such restrictions.  The foregoing shall not be deemed to give Licensor the rights to enter into any agreement with a third party during the Term with the specific intent of impairing the license granted to Licensee herein.  

22.3.

If Licensee desires to use any portion(s) of the Property that is not included within the definition of Proprietary Subject Matter for any purpose including without limitation for advertisements, promotional purposes, or on the Licensed Products, it is Licensee's obligation, at its sole cost and expense, including, without limitation, rights clearances, reuse fees, license fees and payments required by applicable guilds and unions, to enter into separate license agreements for such rights.  Any grant of such rights shall be in form and substance acceptable to Licensor.

22.4.

Licensor shall not be prevented from granting third parties the right to use the Proprietary Subject Matter in any manner whatsoever outside of those exclusive rights to Licensed Products granted herein.  Further, Licensor shall not be prevented from licensing the Proprietary Subject Matter to another licensee during the Term to create and develop products similar to the Licensed Products, so long as such products will not be sold until after the expiration or termination of any period of the Term during which an exclusive license, if any, has been granted for such products.

22.5.

Licensor does not warrant or represent that the Proprietary Subject Matter will continue to appear in or as a part of any publication, program, motion, or other work or that any such work will continue to be exploited.

22.6

All rights to use and/or otherwise exploit the Proprietary Subject Matter not expressly granted to Licensee herein are reserved for Licensor and its licensors including, without limitation, (i) all merchandising and promotional rights with respect to the Proprietary Subject Matter; (ii) all rights with respect to any product that (A) includes gambling which results in cash payment to the player as part of the play pattern, or (B) is embodied in a Licensed Format, but is produced by or on behalf of Licensor primarily for the purpose of promoting, marketing, or advertising the Property (rather than Licensed Products) or driving traffic to retail stores rather than generating revenue in respect of such product (e.g., free or limited game play on any website);  (iii) all rights with respect to any product embodied in any format, delivered by any method, or featuring any play pattern that has been exc luded from the definitions of Licensed Format and Licensed Products; and (iv) all rights that have reverted to Licensor, whether by expiration, early termination or pursuant to Section 31 of this Agreement. For the purpose of clarity, Licensor’s reserved rights include, without limitation, all rights to digitally distribute retail versions of the Property, add ons, expansions, episodic games, massive multiplayer games, and demos, via broadband digital download, streamed-playing, and other mechanisms.  Also for the purpose of clarity, Licensor’s reserved rights include, without limitation, the right to develop, produce, offer, transmit and publicly display and perform via the Internet electronic versions of the Property that are designed by or for iFone pursuant to Licensor’s pre-existing agreement with iFone.   

22.7.

This Agreement relates solely to the creation and use of Licensed Products embodying the Proprietary Subject Matter.  Licensee is not, by virtue of this Agreement, acquiring any merchandising rights whatsoever with respect to any computer game or video game or other endeavor which is based upon, derivative of, inspired by or   otherwise related to the Property, including, without limitation, remakes, sequels, publications or other endeavors which the characters, characterizations, rules of operation, user interface, signs and/or visual representations contained in the Property may appear.  As between Licensor and Licensee, all right, title and interest in and to the foregoing is retained by Licensor, except to the extent the foregoing includes source code or object code that is developed by Licensee in or through the use of its rights under this Agreement and owned by Licensee in accordance with Se ction 25.1, subject to Licensor’s and its licensors’ rights in and to the Proprietary Subject Matter.

23.

CONSIDERATION.  

23.1.

Licensee shall pay Licensor the Asset Purchase  Fee in the amount and at the time specified in Paragraph 14.   In addition, Licensee shall pay Licensor a non-refundable Minimum Installment against Royalties in the amount(s) and at the time(s) specified in Paragraph 15.  Notwithstanding anything to the contrary contained herein, Licensor may terminate this Agreement effective immediately upon notice to Licensee if Licensee fails to make any payment due hereunder.  Without limiting the generality of the foregoing, Licensee’s failure to make any payment due to Licensor upon redemption of the Shares shall be deemed a monetary default entitling Licensor to terminate this Agreement with five (5) business days notice to Licensee,

23.2.

Licensee shall pay Licensor Royalties of the types, in the manner, and at the Royalty Rate specified in Paragraph 12.

23.3.

Royalties hereunder shall accrue when the Licensed Products are distributed, billed and/or paid for, whichever occurs first.    

23.4.

If withholding taxes based on Licensor's direct net income are required, Licensee may deduct the required amount from Royalties prior to remitting same to Licensor, provided Licensee provides Licensor with a copy of such withholding tax payment prior to such deduction and provides Licensor with the appropriate tax credit forms within sixty (60) days of payment of such withholding tax and affords all necessary cooperation and support to Licensor in order to get reimbursed and/or credited.  In the event Licensee does not provide the appropriate tax credit form within sixty (60) days of payment of withholding taxes, Licensee shall be liable to and shall reimburse Licensor for the amounts deducted from Royalties for withholding taxes in the immediately following Royalty Report.

24.

ACCOUNTING; AUDITING.

24.1.

Licensee shall (i) render royalty reports ("Royalty Reports") to Licensor on a quarterly basis within thirty (30) days after the close of each calendar quarter during the Term hereof, whether or not any payment is shown to be due to Licensor thereunder, and (ii) remit payments due Licensor, if any, along with such Royalty Reports prepared on a Licensed Product-by-Licensed Product basis.  Licensee shall include in all Royalty Reports, sales made by Distributors during the subject calendar quarter as if such sales were made directly by Licensee (for example, sales made by a Distributor during the first quarter of the calendar year shall appear in Licensee’s Royalty Report covering the first quarter of the calendar year). Royalties shall be paid in U.S. Dollars and acceptance thereof by Licensor shall not preclude Licensor from questioning the correctness of same at any time.  All Royaltie s shall be paid without set-off of any amount whatsoever whether based upon any claimed debt or liability of Licensor to Licensee.   Licensee shall not have the right to withhold any portion of Royalties as a reserve for returns.  Unless otherwise instructed by Licensor, all Royalty and other payments and all Royalty Reports due hereunder shall be sent to the address set forth in Paragraph 2.

24.2.

Licensee shall keep and maintain accurate books of account and records covering all transactions relating to this Agreement.  Licensor shall be entitled to (i) audit such books and records once during each calendar year, upon at least fifteen (15) days prior written notice to Licensee, and (ii) make copies and summaries of such books and records for use in auditing only.  All such books of account and records shall be retained by Licensee for a minimum of three (3) years after expiration or termination of this Agreement.  If Licensor's duly authorized representative discovers a deficiency in the Royalties paid to Licensor for any period under audit, (an "Audit Deficiency"), Licensee shall promptly pay such Audit Deficiency and to Licensor and, if such Audit Deficiency is three percent (3%) or more of the Royalties paid to Licensor for such audit period, Licensee shall also reimburse Lic ensor for all costs and expenses incurred by Licensor in connection with such audit and the collection of the Audit Deficiency.

24.3.

Without prejudice to any other rights of Licensor hereunder, time is of the essence regarding all payments due hereunder and Licensee shall pay interest on any Audit Deficiency, as well as on all delinquent Royalty payments hereunder, at LIBOR (The London InterBank Overnight Rate)  published by the Wall Street Journal, compounded annually at the rate from time to time in effect and calculated from the date on which such payment was due until such payment is received by Licensor.

24.4.

No costs incurred in developing, advertising, selling, distributing, or otherwise exploiting the Licensed Products, or any indirect expenses, or any taxes, fees, duties or assessments shall be deducted from the Net Sales or the Royalties payable to Licensor nor shall any deduction be made for any other allowances.

24.5.

Royalties may be computed in the currency of the country where earned and shall be credited to Licensor's account in U.S. Dollars at the exchange rate received by Licensee at the time of conversion.  Licensee shall be solely responsible for all costs of any currency conversion to U.S. Dollars, and such costs shall not reduce the amounts due to Licensor hereunder.

24.6.

In the event that Licensee shall be prohibited or restricted from making payment of any moneys at the time when same are due and payable to Licensor hereunder by reason of the laws or currency regulations within the Territory, Licensee shall promptly so advise Licensor in writing.  Licensee shall, upon Licensor's request, deposit any such blocked funds to the credit of Licensor in a bank or banks or other depository in the Territory designated in writing by Licensor, or pay them promptly to such persons or entities as Licensor may designate in writing.

25.

COPYRIGHT; TRADEMARKS; USAGE GUIDELINES.

25.1.

Nothing contained in this Agreement shall be construed as an assignment or grant to Licensee of any right, title, or interest in or to the Proprietary Subject Matter, except as expressly stated herein.  All uses of the Proprietary Subject Matter shall inure to the benefit of Licensor and its licensors.  All ownership, copyrights, trademarks and other rights in and to the Proprietary Subject Matter and related materials, including, without limitation, the related copy, source code, object code, literary text, advertising materials, promotional materials and instructional materials, of any sort utilizing the Proprietary Subject Matter and  properties derived or adapted therefrom shall remain the property of the Licensor or its licensors and title thereof shall be in the name of Licensor or its designees; provided, however, that source code and object code developed by Licensee shall be the property of the Licensee and title thereof shall be in the name of Licensee or its designees, subject to Licensor’s and its licensors’ rights in and to the Proprietary Subject Matter and  properties derived or adapted therefrom.  It is an essential condition of this Agreement that each and every copy of the Licensed Products and related materials shall bear the copyright and trademark notices and any other legal notices, which Licensor may from time to time prescribe.  Licensor recognizes that Licensee will immediately begin to recode and relaunch each of the existing games now played on Games.com, to update such code.

25.2.

Licensee acknowledges and agrees that Licensee shall not include any other notices or any credits from or relating to the Property on the Licensed Products and related materials without Licensor's prior written consent and, in the event Licensor notifies Licensee during the term of this Agreement of any modification(s) and/or additions to the notices set forth in Paragraph 16, and/or of the requirement for Property credits, then Licensee shall promptly implement such additions and/or modifications at Licensee's expense.  Licensee agrees that (i) in the event the modifications and/or additions are required pursuant to a governmental regulation, Licensee shall promptly implement such changes, at Licensee's cost and expense, within the time frame required by such regulation; and (ii) if so required by any governmental entity, Licensee shall include, at Licensee's cost and expense, the required consumer advisory rati ng code(s) on any and all marketing and advertising materials used in connection with the Licensed Product.

25.3.

Licensee recognizes the value of the goodwill associated with the Proprietary Subject Matter.  Licensee agrees, during the Term and thereafter, never to contest the rights of Licensor and its licensors in such Proprietary Subject Matter or the validity of the license herein granted to it.  Licensee shall not at any time apply for any registration of any copyright, trademark or other designation which would affect any of the ownership or rights of Licensor or its licensors in and to the Proprietary Subject Matter nor file any document with any governmental authority to take any action which would affect any of such ownership or rights in and to the Proprietary Subject Matter, or assist anyone else in doing so.  Licensee further agrees that it shall not at any time use and/or authorize the use of any configuration, trademark, trade name or other designation confusingly similar to the Proprietary Subject M atter.

25.4.

Licensee shall assist Licensor, at Licensor's request and expense, in the procurement and maintenance of Licensor's and its licensors’ rights in the Proprietary Subject Matter (including all intellectual property rights, whether recognized currently or in the future).  In connection therewith, Licensee shall, without limitation, execute and deliver to Licensor in such form as it may reasonably request, all instruments necessary to (i) effectuate copyright and trademark protection, (ii) record Licensee as a registered user of any trademarks pursuant to this Agreement, or (iii) cancel any such registration.  Such registration shall be handled by attorneys selected or approved by Licensor.  Licensor makes no warranty or representation that trademark or copyright protection shall be secured in the Proprietary Subject Matter in all countries in the Territory.  

25.5.

Licensee shall cooperate with Licensor and its licensors to ensure that third parties may not unlawfully infringe on the Proprietary Subject Matter or engage in any acts of unfair competition involving the Proprietary Subject Matter.  Licensee shall promptly notify the Licensor of any such infringements or acts of unfair competition by third parties that comes to its attention.  Licensor and its licensors shall have the exclusive right, exercisable at their discretion, to institute in their own names and/or Licensee's name and to control, all actions against third parties relating to Licensor's and its licensor’s copyrights, trademarks, and other proprietary rights in and to the Proprietary Subject Matter, at Licensor's expense.  With respect to any such actions, Licensor and its licensors shall employ counsel of their own choice to direct the handling of the litigation and any settlement thereof.  Licensor and its licensors shall be entitled to receive and retain all amounts awarded, if any, as damages, profits or otherwise in connection with such suits.  Licensee shall not, without Licensor’s prior written consent, institute any suit or take any action on account of such infringements, acts of unfair competition or unauthorized uses.  If, with Licensor's consent, Licensee institutes, at its sole cost and expense, such a suit or action, Licensee shall be entitled to recover all reasonable costs and expenses incurred in such suit or action from any financial recovery awarded or obtained and the remainder shall be shared equally between Licensor and Licensee.  Licensor shall incur no liability to Licensee by reason of Licensor’s failure or refusal to prosecute, or by Licensor’s refusal to permit Licensee to prosecute, any alleged infringement by third parties, nor by reason of any settlement to which Licensor may agree.

25.6.

Licensee may produce Licensed Products using foreign translations.  Licensor shall have the absolute right to approve any such translation prior to its use, in accordance with Section 28. Licensor shall own all rights, title, and interest in and to any and all of such translations consistent with Section 24 and shall have the right to register and protect all involved trademarks and service marks and copyrights.  Information pertaining to specific end users will be protected by Licensee according to its privacy statement and guidelines for the protection of user privacy as amended from time to time by Licensee and in compliance with all applicable foreign, federal, state, and local laws and regulations, including without limitation the federal Video Privacy Protection Act and the Children’s Online Privacy Protection Act. Licensee shall also obtain certification from one of the commercia l privacy certification organizations, such as TRUSTe, ESRB, BBB Online or other reputable organization approved by Licensor, and shall maintain such certification during the Term.   Licensee shall provide Licensor with access to and rights to use information pertaining to specific end users to the extent allowed under Licensee’s privacy policy or as required by law, including but not limited to disclosure to law enforcement or other government officials in connection with an investigation of fraud, intellectual property infringements, or other activity that is illegal or may expose users or the parties to legal liability.

25.7.

Licensee covenants and agrees that it will not use, or authorize the use of, any Proprietary Subject Matter in connection with any products, services or activities that are illegal; defamatory, demean, ridicule or attack individuals on the basis of age, color, national origin, race, religion, sex, sexual orientation or disability; are pornographic, lewd or obscene; include graphic violence; are physically harmful to children; illegal drug use; extreme political or social activism; or gambling or, unless approved in advance by Licensor (including Hasbro), tobacco or alcoholic beverages.  For the avoidance of doubt, this provision shall be deemed to prohibit any web site page that contains any Proprietary Subject Matter from having any link to or advertising for any website with content prohibited by the foregoing sentence; provided, however, that this sentence shall not be deemed to necessarily pr ohibit Licensee from having links to Licensee’s  own websites or links to general websites (for example, yahoo.com, msnbc.com or amazon.com) that may have advertisements with content prohibited by the preceding sentence, provided such prohibited content is not the primary purpose of the linked-to site.  The immediately preceding sentence is not intended to limit or restrict the right of Licensor (and Hasbro) to review and approve the content of website pages that contain any Proprietary Subject Matter, including, without limitation, any links on such pages.

25.8.

Licensee shall require consumers to indicate, at the time of their registration on the site,  their acceptance of an end user license agreement, the form of which shall be subject to the prior written approval of Licensor, prior to and as a condition of gaining access to the Licensed Products

26.

INDEMNIFICATION; WARRANTY DISCLAIMER.

26.1.

Licensor shall indemnify, hold harmless and defend Licensee, and its parents, subsidiaries, affiliates, officers, directors and employees, against any claims, liabilities, demands, causes of action, judgments, settlements and expenses (including, but not limited to, reasonable attorneys' fees and court costs) arising out of or in connection with Proprietary Subject Matter which infringes upon or violates any copyright, right of privacy, or literary or dramatic right of any third party; provided, however, that Licensee shall notify Licensor in writing within ten (10) days after Licensee receives notification of any claim or suit relating to the Proprietary Subject Matter.  Licensor shall undertake and control the defense and settlement of any such claim or suit and Licensee shall cooperate fully with Licensor in connection herewith.  In no event shall Licensor be liable for any consequential damages or loss o f profits which Licensee may suffer arising out of same.  The foregoing indemnity shall not be construed to cover any claim with respect to which Licensee has committed to indemnify Licensor under Section 26.2 below.  Upon notice of an alleged infringement, or upon Licensor’s conclusion that such a claim is likely, Licensor shall have the right, at its option, to obtain the right for Licensee to continue to exercise the rights granted under this Agreement, substitute other property, or modify the Proprietary Subject Matter so that it is no longer infringing. The provisions of this 26.1 are in lieu of all other obligations, including without limitation the implied warranty of noninfringement, and state the sole, exclusive and entire liability of Licensor, and the sole, exclusive and entire remedy of Licensee, with respect to any claim of infringement by any Proprietary Subject Matter.

26.2.

During and after the Term hereof, Licensee shall indemnify and hold harmless, Licensor and Hasbro, Inc., and their respective parents, subsidiaries, affiliates, officers, directors, representatives, employees and agents, and all persons whose names and/or likenesses are licensed hereunder (each, an "Indemnitee" and collectively "Indemnitees") from and against any and all claims, liabilities, demands, causes of action, judgments, settlements and expenses (including, but not limited to, reasonable attorneys' fees and court costs) ("Claim") arising out of or in connection with (i) the design, distribution, advertising, promotion, sale, or exploitation of the Licensed Products, (ii) use of the Games.com Assets; (iii) any breach of any representation, warranty, or covenant made by Licensee hereunder, or (iv) the failure of Licensee to perform any of its covenants or obliga tions contained in this Agreement.  Without limiting the generality of the foregoing, Licensee's indemnity shall specifically apply to claims relating to or based upon defects in the Licensed Products, whether hidden or obvious, and despite Licensor's approval of the Licensed Products, it being agreed that any governmental order of recall or injunction against distribution and/or sale shall, as between Licensee and Licensor, be deemed conclusive proof of such defect for purposes of invoking Licensee's indemnity hereunder.  The foregoing indemnity shall not be construed to cover any claim with respect to which Licensor has committed to indemnify Licensee under Section 26.1 above.  If any Claim is initiated against any Indemnitee with respect to which such Indemnitee may make a demand for indemnity against Licensee pursuant to this Section 26.2, then the Indemnitee shall give prompt written notice of such Claim to the Licensee; provided, however, that the failure to so notify the Licensee shall not relieve the Licensee from any liability under this 26.2 unless, and only to the extent that, such failure results in prejudice to or forfeiture of, substantive rights or defenses of the Licensee.  Licensee, at Licensee’s own expense, shall have the option to assume the defense of such Claim.  If Licensee assumes the defense of such Claim,  (i) Licensee shall keep the Indemnitee informed of all material developments and events relating to such Claim, (ii) the Indemnitee shall have the right to participate, at its own expense, in the defense of such Claim (but such participation shall not be deemed to give the Indemnitee the right to control such defense), (iii) the Indemnitee shall cooperate as reasonably requested by Licensee in the defense of such Claim, and (iv) Licensee shall not settle such Claim without the prior written consent of the Indemnitee, which consent shall not be unreasonably withheld.  If Licensee fails to assume the defense of such Claim, or fails to diligently defend such Claim, Indemnitee may assume the defense of such Claim and Licensee shall reimburse Indemnitee for all reasonable expenses (including reasonable attorneys’ fees which may include, without limitation, an allocation for in-house counsel) as such expenses are incurred, relating to the defense of such Claim.

26.3.

Licensee acknowledges and agrees that, in accordance with the provisions of this Agreement, Licensee shall be solely responsible for the development marketing, sale and distribution of the Licensed Products, and for providing warranty and repair/replacement services for any defective units of the Licensed Products.  Licensor assumes no liabilities hereunder to Licensee or any third parties with respect to the quality and/or performance of any of the Licensed Products.  Licensor shall have no obligation hereunder any claims, damages, liabilities, costs, or expenses based upon the combination, operation, or use of any Property with any programs, data, or other materials not supplied by Licensor.  

26.4.

The liability of Licensor for any loss or damages directly or indirectly suffered by Licensee as a result of the Property shall in no event exceed the Royalties paid hereunder.

26.5.

Neither party shall be liable to the other for any consequential, incidental or special damages or lost profits resulting from a breach or default, and any right to recover such damages or lost profits is hereby expressly waived by both Licensee and Licensor.

27.

INSURANCE.  Licensee shall at all times while this Agreement is in effect and for , obtain and maintain at its own expense, from a qualified insurance carrier with a Best’s rating of “A” or better, first and third party insurance, including, without limitation, commercial general, advertising injury, products and contractual liability coverage covering any and all claims, demands and causes of action, including  for personal injury or property damage arising out of or purporting to arise out of the use or misuse of  any Licensed Product or any failure of any Licensed Product to perform, any Advertising Material and/or any physical or intangible material used in connection therewith, or any media or format, including the World Wide Web and the Internet, which includes as additional insureds Licensor and its parent, subsidiaries, affiliates, officers, directors, employees, representati ves and agents. The amount of coverage shall not be less than the amount specified in Paragraph 18 combined single limit (with no deductible amount) for each single occurrence.  The policy shall provide for thirty (30) days written notice to Licensor from the insurer by registered or certified mail, return receipt requested, in the event of any modification, cancellation or termination.  Upon execution of this Agreement, Licensee shall furnish Licensor with a certificate of insurance issued by the carrier evidencing same.  In no event shall Licensee advertise, distribute, or otherwise commercialize any Licensed Products prior to Licensor's receipt of such certificate of insurance.

28.

ARTWORK; APPROVALS; SAMPLES; QUALITY CONTROL; MARKETING PLAN.

28.1.

Licensor shall supply Licensee with available photographs, and materials as applicable, embodying the Proprietary Subject Matter ("Artwork") that are typically provided to licensees for Licensee's use in developing Licensed Products.  If Licensee has supplemental requests for existing Artwork which results in additional expense to Licensor, Licensee shall pay Licensor for its reasonable out-of-pocket cost in duplicating and providing such Artwork to Licensee.

28.2.

Licensee shall have the right to create artwork in original form and/or artwork derived from Artwork, which includes the Proprietary Subject Matter for use on the Licensed Products ("Licensee Original and Derivative Artwork").  All intellectual property rights (including but not limited to copyright) in Licensee Original and Derivative Artwork shall be owned by Licensor; provided, however, that Licensee shall have a non-exclusive license during the Term to copy and use such Licensee Original and Derivative Artwork for the purposes specified in this Agreement.  If Licensee engages any third parties who are not employees of Licensee to make any contribution to the invention or creation of any Licensee Original and Derivative Artwork so that such third parties might be deemed "authors" or "inventors" of such artwork or designs (as such terms are used in pres ent or future United States copyright and or patent statutes or judicial decisions), then Licensee shall obtain from all such parties, and furnish to Licensor, a full assignment of rights in and to such artwork and/or designs (free and clear of any and all claims or rights of any nature) vesting same in Licensor.

28.3.

Licensee acknowledges and agrees that the Licensed Products, including, without limitation, the title and contents of each of the Licensed Products, as well as Licensee's use of the Proprietary Subject Matter, shall be subject to Licensor's prior written approval  in its sole and absolute discretion  as to acceptable standards of concept, quality, style, appearance, and labeling.  To this end, before Licensee commences the development/programming of each of the Licensed Products Licensee shall submit to Licensor, for its written approval, the following materials:  a written proposal setting forth a description of the product, including the proposed title, storyboards, and graphic art including game style and design, any licensed rights, user interface characteristics, description of player features and options with instructions as to how the proposed game is to be played, developme nt team profile, special hardware/software requirements and any additional information useful in evaluating the proposed product.

28.4.

Licensee shall submit to Licensor, for its written approval, the following pre-production materials for each submitted Licensed Product:  (i) a link to the complete working sample development website and  (ii)  all advertising materials concerning the Licensed Product and depictions of the Proprietary Subject Matter (collectively, the "Advertising Materials").

28.5.

All submissions and samples shall be sent to: Atari Interactive, Inc., 50 Dunham Road, Beverly, MA 01915, Attention:  Licensing.  Licensor will notify Licensee of its approval or disapproval of a submission as soon as practicable, such period not to exceed fifteen (15) business days from the date of submission to Licensor.  Failure by Licensor to give written approval within fifteen (15) business days from the date of a submission to Licensor will be deemed disapproval; provided, however, if Licensee thereafter notifies Licensor in writing that it has not received approval, and Licensor does not respond within seven (7) business days of receipt of such notice, the submission will be deemed approved as if in writing hereunder.  If Licensor’ approval is sought with respect to advertising material intended for display on the Internet, Licensor agrees to attempt, to the extent pra cticable, to convey to Licensee its approval or disapproval of such advertising material as soon as possible, but in no event later than ten (10) business days after the submission of such material.  Licensor shall specify the reasons for its disapproval of the pre-production software, Advertising Materials and related materials for any of the Licensed Products and state the revisions and/or improvements to be undertaken by Licensee in order to receive approval.  Licensee acknowledges that third-party approvals, such as those of Licensor’s licensors, may be required with respect to such submission, and that such approvals may take a longer  period.  After making such revisions and/or improvements as are deemed necessary, Licensee shall submit such website linkage, Advertising Materials and/or related materials for any affected Licensed Product to Licensor for its re-evaluation and potential approval.  Any submission which is not approved in writing by Licensor shall be deemed di sapproved.   

28.6.

The procedures described in Section 28.4 above shall be repeated until the pre-production samples of each of the Licensed Products, Advertising Materials and related materials are expressly approved in writing by Licensor.  No production units of any of the Licensed Products, Advertising Materials and related materials shall be developed, marketed, sold or distributed by or for Licensee unless written approval for such items shall first have been obtained from Licensor.

28.7.

After the pre-production samples of the final software, Advertising Materials and related materials for each of the Licensed Products have been approved by Licensor, Licensee shall not change them in any material respect without the prior written consent of Licensor.  If any of the Licensed Products and/or related materials distributed by Licensee fail to demonstrate conformance with the samples previously approved by Licensor, then Licensor may elect, at its sole discretion, to: (i) terminate this Agreement in accordance with the provisions of Section 31.1, below; or (ii) require that Licensee bring any such non-complying Licensed Products and/or Advertising Materials and/or related materials into compliance within thirty (30) days after receipt of written notice from Licensor.  The failure of Licensee to demonstrate that any affected units of such Licensed Products and/or Advertisin g Materials and/or any related materials have been brought into compliance within such prescribed period shall entitle Licensor to terminate this Agreement pursuant to the provisions of Section 31.1 below.

28.8.

Licensee agrees that, if so required by any governmental entity, or if required in accordance with ESRB guidelines, it shall submit each Licensed Product to such third party as is designated by the governmental entity (or, if applicable, to the ESRB) for the purpose of obtaining consumer advisory rating code(s) for the Licensed Products.  Any and all costs and expenses incurred in connection with the procurement of such consumer advisory rating code(s) shall be borne solely by Licensee.

28.9.

Licensee shall furnish to Licensor, without charge, two (2) subscriptions for access to each Licensed Product from the launch of such Licensed Product on each applicable Licensee Web Site.  Licensee shall permit Licensor to inspect the facilities for development of the Licensed Products on Licensee's premises at all reasonable times, to assure that the provisions of this Agreement are being fully complied with.

28.10.

Licensee acknowledges that if the Licensed Products were proven to be of inferior quality in design, material or workmanship, the substantial value and goodwill which Licensor has built up and now possess in the Proprietary Subject Matter would be impaired. Accordingly, it is an essential condition of this Agreement, and Licensee hereby covenants and agrees, that the Licensed Products shall be of high standard and of such quality, style and appearance and shall (in the reasonable judgment of Licensor) be adequate and suited to their exploitation to the best advantage and to the protection and enhancement of the Proprietary Subject Matter and the goodwill pertaining thereto; that such Licensed Products will be sold, distributed, and advertised in accordance with all applicable (whether national, federal, state, provincial or local) laws; and that the policy of sale, distribution and/or exploitation by Li censee shall be of a commercially reasonable standard and to the best advantage of the Proprietary Subject Matter and that the same shall in no manner reflect adversely upon the good name of Licensor or the Proprietary Subject Matter.

28.11.

From time to time during the term, Licensor and Licensee will attempt to develop procedures designed to streamline the approval process for the Licensed Product and Advertising Materials made available by Licensee online, but yet preserve Licensor’ and its licensors’ control over the usage of the Proprietary Subject Matter (e.g., developing style guides setting forth permitted forms of usage of trademarks included in Proprietary Subject Matter on Licensee Web Site pages that are frequently updated and revised by Licensee).

28.12.

Prior to the launch of the first Licensed Product hereunder and  each anniversary thereafter, Licensee will deliver to Licensor a marketing plan setting forth, with respect to each Licensed Product that Licensee intends to exploit (i) production status, (ii) projected launch dates, (iii) advertising strategy (iv) revenue projections; and (v) such additional information as may be reasonably requested by Licensor from time to time.  Licensee shall provide Licensor with rights of consultation (but not approval) regarding the contents of each marketing plan.  Each of Licensor and Licensee will designate a group of its employees who will serve as the representatives of Licensor and Licensee, respectively, at periodic meetings that will be held to review marketing plans and to discuss issues of interest to Licensor or Licensee concerning their rights and obligations under this Agreement.  Licensee shall make modifications to the marketing plan each quarter for resubmission to Licensor in conjunction with such periodic meetings.  

29.

DISTRIBUTION.

29.1.

The Proprietary Subject Matter shall not be used in conjunction with any other licensed name, character, symbol, design, likeness or literary or artistic material, except that actual representations of a Licensed Product may be shown in advertising showing other articles distributed by Licensee, provided such use is not made in a manner that may be likely to cause doubt or confusion in the minds of the public as to the ownership of the Proprietary Subject Matter.

29.2.

Licensee shall use its reasonable best efforts, consistent with good and ethical business practices, in such a manner as to obtain the largest gross revenues from the exploitation of the Licensed Products as is reasonably possible.

30.

REPRESENTATIONS AND WARRANTIES; LEGAL OPINION.

30.1.

Licensor represents and warrants to Licensee that to Licensor’s knowledge Licensor has the full right, authority and power to enter into this Agreement and to perform all its obligations hereunder.  Licensor makes no representation or warranty as to the amount of receipts Licensee will derive or as to the quality or success of the Property.

30.2.

Licensee represents and warrants to Licensor that (i) it has full power and authority to enter into this Agreement and perform its obligations herein, (ii) except with respect to the Proprietary Subject Matter embodied therein, the Licensed Products do not infringe any copyrights, trademarks or other proprietary rights of any third party, (iii) none of the Licensed Products contains or will contain any virus, worm, time bomb, trojan horse, or other instrumentality, contamination or device that will cause any component of the Licensed Products to be erased, corrupted or become inoperable or incapable of processing, or affect operations of any other systems, (iv) it will not remove any copyright, trademark, proprietary rights, disclaimer, or warning notice included on or embedded in any part of any Property; (v) it will comply with all applicable foreign, federal, state, and local laws and Entertainm ent Software Rating Board guidelines in operating the Licensee Web Sites and distributing the Licensed Products or otherwise utilizing the Proprietary Subject Matter; (vi) Licensee has cash available or existing borrowing facilities which together are sufficient to enable it to consummate the transactions contemplated by this Agreement; (vii) there is no broker or other person who would have any valid claim against Licensor for a fee, commission or brokerage in connection with this Agreement or the transactions contemplated hereby as a result of any agreement, understanding or action by Licensee and Licensee shall be solely responsible for all fees and expenses of any broker, finder or other person engaged by or on behalf of them or otherwise claiming through them in connection with the transactions contemplated by this Agreement; (viii) in evaluating and entering into this Agreement, Licensee has not relied and is not relying on any representations, warranties or other statements, whether oral or written, e xcept those representations and warranties specifically set forth in this Agreement; (ix) the Shares to be issued to the Licensor hereunder have been duly authorized and validly issued and, when issued, will be fully paid and non-assessable; and (x) the Shares to be issued to the Licensor will not be issued in violation of the statutory or contractual preemptive or other similar rights of any securityholder of the Licensee.

30.3

Licensee shall deliver to Licensor a legal opinion issued by an outside counsel to Licensee; in form and substance satisfactory to Licensor in its sole and absolute discretion, opining on the legality of the business to be conducted by Licensee after the Effective Date.

30.4

Licensee shall duly file with the Secretary of State of Delaware the Certificate of Designation, and the Certificate of Designation shall be effective, prior to the Effective Date and the Shares shall be duly issued to Licensor on the dates set forth in Section 15.

31.

TERMINATION.

31.1.

In addition to any and all other remedies available to it hereunder, Licensor may terminate this Agreement effective immediately upon written notice to Licensee if Licensee fails to pay the Minimum Installment against Royalties in the amount(s) and at the time(s) specified in Paragraph 15. Without limiting the generality of the foregoing, Licensee’s failure to make any payment due to Licensor upon redemption of the Shares, for any or no reason, on each anniversary date set forth in Section 5(b) of the Certificate of Designation  shall be deemed a monetary default entitling Licensor to terminate this Agreement effective immediately upon a 5 day written notice to Licensee.

31.2.

In addition to any and all other remedies available to it hereunder, on twenty (20) business days prior written notice to Licensee, Licensor may terminate this Agreement (in which case such termination shall be effective immediately upon expiration of the twenty (20) day notice period), upon the occurrence of any of the following circumstances, provided that during such twenty (20) day period, Licensee fails to cure the breach to Licensor's reasonable satisfaction:

31.2.1.

Licensee makes, sells, offers for sale, uses or distributes any Licensed Product without having the prior written approval of Licensor as specified in Section 28, or continues to make, sell, offer for sale, use or distribute any Licensed Product after receipt of notice from Licensor disapproving of same.

31.2.2.

Licensee materially breaches any provision of this Agreement.

31.2.3.

Licensee becomes subject to any voluntary or involuntary order of any government agency involving the recall of any of the Licensed Products because of safety, health or other hazards or risks to the public.

31.2.4.

Licensee fails to immediately discontinue the advertising, distribution or sale of Licensed Products which do not contain the appropriate legal legend.

31.2.5.

Licensee fails to make timely payment of Royalties when due or fails to make timely submission of Royalty Reports when due.

31.3.

In addition to any and all other remedies available to it hereunder, on thirty (30) days prior written notice to Licensee, Licensor may terminate this Agreement (in which case such termination shall be effective immediately upon expiration of the thirty (30) day notice period), upon the occurrence of any of the following circumstances, provided that during such thirty (30) day period, Licensee fails to cure the breach to Licensor's satisfaction:

31.3.1.

Licensee fails to obtain or maintain insurance as required under Section 27 hereof.

31.3.2.

Licensee violates any of its other obligations or materially breaches any of its representations and warranties hereunder.

32.

EFFECT OF TERMINATION.

32.1.

On expiration or termination of this Agreement, the license and related rights herein granted shall immediately revert to Licensor, all Royalties (including without limitation Minimum Installments) shall be immediately due and payable without set-off of any kind, except with respect to amounts to be recouped against the Minimum Installment, and no portion of the Asset Purchase Fee paid to Licensor shall be refunded to Licensee.  Licensee shall immediately stop the sale and distribution of all Licensed Products and shall send Licensor a complete report and accounting with full payment due, within thirty (30) days after such expiration or termination.

32.2.

On expiration or termination of this Agreement, Licensee shall have no further right to exercise the rights licensed hereunder or otherwise acquired in relation to this Agreement and such rights shall forthwith revert to Licensor.  All Artwork and other materials supplied to Licensee by Licensor hereunder shall be immediately returned to Licensor.  Licensee agrees that (i) its failure to cease the sale and/or distribution of Licensed Products upon the expiration or termination of this Agreement will result in immediate and irreparable damage to Licensor, (ii) there is no adequate remedy at law for such failure and (iii) in the event of such failure, Licensor shall be entitled to injunctive relief.

32.3.

The following provisions shall survive expiration of termination of this Agreement:  Sections 23, 24, 25, 26, 27, 30, and 31-44.

33.

NOTICES.  All notices, demands, contracts or waivers hereunder shall be given in writing by mail, messenger, overnight air courier or telecopier addressed as indicated in Paragraph 1 or as otherwise indicated in writing by a party hereto, with a copy, in the case of a notice to Licensor, to:  Atari, Inc., 417 Fifth Avenue, New York, NY 10016, Attention: General Counsel; facsimile: (212) 726-4214.  The date of messengering or telecopying shall be deemed to be the date of service.  Five (5) business days from the date of mailing shall be deemed to be the date of service for mailed notices.  One (1) business day from the date of overnight air courier handling shall be deemed to be the date of service for courier handled notices where delivery is acknowledged in writing by addressee.

34.

NO MODIFICATION; WAIVER.  The terms of this Agreement shall not be modified except by an agreement in writing signed by both parties hereto.  No waiver by either party of a breach or default hereunder shall be deemed a waiver by such party of a subsequent breach or default of a like or similar nature.

35.

ENTIRE AGREEMENT.  This Agreement, and any confidentiality agreement Licensee may have signed pertaining to the Property or Proprietary Subject Matter, shall constitute the entire understanding of the parties with respect to the subject matter, superseding all prior and contemporaneous promises, agreements and understandings, whether written or oral pertaining thereto.  

36.

RELATIONSHIP OF THE PARTIES.  This Agreement does not appoint either party as the agent of the other party, or create a partnership of joint venture between the parties.

37.

GOVERNING LAW.  This Agreement shall be construed and interpreted pursuant to the laws of the State of  New York and the parties hereto submit and consent to the jurisdiction of the courts of the State of  New York, including Federal Courts located therein, should Federal jurisdiction requirements exist, in any action brought to enforce (or otherwise relating to) this Agreement.  Licensee hereby consents to the exclusive jurisdiction of any State or Federal court empowered to enforce this Agreement in the State of  New York, and waives any objection thereto on the basis of personal jurisdiction or venue.

38.

SEVERABILITY.  Each of the restrictions and provisions contained in this Agreement shall be construed as independent of every other such restriction and provision, to the effect that if any such restriction or provision or the application of any such restriction or provision to any person, firm or company or in any circumstances, shall be determined to be invalid and unenforceable for any reason whatsoever (including, without limitation, by reason of any legislation or other provision having the force of law or by reason of any decision of any court or other body or authority having jurisdiction over the parties to this Agreement, including, but not limited to, the European Commission and the European Court of Justice) such restriction or provision or such part thereof shall be divisible from this Agreement and shall be deemed to be deleted from this Agreement (but only to the extent that in any jurisdiction any such restriction or provision or part thereof requires to be deleted pursuant to the foregoing provisions hereof and so far only as concerns that jurisdiction) and such invalidity or unenforceability shall not affect the validity and enforceability of the remaining provisions of this Agreement which shall continue in full force and effect.

39.

CONFIDENTIALITY; PUBLICITY.  Other than as may be required by any applicable law, government order or regulation, or by order or decree of any court of competent jurisdiction, Licensee shall not publicly divulge or announce, or in any manner disclose to any third party, any information or matters revealed to Licensee pursuant hereto, or any of the specific terms and conditions (including but not limited to Royalty Rates, Asset Purchase Fee, Minimum Installments and Net Sales of Licensed Products) of this Agreement.  Neither party shall make any public announcement regarding the existence or subject matter of this Agreement, nor make any use of the other party’s trademarks, trade names, logos, or business name(s) and products without such party’s prior written approval and consent.

40.

COUNTERPARTS.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same Agreement.

41.

FURTHER ASSURANCES.  The parties hereto shall execute such further documents and perform such further acts as may be necessary to comply with the terms of this Agreement and consummate the transactions herein provided.

42.

HEADINGS.  The headings contained in this Agreement are for convenience and reference purposes only.  They do not form a part hereof and shall not affect the meaning or interpretation of this Agreement.

43.

ASSIGNMENT.  Licensee's rights and obligations hereunder are personal to Licensee and shall not be assigned to any affiliate of Licensee (including, without limitation, subsidiary and parent companies, and partnerships, joint ventures and the like, in which Licensee has an interest) or other person without the consent of Licensor. Licensee’s rights and obligations hereunder shall not be sublicensed, mortgaged or otherwise transferred or encumbered by Licensee unless otherwise previously agreed in writing by Licensor in its sole and absolute discretion.  Licensor reserves the right to assign this Agreement to any third party and to hypothecate or pledge this Agreement as collateral for any purpose.  In the event of any such assignment, Licensee shall pay the Royalties and the Minimum Installment due hereunder as directed by Licensor.  This Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of Licensor.  Licensee recognizes the rights of Hasbro, Inc. in and to the Licensed Properties and acknowledges that Hasbro, Inc. is a third-party beneficiary of this Agreement, with the right to bring suit directly against Licensee.

44.

INJUNCTIVE REMEDIES.  Licensee acknowledges that its failure to perform any of the material terms or conditions of this Agreement shall result in immediate and irreparable damage to Licensor.  Licensee also acknowledges that there may be no adequate remedy at law for such failures and that in the event thereof, Licensor shall be entitled to equitable relief in the nature of an injunction and to all other available relief in equity issued from a court of competent jurisdiction.  

IN WITNESS WHEREOF, the parties hereto have executed this Agreement or caused it to be executed on their behalf as of the day first above written.

ATARI, INC.

By:

Name:

Harry Rubin

Title:

Senior Executive Vice President

Date:

GAMES, INC.

By:

Name:

Title:

Date:

#

In consideration of and as further inducement to Licensor entering into the Agreement, Chicago West Pullman LLC (“Chicago West Pullman”) hereby warrants, guarantees, and agrees to be bound by all the terms, conditions, obligations of the agreement, and of the full performance of each and every provision of the Agreement related to the Asset Purchase Fee and Minimum Installment (including, making payment, for and on behalf of the Licensee, upon redemption of the Shares and taking all actions necessary to ensure that such redemption payment does not violate Section 151 of the Delaware General Corporation Law, as such actions are required by the Certificate of Designation to be filed in accordance with Section 30.4 hereof), including without limitation, Sections 14, 15, and 23.1 of the Agreement.  Chicago West Pullman guarantees the Licensee will perform each and every provision of the Agreement related to t he Asset Purchase Fee and Minimum Installment, regardless of changes or revisions to the Agreement.  This guarantee shall be construed as absolute, continuing, and unlimited, and shall be enforceable against Chicago West Pullman without the obligation first to proceed against the Licensee.  If the Licensee shall fail or cease to perform as required in the Agreement, the Agreement shall be enforceable directly against Chicago West Pullman. This provision will cease to be in effect after Games Inc. has made the required minimum payments and royalties due to Atari and Hasbro under this Agreement.

CHICAGO WEST PULLMAN LLC

By:

Name:

Title:

Date:

#

Schedule A

Property

 Original versions of the classic board or arcade game, with territorial restrictions, if any:

Licensed IP	Any Exclusions
*Backgammon	None
*Bridge	None
*Checkers	None
*Chess	None
*Chinese Checkers	None
*Cribbage	None
*Euchre	None
*Gin Rummy	None
*Hearts	None
*Spades	None

*Represents non-royalty bearing, except as expressly provided in this Agreement

Hasbro Property	Any Limitations or Exclusions
Battleship	Skill based tournament play is subject to Section 7
Boggle	Excluding Italy and Italian Switzerland, Italian language version; Skill based tournament play is subject to Section 7
Boggle Jr.	Excluding Italy and Italian Switzerland, Italian language version; Skill based tournament play is subject to Section 7
Candyland	No skill based tournament play
Chutes & Ladders	No skill based tournament play
Clue	Skill based tournament play is subject to Section 7
Clue Jr.	No skill based tournament play
Game of Life	Skill based tournament play is subject to Section 7
Hi-Ho Cherry O	US and Canada only; No skill based tournament play
Mr. Potato Head	No skill based tournament play
Monopoly	Excluding Italy and Italian Switzerland, Italian language version; Skill based tournament play is subject to Section 7
Pay Day	No skill based tournament play
Pit	Skill based tournament play is subject to Section 7
Risk	Excluding Italy; Skill based tournament play is subject to Section 7
Rook	Skill based tournament play is subject to Section 7
Scattergories	Skill based tournament play is subject to Section 7
Scrabble	US, US territories, APO/FPO and Canada only; Skill based tournament play is subject to Section 7
Silly Six Pins	No skill based tournament play
Sorry	Skill based tournament play is subject to Section 7
Yahtzee	Skill based tournament play is subject to Section 7

#

Atari Property	Any Exclusions
Centipede	► If an online game is derived from any code delivered by Leaping Lizards (Centipede 3D PC and PSX products), Leaping Lizards has (a) right of first negotiation to provide “similar deliverables” for online games and (b) potential royalty rates.
Missile Command	► If an online game is derived from any code delivered by Meyer/Glass Interactive (Missile Command PSX and PC products), Leaping Lizards has right of first negotiation to provide “similar deliverables” for online games.
Tempest	► None
Millipede	► None
Super Breakout	► None
Lunar Lander	► None
Gravitar	► None
Red Baron	► None
Asteroids	► Rights granted in and to the Asteroids product are limited in the following respect.  Licensee may exploit such product, provided that it does not develop, produce, manufacture, publish, market, advertise, promote, distribute, sell, sublicense or otherwise exploit, on any platform, in any territory, any product that could be deemed a "derivative interactive entertainment software product" based on the Asteroids entertainment software product as it existed prior to March 1997.
Asteroids Deluxe	► None
Space Duel	► None
BattleZone	► Rights granted in and to the BattleZone product are limited in the following respect.  Licensee may exploit such product, provided that it does not develop, produce, manufacture, publish, market, advertise, promote, distribute, sell, sublicense or otherwise exploit, on any platform, in any territory, any product that could be deemed a "derivative interactive entertainment software product" based on the Battlezone entertainment software product as it existed prior to August 1997.

#

Schedule B

The following servers:

Model 420 / Serial Number 038H3558

Model 220 / Serial Number 037H3190

Model 220 / Serial Number 037H318C

#

Schedule C

The following are Licensee websites, subject to the Terms and Conditions of the agreement:

www.gameland.com

www.myfreechance.com

www.gamebanc.com

www.luckybucks.net

www.cards2.net

www.gamesuites.com

www.gamesinc.net

www.ad-bot.com

www.cards.com

www.yournumbers.com

www.dotcomdollars.com

www.dollarbill.com

www.winningdollars.com

www.winmail.com

www.wavegame.com

www.wavegames.com

www.cardtoons.com

www.comicmessenger.com

Licensee websites that are restricted from running any Atari or Hasbro IP games as per the agreement, and can be solely used for advertising purposessubject to the terms and conditions of the agreement.

www.lottery.com

www.skillmoney.com

#

Schedule D

Certificate of Designation of Series G Preferred Stock of Games, Inc.

#

 Schedule E

HASBRO, INC.

Atari Interactive, Inc.

50 Dunham Road

Beverly, MA  01915-1844

Attention:  Mr. John Hurlbut

Re:

Games Inc.

Dear John:

Hasbro, Inc. is aware that its licensee, Infogrames Entertainment SA, intends to enter into an agreement with Games Inc. under which Games Inc. would purchase the URL www.Games.com and certain other assets from an Infogrames subsidiary and become a sublicensee of certain Hasbro Intellectual Property (IP) (although Hasbro has not been allowed to see a copy of the agreement(s) between Infogrames and/or its subsidiaries and Games Inc.).

Hasbro gave its consent to the sublicense in our approval memorandum to you and Glenn Magala, dated September 26, 2003.  You have requested this letter as a further statement or clarification of certain points in the September 26 memo.

Hasbro acknowledges that Games Inc. will create a series of skill-based tournament games based on certain Hasbro IP, and that those tournaments will have certain characteristics:

1.

Related only to this agreement, the definition of a tournament is a series of games resulting in a winner and runner-up winners.

2.

Skill-Based Tournaments will be of these general types; Private and Public Winner-Take-All, and various Ladder tournaments. Any other skill based tournament types will be subject to Hasbro’s approval.  For avoidance of doubt, this does not mean that a tournament will not be subject to Hasbro’s approval simply because it is a Private or Public Winner-Take-All or a Ladder tournament.

3.

Games Inc. will limit tournaments to two (2) each day for each Hasbro IP-Brand.  Each tournament for each Hasbro IP-Brand will be subject to Hasbro’s prior approval.  For the avoidance of doubt, Games, Inc. shall not be required to resubmit a tournament for a certain Hasbro IP-Brand if such tournament (including, without limitation, its frequency, prizes, rules, game play and appearance) conforms in all material respects with a previously approved tournament for such Hasbro IP Brand.  Any increase in the daily offering of tournaments must be approved by Hasbro.

4.

Entrants will pay Games Inc. to participate in the tournaments and winners advancing to each subsequent round may be awarded tokens.

5.

Each token will have a value of $1.

6.

Players may accumulate no more than 2500 tokens in the player’s account before having to redeem tokens for an award and may hold the tokens for one (1) year from the date of their winning. Tokens may only be redeemed through Games, Inc and may not be wagered or exchanged, traded or sold for cash or other consideration amongst players, and Games Inc. will not transfer tokens between players’ accounts.  As a sole exception, Games Inc. may allow two players to direct Games Inc. to combine their token accounts for the purpose of redeeming the amount in the combined account for a prize, provided that one player has not sold its account to the other or otherwise transferred its account for cash or other consideration.

7.

Tokens will be awarded to winners based on the following matrix.  Games, Inc. shall provide Hasbro and Atari with rights of consultation regarding tournament frequency per Hasbro IP-Brand and Maximum Token Award per Tournament on a quarterly basis, but these amounts may not be increased without Hasbro’s consent.   

Games, Inc Hasbro Property Tournament Frequency
Tournament Frequency per IP	Maximum Token Award per Tournament
Once or Twice Daily	100
Weekly	700
Monthly	1500
Annual	2500

8.

Hasbro recognizes that competitive conditions in the online games market may require Games Inc. to raise the level of possible prize awards to the players. Hasbro will discuss with Atari and Games Inc. allowing Games Inc. to raise the level of total token award to a single player. Also, due to the changing marketplace, the parties will review the token award levels on a quarterly basis.  But Hasbro has no obligation to agree to increase such levels.

9.

From time to time and due to IP tournament play popularity, games, inc. may desire to change the frequency of tournaments within an IP. Hasbro will discuss with Atari and Games Inc. allowing Games Inc. to alter this frequency.  But Hasbro has no obligation to agree to increase such frequency.

10.

There may be casual tournaments among friends or groups held in private rooms and that these casual tournaments total plays, which award nothing to any entrants or winners, are not included in our weekly/daily/monthly/yearly tournament count.  Players will not be allowed to engage in wagering on the site within these private rooms and Games, Inc will include such language in their usage guidelines.

Please see our September 26, 2003 memorandum for additional terms with respect to Hasbro’s approval of the sublicense to Games Inc., although Hasbro acknowledges that the number of tokens that a player can accumulate is changed by paragraph 6 of this letter, and the SORRY property has replaced MILLE BORNES.

Sincerely,

Tom Klusaritz

Vice President

Global Publishing & New Business Development

#

EX-10

EXHIBIT 10.12

CERTIFICATE OF DESIGNATIONS,

PREFERENCES AND RIGHTS

OF SERIES AA

PREFERRED STOCK

OF

GAMES, INC.

Games, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), does hereby certify that, pursuant to authority conferred upon the Corporation’s Board of Directors by the Corporation’s Certificate of Incorporation, as amended, and pursuant to Section 151 of Title 8 of the Delaware Code of 1953, as amended, said Board of Directors, by the unanimous written consent of its members dated December 29, 2003, duly filed with the minutes of the Board, adopted a resolution providing for the designations, preferences and relative participating, optional or other rights, and the qualifications, limitations or restrictions, of 30,250 shares of Series AA of the Corporation’s Preferred Stock, the text of which resolution is appended hereto as Exhibit A and made a part hereof.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by Carol A. Meinhardt, its Secretary, this 29^th day of December 2003.

GAMES, INC.

By:  /s/ Carol A. Meinhardt

Carol A. Meinhardt, Secretary

EXHIBIT A

TEXT OF CERTIFICATE

OF DESIGNATIONS

OF

SERIES AA PREFERRED STOCK

RESOLVED, that pursuant to the authority conferred upon the Board of Directors of Games, Inc., a Delaware corporation (the “Corporation”) by Article Fourth of the Corporation’s Certificate of Incorporation, as amended, the Board of Directors hereby establishes a series of 30,250 shares of the authorized Preferred Stock of the Corporation to be designated as Series AA Convertible Preferred Stock, par value $.001 per share (hereinafter referred to as “Series AA Preferred Stock”), and fixes and determines the rights, preferences, privileges, limitations, restrictions and relative rights of such Series AA Preferred Stock as follows:

1.

Designations and Amount.

There shall be a series of Preferred Stock of the Corporation which shall be designated “Series AA Convertible Preferred Stock”, $.001 par value per share (the “Series AA Preferred Stock”), and the number of shares constituting such series shall be 30,250.  

2.

Dividends.  No dividends on the Common Stock shall be paid unless the amount of such dividend on the Common Stock is also paid on the Series AA Preferred Stock on an as-converted to Common Stock basis.  Otherwise, the holders of the Series AA Preferred Stock shall not be entitled to receive dividends.  

3.

Liquidation Preference.

(a)

Preference.  In the event of any liquidation, dissolution or winding up of the Corporation, either voluntarily or involuntarily, the holder of each outstanding share of Series AA Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of Common Stock of the Corporation, and pari passu with any other outstanding shares of Series A and Series AA Preferred Stock, an amount equal to $100 per share.  If upon such liquidation, dissolution or winding up of the Corporation, the assets of the Corporation are insufficient to provide for the cash payment described above to the holders of Series A and Series AA Preferred Stock, such assets as are available shall be paid ratably to the holders of Series A and Series AA Preferred Stock.

(b)

Reorganization or Merger.  A reorganization or merger of the Corporation with or into any other corporation or corporations, or a sale of all or substantially all of the assets of the Corporation shall not be deemed to be a liquidation within the meaning of this Section 3; provided that the holders of Series AA Preferred Stock shall be paid in cash or in securities received from the acquiring corporation or in a combination thereof (such combined consideration to be allocated in the same proportions as the consideration received by the holders of Common Stock in the transaction).  Any such consideration to be delivered to the holders of the Series AA Preferred Stock and Common Stock upon a merger, reorganization or sale of substantially all of the assets of the Corporation shall be allocated proportionately to the holders of the Series AA Prefer red Stock and to the holders of the Common Stock, based on the total number of shares of Common Stock that would then be outstanding if the Series AA Preferred Stock were at that time converted to Common Stock as provided below, with the holders of Series AA Preferred Stock to receive in the aggregate a fraction of the total consideration payable in the transaction, such fraction having as its numerator a number equal to the number of shares into which the Series AA Preferred Stock would then convert and having as its denominator the sum of the numerator plus the number of shares of Common Stock then outstanding.  Alternatively, upon the determination of the Corporation’s Board of Directors that the acquiring entity could provide the holders of the Series AA Preferred Stock with a substantially equivalent preferred equity security of the acquiring entity, and at the election of the Corporation’s Board of Directors, and subject to the consent of the holders of Series AA Preferred Stock, they ma y receive such substantially equivalent preferred equity security in lieu of the consideration described in the immediately preceding sentence.

4.

Voting Rights.

This Certificate of Designation and the Certificate of Incorporation of the Corporation, as amended, shall not be amended to adversely affect the rights of the holders of the Series AA Preferred Stock, including amendments authorizing the issuance of any series of Preferred Stock ranking senior or pari passu to the Series AA Preferred Stock with respect to liquidation preference, redemption rights or dividends, without first obtaining the consent of the holders of a majority of the then outstanding total number of shares of Series AA Preferred Stock. Otherwise, the holders of Series AA Preferred Stock shall not have voting rights.

5.

Conversion.  The holders of the Series AA Preferred Stock shall have conversion rights as follows:

(a)

Right to Convert.  Each share of Series AA Preferred Stock shall be convertible into Common Stock of the Corporation without the payment of any additional consideration by the holder thereof and, at the option of the holder thereof, at any time after the date of issuance of such share at the office of the Corporation or any transfer agent for the Series AA Preferred Stock.  Each share of Series AA Preferred Stock shall be convertible into the number of fully paid and nonassessable shares of Common Stock which results from dividing (i) the Conversion Value (as hereinafter defined) in effect at the time of conversion by (ii) the Conversion Price (as hereinafter defined) in effect at the time of conversion.  The Conversion Value shall be the value calculated by multiplying the number of shares of Series AA Preferred Stock being converted by 10 0. From March 30, 2004 until the first anniversary of the Series AA Preferred Stock’s issuance, the Conversion Price of the Series AA Preferred Stock shall be $2.50 (i.e., 10,250 shares of Series AA Preferred Stock will convert into 410,000 shares of Common Stock).  On or after the first anniversary of the Series AA Preferred Stock’s issuance until the second anniversary of such issuance, the Conversion Price of the Series AA Preferred Stock shall be $6.00 (i.e., 10,000 shares of Series AA Preferred Stock will convert into 166,667 shares of Common Stock). On or after the second anniversary of the Series AA Preferred Stock’s issuance, the Conversion Price of the Series AA Preferred stock shall be $7.20 (i.e., 10,000 shares of Series AA Preferred Stock will convert into 138,889 shares of Common Stock).  

(b)

Mechanics of Conversion.  Before any holder of Series AA Preferred Stock shall be entitled to convert any shares thereof into shares of Common Stock, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for the Series AA Preferred Stock.  Such holder shall give at least 15 days written notice to the Corporation at such office that he, she or it elects to convert the number of shares of Series AA Preferred Stock specified in such notice.  The Corporation shall, as soon as practicable after its receipt of such notice or after the date of automatic conversion, as the case may be, issue and deliver at such office to such holder a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid.   Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series AA Preferred Stock to be converted and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares on such date.  No fractional shares of Common Stock shall be issued upon conversion of the Series AA Preferred Stock.  In lieu of any fractional shares to which the holder would otherwise be entitled (after aggregating all shares of the Series AA Preferred Stock held by such holder to be converted, such that the maximum number of shares of Common Stock is issued to such holder upon conversion), the Corporation shall pay cash equal to such fraction multiplied by the Conversion Price.  

6.

Redemption.  

(a)

By Corporation.  The Corporation shall have the right, exercisable at any time upon 15 business days written notice to the holders of any shares of Series AA Preferred Stock, to redeem any outstanding shares of Series AA Preferred Stock for a cash redemption price of $100 per share.  The Corporation shall deposit cash in sufficient amount to fully fund a proposed redemption with a bank or other qualified paying agent who shall be identified in the written notice to the holders of the Series AA Preferred Stock.  The paying agent shall be instructed to hold the funds, without interest, for delivery to the holders upon their presentation to the paying agent of properly endorsed certificates representing the redeemed shares.  The Corporation may exercise its right of redemption under this Section 6(a) at any time during the 15 day notice period referenced in Sect ion 5(b) above, in which case redemption hereunder shall occur in lieu of conversion thereunder.

(b)

By Holder.  Each holder of Series AA Preferred Stock shall have the right, exercisable any time following March 29, 2004, upon written notice delivered to the Corporation, to require the Corporation to redeem an aggregate of 10,250 shares of Series AA Preferred Stock for a cash redemption price of $100 per share.  Additionally, each holder of Series AA Preferred Stock shall have the right, exercisable as of each of the first and second anniversary dates of the issuance of the Series AA Preferred Stock, upon written notice delivered to the Corporation at least 5 business days prior to any of such anniversary dates, to require the Corporation to redeem an aggregate of 10,000 shares of Series AA Preferred Stock per year for a cash redemption price of $100 per share.  Upon receipt of the requisite written notice, the Corporation shall immediately deposit  with a bank or other qualified paying agent who shall be identified in such written notice, cash in sufficient amount to fully fund any such required redemption and, simultaneously, the holders of the Series AA Preferred Stock shall deliver to the Corporation properly endorsed certificates representing the redeemed shares.  

(c)

Guaranty of Redemption Payments.  The above redemption payments shall be guaranteed in accordance with the terms set forth in the Asset Purchase, Assignment and License Agreement by and among the Corporation, Atari, Inc. and Chicago West Pullman LLC, dated as of December 31, 2003.  In the event that the Guaranty is unenforceable or the guarantor otherwise does not promptly pay the redemption price to the holders of the Series AA Preferred Stock and the funds of the Corporation legally available for the payment of the redemption price are insufficient to fully pay such amount on such date, the Corporation shall (a) take such action as shall be necessary or appropriate to promptly remove any impediments to its ability to pay such amount in full, including, without limitation, (1) reducing the stated capital of the Corporation or causing a revaluation of the assets of the Corporation, to the extent permissible under applicable law, to create sufficient surplus to make such payment and (2) incurring any indebtedness necessary to make such payment, and (b) in any event, use any funds that are legally available to make such payment to the maximum extent possible to the holders of the Series AA Preferred Stock on a pro rata basis, based upon the aggregate amount owing to each such holder as of the date of redemption.  At any time thereafter, when additional funds of the Corporation are legally available for the payment of an installment of the redemption payment, such funds will immediately be used to make such payment on a pro rata basis, based upon the aggregate amount owing to each such holder as of the redemption date.

(d)

Priority.

The holders of the Series AA Preferred Stock shall be entitled to receive full payment of the above redemption amounts prior and in preference to any redemption payment being made to the holders of any other series of Preferred Stock of the Corporation.

7.

No Impairment.  The Corporation will not through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid, delay, dilute, or otherwise impair the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Certificate of Designation, including but not limited to Sections 5 and  6 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights and the redemption rights of the holders of Series AA Preferred Stock against impairment.

EX-10

EXHIBIT 10.13

January 12, 2004

Chicago West Pullman LLC

425 Walnut Street

Cincinnati, Ohio 45202

Dear Sir or Madam:

         Reference is hereby made to the purchase of Games.com and various assets and license agreement from Atari, Inc. by the undersigned, which was effective December 31, 2003 and consummated on or about January 9, 2004 (the "Transaction"). The undersigned acknowledges that, at its request, Chicago West Pullman LLC. ("CWP") assisted the undersigned during the Transaction to successfully complete the Transaction.

         The undersigned hereby agrees to pay a total one-time fee of two hundred thousand dollars $200,000 to CWP in consideration for CWP's services rendered to the undersigned in connection with the Transaction as described above, which payment will be made in the form of 400,000 shares of Games, Inc.’s common stock in accordance with CWP's instructions.

Yours very truly

Games, Inc.

By: /s/ Myles S. Cairns

Name: Myles S. Cairns

Title:  Executive Vice President

          and Chief Financial Officer

EX-23

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the use in this Registration Statement of Games, Inc on Form SB-2 of our report dated September 12, 2003, except for the last paragraph of Note R, which is dated October 8, 2003, relating to Games, Inc. financial statements, which report includes an explanatory paragraph as to an uncertainty with respect to the Company’s ability to continue as a going concern, appearing in the Prospectus, which is a part of such Registration Statement, and to the use of our name as it appears under the caption “Experts”.

/s/ Marcum & Kliegman LLP

Marcum & Kliegman LLP

New York, NY

March 29, 2004

EX-23

Exhibit 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the use in this Registration Statement on Form SB-2/A of our report dated October 21, 2002, relating to the financial statements of Games, Inc. as of and for the year ended June 30, 2002, which report includes an explanatory paragraph as to an uncertainty with respect to the Company’s ability to continue as a going concern, and to the reference to our firm under the caption “Experts” in the Prospectus.

/s/ King Griffin & Adamson P.C

Dallas, Texas

March 30, 2003