EXHIBIT 23.3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To PrizePoint Entertainment Corporation:
We have audited the accompanying balance sheet of PrizePoint Entertainment
Corporation (a Delaware corporation) as of December 31, 1998, and the related
statements of operations, stockholders' equity and cash flows for the period
from inception (March 4, 1998) to December 31, 1998. 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 generally accepted auditing
standards. 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 PrizePoint Entertainment
Corporation as of December 31, 1998, and the results of its operations and its
cash flows for the period from inception (March 4, 1998) to December 31, 1998,
in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
New York, New York
April 29, 1999
1
PRIZEPOINT ENTERTAINMENT CORPORATION
BALANCE SHEETS
December 31, March 31,
1998 1999
----------- -----------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................................. $ 1,870,075 $ 1,244,072
Accounts receivable ....................................................... -- 21,250
Prepaid expenses and other current assets ................................. -- 40,054
----------- -----------
Total current assets .................................................... 1,870,075 1,305,376
PROPERTY AND EQUIPMENT, net ................................................. 127,337 366,219
DEPOSITS AND OTHER ASSETS ................................................... 61,239 78,495
----------- -----------
Total assets ............................................................ $ 2,058,651 $ 1,750,090
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .......................................................... $ 63,457 $ 146,634
Accrued expenses .......................................................... 25,867 33,497
Current portion of capital lease obligations .............................. 25,949 102,777
----------- -----------
Total current liabilities ............................................... 115,273 282,908
CAPITAL LEASE OBLIGATIONS ................................................... 15,134 107,513
COMMITMENTS (Note 7)
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value; 5,000,000 shares authorized:
Series A Preferred Stock, 645,000 shares designated, issued and
outstanding as of December 31, 1998 and March 31, 1999 (unaudited),
respectively; liquidation value of $645,000 ............................. 6,450 6,450
Series B Preferred Stock, 495,049 shares designated; 412,541 and 453,795
shares issued and outstanding as of December 31, 1998 and March 31,
1999 (unaudited), respectively; liquidation value of $2,500,000 and
$2,750,000 (unaudited), respectively .................................... 4,125 4,538
Common stock, $.01 par value; 10,000,000 shares authorized 1,186,667
shares issued and outstanding as of December 31, 1998 and March 31,
1999 (unaudited), respectively .......................................... 11,867 11,867
Additional paid-in capital ................................................ 3,134,425 3,384,012
Accumulated deficit ....................................................... (1,228,623) (2,047,198)
----------- -----------
Total stockholders' equity .............................................. 1,928,244 1,359,669
----------- -----------
Total liabilities and stockholders' equity .............................. $ 2,058,651 $ 1,750,090
=========== ===========
The accompanying notes are an integral part of these balance sheets.
2
PRIZEPOINT ENTERTAINMENT CORPORATION
STATEMENTS OF OPERATIONS
For the Period
From Inception For the Three
(March 4, Months
1998) to Ended
December 31, March 31,
1998 1999
------------- ------------
(Unaudited)
REVENUES ............................................ $ -- $ 47,750
------------- -----------
COSTS AND EXPENSES:
Direct costs ...................................... 353,279 305,385
Selling and marketing expenses .................... 214,290 209,299
General and administrative expenses ............... 675,514 321,535
------------- -----------
Operating loss .................................. (1,243,083) (836,219)
OTHER INCOME (EXPENSE):
Interest income, net .............................. 14,460 17,644
------------- -----------
Loss before income taxes ........................ (1,228,623) (818,575)
BENEFIT FOR INCOME TAXES ............................ -- --
------------- -----------
Net loss ........................................ $(1,228,623) $(818,575)
============= ===========
PER SHARE INFORMATION:
Net loss per share--
Basic and Diluted ............................... $ (1.04) $ (.68)
------------- -----------
Weighted average common shares outstanding--
Basic and Diluted ............................... 1,186,667 1,186,667
============= ===========
The accompanying notes are an integral part of these statements.
3
PRIZEPOINT ENTERTAINMENT CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
Series A Series B
Preferred Stock Preferred Stock Common Stock
------------------ ----------------- ------------------
Shares Par Value Shares Par Value Shares Par Value
------ --------- ------ --------- ------ ---------
BALANCE, March 4, 1998 .................... -- $ -- -- $ -- $ --
Issuance of common stock ................ -- -- -- -- 1,186,667 11,867
Issuance of Series A Preferred Stock .... 645,000 6,450 -- -- -- --
Issuance of Series B Preferred Stock .... -- -- 412,541 4,125 -- --
Net loss ................................ -- -- -- -- -- --
------- ------ ------- ------ --------- -------
BALANCE, December 31, 1998 ................ 645,000 6,450 412,541 4,125 1,186,667 11,867
Issuance of Series B Preferred Stock .... -- -- 41,254 413 -- --
Net loss ................................ -- -- -- -- -- --
------- ------ ------- ------ --------- -------
BALANCE, March 31, 1999 (unaudited) ....... 645,000 $6,450 453,795 $4,538 1,186,667 $11,867
======= ====== ======= ====== ========= =======
(RESTUBBED FROM ABOVE TABLE)
Additional Accumulated
Paid-in Capital Deficit Total
--------------- ----------- -----
BALANCE, March 4, 1998 .................... $ -- $ -- $ --
Issuance of common stock ................ -- -- 11,867
Issuance of Series A Preferred Stock .... 638,550 -- 645,000
Issuance of Series B Preferred Stock .... 2,495,875 -- 2,500,000
Net loss ................................ -- (1,228,623) (1,228,623)
---------- ----------- -----------
BALANCE, December 31, 1998 ................ 3,134,425 (1,228,623) 1,928,244
Issuance of Series B Preferred Stock .... 249,587 -- 250,000
Net loss ................................ -- (818,575) (818,575)
---------- ----------- -----------
BALANCE, March 31, 1999 (unaudited) ....... $3,384,012 $(2,047,198) $ 1,359,669
========== =========== ===========
The accompanying notes are an integral part of these statements.
4
PRIZEPOINT ENTERTAINMENT CORPORATION
STATEMENTS OF CASH FLOWS
For the Period For the Three
From Inception Months
(March 4, 1998) to Ended
December 31, March 31,
1998 1999
----------- ----------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................................... $(1,228,623) $ (818,575)
Adjustments to reconcile net loss to net cash used in operating
activities-
Depreciation and amortization .................................... 23,156 19,875
Changes in assets and liabilities-
Increase in accounts receivable ................................ -- (21,250)
Increase in prepaid expenses and other current assets .......... -- (40,054)
Increase in deposits and other assets .......................... (61,239) (17,256)
Increase in accounts payable ................................... 63,457 83,177
Increase in accrued expenses ................................... 25,867 7,630
----------- ----------
Net cash used in operating activities ........................ (1,177,382) (786,453)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ............................... (98,598) (72,747)
----------- ----------
Net cash used in investing activities ........................ (98,598) (72,747)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of capital lease obligations ........................... (10,812) (16,803)
Issuance of Series A Preferred Stock ............................. 645,000 --
Issuance of Series B Preferred Stock ............................. 2,500,000 250,000
Issuance of common stock ......................................... 11,867 --
----------- ----------
Net cash provided by financing activities .................... 3,146,055 233,197
----------- ----------
Net increase (decrease) in cash and cash equivalents ......... 1,870,075 (626,003)
CASH AND CASH EQUIVALENTS, beginning of period ..................... -- 1,870,075
----------- ----------
CASH AND CASH EQUIVALENTS, end of period ........................... $ 1,870,075 $1,244,072
=========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest ......................... $ -- $ --
Cash paid for income taxes ....................................... -- --
Capital lease obligations ........................................ 56,608 186,010
The accompanying notes are an integral part of these statements.
5
PRIZEPOINT ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
PrizePoint Entertainment Corporation ("PrizePoint" or the "Company") was
formed as a Delaware corporation on March 4, 1998. The Company is engaged in the
marketing and promotion forum of games of chance and advertising via its
Internet web site. Individuals or "players" can log on to the Company's site and
earn points for participating in the various product and trivia promotions
offered in the Company's site. Individuals can redeem these points for various
awards. Sponsors provide some of the awards and gifts for the winning
participants in exchange for advertising services.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenues are derived from the sale of advertising on the Company's web
site. Advertising revenues are recognized in the period the advertisement is
displayed provided that no significant Company obligations remain and collection
of the resulting receivable is probable. Company obligations typically include
guarantees of a minimum number of "impressions", or number of times that any
advertisement is viewed by users on the Company's web sites. To the extent
minimum guaranteed impressions are not met, the Company defers recognition of
the corresponding revenues until guaranteed impression levels are achieved.
Direct Costs
Direct costs consist primarily of cash prizes paid to participants, payroll
and related expenses for personnel, systems consultants and systems and
telecommunications infrastructures for web site development. To date, all direct
costs have been expensed as incurred.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Property and Equipment, net
Property and equipment are recorded at cost and depreciated on the
straight-line method over their estimated useful lives, ranging from three to
five years.
6
Costs of maintenance and repairs are charged to expense as incurred.
Accounting for Long-Lived Assets
The Company accounts for long-lived assets under the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." This statement establishes financial accounting and reporting standards for
the impairment of long-lived assets and for long-lived assets to be disposed of.
Management has performed a review of all long-lived assets and has determined
that no impairment of the respective carrying value has occurred as of December
31, 1998.
Income Taxes
The Company accounts for its income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes," which requires recognition of deferred tax
liabilities and assets for the estimated future tax effects of events that have
been recognized in the financial statements or income tax returns. Under this
method, deferred tax liabilities and assets are determined based on differences
between the financial accounting and income tax bases of assets and liabilities,
and the use of carryforwards, if any, using enacted tax rates in effect for the
years in which the differences and carryforwards are expected to reverse and be
utilized. Any deferred assets have been reserved for their full value until the
future realizability can be determined.
Stock-Based Compensation
The Company accounts for its employee stock option plans in accordance with
the provisions of Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations.
Compensation expense related to employee stock options is recorded only if, on
the date of grant, the fair value of the underlying stock exceeds the exercise
price. The Company adopted the disclosure-only requirements of SFAS No. 123,
"Accounting for Stock-Based Compensation," which allows entities to continue to
apply the provisions of APB Opinion No. 25 for transactions with employees and
to provide pro forma net income (loss) and pro forma earnings per share
disclosures (Note 8) for employee stock options as if the fair value based
method of accounting in SFAS No. 123 had been applied to these transactions.
The Company accounts for nonemployee stock-based awards in which goods or
services are the consideration received for the equity instruments issued based
on the fair value of the consideration received or the fair value of the equity
instrument issued, whichever is more readily determinable.
Basic and Diluted Net Loss Per Common Share
The Company accounts for net loss per common share in accordance with the
provisions of SFAS No. 128, "Earnings Per Share." In accordance with SFAS No.
128, basic earnings per share is computed by dividing net income (loss) by the
weighted average number of common shares outstanding and diluted earnings per
share is computed by dividing net income (loss) by the weighted average number
of common shares and dilutive common equivalent shares
7
outstanding during the period. Common equivalent shares have been excluded from
the calculation of diluted earnings per share, as their effect is anti-dilutive.
Business and Credit Concentrations
Financial instruments, which subject the Company to concentrations of
credit risk, consist primarily of cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses. The carrying amounts of these
instruments approximate fair value. The carrying amount of the Company's capital
leases approximate the fair value of these instruments based upon management's
best estimate of interest rates.
The Company maintains cash with a domestic financial institution. The
Company performs periodic evaluations of the relative credit standing of this
institution. From time to time, the Company's cash balances with this financial
institution may exceed Federal Deposit Insurance Corporation insurance limits.
Unaudited Interim Financial Statements
The unaudited consolidated financial information included herein for the
three months ended March 31, 1999, has been prepared in accordance with
generally accepted accounting principles for interim financial statements. In
the opinion of the Company, these unaudited financial statements, reflect all
adjustments necessary, consisting of normal recurring adjustments, for a fair
presentation of such data on a basis consistent with that of the audited data
presented herein. The results of operations for interim periods are not
necessarily indicative of the results expected for a full year.
Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income." This statement establishes standards
for reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. The Company adopted this statement in 1998. The adoption of this
statement did not have an impact on the Company's financial condition or results
of operations. Accordingly, the Company's comprehensive net loss is equal to its
net loss for the period from inception (March 4, 1998) to December 31, 1998.
Additionally, in June 1997, the FASB issued SFAS No. 131, "Disclosures
About Segments of an Enterprise and Related Information." This statement
establishes standards for the way the public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. The Company adopted this
statement in 1998. In the initial year of application, comparative information
for earlier years must be restated. Management has determined that it does not
have any separately reportable business segments.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"), which provides
guidance for determining whether computer software is internal-use software and
on accounting for the proceeds of computer software originally developed or
obtained for internal use and then subsequently sold to the public. It also
provides guidance on capitalization of the costs incurred for computer software
8
developed or obtained for internal use. SOP 98-1 is effective for fiscal years
beginning after December 31, 1998. The Company has expensed all software
development costs and does not expect the adoption of SOP 98-1 to have a
material effect on its financial statements.
2. Property and Equipment, Net
Property and equipment consist of the following at December 31, 1998:
Computer equipment and software ......................... $121,601
Furniture and fixtures .................................. 28,892
--------
150,493
Less- Accumulated depreciation and amortization ......... 23,156
--------
$127,337
========
3. Accrued Expenses
Accrued expenses consist of the following at December 31, 1998:
Accrued Vacation ........................................ $ 15,835
Accrued Rent ............................................ 10,032
--------
Total ................................................... $ 25,867
========
4. Income Taxes
No provision for U.S. federal or state income taxes has been recorded for
the period from inception (March 4, 1998) to December 31, 1998 as the Company
has incurred an operating loss.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets for federal and state income taxes at December
31,1998 are as follows:
Deferred tax assets, net:
Net operating loss carryforwards ........................ $ 493,334
Other ................................................... 5,000
---------
498,334
Less- Valuation allowance ............................... (498,334)
---------
Deferred tax assets, net ................................ $ --
=========
Realization of deferred tax assets is dependent upon future earnings, if
any. The Company has recorded a full valuation allowance against its deferred
tax assets since management believes that it is not more likely than not that
these assets will be realized. No income tax benefit has been recorded for the
period from inception (March 4,1998) to December 31, 1998 as a result of the
valuation allowance.
As of December 31, 1998, the Company had net operating loss carryforwards
for federal income tax purposes of approximately $1,229,000. There can be no
assurance that the Company will realize the benefit of the net operating loss
carryforwards. The federal net
9
operating loss carryforwards are available to offset future taxable income and
expire in 2019 if not utilized.
5. Capital Lease Obligations
At December 31, 1998 the Company was committed under a capital lease
agreement for office equipment. The asset and liability under the capital lease
is recorded at the lower of the present value of minimum lease payments or the
fair market value of the asset. The interest rate on the capital lease was
approximately 1% at December 31, 1998.
Future minimum payments under the capital lease agreements are as follows:
Year ending December 31:
1999 .................................................... $28,308
2000 .................................................... 16,513
-------
Total minimum lease payments ........................ 44,821
Less--
Amounts representing interest ......................... 3,738
-------
41,083
Current portion ....................................... 25,949
-------
Long-term portion ................................... $15,134
=======
6. Stockholders' Equity
Preferred Stock
The Company's stockholders authorized 5,000,000 shares of preferred stock.
The Company has designated 645,000 shares as Series A Preferred Stock and
495,049 shares as Series B Preferred Stock.
Series A Preferred
On April 1, 1998, the Company sold 645,000 shares of Series A Preferred
Stock for net proceeds of $645,000. The Series A Preferred Stock is convertible
into an equal number of common shares at the holder's option, subject to
adjustment for antidilution, and is automatically converted to common stock in
the event of a public offering of securities of the Company. The holders of
Series A Preferred Stock are entitled to receive dividends as and if declared by
the Board of Directors. In the event of liquidation or dissolution of the
Company, the holders of Series A Preferred Stock are entitled to receive all
accrued dividends, if applicable, plus a liquidation price per share of $1.00.
Subject to certain provision, registration rights, as defined in the
Certificate of Designation of Series A Convertible Preferred Stock agreement,
may be exercised after the earlier of (a) the date specified by a vote or
written consent or agreement of holders of at least two-thirds of the shares of
Series A Preferred Stock then outstanding, approving such conversion, or (b) the
effective date of the first registration statement for a public offering of
securities of the Company.
10
Series B Preferred Stock
On December 8, 1998, the Company sold 412,541 shares of Series B Preferred
Stock for net proceeds of $2,500,000. The Series B Preferred Stock is
convertible into an equal number of common shares at the holder's option,
subject to adjustment for antidilution, and is automatically converted to common
stock in the event of a public offering of securities of the Company. The
holders of Series B Preferred Stock are entitled to receive dividends as and if
declared by the Board of Directors. In the event of liquidation or dissolution
of the Company, the holders of Series B Preferred Stock are entitled to receive
all accrued dividends, if applicable, plus a liquidation price per share of
$6.06. Certain of the Series B Preferred Stock holders also received warrants to
receive 41,254 common shares into Series B Convertible Preferred Stock of the
Company at a purchase price equal to $6.06 per share. The warrants expire at the
earlier of (a) 18 months after the effective date of the registration statement
for an initial public offering by the Company and with a price per share of not
less than $6.06 and (b) 60 months after the first date set forth above.
Subject to certain provisions, registration rights, as defined in the
Certificate of Designation of Series B Convertible Preferred Stock agreement,
may be exercised after the earlier of (a) the date specified by vote or written
consent or agreement of holders of at least two-thirds of the shares of Series B
Preferred Stock then outstanding, approving such conversion, or (b) the
effective date of the first registration statement for a public offering of
securities of the Company.
Common Stock
The Company issued 1,186,667 common shares to its founders in April 1998
for total proceeds of $11,867.
7. Commitments
Operating Leases
The Company leases office space, equipment security and trash removal
services under operating leases expiring through February 29, 2004. At December
31, 1998, minimum lease commitments under noncancelable leases are as follows:
Equipment/
Year Office Services
- ---- ------ ----------
1999 ........................................ $ 245,040 $2,225
2000 ........................................ 293,005 1,781
2001 ........................................ 299,480 1,194
2002 ........................................ 305,469 684
2003 ........................................ 320,818 342
Thereafter .................................. 54,190 --
---------- ------
$1,518,002 $6,226
========== ======
Rent expense for the year ended December 31, 1998 was $97,545 for office
space.
11
Advertising and Sponsorship Contracts
The Company entered into several advertising and sponsorship agreements
with third parties, with terms ranging from one to six months whereby the
Company provides advertising in exchange for cash payments or goods. The goods
are used as awards for winning participants in the Company's online games and
sweepstakes. No revenue was earned on such contracts for the year ended December
31, 1998.
8. Stock Options
On April 1, 1998, in order to promote the interests of the Company and
retain persons necessary for the success of the Company, the Company adopted its
1998 Stock Option Plan ("Option Plan") covering up to 150,000 shares, pursuant
to which employees (including officers), directors and independent contractors
of the Company and its present or future subsidiaries and affiliates are
eligible to receive incentive and/or nonstatutory stock options. The Option
Plan, which expires within ten years, will be administered by the Plan
Administrator. The selection of participants, allotment of units, determination
of price and other conditions relating to the purchase of options will be
determined by the Plan Administrator. Options granted under the Option Plan are
exercisable for a period of up to 10 years from the date of grant at an exercise
price, which may be less than, equal to or greater than the fair market value
per unit on the date of the grant. Incentive Options, however, may only be
granted to employees, the exercise price per share may not be less than 100% of
the fair market value per share of common stock on the option grant date, and
for a stockholder owning more than 10% of the outstanding common stock, its
exercise price may not be less than 110% of the fair market value of the common
stock on the date of the grant.
Pursuant to SFAS No. 123, the Company has elected to account for its Option
Plan under APB Opinion No. 25, under which no compensation expense is recognized
for unit option awards granted at or above fair market value. In 1998, the
Company granted 95,000 incentive stock options to various employees. The option
exercise price equals the stock's fair market value at the grant date, and the
options are exercisable over a four-year period, with 25% of options granted
becoming exercisable on the one-year anniversary of the grant date and the
remaining options becoming exercisable at the rate of 1/48 at the end of each
month thereafter. All options will terminate no later than 10 years from the
date of grant. Under SFAS No. 123, compensation cost is measured at the grant
date based on the fair value of the award and is recognized over the service (or
vesting) period. For the year ended December 31, 1998, the compensation cost for
this plan determined in accordance with SFAS No. 123, net of compensation
expense recognized under APB No. 25, is an immaterial amount. As such the
Company's pro-forma net loss has not been presented.
The following table summarizes information about stock options outstanding
at December 31, 1998:
Number Weighted Average Weighted
Outstanding Remaining Average
Exercise Prices at December 31, 1998 Contractual Life Exercise Price
- --------------- -------------------- ---------------- --------------
$.01 ............... 40,000 9.56 $.01
$.10 ............... 55,000 9.95 $.10
------
95,000
======
12
As of December 31, 1998, none of the outstanding options were exercisable.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions: risk-free interest rate of 4.87 percent; expected dividend yield of
0 percent; expected life of 5 years; expected volatility of 100 percent.
The following table summarizes information about stock options outstanding
at December 31, 1998:
December 31, 1998
--------------------------
Weighted Average
Shares Exercise Price
------- ----------------
Outstanding at beginning of period ............. -- $ --
Granted ..................................... 95,000 .06
Cancelled ................................... --
Terminated .................................. --
Exercised ................................... --
------- ----
Outstanding at end of period ................... 95,000 $.06
======= ====
Options exercisable at end of period ........... --
=======
Weighted average fair value of options granted . $ .05
=======
9. Subsequent Events
On January 7, 1999, the Company issued additional 41,254 shares of Series B
Preferred stock for $250,000 in proceeds.
On April 29, 1999 the Company entered into a merger agreement with Uproar
Ltd., a Bermuda corporation, which is a provider of online entertainment and
game shows. Under the provisions of the merger agreement, each share of common
and preferred stock of the Company will be converted into and exchanged for
common stock of Uproar Ltd. based upon a stated conversion rate.
13