SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D. C. 20549

FORM SB-2/A
AMENDED
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

INTERSPACE ENTERPRISES, INC.
(Name of Small Business Issuer as Specified in its charter)

Colorado 84-1283938
-------- ----------
(State or jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification No.)
Code Number)

7825 Fay Avenue, #200
La Jolla, California 92037
(858) 456-3539
(Address, including ZIP Code, and telephone number of principal executive
offices and principal place of business)

Andrew P. Patient
7825 Fay Avenue, #200
La Jolla, California 92037
(858) 456-3539
(Name, address and telephone number of agent for service.)

Copies of all communications, including all communications sent to the agent for
service, should be sent to:

W. Andrew Stack, Esq.
9123 Spinning Leaf Cove
Austin, Texas 78735
(512) 617-6354

Approximate date of proposed distribution and sale to the public: Any time after
the effective date of the Registration Statement.

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, pleases check the following box and
list the Securities Act registration statement number of the earlier
registration 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 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, as amended, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box [X]

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

CALCULATION OF REGISTRATION FEE

Proposed
Title of each Proposed Maximum
class of Maximum Aggregate Aggregate Amount of
securities to be amount to be offering price offering price registration fee
registered registered per unit (1) (2) (1) (2) (1) (2)
- ---------------- ------------- ---------------- -------------- ----------------
Common stock, 40,000,000(3) $0.09 $3,600,000 $860.40
par value
$0.0001 per
share
Common stock, 28,296,991(4) $0.05 $1,414,849.50 $338.15
par value
$0.0001 per
share

Options to 12,000,000(5) $0.05 $600,000 $143.40
purchase
common stock,
par value
$0.0001 par
value

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933, as amended.

(2) Estimated pursuant to rule 457(c)

(3) This amount represents common shares that the Company reasonably
expects to sell within two years of the effective date of this
registration statement pursuant to Rule 415, from which sale the
Company expects to receive monetary benefit. The offering of these
securities will be commenced promptly upon effectiveness of this
registration statement, will be made on a continuous basis and may
continue for a period in excess of 30 days from initial effectiveness.

(4) This amount represents common shares to be registered and sold by
certain selling shareholders described in the registration statement
from which the Company will receive no monetary benefit.

(5) This amount represents securities which will be issued upon the
exercise of outstanding options from which the company will receive
monetary benefit upon exercise.

PART I-INFORMATION REQUIRED IN PROSPECTUS

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

Item 1: Front of Registration Statement and Outside Front Cover of Prospectus

Interspace Enterprises, Inc.
40,000,000 Shares of Common Stock
40,296,991 Shares For Selling Security Holders

(1) Registrant's Name. Interspace Enterprises, Inc.

(2) Title and amount of securities. All of the shares of common stock,
$0.0001 par value, (the "Common Stock") offered hereby (the
"Offering") are being sold by certain shareholders who are registering
28,296,991 shares issued under the terms of a debenture and the
conversion of said debenture into common shares of the company, and
shares which will be issued upon the exercise of outstanding options,
all of which carried certain piggyback registration rights.

In addition, the company is registering an additional 40,000,000
shares of common stock, an amount which it reasonably believes may be
sold within the next two years. This offering will be commenced
promptly, will be made on a continuous basis and may continue for a
period in excess of 30 days from the date of initial effectiveness.
This prospectus may be used only in connection with the resale of
28,296,991 shares of common stock of Interspace Enterprises, Inc. by
the selling stockholders listed on page 13 of this prospectus.

(3) Offering price of the securities. The company is offering 40,000,000
shares of common stock for cash. These shares will be offered at a
maximum price of $0.09 per share. Interspace does not anticipate
paying any commissions related to the sale of these securities. No
underwriting arrangements have been made with respect to the sale of
these securities.

(4) Our common stock is traded on the National Association of Securities
Dealers, Inc.'s OTC Bulletin Board under the symbol "ITET."

(5) INVESTING IN OUR COMMON STOCK INVOLVES SUBSTANTIAL RISKS. INVESTORS
SHOULD CAREFULLY CONSIDER THE RISK FACTORS OUTLINED IN THIS PROSPECTUS
BEGINNING ON PAGE 7 BEFORE MAKING A DECISION TO INVEST IN OUR COMPANY.

(7) Neither the Securities and Exchange Commission nor any state
securities commission has approved or disproved of these securities or
passed upon the adequacy or accuracy of the prospectus. Any
representation to the contrary is a criminal offense.

(8) The information in this prospectus is not complete and may be changed.
The corporation may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
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.

(9) The date of this Prospectus is September 6, 2002.

Item 2: Inside Front and Outside Back Cover Pages of Prospectus

TABLE OF CONTENTS

PART I: INFORMATION REQUIRED IN PROSPECTUS
Item 1: Front and Outside Front Cover of Registration Statement
Item 2: Inside Front and Outside Back Cover Pages of Registration Statement
Item 3: Summary Information
Table of Summary Information
Risk Factors
Reasons for the Stock Distribution
Manner of the Stock Distribution
Certain Tax Matters
Indemnification Agreements
Expenses
Item 4: Use of Proceeds
Item 5: Determination of Offering Price
Item 6: Dilution
Item 7: Selling Shareholders
Item 8: Plan of Distribution
Item 9: Litigation Proceedings
Item 10: Director, Executive Officers, Promoters and Control Persons
Item 11: Security Ownership of Certain Beneficial Owners
Item 12: Description of Securities
Item 13: Interest and Named Experts and Counsel
Item 14: Disclosure of Commission Position on Indemnification
Item 15: Organization Within the Last Five Years
Item 16: Description of Business
Item 17: Management's Discussion and Analysis of Plan of Operation
Item 18: Description of Property
Item 19: Certain Relationships and Related Transactions
Item 20: Market for Common Equity and Related Stockholders Matters
Item 21: Executive Compensation
Item 22: Financial Statements
Item 23: Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure

PART II: INFORMATION NOT REQUIRED IN REGISTRATION STATEMENT
Item 24: Indemnification of Directors and Officers
Item 25: Other Expenses of Issuance and Distribution
Item 26: Recent Sales of Unregistered Securities
Item 27: Exhibits
Item 28: Undertakings

Signatures

Item 3: Summary Information and Risk Factors

PROSPECTUS SUMMARY

This summary highlights information about the Offering and Interspace
Enterprises, Inc. that we believe will be important to you. You should read the
entire prospectus including the financial statements for a complete
understanding of our business and this Offering.

Available Information
Interspace Enterprises, Inc. is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended, and in accordance therewith
file reports, proxy statements and other information with the Securities and
Exchange Commission. These materials can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549. Copies of these materials can also be
obtained from the Commission at prescribed rates by writing to the Public
Reference Section of the Commission, 450 Fifth Street, N.W. Washington, D.C.
20459. The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an
internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC, which is
www.sec.gov. You can also find more information about Interspace Enterprisess,
Inc. at our websites at www.interspaceenterprises.com and www.planetlotto.com.

The Company

InterSpace Enterprises, Inc., a Delaware corporation, was formed on June
30, 1998. Following incorporation, the InterSpace Delaware founders, developed
a preliminary business plan for the PlanetLotto lottery and game show, raised
seed capital, and began to negotiate with various foreign governments to host
the PlanetLotto lottery. For the purposes of becoming a publicly traded
company, InterSpace Enterprises acquired all of the outstanding shares of common
stock of Marathon Marketing Corporation, a Colorado corporation. After
acquiring all of the Marathon Marketing common stock, InterSpace Delaware merged
into its subsidiary on April 17, 2000, changing its name to InterSpace
Enterprises, Inc. Thereafter, the Company has begun to implement the business
plan and carry on the business activities previously initiated by Interspace
Delaware. The Company assumed, performed and became responsible for all assets,
contracts, liabilities, obligations and agreements of InterSpace Delaware as a
result of the Merger. Additionally, the company made the necessary filings to
become a fully reporting 12(g) publicly traded company and subsequently received
approval to begin trading of its common stock on the NASD Over-The-Counter
Bulletin Board market under the symbol "ITET". Interspace Enterprises, Inc. is
a company with little revenues and no assets, and we have generated operating
and net losses since inception. Since inception, Interspace has incurred a net
loss of $1,912,165, and as such, have funded operations primarily through the
sale of company securities.

Interspace Enterprises, Inc. is the exclusive marketer of the
planetlotto.com lottery, hosted and operated by the International Lottery in
Liechtenstein Foundation, under the rules and regulations of the Government of
Liechtenstein. The Company's web

site, www.planetlotto.com, hosts various forms of online lottery games.The
web site also web casts our weekly PlanetLotto draw, which can be viewed live
through the web site, via streaming video. Interspace Enterprises principal
revenue stream is derived directly from a portion of the proceeds of every
transaction on the Planetlotto.com web site.

The Offering

Primary Offering

Interspace is registering 40,000,000 shares of common stock to be sold at a
maximum price of $0.09. This offering will be made on a continuous basis.

Selling Stockholders

Interspace is registering 28,296,991 shares of common stock previously sold
under Rule 144 under which certain piggyback registration rights were granted.

Option Shares

Interspace is registering 12,000,000 shares which will be issuable upon the
exercise of outstanding options on a 1 for 1 conversion basis.

The percentage of the proceeds that Interspace Enterprises receives through our
partnership with ILLF with respect to all of the products currently provided on
the Planetlotto.com website is as follows:

Planetlotto Weekly Lottery - 17.5% of every transaction

Planetlotto Hourly Lottery - 10% to 16% of every transaction
(Range will fluctuate based on promotional campaigns at any given time, such as
the current 50% bonus deposit program currently in place)

Planetlotto Instant Lottery - 10% to 16% of every transaction
(Range will fluctuate based on promotional campaigns at any given time, such as
the current 50% bonus deposit program currently in place)

Planetlotto Bingo - 10% to 16% of every transaction
(Range will fluctuate based on promotional campaigns at any given time, such as
the current 50% bonus deposit program currently in place)
Scratch card Games:

Planet Cash - 10% to 16% of every transaction
(Range will fluctuate based on promotional campaigns at any given time, such as
the current 50% bonus deposit program currently in place)

Martian Madness - 10% to 16% of every transaction

(Range will fluctuate based on promotional campaigns at any given time, such as
the current 50% bonus deposit program currently in place)

Filthy Rich - 10% to 16% of every transaction
(Range will fluctuate based on promotional campaigns at any given time, such as
the current 50% bonus deposit program currently in place)

Code Breaker - 10% to 16% of every transaction
(Range will fluctuate based on promotional campaigns at any given time, such as
the current 50% bonus deposit program currently in place)

Hole in One - 10% to 16% of every transaction
(Range will fluctuate based on promotional campaigns at any given time, such as
the current 50% bonus deposit program currently in place)

Monte Carlo - 10% to 16% of every transaction
(Range will fluctuate based on promotional campaigns at any given time, such as
the current 50% bonus deposit program currently in place)

SUMMARY FINANCIAL INFORMATION

Year Ended December 31 2001 2000 1999

Revenue $ -0- $ -0- $ -0-

Net Income (Loss) ($1,694,934) ($1,230,269) ($613,218)

Earnings per Share ($0.02) ($0.02) ($0.02)

SUMMARY OF CERTAIN INFORMATION

This summary is qualified by the more detailed information set forth
elsewhere in this Prospectus, which should be read in its entirety. When used
with reference to periods after the Stock Distribution (as defined below), the
terms the "Company" mean Interspace Enterprises, Inc.

INTERSPACE ENTERPRISES, INC. Owner of www.planetlotto.com. A
Colorado corporation.

MANAGEMENT For information regarding employment
agreements with certain senior
management of the Company, see page 15.

SHARES OUTSTANDING 122,692,063 as of June 30, 2002

RISK FACTORS Stockholders should carefully consider the

risk factors associated with investing in
our common stock. A detailed description
of the associated risks are contained in
the Section titled "Risk Factors" beginning
on page 7.

TRADING MARKET Over-The-Counter Bulletin Board

STOCK TICKER SYMBOL "ITET" is the current symbol of the Company

TRANSFER AGENT AND REGISTRAR Executive Registrar and Transfer Agency, Inc.

DIVIDEND POLICY The Company has no current plans to declare
or issue a dividend.

PRINCIPAL OFFICE 7825 Fay Avenue, Suite 200
La Jolla, California 92037
(858) 456-3539

RISK FACTORS

OUR SECURITIES ARE HIGHLY SPECULATIVE. YOU SHOULDN'T PURCHASE THEM UNLESS YOU
CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT. YOU SHOULD CAREFULLY CONSIDER THE
FOLLOWING RISK FACTORS BEFORE YOU DECIDE TO PURCHASE OUR SECURITIES.

An investment in this Offering is highly speculative and involves a high
degree of risk. Prior to the purchase of any Shares, a prospective investor
should carefully consider the following risk factors, as well as other
information contained in this Offering Circular, including the financial
statements and notes contained elsewhere in this document. The Shares should
not be purchased by persons who cannot afford the loss of their entire
investment. This Prospectus contains certain forward-looking statements. Our
actual results could differ materially from the results anticipated in these
forward-looking statements as a result of certain of the factors set forth under
"Risks Factors" and elsewhere in this Prospectus.

FACTORS AFFECTING THE COMMON STOCK

TO CONTINUE OPERATIONS, WE RELY ON THE CONTINUED SALE OF POTENTIALLY VOLATILE
STOCK.

It is Unlikely that our Company Will be Able to Continue as a Going Concern
Without a Significant Improvement in Our Financial Condition, Which has
Constrained our Ability to Finance Acquisitions, Web and Internet Development
and Other Operating Expenses as Needed.

Our ability to continue operations is dependent upon our continued sale of
our securities for funds to meet our cash requirements, and as a result, our
ability to continue as a going concern is doubtful.

Unless we are able to generate sufficient revenue or raise additional funds
when needed, it is likely that we will be unable to continue our planned
activities, including our acquisition and expansion strategy even if we are
making progress towards implementing our business plan and attracting new
players. The longer the duration of the business plan implementation, the more
unlikely it is that we will be able to raise such funds on favorable terms to us
or at all, or that any funds raised will be sufficient to complete
implementation of the business plan to the point where revenues will be
sufficient to sustain our operations and meet our expenses. There is no
assurance that the business plan, if and when fully implemented, and additional
financing from the sale of our common stock will improve our financial
condition.

We may not be able to obtain additional financing on favorable terms to us,
if at all. If adequate funds are not available, or are not available on terms
favorable to us, we may not be able to effectively continue or complete the
implementation of our business plan. Our auditor expresses a substantial doubt
about our ability to continue as a going concern. At the present time, we have
negative working capital and negative shareholder's equity, and the book value
of our common stock is zero.

PENNY STOCKS MAY BE DIFFICULT TO SELL IN THE SECONDARY MARKET

Because Our Shares Are 'Penny Stocks,' You May Be Unable to Resell Them in The
Secondary Market. A "penny stock" is an equity security with a market price of
less than $5 per share which is not listed on the NASDAQ or another national
securities exchange. Due to the extra risks involved in an investment in penny
stocks, federal securities laws and regulations require broker/dealers who
recommend penny stocks to persons other than their established customers and
accredited investors to make a special written suitability determination for the
purchaser, provide them with a disclosure schedule explaining the penny stock
market and its risks, and receive the purchaser's written agreement to the
transaction prior to the sale. These requirements limit the ability of
broker/dealers to sell penny stocks. Also, because of the extra requirements,
many broker/dealers are unwilling to sell penny stocks at all. As a result, you
maybe unable to resell the stock you buy as a result of this offering and could
lose your entire investment.

THERE ARE NO ASSURANCES THAT THE PUBLIC TRADING MARKET ON OTC BULLETIN
BOARD FOR INTERSPACE ENTERPRISES WILL BE SUSTAINED.

Subsequent to this offering, there are no assurances that a public trading
market shall continue to exist for the common stock of Interspace Enterprises.
There can be no assurance that a public trading market for the common stock will
be sustained, although we anticipate that it will continue on the OTC Bulletin
Board. Consequently, there can be no assurance that a regular trading market,
other than Bulletin Board trading, for our securities will develop in the
future. If a trading market does in fact develop for the

securities offered hereby, there can be no assurance that it will be maintained.
If for any reason such securities fail to maintain their listing on the Bulletin
Board, the listing is not maintained, or a public trading market ceases to
exist, holders of our securities may have difficulty in selling their securities
should they desire to do so.

OTHER RISK FACTORS

WE FACE PROBLEMS FREQUENTLY ENCOUNTERED BY A NEW BUSINESS. We have just
recently emerged from the development stage, however our operations are subject
to all of the risks inherent in the establishment of a new business enterprise,
including the absence of an operating history. The likelihood of our success
must be considered in light of the problems, expenses, difficulties,
complications and delays frequently encountered in connection with the formation
of a new business, the development of new technology, and the competitive
environment in which we will operate. In order to achieve profitability, we will
need to successfully complete development of certain products, hire and manage
additional staff for administrative, marketing and sales related functions, and
effectively service clientele. We are just beginning to face the challenges of
moving from a development stage company to an operating company, and no
assurances can be given as to whether such transition will take place smoothly
or the likelihood of success in the transition.

WE HAVE A LIMITED OPERATING HISTORY, AND HAVE INCURRED LOSSES SINCE
INCEPTION, WITH NO ASSURANCE OF PROFITABILITY. Interspace Enterprises, Inc. was
incorporated in 1998 and, has just begun to generate revenues as of December 20,
2001. Accordingly, we have a very limited operating history, which makes the
prediction of future results difficult or impossible. We have incurred
significant net losses since inception of approximately of $2,897,298. As of
September 30, 2001, we have negative Shareholders' Equity of approximately
$(410,912). We generally are unable to significantly reduce expenses in the
short-term to compensate for any expected revenue short fall. Accordingly, any
significant short fall of revenues in relation to our expectation would have an
immediate adverse effect on our business, financial conditions and results of
operation. There can be no assurance that we will be profitable in any future
period and recent operating results should not be considered indicative of
future financial performance. We are subject to the risk inherent in the
operation of a new business enterprise and there can be no assurance that we
will be able to successfully address these risks. See "Selected Financial Data"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

WE ARE SUBJECT TO RISKS ASSOCIATED WITH DEPENDENCE ON THE INTERNET AND INTERNET
INFRASTRUCTURE DEVELOPMENT.

Our success will depend in large part on continued growth in, and the use
of, the Internet. There are critical issues concerning the commercial use of
the Internet which remain unresolved. The issues concerning the commercial use
of the Internet which we expect to affect the development of the market for our
products and services include:

. security . ease of access

. reliability . quality of service

. cost . necessary increases in bandwidth availability

The adoption of the Internet for information retrieval and exchange, commerce
and communications, particularly by those enterprises that have historically
relied upon traditional means of commerce and communications, generally will
require that these enterprises accept a new medium for conducting business and
exchanging information. These entities likely will accept this new medium only
if the Internet provides them with greater efficiency and an improved arena for
commerce and communication.

WE ARE SUBJECT TO RISK OF COMPUTER AND COMMUNICATION SYSTEMS FAILURE WHICH MAY
HINDER OUR ABILITY TO OPERATE SUCCESSFULLY.

Our success, in particular our ability to successfully receive and process
lottery purchases and provide high-quality customer service, largely depends on
the efficient and uninterrupted operation of our computer and communications
systems. Our systems and operations are vulnerable to damage or interruption
from fire, flood, power loss, telecommunications failure, break-ins, earthquake
and other third party events and Acts of God.

THE INTERNET MAY BECOME SUBJECT TO ADDITIONAL GOVERNMENT REGULATION, WHICH COULD
AFFECT OUR OPERATIONS OR INCREASE OUR BUSINESS COSTS.

Laws and regulations directly applicable to communications or commerce over
the Internet are becoming more prevalent. The law of the Internet, however,
remains largely unsettled, even in areas where there has been some legislative
action. It may take years to determine whether and how existing laws such as
those governing intellectual property, privacy, libel, contracts and taxation
apply to the Internet. In addition, the growth and development of the market for
online commerce may prompt calls for more stringent consumer protection laws,
both in the United States and abroad, that may impose additional burdens on
companies conducting business online. The adoption or modification of laws or
regulations relating to the Internet could adversely affect our business.

The success of our service will depend in large part upon the development
and maintenance of the Web infrastructure, such as a reliable network backbone
with the necessary speed, data capacity and security. We also depend on timely
development of complementary products, such as high-speed modems, for providing
reliable Web access and services. Because global commerce and the online
exchange of information are new and evolving, it is difficult to predict with
any assurance whether the Web will prove to be a viable commercial marketplace
in the long-term. The Web has experienced, and is expected to continue to
experience significant growth in the numbers of users and amount of traffic. To
the extent that the Web continues to experience increased numbers of users,
frequency of use of increased bandwidth requirements of users, the Web,
infrastructure may not continue to be able to support the demands placed on it
by this continued growth and the performance or reliability of the Web may be
compromised. The infrastructure of complementary products or services necessary
to make the Web a viable commercial

marketplace of the long-term may not be developed and, even if it is developed,
the Web may not become a viable commercial marketplace for products and services
such as those offered by the company. If the necessary infrastructure, standard
or protocols or complementary products, services or facilities are not
developed, or if the Web does not become a viable commercial market place, our
business, financial condition and results of operations will be harmed. Even if
the infrastructures, standards or protocols or complementary products, services
or facilities are developed and the Web becomes a viable commercial marketplace
in the long term, we might be required to incur substantial expenditures in
order to adapt our service to changing Web technologies, which could harm our
financial condition and results of operations.

LEGAL RISKS ASSOCIATED WITH INFORMATION DISSEMINATED THROUGH THE COMPANY'S
SERVICES MAY HARM THE COMPANY'S BUSINESS.

We anticipate marketing a significant amount of products to our members on
the Internet. The law relating to the liability of online companies for
information carried on or disseminated through their web site is currently
unsettled. It is possible that claims could be made against online companies
under both United States and foreign law for defamation, libel, invasion of
privacy, negligence, copyright or trademark infringement, or other theories
based on the nature and content of the material disseminated through their web
sites. Several private lawsuits seeking to impose such liability upon other
online companies are currently pending. In addition, legislation has been
proposed in several states, including California, Maryland, Nevada, Virginia and
Washington that imposes liability for, or prohibits the transmission over the
Internet, of certain types of unsolicited e-mail or advertisements. The
imposition upon the company and other online providers of potential liability
for information carried on or disseminated through their web sites could require
us to implement measures to reduce our exposure to such liability, which may
require us to expend substantial resources and/or to discontinue certain
services. In addition, the increased attention focused upon liability issues as
a result of these lawsuits and legislative proposals could impact the growth of
Internet use. We do not currently carry liability insurance. Therefore, any
costs incurred by us as a result of such liability or asserted liability could
harm our business, financial condition and results of operations.

THE ISSUANCE AND ENFORCEMENT OF BROAD PATENTS COULD FORCE THE COMPANY TO MAKE
CERTAIN CHANGES IN THE WAY IT IMPLEMENTS THE COMPANY'S BUSINESS MODEL.

The U.S. Patent Office recently issued several business-method patents
having an impact on business conducted on the Internet, among them the
business-method patents relating to "one click" online transactions (whereby
third party affiliates provide certain services, including book review, online)
issued to Amazon.com. While we do not believe that any of the business process
patents issued to date will directly impact the way we plan on conducting the
Internet portion of our business, there can be no assurance that the U.S. Patent
Office will not issue additional business-method patents which could have an
adverse impact on our Internet business, forcing modification to some of our
planned business activities in order to avoid possible future claims of patent
infringement. The recent granting of such patents is still being challenged.
Furthermore,

the likelihood and ability to enforce such broad patents remains undetermined.
Nonetheless, the continued granting of such broad patents could, in the future,
force us to change our method of advertising, as well as other important aspects
of the Internet portion of our business or face the risk of litigation.

FORWARD-LOOKING STATEMENTS

This Registration Statement contains statements that constitute
forward-looking statements. All statements other than statements of historical
facts included in the Prospectus are forward-looking statements.
Forward-looking statements are typically identified by the words "believe,"
"expect," "anticipate," "intend," "estimate" and similar expressions. Although
such forward-looking statements (and the assumptions upon which they are based)
reflect Interspace Enterprises, Inc.'s current reasonable judgment regarding the
direction of its business, actual results will almost always vary, sometimes
materially. Interspace Enterprises, Inc. undertakes no obligation to release
publicly any revisions to any such forward-looking statements to reflect events
or circumstances after the date hereof or to reflect the occurrence of
unanticipated results. The information contained in this Prospectus, including
without limitation the information under "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
identifies important factors that could affect actual results, and Interspace
Enterprises, Inc.'s forward-looking statements are expressly qualified in their
entirety by such factors.

Item 4: Use of Proceeds

We will not receive proceeds from the registration of common stock by the
selling security holders as shown in "Selling Security Holders". We will
receive proceeds from the sale of 40,000,000 shares registered herein for sale
at a later date. We intend to use all proceeds from the registration and sale
of common stock for working capital including but not limited to, administrative
and general overhead expenses including salaries and bonuses, repayment of
obligations owed to third parties including vendors and creditors and expansion
of our business including the identification and purchase of other companies or
their assets.

25% 50% 75% 100%
Net Offering Proceeds 900,000 1,800,000 2,700,000 3,600,000

Marketing and Promotion 600,000 1,000,000 1,800,000 2,600,000
Salaries and Benefits 200,000 300,000 300,000 300,000
Web Development 50,000 100,000 100,000 100,000
General and Administrative 50,000 75,000 100,000 125,000
Working Capital 100,000 325,000 400,000 475,000

Item 5: Determination of Offering Price

In addition to the registration of shares of our common stock which is
currently traded on the Over-The-Counter Bulletin Board, the company is
registering 12,000,000 shares issuable upon exercise of options granted to
certain investors as additional consideration for their investment in the
company. The options contain strike prices ranging from $0.01 per share to
$0.20 per share, and were granted at a time when the company's common stock was
trading at or around $0.02 per share. The company will receive proceeds from
the exercise of these options.

Item 6: Dilution

As of December 31, 2001 the pro forma net tangible book value of our common
stock was $(0.01) per share. Net tangible book value per share is equal to our
total tangible assets less liabilities divided by the number of issued and
outstanding shares of our common stock. Assuming the exercise of all 12,000,000
options being registered herein and the sale of all40,000,000 shares registered
for the shelf herein at $0.09 per share, and the application of the net proceeds
as set forth under "Use of Proceeds"; the pro forma net tangible book value of
our common stock at December 31, 2001 would have been $945,087 or $0.01 per
share. This represents an immediate increase in our pro forma net tangible book
value of $0.02 per share to existing shareholders and an immediate dilution in
pro forma net tangible book value of $0.04 per share to persons acquiring our
shares through this registration statement.

Item 7: Selling Security Holders

The table below sets forth certain information as of the date of this
prospectus with respect to the amount and percentage ownership of each selling
security holder before this offering, the number of shares covered by this
prospectus and the amount and percentage ownership of each security holder after
this offering (assuming the issuance of the 28,296,991 shares being registered
for the account of security holders in this registration statement and the
exercise of options to purchase12,000,000 shares of common stock being
registered in this registration statement). Unless otherwise disclosed, none of
the selling security holders has had any material relationship with us in the
past three years.

Selling Security Shares Percentage Shares Shares Owned Percentage
Holder Owned Owned Being After Offering Owned
Before Before Registered (3) After
Offering Offering (2) Offering
(1) (4)

Donlon Murphy 2,007,000 1.9% 2,007,000 -0- Nominal
Corp. (5)

Zabadoo.com 7,000,000 6.6% 7,000,000 -0- Nominal
AG

Robert K. 7,352,000 6.9% 7,352,000 7,352,000 Nominal
Swanson

Bergen Briller 75,000 Nominal 75,000 -0- Nominal

Group
- -----------------
Shari Blecher 13,000 Nominal 13,000 -0- Nominal

Stuart Liberman 13,000 Nominal 13,000 -0- Nominal

Gilbert Satov 600,000 Nominal 600,000 -0- Nominal

Larry Heuchart 150,000 Nominal 150,000 -0- Nominal

Doug E. 163,000 Nominal 163,000 -0- Nominal
Lachance

Carl Jantz 833,333 Nominal 833,333 -0- Nominal

Ronnie Tan 833,333 Nominal 833,333 -0- Nominal

Kavan Singh 1,666,666 1.49% 1,666,666 -0- Nominal

Michael Tait 416,666 Nominal 416,666 -0- Nominal

Jonathan 833,333 Nominal 833,333 -0- Nominal
Wichman

Peter M. 1,500,000 1.34% 1,500,000 -0- Nominal
Reynolds

Donald & Diane 190,000 Nominal 190,000 -0- Nominal
Paquette

Jonathan H. 166,666 Nominal 166,666 -0- Nominal
Davis

David R. 200,000 Nominal 200,000 -0- Nominal
Heilbroner

William E. & 416,666 Nominal 416,666 -0- Nominal
Patricia A. Post

Gary S. Semple 150,000 Nominal 150,000 -0- Nominal

Maria S. 33,333 Nominal 33,333 -0- Nominal
Machado

Philip F. & 500,000 Nominal 500,000 -0- Nominal
Carol Lindner

Frederick C. & 66,666 Nominal 66,666 -0- Nominal
Perri L. Sachs

Robert Bowler 833,333 Nominal 833,333 -0- Nominal

Norman Rest 266,666 Nominal 266,666 -0- Nominal

Robert J.
D'Esposito, Jr. 393,333 Nominal 393,333 -0- Nominal

Marshal D. 20,000 Nominal 20,000 -0- Nominal
Schictman

Giovanni 16,666 Nominal 16,666 -0- Nominal
Garcia

Valentin 16,666 Nominal 16,666 -0- Nominal
Chavez

Gary Mozach 100,000 Nominal 100,000 -0- Nominal

Susan Rohrbach 50,000 Nominal 50,000 -0- Nominal

Paul & Pat 100,000 Nominal 100,000 -0- Nominal
Recore

Freedom
Financial Group 970,665 Nominal 970,665 -0- Nominal

David Robart- 250,000 Nominal 250,000 -0- Nominal

Morgan

Louis Malfara 100,000 Nominal 100,000 100,000 Nominal

(1) Percentage calculation is based on a total of 105,570,563 common
shares outstanding prior to the offering.

(2) Total number of shares being registered assumes exercise of all
12,000,000 options to purchase common shares and the sale of all
40,000,000 shares registered for the shelf.

(3) Total number of shares outstanding after the offering are calculated
assuming exercise of all12,000,000 options to purchase common shares
and the sale of all 40,000,000 shares registered for the shelf.

(4) Percentage calculation is based on a total of 179,692,063 common
shares outstanding after the offering, assuming exercise of all
12,000,000 options to purchase common shares and the sale of all
40,000,000 shares registered for the shelf.

(5) The Donlon Murphy Corporation is made up of members of the family of
Daniel P. Murphy, CEO of Interspace Enterprises, Inc. Mr. Murphy is
not a shareholder of Donlon Murphy, nor does he control any stock of
Donlon Murphy. Donlon Murphy was formed by members of Mr. Murphy's
family who own shares in Interspace Enterprises and have no direct
operational control of Interspace Enterprises, other than the
requisite voting power as a shareholder of Interspace Enterprises. Mr.
Murphy has no voting control over Donlon Murphy shares. The
controlling person of Donlon Murphy is Kelley Murphy.

(6) Zabadoo.com AG is owned by Zabfin Anstalt (100% ownership). Zabfin is
controlled by Adriaan Brink and Hugo Sele.

Bergen Briller is controlled by Mitch Briller and Mike Bergen.

(8) Freedom Financial Group is controlled by Edward Machado and David
Ditosti.

(9) None of the selling security holders are broker dealers or affiliates
of broker dealers.

Item 8: Plan of Distribution

We are registering the shares of common stock and options to purchase
common stock on behalf of the current shareholders of Interspace Enterprises,
Inc. in fulfillment of our contractual obligation to do so contained in certain
piggyback registration rights agreements with selling shareholders. Interspace
Enterprises agreed to pay all costs, expenses and fees in connection with this
registration. Interspace Enterprises will not receive any of the proceeds from
the distribution of the shares in which piggyback registration rights were
granted, but will receive proceeds from the exercise of options to purchase
shares. In addition, Interspace will receive all proceeds from the sale of
shares registered for the shelf, less any applicable commissions. Interspace has
not negotiated for the sale of the shelf registered stock contained in this
prospectus, thus it has no information at this time as to the commissions which
might be charged by underwriters. Interspace anticipates that a substantial
portion of these common shares will be sold directly to investors, outside of
any underwriting agreement, and thus without cost of commissions. Interspace
does not intend to retain an underwriter for the primary offering. Interspace
anticipates that selling shareholders will deposit their shares in

individual brokerage accounts, and that any such sales will occur through such
brokerage accounts.

Item 9: Legal Proceedings

The company is not a party to any material litigation and is not aware of
any threatened material litigation

Item 10: Director, Executive Officers, Promoters and Control Persons

(a) The following persons are currently serving as directors of the Company.
Certain information regarding each director is set forth below, including each
individual's principal occupation, and the year in which the individual was
elected a director of the Company or one of its predecessor companies. Mr.
Murphy is serving a 4 year term which commenced on April 16, 2000. Mr. Trujillo
is serving a 4 year term which commenced on April 16, 2000.

<BTB>

DIRECTORS

NAME AGE PRINCIPAL OCCUPATION SINCE
- ---- --- --------------------- -----
Daniel P. Murphy 32 Founder, President, Chief Executive 1998
Officer, Chairman and Director

Alejandro Trujillo 32 Founder, Chief Technology Officer 1998
and Director

EXECUTIVE OFFICERS

The executive officers of the Company are as follows:

NAME AGE POSITION WITH COMPANY TERM
- ---- --- --------------------- ----
Daniel P. Murphy 32 Chairman of the Board, President and 4 years
Chief Executive Officer

Andrew P. Patient 31 Chief Financial Officer, Treasurer 2 years
and Secretary

All officers spend 100% of their time on Company business. Directors meet at
least once a month on Company business.

EMPLOYMENT AGREEMENTS

its first year, with requirements for minimum increase of 50% each January 1.
Mr. Murphy is eligible for a performance bonus based on the greater of 1% of the
Company's operating income or a calculation based on the Company's increased
market value. No bonus was triggered under this clause during 2000. In addition,
Mr. Murphy is eligible to receive an annual stock incentive bonus equal to 1% of
the Company's outstanding shares and participate in the Company's Incentive
Stock Option Plan. No shares or options were granted for 2000 under the terms of
the contract. The agreement further provides that in the event of the
termination of Mr. Murphy's employment by the Company without cause, the Company
will pay Mr. Murphy his base salary for the remainder of the initial term, a
prorated bonus and continuation of medical insurance coverage, and his
restricted stock and stock options will vest immediately. In the event of the
termination of Mr. Murphy's employment by the Company as a result of change in
control, the Company will be required to pay Mr. Murphy a termination fee equal
to 10 times his annual base salary, plus any accrued bonuses or other incentive
compensation.

Mr. Trujillo's employment contract is for an initial term of two years. The
employment agreement provides for a minimum base salary of $80,000 in its first
year, with requirements for minimum increase of 20% each January 1. Mr. Trujillo
is eligible for a performance bonus based on the greater of 0.25% of the
Company's operating income or a calculation based on the Company's increased
market value. No bonus was triggered under this clause during 2000. In addition,
Mr. Trujillo is eligible to receive an annual stock incentive bonus equal to
0.25% of the Company's outstanding shares and participate in the Company's
Incentive Stock Option Plan. No shares or options were granted for 2000 under
the terms of the contract. The agreement further provides that in the event of
the termination of Mr. Trujillo's employment by the Company without cause, the
Company will pay Mr. Trujillo his base salary for the remainder of the initial
term, a prorated bonus and continuation of medical insurance coverage, and his
restricted stock and stock options will vest immediately.

Mr. Patient's employment contract is for an initial term of two years. The
employment agreement provides for a minimum base salary of $80,000 in its first
year, with requirements for minimum increase of 25% each January 1. Mr. Patient
is eligible for a performance bonus based on the greater of 0.25% of the
Company's operating income or a calculation based on the Company's increased
market value. No bonus was triggered under this clause during 2000. In addition,
Mr. Patient is eligible to receive an annual stock incentive bonus equal to
0.25% of the Company's outstanding shares and participate in the Company's
Incentive Stock Option Plan. No shares or options were granted for 2000 under
the terms of the contract. The agreement further provides that in the event of
the termination of Mr. Patient's employment by the Company without cause, the
Company will pay Mr. Patient his base salary for the remainder of the initial
term, a prorated bonus and continuation of medical insurance coverage, and his
restricted stock and stock options will vest immediately.

(b) Identification of Certain Significant Employees.

NONE

(d) Business Experience

The following is a brief account of the business experience during the past
five years of each of the Company directors and executive officers, including
principal occupations and employment during that period and the name and
principal business of any corporation or other organization in which such
occupation and employment were carried on.

Daniel P. Murphy, President, Chief Executive Officer, Chairman and Director

Mr. Murphy, is the President and Founder of the Company and has served as
its Chief Executive Officer since inception. Mr. Murphy is also the Chairman of
the Board of Directors for Interspace Enterprises. Prior to founding the
Company, Mr. Murphy spent two years in operations management at Taco Bell
Corporation. Mr. Murphy has worked as a business consultant for various
companies from 1990 through 1996. Mr. Murphy, educated at the University of
California, San Diego (UCSD) in the field of Urban Studies and Planning, has an
entrepreneurial background in marketing, sales and business development arising
through his tenure as the Principal of a wholesale belt manufacturing company
from 1990 to 1992. Mr. Murphy was in charge of all aspects of business
operations including advertising, marketing, administration, sales,
manufacturing and design. His current primary responsibility is to develop and
maintain the Company vision, oversee all areas and Company departments, approve
all financial obligations, seek business opportunities and strategic alliances
with other organizations, and plan, develop and establish policies and
objectives of business organization in accordance with board directives and
Company charter. Mr. Murphy also has experience in operations management.

Alejandro Trujillo, Chief Technology Officer, Director

Mr. Trujillo is a co-founder, director and has served as the Company's
Chief Technology Officer since June 1998. Mr. Trujillo is also a member of the
Company's Board of Directors. Prior to working with the Company, Mr. Trujillo
was the V.P. of Development for Netrom Inc., a multimedia development company,
from 1996 through 1998. Mr. Trujillo has an extensive background within the
programming and Internet industry.

Andrew P. Patient, Chief Financial Officer and Secretary

Mr. Patient has served as the Company's Chief Financial Officer and
Secretary since 1999. Before joining Interspace, Mr. Patient held the position
of Chief Financial Officer of Netrom, Inc., a multimedia development company,
from 1997 to 1999. Prior to that, Mr. Patient worked for six years as a senior
audit staff member with BDO Dunwoody in the Toronto area and later with an
affiliate office in San Diego. Mr. Patient earned a Bachelors degree with
honors from Brock University in 1994 and is a Certified Public Accountant and
Canadian Chartered Accountant.
20

Mr. Robert K. Swanson has been nominated to the Board of Directors.

Robert K. Swanson, 69, is currently the chairman of the RKS, Inc., an
International Investment and Marketing Consulting Firm located in Paradise
Valley, Arizona. He is also a Partner in ST International LTD., an International
Marketing Consulting Firm located in London, England. In addition, Swanson is a
consultant to various legal firms on matters of corporate ethics and governance
in the United Kingdom and United States. He has served as a chairman and/or
director of various public and private companies, including the Del Webb Corp.
from January 1981 through October 1987. Swanson received his Bachelor of Arts,
Magna Cum Laude from the University of South Dakota. He was also a Fullbright
Scholar at the University of Melbourne in Melbourne, Australia. In addition,
Swanson has pursued post-graduate studies at the Harvard University School of
Business and Oxford University.

(e) Committees of the Board of Directors

During 2001, the Board of Directors met on twenty-six occasions. All
directors attended 100% of the meetings of the Board during 2001.

The Company is currently actively seeking additional Board members and has
identified several potential candidates in the areas of finance, gaming and
technology. It is the intent of the Company to instate an additional 3 members
to the Board in the 2002 fiscal year.

Item 11: Security Ownership of Certain Beneficial Owners and Management

Securities Ownership of Principal Stockholders

The following table sets forth the Common Stock of the Company's Common
Stock beneficially owned by each person who is known by the Company to be the
beneficial owner of more than five percent of the Common Stock as of September
30, 2001.

Outstanding
-----------
Title Beneficial Owner- Beneficially Percent
Owned
Of Class Name and Address Owned Owned
- ---------- ------------------------- ------------ -------
Common Daniel P. Murphy
President, Chairman, CEO, 15,750,000 (1) 14.91%
and Director
7825 Fay Avenue, #200
La Jolla, California 92037

Common Alejandro Trujillo
Chief Technology Officer and 15,750,000 (2) 14.91%
Director
7825 Fay Avenue, #200
21

La Jolla, California 92037

Common Andrew P. Patient
CFO, Treasurer, and Secretary 6,750,000 (3) 6.39%
7825 Fay Avenue, #200
La Jolla, California 92037

Common Robert K. Swanson 14,372,000 (4) 13.61%

Common Zabadoo.com AG 12,000,000 (5) 11.36%

Beneficial Ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Except as indicated by footnote, and subject
to community property laws where applicable, the persons named in the table
above have sole voting and investment power with respect to all Common and
Preferred Stock and options or warrants to purchase stock.

(1) Includes 6,750,000 shares pledged against payment of a promissory note to
the Company in the amount of $400,000 used to exercise the options under
which the shares were acquired. Mr. Murphy has full power to vote the
shares and exercise all other rights of ownership, other than sale of the
shares.

(2) Includes 6,750,000 shares pledged against payment of a promissory note to
the Company in the amount of $400,000 used to exercise the options under
which the shares were acquired. Mr. Trujillo has full power to vote the
shares and exercise all other rights of ownership, other than sale of the
shares.

(3) Includes 3,600,000 shares pledged against payment of a promissory note to
the Company in the amount of $287,500 used to exercise the options under
which the shares were acquired. Mr. Patient has full power to vote the
shares and exercise all other rights of ownership, other than sale of the
shares.

(4) Includes 7,000,000 shares issuable upon exercise of options to purchase
common stock. Option strike price is $0.01 per share and assumes exercise
of all options,

(5) Includes 5,000,000 shares issuable upon exercise of options to purchase
common stock. Option strike prices range from $0.02 per share to $0.20 per
share and assumes exercise of all options.

Item 12: Description of Securities

All of the shares of common stock, $0.0001 par value, (the "Common Stock")
offered hereby (the "Offering") are being sold by certain shareholders who are
registering up to 28,296,991 shares of common stock, 12,000,000 options to
purchase shares of common stock, and 40,000,000 shares registered for the shelf.
All shares contained in this registration statement are common shares. The
company's common shares are listed on the Over-The-Counter Bulletin Board.

The following description of certain matters relating to the common stock
is a summary and is qualified in its entirety by the provisions of our articles
of incorporation and bylaws.

COMMON STOCK

The holders of our common stock are entitled to one vote per share on all
matters submitted to a vote of our shareholders. The holders of our common stock
have the sole right to vote, except as otherwise provided by law or by our
articles of incorporation. In addition, such holders are entitled to receive
ratably such dividends, if any, as may be declared from time to time by the
board of directors out of legally available funds, subject to the preferences
granted to the holders of our preferred stock. In the event of the dissolution,
liquidation or winding up of 2-Infinity, the holders of our common stock are
entitled to share ratably in all assets remaining after payment of all our
liabilities, subject to the preferences granted to the holders of our preferred
stock.

The holders of our common stock do not have cumulative voting rights or
preemptive rights to acquire or subscribe for additional, unissued or treasury
shares in accordance with the laws of the state of Colorado. Accordingly, the
holders of more than 50 percent of the issued and outstanding shares of our
common stock voting for the election of directors can elect all of the directors
if they choose to do so, and in such event, the holders of the remaining shares
of our common stock voting for the election of the directors will be unable to
elect any person or persons to the board of directors. All outstanding shares of
our common stock are fully paid and nonassessable.

The laws of the state of Colorado provide that the affirmative vote of a
majority of the holders of the outstanding shares of our common stock is
required to authorize: (i) amendments to our articles of incorporation, with
some exceptions; (ii) mergers or consolidations with any corporation, with some
exceptions; or (iii) any liquidation or disposition of any of our substantial
assets other than in the usual and regular course of business.

Item 13: Interest of Named Experts and Counsel

None.

Item 14: Disclosure of Commission Position on Indemnification for Securities
Act Liabilities

The Company's Bylaws and the Colorado Business Corporation Act provide for
and Directors of the Company are indemnified generally against expenses actually
and reasonably incurred in connection with proceedings, whether civil or
criminal, provided that it is determined that they acted in good faith, were not
found guilty, and, in any criminal matter, had reasonable cause to believe that
their conduct was not unlawful.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers, or persons
controlling our Company pursuant to the foregoing provisions, we have been

informed 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.

No dealer, salesperson, or 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 representations must not
be relied upon as having been authorized. Neither the delivery of this
prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in our affairs since the date
hereof or that the information contained herein is correct as of any date
subsequent to the date hereof. This prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any securities offered hereby by
anyone in any jurisdiction in which such offer or solicitation is not authorized
or in which the person making the offer is not qualified to do so or to anyone
to whom it is unlawful to make such offer or solicitation.

Item 15: Organization Within the Last Five Years

The 1999 Omnibus Stock Plan (the "Executive Plan"), approved by
shareholders in 1999, was implemented in March, 2000 with 3 employees
participating. Mr. Murphy was granted options to purchase 250,000 shares at
$1.10 per share for a period of 5 years. Mr. Trujillo was granted options to
purchase 250,000 shares at $1.10 per share for a period fo 5 years. Mr. Patient
was granted options to purchase 250,000 shares at $1.00 per share for 5 years.
Under the terms of the Executive Plan, eligible key employees were granted the
right to purchase shares of the Company's Common Stock at the market price, or
in the case of owners of 10% or more of the outstanding shares 110% of the
market price, which was $1.00 per share at the time of grant. All options were
exercised on March 22, 1999 and were financed through promissory notes from the
Company at the Federal Rate for Mid-Term Funds, payable on or before March 22,
2004. The loans were fully-recourse to the participating employees but were
guaranteed by 150% of the number of shares acquired through the note. Sales of
the shares purchased under the Plan are subject to the restrictions of
unregistered securities.

On April 12, 2000, Berkshire Capital Partners, Inc. entered into a Share
Purchase Agreement with the control shareholders of Marathon Marketing Corp. in
which Berkshire Capital Partners, Inc. was to acquire all 672,000 shares
outstanding of the Registrant from the certain shareholders for purpose of
accomplishing a Merger of InterSpace Enterpsises, Inc. and Marathon Marketing
Corp. The Agreement was subsequently cancelled and Prudential Overseas Company,
Ltd. acquired 672,000 shares. Prudential Overseas Company, Ltd. exchanged
672,000 shares to InterSpace Enterprises, Inc. for 672,000 shares of its stock
on April 17, 2000.

The officers and directors of Marathon Marketing Corporation consisted of the
following: Jeff Ploen, Scott Deitler and Jim Toot. On April 14, 2000 these
individuals sold the entire shares outstanding, which amounted to 672,000 shares
of common stock in Marathon Marketing corporation to Prudential Overseas
Company, Ltd. Their relationship as officers and directors ended after this
transaction occurred. Interspace Enterprises has not had any contact from these
individuals and they have no involvement in Interspace Enterprises in any
capacity.

On April 17, 2000, InterSpace Enterprises, Inc. completed a Share Exchange
Agreement with shareholders of Marathon Marketing Corp. in which InterSpace
Enterprises, Inc., a Delaware corporation, acquired all 672,000 shares
outstanding of the Registrant for the purposes of accomplishing a Merger of
Marathon Marketing Corp. and InterSpace Enterprises, Inc. The Merger was
subsequently completed.

Interspace Delaware was the predecessor Company to the Interspace
Enterprises, Inc., Colorado. The officers and directors of Interspace Delaware
are the same as they are currently. The major shareholders of Interspace
Delaware were the founders, Daniel P. Murphy and Alejandro Trujillo, who
together owned more than 50% of the outstanding common shares at that time.

The merger between Interspace Delaware and Marathon Marketing consisted of
a simple one for one share exchange whereby each shareholder of Interspace
received one share of Marathon. Marathon then changed its name to Interspace
Enterprises, Inc. There were 672,000 shares of Marathon Marketing and 6,668,200
shares of Interspace Delaware outstanding at the time of the merger, for a total
of 7,340,200 shares outstanding on a post-merger basis. No cash was exchanged
as part of the merger and there were no agreements or arrangements that
benefited the officers, directors or major shareholders of either company. Mr.
Michael A. Littman performed legal services as part of the merger and received
approximately $2,500 as compensation.

Item 16: Description of Business: Interspace Enterprises

GENERAL DEVELOPMENT OF BUSINESS

InterSpace Enterprises, Inc. is a Colorado corporation. The principal
executive offices are currently located at 7825 Fay Avenue, Suite 200, La Jolla,
California 92037. All communications with the Company should be forwarded to the
foregoing address, by telephone (858) 456-3539, by facsimile at (858) 454-2679
or via the company's Internet address at www.planetlotto.com.

InterSpace Enterprises, Inc., a Delaware corporation ("InterSpace
Delaware") was formed on June 30, 1998. Following incorporation, the InterSpace
Delaware Founders, developed a preliminary business plan for the PlanetLotto
lottery and game show, raised seed capital, and began to negotiate with various
foreign governments to host the PlanetLotto lottery. For the purposes of
becoming a publicly traded company, InterSpace Enterprises acquired all of the
outstanding shares of common stock of Marathon Marketing Corporation, a
Colorado corporation. After acquiring all of the Marathon Marketing common
stock InterSpace Delaware merged into its subsidiary on April 17, 2000, changing
its name to InterSpace Enterprises, Inc. Thereafter, the Company has begun to
implement the business plan and carry on the business activities previously
initiated by Interspace Delaware. The Company assumed, performed and became
responsible for all assets, contracts, liabilities, obligations and agreements
of InterSpace Delaware as a result of the Merger. Additionally, the company made
the necessary filings to become a fully reporting 12(g) publicly traded company
and subsequently received approval to begin trading of its common stock on the
NASD Over-The-Counter Bulletin Board market under the symbol "ITET".

PRODUCTS AND SERVICES

PlanetLotto Web Site. The Company's core product is the marketing of the
PlanetLotto.com web site. The Company's web site has incorporated all of the
traditional, as well as the new Internet functions of a lottery system.
Consumers are first greeted by a state-of-the-art web site display with a large
continuous "PlanetLotto ticker", which displays the ever-increasing current
weekly jackpot. As customers enter into the weekly jackpot, they will be
instructed to become a player. The player prompts ask the new players to answer
a few simple questions, screen name, country of origin, etc, followed by
appropriate Company disclaimers, and they are then given a player password.
Players may enter any weekly jackpot by simply purchasing a $2.00 (U.S.) entry
fee and selecting their personal numbers or by selecting the "Planet Pick", a
random number picking program. The transaction is secured through an
established online credit card or digital cash transaction company. The player
will then be given a confirmation e-mail, complete with a PlanetLotto
confirmation number. The web site also includes visual displays and an archive
video collection of past winners. As of March 15, 2002, we have had 4987 users
of the Internet lottery games and US$12,522.52 has been paid out in prizes to
date.

Planetlotto Lottery Infrastructure

Lottery License Partner. The company's current lottery partner is the
International Lottery in Liechtenstein Foundation, licensed by the Government of
Liechtenstein to run the company's Lottery. The term of the Lottery License
agreement is five years. The license is highly regulated, with auditors Ernst &
Young appointed by the government to oversee all aspects of the operation.

The company's operational partner, Zabadoo.com AG provides all the website
infrastructure for the planetlotto.com web site, including hosting, bandwidth,
management of the web site and providing all customer support.

Payment Processing. Planetlotto.com has an established relationship with one of
the largest acquiring banks in Germany, and backup facilities in Switzerland and
the UK, to provide Planetlotto.com with acquiring ability. Deposits are help
in trust accounts at the Liechtensteinische Landesbank, owned by the government
and audited by Ernst & Young AG.

Statistics. In order for the company to be able to measure how successful
the company's marketing and promotion program are, the company will utilize an
advanced statistics system, which will enable the company to:

Monitor sales and site traffic in real time
Track data per advertisement banner including hits, signups, conversion rates,
Average spend and total revenue
Get detailed sales and customer information about your best players
Get geographical information by sales and sign ups
Monitor detailed information about click-throughs, including the referring site
Get in-depth information about player paths through the site and most accessed
pages

Server Room. The Planetlotto.com server room is a purpose-built Grade 1
computing environment. It has a dual, high-capacity, under-floor air
conditioners keeping the temperature stable, and Inergen (Argonaut) fire
protection systems. Power supply is ensured with dual uninterruptible power
supplies linked to a 30Kw diesel generator.

Disaster Recovery. A fully functional off-site disaster recovery facility
is in place 10 km from the main server center. This facility contains up-to-date
copies of all data and is linked via wireless network to the primary site. As an
autonomous system with 3 independent backbones (UUNET, GlobalOne and IP Plus),
Planetlotto manages its own BGP (Border Gateway Protocol) sessions with the
backbones giving it the ability to react to localized problems on the Internet
by rerouting traffic where necessary. Each line runs at E1 (2Mb) speed, and
further capacity will be available at short notice. Graphics are served through
a network of 8000 servers around the world provided by Akamai . This ensures
that customers always receive their graphics and other "heavy" content from the
closest server to them. All server equipment will be configured in redundant
clusters to provide the highest possible resilience. This includes firewalls,
routers, utility and database servers. Web servers are accessed through a pair
of Big IP2 load balancing systems that will enable Planetlotto.com to add new
servers very quickly, and load balance across multiple servers.

Data Storage. Compaq Storageworks RA8000 FC Fiber Channel RAID are used
for critical data storage. This system has redundancy throughout and is
extremely fast due to its 64Mb read-write cache unit and high-speed fiber
channel connectivity. The database runs on an 8 processor Compaq Systempro 8500
server with 4Gb main memory.

Security. There is a high level of physical security on site. Access is
controlled to all areas and alarms are monitored 24/7/365 by an on-site security
control room. In addition, firewalls and systems are configured to provide the
highest level of security, and has been tested in both internal and external
penetration tests. Three hardware engineers will also be available 24/7/365 to
solve problems if they occur. A sophisticated alerting system is in place to
notify support staff when there are problems.

Internal Controls. Planetlotto.com weekly draws are attended by two
scrutineers from Ernst & Young AG, Vaduz. They supervise the pre-draw procedures
and take possession of a CD-ROM containing data on entries for the draw. This
record is the definitive record used to verify the winners, and is validated
against the database before the draw can take place. Draws are performed using
one of two mechanical ball machines manufactured by Editec. Prior to the draw a
ball set is selected at random and test draws are carried out to ensure that the
machine and ball sets have not been tampered with. After the draw an independent
program is run by the auditors and the results compared to the database to
verify that the data is correct and there are no errors.

Jackpot Insurance. Planetlotto.com's weekly draw features two headline
jackpots, the weekly 7/49 Jackpot and the Bonus Play Jackpot, which are insured
by a consortium of Lloyds of London insurance underwriters.

Real Time Broadcast. The draws are currently filmed and broadcast live on
the Internet using Real Video. Players can also watch archive copies of the
draws. Draws are filmed using multiple broadcast-quality cameras.

First Tier. The company offers round-the-clock customer support Operators
are multi-lingual and trained to respond to e-mails and phone calls making use
of an extensive knowledgebase. E-mails are assigned a tracking number via an
auto-reply function and are answered personally within 1 hour.

Second Tier. In circumstances where support queries e-mails cannot be
answered by Aqua Online, the player will be informed that the query has been
passed on to a manager and the query is forwarded to our team in Liechtenstein.
Liechtenstein support is available 08.00 to 19.30 CET weekdays and reduced hours
over the weekend and public holidays. Support staff has access to an extensive
CRM database, which will enable them to answer customer queries efficiently and
effectively.

Email Program. The company uses a state-of-the-art e-mail system that
integrates with the database and enables it to send e-mails to selections of
players based on a wide variety of criteria. E-mails are formatted in such a way
as to display correctly in all mail clients and are multilingual and able to
incorporate customer information such as name and account number. Newsletters
will also be sent out weekly to all players who have not opted out.

Marketing Plan. The Company's tentative plans currently include brand
recognition through a comprehensive viral marketing campaign, supplemented with
Internet banner advertisements, search engine cataloging, and e-mail database
marketing.

Charities. PlanetLotto donates 10% of gross revenues to charity. The
Company is committed to a code of ethics that maintains the highest standards
and professional integrity with strict conformance with all legal and ethical
standards in the conduct of administration, finance and programming.

Because giving abroad represents an array of challenges for a private
donor, PlanetLotto has united with organizations that are able to provide
customized service and quick response in places of need around the world. The
Company has selected, International Make A Wish Foundation as our first partner
and currently are assessing two additional groups for potential partnership.

The Make-A-Wish Foundation(R) grants the wishes of children with
life-threatening illnesses to enrich the human experience with hope, strength,
and joy. They are the largest wish-granting organization in the world, with 81
chapters in the United States and its territories, and 22 international
affiliates on five continents.

COMPETITIVE ENVIRONMENT

IWON
URL: www.iwon.com
Location: Irvington, NY

Content: Search engine portal with daily $10,000 sweepstakes and monthly $1
million sweepstakes.
Revenue model: Advertising, sponsorship, e-commerce.
Users: N/A

LuckySurf.com
URL: www.luckysurf.com
Location: South San Francisco, CA
Content: $1 million sweepstakes
Lottery System: 7/50 system
Odds of Winning: 1 in 99 Million
Ticket Price: Free
Revenue model: Advertising: Sells click-thru's rather than impressions. Says its
advertisers have been averaging registration and purchase conversion rates of 13
percent, and that 95 percent of its initial advertisers have signed up for more.
Users: 125,400 registered

TreeLoot
URL: www.treeloot.com
Location: Overland Park, KS
Content: Simple "clicking" game with instant cash prizes of up to $25,000.
Revenue model: Advertising: Sells impressions and targeted impressions.
Users: Profiles approximately 6 million per year

Uproar
URL: www.uproar.com
Location: New York
Content: Dozens of slick, multiplayer, quiz-oriented games.
Revenue model: Advertising, licensing properties to other companies to create
co-branded game such as Lycos Trivia 2000.
Users: 3.6 million registered across all its properties.

Webstakes.com
URL: www.webstakes.com
Location: New York
Content: Weekly sweepstakes for such items as microwave ovens, high- definition
TVs, and cash prizes up to $100,000.
Revenue model: Advertising, sponsorship, syndication, licensing, consulting.
Users: 2 million registered

GOVERNMENT LICENSING AND REGULATION AND RELATED RISKS

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

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

The planetlotto.com web site is licensed and regulated and operated through
the government of Liechtenstein and, by virtue of the Treaty act of Rome,
Liechtenstein is allowed to sell it's products and services, including the sale
of lottery tickets via the Internet to All European States. It is the opinion of
the government of Liechtenstein that all visitors and players to their retail
outlets, including planetlotto.com are within the jurisdiction of Liechtenstein
and therefore there access to their lottery does not violate or is not subject
to such any additional laws and regulations. The company however, has taken a
conservative stance in this regard and has voluntarily restricted access from
U.S. players by not accepting deposits in the jurisdiction until legal
clarification has been established. Therefore, the Company faces the risk of
either civil or criminal proceedings brought by governmental or private
litigants who disagree with the Company's interpretation of laws and
regulations. Because there is little guiding authority, there is a risk that
the Company could lose such lawsuits or actions and be subject to significant
damages or civil or criminal penalties and fines. Such proceedings could also
involve substantial litigation expense, diversion of the attention of key
executives, injunctions or other prohibitions being invoked against the Company.
The uncertainty surrounding the regulation of Internet gaming could have a
material adverse effect on the Company's business, revenues, operating results
and financial condition.

Several countries, most notably law enforcement agencies in the United
States, believe that the laws of their country restrict, and in some instances
prohibit, interactive gaming operators from doing business with residents of
their countries and, in some instances, prohibit or restrict residents of their
respective countries from doing business with interactive gaming operators
located in a foreign country. The Department of Justice of the United States of
America has taken the position that the federal criminal laws of the United
States do, in fact, address interactive gaming operators that accept wagers from
residents of the United States. They have taken this position on legislation
pending in Congress, discussed below, and have also pursued various criminal
prosecutions. For example, of several indictments issued at the request of the
United States Attorney for the Southern District of New York, the one case that
went to trial involved Jay Cohen, an owner of World Sports Exchange, a licensed
gaming operator in Antigua. On February 28, 2000 the jury in the Federal
District Court case found Jay Cohen guilty of violating United States federal
law (18 U.S.C. Section 1084), a federal statute that purports to make it illegal
for a betting or wagering business to use a wire communication facility to
transmit bets or wagers in interstate or foreign commerce. Several of the counts
for which Mr. Cohen was found guilty solely involved his Internet operations.
The decision is on appeal.

Other countries, such as Great Britain, have recently lent new legitimacy
to online gambling. In March 2001, Great Britain dumped its tax on sports
betting in exchange for a pledge by its famed bookmakers to shut down their
offshore Internet operations and reopen them at home. One bookmaker said the
change could turn the United Kingdom into "the hub of the global gambling
industry." The tax-code change, announced by Chancellor of the Exchequer Gordon
Brown as part of the government's budget for 2002, makes Britain the first world
power to embrace Internet gambling. Under the new scheme, the government on
January 1, 2002 scrapped its 9 percent tax on wagers, which was paid directly by
bettors, and replaced it with a 15 percent tax on gross profits that will be
absorbed by bookmakers who conduct off-site wagering, either via the Internet or
by telephone, in Britain. The British bookmakers are free to accept wagers on
sports contests from all over the world, though it is still illegal to offer
online casino-style games over the Internet from the United Kingdom.

Britain's entry into online gambling is expected to put additional pressure
on the United States and other nations to either join the rush toward regulation
or develop a workable strategy to stop Internet gambling operators from
targeting their citizens. Britain's decision is the direct result of
competition from offshore operators doing business in tax-free jurisdictions. In
the face of such competition, virtually all of Britain's bookmakers had
established their own Internet divisions in locales as Antigua, Gibraltar and
Malta, cutting into the tax revenue the British government collects from
gambling.

Now, those bookmakers that return to Britain will enjoy a competitive
advantage over those offshore operators, who will be banned from advertising
their services in the United Kingdom. As a result of the debate on the
effectiveness of laws in the United States to address activities of interactive
gaming operators, there has been an extended effort in the United States to
prohibit certain types of interactive gaming by companies engaged in the
business of gaming. It is impossible to predict the outcome of such
legislation. If passed, such federal legislation would prohibit wagering over
the Internet by gambling businesses, with exceptions for certain forms of
gaming.

The Company believes that if such laws were found to be applicable to
activities of the Company, such laws would have a material adverse effect on the
Company's business, revenues, operating results and financial condition.

H.R. 4419, a Bill introduced in May, 2000 in the House of Representatives,
is titled the Internet Gambling Funding Prohibition Act. In the form introduced,
this Bill would have prohibited any gambling business from accepting any
financial instrument (defined as any check, wire, credit card charge or any
other transaction facilitated by a financial institution) for the purpose of
Internet gaming. At a Banking Committee hearing on June 28, 2000, the Bill
passed out of Committee with amendments that largely removed the international
reach of the Bill and also added exceptions to the prohibitions for pari-mutuel
and lottery. It was serially referred to the House Judiciary Committee for
consideration. More than 11 federal cases against the credit card companies and
several of the issuing banks were consolidated and assigned to Judge Stanwood R.
Duval Jr. in New Orleans. The plaintiffs were people who had lost money gambling
online. They argued that the banks and credit card companies were involved in
"illegal gambling on the Internet." In sending out monthly statements to the
plaintiffs who had used the cards to gamble online, the plaintiffs alleged that

the defendants committed mail and wire fraud in trying to collect "illegal"
debts. The plaintiffs also charged that the financial institutions were "aiding
and abetting "criminal enterprises. If the casinos had not accepted credit
cards, the plaintiffs argued, they wouldn't have gambled online.

On Feb. 23, Duval dismissed the cases outright. In an opinion Duval ruled that
the 1961 federal Wire Act, under which telephone and Internet bookmaker Jay
Cohen was convicted, applies only to sports betting and "does not prohibit
Internet casino gambling."
STRATEGIC RELATIONSHIPS

InterSpace recognizes the speed at which the Internet operates, and as
such, InterSpace plans to enter into several key strategic relationships, and is
pursuing additional partnerships. These partnerships are of several types:

- Alliances or partnerships with other technology companies that enable
InterSpace to get to market faster with a more robust or diverse
product offering.

- Alliances or partnerships that offer new and strong distribution
channels for our products.

- Alliances or partnerships that enhance transaction processing
relationships with financial institutions and e-commerce providers.

RESEARCH AND PRODUCT DEVELOPMENT

The Company recently launched its first product, Planetlotto.com, and new
product development will continue to be a primary focus of InterSpace for the
current fiscal year as the Company refines its business model and adds new types
of lottery style games. As the traditional lottery market and the interactive
online lottery market begin to converge, new games that redefine the online
lottery market will emerge. The Company plans to focus on a variety of
different types, styles and themes of games, focusing on different demographic
and niche markets in order to penetrate a larger user base. The Company spent
approximately $824,417 and $758,922 on research and development activities for
the years ended December 31, 2001 and 2000, respectively.

NUMBER OF EMPLOYEES

As of December 31, 2001, the Company employed 4 full-time employees. All
other personnel operate as independent contractors to the Company.

Item 17: Management's Discussion and Analysis of Plan of Operation

PLAN OF OPERATIONS

During the course of the next twelve months, Interspace Enterprises will
continue to market its PlanetLotto product through targeted affiliate license
partners. Because of its operational structure, Interspace has only minimal
operational cash needs. Management has and will continue to accrue management

salaries until such time as Interspace can afford to pay such salaries on an
ongoing basis. This structure, combined with the fact that PlanetLotto is fully
operational, minimizes the cash needs of the company. Little or no research and
development costs are anticipated, and the company does not anticipate any
expected purchase or sale of plant assets or equipment. There are no current
plans to significantly change the number of employees.

The company anticipates that all cash needs will be met in the short term from
the sale of common stock and proceeds from the sale of PlanetLotto lottery
tickets.

If the company succeeds in raising only nominal funds from this offering,
operations will continue as they have. Management has and will continue to
operate, and associated salaries will continue to accrue until such time as
Interspace can fund such expenses.

OVERVIEW

The most recent fiscal year has been a trying one for the Company. Commitments
for funding that went unfulfilled resulted in the need to reconfigure the
business model such that a partnership proved the most viable means to bring the
Company's core product to market. Limited capital availability due to the
downturn in the Internet and technology sectors meant that the Company was
forced to reduce its staff to core personnel in order to continue to operate. In
spite of these setbacks, the management successfully completed the company's
major milestone of making www.planetlotto.com operational in 2001 through the
partnership in September with the International Liechtenstein Lottery
foundation. Through this partnership, planetlotto.com became a retail outlet for
the Liechtenstein Lottery in December of 2001, a weekly lottery operated by
Zabadoo.com AG and regulated by ILLF and the Government of Liechtenstein,
audited by Ernst and Young, International and Insured by a Lloyds of London
Broker.

The partnership enabled the company to leverage the existing structure of
the lottery operations already in place under Zabadoo.com AG. By virtue of the 5
year agreement, the weekly operations of the Liechtenstein lottery and
management of the planetlotto.com web site, including customer service support,
maintenance and hosting are provided by ILLF and Zabadoo.com AG, in return for
equity in the Company and revenue sharing based on each transaction on the
Company's web site. Initially regarded as the Company's main competition, the
partnership with Zabadoo has allowed the Company to fast-forward its launch and
create the strongest Internet lottery presence currently on the web. In order to
develop a progressive jackpot, with a weekly rollovers of the Planetlotto
lottery, the company modified it's lottery model from a 6/70 lottery format to a
7/49 format which eliminated the need for the company to provide its own lottery
draw equipment, and separate audit procedures, one of them most costly aspects
of the original plan. Modifications in this manner allowed Planetlotto to launch
without the need to for significant additional capital. Additionally, the
Company negotiated a supplemental insurance policy to coincide with the 7/49
Jackpot, exclusive to the Planetlotto.com website. The Supplemental 1-year
insurance was paid in equity to Zabadoo.com AG in return for providing the
initial minimum deposit required to initiate the insurance policy. The 7/49
insurance policy allows Planetlotto.com to guarantee a progressive jackpot that
parallels traditional lotteries. The jackpot insurance is scheduled to increase
on a weekly basis throughout the 2002-year in the event that there is no jackpot
winner(s). Additionally, the term of the agreement includes an allocation of

each ticket sold from the prize pool to be included within the advertised
jackpot amount. Management believes that the implementation of a coordinated
marketing plan in 2002 will drive ticket sales over the insured amount and
develop a mature lottery model without the need to purchase additional insurance
in 2003.

Through the result of these strategic alliances, it is management's belief
that the company is well position within the online lottery industry to capture
a significant percentage of market share within this industry sector. The
current focus of the Company is to develop the Planetlotto brand through
strategic alliances with Internet based portals to distribute it's product on
the Internet. It is management's belief that the Company will be able to secure
adequate funding to enable the company to market the Planetlotto brand and
translate it's marketing effort into self-sufficient revenues and positive cash
flow, however, there can be no assurances that funding will occur.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2001 the Company had $130,815 in cash resources
available to satisfy requirements for operations, which are not sufficient to
sustain operations. No assurances can be given that the Company will be
successful in realizing sufficient funding to continue any operations. Based on
the partnership arrangement with Zabadoo.com AG, the Company was able launch the
PlanetLotto website and begin the generation of its first revenues. While the
website is fully operational, very little cash is available to begin the process
of marketing and promoting the site.

The Company is currently working to create exposure for the website via
strategic alliances and cross-marketing opportunities. While the deterioration
of funding sources for internet based businesses has created financial stress
for the Company, the cost of web-based advertising has likewise decreased. The
Company plans to strategically place test-marketing campaigns via web portals
and other internet sources to determine the most effective means to attract its
core audience. The Company plans to raise capital during the second quarter of
2002 via a formal registration statement. Funds from this placement will be used
to expand our marketing efforts to a much wider audience, via both online and
offline placements.

The Company's consolidated financial statements have been prepared on a
continuing operations basis which contemplates the realization of assets and the
settlement of liabilities and commitments in the normal course of business.

Management recognizes that the Company must generate additional investment in a
timely manner to maintain its current level of development and launch timeframe.
If such investment is delayed, management will be required to reduce the
Company's operations. The Company plans to seek private placements of
equity capital to fund its operations but has no commitments at date of this
report for funding.

As of December 31, 2001, there were no material commitments for capital
expenditures.

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001 AS COMPARED TO THE
YEAR ENDED DECEMBER 31, 2000

The Company did not generate revenue in 2001 or 2000. The Company had general
and administrative expenses of $1,663,264 in 2001 compared with $1,274,835 in
2000. The Company's main expenses continue to be consulting and legal fees as
well as compensation costs. The Company incurred $495,685 in 2001 and $257,250
in 2000 for consulting fees, much of this related to stock-based compensation as
a result of the Company's lack of cash resources. In 2001 the legal and
professional fees increased to $118,039 from $50,201 in 2000 as a result of
costs associated with licensing and financing related items. Other
administrative expenses increased to $410,465 from $120,671 in 2000 due to the
cost of website development, insurance and associated operational costs.
Salaries expense increased to $577,405 from $466,880 as a result of hiring 5
additional staff for most of 2001.

The Company incurred a loss on operations of ($1,663,264) in 2001 compared to
($1,274,835) in 2000. The Company had a net loss of ($1,694,934) in 2001 after
interest expense of $39,774 and interest income of $8,904. In 2000 the net loss
was ($1,230,269) after interest income of $54,471 and interest expense of
$9,105. The loss per share was ($.02) in both 2001 and 2000.

Item 18: Description of the Property

The Company does not own any real property and has no long-term commitments
to lease any space. The Company currently leases office and conference
facilities on a month-to-month basis at 7825 Fay Avenue, #200, La Jolla,
California 92037.

Item 19: Certain Relationships and Related Transactions

The 1999 Omnibus Stock Plan (the "Executive Plan"), approved by shareholders in
1999, was implemented in March, 2000 with 3 employees participating. Mr. Murphy,
the Company's Chairman, President and Chief Executive Officer, was granted
options to purchase 250,000 shares at $1.10 per share for a period of 5 years.
Mr. Trujillo, the Company's Director and Chief Technology Officer was granted
options to purchase 250,000 shares at $1.10 per share for a period of 5 years,
and Mr. Patient, the Company's Chief Financial Officer, was granted options to
purchase 250,000 shares at $1.00 per share for 5 years. Under the terms of the
Executive Plan, eligible key employees were granted the right to purchase shares
of the Company's Common Stock at the market price, or in the case of owners of
10% or more of the outstanding shares 110% of the market price, which was
estimated at $1.00 per share at the time of grant. All options were exercised on
March 22, 1999 and were financed through promissory notes from the Company at
the Federal Rate for Mid-Term Funds, payable on or before March 22, 2004. On
October 1, 2001, the Board of Directors, in consideration of the decline in
market value of the common shares, agreed to reduce the value of the original
purchase transaction to an effective price of $0.01 per share, thereby reducing
the promissory notes and accrued interest by approximately 85%. The repayment
dates and other terms remain the same.

Item 20: Market for Common Equity and Related Stockholder Matters
35

Our common stock is traded on the Over The Counter Bulletin Board under the
symbol "ITET." On January 28, 2002, the low and high bid prices for the common
stock on the Bulletin Board were $0.095 and $0.11, respectively.

The following table shows the range of reported low bid and high bid per
share quotations for our common stock for the periods indicated. The high and
low bid prices for the periods indicated reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent actual
transactions. The quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions.

High Bid Low Bid
2001

First Quarter $5.250 $0.125
Second Quarter $0.421 $0.055
Third Quarter $0.100 $0.010
Fourth Quarter $0.195 $0.019

Penny Stock Regulation

Our shares are subject to the Penny Stock Reform act of 1990, which may
potentially decrease our ability to easily transfer our shares. Broker-dealer
practices in connection with transactions in "penny stocks" are regulated. Penny
stocks generally are equity securities with a price less than $5.00. The penny
stock rules require a broker-dealer prior to a non-exempt transaction to deliver
a standardized risk disclosure document and make a special determination that
penny stocks are a suitable investment for each investor. In addition the
broker-dealer must receive the investor's written agreement to the transaction.
These disclosure requirements may have the affect of reducing the level of
trading activity in our stock and make it more difficult for you to resell your
stock in our Company.

Shareholders

The approximate number of holders of record of the Common stock as of the
date of this prospectus is 196 inclusive of those brokerage firms and/or
clearinghouses holding shares of common stock for their clientele (with each
such brokerage house and/or clearinghouse being considered as one holder).

Dividend Policy

We have not declared or paid any dividends on our shares of common stock.
We intend to retain future earnings, if any, that may be generated from our
operations to finance our future operations and expansion and do not plan for
the reasonably foreseeable future to pay dividends to holders of our common
stock. Any decision as to the future payment of dividends will depend on our
results of operations and financial position and such other factors as our board
of directors in its discretion deems relevant.
36

Item 21: Executive Compensation

Compensation of the Executive Officers

The following table sets forth the compensation by the Company of the Chief
Executive Officer and the four most highly compensated other executive officers
of the Company in 2000, for services in all capacities to the Company and its
subsidiaries during the two fiscal years ended December 31, 2000.

ANNUAL COMPENSATION

Name and Annual Salary Bonus Other Annual Long Term
Principal Position Year
Daniel P. Murphy 2001 $ 120,000 0 0 4,000,000
Chairman of the Board, President and CEO 2000 $ 90,000 0 0 250,000
1999 $ 63,333 0 0 0

Alejandro Trujillo 2001 $ 48,000 0 0 250,000
Director, Chief Technology Officer 2000 $ 83,333 0 0 0
1999 $ 63,333 0 0

2001 $ 83,833 0 0 1,000,000
Andrew P. Patient 2000 $ 86,250 0 0 250,000
Chief Financial Officer and Secretary 1999 $ 18,750 0 0 0

The following table sets forth information concerning grants of stock options to
purchase shares of our Common Stock during the year ended December 31, 2001 to
executive officers:

<BTB>

Name Number of Percentage of Exercise or Expiration Date
Securities Total Options Base Price Per
Underlying Granted to Share ($)
Options Employees in
Granted Fiscal 2001 (%)
- ---------------------- ------------ --------------- ----------------- -------------------

Daniel P. Murphy 4,000,000 80.0% $0.01 September 30, 2006
Chairman of The Board,
President and CEO

Alejandro Trujillo
Director, Chief
Technology Officer 0 0 0 ---

Andrew P. Patient
Chief Financial Officer
and Secretary 1,000,000 20.0% $0.01 September 30, 2006

The following table sets forth information with respect to stock options
exercised by our Executive Officers during the fiscal year ended December 31,
2001 and stock options he held as of December 31, 2001.

Number of
Securities Value of
Underlying Unexercised in-
Unexercised the-money
Options/SARs options/SARs
at FY-end (#) at Fy-end ($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name On Exercise ($) unexcercisable unexcercisable
- ---------------------------- --------------- -------------- --------------- --------------
Daniel P. Murphy
Chairman,President and CEO 0 --- 4,000,000

Alejandro Trujillo
Director 0 --- -0-

Andrew P. Patient
Chief Financial Officer and
Secretary 0 --- 1,000,000

Management salaries are paid from operating capital if available. Unless
salaries are paid, these amounts will accrue as a liability to the company.

B. Directors' Compensation

The Company's director compensation program provides that each director who
does not receive other direct compensation from the Company is eligible to
receive upon his or her initial election to the Board a warrant to purchase
100,000 shares of the Company's common stock at the market price at the date of
grant. Each warrant has a term of five years. No warrants have yet to be granted
under this program, as all members of the current Board receive other direct
compensation from the Company.
38

<BTB>

Name and Year Annual Meeting Consulting/ Number Securities LTIP All
Principal Retainer Fees ($) Other Fees of Underlying Payments Other
Posistion Fees ($) ($) Shares Options/ Compensation
SARs
(#shares)

Daniel P. Murphy, (1) 2001
Director 2000 0 0 0 0 0 0 0
1999 0 0 0 0 0 0 0

Alejandro Trujillo, (1) 2001
Director 2000 0 0 0 0 0 0 0
1999 0 0 0 0 0 0 0

(1) Both Mr. Murphy and Mr. Trujillo were compensated and have options and
incentive participation pursuant to their Employment Contracts as Officers.
Details of compensation are shown in Officers Compensation above and Employment
Agreements below.

EMPLOYMENT AGREEMENTS

In April 2000, as a result of the reorganization, the Company entered into
new employment agreements with Daniel P. Murphy, its Chairman of the Board,
President and Chief Executive Officer, Alejandro Trujillo, its Chief Technology
Officer and Director, and Andrew P. Patient, its Chief Financial Officer and
Secretary. Mr. Murphy's employment contract is for an initial term of four
years. The employment agreement provides for a minimum base salary of $80,000 in
its first year, with requirements for minimum increase of 50% each January 1.
Mr. Murphy is eligible for a performance bonus based on the greater of 1% of the
Company's operating income or a calculation based on the Company's increased
market value. No bonus was triggered under this clause during 2000. In addition,
Mr. Murphy is eligible to receive an annual stock incentive bonus equal to 1% of
the Company's outstanding shares and participate in the Company's Incentive
Stock Option Plan. No shares or options were granted for 2000 under the terms of
the contract. The agreement further provides that in the event of the
termination of Mr. Murphy's employment by the Company without cause, the Company
will pay Mr. Murphy his base salary for the remainder of the initial term, a
prorated bonus and continuation of medical insurance coverage, and his
restricted stock and stock options will vest immediately. In the event of the
termination of Mr. Murphy's employment by the Company as a result of change in
control, the Company will be required to pay Mr. Murphy a termination fee equal
to 10 times his annual base salary, plus any accrued bonuses or other incentive
compensation. Mr. Trujillo's employment contract is for an initial term of two
years. The employment agreement provides for a minimum base salary of $80,000 in
its first year, with requirements for minimum increase of 20% each January 1.
Mr. Trujillo is eligible for a performance bonus based on the greater of 0.25%
of the Company's operating income or a calculation based on the Company's
increased market value. No bonus was triggered under this clause during 2000. In
addition, Mr. Trujillo is eligible to receive an annual stock incentive bonus

equal to 0.25% of the Company's outstanding shares and participate in the
Company's Incentive Stock Option Plan. No shares or options were granted for
2000 under the terms of the contract. The agreement further provides that in the
event of the termination of Mr. Trujillo's employment by the Company without
cause, the Company will pay Mr. Trujillo his base salary for the remainder of
the initial term, a prorated bonus and continuation of medical insurance
coverage, and his restricted stock and stock options will vest immediately. Mr.
Patient's employment contract is for an initial term of two years. The
employment agreement provides for a minimum base salary of $80,000 in its first
year, with requirements for minimum increase of 25% each January 1. Mr. Patient
is eligible for a performance bonus based on the greater of 0.25% of the
Company's operating income or a calculation based on the Company's increased
market value. No bonus was triggered under this clause during 2000. In addition,
Mr. Patient is eligible to receive an annual stock incentive bonus equal to
0.25% of the Company's outstanding shares and participate in the Company's
Incentive Stock Option Plan. No shares or options were granted for 2000 under
the terms of the contract. The agreement further provides that in the event of
the termination of Mr. Patient's employment by the Company without cause, the
Company will pay Mr. Patient his base salary for the remainder of the initial
term, a prorated bonus and continuation of medical insurance coverage, and his
restricted stock and stock options will vest immediately.

Item 22: Financial Statements

INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
BALANCE SHEET
For the Six Months Ended June 30, 2002

ASSETS

June 30 December 31,
2001
-----------------------------
Current Assets
Cash $ 1,259 130,815
Accounts Receivable

- --------------------------------------------------------------------------------
Total current assets 1,259 130,815

Fixed Assets
Computer and office equipment 12,464 11,281
Accumulated depreciation (7,942) (6,662)

- --------------------------------------------------------------------------------
Total fixed assets 4,522 4,619

- --------------------------------------------------------------------------------
Total Assets $ 5,781 135,434
================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities
Accounts payable $ 174,398 232,886
Notes payable 34,000 30,000
Accrued payroll liabilities 711,537 746,361
Accrued income tax 2,400 2,400
Convertible notes payable - 178,000
Current portion long term liabilities 372 700

- --------------------------------------------------------------------------------
Total current liabilities 922,707 1,190,347

Long Term Liabilities 670 842

Stockholders' Equity
Common stock 1,227 998
Accounts receivable subscribed (212,563) (185,697)
Additional paid in capital 3,452,188 2,736,043
Accumulated deficit - during development stage (4,158,448) (3,607,099)

- --------------------------------------------------------------------------------
Total stockholders' equity (917,596) (1,055,755)

- --------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 5,781 135,434
================================================================================

INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
INCOME STATEMENT
For the Six Months Ended June 30, 2002
Cumulative from
June 30, 1998
(Inception of the
Developemnt
Three Months Three Months Six Months Six Months Stage) to
Ended Ended Ended Ended June 30,
June 30, 2001 June 30, 2002 June 30, 2001 June 30,2001 2002_____

Revenues
- - - -
Sales $ 4,888 - $ 9,469 - $ 9,469
- -----------------------------------------------------------------------------------------------------------------------------
Total Revenue 4,888 - 9,469 - 9,469

Research and Development - - - - 5,059

Administrative and Selling Expenses
Consulting 64,300 (131,750) 138,050 191,500 964,560
Depreciation and amortization 640 680 1,280 1,363 7,942
Legal and professional 57,230 3,250 57,230 75,800 376,786
License fees - - - - 373,000
Marketing and promotion 27,495 6,680 127,904 8,772 245,857
Office expense 4,931 13,826 14,709 22,958 103,702
Other administrative expenses 13,184 28,535 55,824 51,175 634,498
Rent 2,593 4,480 5,305 6,558 27,501
Salaries 72,123 171,056 166,063 342,045 1,445,855
- -----------------------------------------------------------------------------------------------------------------------------
Total Administrative Expense 242,496 96,757 566,365 700,171 4,179,701

- -----------------------------------------------------------------------------------------------------------------------------
Net Loss from Operations (237,608) (96,757) (556,896) (700,171) (4,175,291)

Other Income

Interest income (2,014) (13,104) (5,706) (27,106) (20,403)
Interest expense - 74 159 (9,031) 360
- -----------------------------------------------------------------------------------------------------------------------------
Total Other (Income) Expense (2,014) (13,030) (5,547) (36,137) (20,043)

Income Taxes - - - - 3,200

- ----------------------------------------------------------------------------------------------------------------------------
Net loss $ (235,594) (83,727) (551,349) (664,034) (4,158,448)
============================================================================================================================

INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
Statement of Cash Flows
For the Six Months Ended June 30, 2002
June 30, 1998
(Inception of the
Development
Sis Months Sis Months Stage) to
Ended Ended June 30,
June 30, 2002 June 30, 2001 2002_____

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(551,349) (664,034) $(4,158,448)

Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,280 1,363 7,942
Stock issued for services 247,550 341,050 1,743,220
Changes in:
Prepaid expense - 14,750 -
Accounts payable (58,488) (64,629) 174,398
Accrued interest (9,105) -
Accrued payroll liabilities (34,824) 206,189 711,537
State tax payable - 2,400

- ----------------------------------------------------------------------------------------------------------
Net Cash Used in Operating Activities (395,831) (174,416) (1,518,951)

Cash Flows From Investing Activities
Accrued interest related parties (5,706) (27,106) (20,403)
Computer and equipment purchases (1,183) - (12,464)
Note receivable (payments) 45,126 -

- ----------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (6,889) 18,020 (32,867)

Cash Flows From Investing Activities
Notes payable 4,000 (106,000) 43,200
Sale of common stock 447,664 386,050 1,518,035
Repayment of notes (500) (625) (8,158)
Convertible notes (178,000) (136,000) -

- ----------------------------------------------------------------------------------------------------------
Net Cash Used in Financing Activities 273,164 143,425 1,553,077

Net Decrease in Cash (129,556) (12,971) 1,259

Cash, beginning of the year 130,815 17,343 -

- ----------------------------------------------------------------------------------------------------------
Cash, June 30, 2002 $ 1,259 4,372 $ 1,259
==========================================================================================================

INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
Statement of Stockholder's Equity
For the Six Months Ended June 30, 2002

Common Stock Addt'l Paid Accounts Rec. Accum.
Description Shares Dollars In Captial Subscribed Deficit Total
- ---------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 2001 99,887,230 $ 998 $ 2,736,042 $ (185,697) $(3,607,099) $(1,055,756)

Conversion of notes payable 10,923,991 $ 109 $ 295,251 $ 295,360

Conversion of other payables 1,018,064 $ 11 $ 103,454 $ 103,465

Stock issued for current services 3,175,000 $ 32 $ 158,718 $ (45,000) $ 113,750

Interest on notes - $ - $ - $ (3,691) $ (3,691)

Due from shareholder - $ - $ - $ 23,839 $ 23,839

Net loss $ (315,755) $ (315,755)

- ---------------------------------------------------------------------------------------------------------------------------------
Balance March 31, 2002 115,004,285 1,150 3,293,465 (210,549) (3,922,854) (838,788)
=================================================================================================================================
Stock issued for cash 997,778 $ 10 $ 24,990 $ 25,000

Stock issued for current services 6,690,000 $ 67 $ 133,733 $ 133,800

Interest on notes - $ - $ - $ (2,014) $ (2,014)

Net loss $ (235,594) $ (235,594)

- ---------------------------------------------------------------------------------------------------------------------------------
Balance June 30, 2002 122,692,063 1,227 3,452,188 (212,563) (4,158,448) (917,596)
=================================================================================================================================

INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited financial statements include the accounts of
InterSpace Enterprises, Inc. (the "Company"). The financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles.

In the opinion of management, the unaudited interim financial statements for the
period ended June 30, 2002 are presented on a basis consistent with the audited
financial statements and reflect all adjustments, consisting only of normal
recurring accruals, necessary for fair presentation of the results of such
period.

The results for the six months ended June 30, 2002 are not necessarily
indicative of the results of operations for the full year. These financial
statements and related footnotes should be read in conjunction with the
financial statements and footnotes thereto included in the Company's financial
statements of the period ended December 31, 2001.

NOTE 2 - NET REVENUE

The Company operates under an agreement with the International Lottery in
Liechtenstein Foundation (ILLF). As part of this agreement, ILLF is responsible
for collecting payment, and allocating prize payouts, charity fund allocations
and affiliate fees. The Company receives a percentage of the net revenue from
these transactions.

Net revenue represents the residual amount earned by the Company from its weekly
lottery draw ticket sales and scratchcards after deducting payouts, insurance,
charity allocations, affiliate promotions and partnership fees as set out in the
hosting agreement.

Gross receipts for the quarters ended March 31, 2002 and June 30, 2002 were
$30,943 and $32,523 respectively. Total payouts and expenses were $26,362 for
the quarter ended March 31, 2002 and $27,635 for the quarter ended June 30,
2002.

NOTE 3 - CONVERSION OF NOTES PAYABLE

In February 2002, the Company converted $291,100 of convertible promissory notes
into common stock resulting in the issuance of 10,673,991 shares. In addition,
a note payable from the Company in the amount of $15,000 was converted into
250,000 shares of common stock.

NOTE 4 - CONVERSION OF OTHER LIABILITIES

In February 2002, the Company settled $88,465 of payroll liabilities to various
former employees and $15,000 of trade liabilities via the issuance of 1,018,064
shares.

NOTE 5 - NON-MONETARY TRANSACTIONS

The Company issued 9,865,000 shares during the six month period ending June 30,
2002, for certain consulting and advisory services provided to the Company, as
well as services related to the development of the Company's internet
infrastructure. Approximately 600,000 of these shares relate to services to be
provided to the Company over the remainder of the fiscal year. Also,
approximately 765,000 of these shares related to services provided in past
fiscal periods. The Company valued these transactions at what they believed to
be the fair market value of the services provided. The value for these services
also approximates what management believes to be the value of the stock.

NOTE 6 - INTEREST INCOME/EXPENSE

Interest income represents accrued interest on promissory notes to the Company
from certain officers incurred as a result of options previously exercised.

INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
BALANCE SHEET
For the Period Ended March 31, 2002

ASSETS
March 31, December 31,
2002 2001______
CURRENT ASSETS
Cash $ 17,862 130,815
Accounts Receivable 768

- ------------------------------------------------------------------------------------
Total current assets 18,630 130,815

Fixed Assets
Computer and office equipment 12,464 11,281
Accumulated depreciation (7,302) (6,662)

- ------------------------------------------------------------------------------------
Total fixed assets 5,162 4,619

- ------------------------------------------------------------------------------------
Total Assets $ 23,792 135,434
====================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities
Accounts payable $ 172,745 232,886
Notes payable 15,000 30,000
Accrued payroll liabilities 671,393 746,361
Accrued income tax 2,400 2,400
Convertible notes payable - 178,000
Current portion long term liabilities 372 700

- ------------------------------------------------------------------------------------
Total current liabilities 861,910 1,190,347

Long Term Liabilities 670 842

Stockholders' Equity
Common stock 1,150 998
Accounts receivable subscribed (210,549) (185,697)
Additional paid in capital 3,293,465 2,736,043
Accumulated deficit - during development stage (3,922,854) (3,607,099)

- ------------------------------------------------------------------------------------
Total stockholders' equity (838,788) (1,055,755)

- ------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 23,792 135,434
====================================================================================

INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
INCOME STATEMENT
For the Period Ended March 31, 2002

Cumulative from
June 30, 1998
(Inception of the
Development
Three Months Three Months Stage) to
Ended Ended March 31,
March 31, 2002 March 31, 2001 2002______

Revenues

Sales $ 4,581 - $ 4,581
- ---------------------------------------------------------------------------------------------
Total Revenue 4,581 - 4,581

Research and Development - - 5,059

Administrative and Selling Expenses

Consulting 73,750 323,250 900,260
Depreciation and amortization 640 683 7,302
Legal and professional - 72,550 319,556
License fees - - 373,000
Marketing and promotion 100,409 2,092 218,362
Office expense 9,778 9,132 98,771
Other administrative expenses 42,640 22,640 621,314
Rent 2,712 2,078 24,908
Salaries 93,940 170,989 1,373,732
- ---------------------------------------------------------------------------------------------
Total Administrative Expense 323,869 603,414 3,937,205

- ---------------------------------------------------------------------------------------------
Net Loss from Operations (319,288) (603,414) (3,937,683)

Other Income

Interest income (3,692) (14,002) (18,389)
Interest expense 159 (9,105) 360
- ---------------------------------------------------------------------------------------------
Total Other (Income) Expense (3,533) (23,107) (18,029)

Income Taxes - - 3,200

- ---------------------------------------------------------------------------------------------
Net loss $ (315,755) (580,307) (3,922,854)
=============================================================================================

INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
Statement of Cash Flows
For the Period Ended March 31, 2002
June 30, 1998
(Inception of the
Three Months Three Months Development
Ended Ended Stage) to
March 31, 2002 March 31, 2001 March 31, 2002_

Cash Flows From Operating Activities
Net loss $ (315,755) $ (580,307) $ (3,922,854)

Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 640 683 7,302
Stock issued for services 113,750 339,525 1,609,420
Changes in:
Accounts receivable (768) - (768)
Prepaid expense - 14,750 -
Accounts payable (60,141) (1,642) 172,745
Accrued interest - (9,105) -
Accrued payroll liabilities (74,968) 110,633 671,393
State tax payable - - 2,400

- ------------------------------------------------------------------------------------------------------------
Net Cash Used in Operating Activities (337,242) (125,463) (1,460,362)

Cash Flows From Investing Activities
Accrued interest related parties (3,692) (14,002) (18,389)
Computer and equipment purchases (1,183) - (12,464)
Note receivable (payments) - 41,112 -

- ------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (4,875) 27,110 (30,853)

Cash Flows From Financing Activities
Notes payable (15,000) 29,000 24,200
Sale of common stock 422,664 199,150 1,493,035
Repayment of notes (500) (400) (8,158)
Convertible notes (178,000) (136,000) 0

- ------------------------------------------------------------------------------------------------------------
Net Cash Used in Financing Activities 229,164 91,750 1,509,077

Net Decrease in Cash (112,953) (6,603) 17,862

Cash, beginning of the year 130,815 17,343 -

- ------------------------------------------------------------------------------------------------------------
Cash, March 31, 2002 $ 17,862 $ 10,740 $ 17,862
============================================================================================================

INTERSPACE ENTERPRISES, INC.

(A Development Stage Company)
Statement of Stockholder's Equity
For the Period Ended March 31, 2002 Additional
Common Stock Paid in Accounts Rec. Accumulated
Description Shares Dollars Capital Subscribed Deficit Total
- ---------------------------------------------------------------------------------------------------------------------------
Balance December 31, 2001 99,887,230 $ 998 $ 2,736,042 $ (185,697) $(3,607,099) $(1,055,756)

Conversion of notes payable 10,923,991 $ 109 $ 295,251 $ 295,360

Conversion of other payables 1,018,064 $ 11 $ 103,454 $ 103,465

Stock issued for current services 3,175,000 $ 32 $ 158,718 $ (45,000) $ 113,750

Interest on notes - $ - $ - $ (3,691) $ (3,691)

Due from shareholder - $ - $ - $ 23,839 $ 23,839

Net loss $ (315,755) $ (315,755)

- ---------------------------------------------------------------------------------------------------------------------------
Balance March 31, 2002 115,004,285 1,150 3,293,465 (210,549) (3,922,854) (838,788)
===========================================================================================================================

INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

In the opinion of management, the unaudited interim financial statements for the
period ended March 31, 2002 are presented on a basis consistent with the audited
financial statements and reflect all adjustments, consisting only of normal
recurring accruals, necessary for fair presentation of the results of such
period.

The results for the three months ended March 31, 2002 are not necessarily
indicative of the results of operations for the full year. These financial
statements and related footnotes should be read in conjunction with the
financial statements and footnotes thereto included in the Company's financial
statements of the period ended December 31, 2001.

NOTE 2 - NET REVENUE

NOTE 3 - CONVERSION OF NOTES PAYABLE

NOTE 4 - CONVERSION OF OTHER LIABILITIES

In February 2002, the Company settled $88,465 of payroll liabilities to various
former employees and $15,000 of trade liabilities via the issuance of 1,018,064
shares.

NOTE 5 - NON-MONETARY TRANSACTIONS

The Company issued 3,175,000 shares during the three month period ending March
31, 2002, for certain consulting and advisory services provided to the Company,
as well as services related to the development of the Company's internet
infrastructure. Approximately 900,000 of these shares were issued in connection
with services to be provided to the Company over the remainder of the fiscal
year. The Company valued these transactions at what they believed to be the fair
market value of the services. The value for these services also approximates
what management believes to be the value of the stock.

NOTE 6 - INTEREST INCOME/EXPENSE

Interest income represents accrued interest on promissory notes to the Company
from certain officers incurred as a result of options previously exercised.

INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
BALANCE SHEET
For the Period Ended December 31, 2001

ASSETS

December December
31, 2001 _ 31, 2000__
CURRENT ASSETS
Cash $ 130,815 $ 17,343
Prepaid expenses - 14,750
---------------------------------------------------------------------------------------
Total current assets 130,815 32,093

Fixed Assets
Computer and office equipment 11,281 11,281
Accumulated depreciation (6,662) (4,315)
---------------------------------------------------------------------------------------
Total property and equipment 4,619 6,966

---------------------------------------------------------------------------------------
Total Assets $ 135,434 $ 39,059
========================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities
Accounts payable and accrued liabilities $ 232,886 $ 260,053
Notes payable 30,000 136,000
Accrued payroll liabilities 746,361 279,332
Accrued income tax 2,400 1,600
Convertible notes payable 178,000 136,000
Accrued interest - 9,105
Current portion long term debt 700 930
----------------------------------------------------------------------------------------
Total current liabilities 1,190,347 823,020

Long Term Liabilities 842 1,111

Stockholders' Equity (Deficit)
Common stock 998 658
Accounts receivable subscribed-related parties (185,697) (1,187,097)
Additional paid in capital 2,736,043 2,313,532
Accumulated deficit during development stage (3,607,099) (1,912,165)
----------------------------------------------------------------------------------------
Total stockholders' equity (1,055,755) (785,072)

----------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 135,434 $ 39,059
========================================================================================

INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
INCOME STATEMENT
For the Period Ended December 31, 2001

From Inception
June 30, 1998
Through
Decmber 31,
2001 2000 2001
-----------------------------------------------------------------------------------------
Revenues

Research and Development 5,059

Adminstrative and Selling Expenses
License fees - 333,000 373,000
Consulting 495,685 257,250 826,510
Depreciation and amortization 2,347 2,347 6,662
Legal and professional 118,039 50,201 319,556
Marketing and promotion 18,322 14,468 117,953
Office expense 29,628 24,241 88,993
Other administrative expenses 410,465 120,671 578,674
Rent 11,373 5,777 22,196
Salaries 577,405 466,880 1,279,792
-----------------------------------------------------------------------------------------
Total Administrative Expense 1,663,264 1,274,835 3,613,336

-----------------------------------------------------------------------------------------
Net Loss from Operations (1,663,264) (1,274,835) (3,618,395)

Other (Income) Expense
Interest income 39,774 (54,471) (14,697)
Interest expense (8,904) 9,105 201
-----------------------------------------------------------------------------------------
Total Other (Income) Expense 30,870 (45,366) (14,496)

Income Taxes 800 800 3,200

-----------------------------------------------------------------------------------------
Net Income $ (1,694,934) (1,230,269) (3,607,099)
=========================================================================================

Weighted Average Shares 81,561,061 58,321,405
Loss per share (0.02) (0.02)

INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Period Ended December 31, 2001
From Inception
June 30, 1998
Through
December 31,
2001 2000 2001
---------- ---------- ---------------
Cash Flows Operating Activities
Net Loss $(1,694,934) $(1,230,269) $(3,607,099)

Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,347 2,347 6,662
Stock for services 868,170 469,000 1,499,120
Changes in:
Prepaid expense 14,750 (14,750) -
Accounts payable (27,167) 112,316 232,886
Accrued interest (9,105) 9,105 -
Accrued payroll expenses 467,030 168,805 746,362
State tax payable 800 800 2,400
- --------------------------------------------------------------------------------------------------------------
Net Cash Used in Operating Activities (378,109) (482,646) (1,119,669)

Cash Flows from Investing Activities
Accrued interest related parties 39,774 (54,471) (14,697)
Computer and equipment purchases (1,982) (8,335)
Note receivable (payments) 45,126 - -
- --------------------------------------------------------------------------------------------------------------
Net Cash Used by Investing Activities 84,900 (56,453) (23,032)

Cash Flows from Financing Activities
Notes payable (106,000) 136,000 39,200
Sale of common stock 489,550 275,124 1,085,290
Repayment of notes (499) (905) (10,604)
Convertible notes 23,630 136,000 159,630
- --------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 406,681 546,219 1,273,516

Net Increase in Cash 113,472 7,120 130,815

Cash, beginning of the year 17,343 10,223 -

- --------------------------------------------------------------------------------------------------------------
Cash, December 31 $ 130,815 $ 17,343 $ 130,815
==============================================================================================================

Supplemental Non Cash Investing and Financing Activities:
Stock issued for a Lottery license $ - $ 333,000 $ -
Stock for consulting service $ 868,170 $ 136,000 $ 1,004,170
Acquisition of computer on note $ - $ - $ 2,946

Suplemental Information:
Interest paid $ - $ 353 $ -

INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
Statement of Stockholder's Equity
For the Period Ended December 31, 2001

- ---------------------------------------------------------------------------------------------------------------------------
Additional Accounts
Common Stock Paid Rec. Accumulated
Date Description Shares Dollars In Capital Subscribed Deficit Total
- ---------------------------------------------------------------------------------------------------------------------------
Beginning - $ - $ - $ - $ -
balance

June 30,1998 Shares issued 3,475,000 $ 3,475 $ 3,475
to founders

Nov 24,1998 Shares issued 120,000 $ 120 $ 59,880 $ 60,000
for cash

Nov 24,1998 Shares issued 5,000 $ 5 $ 2,495 $ 2,500
for services

Dec. 31,1998 Net loss $ (68,678) $ (68,678)

- --------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1998 3,600,000 $ 3,600 $ 62,375 $ (68,678) $ (2,703)
- --------------------------------------------------------------------------------------------------------------------------

Shares issued for cash 183,200 $ 183 $ 220,307 $ (5,000) $ 215,490

Shares issued for services 242,000 $ 242 $ 155,758 $ 156,000

Nov. 2, 1999 Cancelled Stock (25,000) $ (25) $ (25)

Nov. 18, 1999 Reincorporating $ 36,002 $ (36,002) $ -

Dec. 31,1999 Net loss $ (613,218) $ (613,218)

- --------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1999 4,000,200 $ 40,002 $ 402,438 $ (5,000) $ (681,896) $(244,456)
- --------------------------------------------------------------------------------------------------------------------------

INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
Statement of Stockholder's Equity (continued)
For the Period Ended December 31, 2001
Additional Accounts
Common Stock Paid Rec. Accumulated
Date Description Shares Dollars In Capital Subscribed Deficit Total
- ------------------------------------------------------------------------------------------------------------------------------

January, 2000 Cash Received $ 5,000 $ 5,000

Shares issued for cash 99,000 $ 990 $ 195,510 $ 196,500

March, 2000 Officer Options 1,900,000 $ 19,000 $1,068,500 $(1,087,500) $ -

March, 2000 Exercised options 175,000 $ 1,750 $ 117,000 $ (45,126) $ 73,624

Stock for
March, 2000 Services 469,000 $ 4,690 $ 464,310 $ 469,000

April, 2000 Merger 672,000 $(66,359) $ 66,359 $ -

July, 2000 Dividend 8 X 1 58,521,600 $ 585 $ (585) $ -

December 31 Interest on Notes $ (54,471) $ (54,471)

Dec. 31,2000 Net loss $ (1,230,269) $(1,230,269)

- ------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 2000 65,836,800 $ 658 $ 2,313,532 $ (1,187,097)$ (1,912,165) $ (785,072)
==============================================================================================================================

Conversion of notes payable 366,300 $ 4 $ 183,146 $ 183,150

Shares issued for services 22,554,030 $ 225 $ 867,945 $ 868,170

Shares issued for cash 11,130,100 $ 111 $ 287,919 $ 288,030

Interest on notes $ - $ - $ 39,774 $ 39,774

Officer Options $ - $ (916,500) $ 916,500 $ -

Due from shareholder $ - $ - $ 45,126 $ 45,126

Net loss $ (1,694,934) $(1,694,934)

- ------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 2001 99,887,230 $ 998 $ 2,736,042 $ (185,697) $ (3,607,099) $(1,055,756)
==============================================================================================================================

NOTE A - Summary of Significant Accounting Policies

Organization
Interspace Enterprises, Inc. (the "Company") was originally incorporated in the
State of Nevada on June 30,1998. The Company reincorporated as a Delaware
Corporation on November 17, 1999. Additionally, on April 14, 2000 the Company
entered into a stock exchange with Marathon Marketing Corp., ("MM") a Colorado
Corporation. The Company issued 672,000 shares of common stock for all the
outstanding shares of MM, which was also 672,000 and the transaction was
accounted for as a reverse reorganization. As part of the reorganization all
officers of MM resigned and MM changed its name to InterSpace Enterprises, Inc.

The Company plans to develop a website "PlanetLotto.com", incorporating a global
lottery combined with an interactive half-hour game show. International viewers
will have the potential to win cash and will be able to watch a weekly game show
tailored to meet the needs of diverse international participants. Guests may
enter any weekly jackpot by purchasing a $2.00 (US) entry and selecting their
lucky numbers. Guests may also purchase PlanetLotto.com merchandise online. All
transactions will be secured through an established online credit card
transaction company. All ticket purchases will be confirmed via e-mail.

Development Stage Operations
Since inception, June 30, 1998, the Company has devoted significantly all of its
efforts to development of a web site, obtaining capital resources and obtaining
lottery licenses. Therefore, the Company is considered a development stage
company as described in SFAS No. 7.

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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the period. Actual results could differ from those estimates.

Basic and Diluted Net Loss Per Share
Net loss per share is calculated in accordance with SFAS128, Earnings Per Share
for the period presented. Basic net loss is based upon the weighted average
number of common shares outstanding.

Comprehensive Income
The Company has adopted SFAS 130, Reporting Comprehensive Income, which
establishes standards for reporting comprehensive loss and its components in the
financial statements. To date, the Company's comprehensive loss equals its net
loss.

Reportable Operating Segments
SFAS 131, Segment Information, amends the requirements for companies to report
financial and descriptive information about their reportable operating segments.
Operating segments, as defined in SFAS 131, are components of an enterprise for
which separate financial information is available and is evaluated regularly by
a company in deciding how to allocate resources and in assessing performance.
The financial information is required to be reported on the basis that is used
internally for evaluating segment performance. The Company currently is the
development stage and does not have reportable operating segments.

Cash and Cash Equivalents
Cash equivalents include cash on hand and in banks.

Accounting Method
The Company uses the accrual method of accounting, which recognizes income as it
is earned and expenses as they are incurred.

Equipment and Depreciation
Property and equipment are carried at historical cost. Depreciation is computed
using the straight-line method over the useful life of the asset. Asset lives
are five years for equipment and software. Total depreciation from June 30,
1998, date of inception, through December 31, 2001 was $6,662, which represents
$2,347 for the current calendar year, $2,347 for 2000, $1,660 for 1999 and $308
for the period of inception through December 31, 1998. The Company uses the
modified accelerated cost recovery method for income tax purposes.

Income Taxes
Income taxes are calculated using the liability method specified by Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". Deferred
income taxes reflect the net tax effects of temporary differences between the
financial statement carrying amounts and tax rates in effect in the years in
which the differences are expected to reverse. The Company has a net operating
loss ("NOL") as of December 31, 2000 of approximately $3,100,000 for federal
purposes and $1,550,000 for State tax purposes. This NOL will begin to expire in
the year 2013 if not previously utilized.

Accounting for Stock-Based Compensation
Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" (SFAS No. 123) prescribes a fair value method of accounting for
stock based compensation plans and for transactions in which stock options or
other equity instruments are exchanged for goods or services. The Company
adopted this accounting standard at inception. Accordingly, the fair value of
the equity instruments issued is used to account for the payment of services
rendered. Also, in accordance with SFAS No. 123, the Company has footnote
disclosure with respect to stock-based non-employee compensation. The cost of
stock based compensation is measured at the grant date on the value of the award
and recognizes this cost over the service period. The value of the stock-based
award is determined using a pricing model whereby compensation cost is the
excess of the fair market valued of the stock as determined by the model at
grant date or other measurement date over the amount an employee must pay to
acquire the stock.

New Accounting Pronouncements
In December 1999, the Staff of the Securities and Exchange Commission released
Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition, to provide
guidance on the recognition, presentation and disclosure of revenues in
financial statements. In June 2000, the SEC staff amended SAB 101to provide
registrants with additional time to implement SAB 101. The Company will be
required to adopt SAB 101 by the fourth quarter of fiscal 2001. Upon
commencement of operations, the Company intends to adopt the revenue recognition
practices to conform to SAB 101. Furthermore, the Company does not expect the
adoption of SAB 101 to have a material effect on its financial position or
results of operation.

NOTE B - Notes Payable

The Company has obtained from two interested parties a total of $30,000 in
informal loans to meet the Company's day-to-day cash operating needs. The loans
total $15,000 from each party. Neither party has asked the Company to
collateralize the loan, sign notes or state an interest rate. The Company
intends to repay these parties when significant funding has been obtained. These
notes are demand notes and therefore classified as a current liability.

The Company has not accrued interest on these friendly advances. Subsequent to
year-end one $15,000 note was converted to 250,000 shares of the Company's
common stock.

The Company has assumed a liability from an officer of the Company for
approximately $1,500. The Officer used his personal credit to acquire computer
equipment on a revolving credit basis. The loan is unsecured and bears 18%
interest annually.

The following table represents the annual principal payments due on the
revolving credit over the next five years:

YEAR AMOUNT
2002 $ 700
2003 $ 800
2004 $ -0-
2005 $ -0-
2006 $ -0-

NOTE C - Convertible Notes Payable

In December 2001 the Company raised $178,000 of capital via unsecured
convertible notes. The terms of the notes are between six and twelve months
with interest at 10% annually. The notes are convertible to equity at either
the note holders' wishes or, if certain events occur within the Company, the
Company has the right to convert. At December 31, 2001 no note holders or
events had occurred to trigger conversion. Since these notes were issued at
various times during the last two weeks of the year the accrued interest is
insignificant at December 31, 2001. Subsequent to year-end the outstanding notes
were converted to stock.

The convertible notes, and accrued interest, outstanding at December 31, 2000
were converted to stock in February 2001.

NOTE D - Income Taxes

Income tax expense of $800 represents the minimum California franchise tax for
the year ended December 31, 2001. The deferred income taxes consisted of the
following as of December 31, 2001:

Deferred tax assets
Net operating loss $1,054,000

Deferred tax liabilities
Non deductible items 39,000

Net deferred assets $1,015,000
Valuation allowance $1,015,000
Net deferred tax -0-

Change in valuation allowance $ 839,200

Deferred tax assets relates to the Company's net operating loss from inception
through December 31, 2001. The net operating loss totals $3,100,000 as of
December 31, 2001 and begins to expire in 2013. A valuation allowance has been
provided against this deferred tax asset as it more likely than not that the
deferred tax asset will not be realized.

NOTE E - Preferred Stock

The Company has authorized 40,000,000 shares of $0.0001 par value preferred
stock. As of December 31, 2001 and 2000 no shares were issued and outstanding.

NOTE F - Common Stock

The Company has authorized 200,000,000 shares of $0.00001 par value common
stock. On December 31, 2001 and 2000 there were 99,887,230 and 65,836,800
shares issued and outstanding, respectively. During 2001 the Company sold
11,130,100 shares totaling $306,400 less a $18,370 commission. Additionally,
22,554,030 shares were issued for services, valued at $868,170. The shares
issued for services were valued at various rates. These transactions were
recorded at an amount that approximates the value of the Company's freely traded
stock at the time the transactions were entered into. During the year the stock
price has fluctuated from approximately $0.50 to $0.018.

NOTE G - Stock Options

During 2001 the Company issued two options totaling 9,500,000 shares to a
Director for his continued participation in the Company's leadership. The
options are for a period of two years beginning September 19, 2001 (2,500,000
shares) and October 9, 2001 (7,000,000 shares) and can be exercised at any time
within the two years. The option price is at $0.01 on both options. On the
dates of grant the bid price for the stock was also $0.01. No options had been
exercised as of December 31, 2001.

The Company has also issued options to the President (4,000,000 shares) and the
CFO (1,000,000 shares) for their services. The options are exercisable at 110%
of the closing price of the stock on October 8, 2001. No options had been
exercised as of December 31, 2001.

NOTE H - Non-Monetary Transactions

The Company has an agreement with an agent, whereby a commission is paid for
referrals of investors in the Company's notes and stock. During 2001 and 2000
the Company paid $18,370 and $26,000 respectively for referrals.

The Company issued 22,554,030 shares for certain consulting and advisory
services provided to the Company. The Company valued these transactions at what
they believed approximated the fair market value of the stock at the time the
agreements for services were signed. The Company's stock price ranges from
approximately $0.50 to $0.018 during the year. Therefore, the value recorded
for these services also ranges from $0.50 to $0.02.

NOTE I - Related Party Transactions

The Company currently has assumed a liability from an officer of the Company for
approximately $1,500. The Officer used his personal credit to acquire computer
equipment on a revolving credit basis. The loan is unsecured and bears 18%
interest annually, (see Note B).

Certain officers and consultants were granted options to purchase stock of the
Company in 1999. In March 2000 all outstanding options totaling 18,675,000
shares, at a cost of $1,206,250 were exercised. The options exercised by the
officers for 17,100,000 shares however, were completed by promissory notes to
the Company for $1,087,500 and interest at the annual Federal mid-term rate. In
October the Company adjusted the price of the stock for the officers of the
Company. The total adjustment, ($916,500), reduced Additional Paid in Capital
as well as the Accounts Receivable from Officers. Total accrued interest, at
December 31, 2001, from officer receivable was $14,700.

The Company has issued a total of two options totaling 9,500,000 shares to a
Director for his continued participation in the Company's leadership. The
options are for a period of two years beginning September 19, 2001 (2,500,000
shares) and October 9, 2001 (7,000,000 shares) and

can be exercised at any time within the two years. The option price is at $0.01
on both options. On the dates of grant the bid price for the stock was also
$0.01. (Note G)

NOTE J - Subsequent events

The Company has converted the entire $178,000 of convertible notes to 9,203,326
shares of common stock. Additionally, the note holder of the $15,000 note
converted their note to 250,000 shares of common stock.

NOTE K - Commitments and Contingencies

The Company currently leases space for their corporate headquarters in an
Executive Suite complex in the La Jolla area of San Diego, California. The
Company pays a minimum amount of rent, ($185 monthly) for limited use of
conference and meeting rooms. The Company is also charged for additional
services such as secretarial services, call forwarding and facsimiles. During
2001 the Company paid $11,373 for these services and the service can be
terminated on 30 days written notice.

The Company is currently obligated under the terms of an operating lease for an
automobile used by the CEO. The lease was originally for 36 months, at $618 a
month, and matures August 2002.

NOTE L - Going Concern

At December 31, 2001 the Company had a working capital deficit in excess of
$1,000,000. Additionally, the Company has recurring, losses during their
development stage, negative stockholders' equity as well as
approximately$350,000 liability to the Internal Revenue Service for payroll
taxes and penalties. These factors raise doubt about the Company continuing as
a going concern.

Management continues to seek capital via the sale of common stock. The Company
is also discussing financing alternatives with various investment groups. There
can be no assurance that the Company will be successful in its efforts to raise
adequate capital. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

NOTE M - Concentrations of Credit Risks

The Company maintains cash balances at a financial institution in San Diego,
California. The account is insured by the Federal Deposit Insurance
Corporation, ("FDIC") up to $100,000. At various times during 2001 the
Company's cash balances exceeded FDIC insurance amounts.

NOTE O - Lottery Drawing

On December 20, 2001 the Company began selling tickets for the first lottery
drawing held January 18, 2002. The lottery, including ticket sales are operated
by a casino in Liechtenstein. The Company will receive 17% of the net proceeds
from the drawing. The proceeds from this drawing are insignificant and the
Company has not recorded any anticipated receipts in the December 31, 2001
financials.

Item 23: Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure

Siegel, Smith & Garber, LLP have audited the Company's records since
inception. There were no disagreements with them on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure.

On April 14, 2000, the Company entered into a merger agreement with
Marathon Marketing Corporation for the purposes of attaining a listing on a
public exchange. The business combination was originally accounted for under the
purchase method. During the annual audit, it was mutually agreed, given the
recent clarification of the SEC's position regarding accounting for business
combinations, that the most appropriate method for accounting for the
combination was as a reorganization. As a result, there should have been no
goodwill associated with the transaction. The $622,000 amount booked as
goodwill, as well as accumulated amortization of $440,000 was reversed in the
fourth quarter. The year-end financial statements reflect the appropriate
treatment of the transaction.

PART II: INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24: Indemnification of Directors and Officers

Company's Bylaws and the Colorado Business Corporation Act provide for and
Directors of the Company are indemnified generally against expenses actually and
reasonably incurred in connection with proceedings, whether civil or criminal,
provided that it is determined that they acted in good faith, were not found
guilty, and, in any criminal matter, had reasonable cause to believe that their
conduct was not unlawful.

Item 25: Other Expenses of Issuance and Distribution

The following table sets forth the Company's estimates (other than of the
SEC registration fee) of the expenses in connection with the issuance and
distribution of the shares of common stock being registered:

SEC registration fee . . . . . . . . . . . $1,250.00 (estimate)
Federal taxes . . . . . . . . . . . . . . . $0
State taxes and fees . . . . . . . . . . $0
Trustees' and transfer agent's fees . . .$3,000 (estimate)
Printing expenses . . . . . . . . . . . . . $5,000 (estimate)
Legal fees and expenses . . . . . . . . . $5,000 (estimate)
Accounting fees and expenses . . . . . . .$7,000 (estimate)
Miscellaneous expenses . . . . . . . . . . .$2,000 (estimate)

Total: . . . . . . . . . . . . . . . . . . . $23,250.00 (estimate)

Date Offering Exemption No. of Price per Gross No. of
Type Shares Share
- ---------------- ----------------- -------------- --------- --------- --------- ------
11/8/98-11/30/98 Private placement Reg D Rule 506 1,080,000 $ 0.056 $ 60,000 7

2/3/99-5/18/99 Private placement Reg D Rule 506 922,500 $ 0.111 $ 97,000 27

7/7/99-3/30/00 Private placement Reg D Rule 506 1,842,300 $ 0.278 $ 404,250 24

3/10/00 Option exercise 750,000 $ 0.09 $ 67,500 1

3/10/00 Option exercise 750,000 $ 0.09 $ 36,000 1

3/21/00 Option exercise 100,000 $ 1.00 $ 100,000 1

3/21/00 Option exercise 75,000 $ 0.25 $ 18,750 1

2/22/01 Private placement Reg D Rule 506 366,300 $ 0.50 $ 183,150 44

3/5/01 Private placement Reg D Rule 506 57,600 $ 0.278 $ 16,000 5

6/29/01 Debt conversion 2,400,000 $ 0.05 $ 120,000 1

6/29/01 Debt conversion 1,672,500 $ 0.04 $ 66,900 1

7/31/01 Option exercise 2,500,000 $ 0.025 $ 62,500 1

7/31/01 Option exercise 1,000,000 $ 0.01 $ 10,000 1

9/13/01 Option exercise 1,950,000 $ 0.01 $ 19,500 3

11/1/01 Option exercise 1,500,000 $ 0.01 $ 15,000 1

2/12/02 Private placement Reg D Rule 506 9,703,326 $ 0.03 $ 291,000 24

2/12/02 Debt conversion 250,000 $ 0.06 $ 15,000 1

Item 27: Exhibits

Exhibit # Description of Document
- --------- -----------------------
3.1 Articles of Incorporation Previously filed
3.2 Bylaws Previously filed
5.1 Opinion of W. Andrew Stack Page 67
10.1 Historical Financial Statements Previously filed
23.1 Consent of Siegel, Smith & Garber, LLP Page 68
23.2 Consent of W. Andrew Stack Included in Exhibit 5.1

Item 28: Undertakings

(a) The undersigned registrant hereby undertakes:
a. To file, during any period in which it offers or sells securities, 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;
iii. Include any additional or changed material information on the
plan of distribution.
b. For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to
be the initial bona fide offering.
c. File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.

(i) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.

(ii) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein.

(b) insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in

connection with the securities being registered, the registrant 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 whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

SIGNATURES

In accordance with the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and authorized this registration statement
to be signed on its behalf by the undersigned, in the City of La Jolla, State of
California , on February 6, 2002.

Interspace Enterprises, Inc.

By: /s/ Daniel P. Murphy 2/6/02
----------------------------------- ----------
Daniel P. Murphy Date
President, Chief Executive Officer,
Chairman and Director

In accordance with the requirements of the Securities Act of 1933, the
following persons in the capacities and on the dates stated signed this
Registration Statement:

NAME TITLE DATE
- -----------------------------------------------------------------------------
/s/ Alejandro Trujillo Director 2/6/02
Alejandro Trujillo

/s/ Andrew P. Patient Chief Financial Officer and Secretary 2/6/02