SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10KSB

                            Annual Report Pursuant to
                       The Securities Exchange Act of 1934

                   For the Fiscal Year Ended December 31, 2000
                         Commission file number 0-28465

                                 CIK:0001098331

                          INTERSPACE ENTERPRISES, INC.
                                 --------------
             (Exact name of registrant as specified in its charter)


                            Marathon Marketing Corp.
                              --------------------
                           (Prior name of corporation)

Colorado                       0-28465                 84-1283938
-----------------             -------------            ------------------
(State or other               (Commission              (IRS Employer
jurisdiction of               File Number)             Identification No.
incorporation

                7825 Fay Avenue, #200, La Jolla, California 92037
           ----------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

        Registrant's telephone number, including area code: (858)456-3539


            Securities Registered to be Pursuant to Section 12(b) of
                                    the Act:

                                      NONE

        Securities Registered to be Pursuant to Section 12(g) of the Act

                          COMMON STOCK $.00001 PAR VALUE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2)  has  been  subject  to the  filing
requirements for at least the past 90 days.

              Yes X    No
              -----    -----

Check if disclosure of delinquent  filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will be contained,  to the best
of  Registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. X
                 ---

                                       1
<PAGE>

State issuer's revenues for its most recent fiscal year: $0

Transitional Small Business Disclosure Format:

              Yes      No X
              -----    -----

Aggregate  market  value  of the  voting  stock  held by  non-affiliates  of the
registrant as of December 31, 2000: $N/A - not publicly listed on 12/31/00

Number of outstanding  shares of the  registrant's no par value common stock, as
of December 31, 2000: 65,836,800








                                       2
<PAGE>

                                TABLE OF CONTENTS

ITEM                                                                      PAGE
-------                                                                 --------
                                 PART I

 1    Business.......................................................      4
 2    Properties..................................................         13
 3.   Legal Proceedings....................................................13
 4.   Submission of Matters to a Vote of Security Holders............      13

                                PART II

 5.   Market for Registrant's Common Equity and Related
        Stockholder Matters...........................................     14
 6.   Management's Discussion and Analysis of Financial Condition
        and Results of Operations.....................................     14
 7.   Financial Statements and Supplementary Data.....................     17
 8.   Changes in and Disagreements with Accountants on Accounting
        and Financial Disclosure.....................................      17

                                PART III

 9.   Directors and Executive Officers of the Registrant..............     18
10.   Executive Compensation.........................................      21
11.   Security Ownership of Certain Beneficial Owners and
        Management.....................................................    25
12.   Certain Relationships and Related Transactions....................   26

                                PART IV

13.   Exhibits, Financial Statement Schedules and Reports on Form
        8-K.............................................................   27

Signature page.........................................................    28

Financial Statements.....December 31, 2000 and 1999....................F-1-F-14

                                       3
<PAGE>

ITEM 1. BUSINESS

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".

DESCRIPTION OF BUSINESS

Within the United States,  thirty-eight  states currently  sponsor a traditional
lottery  system.  State lottery  systems are operated  through public  entities,
which  produce,  maintain and operate the state lottery and the state receives a
percentage of the lottery  revenue.  For instance,  the  California  Lottery Act
grants the operator the exclusive  California market, in exchange for 34% of the
weekly jackpot proceeds,  which are contributed to California's public education
system.  Other  states  have  similar  agreements  with  lottery   corporations.
Globally, over 120 countries operate or sponsor lotteries. Unless the lottery is
maintained  by  the  government  itself,  each  of  these  nations  has  similar
agreements with their lottery operators.

                                       4
<PAGE>

INDUSTRY BACKGROUND

It is estimated by TLF  Publications  that the annual lottery revenue within the
United States in 1999 was $39 billion. Revenue for the State of California alone
was $2.5 billion.  World wide, it is estimated  that the total amount of lottery
revenue is around $120 billion. One of the unique aspects of the lottery market,
both in the United States and world wide, is that there has been no competition,
due to the fact that a traditional  lottery ticket must be purchased  within the
state or host nation in order to play,  market  exclusivity  has,  until  today,
remained in effect.

The Online  Gaming  Market  Segment.  The Internet has created a wide variety of
gaming  opportunities that equips the end-user with the ability to travel to any
country in the world via the web. Online gaming sites are  flourishing,  and the
number of sites has increased  from 15 sites in 1997 to 1200-1400  today.  These
sites are  expected  to earn a combined  $1  billion  this  year,  according  to
Christiansen  Capital Advisors in New York. According to ZDNet News, free gaming
and lotto sites are among the most popular  destinations  on the web. In Jupiter
Media  Metrix's  list of the 50 most  popular  sites on the Internet in December
2000,  sweepstakes sites Grab.com and Iwon.com ranked 17th and 26th respectively
and gaming  network Uproar ranked 20th.  According to PC Data Online,  web-based
lotteries and  sweepstakes are among the  fastest-growing  sectors of cyberspace
and  sweepstakes  and  lottery web sites are visited by as many as 40 percent of
all  Internet  users.  Online  Casino's  such  as the  Sands  of the  Caribbean,
thesands.com  one of the most popular online casinos,  handled over $400 million
in wagers last year.

PRODUCTS AND SERVICES

The Company  hopes to utilize  lottery  licenses from  national  governments  to
design, produce and market a worldwide Internet lottery. The PlanetLotto lottery
plan is to allocate a portion of each Jackpot to the  government  of the jackpot
winner(s).  The Company's  business model will allow any government in the world
to participate  and benefit from the lottery  through the creation of its Global
Alliance Network.  The Company's lottery will be marketed through traditional as
well as internet marketing  channels.  The Company's web site,  planetlotto.com,
will be marketed as potentially the single largest lottery,  with the ability to
draw  massive   player   interest  and  produce   weekly   jackpots   previously
unimaginable.  The  web  site  also  has  the  ability  to  webcast  our  weekly
PlanetLotto  draw, to be viewed live through the web site, via streaming  video.
In  Addition,  the company  also  intends to produce and  distribute a series of
weekly  lottery game shows,  to be seen in target markets  internationally.  The
Company's  principal  revenue stream will be derived  directly from a portion of
the proceeds of its prize pools. A substantial  additional amount of advertising
revenue will also be derived from the weekly "PlanetLotto Show."

                                       5
<PAGE>

COMPETITIVE ENVIRONMENT

Traditional  lotteries are bound by the limits of their respective state lottery
machinery  and  systems.  Although  the  goal  of  any  lottery  Company  is  to
continuously  have large "rollover"  jackpots,  PlanetLotto  believes there is a
fundamental flaw within the traditional system. As the interest for a particular
weekly lottery  grows,  the massive  number of  computer-generated  quick picks,
combined with the inherent  limitations of the telephone  system and the limited
number of authorized  lottery  outlets,  creates a re-occurring  bottleneck that
limits the ability to maximize  additional  revenue  generated  by the  rollover
phenomenon.  These  bottlenecks  limit the amount of the  potential  jackpot and
sacrifice  customer loyalty,  due to long lines at the retail outlets and player
frustration.  Another problem  associated with  traditional  lotteries is in the
constant  maintenance and up-keep of the lottery machinery and battles regarding
ticket printing and forgery. In contrast, an Internet based lottery is not bound
by such limitations.  The Internet will allow interested players to casually and
instantaneously  purchase  tickets over the Internet in the comfort of their own
homes,  without the hassles of long lines or  telephone  breakdowns.  Management
believes that including an e-mail confirmation guaranteed by the player's credit
card or digital cash transaction will prove to be a suitable  substitute for the
traditional lottery ticket.

The Company believes that the market exclusivity  enjoyed by traditional lottery
companies has created an industry wide complacency.  The lack of competition for
market share within each lottery,  state and nation has provided an  opportunity
for a market  penetration and direct  competition  with the traditional  lottery
structure.  The majority of the current  Internet market  competitors  have been
ineffective in properly  foreseeing the  possibilities  of a combined  worldwide
lottery system.

Although there are numerous Internet lottery companies  Management  believes the
narrow-minded focus on Internet  advertising without  incorporating  traditional
marketing  methods will invariably result in the emergence of one market leader.
For example,  pluslotto.com,  which has been operating  since 1995, is hosted by
the  Liechtenstein  government  and  operated  by the  International  Lottery in
Liechtenstein  Foundation.   However,  their  Internet  presence  is  merely  an
extension  of their  traditional  lottery and the company  does not transmit the
lottery draw via the internet.  Millions2000.com endeavors to be able to provide
jackpots  well into the millions and has  completed  its annual  jackpot draw on
January 1, 2000.  In addition,  other online  lotteries  such as  freelotto.com,
iwon.com,  and luckysurf.com  have developed a free lottery concept based upon a
pure advertising revenue model.  Players can play in the lottery at no cost, but
must  first  visit the  sponsors  of the site in order to be  eligible  to play.
Although this model is not a direct  competitor of  PlanetLotto,  it illustrates
the power of the lottery  phenomenon  and the ability to generate  revenues with
the promise of large cash prizes. Several countries, including Australia, Canada
and Austria have either already developed or are currently  developing an online
edition  of  their  current  traditional  lottery  system.  However,  Management
believes  their lack of global  vision  will limit their  marketing  efforts and
handicap their ability to capture  increased  market share. The key to surviving
future  competition  will be to  constantly  adapt  and  develop  new  marketing
techniques to remain above the market industry.

                                       6
<PAGE>

Still,  the internet gaming and wagering  industry is increasingly  competitive.
With  relatively low barriers to entry,  new competitors are entering the online
lottery segment of gaming.  Interspace  expects the number of companies offering
lottery products online to increase. InterSpace expects to directly compete with
these  companies,  as well as other  established  companies  that may  enter the
Internet lottery industry. Many of InterSpace Enterprises' current and potential
competitors have far greater resources than InterSpace.

GOVERNMENT LICENSING AND REGULATION AND RELATED RISKS

The PlanetLotto  business model currently provides for all lottery operations to
be  conducted  within a  separate  legal  entity,  to be  formed  under the name
PlanetLotto,  Inc.  The goal of this  structure  is (i) to  insulate  InterSpace
Enterprises,  Inc. (the  "Company") from potential  liabilities  associated with
Internet  gaming,  and (ii) to the extent  possible,  segregate  foreign  source
income from domestic  income for tax purposes.  To that end, we have conducted a
preliminary  review of the gaming and tax laws of various foreign  jurisdictions
in an  effort  to  identify  favorable  tax  and  gaming  regimes  within  which
PlanetLotto,  Inc. can be incorporated,  licenses and/or permits can be obtained
for the Global Alliance Network, and where the PlanetLotto,  Inc. servers can be
located.

Based upon our  preliminary  research we have  identified  a number of different
jurisdictions  that  we  believe  should  be  considered  for one or more of the
foregoing purposes. In doing so, we have considered not only the availability of
a government issued license to operate the lottery, but also the availability of
the requisite  telecommunications  infrastructure  and the  applicable  tax rate
structure of the jurisdiction. Ultimately, it will also be necessary to select a
jurisdiction which offers a stable legal and political environment.  The company
has retained legal counsel and an  international  accounting  firm to review the
respective  gaming  and tax  laws and the  Internet  infrastructure  of  various
jurisdictions  throughout the world to determine the most advantageous  domicile
for  PlanetLotto,  Inc.  The  Company  has also  requested  that its tax counsel
analyze and determine the most  advantageous  tax structure for the relationship
between the Company and  PlanetLotto,  Inc. in an effort to legitimately  reduce
its tax burden.  Presently,  the analysis is focusing on various  Caribbean  and
South American  countries and European  territories.  It is  anticipated  that a
decision  regarding the location and domicile of PlanetLotto,  Inc. will be made
within  thirty  to  ninety  days  upon  completion  of  funding.  At such  time,
PlanetLotto,  Inc.  will be formed as a wholly owned  subsidiary  of the Company
and/or spun off as a wholly independent corporation.

LICENSING HOST NATION GUIDELINES

The "Host  Nation  Program"  was  designed to attract  national  governments  to
license the  PlanetLotto  lottery and accept the Company's  Independent  Auditor
Program as the Company's regulatory committee.  The Host Nation Program was also
designed  to keep  control of the lottery  operations  internally  and  prohibit
outside influence from the host nation.  The Company's  criteria for selecting a
host nation are based upon a number of factors.  The  national  government  must
grant the Company a national Internet lottery license for a period of 5 years or
more  and  maintain  no  interest  and/or  representation  within  the  Company.
Additional  requirements  include the allowance for the lottery  operations  and
jackpot  allocations to be regulated through the Company's  Independent  Auditor
Program and to eliminate all  corporate  taxes  through the  development  and/or
licensing of the lottery through a "Free Trade Zone." In return,  the Company is
offering 10% of the  Country's  ticket sales revenue for the life of the lottery
license,  to be administered to the host nation through the independent  auditor
program and to maintain a satellite  corporate  office in the "Free Trade Zone."
It  is  anticipated  that  this  revenue  sharing  program  can  be  effectively
implemented through the country's existing traditional lottery framework.

                                       7
<PAGE>
GLOBAL ALLIANCE NETWORK

In  addition  to the Host  Nation  Program,  the Company has created the "Global
Alliance Network" which will enable governments  worldwide to participate in the
Company's online lottery.  By joining the Global Alliance Network, a country can
share in the benefits of a floating jackpot. When an individual within a country
that is part of the Global Alliance Network wins the current jackpot,  5% of the
PlanetLotto  jackpot will be allocated to the government of the country in which
the individual resides. Additionally, 4% of the jackpot will be distributed to a
government-sponsored  charity  and 1% will be  allocated  to the  public  school
system of the country, for a total of 10% to the Global Alliance Network.

A  significant  debate  exists  whether the laws of any  country  other than the
country  where  the  computer   gaming  servers  are  physically   located  have
jurisdiction over the operations of the Licensees of InterSpace Enterprises.  In
addition, a significant debate exists whether the laws of any country other than
the country  where the  computer  gaming  servers are  physically  located  have
jurisdiction  over the operations of the Company.  Many gaming companies believe
that they are not subject to the laws of any  country  other than the law of the
country where they are licensed.  As a result,  they accept  customers  from any
country,  without  regard  to the laws of the  country  where  the  customer  is
located,  including  the United  States.  InterSpace  has a policy not to accept
wagers from the  residents of the United  States and Canada and has  implemented
procedures  that prevent  customers from collecting on winnings from wagers from
the  residents  of  such  countries.   While  such  procedures,   as  with  most
precautions,  may be able to be  circumvented,  the  Company  believes  that the
procedures largely prevent such wagers from occurring.

Historically,  gaming  activities  have been subject to extensive  statutory and
regulatory control by government  authorities,  and have been very dependant 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.

                                       8
<PAGE>

The Company  believes that the activities of its  subsidiaries do not violate or
are not subject to such laws and  regulations.  However,  because  there is very
little clear statutory and case law authority,  this conclusion is not free from
doubt.  The  Company  faces the risk of  either  civil or  criminal  proceedings
brought by  governmental  or private  litigants  who disagree with the Company's
interpretation  of  laws  and  regulations.  Because  there  is  little  guiding
authority,  there is a risk that the Company could lose such lawsuits or actions
and be subject to significant  damages or civil or criminal penalties and fines.
Such proceedings could also involve substantial litigation expense, diversion of
the attention of key executives, 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 will scrap its 9 percent tax on wagers, which was paid directly by bettors,
and replace 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 will be free to accept wagers on
sports  contests  from all over the  world,  though it still  will be illegal to
offer online casino-style games over the Internet from the United Kingdom.

                                       9
<PAGE>

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.  After previous  similar  proposals failed to pass in 1998, on March 23,
1999,  Senator Jon Kyl of the United States Senate introduced a revised proposal
intended to prohibit and  criminalize  Internet  gambling.  This Bill passed the
Senate on November  11, 1999.  There can be no  assurance  whether any such bill
will become law.  This Bill, S. 692,  contains  exceptions  that exempt  certain
types of wagering by gambling  businesses.  On October 21, 1999,  Representative
Goodlatte  introduced a bill in the House of  Representatives  (H.R.  3125) with
similar  language  as the Kyl  bill.  H.R.  3125 was  voted  on by the  House of
Representatives  on July 17, 2000 under  suspension of the rules,  which limited
debate and  required a two-thirds  vote for passage.  The vote failed to achieve
the necessary two-thirds vote required for passage. However, it was supported by
over sixty percent (60%) of those voting. Supporters of the Bill continue to try
to bring the Bill up for a vote where only a simple  majority would be required.
It is  impossible  to predict the outcome of the  legislation.  If passed in its
current form, this 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.

                                       10
<PAGE>

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,  before they even got to trial.
That's an unusually strong step for a judge, but Duval ruled that the plaintiffs
had no grounds to bring these cases.  Perhaps more significantly,  he also ruled
that Internet casinos do not violate federal law. "Plaintiffs in these cases are
not victims," the judge stated in his ruling,  "they are independent  actors who
made a knowing and voluntary choice to engage in a course of conduct. Litigation
over their own  actions  arose only when the results of those  actions  became a
debt  that  they did not wish to pay.  At this  point in time,  Internet  casino
gambling is not a violation of federal law."

Duval quoted with approval an Appeals  Court ruling that  stated,"...plaintiffs,
i.e. the players,  can avoid any injury  simply by walking away from the alleged
wrongdoers, the casinos, by not playing . . . in the casinos."

In an opinion Duval ruled that the 1961 federal Wire Act, under which  telephone
and Internet bookmaker Jay Cohen was convicted last year, applies only to sports
betting and "does not prohibit Internet casino  gambling." In his ruling,  Duval
examined  the  requirements  for  bring a RICO  case,  and  determined  that the
plaintiffs did not meet any of them. He stated,  "This case is no different than
JUBILIRER."  That was a  reference  to the case of Art  Jubilirer,  who lost $25
playing blackjack online and tried to bring a RICO claim against  MasterCard and
MBNA Bank.  His suit was  dismissed  by a different  federal  court in September
1999.

The director of litigation for Visa International, Steve Zelinger, was quoted in
a story  about the ruling in a recent  issue of The  American  Banker as saying:
"It's not our role to legislate people's lives. We're not a police organization,
we're a payment mechanism."

In March  2001,  a bill to  legalize  Internet  gaming  in Nevada  overcame  its
toughest  obstacle.  Bill AB296 would allow the state's  Gaming  Commission  and
Gaming  Control  Board to  license  hotel-casinos  that want to launch  Internet
gaming sites.  If the measure passes this  legislative  session and is signed by
Gov. Kenny Guinn, it will be the first such law in the nation.

                                       11
<PAGE>

STRATEGIC RELATIONSHIPS

InterSpace recognizes the speed at which the Internet operates, and is committed
to remaining a leader in the Internet gaming industry. 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.

InterSpace is also developing  strategic  transaction  processing  relationships
with financial institutions and e-commerce providers.

RESEARCH AND PRODUCT DEVELOPMENT

The Company is currently preparing to launch its first product, Planetlotto.com,
thus new  product  development  will be a primary  focus of  InterSpace  for the
current  fiscal year.  As the  traditional  lottery  market and the  interactive
online  lottery  market  begin to converge,  new games that  redefine the online
lottery  market  will  emerge.  InterSpace  hopes to lead  this  convergence  by
redefining  the  online  lottery  experience.  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.

NUMBER OF EMPLOYEES

As of March 31, 2001, the Company employed 9 persons.


                                       12
<PAGE>

ITEM 2. PROPERTIES
-------------------

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 3. LEGAL PROCEEDINGS
--------------------------

The Company is not aware of any current or pending legal action.

No director,  officer or affiliate of  InterSpace  International,  Inc.,  and no
owner of record or beneficial  owner of more than 5.0% of the  securities of the
Company, or any associate of any such director,  officer or security holder is a
party  adverse to  InterSpace  International,  Inc.  or has a material  interest
adverse to it in reference to pending litigation.

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

On April 12, 2000, the owners of a majority of the outstanding  common shares of
Interspace Enterprises,  Inc. voted to approve and ratify the Agreement and Plan
of Merger by and between the Company and Marathon Marketing Corp.

No other matters were submitted to a vote of security holders.

                                       13
<PAGE>

                                    PART II

ITEM 5. MARKET FOR INTERSPACE ENTERPRISE'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS MARKET INFORMATION
--------------------------------------------------------------------------------

The  Company's  common  stock is traded on OTC  Bulletin  Board under the symbol
"ITET".

The Company  received  approval to list its shares on the OTC Bulletin  Board in
late December 2000 and was not listed until January,  2001.  Consequently  there
was no market quote available for the period covered by this report.

SECURITY HOLDERS

As of December  31,  2000,  there were 102  registered  holders of shares of the
outstanding Class A Voting Common Stock of the Company.

DIVIDENDS

On July 14,  2000,  the Board of  Directors  announced a  nine-for-one  split of
InterSpace  common stock. The nine-for-one  split was effected in the form of an
800% stock dividend paid to  stockholders  of record as of the close of business
on July 14, 2000.  All share and per share data reflect this split.  The Company
paid no cash dividends in 2000.

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

OVERVIEW

The Company has been and remains in the development  stage of operations.  Since
its inception in 1998,  management  has performed  significant  legal and market
research  to  determine  the  feasibility  of the model and its  likelihood  for
success.  It was determined  relatively  early in the process that the Company's
business model held significant  potential,  but would require capital resources
necessary to develop infrastructure and properly market the product.  Throughout
its  development,   the  Company  has  raised  sufficient  capital  to  continue
refinement of the model and develop important relationships integral to delivery
of the product on a global scale.

Due to its relative  infancy,  the online  lottery  industry,  and even the more
established  online  casino  industry,  has  suffered due to the  reluctance  of
established  investment groups to participate as a result of the confusing legal
environment.  However, in the past 24 months, new legislation combined with more
established  companies  entering  the fold,  has left a clearer  picture  of the
future of the  industry.  As a result,  online  gaming  is  becoming  one of the
fastest growing sectors of the internet.

                                       14
<PAGE>

It is  management's  belief  that the  Company  will be able to secure  adequate
funding to continue  development of the business into  self-sufficient  revenues
and positive cash flow,  however,  there can be no assurances  that funding will
occur.

LIQUIDITY AND CAPITAL RESOURCES

At year end the  Company  had  $17,343 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 development plan and
low overhead, the Company has been able to stay within its planned timeframe for
launch of the PlanetLotto  website and the generation of its first revenues.  It
is  currently  anticipated  that  the  website  will be  launched  and  publicly
accessible by Fall, 2001.

The  Company is  currently  working  on  strategies  to reduce  the  development
timeframe such that a launch earlier than planned may be possible.  However,  in
order to do so, the Company would need to enter a partnership  arrangement  with
an existing operator to license software and lease infrastructure equipment. The
Company is currently in  discussions  with two operators  regarding such a plan,
however,  there are no assurances that a mutually  agreeable  arrangement can be
established.

It is management's preference to finance with equity whenever possible, however,
during 2000, the Company raised approximately $272,000 in the form of promissory
notes. Since year-end, the Company has converted  approximately $152,000 of such
debt into common stock.

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,  2000,  there  were no  material  commitments  for  capital
expenditures.

                                       15
<PAGE>

RESULTS OF  OPERATIONS  FOR THE YEAR ENDED  DECEMBER 31, 2000 AS COMPARED TO THE
YEAR ENDED DECEMBER 31, 1999

The Company had no revenue in 2000 or 1999. The Company  incurred  $1,274,834 in
2000 and $612,418 in 1999 in general and  administrative  expenses.  The Company
incurred  $333,000 in license fees in 2000 versus  $31,990 in 1999.  The Company
had $257,250 in 2000 and $70,100 in 1999 for consulting  fees. In 2000 the legal
and  professional  fees  went  down to  $50,301  from  $141,061  in 1999.  Other
administrative  expenses increased to $120,671 in 2000 from $44,518 in 1999. The
largest  single area of increase was  $466,880 for salaries in 2000  compared to
$203,199 in 1999.

The Company  incurred a loss on operations of  ($1,274,835)  in 2000 compared to
($612,418)  in 1999.  The Company had a net loss of  ($1,230,269)  in 2000 after
interest  income of $9,105 and interest  expense of  ($54,471).  In 1999 the net
loss was ($613,218). The loss per share was ($.02) in 2000 and 1999.


                                       16
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-----------------------------------------------------

The  response  to this item is included  as a separate  exhibit to this  report.
Please see pages F-1 through F-14.


ITEM 8.     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.

                                       17
<PAGE>
                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS AND SIGNIFICANT MEMBERS OF MANAGEMENT
-------------------------------------------------------------------------------

DIRECTORS

(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.

DIRECTORS

NAME                       AGE      PRINCIPAL OCCUPATION                  SINCE
----                       ---      -----------------------               -----
Daniel P. Murphy           31       Founder, President, Chief Executive     1998
                                    Officer, Chairman and Director

Alejandro Trujillo         31       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           31      Chairman of the Board, President and  4 years
                                    Chief Executive Officer

Alejandro Trujillo         31      Chief Technology Officer              2 years

Andrew P. Patient          30      Chief Financial Officer, Treasurer
                                    and Secretary                        2 years

Brett A. Cohen             33      Vice President, Public Relations       Annual

Douglas Abbott             42      Vice President, Business Development   Annual


(b)  Identification of Certain Significant Employees.  None

(c)  Family Relationships.  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.

                                       18
<PAGE>

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

Mr. Murphy is a co-founder,  President/Chief  Executive Officer, and Chairman of
the Board of the Company. His 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,  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. Mr.
Murphy also has experience in operations management.

         Alejandro Trujillo, Chief Technology Officer, Director

As a  co-founder,  Director and Chief  Technology  Officer of the  Company,  Mr.
Trujillo's  primary  responsibility  is to  plan  and  implement  the  technical
development  of  the  Company.  Mr.  Trujillo,  educated  at the  University  of
California, San Diego (UCSD) in the field of Cognitive Science, has an extensive
background  within the programming and Internet  industry.  During his tenure as
the Vice  President of Production  of an emerging  multimedia  corporation,  Mr.
Trujillo  handled all aspects of his  division,  including  project  management,
coordinator, and operations management.

         Andrew P. Patient, Chief Financial Officer and Secretary

As  the  Chief  Financial   Officer  and  Secretary,   Mr.   Patient's   primary
responsibility is to direct and coordinate financial programs to provide for new
or continuing operations in order to maximize return on investments. Mr. Patient
is  a  Certified  Public  Accountant  and  Canadian  Chartered  Accountant.  His
experience includes seven years of public accounting experience in both the U.S.
and Canada  working with clients from small  owner-operated  businesses to large
multi-national  public companies.  Mr. Patient has spent the last two and a half
years serving as Chief Financial Officer of a publicly-traded multimedia company
where he was an integral part of  structuring  and preparing  private  placement
offerings,  raising  capital  and taking the  Company  public.  Mr.  Patient has
in-depth  experience with investor  relations and shareholder  communications as
well as a strong  background  in all  financial  aspects of business,  including
budgeting,  projections, cash flow management, financing alternatives,  internal
controls and financial reporting.

         Mauricio Tellez, Senior Vice President, Global Alliances

Mr.  Tellez's  primary  responsibility  is to seek  business  opportunities  and
strategic  alliances  with other national  governments  and  organizations.  Mr.
Tellez  received  a  Bachelor  of  Science  in  Political  Science/International
Relations from University of California, Los Angeles (UCLA). Mr. Tellez has held
several increasingly senior sales positions in the field of developing strategic
alliances,  channel  management and  international  sales. Over the years he has
held area sales and management positions in Pitney-Bowes Corporation,  a Fortune
100 Company and Rentas y Ventas de Tijuana  S.A. de C.V.  More  recently he held
the  position  of  Regional   Director  for  Latin   America  for  Datron  World
Communications.  This  position  has  solidified  his  expertise in managing and
promoting the  intricacies  of  international  sales and overseeing the regional
channel  management  network.  Mr. Tellez was  instrumental  in negotiating  and
obtaining the Company's lottery licenses.

                                       19
<PAGE>

         Douglas Abbott, Senior Vice President, Business Development

Mr. Abbott's primary responsibility is to develop strategic alliances and secure
corporate  sponsorships  for the game show and the  PlanetLotto  websites.  Doug
Abbott graduated from San Diego State University in 1983 with a Bachelor of Arts
in Applied Arts and Sciences in  Advertising.  Mr.  Abbott joined the Company in
September  1998 as Executive  Producer in charge of television  programming.  He
moved to his current position,  Senior Vice President of Programming in February
1999.  Mr.  Abbott has an extensive  background in the  entertainment  industry,
including  more  than  twelve  years  in  numerous   supervisory   positions  in
advertising agencies, and film and video production.

         Brett A. Cohen, Senior Vice President, Public Relations

Ms. Cohen's  primary  responsibility  is to build and maintain  positive  global
awareness for the company through the public relations department. Ms. Cohen has
extensive  public   relations   experience   through  the  conception,   design,
development  and  management of global  special  events for  Presidents and CEOs
through her  association  with the Young  Presidents'  Organization.  Regions of
responsibility  included Eastern and Western Europe,  Africa, South America, the
Middle East and the United States where she lead on-site  management  and public
relation  operations  in 22  countries.  Ms. Cohen served as project  liaison to
internal teams, corporate sponsors and speakers including industry experts, CEOs
and  Heads of  State.  She was  previously  the  head of  marketing  and  public
relations for Southern  Methodist  University  and has a ten-year  background in
public relations,  marketing and journalism.  Ms. Cohen holds a Bachelors degree
from Columbia University.

(e)  Committees of the Board of Directors

     During 2000,  the Board of Directors met on nine  occasions.  All directors
attended 100% of the meetings of the Board during 2000.

     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 2001 fiscal year.



                                       20
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
-------------------------------

(a) Officer's Compensation

     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
                      -------------------------------------
                                                             OTHER     LONG-TERM
                                                             ANNUAL    AWARDS OF
NAME AND                            SALARY       BONUS    COMPENSATION   OPTIONS
PRINCIPAL POSITION       YEAR         ($)         ($)         $)        (# SHS)
------------------   --------   -----------    ----------  ----------- ---------
Daniel P. Murphy         2000       90,000       -0-          -0-       250,000
  Chairman of the Board  1999       63,333       -0-          -0-            -0-
  President and Chief
  Executive Officer

Alejandro Trujillo       2000       88,333       -0-          -0-       250,000
  Director, Chief        1999       63,333       -0-          -0-            -0-
  Technology Officer

Andrew P. Patient        2000       86,250       -0-          -0-       250,000
  Chief Financial        1999       18,750       -0-          -0-            -0-
  Officer and Secretary

Douglas Abbott           2000       52,500       -0-          -0-            -0-
  Senior Vice-President  1999           -0-      -0-       4,750(1)          -0-
  Business Development

BRETT A. COHEN           2000       70,000       -0-      50,000(2)          -0-
  Senior Vice-President  1999           -0-      -0-          -0-            -0-
  Public Relations

------------------------------
(1) Mr. Abbott was a consultant  to the Company for a short period in 1999,  and
as a result was compensated with cash on an hourly basis for his services.

(2)  Ms.  Cohen  was  granted  50,000  shares  of  common  stock  as part of her
employment  agreement.  The Company  valued the shares at their  estimated  fair
market value at the time of grant.


                                       21
<PAGE>

(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.

<TABLE>
<CAPTION>

                     SUMMARY COMPENSATION TABLE OF DIRECTORS
                             (To December 31, 2000)

                        Cash Compensation               Security Grants
<S>            <C>     <C>      <C>      <C>        <C>          <C>                 <C>       <C>
----------------------------------------------------------------------------------------------------------------
Name and       Year    Annual   Meeting  Consulting Number       Securities          LTIP      All Other
Principal              retainer Fees ($) Fees/Other   of         Underlying          Payments  Compensation
Position               Fees ($)          Fees($)    Shares (#)   Options/SARs(#)
                                                                 (SHARES)
----------------------------------------------------------------------------------------------------------------
Daniel P.      2000         0      0         0         0              0                   0         0
 Murphy, (1)   1999         0      0         0         0              0                   0         0
Director


Alejandro      2000         0      0         0         0              0                   0         0
Trujillo, (1)  1999         0      0         0         0              0                   0         0
Director
</TABLE>

(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

                                       22
<PAGE>

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.

                                       23
<PAGE>

OPTION GRANTS IN LAST FISCAL YEAR

     The following table sets forth individual grants of stock options and stock
appreciation  rights made during 2000 to each of the executive officers named in
the Summary Compensation Table above. There were no grants of stock appreciation
rights (SARs) to any officers in 2000.

                       OPTION GRANTS IN LAST FISCAL YEAR

                           INDIVIDUAL GRANTS
                           ------------------------------
                           NUMBER OF        % OF TOTAL
                           SECURITIES       OPTIONS           EXERCISE
                           UNDERLYING       GRANTED TO        OR BASE
                           OPTIONS          EMPLOYEES         PRICE       EXPIRY
NAME                       GRANTED (#)      IN FISCAL YR      ($/SH)       DATE
---------                  ------------     --------------    -------    ------
Daniel P. Murphy           250,000            33.3%             1.10     3/1/10
Alejandro Trujillo         250,000            33.3%             1.10     3/1/10
Andrew P. Patient          250,000            33.3%             1.00     3/1/10

AGGREGATED  OPTION  EXERCISES  IN LAST  FISCAL YEAR AND FISCAL  YEAR-END  OPTION
VALUES

     The  following  table sets forth each exercise of stock options made during
the year ended December 31, 2000 by the current Chief Executive Officer, and the
four most highly  compensated  other executive  officers and the fiscal year-end
value of unexercised  options held by those individuals as of December 31, 2000.
There were no exercises or holdings of stock appreciation rights by any officers
during 2000, and there are no outstanding stock appreciation rights.

                           SHARES                             NUMBER OF
                           ACQUIRED ON      VALUE    UNEXERCISED OPTIONS
NAME                       EXERCISE (#)    REALIZED         AT YEAR END
--------                   --------------- --------  ---------------------
Daniel P. Murphy           750,000          $400,000         -0-
Alejandro Trujillo         750,000          $400,000         -0-
Andrew P. Patient          400,000          $287,500         -0-


                                       24
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires that the Company's
directors  and  executive  officers,  and  persons  who own  more  than 10% of a
registered  class of the Company's equity  securities,  file with the Securities
and Exchange  Commission  initial  reports of ownership and reports of change in
ownership of Common Stock and other equity securities of the Company.  Officers,
directors and greater than 10%  shareholders  are required by SEC  regulation to
furnish the Company with copies of all Section 16(a) forms that they file.

To the Company's knowledge,  during the fiscal year ended December 31, 2000, all
Section 16(a) filing  requirements  applicable  to its  officers,  directors and
greater than 10% beneficial owners were not complied with.

(a) The following table lists any person  (including any "group" as that term is
used in Section  13(d)(3)  of the  Exchange  Act) who, to the  knowledge  of the
Company,  was the beneficial  owner as of March 31, 2001, of more than 5% of the
outstanding voting shares of the Company.  Unless otherwise noted, the owner has
sole voting and dispositive power with respect to the securities.

TITLE        NAME OF                       AMOUNT OF         PERCENT
OF CLASS     BENEFICIAL OWNER        BENEFICIAL OWNERSHIP   OF CLASS(1)
----------   ----------------        --------------------   --------------
Common Stock Prudential Overseas          6,048,000            9.19%
             Company, Ltd.




(1)  With  respect  to the  Common  Stock,  percentages  shown  are  based  upon
65,836,800 shares of Common Stock actually outstanding as of December 31, 2000.

(b) The  following  table  sets  forth  as of March  31,  2001,  the  beneficial
ownership of the Company's voting shares by all current  directors and executive
officers  of the Company as a group.  Unless  otherwise  indicated,  each person
listed below has sole voting and investment  power over all shares  beneficially
owned by him.

 TITLE          NAME OF                   AMOUNT OF                  PERCENT
OF CLASS     BENEFICIAL OWNER        BENEFICIAL OWNERSHIP           OF CLASS(1)
----------   ----------------        -------------------            -----------
Common Stock   Daniel P. Murphy          15,750,000(1)                 23.92%
               President, Chairman
               CEO & Director



               Alejandro Trujillo        15,750,000(2)                 23.92%
               Chief Technology Officer
                & Director


               Andrew P. Patient          6,750,000(3)                 10.25%
               CFO, Treasurer,
               & Secretary


               Douglas Abbott               900,000                     1.37%
               Vice President
               Business Development


               Brett A. Cohen               450,000                        *
               Vice President
               Public Relations


*  Less than 1% of the class.

                                       25
<PAGE>

(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.

ITEM 12. 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.  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  purchase.  Participating
employees  financed the purchases of these shares through  promissory notes from
the Company at the Federal Rate for Mid-Term Funds, payable over five years. 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  Enterprises,  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.

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.


                                       26
<PAGE>

                                     PART IV

ITEM 13. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
---------------------------------------------------

(a) Financial  Statements and Schedules.  The following financial statements and
schedules for InterSpace Enterprises,  Inc. as of December 31, 2000 are filed as
part of this report.

     (1) Financial statements of InterSpace Enterprises, Inc. (formerly Marathon
Marketing Corp.) and subsidiaries.

                                                                     Page

Cover Page

Contents to Financial Statements                                      F-1

Independent Auditor's Report for years ended
December 31, 2000                                                     F-2

Consolidated Balance Sheet at end of December 31, 2000                F-3

Consolidated Statement of Operations at end of December 31, 2000      F-4

Consolidated Statement of Cash Flows at end of December 31, 2000      F-5

Consolidated Statement of Stockholders' Equity at end of
December 31, 2000                                                     F-6-F-7

Notes to the Consolidated Financial Statements                        F-8-F-14

     (2) Financial Statement Schedules:

  All  schedules  are omitted  because they are not  applicable  or the required
information is shown in the financial statements or notes thereto.

(b) Exhibits

SK#                      Name of Exhibit                    Page No.

                         8-K                           Incorporated by Reference
                                                       as filed with the
                                                       Securities & Exchange
                                                       Commission on 12/10/99
                                                       under file #0-28465

                                       27
<PAGE>


                                   SIGNATURES

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

DATE: April 16, 2001
                                             INTERSPACE ENTERPRISES, INC.

                                             by:/s/Daniel P. Murphy
                                             ----------------------------
                                             Daniel P. Murphy, President

   Pursuant  to the  requirements  of  Section  13 or 15  (d) of the  Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated.

                              Chairman of the Board, President   April 16, 2001
/s/Daniel P. Murphy           Chief Executive Officer & Director
------------------
Daniel P. Murphy


                              Chief Technology Officer and       April 16, 2001
/s/Alejandro Trujillo         Director
-----------------
Alejandro Trujillo


                              Chief Financial Officer,           April 16, 2001
/s/Andrew P. Patient          Treasurer, and Secretary
-----------------
Andrew P. Patient



/s/Brett A. Cohen             Vice President, Public Relations   April 16, 2001
------------------
Brett A. Cohen



                              Vice President,                    April 13, 2001
/s/Douglas Abbott             Business Development
------------------
Douglas Abbott


                                       28
<PAGE>

                          INTERSPACE ENTERPRISES, INC.
                        (A Developmental Stage Company)


                              FINANCIAL STATEMENTS
                      For the Year Ended December 31, 2000



                             SIEGEL, SMITH & GARBER
                          Certified Public Accountants

<PAGE>
                        INTERSPACE ENTERPRISES, INC. AND SUBSIDIARIES

                                  AUDIT REPORT
                           DECEMBER 31, 2000 AND 1999

                                 C O N T E N T S

   Independent Auditors' Report . . . . . . . . . . . . . . . . . . .  F-2

   Consolidated Balance Sheet as of December 31, 2000 and 1999.....    F-3

   Consolidated Statement of Operations For The Years Ended
     December 31, 2000 and 1999 . . . . . . . . . . . . . . . .        F-4

   Consolidated Statement of Cash Flows For The Years Ended
     December 31, 2000 and 1999 . . . . . . . . . . . . . . .          F-5

   Consolidated Statement of Stockholders' Equity For The Years Ended
     December 31, 2000 and 1999 . . . . . . . . . . . .                F-6-F-7

   Notes to the Consolidated Financial Statements . .. . .             F-8-F-14

All  schedules  are omitted  because  they are not  applicable  or the  required
information is shown in the financial statements or notes thereto.

                                      F-1






<PAGE>
                           SIEGEL, SMITH & GARBER, LLP
                          CERTIFIED PUBLIC ACCOUNTANTS
                               FINANCIAL ADVISORS
                          Member American Institute of
                          Certified Public Accountants

                        400 S. Sierra Avenue, Suite 100
                         Solana Beach, California 92075
                               Tel. 858.792.8606
                                Fax 858.792.8608


                          INDEPENDENT AUDITOR'S REPORT

Board of Directors and Stockholders
InterSpace Enterprises, Inc.
7825 Fay Avenue, Suite 200
La Jolla, CA  92037


We have audited the accompanying balance sheet of InterSpace Enterprises,  Inc.,
(A development  stage company) as of December 31, 2000 and 1999, and the related
statements of operations,  stockholders' equity (deficit),  and cash flows years
ended and from June 30,  1998,  date of  inception,  through  December 31, 2000.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of InterSpace Enterprises, Inc. as
of December 31, 2000 and 1999,  and the results of its  operations  and its cash
flows for the year then ended and from June 30 1998, date of inception,  through
December 31, 2000 in conformity with generally accepted accounting principles.

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


/s/Siegel, Smith & Garber LLP

Siegel, Smith & Garber LLP
Solana Beach, California
April 5, 2001

                                      F-2

<PAGE>
<TABLE>
<CAPTION>
                                 INTERSPACE ENTERPRISES, INC.
                                (A DEVELOPMENT STAGE COMPANY)
                                        BALANCE SHEET
                                         DECEMBER 31,

                                           ASSETS

<S>                                                          <C>                <C>
                                                                   2000              1999
-----------------------------------------------------------------------------------------------
CURRENT ASSETS

     Cash                                                    $        17,343   $        10,223
     Prepaid expenses                                                 14,750                 0
-----------------------------------------------------------------------------------------------
        TOTAL CURRENT ASSETS                                          32,093            10,223

FIXED ASSETS

     Computer and office equipment                                    11,281             9,299
     Accumulated depreciation                                         (4,315)           (1,968)
-----------------------------------------------------------------------------------------------
       TOTAL PROPERTY AND EQUIPMENT                                    6,966             7,331
-----------------------------------------------------------------------------------------------
          TOTAL ASSETS                                       $        39,059   $        17,554
===============================================================================================


                        LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
     Accounts payable                                        $       260,053   $       147,737
     Notes payable                                                   136,000
     Accrued payroll liabilities                                     279,332           110,527
     Accrued income tax                                                1,600               800
     Convertible notes payable                                       136,000
     Accrued interest                                                  9,105
     Current portion long term debt                                      930               719
-----------------------------------------------------------------------------------------------
       TOTAL CURRENT LIABILITIES                                     823,020           259,783

LONG TERM LIABILITIES                                                  1,111             2,227

STOCKHOLDERS' EQUITY (DEFICIT)
     Common stock                                                        658            40,002
     Additional paid in capital                                    2,313,532           402,438
     Accounts receivable subscribed-related parties               (1,187,097)           (5,000)
     Accumulated deficit during development stage                 (1,912,165)         (681,896)
-----------------------------------------------------------------------------------------------
       Total stockholders' equity                                   (785,072)         (244,456)
-----------------------------------------------------------------------------------------------
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY           $        39,059   $        17,554
===============================================================================================
</TABLE>


                 See Accompanying Notes to Financial Statements


                                               F-3
<PAGE>
<TABLE>
<CAPTION>
                                INTERSPACE ENTERPRISES, INC.
                               (A DEVELOPMENT STAGE COMPANY)
                                  STATEMENT OF OPERATIONS
                    FOR THE YEARS ENDED DECEMBER 31 AND INCEPTION TO DATE

<S>                                                      <C>           <C>         <C>
                                                                                    From Inception
                                                                                    June 30, 1998
                                                                                       Through
                                                         2000          1999        December 31,2000
    --------------------------------------------------------------------------------------------------
REVENUES

RESEARCH AND DEVELOPMENT                                                                        5,059

ADMINISTRATIVE AND SELLING EXPENSES

    License fees                                           333,000        31,990              373,000
    Consulting                                             257,250        70,100              330,825
    Depreciation and amortization                            2,347         1,660                4,315
    Legal and professional                                  50,201       141,061              201,517
    Marketing and promotion                                 14,468        85,163               99,631
    Office expense                                          24,241        31,076               59,365
    Other administrative expenses                          120,671        44,518              168,209
    Rent                                                     5,777         3,651               10,823
    Salaries                                               466,880       203,199              702,387
                                                   ---------------------------------------------------
       TOTAL ADMINISTRATIVE EXPENSE                      1,274,835       612,418            1,950,072
                                                   ---------------------------------------------------
         NET LOSS FROM OPERATIONS                       (1,274,835)     (612,418)          (1,955,131)

OTHER (INCOME) EXPENSE
    Interest income                                        (54,471)                           (54,471)
    Interest expense                                         9,105                              9,105
                                                   ---------------------------------------------------
       TOTAL OTHER (INCOME) EXPENSE                        (45,366)                           (45,366)

INCOME TAXES                                                   800           800                2,400

                                                   ---------------------------------------------------
         NET INCOME                               $     (1,230,269)     (613,218)          (1,912,165)
                                                   ===================================================


    Weighted Average Shares                             58,321,405    32,206,741
    Loss per share                                           (0.02)        (0.02)
</TABLE>


                       See Accompanying Notes to Financial Statements


                                             F-4

<PAGE>
<TABLE>
<CAPTION>

                         INTERSPACE ENTERPRISES, INC.
                         (A DEVELOPMENT STAGE COMPANY)
                            STATEMENTS OF CASH FLOWS
       FOR THE YEARS ENDED DECEMBER 31 AND FROM INCEPTION, JUNE 30, 1998
                           THROUGH DECEMBER 31, 2000
<S>                                                     <C>              <C>                <C>
                                                                                              From Inception
                                                                                               June 30, 1998
                                                                                                  Through
                                                              2000             1999          December 31,2000
                                                          --------------   --------------   --------------------
CASH FLOWS FROM OPERATING ACTIVITIES

     Net Loss                                           $    (1,230,269) $      (613,218) $          (1,912,165)
     Adjustments  to  reconcile  net income to net cash
     provided  by  operating activities:
         Depreciation                                             2,347            1,660                  4,315
         Stock for services                                     469,000          158,475                630,950
         Changes in:
         Prepaid expense                                        (14,750)               0                (14,750)
         Accounts payable                                       112,316          147,737                260,053
         Accrued interest                                         9,105                0                  9,105
         Accrued payroll expenses                               168,805           91,684                279,332
         State tax payable                                          800              800                  1,600

                                                            ----------------------------------------------------
Net Cash Used in Operating Activities                          (482,646)        (212,862)              (741,560)

CASH FLOWS FROM INVESTING ACTIVITIES
         Accrued interest related parties                       (54,471)               0                (54,471)
         Computer and equipment purchases                        (1,982)          (5,815)                (8,335)
         Note receivable (payments)                                                3,000                      0

                                                            ----------------------------------------------------
Net Cash Used by Investing Activities                           (56,453)          (2,815)               (62,806)

CASH FLOWS FROM FINANCING ACTIVITIES
         Notes payable                                          136,000                0                145,200
         Sale of common stock                                   275,124          212,990                550,614
         Repayment of notes                                        (905)          (9,200)               (10,105)
         Convertible notes                                      136,000                0                136,000

                                                            --------------------------------------------=-------
Net Cash Provided by Financing Activities                       546,219          203,790                821,709

         Net Increase in Cash                                     7,120          (11,887)                17,343

     Cash, beginning of the year                                 10,223           22,110                      0
----------------------------------------------------------------------------------------------------------------
     Cash, December 31                                  $        17,343  $        10,223  $              17,343
================================================================================================================

SUPPLEMENTAL NON CASH INVESTING AND FINANCING ACTIVITIES:
     Stock issued for a Lottery license                 $       333,000  $                $             333,000
     Stock for consulting service                       $       136,000  $                $             136,000
     Acquisition of computer on note                    $                $         2,946  $               2,946

SUPPLEMENTAL INFORMATION:
         Interest paid                                  $           353  $           413 $                    0
         Taxes paid                                     $             0  $             0 $                    0

</TABLE>

                                             F-5
                           See Accompanying Notes to Financial Statements

<PAGE>

<TABLE>
<CAPTION>
                                                    INTERSPACE ENTERPRISES, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                       STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                                      FROM INCEPTION, JUNE 30, 1998 THROUGH DECEMBER 31, 2000
<S>              <C>                      <C>          <C>        <C>              <C>                <C>                <C>
                                             Common Stock         Additional Paid      Accounts       Accumulated
      Date          Description           Shares       Dollars      in Capital     Rec. 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)
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------


                                           See Accompanying Notes to Financial Statements




                                                                F-6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                   INTERSPACE ENTERPRISES, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                       STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                                      FROM INCEPTION, JUNE 30, 1998 THROUGH DECEMBER 31, 2000
<S>              <C>                      <C>          <C>        <C>              <C>                <C>                <C>
                                             Common Stock         Additional Paid      Accounts       Accumulated
      Date          Description           Shares       Dollars      in Capital     Rec. 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
March, 2000      Stock for 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)
====================================================================================================================================


                                           See Accompanying Notes to Financial Statements
                                                                 F-7
</TABLE>
<PAGE>
                          INTERSPACE ENTERPRISES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


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. MM became a wholly owned subsidiary.  The Company then
merged with its wholly owned subsidiary  becoming a Colorado  Corporation  under
the name of InterSpace Enterprises,  Inc. The transaction was accounted for as a
reverse reorganization.

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 its  business  plan, 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.  Diluted  loss per share is based on the
assumption that all-dilative convertible shares and stock options were converted
or exercised.  Dilution is computed by applying the treasury stock method. Under
this method,  options and warrants are assumed to be exercised at the  beginning
of the period (or at the time of issuance,  if later),  and as if funds obtained
thereby were used to purchase  common  stock at the average  market price during
the period.

                                      F-8
<PAGE>
                          INTERSPACE ENTERPRISES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

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, 2000 was $4,315, which represents
$2,347 for the current calendar year, $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,  1999 of  approximately  $700,000  for federal
purposes and $350,000 for State tax purposes.  This NOL will be gin to expire in
the year 2013 if not previously utilized.

                                      F-9
<PAGE>
                          INTERSPACE ENTERPRISES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

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.

                                      F-10
<PAGE>
                          INTERSPACE ENTERPRISES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000

NOTE B - NOTES PAYABLE

The  Company has  obtained  from two  interested  parties a total of $136,000 in
informal loans to meet the Company's  day-to-day cash operating needs. The loans
total  $16,000 from one party and $120,000  from the second.  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  accrued  $3,441  interest at a rate of 10
percent on these friendly advances.  Subsequent to year-end the $16,000 note was
converted to 57,600 shares of the Company's common stock.

The  Company  has  assumed  a  liability  from an  officer  of the  Company  for
approximately  $2,000.  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
                                           2001                        $    930
                                           2002                        $ 1,110
                                           2003                        $    -0-
                                           2004                        $    -0-
                                           2005                        $    -0-

NOTE C - CONVERTIBLE NOTES PAYABLE

In August 2000 the Company raised $136,000 of capital via unsecured  convertible
notes.  The terms of the notes are one (1) year 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,  2000 no note  holders  or  events  had  occurred  to  trigger
conversion and the Company  accrued  $5,664 of interest  payable on these notes.
Subsequent to year-end the Company's stock traded on the National Association of
Securities Dealers,  Over-The-Counter Bulletin Board, in excess of the benchmark
established  in the  Convertible  Note  Agreement.  Therefore,  the  Company has
converted all notes to stock subsequent to December 31, 2000.


                                      F-11
<PAGE>
                          INTERSPACE ENTERPRISES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


NOTE D - INCOME TAXES

Income tax expense of $800 represents the minimum  California  franchise tax for
the year ended  December 31, 2000.  The deferred  income taxes  consisted of the
following as of December 31, 2000, 1999 and 1998.

                                                      2000      1999       1998
 Deferred tax asset:
    NOL                                            $175,800   $106,200 $ 68,700
--------------------------------------------------------------------------------
         Total deferred tax asset                  $175,800   $106,200 $ 68,700
         LESS: VALUATION ALLOWANCE                 (175,800   (106,200) (68,700)
      --------------------------------------------------------------------------
                    Net deferred tax asset         $      -     $    -  $     -
===============================================================================
  Change in valuation allowance                   $  69,600  $  37,500 $ 68,700


Deferred tax assets  relates to the Company's net operating  loss from inception
through  December 31,  2000.  The net  operating  loss totals  $1,900,000  as of
December 31, 2000 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, 2000 and 1999 no  preferred  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, 2000 and 1999 there were  65,836,800  (post dividend) and
4,000,200 (pre dividend)  shares issued and  outstanding,  respectively.  During
2000,  prior to the stock  dividend  the  Company  sold 99,000  shares  totaling
$222,500 less a $26,000 commission. Additionally, 136,000 shares, (pre dividend)
were issued for services,  valued at $136,000 and 333,000 shares were issued for
a license in Ecuador. The shares issued for services and the license were valued
at what management believed was the value of the stock issued, $1.00 per share.

On July 14,  2000,  the Board of  Directors  announced a  nine-for-one  split of
InterSpace  common stock. The nine-for-one  split was effected in the form of an
800% stock dividend paid to  stockholders  of record as of the close of business
on July 14, 2000. All share and per share data reflect this split.


                                      F-12

<PAGE>
                          INTERSPACE ENTERPRISES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000

NOTE G - NON-MONETARY TRANSACTIONS

The Company initiated a policy, whereby a fifteen-percent commission is paid for
referrals of investors in the Company's stock.  During 2000 and 1999 the Company
paid $26,000 and $33,260 respectively for referrals.

On February 9, 2000 the Company issued 2,997,000  shares,  (post  dividend),  of
common stock to The  Association of Ecuador for a license to operate an internet
lottery in Ecuador for a ten year period or until  terminated.  The Company will
pay a 1.5%  commission to The  Association of Ecuador for each lotto ticket sold
in Ecuador. The Company valued the transaction at $333,000.  The value was based
upon what  management  believed  to be the value of the stock  between a willing
buyer and a willing  seller at that point in time.  Various  stock  transactions
occurred at other prices during this time period.  However,  management believes
that the transactions were limited and the Company  encountered  resistance from
certain buyers at higher stock price.

Additionally,  the Company issued  1,224,000 (post dividend)  shares for certain
consulting  and advisory  services  provided to the Company.  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 H - RELATED PARTY TRANSACTIONS

The Company currently has assumed a liability from an officer of the Company for
approximately  $2,000.  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 (post  dividend),  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. Total accrued interest at December 31, 2000 was $54,471.
The interest was accrued on officer notes only.  The Company has a balance owing
to one consultant,  that converted options, which approximates the amount of the
note receivable.  Additionally,  the remaining  consultant has paid $25,000 cash
and provided services, which have been applied to the note.

The options  exercised by the  consultants  have been offset in part by services
and or amounts owed to the consultants.  As of December 31, 2000 the consultants
owed the Company  $45,126 for the stock and the Company owed the consultants for
services $18,750.

                                      F-13
<PAGE>
                          INTERSPACE ENTERPRISES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000

NOTE I - SUBSEQUENT EVENTS

The Company has converted the entire  $136,000 of  convertible  notes to 272,000
shares of common  stock.  Additionally,  the note  holder  of the  $16,000  note
converted their note to 57,600 shares of common stock.

NOTE J - 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
2000  the  Company  paid  $5,868  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 K - GOING CONCERN

At December  31, 2000 and 1999 the Company  had a  significant  working  capital
deficit. Additionally, the Company has recurring losses during their development
stage as well as negative  stockholders' equity. 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.

                                      F-14