U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

|X| Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended December 31, 1999.

      Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from         to           .

                                   ----------

                         ALADDIN SYSTEMS HOLDINGS, INC.
             (Exact name of registrant as specified in its charter)

          NEVADA                                         86-0866757
(State or Other Jurisdiction of                   I.R.S. Employer Identification
Incorporation or Organization)                    Number

               165 WESTRIDGE DRIVE, WATSONVILLE, CALIFORNIA 95076
              (Address of Principal Executive Offices and Zip Code)

                    Issuer's Telephone Number: (831) 761-6200

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.001 per share

Indicate by mark (X) 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 such filing
requirements for the past 90 days.

<PAGE>

                             (Cover page continued)

         YES  |X|                   NO |_|

Indicate by mark (X) if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained herein, and will not 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. [ ]

Issuer's revenues for its most recent fiscal year: $10,097,661

Aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing price of the Common Stock on March 31, 2000:

$10,310,120

Number of shares outstanding of each of the registrant's classes of common stock
as of March 31, 2000:

Common Stock: 9,328,578

DOCUMENTS INCORPORATED BY REFERENCE:

List hereunder the following documents if incorporated by reference and the Part
of the 10-KSB into which the document is incorporated.

None


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<PAGE>

                         ALADDIN SYSTEMS HOLDINGS, INC.
                         1999 FORM 10-KSB ANNUAL REPORT
                                Table of Contents

                                                                            Page

Trademarks/Definitions

PART I

Item 1.  Business                                                            4
Item 2.  Properties                                                         20
Item 3.  Legal Proceedings                                                  20
Item 4.  Submission of Matters to a Vote of Security Holders                20

PART II

Item 5.  Market for the Registrant's Common Equity and Related
     Stockholder Matters                                                    21
Item 6.  Management's Discussion and Analysis of Financial
     Condition and Results of Operations                                    21
Item 7.  Financial Statements                                               42
Item 8.  Changes in and Disagreements with Accountants on
     Accounting and Financial Disclosure                                    42

PART III

Item 9.  Directors and Executive Officers of the Registrant                 42
Item 10. Executive Compensation                                             44
Item 11. Security Ownership of Certain Beneficial Owners and
     Management                                                             48
Item 12. Certain Relationships and Related Transactions                     49

PART IV

Item 13. Exhibits, Financial Statements, and Reports on Form 8-K
Signatures                                                                  50

                                                                               3
<PAGE>

TRADEMARKS/DEFINITIONS

      "Aladdin", "StuffIt" "DropStuff" StuffIt Expander", "MacTicker",
"InstallerMaker", "Spring Cleaning", "ShrinkWrap", "MacTicker," "MacTuner,"
"MacHeadlines," "WeatherTracker" and "PrivateFile" are trademarks and service
marks of Aladdin Systems, Inc. and Aladdin Systems Holdings, Inc. All other
trademarks, service marks or tradenames referred to in this Form 10-KSB are the
property of their respective owners. Except as otherwise required by the
context, all references in this Form 10-KSB to (a) "we," "us," "our," the
"Company" or "Aladdin" refer to the consolidated operations of Aladdin Holdings,
Inc., a Nevada corporation, and its wholly-owned subsidiary, Aladdin Systems,
Inc., a Delaware corporation, (b) "you" refers to the readers of this Form
10-KSB, (c) the "Web" refer to the World Wide Web, and (d) the "site" refer to
our Web site ("www.aladdinsys.com").

PART I

Item 1: Business

General

      Aladdin is a developer and publisher of software products for the
Macintosh and Windows software markets. Aladdin Systems, Inc. was formed in
January, 1989 to publish software for the Macintosh computer. In May, 1989,
Aladdin entered into a publishing agreement to publish two software products for
the Macintosh computer developed by Raymond Lau, the StuffIt data compression
software product and the Shortcut desktop productivity application.

      Since 1990, Aladdin Systems has refined, expanded and improved the StuffIt
software and today publishes several different products based upon StuffIt for
both the Macintosh and Windows markets. We also publish several other popular
software applications including Spring Cleaning, a software uninstaller package
for the Macintosh; Private File, a file encryption application for both the
Macintosh and Windows markets; Aladdin Flashback, a version control application
for both the Macintosh and Windows markets which saves older versions of
documents as newer ones are created; DragStrip, a quick launch application for
both the Macintosh and Windows markets; and MacTicker, an automatically updated
stock ticker for the Macintosh which accesses data over the Internet without the
need for separate Web browser software. We sell these products to consumers
through distributors and resellers, as well as directly from our Web site
(www.aladdinsys.com).


                                                                               4
<PAGE>

      In addition to products for the consumer market, we also develop and
market products to other software developers. Our InstallerMaker software
simplifies the installation of software products for Macintosh computers and our
StuffIt Engine product for the Macintosh and Windows markets provides developers
with the ability to include compression features in their own products. In
addition, we publish ShrinkWrap, a disk image product which is used by software
developers.

      On March 21, 2000, Aladdin Systems acquired Trexar Technologies, Inc.
("Trexar"), a Georgia corporation. Trexar is a developer of Windows and
Macintosh software products which act as Internet information utilities.
Trexar's products, MacTuner, MacHeadlines and WeatherTracker are discussed
below. The merger will be accounted for as a pooling of interests. The
shareholders of Trexar received 449,539 shares of common stock of the Company as
consideration for the merger.

The Company

      Aladdin Systems Holdings, Inc., was formed on March 26, 1997 as Foreplay
Golf & Travel Tours, Inc. The Company changed its name to Aladdin Systems
Holdings, Inc. in October, 1999 after acquiring all the common stock of Aladdin
Systems, Inc., a Delaware corporation. The merger was accounted for as a reverse
acquisition. Aladdin Systems Holdings, Inc., exists primarily as a stock holding
company, and accordingly, the operations described in this document, unless
otherwise specified, are those of the subsidiary, Aladdin Systems, Inc.

      Our software products are all branded under the "Aladdin Systems" name and
are either developed internally by our own staff of software developers or are
acquired from third party developers in exchange for royalty payments pursuant
to publishing agreements. The publishing agreements we enter into either assign
to us all rights in the software or give us a perpetual right to modify and
publish the software, in exchange for a royalty which have historically ranged
from 3% to 20% of our net revenue from the sales and licensing of such software.
We attempt to negotiate limits on the amounts of royalties that are to be paid
to the developer of the product.

      Whether we create a product or acquire it from a developer, we assume all
costs associated with publishing it, including the costs of producing
documentation, packaging, marketing, advertising and distribution as well as the
costs of technical support for the products.

Products


                                                                               5
<PAGE>

      Our products are divided into two different product groups serving two
different markets: consumers and software developers. While many of our products
are used by both groups, most of our developer products are licensed directly
rather than sold through the retail software distribution channel. Our products
are divided between these two market segments as follows:

Consumer Products:

StuffIt Deluxe  (Macintosh)
DropStuff (Windows and Macintosh)
Expander (Windows and Macintosh)
StuffIt Lite (Macintosh)
DropZip (Windows and Macintosh)
Spring Cleaning (Macintosh)
Private File (Windows and Macintosh)
Aladdin FlashBack (Windows and Macintosh)
Shrinkwrap
DragStrip (Windows and Macintosh)
MacTicker (Macintosh)
MacTuner (Macintosh)
MacHeadlines (Macintosh)
IntelliNews (Macintosh)
WeatherTracker (Windows and Macintosh)

Developer Products

StuffIt Engine (Windows and Macintosh)
StuffIt InstallerMaker (Macintosh)

StuffIt Product Line (Windows and Macintosh Platforms)

      Our flagship product line is based upon Aladdin's data compression
technology: StuffIt Deluxe, DropStuff, Expander, StuffIt Lite and the StuffIt
Engine. StuffIt software is used to compress and expand data. The software
allows users to compress files, directories, hard drives or other media for
faster transmission over computer networks, including the Internet, and for
archival purposes. Because files encoded in the StuffIt format are compressed,
they are smaller than ordinary files which allows StuffIt files to be
transmitted faster than non-compressed files over computer networks including
the Internet regardless of the method of transmission - modem, DSL, cable modem,
etc.


                                                                               6
<PAGE>

      Aladdin Systems commenced publishing StuffIt in 1989 when it acquired the
publishing rights to the product. Pursuant to the 1989 publishing agreement with
Raymond Lau, Aladdin assumed the publishing rights to StuffIt in exchange for
royalty payments to Mr. Lau. In 1995, we purchased all rights to StuffIt from
Mr. Lau. Since we first published StuffIt in 1989, Aladdin has continually
improved and updated the product. StuffIt was originally designed to run only on
Macintosh computers. In 1995, Aladdin started to publish versions of certain
StuffIt products for Microsoft Windows-based computers. The Windows versions of
our StuffIt products (DropStuff, Expander and the StuffIt Engine) all operate on
the Windows 98, Windows NT and Windows 2000 operating systems.

      StuffIt has been adopted as a worldwide compression standard for the
Macintosh computer by Apple Computer and America Online. In 1990, America Online
adopted StuffIt as their standard for compressing Macintosh files utilizing
StuffIt to automatically compress files for transmission. StuffIt products have
been shipped to over 10 million users worldwide over the last two years,
including eight million copies distributed by Apple Computer shipped pre-loaded
on Apple Computer's products. While originally Apple Computer paid us for the
right to distribute StuffIt products, currently, Aladdin receives no
compensation therefor.

      The StuffIt product line is divided into six different software products,
StuffIt Deluxe, DropStuff, DropZip, Expander, the StuffIt Engine and StuffIt
Lite, designed for multiple computing platforms, and distributed through a
worldwide multi-channel distribution network. The StuffIt products are each
protected by copyright law.

      StuffIt Deluxe (Macintosh) - StuffIt Deluxe is a full featured product
offering a complete compression and expansion solution to users. StuffIt Deluxe
is sold commercially through Aladdin's physical and electronic worldwide
distribution network of distributors, resellers, mail order houses, Web-based
retailers, and through our Web site (www.aladdinsys.com). StuffIt Deluxe was
first released for commercial sale in 1990. A localized kanji version is
distributed by our Japanese distributor. StuffIt Deluxe sells for a suggested
retail price of $129.95.

      DropStuff (Windows and Macintosh) - DropStuff allows users to quickly and
easily compress a file by simply moving the file's icon directly over the
DropStuff icon on the user's desktop. DropStuff is distributed as shareware.
Shareware is generally recognized in the software industry as being on the
"honor system" with the software freely distributed at no charge pursuant to a
license agreement which requires payment as a condition of continued use after


                                                                               7
<PAGE>

30 days. We expect that the vast majority of shareware users will not register
the software or pay the license fee. However, we believe that on a historical
basis, the distribution of DropStuff as shareware has benefited Aladdin through
an increase in the number of users of our StuffIt compression standard as well
as increasing Aladdin's goodwill in the computer industry. In 1999, we started
distributing DropStuff (both Macintosh and Windows versions) through e-commerce
retailers as a commercial product. DropStuff is currently distributed by Apple
Computer as part of the Mac OS. We receive no compensation from Apple Computer
therefor. DropStuff sells for a suggested retail price of $20.00 for the Windows
version and $30.00 for the MacOS version.

      Expander (Windows and Macintosh) - StuffIt Expander for the Macintosh and
Aladdin Expander for Windows are corresponding products which automatically
decompress files that are compressed into the StuffIt format. These products do
not compress files themselves. Expander is distributed as freeware in order to
encourage the wide distribution of files in StuffIt format and to seed the
market for our commercial products. Despite being distributed free of charge,
Expander is protected by copyright law and its use is subject to a license
agreement. In addition to decoding files in StuffIt format, Expander also
decodes files in other popular compression and encoding formats, including Zip,
Binhex, Base64 (MIME) and TAR, further increasing its popularity and usefulness.
We have entered into agreements allowing distribution of StuffIt Expander with
third parties such as Apple Computer, Netscape, IDG Communications and Connectix
Corporation. Generally, we receive no revenue from such agreements. We also
distribute Expander from our Web site (www.aladdinsys.com).

      StuffIt Engine (Windows and Macintosh) - The StuffIt Engine is licensed
directly to software developers who wish to incorporate Aladdin's compression
technology into their software. We have licensed the StuffIt Engine to third
parties such as American Online and DataViz. Since the StuffIt Engine is
licensed on a negotiated basis, we do not have a suggested retail price for the
product.

      StuffIt Lite (Macintosh) - StuffIt Lite is a shareware compression product
designed to provide basic compression and expansion capabilities. The software
is only distributed electronically and is available for download through
multiple sources. StuffIt Lite is still distributed as shareware and is
primarily distributed via our Web site (www.aladdinsys.com). The suggested
shareware fee for StuffIt Lite is $30.00.

      DropZip (Windows and Macintosh)


                                                                               8
<PAGE>

      DropZip allows users to quickly and easily compress a file into the
industry-standard "Zip" format by simply moving the file's icon directly over
the DropZip icon on the user's desktop. DropZip is distributed as shareware.
DropZip sells for a suggested retail price of $20.00 for the Windows version and
$30.00 for the MacOS version.

Spring Cleaning (Macintosh)

      Spring Cleaning is a software uninstaller product for the Macintosh market
which removes unwanted and unused software and related files from a user's
computer. Spring Cleaning is published by Aladdin pursuant to a publishing
agreement with The Excelsior Group which grants to Aladdin perpetual rights to
publish the product and to create updates and derivative products. Spring
Cleaning is sold commercially through Aladdin's physical and electronic
worldwide distribution network of distributors, resellers, mail order houses,
Web retailers, and through our Web site (www.aladdinsys.com). Localized kanji,
Dutch and French language versions of the product are distributed by our
Japanese, Dutch and French distributors. Spring Cleaning is protected by
copyright law. Spring Cleaning sells for a suggested retail price of $49.95.

Private File (Windows and Macintosh)

      Private File incorporates StuffIt compression technology into a data
security software product designed to send secure information over computer
networks including the Internet. Private File was released in 1997. The product
faces competition from many sources, with Network Associates and Symantec being
the market leaders. Private File is sold commercially through both retail
software distribution channels and via our Web site (www.aladdinsys.com).
Private File is protected by copyright law. Private File sells for a suggested
retail price of $49.95.

ShrinkWrap (Macintosh)

      ShrinkWrap is used by developers and consumers to create disk image files,
allowing the users to create exact copies of their hard disk, floppies, or CD
ROMs. ShrinkWrap was released in 1997. ShrinkWrap's only competition is Disk
Copy from Apple Computer. ShrinkWrap is distributed directly from Aladdin via
our Web site and by other Web-based retailers in a time-locked "trialware"
format which allows unrestricted use of the software for a period of thirty days
and then disables itself, unless the user enters an activation code received
after the license fee is paid. A localized kanji version is distributed by our
Japanese distributor. ShrinkWrap sells for a suggested retail price of $30.00.


                                                                               9
<PAGE>

Aladdin FlashBack (Windows and Macintosh)

      Aladdin FlashBack is a version control product designed to allow users to
restore versions of documents regardless of the application being used, and
protect them from data loss and accidental overwriting. Aladdin Flashback has no
competition in the Macintosh market and several competitors in the Windows
market, including Lost & Found from PowerQuest. None of the competitive products
are dominant in the market for such products. Aladdin Flashback was released in
1997 and is sold commercially through Aladdin's physical and electronic
worldwide distribution network of distributors, resellers, mail order houses,
Web-based retailers and through our Web site (www.aladdinsys.com). Localized
kanji, German and French language versions of the product are also distributed
by our Japanese, German and French distributors, respectively. Aladdin FlashBack
sells for a suggested retail price of $69.95.

StuffIt InstallerMaker (Macintosh)

      StuffIt InstallerMaker, first published in 1991, is a product used by
software developers to create custom installers for the distribution of software
and is licensed by us directly to developers. StuffIt InstallerMaker
incorporates Aladdin's e-commerce technology which enables a developer to
disable their software after a certain period of time unless the user enters an
authorization code. InstallerMaker's licensee's include Apple Computer, Lexmark,
The Learning Company and RealNetworks. Aladdin licenses StuffIt InstallerMaker
at a variable license fee, depending upon usage, ranging from free to $10,000.

DragStrip (Windows and Macintosh)

      In March, 1999, Aladdin started publishing DragStrip pursuant to a
software publishing agreement with Poppybank Software which granted Aladdin
exclusive, perpetual rights to publish the software and create derivatives
thereof in exchange for a royalty payment. DragStrip allows users to launch,
find, organize, and access applications and documents quickly and efficiently,
allowing users to become better organized. DragStrip is sold commercially
through Aladdin's physical and electronic worldwide distribution network of
resellers, mail order houses, Web-based retailers and through our Web site
(www.aladdinsys.com). DragStrip sells for a suggested retail price of $19.95.

MacTicker (Macintosh)


                                                                              10
<PAGE>

      In July, 1999, we acquired the rights to MacTicker from Galleon Software,
Inc. MacTicker represents a new kind of product for Aladdin. MacTicker is a
browser-less Internet client software which displays a moving stock ticker
across a user's computer screen. The acquisition agreement for the MacTicker
product assigned to Aladdin all right, title and interest in the software in
exchange for a royalty payment which terminates after five years. The stock
quote information is continually fed to the software from a Web site. Currently,
we charge for the MacTicker software and provide 15 minute delayed stock quotes
free of charge. While several Web sites currently offer stock market tickers, we
believe that MacTicker will appeal to a portion of the market which would prefer
not to have to access a Web site to receive stock quote. MacTicker sells for a
suggested retail price of $29.95. We believe that a market for products like
MacTicker will exist since they are easier to use than similar offerings
provided by certain financial Web sites, in some cases, free of charge, and
contain additional functionality not found on these Web site based competitors.
We are currently exploring alternative revenue models for MacTicker including
charging a subscription fee for real time stock quotes and OEM arrangements with
brokerage houses and financial Web sites, as well as additional kinds of
information which can be provided to users. We have not yet determined if such
alternative revenue models will be viable and if implemented, whether such
alternative revenue models will succeed.

MacTuner (Macintosh)

MacTuner, a product originally developed by Trexar, is a stand-alone software
product which acts as a search engine and player for Web sites which stream
radio and video broadcasts over the Web. MacTuner requires an active Internet
connection to function, but does not utilize a Web browser to work. MacTuner
contains an updated database of over 1,900 live radio, TV, and Web events from
all over the world which can be listened to or watched using the software. While
several Web sites and free software products such as the RealMediaPlayer from
Real Audio, Inc. provide similar functions, we believe that a market exists for
the software based upon the added functionality provided by MacTuner including
its integrated search engine. MacTuner is sold commercially through Aladdin's
physical and electronic worldwide distribution network of resellers, mail order
houses, Web-based retailers and through our Web site (www.aladdinsys.com).
MacTuner sells for a suggested retail price of $22.95. When sold online, the
software is available as "trialware" which is fully functional for 20 days and
then automatically disables itself unless the user acquires a registration code
by paying the license fee for the software.

MacHeadlines Pro and MacHeadlines Lite (Macintosh)


                                                                              11
<PAGE>

MacHeadlines Pro and Lite, are products originally developed by Trexar, and are
stand-alone software products which display on the user's desktop a scrolling
ticker containing news headlines and sports news which is gathered from various
Internet sources. MacTuner requires an active Internet connection to function,
but does not utilize a Web browser to work. While several Web sites and free
software products such as the AOL Instant Messenger provide similar functions,
we believe that a market exists for the software based upon the added
functionality provided by MacHeadlines. MacHeadlines is sold commercially
through Aladdin's physical and electronic worldwide distribution network of
resellers, mail order houses, Web-based retailers and through our Web site
(www.aladdinsys.com). MacHeadlines Pro sells for a suggested retail price of
$19.95. MacHeadlines Lite is a version of the same product which is designed for
distribution through OEM partners. When sold online, MacHeadlines Pro is
available as "trialware" which is fully functional for 20 days and then
automatically disables itself unless the user acquires a registration code by
paying the license fee for the software.

WeatherTracker (Macintosh and Windows)

WeatherTracker, a product originally developed by Trexar, is a stand-alone
software product which displays a wide array of weather data to the user, in
easy-to-read graphical displays. The weather data available includes current
conditions and forecasts for thousands of locations around the world. While
several Web sites provide similar information, we believe that a market exists
for the software based upon the added functionality provided by WeatherTracker
including its ability to bring together in one location updates on the
temperature, pressure, wind speed and direction, humidity, local conditions,
forecasts, and climatic information for thousands of cities worldwide, detailed
five-day outlooks and marine data for many coastal locations. WeatherTracker is
sold commercially through Aladdin's physical and electronic worldwide
distribution network of resellers, mail order houses, Web-based retailers and
through our Web site (www.aladdinsys.com). WeatherTracker sells for a suggested
retail price of $24.95. When sold online, the software is available as
"trialware" which is fully functional for 20 days and then automatically
disables itself unless the user acquires a registration code by paying the
license fee for the software.

IntelliNews (Macintosh)

IntelliNews is a stand-alone software product which displays headlines from all
the premier Internet news sites and delivers them directly to your desktop,
eliminating the need to use a Web browser to move from site to site. The


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<PAGE>

IntelliNews software displays up-to-the-minute sport scores, detailed weather
reports from cities across the United States, detailed stock quotes, and company
profiles. While several Web sites and free software products such as the AOL
Instant Messenger provide similar functions, we believe that a market exists for
the software based upon the added functionality provided by IntelliNews.
IntelliNews is sold commercially through Aladdin's physical and electronic
worldwide distribution network of resellers, mail order houses, Web-based
retailers and through our Web site (www.aladdinsys.com). IntelliNews sells for a
suggested retail price of $20.00. When sold online, the software is available as
"trialware" which is fully functional for 20 days and then automatically
disables itself unless the user acquires a registration code by paying the
license fee for the software.

Royalty Payments

      Pursuant to the publishing agreements we have made total royalty payments
to developers in 1999, 1998 and 1997 totalling $241,291, $226,511 and $201,220,
respectively.

Resale of Third Party Products

      In addition to publishing our own products, we utilize our resources and
customer list to act as a reseller of software products published by other
software companies. Historically, we resold limited numbers of third-party
products through "bundling" offers with our products which were distributed via
direct mail efforts. We are now focusing on offering third party products for
sale via our Web site, primarily through a download model, where the customer
receives the product downloaded directly to their computer after credit card
information is entered and verified.

      During 1999, third-party products have been primarily conducted through
our Web site and 1999 revenues for third-party products sales increased to
$818,194 through December 31, 1999 from $148,363 for the year ended December 31,
1998.

      Our resale agreements run for periods from 90 days to one year and all are
non-exclusive. We receive a percentage of the net sales ranging from 3% to 70%.

Product Revenue


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<PAGE>

      The following table shows our net revenue from software products for the
last three years.

--------------------------------------------------------------------------------
                                   1999             1998             1997
--------------------------------------------------------------------------------
Consumer                           $ 8,519,691      $ 6,707,281      $ 5,775,838
Developer                              759,776        1,146,874        1,274,241
Third Party Products                   818,194          148,363          224,835

Total revenues                     $10,097,661      $ 8,002,518      $ 7,274,914

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

Product Support

      We believe that customer and technical support is an important part of the
Company's overall performance and success. On December 31, 1999, we employed 9
full-time support personnel. Our employees provide technical support services to
our customers by electronic mail, via our Web site, telephone, or fax. Support
services include explaining how the customer's computer works, how the
customer's other software works in relation to our products, solving problems
with software operation and suggesting solutions to business and personal
computing issues. We offer product support free of charge to registered users of
our products. The majority of support calls from customers occur within 60 days
of customers' purchases of products.

Distribution and Marketing

      Our products are marketed through independent distributors in the United
States and Canada, through numerous resellers and mail order companies and
distributors in other countries, directly to corporate and educational accounts
under site licensing agreements, volume purchasing agreements and directly to
end-users through direct marketing campaigns and our Web site
(www.aladdinsys.com).

      Of the Company's total net revenues for 1999, approximately 21% was as a
result of sales through independent, domestic, nonexclusive distributors. Sales
to one such distributor, Ingram Micro, accounted for nearly 14% of total net
revenues. Domestic distributors purchase product at a discount from list prices.


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<PAGE>

      Of the Company's total net revenues for 1999, approximately 12% was as a
result of sales made through independent, international distributors. Several of
these distributors are limited by contract to distribution within a specified
geographic area. We currently provide translations of certain products in
Japanese, German, Dutch and French languages. Sales to two of such distributors,
Act2 (Japan), and Softline (United Kingdom), accounted for approximately 6%, and
1%, of total net revenues in 1999, respectively. International distributors
generally require a somewhat larger discount in return for various advertising,
customer service, and customer registration duties performed by them in
connection with the software. This discount normally ranges from 40% to 60% off
of the suggested retail price of the products.

      The Company gives its distributors industry-standard rights of return for
stock balancing and for defective products, and replacement rights when products
are upgraded to new versions. A reserve for returns has been recorded and was
$181,659 and $37,368 at December 31, 1999 and 1998, respectively. Returns
exchanged for product upgrades and new version releases do not have a material
impact on the financial statements because of the Company's low cost to replace
such returns. Returns from end users have not been significant.

      Of the Company's total net revenues for 1999, approximately 8% was a
result of sales of our developer products, as compared to 14% in 1998. The
decrease was a result of an increase in sales of our consumer products as a
proportion of overall sales and the loss of several large customers who did not
renew their licenses for our developer products.

Product Development

      The personal computer software industry continues to undergo rapid
technological change, requiring a continuous high level of enhancement of
existing products and development of new products. We intend to continue the
enhancement of our existing products and to develop additional products which we
believe will be marketable to our existing customer base and new customers and
which will extend our current products to new computing platforms.

      We regularly upgrade our existing products to add new features in response
to customer requests for additional features and to match or exceed features
contained in competing products. Historically, 10% to 50% of the registered
users of a software product have purchased the upgraded version of the same
product.


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<PAGE>

      We have recently announced a new software product which is a version of
our Aladdin Expander that runs under the Red Hat and Corel versions of the Linux
operating system. This product is currently being publicly beta-tested by user
who have volunteered to test the product.

      During the years 1999 and 1998, we spent approximately $1,630,585 and
$1,506,798, respectively, on research and development and enhancement
activities, representing approximately 16.1%, and 18.8%, respectively, of net
revenues in each of these periods.

      Our future financial performance will depend in part on the successful
development, completion, and introduction of such new software products, and on
such enhanced versions of existing products, and customer acceptance of those
products. In the future, there is no assurance that we will not encounter
difficulties that could delay or prevent the successful development of, or
marketing of, new products and/or enhancements of existing products. There also
can be no assurance that such products will yield positive results or that such
results can be obtained on a timely basis or without the expenditure of
substantial funds.

Competition

      The personal computer software market is highly competitive and has been
subject to rapid change, which is expected to continue. Various different
competitors exists for our different products. For our flagship StuffIt product
line for the Macintosh, we believe that our long history of publishing
compression software for the Macintosh, the goodwill associated with our
"Aladdin" and "StuffIt" brands, our large installed base of users as well as our
strategic relationships with Apple Computer and America Online makes StuffIt for
the Macintosh the leading product in its category. However, our attempts to
extend the StuffIt line of products to the Windows market will face strong
competition from the many Windows-based compression products with implement the
"Zip" compression standard. There are several major and many minor companies
currently publishing "Zip" products which will directly compete with our StuffIt
products in the Windows market.

      In addition, certain computer manufacturers may devote significant
resources to creating software, directly competitive with products of Aladdin,
for inclusion with their computers and computer systems without additional
charge to consumers, specifically, Apple Computer provides a file encryption
technology in its Mac OS 9 operating system and Microsoft includes a compression
utility in its Windows 98 and Windows NT operating systems.


                                                                              16
<PAGE>

      Our competitors include many independent software vendors that have
financial, marketing, and technological resources far in excess of ours. Some of
these include Apple, Symantec, Microsoft, Network Associates, PowerQuest, and
MindVision.

      Aladdin's software products are marketed primarily through the retail
channel. All of these products face competing products offering many similar
features. Aladdin believes that the principal competitive factors in the market
include product features and functions, ease of understanding and operating the
software, product reliability, price/performance characteristics, name
recognition, and availability and quality of support and training services.
Price competition could become an increasing factor in the personal computer
software market, which could, in turn, be expected to increase pressures on
profit margins in the future.

      As the Internet and e-commerce become an increasing important channel for
the distribution and sales of software products, we plan to increase our efforts
to sell both our products and the third-party products we resell direct to
consumers via our Web site (www.aladdinsys.com). In order to accomplish this, we
may need to invest money, effort and other resources into our Web efforts which
may divert attention and resources from our traditional sales channels. In
addition, we may be competing against existing and new companies that have
financial, marketing, and technological resources far in excess of Aladdin's. In
the event that we are not able to successfully compete against such companies it
could have a material adverse effect upon our business, results of operations
and financial condition.

      We regard the protection of our copyrights, service marks, trademarks,
trade dress and trade secrets as critical to our future success and rely on a
combination of copyright, trademark, service mark and trade secret laws and
contractual restrictions to establish and protect our proprietary rights in
products and services. Software products are generally protected against copying
pursuant to the Copyright Act and license agreements. In addition, many software
companies implement schemes designed to reduce unauthorized copying by requiring
that users enter a unique registration code to activate the software. Where
applicable, some companies also seek for patent protection for specific
technologies embodied in their products.

      We regard our software as proprietary and attempt to protect it with
copyrights, trade secret laws, and internal nondisclosure safeguards, as well as
restrictions on disclosure and transferability that are incorporated into our
software license agreements. Our copyrights run for a period of 75 years from


                                                                              17
<PAGE>

the first creation of the work in accordance with the provisions of the
Copyright Act. None of our products lack the necessary copyright or trademark
protection. Aladdin licenses its software products to customers rather than
transferring title. Despite these restrictions, it may be possible for
competitors or users to copy aspects of the Aladdin's products or to obtain
information which Aladdin regards as trade secrets. Computer software generally
can be patented only with difficulty, and existing copyright laws afford only
limited practical protection. On a regular basis, we evaluate our development
efforts to determine if patent protection would be applicable. To date, we have
not pursued patent protection for any of our products.

      Our products require that a product registration number be entered in
order to be activated. We believe that this system helps to reduce unauthorized
copying of our products. The range of product registration numbers distributed
is changed from time to time in order to further deter copying of the software.
However, because of the rapid pace of technological change in its industry, we
believe that such protections are less significant than factors such as frequent
product enhancements, and the timeliness and quality of Aladdin support
services. Policing unauthorized use of such a broadly disseminated product as
computer software is difficult, and software piracy can be expected to be a
persistent problem for the packaged software industry. These problems may be
particularly acute in international markets. We do not have specific information
regarding how unauthorized copying affects our sales in either the United States
or foreign markets; however, we believe that such unauthorized copying has had
limited effects on our revenues.

      Although we do not believe that we infringe the proprietary rights of
third parties, there can be no assurance that third parties will not claim
infringement by us with respect to past, current or future technologies. We
expect that participants in our markets will be increasingly subject to
infringement claims as the number of software products and competitors in our
industry segment grows. Any such claim, whether meritorious or not, could be
time-consuming, result in costly litigation, cause software upgrade delays or
require us to enter into royalty or licensing agreements. Such royalty or
licensing agreements might not be available on terms acceptable to us or at all,
as a result, any such claim could have a material adverse effect upon our
business, results of operations and financial condition.

      Since we produce computer software products and are not engaged in
hardware manufacturing, we did not spend any material amounts on compliance with
environmental laws.

Employees


                                                                              18
<PAGE>

      As of December 31, 1999, the Company employed 53 full-time equivalent
employees (FTE's) and 55 total employees. Although talented and qualified
employees are difficult to find in the current tight job market, we have
experienced relative success in attracting and retaining highly motivated and
talented employees.

      We believe that the future success of the Company will depend in part on
our continued ability to attract, integrate, retain and motivate highly
qualified technical and managerial personnel, and upon the continued service of
our senior management and key technical personnel. The competition for qualified
personnel in our industry and geographical location is intense, and there can be
no assurance that we will be successful in attracting, integrating, retaining
and motivating a sufficient number of qualified personnel to conduct our
business in the future. From time to time, we also employ independent
contractors to support our research and development, marketing, sales and
support and administrative organizations. We have never had a work stoppage, and
no employees are represented under collective bargaining agreements. We consider
our relations with our employees to be good.

Subsidiaries

      The Company has two subsidiaries, Aladdin Systems, Inc., a Delaware
corporation and Transaction Services, Inc. ("TSI"), a California corporation,
which was incorporated in 1996 and is a wholly-owned subsidiary of Aladdin
Systems, Inc. TSI was formed in order to provide technology and services to
other software publishers which allows such companies to make trial versions of
their software available.

Forward-looking statements

      The Company or management may make or may have made certain
forward-looking statements, orally or in writing, such as those within
Management's Discussion and Analysis contained in its various SEC filings. The
Company wishes to ensure that such statements are accompanied by meaningful
cautionary statements, so as to ensure to the fullest extent possible the
protections of the safe harbor established in the Private Securities Litigation
Reform Act of 1995. Such statements are therefore qualified in their entirety by
reference to and are accompanied by the following discussion of certain
important factors that could cause actual results to differ materially from
those described in such forward-looking statements.


                                                                              19
<PAGE>

      The Company cautions the reader that this list of factors is not intended
to be exhaustive. The Company operates in a continually changing business
environment, and new risk factors emerge from time to time. Management cannot
predict such factors, nor can it assess the impact, if any, of such factors on
the Company's business or the extent to which any factors may cause actual
results to differ materially from those described in any forward-looking
statement. None of the Company's forward-looking statements should be relied
upon as a prediction of actual results.

      The Company faces risks and uncertainties that could render actual events
materially different than those described in our forward-looking statements.
These risks and uncertainties include, but not limited to, the risk new products
and product upgrades may not be effected on a timely basis; the risk such
products may not achieve market acceptance within the Windows or Macintosh
markets; the risk the prevalence and functionality of available free compression
software may erode revenues; the risk the Company would not be able to fund its
working capital needs from cash flows; and the risk associated with domestic and
international general economic conditions. The Company's products are sold in
markets that change rapidly and the Company must continually anticipate and
adapt its products to emerging computer technologies and capabilities. The
Company may not be able to successfully adapt to these changing markets. The
Company may experience material fluctuations in future revenues and operating
results on a quarterly or annual basis resulting from a number of factors,
including but not limited to the risks discussed in the paragraph above.

Item 2: Properties

      Our executive offices, comprising approximately 12,000 square feet, are
located at 165 Westridge Drive, Watsonville, California 95076. Our subsidiaries,
Aladdin Systems, Inc. and Transactions Services, Inc. are housed in the same
location. These facilities are leased pursuant to a lease expiring during July,
2001. The monthly rent is $13,719. Our leased space is currently adequate for
our needs. We are currently evaluating the renewal of our lease at the end of
the term or a potential move of our office facility at the end of the lease
term. We are currently evaluating office space in and around Atlanta, Georgia
for our Trexar subsidiary.

Item 3: Legal Proceedings

      None

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


                                                                              20
<PAGE>

      No matters were submitted to the stockholders in the fourth quarter of
fiscal 1999, except a vote of the original shareholders of FGT in connection
with Reorganization. The Reorganization was unanimously approved by the
then-current shareholders.

PART II

Item 5: Market for Registrant's Common Equity and Related Stockholder Matters

      As of March 31, 2000, there were 28 stockholders of record. The Company
believes that it has approximately 250 beneficial stockholders.

      The Company's common stock trades on the National Quotation Bureau's
Electronic Pink Sheets under the symbol: ALHI. The Company expects to soon meet
the eligibility requirements for trading on the NASD's Over The Counter Bulletin
Board ("OTCBB") and expects it stock to be trading on the OTCBB.

      The following table sets forth the range of high and low bid prices per
share of common stock for the last two fiscal years as provided by Prophet
Information Systems. The quotations shown below reflects inter-dealer prices,
without mark-up, mark-down or commissions and may not present actual
transactions. There was no significant trading of the common stock prior to
October 26, 1999.

Quarter ended:                                Common stock
                                             Low      High
October 26, 1999 to
December 31, 1999                           $3.00       $5.60

      The Company has never declared, nor has it paid, any cash dividends on its
Common Stock. The Company currently intends to retain its earnings to finance
future growth and does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future.

Item 6: Management's Discussion and Analysis of Financial Condition and Results
of Operations

RESULTS OF OPERATIONS


                                                                              21
<PAGE>

      The following discussion should be read in conjunction with the
consolidated financial statements and related notes included elsewhere herein.
Historical results and percentage relationships are not necessarily indicative
of the operating results for any future period. Within this discussion and
analysis, all dollar amounts (except for per share amounts) have been rounded to
the nearest thousand.

      The following table sets forth certain data derived from the consolidated
statements of operations, expressed as a percentage of net revenues for each of
the years in the two-year period ended December 31, 1999.

                                                       Years ended December 31,
                                                          1999        1998
Percentage of net revenues:
Net revenues                                              100%        100%
Cost of revenues                                          20%         18%

                                                          ----------------
   Gross profit                                           80%         82%

Sales and marketing                                       37%         44%
General and administrative                                12%         11%
Research and development                                  16%         19%

                                                          ----------------
  Total operating expenses                                65%         74%

                                                          ----------------
Operating gain (loss)                                     15%          8%
Other (expense) income, net                                0%         (2)%

                                                          ----------------
  Earnings (loss) before income taxes                     15%          6%
Income tax (benefit) expense                               5%         (1)%

                                                          ----------------
  Net earnings (loss)                                     10%          7%

                                                          ================

NET REVENUES

      Overall revenues increased from $8,002,518 in 1998 to $10,097,661 in 1999,
an increase of 26% from 1998 to 1999. Approximately 84% of the Company's 1999
revenues were from Consumer products. These revenues are from sales of our
StuffIt products, Spring Cleaning, PrivateFile, Aladdin Flashback, DragStrip


                                                                              22
<PAGE>

and MacTicker software products. Revenues from sales of our Consumer products in
1998 also represented 84% of our overall sales, however, the sales of our
Consumer products in 1999 represented a larger dollar amount than in 1998 due to
an overall increase in sales, especially in the strong sales of StuffIt Deluxe
which accounted for 88% of the increase in net revenue.

      Revenues from the Company's Developer products, InstallerMaker and StuffIt
Engine, decreased 34% during 1999, but still accounted for approximately 8% of
the Company's total net revenues. Historically, these revenues have represented
decreasing percentages of the Company's overall sales as our Consumer products
have grown.

      Revenues from sales over our Web site accounted for 35% of revenue in 1999
as compared to 12% of revenue in 1998. The Company believes that sales over its
Web site will represent an increasingly important component of the Company's
sales strategy and will allow the Company to reach a large number of potential
consumers at lower costs than sales through distributors.

COST OF REVENUES AND GROSS MARGIN

      The Company's cost of revenues is composed primarily of: (1) the costs of
product materials such as manuals, diskettes, CD-ROMS, and packaging; (2)
amortization of capitalized purchased software; (3) royalties paid to outside
developers on certain software products; and (4) amortization of capitalized
manufacturing expenses.

      Cost of revenues, as a percentage of net revenues increased to 20% in 1999
from 18% in 1998. The change, on a percentage basis, was due to a write-off of
certain prepaid royalties which we deemed would not be earned.

      As a result of the increase in the cost of revenues, as a percentage of
net revenues, our gross margins fell to 80% from 82%.

SALES AND MARKETING

      Sales and marketing expenses increased to $3,773,226 in 1999 from
$3,520,106 during 1998. This 7% increase in sales and marketing expenses
resulted in the 26% increase in sales we experienced during 1999.


                                                                              23
<PAGE>

GENERAL AND ADMINISTRATIVE

      General and administrative expenses are composed principally of salaries
of administrative personnel, fees for professional services and facilities
expenses. These expenses increased $256,064 or 28% during 1999 compared to 1998.
The increase in these expenses was related to the costs of professional services
associated with the reverse acquisition which took place in October, 1999.

RESEARCH AND DEVELOPMENT

      Research and development expenses were $1,630,585, and $1,506,798 in 1999
and 1998. These expenses were 16% and 19% of net revenues. Salaries and benefits
and overhead increased by $58,295 and $21,892, respectively, in 1999 compared to
1998 due to the increased number of employees in research and development. Due
to the current high demand for software engineers and other technical
specialists, the Company anticipates having to both increase wages of existing
research and development personnel as well as having to pay higher salaries to
new employees. Such additional expense for payroll and benefits may have the
effect of increasing our research and development expenses in upcoming fiscal
quarters.

INCOME TAXES

      The Company's effective income tax rate for fiscal 1999 was 33.1% and
there was an income tax benefit for fiscal year 1998 of 16.4%. As of the end of
fiscal 1999, all operating loss carryforward available to the Company have been
utilized. In 1998, the Company had a tax benefit due to utilizing previously
unrecognized net operating loss carry forwards.

LIQUIDITY AND CAPITAL RESOURCES

      Net cash provided by operating activities during 1999 was $817,010 an
increase of $174,436 compared to net cash provided by operating activities of
$642,574 in 1998. The increase is due primarily to an increase in net income
generated by increased sales.

      Net cash used in investing activities in 1999 was $259,723 an increase of
$233,304 compared to net cash used in investing activities of $26,419 in 1998,


                                                                              24
<PAGE>

reflecting an increase in cash used for equipment and software product
acquisition.

      Net cash provided by financing activities in 1999 was $445,553 as compared
to $607,380 used in 1998 reflecting the net proceeds from the sale of common
stock in a private placement during October, 1999, offset by payments on bank
borrowings and other long term debt.

      Our capital requirements are dependent on several factors, including
market acceptance of our software and services, timely updating of the Company's
existing software product, developing new software products or acquiring the
rights to existing software products from third parties, the resources devoted
to marketing and selling the Company's services and brand promotions and other
factors. At December 31, 1999, the Company had cash and cash equivalents
totaling $1,063,404, resulting principally from the sale of common stock in a
private placement during October, 1999.

      During 1997, certain Stockholders, the Company's former President, a key
employee, and a relative of a stockholder lent the Company a total of $225,062,
in the form of demand notes with interest payable monthly at 8.92%. These notes
contain a conversion feature where they can be converted into common stock in
part or whole at any time for $1.10 per share. The notes are payable upon thirty
(30) days notice by the holder. During 1999, the Company paid $54,000 against
these notes resulting in a balance remaining of $160,062 as of December 31,
1999.

      We believe that our current cash and cash equivalents will be sufficient
to meet our anticipated cash needs for working capital and capital expenditures
through 2000. If cash generated from operations is insufficient to satisfy our
liquidity requirements, we may seek to sell additional equity or debt securities
or to obtain a credit facility. The sale of additional equity or convertible
debt securities could result in additional dilution to our stockholders. The
incurrence of indebtedness would result in an increase in our fixed obligations
and could result in borrowing covenants that would restrict our operations.
There can be no assurance that financing will be available in amounts or on
terms acceptable to us, if at all. If financing is not available when required
or is not available on acceptable terms, we may be unable to develop or enhance
our products or services. In addition, we may be unable to take advantage of
business opportunities or respond to competitive pressures. Any of these events
could have a material and adverse effect on our business, results of operations
and financial condition.

RISKS AND UNCERTAINTY


                                                                              25
<PAGE>

      As part of our plan to expand our business, during the first quarter of
2000, the Company acquired Trexar Technologies, Inc., and committed to increased
expenditures to hire additional technical personnel, develop and acquire new
products and to increase marketing expenses for our new and existing products.
The Company anticipates that these expenditures may result in operating expenses
in excess of our revenues for the first two quarters of 2000 and may result in a
net loss for those two quarters. We believe that the merger with Trexar
Technologies, Inc., and our investments in additional personnel and marketing
expenses are important parts of our plan to create long term growth and
profitability of the Company and we expect that we will return to profitability
by the fourth quarter of 2000. If we are not successful in increasing long term
growth through these actions, it could have a material, adverse affect on the
Company.

      The preceding statements under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" which are not historical facts
are forward-looking statements. These forward-looking statements involve risks
and uncertainties that could render them materially different, including, but
not limited to, the risk that new products and product upgrades may not be
available on a timely basis, the risk that such products and upgrades may not
achieve market acceptance, the risk that competitors will develop similar
products and reach the market first, and the risk that the Company would not be
able to fund its working capital needs from cash flow.

Item 7: Financial Statements

Index to Item 7: Financial Statements                                       Page

Independent Auditors' Reports                                                27

Consolidated Balance Sheets                                                  29

Consolidated Statements of Earnings                                          30

Consolidated Statement of Stockholders' Equity                               31

Consolidated Statements of Cash Flows                                        32

Notes to Consolidated Financial Statements                                   33


                                                                              26
<PAGE>

               Report of Independent Certified Public Accountants

Board of Directors and Stockholders
Aladdin Systems Holdings, Inc.

We have audited the accompanying consolidated balance sheet of Aladdin Systems
Holdings, Inc., and Subsidiary (the "Company") as of December 31, 1999, and the
related consolidated statements of earnings, stockholders' equity and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 consolidated financial position of the Company as of
December 31, 1999, and the consolidated results of its operations and its
consolidated cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States.

/s/ Grant Thornton LLP
San Jose, California
March 7, 2000


                                                                              27
<PAGE>

Independent Auditors' Report on the Financial Statements

To the Board of Directors
Aladdin Systems, Inc.
Watsonville, California

We have audited the accompanying consolidated balance sheet of Aladdin Systems
Holdings, Inc. and subsidiary, as of December 31, 1998 and the related
consolidated statement of earnings, stockholders' equity, and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated 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 consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above present
fairly in all material respects, the financial position of Aladdin Systems
Holdings, Inc. and subsidiary as of December 31, 1998, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.


/s/ Hutchinson and Bloodgood LLP
Watsonville, CA
March 29, 1999
except for the second paragraph
of Note 1, the date of which is
October 12, 1999


                                                                              28
<PAGE>

                  Aladdin Systems Holdings, Inc. and Subsidiary

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                              -------------------------------
                                                                              1999                    1998
                                                                              ----                    ----
<S>                                                                           <C>                 <C>
Current assets:
  Cash and cash equivalents                                                   $ 1,063,404         $    60,564
  Accounts receivable (net of allowance of $181,659 and $37,368)                1,352,291             729,942
  Inventories                                                                     103,903              70,491
  Prepaid expenses                                                                125,732             326,576
  Deposits                                                                        147,686              18,733
                                                                              -----------         -----------
          Total current assets                                                  2,793,016           1,206,306

Capitalized software, net                                                         157,823             155,078

Property and equipment, net                                                       483,787             438,757

Deferred income taxes                                                              94,369             263,559
                                                                              -----------         -----------

                                                                              $ 3,528,995         $ 2,063,700
                                                                              ===========         ===========
</TABLE>


                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>

<S>                                                                           <C>                 <C>
Current liabilities:
  Current maturities of long-term debt                                        $   377,271         $   320,644
  Factoring line outstanding                                                           --             160,888
  Accounts payable                                                                554,344             792,280
  Accrued expenses and other  liabilities                                         266,151             193,300
  Income tax payable                                                               69,276               1,600
                                                                              -----------         -----------
          Total current liabilities                                             1,267,042           1,468,712

Long-term debt                                                                    100,435             340,145

Commitments and contingencies

Stockholders' equity:
  Preferred stock, $.001 par value; 1,000,000 shares authorized;
    none issued and outstanding                                                        --                  --
  Common stock, $.001 par value; 50,000,000 shares authorized;
    9,328,578 and 8,278,578 issued and outstanding
    in 1999 and 1998, respectively                                                  9,329               8,279
  Paid-in capital                                                               1,078,021             148,021
  Retained earnings                                                             1,074,168              98,543
                                                                              -----------         -----------
          Total stockholders' equity                                            2,161,518             254,843
                                                                              -----------         -----------

                                                                              $ 3,528,995         $ 2,063,700
                                                                              ===========         ===========
</TABLE>

See accompanying notes to consolidated financial statements.


                                                                              29
<PAGE>

                  Aladdin Systems Holdings, Inc. and Subsidiary

                       CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
                                                              Year ended December 31,
                                                              -----------------------
                                                              1999            1998
                                                              ----            ----
<S>                                                         <C>             <C>
Sales                                                       $ 10,097,661    $  8,002,518
Cost of sales                                                  2,023,979       1,405,496
                                                            ------------    ------------
  Gross profit                                                 8,073,682       6,597,022

Operating expenses:
  Marketing, sales and support                                 3,773,266       3,520,106
  Research and development                                     1,630,585       1,506,798
  General and administrative                                   1,163,624         907,560
                                                            ------------    ------------
          Total operating expenses                             6,567,475       5,934,464
                                                            ------------    ------------

Income from operations                                         1,506,207         662,558

Other income (expense):
  Interest expense                                               (58,950)       (175,490)
  Other                                                           11,685          11,346
                                                            ------------    ------------

          Net income before income tax                         1,458,942         498,414

Income tax expense (benefit)                                     483,317         (81,769)
                                                            ------------    ------------

          Net income                                        $    975,625    $    580,183
                                                            ============    ============
Earnings per share - basic                                  $       0.11    $       0.07
                                                            ============    ============
Earnings per share - diluted                                $       0.11    $       0.07
                                                            ============    ============

Shares used in computing basic earnings per share              8,497,328       8,275,873
                                                              ==========      ==========
Shares used in computing diluted earnings per share            8,831,048       8,668,142
                                                              ==========      ==========
</TABLE>

See accompanying notes to consolidated financial statements.


                                                                              30
<PAGE>

                  Aladdin Systems Holdings, Inc. and Subsidiary

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                   Common Stock                         Retained
                                                   ------------             Paid-in     Earnings
                                              Shares          Amount        Capital     (Deficit)       Total
                                              ------          ------        -------     --------        -----
<S>                <C>                        <C>             <C>       <C>           <C>            <C>
Balance at January 1, 1998                    8,273,167       $ 8,273   $   141,727   $  (481,640)   $  (331,640)

  Issuance of common stock for cash               5,411             6         6,294            --          6,300
  Net income                                         --            --            --       580,183        580,183
                                              ---------       -------   -----------   -----------    -----------

Balance at December 31, 1998                  8,278,578         8,279       148,021        98,543        254,843

  Issuance of common stock in private
  placement
    (net of issuance costs of $68,950)        1,050,000         1,050       930,000            --        931,050
  Net income                                         --            --            --       975,625        975,625
                                              ---------       -------   -----------   -----------    -----------

Balance at December 31, 1999                  9,328,578       $ 9,329   $ 1,078,021   $ 1,074,168    $ 2,161,518
                                              =========       =======   ===========   ===========    ===========
</TABLE>

See accompanying notes to consolidated financial statements.


                                                                              31
<PAGE>

                  Aladdin Systems Holdings, Inc. and Subsidiary

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                     Year ended December 31,
                                                                     -----------------------
                                                                      1999           1998
                                                                      ----           ----
<S>                                                                 <C>            <C>
Cash flows from operating activities:
  Net income                                                        $   975,625    $   580,183
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Depreciation and amortization                                     353,474        367,808
      Deferred income taxes                                             169,190        (83,369)
      Changes in operating assets and liabilities:
        Accounts receivable                                            (622,349)         7,000
        Inventories                                                     (33,412)        14,194
        Prepaid expenses                                                200,844          7,737
        Deposits                                                       (128,953)            --
        Accounts payable                                               (237,936)      (176,074)
        Accrued expenses and other liabilities                           72,851        (74,905)
        Income tax payable                                               67,676             --
                                                                    -----------    -----------
          Net cash provided by operating activities                     817,010        642,574

Cash flows from investing activities:
  Acquisition of property and equipment                                (111,764)       (21,419)
  Acquisition of software rights                                       (147,959)        (5,000)
                                                                    -----------    -----------
          Net cash used in investing activities                        (259,723)       (26,419)

Cash flows from financing activities:
  Net proceeds from issuance of common stock                            931,050          6,300
  Repayment of bank borrowings                                         (160,888)      (263,286)
  Repayment of long-term debt                                          (324,609)      (350,394)
                                                                    -----------    -----------
          Net cash provided by (used in) financing activities           445,553       (607,380)
                                                                    -----------    -----------

          Net increase in cash and cash equivalents                   1,002,840          8,775

Cash and cash equivalents at beginning of period                         60,564         51,789
                                                                    -----------    -----------

Cash and cash equivalents at end of period                          $ 1,063,404    $    60,564
                                                                    ===========    ===========
Cash paid during the period for:
  Interest                                                          $    68,185    $   165,242
                                                                    ===========    ===========
  Income taxes                                                      $   247,500    $     1,600
                                                                    ===========    ===========
</TABLE>

Noncash Transactions:

During 1999, the Company acquired assets under a capital lease in the amount of
$106,000.

During 1999, the Company issued 50,000 shares of common stock as a commission in
connection with the issuance of 1,000,000 shares of common stock.


                                                                              32
<PAGE>

During 1999, the Company acquired software rights in exchange for a note payable
in the amount of $35,000.

See accompanying notes to consolidated financial statements.

<PAGE>

                  Aladdin Systems Holdings, Inc. and Subsidiary

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1999 and 1998

NOTE 1 -ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 Organization

 Aladdin Systems Holding, Inc. ("Holdings") and its wholly owned subsidiary
 (collectively the "Company"), develop, publish, and distribute computer
 software for the Macintosh and Windows software market. In addition, the
 Company develops and markets products to other software developers.
 Products are marketed through independent distributors in the United
 States and Canada, through resellers and mail order companies in other
 countries, directly to corporate accounts under site licensing agreements,
 and directly to end-users through direct marketing and the Internet.

 Reverse Acquisition

 In October 1999, Holdings, (formerly Foreplay Golf and Travel Tours, Inc.)
 acquired Aladdin Systems, Inc. ("Systems") through an exchange of common
 stock. Each share of Systems common stock was converted to 1.61997 shares
 of Holdings common stock. The acquisition was accounted for as a reverse
 acquisition whereby Systems was deemed to be the "accounting acquirer"
 using the guidance in Staff Accounting Bulletin No. 97. The historical
 financial statements prior to the acquisition are that of Systems. The
 balances of common stock and additional paid-in-capital reflect the
 recapitalization of the Company as if the acquisition had occurred at the
 beginning of 1998.

 Principles of Consolidation

 The consolidated financial statements include the accounts of Holdings and
 its wholly owned subsidiary, Systems. All significant intercompany
 transactions and balances are eliminated in consolidation.

 Cash and Cash Equivalents

 The Company considers all highly liquid investments purchased with a
 maturity of three months or less to be cash equivalents.

 Inventories

 Inventories are valued at the lower of cost or market and are accounted
 for on the first-in, first-out basis. Management performs periodic
 assessments to determine the existence of


                                                                              33
<PAGE>

 obsolete, slow moving and non-salable inventories, and records necessary
 provisions to reduce such inventories to net realizable value.

 Property and Equipment

 Property and equipment are stated at cost. Capital leases are recorded at
 the present value of the minimum lease payments at the date of acquisition.
 Depreciation is computed on a accelerated basis over the estimated useful
 lives of the assets or lease term, whichever is shorter.

 Revenue recognition

 Revenues and accounts receivable are principally derived from sales to
 distributors and resellers of the Company's products. These revenues are
 recognized net of reserves for returns and rebates. Return reserves are
 based on management's estimate of inventory at distributors or resellers
 that is in excess of levels appropriate for that channel and is likely to be
 returned. The Company recognizes revenue, net of estimated returns and
 rebates, upon shipment or delivery of the product, when no significant
 obligations remain and collectability is probable. Certain of the Company's
 sales are made to customers under agreements permitting rights of return for
 stock balancing.

 Research and development

 Research and development costs are charged to operations when incurred.

 Capitalized Software

 Costs incurred in the initial design phase of software development are
 expensed as incurred as research and development. Once the point of
 technological feasibility is reached, direct production costs are
 capitalized. The Company ceases capitalizing computer software costs when
 the product is available for general release to customers. Costs associated
 with acquired completed software are capitalized. Total capitalized software
 development costs at December 31, 1999 and 1998 were $1,065,347 and $882,388
 respectively, less accumulated amortization of $907,524 and $727,310,
 respectively.

 The Company amortizes capitalized software development costs on a
 product-by-product basis. The amortization for each product is the greater
 of the amount computed using (a) the ratio of current gross revenues to the
 total of current and anticipated future gross revenues for the product or
 (b) 60 months. In addition, the Company evaluates the net realizable value
 of each software product at each balance sheet date and records write-downs
 to net realizable value for any products for which the carrying value is in
 excess of the estimated net realizable value. Total amortization expense for
 capitalized software, all of which was charged to cost of sales, was
 $196,101 and $171,978 in fiscal years 1999 and 1998, respectively.

 Advertising

 The Company expenses advertising costs as they are incurred. Advertising and
 related promotion expenses for fiscal years 1999 and 1998 were $1,187,646
 and $1,333,626, respectively.

 Income Taxes


                                                                              34
<PAGE>

 Income taxes are computed using the asset and liability method under
 Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for
 Income Taxes. Deferred income tax assets and liabilities are determined
 based on the differences between the financial reporting and tax bases of
 assets and liabilities and are measured using the currently enacted tax
 rates and laws.

 Stock-Based Compensation

 The Company accounts for stock-based employee compensation arrangements in
 accordance with the provisions of Accounting Principles Board ("APB") No.
 25, Accounting for Stock Issued to Employees, and complies with the
 disclosure provisions of SFAS No. 123, Accounting for Stock-Based
 Compensation. Under APB No. 25, compensation cost is recognized over the
 vesting period based on the difference, if any, on the date of grant between
 the fair value of the Company's stock and the amount an employee must pay to
 acquire the stock.

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

 Segment Reporting

 The Company's business is conducted in a single operating segment. The
 Company's chief operating decision maker is the Chief Executive Officer who
 reviews a single set of financial data that encompasses the Company's entire
 operations for purposes of making operating decisions and assessing
 performance.

 Earnings Per Share

 Basic earnings per share is computed using the weighted average number of
 common shares outstanding during the period. Diluted earnings per share is
 computed using the weighted average number of common and common equivalent
 shares outstanding during the period. Common equivalent shares consist of
 the incremental common shares issuable upon conversion of convertible debt
 (using the if-converted method) and shares issuable upon the exercise of
 stock options and warrants (using the treasury stock method). A total of
 approximately 1,683,000 outstanding stock options in 1999 and 2,165,000
 outstanding stock options in 1998 have been excluded from the diluted
 earnings per share calculation, as the inclusion would be anti-dilutive.

 The following table reconciles the amounts used in the per share computation:

                                                           1999           1998
                                                        ---------      ---------
Numerator
  Net income                                            $ 975,625      $ 580,183
  Interest expense on convertible debt                     16,878         23,148
                                                        ---------      ---------
  Net income used in computing diluted
    earnings per share                                  $ 992,503      $ 603,331
                                                        =========      =========


                                                                              35
<PAGE>

                                                           1999           1998
                                                        ---------      ---------
Denominator
  Weighted average common shares
    outstanding during the period                       8,497,328      8,275,873
  Dilutive effect of convertible debt                     333,720        392,269
                                                        ---------      ---------
  Shares used in computing diluted
    earnings per share                                  8,831,048      8,668,142
                                                        =========      =========

 Fair Value of Financial Instruments

 The fair value of cash and cash equivalents, accounts receivable and
 accounts payable approximate carrying value due to the short term nature of
 such instruments. The fair value of long term obligations with third-parties
 approximates carrying value based on terms available for similar
 instruments. The fair value of debt with related parties is not determinable
 due to the terms of the debt and no comparable market for such debt.

 Reclassifications

 Certain 1998 information has been reclassified to conform to 1999 presentation.

NOTE 2 - PROPERTY AND EQUIPMENT

  Property and equipment at December 31 consist of:

<TABLE>
<CAPTION>
                                                    Useful lives (years)     1999              1998
                                                    -------------------- -----------       -----------
       <S>                                           <C>                 <C>               <C>
       Computer equipment                              5                 $   773,895       $   685,648
       Office equipment                                5                     160,213            55,606
       Furniture and fixtures                          7                     246,907           246,907
       Displays                                      5 - 7                   121,306            99,921
                                                                         -----------       -----------
                                                                           1,302,321         1,088,082
       Less accumulated depreciation                                         818,534           649,325
                                                                         -----------       -----------
                                                                         $   483,787       $   438,757
                                                                         ===========       ===========
</TABLE>

NOTE 3 - BANK FACTORING AGREEMENT

  The Company has an arrangement with Silicon Valley Bank (the "Bank") whereby
  the Bank may advance 50% of pledged receivables, up to $1,200,000, to the
  Company. The Bank acquires the receivables from the Company with full
  recourse. In the event receivables are not collected within 90 days of
  invoice date, the Company is obligated to pay the pledged amount upon
  demand. Upon receipt of the collections, the Bank applies the payment to the
  Company's account. Interest is 1.25% per month on the average daily balance
  and an administrative fee is charged at .50% of the face amount of the
  receivables. The Company had no outstanding balance at December 31, 1999 and
  $160,888 at December 31, 1998.


                                                                              36
<PAGE>

NOTE 4 - LONG-TERM DEBT

  Long-term debt at December 31, consists of:

<TABLE>
<CAPTION>
                                                                  1999              1998
                                                             -------------     -------------
                   <S>                                       <C>               <C>
                   Capital lease obligations                 $     181,627     $     164,352
                   Notes payable to related parties                160,062           214,062
                   Notes payable for software                      129,517           225,877
                   Severance agreement                               6,500            56,500
                                                             -------------     -------------
                                                                   477,706           660,791
                   Less current portion                            377,271           320,646
                                                             -------------     -------------
                                                             $     100,435     $     340,145
                                                             =============     =============
</TABLE>

  Notes Payable to Related Parties

  Notes payable to related parties are payable on demand. Interest is
  compounded daily at 8.92% and is payable monthly. The notes are convertible
  into common stock at the lesser of $1.74 per share or at the lowest price
  shares of common stock are sold or options are granted after the date the
  notes were issued.

  Notes Payable for Software

  The Company has a note payable in relation to the acquisition of the StuffIt
  program. The amount due at December 31, 1999 is $94,517. Interest is
  compounded daily at 10% and is payable monthly. The notes are convertible
  into common stock at the most recently granted employee option price plus
  $0.10 per share.

  The Company also has a $35,000 note payable for the acquisition of the
  software rights payable in 2000.

  Severance Agreement Payable

  The Company entered into an agreement with a former employee whereby the
  Company would make semi-monthly payments of $1,923 until the balance is paid
  in full. At December 31, 1999, the balance is $6,500.

  Installments due on debt principal are as follows:

                        Year ending December 31,
                        ------------------------
                                 2000                     $ 377,271
                                 2001                        33,579
                                 2002                        31,351
                                 2003                        24,559
                                 2004                        10,946
                                                          ---------
                                                          $ 477,706
                                                          =========


                                                                              37
<PAGE>

NOTE 5 - INCOME TAXES

  Income tax expense (benefit) for the years ended December 31, consist of:

                                                     1999                1998
                                                   ---------           ---------
  Current
    Federal                                        $ 225,176          $      --
    State                                             91,600              1,600
                                                   ---------          ---------
      Total current                                  316,776              1,600

  Deferred
    Federal                                          157,411            (83,822)
    State                                             11,779                453
                                                   ---------          ---------
      Total deferred                                 169,190            (83,369)
                                                   ---------          ---------
                                                   $ 483,317          $ (81,769)
                                                   =========          =========

  The tax effect of temporary differences that give rise to significant
  portions of net deferred tax assets at December 31, is presented below:

                                                     1999                1998
                                                   ---------           ---------
  Deferred tax assets (liabilities)
    Net operating loss carryforward                $      --          $ 265,139
    State taxes                                       26,483            (11,011)
    Interest on installment sale                      11,339             11,339
    Severance payments                                 1,236             22,656
    Depreciation                                      55,311             63,289
                                                   ---------          ---------
      Total                                           94,369            351,412
      Less: valuation allowance                           --            (87,853)
                                                   ---------          ---------
      Net deferred tax asset                       $  94,369          $ 263,559
                                                   =========          =========

  The net change in the valuation allowance was a decrease of $87,853 in 1999
  and $92,337 in 1998. The effective tax rate as a percentage of income before
  income taxes differs from the statutory federal income tax rate (when applied
  to income before income taxes) for the years ended December 31, as follows:

                                                              1999        1998
                                                              ----        ----
  Statutory federal income tax rate                           34.0%       34.0%
  Increase (decrease) resulting from:
    State income taxes, net of federal tax benefit             5.8         5.8
    Utilization of net operating loss carryforwards           (0.7)      (37.7)
    Reduction of valuation allowance                          (6.0)      (18.5)
                                                              ----       -----
    Effective tax rate                                        33.1%      (16.4)%
                                                              ====        ====

NOTE 6 - MAJOR CUSTOMERS


                                                                              38
<PAGE>

  The Company has one major customer who accounted for $1,453,119 or 14% and
  $2,011,939 or 25% of revenues in 1999 and 1998, respectively.

NOTE 7 - STOCKHOLDERS' EQUITY

  Stock Options

  The Aladdin Systems Holdings, Inc. 1999 Stock Option Plan (the "Plan")
  allows for the issuance of incentive stock options and non-qualified stock
  options to purchase shares of the Company's common stock. The Plan has
  authorized 3,000,000 million shares of which 1,190,491 remain available for
  granting at December 31, 1999. Under the Plan, incentive stock options may
  be granted to employees, directors, and officers of the Company and
  non-qualified stock options may be granted to consultants, employees,
  directors, and officers of the Company. Options granted under the Plan are
  for periods not to exceed ten years, and must be issued at prices not less
  than 100% of the fair market value of the stock on the date of grant.
  Options granted to shareholders who own greater than 10% of the outstanding
  stock are for periods not to exceed five years and must be issued at prices
  not less than 110% of the fair market value of the stock on the date of
  grant. Options granted under the Plan generally vest within 4 years.

  Stock option activity is summarized as follows:

<TABLE>
<CAPTION>
                                                                                          Weighted
                                                                                           Average
                                                                                          Exercise
                                                                            Shares          Price
                                                                            ---------      ------
    <S>                                                                     <C>            <C>
    Balance at January 1, 1998.........................................     2,165,116      $ 1.06
       Granted.........................................................       398,351        1.12
       Exercised.......................................................        (5,411)       1.16
       Cancelled ......................................................      (874,631)       1.05
                                                                            ---------
    Balance at December 31, 1998.......................................     1,683,425        1.08
       Granted.........................................................       347,298        2.11
       Cancelled ......................................................      (221,214)       1.05
                                                                            ---------
    Balance at December 31, 1999.......................................     1,809,509      $ 1.29
                                                                            =========
</TABLE>

  The following table summarizes information about stock options outstanding as
  of December 31, 1999:

<TABLE>
<CAPTION>
                                                           Weighted
                                             Weighted       Average                          Weighted
       Range of                              Average       Remaining                         Average
       Exercise               Number         Exercise     Contractual         Number         Exercise
         Price             Outstanding        Price       Term (years)      Exercisable       Price
     ------------          -----------      ----------    ------------      -----------    ----------
     <S>                     <C>              <C>             <C>              <C>            <C>
     $1.05 - 1.07            1,268,345        $1.06           7.34             613,728        $1.06
     $1.18 - 1.85              483,598        $1.52           4.04             144,388        $1.61
     $3.00 - 4.63               65,666        $3.73           4.41              16,666        $3.25
                           -----------                                      -----------
</TABLE>


                                                                              39
<PAGE>

<TABLE>

<S>                          <C>                                               <C>
                             1,809,509                                         774,782
                             =========                                         ========
</TABLE>

  The fair value of option grants has been determined using the Black-Scholes
  option pricing model with the following weighted average assumptions: expected
  life of 10 years; interest rate of 6.0%, volatility of 75% (minimum value
  prior to the acquisition of Systems by Holdings) and no dividend yield. The
  weighted average fair value of options granted to employees was $0.08 and
  $0.38 for 1999 and 1998, respectively.

  The following table depicts the pro forma results of operations had
  compensation expense for employee options been determined based on the fair
  value at the grant dates, as prescribed in SFAS No. 123.

<TABLE>
<CAPTION>
                                                                               Year Ended December 31,
                                                                           -----------------------------
                                                                               1999              1998
                                                                           ----------         ----------
    <S>                                                                    <C>                <C>
    Net income
      As reported.....................................................     $  975,625         $ 580,183
      Pro forma.......................................................        664,025           290,705

    Basic net income per share
      As reported.....................................................          $0.11             $0.07
      Pro forma.......................................................           0.08              0.04
    Diluted net income per share
      As reported.....................................................           0.11              0.07
      Pro forma.......................................................           0.08              0.04
</TABLE>

NOTE 8 - RETIREMENT PLAN

  The Company has established a 401(k) retirement plan for all employees.
  Employees may elect to contribute up to 15% of their gross salary not to
  exceed federal tax law limitations. The Company may elect to match a portion
  of the employee contributions. No matching contributions were made for the
  years ended December 31, 1999 and 1998.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

  Leases

  The Company conducts its operations from facilities that are leased under an
  operating lease expiring July 31, 2001. Rent expense was $144,457 and $162,645
  in 1999 and 1998, respectively.

  The Company also has certain equipment under capital leases. The cost of
  assets acquired under capital leases was $374,585 and $268,061 in 1999 and
  1998, respectively. Accumulated amortization on these assets at December 31,
  1999 and 1998 was $261,4155 and $184,048, respectively. Amortization expense
  recorded on capital leases during 1999 and 1998 was $77,407 and $70,017,
  respectively.

  Future minimum commitments under capital leases and non-cancelable operating
  leases as of December 31, 1999 are as follows:


                                                                              40
<PAGE>

                                                      Capital         Operating
      Year ending December 31,                        Leases            Leases
      ------------------------                      ----------        ----------
              2000                                  $   94,394      $    162,500
              2001                                      40,515            81,250
              2002                                      36,347                --
              2003                                      26,903                --
              2004                                      14,521                --
                                                    ----------        ----------
              Total minimum lease payment              212,680      $    243,750
                                                                    ============
              Less amount representing interest         31,053
                                                    ----------
                                                    $  181,627
                                                    ==========

  Consulting Agreement

  The Company has a consulting agreement with a software developer whereby the
  Company will pay $20,000 per month for services. Payments started in July 1999
  and will end in June 2000.

NOTE 10 - SUBSEQUENT EVENT (unaudited)

  On March 21, 2000, the Company merged with Trexar Technologies, Inc.
  ("Trexar"), a leading Windows and Macintosh software developer of Internet
  information utilities. The merger will be accounted for as a pooling of
  interests. The Company acquired 100% of the shares of Trexar in exchange for
  449,539 shares of common stock of the Company.


                                                                              41
<PAGE>

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

      On September 17, 1999, prior to the Reorganization, Grant Thornton, LLP
became the Accountants of Aladdin Systems, Inc. replacing Hutchinson and
Bloodgood, LLP.

PART III

Item 9:  Directors and Executive Officers of the Registrant

The following table sets forth the names and positions of our directors and
executive officers:

NAME                           AGE       POSITION
-------------------------      ---       ------------------------------------
Jonathan Kahn                  42        Chairman, Chief Executive Officer,
                                         Treasurer and Director
-------------------------      ---       ------------------------------------
Darryl Lovato (1)              33        President, Chief Technology Officer and
                                         Director
-------------------------      ---       ------------------------------------
Brad Peppard (2)(3)            43        Director
-------------------------      ---       ------------------------------------
Paul Goodman (2)(3)            40        Director
-------------------------      ---       ------------------------------------
David Schargel (2)(3)          34        Director
-------------------------      ---       ------------------------------------
Benna Lovato (1)               34        Secretary, Director
-------------------------      ---       ------------------------------------

(1)  Darryl Lovato and Benna Lovato are married
(2)  Member of the Compensation Committee
(3)  Member of the Audit Committee

      The following sets forth biographical information concerning our directors
and executive officers for at least the past five years:

      JONATHAN KAHN is currently Chairman and CEO of Aladdin. Mr. Kahn is one of
the original founders of Aladdin Systems and has served as a Director since
1988. Prior to becoming CEO in 1998, he served as President, and Vice President
of Sales. Mr. Kahn has extensive expertise in software industry


                                                                              42
<PAGE>

sales, marketing, business development and licensing arrangements. Mr. Kahn is a
graduate of the University of Rhode Island with a B.A. in Economics.

      DARRYL LOVATO has been President and Chief Technology Officer of Aladdin
since 1997. Mr. Lovato is a co-founder of Aladdin Systems and has been
responsible for overseeing the Company's technical operations and leading
research on new technologies and products. Mr. Lovato has served as a Director
since the company's founding in 1988. Prior to holding his current title, Mr.
Lovato was Aladdin's Vice President and Chief Technology Officer. Prior to
co-founding Aladdin, Mr. Lovato worked at Apple Computer as a Senior Software
Engineer. Mr. Lovato has over fifteen-years of software programming and
development experience.

      BRAD PEPPARD has been President of Lime Tree Productions, Inc., a boutique
consulting firm providing marketing and research consulting services to high
tech companies. Mr. Peppard served as Vice President of Marketing at Aladdin
Systems from 1996 through 1998. In 1998, Mr. Peppard became a Director of
Aladdin. Prior to joining Aladdin, Mr. Peppard was responsible for worldwide
marketing at Quarterdeck Office Systems, during which time the company grew from
$20 million to $120 million in revenue. Prior to 1993, he was also Vice
President of Marketing at Software Publishing Corporation, a pioneer in both
high-tech direct marketing and Internet electronic marketing, Mr. Peppard was
President and founder of SoftMail Corporation, one of the leading direct
marketing agencies in the country, as well as president of Monogram Software.
Mr. Peppard has an MBA from Stanford University and a B.A. from Amherst College.

      DAVID SCHARGEL is the Chairman and President of Aportis Technologies
Corp., a leader in software for carryable and wearable computers (focusing on
Palm Pilot and Window CE computers), which he founded in 1997. Mr. Schargel is
one of the co-founders of Aladdin and served as its President from 1988 to 1994.
Mr. Schargel has served as a Director since 1988. From 1994 through 1997, he
performed various executive roles at Aladdin. Prior to co-founding Aladdin, Mr.
Schargel was Vice President at Olduvai Corporation, a publisher of software for
the Macintosh computer and also had served as Technical Editor at MacUser
Magazine. Mr. Schargel has extensive experience in software product management
and marketing.

      PAUL GOODMAN since 1987 has been a partner in the New York City law firm
of Elias, Goodman Shanks & Zizmor, LLP where he concentrates on representing
software and Web companies in a wide range of business and financing
transactions. He has represented Aladdin since its inception. In addition to a
Juris Doctor degree, Mr. Goodman hold a BA and MA degree in


                                                                              43
<PAGE>

Computer Science, was a former member of the Computer Science faculty of Queens
College, is the author of five books on microcomputer programming and is the
editor and publisher of WebLegalGuide.com, a legal resource for companies
involved in the Web industry.

      BENNA LOVATO is one of the co-founders of Aladdin. She is also President
of Nurture, a non-profit organization located in Santa Cruz county, devoted to
the goal that all woman have education, advocacy and support in the
child-bearing years. She is also a member of the Board of Directors of the Birth
Network of Santa Cruz county.

Item 10: Executive Compensation

COMPENSATION SUMMARY

      The following table sets forth the compensation awarded or paid to, or
earned by, our Chief Executive Officer and all our other executive officers who
earned in excess of $100,000 in salary and bonus (collectively the "Named
Executives") for services rendered to us during the year ended December 31,
1999:

SUMMARY COMPENSATION TABLE (1)(2)

                      ANNUAL COMPENSATION              LONG-TERM COMPENSATION
                      -------------------              -------------------------
                      SALARY ($)                       NUMBER OF SECURITIES
                                                       UNDERLYING OPTIONS (#)(3)
NAME AND
PRINCIPAL
POSITION

Jonathan Kahn, CEO
                        $164,119                               20,000

Darryl Lovato, President and Chief
Technology Officer

                        $161,419                               20,000

      (1) Information set forth herein includes services rendered by the named
executives while employed by Aladdin Systems prior to the reorganization and by
Aladdin following the Reorganization.


                                                                              44
<PAGE>

      (2) The columns for "Bonus", "Other Annual Compensation", "Restricted
Stock Awards", "LTP Payouts" and "All other Compensation" have been omitted
because there is no such compensation to be reported.

      (3) Represents options granted to such executives during 1999.

      The following table sets forth certain information concerning options
granted to the named executives during 1999.

OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1999 (1)

                  Number of         % of Total       Exercise       Expiration
                  Securities        Options          Price Per      Date(4)
                  Underlying        Granted to       Share
                  Options           Employee         ($/SH)
                  Granted (2)       In 1999 (3)

NAME

Jonathan
Kahn                 20,000          5.8%             $4.00      December, 2010

Darryl
Lovato               20,000          5.8%             $4.00      December, 2010

      (1) No SARs were granted to the Named Executives during 1999.

      (2) Each option represents the right to purchase one share of our common
stock.

      (3) In 1999, we granted officers, employees and consultants options to
purchase an aggregate of 347,298 shares of our common stock.


                                                                              45
<PAGE>

      (4) Options may terminate before their expiration dates if the optionee's
status as an employee or consultant is terminated or upon the optionee's death
or disability.

OPTION EXERCISES AND YEAR-END OPTION VALUES

      The following table sets forth certain information with respect to the
named executives concerning exercisable and unexercisable stock options held by
them as of December 31, 1999. None of these executive officers exercised options
to purchase common stock in 1999.

AGGREGATE OPTION EXERCISES IN 1999 AND YEAR END OPTION VALUES (1)

<TABLE>
<CAPTION>

Name                            Number of Unexercised              Value of Unexercised In-the-
                               Options at Year End(#)              Money Options at Year End (2)
                         -----------------------------------       -----------------------------
                           Exercisable       Unexercisable         Exercisable     Unexercisable
                         ---------------     -------------         -----------     -------------
<S>                          <C>               <C>                   <C>              <C>
Jonathan Kahn                136,509           161,716               $546,036         $646,864

Darryl Lovato                131,766           161,716               $527,064         $646,864

</TABLE>

      (1) No SARs were owned or exercised by any of the Named Executives during
1998.

      (2) Based on a per share fair market value of our common stock equal to
$4.00 per share, the trading price market value of our common stock on December
31, 1999.

EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS

      On October 25, 1999 we entered into an employment agreement with Jonathan
Kahn (the "Kahn Employment Agreement"). Under the Kahn Employment Agreement,
Jonathan Kahn is to serve as our Chief Executive Officer and perform such duties
as may be reasonably assigned to him by the


                                                                              46
<PAGE>

Board of Directors. The Kahn Employment Agreement provides for an annual base
salary of $150,000. The Kahn Employment Agreement also provides that Jonathan
Kahn is to receive options to purchase shares of our Common stock in an amount
as to be determined, from time to time, by the Board of Directors of the
Company, and that he is eligible to receive vacation in accordance with the
Company's policies. He is also eligible to participate in the health, life
insurance, medical, retirement and other benefit programs which we may offer
from time to time.

      The term of the Kahn Employment Agreement lasts until September 30, 2002
unless terminated pursuant to the terms thereof. We may terminate the Kahn
Employment Agreement only for cause. The term "cause" is defined in the Kahn
Employment Agreement as: (i) the willful neglect of duties reasonably assigned
by the Board of Directors; (ii) material breach of the agreement; or (iii)
willful gross misconduct. If Jonathan Kahn is terminated without cause or in the
event of a change of control of the Company, defined as a change in control of
at least 40% of the voting shares of the Company, he is to receive severance pay
through September 30, 2002 equal to: (i) the base salary; (ii) bonus
compensation; (iii) vested options to purchase Common stock; (iv) health
insurance; and (v) any unused vacation time. The change of control provision in
the employment agreement was not triggered by the recent Reorganization with
Foreplay Golf Travel & Tours, Inc. If Jonathan Kahn resigns from his position
for good cause, including a substantial reduction in his position, duties or a
material breach of the agreement by us, he is to be deemed terminated without
cause and is eligible to receive severance.

      On October 25, 1999 we entered into an employment agreement with Darryl
Lovato (the "Lovato Employment Agreement"). Under the Lovato Employment
Agreement, Darryl Lovato is to serve as our President and Chief Technology
Officer and perform such duties as may be reasonably assigned to him by the
Board of Directors. The Lovato Employment Agreement provides for an annual base
salary of $150,000. The Lovato Employment Agreement also provides that Darryl
Lovato is to receive options to purchase shares of our Common stock, in an
amount as to be determined, from time to time, by the Board of Directors of the
Company, and that he is eligible to receive vacation in accordance with the
Company's policies. He is also eligible to participate in the health, life
insurance, medical, retirement and other benefit programs which we may offer
from time to time.

      The term of the Lovato Employment Agreement lasts until September 30, 2002
unless terminated pursuant to the terms thereof. We may terminate the Lovato
Employment Agreement only for cause. The term "cause" is defined in the Lovato
Employment Agreement as: (i) the willful neglect of duties reasonably


                                                                              47
<PAGE>

assigned by the Board of Directors; (ii) material breach of the agreement; or
(iii) willful gross misconduct. If Darryl Lovato is terminated without cause or
in the event of a change of control of the Company, defined as a change in
control of at least 40% of the voting shares of the Company, he is to receive
severance pay through September 30, 2002 equal to: (i) the base salary; (ii)
bonus compensation; (iii) vested options to purchase Common stock; (iv) health
insurance; and (v) any unused vacation time. The change of control provision in
the employment agreement was not triggered by the recent Reorganization with
Foreplay Golf Travel & Tours, Inc. If Darryl Lovato resigns from his position
for good cause, including a substantial reduction in his position, duties or a
material breach of the agreement by us, he is to be deemed terminated without
cause and is eligible to receive severance.

Item 11: Security Ownership of Certain Beneficial Owners and Management

The following tables shows all directors and officers of the Company and all
persons known to the Company to be the beneficial owner of more than five
percent of the Company's common stock.

 Name and Address                      Amount and Nature             Percent
of Beneficial Owner                of Beneficial Ownership(1)        of Class

EXECUTIVE OFFICERS AND DIRECTORS
--------------------------------        ------------------           --------

Jonathan Kahn(2)                            1,822,789                 19.54%

David Schargel                              1,601,571                 17.17%

Darryl Lovato (3)                           1,765,066                 18.92%

Brad Peppard (4)                               63,210                  0.68%

Benna Lovato                                1,633,300                 17.51%

Paul Goodman                                       --                    --

All directors and executive                 6,885,936                 73.82%
officers as a group (6 Persons)

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


                                                                              48
<PAGE>

OTHER 5% STOCKHOLDERS (1):
---------------------   ----------------------------------   ------------------

Marco Gonzalez                                680,680                  7.44%

All directors,
executive officers and 5%
stockholders as a group                     7,566,616                 81.26%

      (1) Calculated pursuant to Rule 13d-3(d) of the Exchange Act. Under Rule
13d-3(d), shares not outstanding which are subject to options, warrants, rights
or conversion privileges exercisable within 60 days are deemed outstanding for
the purpose of calculating the number and percentage owned by such person, but
are not deemed outstanding for the purpose of calculating the percentage owned
by each other person listed.

      (2) Includes 136,509 shares of Common Stock subject to options that are
exercisable within 60 days of the date hereof.

      (3) Includes 131,766 shares of Common Stock subject to options that are
exercisable within 60 days of the date hereof.

      (4) Includes 31,605 shares of Common Stock subject to options that are
exercisable within 60 days of the date hereof.

Item 12: Certain Relationships and Related Transactions

      In 1998, Jonathan Kahn, CEO and Darryl Lovato, President each received
options to purchase up to 57,898 shares of Common Stock, respectively, with
exercise prices of $1.18 per share. These options vest in 48 monthly
installments.

      In 1999, Brad Peppard, Director received options to purchase up to 31,605
shares of Common Stock, with exercise prices of $1.54 per share.


                                                                              49
<PAGE>

      BAYTREE CAPITAL ASSOCIATES, LLC. In July, 1999 Aladdin Systems, Inc.
entered into an agreement with Baytree Capital Associates, LLC which was
continued after the Reorganization. Under the agreement, Baytree provided
financial consulting and assistance to Aladdin Systems, Inc. which included the
identification of a merger candidate and assistance with the Reorganization. For
their services, Baytree received 50,000 shares of our Common Stock and was paid
$20,000 plus $10,000 in non-accountable expense reimbursement. In addition,
Baytree has been granted an 18 month right of first refusal with respect to any
subsequent financings.

PART IV
Item 13: Exhibits, Financial Statements, and Reports on Form 8-K

(a) The following documents are filed as a part of this Report:

1. Financial Statements

The following consolidated financial statements of Aladdin Systems Holdings,
Inc., and subsidiaries, and the Independent Auditors' Reports issued thereon,
are incorporated by reference in Part II, Item 7:

Independent Auditors' Reports.
Consolidated Balance Sheets.
Consolidated Statements of Earnings.
Consolidated Statements of Stockholders' Equity.
Consolidated Statements of Cash Flows.
Notes to Consolidated Financial Statements.

2. Exhibits

The following exhibits are filed as part of, or incorporated by reference into,
this Report:

2.1   Agreement and Plan of Reorganization dated as of October 12 1999 by and
      among FGT, Gary Ulmer, Aladdin Systems, Inc. and the shareholders of
      Aladdin Systems, Inc.*
3.1   Articles of Incorporation of the Registrant.*
3.2   Certificate of Amendment to the Articles of Incorporation of the
      Registrant.*
3.3   By-Laws of Registrant.*
4.1   Sample Stock Certificate of the Registrant.*


                                                                              50
<PAGE>

10.1  Letter Agreement, dated July 14, 1999 by and between Bay Tree Capital
      Associates, LLC and the Registrant.**
10.2  Employment Agreement dated October 25, 1999 by and between Mr. Jonathan
      Kahn and the Registrant. **
10.3  Employment Agreement dated October 25, 1999 by and between Mr. Darryl
      Lovato and the Registrant. **
10.4  Stock Option Plan of the Registrant. **
10.5  Form of Stock Option Agreement issued under the Stock Option Plan of the
      Registrant. **
21.1  Subsidiaries of Registrant
27.1  Financial Data Schedule

Legend

* Incorporated into this Report by reference to the Registrant's Registration
Statement on Form 10-SB

** Incorporated into this Report by reference to the Registrant's Amendment No.
2 to the Registration Statement on Form 10-SB dated

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.

  ALADDIN SYSTEMS HOLDINGS, INC.
  (Registrant)


  By /s/ Jonathan Kahn
     ------------------------------
  (Jonathan Kahn, Chief Executive Officer,
   Principal Financial and Accounting Officer and Director)

Pursuant to the requirements 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 below.

 Signature                             Title                           Date


                                                                              51
<PAGE>

 /s/ Jonathan Kahn
-------------------------  Chief Executive Officer and Director      4/21/00
  (Jonathan Kahn)

 /s/ Darryl Lovato
-------------------------  President and Director                    4/21/00
  (Darryl Lovato)

/s/ Brad Peppard
-------------------------  Director                                  4/21/00
  (Brad Peppard)

/s/ David Schargel
-------------------------  Director                                  4/21/00
  (David Schargel)

/s/ Benna Lovato
-------------------------  Director                                  4/21/00
  (Benna Lovato

/s/ Paul Goodman
-------------------------  Director                                  4/21/00
  (Paul Goodman)


                                                                              52
<PAGE>

EXHIBIT INDEX

Exhibit Reference (*)
Number or Page #

2.1   Agreement and Plan of Reorganization dated as of October 12 1999 by and
      among FGT, Gary Ulmer, Aladdin Systems, Inc. and the shareholders of
      Aladdin Systems, Inc.*
3.1   Articles of Incorporation of the Registrant.*
3.2   Certificate of Amendment to the Articles of Incorporation of the
      Registrant.*
3.3   By-Laws of Registrant.*
4.1   Sample Stock Certificate of the Registrant.*
10.1  Letter Agreement, dated July 14, 1999 by and between Bay Tree Capital
      Associates, LLC and the Registrant.*
10.2  Employment Agreement dated October 25, 1999 by and between Mr. Jonathan
      Kahn and the Registrant. *
10.3  Employment Agreement dated October 25, 1999 by and between Mr. Darryl
      Lovato and the Registrant. *
10.4  Stock Option Plan of the Registrant. *
10.5  Form of Stock Option Agreement issued under the Stock Option Plan of the
      Registrant*.
21.1  Subsidiaries of Registrant*
27.1  Financial Data Schedule*

Legend

* Incorporated into this Report by reference to the Registrant's Registration
Statement on Form 10-SB dated

** Incorporated into this Report by reference to the Registrant's Amendment
Registration Statement on Form 10-SB dated

***** Incorporated into this Report by reference to the Registrant's Amendment
Registration Statement on Form 10-SB dated


                                                                              53