SECURITIES AND EXCHANGE COMMISSION
                       Washington, D.C.  20549
            ______________________________________________

                             Form 10-KSB

      [X]         Annual Report under Section 13 or 15(d) 
                   of the Securities Exchange Act of 1934

                  For the Fiscal Year Ended June 30, 1997

                                  OR

      [ ]         Transition Report under Section 13 or 15(d)
                   of the Securities Exchange Act of 1934

                      Commission File No.:  0-27828

                       WANDERLUST INTERACTIVE, INC.
              (Name of Small Business Issuer in its charter)

            Delaware                         13-3779546
     (State or other Jurisdiction            (IRS Employer
     of Incorporation or Organization)       Identification
                                             Number)
     
5301 Beethoven Street, Los Angeles, CA       90066
(Address of principal executive offices)     (Zip Code)

Issuer's telephone number: (310) 821-7880

Securities registered pursuant to Section 12(b) of the Exchange
Act: None

Securities registered pursuant to Section 12(g) of the Exchange
Act:   Common Stock, par value $.01 per share
                              (Title of class) 

     Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act
during the past 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.
Yes [X]      No ___

     Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained herein, and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [X].

     The issuer's revenues for its most recent fiscal year were
$1,504,420.

     The aggregate market value of the shares of Common Stock
held by non-affiliates as reported by NASDAQ on September 30,
1997 was approximately $3,383,258.

     As of September 30, 1997, the Registrant had outstanding
5,041,228 shares of Common Stock, par value $.01 per share.

     The proxy statement of the Registrant to be filed on or
before October 29, 1997 is incorporated into Part III herein by
reference.
<PAGE>
                                  PART I

ITEM 1.   Business.

     Wanderlust Interactive, Inc. (the "Company") was formed in
May 1994 to develop and market interactive multimedia software
education and entertainment titles on CD-ROM (Compact Disk Read
Only Memory) for use on multimedia personal computers (MPCs)
using Microsoft Windows-based CD-ROM playback systems.  In March
1996, the Company completed an initial public offering of
securities.  In February 1997, the Company acquired all of the
outstanding shares of stock of Western Technologies, Inc.
("Western") from Jay Smith III, its present CEO.  The Company and
its wholly-owned subsidiary are collectively referred to herein
as the Company.

     In May 1995, the Company entered into a license agreement
with MGM/UA Licensing and Merchandising, a division of Metro-
Goldwyn-Mayer Inc. ("MGM"), to use the Pink Panther character and
other related characters (collectively referred to as the "Pink
Panther characters") in two interactive multimedia CD-ROMs (the
"License Agreement").  On May 2, 1996, the License Agreement was
amended to include, among other things, a license to manufacture
and market a companion guide book to the Company's products which
contain the Pink Panther characters and the soundtrack audio CD
with ten original songs to be released October 1997, to the
Company's licensed products. See "Licensing."

     The Company completed a CD-ROM entitled "Passport to Peril,"
which it released in October 1996, and an Internet game entitled
"Postcards to Peril" which it released on the Company's web site
in November 1996, and a second interactive CD-ROM involving the
Pink Panther entitled "Hokus Pokus Pink," released in October
1997.  Many of the major international publishers who licensed
the first Pink Panther title, "Passport to Peril", have also
licensed "Hokus Pokus Pink".  

     In connection with the Company's first two CD-ROM titles,
which were completed in September 1996 and September 1997,
respectively, the Company created the artwork, sound, text, and
programming features of these titles.  

     The Company's subsidiary, Western, has designed and
programmed over forty video and computer games, several of which
have sold over one million units, including "X-Men" for Sega for
Sega Genesis and "Q-Bert" for Parker Brothers.  As part of the
acquisition referred to above, the Company acquired rights to
over 40 patents.  Western also has created and developed over 20
electronic toys and electronic consumer products including "Talk
to Me Barbie" by Mattel, "Baby Talk II" by Galoob, "IR Ear
Thermometer" by Thermoscan and "Electronic PC Board" for exercise
equipment by Paramount Fitness Equipment.

     Since the date of acquisition of Western (February 1997),
Western has begun development of five new projects.  These
projects include the development of electronic game software
projects for publishers such as Electronic Arts, Hasbro and TH-Q. 
In addition, development has begun on interactive television
projects for Telia InfoMedia, the Swedish Microsystems and
Thomson Consumer Electronics, a parent of RCA.  New electronic
toy projects have begun with both Hasbro and Mattel.

Products

     The Company also develops entertainment software for a
variety of platforms including Sony PlayStation, Sega Saturn, as
well as PC CD-ROM.  Some of the new products are designed for
multiple platforms.  The Company's bowling game design "Ten Pin
Alley" has been programmed on all three of these platforms.  Some
of the current projects under development will utilize both Sony
Play Station and PC CD-ROM.  

     The Company creates concepts, develops and licenses toy
designs for a wide variety of play categories.  These include
preschool, boy toys and girl toys.  Many of the toy designs have
electronic components that are a specialty of the Company.  The
Company has designed a number of toys that are specifically
interactive with computer PC CD-ROM software and a number of new
designs will incorporate this feature.  Other electronic
specialties include new types of digital remote control and
acceleration sensing devices.

     The interactive television applications are an outgrowth of
the game software development capability.  These applications are
designed to run on the digital set-top boxes that are used with
satellite television, digital cable and wireless cable
installations now being installed around the world.  The first
application for the Company is a suite of games that includes
Trivial Pursuit and is to be installed in a digital cable system
now being implemented in Sweden and other Scandinavian countries.

     The Company developed two interactive multimedia software
entertainment titles for use on MPCs.  The Company's initial
product format is CD-ROMs for the MPC.  The Company is marketing
its initial products under the name "Intelligent Fun & Games." 
The first two titles in the "Intelligent Fun & Games" series are
travel and culture titles, featuring the Pink Panther characters. 
The Company entered into the License Agreement under which the
Company has the right to utilize the Pink Panther characters for
these two CD-ROM titles.  See  "Licensing."

     In the first two titles, the Pink Panther visits different
countries.  The Company's products enable the Pink Panther to
eat, sleep, drink, dress, speak, shop, worship, dance, learn,
work and play with the local citizens.  Through this interaction
it is expected that the player will learn about lifestyles,
customs, rituals, food, clothing, religions and other aspects of
the culture he is visiting.  The personalities of the Pink
Panther and the other characters are an integral part of the
games, and a humorous script and colorful animation further
enhance the entertainment value of the products.    

Distribution

     For its first "Pink Panther" titles, the Company utilized a
distributor to market its products to mass market retailers,
specialty stores and directly to consumers in the United States. 
The Company entered into a distribution agreement with BMG Music
d/b/a BMG Entertainment ("BMG") in May 1996 which provided for
distribution of the Company's products in the United States (the
"BMG Agreement").  BMG agreed to distribute at least 60,000
units.  A dispute arose between BMG and the Company concerning a
guarantee that sixty thousand (60,000) units of Company's first
"Pink Panther" titles would be distributed within the two year
period following the initial commercial release date which
occurred on October 1, 1996 (the "Guarantee") and the
establishment of a fair and competitive "net price" per unit.  In
June 1997, BMG and the Company entered into a settlement
agreement (the "BMG Settlement") whereby the BMG Agreement was
terminated, BMG agreed to pay the Company $175,000 and BMG agreed
to reduce the Company's obligations to BMG by approximately
$200,000.  In addition, the BMG Settlement provides that BMG
shall continue to have the right to sell and distribute in the
United States, the Company's first title, "Passport to Peril" at
any "net price" established by BMG provided it does not exceed
50,000 units.  If BMG sells in excess of 50,000 units, BMG shall
pay the Company a fair and competitive royalty.

     The balance of distribution of its products that it
distributes itself has been done by entry into several sub-
license agreements to market its Pink Panther products.  The
countries or regions within which the Company has concluded
agreements include Brazil, Taiwan, Finland, Israel, Denmark,
Spain, Germany, Austria, Switzerland, Sweden, Norway, Italy, The
Netherlands and the Dutch-speaking region of Belgium.  Each
agreement, which is exclusive for its region, provides for
minimum number of Units to be distributed, which range from
30,000 units over a two-year period to 3,000 over a one-year
period; the royalties to be generated by these agreements range
from $6.00 per unit to $8.00 per unit.

     In the United States, educational and entertainment CD-ROMs
are sold through computer stores, consumer electronics stores,
toy stores, book stores, music and video stores (collectively
"specialty stores") mail order catalogues, direct mailings to
consumers and mass merchants.  Retailers of computer software
such as CD-ROMs have a limited amount of shelf space, and there
is intense competition among consumer software products for
adequate levels of shelf space and promotional support from
retailers.  To the extent that the number of consumer software
products and computer operating systems increases, this
competition for shelf space may intensify.  The Company's
products will likely constitute only a relatively small
percentage of a retailer's sales volume, and there can be no
assurance that retailers will purchase the Company's products or
provide the Company's products with adequate levels of shelf
space. 

Marketing and Sales

     The Company relies primarily on its Chief Executive Officer
and Director of Marketing for sales and licensing of the Company
developments.  The Company believes that marketing to both retail
channels and to end users is important to the success of its
products and will be the responsibility of licensees and
distributors.  The Company expects its distributors and licensees
will employ a variety of marketing techniques which may include
in store promotions, direct mailings of catalogues and brochures,
advertising in multimedia trade and general consumer publications
to promote sales of its products.

     The Company relies on its contacts and relationships within
the industry to license its concepts and obtain development
contracts.  In addition, it is constantly seeking new
relationships and customers.

Product Development and Manufacturing

     The development of the Company's concepts is generally
developed in-house with the Company's full-time employees plus
occasional freelance artists, animators, writers or programmers. 
The Company maintains a schedule and budgeting system designed to
control development costs and to meet deadlines.  Currently the
Company's development efforts are concentrated in California.

     The development capabilities include programming for a
variety of game systems including IBM PC, Sony PlayStation and
Sega Saturn.  Artwork and graphics include two-dimensional
animation for Pink Panther and three-dimensional animation and
graphics for games such as Ten Pin Alley.  Audio includes sound
effects, music and voiceover in a variety of formats.  Producers
direct the design and development of each of the games and game
design starts with the concept stage and is involved in each step
of the development.

     The Company licenses the manufacturing and distribution of
its new concepts to marketing firms, both domestic and
international.

Licensing

     In May 1995, the Company entered into the License Agreement
with MGM for use on two interactive multimedia CD-ROMs of the
"Pink Panther" character and other related characters from the
Pink Panther cartoon, including The Inspector, Boss Man, Dr. Von
Schmarty, The Ant and the Aardvark, The Little Old Lady, Manly
Man, Dogfather, Pugg, Louie and Voodooman (collectively referred
to as the "Pink Panther characters").  The License Agreement,
which is nonexclusive, is for four years and provides that MGM
has a right of first negotiation and last refusal with respect to
distribution of the Company's products which contain the Pink
Panther characters (the "Licensed Products") which it has not
exercised.  The License Agreement also encompasses the design,
manufacturing and marketing of a companion guide book and audio
soundtrack CD to the Licensed Products. 

     The Company paid MGM $300,000 as a nonrefundable advance
royalty, which will be applied to future royalties due in respect
of the sale of the Licensed Products. The Company shall pay MGM
(i) 12 1/2 % of the wholesale price for products sold in the
United States and 15% for products sold outside of the United
States and (ii) upon sales of the Licensed Products that are
jointly sold (bundled) with computer hardware systems, 50% of the
Company's revenues, less the cost of goods sold.  The License
Agreement also provides that in the event the companion guide
book and soundtrack audio CD are sold separately from the CD-Rom,
the Company shall pay MGM an amount equal to 10% of the wholesale
price of each of these items. MGM has the right to approve the
Company's software titles that use the Pink Panther characters,
which approval may be granted or denied in MGM's sole discretion.

     MGM does not own the rights to the Pink Panther theme music
and the Company did not elect to use such music for its first
titles.  

     The Company has licensed the use of the Trivial Pursuit name
and content for use in the first year of testing of the
interactive television applications in Sweden.  The terms were
not announced.

Competition

     The Company is aware that the market for its products is
intensely competitive.  The principal competitive factors in the
consumer interactive multimedia software market include quality
and originality of products, price, brand name recognition,
marketing capabilities, access to distribution channels, ease of
use and quality of support services.

     The Company competes primarily against other companies
offering consumer interactive multimedia and entertainment and
educational software.  Existing consumer interactive multimedia
software companies may broaden their product lines or increase
their focus to compete more directly with the Company's products. 
These competitors include, among others, Grolier Electronic
Publishing, Inc., Broderbund Software, Inc., Mindscape
International USA, Maxis, Inc., Discovery Communications and
Microsoft Corp.  Potential new competitors, including computer
hardware or software manufacturers, diversified media companies
and publishing companies, may enter the consumer interactive
multimedia entertainment software market.  The competition for
retail shelf space is also likely to increase due to the
proliferation of consumer software products.  Most of the
Company's existing and future competitors have greater financial,
technical, marketing, sales and customer support resources, as
well as greater name recognition and greater access to consumers
than the Company.  There can be no assurance that the Company
will respond effectively to this market or that competition will
not develop technologies or products that render the Company's
products obsolete or less marketable.  In addition, increasing
competition in the consumer software market may cause prices to
fall, which may materially adversely affect the Company.   

Intellectual Property Rights

     The Company has registered "Wanderlust," "Adrenalin,"
"Western Technologies," and "Passport to Peril" as trademarks
with the U.S. Patent and Trademark Office.  The Company has
applied for registration of the trademarks "Intelligent Fun &
Games" and "Alyce's Adventures in Wonderland."   There is no
assurance, however, that the Patent Office will allow such
filings to be registered.

     The Company has 40 patents in various areas ranging from
circuit boards to toys.  Some of the patents are mechanical
design patents, some are software or article patents and some are
for basic technology ranging from hardware to optical.

     The Company intends to treat its concepts and software as
proprietary and will rely primarily on a combination of
trademark, copyright and trade secret laws and employee and
third-party nondisclosure agreements to protect its intellectual
property rights.  Also, as the number of software products in the
industry increases and the functionality of these products
overlaps, software developers and publishers may increasingly
become subject to infringement claims.  There can be no assurance
that third parties will not assert infringement claims against
the Company in the future with respect to its proposed products.

     Although the Company is not currently the subject of any
intellectual property litigation, management believes there has
been substantial litigation regarding copyright, trademark and
other intellectual property rights involving computer software
companies.  Policing unauthorized use of the Company's products
may be difficult.

     The Company may enter into transactions in countries where
intellectual property laws are not well developed or are poorly
enforced.  Legal protection of the Company's rights may be
ineffective in such countries.  Any claims or litigation, with or
without merit, could be costly and could result in a diversion of
management's attention, either of which could have a material
adverse effect on the Company.  Adverse determinations in such
claims or litigation could also have a material adverse effect on
the Company.

     The Company plans to enter into additional license
agreements with other companies for its own design or for their
properties, but there is no assurance that the Company will
successfully negotiate or enter into any such agreements.

Employees

     As of September 30, 1997, the Company employed 27 people on
a full-time basis, including persons engaged in game design,
writing, research, sound, art, animation, computer programming,
management and administration.  At September 30, 1997, the
Company had engaged approximately four persons as part-time and
free-lance employees.  The Company believes that its relations
with employees are satisfactory.

ITEM 2.   Property.

     The Company operates its California operation from a
noncancellable lease agreement for a production and office
facility for minimum monthly payments of $13,801 through January
31, 1999 for the Company's California-based offices.  The lease
provides for two one-year renewal options.  

     In September 1996, the Company entered into a sublease with
an unaffiliated party for premises located at 462 Broadway, New
York, New York (the "Sublease"). The Sublease terminates on March
31, 2001. For the first year, the Company's rent is $120,000,
with annual increases during the term.  The space includes
approximately 15,000 square feet.  Presently, the Company
subleases parts of this facility pursuant to sublease agreements
with four unaffiliated entities.

ITEM 3.   Legal Proceedings

     In 1996, an action was brought against the Company by Robert
Owens ("Owens") in the United States District Court for the
Southern District of New York.  The Company did not accept a
subscription from Owens who sought to acquire 90,035 shares of
Common Stock of the Company (the "Common Stock") from the Company
in a private placement.  Owens advanced the Company $27,000 which
amount the Company has attempted to return.  Owens refused to
accept these funds until recently when he accepted the return of
$13,500 of these funds.  The remaining $13,500 is currently being
held in escrow by counsel to the Company for the benefit of
Owens.  There is a dispute as to whether Owens performed certain
services for the Company that would enable him to subscribe for
the 90,035 shares of Common Stock.  There is no assurance that
Owens may not have a claim against the Company due to the
Company's failure to accept this person's subscription agreement
and failure to issue him 90,035 shares of Common Stock. 
Presently, this lawsuit is in the discovery stage.  The Company
believes it has meritorious defenses and intends to vigorously
defend itself.

ITEM 4.   Submission of Matters to a Vote of Security Holders.

     During the Company's fourth fiscal quarter ended June 30,
1997, no matters were submitted to a vote of the security holders
of the Company.

                                  PART II

ITEM 5.   Market for Registrant's Common Equity and Related
Stockholder Matters.

     (a)  The Common Stock is traded in the Over-the-Counter
market and is quoted on the NASDAQ System.

     The following table sets forth, for the Company's last two
fiscal years commencing from the inception of trading on March
21, 1996, the high and low bid quotations for the Company's
Common Stock.  The market quotations represent prices between
dealers, do not include retail markup, markdown or commissions
and may not represent actual transactions.

Quarter Ended            High Bid            Low Bid

Fiscal 1996

March 31, 1996             7.50                5.75
June 30, 1996              7.50                5.375
September 30, 1996         1.0625               .65625

Fiscal 1997

September 30, 1996         7.25                6.50
December 31, 1996          6.50                4.125
March 31, 1997             5.125               2.3125
June 30, 1997              2.3125               .625

     On September 30, 1997, the closing bid price in the Over-
the-Counter market for the Common Stock, as reported by NASDAQ,
was $1.00 and the closing bid for the Company's warrants to
purchase an additional 2,415,000 shares of Common Stock at $7.00
per share, (the "Warrants"), as reported by NASDAQ, was $.15625.  
The Warrants expire on March 20, 1999.

     In order to qualify for continued listing on NASDAQ, a
company, among other things, must maintain a minimum bid price of
$1.00 per share, as an alternative if the bid price is less than
$1.00, maintain $2,000,000 in net tangible assets.  In a letter
dated September 9, 1997, NASDAQ informed the Company that the bid
price requirement had not been met.  NASDAQ provided the Company
ninety (90) calendar days in which to regain compliance with the
minimum bid price or the alternative requirement.  If at any time
within the next ninety (90) calendar days from the date of this
letter, the shares of Common Stock reports a closing bid price of
$1.00 or greater for ten consecutive trading days, it will have
complied with the minimum bid price requirement.  If the Company
is unable to demonstrate compliance with the minimum $1.00 bid
price on or before the end of the ninety day period, December 9,
1997, it must submit by that date, its proposals for achieving
compliance.  On the basis of the information provided by the
Company, NASDAQ will determine whether or not the Company may
continue to be listed on The NASDAQ Stock Market.  If the Company
is unable to satisfy the maintenance requirements for quotation
on NASDAQ, of which there can be no assurance, it is anticipated
that the securities would be quoted in the over-the-counter
market National Quotation Bureau ("NQB") "pink sheets" or on the
NASD OTC Electronic Bulletin Board.  As a result, an investor may
find it more difficult to dispose of, or obtain, accurate
quotations as to the market price of the securities, which may
materially adversely affect the liquidity of the market for the
securities.  In addition, if the securities are delisted from
NASDAQ, they might be subject to the low-priced security or so-
called "penny stock" rules that impose additional sales practice
requirements on broker-dealers who sell such securities.

     (b)  On September 30, 1997, there were approximately 113
holders of record of the Common Stock.  The Company believes that
there are significantly more beneficial holders of the Common
Stock as many of the shares of Common Stock are held in "street"
name.  There were also approximately 25 holders of record of the
Warrants.

     (c)  No cash dividends have been paid on the Common Stock,
and the Company does not anticipate paying cash dividends in the
foreseeable future.

<PAGE>
ITEM 6.   Management's Discussion and Analysis.

     (a)  Results of Operations.

     During Fiscal 1997 the Company had revenues of $1,504,420 
as compared to revenues of $50,000 in Fiscal 1996.  During Fiscal
1997, the Company had $288,820 of product sales, $613,887 of
revenues for development contracts and $601,713 of royalty
revenues.  During Fiscal 1997, the Company incurred a net loss of
$4,486,396, or $1.07 per share, as compared to a loss of
$2,035,000, or $.72 per share, during Fiscal 1996.  These
increased losses were largely due to slower product sales and
increased costs of development and higher selling general and
administrative costs during Fiscal 1997.

     (b)  Liquidity and Capital Resources

     As of June 30, 1997, the Company had an accumulated deficit
of $6,843,220.  At June 30, 1997, the Company had cash and cash
equivalents of $228,761, as compared to $4,893,658 as of June 30,
1996. The Company's working capital deficit at June 30, 1997 was
$1,116,839 as compared to working capital of $4,287,387 at June
30, 1996. At June 30, 1997, the Company's stockholders' equity
was $4,711,765 as compared to $4,897,161 at June 30, 1996. 

     The Company has significant requirements for capital to
continue to fund its activities.  During Fiscal 1997, the Company
used $3,561,885 of funds as compared to the use of $1,893,944
during Fiscal 1996.  These funds were used to fund the Company's
loss from operations during both periods.  During Fiscal 1997,
the Company used $1,009,764 of funds in investing activities as
compared to the use of $531,359 during Fiscal 1996.  During both
periods, the Company used funds to pay an advance under the
License Agreement and to purchase equipment and fixtures,
primarily computer equipment.  In Fiscal 1997, the Company also
advanced $387,500 to its Western subsidiary.  During Fiscal 1997,
the Company used $93,248 in financing activities as compared to
generating $6,596,993 from such activities (primarily the
Company's initial public offering of securities) during Fiscal
1996.  

     In May, 1995, the Company issued units consisting of
convertible debentures and common stock.  An aggregate of
$507,500 of debentures payable and 465,374 shares of Common Stock
were issued to various investors in exchange for $1,015,000.  The
debentures bear interest at the rate of 8% (payable annually),
and were due in May, 1997.  The Company offered the debenture
holders two options in lieu of payment:  (1) Conversion into
shares of Common Stock at the rate of $.60 per share or, (2)
extend the due date for one year in exchange for 200 shares of
<PAGE>
Common Stock for each $1,000 so extended.  As of June 30, 1997,
404,159 shares of Common Stock were issued in exchange for
$242,500 of the convertible debentures, and 13,000 shares were
issued to extend the due date of $65,000 of convertible
debentures.  As of October 7, 1997, holders of $83,750 of
debentures did not exercise either option, one of whom has
threatened litigation against the Company, and such debentures are
due, payable and in default.

     Currently, the Company is attempting to raise additional
funds through a private placement offering.  In that regard, the
Company has entered into an agreement for consulting services
with Mackenzie Shea, Inc. ("MSI"), pursuant to which MSI will
provide financial and business consulting services to the Company
for a term of 24 months and will be paid $6,000 per month.  The
agreement may be cancelled on 30 days notice.  MSI has been
issued 250,000 shares of Common Stock and warrants to purchase
500,000 shares of Common Stock for $.25 per share.  If MSI fails
to provide the services provided for in the MSI engagement
agreement, the Company may redeem certain of its warrants issued
to MSI for nominal consideration.  MSI may appoint one director
to the Company.  In addition, the Company has entered into an
agreement for business consulting services with Morgan, Evan &
Company,, Inc. ("Morgen"), pursuant to which Morgen will support
a private placement offering and provide financial and business
consulting services to the Company and will earn a quarterly
retainer fee of 35,000 shares of Common Stock for the first
quarter and 30,000 shares of Common Stock for each subsequent
quarter.  In addition, Morgen shall earn a fee of 6% of funds
raised for the Company upon the structuring of the private
placement terms.  Such fee will be payable at closing of the
private placement.  Lastly, the Company may cancel this agreement
at any time by giving Morgen thirty days prior written notice. 
There is no assurance, however, that such additional capital will
be raised.

     Due to significant losses and lower sales then forecast from
the Company's first product, the Company has experienced
significant cash flow shortages resulting in the Company
substantially reducing its staff, especially in its New York
office where it went from 50 to three.  In addition, the Company
is attempting to further reduce its expenditures.  Evenso, unless
the Company raises additional capital or its revenues from
operations dramatically increase, the Company will encounter
increased liquidity pressures that could result in a further
material disruption of its operations.  There is no assurance,
however, that such additional capital will be available, or if
available, whether it will be available on terms acceptable to
the Company.  

<PAGE>
ITEM 7.   Financial Statements.

     The financial statements listed below are included on pages
F-1 through F-26 following the signature page.

     Title of Document                                     Page

Independent Auditors' Report                                F-1

Consolidated Balance Sheet
     June 30, 1997                                          F-2

Consolidated Statements of Operations -                     F-4
     Years Ended June 30, 1997
        and 1996

Consolidated Statements of Shareholders'
     Equity - Years Ended June 30, 1997                     F-5
        and 1996

Consolidated Statements of Cash Flows -                     F-7
     Years Ended June 30, 1997
         and 1996

Notes to Consolidated Financial Statements                  F-9


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

     None.

                                 PART III

     Items 9, 10, 11 and 12 are incorporated herein by reference
to the Company's Proxy Statement to be filed on or prior to
October 29, 1997.

ITEM 13.  Exhibits and Reports on Form 8-K.

(a)  Exhibits

3.1       Certificate of Incorporation, as amended, incorporated
          by reference to the Company's Registration Statement on
          Form SB-2, No. 333-00178 (the "Registration
          Statement"). 

3.2       By-Laws, as amended, incorporated by reference to
          Exhibit 3.2 to the Registration Statement.

<PAGE>
4.1       Form of Underwriter's Warrant Agreement, including the
          form of Underwriter's Warrant, incorporated by
          reference to Exhibit 4.1 to the Registration Statement.

4.2       Form of Warrant Agreement between the Company and the
          Warrant Agent, including form of Redeemable Warrant,
          incorporated by reference to Exhibit 4.2 to the
          Registration Statement.

4.3       Form of Convertible Debenture, incorporated by
          reference to Exhibit 4.3 to the Registration Statement.

4.4       Form of Warrant issued in connection with the Bridge
          Financing, incorporated by reference to Exhibit 4.4 to
          the Registration Statement.

10.1      License Agreement between the Company and MGM/UA
          Licensing and Merchandising, a division of Metro-
          Goldwyn-Mayer Inc. ("MGM/UA"), dated May 25, 1995, as
          amended, incorporated by reference to Exhibit 10.2 to
          the Registration Statement.

10.2      Amendments to the License Agreement between the Company
          and MGM/UA dated October 26, 1995, May 2, 1996 and May
          31, 1996, incorporated by reference to Exhibit 10.3 of
          the Company's Form 10-KSB for fiscal year ended June
          30, 1996 (the "1996 10-KSB").

10.3      Sublease between the Company and Greenpeace, Inc. dated
          September 13, 1996 for the Company's premises located
          at 462 Broadway, New York, New York, incorporated by
          reference to Exhibit 10.5 of the Company's 1996 10-KSB.

10.4      Stock Option Plan, as amended, incorporated by
          reference to a Exhibit 10.4 to the Registration
          Statement.

10.5      Financial Advisory and Consulting Agreement between the
          Company and A.S. Goldmen & Co., Inc. incorporated, by
          reference to Exhibit 10.6 to the Registration
          Statement.

10.6      Form of Sub-license Agreement entered into by the
          Company and its international sub-licensees,
          incorporated by reference to Exhibit 10.10 of the
          Company's 1996 10-KSB.

10.7      1996 Stock Option Plan, incorporated by reference to
          Exhibit A of the Company's 1996 Proxy Statement.

<PAGE>
10.8      Acquisition Agreement among the Company, Western
          Technologies, Inc. ("Western") and Mr. Jay Smith III
          d/b/a Smith Engineering dated as of December 30, 1996,
          incorporated by reference to Exhibit 7(c)(1) of the
          Company's Form 8-K dated February 4, 1997 ("1997 Form
          8-K").

10.9      License Agreement between Western and Mr. Smith dated
          February 4, 1997, incorporated by reference to Exhibit
          7(c)(2) of the Company's 1997 Form 8-K.

10.10     Employment Agreement between Western and Mr. Jay Smith
          III, incorporated by reference to Exhibit 7(c)(3) of
          the Company's 1997 Form 8-K.

10.11     Settlement Agreement and General Releases between the
          Company and BMG Music d/b/a BMG Entertainment, dated
          June 11, 1997.

10.12     Settlement Agreement between the Company and Ms.
          Catherine Winchester, dated as of June 30, 1997.

10.13     Consulting Agreement between the Company and Ms.
          Catherine Winchester, dated as of July 1, 1997.

10.14     Settlement Letter between the Company and Mr. Jay Smith
          III dated July 31, 1997.

10.15     Software Development and License Agreement dated May
          30, 1997, between the Company and Telia Info Media Tele
          Vision AB.

10.16     Software Programming Services Agreement dated April 11,
          1997, between the Company and THQ, Inc.

10.17     Consulting Agreement dated June 1997, between the
          Company and Electronic Arts, Inc.

21        Subsidiaries of the Company.

(b)  Reports on Form 8-K.

     None.


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

                                   WANDERLUST INTERACTIVE, INC.




                                   
Dated:    October 10, 1997    By:  s/Jay Smith III              
                                   Jay Smith III,
                                   Chief Executive
                                   Officer and Secretary


     Pursuant to the requirement, of the Securities Exchange Act
of 1934, as amended, the Company has duly caused this report to
be signed on its behalf by the following persons on behalf of the
Company and in the capacities and on the dates indicated:

Name                     Capacity                 Date



s/Jay Smith III       
Jay Smith III            Chief Executive          October 10, 1997
                         Officer, Secretary and
                         Director (Principal
                         Executive, Financial and
                         Accounting Officer)


s/Catherine Winchester
Catherine Winchester     Director                 October 10, 1997



<PAGE>
                          Independent Auditor's Report



Board of Directors
Wanderlust Interactive, Inc.
New York, New York

We have audited the accompanying consolidated balance sheet of
Wanderlust Interactive, Inc. and subsidiary ("Company") as of June 30,
1997, and the related consolidated statements of operations, changes
in shareholders' equity and cash flows for the years ended June 30,
1997 and 1996.  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 audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the
audits 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 audits provide 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 Wanderlust Interactive, Inc. and subsidiary as of June 30, 1997 and
the consolidated results of its operations and its consolidated cash
flows for the years ended June 30, 1997, and 1996, in conformity with
generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern.  As
discussed in Note 2 to the consolidated financial statements, the
Company has suffered recurring losses from operations, has a working
capital deficiency and has defaulted on payment of $83,750 of
convertible debentures.  These matters raise substantial doubt as to
the Company's ability to continue as a going concern.  Management's
plans in regard to these matters are also discussed in Note 2.  The
consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

                              DRUCKER, MATH & WHITMAN, P.C.
North Brunswick, New Jersey
   August 28, 1997 except for
   Note 21 (b), (c) (d) and (e),
   as to which the date is
   October 7, 1997


F-1

<TABLE>
<CAPTION>
                WANDERLUST INTERACTIVE, INC. AND SUBSIDIARY
                         CONSOLIDATED BALANCE SHEET
                              June 30, 1997





                                   ASSETS

<S>                                                 <C>
Current assets:
   Cash and cash equivalents                    $   228,761
   Accounts receivable, net of allowance
     for doubtful accounts of $23,500               236,981
   Costs and estimated earnings in excess
    of billings on uncompleted contracts             20,600
   Prepaid expenses                                  24,500
                                                  ---------
     Total current assets                           510,842
                                                  ---------
Fixed assets, net                                   845,799
                                                  ---------
Other assets:
   Patents and licenses, net of accumulated
    amortization of $354,308                      3,047,051
   Goodwill, net of accumulated
    amortization of $17,507                       1,663,165
   License rights, advance royalty
    net of write-off of $100,000                    200,000
   Capitalized software                              99,938
   Security deposits and other                       55,951
                                                  ---------
                                                  5,066,746
                                                  ---------
                                                 $6,422,746
                                                  =========

                               (continued)

F-2


<PAGE>
                WANDERLUST INTERACTIVE, INC. AND SUBSIDIARY
<CAPTION>
                      CONSOLIDATED BALANCE SHEET (cont.)
                              June 30, 1997





                   LIABILITIES AND SHAREHOLDERS' EQUITY


<S>                                                 <C>
Current liabilities:
   Accounts payable and accrued liabilities     $   744,227
   Billings in excess of costs and estimated
    earnings on uncompleted contracts               130,285
   Notes and loans payable                          488,169
   Convertible debentures                           265,000
                                                 ----------
Total current liabilities                         1,627,681
                                                  ---------
Due to officer/shareholder                           83,300
                                                 ----------
Commitments and contingencies

Shareholders' equity:
   Preferred stock, $.01 par value;
     authorized, 100,000 shares;
     issued and outstanding, none                       0
   Common stock, $.01 par value;
     authorized, 10,000,000 shares;
     issued and outstanding, 5,041,228
     shares                                        50,412
   Additional paid-in capital                  11,504,573
   Accumulated deficit                         (6,843,220)
                                               ----------
                                                4,711,765
                                               ----------
                                               $6,422,746
                                                =========



           See notes to consolidated financial statements.


F-3

<PAGE>
                WANDERLUST INTERACTIVE, INC. AND SUBSIDIARY
<CAPTION>
                    CONSOLIDATED STATEMENTS OF OPERATIONS


                                        For the year ended June 30,
                                     1997                  1996
                               ----------------        --------------
<S>                                  <C>                  <C>
Revenues:

   Product sales                   $   288,820            $         0
   Development contracts               613,887                      0
   Royalties                           601,713                 50,000
                                    ----------            -----------
                                     1,504,420                 50,000
                                    ----------            -----------

Expenses:
   Cost of product sales               143,264                      0
   Cost of development contracts       716,280                      0
   Research and development          2,231,998              1,274,183
   Selling, general and
     administrative                  2,936,360                859,546
   Interest income, net                (37,086)               (48,149)
                                     ---------              ---------
                                     5,990,816              2,085,580
                                     ---------              ---------
Net loss                           $(4,486,396)           $(2,035,580)
                                     =========              =========
Net loss per common stock share    $     (1.07)           $     (0.72)
                                     =========              =========
Weighted average shares
  outstanding                        4,175,058              2,825,802
                                     =========              =========


           See notes to consolidated financial statements.


F-4

<PAGE>
                          WANDERLUST INTERACTIVE, INC. AND SUBSIDIARY
<CAPTION>
                         STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                          Common Stock       Additional                        Total
                        ---------------       paid-in      Accumulated      shareholders'
                        Shares    Amount      capital        deficit           equity
                        ------    ------     ----------    -----------      -------------
<S>                   <C>         <C>          <C>            <C>             <C>
Balances,
   June 30, 1995      2,024,973  $ 20,250    $  634,895     $  (321,244)     $  333,901
                      ---------   -------     ---------      ----------       ---------
December 1995,
  issued for cash,
  $1.09 per share       343,746     3,437       371,246                         374,683
December 1995,
  issued 515,624
  warrants for
  cash $.01 per
  warrant                                         4,067                           4,067
March 1996, issued
  for cash, $5.00
  per share           1,300,000    13,000     6,487,000                       6,500,000
March 1996, issued
  2,100,000
  warrants for
  cash $.25 per
  warrant                                       525,000                         525,000
March 1996, issued
  Underwriters
  warrants for cash                                  20                              20
April 1996, issued
  for cash, $5.00
  per share              95,000       950       474,050                         475,000
April 1996, issued
  315,000 warrants
  for cash $.25 per
  warrant                                        78,750                          78,750
Costs related to
  issuance of common
  stock and warrants                         (1,358,680)                     (1,358,680)


F-5                                                   (continued)


                          WANDERLUST INTERACTIVE, INC. AND SUBSIDIARY
<CAPTION>
                      STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (cont.)

                          Common Stock      Additional                         Total
                        ---------------      paid-in       Accumulated      shareholders'
                        Shares    Amount     capital         deficit           equity
                        ------    ------    ----------     -----------      -------------
<S>                      <C>       <C>        <C>            <C>             <C>
Net loss for the year
  ended June 30, 1996                                       $(2,035,580)    $(2,035,580)
                       --------    -------    ---------       ---------       ---------
Balances,
   June 30, 1996      3,763,719  $ 37,637   $7,216,348       (2,356,824)      4,897,161

February 1997,
 issued for
 acquisition of
 Western                800,000     8,000    3,992,000                        4,000,000
February 1997,
 issued in settlement
 of accounts payable      2,350        23        4,677                            4,700
February 1997,
 issued for services      8,000        80       15,920                           16,000
May 1997, issued
 in exchange for
 convertible
 debentures             404,159     4,042      238,458                          242,500
May 1997, issued
 for extension
 of due date of
 debentures              13,000      130         7,670                            7,800
June 1997, issued
 in connection with
 contract settlement     50,000      500        29,500                           30,000
Net loss for the
 year ended
 June 30, 1997                                              (4,486,396)      (4,486,396)
                     ----------    -----     ---------       ---------        ---------
Balances,
 June 30, 1997       5,041,228   $50,412   $11,504,573      $(6,843,220)     $4,711,765
                     =========    ======    ==========        =========       =========

Per share and other amounts may not reconcile precisely due to roundings.
F-6                         See notes to consolidated financial statements.


                      WANDERLUST INTERACTIVE, INC. AND SUBSIDIARY
<CAPTION>
                          CONSOLIDATED STATEMENTS OF CASH FLOW

                                  For the year ended June 30,
                                     1997                  1996
                               ---------------     --------------
<S>                              <C>                 <C>
Cash flows from operating
   activities:

Net loss                          $ (4,486,396)     $ (2,035,580)

Adjustments to reconcile net
   loss to net cash used in
   operating activities:
     Write-off of fixed assets         100,000              -
     Write-off of license rights       100,000              -
     Amortization                      371,815              -
     Depreciation                      319,970           116,579
     Loss on disposal of fixed
       assets                           29,718              -
     Common stock issued for
       services                         16,000              -
     Common stock issued in
       connection with settlement       30,000              -
Change in:
     Accounts receivable               (68,641)             -
     Costs and estimated earnings
       in excess of billings on
       uncompleted contracts            49,202              -
     Billings in excess of costs
       and estimated earnings on
       uncompleted contracts           (13,664)             -
     Accounts payable and
       accrued liabilities             (70,126)           98,481
     Other assets                       52,937           (49,424)
     Prepaid expenses                    7,300           (24,000)
Net cash used in operating           ---------           --------
   activities                       (3,561,885)       (1,893,944)
                                     ---------         ---------
Cash flows from investing
   activities:
     Purchase of license                  -             (225,000)
     Purchase of fixed assets         (536,234)         (306,359)
     Advances to subsidiary,
       prior to acquisition           (387,500)             -
     Capitalized software              (99,938)             -
     Cash acquired from subsidiary      13,908              -
                                     ---------         ---------
Net cash used in investing
   activities                       (1,009,764)         (531,359)
                                     ---------           -------


F-7           See notes to consolidated financial statements.



                WANDERLUST INTERACTIVE, INC. AND SUBSIDIARY
<CAPTION>
                CONSOLIDATED STATEMENTS OF CASH FLOW (cont.)

                                  For the year ended June 30,
                                     1997               1996
                               ---------------     --------------
<S>                                <C>                <C>
Cash flows from financing
   activities:
   Issuance of common stock
     and warrants, net of
     costs of issuance                                 $6,598,840
   Payments on notes and 
    loans payable                 $     (56,548)
   Payments on due to officer,
    net of interest accrued             (36,700)
   Debt acquisition costs                                 (1,847)
                                     ----------         ---------
Net cash provided by (used in)
  financing activities                  (93,248)        6,596,993
                                     ----------         ---------
Increase (decrease) in cash
   and cash equivalents              (4,664,897)        4,171,690

Cash and cash equivalents,
   beginning                          4,893,658           721,968
                                      ---------         ---------
Cash and cash equivalents,
   ending                           $   228,761       $ 4,893,658
                                     ==========         =========
Cash paid during the year for:

  Interest                          $    61,075       $    40,750
                                     ==========        ==========
  Income Taxes                      $       800       $         -
                                     ==========        ==========

Noncash investing and financing activities:

See Note 3 regarding acquisition during fiscal year ended June
30, 1997.

See Note 8 regarding convertible debentures converted during 
  fiscal year ended June 30, 1997.

During fiscal year ended June 30, 1997, 2,350 shares were issued 
  in settlement of $4,700 of accounts payable.

During fiscal year ended June 30, 1997, 13,000 shares were issued
  for extension of due date of debentures.


           See notes to consolidated financial statements.

F-8
</TABLE>

               Wanderlust Interactive, Inc. and Subsidiary
                Notes to Consolidated Financial Statements
                For the years ended June 30, 1997 and 1996


1.   Summary of significant accounting policies and business
     activity:

     Business activity and basis of presentation:

     The consolidated financial statements of Wanderlust
     Interactive, Inc. and subsidiary ("Company") include the
     accounts of Wanderlust Interactive, Inc. ("Wanderlust"), its
     wholly-owned subsidiary, Western Technologies, Inc.
     ("Western"), and certain defined assets and certain defined
     liabilities of Smith Engineering ("SE"), which was a sole
     proprietorship prior to the Company's acquisition of
     Western.  Intercompany transactions and balances have been
     eliminated.

     Wanderlust is engaged in the creation, development,
     publishing, marketing and selling of interactive multimedia
     software entertainment titles on CD-ROM for personal
     computers.  Wanderlust is located in Los Angeles,
     California.

     Western and SE are engaged in the invention and development
     (including engineering and software development) of
     electronic designs, technology, and software, principally
     for toys and electronic games.  Western licenses or sells
     inventions, designs, and software to independent
     manufacturers and publishers.  Such manufacturers and
     publishers generally pay advance royalties or development
     fees and may pay additional royalties based on products
     sold.  Western also provides product development services to
     manufacturers.  Western and SE are located in Los Angeles,
     California.

     The Company's customers are concentrated in the toy and
     electronic entertainment industries.  These industries are
     characterized by rapid changes in technology and customer
     preferences.

     Use of estimates:

     The preparation of financial statements in conformity with
     generally accepted accounting principles requires management
     to make estimates and assumptions that affect the reported
     amounts of assets and liabilities and disclosure of
     contingent assets and liabilities at the date of the
     financial statements and the reported amounts of revenues
     and expenses during the reporting period.  Actual results
     could differ from those estimates.


F-9

<PAGE>
               Wanderlust Interactive, Inc. and Subsidiary
                Notes to Consolidated Financial Statements
                For the years ended June 30, 1997 and 1996


1.   Summary of significant accounting policies and business
     activity (continued):

     Cash and cash equivalents:

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

     Concentration of credit risk:

     Financial instruments which subject the Company to
     concentrations of credit risk consist of temporary cash
     instruments and accounts receivable.  The Company places its
     temporary cash investments with high quality financial
     institutions.  At times, the Company's cash balances with
     these institutions exceed the current insured amount under
     the Federal Deposit Insurance Corporation.  Accounts
     receivables are primarily from development contracts.  The
     Company reviews its accounts receivable monthly and provides
     allowances for potential uncollectible accounts.

     Fixed assets:

     Fixed assets consist primarily of computers, leasehold
     improvements and furniture, and are stated at cost. 
     Amortization of leasehold improvements is provided on a
     straight-line basis over the shorter of the estimated useful
     lives of the improvements or the life of the lease. 
     Depreciation is provided on a straight-line basis over the
     estimated useful life of the related assets.

     Patents and licenses:

     Patents and licenses are amortized on a straight-line basis
     over their estimated useful lives of four years.

     Goodwill:

     Goodwill represents the excess of cost over the fair value
     of assets acquired and is amortized using the straight-line
     method over 40 years.  The Company assesses the
     recoverability of its goodwill, and whenever continued
     adverse events or changes in circumstances indicate
     impairment, a write-off will be recorded.  Based on the
     short interval since the Company's business combination with
     Western, the Company believes no material impairment of
     goodwill exists at June 30, 1997.


F-10


               Wanderlust Interactive, Inc. and Subsidiary
                Notes to Consolidated Financial Statements
                For the years ended June 30, 1997 and 1996

1.   Summary of significant accounting policies and business
     activity (continued):

     Capitalized software:

     Capitalized software consists of salaries and other costs
     incurred to develop software from the time technical
     feasibility is established through the date the product is
     ready for sale.  Amortization begins when the software is
     available for general release and is calculated on a
     product-by-product basis using the faster of the straight-
     line method over the estimated useful life or based on
     expected units of sale.  Amortization expense was nil for
     the years ended June 30, 1997 and 1996.

     Development contract revenue and cost recognition:

     Revenues from fixed-price and modified fixed-price
     development contracts are recognized on the percentage-of-
     completion method measured by the percentage that costs
     incurred to date bear to total estimated costs.

     A contract is considered complete when all costs, except
     insignificant items, have been incurred.

     Contract costs include all direct labor, subcontractor and
     other costs and those indirect costs related to contract
     performance, such as indirect salaries, employee benefits,
     insurance, and payroll taxes.

     Provisions for estimated losses on uncompleted contracts are
     made in the period in which such losses are determined. 
     Changes in job performance, customer acceptance of work
     done, technological developments and estimated profitability
     may result in revisions to costs and income and are
     recognized in the period in which the revisions are
     determined.

     The asset, "Costs and estimated earnings in excess of
     billings on uncompleted contracts", represents revenues
     recognized in excess of amounts billed.  The liability,
     "Billings in excess of costs and estimated earnings on
     uncompleted contracts", represents billings in excess of
     revenues recognized.


F-11

<PAGE>
               Wanderlust Interactive, Inc. and Subsidiary
                Notes to Consolidated Financial Statements
                For the years ended June 30, 1997 and 1996


1.   Summary of significant accounting policies and business
     activity (continued):

     Royalty revenue:

     Royalties earned by the Company are generally reported by
     the licensees on a calendar quarter basis.  The Company
     recognizes royalty revenue when received.

     Net loss per share:

     Net loss per share is based on the weighted average number
     of shares of common stock outstanding during the period. 
     Common stock issued for consideration below the initial
     public offering price of $5.00 per share during the 12
     months preceding the date of the initial filing of a
     registration statement with the Securities and Exchange
     Commission has been included in the calculation of the
     weighted average as if they were outstanding for the entire
     period.

2.   Going concern:

     The accompanying consolidated financial statements have been
     prepared on a going concern basis which contemplates the
     realization of assets and satisfaction of liabilities in the
     normal course of business.  The Company has suffered
     recurring losses from operations, has a working capital
     deficiency and has defaulted on payment of $83,750 of
     convertible debentures.  These factors raise substantial
     doubt about the Company's ability to continue as a going
     concern.  The financial statements do not include any
     adjustments relating to the recoverability and
     classification of recorded asset amounts or the amount of
     liabilities that might be necessary should the Company be
     unable to continue in existence.  Continuation of the
     Company as  going concern is dependent on achieving
     profitable operations and satisfying convertible debenture
     holders.  Management's plans to achieve profitability 
     include developing new products, obtaining new customers,
     and continuation of a cost cutting program started during
     fiscal year 1997.  Management also plans to obtain
     additional investment capital and to continue negotiations
     with holders of convertible debentures to defer payment
     dates and/or convert debentures to common shares.



F-12


               Wanderlust Interactive, Inc. and Subsidiary
                Notes to Consolidated Financial Statements
                For the years ended June 30, 1997 and 1996


3.   Acquisition:

     On February 4, 1997, Wanderlust closed on an acquisition
     agreement among Wanderlust, Western, SE and Mr. Jay Smith,
     III ("Mr. Smith").  The agreement provided for the sale of
     100% of the outstanding shares of stock of Western and
     certain assets and certain liabilities of SE in exchange for
     800,000 shares of the Company's common stock.  An additional
     600,000 shares of the Company's common stock may be issued
     if certain events, relating to the Company's obtaining
     additional equity capital, transpire.  See Note 21 regarding
     subsequent event.  As part of the acquisition, a license
     agreement was entered into between Western and Mr. Smith in
     which Mr. Smith granted to Western the exclusive right to
     use and market patents and license agreements owned by Mr.
     Smith.  The license agreement provides that 75% of the
     revenues from such patents and licenses will be retained by
     Western and 25% will be retained by Mr. Smith until Mr.
     Smith receives an aggregate revenue from such patents and
     licenses of $2,000,000, at which time no further revenue
     will inure to Mr. Smith.

     The business combination has been accounted for using the
     purchase method.  The results of operations of Western for
     the period from February 4, 1997 through June 30, 1997 are
     included in the Company's statements of operations and cash
     flows for the year ended June 30, 1997.

     The cost of the acquired enterprise was $5,082,000.  800,000
     shares of common stock with an assigned value of $5 each
     were issued.

     Acquired goodwill will be amortized over forty years using
     the straight-line method.




F-13


<PAGE>
               Wanderlust Interactive, Inc. and Subsidiary
                Notes to Consolidated Financial Statements
                For the years ended June 30, 1997 and 1996

4.   Accounts receivable:
                                                  June 30, 1997
                                                  -------------
     Completed contracts                           $    20,000
     Contracts in progress                             110,000
     Other                                             130,481
                                                    -----------
                                                       260,481
     Less allowance for doubtful accounts               23,500
                                                    -----------
                                                   $   236,981
                                                    ===========

5.   Billings in excess of costs and estimated earnings on
     uncompleted contracts:
                                                  June 30, 1997
                                                  -------------
     Costs incurred                                $   293,149
     Estimated earnings                                 12,166
                                                    -----------
                                                       305,315
     Less billings to date                            (415,000)
                                                    -----------
                                                   $  (109,685)
                                                     ==========
Included in the accompanying consolidated balance sheet under the
following:

     Costs and estimated earnings in 
      excess of billings on uncompleted
       contracts                                   $    20,600
     Billings in excess of costs and
       estimated earnings on uncompleted
        contracts                                     (130,285)
                                                    -----------
                                                   $  (109,685)
                                                    ===========
6.   Fixed assets, net:
                                                  June 30, 1997
                                                  -------------
     Computers                                     $ 1,618,018
     Furniture                                         146,657
     Leasehold improvements                            327,180
                                                     ----------
                                                     2,091,855
     Less accumulated depreciation
       and amortization                              1,246,056
                                                     ----------
                                                   $   845,799
                                                     ==========

F-14

<PAGE>
               Wanderlust Interactive, Inc. and Subsidiary
                Notes to Consolidated Financial Statements
                For the years ended June 30, 1997 and 1996


7.   Notes and loans payable

      Note payable, bank, $150,000, due on demand,
      being paid in 36 monthly installments
      of $4,167 plus interest.  The interest
      rate is the prime rate plus 2%.
      prime rate was 8.50% at June 30, 1997.              $24,990

      Note payable, bank, $100,000, due on demand,
      being paid in 36 monthly installments
      of $2,780 plus interest.  The interest
      rate is prime plus 2%.                               38,838

      Note payable, bank, $150,000, due on demand,
      being paid in 36 monthly installments
      of $4,864, which includes principal and
      interest.  Interest rate is prime plus 2%.          106,099

      Note payable, bank, $32,375, due on demand,
      being paid in 30 monthly installments
      of $1,224, which includes principal and
      interest.  Interest rate is prime plus 1.5%          29,224

      Revolving loan, bank, up to $250,000, due on
      demand.  Payment of interest only is due
      monthly.  Interest rate is prime plus 1.5%.         256,951

      Loan payable to an individual, $50,000.
      Interest accrues at 10% and is payable
      annually.  The principal is due in
      February, 2002.                                      52,066
                                                          -------
                                                         $488,169
                                                          =======

Substantially all of the above loans are secured by a blanket
lien on all assets of Western, and are personally guaranteed by
Mr. and Mrs. Smith.

8.   Convertible debentures:

     In May, 1995, the Company issued units consisting of
     convertible debentures and common stock.  An aggregate of
     $507,500 of debentures payable and 465,374 shares of common
     stock were issued to various investors in exchange for
     $1,015,000.  The debentures bear interest at the rate of 8%



F-15

               Wanderlust Interactive, Inc. and Subsidiary
                Notes to Consolidated Financial Statements
                For the years ended June 30, 1997 and 1996

8.   Convertible debentures (continued):

     (payable annually), and were due in May, 1997.  The Company
     offered the debenture holders two options in lieu of
     payment:  1) Conversion into shares of common stock at the
     rate of $0.60 per share or, 2) extend the due date for one
     year in exchange for 200 shares of common stock for each
     $1,000 so extended.  As of June 30, 1997, 404,159 shares of
     common stock were issued in exchange for $242,500 of the
     convertible debentures, and 13,000 shares were issued to
     extend the due date of $65,000 of convertible debentures. 
     See Note 21(e) for subsequent events regarding debentures.

9.   Due to officer/shareholder:

     This loan is payable to Mr. Smith in the face amount of
     $80,000 plus accumulated interest of $3,300.  Interest
     accrues at 10% and is payable annually.  The principal is
     due in February, 2002.

10.  Incentive stock options:

     In 1994, the Company adopted an Incentive Stock Option Plan
     ("Plan").  In September, 1995, the Company amended the Plan. 
     The Plan provides for the granting of options to purchase up
     to 360,000 shares of common stock at an exercise price equal
     to the fair market value of the common stock (110% of fair
     market value for a holder in excess of 10%) on the date of
     the grant.  No options have been exercised to date.

     Plan activity during the year ended June 30, 1996 follows:

                                                          Average
                                            Shares         Price
                                            ------        -------
      Outstanding at beginning of year      65,023         $1.08
      Granted                              380,028          3.56
      Exercised                               -              -
      Forfeited                             85,051          1.16
                                           -------          ----
      Outstanding at end of year           360,000          3.03
      Options exercisable                  =======          ====
       at June 30, 1996                      8,000         $1.08
      Weighted average remaining           =======          ====
       contractual life, years                 4.5
                                           =======



F-16


               Wanderlust Interactive, Inc. and Subsidiary
                Notes to Consolidated Financial Statements
                For the years ended June 30, 1997 and 1996


10.  Incentive stock options (continued):

      Plan activity during the year ended June 30, 1997 follows:

                                                          Average
                                            Shares         Price
                                            ------        -------
      Outstanding at beginning of year      360,000        $3.03
      Granted                               164,509         2.22
      Exercised                                -             -
      Forfeited                             204,988         2.88
                                            -------         ----
      Outstanding at end of period          319,521        $2.06
      Options exercisable at                =======         ====
       June 30, 1997                         67,605        $1.99
      Weighted average remaining            =======         ====
       contractual life, years                  3.9
                                            =======

      Options outstanding at June 30, 1997:

                                            Shares         Price
                                            ------        -------
                                            185,508        $0.625
                                             60,000         5.00
                                             36,000         5.50
                                             33,011         1.20
                                              5,002         1.08
                                            -------
                                            319,521
                                            =======

     In July, 1996, the Company adopted the 1996 Incentive Stock
     Option Plan ("96 Plan").  The 96 Plan provides for the
     granting of options to purchase up to 360,000 shares of
     common stock at an exercise price equal to the fair market
     value of the common stock (110% of fair market value for a
     holder of in excess of 10%) on the date of the grant.  No
     options have been exercised to date.



F-17

<PAGE>
                Wanderlust Interactive, Inc. and Subsidiary
                Notes to Consolidated Financial Statements
                For the years ended June 30, 1997 and 1996


10.  Incentive stock options (continued):

      Plan activity during the year ended June 30, 1997 follows:

                                                          Average
                                            Shares         Price
                                            ------        -------
      Outstanding at beginning of year         -             -
      Granted                               209,000        $2.72
      Exercised                                -             -
      Forfeited                              90,750         4.48
                                            -------         ----
      Outstanding at end of period          118,250        $1.36
      Options exercisable at                =======         ====
       June 30, 1997                         15,312        $0.625
      Weighted average remaining            =======         ====
       contractual life, years                  4.4
                                            =======

      Options outstanding at June 30, 1997:

                                            Shares         Price
                                            ------        -------
                                             98,250        $0.625
                                             20,000         5.00
                                            -------
                                            118,250
                                            =======

     During the fiscal year ended June 30, 1997, the Company
     granted non-plan options as follows:  40,000 at exercise
     price of $5.00 plus 55,000 at exercise price of $.625.  No
     options have been exercised to date.

11.  Accounting for stock based compensation:

     For the year ending June 30, 1997, the Company adopted the
     disclosure-only provisions of Statement of Financial
     Accounting Standards No. 123, "Accounting for Stock-Based
     Compensation" ("SFAS 123").  Accordingly, no compensation
     cost has been recognized in the consolidated financial
     statements for the stock option plans.


F-18


<PAGE>
                Wanderlust Interactive, Inc. and Subsidiary
                Notes to Consolidated Financial Statements
                For the years ended June 30, 1997 and 1996

11.  Accounting for stock based compensation (continued):

Had compensation cost for the Company's stock option plans been
recognized based on the fair value at the grant date for awards
consistent with the provisions of SFAS 123, the Company's net
loss and loss per share would have been as indicated below:

Net loss - as reported                             $4,486,396
Net loss - pro forma                               $4,755,851
Loss per share - as reported                            $1.07
Loss per share - pro forma                              $1.13

The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following weighted average assumptions used for grants: expected
volatility of 120%; risk-free interest rate of 6.0%; and expected
lives of 4.5 years.

12.  Commitments and contingencies:

Commitments:

On June 30, 1997, the Company entered into a settlement agreement
with a former officer.  The agreement provides for the
cancellation of an employment agreement and cancellation of
options to purchase 200,000 shares of common stock.  The former
officer was issued 50,000 shares of common stock which were
valued at $30,000 and recorded as a charge in the consolidated
statement of operations.  The Company also entered into a one
year consulting agreement with the former officer, providing for
compensation of $60,000.

In February, 1997, the Company entered into a three year
employment agreement with an officer providing for base salary of
$150,000 per year.

In May, 1995, the Company entered into a four year nonexclusive
license agreement with Metro-Goldwyn-Mayer Inc., ("MGM") which
provides for use of the "Pink Panther" character.  The agreement
was amended in May of 1996, and the Company paid $300,000 as a
nonrefundable advance royalty, to be applied to future royalties. 
The agreement provides for payment of the greater of a percentage
royalty on wholesale prices or an absolute minimum per unit sold. 
The agreement also provides for the shipment of minimum copies by
certain due dates.  Failure to ship such minimum copies may cause
termination of the agreement.  The agreement grants MGM a right
to first negotiation and last refusal in regards to distribution
of the licensed products.  MGM also has the right to approve, at
its sole discretion, the Company's software titles that contain
the "Pink Panther" character.

F-19

<PAGE>
                Wanderlust Interactive, Inc. and Subsidiary
                Notes to Consolidated Financial Statements
                For the years ended June 30, 1997 and 1996

12.  Commitments and contingencies (continued):

Commitments (continued):

The Company wrote off $100,000 of the advance royalty as a result
of weaker than expected sales of the licensed product.

In September, 1996, the Company entered into a five year lease
for office space in New York, New York.  Annual rentals of
$100,000 are due in the first year, and increase to $135,000 by
the fifth year.

The Company is obligated under a lease agreement for office space
in Los Angeles, California.  Minimum monthly payments of $13,801
are due through January 31, 1999.  The lease provides for two
one-year renewal options.  

Rent expense for the fiscal years ended June 30, 1997 and 1996
was $151,813 and $57,173, respectively.

Future minimum rental commitments under both leases are: 1998,
$289,612; 1999, $225,567; 2000, $134,112,  2001, $104,382.

The Company leases computer equipment under several operating
leases that are substantially similar.  These leases have
expiration dates from fiscal year ending 1998 to 2001.

Future minimum lease payments are:  1998, $63,930; 1999, $52,711;
2000, $11,012; 2001, $6,691.

See Note 21 regarding commitment arising from subsequent event.

Contingencies:

In July, 1994, the Company effected a private placement of common
stock.  The Company did not accept a subscription from one person
who sought to acquire 90,035 shares of Common Stock from the
Company.  This individual advanced the Company $27,000, which
amount the Company has attempted to return.  This individual
refused to accept these funds until August, 1997 when he accepted
the return of $13,500 of these funds.  The remaining $13,500 is
currently being held in an attorney's trust account.  There is a
dispute as to whether the individual performed certain services
for the Company that would enable him to subscribe for the 90,035
shares of Common Stock, and that individual filed a lawsuit in
U.S.  District Court.  There is no assurance that there may not
be a valid claim against the Company due to the Company's failure
to accept the subscription and failure to issue 90,035 shares of
Common Stock.  The Company believes it has meritorious defenses
and intends to vigorously defend itself.

F-20


                Wanderlust Interactive, Inc. and Subsidiary
                Notes to Consolidated Financial Statements
                For the years ended June 30, 1997 and 1996

12.  Commitments and contingencies (continued):

Contingencies (continued):

In connection with the acquisition discussed in Note 3, the
Company acquired Western, certain assets and liabilities of SE,
and certain rights from Mr. Smith.  Prior to the acquisition, SE
entered into a contract with GT Interactive Software Corp. ("GT")
to produce a software title named "Vampire".  A dispute has
arisen between GT and SE whereby SE, having spent over $700,000
of its own funds on changing requirements to meet GT demands,
seeks reimbursement of those funds and GT, having failed to
receive a complete project, is seeking the return of $645,000,
funds which GT advanced to SE.  The acquisition agreement
specifically provides that the Company has no obligation with
respect to GT.  Recently, the Company (as the alleged successor
of SE) received a letter from GT requesting payment for the
Vampire project.  The Company responded to GT stating it is not
responsible for any payment because the acquisition agreement
does not provide for the Company to acquire any of the rights to
the Vampire project, nor is the Company the successor to SE.  No
lawsuit has been brought by GT against the Company to date.  The
Company believes it has meritorious defenses against this claim
and, if a lawsuit is commenced, intends to vigorously defend
itself.

Prior to the acquisition, SE entered into several contracts with
a sub-contractor, Rogue Studios, Inc. ("Rogue"), involving
creation of software known as "Into the Void" ("Software"). 
Rogue failed to deliver the source code for the Software to SE. 
As a result, SE was unable to provide Funsoft GMbh ("Funsoft")
the source code for the Software, thereby causing Funsoft to
cancel its license with Playmates Interactive Entertainment Inc.
("Playmates").  In July, 1997, SE received a letter from
Playmates claiming damages of not less than $120,000 due to SE's
alleged breach of contract with Funsoft.  The Company does not
believe it assumed any liabilities relating to Rogue or Playmates
from SE.  In any event, SE intends to respond to Playmates that
it is not responsible for any damages since Rogue caused the
breach of contract.  No lawsuit has been brought by Playmates
against the Company or SE to date.  The Company believes it has
meritorious defenses against this claim and, if a lawsuit is
commenced, intends to vigorously defend itself.

See Note 21 for subsequent event re: contingency.



F-21


<PAGE>
                Wanderlust Interactive, Inc. and Subsidiary
                Notes to Consolidated Financial Statements
                For the years ended June 30, 1997 and 1996


13.  Initial public offering:

In March and April, 1996, the Company closed an initial public
offering of common stock and redeemable warrants.  A total of
1,395,000 shares of common stock and 2,415,000 redeemable
warrants were issued.  The redeemable warrants are exercisable at 

any time during a three year period commencing March 28, 1996 at
an exercise price of $7.00 per share.  The redeemable warrants
include an option whereby, under certain conditions, the Company
can redeem the warrants.

In connection with the initial public offering, the investment
banker received, for nominal consideration, five year warrants to
purchase 130,000 shares of common stock and 210,000 redeemable
warrants.  These warrants are exercisable at any time during a
four year period commencing March 1997 for $6.00 per share of
common stock and $.30 per redeemable warrant.  The Company has
also agreed to utilize the services of the investment banker on a
consulting basis for two years at a monthly fee of $2,000; the
aggregate fee of $48,000 was paid at closing.

14.  Bridge financing:

On December 29, 1995 the Company completed a private offering of
343,746 shares of common stock and 515,624 redeemable warrants
for an aggregate consideration of $378,750.  The redeemable
warrants provide for automatic conversion into an equal number of
warrants bearing the same rights as those discussed in Note 13,
"Initial public offering".

15.  Related party transactions:

During the year ended June 30, 1996, the Company incurred
$250,007 of legal fees and disbursements to a law firm.  For the
year ended June 30, 1997, legal fees and disbursements of
$175,888 were incurred to the same law firm.  A partner in that
firm was an officer/shareholder/director, and is currently a
shareholder.




F-22

<PAGE>
                Wanderlust Interactive, Inc. and Subsidiary
                Notes to Consolidated Financial Statements
                For the years ended June 30, 1997 and 1996


16.  Income taxes:

For income tax purposes, as of June 30, 1997 the Company has
deferred start-up costs and a net operation loss carryforward
approximating the financial accounting net loss since inception. 
The start-up costs will be amortized over five years commencing 
during the third quarter of fiscal 1997.  The net operating loss
carryforward will expire in 2012.  These items result in a
deferred tax asset of approximately $2,275,000.  However, a
valuation reserve has been recorded for the full amount due to
the uncertainty of realization of the deferred tax asset.

17.  Emergency from development stage:

During the third quarter of fiscal year end June 30, 1997, the
Company no longer considered itself to be in the development
stage.  Prior thereto, the Company was considered to be in the
development stage as either planned principal operations had not
commenced, or such operations had commenced, but no significant
revenue was derived therefrom.

18.  Concentration of credit risk and major customers:

The Company deals with a relatively small number of customers
which account for the majority for revenues and receivables.

                        % of Revenues            % of Receivables
                        Year ended June 30,       As of June 30,
                        -------------------      ----------------
                        1997         1996               1997
                        ----         ----               ----
Customer "A"             35%           -                  -
Customer "B"             11%           -                  -
Customer "C"             10%          80%                18%
Customer "D"              3%           -                 23%
Customer "E"              2%           -                 20%

19.  Business segment information and foreign revenue:

The Company's operations have been classified into two business
segments: publishing and development contracts.  Prior to the
Company's acquisition of Western, it operated as a publisher.  





F-23

<PAGE>
                Wanderlust Interactive, Inc. and Subsidiary
                Notes to Consolidated Financial Statements
                For the years ended June 30, 1997 and 1996

19.  Business segment information and foreign revenue
(continued):

Information by segment for the fiscal year ended June 30, 1997
follows.  Information regarding development contracts is for the
five months ended June 30, 1997:

                                      Development
                        Publishing    contracts           Total
                        ----------    -----------      ----------

Revenues                $  747,000    $  757,000      $1,504,000

Operation loss           3,557,000       929,000       4,486,000

Total assets             1,063,000     5,360,000       6,423,000

Depreciation and
  amortization             235,000       457,000         692,000

Capital expenditures       524,000        12,000         536,000

Foreign royalties for the fiscal year ended June 30, 1997 and
1996 were $458,000 and $50,000, respectively.

20.  New authoritative accounting pronouncements:

In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings
per Share" ("SFAS 128").  This new standard requires dual
presentation of basic and diluted earnings per share ("EPS") on
the face of the consolidated statement of operations and requires
a reconciliation of the numerators and denominators of the basic
and diluted EPS calculations.  Adoption of SFAS 128 is required
for the year ended June 30, 1998.  The Company's current EPS
calculation conforms to basic EPS.  The Company has not made a
determination of the impact on EPS of the adoption of SFAS 128.

21.  Subsequent events:

(a)     On July 31, 1997, the Company and Mr. Smith entered into
an agreement whereby the 600,000 shares of common stock
contingently issuable (See Note 3) to him were canceled and the
Company committed to lend to Mr. Smith up to $100,000 solely to
allow Mr. Smith to purchase up to $100,000 of shares of common
stock which may be offered in a private offering.  If such
offering takes place and such loan is made, the loan will bear
interest at 6% and be payable within three years.



F-24

<PAGE>
                Wanderlust Interactive, Inc. and Subsidiary
                Notes to Consolidated Financial Statements
                For the years ended June 30, 1997 and 1996


21.  Subsequent events (continued):

(b)     The Company had entered into an agreement with BMG Music,
d/b/a BMG Entertainment ("BMG") to distribute certain of its
software titles in the United States ("BMG Agreement").  BMG and
the Company reached a settlement of this agreement on June 11,
1997 ("BMG Settlement") which provided in pertinent part, that:
(a) BMG agreed to pay the Company $175,000 and (b) for the BMG
Releasees (as such term is defined in the BMG Settlement) to
release the Company from any obligations to BMG.  In connection
with the BMG Agreement, the Company acquired services from
Sonopress in the amount of $62,500.  The Company believes
Sonopress is affiliated with BMG and the Company obtained a
release against this obligation pursuant to the BMG Settlement. 
On September 17, 1997, the Company received a letter from
Sonopress' counsel requesting payment of $62,500.  The Company
believes, pursuant to the terms of the BMG Settlement, that it is
released from this obligation.  To date, no lawsuit has been
brought by Sonopress against the Company.  There is no assurance
that Sonopress may not have a valid claim against the Company. 
The Company believes it has meritorious defenses, and if a
lawsuit is commenced, intends to vigorously defend itself.

(c)     On October 3, 1997, the Company entered into an agreement
with a business consulting firm.  The agreement provides for the
business consulting firm to assist the Company in its efforts to
seek additional business and/or business relationships and to
advise the Company in its efforts to seek additional equity
financing.  The Company is required to (1) pay $20,000 (payable
as operating funds become available but no later than the
distribution of escrowed funds from any financing); (2) issue
250,000 shares of Common Stock and 500,000 Warrants to purchase
additional shares at $.25 per share; (3) pay a monthly fee of
$6,000.  In the event of a merger or obtaining of financing the
Company is required to pay a cash fee of 2% to 4% of the gross
proceeds of the transaction, depending upon the amount of the
transaction.  In the event the Company does not complete a bridge
loan financing within 60 days of completion of an offering
memorandum, then the Company shall have the right to cancel the
500,000 Warrants.  After 90 days from signing, the Company may
terminate the agreement upon 30 days written notice.

(d)     On October 6, 1997, the Company entered into an agreement
with an investment banking firm.  The agreement provides for the
investment banking firm to identify, evaluate and prioritize
prospective merger parties, purchasers or investors and to
determine a fair value to negotiate a transaction.  The Company
is required to pay a retainer fee of 35,000 shares of Common
Stock for the first quarter and 30,000 shares for each subsequent 

F-25

<PAGE>
                Wanderlust Interactive, Inc. and Subsidiary
                Notes to Consolidated Financial Statements
                For the years ended June 30, 1997 and 1996


21.  Subsequent events (continued):

quarter.  The Company may cancel the agreement upon thirty days
written notice.  The agreement also provides for a contingent fee
upon a successful transaction, ranging from 2% to 6% of the
valuation of the transaction, depending upon the type of
transaction, to be paid in the same form as that received by the
Company in the transaction.

(e)     Subsequent to June 30, 1997, certain holders of
convertible debentures exercised the following options in lieu of
payment:

$93,750 of debentures were converted into 156,250 shares of
Common Stock; the due date of $22,500 of debentures was extended
in exchange for 4,500 shares of Common Stock.  $83,750 of
convertible debentures are due and payable as of October 7, 1997.

22.  Pro forma information (unaudited):

Supplemental pro forma information for the years ended June 30,
1997 and 1996, as if the acquisition had occurred at the
beginning of each fiscal year:

                                   Year ended June 30,
                                   ------------------
                                   1997          1996
                                ----------     ----------

Proforma revenue                $3,092,000     $4,600,000

Proforma net (loss)            ($5,780,000)   ($4,182,000)

Proforma (loss) per share           ($1.24)        ($1.15)




F-26


<PAGE>
                               EXHIBIT INDEX


10.11     Settlement Agreement and General Releases between the
          Company and BMG Music d/b/a BMG Entertainment, dated
          June 11, 1997.

10.12     Settlement Agreement between the Company and Ms.
          Catherine Winchester, dated as of June 30, 1997.

10.13     Consulting Agreement between the Company and Ms.
          Catherine Winchester, dated as of July 1, 1997.

10.14     Settlement Letter between the Company and Mr. Jay Smith
          III dated July 31, 1997.

10.15     Software Development and License Agreement dated May
          30, 1997, between the Company and Telia Info Media Tele
          Vision AB.

10.16     Software Programming Services Agreement dated April 11,
          1997, between the Company and THQ, Inc.

10.17     Consulting Agreement dated June 1997, between the
          Company and Electronic Arts, Inc.


C:\WPDOCS\CDKIDZ\10K.97