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

                                   FORM 10-KSB

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the Fiscal Year ended: December 31, 1999
                           Commission File No. 0-23780

                               MEDIAX CORPORATION
        (Exact Name of Small Business Issuer as Specified in its Charter)

                                     Nevada
         (State or Other Jurisdiction of Incorporation or Organization)

                                   84-1107138
                     (I.R.S. Employer Identification Number)

        8522 National Boulevard, Suite 110, Culver City, California 90232
          (Address of Principal Executive Offices, Including Zip Code)

                                 (310) 815-8002
                            Issuer's Telephone Number
        Securities Registered Pursuant to Section 12(b) of the Act: None.
           Securities Registered Pursuant to Section 12(g) of the Act:

                    SHARES OF COMMON STOCK, $.0001 PAR VALUE

Check  whether the Issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  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 disclosure of delinquent  filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will be contained,  to the best
of  Registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [X]

The Issuer's revenues for its most recent fiscal year were $ 55,918.

The aggregate market value of the Issuer's Common Stock,  $.0001 Par Value, held
by non-affiliates  of the Issuer,  based on the closing sale price of the Common
Stock on March 31, 2000 as reported on the OTC Bulletin Board, was approximately
$ 18,170,343.

As of March 31, 2000 there were 6,961,781  shares of the Issuer's  Common Stock,
$.0001 Par Value, outstanding.

Transitional Small Business Disclosure Format (check one): Yes [  ] No [X]

<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL

DESCRIPTION OF BUSINESS

Originally  founded as a multi-media  production studio in 1995, MediaX Inc. was
acquired  by  ZeitGeist  Werks,  Inc and went  public  in 1996 and  subsequently
renamed  MediaX  Corporation.  MediaX  began as a  real-time  3D  computer  game
development company, developing high marquee-value intellectual properties, such
as the exclusive  license for George  Orwell's "1984" for  distribution  through
both conventional and Internet distribution channels, as well as licensing it to
large publishers.

After the acquisition  MediaX's business  development strategy began to focus on
the production of new media content for Internet and Broadband channels; website
design and hosting and  Internet-based  commerce and on-line  marketing.  MediaX
believes that since any sucessful Internet presence today requires a skilled and
experienced  engineering  & graphic  artist team and advanced  technology,  that
MediaX's  real-time 3D  engineering  team and the  technology  developed by that
team, will prove to become a competitive advantage.

Leading  edge on-line  campaigns,  such as the full screen  real-time  streaming
graphically  intense event in June 1999 for Paul McCartney,  could not have been
produced  without  this skill  set.Subsequently  MediaX has entered into several
contracts that require and recognize this  development and technology skill set.
With the varied  expertise of MediaX's  Chairman,  President and Executive  Vice
President in the areas of artist and record company management, film production,
software  development  &distribution  and  proprietary  technology  development,
MediaX  expects to bridge an existing gap in the  entertainment  and  technology
markets  and become a  successful  player in the  Internet  content  production,
marketing and e-commerce market.

MediaX  designs,  owns,  hosts and maintains an  integrated  network of distinct
types of entertainment  based web sites.  This network of sites positions MediaX
to  generate  revenue  through  web site  design  services,  the sale of  artist
specific  merchandises,  entertainment  related  products,  club  subscriptions,
endorsements  by corporate  sponsors,  third party  advertising and a variety of
products provided by affiliates.  In February 1999, MediaX launched amuZnet.com,
an entertainment  destination and e-commerce site now offering more than 300,000
entertainment titles on CDs, DVDs, videos and movies for sale. MediaX places its
own  and/or  third  party   marketing   campaigns  on  amuZnet.com  to  generate
re-occurring traffic to the site.

With increasing  numbers of visitors from MediaX's most recent site launches and
on-line  campaigns  with Rod Stewart,  Divine,  Paul  McCartney,  Faith Hill, AJ
MacLean and NSYNC,  MediaX believes that  amuZnet.com is on the path to become a
substantial  entertainment  destination  site.  MediaX's  team of engineers  and
graphic artists develops,  designs and maintains all MediaX designed/owned sites
in this  network in house and hosts all  services on the MediaX  server  system,
including the real time streaming of video and audio.

MediaX  continues  to produce  new  content  for the  Internet  and based on its
technological  structure is in a position to re-purpose all Internet  content it
has produced for interactive satellite  broadcasting and other broadband systems
such as  cable  TV or ADSL  subscriber  systems,  without  applying  significant
technological  effort.  This affords MediaX several outlets for the same digital
interactive content it produces.

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<PAGE>

MediaX has signed  contracts  with EchoStar  (Dish Network) for the launch of an
Interactive  Satellite  Entertainment  Channel and hopes to further tap into the
rapidly  emerging  efforts  of cable and  telecom  companies  with its  existing
technology  and content.  However,  there can be no  assurance  that MediaX will
achieve its  objectives  or  successfully  implement its  interactive  satellite
business plan.

         Historical Products and Services
         MediaX has developed,  produced and marketed  software products for the
information,  entertainment and development tool sector of the software industry
in the form of software distributed on floppy disks and CD-ROM's. Three released
CD-ROM products are "On the Road with BB King, "Queensryche's Promised Land" and
"Peter  Norton  -  PC  Guru"   distributed  by  MCA,  EMI  Records  and  MediaX,
respectively.

         MediaX was selected by Apple Computer to produce the Welcome Experience
for their limited edition Twentieth Anniversary Macintosh,  which was introduced
on March 19, 1997. The multimedia  presentation featured leading-edge animation,
digital video, interactive 3D graphics,  original soundtrack and theater quality
audio, which highlighted the Macintosh's extreme multimedia capabilities.

         In December 1997,  MediaX released and  distributed  "Peter Norton - PC
Guru." During the fourth  quarter of 1998, it was  determined  that this product
would not gain significant  additional sales beyond 1998, therefore,  MediaX has
ceased distribution of the product.

PATENTS, TRADEMARKS AND LICENSES

            As a site developer, MediaX also develops its own proprietary sites,
which sometimes  results in the development of innovative  technology  solutions
with broad  applications  in other  growing  markets,  especially in the on-line
environment.  MediaX owns several Internet domain names. MediaX either has filed
or is in the  process  of  filing  the  appropriate  applications  for  patents,
trademarks  or  licenses  for  its  products.  Based  on the  experience  of its
engineering  and graphic  artist team and the  successful  launch and hosting of
several  prominent  web sites,  MediaX is well  positioned to gain revenues from
site development and Internet marketing services to larger corporations  against
payment of a development  fee and  participation  in e-commerce and  advertising
revenues with these partners.

COMPETITION

            MediaX  is a  minor  participant  among  companies  that  engage  in
multimedia  and  Internet  content  development.  Many of these  companies  have
significantly   greater   capitalization   and   experience  in  this  industry.
Additionally,  online  commerce is rapidly  evolving and highly  competitive and
MediaX expects competition to further intensify.  Barriers to entry are minimal,
and a competitor can launch a simple site at a relatively low cost. In addition,
the  general  retail  music  industry  is  also  intensely  competitive.  MediaX
currently  competes with a variety of  companies,  including  online  vendors of
consumer  products  including CDs, DVDs, music videos and other related products
and  traditional   retailers  of  music  products,   including  specialty  music
retailers,  many of which also have  dedicated  web sites that compete  directly
with MediaX.

            MediaX is aware that  several  of its  competitors  have  aggressive
pricing  or  inventory  availability  policies  and  devote  substantially  more
resources to site and systems development than MediaX. Increased competition may
result in reduced operating margins.

            There  can be no  assurance  that  MediaX  will be  able to  compete
successfully against current and future competitors.

                                       3

<PAGE>

EMPLOYEES

         As of March 31, 2000, MediaX had 29 employees and subcontractors.

YEAR 2000

          In 1999,  MediaX  completed  its  remediation  and testing of MediaX's
systems.   Because  of  those  planning  and  implementation   efforts,   MediaX
experienced no significant  disruptions in critical  information  technology and
non-information technology systems and those systems have successfully responded
to the Year 2000 date  change.  MediaX  did not incur any  significant  expenses
during 1999 in  connection  with its  remediation  and  testing of its  systems.
MediaX is not aware of any material  problems  resulting  from Year 2000 issues,
either with its  products,  internal  systems,  or the  products and services of
third   parties.   MediaX  will  continue  to  monitor  its  critical   computer
applications and those of its suppliers and vendors  throughout the year 2000 to
ensure any latent Year 2000 matters arising are addressed promptly.

ITEM 2.  DESCRIPTION OF PROPERTY

         MediaX maintains its corporate office at 8522 National Boulevard, Suite
110,  Culver  City,   California  90232  on  a  month-to-month  basis  and  pays
approximately  $3,200 per month for rent.  MediaX  entered  into an agreement to
lease new corporate  offices in Culver City,  California  through December 2004.
The agreement provides for monthly lease payments of $9,250 increasing yearly to
$10,411 in the last year.  MediaX maintains its software  development  office at
303  Potrero  St.,  #42-302,   Santa  Cruz,   California   95060.   MediaX  pays
approximately  $3,146 per month for rent  pursuant to a lease,  which expires in
June 2000.

ITEM 3.  LEGAL PROCEEDINGS

         Valley  Media,  Inc.  ("Valley")  commenced an  arbitration  proceeding
against MediaX  Corporation  ("MediaX") for breach of contract in relation to an
order fulfillment contract and related license agreement. MediaX participated in
the  arbitration  while  reserving  the  right  to  challenge  the  scope of the
arbitrator's  authority and the arbitration  provision in the written agreement.
On March 6, 2000, the arbitrator  found in favor of Valley and awarded  $170,000
in damages, plus the cost of the arbitration.  MediaX has recorded approximately
$183,000 in the 1999 balance sheet and statement of operations. MediaX is in the
process of challenging the arbitrator's authority and the arbitration provisions
in the written agreement and plans to request the superior court of the state of
California to vacate the arbitration awards.


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

         No matters  were  submitted  to a vote of security  holders  during the
fourth quarter of the fiscal year ended December 31, 1999 other than as follows:

          On September 10, 1999,  shareholders  of MediaX  holding a majority of
the  voting  power,  acting  pursuant  to  Nevada  law and in lieu of an  annual
meeting, elected Nancy Poertner,  Rainer Poertner and Matthew MacLaurin to serve
as  directors  for the  ensuing  year;  approved  an  increase  in the number of
authorized $.0001 par value common shares to 25,000,000 from 7,500,000; approved
and  ratified  the 1998  Amendment  to  MediaX's  1996  Stock  Option  Plan that


increased the number of shares of common stock  available to the Plan to 500,000
shares of $.0001 par value common stock and ratified the  appointment of Davis &
Co. CPA's P.C. as MediaX's  independent  accountants for the year ended December
31, 1999.  Notice of the proposed  written  consent in lieu of an annual meeting
was filed with the SEC on Schedule 14C and mailed to all  shareholders of record
on September 29, 1999.

                                       4

<PAGE>

                                     PART II

ITEM 5.           MARKET FOR  COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         (a)  MARKET  INFORMATION.  MediaX's  Common  Stock  is  traded  on  the
over-the-counter  market.  The  following  table sets forth the high and low bid
price for  MediaX's  Common  Stock for the periods  indicated as reported by the
OTC's  Electronic  Bulletin Board.  These prices are believed to be inter-dealer
quotations  and do not include  retail  mark-ups,  mark-downs,  or other fees or
commissions, and may not necessarily represent actual transactions.


                          Quarter Ended                  High Bid     Low Bid
                         ------------------              --------     -------
                         March 31, 1999                    $4.62        $2.06
                         June 30, 1999                     $6.91        $3.56
                         September 30, 1999                $5.25        $1.75
                         December 31, 1999                 $3.03        $1.31

                         March 31, 1998                    $13.31       $3.80
                         June 30, 1998                     $5.00        $1.30
                         September 30, 1998                $3.50        $1.50
                         December 31, 1998                 $3.00        $ .60

         (b)  HOLDERS.  As of March 31,  2000,  MediaX  had  approximately  1500
shareholders  of record,  which  includes  shareholders  who hold stock in their
accounts at broker/dealers.

         (c)  DIVIDENDS.  MediaX  has never paid a cash  dividend  on its common
stock and does not expect to pay a cash dividend in the foreseeable future.

         (d)      RECENT SALES OF UNREGISTERED SECURITIES.

                  Year ended December 31, 1999

                  Stock sales
During  January 1999,  MediaX issued 30,000 shares of common stock in connection
with the exercise of stock  warrants for $75,000.  Exemption  from  registration
under the Securities Act of 1933, as amended ("Act"), is claimed for the sale of
all the  securities  set forth above in reliance upon the exemption  afforded by
Section 4(2) of the Act.

During  January  through  September1999,  MediaX  issued 30,000 shares of common
stock  valued at $106,875  (based on the market  value on the date of grant) and
830,000  shares of restricted  common stock valued at  $1,689,807  (based on the
market  value  on the date of  grant)  to  consultants  for  services  rendered.
Exemption  from  registration  under  the  Securities  Act of 1933,  as  amended
("Act"),  is  claimed  for the sale of all the  securities  set  forth  above in
reliance upon the exemption afforded by Section 4(2) of the Act.

During January  through April 1999,  MediaX issued 20,000 shares of common stock
and 340,000  shares of restricted  stock for $20,000 and $421,500,  respectively
(plus 16,000 shares issued for finders fees).  Exemption from registration under
the Securities Act of 1933, as amended  ("Act"),  is claimed for the sale of all
the  securities  set forth  above in  reliance  upon the  exemption  afforded by
Section 4(2) of the Act.

                                       5

<PAGE>

During March 1999,  MediaX  issued  200,000  shares of  restricted  common stock
valued at  $393,125  (based on the market  value on the date of grant to a third
party for  prepaid  advertising  time.  Exemption  from  registration  under the
Securities Act of 1933, as amended  ("Act"),  is claimed for the sale of all the
securities  set forth above in reliance upon the  exemption  afforded by Section
4(2) of the Act.

                  Convertible Securities
Included in convertible subordinated debentures payable at December 31, 1998 was
$1,454,092 of various notes payable.  The notes,  bearing  interest at the prime
rate  (prime  rate at  December  31,  1999 was 8.25%) plus 2% to 4%, were due on
various dates through  September 1999. In 1999,  MediaX offered the note holders
an  inducement  to  convert  the notes  with a  current  balance  of  $1,566,192
(including  accrued interest in 1999 of $112,100) into common stock at $1.69 per
share  (estimated fair market value on the date of conversion was  approximately
$2.71 per  share) or  921,925  shares.  Exemption  from  registration  under the
Securities Act of 1933, as amended  ("Act"),  is claimed for the sale of all the
securities  set forth above in reliance upon the  exemption  afforded by Section
4(2) of the Act.

In 1999, MediaX entered into a securities  purchase  agreement with an investor,
whereby MediaX sold to the investor a $2,200,000  principal  amount  convertible
note for $2,024,000 (net of finders fee of $176,000). The note bears interest at
5% and is due on August  24,  2002.  The  holder  of the note has the  option to
require  interest  payments  in cash  or  stock.  The  note  is  convertible  at
beneficial rates which vary based on recent stock prices and date of conversion,
as defined In addition,  MediaX gave the investor a warrant to purchase  220,000
shares of its  common  stock at $3.40 per share  expiring  in August  23,  2004.
Exemption  from  registration  under  the  Securities  Act of 1933,  as  amended
("Act"),  is  claimed  for the sale of all the  securities  set  forth  above in
reliance upon the exemption afforded by Section 4(2) of the Act.


                  Year Ended December 31, 1998

                  Stock sales
During  April to December  1998,  MediaX sold  468,313  shares to an  accredited
unrelated investor for proceeds of $500,000. In addition, the investor exercised
200,000  warrants during December of 1998,  resulting in the issuance of 200,000
shares for proceeds of $20,000. Exemption from registration under the Securities
Act of 1933, as amended  ("Act"),  is claimed for the sale of all the securities
set forth above in reliance upon the  exemption  afforded by Section 4(2) of the
Act.

Another  accredited  unrelated investor purchased 104,000 shares during February
1998 for proceeds of $200,000.  Exemption from registration under the Securities
Act of 1933, as amended  ("Act"),  is claimed for the sale of all the securities
set forth above in reliance upon the  exemption  afforded by Section 4(2) of the
Act.

During  December  1998, the Company issued 190,000 shares of common stock valued
at $185,625  (based on the market value on the date of grant) to consultants for
services rendered. Exemption from registration under the Securities Act of 1933,
as amended  ("Act"),  is claimed  for the sale of all the  securities  set forth
above in reliance upon the exemption afforded by Section 4(2) of the Act.


                  Convertible Securities
 On March 1, 1998,  MediaX replaced  certain  outstanding  debentures with a new
convertible  debenture for $850,000  which pays interest at the same rate as the
replaced  debentures  and is due on September 1, 1999.  The principal sum of the
new  debenture and any accrued  interest may be converted  into common shares at

                                       6

<PAGE>

any time prior to the due date at $1.75 per share.  Accrued interest at December
31,  1998 was  $73,754.  On March 1, 1999 the  investor  converted  $350,000  of
principal into 200,000 shares of common stock. Exemption from registration under
the Securities Act of 1933, as amended  ("Act"),  is claimed for the sale of all
the  securities  set forth  above in  reliance  upon the  exemption  afforded by
Section 4(2) of the Act.

                  Year Ended Decmeber 31, 1997

                  Stock sales
On April 20, 1997,  MediaX  engaged a  consultant  to provide  financial  public
relations  services  for  MediaX  for a term of  twelve  months.  As part of the
compensation  for such services,  MediaX issued to the consultant 7500 shares of
MediaX's common stock.  Exemption from registration  under the Securities Act of
1933,  as amended  ("Act"),  is claimed for the sale of all the  securities  set
forth above in reliance upon the exemption afforded by Section 4(2) of the Act.

On August 22, 1997,  MediaX sold 20,000  shares of common stock to an accredited
investor for $148,000.  Exemption from registration  under the Securities Act of
1933,  as amended  ("Act"),  is claimed for the sale of all the  securities  set
forth above in reliance upon the exemption afforded by Section 4(2) of the Act.

On August 29, 1997,  MediaX sold 5,000  shares of common stock to an  accredited
investor for $52,000.  Exemption from  registration  under the Securities Act of
1933,  as amended  ("Act"),  is claimed for the sale of all the  securities  set
forth above in reliance upon the exemption afforded by Section 4(2) of the Act.

On September 2, 1997,  MediaX sold 5,000 shares of common stock to an accredited
investor for $52,000.  Exemption from  registration  under the Securities Act of
1933,  as amended  ("Act"),  is claimed for the sale of all the  securities  set
forth above in reliance upon the exemption afforded by Section 4(2) of the Act.

On September 7, 1997, MediaX sold 10,000 shares of common stock to an accredited
investor for $104,000.  Exemption from registration  under the Securities Act of
1933,  as amended  ("Act"),  is claimed for the sale of all the  securities  set
forth above in reliance upon the exemption afforded by Section 4(2) of the Act.

On September 9, 1997, MediaX sold 10,000 shares of common stock to an accredited
investor for $104,000.  Exemption from registration  under the Securities Act of
1933,  as amended  ("Act"),  is claimed for the sale of all the  securities  set
forth above in reliance upon the exemption afforded by Section 4(2) of the Act.

On September 10, 1997, MediaX sold 5,000 shares of common stock to an accredited
investor for $52,000.  Exemption from  registration  under the Securities Act of
1933,  as amended  ("Act"),  is claimed for the sale of all the  securities  set
forth above in reliance upon the exemption afforded by Section 4(2) of the Act.

On  September  25,  1997,  MediaX  sold  19,231  shares  of  common  stock to an
accredited  investor  for  $200,000.   Exemption  from  registration  under  the
Securities Act of 1933, as amended  ("Act"),  is claimed for the sale of all the
securities  set forth above in reliance upon the  exemption  afforded by Section
4(2) of the Act.

On November 4, 1997, MediaX issued 40,000 shares of common stock to an unrelated
third party in exchange  for  $600,000 of prepaid  advertising.  Exemption  from
registration  under the Securities Act of 1933, as amended  ("Act"),  is claimed
for the  sale of all the  securities  set  forth  above  in  reliance  upon  the
exemption afforded by Section 4(2) of the Act.

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<PAGE>

                  Convertible Securities
On March 25, 1997,  the Company sold to an accredited  investor for $450,000,  a
convertible debenture which pays interest at 2% per annum over the prime rate of
the Bank of America,  calculated  monthly on the  principal  portion of $350,000
from February 11, 1997 and on the  principal  portion of $100,000 from March 25,
1997.  The debenture is due on February 28, 1998,  but the principal sum and any
accrued interest may be converted into shares of common stock at any time before
the due date at a price of $1.00 per share.  Exemption from  registration  under
the Securities Act of 1933, as amended  ("Act"),  is claimed for the sale of all
the  securities  set forth  above in  reliance  upon the  exemption  afforded by
Section 4(2) of the Act.

On August 1, 1997, MediaX sold a convertible debenture to an accredited investor
for  $320,000,  which pays interest on the principal of $320,000 at 2% per annum
over the prime rate of the Bank of America,  calculated  monthly  from August 1,
1997.  The  debenture is due on July 31,  1998,  but the  principal  sum and any
accrued interest may be converted into shares of common stock at any time before
the due date at a price of $7.00 per share.  Exemption from  registration  under
the Securities Act of 1933, as amended  ("Act"),  is claimed for the sale of all
the  securities  set forth  above in  reliance  upon the  exemption  afforded by
Section 4(2) of the Act.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

         The  following  information  should  be read in  conjunction  with  the
audited  financial  statements of MediaX as of and for the years ended  December
31,  1999 and 1998 and for the period  from March 30,  1995 (date of  inception)
through  December 31, 1999  together  with the notes  thereto.  The analysis set
forth  below  is  provided  pursuant  to  applicable   Securities  and  Exchange
Commission  regulations  and is not intended to serve as a basis for projections
of future events.

FORWARD-LOOKING STATEMENTS

      EXCEPT FOR HISTORICAL  INFORMATION CONTAINED HEREIN, THE MATTERS DISCUSSED
IN THIS FORM 10-KSB ARE  FORWARD-LOOKING  STATEMENTS THAT ARE SUBJECT TO CERTAIN
RISKS AND  UNCERTAINTIES  THAT COULD CAUSE ACTUAL  RESULTS TO DIFFER  MATERIALLY
FROM THOSE SET FORTH IN SUCH FORWARD LOOKING  STATEMENTS.  SUCH  FORWARD-LOOKING
STATEMENTS MAY BE IDENTIFIED BY THE USE OF CERTAIN FORWARD-LOOKING  TERMINOLOGY,
SUCH AS "MAY," "WILL," "EXPECT,"  "ANTICIPATE,"  "INTEND," "ESTIMATE," "BELIEVE"
OR COMPARABLE  TERMINOLOGY THAT INVOLVES RISKS OR  UNCERTAINTIES.  ACTUAL FUTURE
RESULTS  AND  TRENDS MAY  DIFFER  MATERIALLY  FROM  HISTORICAL  AND  ANTICIPATED
RESULTS,  WHICH MAY OCCUR AS A RESULT OF A VARIETY  OF  FACTORS.  SUCH RISKS AND
UNCERTAINTIES INCLUDE,  WITHOUT LIMITATION,  MEDIAX'S LIMITED OPERATING HISTORY,
THE  UNPREDICTABILITY  OF ITS FUTURE REVENUES,  THE  UNPREDICTABLE  AND EVOLVING
NATURE  OF ITS KEY  MARKETS,  THE  INTENSELY  COMPETITIVE  ONLINE  COMMERCE  AND
ENTERTAINMENT  ENVIRONMENTS,  MEDIAX'S  DEPENDENCE ON ITS  STRATEGIC  ALLIANCES,
DEPENDENCE  ON  KEY   PERSONNEL,   DEPENDENCE  ON  THIRD  PARTIES  FOR  INTERNET
OPERATIONS,  DEPENDENCE  ON CONTENT  ACQUISITION,  CREATION AND  LICENSING,  THE
MANAGEMENT OF GROWTH AND MEDIAX'S NEED FOR ADDITIONAL CAPITAL EXCEPT AS REQUIRED
BY LAW. MEDIAX UNDERTAKES NO OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENT,
WHETHER AS A RESULT OF NEW  INFORMATION,  FUTURE  EVENTS OR  OTHERWISE.  READERS
SHOULD CAREFULLY REVIEW THE FACTORS SET FORTH IN OTHER REPORTS OR DOCUMENTS THAT

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<PAGE>

MEDIAX  FILES FROM  TIME-TO-TIME  WITH THE SEC AND MATTERS  GENERALLY  AFFECTING
ONLINE COMMERCE AND ONLINE SALE OF  ENTERTAINMENT-RELATED  PRODUCTS,  INCLUDING,
BUT NOT LIMITED TO, MUSIC RETAILING.

OVERVIEW

         MediaX   designs   and   hosts   entertainment   web   sites   such  as
rodstewartlive.com,  NSYNC.com,  Divinelive.com,  EYCLive.com,  Officeradio.com,
Jbirdrecords.com,  BSBFunclub.com,  videodrone.com  and others.  MediaX provides
artists with a platform to develop  their  presence on the  Internet.  Each site
provides   content  and  products  to  fans  including   artist  news,   concert
information, music and video programming,  ticket giveaways,fan club activities,
live chats,  and live  concerts  that are globally  broadcast  on the  Internet.
MediaX   has   established   strategic   relationships   with   companies   like
Broadcast.com, AOL, Microsoft, RealNetworks, Yahoo! and others for this purpose.

In February 1999, MediaX launched amuZnet.com - an entertainment destination and
e-commerce site offering more than 300,000 entertainment titles on CDs, DVDs and
Videos by major  record  labels and  studios  and over 4,000  independent  music
labels for purchase  on-line.  AmuZnet.com  offers  music news and  information,
digital  downloads,  custom  compilations of CDs,  movies for sale.  MediaX also
sells  advertising  space and sponsorships to companies  interested in promoting
their own goods and services within each entertainment web sites and amuZnet.com
customer base and visitors.

GOING CONCERN

         MediaX has incurred  significant net losses since its inception.  As of
December 31, 1999, MediaX has a deficit accumulated during the development stage
of  $13,333,066.  As it seeks to expand  aggressively,  MediaX believes that its
operating expenses will continue at a certain level as a result of the financial
commitments  related to the  development of new web sites,  marketing  channels,
advertising,   future  marketing   agreements  and  campaigns,   acquisition  of
entertainment  content and improvements to its existing Internet sites and other
capital   expenditures.   The  ability  of  MediaX  to   generate   and  enhance
profitability depends upon its ability to substantially  increase its net sales.
To the extent that  significantly  higher net sales do not result from  MediaX's
selling and marketing  efforts,  MediaX will be materially  adversely  affected.
MediaX  may need to  utilize  its common  stock to fund its  operations  through
fiscal 2000.  As such,  there can be no assurance  that MediaX will realize such
anticipated sales or secure  additional  alternative  financing.  Because of the
above factors,  the accompanying  consolidated  financial  statements contain an
auditor's  report  that is  modified  as to an  uncertainty  regarding  MediaX's
ability to continue as a going concern.


RESULTS OF OPERATIONS

           In view of the rapidly  evolving nature of MediaX's  business and its
limited  operating  history,  period-to-period  comparisons  of its revenues and
operating  results,  including  operating  expenses as a percentage of total net
revenues,  are not  necessarily  meaningful  and  should  not be relied  upon as
indications of future  performance and therefore,  comparative  discussions have
not been included.  Although MediaX has experienced  sequential quarterly growth
in  revenues,  it  does  not  believe  that  its  historical  growth  rates  are
necessarily sustainable or indicative of future growth.

                                       9

<PAGE>

         Year ended  December 31, 1999  Compared to the Year Ended  December 31,
1998 (as restated)

Sales are  composed  of website  design  fees ,  membership  dues,  advertising,
sponsorships, sale of artist specific merchandises, pre-recorded music and other
entertainment-related products, net of returns and include outbound shipping and
handling charges.  To further promote the websites,  MediaX  occasionally offers
free shipping  and/or  increases the discounts it offers to its customers  which
partially  offset the positive effect of website design fees , membership  dues,
advertising  and  sponsorship  revenue,  which has a higher  margin than product
sales.

Cost of sales  consists  primarily  of cost of  merchandise  sold to  customers,
including product fulfillment and outbound shipping and handling charges. MediaX
over time intends to expand its  operations  by promoting  new or  complementary
products or sales  formats and by expanding the breadth and depth of its product
or service offerings and may otherwise alter its pricing structure and policies.
Included  in  cost  of  sales  is  payroll  and  related  expenses  for  website
development  of  $296,417  and  $68,108  for the  years  ended  1999  and  1998,
respectively.  Additionally, included in the prior year cost of sales is cost of
merchandise of its discontinued CD-rom products of $65,696.

Operating expenses consist primarily of payroll and related expenses for website
development,   marketing;   Internet  content   acquisition  and  operations  of
underlying technology infrastructure; and general and administrative payroll and
other corporate expenses.

Total other income  (expense)  consists of interest income cash  equivalents and
notes  receivable,  and interest  expense  including  non-cash  charge  interest
expense associated with convertible debts and short-term borrowings.

Net Loss. MediaX's net loss was $7,244,707 for the year ended December 31, 1999,
compared to $3,352,541 for the comparable period last year.

         LIQUIDITY AND CAPITAL RESOURCES

                  At December 31, 1999,  MediaX had positive  working capital of
$1,087,082,  as compared to negative  working  capital of $1,773,728 at December
31, 1998.  The increase in working  capital is attributed  to the  conversion of
debentures  and  exercise  of  options  and  warrants , an  increase  to prepaid
advertising  and net proceeds  received from  convertible  debt issued in August
1999 and sales of stock to investors  throughout  the year  partially  offset by
payments of general operating expenses.

                 Net cash used in operating  activities  of  $2,457,961  for the
year  ended  December  31,  1999  was  primarily  attributed  to a net  loss  of
$7,244,707,   offset  by  $349,804   non-cash   charge  for   depreciation   and
amortization,  bad debt and development costs written off; a $4,060,217 non-cash
charge for  stock-based  compensation  for consulting  services and common stock
issued to employees and non-employees,  beneficial  conversion of debentures and
amortization  of debt  issuance  costs;  and  $150,953  for accrued  interest on
convertible  debt and  change  in other  operating  assets  and  liabilities  of
$225,772. Net cash used in operating activities of $1,811,470 for the year ended
December 31, 1998 was primarily  attributable  to a net loss of  $3,352,541,  of
which $358,003 for depreciation  and amortization and development  costs written
off; $590,475 was a non-cash charge for stock-based  compensation for consulting
services and common stock issued to employees  and  non-employees  and change in
other operating assets and liabilities of $592,593.

                  Net cash used in investing activities was $60,023 for the year
ended December 31, 1999,  consisted of purchases of fixed assets.  Net cash used
in  investing  activities  was  $218,486  for the year ended  December  31, 1998
consisted of acquisition of license  agreement and trademark,  deferred software
development costs and purchases of fixed assets.

                                       10

<PAGE>

                  Net cash provided by financing  activities  was $3,258,316 for
the year ended December 31, 1999,  and consisted  primarily of net proceeds from
sale of stock to  investors,  subscription  advances,  exercise  of options  and
warrants and issuance of convertible debentures.  Net cash provided by financing
was $1,657,258 for the year ended December 31, 1998, and consisted  primarily of
net proceeds from sale of stock to investors, subscription advances, exercise of
options and warrants and issuance of convertible  debentures partially offset by
payments made on capital lease and retirement of notes payable.

                  MediaX's success and ongoing financial viability is contingent
upon the success and expansion of its network of sites, the increasing number of
visitors to this network,  the revenues  generated  through its design services,
e-commerce  model,  advertising  and  sponsorships,  the alliance  with Echostar
interactive satellite distribution and the generation of related cash flows.

                  MediaX   evaluates  its  liquidity  and  capital  needs  on  a
continuous  basis  and  based  on  MediaX's   requirements  and  capital  market
conditions may, from time to time, raise working capital through additional debt
or equity financing. There is no assurance that such financing will be available
in the future to meet additional  capital needs of MediaX, or as to the terms or
conditions  of any  such  financing  that  is  available.  Should  there  be any
significant delays in the release of new products,  or lack of acceptance in the
marketplace  for such products if released,  or MediaX's  working  capital needs
otherwise exceed its resources,  the adverse  consequences  would be severe. The
generation  of MediaX's  current  growth and the  expansion of MediaX's  current
business  involve  significant  financial risk and require  significant  capital
investment.

                  Because  MediaX is in the  development  stage,  thus  incurred
cumulative  losses from inception  through  December 31, 1999 of $13,333,066 and
lack of profitable operational history in internet services,  MediaX's auditors,
in their report on the  financial  statements of MediaX as of December 31, 1999,
expressed  doubt about MediaX's  ability to continue as a going  concern,  which
contemplates,  among other things, the realization of assets and satisfaction of
liabilities  in  the  normal  course  of  business.  MediaX  intends  to  obtain
additional debt and equity financing for marketing,  development and the funding
of  operations  as well as the  generating  of  income  from  product  sales and
services.  Management  believes these funding sources will be sufficient to fund
its  capital   expenditures,   working  capital   requirements  and  other  cash
requirements  through  December 31, 2000.  There is no assurance  MediaX will be
able to obtain sufficient  additional funds when needed, or that, such funds, if
available, will be obtainable on terms satisfactory to MediaX.


ITEM 7.  FINANCIAL STATEMENTS

                  Please see pages F-1 through F-27.

ITEM 8.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

 On January 11, 2000,  MediaX filed on Form 8-K,  reporting a change of MediaX's
accountants. Davis & CO., CPA's P.C was previously the principal accountants for
MediaX.  On January 4, 2000,  Davis & CO., CPA's P.C was disengaged by MediaX as
principal accountants and Corbin & Wertz was engaged as principal accountants to
audit the accounts of MediaX for the year ending December 31, 1999. The decision
to change accountants was approved by MediaX's Board of Directors.

                                       11

<PAGE>

         During the fiscal  years ended  December  31, 1998 and 1997 and through
the date of this report, there were no disagreements with Davis & CO., CPA's P.C
on any  matter  of  accounting  principles  or  practices,  financial  statement
disclosure or audit scope or procedure  which  disagreement,  if not resolved to
the  satisfaction  of Davis & CO.,  CPA's P.C , would have  caused  them to make
reference to the matter of such  disagreement  in connection  with the Form 8-K,
dated  January 11,  2000.  The  accountant's  report for the fiscal  years ended
December  31,  1998 and 1997 was  modified  as to  uncertainty  that MediaX will
continue  as  a  going  concern.  MediaX  has  suffered  recurring  losses  from
operations,  and has net working capital and stockholders'  equity deficiencies.
These matters raise  substantial  doubt about MediaX's  ability to continue as a
going concern.

         MediaX  had  requested  that Davis & CO.,  CPA's P.C  furnish it with a
letter  addressed to the Securities and Exchange  Commission  stating whether it
agrees with the above statements. A copy of that letter is filed as Exhibit 1 to
the Form 8-K, dated January 11, 2000, incorporated herein by reference.

                                       12

<PAGE>

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT

                  The directors and  executive  officers of MediaX,  their ages,
positions held in MediaX, and duration as such, are as follows:

                  NAME                      AGE     POSITION HELD AND TENURE

                  Nancy Poertner            44       President, Secretary and
                                                     Director since February 23,
                                                     1996
                  Rainer Poertner           52       Director since February 23,
                                                     1996
                  Matthew MacLaurin         33       Director, Executive V.P.
                                                     since June 27, 1996
                  Jacqueline Cabellon       38       Controller since November
                                                     16, 1998

         BUSINESS EXPERIENCE

                  The following is a brief account of the education and business
experience during at least the past five years of MediaX's directors,  executive
officers, and key employees,  indicating the principal occupation and employment
during that period,  and the name and principal  business of the organization in
which such occupation and employment were carried out.

                  NANCY  POERTNER,   PRESIDENT,   SECRETARY  AND  DIRECTOR.  Ms.
Poertner has been involved in the  entertainment  industry since 1979. From 1981
to December 1995, she was Vice President for a major artist  management  company
based in Los  Angeles,  where  she was  responsible  for all  aspects  of artist
management domestic and international  touring,  marketing,  promotion and album
recordings.  In addition,  from 1991 to December 1995, she led the international
department of a major record label distributed  through MCA,  resulting in sales
generating  five  international  gold records,  five top fifteen singles and two
number one positions.  Several of the  entertainers  she has worked with include
Matthew  Broderick,  Rod Stewart,  Toni  Braxton,  Suzanne  Hoffs  (Bangles) and
recording  artist  Morrissey.  As a result  of her  years in the  business,  Ms.
Poertner  has  extensive  personal  relationships  throughout  the  domestic and
international film and recording industries. Ms. Poertner was educated overseas,
graduated  with a Bachelor of Arts in Education  and taught in  Afghanistan  and
Turkey through the Peace Corps.

                  RAINER  POERTNER,  DIRECTOR.  Mr.  Poertner  has  served  as a
Director of MediaX since February 23, 1996. Mr. Poertner has a twelve-year track
record of bringing new and innovative  computer hardware and software technology
to the international  market place. He has served as President and a Director of
Syncronys  Softcorp since May 8, 1995, and as Chief Executive Officer since July
1, 1995.  He left the company to fully  concentrate  on MediaX in July 1998.  He
co-founded Seamless Software Corporation ("Seamless") and served as Director and
as  President of Seamless  from its  inception in May 1993 until its merger with
Syncronys  Softcorp on May 8, 1995.  After having held several  positions in the
European and U.S.  entertainment  industries,  he founded Hybrid Arts,  Inc., in
1986  by  arranging  $3  million  of  venture  financing  for  ADAP - the  first
Direct-to-Disk  Digital Recording  System.  After arranging Hybrid Art's sale in
1991, Mr. Poertner became a consultant for Hydra Systems,  Inc., which developed
and marketed ANDOR - a fully  functional  Macintosh CPU on a PC peripheral card.
Hydra Systems  subsequently  sold the  technology  and the inherent  rights to a
company  in  Seoul,  South  Korea in 1992.  Mr.  Poertner  received  degrees  in
economics  from the  University  of Frankfurt  in 1975 and the Klinger  Business
School in 1973.

                                       13

<PAGE>

                  Rainer Poertner and Nancy Poertner are husband and wife.

                  MATTHEW MACLAURIN,  EXECUTIVE VICE PRESIDENT.  Mr. MacLaurin's
experience stretches back to the early days of personal computers when, 17 years
ago, he developed games for the Commodore Pet 2001.  Later, Mr. MacLaurin joined
Sapiens Software to create tools for artificial intelligence  engineering on the
IBM  PC  XT  platform.   He  was  the  key  engineer  for  the  development  and
implementation of Common Lisp, a computer language for the 640K DOS platform. At
Apple Computer he secured  funding for,  designed and led the development of the
patented GATE system, a leading-edge  artificial intelligence testing system. In
Apples  Advanced  Product  Group,  he led  the  development  of a  revolutionary
pen-based computer called Bauhaus,  which incorporated  handwriting  recognition
and an advanced  artificial  intelligence  memory system. In 1994, Mr. MacLaurin
joined forces with Gaben Chancellor to found the original MediaX, Inc.

                 JACQUELINE  CABELLON,  CPA. Ms. Cabellon has been controller of
MediaX since  November  16, 1998.  Prior to that,  Ms.  Cabellon  practiced as a
certified public accountant  assisting  companies with consulting and accounting
projects since  January,  1993.  Prior to that time, she was an accountant  with
local accounting firms since December, 1986.

         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

                  No persons who were either a Director,  Officer or  beneficial
owner of more  than 10% of  MediaX's  Common  Stock,  failed to file on a timely
basis  reports  required by Section  16(a) of the  Exchange  Act during the most
recent fiscal year.

ITEM 10. EXECUTIVE COMPENSATION

                  The  following  table sets  forth  information  regarding  the
executive  compensation for MediaX's  President and Executive V.P. for the years
ended  December 31,  1999,  1998 and 1997 from MediaX and its  subsidiaries.  No
other executive officer received compensation in excess of $100,000 during these
periods. Directors serve with out compensation.

<TABLE>
<CAPTION>

  Summary Compensation Table

Name and Principal Position                         Fiscal   Salary                  Other Annual                Options
                                                  Year        ($)                  Compensation  ($)             Granted
---------------------------------------- ------------------- ------------------ ------------------------- -----------------------
<S>                                      <C>                 <C>                <C>                       <C>

         Nancy Poertner                             1999     185,000                  10,157 (1)                     0
         President,                                 1998     185,000                   3,500                        N/A
         Secretary, Director                        1997     158,458                   6,720                        N/A
---------------------------------------- ------------------- ------------------ ------------------------- -----------------------
         Matthew MacLaurin                          1999     143,333                  51,370 (2)                  500,000
         Executive                                  1998     125,000                    N/A                        50,000
         VP, Director                               1997     114,000                    N/A                         N/A
---------------------------------------- ------------------- ------------------ ------------------------- -----------------------
         Rainer Poertner                            1999       N/A                   120,000 (3)                  500,000
         Chairman   Of  the   Board  of             1998       N/A                    50,000                       50,000
         Directors                                  1997       N/A                      N/A                         N/A
---------------------------------------- ------------------- ------------------ ------------------------- -----------------------
</TABLE>

                                       14

<PAGE>

(1)      Represents automobile allowance and a 1999 bonus of $1,657.

(2)      Represents a 1999 bonus of $1,370 and a signing bonus of $50,000.

(3)      Represents  consulting  payments  made  under a  consulting  agreement.
         Effective  January,  2000, the Chairman accepted a management  position
         with MediaX.

         OPTION GRANTS IN LAST FISCAL YEAR

         The following  table sets forth  information  with respect to grants of
options  ("Options") to purchase Common Stock under the Stock Option Plan to the
Named Executive Officers during the fiscal year ended December 31, 1999.

<TABLE>
<CAPTION>

                                                                                                 Potential Realizable
                                 Number of      % of Total                                         Value at Assumed
                                Securities        Options                                        Annual Rate of Stock
                                Underlying      Granted to       Exercise                          Appreciation for
                                  Options        Employees         Price       Expiration           Option Term(2)
           Name                 Granted(#)    in Fiscal Year     ($/sh)(1)        Date             5%             10%
           ----                 ----------    --------------     ---------     ----------    --------------- --------
<S> <C>                         <C>           <C>                <C>           <C>           <C>

    Matthew MacLaurin          500,000              46.01           1.12            12/31/08    588,000        616,000

    Rainer Poertner            500,000              46.01           1.12            12/31/08    588,000        616,000

</TABLE>

(1)      The exercise  price was market value of the Common Stock on the date of
         grant.

(2)      These amounts  represent  certain assumed rates of  appreciation  only.
         Actual gains,  if any, on option  exercises  are  dependent  upon other
         factors,  including  the future  performance  of the  Common  Stock and
         overall stock market conditions.

         OPTION EXERCISES AND FISCAL YEAR END VALUE

         The  following  table sets forth  with  respect to the Named  Executive
Officers information with respect to options exercised,  unexercised options and
year-end  option  values with  respect to options to  purchase  shares of Common
Stock.

<TABLE>
<CAPTION>

Aggregated Option Exercises During Fiscal 1999 and Fiscal Year-End Option Values

                                                               Number of Securities
                                                                    Underlying                   Value of Unexercised
                              Shares           Value          Unexercised Options at             In the Money Options
                            Acquired on      Realized            December 31, 1999             at December 31, 1999 (1)
                                                          -----------------------------     ---------------------------
        Name                Exercise(#)         ($)         Exercisable   Unexercisable       Exercisable   Unexercisable
        ----               ------------      --------     -------------- --------------     -------------- --------------
  <S>                      <C>               <C>          <C>            <C>                <C>

  Matthew MacLaurin                --              --     16,666         533,334                9,707        240,000
  Rainer Poertner                  --              --     16,666         533,334                9,707        240,000

</TABLE>

                                       15

<PAGE>

(1)      Represents the  difference  between the last reported sale price of the
         Common Stock on December 31, 1999 and the exercise  price of the option
         multiplied by the applicable number of shares.

         EMPLOYMENT AGREEMENTS

MediaX entered into an employment  agreement  with its President.  The agreement
which expires in December  2001,  provides for an annual base salary of $185,000
and increases to $215,000.  The aggregate  minimum annual  commitment for future
payments at December 31, 1999 was approximately $400,000.  Amounts paid pursuant
to this  agreement  totaled  $185,000 for the years ended  December 31, 1999 and
1998, respectively.

MediaX entered into an employment  agreement with its executive vice  president.
The agreement, which expires in June 2001, provides for an annual base salary of
$185,000 and increases to $215,000.  The aggregate minimum annual commitment for
future payments at December 31, 1999 was  approximately  $307,500.  Amounts paid
pursuant to this  agreement  totaled  $143,000  and $125,000 for the years ended
December 31, 1999 and 1998, respectively.

Both of these  agreements  also  provide  for a bonus at the end of each  fiscal
quarter as  determined  by MediaX's  Board of  Directors.  No bonuses  have been
declared  or  paid  since   inception.   Both  the   President   and   Executive
Vice-President may voluntarily terminate their employment at any time.

Consulting Fees to Officer/Director

Beginning August 1, 1998, MediaX's chairman provides services to MediaX pursuant
to a month  to month  consulting  agreement  requiring  $10,000  for each  month
worked.   During  1999  and  1998,   MediaX   expensed   $120,000  and  $50,000,
respectively,  related to this  agreement.  As of December 31, 1999,  $40,000 is
accrued and included in accounts payable. In January 2000, the Chairman accepted
a full-time management position with MediaX.

         STOCK OPTION PLAN

                  During  April  1996,  the Board of  Directors  adopted a Stock
Option Plan (the "Plan"),  and on July 3, 1996, the  Corporation's  shareholders
approved the Plan. The Plan authorized the issuance of options to purchase up to
100,000 shares of MediaX's Common Stock.  During  December 1998,  MediaX amended
the Plan to increase the available  amount of shares to purchase  under the plan
to 500,000  shares of MediaX's  common stock.  All options  granted must have an
exercise price no less than the stock's fair market value on the date of grant.

                  The Plan allows the Board to grant stock  options from time to
time to employees,  officers, directors and consultants of MediaX. The Board has
the power to determine at the time that the option is granted whether the option
will be an Incentive  Stock Option (an option which  qualifies under Section 422
of the  Internal  Revenue  Code of 1986) or an option  which is not an Incentive
Stock Option. Vesting provisions are determined by the Board at the time options
are  granted.  The  option  price for any  option  will be no less than the fair
market value of the Common Stock on the date the option is granted.

                  Since all options granted under the Plan must have an exercise
price no less than the fair market  value on the date of grant,  MediaX will not
record any expense upon the grant of options,  regardless of whether or not they

                                       16

<PAGE>

are incentive  stock  options.  Generally,  there will be no federal  income tax
consequences  to MediaX in connection with Incentive Stock Options granted under
the Plan.  With regard to options that are not Incentive  Stock Options,  MediaX
will  ordinarily be entitled to deductions for income tax purposes of the amount
that option holders report as ordinary income upon the exercise of such options,
in the year such income is reported.

                  Options  granted  under the Plan to  employees,  officers  and
directors was 193,000  shares at an exercise  price of $0.98 for 1998 and 93,000
shares at an exercise price of $1.68 for 1999.

ITEM 11.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                  The following table sets forth, as of March 31, 2000 the stock
ownership  of each  person  known by MediaX to be the  beneficial  owner of five
percent  or  more  of  MediaX's   Common   Stock,   each  Officer  and  Director
individually,  and all Officers and  Directors as a group.  Each person has sole
voting and investment power over the shares except as noted.

<TABLE>
<CAPTION>

                                                                            Amount and Nature
               Name and Address                                          of Beneficial Interest                      Percent
                                                                             of Common Stock                        of Class
----------------------------------------------------------------------- ------------------------------------- ---------------------
<S>      <C>                                                            <C>                                   <C>


         Nancy Poertner                                                          1,359,375 (1)(2)                         14.41
         8522 National Blvd., Suite  110
         Culver City, CA 90232
----------------------------------------------------------------------- ------------------------------------- ---------------------
         Rainer Poertner                                                         1,359,375 (1)(2)                         14.41
         8522 National Bvd, Suite 110
         Culver City, CA 90232
----------------------------------------------------------------------- ------------------------------------- ---------------------
         Assisi Limited Partnership                                              1,359,375 (1)(2)                         14.41
         10866 Wilshire Blvd., 15th Floor
         Los Angeles, CA  90024
----------------------------------------------------------------------- ------------------------------------- ---------------------
         Matthew MacLaurin                                                          645,625(3)                            6.84
         8522 National Blvd, Suite 110
         Culver City, CA 90232
----------------------------------------------------------------------- ------------------------------------- ---------------------
         All Directors and Officers                                               2,005,000 (1)(2)(3)                     21.25
           as a group (3 persons)
----------------------------------------------------------------------- ------------------------------------- ---------------------
         Liviakis Financial Communications, Inc.                                 888,800 (4)                              9.42
         495 Miller Ave, Third Floor
         Mill Valley, CA 94941
----------------------------------------------------------------------- ------------------------------------- ---------------------
         Apple Investors LLC                                                      658,815 (5)                              7.00
         1 World Trade Center, Suite 4563
         New York, NY 10048
----------------------------------------------------------------------- ------------------------------------- ---------------------
</TABLE>

                                       17

<PAGE>

(1)      Assisi Limited  Partnership  is a Nevada  Limited  Partnership of which
         Nancy Poertner is a General Partner and owns a 100% interest. Amount of
         common  shares  owned  809,375.  Rainer  Poertner may be deemed to be a
         beneficial  owner of the shares owned by Assisi Limited  Partnership by
         virtue of his spousal  relationship  to Nancy  Poertner.  Mr.  Poertner
         disclaims any beneficial interest in such shares.

(2)      Amount beneficially owned by Mr. Poertner as reported and filed on Form
         4s dated May 21, 1999 and  February  2000 - Options to purchase  common
         shares total 550,000 were granted to Mr. Rainer  Poertner with exercise
         prices of $.98 and $1.12.

(3)      Amount  beneficially  owned by Mr.  MacLaurin  as reported and filed on
         Form 4s dated  July 27,  1999 and  February  2000 - Option to  purchase
         common shares total 550,000 were granted to Mr. MacLaurin with exercise
         prices of $.98 and $1.12. Amount of common shares owned 95,625.

(4)      Amount beneficially owned by Liviakis Financial Communications, Inc. as
         reported and filed on Form Schedule 13G dated December 31, 1999.

(5)      Amount  beneficially owned by Apple Investors LLC as reported and filed
         on Form Schedule 13G dated August 24, 1999.


                 MediaX knows of no arrangement or understanding,  the operation
of which may at a subsequent date result in a change of control of MediaX.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         TRANSACTIONS INVOLVING MEDIAX

                  On December 6, 1995,  Zeitgeist,  Inc.  loaned Nancy Poertner,
MediaX's President, $50,000 pursuant to an unsecured note bearing interest at 4%
and with a due date of January 1, 2000.  On February  25,  1996,  an  additional
$50,000 was loaned to Ms.  Poertner  on the same  terms.  As of the date of this
report, a new due date has yet to be determined. The total amount owed to MediaX
under these notes is $115,830 at December 31, 1999.

                                       18

<PAGE>

                                     PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

         (a)      3. EXHIBITS.

<TABLE>
<CAPTION>

         #                                    DESCRIPTION                                             LOCATION
         ------------ ----------------------------------------------------------- -------------------------------------------------
<S>     <C>           <C>                                                         <C>

         .1           Certificate of Incorporation                                Incorporated  by reference to Exhibit 3.1 to the
                                                                                  Company's  Registration  Statement  on Form S-18
                                                                                  (No. 33-28258)

         .1(a)        Articles of  Amendment  to the  Articles of  Incorporation  Incorporated  by reference to Exhibit  3.1(a) to
                      dated   February  23,   1996,   for  the  name  change  to  the  Company's  Form  10-KSB  for the year ended
                      Zeitgeist  Werks, Inc.                                      December 31, 1995

         .1(b)        Articles of  Amendment  to the  Articles of  Incorporation  Incorporated by reference  to  Exhibit  3.1(b)  to
                      dated August  15,  1996,  for the  name  change  to  MediaX the Company's  Form  10-KSB  for the  year  ended
                      Corporation                                                 December 31, 1996

         .1(c)        Certificate of Amendment Reverse Split                      Incorporated  by reference to Exhibit  3.1(c) to
                                                                                  the Company's Schedule 14C

         .2           Bylaws                                                      Incorporated  by reference to Exhibit 3.2 to the
                                                                                  Company's  Registration  Statement  of Form S-18
                                                                                  (No. 33-28258)

         0.1          Disengagement  Agreement  dated  February 20,  1997,  with  Incorporated  by  reference  to Exhibit  10.1 to
                      Gaben   Chancellor                                          the  Company's  Form  10-KSB  for the year ended
                                                                                  December 31, 1996

         0.2          Employment  Agreement  dated  January  1, 1996 with  Nancy  Incorporated  by  reference  to Exhibit  10.2 to
                      Poertner                                                    the  Company's  Form  10-KSB  for the year ended
                                                                                  December 31, 1996.

         0.3          Employment  Agreement  dated  June 26,  1996 with  Matthew  Incorporated  by  reference  to Exhibit  10.3 to
                      MacLaurin                                                   the  Company's  Form  10-KSB  for the year ended
                                                                                  December 31, 1996.

         0.4          Consulting Agreement with Ted Ralston                       Incorporated  by  reference  to Exhibit  10.4 to
                                                                                  the  Company's  Form  10-KSB  for the year ended
                                                                                  December 31, 1998

         0.5          Consulting Agreement with The Globus Group, Inc             Incorporated  by  reference  to Exhibit  10.5 to
                                                                                  the  Company's  Form  10-KSB  for the year ended
                                                                                  December 31, 1998.

         0.6          Consulting    Agreement    with    Winchester   Investment  Incorporated  by  reference  to Exhibit  10.6 to
                      Securities, Inc.                                            the  Company's  Form  10-KSB  for the year ended
                                                                                  December 31, 1998.

         0.7          Consulting Agreement with Arnold Stiefel                    Incorporated  by  reference  to Exhibit  10.7 to
                                                                                  the  Company's  Form  10-KSB  for the year ended
                                                                                  December 31, 1998.

         0.8          Consulting Agreement with Anne Challis                      Incorporated  by  reference  to Exhibit  10.8 to
                                                                                  the  Company's  Form  10-KSB  for the year ended
                                                                                  December 31, 1998.

         0.9          Consulting     Agreement    with    Liviakis     Financial  Incorporated  by reference  to Exhibit  10.9 to
                      Communications, Inc.                                        the  Company's  Form  10-KSB  for the year ended
                                                                                  December 31, 1998.
</TABLE>

                                       19

<PAGE>

<TABLE>
<CAPTION>

         #                                    DESCRIPTION                                             LOCATION
         ------------ ----------------------------------------------------------- -------------------------------------------------
<S>     <C>           <C>                                                         <C>

         0.10         Consulting Agreement with Richard O. Weed                   Incorporated  by  reference  to Exhibit  10.A to
                                                                                  the  Company's  registration  statement  on Form
                                                                                  S-8  (No. 33-28258)

         0.11         Consulting Agreement with Steven H. Dong                    Incorporated  by  reference  to Exhibit  10.B to
                                                                                  the  Company's  registration  statement  on Form
                                                                                  S-8  (No. 33-28258)

         0.12         1996 Stock Option Plan and Amendment                        Incorporated  by  reference  to Exhibit  10.C to
                                                                                  the  Company's  registration  statement  on Form
                                                                                  S-8  (No. 33-28258)

         0.13         Consulting Agreement with CSK Securities Research           Incorporated by reference to Exhibit 10.13  to
                                                                                  the Company's Form 10-KSB for the year ended
                                                                                  December 31, 1998.

         0.14         Consulting Agreement with Robert J. Adsit                   Incorporated by reference to Exhibit 10.14 to
                                                                                  the Company's Form 10-KSB for the year ended
                                                                                  December 31, 1998.

         0.15         Consulting Agreement with John H. Shaw                      Incorporated by reference to Exhibit 10.15 to
                                                                                  the Company's Form 10-KSB for the year ended
                                                                                  December 31, 1998.

         0.16         Consulting Agreement with Retail OEM International Inc.     Incorporated by reference to Exhibit 10.16 to
                                                                                  the Company's Form 10-KSB for the year ended
                                                                                  December 31, 1998.

         0.17         Consulting Agreement with SME Financial Communications      Incorporated by reference to Exhibit 10.17 to
                                                                                  the Company's Form 10-KSB for the year ended
                                                                                  December 31, 1998.

         0.18         Consulting Agreement with Business News Network Inc.        Incorporated by reference to Exhibit 10.18 to
                                                                                  the Company's Form 10-KSB for the year ended
                                                                                  December 31, 1998.

         0.19         Consulting Agreement with Willow Run                        Incorporated by reference to Exhibit 10.19 to
                                                                                  the Company's Form 10-KSB for the year ended
                                                                                  December 31, 1998.

         0.20         Consulting Agreement with Tim Werry                         Incorporated by reference to Exhibit 10.20 to
                                                                                  the Company's Form 10-KSB for the year ended
                                                                                  December 31, 1998.

         0.21         Agreement with Business News Network Inc.                   Incorporated  by reference  to Exhibit  10.21 to
                                                                                  the  Company's  Form  10-KSB  for the year ended
                                                                                  December 31, 1998.

         0.22         Agreement with Apple Investors LLC                          Incorporated  by reference  to Exhibit  10.22 to
                                                                                  the  Company's  Registration  Statement  on Form
                                                                                  S3. (No. 33-28258)

         27           Financial Data Schedule                                     Filed herewith electronically

</TABLE>

         (b)      REPORTS ON FORM 8-K.

On January 11, 2000, MediaX filed on Form 8-K, dated January 11, 2000, reporting
a change of MediaX's  accountants.  Davis & CO.,  CPA's P.C was  previously  the
principal accountants for MediaX. On January 4, 2000, Davis & CO., CPA's P.C was
disengaged by MediaX as principal  accountants and Corbin & Wertz was engaged as
principal  accountants  to audit  the  accounts  of MediaX  for the year  ending
December 31, 1999. The decision to change  accountants  was approved by MediaX's
Board of Directors.

                                       20

<PAGE>

                                   SIGNATURES



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

         Date:    April 13, 2000        MEDIAX CORPORATION

                                        By:  /s/  Nancy Poertner
                                             ----------------------------------
                                                  Nancy Poertner, President

                  Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following person on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

                  Signature                          Title                                     Date
<S>       <C>                                <C>                                       <C>

          /s/   Nancy Poertner               President, Secretary                      April 13, 2000
          -----------------------            and Director
              Nancy Poertner

          /s/ Rainer Poertner                Director                                  April 13, 2000
          -----------------------
              Rainer Poertner

          /s/ Matthew MacLaurin              Executive V.P. and                        April 13, 2000
          -----------------------            Director
              Matthew MacLaurin

          /s/ Jacqueline Cabellon            Controller (Principal                     April 13, 2000
          -----------------------            Accounting Officer)
              Jacqueline Cabellon

</TABLE>

                                       22

<PAGE>

                         INDEX TO FINANCIAL STATEMENTS

Independent Auditors' Reports........................................ F-1-F-2

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

Statements of Operations for the years ended December 31, 1999 and
     1998 and for the period from March 30, 1995 (date of inception)
     through December 31, 1999 .......................................F-4

Statements of Stockholders' Equity (Deficit) for the years ended
     December 31, 1999 and 1998 and for the period from March 30, 1995
     (date of inception) through December 31, 1999....................F5-F-10

Statements of Cash Flows for the years ended December 31, 1999
     and 1998 and for the period from March 30, 1995 (date of inception)
     through December 31, 1999 .......................................F-11-F-12

Notes to the Financial Statements ....................................F-13-F-27

<PAGE>

INDEPENDENT AUDITORS' REPORT



Board of Directors
MediaX Corporation


We have  audited  the  accompanying  balance  sheet  of  MediaX  Corporation  (a
development  stage  company) (the  "Company")  as of December 31, 1999,  and the
related statements of operations,  stockholders' equity (deficit) and cash flows
for the year then ended.  These financial  statements are the  responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of the Company as of December 31,
1999,  and the  results of its  operations  and its cash flows for the year then
ended in conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern. As shown in the accompanying financial
statements,  the Company is a development  stage  company which has  experienced
significant losses since inception with no significant  revenues.  These factors
and  other  factors  discussed  in  Note 1 to  the  financial  statements  raise
substantial  doubt  about the  ability  of the  Company to  continue  as a going
concern.  Management's plans in regard to these matters are described in Note 1.
The financial  statements do not include any adjustments  that might result from
the outcome of this uncertainty.



                                        /s/  CORBIN & WERTZ
                                        --------------------------------------
                                             Corbin & Wertz


Irvine, California
March 17, 2000

<PAGE>

                          INDEPENDENT AUDITORS' REPORT


Board of Directors
MediaX Corporation


We have audited the accompanying statements of operations,  stockholders' equity
(deficit) and cash flows of MediaX  Corporation  (a  development  stage company)
(the  "Company")  for the year ended December 31, 1998 and the period from March
30, 1995 (date of  inception)  to December  31, 1998 (as restated - see Note 1).
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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the results of the Company's  operations and cash flows
for the year ended  December  31,  1998 and for the period  from March 30,  1995
(date of  inception)  to  December  31,  1998  (as  restated  - see Note 1),  in
conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern. As shown in the accompanying financial
statements,  the Company is a development  stage  company which has  experienced
significant losses since inception with no significant  revenues.  These factors
and  other  factors  discussed  in  Note 1 to  the  financial  statements  raise
substantial  doubt  about the  ability  of the  Company to  continue  as a going
concern.  Management's plans in regard to these matters are described in Note 1.
The financial  statements do not include any adjustments  that might result from
the outcome of this uncertainty.



                                        /s/  DAVIS & CO., CPAs, P.C.
                                        --------------------------------------
                                             David & Co., CPAs, P.C.

Englewood, Colorado
March 26, 1999

<PAGE>

<TABLE>
<CAPTION>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

                                  BALANCE SHEET

                                December 31, 1999

                                     ASSETS

<S>                                                                                             <C>

Current assets:
     Cash and cash equivalents                                                                  $         760,307
     Accounts receivable, net of reserve of $8,500                                                          2,218
     Inventories                                                                                           12,855
     Prepaid advertising costs                                                                            708,125
     Other prepaid expenses                                                                                52,097
                                                                                                 ----------------
         Total current assets                                                                           1,535,602
                                                                                                 ----------------
Property and equipment, at cost:
     Computer equipment                                                                                   334,640
     Office equipment                                                                                      36,580
     Leasehold improvements                                                                                 7,630
                                                                                                 ----------------
                                                                                                          378,850
     Less accumulated depreciation and amortization                                                      (276,723)
                                                                                                 ----------------
         Property and equipment, net                                                                      102,127

Deposits and other assets                                                                                  35,372
                                                                                                 ----------------
                                                                                                $       1,673,101

                                     LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
     Accounts payable                                                                           $         400,556
     Accrued payroll and related costs                                                                     28,048
     Accrued expenses                                                                                      19,916
                                                                                                 ----------------
         Total current liabilities                                                                        448,520

Long-term liabilities:
     Convertible notes payable                                                                          2,238,877
                                                                                                 ----------------
         Total liabilities                                                                              2,687,397
                                                                                                 ----------------
Commitments and contingencies

Stockholders' deficit:
     Preferred stock, $.0001 par value per share; 10,000,000 shares
       authorized and no shares issued                                                                          -
     Common stock, $.0001 par value per share; 25,000,000 shares
       authorized; 6,667,800 shares issued and outstanding                                                    667
     Additional paid-in capital                                                                        12,154,940
     Subscription advances                                                                                278,993
     Stockholder notes and accrued interest receivable                                                   (115,830)
     Deficit accumulated during the development stage                                                 (13,333,066)
                                                                                                 ----------------
         Total stockholders' deficit                                                                   (1,014,296)
                                                                                                 ----------------
                                                                                                $       1,673,101
                                                                                                 ----------------
</TABLE>

 See independent auditors' report and accompanying notes to financial statements

                                       F-3

<PAGE>

<TABLE>
<CAPTION>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

                            STATEMENTS OF OPERATIONS

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999

                                                                                                   March 30, 1995
                                                                                                (Date of  Inception)
                                                    Year Ended             Year Ended                 Through
                                                    December 31,          December 31,              December 31,
                                                       1999                   1998                      1999
                                                 ------------------     ------------------      ---------------------
                                                                         (As Restated -
                                                                           See Note 1)
<S>                                               <C>                   <C>                      <C>

Sales                                             $        55,918       $       162,021          $       838,575
Cost of sales                                             316,497               135,988                  863,387
                                                   --------------        --------------           --------------

Gross profit (loss)                                      (260,579)               26,033                  (24,812)

Operating expenses                                      5,016,299             3,244,333               10,446,469
                                                   --------------        --------------           --------------

Loss from operations                                   (5,276,878)           (3,218,300)             (10,471,281)
                                                   --------------        --------------           --------------

Other income (expense):
   Interest income                                         24,712                 6,926                   54,224
   Interest expense                                    (1,991,741)             (138,274)              (2,203,531)
   Loss on sale of asset                                        -                (2,093)                  (1,093)
   Other income                                                 -                     -                   16,501
                                                   --------------        --------------           --------------
         Total other income (expense)                  (1,967,029)             (133,441)              (2,133,899)
                                                   --------------        --------------           --------------

Loss before provision for income taxes                 (7,243,907)           (3,351,741)             (12,605,180)

Provision for taxes                                           800                   800                    3,200
                                                   --------------        --------------           --------------

Net loss                                          $    (7,244,707)      $    (3,352,541)         $   (12,608,380)
                                                   ==============        ==============           ==============

Basic and diluted loss per common share           $         (1.37)      $         (1.79)
                                                   ==============        ==============

Basic and diluted weighted average common
 shares outstanding                                     5,280,837             1,873,517
                                                   ==============        ==============
</TABLE>

 See independent auditors' report and accompanying notes to financial statements

                                      F-4

<PAGE>

<TABLE>
<CAPTION>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999

                                                                                                                        Stockholder
                                                                                                                           Notes
                                                       Common Stock                Additional                           and Accrued
                                              -------------------------------        Paid-in         Subscription        Interest
                                                 Shares            Amount            Capital           Advances         Receivable
                                              -------------     -------------     --------------    ---------------    -------------
<S>                                           <C>              <C>                <C>               <C>                 <C>

Shares issued in March 1995 for cash of
$.00008 per share to an officer and
director                                      1,250,000        $    125           $  (25)           $      -           $       -

Loan to stockholder in December 1995                  -               -                -                   -             (50,000)

Net loss for the period from March 30,
1995 (date of inception) to December 31,
1995                                                  -               -                -                   -                   -
                                              ----------       --------           ------            --------           ---------
Balance at December 31, 1995                   1,250,000            125              (25)                  -             (50,000)

Adjustment for shares of ZeitGeist Werks,
Inc. outstanding immediately prior to
re-organization on February 23, 1996,
valued at net monetary asset amount               65,804              7          249,816                   -                   -

Loan to stockholder in February 1996                   -              -                -                   -             (50,000)

Exchange of 15,400 shares in March 1996 for
notes and interest payable at $20 per share       15,400              2          307,998                   -                   -

Issuance of 12,500 shares to consultant in
April  1996 in exchange for services at $10
per share                                         12,500              1          124,999                   -                   -

Cancellation of 203,750 shares by majority
stockholder in June 1996                        (203,750)           (20)            (184)                  -                   -

Issuance of 203,750 shares in June 1996 in
exchange for all of the stock of MediaX, Inc.    203,750             20              184                   -                   -

</TABLE>


                                      F-5

Continued

<PAGE>

<TABLE>
<CAPTION>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999

                                                       Deficit
                                                     Accumulated              Total
                                                      During The          Stockholders'
                                                     Development              Equity
                                                        Stage               (Deficit)
                                                   -----------------     -----------------
<S>                                                <C>                   <C>

Shares issued in March 1995 for cash of
$.00008 per share to an officer and
director                                              $      -             $       100

Loan to stockholder in December 1995                         -                 (50,000)

Net loss for the period from March 30,
1995 (date of inception) to December 31,
1995                                                   (37,238)                (37,238)
                                                      --------             -----------
Balance at December 31, 1995                           (37,238)                (87,138)

Adjustment for shares of ZeitGeist Werks,
Inc. outstanding immediately prior to
re-organization on February 23, 1996,
valued at net monetary asset amount                   (268,064)                (18,241)

Loan to stockholder in February 1996                         -                 (50,000)

Exchange of 15,400 shares in March 1996 for
notes and interest payable at $20 per share                  -                 308,000

Issuance of 12,500 shares to consultant in
April  1996 in exchange for services at $10
per share                                                    -                 125,000

Cancellation of 203,750 shares by majority
stockholder in June 1996                                     -                    (204)

Issuance of 203,750 shares in June 1996 in
exchange for all of the stock of MediaX, Inc.                -                     204

</TABLE>


                                      F-5A

Continued


<PAGE>

<TABLE>
<CAPTION>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

            STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999

                                                                                                                        Stockholder
                                                                                                                           Notes
                                                       Common Stock                Additional                           and Accrued
                                              -------------------------------        Paid-in         Subscription        Interest
                                                 Shares            Amount            Capital           Advances         Receivable
                                              -------------     -------------     --------------    ---------------    -------------
<S>                                           <C>              <C>                <C>               <C>                 <C>

Sale of 2,510 shares in June and July
1996 at  $20.80 per share                         2,510               -              52,200                -                   -

Sale of 35,000 shares in November and
December 1996 at $10.00 per share                35,000               3             349,997                -                   -

Accrued interest on stockholder notes
receivable                                            -               -                   -                -              (3,830)

Net loss                                              -               -                   -                -                   -
                                              ----------       --------           ---------         --------           ---------
Balance at December 31, 1996                   1,381,214            138           1,084,985                -            (103,830)

Sale of 35,000 shares in January and
February 1997 at $10.00 per share
(net of issuance costs of $80,000)                35,000              4             269,996                -                   -

Sale of 10,000 shares and warrants in
May   1997 at $7.00 per unit                      10,000               1             69,999                -                   -

Sale of 54,231 shares and warrants in
August and September 1997 at $10.40 per share     54,231               5            563,995                -                   -

Sale of 20,000 shares in August 1997 at
$7.40 per share                                   20,000               2            147,998                -                   -

Exchange of 40,000 shares in August 1997 for
note and interest payable at $7.94 per share      40,000               4            317,543                -                   -

</TABLE>

                                      F-6

Continued

<PAGE>
<TABLE>
<CAPTION>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

            STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999

                                                       Deficit
                                                     Accumulated              Total
                                                      During The          Stockholders'
                                                     Development              Equity
                                                        Stage               (Deficit)
                                            --     -----------------     -----------------
<S>                                                <C>                   <C>

Sale of 2,510 shares in June and July
1996 at  $20.80 per share                                    -                  52,200

Sale of 35,000 shares in November and
December 1996 at $10.00 per share                            -                 350,000

Accrued interest on stockholder notes
receivable                                                   -                  (3,830)

Net loss                                              (643,553)               (643,553)
                                                      --------             -----------
Balance at December 31, 1996                          (948,855)                 32,438

Sale of 35,000 shares in January and
February 1997 at $10.00 per share
(net of issuance costs of $80,000)                           -                 270,000

Sale of 10,000 shares and warrants in
May   1997 at $7.00 per unit                                 -                  70,000

Sale of 54,231 shares and warrants in
August and September 1997 at $10.40 per share                -                 564,000

Sale of 20,000 shares in August 1997 at
$7.40 per share                                              -                 148,000

Exchange of 40,000 shares in August 1997 for
note and interest payable at $7.94 per share                 -                 317,547

</TABLE>

                                      F-6A

Continued

<PAGE>

<TABLE>
<CAPTION>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

            STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999

                                                                                                                        Stockholder
                                                                                                                           Notes
                                                       Common Stock                Additional                           and Accrued
                                              -------------------------------        Paid-in         Subscription        Interest
                                                 Shares            Amount            Capital           Advances         Receivable
                                              -------------     -------------     --------------    ---------------    -------------
<S>                                           <C>              <C>                <C>               <C>                 <C>
Issuance of 40,000 shares in exchange for
prepaid advertising in November 1997 at
$15.00 per share                                 40,000              4              599,996                -                   -

Issuance of 7,600 shares at par value
pursuant to other agreements in 1997
for services performed                            7,600              1                    7                -                   -

Accrued interest on stockholder notes
receivable                                            -               -                   -                -              (4,000)

Net loss                                              -               -                   -                -                   -
                                              ----------       --------           ---------         --------           ---------
Balance at December 31, 1997                   1,588,045            159           3,054,519                -            (107,830)

Sale of 104,000 shares in February and
May 1998 at $1.92 per share                      104,000             10             199,990                -                   -

Sale of 301,313 shares from April through
October 1998 at $1.39 per share                  301,313              30            419,970                -                   -

Fractional share adjustment for 10 for 1
reverse stock split on November 17, 1998              17               -                  -                -                   -

Estimated fair market value of warrants
issued in connection with the sale of stock
(as restated - see Note 1)                             -               -             456,622               -                   -

</TABLE>

                                      F-7

Continued

<PAGE>

<TABLE>
<CAPTION>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

            STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999

                                                       Deficit
                                                     Accumulated              Total
                                                      During The          Stockholders'
                                                     Development              Equity
                                                        Stage               (Deficit)
                                                   -----------------     -----------------
<S>                                                <C>                   <C>
Issuance of 40,000 shares in exchange for
prepaid advertising in November 1997 at
$15.00 per share                                             -                600,000

Issuance of 7,600 shares at par value
pursuant to other agreements in 1997
for services performed                                       -                      8

Accrued interest on stockholder notes
receivable                                                   -                 (4,000)

Net loss                                            (1,330,341)            (1,330,341)
                                                    ----------             -----------
Balance at December 31, 1997                        (2,279,196)               667,652

Sale of 104,000 shares in February and
May 1998 at $1.92 per share                                  -                200,000

Sale of 301,313 shares from April through
October 1998 at $1.39 per share                              -                420,000

Fractional share adjustment for 10 for 1
reverse stock split on November 17, 1998                     -                      -

Estimated fair market value of warrants
issued in connection with the sale of stock
(as restated - see Note 1)                            (456,622)                     -

</TABLE>

                                      F-7A

Continued

<PAGE>

<TABLE>
<CAPTION>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

            STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999

                                                                                                                        Stockholder
                                                                                                                           Notes
                                                       Common Stock                Additional                           and Accrued
                                              -------------------------------        Paid-in         Subscription        Interest
                                                 Shares            Amount            Capital           Advances         Receivable
                                              -------------     -------------     --------------    ---------------    -------------
<S>                                           <C>              <C>                <C>               <C>                 <C>

Warrants exercised in December 1998 at $0.10
per share                                       200,000             20               19,980                -                   -

Sale of 167,000 shares in December 1998 at
$0.48 per share                                 167,000             17               79,983                -                   -

Estimated fair market value of  stock issued in
December 1998 for services rendered at $1.00 per
share (as restated - see Note 1)                 90,000              9               89,991                -                   -

Estimated fair market value of  restricted stock
issued in December 1998 for services
rendered at $0.96 per share (as restated
- see Note 1)                                   100,000             10               95,615                -                   -

Estimated fair market value of options and
warrants granted from February through
December 1998 to consultants for services
rendered (as restated - see Note 1)                   -              -              404,850                -                   -

Accrued interest on stockholder notes receivable      -              -                    -                -              (4,000)

Subscription advances in December 1998                -              -                    -          320,000                   -

Net loss (as restated - see Note 1)                   -              -                    -                -                   -
                                              ----------       --------           ---------         --------           ---------
Balance at December 31, 1998 (as restated -
 see Note 1)                                   2,550,375               255          4,821,520           320,000           (111,830)

Vested portion of intrinsic value of options
granted in 1998 to employees                           -                 -              1,237                 -                  -

</TABLE>


                                      F-8

Continued

<PAGE>

<TABLE>
<CAPTION>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

            STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999

                                                       Deficit
                                                     Accumulated              Total
                                                      During The          Stockholders'
                                                     Development              Equity
                                                        Stage               (Deficit)
                                                   -----------------     -----------------
<S>                                                <C>                   <C>

Warrants exercised in December 1998 at $0.10
per share                                                    -                  20,000

Sale of 167,000 shares in December 1998 at
$0.48 per share                                              -                  80,000

Estimated fair market value of  stock issued in
December 1998 for services rendered at $1.00 per
share (as restated - see Note 1)                             -                  90,000

Estimated fair market value of  restricted stock
issued in December 1998 for services
rendered at $0.96 per share (as restated
- see Note 1)                                                -                  95,625

Estimated fair market value of options and
warrants granted from February through
December 1998 to consultants for services
rendered (as restated - see Note 1)                          -                 404,850

Accrued interest on stockholder notes receivable             -                  (4,000)

Subscription advances in December 1998                       -                 320,000

Net loss (as restated - see Note 1)                 (3,352,541)             (3,352,541)
                                                    ----------             -----------
Balance at December 31, 1998 (as restated -
 see Note 1)                                        (6,088,359)             (1,058,414)

Vested portion of intrinsic value of options
granted in 1998 to employees                                 -                   1,237

</TABLE>


                                      F-8A

<PAGE>

<TABLE>
<CAPTION>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

            STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999

                                                                                                                        Stockholder
                                                                                                                           Notes
                                                       Common Stock                Additional                           and Accrued
                                              -------------------------------        Paid-in         Subscription        Interest
                                                 Shares            Amount            Capital           Advances         Receivable
                                              -------------     -------------     --------------    ---------------    -------------
<S>                                           <C>              <C>                <C>               <C>                 <C>

Issuance of shares in January, February
and June 1999 for services rendered at
$3.56 per share average                           30,000              3             106,872                -                   -

Warrants exercised in January through
July 1999 at $0.30 per share                   1,638,667            164             496,843         (220,000)                  -

Sale of 340,000  restricted shares in
January,  March and April 1999 for cash at
$1.24 per share (including 16,000 shares
issued for finders fees)                         356,000             36            421,464                 -                   -

Exchange of 921,925 shares in February and
December 1999 for convertible debt and
interest at $1.70 per share                      921,925             92          1,566,075                 -                   -

Sale of 20,000 shares in February 1999 at
$1.00 per share                                   20,000              2             19,998                 -                   -

Issuance of restricted shares in March,
August and September 1999 for services
rendered at $2.04 per share average              830,000             83           1,689,724                -                   -

Subscription advances in March and April
1999                                                   -              -                   -          178,993                   -

Issuance of restricted stock in March 1999
for prepaid advertising at $1.97 per share       200,000             20             393,105                -                   -

Estimated fair market value of options granted
in March 1999 for prepaid advertising                  -              -             215,000                -                   -

</TABLE>

                                      F-9

Continued

<PAGE>

<TABLE>
<CAPTION>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

            STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999

                                                       Deficit
                                                     Accumulated              Total
                                                      During The          Stockholders'
                                                     Development              Equity
                                                        Stage               (Deficit)
                                                   -----------------     -----------------
<S>                                                <C>                   <C>

Issuance of shares in January, February
and June 1999 for services rendered at
$3.56 per share average                                      -                 106,875

Warrants exercised in January through
July 1999 at $0.30 per share                                 -                 277,007

Sale of 340,000  restricted shares in
January,  March and April 1999 for cash at
$1.24 per share (including 16,000 shares
issued for finders fees)                                    -                  421,500

Exchange of 921,925 shares in February and
December 1999 for convertible debt and
interest at $1.70 per share                                  -               1,566,167

Sale of 20,000 shares in February 1999 at
$1.00 per share                                              -                  20,000

Issuance of restricted shares in March,
August and September 1999 for services
rendered at $2.04 per share average                          -               1,689,807

Subscription advances in March and April
1999                                                         -                 178,993

Issuance of restricted stock in March 1999
for prepaid advertising at $1.97 per share                   -                 393,125

Estimated fair market value of options granted
in March 1999 for prepaid advertising                        -                 215,000

</TABLE>

                                      F-9A

<PAGE>

<TABLE>
<CAPTION>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

            STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999

                                                                                                                        Stockholder
                                                                                                                           Notes
                                                       Common Stock                Additional                           and Accrued
                                              -------------------------------        Paid-in         Subscription        Interest
                                                 Shares            Amount            Capital           Advances         Receivable
                                              -------------     -------------     --------------    ---------------    -------------
<S>                                           <C>              <C>                <C>               <C>                 <C>

Options exercised in April, June and
August at $2.79 per share                        120,833             12             336,804                -                   -

Estimated fair market value of  options
granted in May and June 1999 to
consultants for services rendered                      -              -             453,600                -                   -

Estimated fair market value of  warrants
issued in August 1999 in connection with
convertible debt                                       -              -             345,400                -                   -

Value of beneficial and induced conversion in
connection with convertible debt                       -              -           1,287,298                -                   -

Accrued interest on stockholder notes
receivable                                             -              -                   -                -              (4,000)

Net loss                                               -              -                   -                -                   -
                                              ----------     ------------     --------------    ---------------    ---------------

Balance at December 31, 1999                   6,667,800     $      667       $  12,154,940     $    278,993       $    (115,830)
                                              ==========     =============    ===============   ===============    ===============
</TABLE>

                                      F-10



<PAGE>

<TABLE>
<CAPTION>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

            STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999

                                                       Deficit
                                                     Accumulated              Total
                                                      During The          Stockholders'
                                                     Development              Equity
                                                        Stage               (Deficit)
                                                   -----------------     -----------------
<S>                                                <C>                   <C>

Options exercised in April, June and
August at $2.79 per share                                    -                 336,816

Estimated fair market value of  options
granted in May and June 1999 to
consultants for services rendered                            -                 453,600

Estimated fair market value of  warrants
issued in August 1999 in connection with
convertible debt                                             -                 345,400

Value of beneficial and induced conversion in
connection with convertible debt                             -               1,287,298

Accrued interest on stockholder notes
receivable                                                   -                  (4,000)

Net loss                                            (7,244,707)             (7,244,707)
                                               ------------------      ---------------

Balance at December 31, 1999                   $   (13,333,066)        $    (1,014,296)
                                               ==================      ===============

</TABLE>


                                      F-10A

See independent auditors' report and accompanying notes to financial statements

<PAGE>

<TABLE>
<CAPTION>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

                            STATEMENTS OF CASH FLOWS

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999

                                                                                                           March 30, 1995
                                                                                                         (Date of Inception
                                                                Year Ended            Year Ended              Through
                                                               December 31,          December 31,           December 31,
                                                                 1999                    1998                  1999
                                                            -------------------     ----------------     ------------------
                                                                                     (As Restated -
                                                                                      See Note 1)
<S>                                                         <C>                    <C>                   <C>

Cash flows from operating activities:
   Net loss                                                  $     (7,244,707)     $     (3,352,541)     $    (12,608,380)
   Adjustments to reconcile net loss to net
     cash used in operating activities:
      Depreciation and amortization                                    47,112               103,003               273,516
      Allowance for doubtful accounts                                   8,500                     -                 8,500
      Software development costs written off                          294,192               255,000               341,667
      Estimated value of shares issued for
        consulting services                                         1,796,682               185,625             2,707,315
      Estimated value of options and warrants
        granted for consulting services                               800,237               404,850               859,687
      Estimated value of beneficial and induced
        conversion of debt                                          1,287,298                     -             1,632,698
      Amortization of debt issuance costs                             176,000                     -               176,000
      Interest accrued on convertible debt prior to
        conversion                                                    150,953                     -               150,953
      Interest accrued on stockholder notes
        receivable                                                     (4,000)               (4,000)              (15,830)
      Changes in operating assets and liabilities:
        Accounts receivable                                            66,090               (66,465)              (10,718)
        Prepaid expense                                               (21,772)                7,064               (52,097)
        Inventories                                                    79,908               (40,946)              (12,855)
        Prepaid advertising costs                                           -               500,000              (100,000)
        Deposits and other assets                                     (23,467)               (1,225)              173,494
        Accounts payable and accrued expenses                         129,013               222,620               430,341
        Accounts payable - related parties                                  -               (24,455)                    -
                                                              ---------------       ---------------       ---------------

   Net cash used in operating activities                           (2,457,961)           (1,811,470)           (6,045,709)
                                                              ---------------       ---------------       ---------------

Cash flows from investing activities:
   Acquisition of license agreement and trademark                           -               (81,135)             (102,287)
   Deferred software development costs                                      -              (105,238)             (405,238)
   Purchase of fixed assets                                           (60,023)              (32,113)             (299,287)
   Loans to stockholder                                                     -                     -              (100,000)
   Proceeds from sale of fixed assets                                       -                     -                 2,822
                                                              ---------------       ---------------       ---------------

   Net cash used in investing activities                              (60,023)             (218,486)             (903,990)
                                                              ---------------       ---------------       ---------------

</TABLE>

                                      F-11

Continued

<PAGE>

<TABLE>
<CAPTION>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

                      STATEMENTS OF CASH FLOWS - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999

                                                                                                           March 30, 1995
                                                                                                         (Date of Inception
                                                                Year Ended            Year Ended             Through
                                                               December 31,          December 31,          December 31,
                                                                  1999                   1998                  1999
                                                            -------------------     ----------------     ------------------
                                                                                     (As Restated -
                                                                                      See Note 1)
<S>                                                         <C>                    <C>                   <C>

Cash flows from financing activities:
   Principal payments on capital lease                                      -                (5,146)              (27,567)
   Subscription advances                                              178,993               320,000               498,993
   Net proceeds from sale of stock to investors                       441,500               700,000             2,616,952
   Net proceeds from the exercise of options
     and warrants                                                     613,823                20,000               633,823
   Retirement of notes payable                                              -               (32,276)             (155,269)
   Proceeds received from issuance of notes
    payable and convertible debentures (net of
    debt issuance costs of $176,000 in 1999)                        2,024,000               654,680             4,143,074
                                                              ---------------       ---------------       ---------------

   Net cash provided by financing activities                        3,258,316             1,657,258             7,710,006
                                                              ---------------       ---------------       ---------------

Change in cash and cash equivalents                                   740,332              (372,698)              760,307

Cash and cash equivalents, beginning of period                         19,975               392,673                     -
                                                              ---------------       ---------------       ---------------

Cash and cash equivalents, end of period                     $        760,307      $         19,975      $        760,307
                                                              ===============       ===============       ===============

Supplemental  disclosures of cash flow information:  Cash paid during the period
   for:
         Interest                                            $              -      $        150,151      $        223,667
                                                              ===============       ===============       ===============
         Income taxes                                        $            800      $            800      $          3,200
                                                              ===============       ===============       ===============

</TABLE>

Supplemental schedule of non-cash investing and financing activities:
   See accompanying notes to the financial statements for additional information
   relating to non-cash  investing and financing  activities  during fiscal 1999
   and 1998.

See independent auditors' report and accompanying notes to financial statements

                                      F-12

<PAGE>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS

                 For The Years Ended December 31, 1999 and 1998
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Originally  founded as a multi-media  production studio in 1995, MediaX Inc. was
acquired and became  public in 1996 as ZeitGeist  Werks,  Inc. and  subsequently
renamed  MediaX  Corporation  ("MediaX"  or the  "Company").  MediaX  began as a
real-time 3D computer game  development  company for  distribution  through both
conventional and Internet  distribution  channels,  as well as licensing through
large  publishers.  After the  acquisition,  the  Company's  strategic  focus is
centered on the following:  new media content, web site development for Internet
and broadband channels, Internet-based commerce and on-line marketing.

MediaX  designs,  owns,  operates,  hosts and  integrates  a network  of several
distinct  types of  entertainment-  based  Internet  web sites.  The  company is
positioned to generate  revenue  through web site design  services,  the sale of
artist specific merchandise, entertainment-related products, club subscriptions,
endorsement  opportunities for corporate sponsors, third party advertising and a
variety of  products  provided by  affiliates.  In  February  1999,  the Company
launched amuZnet.com,  an entertainment destination and e-commerce site offering
entertainment  titles on CDs,  DVDs,  videos and movies  for sale.  The  Company
operates its own and/or third party marketing campaigns on amuZnet.com.

All content that is currently  produced for the Internet will be re-purposed for
interactive  satellite  broadcasting and can also easily be transferred to other
broadband  systems  such  as  cable  TV  or  ADSL  subscriber   systems  without
significant  technological effort. This puts the Company in the position to have
several outlets for the digital interactive content it produces. The Company has
signed  contracts  with EchoStar (Dish Network) for the launch of an Interactive
Satellite  Channel and hopes to further tap into the rapidly emerging efforts of
cable and telecom companies with its existing technology and content expected to
be launched in late 2000.  However,  there can be no assurance  that the Company
will achieve its objectives or successfully  implement its interactive satellite
business plan.

Development Stage Company

The Company has been in the  development  stage since its  formation  due to the
change in the Company's business plan in late 1998 with no significant  revenues
being  generated  from these  proposed new  activities.  During the  development
stage, the Company is primarily engaged in raising capital, obtaining financing,
advertising  and promoting the Company and  administrative  functions along with
developing a unique network of celebrity web sites,  central  e-commerce  sites,
unique entertainment and an on-line shopping experience.

                                      F-13

<PAGE>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

Restatement of 1998 Financial Statements

Based on updated information on certain  transactions,  the Company has restated
its 1998 audited financial statements as follows:

         The estimated fair market value of 190,000  shares of restricted  stock
         committed to be issued in December 1998 for services rendered (see Note
         4) were not  recorded  as the stock had not yet been  issued.  Based on
         updated  information,  the estimated fair market value of the stock has
         been recorded at $185,625.  The estimated value of options and warrants
         to purchase  191,000 shares of common stock issued to consultants  (see
         Notes 5 and 6) for services  rendered were incorrectly  recorded at $0.
         Based on updated  information,  the estimated fair value of the options
         and warrants was $415,190,  of which  $404,850 was recorded in 1998. In
         addition,  the estimated  value of the  detachable  warrants  issued to
         purchase  3,676,667  shares of common stock in connection  with sale of
         stock (see Note 4) were  incorrectly  recorded at $0.  Based on updated
         information,  the  estimated  fair  value  of the  detachable  warrants
         (recorded  as stock  dividends)  has been  recorded at  $456,622.  As a
         result of these  restatements,  the Company's  loss for fiscal 1998 was
         restated to $3,352,541 from the previously  recorded $2,762,066 and the
         loss per share was  restated to $(1.79)  from the  previously  recorded
         $(1.49).

Risk and Uncertainties

The Company is a development  stage company subject to the substantial  business
risks and uncertainties of such an entity,  including potential risk of business
failure.

The accompanying  financial  statements have been prepared  assuming the Company
will continue as a going concern,  which  contemplates,  among other things, the
realization  of assets and  satisfaction  of liabilities in the normal course of
business.  The Company's  losses from operations  through  December 31, 1999 and
lack of operating  history,  among other matters,  raise substantial doubt about
its ability to continue as a going concern. The Company hopes to obtain revenues
from product sales and the development of celebrity web sites. In the absence of
significant  sales and profits,  the Company intends to fund operations  through
additional debt and equity financing arrangements which management believes will
be sufficient to fund its capital expenditures, working capital requirements and
other cash  requirements  through  December 31, 2000.  There is no assurance the
Company will be able to obtain sufficient  additional funds when needed, or that
such funds,  if  available,  will be  obtainable  on terms  satisfactory  to the
Company.

These  circumstances  raise  substantial  doubt about the  Company's  ability to
continue  as a going  concern.  The  accompanying  financial  statements  do not
include any adjustments that might result from the outcome of this uncertainty.

                                      F-14

<PAGE>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

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

Year 2000

The Year 2000 issues relates to limitations in computer systems and applications
that may prevent proper  recognition  of the Year 2000. The potential  effect of
the Year 2000 issue on the Company and its business  partners  will not be fully
determinable until the Year 2000 and thereafter.  If the Year 2000 modifications
are not  properly  completed  either by the Company or  entities  with which the
Company conducts business,  the Company's revenues and financial condition could
be adversely impacted.

Cash and Cash Equivalents

For purposes of the statement of cash flows,  cash and cash equivalents  consist
of demand  deposits in banks with an initial  maturity of 90 days or less.  Cash
equivalents are carried at cost which approximates market.

Inventories

Inventories  at  December  31,  1999  consist   primarily  of  artist   specific
merchandise  sold over the  Internet.  Inventories  are recorded at the lower of
cost or market using the first-in, first-out method.

Property and Equipment

Property  and  equipment  are  recorded  at cost and are  depreciated  using the
straight-line  method over the  estimated  useful  lives of the related  assets,
ranging  from three to seven  years.  Depreciation  expense  for the years ended
December  31, 1999 and 1998 was $47,112 and $57,059,  respectively.  Maintenance
and  repairs  are  charged to  expense as  incurred.  Significant  renewals  and
betterments are capitalized.  At the time of retirement or other  disposition of
property and equipment,  the cost and accumulated  depreciation are removed from
the accounts and any resulting gain or loss is reflected in operations.

                                      F-15

<PAGE>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

Deferred Software Development Costs

Certain  development costs of CD-rom masters were capitalized in accordance with
SFAS No. 86 ("SFAS 86"),  "Accounting  for the Costs of Computer  Software to be
Sold, Leased or Otherwise Marketed" and are reported at the lower of unamortized
cost or net realizable  value.  Amortization  will be taken  commencing with the
sales activity of the related product using the  straight-line  method and asset
lives approximating the retail sales life of the final product,  generally three
to five years. During 1999 and 1998, due to the change in the Company's business
plan,  the Company  wrote-off  previously  capitalized  and in process  software
development costs of $294,192 and $255,000,  respectively, which are recorded in
the accompanying statements of operations.

Impairment of Long-Lived Assets

Management  of the Company  assesses  the  impairment  of  long-lived  assets by
comparing the future undiscounted net cash flows (without interest charges) from
the use and ultimate disposition of such assets with their carrying amounts. The
amount of impairment,  if any, is measured based on fair value and is charged to
operations in the period in which such  impairment is determined by  management.
There was no  impairment  of  long-lived  assets  identified  for the year ended
December 31, 1999.

Income Taxes

The Company  accounts for income taxes under  Statement of Financial  Accounting
Standards No. 109 ("SFAS 109"),  "Accounting  for Income Taxes." Under SFAS 109,
deferred  tax  assets  and   liabilities  are  recognized  for  the  future  tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
expected  to apply to  taxable  income  in the  years in which  those  temporary
differences  are expected to be recovered or settled.  A valuation  allowance is
provided  for  significant  deferred  tax assets when it is more likely than not
that such assets will not be recovered.

Stock Based Compensation

The  Financial  Accounting  Standards  Board (the  "FASB")  issued  Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation,"  which  defines  a fair  value  based  method of  accounting  for
stock-based  compensation.  However,  SFAS 123 allows an entity to  continue  to
measure compensation cost related to stock and stock options issued to employees
using the  intrinsic  method of accounting  prescribed by Accounting  Principles
Board  Opinion No. 25 ("APB 25"),  "Accounting  for Stock Issued to  Employees."
Entities  electing to remain with the accounting  method of APB 25 must make pro
forma  disclosures  of  net  income  (loss),  as if the  fair  value  method  of
accounting  defined in SFAS 123 had been  applied.  The  Company  has elected to
account for its stock-based compensation to employees under APB 25.

                                      F-16

<PAGE>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

Revenue Recognition

Sales of goods and services and the related  cost of sales are  recognized  when
orders are received and goods are shipped or services  are  delivered.  Revenues
from internet advertising and web development are recorded when earned.

Advertising

Advertising costs are expensed as incurred. Prepaid advertising costs represents
the estimated market value of stock issued (see Note 4) and options granted (see
Note 5) to a third party for advertising to be received in future periods.

Basic and Diluted Loss Per Share

The Company has adopted  Statement of  Financial  Accounting  Standards  No. 128
"Earnings  Per  Share"  ("SFAS  128").  SFAS  128  changes  the  methodology  of
calculating earnings per share and renamed the two calculations,  basic earnings
per share  (formerly  primary) and diluted  earnings per share  (formerly  fully
diluted).  The calculations  differ by eliminating any common stock  equivalents
(such as stock  options,  warrants,  etc.)  from  basic  earnings  per share and
changes certain  calculations  when computing  diluted  earnings per share.  The
adoption  of SFAS  128 has  not  materially  impacted  the  Company's  financial
position or results of operations.

Basic and diluted loss per share were  computed  based on the  weighted  average
number of shares  outstanding  for the period.  Basic and diluted loss per share
are the same as the effect of stock  options and  warrants on loss per share are
antidilutive and thus not included in the diluted loss per share calculation.

Comprehensive Income

The Company has adopted  Statement of  Financial  Accounting  Standards  No. 130
("SFAS 130"),  "Reporting  Comprehensive Income." SFAS 130 establishes standards
for reporting and display of  comprehensive  income and its components in a full
set of  general-purpose  financial  statements.  SFAS 130 had no  effect  on the
Company's financial statements as it had no comprehensive income components.

Segment Information

The Company has adopted  Statement of  Financial  Accounting  Standards  No. 131
("SFAS  131"),   "Disclosures  about  Segments  of  an  Enterprise  and  Related
Information." SFAS 131 changes the way public companies report information about
segments of their  business in their annual  financial  statements  and requires
them to report selected segment information in their quarterly reports issued to
stockholders.  It also requires  entity-wide  disclosures about the products and
services an entity provides, the material countries in which it holds assets and
reports  revenues  and its major  customers.  As the Company is currently in the
development stage, the Company does not yet have any reportable segments.

                                      F-17

<PAGE>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, continued

Fair Value of Financial Instruments

Financial  Accounting  Standards  Board ("FASB")  issued  Statement of Financial
Accounting  Standards  No. 107 ("SFAS  107"),  "Disclosures  About Fair Value of
Financial  Instruments." SFAS 107 requires  disclosure of fair value information
about financial  instruments  when it is practicable to estimate that value. The
carrying amount of the Company's  cash,  receivables,  trade  payables,  accrued
expenses and convertible notes payable  approximates their estimated fair values
due to the  short-term  maturities  of those  financial  instruments  or because
interest rates approximate market rates.

Recent Accounting Pronouncements

The FASB issued  Statement  of  Financial  Accounting  Standards  No. 133 ("SFAS
133"),  "Accounting for Derivative Instruments and Hedging Activities." SFAS 133
establishes  accounting  and  reporting  standards for  derivative  instruments,
including certain derivative  instruments  embedded in other contracts,  and for
hedging  activities.  It requires that an entity  recognize all  derivatives  as
either  assets or  liabilities  on the balance  sheet at their fair value.  This
statement, as amended by SFAS 137, is effective for financial statements for all
fiscal  quarters of all fiscal years  beginning after June 15, 2000. The Company
does not expect the adoption of this  standard to have a material  impact on its
results of operations, financial position or cash flows as it currently does not
engage in any derivative or hedging activities.


Reverse Stock Split

Effective November 18, 1998, the Company's Board of Directors approved a reverse
stock split of ten-to-one.  All references throughout these financial statements
to number of shares,  per share amounts,  stock option data and market prices of
the  Company's  common  stock have been  restated to reflect  the reverse  stock
split.

Reclassifications

Certain  reclassifications  have been made to the  December  31, 1998  financial
statements in order to conform to classification used in the current year.

NOTE 2 - CONVERTIBLE SUBORDINATED DEBENTURES AND NOTES PAYABLE

Included in convertible subordinated debentures payable at December 31, 1998 was
$1,454,092 of various notes payable.  The notes,  bearing  interest at the prime
rate  (prime  rate at  December  31,  1998 was 8.25%) plus 2% to 4%, were due on
various dates through  September  1999.  In 1999,  the Company  offered the note
holders an inducement to convert the notes with a current  balance of $1,566,192
(including  accrued interest in 1999 of $112,100) into common stock at $1.69 per
share  (estimated fair market value on the date of conversion was  approximately
$2.71 per share) or 921,925 shares. As a result of this induced conversion,  the
Company recorded  additional  interest expense of $938,112 during the year ended
December 31, 1999.

                                      F-18

<PAGE>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999


NOTE 2 - CONVERTIBLE SUBORDINATED DEBENTURES AND NOTES PAYABLE,
continued

In 1999,  the Company  entered  into a  securities  purchase  agreement  with an
investor, whereby the Company sold to the investor a $2,200,000 principal amount
convertible  note for $2,024,000 (net of debt issuance costs of $176,000,  which
were amortized to interest expense due to the immediate  convertibility  of this
note).  The note bears  interest at 5% and is due on August 24, 2002. The holder
of the note has the option to require interest  payments in cash or stock. As of
December 31, 1999, the Company has incurred interest expense related to the note
in the amount of $38,877. The note is convertible at beneficial rates which vary
based on recent stock prices and date of conversion, as defined. Due to the note
being immediately  convertible at the option of the noteholder,  the Company has
recorded a  beneficial  conversion  of  $349,186  that is  included  in interest
expense at December  31,  1999.  In  addition,  the Company  gave the investor a
warrant  to  purchase  220,000  shares  of its  common  stock at $3.40 per share
expiring in August 23, 2004 which was valued at $345,400 (based on Black-Scholes
computation under SFAS 123 - see Note 6) and recorded as interest expense.

NOTE 3 - SUBSCRIPTION ADVANCES

Subscription  advances  represents  monies  received  in  advance  from  certain
investors  for the future  exercise of warrants or purchase of stock.  The total
number of warrants to be exercised or the total number of shares to be purchased
has not yet been determined.  During 1999,  $220,000 of the previously  received
advances were utilized to exercise certain warrants (see Note 4) and the Company
received  $178,993 of new advances.  At December 31, 1999, the total outstanding
balance on subscription advances was $278,993.

NOTE 4 - STOCKHOLDERS' EQUITY

Preferred Stock

The Company's  Articles of  Incorporation  authorize up to 10,000,000  shares of
$.0001 par value preferred stock. Shares of preferred stock may be issued in one
or more classes or series at such time the Board of Directors may determine. All
shares of any one series shall be equal in rank and  identical in all  respects.
As of December 31,  1999,  the Board of Directors  has  designated  6,000,000 as
Series A 10% convertible preferred stock ("Preferred A"). Each Preferred A share
has a  liquidation  preference  of $1 per share plus  accrued  dividends  and is
convertible  at 3.5 shares of Preferred A into one common share.  As of December
31, 1999, no preferred shares have been issued.

                                      F-19

<PAGE>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999


NOTE 4 - STOCKHOLDERS' EQUITY, continued

Common Stock

During April to December  1998, the Company sold 468,313 shares to an accredited
investor  for proceeds of $500,000.  In  addition,  the Company  granted to this
investor  warrants to purchase up to 3,676,667 shares of common stock at varying
prices with a fair market value of $456,622 (based on Black-Scholes  computation
under SFAS 123) and recorded as a common stock dividend.  The warrants expire on
various dates  through  September 7, 2001 and the number of shares and price per
share will not be adjusted for any future stock splits or reverse  stock splits.
In addition,  the investor is limited to only exercise  200,000  warrants in any
sixty-day  period.  200,000 of these warrants were exercised  during December of
1998 for proceeds of $20,000.  During 1999,  1,608,667  of these  warrants  were
exercised for proceeds of $422,007, of which $220,000 was received in prior year
and recorded as subscription advances (see Note 3).

Another  accredited  unrelated investor purchased 104,000 shares during February
1998 for proceeds of $200,000.

During  December  1998, the Company issued 190,000 shares of common stock valued
at $185,625  (based on the market value on the date of grant) to consultants for
services rendered.

During  January  1999,  the  Company  issued  30,000  shares of common  stock in
connection  with the exercise of stock warrants for $75,000,  in addition to the
warrants exercised above.

During  January  through  September  1999,  the Company  issued 30,000 shares of
common  stock  valued at  $106,875  (based on the market  values on the dates of
grant) and 830,000 shares of restricted common stock valued at $1,689,807 (based
on the  market  values  on the  dates of  grant)  to  consultants  for  services
rendered.

During  January  through April 1999,  the Company issued 20,000 shares of common
stock and  340,000  shares  (plus  16,000  shares  issued for  finders  fees) of
restricted stock for $20,000 and $421,500, respectively.

During March 1999, the Company issued 200,000 shares of restricted  common stock
valued at $393,125  (based on the market value on the date of grant) and options
to purchase  100,000 shares of common stock with an estimated  value of $215,000
(using the  Black-Scholes  option pricing model pursuant to SFAS 123) to a third
party for prepaid advertising time (see Note 1).

During April through  August 1999,  the Company  issued 120,833 shares of common
stock in connection with the exercise of stock options for $336,816.

                                      F-20

<PAGE>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999


NOTE 5 - STOCK OPTIONS

In December 1998, the Company amended the incentive stock option plan adopted in
1996.  The plan  authorizes  the  issuance  of options to purchase up to 500,000
shares of the Company's common stock. All options must have an exercise price of
no less than the stock's fair market value on the date of grant. The option plan
expires on December 10, 2008.

During  fiscal  1998,  pursuant to various  employment  agreements,  the Company
issued options to purchase  185,500  shares of the Company's  common stock at an
exercise price of $0.98. The options vest on various dates through December 2001
and are exercisable through December 10, 2008. A total of $3,711 of compensation
expense  will be recorded  over the vesting  period,  of which $1,237 and $0 was
recognized during 1999 and 1998, respectively.

From  time to time,  the  Company  issues  stock  options  pursuant  to  various
agreements and other compensatory arrangements.

During fiscal 1998,  pursuant to various consulting and outside service provider
agreements, the Company issued to consultants options to purchase 131,000 shares
of the Company's common stock at exercise prices ranging from $0.98 to $7.50 per
share.  The  options  vest  on  various  dates  through  December  2001  and are
exercisable  through December 2008. Total consulting  expense of $134,090 (using
the Black-Scholes option pricing model pursuant to SFAS 123 - see below) will be
recorded over the vesting  period,  of which none and $123,750 was recognized at
December 31, 1999 and 1998, respectively.

During  fiscal 1999,  the Company  entered into  various  employment  agreements
wherein the Company has agreed to supplement  compensation to certain  employees
in the form of stock  options.  Pursuant to the  agreements,  the Company issued
options to purchase  1,086,700 shares of common stock at exercise prices ranging
from $1.12 per share to $1.95 per share and vesting  over a period  ranging from
one to three  years  from the date of grant.  A total of  approximately  $537 of
compensation expense will be recorded over the vesting period, of which none was
recognized during fiscal 1999.

During fiscal 1999,  pursuant to various consulting and outside service provider
agreements, the Company issued to consultants options to purchase 294,400 shares
of the Company's common stock at exercise prices ranging from $1.40 to $6.50 per
share.  The  options  vest  on  various  dates  through  December  2002  and are
exercisable  through December 2009. Total consulting expense of $501,000 will be
recorded over the vesting  period of which  $453,600 was  recognized at December
31,  1999.  Included in these  options was 100,000  options that were issued for
prepaid  advertising  costs.  The estimated  value of these options was $215,000
(using the Black-Scholes option pricing model pursuant to SFAS 123 - see below),
which the Company has recorded as prepaid  advertising  on the balance  sheet at
December 31, 1999.

                                      F-21

<PAGE>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999


NOTE 5 - STOCK OPTIONS, continued

<TABLE>
<CAPTION>

Following is a status of the stock options  outstanding at December 31, 1999 and
1998 and the changes during the years then ended:

                                                          1999                                    1998
                                          -------------------------------------    -----------------------------------
                                                                  Weighted                                Weighted
                                                                  Average                                 Average
                                                                  Exercise                                Exercise
                                              Options              Price              Options              Price
                                          ----------------    -----------------    ---------------     ---------------
<S>                                       <C>                 <C>                  <C>                 <C>

Outstanding, beginning of year                  331,635      $        2.15              15,135      $        14.68
     Granted                                  1,381,100               1.75             316,500                1.55
     Exercised                                 (120,833)             (2.79)                  -                   -
     Expired/Forfeited                          (33,667)              0.98                   -                   -
                                          -------------       ------------        ------------       -------------

Outstanding, end of year                      1,558,235      $        1.77             331,635      $         2.15
                                          =============       ============        ============       =============

Exercisable, end of year                        259,129      $        2.80             132,923      $         3.54
                                          =============       ============        ============       =============

Weighted average fair value of
  options granted                                            $        1.42                          $         0.97
                                                              ============                           =============
</TABLE>

1,378,100 of the options  outstanding at December 31, 1999 have exercise  prices
between $0.98 and $1.95,  with a weighted  average exercise price of $1.15 and a
weighted  average  remaining  contractual  life of 8.4  years.  178,994 of these
options are  exerciseable  at December 31, 1999. The remaining  180,135  options
have exercise prices between $2.50 and $22.50,  with a weighted average exercise
price of $6.50 and a weighted average  remaining  contractual life of 2.6 years.
80,135 of these options are exercisable at December 31, 1999.

The fair value of each option granted  during 1999 and 1998 to  consultants  and
outside service  providers is estimated using the  Black-Scholes  option-pricing
model on the date of grant  using the  following  assumptions:  (i) no  dividend
yield,  (ii) average  volatility  of 240 percent and 205 percent,  respectively,
(iii) weighted-average  risk-fee interest rate of approximately 6.15 percent and
5.2 percent,  respectively,  and (iv) expected life of 2.75 years and 2.5 years,
respectively.

Had  compensation  cost  for the  Company's  1999 and 1998  options  granted  to
employees been  determined  consistent with SFAS 123, the Company's net loss and
net  loss per  share  for the  year  ended  December  31,  1999  and 1998  would
approximate the pro forma amounts below:

<TABLE>
<CAPTION>

                                                          1999                                    1998
                                          -------------------------------------    -----------------------------------
                                            As Reported          Pro Forma          As Reported          Pro Forma
                                          ----------------    -----------------    ---------------     ---------------
<S>                                     <C>                 <C>                   <C>               <C>

Net loss                                $  (7,244,707)      $   (7,302,920)       $ (3,352,541)     $   (3,352,541)
Basic and diluted loss per share        $       (1.37)      $        (1.38)       $      (1.79)     $        (1.79)

</TABLE>

                                      F-22

<PAGE>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999


NOTE 6 - STOCK WARRANTS

From time to time, the Company issues  warrants  pursuant to various  consulting
agreements.

During fiscal 1998,  pursuant to contract  agreements with outside  consultants,
the Company issued  warrants to purchase  60,000 shares of the Company's  common
stock at exercise  prices ranging from $2.50 to $15.00.  The warrants  vested on
the date of grant and are exercisable  through  September 2001. Total expense of
$281,100  representing  the fair value of these warrants was  recognized  during
fiscal 1998.

In connection with the sale of its common stock,  the Company issued warrants to
purchase  3,676,667  shares of the  Company's  common  stock at exercise  prices
ranging from $0.10 to $0.40 (see Note 4). The warrants vest on the date of grant
and  are  exercisable  through  September  2001.  Total  dividends  of  $456,622
representing  the fair  market  value of these  warrants  was  recognized  as of
December 31, 1998.

During fiscal 1999, the Company issued  additional  warrants to purchase 220,000
shares of the Company's  common stock at an exercise price of $3.40 per share in
connection with the issuance of convertible debt (see Note 2). The warrants vest
on the date of grant and are exercisable  through August 2004.  Total additional
interest  expense of $345,400  representing the fair value of these warrants was
recognized during fiscal 1999.

The  following  represents a summary of the warrants  outstanding  for the years
ended December 31, 1999 and 1998:

<TABLE>
<CAPTION>

                                                          1999                                    1998
                                          -------------------------------------    -----------------------------------
                                                                  Weighted                                Weighted
                                                                  Average                                 Average
                                                                  Exercise                                Exercise
                                             Warrants              Price              Warrants             Price
                                          ----------------    -----------------    ---------------     ---------------
<S>                                       <C>               <C>                    <C>              <C>

Outstanding, beginning of year               3,600,898      $          0.57              66,841     $         14.09
     Granted                                   220,000                 3.40           3,736,667                0.33
     Exercised                              (1,638,667)                0.30            (200,000)               0.10
     Expired/Forfeited                               -                    -              (2,610)              30.00
                                         -------------       --------------        ------------      --------------

Outstanding, end of year                     2,182,231      $          1.06           3,600,898     $          0.57
                                         =============       ==============        ============      ==============

Exercisable, end of year                     2,182,231      $          1.06           3,600,898     $          0.57
                                         =============       ==============        ============      ==============

Weighted average fair value of
  warrants granted                                          $          1.57                         $          0.20
                                                             ==============                          ==============
</TABLE>

1,868,000 of the warrants  outstanding at December 31, 1999 have exercise prices
between $0.10 and $0.27,  with a weighted  average exercise price of $0.14 and a
weighted average remaining  contractual life of 1.6 years. All of these warrants
are  exercisable  at December 31, 1999.  The  remaining  314,231  warrants  have
exercise  prices  between $3.40 and $15.00,  with a weighted  average  remaining
contractual life of 4.8 years. All of these warrants are exercisable at December
31, 1999.

                                      F-23

<PAGE>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999


NOTE 6 - STOCK WARRANTS, continued

The fair value of each warrant  granted during 1999 and 1998 is estimated  using
the Black-Scholes  option-pricing model on the date of grant using the following
assumptions:  (i) no dividend yield, (ii) average  volatility of 174 percent and
200 percent,  respectively,  (iii)  weighted-average  risk-free interest rate of
approximately  5.95 percent and 4.66  percent,  respectively,  and (iv) expected
life of 1.5 years.

NOTE 7 - RELATED PARTY TRANSACTIONS


Stockholder Notes and Accrued Interest Receivable

Stockholder notes receivable represents monies loaned to the Company's President
and stockholder.  The notes, which are due on demand, are  uncollateralized  and
bear  interest at 4% per annum.  At December  31,  1999,  the total  outstanding
balance was $115,830, including accrued interest of $15,830, of which $4,000 was
recorded in 1999 and 1998, respectively. As the notes are due from the President
and  stockholder,  the Company has presented the  receivables  as a reduction of
stockholders' deficit at December 31, 1999.


Commitment - Employment Agreements

The  Company  entered  into an  employment  agreement  with its  President.  The
agreement which expires in December 2001,  provides for an annual base salary of
$185,000 and increases to $215,000.  The aggregate minimum annual commitment for
future payments at December 31, 1999 was  approximately  $400,000.  Amounts paid
pursuant to this  agreement  totaled  $185,000 for the years ended  December 31,
1999 and 1998, respectively.

The  Company  entered  into an  employment  agreement  with its  executive  vice
president.  The  agreement,  which expires in June 2001,  provides for an annual
base salary of $185,000 and increases to $215,000.  The aggregate minimum annual
commitment for future payments at December 31, 1999 was approximately  $307,500.
Amounts paid pursuant to this  agreement  totaled  $143,000 and $125,000 for the
years ended December 31, 1999 and 1998, respectively.

Both of these  agreements  also  provide  for a bonus at the end of each  fiscal
quarter as determined by the Company's Board of Directors.  No bonuses have been
declared  or  paid  since   inception.   Both  the   President   and   Executive
Vice-President may voluntarily terminate their employment at any time.

Consulting Fees to Officer/Director

Beginning  August 1, 1998,  the  Company's  chairman  provides  services  to the
Company pursuant to a month to month consulting  agreement requiring $10,000 for
each month  worked.  During 1999 and 1998,  the Company  expensed  $120,000  and
$50,000,  respectively,  related to this  agreement.  As of December  31,  1999,
$40,000 is accrued and  included  in  accounts  payable.  In January  2000,  the
Chairman accepted a full-time management position with the Company.

                                      F-24

<PAGE>

NOTE 8 - INCOME TAXES

The tax effects of temporary  differences that give rise to deferred taxes as of
December 31, 1999 are as follows:

<TABLE>
<CAPTION>
<S>      <C>                                                                                    <C>

         Deferred tax asset:
              Net operating loss carryforward                                                   $       4,185,000
              Expense recognized for granting options and warrants                                        343,000
                                                                                                 ----------------
                    Total gross deferred tax asset                                                      4,528,000

              Less valuation allowance                                                                 (4,528,000)

                                                                                                $               -
                                                                                                 ================
</TABLE>

The valuation  allowance  increased by approximately  $2,941,800 during the year
ended  December 31, 1999. No current  provision for income taxes for the periods
ended  December 31, 1999 and 1998 is required,  except for minimum  state taxes,
since the Company incurred taxable losses during such years.

The  provision  for income  taxes for fiscal  1999 and 1998 was $800 and differs
from the amount computed by applying the U.S.  federal income tax rate of 34% to
loss before income taxes as a result of the following as of December 31:

<TABLE>
<CAPTION>

                                                                              1999                      1998
                                                                       -------------------        -----------------
<S>                                                                    <C>                      <C>

Computed tax benefit at federal statutory rate                          $     (2,463,000)       $      (1,140,000)
State income tax benefit, net of federal effect                                 (478,000)                (221,000)
Increase in valuation allowance                                                2,941,800                1,361,800
                                                                         ---------------         ----------------

                                                                        $            800        $             800
                                                                         ===============         ================

</TABLE>

As of December 31, 1999,  the Company had net operating  loss  carryforwards  of
approximately  $10,760,000  and  $5,960,000  for  federal  and state  income tax
reporting purposes, which begin expiring in 2011 and 2001, respectively.

In the  event the  Company  were to  experience  a  greater  than 50%  change in
ownership  as  defined  in  Section  382  of  the  Internal  Revenue  Code,  the
utilization of the Company's net operating loss carryforwards  could be severely
restricted.

                                      F-25

<PAGE>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999


NOTE 9 - EARNINGS PER SHARE

The following is a  reconciliation  of the  numerators and  denominators  of the
basic and diluted earnings per share calculations:

<TABLE>
<CAPTION>

                                                                              1999                      1998
                                                                       -------------------        -----------------
<S>                                                                    <C>                        <C>

Numerator for basic and diluted earnings per share:
     Net loss available to common stockholders                          $     (7,244,707)       $      (3,352,541)
                                                                         ===============         ================

Denominator for basic and diluted earnings per share:
     Weighted average shares                                                   5,280,837                1,873,517
                                                                         ===============         ================

Basic and diluted loss available to common
  stockholders per common share                                         $          (1.37)       $          (1.79)
                                                                         ===============         ===============
</TABLE>

NOTE 10 - 401(k) RETIREMENT PLAN

On January 1, 1998, the Company  adopted a Section 401(k) tax sheltered  annuity
program in which each full time  employee  with at least three months of service
may  contribute  up to 15% of  his/her  gross  salary (up to a maximum of $9,500
adjusted annually for inflation)  annually on a tax-deferred  basis. The Company
is not required to make any employer contributions to the plan.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

Lease Commitments

The  Company  leases  its  corporate  offices  on  a  month-to-month  basis  for
approximately  $3,200 per month.  Subsequent  to December 31, 1999,  the Company
entered into an agreement to lease new corporate  offices through December 2004.
The agreement provides for monthly lease payments of $9,250.

The  Company  leases  space  for its  research  and  production  studio  from an
unrelated party under an operating lease agreement that expires June 30, 2000.

Future minimum annual commitments under lease agreements are as follows:

<TABLE>
<CAPTION>

                          Years Ending
                          December 31
                   ---------------------------
                   <S>                                                                          <C>

                             2000                                                               $         130,000
                             2001                                                                         114,000
                             2002                                                                         118,000
                             2003                                                                         121,000
                             2004                                                                         125,000
                                                                                                 ----------------

                                                                                                $         608,000
</TABLE>

                                      F-26

<PAGE>

                               MEDIAX CORPORATION
                          (A Development Stage Company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

               For The Years Ended December 31, 1999 and 1998 and
             For The Period From March 30, 1995 (Date of Inception)
                            Through December 31, 1999


NOTE 11 - COMMITMENTS AND CONTINGENCIES, continued

Rent expense under operating  leases was $78,088 and $70,869 for the years ended
December 31, 1999 and 1998, respectively.

Direct Fulfillment Service

In December 1998, the Company entered into a consumer direct fulfillment service
agreement  with a third party.  The  agreement,  which expires in December 2001,
provides for a minimum monthly commitment fee of $2,000, increasing to $4,000 in
August 1999,  or 1.5% of sales.  The  aggregate  minimum  commitment  for future
payments at December 31, 1999 was approximately  $96,000.  Amounts paid pursuant
to this agreement totaled $24,000 for the year ended December 31, 1999.

NOTE 12 - SUBSEQUENT EVENTS

In January 2000, the Company  granted  options to purchase  50,000 shares of the
Company's  common stock at an exercise price of $1.68  (estimated by the Company
to be the fair market value) to  consultants.  The options vest  immediately and
are exercisable through December 2001. Total consulting expense to be recognized
using  the   Black-Scholes   option  pricing  model  pursuant  to  SFAS  123  is
approximately $80,000.

In February 2000, the Company granted options to employees to purchase 50,000 of
the  Company's  common  stock at an exercise  price of $2.81  (estimated  by the
Company to be the fair market value).  The options vest over a three-year period
and are exercisable through December 2008.

In February 2000,  noteholders of convertible  debentures exercised their option
to convert $102,575  (including  accrued interest of $2,575) of debt into 75,981
shares of the Company's common stock.

In March 2000, the Company was ordered to pay an  arbitration  award of $170,000
plus costs of approximately  $13,000 to an order fulfillment  company. The award
was a result of a breach of  contract  pursuant  to a 1999  licensing  agreement
between the Company and the order fulfillment company; therefore the Company has
recorded the related liability of approximately $183,000 at December 31, 1999 in
the related  balance  sheet and statement of  operations.  The Company is in the
process of challenging the arbitrator's authority and the arbitration provisions
in the written agreement.

In March 2000, the Company  issued 218,000 shares of the Company's  common stock
in connection  with the exercise of warrants for $58,200,  which was included in
subscription advances as of December 31, 1999.

                                      F-27