U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-KSB
(Mark one)

  [X]    Annual report under section 13 or 15(d) of the Securities  Exchange Act
         of 1934 for the fiscal year ended December 31, 1998.

  [ ]    Transition report under section 13 or 15(d) of the Securities  Exchange
         Act  of  1934  for  the   transition   period  from   ____________   to
         _____________.

Commission file number

                            GALAXY ENTERPRISES, INC.
                 (Name of small business issuer in its charter)

                   Nevada                             88-0315212
       (State or other jurisdiction of               (I.R.S. Employer
       incorporation or organization)                Identification No.)

       890 North Industrial Park Drive
                Orem, Utah                                         84057
   (Address of principal executive office)                      (Zip Code)

(Issuer's telephone number) (801) 227-0004

      Securities to be registered under Section 12(b) of the Act:
             Title of each class       Name of each exchange on which registered
        Common Stock, Par Value $.007                      None

Check  whether  the  registrant  (1) filed all  reports  required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter  period that the registrant was required to file such reports),
Yes X No , and (2) has been subject to such filing  requirements for the past 90
days. Yes No __X_

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulations  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.

State the registrant's net revenue for its most recent fiscal year: $11,448,392.

The  aggregate  market  value of  voting  stock  held by  non-affiliates  of the
registrant  computed by reference  to the price at which the stock was sold,  or
the  average  bid and asked  prices of such  stock,  as of March 24,  1999,  was
$13,540,180.

As of March 24, 1999,  5,700,841 shares of registrant's  Common Stock, par value
$.007 per share were outstanding.

Documents  incorporated  by  reference:  Proxy  Statement  for June 1999  Annual
Shareholders Meeting (Part III of this Report).
<PAGE>
                            GALAXY ENTERPRISES, INC.
                                 March 31, 1999
                                   Form 10-KSB

                                     PART 1.

ITEM 1.  Description Of Business

(A)      Business Development

      (1)  Form and year of organization.

Galaxy  Enterprises,  Inc.  (the  "Company"  or  "Galaxy")  was  organized  as a
corporation  under the laws of the State of Nevada on March 3, 1994. The Company
was originally  formed under the name Cipher Voice,  Inc., and was  incorporated
for the purpose of  developing,  producing  and marketing  equipment  related to
computer  hardware  security,  known as a  digital  voice  encryption-decryption
electronic device. The Company was unsuccessful in developing the technology and
subsequently ceased operations. On December 4, 1996, the Company acquired all of
the  issued  and  outstanding  common  stock of  Galaxy  Mall,  Inc.,  a Wyoming
corporation  ("GMI"),  in exchange for 3,600,000  shares of the Company's common
stock.  On December 16, 1996,  the Company  changed its name from Cipher  Voice,
Inc.  to Galaxy  Enterprises,  Inc. As a result of this stock  acquisition,  GMI
became a wholly owned subsidiary of the Company.  Most of the Company's  current
products and services are offered through GMI.

      (2) Bankruptcy, receivership or similar proceedings.

The Company has neither filed nor been the subject of a bankruptcy, receivership
or similar proceeding.

      (3) Material reclassifications,  mergers,  consolidations,  or purchase or
          sale of a significant  amount of assets not in the ordinary  course of
          business.

Effective October 1, 1997 the Company,  through its wholly-owned subsidiary GMI,
acquired Profit Education  Systems,  ("PES"),  a Wyoming  corporation  organized
April  26,  1993.  The  Company  previously  had used the  services  of PES as a
marketer  of the  Company's  services  and as a provider  and  conductor  of the
Company's  Internet  education  seminars.  As part of the PES  acquisition,  the
Company acquired PES's marketing strategies and products, employees and assets.

Also effective  October 1, 1997 the Company,  again through GMI,  acquired CO-OP
Business  Services,  Inc.,  ("CO-OP"),  a Utah corporation  organized August 31,
1989.  CO-OP  previously  had provided  GMI with  customer  support,  electronic
storefront  programming,  and merchant and client  interface  programs for GMI's
storefronts on the Galaxy Mall. As part of the  transaction,  the Company agreed
to assume approximately  $85,000 of CO-OP payables and liabilities,  and assumed
future payment of certain existing  equipment and other leases.  CO-OP agreed to
transfer to GMI its assets including computers, office equipment and inventory.

                                       2
<PAGE>
(B)  Business of Issuer

      (1)      Principal Products and Services

The Company,  through its subsidiary GMI,  engages in the business of selling to
its customers  electronic home pages, or  "storefronts,"  on its Galaxy Mall, an
Internet shopping mall, and hosts those storefront sites on its Internet server.
The  Company's  business is to allow its  customers (i) to acquire a presence on
the Internet and (ii) to  advertise  and sell their  products or services on the
Internet.  Storefronts  designed by or for the customers  are  programmed by the
Company   for   display   on  the  mall.   The   Galaxy   Mall  is   located  at
http://www.galaxymall.com.

The Company contracts with consultants and independent  contractors,  or creates
and produces in-house,  various products which it markets. Such products include
the following:

Commercial Web Sites/Web Hosting: The Company programs commercial web sites with
the most current and  up-to-date  types of Internet  programming,  such as HTML,
JavaScript,  and  Perl.  Each site  programmed  for its  customer/merchants  has
available  on-line  ordering  capabilities.  All orders  processed  on-line  are
supported by encrypted  security,  which provides  merchants and their customers
confidence  in the safety of ordering  products  and  services  on-line.  Galaxy
either hosts the sites on its own infrastructure  (servers), or provides virtual
hosting,  which give the  customer/merchant's  site the appearance of having its
own web pages hosted by such customer/merchant.

Auto-responders:  Galaxy sets up e-mail  addresses for its  merchants  that send
back to the individual  requesting  information an instant reply,  then forwards
the  original   message  to  the  owner  of  the   auto-responder.   Similar  to
fax-on-demand,  auto-responders  are a  powerful  marketing  tool for  merchants
offering  products or services.  A merchant can write  advertising  copy for its
product and when someone inquires to the merchant's e-mail address,  the ad copy
immediately is sent to the potential customer.

Tracking Software: The Company provides software for a merchant's web site which
tracks the volume of traffic to that web site.  It also  provides  the  merchant
with  information  concerning the derivation of its potential  customer and such
person's  referring  universal  resource  locator.  This enables the merchant to
track its  marketing  efforts to determine if its potential  customer  found the
merchant  through the  merchant's  Internet  advertisements  or its  listings in
search directories.

Internet Classified Advertisements: Galaxy sells 200 world classified ads on its
classified ad network.  Each classified ad runs on the network for 90 days. This
network is comprised of thousands of listings.

Merchant  Accounts:  Galaxy sells merchant accounts combined with software which
allows the  customer to have real time on-line  processing  for credit cards and
checks.

                                       3
<PAGE>

Banner  Course/Banner  License: The Banner Course consists of over 200 pages and
10 audio  cassettes of  instruction.  Banners are the  equivalent of billboards.
They are graphical images placed  throughout the Internet  advertising  specific
web  pages.  Internet  users  simply  click on the  image  and  they  are  taken
immediately to the site the image is advertising.  The purpose of this course is
to  help  merchants  better  understand  how  banner  advertising  works  on the
Internet.  It helps them benefit their own Internet  business by learning how to
properly use banner  advertising  to promote  their  Internet  site.  The banner
license,  which is sold in conjunction  with the course,  allows the customer to
put banners on multiple  sites within the Galaxy  Mall,  as well as benefit from
ongoing discounts for future impression and banner purchases.

Banner/Impressions:  Galaxy designs and program banners for its customers. These
banners are then  advertised on Galaxy's  network of over 20,000 Internet sites.
The number of banner impressions is determined by the number of times the banner
advertisement  is uploaded,  or displayed,  on one of Galaxy's  Internet  sites.
Galaxy's  customer  purchases a number of  impressions  based upon its  specific
marketing and advertising needs.

Executive Mentor Program:  Galaxy's  mentoring  program is a one-year program in
which a select  number of  Galaxy's  customers  become  involved.  This  program
provides a personal coach to the customer who works with the customer one-on-one
to help the customer build its business on the Internet.


         (2)      Distribution Methods

          Most of the Company's products are Internet related and, consequently,
do not  utilize  traditional  distribution  channels.  The  Company's  principal
products  involve  delivering  to its  customers  access to the  Internet or the
capacity  to  conduct  business  via the  Internet.  The  Company  attracts  its
customers  through Internet  marketing  workshops.  Such workshops are presented
several  times a week  during most weeks of the year.  The  Company  rents hotel
conference  rooms in various  cities  throughout  the United  States in which it
hosts its preview sessions and Internet training workshops.  The Company uses an
information seminar  representing a 90-minute preview of the Galaxy Mall and the
Internet.  Preview  attendees  are then  invited to attend a one day workshop at
which the Company  provides an intensive  training course on Internet and e-mail
use, news groups,  auto-responders,  classified  ads, and search engines used to
market their products and services on the Galaxy Mall.  Interested attendees are
then offered the  opportunity to acquire a  "storefront"  presence on the Galaxy
Mall to market their  products and services.  As a customer of the Company,  the
customer  acquires a website hosted by Galaxy Mall created and maintained by the
Company for which it charges the customer a fee.

The  Company  advertises  its  preview  sessions  and  workshops  in direct mail
solicitations  targeted  to  potential  customers  meeting  certain  demographic
criteria  established  by the  Company.  The  direct  mail  pieces are mailed to
persons and small  businesses  located in cities  scheduled to be visited by the
Company's  workshop  personnel.  Mailing lists  approximating  the  demographics
established  by the Company are obtained  from list  brokers.  Announcements  of
upcoming preview sessions and workshops also appear in newspaper  advertisements
in scheduled cities.

                                       4
<PAGE>

            The Company also uses a  telemarketing  company to advertise  and/or
market Company products and services, including advertising preview sessions and
workshops at selected locations.


         (3)      Status of Publicly Announced New Products

On May 27, 1998 Galaxy  announced  the  introduction  of a new product  known as
BannerSource. BannerSource is a means by which merchants with storefronts on the
Internet can increase traffic to their sites by using banner  advertising on the
World Wide Web. The Galaxy  BannerSource  network currently markets in excess of
one  million  banner  impressions  daily to  businesses  doing  commerce  on the
Internet. (www.bannersource.com).

On December 1, 1998 Galaxy  announced the completion of successful  testing of a
new search engine developed by the Company called MatchSite.  This search engine
allows  Internet users to browse the Web and find sites of interest.  When a Web
user types in a search request,  MatchSite sends the query to several  different
resources,  including the leading,  major search engines. The responses are then
returned to the user organized into a uniform format, and ranked by relevance.
(www.matchsite.com).


         (4)      Competitive Business Conditions

The  Internet  has  developed  at a very  rapid  pace  and it is  impossible  to
determine  what, if any,  changes could or will occur that would change  current
competitive business conditions.  The Company anticipates that new entrants will
try to develop competing Internet malls or new forums for conducting  e-commerce
that  could be  deemed  competitors.  The  Company,  however,  believes  that it
presently has a competitive  advantage due to its marketing  strategies  for its
Galaxy Mall and other products.  In 1995,  certain of the Company's  principals,
who at that time were  working  with  PES,  were  instrumental  in  creating  an
Internet  marketing  workshop  industry.  The  Company  obtained  this  Internet
marketing  workshop  expertise  when it acquired PES. To the knowledge of Galaxy
there  were no other  businesses  engaged  in the  Internet  marketing  workshop
industry at that time. Due to its experience with such marketing workshops,  the
Company  believes  it enjoys a strong  competitive  position  in this  industry.
Galaxy has used its  position  as a leader in the  Internet  marketing  workshop
industry  to  establish  its  Galaxy  Mall as one of the  largest  malls  on the
Internet.  According to the December,  1998 edition of Internet World, Galaxy is
considered "one of the large general malls."

Galaxy is aware of several companies previously active in the Internet marketing
workshop  industry  that no longer are connected  with the  industry.  Galaxy is
aware of only three companies  currently in the industry with which it competes,
and to the knowledge of Galaxy,  only one of these  competitors has been engaged
in the industry as long as has Galaxy.

Anticipated  and  expected  technology  advances  associated  with the  Internet
itself,  increasing use of the Internet,  and new software products, are welcome
advancements  expected to attract more  interest in the Internet and broaden its
potential  as a viable  marketplace  and  industry.  Galaxy  anticipates  it can
compete  successfully,  building on its three-year head start in its segments of
the industry by relying on its infrastructure, existing marketing strategies and
techniques,  systems and procedures,  by adding additional products and services
in the future,  and by periodic  revision of such  methods of doing  business as
deemed necessary.

                                       5
<PAGE>

      (5)  Sources and Availability of Raw Material

Galaxy does not rely on any raw materials for its business operations.

      (6)  Dependence on Major Customers

Registrant does not rely nor is it dependent on one or a few major customers.

      (7)  Intellectual Property

Registrant business  operations do not depend upon any proprietary  intellectual
property other than certain trade secrets.

      (8)  Need For Governmental Approval

The Company  believes that its business  operations do not require  governmental
approval.  At least one jurisdiction,  however,  has asserted that the Company's
products  constitute a "business  opportunity"  and must be registered  prior to
sale.  The Company has disputed this assertion and has entered into a settlement
with that jurisdiction pursuant to which no such registration will be necessary.
See "Legal Proceedings."

      (9)  Effect of Governmental Regulation on Business

The Company is not aware of any existing  governmental  regulation  and does not
anticipate any governmental  regulation  which materially  affects the Company's
ability to conduct its business operations.  Currently sales on the Internet are
not taxed. Whether or when governmental  agencies impose sales taxes on Internet
sales,  it is expected they will be passed on to the consumer as in  traditional
marketing and sales.

      (10)  Research and Development

During the last two fiscal years  Galaxy has engaged in  extensive  research and
development  activities,  developing the various products and services described
above. Galaxy also has developed the following:

An on-line  order  processing  system  allowing its  customers to have real time
verification and processing of all their orders.

A "shopping cart" system allowing  unlimited  products to be added to an on-line
order.  It calculates the product price totals and adds  shipping,  handling and
other applicable charges.

                                       6
<PAGE>

Specialized  "bridges"  allowing  faster access to on-line  processing of credit
cards by credit card processors.

A "window  shopping"  feature allowing users to surf through random  storefronts
with greater ease.

Automated  auto-responder  software allowing a Galaxy customer to Log in to make
changes to the  customer's  auto-responder,  rather  than  relying  on  Galaxy's
programmers to make such changes manually.

A database driven merchant  registration  service allowing Galaxy to monitor and
keep secure its "Merchants Only" section of the Galaxy Mall.

Integrated directory database and billing database, providing Galaxy with faster
and easier billing of its customers.

New banner exchange  software and search engine software allowing Galaxy to sell
advertising  space based upon the impressions  each site  generates.  The banner
exchange  is located  at  bannersource.com  and the search  engine is located at
matchsite.com.

The  Company  estimates  that it spent  approximately  $150,000  during 1997 and
$250,000 during 1998 on such research and development  activities.  In addition,
the Company spent during such time in excess of $100,000 in marketing  research,
development  and market  testing to  introduce  its products and services to the
Canadian market.

      (11)  Compliance with Environmental Laws

Cost of  compliance  with  environmental  laws  are  nominal,  if  any,  and are
therefore immaterial to the Company's operations.

      (12)  Employees

As of March 12, 1999, the Company employed 84 people, 55 of whom work full-time.
Of  the  total  employees,  three  employees  are  executive  personnel,  35 are
technical personnel,  24 are in marketing and sales, and 22 were administrative,
accounting, information systems, and clerical personnel.

ITEM 2.  Description Of Property

The Company's  principal  office is located at 890 North  Industrial Park Drive,
Orem,  Utah 84057.  The property is an  unfurnished  two-story  office  building
having  approximately  8,000 square feet, and includes  landscaping  and a paved
parking area adequate for employee and customer vehicle parking. The property is
leased from an unaffiliated  third party for a period of three years with annual
rental of  $72,000,  payable  monthly  in the  amount  of  $6,000.  The  Company
maintains  tenant fire and casualty  insurance  on its property  located in such
building in an amount deemed adequate by the Company.

                                       7
<PAGE>

The Company also rents on a daily basis hotel  conference  rooms and  facilities
from time to time in various  cities  throughout the United States and Canada at
which it hosts its preview session and Internet training workshops.  The Company
is under no long-term obligations in connection with such hotels.


ITEM 3.  Legal Proceedings

On May 14, 1998 the Company initiated legal action against a competitor, certain
of its officers and employees,  and others, in the Third Judicial District Court
of Salt Lake County,  State of Utah in a proceeding entitled Galaxy Enterprises,
Inc. vs. Cyberworks Institute, Inc. The Commercium, Inc., Scott Alexander, Marek
Shon,  Curtis  Matsko,  Adam  Maher,  and John Does I through  XX,  case  number
980904883.  In this action,  the Company  asserts  claims of breach of contract,
misappropriation of trade secrets,  common law unfair competition,  interference
with  contract  and  economic  advantage,  breach of duty of good faith and fair
dealing, breach of fiduciary duty and common law duty of loyalty, and conspiracy
for which the Company  seeks a minimum of  $3,000,000.  The case is still in the
discovery state and no trial date has yet been scheduled.

On June 18, 1998,  the  Commonwealth  of Kentucky filed an action against Galaxy
Mall, Inc., a wholly-owned  subsidiary of the Company,  in a proceeding filed in
the Fayette County Circuit Court entitled Commonwealth of Kentucky, ex rel. A.B.
Chandler  III,  Attorney  General vs.  Galaxy Mall,  Inc.,  civil action  number
98CI2257.  The action  alleges  Galaxy Mall,  Inc.  offered for sale in Kentucky
business  opportunities  without first  registering with the Attorney General or
posting a surety bond as required by Kentucky law. The suit seeks to: (i) enjoin
Galaxy Mall,  Inc.  from further  sales unless first  registered,  (ii) impose a
$2,000  civil  penalty,  (iii)  cancel any  contracts  made in Kentucky and (iv)
return  of  funds  to  Kentucky   purchasers.   Galaxy  Mall,  Inc.  denied  all
allegations.  On December 15, 1998,  an Order of Dismissal  was entered based on
Galaxy  agreeing  to  advise  the  Kentucky  Attorney  General's  office  of any
complaints from Galaxy  customers in Kentucky for a period of twelve months from
the date of entry of the Order of Dismissal.

In December,  1998 the Company and GMI were served as  defendants in a purported
class action filed in the Superior Court of Orange County,  State of California,
in a case entitled Pamela Chang vs. Busting Out, Inc., De'Nae Walker,  New Body,
Inc.,   Steven   Olschwanger,   Natural  Curves  LLC,  New  Woman,  Ltd,  Galaxy
Enterprises,  Inc.,  Galaxy Mall, Inc., The Barnstead Trust,  East Bay Products,
LLC, Rick Raynford,  et al., in which the plaintiff  claims to have been damaged
in that she was  offered the  opportunity  to  purchase a certain  product  from
various web sites on the Internet operated by defendants.  Plaintiff alleges the
product was offered for sale through  unfair,  deceptive,  untrue or  misleading
advertising  intended  to result in the sale of the  product,  in  violation  of
applicable  California  law.  Plaintiff  seeks to enjoin the use of such alleged
deceptive  practices,  an  accounting  of all  money  received  and all  profits
acquired as a result of such  practices,  an order of restitution to all persons
of funds  acquired  by such  alleged  practices,  a  distribution  of any moneys
recovered,  unspecified actual damages, unspecified punitive damages, attorney's
fees and costs. The Company has denied all allegations and has asserted numerous
affirmative  defenses.  The Company also filed a motion to quash  service of the
summons for lack of  jurisdiction.  On March 17, 1999 the Superior Court granted
the motion to quash.
Consequently, the Superior Court currently has no jurisdiction over the Company.


                                       8
<PAGE>

ITEM 4.  Submission Of Matters To A Vote Of Security Holders

No  matters  were  submitted  for a vote of the  shareholders  during the fourth
quarter of 1998.



                                     PART II

ITEM 5.  Market For Common Equity And Related Stockholders Matters

The Company's  common stock is listed on the National  Association of Securities
Dealers Automated Quotation bulletin board system,  under the symbol "GLXY." The
common stock was first publicly traded on January 7, 1997.

The  following  table  sets  forth the range of high and low bids for the common
stock of the Company for the past two years.

      Common Stock Schedule

                Fiscal Year 1998 Quarter Ended        High      Low

                September 30, 1998 ...........   $    2.32$     .562
                June 30, 1998 ................        2.12      .750
                March 31, 1998 ...............        2.25      .750
                December 31, 1997 ............        2.72     1.375


                Fiscal Year 1997 Quarter Ended   High     Low

                September 30, 1997 ...........   $    3.87$    1.375
                June 30, 1997 ................        5.25     3.000
                March 31, 1997 ...............        5.50     2.500
                December 31, 1996 ............         n/a      n/a


On March 24, 1999,  the closing  quotation  for the common stock on the bulletin
board was $2.875 per share. As of March 24, 1999, there were 5,700,841 shares of
common stock issued and outstanding,  held by approximately  141 shareholders of
record, including several holders who are nominees for an undetermined number of
beneficial owners.

The  trading  volume  of  the  Company's  common  stock  is  limited,   creating
significant  changes in the  trading  price of the  common  stock as a result of
relatively  minor  changes  in the supply and  demand.  Consequently,  potential
investors  should be aware  that the price of the  common  stock in the  trading
market  can  change  dramatically  over  short  periods  as a result of  factors
unrelated to the operations, earnings and business activities of the Company.

The Company has not paid any dividends with respect to its common stock and does
not  anticipate  paying any dividends in the near future.  The Company's  credit
facility with its bank prohibits the payment of dividends without the consent of
the bank.

                                       9
<PAGE>


        ITEM 6. Management's Discussion and Analysis or Plan of Operation

The following  discussion and analysis  should be read in  conjunction  with the
Financial  Statements  and Notes thereto of Galaxy  Enterprises,  Inc. and other
financial information appearing elsewhere herein.

Results of Operations

Revenues.  The Company's  sales for the calendar  year ending  December 31, 1998
were $11,448,392 as compared to $2,495,096 for the twelve months ending December
31,  1997.  This  increase was due in part to the purchase by the Company of the
assets and business  interests of PES and CO-OP. Both companies were acquired on
October 1, 1997,  and therefor the revenues  from them were included in 1998 for
the full year,  but in1997 for only the fourth  quarter.  The  Company  does not
break  down  sales  for  the  businesses   acquired  from  PES  and  CO-OP  and,
consequently,  the Company  cannot give  meaningful  comparisons  of the revenue
attributable to each for the fourth quarter of each year.

Cost of  Services/Products  Sold. Cost of sales during 1998 totaled  $5,105,614,
which  is  equal  to  44.6% of  revenues.  Cost of  sales  during  1997  totaled
$1,056,579,  which is equal to 42.3% of revenues.  This  increase in the cost of
sales  as a  percentage  of  revenues  is  primarily  due  to  the  increase  in
telemarketing  sales which have lower  margins.  Cost of sales is made up of the
cost of tangible products sold, the cost to conduct Internet training workshops,
the  cost  to  program  customer  storefronts  and  contract  and  telemarketing
services. Cost of sales does not include any depreciation.

Selling,   General   and   Administrative   Expenses.   Selling,   General   and
Administrative  Expenses  plus  depreciation  were equal to  $6,244,453  in 1998
compared to  $1,167,880  in 1997.  These  expenses,  as a  percentage  of sales,
increased in 1998 to 54.5% from 46.8% in 1997. The increase in the expenses as a
percentage  of sales is  attributable  to increases in royalty  payments,  legal
expenses,  telephone  expenses and rent for larger quarters;  as well as postage
and mailing expenses to solicit persons to attend the Company's preview sessions
and workshops that are disproportionately  higher than the increase in revenues.
The Company anticipates that such expenses,  as a percentage of sales, will stay
the same because the Company had a significant moving expense in 1998 which will
not occur in 1999 and mailing costs are  anticipated to stay  substantially  the
same.

Amortization.  During 1998  amortization  of Goodwill and  Deferred  Charges was
$80,175  compared  to $36,826  in 1997.  Total  Goodwill  at the end of 1998 was
$794,753 and Deferred Charges were $67,127 (net of  amortization).  The Goodwill
arose  through the purchase by GMI of PES and CO-OP.  The Company  believes that
the combination of the three companies will reduce costs and provide the Company
with greater control over its business activities.

                                       10
<PAGE>

Non-Recurring  Expenses. An expense item in the income statement for fiscal year
1997 called "Merger Expenses" was a one time,  non-recurring  charge relative to
an  investment  in Books Now,  Inc.  ("Books  Now") The Company  entered into an
agreement  to purchase  Books Now in a stock for stock  exchange  and to provide
working  capital for the  implementation  of its business plan.  Pursuant to the
agreement,  the Company  advance  $108,000  to Books Now.  By December  1997 the
Company  determined  that it was not in the  best  interest  of the  Company  to
continue the  arrangement  with Books Now. A settlement  was  negotiated and the
companies  signed a mutual release of claims against each other. The advance was
written off the financial records of the Company.

Income Taxes. Income tax benefit for 1998 was $15,951.  The net benefit arose as
a result  of tax  refunds  from  prior  years  and a  reversal  of a prior  year
over-accrual, offset by the current year income tax liability.

Net  Income/Loss.  The Company  reported  Net Income of $35,375 for the Calendar
year  ending  December  31,  1998,  as compared to Net Income of $87,328 for the
twelve-month period ending December 31, 1997. On a per share basis this amounted
to a profit of  $.0067  per  share in 1998 as  compared  to a profit of $.02 per
share in 1997.


Capital Resources

New  Investments.  Since the end of fiscal  year 1998,  the  Company  (i) sold a
$500,000  convertible  note to the  Augustine  Fund  through  Augustine  Capital
Management,  an  institutional  investor  based in Chicago,  Illinois,  and (ii)
entered into an agreement with Invest Linc Capital Corp. ("Invest Linc") whereby
Invest Linc,  through  certain  related  funds,  will invest up to $1,000,000 in
exchange for equity in the Company.  Also as part of the Agreement,  Invest Linc
received a warrant to purchase an  additional  250,000  shares of the  Company's
stock, at $2.84 per share.  The warrant has a two-year term.  During January and
February, 1999, the Augustine Fund converted the note into 169,189 shares of the
Company's  common stock at a weighted  average price of $2.96 per share.  Invest
Linc has invested a total of  $1,000,000  in exchange for 250,000  shares of the
Company's  common stock.  This capital infusion has  significantly  improved the
Company's liquidity and its ability to meet ongoing working capital needs.

Cash.  Cash on hand at December 31, 1998 totaled $24,718 as compared to $113,144
at  the  end  of  1997.   Total  current  assets  were  $268,292  and  $202,042,
respectively.

Accounts Payable.  Accounts payable at December 31, 1998 totaled $651,473. There
was also a bank overdraft of $179,301  bringing the total payable up to $830,744
as compared to $738,004 at the end of 1997.  Some of the proceeds of the sale of
the  convertible  note  were  used  to  retire  the  overdraft.   Total  current
liabilities  at December  31, 1998 were  $1,068,270  compared to  $1,052,555  at
December 31, 1997.

Equipment  and  Property.  Equipment  increased  during  1998 from  $121,702  to
$171,868 net of accumulated  depreciation of $6,592 in 1997 and $59,773 in 1998.
This was due to the need for additional  computer and other equipment to conduct
the Company's business. Additional capital equipment purchases will be necessary
as the Company  grows.  The Company also leases  equipment.  Leasing  allows the
Company the use of equipment  without the need to disburse  the entire  purchase
price  in cash at the  time of  acquisition.  As of  December  31,  1998  future
aggregate  minimum  obligations  under  equipment  leases for the year 1999 were
$141,027. This includes both the corporate office building and equipment leases.

                                       11
<PAGE>

Stockholders'  Equity.  Total Stockholders'  Equity increased to $256,285 during
1998 from $207,160 at December 31, 1997,  an increase of $49,125.  This resulted
from net income  together with the sale of 10,000 shares of stock to a member of
the board of directors for $13,750.


Liquidity

Ratios.  At December  31,  1998 the  Company's  current  ratio,  current  assets
compared  to current  liabilities,  was a negative 4 to 1 compared to a negative
5.2 to 1 as of  December  31,  1997.  This  out of  balance  situation  is being
corrected by  projected  profitable  operations  and through the sale of Company
stock.

Financing  Arrangements.  The Company has worked out extended payment plans with
hotels and other vendors and is meeting its commitments under the plans. On July
30, 1998 the Company was able to arrange a bank line of credit for $100,000 with
Far West Bank of  Provo,  Utah.  This line is  intended  to assist  the  Company
through the seasonal slow periods it experiences. From July 15 through Labor Day
and again  from  Thanksgiving  Day until  January 15 of the  following  year the
business is slower than at other times.  It is the result of fewer  attendees at
the Company's  Internet training seminars during these traditional  vacation and
holiday periods.

Cash flow.  Current cash flow from operations plus cash from the sale of Company
stock will allow the Company to meet its current  obligations.  During  February
and March 1999 the Company  sold  250,000  shares of common stock to Invest Linc
for a total investment of $1,000,000.  These cash inflows enabled the Company to
begin  implementing  its strategic plan for future growth,  but they will not be
sufficient to fund the entire business plan. Therefore,  it will be necessary to
obtain  additional  equity  funding  and  long-term  loans  from  banks or other
financial institutions to meet its long-term goals. The Company anticipates that
it will sell  additional  stock  through  either  private or  registered  public
offerings  during 1999,  and will  continue its efforts to improve its financial
condition  so  as to  qualify  for  long  term  loans  from  commercial  banking
institutions.


Business Development

In October of 1997 the  Company  embarked  on a campaign  to  increase  sales by
telemarketing to its customers and other interested  parties.  Independent firms
under  contract to GEI  provided  the  telemarketing  services.  The program was
successful  and sales during  fiscal year 1998 from  telemarketing  efforts were
$4,338,663  compared to $74,320 for the fourth quarter of 1997. After the end of
fiscal year 1998, the Company signed a letter of intent to acquire Impact Media,
L.L.C. ("Impact"). Impact is a product development company and produces products
that can be sold to GMI customers.  The Company estimates that one-half of these
additional sales will occur via  telemarketing.  With the acquisition of Impact,
the Company believes it will be able to significantly increase sales.


                                       12
<PAGE>

Year 2000 Readiness

In general,  the Year 2000 issue  relates to computers  and other  systems being
unable to  distinguish  between  the years  1900 and 2000  because  they use two
digits,  rather than four, to define the applicable  year.  Systems that fail to
properly recognize such information will likely generate erroneous data or cause
a system to fail possibly resulting in a disruption of operations. The Company's
products and services do incorporate  such date coding so the Company's  efforts
to address  the Year 2000  issue  fall in the  following  three  areas:  (i) the
Company's  information  technology  ("IT")  systems;  (ii) the Company's  non-IT
systems (i.e.,  machinery,  equipment and devices which utilize technology which
is  "built  in"  such  as  embedded  microcontrollers);  and  (iii)  third-party
suppliers. Management has initiated a program to prepare for compliance in these
three areas and expects such  program to be  implemented  and  completed by June
1999.  Costs will be expensed as incurred and  currently  are not expected to be
material.

The Company  believes its current IT systems,  with a few  exceptions  which are
being addressed, are year 2000 compliant. The Company is currently conducting an
inventory  of non-IT  systems  which may have  inadequate  date  coding and will
commence  efforts  to remedy any  non-compliant  systems by the end of the first
quarter of 1999. Third party suppliers and customers present a different problem
in that the  Company  cannot  control  the  efforts of such third  parties.  The
Company  anticipates  requesting  confirmations  from third party suppliers that
they are year 2000  compliant to avoid  disruptions  of services  and  supplies.
However,  any  failure  on the part of such  companies  with  whom  the  Company
transacts  business to be year 2000  compliant on a timely  basis may  adversely
affect the operations of the Company.

The foregoing statements are based upon management's current assumptions


ITEM 7.  Financial Statements

The financial  statements and supplementary  data are included beginning at page
F-1.


ITEM  8.  Changes  In And  Disagreements  With  Accountants  On  Accounting  And
Financial Disclosure

None.

                                       13
<PAGE>


                                    PART III

ITEM 9. Directors, Executive Officers, Promoters And Control Persons; Compliance
With Section 16(a) Of The Exchange Act

The information required is set forth under the captions "Election of Directors,
Directors and Executive  Officers;  Compliance  with Section 16(a) of Securities
Exchange Act of 1934" in the Company's  definitive  proxy  statement to be filed
pursuant to Regulation 14A and is incorporated herein by reference.


ITEM 10.  Executive Compensation

The  information  required  is set forth  under  the  caption  "Compensation  of
Executive  Officers" in the  Company's  definitive  proxy  statement to be filed
pursuant to Regulation 14A and is incorporated herein by reference.


ITEM 11.  Security Ownership Of Certain Beneficial Owners And Management

The information  required is set forth under the caption "Security  Ownership of
Certain  Beneficial  Owners and  Management" in the Company's  definitive  proxy
statement to be filed pursuant to Regulation 14A and is  incorporated  herein by
reference.


ITEM 12.  Certain Relationships And Related Transactions

The information required is set forth under the caption "Election of Directors -
Certain Relationships and Related Transaction" in the Company's definitive proxy
statement to be filed pursuant to Regulation 14A and is  incorporated  herein by
reference.


                                       14
<PAGE>

ITEM 13.  Exhibits And Reports On Form 8-K

        (a)     Exhibits

Exhibit No.                                                  Description
     *3.1         Articles of Incorporation of Cipher Voice, Inc.
     *3.2         Certificate  of  Amendment  of Articles of  Incorporation  for
                  Cipher Voice, Inc., dated October 30, 1996
     *3.3         Certificate  of  Amendment  of Articles of  Incorporation  for
                  Cipher Voice, Inc., dated December 16, 1996
     *3.4         By-Laws of Cipher Voice, Inc.
    *10.1         Stock for  Stock  Agreement  dated  December  4, 1996  between
                  Cipher Voice and the shareholders Galaxy Mall, Inc.
     *10.2        Exchange  Agreement  between  Galaxy  Mall,  Inc.  and  Profit
                  Education Systems, Inc. dated October 1, 1997
     *10.3        Transfer   Agreement  Between  Galaxy  Mall,  Inc.  and  CO-OP
                  Business Services dated October 1, 1997
     *10.4        1997 Employee Stock Option Plan
     *10.5        Incentive Stock Option Agreement
     *10.6        Stock  Option  Agreement   between  Ray  Anderson  and  Galaxy
                  Enterprises, Inc. dated August 10, 1998
     *10.7        Stock  Option  Agreement  between  Darral G. Clarke and Galaxy
                  Enterprises, Inc. dated August 10, 1998
     *10.8        Consulting Agreement with Gary Cochran dated October 1, 1998
     *10.9        Royalty and Consulting Agreement with Gary Cochran May 1, 1998
     **23.1       Consent of Wisan, Smith, Racker & Prescott, LLP
     **27.1       Financial Data Schedule - filed herewith

    * Filed as an Exhibit to the Form 10-SB filed on November 12, 1998.
    ** Filed herewith.


       (b)      Reports on Form 8-K.

               None.

                                       15
<PAGE>



                                   Signatures

In accordance  with Section 13 or 15(d) of the Exchange Act, the Company  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.


Date:   April 3, 1999            GALAXY ENTERPRISES, INC.



                             By: /s/ John J. Poelman
                                 John J. Poelman
                                  President, Chief Executive Officer
                                  and Director

In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  Company  and in the  capacities  and on the
dates indicated below.



        Date:  April 3, 1999            By:  /s/ John J. Poelman
                                        John J. Poelman
                                        President, Chief Executive Officer
                                        and Director



        Date:  April 3, 1999           By:  /s/ Brandon B. Lewis
                                       Brandon B. Lewis
                                       Executive Vice President, Chief Operating
                                       Officer and Director



        Date:  April 3, 1999          By:  /s/ Frank C. Heyman
                                      Frank C. Heyman
                                      Chief Financial Officer



        Date:  April 3, 1999          By:  /s/ __________________
                                      Darral G. Clarke
                                      Director



        Date:  April ___, 1999        By:_________________________
                                      B. Ray Anderson
                                      Director

                                       16
<PAGE>

                            GALAXY ENTERPRISES, INC.
                                 AND SUBSIDIARY

                        CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1997



                                      F-1
<PAGE>


                                 C O N T E N T S

                                                                            Page

INDEPENDENT AUDITORS'
REPORT.......................................................................F 3

CONSOLIDATED BALANCE
SHEETS.......................................................................F 4

CONSOLIDATED STATEMENTS OF
OPERATIONS...................................................................F 6

CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY.......................................................................F 7

CONSOLIDATED STATEMENTS OF CASH
FLOWS........................................................................F 8

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS...................................................................F 9




                                      F-2
<PAGE>

                          INDEPENDENT AUDITORS' REPORT


Board of Directors
Galaxy Enterprises, Inc.
Orem, Utah


We  have  audited  the  accompanying   consolidated  balance  sheets  of  Galaxy
Enterprises,  Inc.  and  Subsidiary  as of December  31, 1998 and 1997,  and the
related  consolidated  statements of operations,  stockholders'  equity and cash
flows for the years then ended. These consolidated  financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of Galaxy Enterprises,
Inc. and  Subsidiary as of December 31, 1998 and 1997,  and the results of their
operations  and their cash flows for the years  then  ended in  conformity  with
generally accepted accounting principles.

                                             Wisan, Smith, Racker & Prescott LLP

Salt Lake City, Utah
March 19, 1999



                                      F-3
<PAGE>
                            GALAXY ENTERPRISES, INC.
                                 AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1998 and 1997


                                                           1998          1997
                                                      -----------    -----------
    ASSETS

CURRENT ASSETS
  Cash .............................................    $   24,718    $  113,144
  Trade accounts receivable (net of allowance of
   $43,832 at December 31, 1998) ...................        40,839        41,109
  Related party trade accounts receivable ..........        38,910          --
  Prepaid expenses .................................        18,549          --
  Employee advances ................................         1,871         1,000
  Deferred income taxes ............................        14,200          --
  Credit card reserves .............................       129,205        46,789
                                                        ----------    ----------
              TOTAL CURRENT ASSETS .................       268,292       202,042

EQUIPMENT ..........................................       171,868       121,702

OTHER ASSETS
  Deferred charges .................................        67,127        89,502
  Goodwill .........................................       794,753       852,553
  Other ............................................        32,815        16,016
                                                        ----------    ----------
                                                           894,695       958,071




              TOTAL ASSETS .........................    $1,334,855    $1,281,815
                                                        ==========    ==========




The accompanying notes are an integral part of the financial statements.

                                      F-4
<PAGE>

                            GALAXY ENTERPRISES, INC.
                                 AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1998 and 1997


                                                          1998            1997
                                                -----------------    -----------
    LIABILITIES AND EQUITY

CURRENT LIABILITIES
  Trade accounts payable .......................      $  606,553      $  673,044
  Related party trade accounts payable .........          44,920          64,960
  Bank overdraft ...............................         179,301            --
  Accrued expenses .............................         108,536         280,043
  Income taxes currently payable ...............           7,900          27,636
  Notes payable ................................         115,000            --
  Unearned income ..............................           6,060           6,872
                                                      ----------      ----------
        TOTAL CURRENT LIABILITIES ..............       1,068,270       1,052,555

DEFERRED INCOME TAXES ..........................          10,300           7,100
NOTE PAYABLE ...................................            --            15,000

STOCKHOLDERS' EQUITY
  Common stock, par value $.007
   Authorized 25,000,000 shares
   5,281,652 and 5,271,652 shares
   issued and outstanding, respectively ........          36,971          36,901
  Additional paid-in capital ...................          91,959          78,279
  Retained earnings ............................         127,355          91,980
                                                      ----------      ----------
        TOTAL STOCKHOLDERS' EQUITY .............         256,285         207,160
                                                      ----------      ----------

        TOTAL LIABILITIES AND EQUITY ...........      $1,334,855      $1,281,815
                                                      ==========      ==========


The accompanying notes are an integral part of the financial statements.

                                      F-5
<PAGE>

                            GALAXY ENTERPRISES, INC.
                                 AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     Years Ended December 31, 1998 and 1997


                                                       1998             1997
                                               -----------------    -----------
REVENUE
  Sales ....................................     $ 11,448,392      $  2,495,096
  Cost of sales ............................        5,105,614         1,056,579
                                                 ------------      ------------
            GROSS PROFIT ...................        6,342,778         1,438,517
                                                 ------------      ------------

OPERATING EXPENSES
  Selling ..................................        4,764,340           856,073
  General and administrative ...............        1,383,021           305,215
  Bad debt expense .........................           43,832              --
  Depreciation .............................           53,260             6,592
  Amortization .............................           80,175            36,826
  Merger expenses ..........................             --             108,000
                                                 ------------      ------------
           TOTAL OPERATING EXPENSES ........        6,324,628         1,312,706
                                                 ------------      ------------

           OPERATING INCOME ................           18,150           125,811

OTHER (INCOME) EXPENSES
  Interest income ..........................              (11)              (31)
  Other income .............................           (5,405)             --
  Interest expense .........................            4,142               433
                                                 ------------      ------------
         TOTAL OTHER (INCOME) EXPENSES .....           (1,274)              402

  Income before income taxes ...............           19,424           125,409

  Income tax expense (benefit) .............          (15,951)           38,081
                                                 ------------      ------------

            NET INCOME .....................     $     35,375      $     87,328
                                                 ============      ============

Weighted average shares outstanding:
  Basic ....................................        5,272,069         5,271,652
  Diluted ..................................        5,724,683         5,271,652

Net income per share:
  Basic ....................................     $      .0067      $        .02
                                                 ============      ============

  Diluted ..................................     $      .0062      $        .02
                                                 ============      ============

The accompanying notes are an integral part of the financial statements.

                                      F-6
<PAGE>

                            GALAXY ENTERPRISES, INC.
                                 AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     Years Ended December 31, 1998 and 1997


                                                             Additional
                                              Common Stock     Paid in  Retained
                                            Shares    Amount   Capital  Earnings
                                            ------------------------------------

Balance, December 31, 1996 ..............  5,255,352  $36,787  $78,279  $  4,652

Common stock issued for
 bonuses at $.007 per share .............     16,300      114     --        --

Net income for the period ended
 December 31, 1997 ......................       --       --       --      87,328
                                           ---------  -------  -------  --------

Balance, December 31, 1997 ..............  5,271,652   36,901   78,279    91,980

Common stock issued for
 stock options at $.007 per share .......     10,000       70   13,680      --

Net income for the year ended
 December 31, 1998 ......................       --       --       --      35,375
                                           ---------  -------  -------  --------

Balance, December 31, 1998 ..............  5,281,652  $36,971  $91,959  $127,355
                                           =========  =======  =======  ========

The accompanying notes are an integral part of the financial statements.


                                      F-7
<PAGE>

                            GALAXY ENTERPRISES, INC.
                                 AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Years Ended December 31, 1998 and 1997

                                                         1998            1997
                                                -----------------    -----------
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income .........................................   $  35,375    $  87,328

  Adjustments to reconcile net income
  to net cash flows from (used by)
  operating activities:
   Depreciation ......................................      53,260        6,592
   Amortization ......................................      80,175       36,826
   Deferred income taxes .............................     (11,000)       7,100
   Bad debt provision ................................      43,832         --

   Changes in operating assets and liabilities:
    Increase in credit card reserves .................     (82,416)     (46,789)
    Increase in trade accounts receivable ............     (43,562)     (41,109)
    Increase in employee advances ....................        (871)      (1,000)
    Increase in prepaid expenses .....................     (18,549)        --
    (Increase) decrease in trade accounts receivable
       - related entity ..............................     (38,910)      87,787
    Increase in deposits .............................     (16,799)     (16,015)
    Increase in goodwill .............................        --       (867,004)
    Increase (decrease) in trade accounts payable ....     (66,491)     673,044
    Increase (decrease) in trade accounts payable
      - related entity ...............................     (20,040)      63,741
    Increase (decrease) in accrued expenses ..........    (171,507)     280,043
    Increase (decrease) in income taxes payable ......     (19,736)      26,527
    Decrease in unearned income ......................        (812)     (80,915)
                                                         ---------    ---------
     Net cash flows from (used by)
       operating activities ..........................    (278,051)     216,156
                                                         ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of equipment ..............................    (103,426)    (128,294)
                                                         ---------    ---------
      Net cash used by investing activities ..........    (103,426)    (128,294)
                                                         ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES
  Cash from notes payable ............................     100,000       15,000
  Increase in bank overdraft .........................     179,301         --
  Common stock issued for cash .......................      13,750         --
  Common stock issued for bonuses ....................        --            114
                                                         ---------    ---------
      Net cash flows from financing activities .......     293,051       15,114
                                                         ---------    ---------

      NET INCREASE (DECREASE) IN
    CASH AND CASH EQUIVALENTS ........................     (88,426)     102,976

    CASH AND CASH EQUIVALENTS
      AT BEGINNING OF YEAR ...........................     113,144       10,168
                                                         ---------    ---------

   CASH AND CASH EQUIVALENTS
      AT END OF YEAR .................................   $  24,718    $ 113,144
                                                         =========    =========


The accompanying notes are an integral part of the financial statements.

                                      F-8
<PAGE>

                            GALAXY ENTERPRISES, INC.
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1998 and 1997


NOTE 1 -       SIGNIFICANT ACCOUNTING POLICIES
               Organization and Operating History
               The Company was  incorporated  in the State of Nevada on March 3,
               1994  under  the name of  Cipher  Voice,  Inc.  The  Company  was
               originally  organized to engage in the  research and  development
               for the  production  of  equipment  related to computer  hardware
               security.  Initial  capitalization  consisted  of $10,000 in cash
               from incorporators for 821,429 shares of common stock (all shares
               are  post  reverse  split  1:7).  In 1994  the  Company  received
               $100,059  as the  net  proceeds  from a  public  stock  offering;
               404,571 shares of common stock were issued. During 1994 and 1995,
               1,293,858 shares of common stock were reacquired, at no cost, and
               cancelled.  Also, during 1994, 1995, and 1996,  651,067 shares of
               common stock were issued for service  rendered.  During 1996, the
               Company  completed a public offering with net proceeds of $1,757;
               1,130,000  shares  of  common  stock  were  issued.  The  Company
               expended  all of the capital  raised in the 1994  initial  public
               offering   without   completing  the  research  and   development
               necessary to produce the computer hardware  desired.  The Company
               was then considered to be a development stage company. On October
               30, 1996 the Company changed its authorized capital to 25,000,000
               shares of $.007 par value  shares,  by amending  its  articles of
               incorporation,  following the  authorization of a 1 for 7 reverse
               stock split.

               On December 4, 1996, the Company  acquired all of the outstanding
               common stock of Galaxy Mall, Inc., (the Subsidiary) for 3,600,000
               shares of the Company's  common stock.  For accounting  purposes,
               the  acquisition  of  the  Subsidiary  has  been  treated  as  an
               acquisition   of  the  Company  by  the   Subsidiary   and  as  a
               recapitalization  of the Subsidiary.  The acquired  company,  the
               Subsidiary,  is treated as the  surviving  entity for  accounting
               purposes.  The Subsidiary was formed on June 7, 1996 in the state
               of Wyoming.  The  Subsidiary  is engaged in the field of Internet
               marketing,  training  and  providing  storefronts  in an Internet
               shopping mall through  seminars  conducted  throughout the United
               States.

               The  Company  changed  its name to Galaxy  Enterprises,  Inc.  by
               amending its articles of  incorporation on December 16, 1996. Due
               to the operations  conducted and revenues generated,  the Company
               is no longer considered a development stage company.

               The Company  purchased all of the assets of both Profit Education
               Systems,  Inc.  (PES)  and CO-OP  Business  Services  (CO-OP)  on
               October 1, 1997. The Company agreed to assume the  liabilities of
               PES and CO-OP in  exchange  for  their  assets.  The  liabilities
               assumed by the Company in excess of the assets  acquired in these
               transactions  resulted in the recording of goodwill in the amount
               of $867,004.



                                      F-9
<PAGE>
                            GALAXY ENTERPRISES, INC.
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1998 and 1997


NOTE 1 -       SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
               Business Activity
               The Company,  through it  subsidiary,  engages in the business of
               leasing to its customers electronic home pages, or "storefronts,"
               on its Galaxy Mall, an Internet  shopping  mall,  and hosts those
               storefront sites on its Internet server.  The Company's  business
               is to allow  its  customers  (i) to  acquire  a  presence  on the
               Internet  and  (ii) to  advertise  and  sell  their  products  or
               services  on the  Internet.  Storefronts  designed  by or for the
               customers are  programmed by the Company for display on the mall.
               The Company  also  contracts  with  consultants  and  independent
               contractors,  or creates and  produces  in-house,  various  other
               internet business related products which it markets.  The Company
               markets its products and services throughout the United States.

               Principles of Consolidation
               The  consolidated  financial  statements  include those of Galaxy
               Enterprises,  Inc. and its wholly-owned subsidiary,  Galaxy Mall.
               All significant  intercompany accounts and transactions have been
               eliminated.

               Cash and Cash Equivalents
               Cash equivalents are generally comprised of certain highly liquid
               investments with maturities of less than three months.

               Property and Equipment
               Depreciation expense is computed principally on the straight-line
               method in amounts sufficient to write off the cost of depreciable
               assets over their estimated useful lives.

               Normal  maintenance  and  repair  items are  charged to costs and
               expenses as incurred.  The cost and  accumulated  depreciation of
               property and equipment sold or otherwise retired are removed from
               the accounts and gain or loss on  disposition is reflected in net
               income in the period of disposition.

               Amortization
               Deferred  charges are amortized  using the  straight-line  method
               over five years for organization  and startup costs.  Goodwill is
               amortized using the straight-line method over fifteen years.

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



                                      F-10
<PAGE>

                            GALAXY ENTERPRISES, INC.
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1998 and 1997


NOTE 1 -       SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
               Earnings per Share
               In  1997,  the  Financial   Accounting   Standards  Board  issued
               Statement  No. 128,  "Earnings  Per Share"  (SFAS 128).  SFAS 128
               replaced the  calculation of primary and fully diluted net income
               per share with  basic and  diluted  net  income per share.  Basic
               earnings  per share  exclude  any  dilutive  effects of  options,
               warrants, and convertible securities.  Diluted earnings per share
               include any dilutive effects of options, warrants and convertible
               securities,  and  therefore,  are  comparable to the earnings per
               share the Company previously reported as earnings per share.

               Revenue Recognition
               Revenue is recognized when services are provided to customers.

               Income Taxes
               The  Company  accounts  for  income  taxes  using  an  asset  and
               liability  approach to financial  accounting  and  reporting  for
               income taxes. The difference between the financial  statement and
               tax bases of  assets  and  liabilities  is  determined  annually.
               Deferred income tax assets and liabilities are computed for those
               differences that have future tax consequences using the currently
               enacted  tax laws and rates  that  apply to the  periods in which
               they are expected to affect taxable income.  Valuation allowances
               are established,  if necessary,  to reduce the deferred tax asset
               to the amount that will more likely than not be realized.  Income
               tax  expense is the current  tax  payable or  refundable  for the
               period  plus or minus the net change in the  deferred  tax assets
               and liabilities.

               Comprehensive  Income  In June  1997,  the  Financial  Accounting
               Standards  Board  issued SFAS No. 130,  "Reporting  Comprehensive
               Income,"  which  establishes  new  rules  for the  reporting  and
               display of comprehensive  income and its components.  Application
               of SFAS No.  130 had no impact  on the  Company's  net  income or
               stockholders' equity.

               Stock-Based Compensation
               The  Company  applies the  Accounting  Principles  Board  ("APB")
               Opinion 25,  "Accounting for Stock Issued to Employees",  and the
               related  interpretation in accounting for all stock option plans.
               Under APB Opinion 25,  compensation  cost is only  recognized for
               stock  options  issued when the exercise  price of the  Company's
               stock  options  granted  is less  than  the  market  price of the
               underlying  common  stock  on the  grant  date.  Such  costs  are
               expensed over the vesting period of the stock options.


                                      F-11
<PAGE>

                            GALAXY ENTERPRISES, INC.
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1998 and 1997


NOTE 1 -       SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
               Stock-Based Compensation (continued)
               SFAS No. 123, "Accounting for Stock-Based Compensation", requires
               the Company to provide pro-forma information regarding net income
               as if compensation  cost for the Company's stock option plans had
               been  determined in  accordance  with the fair value based method
               prescribed  in SFAS No. 123. To provide  the  required  pro-forma
               information,  the Company  estimates the fair value of each stock
               option   at  the   grant   date  by   using   the   Black-Scholes
               option-pricing model.

               Research and Development Costs
               Research and  development  costs are  expensed as incurred.  Such
               costs were approximately $250,000 in 1998 and $150,000 in 1997.

               Advertising and Promotion
               Costs  of  direct  response  advertising  are  matched  with  the
               expected  revenue  stream,  generally  six to 24  months.  Direct
               response  advertising  consists  primarily of  advertising  costs
               incurred in connection with the procurement of leases of space in
               the Company's on-line mall.

               Advertising expenses of $2,675,335 and $524,055 were incurred for
               the  years  ended  December  31,  1998  and  1997,  respectively.
               Advertising costs deferred, included in other non-current assets,
               amounted to $19,800 at December 31, 1998.

               Reclassifications  Certain amounts in 1997 have been reclassified
               to conform with the 1998 financial statement presentation.


NOTE 2 -       EQUIPMENT
               Equipment  as of December  31, 1998 and 1997 are  detailed in the
               following summary:

                                                Accumulated   Net Book
               1998                  Cost       Depreciation    Value
               ----                -------   --------------- ----------

            Computer equipment ...   $157,351   $ 48,117   $109,234
            Computer software ....     32,189      2,263     29,926
            Office equipment .....     33,157      7,883     25,274
            Furniture and fixtures      6,104        505      5,599
            Leasehold improvements      2,840      1,005      1,835
                                     --------   --------   --------

                                     $231,641   $ 59,773   $171,868
                                     ========   ========   ========



                                      F-12
<PAGE>
                            GALAXY ENTERPRISES, INC.
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1998 and 1997


NOTE 2 -       EQUIPMENT (CONTINUED)
                                            Accumulated    Net Book
               1997                 Cost    Depreciation    Value
               ----               ------- --------------- --------

              Computer equipment   $ 95,815   $  5,007   $ 90,808
              Computer software         201         10        191
              Office equipment .     32,278      1,575     30,703
                                   --------   --------   --------

                                   $128,294   $  6,592   $121,702
                                   ========   ========   ========


NOTE 3 -       COMMITMENTS AND CONTINGENCIES
               Leases
               The Company leases certain of its equipment and corporate offices
               under  long-term  lease  agreements  expiring  at  various  dates
               through  2003.   Future  aggregate   minimum   obligations  under
               operating leases as of December 31, 1998,  exclusive of taxes and
               insurance, are as follows:
                                                           Operating
                                                             Leases
               Year ending December 31,
                 1999                             $          141,027
                 2000                                        139,255
                 2001                                         68,157
                 2002                                         33,334
                 2003                                         27,192
                                                      ------------------

               Total                               $          408,965
                                                       ==================

               Rental  expense  under the  operating  lease  agreements  totaled
               approximately  $186,877 and $83,000 for the years ended  December
               31, 1998 and 1997 respectively.

               The Company is a defendant in two lawsuits  arising in the normal
               course  of  its  business.  In  the  opinion  of  management  the
               liabilities, if any, resulting from these matters will not have a
               material effect on the consolidated  financial  statements of the
               Company.



                                      F-13
<PAGE>
                            GALAXY ENTERPRISES, INC.
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1998 and 1997


NOTE 4 -       DEFERRED CHARGES
               Deferred charges consist of the following:
                                             1998          1997
                                         ----------    -----------

               Organization costs .....   $   7,955    $   7,955
               Startup costs ..........     103,923      103,923
                                          ---------    ---------
                                            111,878      111,878
               Accumulated amortization     (44,751)     (22,376)
                                          ---------    ---------

                                          $  67,127    $  89,502
                                          =========    =========


NOTE 5 -       GOODWILL
Goodwill is comprised of the following  amounts,  resulting from the purchase of
assets from the corresponding entities:
                                                   1998         1997
                                              -----------    -----------

               Profit Education System (PES) .   $ 793,394    $ 793,394
               CO-OP Business Services (CO-OP)      73,610       73,610
                                                 ---------    ---------
                                                   867,004      867,004
               Accumulated amortization ......     (72,251)     (14,451)
                                                 ---------    ---------

                                                 $ 794,753    $ 852,553
                                                 =========    =========


NOTE 6 -       INCOME TAXES
               The  components  of  income  tax  expense  (benefit)  related  to
continuing operations are as follows:
                                            1998           1997
                                        -----------    -----------

               Current ...........       $ (4,951)       $ 30,981
               Deferred ..........        (11,000)          7,100
                                         --------        --------

                                         $(15,951)       $ 38,081
                                         ========        ========

                                      F-14
<PAGE>
                            GALAXY ENTERPRISES, INC.
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1998 and 1997


NOTE 6 -       INCOME TAXES (CONTINUED)
                                                     1998             1997
                                             ------------------  -----------
               Differences between the U.S. statutory
                and effective tax rates

                 U.S. statutory rate .........   $  6,600    $ 29,692
                 State income taxes, net of
                 federal tax effect ..........      3,300       3,500
                 Refund of prior year taxes ..    (17,650)       --
                 Overaccrual of prior year tax     (3,750)       --
                 Other, net ..................     (4,451)      4,889
                                                 --------    --------

                 Effective tax expense (benefit)   $(15,951)   $ 38,081
                                                  ========    ========

                 Cash paid for income taxes ....   $ 32,400    $  4,500
                                                  ========    ========

               The net deferred income taxes in the accompanying  balance sheets
               include the following  amounts of deferred  income tax assets and
               liabilities:

                                                    1998        1997
                                               -----------    --------
           Deferred tax assets
             Receivable valuation .............   $14,200   $  --

           Deferred tax liabilities
             Depreciation .....................    10,300     7,100
                                                  -------   -------

           Net deferred tax asset (liabilities)   $ 3,900   $(7,100)
                                                  =======   =======



                                      F-15
<PAGE>
                            GALAXY ENTERPRISES, INC.
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1998 and 1997


NOTE 7 -       NOTES PAYABLE
               Notes  payable as of December  31, 1998 and 1997 are  detailed in
               the following summary:

                                                          1998          1997
                                                   --------------    -----------

   Note payable to an individual, interest at
    8.5%, unsecured ...............................   $  15,000    $  15,000

   Note  payable  to a  financial  institution  due
   July  30,  1999, interest at prime plus 3%
   (10.75% at December 31, 1998), secured
    by equipment and common stock .................     100,000         --
                                                      ---------    ---------
                                                        115,000       15,000

     Less current portion .........................    (115,000)        --
                                                      ---------    ---------

   Long-term portion ..............................   $    --      $  15,000
                                                      =========    =========

Interest  paid during the years ended  December 31, 1998 and 1997 was $4,100 and
$400, respectively.


NOTE 8 -       RELATED ENTITY TRANSACTIONS
As             discussed in Note 1, on October 1, 1997, the Subsidiary purchased
               the assets and  business  interest of Profit  Education  Systems,
               Inc. (PES).  Until such date, PES had been working under contract
               with  the  Subsidiary,   providing  marketing  services  for  its
               Internet  workshops.  The purchase  price of PES was equal to the
               obligations  of PES which were  assumed by the  Subsidiary.  Such
               acquisition was accounted for as a purchase.

               Also  discussed  in Note 1, on October 1,  1997,  the  Subsidiary
               purchased  the assets and business  interests  of CO-OP  Business
               Services,  Inc. (CO-OP).  Until such date, CO-OP had been working
               under contract to the Subsidiary  providing  customer services to
               its merchants on the Galaxy Mall, an Internet  shopping mall. The
               purchase  price was equal to the  obligations of CO-OP assumed by
               the Subsidiary. Such acquisition was accounted for as a purchase




                                      F-16
<PAGE>

                            GALAXY ENTERPRISES, INC.
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1998 and 1997


NOTE 8 -       RELATED ENTITY TRANSACTIONS (CONTINUED)
               In addition to its direct sales efforts, the Company utilizes the
               services of American  Marketing  Systems,  Inc. ("AMS"), a Nevada
               corporation.  AMS provides  telemarketing services to its various
               clients,  including the Company.  It sells  coaching  (mentoring)
               services to Galaxy Mall  merchants,  and  coaching  services  and
               Company  products to prospects who have not previously  purchased
               Company  products.  During the years ended  December 31, 1998 and
               1997,  the Company paid AMS  $1,441,800  and  $220,200,  in sales
               commissions,  respectively.  John J.  Poelman,  President,  Chief
               Executive  Officer  and  a  Director  of  the  Company  is a  30%
               shareholder of AMS.

               The  Company   utilizes  the  services  of  Electronic   Commerce
               International,  Inc. ("ECI"), a Utah corporation,  which provides
               merchant accounts and leasing services to small  businesses.  ECI
               processes the financing of Company  merchants'  storefront leases
               and also  wholesales  software  to the  Company  used for on-line
               processing  of  credit  card   transactions.   John  J.  Poelman,
               President,  Chief Executive Officer and a Director of the Company
               is the sole stockholder of ECI. Total fees paid to ECI during the
               year ended December 31, 1998 totaled  $306,400.  The Company also
               has a  receivable  from ECI for leases in process at December 31,
               1998 of $38,910.

               Effective  October 1, 1997,  Galaxy  entered into a  nonexclusive
               three  year  consulting  and  marketing   agreement  with  Profit
               Education Specialists which is owned by Gary Cochran ("Cochran"),
               the husband of a shareholder who owns approximately  12.1% of the
               Company's   outstanding  stock.  Such  consulting  and  marketing
               agreement  requires  Mr.  Cochran to provide  services to improve
               existing  marketing  programs  of  Galaxy,  assist in  developing
               brochures, advertisements and other marketing materials, training
               potential   sales   personnel  and  evaluating   future  business
               products,  opportunities or strategies.  Compensation  payable to
               Mr. Cochran is $60,000 per year  commencing  January 1, 1998, and
               increasing 10% per year commencing the second year and subsequent
               years. The agreement is automatically renewable unless terminated
               prior  thereto by consent of the  parties.  The  Company  further
               agrees to pay Cochran  royalties in various  amounts on its sales
               of Cochran created training and Internet  educational  materials.
               Payments to Cochran totaled $63,000 in 1998.




                                      F-17
<PAGE>
                            GALAXY ENTERPRISES, INC.
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1998 and 1997


NOTE 8 -       RELATED ENTITY TRANSACTIONS (CONTINUED)
               Effective  May  1,  1998  Galaxy   entered  into  a  royalty  and
               consulting  agreement  with Cochran in which Galaxy agrees to pay
               Cochran a royalty on Galaxy's  sales of training  manuals,  audio
               tape  presentations  and related  educational  items on marketing
               techniques  for the Internet user created by Cochran.  Such items
               are designed to explain Internet banner  advertising and are used
               by Galaxy to promote sales of its banner  impressions,  BannerWeb
               License,  and BannerWeb Network. The term of the agreement is for
               three years, and is renewable yearly  thereafter  provided Galaxy
               continues to use or distribute  such Cochran  created  materials.
               The  agreement  can be cancelled at any time upon consent of both
               parties.  During the year ended  December 31,  1998,  the Company
               paid Cochran $60,500 for royalties.


NOTE 9 -       MERGER EXPENSES
               On June 23, 1997,  the Company  entered  into an  agreement  with
               Books Now,  Inc.  (Books) to purchase  Books in a stock for stock
               exchange and to provide working capital for the implementation of
               Books business plan. The Company advanced $30,000 upon signing of
               the agreement and made  additional  advances from time to time so
               that the total  advanced  during the year was $108,000.  No stock
               was exchanged between the companies.

               By  December,  1997 it became  clear  that it was not in the best
               interest of the Company to continue this arrangement  since Books
               needed  significantly  more cash than the Company had advanced to
               implement its business  plan. A settlement was negotiated and the
               companies  signed a mutual  release of claims against each other.
               This caused the advances  made by the Company to be worthless and
               they were written off accordingly.  It did, however,  protect the
               Company  from any  liability in the future for breach of contract
               or any other claim that may have been filed by Books.


NOTE 10 -      STOCK OPTION PLAN
               During 1998, the Company  adopted a stock option plan under which
               officers, employees,  directors and others may be granted options
               to purchase  the  Company's  common  stock.  Under the Plan,  the
               Company may grant up to 1,000,000 shares of common stock.  During
               1998, the Company granted  928,250  options to certain  employees
               and directors at an exercise price of $.63 to $3.50 per share.

               Stock  options  expire  ten years from the date of grant and vest
               ratably over five years from the date of grant.  Shares available
               to  future  grants  amount  to  148,250  at  December  31,  1998.
               Subsequent  to year  end,  the board  approved  the  addition  of
               500,000 shares to the plan to be available for future grants.




                                      F-18
<PAGE>
<TABLE>
<CAPTION>
                            GALAXY ENTERPRISES, INC.
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1998 and 1997


NOTE 10 -      STOCK OPTION PLAN (CONTINUED)
               A summary of the status of the Company's  stock option plan as of
               December 31, 1998 and changes during the year is presented below:
                                                                                Weighted
                                                                                 Average
                                                          Exercise              Exercise               Number
                                                            Price                 Price               of Shares

               Balance, December 31, 1997                                                                    -
<S>                                                  <C>           <C>     <C>                              <C>    
                 Granted                             $      0.63 - 3.50    $             0.80               928,250
                 Exercised                           $             1.38    $             1.38               (10,000)
                 Cancelled or Expired                $      0.63 - 2.00    $             0.82               (76,500)
                                                     ------------------    ------------------    ------------------

               Balance, December 31, 1998            $      0.63 - 3.50    $             0.79               841,750
                                                     ==================    ==================    ==================

               Options currently outstanding and exercisable are as follows:

                                                                     Weighted Average
                                                Number                   Remaining                   Number
                   Exercise Price             Outstanding            Contractual Life              Exercisable

               $         .63 to 1.00                   817,500                9.20 years                    126,184
               $        1.01 to 1.50                    20,250                9.30 years                     10,132
               $       1.51 to 2.00                      2,000                9.70 years                        192
               $                3.50                     2,000                9.95 years                         23
               ---------------------    ----------------------    ----------------------     ----------------------

               $          .63 - 3.50                  841,750                 9.25 years                    136,531
               =====================    =====================     ======================     ======================
</TABLE>

               The Company has elected to account for  stock-based  compensation
               under  the  intrinsic  value  method   prescribed  by  Accounting
               Principles Board Opinion No. 25,  "Accounting for Stock Issued to
               Employees," under which no compensation cost for stock options is
               recognized  for stock  option  awards  granted  at or above  fair
               market value. During 1998, the Company recognized no compensation
               expense.  Had  compensation  cost  been  recognized  based on the
               estimated fair market value of the options at the grant date, the
               Company's  net income  and  income  per share  would have been as
               follows:




                                      F-19
<PAGE>




                                             GALAXY ENTERPRISES, INC.
                                                  AND SUBSIDIARY
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                            December 31, 1998 and 1997


NOTE 10 -      STOCK OPTION PLAN (CONTINUED)
                                                       1998
                                                       ----

                    Net income as reported $        35,375
                    Pro-forma net loss              (3,059)
                    Basic EPS as reported                 .0067
                    Pro-forma Basic EPS                  (.0006)
                    Diluted EPS as reported               .0062
                    Pro-forma Diluted EPS                (.0005)



               The  fair  value  of  the  options  were   estimated   using  the
               Black-Scholes   option-pricing   model  based  on  the  following
               weighted average assumptions:

                                                     1998
                                                     ----

                        Risk-free interest rate      4.7%
                        Expected life, in years      9.25
                        Dividend yield               0%
                        Volatility                   4.4%

               The  weighted  average  grant  date fair  value of stock  options
               granted during the year is summarized as follows:

                                                     1998
                                                     ----

               Weighted average fair value    $       0.27
                                              ==================


NOTE 11 -      INCENTIVE COMPENSATION PLAN
               During  1998  ,  the  Company  adopted  an  Officers'   Incentive
               Compensation Plan. The Plan, as amended,  provides that incentive
               compensation  will  be  paid  to the  Company's  chief  executive
               officer,  chief operations officer and chief financial officer if
               the  Company  achieves  certain  levels of  revenues  and  pretax
               profits  as  approved  by the Board of  Directors.  No  incentive
               compensation was earned under such plan in 1998.


NOTE 12 -      SUBSEQUENT EVENTS
               Subsequent  to year end, the Company sold a $500,000  convertible
               promissory   note  bearing   interest  at  7%  per  annum  to  an
               institutional investor.  Prior to the issuance of these financial
               statements,  the note was  converted  into 169,189  shares of the
               Company's common stock.



                                      F-20
<PAGE>
                            GALAXY ENTERPRISES, INC.
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1998 and 1997


NOTE 12 -      SUBSEQUENT EVENTS (CONTINUED)
               The Company also entered into an agreement with another investor,
               whereby the  investor  has  invested  $1 million in exchange  for
               250,000  shares of common  stock.  The investor was also issued a
               warrant  to  purchase  up to  250,000  additional  shares  of the
               Company's  stock at an  exercise  price of $2.84 per  share.  The
               warrant has a two year term.

               On March 4, 1999,  the Company  announced the signing of a letter
               of intent to purchase  Impact  Media,  L.L.C.  Impact  Media is a
               marketing development company for internet products. Terms of the
               letter  of  intent   provide  for  the   Company's   purchase  of
               substantially   all  the   assets  and   assumption   of  certain
               liabilities of Impact Media.







                                      F-21
<PAGE>