SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB/A

                       [X] ANNUAL REPORT UNDER SECTION 13
                 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                     FOR THE FISCAL YEAR ENDED JUNE 30, 1997

                     [ ] TRANSITION REPORT UNDER SECTION 13
                 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                          Commission File No. 000-21775
                        ---------------------------------

                              THINK NEW IDEAS, INC.
                 (Name of small business issuer in its charter)

          DELAWARE                                                95-4578104
   (State or other jurisdiction                              (I.R.S. Employer
of incorporation or organization)                         Identification Number)

    45 WEST 36TH STREET, 12TH FLOOR, NEW YORK, NEW YORK 10018 (212) 629-6800
          (Address and telephone number of principal executive offices)
                         -------------------------------

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

Securities  registered  pursuant to Section  12(g) of the Exchange  Act:  Common
Stock, $0.0001 par value.


Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange Act during the past twelve (12) months (or for such
period that the Registrant was required to file such reports);  and (2) has been
subject to such filing  requirements for the past ninety (90) days.
Yes /x/ No / /

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B 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. / /

The  Registrant's  revenues  for the fiscal  year ended  June 30,  1997  totaled
$17,436,847.

As of September 26, 1997, the aggregate market value of the voting stock held by
non-affiliates of the Registrant  (assuming for this purpose that only directors
and officers of the Registrant are affiliates of the  Registrant),  based on the
average of the  closing  bid and asked  prices on that date,  was  approximately
$24,607,482.

As  of  September  26,  1997,  there  were  6,611,667  shares  of  Common  Stock
outstanding.

Documents   incorporated  by  reference:   Certain  exhibits  hereto  have  been
specifically incorporated by reference herein in Item 13 under Part III hereof.

Transitional Small Business Disclosure Format: Yes / /          No /x/


<PAGE>




                              INDEX TO FORM 10-KSB
                                       OF
                              THINK NEW IDEAS, INC.
                                                                            PAGE
                                     PART I

ITEM 1.   DESCRIPTION OF BUSINESS..............................................2

ITEM 2.   DESCRIPTION OF PROPERTY.............................................12

ITEM 3.   LEGAL PROCEEDINGS...................................................13

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................13

                                     PART II

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS............13

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
          AND RESULTS OF OPERATIONS...........................................14

ITEM 7.   CONSOLIDATED FINANCIAL STATEMENTS..................................F-1

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
          AND FINANCIAL DISCLOSURES...........................................24

                                    PART III

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
          PERSONS; COMPLIANCE WITH SECTION 16(A) OF
          THE EXCHANGE ACT....................................................24

ITEM 10.  EXECUTIVE COMPENSATION..............................................28

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT..........................................................33

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................35

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K....................................37


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        The  Business  section and other parts hereof  contain  forward-looking
statements that involve risks and  uncertainties.  The Company's  actual results
may differ  significantly  from the  results  discussed  in the  forward-looking
statements.  Factors  that might cause such a  difference  include,  but are not
limited to, those discussed in the sections entitled "Business-Factors Affecting
Operating  Results and Market Price of Stock" and  "Management's  Discussion and
Analysis of Financial Condition and Results of Operations."



                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

CORPORATE OVERVIEW

         THINK New Ideas,  Inc., a Delaware  corporation  (the  "Company"),  was
incorporated  pursuant to the laws of the State of Delaware in January  1996 for
the purpose of creating a corporate  structure to  facilitate  the  combination,
operation,  and integration of specialized  businesses operating in the areas of
advertising,  marketing,  Internet and intranet services and data management. On
June 30, 1996, the Company  completed the  acquisition of all of the outstanding
shares of common stock of the following entities: Internet One, Inc., a Colorado
corporation  ("Internet One"),  Creative Resources,  Inc., a Georgia corporation
("Creative  Resources");  Scott A.  Mednick &  Associates,  Inc.,  a  California
corporation  ("The  Mednick  Group");  The  Goodman  Group,  Inc.,  a  New  York
corporation  ("Goodman  Group");  On Ramp,  Inc.,  a New York  corporation  ("On
Ramp"); NetCube Corporation,  a Delaware corporation and NetCube Corporation,  a
New Jersey corporation (collectively,  "NetCube"),  (collectively referred to as
the  "Subsidiaries")  in  exchange  for an  aggregate  of 723,167  shares of the
Company's common stock (the "Common Stock").  See  "Management's  Discussion and
Analysis of Financial Condition and Results of Operations."

         In August 1996, the Company entered into a strategic  relationship with
Omnicom  Group Inc., a publicly held company  ("Omnicom").  Omnicom is the third
largest  marketing  and  advertising  company  in  the  world.  Pursuant  to the
Company's agreement with Omnicom (the "Omnicom Agreement"), the Company received
net  proceeds of  $4,948,000  through the  issuance of 938,667  shares of Common
Stock to Omnicom.  In November 1996, four principal  stockholders of the Company
transferred  an  aggregate  of 124,667  shares of Common Stock to Omnicom for no
cash consideration (the "Omnicom Transaction"). Since June 1996, the Company and
Omnicom have engaged in joint  marketing  of their  services to several  Omnicom
clients and the Company  believes that the relationship is providing access to a
substantial additional client base.

         In November  1996, the Company  completed its initial  public  offering
(the "Initial Public  Offering")  pursuant to which the Company issued 2,150,000
shares of Common Stock. See  "Management's  Discussion and Analysis of Financial


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<PAGE>




Condition  and Results of  Operations  - Liquidity  and Capital  Resources."  In
connection with the Initial Public  Offering,  the Company  effected two reverse
stock splits; accordingly,  all share and per share data reflects the effects of
such splits. See "Note 7 to the Company's Consolidated Financial Statements."

         Pursuant to the terms of a certain Asset  Acquisition  and  Forbearance
Agreement  dated as of May 31,  1997  (the  "Ketchum  Agreement"),  the  Company
acquired certain assets and operations of Fathom Advertising ("Fathom"),  a full
service advertising agency, from Ketchum  Communications,  Inc.  ("Ketchum"),  a
wholly-owned  subsidiary of Omnicom in exchange for the issuance of an aggregate
of 120,000 shares of Common Stock.  The Company's  acquisition of certain assets
and  operations  of  Fathom  was  accounted  for using  the  purchase  method of
accounting.  Accordingly, the results of operations of Fathom have been included
in the Company's  Consolidated Financial Statements since June 1, 1997. Fathom's
single largest client is Oracle Corporation,  a Delaware corporation ("Oracle"),
which  accounts for virtually all of its revenue.  Larry Kopald,  the individual
who was responsible  for the Oracle account while at Fathom,  joined the Company
in connection with its acquisition of Fathom.  See  "Management"  and "Executive
Compensation."

         In June  1997,  the  Company  made  the  decision  to  restructure  its
operations in Boulder,  Colorado and Edgewater, New Jersey. These operations had
been conducted through Internet One and NetCube, respectively.  Internet One had
become a production facility for high level technology client services, but with
limited sales and marketing efforts. The Company determined it could effectively
consolidate the client relationships of its Boulder office into its New York and
Los Angeles  facilities  with minimal  impact,  and therefore,  the facility was
closed and all of the  employees  of Internet One were  terminated.  NetCube had
developed  proprietary data mining and analysis software for large data base and
data  warehousing  applications.  The Company  determined  that the marketing of
"shrink-wrapped" software was not its core competency and would both confuse the
Company's focus and involve too great an investment for the anticipated  return.
The  Company  has hired  several key  developers  from  NetCube for its New York
interactive group, ceasing the ongoing marketing and helpdesk development at its
New Jersey  facility.  This has  resulted in the  termination  of the  remaining
employees  of  NetCube.  The  Company is  currently  discussing  the sale of the
remaining assets of NetCube, primarily the software code, with several different
companies.  Total  estimated  costs  associated  with the above in the amount of
approximately  $1,732,000  have  been  included  in the  Company's  Consolidated
Financial  Statements  for  the  fiscal  year  ended  June  30,  1997.  See  the
Consolidated  Financial  Statements of the Company and "Management's  Discussion
and Analysis of Financial Condition and Results of Operations."

BUSINESS

         The Company's  operations  are  conducted  through  several  sectors of
business:  Traditional,  or  "off-line"  marketing  and  communications,  Online
marketing and communications,  Marketing and Technology Consulting, and Internet
and Intranet systems development and integration.  The Company generates revenue
from both  traditional  marketing and Internet and  interactive  media  services


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<PAGE>




including Website  development and hosting,  corporate  internal  communications
solutions,  database  marketing,  corporate  identity  and product  branding and
packaging,  advertising and media placement  services,  and interface  solutions
that  provide  high-speed  access  via  the  Internet  to  off-line   databases.
Historically, revenues from these services by the Subsidiaries have been derived
on a  project-by-project  basis,  which tends to cause  fluctuations in revenues
between  reporting  periods.  A substantial  portion of those revenues have been
fixed fees for services to be delivered.  While the Company has recently entered
into a number of contracts  for ongoing  maintenance,  content  updates,  server
hosting,  software  licensing  and  subscription  services,  which  will  create
recurring revenue streams for the life of their respective  contracts (typically
twelve (12) months),  it is anticipated that project revenue will continue to be
a significant  component of total revenues and therefore revenue may continue to
fluctuate significantly from quarter to quarter.

         The Company  generally  provides  Website  design and  development  and
traditional marketing services under contracts that vary in duration from two to
four weeks in the case of smaller  projects and up to five months in the case of
larger projects. In connection with Website design and development,  the Company
typically  enters into  twelve-month  arrangements  providing  for  maintenance,
content  updates of  Websites  and  software  licensing  and hosting of a client
Website  on  the  Company's  servers.  Revenues  from  contracted  services  are
generally  recognized  using the percentage of completion  method based upon the
ratio of costs incurred to total estimated  costs of the project.  Revenues from
hosting, maintenance and updates are recognized as the services are provided.

         Part of the  Company's  overall  business  strategy  is to  continue to
increase  the  percentage  of revenue  which is  recurring  and to  continue  to
increase the number of services provided to a particular  client. The Company is
implementing   this   strategy  by   increasing   its  over-all   marketing  and
cross-marketing efforts.

         Another part of the Company's  business strategy is to grow through the
acquisition  and  integration  of  synergistically  compatible  businesses.  The
Company  believes  that there  will be a  consolidation  among  technology-based
marketing solution providers and that this consolidation will continue to create
opportunities for the Company to expand through acquisitions and joint ventures.
In addition to its  acquisition of certain assets and operations of Fathom,  the
Company has undertaken  discussions with several companies engaged in businesses
that are  complimentary or supplementary to those of the Company.  The Company's
acquisition  strategies include acquiring companies that will be integrated into
the Company's existing infrastructure, enabling the Company to acquire access to
additional  product  or  service  offerings,  experienced  management  that  can
contribute  to building the business in a profitable  manner,  and  potentially,
provide international expansion (through the acquisition of companies outside of
the United States).



                                       4
<PAGE>




SERVICES AND PRODUCTS

         The  Company   combines   technological   expertise   in  Internet  and
interactive  communications with extensive  traditional  marketing experience to
provide  integrated  solutions  to leading  corporate  accounts.  The  Company's
solutions  incorporate  brand and corporate  strategy and  positioning,  Website
development,  maintenance,  updating and hosting,  corporate intranet solutions,
sophisticated content development  capabilities,  data access and profile-driven
response technologies, and advertising and media placement services. The Company
has developed several proprietary software applications  (including WebMechanic,
E-Corp, ASAP, Comparabase) that it utilizes in delivering marketing solutions to
its  clients.  The Company  focuses on  assisting  its clients in the  following
areas:

         POSITION AND BRAND  PRODUCTS  AND  SERVICES.  The Company  utilizes its
experience  in  traditional   advertising   and   marketing,   as  well  as  its
understanding  of the  capabilities of different and emerging media, to position
clients and market  their  products.  The Company  provides a range of services,
including brand positioning, developing corporate identity and print, television
and packaging design.

         MARKET CLIENT PRODUCTS,  SERVICES AND ENHANCE  CORPORATE  COMMUNICATION
USING INTERNET  TECHNOLOGY.  The Company  combines  traditional  and interactive
media  approaches to advertising  and marketing in order to position its clients
and market  their  products  and  services on the  Internet.  This  includes the
development of Websites that incorporate the latest in Internet technology.  For
example, at the NEC Website a visitor can request a database-driven catalogue to
compare a number of NEC products and generate  customized  Webpages displaying a
comparative  presentation  of those NEC  products  in which that  visitor has an
interest  (http://www.nec.com).  The Company's "smart Website" methodology helps
to track visitors as they are referred by online advertising and journey through
a Website,  making  suggestions via  "dynamically  generated  content"  targeted
toward an  individual's  browsing habits  (http://www.avon.com),  or category of
interest  (www.as400.ibm.com).  The Company's  WebMechanic  sitebuilding  system
enables  centralized  corporations to empower their  distributors,  wholesalers,
retailers,  etc. to created custom,  personalized  "satellite" Websites and edit
them  at  will  with  virtually  no  online   experience   (www.bigleaguers.com;
www.chrysler.com).  The  skillful  application  of these  technologies  enable a
business  to  enhance   targeted   communications   directly  with  and  between
wholesalers, retailers, manufacturers and customers.

         IDENTIFY AND DEVELOP NEW LINES OF DISTRIBUTION.  The Company is working
with its clients to develop new channels of distribution utilizing the Internet.
For example,  Avon sought to utilize a marketing channel not currently addressed
by its  traditional  distribution  system.  The  Company  is  assisting  Avon in
establishing a Website from which it will market  directly to customers over the
Internet  and allow Avon  representatives  to receive  product  information  and
communicate internally. The Website  (http://www.avon.com) was introduced during
the fiscal year ended June 30, 1997. The Company has also created a Website that


                                       5
<PAGE>




enables Bloomingdale's to sell a variety of its merchandise online,  allowing it
to extend its distribution  beyond its current retail store and catalog presence
(http://www.bloomingdales.com).

         COMMUNICATE  AND OPERATE MORE  EFFECTIVELY  INTERNALLY.  The  Company's
user-friendly interfaces and Internet tools, combined with training software and
methodology,  enable it to develop and deploy  sophisticated  intranet solutions
for its  clients.  For  example,  the  Company  developed  a  password-protected
intranet to allow Anheuser Busch to deliver proprietary marketing information to
its  distributors.  This intranet allows Anheuser Busch,  among other things, to
distribute information and engage in communication with its distributors quickly
and  provides  a means for  distributors  to order  marketing  materials  easily
through a secure medium.

         ACCESS DATA MORE EFFICIENTLY.  The Company's  proprietary  technologies
allow users of both the World Wide Web and corporate intranets to easily access,
analyze and utilize  data via an online  environment.  The  Company's  solutions
include such software components as WebMechanic,  E-Corp, ASAP, and Comparabase.
The Company has integrated the learning derived from the NetCube technology into
a  variety  of  software  solutions,  enhancing  data  retrieval  and  analysis.
WebMechanic and E-Corp enable the Company's  clients to automate data publishing
and email on the  Internet,  via an  "automated  Website  building"  engine  and
"automated email engine" that can be simply  controlled by non-technical  users.
ASAP, the Advanced  Statistical Analysis Program, is a software application that
provides proprietary  statistical analysis to the sponsor of a Website regarding
the number and nature of the visits to that Website. Comparabase is a searchable
comparative  on-line  database that enables  consumers to select products from a
sizeable  on-line  catalogue  and compare  them to similar  products by feature.
These  proprietary  tools  allow the  Company  to: (i) craft  on-line  marketing
solutions  that are  responsive to user needs,  allowing the user to more easily
access,  compile and analyze data; and (ii) provide necessary tools to allow the
Website sponsor to assess the effectiveness of its marketing solutions.

CUSTOMERS

         The  following is a list of  customers of the Company that  represented
$50,000 or more of the combined  revenues of the Company  during the fiscal year
ended June 30, 1997.

<TABLE>
<CAPTION>

<S>                        <C>                               <C>
CONSUMER GOODS             SPORTS & ENTERTAINMENT            TECHNOLOGY
Anheuser Busch             Disney Art Classics               Adlink
Avon Products, Inc.        Home Box Office.                  Amgen, Inc.
Bandai                     Major League Baseball Players     I-LINK
Bloomingdale's             Association                       Inquiry.com
Busch Entertainment        NFL Properties                    IBM
Coca-Cola Company          Request Television                Internet Shopping Network
Colorado Utility           Turner Corp                       Logitech
Crystal Geyser Water                                         McAfee


                                       6
<PAGE>




Curtis Mathes Holding       BUSINESS TO BUSINESS             Mita
Nioxin                      Bankers Trust                    MSNBC
Pioneer Electronics         Eagle River Interactive          NEC USA
Reebok                      ING Barings                      NETCOM
Reebok International, Inc.  Janus Funds                      Netscape
Rockport                    Security First Network           Oracle
Rockport Foundation         Security First Technology        Securware, Inc.
Segasoft                    Sony Electronics
Tambrands                   Sprint                           TRAVEL & TRANSPORTATION
Toshiba                     VisionNet                        Continental Airlines
VF Corporation              Wentworth Research               Chrysler Motors
                            Western Digital Corp
</TABLE>

         During  the  fiscal  year ended  June 30,  1997,  Chrysler  Corporation
accounted for  approximately  10% of the Company's  combined revenue and Pioneer
Electronics  accounted for approximately 13% of the Company's  combined revenue.
No other  customers  accounted  for  more  than  10% of the  Company's  combined
revenue.

COMPETITION

         The market for the  Company's  services  is highly  competitive  and is
characterized  by pressures to incorporate new  capabilities  and accelerate job
completion  schedules.  The Company faces  competition from a number of sources.
These sources include  national and regional new media  marketing  companies and
national and local advertising  agencies,  many of which have started to develop
or acquire  interactive  media  capabilities.  New boutiques that either provide
integrated or  specialized  services  (e.g.,  corporate  identity and packaging,
advertising services or Website design) and are technologically proficient, have
emerged and are competing with the Company. Many of the Company's competitors or
potential   competitors   have  longer   operating   histories,   longer  client
relationships  and  significantly  greater  financial,  management,  technology,
development,  sales,  marketing  and  other  resources  than  the  Company.  The
Company's  ability to maintain  its  existing  clients and  generate new clients
depends  to a  significant  degree  on the  quality  of  its  services  and  its
reputation among its clients and potential clients, as compared with the quality
of services provided by and the reputations of the Company's competitors. In the
event that the Company loses clients to competitors  because of  dissatisfaction
with the services performed or provided by the Company, or the reputation of the
Company is otherwise adversely impacted,  the business,  financial condition and
operating results of the Company could be materially adversely affected.

         There are relatively low barriers to entry into the Company's business.
The Company expects that it will face additional  competition  from new entrants
into the market in the future. There can be no assurance that existing or future
competitors  will not  develop or offer  marketing  communication  services  and
products that provide significant performance, price, creative, technological or


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other advantages over those offered by the Company,  which could have a material
adverse effect on the business, financial condition and operating results of the
Company.

         The Company  believes  that the  principal  competitive  factors in the
market  for new media  marketing  services  are  creative  content,  quality  of
service,   breadth   of   services   offered,   technological   and  new   media
sophistication, perceived value, responsiveness to clients' needs and timeliness
in  delivering  solutions.  The  Company  believes  that it  generally  competes
favorably with respect to each of these factors.

EMPLOYEES

         As of September 26, 1997, the Company employed 149 full-time employees,
including 5 officers,  13 management personnel,  126 in operations,  and 5 sales
and service  representatives.  The Company  considers its relationship  with its
employees  satisfactory  and  is  not  a  party  to  any  collective  bargaining
agreement.

GOVERNMENT REGULATION

         The Company has no  knowledge  of any  governmental  regulations  which
materially adversely affect its business operations.

FACTORS AFFECTING OPERATING RESULTS AND MARKET PRICE OF STOCK

         The Company operates in a rapidly changing  environment that involves a
number of  uncertainties,  some of which are beyond the  Company's  control.  In
addition  to  the  uncertainties  described  elsewhere  in  this  report,  these
uncertainties include:

         DEPENDENCE  ON  KEY  ACCOUNTS.   The  Company's  four  largest  clients
accounted  for  thirty-eight  percent  (38%) of the  Company's  revenues for the
fiscal  year ended June 30,  1997,  with  fluctuations  in the amount of revenue
contribution from each such client from quarter to quarter.  Pioneer Electronics
and Chrysler  Corporation,  the Company's two largest  clients during the fiscal
year ended June 30, 1997, accounted for approximately thirteen percent (13%) and
ten percent (10%) of the Company's  revenues,  respectively,  during the period.
Since the Company's clients generally retain the Company on a project by project
basis,  a client  from whom the  Company  generates  substantial  revenue in one
period may not be a substantial source of revenue in a subsequent period. To the
extent that the Company's  major  clients do not remain a significant  source of
revenues,  and the Company is unable to replace these clients,  there could be a
direct  and  immediate  material  adverse  effect  on  the  Company's  business,
financial  condition and operating results.  The Company's typical project lasts
from two to four weeks in the case of smaller  projects and up to five months in
the case of  larger  projects.  Once a  project  is  completed  there  can be no
assurance  that a client  will  engage the  Company  for  further  services.  In
addition,  the  Company's  clients  may  unilaterally  reduce  their  use of the
Company's  services  or  terminate   existing  projects  without  penalty.   The


                                       8
<PAGE>




termination of the Company's  business  relationship with any of its significant
clients  or a  material  reduction  in the use of the  Company's  services  by a
significant  client  would  have a  material  adverse  effect  on the  Company's
business, financial condition and operating results.

         FLUCTUATIONS IN QUARTERLY OPERATING RESULTS AND MARGINS; SEASONALITY OF
BUSINESS.  The Company's  operating  results have fluctuated in the past and may
fluctuate in the future as a result of a variety of factors, including timing of
the completion, material reduction or cancellation of major projects or the loss
of a major client,  timing of the receipt of new business,  timing of the hiring
or loss of  personnel,  timing of the  opening  or  closing  of an  office,  the
relative  mix of high margin  creative  projects  as  compared  to lower  margin
production projects, changes in the pricing strategies and business model of the
Company or its competitors, capital expenditures and other costs relating to the
expansion of  operations,  and other  factors that are outside of the  Company's
control.  Operating  results  could also be  materially  adversely  affected  by
increased  competition in the Company's markets. The Company's operating margins
may  fluctuate  from  quarter to quarter  depending on the relative mix of lower
cost full time employees versus higher cost independent contractors. The Company
experiences  some  seasonality  in its  business  which  results  from timing of
product  introductions  and  business  cycles  of  the  Company's  clients.  The
Company's  revenues  may be  somewhat  higher  during  certain  quarters  of the
Company's fiscal year reflecting the trends of its clients  preparing  marketing
campaigns  for  products  launched in  anticipation  of fall trade shows and the
holiday season.  The Company's  revenues for the first fiscal quarter tend to be
somewhat  lower  because  many  clients have  expended  most of their  marketing
budgets  prior to the end of the calendar year and do not release funds from the
next calendar  year's  marketing  budget until mid to late January.  The Company
expects this seasonality to continue in the future. As a result of the foregoing
and other factors,  the Company  anticipates that it may experience material and
adverse fluctuations in future operating results on a quarterly or annual basis.
Therefore,  the  Company  believes  that  period  to period  comparisons  of its
revenues and  operating  results are not  necessarily  meaningful  and that such
comparisons cannot be relied upon as indicators of future performance.

         MANAGEMENT OF GROWTH;  RISKS  ASSOCIATED WITH EXPANSION.  The Company's
business  has grown  rapidly  in recent  periods.  The  growth of the  Company's
business and expansion of its customer base have placed a significant  strain on
the  Company's  management  and  operations.  In the last year,  the Company has
opened an office in Seattle,  Washington;  integrated several companies into one
corporate  organization;  and has increased the size of each of its divisions in
Los Angeles and New York. The Company's expansion has resulted,  and is expected
in the future to result,  in  substantial  growth in the number of its employees
and in increased  responsibility for both existing and new management  personnel
and strain on the  Company's  existing  operational,  financial  and  management
information  systems.  The Company's success depends to a significant  extent on
the ability of its executive  officers and other members of senior management to
operate effectively, both independently and as a group.

         In addition,  the Company  plans to expand its  offerings of integrated
marketing  communication  services and products.  There can be no assurance that
the Company will be successful in identifying new services or products that will


                                       9
<PAGE>




be  attractive  to clients or that such  services  or products  will  ultimately
generate  revenues  in  excess  of  costs to  implement  them.  Difficulties  in
recruiting and assimilating new personnel, enhancing the Company's financial and
operational  controls and expanding the Company's marketing and customer support
capabilities may impede the Company's ability to pursue its growth strategy.  In
general,  there can be no assurance  that the Company will be able to manage its
recent or any future  expansions  effectively,  and any inability to do so would
have a material adverse effect on the Company's  business,  financial  condition
and operating  results.  There also can be no assurance that the Company will be
able to sustain the rates of growth  that it has  experienced  in the past.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."

         DEVELOPING MARKET FOR NEW MEDIA; NEW ENTRANTS;  UNPROVEN  ACCEPTANCE OF
THE COMPANY'S NEW MEDIA Solutions. The Company's future growth is dependent to a
significant extent upon its ability to increase the amount of revenue it derives
from providing marketing and advertising  solutions to its customers through new
media,  which the Company defines as media that delivers content to end users in
digital form,  including the World Wide Web, the  Internet,  proprietary  online
services,  CD-ROMs and laptop PC  presentations.  The market for  marketing  and
advertising  through new media has only  recently  begun to develop,  is rapidly
evolving and is  characterized  by an increasing  number of market  entrants who
have  introduced  or  developed  products and  services  for  communication  and
commerce through new media. Demand and market acceptance for recently introduced
products and services are subject to a high level of  uncertainty.  There can be
no assurance that commerce and communication  through new media will continue to
grow. The use of new media in marketing and  advertising,  particularly by those
individuals and enterprises that have historically relied upon traditional means
of marketing and advertising,  generally requires the acceptance of a new way of
conducting business and exchanging information. In particular,  enterprises that
have  already  invested  substantial  resources  in other  means  of  conducting
commerce and exchanging  information  may be  particularly  reluctant or slow to
adopt a new strategy that may make their existing  resources and  infrastructure
less useful.

         In connection  with the Company's  new media  services,  the Company is
exploring  new methods to derive  revenue,  so that a larger  percentage  of its
revenues is  recurring.  These  methods  include  long-term  service  contracts,
ongoing content development  contracts and technology consulting and maintenance
services.  There is no assurance that the Company will be able to negotiate such
arrangements with clients.

         RISKS ASSOCIATED WITH  ACQUISITIONS.  As part of its business strategy,
the Company expects to make  acquisitions of companies that are in complementary
and/or  supplementary  to the  Company.  Any such future  acquisitions  would be
accompanied by the risks commonly  encountered  in  acquisitions  of businesses.
Such risks  include,  among other things,  the  difficulty of  assimilating  the
operations and personnel of the acquired businesses, the potential disruption of
the  Company's  ongoing  business,  the  inability of management to maximize the
financial  and  strategic   position  of  the  Company  through  the  successful
incorporation  of acquired  personnel and clients,  the  maintenance  of uniform
standards, controls, procedures and policies and the impairment of relationships


                                       10
<PAGE>




with  employees  and clients as a result of any  integration  of new  management
personnel.  In June 1997, the Company acquired certain assets for  consideration
consisting of 120,000  shares of Common Stock.  The Company is also  negotiating
with other  potential  acquisition  targets.  The  Company  expects  that future
acquisitions,  if any, could provide for consideration to be paid in cash, stock
or a combination of cash and stock. There can be no assurance that any potential
acquisition  will be consummated.  The Company has also closed the operations of
two (2) of the  Subsidiaries.  Therefore,  there  can be no  assurance  that the
Company's prior acquisitions or any other potential acquisitions will not have a
material  adverse  effect on the  Company's  business,  financial  condition and
operating  results.  See  "Management's  Discussion  and  Analysis of  Financial
Condition and Results of Operations -- Overview."

         UNCERTAIN   ADOPTION  OF   INTERNET   AS  A  MEDIUM  OF  COMMERCE   AND
COMMUNICATIONS;  DEPENDENCE  ON THE INTERNET.  The  Company's  ability to derive
revenues from new media solutions will depend in part upon a robust industry and
the  infrastructure for providing Internet access and carrying Internet traffic.
The  Internet  may not prove to be a viable  commercial  marketplace  because of
inadequate  development  of the  necessary  infrastructure,  such as a  reliable
network backbone or timely development of complementary  products,  such as high
speed modems.  Because global commerce and online exchange of information on the
Internet and other similar open wide area  networks are new and evolving,  it is
difficult to predict with any  assurance  whether the Internet  will prove to be
and remain a viable commercial marketplace. Moreover, critical issues concerning
the commercial use of the Internet (including security,  reliability, cost, ease
of use and access,  and quality of service) remain unresolved and may impact the
growth of Internet use.  There can be no assurance that the Internet will become
a  viable   commercial   marketplace.   If  the  necessary   infrastructure   or
complementary  products are not developed,  or if the Internet does not become a
viable commercial  marketplace,  the Company's  business,  operating results and
financial condition could be materially adversely affected.

         PROJECT  PROFIT  EXPOSURES.   The  Company  generates  the  substantial
majority of its revenues  through project fees on a fixed fee for service basis.
The Company assumes greater financial risk on fixed-price type contracts than on
either time-and-material or cost-reimbursable  contracts.  Failure to anticipate
technical   problems,   estimate  costs   accurately  or  control  costs  during
performance of a fixed-price contract may reduce the Company's profit or cause a
loss. Although the majority of the Company's projects typically last four to six
weeks and therefore each  individual  short-term  project  creates less exposure
than a  long-term  fixed-price  contract,  in the  event  the  Company  does not
accurately anticipate the progress of a number of significant revenue-generating
projects  it could have a material  adverse  effect on the  Company's  business,
operating results and financial condition.

         CONFLICTS  OF  INTEREST.  Conflicts of interest are inherent in certain
segments of the marketing communications industry,  particularly in advertising.
The Company has in the past and will in the future be unable to pursue potential
advertising and other opportunities  because such opportunities will require the


                                       11
<PAGE>




Company to provide  services to direct  competitors  of existing  clients of the
Company.  In addition,  the Company risks alienating or straining  relationships
with existing  clients each time the Company agrees to provide  services to even
indirect  competitors  of existing  Company  clients.  Conflicts of interest may
jeopardize  the  stability  of  revenues  generated  from  existing  clients and
preclude access to business prospects, either of which developments could have a
material  adverse  effect on the  Company's  business,  financial  condition and
operating results.

         MARKET ACCEPTANCE OF THE COMPANY'S APPROACH; SERVICE DEVELOPMENT; RAPID
TECHNOLOGICAL  CHANGE.  The Company provides an integrated  approach to meet the
marketing  communications  needs of its clients. To compete successfully against
specialized  service  providers,  the Company  believes  that its  products  and
services in each marketing communication  discipline will need to be competitive
with the services offered by the firms that specialize in each discipline. There
can be no assurance that the Company will be successful in providing competitive
solutions to clients in each of its integrated marketing  communication services
and products. Failure to do so could result in the loss of existing customers or
the inability to attract and retain new customers,  either of which developments
could  have a  material  adverse  effect on the  Company's  business,  financial
condition and operating results.

         SUSCEPTIBILITY TO GENERAL ECONOMIC  CONDITIONS.  The Company's revenues
and results of operations will be subject to fluctuations based upon the general
economic  conditions.  If there  were to be a  general  economic  downturn  or a
recession  in  the  United  States,  then  the  Company  expects  that  business
enterprises, including its clients and potential clients, will substantially and
immediately reduce their advertising and marketing budgets. In the event of such
an economic  downturn,  there can be no assurance  that the Company's  business,
operating results and financial  condition would not be materially and adversely
affected.

ITEM 2.  DESCRIPTION OF PROPERTY

         The Company's  executive and administrative  offices are located in New
York, New York. The Company also maintains  offices in Los Angeles,  California;
Atlanta, Georgia; Edgewater, New Jersey; and Seattle, Washington.

         The New York facilities consist of approximately  20,000 square feet on
two floors in midtown Manhattan (the "Manhattan Space").  The Manhattan Space is
currently leased on a  month-to-month  basis for $145,000 per annum from October
1, 1996 to  September  2001 and then for $155,000 per annum from October 1, 2001
to September 30, 2006.

         The California facility consists of approximately 14,000 square feet of
space located in Los Angeles.  Such space is currently leased by the Company for
a term of ten (10)  years.  The  initial  rent for the first  three years of the
lease is approximately $27,524 per month. The rent for the following three years
is approximately  $30,276 per month and approximately  $34,405 per month for the
remaining term of the lease.



                                       12
<PAGE>




         The  Company  operates a facility  in New  Jersey,  which is  currently
utilized to support  the  Company's  accounting  operations.  Additionally,  the
Company operates facilities in Boulder, Colorado; Atlanta, Georgia; and Seattle,
Washington that are engaged in the Company  Business  sectors.  These facilities
range in space  from  2,500  square  feet to 9,000  square  feet.  Each of these
facilities is leased, with monthly rents ranging from $750 to $10,000.

         The Company believes that its existing  facilities are adequate to meet
its current operating needs and that suitable additional space will be available
to the Company on favorable terms should the Company require additional space to
accommodate future operations or expansion.  Further,  in the event that any one
of the foregoing  leases was not renewed,  the Company believes that it would be
able to obtain suitable alternative space on terms comparable to those currently
afforded to the Company.

         The  Company  owns no real estate and does not intend to invest in real
estate or interests in real estate,  real estate mortgages,  or securities of or
interests  in  persons  primarily  engaged  in real  estate  activities  for the
foreseeable future.

ITEM 3.  LEGAL PROCEEDINGS

         The  Company  is not a party to any legal  proceedings  required  to be
disclosed pursuant hereto.

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

         There were no matters  submitted to the stockholders of the Company for
consideration during the fourth quarter of the fiscal year ended June 30, 1997.

                                     PART II


ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
                  MATTERS

         In November 1996, in connection with the Initial Public  Offering,  the
Company applied for and was granted inclusion of its securities for quotation on
the  Nasdaq  National  Marketsm  ("Nasdaq").   Consequently,  the  Common  Stock
commenced on quotation on Nasdaq on November 26, 1996 under the symbol "THNK."

         The following table sets forth, for the periods indicated, the reported
high and low bid and asked price  quotations for the Common Stock for the period
from November 26, 1996 (when the  Company's  securities  commenced  quotation on
Nasdaq)  through  June 30, 1997 (the end of the  Company's  most  recent  fiscal


                                       13
<PAGE>




year).  Such quotations  reflect  inter-dealer  prices,  without retail mark-up,
mark-down or commission and may not represent actual transactions.

<TABLE>
<CAPTION>

                                                                      COMMON STOCK
                                                   -------------------------------------------------

                                                          BID ($)                    ASKED ($)

        PERIOD OF QUOTATION                         HIGH           LOW            HIGH          LOW
        -------------------                         ----           ---            ----          ---

Fiscal 1997:
------------
<S>                                                 <C>           <C>             <C>          <C> 
  Second Quarter                                    7.00          5.88            7.38         6.13
  (commencing November 26, 1996)

  Third Quarter                                     6.00          3.75            6.25         4.13

  Fourth Quarter                                    4.50          2.50            5.88         2.88

</TABLE>

         As of  September  26,  1997,  there were 47 holders of record of Common
Stock based upon information  furnished by Continental  Stock Transfer and Trust
Company,  New York, New York,  the transfer agent for the Company's  securities.
The Company believes,  based upon security  positions  listings,  that there are
more than 300 beneficial  owners of the Common Stock.  The closing bid and asked
prices of the  Company's  securities as reported on Nasdaq on September 26, 1997
were: $10.63 and $10.75 per share of Common Stock, respectively. As of September
26, 1997, there were 6,611,667 shares of Common Stock outstanding.

         The  Company  has never  paid and does not  anticipate  paying any cash
dividends on its Common Stock in the foreseeable  future. The Company intends to
retain all  earnings for use in the  Company's  business  operations  and in the
expansion of its business.

         Pursuant to the terms the  Ketchum  Agreement,  the  Company  issued an
aggregate  of  120,000  shares  of  Common  Stock  to  Ketchum,  a  wholly-owned
subsidiary of Omnicom  pursuant to Section 4(2) of the  Securities  Act of 1933.
Further  description of the transaction is provided under the sections  entitled
"Business" and "Certain Relationships and Related Transactions."

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

         The following  discussion  and analysis of the  Company's  consolidated
financial condition and results of operations should be read in conjunction with
the  Company's  Consolidated  Financial  Statements  and Notes thereto in Item 7
hereof.   The  Business   section  and  other  parts  of  this  Report   contain
forward-looking  statements that involve risks and uncertainties.  The Company's
actual  results  may differ  significantly  from the  results  discussed  in the
forward looking statements.  Factors that might cause such a difference include,
but  are  not   limited   to,   those   discussed   in  the   section   entitled
"Business--Factors  Affecting  Operating  Results  and  Market  Price of  Stock"
commencing on page 2.



                                       14
<PAGE>




OVERVIEW

         The Company was  incorporated  in the State of Delaware in January 1996
for the purpose of creating a corporate  structure to facilitate the combination
and integration of specialized businesses operating in the areas of advertising,
marketing, Internet and intranet services and data management.

         On June 30, 1996, the Company  completed the  acquisition of all of the
outstanding  shares of  common  stock of the  Subsidiaries  in  exchange  for an
aggregate of 723,167  shares of Common Stock.  The Company's  acquisition  of On
Ramp was  accounted  for using the purchase  method of  accounting.  Each of the
Company's  other  acquisitions  was accounted for using the pooling of interests
method.  Accordingly,  the results of  operations  for each of the  Subsidiaries
(other than On Ramp) have been  included in the Company's  Financial  Statements
since the earlier of July 1, 1993 or each of such  Subsidiary's  inception.  The
results of operations  of On Ramp have been included in the Company's  Financial
Statements since July 1, 1996.

         Pursuant to the terms of the Ketchum Agreement, effective as of May 31,
1997,  the Company  acquired  certain  assets and  operations of Fathom,  a full
service advertising agency, from Ketchum (a wholly-owned  subsidiary of Omnicom)
for an aggregate of 120,000 shares of Common Stock. The Company's acquisition of
the assets and operations of Fathom was accounted for using the purchase  method
of  accounting.  Accordingly,  the  results of  operations  of Fathom  have been
included in the Company's  Consolidated Financial Statements since June 1, 1997.
Fathom's  single largest  client is Oracle,  which accounts for virtually all of
its revenue.  Larry Kopald,  the individual who was  responsible  for the Oracle
account while at Fathom,  joined the Company in connection  with its acquisition
of Fathom. See "Management" and "Executive Compensation."

         In June  1997,  the  Company  made  the  decision  to  restructure  its
operations in Boulder,  Colorado and Edgewater, New Jersey. These operations had
been conducted through Internet One and NetCube, respectively.  Internet One had
become a production facility for high level technology client services, but with
limited sales and marketing efforts. The Company determined it could effectively
consolidate the client relationships of its Boulder office into its New York and
Los Angeles  facilities  with minimal  impact,  and therefore,  the facility was
closed and all of the  employees  of Internet One were  terminated.  NetCube had
developed  proprietary data mining and analysis software for large data base and
data  warehousing  applications.  The Company  determined  that the marketing of
"shrink-wrapped" software was not its core competency and would both confuse the
Company's focus and involve too great an investment for the anticipated  return.
The  Company  has hired  several key  developers  from  NetCube for its New York
interactive group, ceasing the ongoing marketing and helpdesk development at its
New Jersey  facility.  This has  resulted in the  termination  of the  remaining
employees  of  NetCube.  The  Company is  currently  discussing  the sale of the
remaining assets of NetCube, primarily the software code, with several different
companies.  Total  estimated  costs  associated  with the above in the amount of


                                       15
<PAGE>




approximately  $1,732,000  have  been  included  in the  Company's  Consolidated
Financial Statements for the fiscal year ended June 30, 1997.
See the Consolidated Financial Statements of the Company.

         The Company  generates  revenue  from both  traditional  marketing  and
Internet and  interactive  media  services  including  Website  development  and
hosting,  corporate  internal  communications  solutions,   database  marketing,
corporate  identity and product  branding and packaging,  advertising  and media
placement  services,  and interface solutions that provide high-speed access via
the Internet to off-line databases.  Historically,  revenues from these services
by the Company have been derived on a  project-by-project  basis, which tends to
cause fluctuations in revenues between reporting periods.  Substantial  portions
of those  revenues have been fixed fees for services to be delivered.  While the
Company has recently entered into a number of contracts for ongoing maintenance,
content  updates,   server  hosting  and  software  licensing  and  subscription
services,  which will  create  recurring  revenue  streams for the life of their
respective  contracts  (typically  twelve (12) months),  it is anticipated  that
project  revenue will continue to be a significant  component of total  revenues
and therefore  revenue may continue to fluctuate  significantly  from quarter to
quarter.

         The Company  generally  provides  Website  design and  development  and
traditional marketing services under contracts that vary in duration from two to
four weeks in the case of smaller  projects and up to five months in the case of
larger projects. In connection with Website design and development,  the Company
typically  enters into  twelve-month  arrangements  providing  for  maintenance,
content  updates of  Websites  and  software  licensing  and hosting of a client
Website  on  the  Company's  servers.  Revenues  from  contracted  services  are
generally  recognized  using the percentage of completion  method based upon the
ratio of costs incurred to total estimated  costs of the project.  Revenues from
hosting, maintenance and updates are recognized as the services are provided.

         Part of the  Company's  overall  business  strategy  is to  continue to
increase the percentage of revenue that is recurring and to continue to increase
the  number  of  services  provided  to a  particular  client.  The  Company  is
implementing   this   strategy  by   increasing   its  over-all   marketing  and
cross-marketing efforts.

         Another part of the Company's  business strategy is to grow through the
acquisition  and  integration  of  synergistically  compatible  businesses.  The
Company  believes  that there  will be a  consolidation  among  technology-based
marketing solution providers and that this consolidation will continue to create
opportunities for the Company to expand through acquisitions and joint ventures.
In addition  to its  acquisition  of the assets and  operations  of Fathom,  the
Company has undertaken  discussions with several companies engaged in businesses
that are  complementary or supplementary to those of the Company.  The Company's
acquisition  strategies include acquiring companies that will be integrated into
Company's  existing  infrastructure,  enabling the Company to acquire  access to
additional  product  or  service  offerings,  experienced  management  that  can
contribute  to building the business in a profitable  manner,  and  potentially,
provide international expansion (through the acquisition of companies outside of
the United States).



                                       16
<PAGE>




YEARS ENDED JUNE 30, 1997 AND 1996

         REVENUES.  The  following  table  presents the  Company's  consolidated
revenues, by reference to line of business,  for the fiscal years ended June 30,
1997  and  1996.  The  individual  and  combined   historical  revenues  of  the
Subsidiaries  are not necessarily  indicative of the future revenues that may be
expected.

<TABLE>
<CAPTION>

                                                                     YEAR ENDED JUNE 30,
                                              ------------------------------------------------------------------
                                                                      ($ IN THOUSANDS)
                                                           1997                                 1996
                                              ------------------------------       -----------------------------
                                                       $                 %                  $              %
<S>                                                <C>                  <C>              <C>               <C>
Traditional Marketing                              $ 7,685              44%              $7,084            72%
                                                                                         
Interactive Marketing                                                
                                                     9,752              56%               2,739            28%
                                                     ------                              ------            ---
Total
                                                   $17,437             100%              $9,823            100%
                                                  ========            =====              ======            ====
</TABLE>


         Revenues for the Traditional  Marketing business,  consisting primarily
of  advertising,  strategic  marketing  and  corporate  and  brand  positioning,
increased to $7,685,000 in fiscal 1997 from  $7,084,000 in fiscal 1996 (9%). The
increase  in  revenues  in fiscal 1997  primarily  resulted  from the  Company's
acquisition of the assets and operations of Fathom.

         Revenues for the Interactive  Marketing business,  consisting primarily
of Internet and intranet site development,  systems and services, on-line system
licensing  and site hosting and  maintenance,  increased to $9,752,000 in fiscal
1997 from  $2,739,000 in fiscal 1996 (256%).  The increase in revenues in fiscal
1997 is primarily due to the  acquisition of On Ramp on June 30, 1996 (which had
revenues of  $8,673,000  in fiscal 1997) and the result of increased  demand for
Internet  access and  infrastructure.  This increase was  partially  offset by a
decrease in revenues at NetCube and Internet One, as previously discussed.

         DIRECT  SALARIES  AND RELATED  EXPENSES.  Direct  salaries  and related
expenses consist of wages, payroll taxes and employee benefits.  Direct salaries
and related expenses  increased to $10,029,000 in fiscal 1997 from $3,629,000 in
fiscal  1996  (176%).  The  increase  in  fiscal  1997 is  primarily  due to the
acquisition of On Ramp (which caused an increase of  $3,862,000)  and the hiring
of additional  personnel necessary to build the infrastructure for future growth
of the Company.

         OTHER DIRECT EXPENSES. Other direct expenses consist of contract labor,
materials and facility expenses  associated with providing  services to clients.
Other direct expenses  increased to $4,692,000 in fiscal 1997 from $3,870,000 in
fiscal 1996 (21%).  The increase in fiscal 1997 is primarily due to  incremental
costs incurred by the Subsidiaries as a result of higher levels of operations.



                                       17
<PAGE>




         SELLING,  GENERAL AND  ADMINISTRATIVE  EXPENSES.  Selling,  general and
administrative  expenses consist of marketing expenses and technology costs such
as hardware and software  purchases and leasing,  as well as  telecommunications
costs for Internet access. Additionally, this category includes occupancy costs,
insurance,  consulting and  professional  fees,  general office expenses and bad
debt  expense.   Selling,  general  and  administrative  expenses  increased  to
$6,842,000 in fiscal 1997 from $2,377,000 in fiscal 1996 (188%). The increase in
fiscal 1997 is  primarily  due to the  acquisition  of On Ramp (which  caused an
increase of $2,918,000).  The remainder is due to increased  occupancy  expenses
and administrative salaries, particularly at the corporate level, as the Company
continued to build its  infrastructure to accommodate the Company's  operational
growth,  as well as non-cash  consulting  fees in the amount of $369,000 for the
value of Common Stock issued to a consultant and options issued to  non-employee
directors.  See "Executive  Compensation" and "Certain Relationships and Related
Transactions."

         DEPRECIATION AND AMORTIZATION.  Depreciation and amortization increased
to  $1,619,000  in fiscal 1997 from  $209,000 in fiscal  1996.  The  increase in
fiscal 1997 is primarily due to amortization of intangibles,  primarily goodwill
acquired in connection with the acquisition of On Ramp (which caused an increase
of  $1,325,000).  The  remaining  increase  in fiscal 1997 is  primarily  due to
increased   depreciation  and   amortization   associated  with  higher  capital
expenditures.  It was anticipated that  depreciation  and amortization  expenses
would  increase  significantly  in  fiscal  1997  and  1998 as a  result  of the
amortization  of  goodwill  and  other   intangible   assets  arising  from  the
acquisition of On Ramp.

         RESTRUCTURING  COSTS. The Company incurred  restructuring costs in 1997
of $1,732,000  due to its decision in June 1997 to cease  operations in Boulder,
Colorado and Edgewater,  New Jersey and to close the offices of its Internet One
and NetCube respectively located there, as previously discussed.

         MERGER  EXPENSES.  Merger expenses  consist of the  nonrecurring  costs
incurred by the Company in completing the  acquisitions  of the  Subsidiaries on
June 30, 1996, including a finder's fee paid to an affiliate of the Company. See
"Certain Relationships and Related Transactions."

         NET INTEREST INCOME. Interest income was $286,000 in fiscal 1997 due to
income earned on investment  of the proceeds of the Initial  Public  Offering on
November 26, 1996.  Interest  expense  decreased to $134,000 in fiscal 1997 from
$373,000 in fiscal 1996 (64%).  The decrease in fiscal 1997 was primarily due to
savings  resulting  from the  elimination  of debt  through  the  repayment  and
conversion of amounts  outstanding under certain  convertible  promissory notes.
See "Certain Relationships and Related Transactions."

         TAXES ON INCOME.  The  Company  had income tax  expense of  $246,000 in
fiscal 1997 and  $141,000 in fiscal  1996.  Income tax expense in fiscal 1997 is
the result of the Company  establishing  a valuation  allowance  on deferred tax
assets  due to the  uncertainty  of  their  future  realization  and  state  tax
liabilities.  In fiscal 1996,  certain of the  Subsidiaries  were not subject to
taxation  in  fiscal  1996  (as  such  subsidiaries  had  elected  Subchapter  S


                                       18
<PAGE>




corporation  status under applicable  provisions of the Internal Revenue Code of
1986,  as amended,  and certain state  statutes) and the remaining  Subsidiaries
were  subject  to  state  income  taxes  based  on  their  respective   discreet
operations.  Therefore, an effective tax rate on a consolidated historical basis
is not meaningful.  The Company intends to file consolidated Federal tax returns
beginning with the June 30, 1997 tax year.

         NET  LOSS.  As a result of the  above  factors,  the net loss per share
increased  to  $(1.63)  in  fiscal  1997  from a pro forma net loss per share of
$(.32) in fiscal 1996.

   
         FOURTH QUARTER  OPERATING  RESULTS.  The Company  incurred an operating
loss of  $4,911,000  for the fourth  quarter of fiscal  1997 as  compared  to an
operating  loss of  $1,724,000  for the three  months  ended March 31, 1997 (the
third quarter of fiscal 1997). The third quarter operating loss of $1,724,000 is
after the restatement of the financial  statements for the three and nine months
ended March 31, 1997,  which were restated through the filing of an amended Form
10-QSB to increase  other  direct  expenses by  $212,000,  selling,  general and
administrative by $289,000 and the net loss, and accounts  payable,  by $501,000
for costs incurred in the late stages of the  completion of contracts  completed
in the third quarter of fiscal 1997 which previously had not been identified and
accrued.  The Company identified these items in the preparation of its financial
statements for the year ended June 30, 1997, and determined that the omission of
their  accrual in the  originally  issued  March 31, 1997  financial  statements
resulted from failure of the  production  departments  to advise  accounting and
financial  functions of certain late stage  expenses on a basis timely enough to
allow  their  consideration  when the  contracts  were  closed and billed to the
client. In the first and second quarters of fiscal 1998 the Company  implemented
certain new job  budgeting  and closing  systems and  procedures  to improve the
control over both the amount of costs incurred in performing client services and
the timely  identification  and consideration of such items. The restatement had
the effect of  increasing  the net loss per share by $.09 and $.12 for the three
and nine months ended March 31, 1997, respectively.

         Revenues  for the fourth  quarter,  as compared  to the third  quarter,
increased  23% to  $5,123,000,  due to the June 1, 1997  acquisition  of Fathom,
which  accounted for $300,000 of the increase,  and an increase in the number of
projects from existing clients in the Company's interactive business.  Operating
expenses  increased 70% to  $10,094,000  from  $5,935,000 in the third  quarter,
principally as the result of the $1,732,000 restructuring charge recorded in the
fourth quarter and a $1,987,000 increase in selling,  general and administrative
expenses. Selling, general and administrative expenses increased principally due
to the expenses of Fathom  ($523,000) and due to added payroll and related costs
in New York and Los  Angeles,  each of which  increased  staffing  in efforts to
pursue  revenue  growth.  In the  fourth  quarter  of fiscal  1997 and the first
quarter of fiscal 1998 the  Company  reviewed  the causes of the fourth  quarter
increase  in selling,  general  and  administrative  expenses  and made  certain
operational   changes,   including  the  closing  or  consolidation  of  certain
operations (see "Overview").  As a result the Company anticipates that the level


                                       19
<PAGE>




of expenses  for fiscal 1998 will be returned to levels,  relative to  revenues,
closer to those experienced in the first three quarters of fiscal 1997. 
    

LIQUIDITY AND CAPITAL RESOURCES

         Since their respective formations, the Subsidiaries have financed their
operations  primarily  through cash generated from operations,  bank borrowings,
shareholder contributions and private financings.

         During 1996, the Company entered into a series of transactions in order
to fund the operations of the Subsidiaries and to prepare itself for the Initial
Public Offering. The Company raised $270,000 in a private offering,  pursuant to
which the  Company  issued  three  convertible  10%  promissory  notes (the "10%
Notes").  Proceeds of the private  placement were used to cover costs related to
the Company's  acquisitions of the Subsidiaries and the Initial Public Offering.
The  Company  raised an  additional  $1,800,000  in  another  private  offering,
pursuant to which the Company issued several 12%  convertible  promissory  notes
(the "12% Notes").  Proceeds received by the Company,  after deducting placement
fees and other  expenses,  totaled  $1,582,500.  Of the funds received from this
private  placement,  $1,000,000  was  loaned to On Ramp in order to  complete  a
transaction  in which On Ramp redeemed  outstanding  shares of its common stock.
The remaining  funds  received from this private  placement were used to provide
working capital for On Ramp and Internet One.

         In August 1996, the Company received net proceeds of $4,948,000 through
the issuance of 938,667 shares of Common Stock to Omnicom.  Proceeds raised from
the Omnicom  Transaction  were used by the Company to retire the  nonconvertible
portion of the  outstanding  principal and accrued  interest under the 10% Notes
and 12%  Notes  (aggregating  $1,880,505),  to  repay  certain  other  debt  and
outstanding obligations, to fund the operations of the Subsidiaries and to cover
expenses  and  costs  incurred  in  connection  with  the  acquisitions  of  the
Subsidiaries and the Initial Public Offering.

         In November  1996, the Company  completed its Initial Public  Offering,
which  has  provided   significant  working  capital  to  the  Company  and  its
Subsidiaries.  The Company issued  2,150,000 shares of Common Stock and received
net proceeds from the Initial Public Offering of $11,973,000.

         At June  30,  1997,  the  Company  had cash  and  cash  equivalents  of
approximately  $3,451,000  and  working  capital  of  approximately  $8,079,000,
primarily as a result of effecting  the following  transactions  during the year
ended June 30, 1997: (i) the Omnicom Transaction and the receipt of net proceeds
therefrom of  $4,948,000;  (ii) the  conversion  of $27,000 in principal  amount
under  the 10% Notes and  $162,000  in  principal  amount  under the 12%  Notes,
respectively,  into  216,667  and  216,660  shares  of Common  Stock;  (iii) the
repayment of the non-convertible portion of principal and interest under the 10%
Notes and the 12% Notes, aggregating $1,880,550 from the proceeds of the Omnicom
Transaction;  (iv)  the  payment  of a  finder's  fee in  consideration  for the


                                       20
<PAGE>




termination  of a certain  finder's  agreement  using  proceeds from the Omnicom
transaction;  (v) the  renegotiation of the terms of a note payable to a related
party,  providing for  liquidation  of $288,000 of such debt using proceeds from
the Omnicom  Transaction and extending the maturity of the remaining  balance of
$516,000 until March 1998; and (vi) the Initial Public Offering.

         Net cash used in  operating  activities  for fiscal 1997 of  $7,849,000
resulted  primarily  from a net loss of $7,571,000  combined with an increase in
accounts and unbilled  receivables of $4,336,000 and  $2,200,000,  respectively,
offset in part by non-cash  charges for: (i)  depreciation  and  amortization of
$1,619,000  (including  amortization  of  intangibles of  $1,297,000),  and (ii)
restructuring costs of $1,732,000, combined with an increase in accounts payable
and accrued  expenses of  $1,843,000.  The increase in unbilled  receivables  is
principally due to two Website  development  projects  undertaken by On Ramp for
which  significant  work has been performed in advance of the dates billings are
permitted under the contracts.  Accounts  receivable  increased primarily due to
the increased  volume of work  performed by On Ramp and an increase in the aging
of accounts  receivable.  Accounts  receivable  greater than sixty (60) days old
increased  from $494,000 at June 30, 1996 to  $1,582,000  at June 30, 1997.  The
increase in such  receivables  is primarily due to certain  receivables  arising
from ongoing strategic marketing and branding assignments undertaken for certain
significant  long-standing  customers  which the  Company  believes  are credit-
worthy.  Such amounts were either  collected  subsequent to June 30, 1997 or the
Company believes them to be collectible. The Company believes that the provision
for bad debts of approximately  $614,000  recognized  during the year ended June
30, 1997 is sufficient to adjust the carrying  amount of its receivables at June
30, 1997 to an amount which approximates net realizable value.  Accounts payable
and accrued  expenses  increased  principally due to the inclusion of On Ramp in
fiscal 1997.

         Net cash used in  investing  activities  for fiscal 1997 of  $2,898,000
resulted  primarily  from capital  expenditures  of  $1,487,000  and purchase of
marketable securities of $1,322,000.

         Net  cash  provided  by  financing   activities   for  fiscal  1997  of
$14,198,000  resulted  primarily  from net cash proceeds from the Initial Public
Offering  and  the  Omnicom   Transaction   of   $11,973,000   and   $4,948,000,
respectively,  partially  offset by repayments  on promissory  notes and related
party payables of $1,881,000 and $500,000 respectively.

         The Company has entered into employment agreements ranging in term from
one year to three years  (exclusive of extensions) with several of its executive
officers  pursuant to which the Company is obligated to pay such  individuals up
to an aggregate of $1,095,000 per year. See "Executive Compensation."

         The  Company  anticipates  significant  changes in its  operating  cost
structure once the remaining subsidiaries have been completely  integrated,  and
administration  and  control  of  the  Company's  future  operations  have  been
centralized.  The Company  believes that its existing cash balances and the cash
generated from continuing  operations will be sufficient to fund its operations,


                                       21
<PAGE>




the   anticipated   expenditures   required   for   product   development,   its
organizational  infrastructure  (including  additional  personnel  and  upgraded
telecommunications  and computer  systems) and general  corporate  needs for the
next twelve (12) months.

         There can be no assurance that the Company will not be required to seek
additional  sources of financing within the foreseeable  future.  The failure to
raise the funds  necessary  to finance the  Company's  future cash  requirements
would  adversely  affect  the  Company's   ability  to  pursue  its  operational
strategies.

         In connection  with the  acquisition of On Ramp,  the Company  recorded
goodwill and other  intangible  assets in the  aggregate  amount of  $2,410,000,
substantially  all of which is being  amortized using the  straight-line  method
over a period of two years.  As a result,  the Company  incurred during the year
ended June 30, 1997, and will incur over the next fiscal year, a non-cash charge
to operations of approximately $1,205,000 each year.

         In  connection  with the  acquisition  of the assets and  operations of
Fathom, the Company recorded goodwill in the amount of $442,500,  which is being
amortized  using the  straight-line  method over a period of two (2) years. As a
result,  the Company  incurred  during the year ended June 30,  1997, a non-cash
charge to operations of  approximately  $18,000 and will incur over the next two
(2) fiscal years, a non-cash charge to operations of  approximately  $18,000 per
month.

         In connection with the Initial Public Offering, certain stockholders of
the  Company  agreed to place  their  shares of Common  Stock in an escrow to be
released upon the Company's attainment of certain performance goals (the "Escrow
Shares").  In the event of the release of the Escrow  Shares,  the Company  will
recognize  during the period in which the  earnings  thresholds  are probable of
being  met or such  stock  levels  achieved,  a  substantial  noncash  charge to
earnings  equal to the fair  market  value of such  shares  on the date of their
release,  which would have the effect of significantly  increasing the Company's
loss or reducing or eliminating  earnings, if any, at such time. The recognition
of such compensation expense may have a depressive effect on the market price of
the Company's securities. Notwithstanding the foregoing discussion, there can be
no  assurance  that the Company  will attain the targets  which would enable the
Escrow  Shares to be released  from  escrow.  Similar  accounting  treatment  is
expected to be applied with respect to the issuance in subsequent periods of the
securities issuable under a certain consulting agreement between the Company and
Jason H. Pollak. See "Certain Relationships and Related Transactions."



                                       22
<PAGE>




INFLATION

         While  inflation  has  not  had a  material  effect  on  the  Company's
operations in the past,  there can be no assurance that the Company will be able
to continue to offset the effects of  inflation  on the costs of its products or
services  through  price  increases  to its  customers  without  experiencing  a
reduction in the demand for its  products;  or that  inflation  will not have an
overall  effect on the  advertising,  marketing,  Internet and intranet and data
management market that would have a material affect on the Company.

IMPLEMENTATION OF NEW ACCOUNTING STANDARDS

         EARNINGS  PER  SHARE.  In  February  1997,  the  Financial   Accounting
Standards Board issued SFAS No. 128, "Earnings Per Share" ("SFAS No. 128"). SFAS
No. 128 specifies the computation,  presentation and disclosure requirements for
earnings per share.  SFAS No. 128 is effective for periods ending after December
15,  1997.  The  adoption of this  statement  is not expected to have a material
effect on the consolidated financial statements.

         REPORTING  COMPREHENSIVE INCOME. In June 1997, the Financial Accounting
Standards Board issued SFAS No. 130, "Reporting Comprehensive Income" ("SFAS No.
130"),  which  established  standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
to include all changes in equity  except those  resulting  from  investments  by
owners  and  distributions  to owners.  Among  other  disclosures,  SFAS No. 130
requires  that all  items  that are  required  to be  recognized  under  current
accounting  standards as  components  of  comprehensive  income be reported in a
financial  statement  that is  displayed  with  the  same  prominence  as  other
financial statements.

         SFAS  No.  130  is  effective  for  financial  statements  for  periods
beginning  after  December 15, 1997 and  requires  comparative  information  for
earlier years to be restated.  Because of the recent  issuance of this standard,
management  has been unable to fully  evaluate the impact,  if any, the standard
may have on future financial  statement  disclosures.  Results of operations and
financial  position,  however,  will be  unaffected  by  implementation  of this
standard.

         REPORTING  SEGMENTS  OF AN  ENTERPRISE.  In June  1997,  the  Financial
Accounting  Standards Board issued SFAS No. 131,  "Disclosures about Segments of
an Enterprise and Related  Information"  ("SFAS No. 131"), which supersedes SFAS
No. 14, "Financial  Reporting for Segments of a Business  Enterprise".  SFAS No.
131 establishes  standards for the way that public companies report  information
about operating  segments in annual financial  statements and requires reporting
of selected information about operating segments in interim financial statements
issued to the public.  It also establishes  standards for disclosures  regarding
products  and  services,  geographic  areas and major  customers.  SFAS No.  131
defines  operating  segments as  components  of a company  about which  separate
financial  information  is available  that is  evaluated  regularly by the chief
operating  decision maker in deciding how to allocate resources and in assessing
performance.

         SFAS  No.  131  is  effective  for  financial  statements  for  periods
beginning  after  December 15, 1997 and  requires  comparative  information  for


                                       23
<PAGE>




earlier years to be restated.  Because of the recent  issuance of this standard,
management has been unable to fully evaluate the impact,  if any, it may have on
future  financial  statement  disclosures.  Results of operations  and financial
position, however, will be unaffected by implementation of this standard.





























                                       24
<PAGE>




ITEM 7.  CONSOLIDATED FINANCIAL STATEMENTS


                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                            PAGE

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS...........................F-2

CONSOLIDATED FINANCIAL STATEMENTS:

    Balance Sheet............................................................F-3

    Statements of Operations.................................................F-4

    Statements of Shareholders' Equity ......................................F-5

    Statements of Cash Flows.................................................F-6

    Notes to Consolidated Financial Statements...............................F-7









                                      F-1
<PAGE>




               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Shareholders of THINK New Ideas, Inc.
New York, New York

We have audited the accompanying  consolidated balance sheet of THINK New Ideas,
Inc.  and  subsidiaries  as of  June  30,  1997  and  the  related  consolidated
statements of  operations,  shareholders'  equity and cash flows for each of the
two years in the  period  ended  June 30,  1997.  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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of THINK New Ideas,
Inc. and  subsidiaries  as of June 30, 1997 and the results of their  operations
and their  cash  flows for each of the two years in the  period  ended  June 30,
1997, in conformity with generally accepted accounting principles.






                                              BDO Seidman, LLP


New York, New York
September 19, 1997



                                      F-2
<PAGE>



<TABLE>
<CAPTION>

                                      THINK NEW IDEAS, INC. AND SUBSIDIARIES

                                            CONSOLIDATED BALANCE SHEET

                                                                                                          June 30, 1997
                                                                                                    --------------------------
                                              ASSETS
<S>                                                                                                                <C>       
Current assets:
   Cash and cash equivalents                                                                                       $3,451,347
   Marketable securities                                                                                            1,321,722
   Accounts receivable, net of allowance for doubtful accounts of $614,137                                          9,314,851
   Unbilled receivables                                                                                             2,497,389
   Prepaid expenses and other current assets                                                                          535,307
                                                                                                    --------------------------
           Total current assets                                                                                    17,120,616

Property and equipment, net (Note 3)                                                                                2,285,620
Software development costs                                                                                            131,253
Goodwill, net of accumulated amortization of $1,098,938 (Note 2)                                                    1,502,562
Other assets                                                                                                          362,119
                                                                                                    --------------------------
           Total assets                                                                                           $21,402,170
                                                                                                    ==========================

                               LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable and accrued expenses                                                                           $4,848,932
   Accrued restructuring costs (Note 10)                                                                            1,135,000
   Deferred revenue                                                                                                   953,556
   Income taxes payable (Note 5)                                                                                       40,571
   Due to related party (Note 2)                                                                                    1,906,512
   Current portion of obligations under capital leases (Note 6)                                                       156,867
                                                                                                    --------------------------
           Total current liabilities                                                                                9,041,438
Obligations under capital leases (Note 6)                                                                             264,372
Note payable to related party (Note 9)                                                                                515,760
Other long-term liability (Note 6)                                                                                    206,250
                                                                                                    --------------------------
           Total liabilities                                                                                       10,027,820
                                                                                                    --------------------------
Commitments and contingencies (Note 6) Shareholders' equity (Note 7):
   Preferred stock, $.0001 par value; 5,000,000 shares authorized; none issued and
      outstanding                                                                                                           -
   Common stock, $.0001 par value; 50,000,000 shares authorized; 6,536,667 shares issued
                                                                                                                          654
   Additional paid-in capital                                                                                      19,050,174
   Accumulated deficit                                                                                            (7,676,478)
                                                                                                    --------------------------
           Total shareholders' equity                                                                              11,374,350
                                                                                                    ==========================
           Total liabilities and shareholders' equity                                                             $21,402,170
                                                                                                    ==========================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>




<TABLE>
<CAPTION>

                                      THINK NEW IDEAS, INC. AND SUBSIDIARIES

                                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                                       Year ended June 30,
                                                                       -----------------------------------------------------
                                                                                1997                        1996
                                                                       -----------------------    --------------------------
<S>                                                                               <C>                            <C>       
Revenues                                                                          $17,436,847                    $9,822,983
Operating expenses:
   Direct salaries and related expenses                                            10,029,004                     3,628,643
   Other direct expenses                                                            4,691,563                     3,869,634
   Selling, general and administrative expenses                                     6,842,308                     2,377,053
   Depreciation and amortization                                                    1,619,104                       208,813
   Restructuring costs (Note 10)                                                    1,732,000                             -
   Merger expenses (Note 2)                                                                 -                       676,198
                                                                       -----------------------    --------------------------
Operating loss                                                                    (7,477,132)                     (937,358)
Interest expense                                                                    (134,489)                     (372,736)
Interest income                                                                       286,358                             -
Other, net                                                                                  -                        36,232
                                                                       -----------------------    --------------------------
Loss before taxes on income                                                       (7,325,263)                   (1,273,862)
Taxes on income (Note 5)                                                              245,900                       140,870
                                                                       -----------------------    --------------------------
Net loss                                                                         $(7,571,163)                  $(1,414,732)
                                                                       =======================    ==========================
Net loss per share                                                                    $(1.63)
                                                                       =======================
Pro forma amounts (unaudited):
   Historical loss before taxes on income                                                                      $(1,273,862)
   Compensation adjustment                                                                                        (227,000)
   Merger expense adjustment                                                                                        676,198
                                                                                                  --------------------------
   Net loss                                                                                                      $(824,664)
                                                                                                  ==========================
   Net loss per share                                                                                                $(.32)
                                                                                                  ==========================
Weighted average common and common equivalent shares outstanding
                                                                                    4,638,337                     2,506,681
                                                                       =======================    ==========================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>



<TABLE>
<CAPTION>

                                      THINK NEW IDEAS, INC. AND SUBSIDIARIES

                                  CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                                                                                                  Retained earnings
                                                    COMMON STOCK                Additional           (accumulated
                                                Shares          Amount        paid-in capital          deficit)
                                           -----------------  ------------   ------------------  ---------------------

<S>                                                 <C>               <C>              <C>                   <C>     
Balance at June 30, 1995                            491,595           $48              $83,837               $199,101
   Issuance of common stock for cash              2,171,506           217                  439                      -
   Acquisition of On Ramp (Note 2)                  231,572            24            1,088,363                      -
   Conversion of shareholders' loans and
      interest                                            -             -            1,450,142                      -
   Distributions to shareholders                          -             -             (24,325)              (153,510)
   Capitalization of accumulated deficit
      of subsidiaries upon termination of
      S corporation elections                             -             -          (1,263,826)              1,263,826
   Net loss for the year                                  -             -                    -            (1,414,732)
                                           -----------------  ------------   ------------------  ---------------------

Balance at June 30, 1996                          2,894,673           289            1,334,630              (105,315)
   Issuance of common stock in connection
      with private placement (Note 7(b))
                                                    938,667            94            4,947,968                      -
   Conversion of convertible debt
      (Note 7(c))                                   433,327            44              189,452                      -
   Issuance of common stock pursuant to
      initial public offering (Note 7(d))
                                                  2,150,000           215           11,972,636                      -
   Issuance of common stock in connection
      with acquisition (Note 2)
                                                    120,000            12              442,488                      -
   Issuance of stock options to
      non-employee directors (Note 8(b))
                                                          -             -              163,000                      -
   Net loss for the year                                  -             -                    -            (7,571,163)
                                           -----------------  ------------   ------------------  ---------------------

Balance at June 30, 1997                          6,536,667          $654          $19,050,174           $(7,676,478)
                                           =================  ============   ==================  =====================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>



<TABLE>
<CAPTION>

                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


                                                                                             Year ended June 30,
                                                                              ---------------------- ---- ----------------------
                                                                                      1997                        1996
                                                                              ----------------------      ----------------------
<S>                                                                                    <C>                         <C>         
Cash flows from operating activities:
   Net loss                                                                            $(7,571,163)                $(1,414,732)
   Adjustments to reconcile net loss to net cash used in operating
      activities:
      Depreciation and amortization                                                         322,085                     208,813
      Amortization of intangibles and deferred financing costs                            1,297,019                     163,000
      Deferred income taxes                                                                 140,000                   (364,000)
      Bad debt expense                                                                      428,137                     113,655
      Restructuring charges                                                               1,732,000                           -
      Consulting fees                                                                       369,250                           -
      Changes in assets and liabilities, excluding effects of acquisitions:
         Accounts receivable                                                            (4,335,664)                   (595,516)
         Unbilled receivables                                                           (2,200,486)                     494,912
         Due from shareholders                                                                    -                      89,400
         Accounts payable and accrued expenses                                            1,842,772                     702,400
         Deferred revenue                                                                   500,597                   (272,882)
         Other assets and liabilities                                                     (373,492)                     146,328
                                                                              ----------------------      ----------------------
            Net cash used in operating activities                                       (7,848,945)                   (728,622)
                                                                              ----------------------      ----------------------
Cash flows from investing activities:
   Additions to software development costs                                                (518,315)                   (167,436)
   Purchases of property and equipment                                                  (1,487,435)                   (171,900)
   Purchases of marketable securities                                                   (1,321,722)                           -
   Advances to and acquisition of On Ramp, net of cash acquired                                   -                 (1,691,739)
      (Note 2)                                                                ----------------------      ----------------------

            Net cash used in investing activities                                       (3,327,472)                 (2,031,075)
                                                                              ----------------------      ----------------------
Cash flows from financing activities:
   Proceeds from issuance (repayment) of promissory notes                               (1,880,505)                   2,070,000
   Deferred financing costs                                                                       -                   (217,500)
   Increase in notes payable to related parties                                                   -                     827,326
   Deferred offering costs                                                                (272,240)                   (217,528)
   Borrowings (repayment) on operating lines of credit                                     (70,000)                      70,000
   Proceeds from private placement                                                        4,948,062                           -
   Issuance of common stock                                                                       -                         656
   Proceeds from initial public offering                                                 11,972,851                           -
   Proceeds from (payments on) amounts due to related party                               (500,000)                     500,000
   Distributions to shareholders                                                                  -                   (177,835)
                                                                              ----------------------      ----------------------
            Net cash provided by financing activities                                    14,198,168                   2,855,119
                                                                              ----------------------      ----------------------
Net increase in cash and cash equivalents                                                 3,021,751                      95,422

Cash and cash equivalents, beginning of year                                                429,596                     334,174
                                                                              ----------------------      ----------------------
Cash and cash equivalents, end of year                                                   $3,451,347                   $ 429,596
                                                                              ======================      ======================
Supplemental cash flow information: Cash paid during the year for:
      Income taxes                                                                         $153,010                    $139,967
      Interest                                                                              180,949                       8,091

   Noncash investing and financing activities:
      Loans and accrued interest payable to shareholders converted to
         additional paid-in capital                                                               -                   1,450,142
      Issuance of common stock for acquisitions (Note 2)                                    442,500                   1,088,387
      Conversion of convertible promissory notes into common stock
         (Notes 4 and 7(c))                                                                 189,496                           -
      Purchases of equipment by capital leases (Notes 3 and 6(a))                           421,439                           -

</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>




                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS AND PRINCIPLES OF CONSOLIDATION

        The consolidated  financial statements include the accounts of THINK New
Ideas,  Inc.  ("THINK" or the "Company") and its  subsidiaries.  All significant
intercompany accounts and transactions have been eliminated in consolidation.

        The Company was  incorporated  in January  1996.  On June 30, 1996,  the
Company  acquired the  companies  discussed in Note 2 in business  combinations.
Certain of the business  combinations  were  accounted  for using the pooling of
interests method. The consolidated  financial statements give retroactive effect
to those  acquisitions.  One business  combination  was  accounted for using the
purchase  method,  and the accounts of this business have been  reflected in the
consolidated financial statements from the date of acquisition.

        The Company provides  marketing and  communications  services to clients
seeking to market their products and services and convey  messages and images to
the public.  The Company  provides  traditional  services,  such as advertising,
graphic design and artwork, and "new media" services. New media services include
developing Internet web sites and related analytical tools.

CASH AND CASH EQUIVALENTS

        For  purposes  of  the  consolidated  balance  sheets  and  consolidated
statements of cash flows,  the Company  considers all highly liquid  investments
having original maturities of three months or less to be cash equivalents.

MARKETABLE SECURITIES

        Marketable securities are stated at fair market value which approximates
cost and  classified  as  available  for sale in  accordance  with  Statement of
Financial  Accounting  Standard No. 115,  "Accounting for Certain Investments in
Debt and Equity Securities",  and consist of investments in corporate commercial
paper maturing through December 1997.





                                      F-7
<PAGE>



                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE 1 - NATURE OF  BUSINESS  AND  SUMMARY OF  SIGNIFICANT  ACCOUNTING  POLICIES
         (CONTINUED)

PROPERTY AND EQUIPMENT

        Property  and  equipment  are stated at cost.  Depreciation  is provided
using the  straight-line  method and includes the  amortization of capital lease
assets. The estimated useful lives of property and equipment are as follows:

                                                          Years
                                                    ------------------

         Equipment                                             3 to 5
         Furniture and fixtures                                5 to 7

        Leasehold  improvements  are amortized over the term of the lease or the
useful life, if shorter.

SOFTWARE DEVELOPMENT COSTS

        In accordance  with the provisions of Statement of Financial  Accounting
Standards  ("SFAS") No. 86, "Accounting for the Costs of Computer Software to be
Sold, Leased, or Otherwise Marketed," software development costs incurred by the
Company  subsequent to establishing  technological  feasibility of the resulting
product or enhancement  and, until the product is available for general  release
to customers,  are capitalized  and carried at the lower of unamortized  cost or
net realizable  value.  Net realizable value is determined based on estimates of
future revenues to be derived from sale of the software product reduced by costs
of  completing  and  disposing  of  that  product.  Amortization  of  the  costs
capitalized  began  in 1997  and is  based on  current  and  anticipated  future
revenues  for each  product  or  enhancement  with an  annual  minimum  equal to
straight-line  amortization  over the remaining  estimated  economic life of the
product or enhancement.

LONG-LIVED ASSETS

        Long-lived  assets,  such as goodwill and property  and  equipment,  are
evaluated for impairment when events or changes in  circumstances  indicate that
the carrying  amount of the assets may not be recoverable  through the estimated
undiscounted  future  cash  flows  from the use of these  assets.  When any such
impairment  exists,  the related  assets will be written down to fair value.  No
impairment losses have been necessary through June 30, 1997.



                                      F-8
<PAGE>




                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE 1 - NATURE OF  BUSINESS  AND  SUMMARY OF  SIGNIFICANT  ACCOUNTING  POLICIES
         (CONTINUED)

GOODWILL

        Goodwill  represents  the  excess of the cost over the fair value of the
identifiable  assets  acquired in a business  combination and is being amortized
using the  straight-line  method over a period of two years unless future events
or changes  in  circumstances  indicate  that an  impairment  has  occurred.  No
impairment losses have been necessary through June 30, 1997.

REVENUE RECOGNITION

        Revenues  from the  design and  development  of  Internet  web sites and
traditional marketing services are recognized using the percentage-of-completion
method based on the ratio of costs incurred to total estimated  costs.  Unbilled
receivables  represent costs incurred and anticipated profits earned on projects
in progress in excess of amounts  billed,  and are recorded as assets.  Deferred
revenue  includes  amounts  billed  in excess of costs  incurred  and  estimated
profits earned,  and are recorded as  liabilities.  To the extent costs incurred
and  anticipated  costs to  complete  projects in  progress  exceed  anticipated
billings, a loss is recognized for the excess.

        Payments  received for subsequent  maintenance of Internet web sites are
deferred  and  recognized  over the  period  during  which  the  maintenance  is
supplied.

TAXES ON INCOME

        Certain of the Company's  subsidiaries had elected S corporation  status
under  applicable  provisions  of the Internal  Revenue  Code and certain  state
statutes and,  accordingly,  were not subject to income taxes. The S corporation
status of these  subsidiaries  terminated  on June 30, 1996 as a result of their
acquisition by the Company.

        The Company  accounts for income taxes in accordance with the provisions
of SFAS No.  109,  "Accounting  for Income  Taxes."  SFAS No. 109  requires  the
recognition  of deferred  tax assets and  liabilities  for the  expected  future
income tax  consequences  of events  that have been  recognized  in a  company's
financial  statements or tax return.  Deferred  income taxes reflect the net tax
effects of  temporary  differences  between the  carrying  amounts of assets and
liabilities  for  financial  reporting  purposes  and the amounts for income tax
purposes  using  enacted tax rates in effect in the years in which the temporary
differences are expected to reverse.




                                      F-9
<PAGE>




                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE 1 - NATURE OF  BUSINESS  AND  SUMMARY OF  SIGNIFICANT  ACCOUNTING  POLICIES
         (CONTINUED)

PRO FORMA DATA (UNAUDITED)

        Concurrent with the business combinations  consummated on June 30, 1996,
the Company entered into employment  agreements with certain of its officers (as
discussed  further in Note 6(c)). Pro forma  adjustments for the year ended June
30, 1996 have been  presented  to exclude the costs of  effecting  the  business
combination transactions accounted for using the pooling-of-interests method and
reflect these  employment  agreements  as if they had been in effect  throughout
1996.

        The pro forma data for 1996 do not  reflect a benefit  for income  taxes
because none would have been recognized if the business  combinations  accounted
for using the pooling of  interests  method had occurred and the Company and all
of its subsidiaries had been taxed as C corporations since July 1, 1993.

LOSS PER SHARE

        Loss per share is  computed  based on  historical  net loss for the year
ended  June 30,  1997 and pro forma net loss for the year  ended  June 30,  1996
using the  weighted  average  number of shares of common  stock and common stock
equivalents  outstanding (which excludes 825,000 shares held in escrow (see Note
7(d)) as adjusted for the effects of applying Securities and Exchange Commission
Staff  Accounting  Bulletin  ("SAB") No. 83,  using the treasury  stock  method.
Pursuant to SAB No. 83,  common  stock issued by the Company at prices less than
the initial public offering price during the twelve months preceding the initial
filing of a registration statement, together with the number of shares of common
stock subject to options and  convertible  debt issued during such period having
exercise or conversion  prices below the initial public offering price have been
treated as outstanding  for all periods  presented.  As a result,  4,638,337 and
2,506,681 shares were used in the calculations for the years ended June 30, 1997
and 1996, respectively. Similarly, historical and pro forma net loss used in the
calculations  were adjusted by  approximately  $10,000 and $19,000 for the years
ended June 30, 1997 and 1996,  respectively,  to exclude  the related  amount of
interest expense on convertible debt issued (see Note 4).



                                      F-10
<PAGE>




                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE 1 - NATURE OF  BUSINESS  AND  SUMMARY OF  SIGNIFICANT  ACCOUNTING  POLICIES
         (CONTINUED)

LOSS PER SHARE (CONTINUED)

        Supplemental  pro forma  loss per share was  $(1.58)  and $(.22) for the
years ended June 30, 1997 and 1996,  respectively,  and was computed by dividing
supplemental historical and pro forma net loss (each as adjusted as described in
the preceding paragraph,  further adjusted by approximately $95,000 and $224,000
for the years ended June 30, 1997 and 1996, respectively, the amount of interest
expense on debt repaid with the  proceeds of the August 1996  private  placement
(see Note 7(b)),  by the weighted  average number of shares that would have been
treated as  outstanding  (4,713,660  and  2,617,878 for the years ended June 30,
1997 and 1996,  respectively)  had the portion of the  proceeds  from the shares
sold in August 1996 to fund debt repayments been used to repay debt on the dates
it was issued, rather than for the assumed purchase of treasury stock.

        Historical  loss per share data for the year ended June 30,  1996 is not
considered meaningful and, therefore, is not presented.

FAIR VALUES OF FINANCIAL INSTRUMENTS

        The carrying amounts reported in the consolidated balance sheet for cash
equivalents,  accounts and unbilled receivables,  and accounts and notes payable
approximate fair value because of the immediate or short-term  maturity of these
financial  instruments.  The carrying  amounts  reported for the  nonconvertible
portions of the convertible  promissory  notes  approximate fair value. The fair
values of the  convertible  portions of the  convertible  promissory  notes were
estimated  based on the estimated  fair value of the common stock into which the
notes  were  convertible.  Based on the price per share for which the  Company's
common  stock was sold in a private  placement  in August 1996 (see Note 4), the
estimated  aggregate fair value of the  convertible  portions of the convertible
promissory notes approximated $2,037,000 at June 30, 1996.

USE OF ESTIMATES

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




                                      F-11
<PAGE>



                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE 1 - NATURE OF  BUSINESS  AND  SUMMARY OF  SIGNIFICANT  ACCOUNTING  POLICIES
         (CONTINUED)

CONCENTRATION OF CREDIT RISK, MAJOR CUSTOMERS AND GEOGRAPHIC INFORMATION

        Financial  instruments  which  potentially  subject  the  Company  to  a
concentration  of credit risk consist of cash and cash  equivalents,  marketable
securities and accounts and unbilled receivables.  Cash and cash equivalents and
marketable  securities  consist of deposits  and money  market funds placed with
various high credit quality financial institutions.

        The Company  generates  revenue  principally  from customers  located in
North  America,  many of which are large  multi-national  organizations.  During
1997, two customers accounted for 10% and 13%, respectively,  of total revenues.
One  of  these   customers   accounted  for  18%  of  total  revenues  in  1996.
Concentrations of credit risk with respect to receivables are limited due to the
geographically  diverse  customer base.  The Company  maintains an allowance for
uncollectible   receivables  based  upon  expected  collectibility  of  accounts
receivable.  At June 30, 1997, one customer  accounted for  approximately 10% of
accounts and unbilled receivables, collectively.

STOCK-BASED COMPENSATION

        The Company  accounts  for its stock option  awards under the  intrinsic
value based method of  accounting,  prescribed  by Accounting  Principles  Board
Opinion No. 25,  "Accounting for Stock Issued to Employees." Under the intrinsic
value  based  method,  compensation  cost is the  excess,  if any, of the quoted
market  price of the  stock at grant  date or other  measurement  date  over the
amount an employee  must pay to acquire the stock.  The Company  makes pro forma
disclosures  of net income  and  earnings  per share as if the fair value  based
method of accounting  had been applied as required by SFAS No. 123,  "Accounting
for Stock-Based Compensation."

RECLASSIFICATIONS

        Certain amounts as previously reported have been reclassified to conform
to current year classifications.

NEW ACCOUNTING PRONOUNCEMENTS

(a)     EARNINGS PER SHARE

        In February 1997, the Financial  Accounting  Standards Board issued SFAS
No.  128,  "Earnings  Per  Share".  SFAS  No.  128  specifies  the  computation,
presentation and disclosure


                                      F-12
<PAGE>



                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE 1 - NATURE OF  BUSINESS  AND  SUMMARY OF  SIGNIFICANT  ACCOUNTING  POLICIES
         (CONTINUED)

NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)

requirements  for  earnings  per share.  SFAS No. 128 is  effective  for periods
ending after  December 15, 1997.  The adoption of this statement is not expected
to have a material effect on the consolidated financial statements.

(b)     REPORTING COMPREHENSIVE INCOME

        In June 1997, the Financial  Accounting  Standards Board issued SFAS No.
130,  "Reporting  Comprehensive  Income"  ("SFAS No.  130"),  which  establishes
standards for reporting and display of comprehensive  income, its components and
accumulated balances.  Comprehensive income is defined to include all changes in
equity except those resulting from  investments by owners and  distributions  to
owners.  Among other disclosures,  SFAS No. 130 requires that all items that are
required to be recognized  under current  accounting  standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements.

        SFAS No. 130 is effective for financial statements for periods beginning
after December 15, 1997 and requires  comparative  information for earlier years
to be restated. Because of the recent issuance of this standard,  management has
been unable to fully  evaluate  the impact,  if any,  the  standard  may have on
future  financial  statement  disclosures.  Results of operations  and financial
position, however, will be unaffected by implementation of this standard.

(c)     REPORTING SEGMENTS OF AN ENTERPRISE

        In June 1997, the Financial  Accounting  Standards Board issued SFAS No.
131,  "Disclosures  about  Segments of an  Enterprise  and Related  Information"
("SFAS No.  131"),  which  supersedes  SFAS No.  14,  "Financial  Reporting  for
Segments of a Business  Enterprise".  SFAS No. 131 establishes standards for the
way that public companies report  information about operating segments in annual
financial  statements  and  requires  reporting  of selected  information  about
operating segments in interim financial statements issued to the public. It also
establishes   standards  for  disclosures   regarding   products  and  services,
geographic areas and major customers. SFAS No. 131 defines operating segments as
components of a company about which separate financial  information is available
that is evaluated  regularly by the chief  operating  decision maker in deciding
how to allocate resources and in assessing performance.




                                      F-13
<PAGE>



                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE 1 - NATURE OF  BUSINESS  AND  SUMMARY OF  SIGNIFICANT  ACCOUNTING  POLICIES
         (CONTINUED)

NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)

        SFAS No. 131 is effective for financial statements for periods beginning
after December 15, 1997 and requires  comparative  information for earlier years
to be restated. Because of the recent issuance of this standard,  management has
been  unable  to fully  evaluate  the  impact,  if any,  it may  have on  future
financial statement  disclosures.  Results of operations and financial position,
however, will be unaffected by implementation of this standard.

NOTE 2 - BUSINESS ACQUISITIONS

        On May 31, 1997, the Company  acquired  certain assets and operations of
Fathom  Advertising  Agency,  Inc.  ("Fathom"),  a provider of traditional  full
service advertising services, from Ketchum Communications,  Inc. ("Ketchum"),  a
wholly-owned subsidiary of Omnicom Group Inc. ("Omnicom"),  a shareholder of the
Company,  in exchange for 120,000 shares of the Company's  common stock.  Fathom
had revenues of  approximately  $1,800,000 for the year ended December 31, 1996,
which  were  derived  primarily  from one  customer.  The  acquisition  has been
accounted for using the purchase  method of  accounting  and,  accordingly,  the
results  of  operations  of  Fathom  have  been  reflected  in the  consolidated
financial  statements  from  the date of  acquisition.  In  connection  with the
acquisition,  the Company is to return the excess of media  accounts  receivable
purchased  ($3,012,592) over accounts payable assumed ($1,106,080) to the seller
in the amount of $1,906,512, as collected. The purchase price of $442,500, which
equals the excess over the carrying values of the net assets acquired,  is being
amortized over two years.

        On June 30, 1996, the Company acquired all of the issued and outstanding
shares of common stock of the following  entities in exchange for 491,595 shares
of the Company's common stock:

<TABLE>
<CAPTION>
                                                                            Number of shares
Entity/Date Operations Commenced                                            issued to effect
                                                                               acquisition
--------------------------------------------------------------------     ------------------------
<S>                                                                                      <C>    
The Mednick Group ("Mednick")/October 1982                                               208,084
Creative Resources Agency, Inc. ("Creative Resources")/November 1994                       3,970
The S.D. Goodman Group ("Goodman")/July 1993                                              49,623
Internet One, Inc. ("Internet One")/November 1993                                         34,736
NetCube, Inc. ("NetCube")/February 1978                                                  195,182

</TABLE>


                                      F-14
<PAGE>



                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE 2 - BUSINESS ACQUISITIONS (CONTINUED)

        Mednick,  Creative  Resources  and  Goodman  provide a wide  variety  of
marketing-related  services.  NetCube and Internet One are principally providers
of new media  services.  The  acquisition  of each of these  companies  has been
accounted  for  using  the  pooling  of  interests  method  of  accounting,  and
accordingly, the accompanying consolidated financial statements give retroactive
effect to these  acquisitions,  as if the  companies  had always  operated  as a
single entity. In connection with these acquisitions,  approximately $676,000 of
transaction  costs and expenses  were  incurred and have been charged to expense
during 1996.

        Separate  results of operations for the combining  entities for the year
ended June 30, 1996 are as follows:

                 Revenues:
                    Mednick                                  $6,150,950
                    Creative Resources                          371,298
                    Goodman                                     561,203
                    Internet One                              1,338,246
                    NetCube                                   1,401,286
                    THINK                                             -
                                                  ----------------------

                    Combined                                 $9,822,983
                                                  ======================

                 Net income (loss):
                    Mednick                                    $263,428
                    Creative Resources                           74,000
                    Goodman                                     133,010
                    Internet One                                  2,974
                    NetCube                                 (1,032,583)
                    THINK                                     (855,561)
                                                  ----------------------

                    Combined                               $(1,414,732)
                                                  ======================

        On June 30,  1996,  the Company  also  acquired  all of the  outstanding
shares of common stock of On Ramp,  Inc.  ("On  Ramp"),  a provider of new media
services,  in exchange for 231,572  shares of the Company's  common  stock.  The
acquisition has been accounted for using the purchase method of accounting,  and
accordingly,  the accounts of On Ramp have been  reflected  in the  consolidated
financial  statements  from  the  date of  acquisition.  The  purchase  price of
$1,338,000 (which includes transaction costs of approximately $250,000) has been
allocated to the assets  purchased and the liabilities  assumed based upon their
estimated fair


                                      F-15
<PAGE>



                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE 2 - BUSINESS ACQUISITIONS (CONTINUED)

values at the date of  acquisition.  The excess of the  purchase  price over the
carrying values of the net assets acquired was approximately  $2,310,000 and has
been allocated as follows:


          Goodwill                                             $2,159,000
          Purchased software and other intangible assets          251,000
          Deferred income taxes                                 (100,000)
                                                           ===============
                                                               $2,310,000
                                                           ===============

        Prior to the acquisition, the Company had loaned $1,494,000 to On Ramp.

        The following table presents summarized consolidated unaudited pro forma
results of operations  for 1997 and 1996 as if the above  purchase  acquisitions
had  occurred  at the  beginning  of each  year.  The table  presents  first the
Company's  historical  1997 and 1996  operating  results,  as  adjusted  for the
effects of the Fathom  acquisition  in 1997 and both Fathom and On Ramp in 1996.
Below those amounts are the pro forma 1996  operating  results  reflected in the
consolidated statements of operations, as further adjusted to give effect to the
On Ramp  acquisition.  These pro forma  results  are  provided  for  comparative
purposes  only and do not purport to be  indicative  of the results  which would
have been  obtained if the  acquisition  had been  effected on those dates or of
future results of operations of the consolidated entities.

                                                         June 30,
                                         --------------------------------------
                                                 1997                 1996
                                         -----------------  -------------------
         Revenues                             $19,342,847          $13,293,348
         Historical net loss                  (8,707,633)          (3,588,682)
         Loss per share                            (1.84)               --
         Pro forma net loss                                        (3,139,484)
         Pro forma net loss per share                                   (1.09)

        Transaction  costs  and  expenses  relating  to the On Ramp  acquisition
referred to above include  $500,000 in finder's  fees to Benchmark  Equity Group
("Benchmark"), a shareholder of the Company.



                                      F-16
<PAGE>



                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE 3 - PROPERTY AND EQUIPMENT

        Property and equipment consists of the following:

         Equipment                                                $3,065,576
         Furniture and fixtures                                      660,137
         Leasehold improvements                                    1,127,519
                                                              ---------------
                                                                   4,853,232
         Less:  Accumulated depreciation and amortization          2,567,612
                                                              ===============
         Property and equipment, net                              $2,285,620
                                                              ===============


        Included  in  equipment  is  $465,855  of  equipment  with   accumulated
amortization of $16,796 under capital leases.

NOTE 4 - CONVERTIBLE PROMISSORY NOTES

        In March 1996, the Company  borrowed  $270,000  pursuant to the terms of
three separate  convertible  promissory notes. Two of the notes, having original
principal balances of $225,000 and $20,000, were payable to an entity controlled
by a shareholder of the Company and to a shareholder,  respectively. Each of the
notes bore  interest at 10% and were due upon the earlier of September  30, 1996
or the Company raising  $2,000,000  through a debt or equity  financing.  At the
option of the note  holders,  up to an  aggregate  of $27,000 in  principal  was
convertible into 216,667 shares of the Company's common stock.

        In April 1996, the Company raised  $1,582,500,  net of placement fees of
$217,500,  through a private placement of 12% convertible  promissory notes. The
principal balance,  together with accrued interest,  was due upon the earlier of
April  30,  1997 or the  Company  raising  $3,000,000  through  a debt or equity
financing. The notes were secured by the pledge of all of the outstanding shares
of  common  stock of On  Ramp.  At the  option  of the  note  holders,  up to an
aggregate of $162,495 in principal was  convertible  into 216,660  shares of the
Company's common stock.

        As discussed more fully in Note 7(c), the convertible  promissory  notes
were converted into common stock or repaid with proceeds  obtained from the sale
of the Company's common stock.



                                      F-17
<PAGE>



                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE 5 - INCOME TAXES

        Taxes on income consist of the following:

                                    1997                       1996
                              ------------------         ------------------
         Current:
            Federal                    $      -                   $382,735
            State                       105,900                    122,135
                              ------------------         ------------------
                                        105,900                    504,870
                              ------------------         ------------------

         Deferred:
            Federal                     120,000                  (311,000)
            State                        20,000                   (53,000)
                              ------------------         ------------------
                                        140,000                  (364,000)
                              ==================         ==================
         Taxes on income               $245,900                   $140,870
                              ==================         ==================


        The difference  between the Federal statutory tax rate and the effective
tax rate resulted from the following:

                                                       1997         1996
                                                  ------------ -------------

Federal statutory tax rate                            (34.0)%       (34.0)%
Subsidiaries not subject to income taxes                    -           5.7
Merger expenses and other permanent differences
                                                            -          28.3
State income taxes, net of Federal tax benefit            1.4           6.3
Change in valuation allowance                            39.4           7.1
Other items, net                                        (3.4)         (2.3)
                                                  ============ =============
Effective tax rate                                       3.4%         11.1%
                                                  ============ =============




                                      F-18
<PAGE>



                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE 5 - INCOME TAXES (CONTINUED)

        Temporary  differences  which  gave  rise  to the  deferred  tax  assets
(liabilities) consisted of the following at June 30, 1997:

         Current:
            Accounts receivable                                      $(95,250)
            Allowance for doubtful accounts                            253,655
            Accounts payable                                           176,250
            Other                                                       21,600
                                                                 --------------

         Total current                                                 356,255
                                                                 --------------

         Noncurrent:
            Property and equipment                                      98,830
            Software development costs and other intangibles          (17,000)
            Net operating loss carryforwards                         3,223,600
                                                                 --------------

         Total noncurrent                                            3,305,430
                                                                 --------------

         Deferred tax asset valuation allowance                    (3,366,685)
                                                                 --------------

         Net deferred tax asset                                    $         -
                                                                 ==============


        Management  believes that,  based on a number of factors,  the available
objective evidence creates sufficient uncertainty regarding the realizability of
the deferred tax assets such that a full valuation  allowance has been recorded.
These factors include the lack of significant history of profits,  the fact that
the  market  in  which  the  Company  competes  is  intensely   competitive  and
characterized by rapidly changing technology, and the lack of carryback capacity
to realize these assets.

        At  June  30,  1997,   the  Company  had  Federal  net  operating   loss
carryforwards of approximately $7,500,000.  The net operating loss carryforwards
will expire at various dates beginning 2011, if not utilized. Utilization of the
net operating  losses may be subject to a substantial  annual  limitation due to
the ownership change  limitations  provided by the Internal Revenue Code of 1986
and similar state provisions. The annual limitation may result in the expiration
of net operating losses before utilization.




                                      F-19
<PAGE>



                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE 6 - COMMITMENTS AND CONTINGENCIES

(a)     LEASES

        Future minimum payments,  by year and in the aggregate,  under operating
and capital leases with initial or remaining terms of one year or more consisted
of the following at June 30, 1997:

<TABLE>
<CAPTION>

                                                   Operating leases       Capital leases           Total
                                                   ------------------     ---------------    -------------------
         <S>                                                <C>                 <C>                    <C>     
         1998                                               $635,100            $208,424               $843,524
         1999                                                631,080             208,424                839,504
         2000                                                625,282              16,800                642,082
         2001                                                658,704              16,800                675,504
         2002                                                673,716               8,392                682,108
         Thereafter                                        3,306,960                   -              3,306,960
                                                   ==================     ---------------    ===================
         Total minimum lease payments                     $6,530,842             458,840             $6,989,682
                                                   ==================                        ===================
         Amount representing interest                                             37,601
                                                                          ---------------
         Present value of net minimum lease
            payments                                                             421,239
         Less:  Current portion                                                  156,867
                                                                          ===============
                                                                                $264,372
                                                                          ===============
</TABLE>


        Total rent  expense  under  operating  leases  amounted to $654,268  and
$572,248 for the years ended June 30, 1997 and 1996, respectively.

        At June 30, 1997, the Company has a commitment to a landlord of $400,000
for a standby letter of credit in connection  with one of its operating  leases.
Such  commitment  expires on November  30,  1997,  but is renewable on an annual
basis at the landlord's option.

(b)     CONSULTING AGREEMENTS

        On June  30,  1997,  the  Company  entered  into a one  year  consulting
agreement  with an individual  whereby the Company will issue up to an aggregate
of 200,000 shares of common stock and options to acquire up to 150,000 shares of
common stock.  The agreement,  which can be terminated  with or without cause by
the Company upon thirty days notice,  provides for the issuance of 50,000 shares
within 15 days of signing for services  rendered  prior to such issuance and the
issuance of 12,500 shares of common stock and options to purchase  12,500 shares
of common  stock at the end of each  month.  The fair  value of the  shares  and
options  will be  charged  to  operations  on the date of  issuance  and  grant,
respectively. At June 30, 1997, the


                                      F-20
<PAGE>



                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE 6 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

Company  has charged  approximately  $206,000 to  operations  and,  accordingly,
classified the liability for the issuance of 50,000 shares as noncurrent.

(b)     CONSULTING AGREEMENTS (CONTINUED)

        In March 1996, the Company entered into a two year consulting  agreement
with  Benchmark.  Under the agreement,  the Company is required to pay Benchmark
$35,000 at signing and a monthly fee of $7,000.  The  Company  paid  $84,000 and
$56,000 for the years ended June 30, 1997 and 1996,  respectively,  to Benchmark
in connection with the agreement.

(c)     EMPLOYMENT AGREEMENTS

        The Company has entered into  employment  agreements with certain of its
officers.  The agreements have terms from three to five years and include, among
other things, noncompete agreements and salary and benefits continuation. On May
31, 1997,  the Company  entered  into an  employment  agreement  with the former
president  of  Fathom  (see  Note 2).  The  agreement,  which is for two  years,
provides  for,   among  other   things,   salaries  of  $300,000  and  $350,000,
respectively,  options,  which vest  evenly  over four years and are  subject to
accelerated  vesting  during the first two years based on certain  profitability
milestones,  to purchase  250,000  shares of the Company's  common stock,  at an
exercise  price of $3.69 per share (the market price on the date of grant),  and
bonuses based on certain  profitability  and other  milestones.  Future  minimum
salaries under the agreements as of June 30, 1997 are as follows:

           Year ended June 30,
                  1998                                $1,095,000
                  1999                                 1,020,000
                  2000                                   475,000
                  2001                                   475,000

NOTE 7 - SHAREHOLDERS' EQUITY

(a)     STOCK SPLITS

        In June 1996,  the Company  effected a  6.855-for-one  stock  split.  In
September  1996,  the Company  effected a .496-for-one  reverse stock split.  In
November 1996, the Company


                                      F-21
<PAGE>



                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


effected a two-for-three reverse stock split. All applicable share and per share
data have been retroactively restated to reflect the stock splits.

(b)     PRIVATE PLACEMENT

        In  August  1996,  the  Company  sold  equity  securities  in a  private
placement. In November 1996, the agreement pursuant to which the securities were
sold was amended. As a result, the Company issued an aggregate of 938,667 shares
of its common  stock in exchange for net proceeds  (after  transaction  costs of
approximately  $50,000) of  $4,948,000.  Additionally,  certain of the Company's
shareholders  gave the purchaser an additional  124,667  shares of the Company's
common stock held by them for no consideration.

(c)     DEBT CONVERSIONS AND EXTINGUISHMENTS

        In  August  1996,  the  holders  of  the  convertible  promissory  notes
discussed in Note 4 converted  such notes,  aggregating  $189,496,  into 433,327
shares of common  stock.  In addition,  a portion of the proceeds of the private
placement  discussed  above was used to extinguish  the remaining  $1,880,505 of
such notes.

(d)     INITIAL PUBLIC OFFERING

        On November 26, 1996, the Company  completed its initial public offering
of  2,150,000  shares of its  common  stock at a price of $7.00  per share  (the
"Offering") which resulted in the Company receiving net proceeds of $11,972,851.

        In connection with the Offering,  the Company issued the underwriters of
the Offering  warrants to purchase up to 215,000  shares of common  stock.  Such
warrants are exercisable  during the four-year period  commencing one year after
the Offering at an exercise  price of $9.80 per share,  subject to adjustment in
certain  events to protect  against  dilution,  and are not  transferable  for a
period of one year after the date of the  Offering.  In  addition,  the  warrant
agreement contains "cashless exercise" provisions, as defined.

(d)    INITIAL PUBLIC OFFERING (CONTINUED)

        Also  in   connection   with  the  Offering,   the  Company's   founding
shareholders,  together with the  shareholders who acquired shares in connection
with the business acquisitions  discussed in Note 2, contributed,  on a pro rata
basis,  825,000 shares of the Company's common stock held by them into an escrow
account.  The  shares are to be  released  to the  shareholders  from the escrow
account upon the Company achieving certain net income targets, as defined in the


                                      F-22
<PAGE>




                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


escrow agreement, or the closing price of the Company's common stock averages in
excess of  $20.00  per share for forty  consecutive  business  days  during  the
three-year period subsequent to the Offering.  The value of the shares released,
as determined by the market price of the shares on the date of the release, will
be recognized as compensation expense in future periods.

NOTE 8 - EMPLOYEE RETIREMENT PLANS

(a)     401(K) PLANS

        Certain of THINK's subsidiaries sponsor defined contribution  retirement
plans  (the  "Plans")  which  cover  all  employees   meeting   minimum  service
requirements.  The Plans qualify as deferred salary  arrangements  under Section
401(k) of the Internal  Revenue Code.  The  subsidiaries'  contributions  to the
plans  are  based  on  percentages  of the  employees'  contributions.  Employer
contributions  to the Plans  during the years  ended June 30, 1997 and 1996 were
approximately $52,000 and $35,000, respectively.

(b)     STOCK COMPENSATION PLAN

        In  July  1996,  the  Board  of  Directors  adopted  and  the  Company's
shareholders  approved  the 1996 Stock Option Plan (the "1996 Plan") , which was
subsequently  amended and restated in November  1996. The 1996 Plan provided for
the grant of  options  which  qualify as  incentive  stock  options  ("Incentive
Options")  under  Section 422 of the Internal  Revenue Code of 1986,  as amended
(the "Code"),  to officers and employees of the Company and options which do not
so qualify  ("Non-Qualified  Options") to  officers,  directors,  employees  and
consultants of the

(b)    STOCK COMPENSATION PLAN (CONTINUED)

Company.  A total of 966,667  shares of common  stock was  reserved for issuance
under  the 1996  Plan  (subject  to  adjustment  in the  event of the  Company's
declaration  of  stock  dividends,  stock  splits,   reclassifications  and  the
occurrence  of other  similar  events).  Options to purchase  966,667  shares of
common stock at an exercise  price per share of $7.50 (the  estimated fair value
of the  shares  on the date of grant)  were  granted  to  certain  employees  in
November 1996.  The options  granted were to vest in increments of one-fourth at
the end of each year over a four year  period  from the date of grant and expire
after ten years.

        Pursuant  to a  resolution  of  the  Board  of  Directors,  the  Company
terminated the 1996 Plan and  established  the THINK New Ideas,  Inc. 1997 Stock
Option Plan (the "1997 Plan") which provides for the granting of options,  which
qualify as  Incentive  Options  under  Section 422 of the Code,  to officers and
employees  of the  Company and  Non-Qualified  Options to  officers,  directors,
employees  and  consultants  of the Company.  The Board of  Directors  deemed it
advisable  and in the best  interest  of the  Company  and its  shareholders  to


                                      F-23
<PAGE>




                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


terminate  the 1996 Plan and to  establish  the 1997  Plan.  All of the  persons
entitled  to  participate  in the  1996  Plan  were  given  the  opportunity  to
participate in the 1997 Plan and received options to purchase the same number of
shares,  with the same terms as the 1996 Plan options,  of the common stock they
were  entitled  to  purchase  under the 1996 Plan at a price per share  equal to
$4.05 (the market price on the date of grant).  Under the 1997 Plan, the Company
may grant options to purchase up to 2,000,000 shares of common stock. As of June
30, 1997, there were outstanding options exercisable to purchase up to 1,137,796
shares of common stock.

        During the  fiscal  year ended  June 30,  1997,  the Board of  Directors
granted  options to purchase  20,000  shares at an exercise  price  ranging from
$3.69 to $4.46  (based on the closing  bid price of the Common  Stock) of common
stock to each of seven directors,  of which four are non-employee directors and,
accordingly,  the Company has recognized  $163,000 of expense,  which equals the
fair value of the options granted based on a Black-Scholes  model, upon granting
the options. Such options become exercisable over a period of four years.

        The  Company  applies  Accounting   Principles  Board  Opinion  No.  25,
"Accounting   for  Stock   Issued  to   Employees"   ("APB   25")  and   related
interpretations  in accounting  for its employee  stock  options.  Under APB 25,
because the exercise  price of the Company's  employee  stock options equals the
market  price of the  underlying  stock on the date of  grant,  no  compensation
expense is recognized.

(b)    STOCK COMPENSATION PLAN (CONTINUED)

        Pro forma  information  regarding  net income and  earnings per share is
required  by SFAS  No.  123,  and has  been  determined  as if the  Company  had
accounted for its employee stock options under the fair value method of SFAS No.
123. The fair value for these options was estimated at the date of grant using a
Black-Scholes   option  pricing  model  with  the  following   weighted  average
assumptions  for 1997;  risk-free  interest rates of 5.53% to 6.51%;  volatility
factor of the expected market price of the Company's  common stock of 35%; and a
weighted average expected life of the option of 10 years.



                                      F-24
<PAGE>




                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


        Under the accounting  provisions of SFAS No. 123, the Company's net loss
and loss per share would have been increased to the pro forma amounts  indicated
below:

                                                         Year ended
                                                        June 30, 1997
                                                  --------------------------
         Net loss:
            As reported                                        $(7,571,163)
            Pro forma                                           (8,129,163)
         Net loss per common share:
            As reported                                             $(1.63)
            Pro forma                                                (1.75)


NOTE 8 - EMPLOYEE RETIREMENT PLANS (CONTINUED)

        A summary of the status of the Company's  fixed stock option plans as of
and for the year ended June 30, 1997 is presented below:

<TABLE>
<CAPTION>

                                                                             June 30, 1997
                                                          -----------------------------------------------------
                                                                                          Weighted average
                                                                  Shares                   exercise price
                                                          ------------------------    -------------------------
         <S>                                                            <C>                               <C> 
         Outstanding at beginning of year                                       -                        $   -
         Granted                                                        2,104,463                         5.59
         Exercised                                                              -                            -
         Forfeited/cancelled                                            (966,667)                         7.50
                                                          ------------------------
         Outstanding at end of year                                     1,137,796                         3.97
                                                          ========================
         Options exercisable at year-end                                        -
                                                          ========================
         Weighted average fair value of options                                                           1.69
            granted during the year
</TABLE>

(b)     STOCK COMPENSATION PLAN (CONTINUED)

        The  following  table   summarizes   information   about  stock  options
outstanding at June 30, 1997.

<TABLE>
<CAPTION>

                                          Options outstanding                          Options exercisable
                           --------------------------------------------------     ------------------------------
                                               Weighted
                              Number           average            Weighted                          Weighted
Exercise price             outstanding        remaining           average           Number           average
                                             contractual          exercise        exercisable       exercise
                                                 life              price                              price
-----------------------    -------------    ---------------     -------------     ------------    --------------
<S>              <C>       <C>               <C>                 <C>               <C>              <C>
                 $3.69          250,000       9.9 years                $3.69                -             $3.69
                  4.05          887,796          9.6                    4.05                -              4.05
                           =============                                          ============
                              1,137,796          9.7                    3.96                -              3.96
                           =============                                          ============
</TABLE>


NOTE 9 - RELATED PARTY TRANSACTIONS

        At June 30, 1997,  the Company owed $515,760 to the father of the former
shareholder  of NetCube.  Upon  completion of the Offering (see Note 7(d)),  the


                                      F-25
<PAGE>





                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


Company repaid  approximately  $288,000 of an outstanding  unsecured  promissory
note bearing  interest at 10%. On October 1, 1996, the Company amended the terms
of the promissory  note whereby the note is  convertible,  at the payee's option
through March 31, 1998,  into shares of the Company's  common stock at $7.00 per
share (the initial public  offering  price),  is unsecured and bears interest at
8%.  Interest  expense  incurred by the Company  related to the promissory  note
totaled  approximately $58,000 and $58,000 for the years ended June 30, 1997 and
1996, respectively.

NOTE 10 - RESTRUCTURING COSTS

        In June 1997,  the Company  implemented  a plan for NetCube and Internet
One which was designed to close the operations of these subsidiaries and dispose
of related  assets due to continued  decline in the entities'  performance.  The
cost of this plan was accounted for in accordance with the guidance set forth in
Emerging  Issues  Task  Force  Issue 94-3  "Liability  Recognition  for  Certain
Employee  Termination  Benefits  and Other Costs to Exit an Activity  (Including
Certain Costs Incurred in a Restructuring)" ("EITF 94-3").

        The pretax costs of  approximately  $1,732,000  which were incurred as a
part of this plan  represent  employee  termination  and  severance  costs,  the
write-down  of  capitalized  software  costs and other  related  costs that were
incurred as a direct  result of the plan.  As of June 30,  1997 no amounts  were
paid under this arrangement.  The components of the  restructuring  costs are as
follows:

        Write-down of capitalized software costs                   $597,000
        Severance benefits and employee termination costs           681,000
        Disposal of fixed assets and other assets                   369,000
        Other                                                        85,000
                                                             ===============
                                                                 $1,732,000
                                                             ===============



                                      F-26
<PAGE>




                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


      Aggregate  revenues and operating  losses for NetCube and Internet One for
1997 and 1996 were as follows:

                                             1997                   1996
                                     ------------------    -------------------
         Revenues                           $1,253,000             $2,740,000
         Operating loss                    (1,746,000)            (1,073,000)





                                      F-27
<PAGE>





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


                  There were no changes in or  disagreements  with the Company's
independent  accountants  with respect to accounting  and financial  disclosures
during the fiscal year ended June 30, 1997.


                                    PART III

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

         The names  and ages of all  directors  and  executive  officers  of the
Company are as follows:

         NAME          AGE                  POSITION WITH THE COMPANY

Scott Mednick           41     Chief Executive Officer and Chairman of the Board
Ronald Bloom            45     President, Chief Operating Officer and Director
Melvin Epstein          50     Chief Financial Officer and Secretary
Adam Curry              33     Chief Technology Officer and Director
Larry Kopald            43     Chief Creative Officer and Director
James Grannan           34     Executive Vice President
Susan Goodman           42     Executive Vice President
James Carlisle          50     Executive Vice President
Richard Char            38     Director
Marc Canter             40     Director
Barry Wagner            57     Director


MANAGEMENT BIOGRAPHIES

SCOTT MEDNICK has been  Chairman of the Board of Directors  and Chief  Executive
Officer of the Company since its inception in January 1996. Mr. Mednick  founded
The Mednick Group a Subsidiary  primarily  engaged in the provision of strategic
marketing  and  corporate  and brand  positioning,  in 1985.  Mr.  Mednick is an
officer and director of The Mednick  Group.  Mr.  Mednick holds a B.F.A.  Degree
from the Rhode Island School of Design and a M.A.  from the  University of Santa
Monica.

RONALD BLOOM has been a Director and the President and Chief  Operating  Officer
of the Company since June 1996. From 1995 to 1996, Mr. Bloom was Chief Operating
Officer and General  Manager of On Ramp, a Subsidiary  primarily  engaged in the
provision of Internet and intranet  systems and services and presently serves as
its Vice  President and  Secretary.  Prior to joining On Ramp, Mr. Bloom founded


                                       24
<PAGE>




and served as the President of Ron Bloom  Productions,  a production company and
consulting firm founded by Mr. Bloom from 1989 to 1994.

MELVIN  EPSTEIN  has been the  Chief  Financial  Officer  of the  Company  since
November 1996. From 1994 to August 1996, Mr. Epstein was Managing Director of TN
Services, a unit of True North  Communications,  an advertising agency. Prior to
joining TN  Services,  Mr.  Epstein  was the Chief  Financial  Officer of Backer
Spielvogel Bates, a subsidiary of Saatchi & Saatchi,  P.L.C., from 1987 to 1994.
Mr. Epstein holds a B.S. in Accounting from Queens College.

ADAM CURRY has been a Director  and the Chief  Technical  Officer of the Company
since  June  1996.  Mr.  Curry  founded  and has been  Chairman  of the Board of
Directors of On Ramp since 1994 and its President since March 1996. From 1987 to
1992, Mr. Curry served as an On-Air Personality for MTV Networks in New York.

JAMES GRANNAN has been  Executive Vice President of the Company since June 1996.
Mr. Grannan founded Creative  Resources,  a Subsidiary  primarily engaged in the
provision of strategic  marketing and corporate and brand positioning  services,
in 1994. Mr. Grannan was Creative Manager for the Coca-Cola Company from 1992 to
1994 and  Promotional  Packaging  and Design  Manager for the Coca- Cola Company
from 1988 to 1992.  Mr. Grannan holds a B.A.  Degree in Advertising  Design from
the Atlanta College of Art.

SUSAN GOODMAN has been  Executive Vice President of the Company since June 1996.
Ms. Goodman  founded the Goodman Group,  a Subsidiary  primarily  engaged in the
provision of strategic  marketing and corporate and brand positioning  services,
in 1993.  Previously  she was  Director  of Client  Services at Chiat Day Direct
Marketing  from  February  1992 through  July 1992.  Ms.  Goodman  serves on the
Operating Committee of the Direct Marketing  Association's  Business to Business
Council.  Ms.  Goodman has a B.A. in history from Tufts  University and received
her M.B.A.  in  Marketing,  Finance and  Strategic  Planning  from  Northwestern
University's Kellogg School of Management.

JAMES CARLISLE has been Executive Vice President of the Company since June 1996.
Dr. Carlisle founded NetCube Corporation,  a Subsidiary primarily engaged in the
provision of database and information  management and utilization  services,  in
1978. Dr. Carlisle received his Ph.D. and M.Phil.  from Yale University's School
of  Organization  and  Management  and a B.S.  in  Engineering  with Honors from
Princeton University.

BARRY WAGNER has been a Director of the Company since September 1996. Mr. Wagner
has been an employee of Omnicom since 1974,  and  currently  serves as Secretary
and General  Counsel of Omnicom.  Mr.  Wagner also serves as Secretary and Chief
Legal  Officer of BBDO  Worldwide  Inc. and is Senior Vice  President  and Chief
Legal  Officer  of BBDO New York,  both of which are part of  Omnicom.  Prior to
joining  Omnicom,  Mr.  Wagner was an attorney  with the  National  Broadcasting
Company and the Federal  Reserve Bank of New York.  Mr.  Wagner is a graduate of
Hamilton College and Harvard Law School.



                                       25
<PAGE>




RICHARD CHAR has been a director of the Company  since  August 1997.  Mr Char is
Managing Director and Head of Technology  Investment Banking at Cowen & Company.
Prior to joining  Cowen & Company,  Mr. Char was an attorney for Wilson  Sonsini
Goodrich & Rosati for  thirteen  years.  Mr.  Char  holds an A.B.  from  Harvard
University and a J.D. from Stanford University.

MARC CANTER has been a director of the Company since August 1997. Mr. Canter has
been the Chairman of Canter Technology since founding the company in 1992. Prior
to forming  Canter  Technology,  Mr.  Canter was the  founder  and  chairman  of
MacroMind,  which merged into  MacroMedia,  until he retired in 1991. Mr. Canter
holds a B.F.A. from Oberlin Conservatory of Music.

LARRY KOPALD,  a director has been the Chief Creative Officer of the Company and
the President of the Company's Los Angeles  office since May 1997 and a Director
of the Company since  September 1997.  Prior to joining the Company,  Mr. Kopald
was  the  Executive   Creative   Officer  of  Fathom,   a  division  of  Ketchum
Communications,  Inc. from 1995 to 1997. Prior to joining Fathom, Mr. Kopald was
the  Executive  Creative  Director/Executive  Vice  President of Foote,  Coyne &
Belding from 1987 to 1994.  In 1994,  Mr.  Kopald  founded The Kopald  Group,  a
consulting firm specializing in strategic and creative issues.  Mr. Kopald holds
a  B.S.  in  Pre-Med.  from  Drake  and a  Masters  degree  in  Journalism  form
Northwestern University.

ANGEL MARTINEZ,  formerly a director of the Company,  resigned from his position
on the Board of Directors in February 1997.

MICHAEL RIBERO,  formerly a director of the Company,  resigned from his position
on the Board of Directors in August 1997.

FRANK DELAPE, formerly a director of the Company,  resigned from his position on
the Board of Directors in September 1997.

         All  officers of the  Company  are elected to serve in such  capacities
until the next annual meeting of the Board of Directors of the Company and until
their successors are duly elected and qualified.

         The Board of  Directors  met in excess  of five (5)  times  during  the
fiscal  year  ended June 30,  1997.  Two former  directors  attended  fewer than
seventy-five  percent (75%) of the total number of meetings held by the Board of
Directors.

         There are no material  proceedings  to which any  director,  officer or
affiliate of the Company,  any owner of record or beneficially of more than five
percent (5%) of any class of voting securities of the Company,  or any associate
of any such director,  officer, affiliate of the Company or security holder is a
party adverse to the Company.



                                       26
<PAGE>




COMMITTEES OF THE BOARD OF DIRECTORS

         The Board of Directors has established an Audit Committee, an Executive
Committee and a Compensation Committee, as more fully described below.

         AUDIT COMMITTEE.  The Company's audit committee (the "Audit Committee")
is responsible for making  recommendations to the Board of Directors  concerning
the selection  and  engagement of the  Company's  independent  certified  public
accountants  and for reviewing the scope of the annual  audit,  audit fees,  and
results of the audit.  The Audit  Committee  also  reviews  and  discusses  with
management  and the Board of Directors  such matters as accounting  policies and
internal  accounting  controls,  and  procedures  for  preparation  of financial
statements.  Prior to his resignation, Mr. Ribero served on the Audit Committee.
Currently,  Messrs. Char and Wagner serve as members of the Audit Committee. The
Audit Committee held no meetings during the fiscal year ended June 30, 1997.

         EXECUTIVE COMMITTEE.  The Company's executive committee (the "Executive
Committee") has the rights, privileges,  duties and responsibilities to exercise
the full power and authority of the Board of Directors in the  management of the
business of the Company,  to the extent not assigned to other  committees of the
Board of Directors and to the extent  permitted by Delaware law, the Articles of
Incorporation and the Bylaws of the Company.  Currently,  Messrs. Mednick, Bloom
and Wagner serve as members of the Executive Committee.  The Executive Committee
was formed in June 1997 and held one  meeting  during the fiscal year ended June
30, 1997. The Company has no nominating  committee,  but the Executive Committee
currently  serves the function that a nominating  committee  would be created to
serve.

         COMPENSATION  COMMITTEE.  The  Company's  compensation  committee  (the
"Compensation  Committee")  approves the compensation for executive employees of
the Company.  The Compensation  Committee reviews and recommends to the Board of
Directors the compensation and benefits of all officers of the Company,  reviews
general policy matters relating to compensation and benefits of employees of the
Company and  administers  the Company's  1997 Stock Option Plan.  Prior to their
resignations,  Messrs. Ribero and Martinez served on the Compensation Committee.
Currently,  Messrs.  Char  and  Canter  serve  as  members  of the  Compensation
Committee.  The  Compensation  Committee held one meeting during the fiscal year
ended June 30, 1997.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT OF 1934

         Section 16(a) of the  Securities  Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors,  and persons who
own  more  than ten  percent  of a  registered  class  of the  Company's  equity
securities,  to file  reports of  ownership  and changes in  ownership of equity
securities,  to file  reports of  ownership  and changes in  ownership of equity
securities of the Company with the  Commission and NASDAQ.  Officers,  directors
and greater than ten percent  stockholders are required by regulation to furnish
the Company with copies of all Section 16(a) forms that they file.



                                       27
<PAGE>




         Based solely upon a review of Forms 3, Forms 4 and Forms 5 furnished to
the Company  pursuant to Rule 16a-3 under the Exchange  Act, it is the Company's
belief that,  other than as set forth below, any such forms required to be filed
pursuant to Section 16(a) of the Exchange Act were filed,  as necessary,  by the
officers,  directors and securityholders required to file the same but some were
filed late as set forth below.
   
         Based  on the  Company's  knowledge,  Messrs.  Mednick,  Bloom,  Curry,
Epstein, Wagner, DeLape, Ribero and Martinez were required to file Forms 5. Each
of Messrs.  Mednick,  Bloom, Curry, DeLape,  Epstein and Wagner were required to
file a Form 5 for the fiscal year ended June 30, 1997, and filed such form late.
Messrs.  Ribero and  Martinez  did not file Forms 5. Other than Mr.  Epstein who
received  options to purchase  133,333 shares of Common Stock,  each such person
received during the fiscal year ended June 30, 1997, an option to acquire 20,000
shares of Common Stock,  which  transaction  would have been the subject of such
Form 5. 
    
ITEM 10. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

         The following table sets forth the aggregate cash compensation  awarded
to, earned by or paid for services  rendered to the Company  during the last two
fiscal years by each person serving as the Company's Chief Executive Officer and
the five most  highly  compensated  executive  offices  serving at June 30, 1997
whose compensation was in excess of $100,000 (the "Named Executive Officers").

<TABLE>
<CAPTION>
                                 ANNUAL COMPENSATION                            AWARDS              PAYOUTS
                     --------------------------------------------       ------------------------    ---------
                                                                                    SECURITIES
                                                                       RESTRICTED   UNDERLYING
     NAME AND                                          OTHER ANNUAL       STOCK      OPTIONS/       LTIP         ALL OTHER
PRINCIPAL POSITION    YEAR   SALARY($)    BONUS($)   COMPENSATION($)    AWARDS($)     SARS(#)    PAYOUTS($)   COMPENSATION($)
------------------    ----   ---------    --------   ---------------    ---------     -------    ----------   ---------------
<S>                  <C>     <C>           <C>            <C>            <C>          <C>          <C>            <C>    
Scott A. Mednick1    1997    225,000       28,782           --             --         20,0002        --           9,60010
Chairman and CEO     1996    225,000       11,376         20,000           --           --           --           9,60010

Ronald E. Bloom3     1997    125,000      69,6964           --             --         20,0002        --           9,60010
President            1996    106,250       58,234           --             --           --           --           9,60010

Adam C. Curry5       1997    125,000      81,4804           --             --         20,0002        --           9,60010
Chief Technology     1996    125,000       2,684            --             --           --           --           9,60010
Officer

Melvin Epstein6      1997    156,923         --             --             --        133,3332        --              --
Chief Financial      1996        --          --             --             --           --           --              --
Officer

Susan Goodman7       1997    195,000       46,825           --             --         36,6672        --              --
Executive Vice       1996    138,000         --             --             --           --           --           130,0008
President

Larry Kopald9        1997    300,000         --             --             --        250,0002        --           9,60010
President, The       1996        --          --             --             --           --           --              --
Mednick Group
--------------------------
</TABLE>

                                       28
<PAGE>




1     Mr. Mednick  commenced his  employment  with the Company in March 1996 and
      was appointed Chairman and Chief Executive Officer in March 1996.
   
2     Represents  shares of Common  Stock  issuable  upon  exercise  of  options
      granted to the noted officer  pursuant to the 1997 Stock Option Plan at an
      exercise  price of $4.05  per share for each  individual,  other  than Mr.
      Bloom, who owned in excess of ten percent (10%) of the outstanding  Common
      Stock on the date of grant and whose  options  have an  exercise  price of
      $4.46 per share and Mr.  Kopald,  whose options have an exercise  price of
      $3.69 per share (representing the fair market value of the Common Stock at
      the time of grant as determined in accordance  with the provisions of such
      plan).
    
3     Mr. Bloom  commenced his employment  with the Company in June 1996 and was
      appointed  President in July 1996. 
4     Represents  a bonus as  determined  by the  Compensation  Committee of the
      Board of Directors.  
5     Mr. Curry  commenced his employment  with the Company in June 1996 and was
      appointed Chief Technology  Officer in June 1996. 
6     Mr. Epstein  commenced his  employment  with the Company in August 1996. 
7     Ms.  Goodman  commenced  her  employment  with the Company in June 1996. 
8     Represents  distributions  to  the  noted  executive  as the  former  sole
      stockholder of the S.D. Goodman Group, lnc., a Subsidiary and previously a
      Subchapter S corporation.  
9     Mr. Kopald  commenced his employment with the Company  effective as of May
      31,  1997;  consequently,  prior to the end of  fiscal  1997,  Mr.  Kopald
      received  approximately  $25,000 of the salary noted above.  
10    Represents car allowances provided to the noted individuals.

STOCK OPTION PLANS

         In July  1996,  the  Board  of  Directors  adopted  and  the  Company's
stockholders  approved the 1996 Stock Option Plan (the "1996  Plan"),  which was
subsequently  amended and restated in November  1996. The 1996 Plan provided for
the grant of  options  which  qualify as  incentive  stock  options  ("Incentive
Options") under Section 422 of the Internal  Revenue Code of 1986, as amend (the
"Code"),  to officer and  employees  of the Company and options  which do not so
qualify  ("Non-Qualified  Options")  to  officers,   directors,   employees  and
consultants of the Company (including  Subsidiaries).  A total of 966,667 shares
of Common  Stock was  reserved  for  issuance  under the 1996 Plan  (subject  to
adjustment in the event of the Company's  declaration of stock dividends,  stock
splits,  reclassifications and the occurrence of other similar events).  Options
to purchase  966,667  shares of Common  Stock at an exercise  price per share of
$7.50 were granted by the Company in November 1996. The Options  granted were to
vest in increments of one-fourth at the end of each year over a four year period
from the date of grant.

         Pursuant  to a  resolution  of the  Board  of  Directors,  the  Company
terminated the 1996 Plan and  established  the THINK New Ideas,  Inc. 1997 Stock
Option Plan (the "1997  Plan")  which  provides  for the grant of options  which
quality as  Incentive  Options  under  Section 422 of the Code,  to officers and
employees of the Company (and the  Subsidiaries)  and  Non-Qualified  Options to
officers,  directors,   employees  and  consultants  of  the  Company  (and  the
Subsidiaries).  The  Board of  Directors  deemed  it  advisable  and in the best
interests of the Company and its  shareholders to terminate the 1996 Plan and to
establish  the 1997 Plan and has, by  resolution,  directed that adoption of the
1997 Plan be  presented  to the  shareholders  of the Company for  approval  and
ratification  at the  Annual  Meeting  (currently  scheduled  to take  place  on
December 11, 1997).  All of the persons entitled to participate in the 1996 Plan
were given the opportunity to participate in the 1997 Plan and received  options
to  purchase  the same  number of shares of Common  Stock they were  entitled to


                                       29
<PAGE>




purchase  under the 1996 Plan at an price per share  equal to $4.05,  the market
price as established  pursuant to the 1997 Plan on the date of grant.  Under the
1997 Plan,  the Company may grant options to purchase up to 1,250,000  shares of
Common Stock. In July 1997, the Executive  Committee  authorized an amendment to
the 1997 Plan to  increase  the  number of shares  reserved  for  issuance  from
1,250,000 shares of common stock to 2,000,000 shares of common stock. As of June
30,  1997,  there were  options to  purchase  1,137,796  shares of Common  Stock
outstanding under the 1997 Plan.

         An  aggregate  of 68 persons are  eligible to  participate  in the 1997
Plan.  Such persons include 4 executive  officers and/or  directors who are also
employees of the Company and 64 other  employees of the Company who are eligible
to receive  Incentive  Options  under the 1997 Plan,  all of which  persons  (in
addition to 4  non-employee  directors)  are  eligible to receive  Non-Qualified
Options under the 1997 Plan.

         In  addition  to the  foregoing,  during the fiscal year ended June 30,
1997, the Board of Directors granted options to purchase 20,000 shares of Common
Stock to each of Scott A. Mednick, Ronald Bloom, Adam Curry, Frank DeLape, Barry
Wagner,  Michael Ribero and Angel Martinez.  Consultants  engaged by the Company
from time to time are also  expected  to be  eligible  to receive  Non-Qualified
Options under the 1997 Plan.

OPTION/SAR GRANTS IN LAST FISCAL YEAR
   
<TABLE>
<CAPTION>

                          NUMBER OF SECURITIES            PERCENT OF TOTAL          1EXERCISE
                               UNDERLYING              OPTIONS/SARS GRANTED TO       OR BASE
     NAME               OPTIONS/SARS GRANTED (#)      EMPLOYEES IN FISCAL YEAR    PRICE ($/SH)       EXPIRATION DATE
------------------      ------------------------      ------------------------    ------------       ---------------
<S>                             <C>                              <C>                  <C>                  <C> 
Scott Mednick                   20,000                           1.76                 4.05                 2002
Ronald Bloom                    20,000                           1.76                 4.46                 2002
Adam Curry                      20,000                           1.76                 4.05                 2002
Melvin Epstein                 133,333                          11.72                 4.05                 2007
Susan Goodman                   36,667                           3.22                 4.05                 2007
Larry Kopald                   250,000                          21.97                 3.69                 2007
</TABLE>
--------------------------
1 Based upon the  closing  bid price of the  Company's  Common  Stock on the day
prior to the grant date as quoted by the Nasdaq National Market Systemsm.
    
   

AGGREGATE   OPTION/SAR  EXERCISES  IN  LAST  FISCAL  YEAR  AND  FISCAL  YEAR-END
OPTION/SAR VALUES

         There  were no  options  exercised  during  fiscal  1997  by the  Named
Executive  Officers.  The following  table sets forth certain  information  with
respect to unexercised options held by such persons at the end of fiscal 1997.

                                       30
<PAGE>




<TABLE>
<CAPTION>

                                                        NUMBER OF SECURITIES UNDERLYING
                            SHARES                        UNEXERCISED OPTIONS/SARS AT      VALUE OF UNEXERCISED IN THE MONEY
                         ACQUIRED ON        VALUE                 FY-END (#)                  OPTIONS/SARS AT FY-END ($)1
NAME                    EXERCISE (#)    REALIZED ($)   EXERCISABLE     UNEXERCISABLE      EXERCISABLE       UNEXERCISABLE
----                    ------------    ------------   -----------     -------------      -----------       -------------
<S>                          <C>            <C>             <C>             <C>                 <C>              <C>
Scott Mednick                None           None            None            20,000              None              $1,600
Ronald Bloom                 None           None            None            20,000              None              $1,600
Adam Curry                   None           None            None            20,000              None              $1,600
Melvin Epstein               None           None            None            133,333             None             $10,667
Susan Goodman                None           None            None            36,667              None              $2,933
Larry Kopald                 None           None            None            250,000             None             $110,000
</TABLE>
--------------------------
1        The  calculations of the value of unexercised  options are based on the
         difference  between the closing bid price quoted by the Nasdaq National
         Market  System of the Common Stock on June 30,  1997,  and the exercise
         price of each option, multiplied by the number of shares covered by the
         option. 
    
EMPLOYMENT AGREEMENTS

         In June 1996,  the Company  entered into an employment  agreement  with
each of Scott  Mednick,  Ronald Bloom,  Adam Curry and James  Carlisle,  each of
which  provides  for an  initial  term of  three  years,  subject  to  automatic
extension  for a period of two years in the absence of notice to the contrary at
the option of the Company.  Mr. Mednick's  employment agreement provides that he
is entitled to receive an annual  salary of  $225,000.  Pursuant to the terms of
their respective employment agreements, as amended, each of Messrs. Bloom, Curry
and Carlisle  receives an annual  salary of $125,000.  Each of Messrs.  Mednick,
Bloom,  Curry and Carlisle are entitled to receive  bonuses as determined by the
Board of Directors.  The  Compensation  Committee has granted bonuses to each of
Messrs.  Mednick,  Bloom and Curry in the aggregate  amounts,  respectively,  of
$28,782; $69,696 and $81,480.

         The  Company  also  entered  into an  employment  agreement  with James
Grannan which  provided for a term of one year,  subject to renewal for a period
of one year at the discretion of the Company.  On July 31, 1997,  Mr.  Grannan's
employment agreement was renewed for a period of one year. Pursuant to the terms
of such agreement, Mr. Grannan receives an annual salary of $125,000 and bonuses
as determined by the Board of Directors.  In connection with the recent renewal,
Mr. Grannan was granted a $15,000 bonus.

         The  Company  is also a party to an  employment  agreement  with  Susan
Goodman,  entered into in June 1996, which provides for an initial term of three
years.  Pursuant  to the  terms of the  employment  agreement,  Ms.  Goodman  is
entitled to receive an annual  salary of  $195,000  and  bonuses  thereafter  as
determined  by the Board of  Directors.  In addition,  Ms.  Goodman has received
bonuses pursuant to the terms of her employment agreement with the Company.

         The Company also entered  into an  employment  letter with Mel Epstein,
which  provides  for a term of one year,  subject to renewal  for periods of one
year at the discretion of the Company.  Pursuant to the terms of such agreement,
Mr. Epstein receives an annual salary of $180,000.



                                       31
<PAGE>




         In April  1997,  the  Company  and David  Hieb,  formerly  the owner of
Internet One, entered into an agreement  pursuant to which Mr. Hieb's employment
with the  Company  was  terminated  in  exchange  for the payment to Mr. Hieb of
$40,000 and  acceleration  of the vesting of options  previously  granted to him
under the 1997 Plan to acquire 10,470 shares of Common Stock.

         In May 1997, in connection  with the Company's  acquisition  of certain
assets of Ketchum, the Company reached an agreement with Larry Kopald,  pursuant
to which Mr.  Kopald is  entitled to receive an annual  salary of  $300,000  the
first year of his employment and $350,000 the second year of his employment.  In
addition,  Mr.  Kopald is entitled  to receive  bonuses of up to $150,000 in the
first  year of his  employment  and up to  $100,000  in the  second  year of his
employment based upon Oracle entering into advertising services agreements.  Mr.
Kopald is also entitled to receive bonuses of up to ten percent (10%) of profits
on billings on the Oracle account in excess of $16 million  dollars in the first
year of his  employment  agreement  and up to ten  percent  (10%) of  profits on
billings on the Oracle  account in excess of $20  million  dollars in the second
year of his employment, and options exercisable to purchase up to 250,000 shares
of Common Stock in equal  increments  over a period of four years at an exercise
price of $3.69 per share,  the market  price of the Common  Stock at the date of
grant.

         The Company's  employment  agreements  provide for  termination  by the
Company upon death or disability of the individual and may be terminated with or
without cause (as defined  therein).  Such agreements also provide for severance
payments  upon  termination  without  cause based upon a multiple of the monthly
salaries  provided for therein (for up to twelve months  following the number of
months  otherwise  remaining  under such  agreements).  In addition,  all of the
foregoing  employment  agreements contain  non-competition  and  confidentiality
provisions  that  extend  beyond the  respective  terms of such  agreements  for
periods of up to one year.

CONSULTING AND OTHER ARRANGEMENTS

         In March 1996,  the Company  entered into  consulting  agreements  with
Benchmark Equity Group,  Inc.  ("Benchmark")  pursuant to which the Company paid
Benchmark $500,000 in finders fees and pays $7,000 per month in consulting fees.
As of the date  hereof,  only  one of such  agreements  (the  $7,000  per  month
agreement)  remains in effect and is  scheduled  to expire in March 1998.  Frank
DeLape,  a stockholder  and former  director of the Company,  is a principal and
director of Benchmark.

         In June 1997,  the Company  entered  into a consulting  agreement  with
Jason H. Pollak,  pursuant to which Mr.  Pollak  agreed to render to the Company
for a period of one year certain  consulting  services,  including,  among other
things,  providing  merger and  acquisition  and investor  and public  relations
services. In exchange therefor,  the Company issued, in July 1997, 50,000 shares
of Common  Stock and agreed to issue an  aggregate  of 150,000  shares of Common
Stock and options to acquire up to 150,000  additional  shares of Common  Stock.
The securities subject to the consulting agreement are issuable in equal monthly
installments and the option exercise prices are based upon the closing bid price
of the Common Stock in each month that the corresponding options are issued.



                                       32
<PAGE>





REMUNERATION OF DIRECTORS

         Employee directors of the Company receive no compensation for acting as
directors  or  attending  meetings  of  the  Board  of  Directors.  Non-employee
directors  receive  $1,000  per year for each year such  director  serves on the
Board of Directors and $2,500 per meeting attended.  In addition,  all directors
are eligible to receive  options under the 1997 Plan. All directors are entitled
to  reimbursement of reasonable  expenses  related to attending  meetings of the
directors.  In  addition,  each  director  received  an  option to  purchase  an
aggregate  of  20,000  shares  of  Common  Stock.   See  the  charts  set  forth
hereinabove.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT

         The  following  table  sets  forth  as  of  the  date  hereof,  certain
information  with respect to stock  ownership  of: (i) all persons  known by the
Company to be beneficial  owners of five percent or more of  outstanding  Common
Stock; (ii) each of the Company's  directors and executive  officers;  and (iii)
all directors and executive  officers as a group (7 persons).  Unless  otherwise
indicated,  the beneficial owners have sole voting and investment power over the
shares of Common Stock listed below.
   
<TABLE>
<CAPTION>
                                            NUMBER OF SHARES            % OF OUTSTANDING
NAME AND ADDRESS                             OF COMMON STOCK            SHARES OF COMMON
OF BENEFICIAL OWNER                        BENEFICIALLY OWNED(1)    STOCK BENEFICIALLY OWNED
-------------------                        ---------------------    ------------------------

<S>                                               <C>                        <C>  
Frank M. DeLape(2)                                898,898(3)                 13.6%
16406 Brook Forest Drive
Houston, Texas 77059

Benchmark Equity Group, Inc.                      682,231(4)                 10.3%
700 Gemini
Houston, Texas 77058

Ronald Bloom(5)                                   955,933(6)                 14.3%
45 West 36th Street
New York, New York 10018

Scott A. Mednick(5)                               710,467(6)                 10.6%
8000 Sunset Boulevard, Penthouse East
Los Angeles, California 90046


                                       33
<PAGE>




                                            NUMBER OF SHARES            % OF OUTSTANDING
NAME AND ADDRESS                             OF COMMON STOCK            SHARES OF COMMON
OF BENEFICIAL OWNER                        BENEFICIALLY OWNED(1)    STOCK BENEFICIALLY OWNED
-------------------                        ---------------------    ------------------------

Adam Curry(5)                                        258,225(6)               3.9%
30 Glen Road
Verona, New Jersey 07044

Melvin Epstein(7)                                     33,333(8)                  *
45 West 36th Street
New York. New York 10018

Larry Kopald(5)                                      250,000(9)                  *
8000 Sunset Boulevard, Penthouse East
Los Angeles, California 90046

James Carlisle(10)                                  211,849(11)               3.2%
45 Allison Road
Alpine, New Jersey 07620

Susan Goodman(10)                                    58,790(12)                  *
45 West 36th Street
New York. New York 10018

James Grannan(10)                                    12,637(13)                  *
500 Bishop Street, Suite 5A
Atlanta, GA 30305
Omnicom Group Inc.                                1,183,333(14)              17.9%
437 Madison Avenue
New York, New York 10022

Barry Wagner(15)                                     20,000(16)                  *
437 Madison Avenue, 9th Floor
New York, New York 10022

Richard Char(15)                                     20,000(16)                  *
14 Sunkist Lane
Los Altos, California 94022

Marc Canter(15)                                      20,000(16)                  *
701 Rhode Island
San Francisco, California 94107

All Directors and Executive Officers as a         2,261,234                  32.7%
Group (11 persons)
</TABLE>
------------------- 
*     Denotes less than one percent.
1     Unless  otherwise  noted,  all of such shares of Common Stock listed above
      are owned of record by each individual  named as beneficial owner and each
      such individual has sole voting and dispositive  power with respect to the
      shares of Common Stock owned. The percentage of ownership is determined by
      assuming  that any  options or  convertible  securities  held by the noted
      securityholder  which are exercisable  within 60 days from the date hereof
      have been exercised or converted, as the case may be.
2     Former  director of the Company.  See "Directors  and Executive  Officers"
      below.
3     Includes  682,231 shares and 180,000  shares of Common Stock  beneficially
      owned by Benchmark Equity Group, Inc. and Trident II, L.L.C., respectively
      and 16,667 shares of Common Stock beneficially owned by Frank DeLape. Also
      includes options to acquire 20,000 shares of Common Stock granted to Frank
      DeLape as a director of the Company prior to his  resignation.  Mr. DeLape
      is an officer,  director and  principal  stockholder  of Benchmark  Equity


                                       34
<PAGE>




      Group,  Inc., a principal  stockholder of the Company,  and is an officer,
      director and principal of Oak Tree Capital, Inc., which is the manager and
      a member of Trident II,  L.L.C.  Mr. DeLape may be deemed to be beneficial
      owner of all such  shares.  Excludes  97,461  shares  held by  Christopher
      Efird, a principal of Benchmark Equity Group,  Inc., and a former director
      of the Company.
4     Excludes  180,000  shares of Common  Stock  owned by Trident  II,  L.L.C.,
      16,667  shares of Common Stock owned by Frank DeLape and 20,000  shares of
      Common Stock issuable upon exercise of options granted to Mr. DeLape.
5     Officer  and  director  of  the  Company.  See  "Directors  and  Executive
      Officers" below.
6     Includes 80,000 shares of Common Stock issuable upon exercise of currently
      exercisable  options  granted to the noted  securityholder,  but  excludes
      20,000  shares of Common Stock  subject to options which are not currently
      exercisable. See "Executive Compensation."
7     Chief  Financial  Officer of the Company.  See  "Directors  and  Executive
      Officers" below.
8     Includes 33,333 shares of Common Stock issuable upon exercise of currently
      exercisable  options  granted to the noted  securityholder,  but  excludes
      125,000  shares of Common Stock subject to options which are not currently
      exercisable. See "Executive Compensation."
9     Includes  250,000 shares of Common Stock issuable upon exercise of options
      granted  to the noted  securityholder,  which  options  are not  currently
      exercisable. See "Executive Compensation."
10    Officer of the Company.
11    Includes 16,667 shares of Common Stock issuable upon exercise of currently
      exercisable  options  granted to the noted  securityholder,  but  excludes
      50,000  shares of Common Stock  subject to options which are not currently
      exercisable.
12    Includes  9,167 shares of Common Stock  issuable  upon exercise of options
      granted to the noted  securityholder  but excludes 52,500 shares of Common
      Stock subject to options which are not currently exercisable.
13    Includes  8,667 shares of Common Stock  issuable  upon exercise of options
      granted to the noted  securityholder  but excludes 36,000 shares of Common
      Stock subject to options which are not currently exercisable.
14    Includes  120,000  shares issued to Omnicom Group Inc. in connection  with
      the  Company's   acquisition  of  the  assets  and  operations  of  Fathom
      Advertising from Ketchum  Communications,  Inc., a wholly-owned subsidiary
      of Omnicom Group Inc.
15    Director of the Company. See "Directors and Executive Officers" below.
16    Includes  20,000 shares of Common Stock  issuable upon exercise of options
      granted  to the noted  securityholder,  which  options  are not  currently
      exercisable.
    

         There are no agreements or other  arrangements or understandings  known
to the Company concerning the voting of the Common Stock or otherwise concerning
control of the Company which are not disclosed herein.  There are no pre-emptive
rights applicable to the Company's securities.


                                       35
<PAGE>





ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In January 1996, Scott Mednick, Ronald Bloom, Benchmark and Christopher
Efird,  as the founding  stockholders  of the Company,  acquired an aggregate of
2,171,506 shares of Common Stock in exchange for payment of an aggregate of $656
therefor.

         In connection  with the Company's  acquisition  of The Mednick Group in
June 1996, the Company issued to Scott Mednick,  as the sole  stockholder of The
Mednick Group, an aggregate of 208,084 shares of Common Stock. Mr.
Mednick is a founding stockholder, an officer and a director of the Company.

         In March 1996, the Company  obtained a loan in the aggregate  principal
amount of $270,000 from three separate lenders, including Trident II, L.L.C. and
Frank M. DeLape.  In exchange  for  extension  of the loan,  the Company  issued
the10% Notes,  including one in the principal  amount of $225,000 to Trident II,
L.L.C. and one in the principal  amount of $20,000 to Mr. DeLape.  Mr. DeLape, a
founder of the  Company  and a former  director,  is an  officer,  director  and
principal of Benchmark and of Oak Tree Capital, Inc., which is the manager and a
member of  Trident  II,  L.L.C.  In August  1996,  an  aggregate  of  $27,000 in
principal amount of the foregoing 10% Notes was converted by the holders thereof
into an aggregate of 216,667 shares of Common Stock.  In July 1996,  Trident II,
L.L.C.  loaned  the  Company  an  additional  $75,000  evidenced  by a  separate
non-convertible  promissory note.  Principal and interest  outstanding under the
10% Notes and the $75,000 non-convertible promissory note were repaid out of the
proceeds of the Omnicom  Transaction  in August  1996,  as more fully  described
elsewhere herein.

         Also in March 1996, the Company entered into consulting agreements with
Benchmark  pursuant to which the Company paid Benchmark $500,000 in finders fees
and pays $7,000 per month in consulting fees. As of the date hereof, only one of
such  agreements  (the  $7,000  per month  agreement)  remains  in effect and is
scheduled  to expire in March  1998.  Frank  DeLape,  a  stockholder  and former
director of the Company, is a principal and director of Benchmark.

         In April  1996,  upon  release  of an  escrow  account  established  to
facilitate  the following loan  transaction,  the Company loaned an aggregate of
$1,000,000 to On Ramp in connection with the redemption by On Ramp of 100 shares
of its common stock (which shares of common stock  represented 66% of the issued
and outstanding  capital stock of On Ramp). Such redemption was the result of an
agreement  previously  reached among the former  stockholders of On Ramp arising
out of fundamental  differences among such individuals relating to the operation
and  business  strategy  of On Ramp.  In  addition,  pursuant  to the terms of a
certain loan  agreement  between the Company and On Ramp,  the Company agreed to
make  available to On Ramp an additional  $600,000,  of which  $494,000 has been
borrowed  by On  Ramp  as of the  date  hereof.  Such  loans  are  evidenced  by
promissory  notes  executed  on behalf of On Ramp in favor of the Company in the


                                       36
<PAGE>




principal  amounts  of  $1,000,000  and  $600,000,  respectively  (the  "On Ramp
Notes"). Amounts outstanding under the On Ramp Notes accrue interest at the rate
of 12% per annum. Payment of principal and interest on the On Ramp Notes was due
on August 16, 1996,  subject to a six-month  cure  period.  Repayment of amounts
outstanding  under the On Ramp Notes were  secured by the pledge in favor of the
Company of 26 shares of common stock of On Ramp by Adam Curry (who,  as a result
of  the  foregoing  redemption,   became  the  sole  stockholder  of  On  Ramp).
Subsequently,  in connection  with the  Company's  acquisition  of On Ramp,  the
Company  acquired all of the issued and  outstanding  capital  stock of On Ramp,
including the shares of common stock subject to the On Ramp Pledge Agreement.

         In May 1996,  pursuant to the terms of a certain loan agreement between
the Company and Internet One, the Company  agreed to make  available to Internet
One up to $70,000,  of which $50,000 has been borrowed by Internet One as of the
date hereof.  Such loan is evidenced by a promissory  note  executed by Internet
One in favor of the Company in the  principal  amount of $70,000 (the  "Internet
One Note").  Amounts  outstanding under the Internet One Note accrue interest at
the rate of 12% per annum. Payment of principal and interest on the Internet One
Note is due on September 30, 1996.  Repayment of amounts  outstanding  under the
Internet  One Note was  secured  by the  pledge  in  favor of the  Company  (the
"Internet One Pledge  Agreement")  of 132,000 shares of common stock of Internet
One (which shares of common stock  represent  33% of the issued and  outstanding
capital  stock of Internet  One) by David R. Hieb.  Subsequently,  in connection
with the Company's  acquisition of Internet One, the Company acquired all of the
outstanding  shares of capital  stock of Internet  One,  including the shares of
common stock subject to the Internet One Pledge Agreement.

         Historically,  Dr.  Carlisle  and his father,  Dan  Carlisle,  extended
credit to NetCube.  In connection  with the Company's  acquisition of NetCube in
June  1996,  Dr.  Carlisle  agreed to  forgive  an  aggregate  of  approximately
$1,220,000 in debt owed to him by NetCube.  In addition,  the Company  agreed to
issue three  promissory notes providing for repayment of amounts owed to each of
Dr. Carlisle and Dan Carlisle. Each of such promissory notes accrued interest at
the rate of 8% per annum and was  convertible  into shares of Common Stock prior
to expiration  thereof at the rate of $7.50 per share.  The principal  amount of
the  promissory  note issued to Dr.  Carlisle  was  $132,000  and the  principal
amounts of the two  promissory  notes issued to Dan Carlisle  were  $288,000 and
$515,760,  respectively. The $132,000 promissory note issued to Dr. Carlisle and
the $288,000  promissory  note issued to Dan  Carlisle  were repaid prior to the
Initial Public Offering.  The $515,760 convertible promissory note issued to Dan
Carlisle is payable on March 31, 1998 (or earlier, upon the Company's receipt of
$3,000,000 from a private offering of securities,  the sale of 50% of the assets
of the Company or another public offering).

         Pursuant to the terms of the Omnicom  Agreement:  (a) Omnicom purchased
938,667  shares of Common Stock from the Company in exchange for net proceeds of
$4,948,000;  (b) the Company  appointed Barry Wagner to represent Omnicom on the
Board of Directors; (c) Omnicom agreed not to increase its ownership interest in


                                       37
<PAGE>




the  Company  absent the  approval  of the Board of  Directors;  and (d) Omnicom
granted  the Company a right of first  refusal to purchase  the shares of Common
Stock owned by Omnicom.

         In  November  1996,   four  principal   stockholders   of  the  Company
transferred  an  aggregate  of 124,667  shares of Common Stock to Omnicom for no
cash consideration.  In connection therewith, Omnicom consented to a stock split
by the Company and related  amendments to the Omnicom  Agreement and the Company
agreed to decrease the number of shares available under the 1996 Plan.

         The  Company  entered  into the  Omnicom  Transaction  to  establish  a
strategic  relationship  which  management of the Company believes could provide
access  to a  substantial  additional  client  base,  although  there  can be no
assurance that such result will occur.  Since June 1996, Omnicom and the Company
have  engaged  in the joint  marketing  of their  services  to  several  Omnicom
clients.  There can be no assurance that such joint marketing will continue, nor
can there be any assurance  with respect to the effect of such  marketing on the
Company's operations.

         In May 1997, the Company entered into the Ketchum  Agreement,  pursuant
to which the  Company  acquired  certain  assets and  operations  of Fathom from
Ketchum, a wholly-owned  subsidiary of Omnicom,  in exchange for the issuance of
120,000 shares of Common Stock.


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)      EXHIBITS.

         EXHIBIT
         NUMBER            TITLE OF EXHIBIT

         2.1               Asset Purchase and Forbearance  Agreement,  dated May
                           31, 1997,  by and between  THINK New Ideas,  Inc. and
                           Ketchum Communications, Inc.

         3.1               Articles of Incorporation  of THINK NEW IDEAS,  Inc.,
                           (Delaware) (Registrant) filed with the Securities and
                           Exchange  Commission  on  September  26,  1996  as an
                           exhibit to the  Company's  Registration  Statement on
                           Form  SB-2  (File  No.  333-12795)  and  incorporated
                           herein by reference.

         3.2               Agreement  and Plan of Merger by and among  THINK NEW
                           IDEAS,  Inc., On Ramp, Inc. and Adam Curry filed with
                           the Securities  and Exchange  Commission on September
                           26, 1996 as an exhibit to the Company's  Registration


                                       38
<PAGE>




                           Statement  on Form  SB-2  (File  No.  333-12795)  and
                           incorporated herein by reference.

         3.3               Agreement  and Plan of Merger by and among  THINK NEW
                           IDEAS, Inc., NetCube  Corporation and James Carlisle,
                           Ph.D.   filed  with  the   Securities   and  Exchange
                           Commission on September 26, 1996 as an exhibit to the
                           Company's  Registration  Statement on Form SB-2 (File
                           No. 333-12795) and incorporated herein by reference.

         3.4               Agreement  and Plan of Merger by and among  THINK NEW
                           IDEAS,  Inc.,  Creative  Resources,  Inc.  and  James
                           Grannan  filed  with  the   Securities  and  Exchange
                           Commission on September 26, 1996 as an exhibit to the
                           Company's  Registration  Statement on Form SB-2 (File
                           No. 333-12795) and incorporated herein by reference.

         3.5               Agreement  and Plan of Merger by and among  THINK NEW
                           IDEAS,  Inc., The S.D. Goodman Group,  Inc. and Susan
                           Goodman  filed  with  the   Securities  and  Exchange
                           Commission on September 26, 1996 as an exhibit to the
                           Company's  Registration  Statement on Form SB-2 (File
                           No. 333-12795) and incorporated herein by reference.

         3.6               Agreement  and Plan of Merger by and among  THINK NEW
                           IDEAS,  Inc.,  Internet  One, Inc. and David and Dana
                           Hieb  filed   with  the   Securities   and   Exchange
                           Commission on September 26, 1996 as an exhibit to the
                           Company's  Registration  Statement on Form SB-2 (File
                           No. 333-12795) and incorporated herein by reference.

         3.7               Agreement  and Plan of Merger by and among  THINK NEW
                           IDEAS,  Inc.,  Scott Mednick &  Associates,  Inc. and
                           Scott Mednick filed with the  Securities and Exchange
                           Commission on September 26, 1996 as an exhibit to the
                           Company's  Registration  Statement on Form SB-2 (File
                           No. 333-12795) and incorporated herein by reference.

         3.8               Bylaws  of  THINK  New  Ideas,  Inc.  filed  with the
                           Securities  and Exchange  Commission on September 26,
                           1996  as an  exhibit  to the  Company's  Registration
                           Statement  on Form  SB-2  (File  No.  333-12795)  and
                           incorporated herein by reference.

         4.1               Specimen  Common  Stock  Certificate  filed  with the
                           Securities  and Exchange  Commission on September 26,
                           1996  as an  exhibit  to the  Company's  Registration
                           Statement  on Form  SB-2  (File  No.  333-12795)  and
                           incorporated herein by reference.



                                       39
<PAGE>




         4.2               Form  of  Warrant   Agreement   among  the   Company,
                           Commonwealth   Associates   and   Continental   Stock
                           Transfer and Trust Company filed with the  Securities
                           and Exchange  Commission  on September 26, 1996 as an
                           exhibit to the  Company's  Registration  Statement on
                           Form  SB-2  (File  No.  333-12795)  and  incorporated
                           herein by reference.

         4.3               THINK New Ideas,  Inc. 1996 Stock Option Plan,  filed
                           with  the  Securities  and  Exchange   Commission  on
                           September  26,  1996 as an exhibit  to the  Company's
                           Registration   Statement   on  Form  SB-2  (File  No.
                           333-12795) and incorporated herein by reference.

         4.4               THINK New Ideas, Inc. 1997 Stock Option Plan.

         10.1              Employment  Agreement  between THINK New Ideas,  Inc.
                           and Scott  Mednick,  filed  with the  Securities  and
                           Exchange  Commission  as an exhibit to the  Company's
                           Registration  Statement on Form SB-2, dated September
                           26,  1996  (File  No.  333-12795),  and  incorporated
                           herein by reference.

         10.2              Employment  Agreement  between THINK New Ideas,  Inc.
                           and Ron Bloom, filed with the Securities and Exchange
                           Commission   as   an   exhibit   to   the   Company's
                           Registration  Statement on Form SB-2, dated September
                           26,  1996  (File  No.  333-12795),  and  incorporated
                           herein by reference.

         10.3              Employment  Agreement  between THINK New Ideas,  Inc.
                           and  Adam  Curry,   filed  with  the  Securities  and
                           Exchange  Commission  as an exhibit to the  Company's
                           Registration  Statement on Form SB-2, dated September
                           26,  1996  (File  No.  333-12795),  and  incorporated
                           herein by reference.

         10.4              Employment  Agreement  between THINK New Ideas,  Inc.
                           and Susan  Goodman,  filed  with the  Securities  and
                           Exchange  Commission  as an exhibit to the  Company's
                           Registration  Statement on Form SB-2, dated September
                           26,  1996  (File  No.  333-12795),  and  incorporated
                           herein by reference.

         10.5              Employment  Agreement  between THINK New Ideas,  Inc.
                           and James  Carlisle,  filed with the  Securities  and
                           Exchange  Commission  as an exhibit to the  Company's
                           Registration  Statement on Form SB-2, dated September
                           26,  1996  (File  No.  333-12795),  and  incorporated
                           herein by reference.



                                       40
<PAGE>




         10.6              Employment  Agreement  between THINK New Ideas,  Inc.
                           and James  Grannan,  filed  with the  Securities  and
                           Exchange  Commission  as an exhibit to the  Company's
                           Registration  Statement on Form SB-2, dated September
                           26,  1996  (File  No.  333-12795),  and  incorporated
                           herein by reference.

         10.7              Employment  Agreement  between THINK New Ideas,  Inc.
                           and Mel Epstein.

         10.8(a)           Employment  Letter between THINK New Ideas,  Inc. and
                           Larry Kopald.
   
         10.8(b)*          Employment  Agreement  between THINK New Ideas,  Inc.
                           and Larry Kopald.
    
         10.9              Consulting  Agreement,  dated June 30, 1997,  between
                           THINK New Ideas, Inc. and Jason H. Pollak, filed with
                           the Securities and Exchange  Commission as an exhibit
                           to the Company's  Registration  Statement on Form S-8
                           filed  with the  Commission  on July 17,  1997  (File
                           No.333-31511) and incorporated herein by reference.

         10.10             Letter  Amendment  to  Employment  Agreement of James
                           Grannan.

         10.11             Termination  Agreement  between THINK New Ideas, Inc.
                           and David Hieb.

         11                Statement regarding earnings per share.

         12.1              Quarterly  Report on Form  10-QSB for  quarter  ended
                           December  31,  1997  filed  with the  Securities  and
                           Exchange   Commission   on  February   15,  1997  and
                           incorporated herein by reference.

         12.2              Quarterly  Report on Form  10-QSB for  quarter  ended
                           March 31, 1997 filed with the Securities and Exchange
                           Commission on April 15, 1997 and incorporated  herein
                           by reference.

         23.1              Consent of BDO Seidman, LLP

         27                Financial Data Schedule.

* Denotes documents filed herewith.  Other documents are incorporated  herein by
reference as noted above.

                                       41
<PAGE>




(b)      REPORTS ON FORM 8-K.

         There were no Current  Reports on Form 8-K filed by the Company  during
the last quarter of the fiscal year ended June 30, 1997.


















                                       42
<PAGE>



                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended,  the  Registrant has duly caused this report to be signed on its behalf
by the undersigned, hereunto duly authorized.

                              THINK NEW IDEAS, INC.


Dated:  May 4, 1998                     By:  /s/ Scott A. Mednick
                                             ----------------------
                                             Scott A. Mednick, Chairman and 
                                                  Chief Executive Officer


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

<S>                                   <C>                                          <C>    
/s/ Scott A. Mednick                  Chief Executive Officer, Chairman            May 4, 1998
-----------------------------         of the Board and Director
Scott A. Mednick                      

/s/ Ronald Bloom                      President and Director                       May 4, 1998
-----------------------------
Ronald Bloom

/s/ Adam Curry                        Chief Technology Officer and                 May 4, 1998
-----------------------------         Director
Adam Curry                            

/s/ Melvin Epstein                    Chief Financial Officer                      May 4, 1998
-----------------------------
Melvin Epstein

/s/ Barry Wagner                      Director                                     May 4, 1998
-----------------------------
Barry Wagner

                                      Director
-----------------------------
Richard Char

                                      Director
-----------------------------
Marc Canter

/s/ Larry Kopald                      Director                                     May 4, 1998
-----------------------------
Larry Kopald
</TABLE>

                                       43