SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549

                                     FORM 10-KSB

                         [X]  ANNUAL REPORT UNDER SECTION 13
                   OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                       FOR THE FISCAL YEAR ENDED JUNE 30, 1998

                      [  ]  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,  1998  totaled
$42,644,405.

As of September 16, 1998, 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
last sale price on that date, was approximately $44,133,475.

As  of  September  16,  1998,  there  were  8,440,698  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>




                                      6

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

ITEM 1.     Description of Business..........................................2

ITEM 2.     Description of Property.........................................14

ITEM 3.     Legal Proceedings...............................................15

ITEM 4.     Submission of Matters to a Vote of Securityholders..............15

                                    PART II

ITEM 5.     Market for Common Equity and Related Stockholder Matters........15

ITEM 6.     Management's Discussion and Analysis of Financial Condition and
            Results of Operations...........................................16

ITEM 7.     Consolidated Financial Statements..............................F-1

ITEM 8.     Changes in and Disagreements with Accountants on Accounting and
            Financial Disclosures...........................................26

                                   PART III

ITEM 9.     Directors, Executive Officers, Promoters and Control Persons;
            Compliance with Section 16(a) of the Exchange Act...............26

ITEM 10.    Executive Compensation..........................................30

ITEM 11.    Security Ownership of Certain Beneficial Owners and  Management.38

ITEM 12.    Certain Relationships and Related Transactions..................38

ITEM 13.    Exhibits and Reports On Form 8-K................................41

      NOTE: Certain sections of this document 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."


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<PAGE>


                                    PART I


ITEM 1      DESCRIPTION OF BUSINESS

BACKGROUND

      THINK New Ideas,  Inc. (the  "Company") was  incorporated  in the State of
Delaware in January 1996. On June 30, 1996, the Company commenced its operations
upon  completion of the acquisition of all of the capital stock of the following
entities:  Internet One, Inc., a Colorado corporation ("Internet One"), Creative
Resources Agency, Inc., a Georgia corporation ("Creative  Resources");  Scott A.
Mednick & Associates, Inc., a California corporation ("Mednick Group"); The S.D.
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"), in
exchange for issuance of an aggregate of 723,167 shares of the Company's  common
stock (the "Common  Stock").  All of the foregoing  companies may be referred to
hereinafter as the "Founding Companies."

      In August 1996,  the Company  entered into a strategic  relationship  with
Omnicom Group Inc., a publicly held company ("Omnicom").  Omnicom is the 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  from 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").

      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
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 9 to the Company's Consolidated Financial Statements.

      Effective  as of May 31, 1997,  the Company  acquired  certain  assets and
operations of Fathom Advertising,  a full service advertising agency ("Fathom"),
from  Ketchum  Communications,   Inc.,  a  wholly-owned  subsidiary  of  Omnicom
("Ketchum")  in exchange for the  issuance of an aggregate of 120,000  shares of
Common Stock (the "Fathom Acquisition").

      In November  1997,  the Company  acquired all of the  outstanding  capital
stock of BBG New  Media,  Inc.,  a  Massachusetts  corporation,  which  provides
interactive  marketing  services ("BBG") in exchange for the issuance of 303,334
shares of Common Stock and payment of $175,000 in cash  pursuant to an Agreement

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<PAGE>




and Plan of Merger dated  November 3, 1997 (the "BBG  Agreement").  In addition,
under the terms of the BBG Agreement,  the Company will issue additional  shares
of  Common  Stock to the  former  stockholders  of BBG if the  Company  achieves
certain sales growth during the period from November 1, 1998 through October 31,
1999. See Note 2 to the Consolidated Financial Statements of the Company.

      In April 1998, the Company  acquired all of the outstanding  capital stock
of Herring/Newman,  Inc., a Washington  corporation,  which provides advertising
services  ("Herring/Newman")  in exchange for the issuance of 127,799  shares of
Common Stock and payment of $400,000 in cash  pursuant to an Agreement  and Plan
of Merger dated April 2, 1998 (the "HN Acquisition").  In addition,  the Company
issued  77,220  shares of Common  Stock  which are being held in escrow (the "HN
Escrow  Shares").   The  HN  Escrow  Shares  will  be  released  to  the  former
stockholders of  Herring/Newman  on the first  anniversary of the HN Acquisition
upon  fulfillment  of certain  conditions,  including  retention  of certain key
clients. See Note 2 to the Consolidated Financial Statements of the Company.

      In June 1998, the Company acquired all of the outstanding capital stock of
Interweb,  Inc., a Georgia  corporation,  which provides Web-based  solutions to
Fortune  500  companies   ("Interweb")  and  UbiCube  Group,  Inc.,  a  Delaware
interactive  marketing  corporation  ("UbiCube").  The Company acquired Interweb
pursuant to an  Agreement  and Plan of Merger dated June 2, 1998 in exchange for
the  issuance  of  600,000  shares of Common  Stock  and  $200,000  in cash (the
"Interweb  Acquisition").  The Company acquired UbiCube pursuant to an Agreement
and Plan of Merger  dated  June 27,  1998 (the  "UbiCube  Agreement")  through a
wholly-owned subsidiary, UbiCube Acquisition Corp., in exchange for the issuance
of 154,257  shares of Common  Stock and the  promise to pay  $2,250,000  through
January 15, 2000 (the "UbiCube Acquisition"). Pursuant to the UbiCube Agreement,
an additional  154,257  shares of Common Stock were placed in escrow and will be
released  to the former  stockholders  of  UbiCube  based on the  attainment  of
certain  milestones on January 15, 1999, January 15, 2000, and January 15, 2001.
In addition,  in connection with the UbiCube Acquisition,  the Company may issue
additional shares of Common Stock to the former  stockholders of UbiCube subject
to the  attainment of certain  revenue and profit targets during the three years
ending June 2001.  See Note 2 to the  Consolidated  Financial  Statements of the
Company.

      The Founding Companies,  BBG,  Herring/Newman,  Interweb and UbiCube may
be collectively referred to hereinafter as the "Subsidiaries."

BUSINESS OVERVIEW

      The Company provides integrated  marketing,  communications and technology
solutions  enabling  clients  to  utilize  the  Internet  and other  interactive
technologies  to enhance  their  competitive  position.  The Company  focuses on
identifying  opportunities  for  companies to  restructure  their  marketing and
distribution   strategies  around  interactive   technologies  and  implementing
creative  solutions to deliver  their  messages  with the greatest  impact.  The


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Company's  solutions  incorporate  various  technologies   including  customized
interactive applications, e-commerce and e-catalog technology, consumer modeling
and response  technology and database  development.  The Company  integrates its
core  expertise  through a  standardized  process  that  begins  with  strategic
planning   and   consulting   and   continues   through    implementation    and
post-implementation review and maintenance. The Company's solutions are intended
to help clients determine and implement their business  strategies,  build brand
awareness,  and  effectively  communicate  information  to  their  internal  and
external constituents.

      The Company  approaches  each client  engagement  utilizing  its  standard
proprietary methodology,  the THINK Vision Process (described more fully below).
Utilizing this process, the Company thoroughly researches a client's business to
determine the  effectiveness  of existing  communications  programs and how such
programs may be improved and  integrated  into an  interactive  strategy that is
intended to help clients  gain a  competitive  advantage in a changing  business
landscape.

      The Company  currently  operates an international  network of offices with
headquarters in New York City, New York and regional offices in Los Angeles; San
Francisco,  California; Seattle, Washington; Stoneham,  Massachusetts;  Atlanta,
Georgia;  London, England and Sophia,  Bulgaria. The Company provides integrated
solutions  through  multi-disciplinary  teams  with  creative,   consulting  and
technological expertise from across the Company's network of offices.

METHODOLOGY

       THE THINK VISION PROCESS.  The Company  approaches each client engagement
utilizing  its  standard  proprietary  methodology,  the THINK  Vision  Process.
Through this process, the Company's  consultants  thoroughly research a client's
entire business - including internal audiences,  such as employees, and external
audiences,  such as customers and suppliers - to determine the  effectiveness of
existing  communications  programs  and how such  programs  may be improved  and
integrated  into an  Interactive  Communications  strategy that helps the client
gain a competitive advantage in a changing business landscape.  The THINK Vision
Process places significant  emphasis on strategic  planning and  implementation.
The THINK Vision Process is composed of six phases: (1) assessment; (2) strategy
development and specification; (3) concept development; (4) implementation;  (5)
review and adjustment; and (6) maintenance and long-term planning.

MARKETING EXPERTISE

      The  Company's  marketing  expertise  helps  its  clients  identify  their
customers and other target  audiences,  define the processes of communicating to
those  audiences  and analyze the results of those  communications.  The Company
applies its marketing expertise to each integrated solution to enable clients to
deliver the right message at the right time to the right audience. The Company's


                                       4
<PAGE>




solutions  range from  extending,  enhancing and  developing  brands,  designing
corporate  and  product  brand  networks,   integrating  and  developing   media
programming and relationship-building to acquiring and maintaining customers.

BUSINESS EXPERTISE

      The Company's  expertise in business  processes  helps its clients improve
the entire  value  chain of their  businesses,  from  sales,  accounting,  order
management,  supply chain management and inventory procurement,  to planning and
scheduling,  manufacturing and finished goods delivery.  The Company applies its
expertise  in  business  processes  to ensure that each  Integrated  Solution is
designed to consider,  analyze and improve all components of each client's value
chain.

TECHNOLOGY EXPERTISE

      The Company's  technology  expertise provides the Company with the ability
to  design,  develop  and  implement  integrated  marketing  and  communications
technology solutions.  The Company is "technology agnostic" and seeks to develop
secure,  flexible and innovative solutions across a wide range of networking and
telecommunications  environments using third-party and proprietary technologies.
The Company's  technology expertise  encompasses multiple system  architectures,
programming languages,  broadband technologies,  digital media applications, and
communication  networks utilizing Internet,  intranet and extranet technologies.
The Company's core technical competencies include:

      APPLICATIONS  DESIGN AND  DEVELOPMENT.  The Company  utilizes a variety of
programming languages and tools including C/C++, CORBA, Java, SQL, Visual Basic,
and other  object-oriented  technologies.  The Company also develops programming
tools  and  environments  when  appropriate  in  order  to  implement  the  most
cost-effective and functional Interactive Solution.

      INNOVATIVE  GUI  DESIGN  AND   DEVELOPMENT.   In  order  to  maximize  the
effectiveness  of the  Company's  solutions,  the  Company  integrates  creative
marketing and communications expertise with software applications development to
create  engaging,  innovative  and  easy-to-use  GUIs for Web  Sites  and  other
front-end applications.

      NETWORK  INTEGRATION  AND  SYSTEMS  MANAGEMENT.   In  order  to  implement
effectively  the  Company's  solutions,  the  Company  utilizes  a wide range of
database  management and information  technology  integration and implementation
services.  The  Company  integrates  its  solutions  into  existing  information
technology  environments  and  infrastructures,  including  front  and  back-end
objected oriented and relational databases,  enterprise-wide local and wide area
networks,   client/server   architectures   and  other   distributed   computing
environments.

      INTERNET  APPLICATIONS AND SERVICES.  The Company's Internet  applications
and services  expertise  includes the development of secure  electronic-commerce
and   electronic-catalog   environments,   Web-tracking   software   and   other
Internet-related  applications  and  services.  This  expertise  has allowed the


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Company to develop certain applications that are integrated into its Interactive
Solutions.  For instance,  the Company has developed the following  applications
and tools that can be integrated into its Interactive Solutions:

Multi-user ,Object-          Client authoring tool that enables executives with-
oriented Authoring           out  technical experience to add  animated graphics
Tool ("MOAT")                and text to any part of  a  Web  site, intranet  or
                             extranet.

WebMechanic                  Automated   Website  and   intranet   building  and
                             management tool that enables  real-time  generation
                             of customized Web sites.  WebMechanic also provides
                             the  ability to edit,  create and  refresh  content
                             from any location in a user-friendly process.

Electronic                   Consumer   relations   program   that     automates
Consumer                     communications  aspect  of  relationship management
Relations                    systems,  automatically  generating   personalized 
Program                      responses   based  on   information  provided    or
("E-CORP")                   queried.  E-CORP  simultaneously  logs and forwards
                             messages  to  appropriate   internal   departments.
                             E-CORP collects responses in a relational  database
                             allowing  information to be segmented and analyzed,
                             facilitating  outward  communications with interest
                             groups based on various criteria.

Advanced Statistical         Tracks   and   analyzes   Web    site   usage   and
Analysis Program             functionality.  ASAP works with  existing log  file
("ASAP")                     analysis  technology  to  present  information in a
                             format and language that can be easily understood.

X-Tracker                    Tracks and analyzes  Web site  traffic  generation.
                             Allows    generation    of   reports    that   show
                             effectiveness  of  individual  campaigns and events
                             from any  medium in  driving  traffic to Web sites.
                             X-Tracker  reports  graphically and  quantitatively
                             show correlation  between individual and integrated
                             campaigns in directing traffic.

Lightweight                  Directory  service   protocol that allows end users
Directory Access             to query  directory  entries  for any attribute  or
Protocol ("LDAP")            combination of attributes.  LDAP  provides  answers
                             to  problems  historically  associated  with online
                             directory  systems by  standardizing  data  storage
                             structure and optimizing use of system resources.


SALES AND MARKETING

      The Company has 30  employees  dedicated  to sales and  marketing  divided
between regional and national  development  teams in all of its U.S. offices and
in its U.K.  office and a national  Corporate  Business  Development  Group (the
"Development  Group").  The  sales and  marketing  department  manages  the many
opportunities  developed from (1) the leverage and expansion of existing  client
opportunities,  (2) pursuit of referrals  from  existing  clients,  partners and


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third party  organizations and (3) leads developed through the Company extensive
conference and sponsored corporate speaking engagements.

      The  Development  Group,  staffed  with  strategic  marketers  and account
planners,  lead and assist in developing and writing sophisticated  responses to
the  requests  for  proposals  as  developed  and  aggregated  by the  Company's
marketing  efforts.  The Development  Group is also responsible for coordinating
and tracking all new business  opportunities,  resource  allocation  and revenue
goal  planning  and  tracking.  The  Company  tracks  extensively  all  business
development  activity and maintains an active business  development  database to
statistically  track and measure the success of its sales and marketing  efforts
on a quarterly basis.

      The Company markets itself through traditional brand promotion  strategies
such  as  consolidated  marketing  and  collateral  material,  public  relations
campaigns,  client and partner referrals, and speaking engagements.  The Company
also depends on establishing and maintaining close  relationships  with industry
analysts, industry publications and speaking circuit registries.

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,
including   specialized  and  integrated   marketing  and  communication  firms,
information  technology  consulting firms, and national and regional advertising
agencies.  In addition,  many  national  advertising  agencies  have  internally
developed or acquired new media capabilities.  New competitors have also emerged
that either provide integrated or specialized services (e.g., corporate identity
and packaging,  advertising  services or Web site design) or are technologically
proficient, especially in the new media arena. 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  business has moderately low barriers to entry.  The Company
has no  significant  proprietary  technology  that  would  preclude  or  inhibit
competitors from entering the Company's market. The Company expects that it will
face  additional  competition  from new  market  entrants.  Existing  or  future
competitors may develop or offer marketing  communication  services and products
that provide significant  performance,  price, creative or other advantages over
those offered by the Company,  which could have a material adverse effect on the
Company's business, financial condition and results of operations.

EMPLOYEES

      As of June 30,  1998,  the  Company  had 418  full-time  employees  and 56
part-time  employees.  Of  these  employees,  5 were  officers,  27  were  other
management  personnel,  71  were  in  operations,  124  were  in  technical  and


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production, 81 were in creative/design and media, and 110 were sales and service
representatives.  None of the  Company's  employees are  represented  by a labor
union or are subject to a collective bargaining agreement. The Company has never
experienced a work stoppage and believes its employee relations are good.

GOVERNMENT REGULATION

      The  Company  has no  knowledge  of  any  governmental  regulations  which
materially adversely affect its 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-nine  percent  (39%) of the  Company's  revenues for the fiscal year
ended June 30, 1998,  with  fluctuations  in the amount of revenue  contribution
from each such client from quarter to quarter. Oracle and Pioneer, the Company's
two largest  clients  during the fiscal year ended June 30, 1998,  accounted for
approximately thirteen percent (13%) each of the Company's revenues,  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
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


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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 calendar 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 and its customer base has expanded
significantly.  In the last year,  the Company has opened new offices in Boston,
San  Francisco,   Seattle,  the  United  Kingdom  and  Bulgaria;  continued  the
integration  of  several  companies  into one  corporate  organization;  and has
increased the size of each of its offices in Los Angeles,  New York and Atlanta.
The Company  expects that the number of its employees  will continue to grow and
that  both  existing  and  new   management   personnel   will  increase   their
responsibilities.  The Company's success depends on the ability of its executive
officers and other  members of senior  management to operate  effectively,  both
independently  and as a group.  This continued growth is expected to continue to
strain the Company's existing operational,  financial and management information
systems.

      The  Company  also  intends to expand its  operations  into  international
markets.  However, the Company has only two offices outside of the United States
and has little  experience  in managing an  international  network of consulting
offices and marketing services to international  clients. The Company expects to
incur  significant  costs in  pursuit  of these  activities.  If  revenues  from
international  consulting  offices are not  adequate  to offset the  expenses of
establishing  and  maintaining  them,  or if the Company is unable to market its
services to international clients, the Company's business, results of operations
and financial condition could be materially adversely affected.  The Company may
not be able to  establish  and  maintain  international  offices  or market  its
services to international clients.

      There  are  also  certain   risks   inherent  in  doing   business  on  an
international level. These risks include:



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o         unexpected changes in regulatory requirements,
o         export and import restrictions,
o         tariffs and other trade barriers,
o         difficulties in staffing and managing foreign operations,
o         potentially adverse differences in business customs,  practices, and
          norms,
o         longer payment cycles,
o         problems in collecting accounts receivable,
o         political instability,
o         fluctuations in currency exchange rates,
o         software piracy,
o         seasonal reductions in business activity,
o         potentially adverse tax consequences.

One or more of these  factors  may  materially  adversely  affect the  Company's
future  international  operations  and,  consequently,  the Company's  business,
results of operations and financial condition.  See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

      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
be  attractive  to clients or that such  services  or products  will  ultimately
generate  revenues in excess of the costs of introducing  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. The
Company may be unable 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.  In addition,  the Company
may be unable 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  INTEGRATED  SOLUTIONS;  UNCERTAIN  ADOPTION OF THE
COMPANY'S  INTEGRATED  SOLUTIONS.  The Company's  future  growth  depends on its
ability to increase the amount of revenue it derives from  providing  integrated
marketing and communication solutions to its customers.  The Company's marketing
and  communication  solutions  use a  variety  of  marketing  and  communication
channels, including the Internet,  intranets,  extranets and other new media, as
well as other traditional forms of marketing, such as print and broadcast media.
The market for integrating  marketing and communication through new media is new
and rapidly evolving.  It is characterized by an increasing number of new market
entrants.  Demand and market  acceptance for the Company's  recently  introduced
services,  and the broader  market for marketing and  communication  through new
media, are both uncertain.



                                       10
<PAGE>




      Organizations  that have  historically  relied upon  traditional  means of
marketing and communication  generally may need to accept new ways of conducting
business  and  exchanging  information  if they  choose  to adopt an  integrated
solution  to  facilitate  such  marketing  and  communication.   In  particular,
companies  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.

      RISKS ASSOCIATED WITH ACQUISITIONS.  As part of its business strategy, the
Company expects to acquire companies that are complementary to the Company.  Any
such future acquisitions would be accompanied by the risks commonly  encountered
in acquisitions  of businesses  including:  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
with  employees  and clients as a result of any  integration  of new  management
personnel.  In  fiscal  1998,  the  Company  acquired  four new  companies.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."  In addition to the integration  challenges  presented by these and
earlier  acquisitions,  the Company  expects  that it will  continue to pursue a
growth strategy predicated in part on additional acquisitions, some of which may
be dilutive to existing Company stockholders if the acquisitions are paid for in
whole or in part with shares of Common Stock.  The Company closed the operations
of two of its  subsidiaries at the end of fiscal 1997. In addition,  the Company
has eliminated and is continuing to eliminate portions of the businesses that it
has acquired that no longer fit its business model. Consequently,  the Company's
prior  acquisitions or any potential  acquisitions  may 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."

      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


                                       11
<PAGE>




advertising and other opportunities  because such opportunities will require the
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.

      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.

      DEPENDENCE ON PROPRIETARY TECHNOLOGIES. The Company regards certain of its
products and technologies,  including its software applications, as proprietary.
The Company relies upon a combination  of trademark,  copyright and trade secret
law,  together with  non-disclosure  and  invention  assignment  agreements,  to
establish and protect its proprietary rights. Much of the Company's  proprietary
information  may not be patentable,  and the Company does not currently  possess
any patents. The Company's current  intellectual  property rights may not afford
meaningful  protection and the Company's  competitors may independently  develop
technologies  that are  substantially  equivalent  or superior to the  Company's
technologies.  Others may infringe the  Company's  proprietary  rights or assert
claims  that the  Company's  technologies  infringe  their  proprietary  rights.
Litigation  concerning the alleged violation of intellectual  property rights is
inherently uncertain and could result in significant costs to the Company,  even
if any such claims are not valid.

      PROBLEMS WITH SYSTEM SECURITY.  The Company currently operates servers and
maintains  Internet  connectivity from all of its offices.  Although the Company
has implemented network security measures, such as limiting physical and network
access to its routers, the Company's Internet infrastructure could be vulnerable
to  computer  viruses,  break-ins  and  similar  disruptive  problems.  Computer
viruses, break-ins or other security problems could lead to interruption, delays
or  cessation  in  service  to  the  Company's  Internet   customers.   Further,
inappropriate use of the Internet could also potentially jeopardize the security
of  confidential  information  stored in the computer  systems of the  Company's
customers and other entities connected to the Internet. This may deter customers
and give rise to potential liability to users whose security or privacy has been
infringed.



                                       12
<PAGE>




      RISK OF SYSTEM  FAILURE.  The Company's  success depends on its ability to
deliver high quality,  uninterrupted  Internet  hosting.  Therefore,  THINK must
protect its computer equipment and the information stored in its servers against
damage by fire,  natural  disaster,  power  loss,  telecommunications  failures,
unauthorized intrusion and other catastrophic events. Any damage or failure that
causes  interruptions in the Company's  operations could have a material adverse
effect on its  business,  results of  operations  and  financial  condition.  In
particular,  a failure at its New York offices,  if  prolonged,  could result in
reduced revenues, loss of customers and damage to the Company's reputation.  The
Company has an aggressive  and stable back-up plan that  encompasses  daily full
backups of all server platforms - both  inter-company  and hosting devices.  The
Company has contracted an off-site  storage vendor to store the backup  off-site
in an  elements-proof  storage  facility  outside  the New York City area.  This
rotation  occurs  on a weekly  basis,  thus at any time we have the  ability  to
retrieve  the data back onsite if there is ever a need to do so.  This  facility
also provides multiple network  environments if ever the need arose to duplicate
a server at their location due to the inability to do so at THINK (fire,  flood,
etc.). The automated backup process is only accessable by the Systems Operations
Manager,  the Senior NT Administrator and the Manager of Hosting  Operations all
senior members of THINK's Corporate Technology Services Department. Any of these
events could have a material adverse effect on the Company's  business,  results
of operations and financial condition. Although the Company carries property and
business interruption insurance to cover its operations, the coverage may not be
adequate to compensate the losses that may occur.

      RISK OF LOSS DUE TO FIXED  FEE-FOR-SERVICE  PRICING. The Company generates
most of its  project  revenues  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  document  the
project properly,  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.  However,  if the Company does not accurately
anticipate the progress of a number of significant  revenue-generating projects,
the Company's  business,  results of operations and financial condition could be
materially adversely affected.

      POTENTIAL  LIABILITY  TO  CLIENTS.   Many  of  the  Company's   consulting
engagements   involve  the  development,   implementation   and  maintenance  of
applications that are critical to the operations of its clients' businesses. The
Company's failure or inability to meet a client's  expectations could injure the
Company's  business  reputation  or result in a claim  for  substantial  damages
against the Company, whether or not the Company is responsible for such failure.
The Company attempts to limit  contractually  its damages arising from negligent
acts, errors,  mistakes or omissions in rendering its services.  However,  these
contractual  protections  may not be  enforceable  in all  instances and may not
otherwise  fully  protect the Company from  liability  for damages.  The Company
maintains general liability  insurance  coverage,  including coverage for errors
and omissions.  Nevertheless,  this coverage may not continue to be available on
reasonable terms and may not be available in amounts  sufficient to cover one or
more large  claims.  In addition,  the insurer may  disclaim  coverage as to any


                                       13
<PAGE>




future  claim.  The  Company's  business,  results of  operations  and financial
condition may be materially  adversely  affected if one or more large claims are
asserted  against the Company that are  uninsured,  exceed  available  insurance
coverage or result in changes to the  Company's  insurance  policies,  including
premium increases.

      YEAR 2000  COMPLIANCE.  Many  currently  installed  computer  systems  and
software  products are coded to accept only  two-digit  entries in the date code
field. Beginning in the year 2000, these date code fields must accept four-digit
entries to distinguish  21st century dates from 20th century dates. As a result,
in less than two years,  computer systems and/or software used by many companies
may  need  to  be  upgraded  to  comply  with  such  "Year  2000"  requirements.
Significant  uncertainty exists concerning the potential effects associated with
this  compliance.  Although the Company  believes that its systems are Year 2000
compliant,  there can be no assurance  that coding  errors or other defects will
not be  discovered  in the  future.  Any Year  2000  compliance  problem  of the
Company, its customers or the Internet infrastructure could result in a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.

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 and San
Francisco,   California;  Atlanta,  Georgia;  Boston,  Massachusetts;   Seattle,
Washington; London, United Kingdom and Sophia, Bulgaria.

      The New York facilities consist of approximately 20,000 square feet on two
floors in midtown  Manhattan.  The office space is currently leased for $290,000
per annum  from  October  1, 1996 to  September  2001.  The rent on the New York
facilities will increase to $310,000 per annum from October 1, 2001 to September
30, 2006.

      The Los Angeles,  California  facility  consists of  approximately  15,500
square feet of space.  The lease is for a term of ten years ending May 31, 2007.
The rent for the first three years of the lease is  approximately  $330,000  per
annum. The rent for the remainder of the lease approximately $370,000 per annum.

      The Georgia facility consists of approximately 14,000 square feet of space
located  in  Atlanta.  The  Company  leased  this space for a term of five years
ending May 15, 2002.  The rent for the five years of the lease is  approximately
$108,000 per annum.

      The Massachusetts facility consists of approximately 16,000 square feet of
space located in Stoneham.  The current lease expires January 15, 1999. The rent
payments for the remaining  six and a half months of the lease is  approximately
$158,000.  The Company has negotiated a new lease for 17,500 square feet for new
office  space  in  Boston.  The new  lease  is for a term of five  years  and is
effective October 1, 1998. The rent for the lease term is approximately $625,000
per annum.



                                       14
<PAGE>




      The Washington  facility  consists of approximately  18,542 square feet of
space  located in Seattle.  The lease  expires on May 1, 1999.  The rent for the
remaining eleven months is approximately $300,000.

      The San Francisco,  California  facility  consists of approximately  3,600
square feet of space which is leased through June 30, 2001 at the rate of $5,409
per month,  which rate will increase to $5,666 in 1999 and to $5,924 in 2000 and
2001.

      The London facility  consists of approximately  2,500 square feet of space
which is leased through March 31, 2000 at the rate of $40,000 per annum.

      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
interest  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, 1998.

                                   PART II


ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
            MATTERS

                         MARKET PRICE OF COMMON STOCK

      The Common Stock commenced  quotation on Nasdaq under the symbol "THNK" on
November 26, 1996 upon  consummation  of the Initial Public  Offering.  Prior to
that date,  there was no public market for the Common Stock. The following table
sets forth, for the periods  indicated,  the high and low transaction  prices of
the Common Stock as quoted by Nasdaq.



                                       15
<PAGE>




                                                     HIGH             LOW
                                                  -----------    ---------------

Second Quarter 1997 (from November 27, 1996)        $ 7.2500           $ 5.8750
Third Quarter 1997........................            6.2500             3.8750
Fourth Quarter 1997.......................            4.8750             2.5000
First Quarter 1998........................           10.8750             4.0625
Second Quarter 1998.......................           13.0000             7.2500
Third Quarter 1998........................           17.9375             7.6250
Fourth Quarter 1998.......................           39.2500            17.0000
First Quarter 1999 (through September 16,            
  1998)...................................           33.2500             6.0630

      As of September 11, 1998, there were 166 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 400  beneficial  owners of the Common  Stock.  The sales  price of the
Common  Stock as  reported  by Nasdaq on  September  16,  1998 was $6.47.  As of
September 11, 1998, there were 8,440,698 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.

      During the fiscal year ended June 30,  1998,  in  connection  with the BBG
Acquisition,  the H/N  Acquisition,  the  Interweb  Acquisition  and the UbiCube
Acquisition, the Company issued an aggregate of 1,185,390 shares of Common Stock
pursuant  to Section 4 and  Regulation  D of the  Securities  Act of 1933.  More
specific  descriptions  of each of these  transactions  is  provided  under  the
sections hereof entitled  "Business,"  "Management's  Discussion and Analysis of
Financial  Condition and Results of Operations" 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. This 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 section entitled  "Business--Factors  Affecting Operating
Results and Market Price of Stock" commencing on page 8.



                                       16
<PAGE>




OVERVIEW

      The Company was  incorporated in January 1996 and commenced  operations in
June  1996  upon  completion  of its  acquisitions  of  Internet  One,  Creative
Resources, Mednick Group, Goodman Group, On Ramp and NetCube (previously defined
as the "Founding  Companies").  In fiscal 1997, the Company acquired Fathom, and
in fiscal 1998, the Company acquired BBG, Herring/Newman,  Interweb and UbiCube.
See Note 2 to the Company's Consolidated Financial Statements.

      The  combination  of the Mednick Group,  the Goodman Group,  Internet One,
Creative  Resources and NetCube was accounted for using the pooling of interests
method of accounting.  Accordingly, the Consolidated Financial Statements of the
Company have been prepared as if each of the foregoing  entities had been a part
of the Company since the respective dates of each such entity's  inception.  The
Company's  acquisitions of On Ramp, Fathom,  BBG,  Herring/Newman,  Interweb and
UbiCube were accounted for using the purchase method of accounting. Accordingly,
the results of  operations  of each of the  foregoing  have been included in the
Consolidated  Financial  Statements of the Company since the respective  date of
each such acquisition.  As a result of these purchase method  acquisitions,  the
Company's financial statements may lack comparability from period to period.

      The Company provides integrated  marketing,  communications and technology
solutions  enabling  clients  to  utilize  the  Internet  and other  interactive
technologies  to enhance  their  competitive  position.  The Company  focuses on
identifying  opportunities  for  companies to  restructure  their  marketing and
distribution   strategies  around  interactive   technologies  and  implementing
creative  solutions to deliver  their  messages  with the greatest  impact.  The
Company's  solutions  incorporate  various  technologies   including  customized
interactive applications, e-commerce and e-catalog technology, consumer modeling
and response  technology and database  development.  The Company  integrates its
core  expertise  through a  standardized  process  that  begins  with  strategic
planning   and   consulting   and   continues   through    implementation    and
post-implementation review and maintenance. The Company's solutions are intended
to help clients determine and implement their business  strategies,  build brand
awareness,  and  effectively  communicate  information  to  their  internal  and
external constituents.

      The Company  approaches  each client  engagement  utilizing  its  standard
proprietary methodology,  the THINK Vision Process (described more fully below).
Utilizing this process, the Company thoroughly researches a client's business to
determine the  effectiveness  of existing  communications  programs and how such
programs may be improved and  integrated  into an  interactive  strategy that is
intended to help clients  gain a  competitive  advantage in a changing  business
landscape. See "Business."

      The Company  has  historically  generated  revenue  from both  traditional
marketing and  interactive  media services  including  Website  development  and
hosting,  corporate  internal  communications  solutions,   database  marketing,


                                       17
<PAGE>




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.  Although the Company derives revenues from
both  traditional  marketing and interactive  media services,  management of the
Company  assesses  the  performance  of  the  internal  organization  and  makes
operational  decisions on the Company as one integrated client service business.
Revenues from these  services 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 from fixed fee contracts for
services to be delivered.  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 period to period.

      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 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.

      The Company's  strategy is to  concentrate  its future on the expansion of
its interactive  marketing services and, as a result,  revenues from traditional
advertising  services  are  anticipated  to decrease in  importance  in 1999 and
future years.  As a part of this strategy the Company  decided in April 1998, to
dispose of its traditional graphic design departments, and in the fourth quarter
of 1998  recorded a  restructuring  charge of $921,000 for the costs  associated
with that  disposal.  Revenues and operating  losses  generated from the graphic
design and digital output businesses located in Atlanta,  Los Angeles and Boston
are  included  in the results of  operations  for fiscal 1998 and, to the extent
that they are  unlikely  to reoccur  in fiscal  1999,  may make the fiscal  1998
results of operations not indicative of future periods.

      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  recent  acquisitions,  the  Company  continues  to  pursue


                                       18
<PAGE>




acquisition  opportunities and has undertaken discussions with several companies
engaged in businesses that are  complementary  or  supplementary to those of the
Company.  The Company's  acquisition  strategies  continue to focus on 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  provide  international  expansion,  such as that
achieved in Europe through the UbiCube Acquisitions. Throughout the coming years
the Company  expects to continue its focus on growth  opportunities  through new
clients,  expanded  representation of existing clients and business acquisition.
The Company  will look to continue to maximize  the use if its  resources by the
divestiture of non-strategic  businesses and investment in those portions of the
business offering the highest returns.

RESULTS OF OPERATIONS - YEARS ENDED JUNE 30, 1998 AND 1997

REVENUES

      Consolidated  revenues  were  $42,644,000  in fiscal 1998,  an increase of
$25,208,000 or 145% from revenues of $17,437,000 in fiscal 1997.

      Of the  overall  increase  in  revenues,  $6,700,000  is the result of the
inclusion of the operations of BBG,  Interweb,  Herring/Newman  and Ubicube (the
"1998  Acquisitions").  In addition,  the Company's acquisition of Fathom in the
last month of fiscal 1997 accounted for  $11,600,000 of the increase in revenues
and the  closures of NetCube and  Internet One in fiscal 1997 caused a reduction
of $1,250,000. The balance of revenue increase of $8,158,000 was attributable to
increased  business  generated  by  the  Company's   interactive  marketing  and
communications services.

OPERATING RESULTS

      Operating loss for fiscal 1998 increased  $20,000,000 to $27,400,000  from
$7,400,000 in fiscal 1997,  primarily as a result of an increase of  $27,300,000
from  restructuring  and non-cash  charges  (stock  compensation  and  purchased
research  and  development) recorded in fiscal 1998 as compared to fiscal  1997.
Excluding the  consideration of such charges from both 1998 and 1997,  operating
income  improved by  approximately  $8,300,000  principally as the result of the
increase in revenues and a decline in direct salaries and related  expenses as a
percentage of revenues.

DIRECT SALARIES AND RELATED EXPENSES

      Direct  salaries  and  related  expenses  consist  primarily  of wages and
associated  payroll costs and benefits for  permanent  and temporary  employees.
Direct  salaries  and  related  expenses   increased   $4,557,000  or  73.4%  to
$10,764,000 or 25.2% of revenue in fiscal 1998 from $6,207,000 or 35% of revenue
in fiscal 1997. The 1998 Acquisitions  accounted for $2,809,000 of the increase,


                                       19
<PAGE>




while the  closures in fiscal 1997 of the NetCube and  Internet  One  operations
provided a  $1,138,000  reduction.  The  remainder  of the  increase  was due to
expansion of the Company's  marketing,  technology,  client service and creative
functions to meet the  requirements  of the growth in assignments  that produced
the increase in revenues.  Direct  salaries and related  expenses  declined as a
percentage of revenues due to better utilization of multi-skilled  employees and
higher margin projects in fiscal 1998,  specifically in strategic  marketing and
consulting.  Certain  specific or types of assignments may carry higher or lower
margins,  as a result of which  future  periods may not  reflect as  favorable a
relationship between revenues and direct costs.

OTHER DIRECT EXPENSES

      Other direct  expenses  consist of contract  labor,  travel and production
expenses  associated with providing  services to clients.  Other direct expenses
increased  $8,164,000 to  $12,856,000  in fiscal 1998 from  $4,692,000 in fiscal
1997.  The increase in fiscal 1998 is due to the inclusion of the  operations of
the 1998  Acquisitions as well as production  related costs  associated with the
Company's higher level of revenues.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

      Selling,   general  and  administrative   expenses  consist  of  marketing
expenses,  technology  costs  (hardware and software  purchases and leasing) and
telecommunications   costs   for   Internet   access.   Selling,   general   and
administrative  expenses  also  includes  corporate  expenses such as insurance,
personnel  costs for  finance  and  administration,  accounting  and legal fees,
management  information  systems,  and employee benefits.  Selling,  general and
administrative  expenses  increased by $3,781,000 to  $14,445,000 in fiscal 1998
from $10,664,000 in fiscal 1997. The 1998 Acquisitions  accounted for $1,499,000
of such increase,  while the closures of NetCube and Internet One in fiscal 1997
reduced these expenses by $1,714,000.  The net remaining  increase of $4,086,000
reflects increases in occupancy expenses, corporate executive and administrative
salaries  required to support the Company's growth. As a percentage of revenues,
selling,  general  and  administrative  expenses  declined to 33.9% in 1998 from
61.2% in 1997 as the growth in the Company's  revenues created  efficiencies and
economies of scale.

DEPRECIATION AND AMORTIZATION

      Depreciation and amortization increased $1,208,000 to $2,827,000 in fiscal
1998 from  $1,619,000  in fiscal 1997.  The increase in fiscal 1998 is primarily
due to the  amortization of goodwill related to the 1998  Acquisitions  which in
the aggregate amounted to $1,400,000.  The increase in fiscal 1998 also includes
the  amortization  of additions  to  capitalized  software of $92,400.  The 1998
amortization  includes  $1,200,000 of goodwill  amortization  resulting from the
purchase of On Ramp which has been fully amortized.



                                       20
<PAGE>




STOCK COMPENSATION EXPENSE

      ESCROW SHARES.  In fiscal 1998, the Company  recorded a one-time charge of
$21,700,000 as the result of the release to certain  stockholders of the Company
of the shares of Common  Stock owned by such  stockholders  which were placed in
escrow at the time of the Initial  Public  Offering  (the "IPO  Escrow").  These
shares  were  subject  to  release  upon the  attainment  of any one of  certain
performance  targets by the Company,  including a market price target of $20 per
share for forty  consecutive  business  days,  which was  achieved in the fourth
quarter of fiscal 1998. See "Certain Relationships and Related Transactions."

      STOCK  ACCELERATION.  In the fourth  quarter of fiscal  1998,  the Company
reached a settlement  agreement,  as amended,  with Scott A. Mednick, the former
Chief  Executive  Officer and Chairman of the Board of Directors of the Company,
in connection with his resignation from such positions. Pursuant to the terms of
the amended agreement,  the Company accelerated the exercise dates of options to
purchase  up to 60,000  shares of Common  Stock  granted  to Mr.  Mednick.  As a
result,  the Company  recorded a $1,400,000  non-cash  charge for the difference
between  the  exercise  price  for  such  options  and the  market  price of the
underlying Common Stock as of the settlement.

RESTRUCTURING COSTS

      In April  1998,  the  Company  formalized  a  decision  to  dispose of its
traditional  graphic design  departments and in connection  therewith recorded a
restructuring charge of $921,000 for costs associated with that closure. As part
of the  restructuring  plan,  approximately  25 employees were terminated in the
fourth quarter of fiscal 1998 and the charge includes $500,000 for severance and
other related personnel costs and  approximately  $421,000 for lease liabilities
and other  occupancy and  facilities  related  costs.  The Company also recorded
restructuring costs in fiscal 1997 of $1,732,000 in connection with its decision
to cease operations of Internet One in Colorado and NetCube in New Jersey.

PURCHASED RESEARCH AND DEVELOPMENT EXPENSE

      In its fiscal  1998  acquisitions  of  Interweb  and  UbiCube  the Company
acquired,  among other things,  the research and development  being conducted by
those companies on the  development of certain  software  products.  Since these
research and development  projects were in process for products that had not yet
reached  technological  feasibility  and since  the  efforts,  except  for those
products,  would have no other alternative  future use, the Company was required
by generally accepted accounting  principles to charge a portion of the purchase
price,  representing the fair value of the research to date, to expense. On such
basis,  the Company  charged  $4,700,000 and $500,000 of the purchase  prices of
Interweb and UbiCube, respectively, to research and development expense.



                                       21
<PAGE>




NET INTEREST INCOME

      Net  interest  income was  $199,000 in fiscal 1998 and  $152,000 in fiscal
1997.  Interest  expense  decreased in fiscal 1998 to $89,000  from  $134,000 in
fiscal 1997. The decrease in fiscal 1998 was primarily due to savings  resulting
from the  elimination  of debt through the  conversion of an amount  outstanding
under a certain  convertible  promissory  note. See "Certain  Relationships  and
Related Transactions."

TAXES ON INCOME

      The Company  recorded income tax provisions of $339,000 in fiscal 1998 and
$246,000 in fiscal 1997. The 1998 income tax provision  represents certain state
income taxes,  while the 1997 provision results from both state income taxes and
a change in the  valuation  allowance.  Valuation  allowances  of 100% have been
established  for the Company's net federal and state deferred tax assets,  which
result principally for net operating loss carryforwards  which have not yet been
reflected in the results of  operations.  The net operating  loss  carryforwards
differ   from   the   Company's   financial   reporting   losses   due   to  the
non-deductibility  of the 1998  charges  for stock  compensation  and  purchased
research and development.

LIQUIDITY AND CAPITAL RESOURCES

      Through fiscal 1997, the Company financed its operations with the proceeds
of bank borrowings, the private placement of debt and equity securities, and the
proceeds of the Initial Public  Offering.  In fiscal 1998, the Company  financed
its  operations,  the  cash  requirements  of its  acquisitions  and an  overall
reduction in its interest-bearing  debt,  principally through the cash generated
by operations.

      During fiscal 1996, the Company  entered into a series of  transactions in
order to fund the operations of the Founding Companies 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 Founding  Companies 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.  Approximately,
$1,000,000 of the funds  received  from this private  placement 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


                                       22
<PAGE>




and 12% Notes  (aggregating  $1,880,505),  to repay certain other corporate debt
and outstanding  obligations,  to fund the operations of the Founding  Companies
and to cover expenses and costs incurred in connection with the  acquisitions of
the Founding Companies and the Initial Public Offering.

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

       In fiscal  1998,  the Company  received  $1,066,000  from the exercise of
stock options granted under the Company's 1997 Plan (as hereinafter defined).

      The Company's  operations  generated  cash flows of  $10,049,000 in fiscal
1998 due  principally  to the  inclusion in net loss of the non-cash  charges of
$23,043,000  for stock  compensation  and $5,200,000 for purchased  research and
development,  together with increase in accounts payable and accrued expenses of
$6,094,000. Accounts payable and accrued expenses increased at June 30, 1998 due
to the timing of media and  vendor  payments,  which is the result of  increased
business.  The Company expects that its level of accounts payable will decrease,
using cash from operations.

      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 noncash  charges  for (i)  depreciation  and  amortization  of
$1,619,000   (including   amortization  of  intangibles  of  $1,297,000),   (ii)
restructuring  costs of  $1,732,000,  and (iii) a combined  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.

      At June 30, 1998, the Company had cash and cash  equivalents of $7,650,000
and net  working  capital  of  $6,869,000  compared  to net  working  capital of
$8,079,000  at June 30, 1997.  The  $1,210,000  decrease in net working  capital
reflects an increase in the cash used in fiscal 1998 for  investing  activities,
including acquisitions.

      The Company's  investing  activities utilized cash of $4,938,000 in fiscal
1998,  including  $3,441,000 used to finance portions of the BBG Acquisition and
the  HN  Acquisition   and   $2,828,000   expended  on  equipment  and  software
development.  The cash used in investing activities increased from $3,327,000 in
fiscal  1997  principally  due to the  cash  acquisition  expenditures,  and the
increase in capital  expenditures caused by the overall increase in the scope of
the  Company's  operations.  These  increases in investing  cash  outflows  were
partially offset by cash provided by the Company's  operations.  These increases
in  investing  cash  outflows  were  partially  offset by cash  provided  by the


                                       23
<PAGE>




Company's  sale of the marketable  securities  held at the end of fiscal 1997 as
the result of the  temporary  investment  of the proceeds of the Initial  Public
Offering.

      Financing  activities  in 1998 utilized  cash of $908,000  principally  to
reduce bank and related party debt by an aggregate of $1,518,000 and pay capital
lease installments of $455,000, partially funded by $1,065,000 received upon the
exercise  of stock  options  granted by the  Company.  The cash  generated  from
financing  activities  of  $14,198,000  in fiscal 1997  reflects  receipt of the
proceeds of the Company's private and public offerings of securities during such
year.

      The Company believes that cash generated by its operations in 1999 will be
sufficient  to  fund  its  operations,  pay  required  debt  and  capital  lease
obligations,  and continue the Company's  strategy growth through  acquisitions.
However,  there can be no assurance  that such cash  requirements  can be funded
totally from operations,  and in particular,  the cash required for acquisitions
that cannot be  structured  solely with common stock or deferred  payments.  The
Company  may be  required to seek  additional  sources of capital to  facilitate
transactions that require  significant cash payments.  There can be no assurance
that such additional  capital would be available when needed,  and the inability
to obtain such financing  could  adversely  affect the Company's  pursuit of its
strategies.

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.

IMPACT OF YEAR 2000

      The Year 2000 issue is a result of computer  programs  being written using
two digits, rather than four, to define the applicable year. Accordingly, any of
the  Company's  computer  programs that have date  sensitive  software may cause
system  failures or  miscalculations  if data entry of "00" is recognized as the
year  1900  rather  than  2000.  The  Company  is  addressing  this  risk to the
availability and integrity of its financial systems. The Company has established
processes for evaluating and managing the risks and costs  associated  with this
problem. The Company's assessment of its systems will be completed during fiscal
1999.  Additionally,  the Company has  provided its clients and vendors with the
tools  needed to perform  their  Year 2000  compliance  initiatives.  Due to the
Company having state of the art computer  systems,  no hardware  upgrade will be
required.  The Company's primary focus is the state of readiness of the Internet
infrastructure and is working with the Internet Engineering Task force ("IETF"),
of which  the  Company  is a  member,  Cisco  Systems  and  Worldcom  to  ensure
mitigation  of risk  with  redundant  and Year  2000  compliant  infrastructure.
Additionally,  the  Company is working  with and  seeking  Year 2000  compliance


                                       24
<PAGE>




statements from its software  vendors,  such as Microsoft,  Sun Microsystems and
Apple. The Company  estimates the total direct amount to remediate the Year 2000
issue to be  immaterial  to the  Company's  results of  operations  or financial
condition.  All costs will be  expensed  as  incurred,  unless new  software  is
purchased which will be capitalized.

NEW ACCOUNTING PRONOUNCEMENTS

      In June 1997,  Financial  Accounting  Standards Board issued  Statement of
Financial  Accounting  Standards ("SFAS") No. 131, "Disclosure About Segments of
an Enterprise and Related  Information,"  which is effective for years beginning
after December 15, 1997. SFAS 131 establishes  standards for the way that public
enterprises  report  information  about operating  segments in annual  financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports.  It also establishes  standards
for related disclosures about products and services, geographic areas, and major
customers.  SFAS 131 is  effective  for  financial  statements  for fiscal years
beginning  after December 15, 1997, and therefore the Company will adopt the new
requirements  retroactively  in fiscal 1999.  Management  has not  completed its
review of SFAS 131, but does not anticipate  that the adoption of this statement
will have a significant effect on the Company.

      In June  1998, the Financial  Accounting  Standards  Board issued SFAS No.
133,  "Accounting for Derivative  Instruments and Hedging  Activities." SFAS No.
133 must first be applied in the first  quarter of fiscal years that begin after
June 15, 1999, and in general,  requires that entities  recognize all derivative
financial  instruments  as assets or  liabilities,  measured at fair value,  and
include  in  earnings  the  changes  in  the  fair  value  of  such  assets  and
liabilities. SFAS No. 133 also provides that changes in the fair value of assets
or liabilities being hedged with recognized derivative instruments be recognized
and included in earnings.  The Company does not utilize derivative  instruments,
either  for  hedging  or other  purposes,  and  therefore  anticipates  that the
adoption of the  requirements of SFAS No. 133 will not have a material affect on
its consolidated financial statements.



                                       25
<PAGE>




ITEM 7.     CONSOLIDATED FINANCIAL STATEMENTS


                    THINK New Ideas, Inc. and Subsidiaries

                  Index to Consolidated Financial Statements




                                                                    PAGE

Report of Independent Auditors, Ernst & Young, LLP...................F-2

Report of Independent Certified Public Accountants, BDO Seidman, LLP.F-3

Consolidated Financial Statements:

  Consolidated Balance Sheets........................................F-4

  Consolidated Statements of Operations..............................F-5

  Consolidated Statements of Shareholders' Equity....................F-6

  Consolidated Statements of Cash Flows..............................F-7

  Notes to Consolidated Financial Statements.........................F-8









                                      F-1
<PAGE>






                        Report of Independent Auditors

Board of Directors
  THINK New Ideas, Inc.

We have audited the accompanying  consolidated balance sheet of THINK New Ideas,
Inc.  and  subsidiaries  (the  "Company")  as of June 30,  1998 and the  related
consolidated  statements of operations,  shareholders' equity and cash flows for
the  year  then  ended.   These  consolidated   financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of THINK New Ideas,
Inc. and subsidiaries as of June 30, 1998 and the consolidated  results of their
operations  and their  cash  flows for the year in the  period  then  ended,  in
conformity with generally accepted accounting principles.


                                                          /s/ ERNST & YOUNG LLP
                                                          ----------------------
                                                            ERNST & YOUNG LLP

New York, New York
August 5, 1998



                                      F-2
<PAGE>






              Report of Independent Certified Public Accountants

Board of Directors
  THINK New Ideas, Inc.

We have audited the accompanying  consolidated balance sheet of THINK New Ideas,
Inc.  and  subsidiaries  (the  "Company")  as of June 30,  1997 and the  related
consolidated  statements of operations,  shareholders' equity and cash flows for
the  year  then  ended.   These  consolidated   financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

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




                                                            /s/ BDO Seidman, LLP
                                                            --------------------
                                                              BDO Seidman, LLP

New York, New York
September 19, 1997



                                      F-3
<PAGE>






                     THINK New Ideas, Inc. and Subsidiaries

                           Consolidated Balance Sheets
<TABLE>
<CAPTION>

                                                                                       June 30
                                                                       ----------------------------------------
                                                                              1998                  1997
                                                                       -------------------    -----------------
<S>                                                                    <C>                    <C>
Assets
Current assets:
   Cash and cash equivalents                                              $   7,653,576          $   3,451,347
   Marketable securities                                                              -              1,321,722
   Accounts receivable, net of allowance for doubtful accounts
     of $ 1,019,475 in 1998 and $614,137 in 1997                             14,431,288              9,314,851
   Unbilled receivables                                                       3,455,181              2,497,389
   Prepaid expenses and other current assets                                    715,574                535,307
                                                                       -------------------    -----------------
Total current assets                                                         26,255,619             17,120,616

Property and equipment, net                                                   5,682,059              2,285,620
Capitalized software, net                                                     1,858,370                131,253
Goodwill, net of accumulated amortization of $2,534,207 in 1998
   and $1,098,938 in 1997                                                    17,344,798              1,502,562
Other assets                                                                  1,112,225                362,119
                                                                       -------------------    -----------------
Total assets                                                              $  52,253,071          $  21,402,170
                                                                       ===================    =================

Liabilities and shareholders' equity
Current liabilities:
   Accounts payable                                                       $   9,912,683          $   2,647,833
   Accrued expenses                                                           3,414,977              2,201,099
   Accrued restructuring costs                                                  307,482              1,135,000
   Media payable                                                              3,407,266                953,556
   Income taxes payable                                                         566,578                 40,571
   Bank payable                                                                 491,915                      -
   Due to related party                                                         591,946              1,906,512
   Current portion of obligations under capital leases                          693,619                156,867
                                                                       -------------------    -----------------
Total current liabilities                                                    19,386,466              9,041,438
Obligations under capital leases                                                260,645                264,372
Convertible promissory note payable to related party                                  -                515,760
Other long-term liabilities                                                     102,548                206,250
                                                                       -------------------    -----------------
Total liabilities                                                            19,749,659             10,027,820

Commitments and contingencies

Shareholders' equity:
   Preferred stock, $.0001 par value; 5,000,000 shares authorized;
     none issued and outstanding                                                      -                      -
   Common stock, $.0001 par value; 50,000,000 shares authorized;
     8,433,656 and 6,536,667 shares issued in 1998 and 1997,                        843                    654
     respectively
   Additional paid-in capital                                                67,731,946             19,050,174
   Accumulated deficit                                                      (35,229,377)            (7,676,478)
                                                                       -------------------    -----------------
Total shareholders' equity                                                   32,503,412             11,374,350
                                                                       ===================    =================
Total liabilities and shareholders' equity                                $  52,253,071          $  21,402,170
                                                                       ===================    =================

</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                      F-4
<PAGE>


                     THINK New Ideas, Inc. and Subsidiaries

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>

                                                                  Year ended June 30
                                                        ----------------------------------------
                                                               1998                 1997
                                                        -------------------  -------------------
<S>                                                     <C>                  <C>

  Revenues                                                $   42,644,405       $  17,436,847

  Operating expenses:
     Direct salaries and related expenses                     10,764,109           6,207,371
     Other direct expenses                                    12,856,128           4,691,563
     Selling, general and administrative expenses             14,445,056          10,663,941
     Depreciation and amortization                             2,827,391           1,619,104
     Stock compensation expense                               23,043,450                   -
     Restructuring costs                                         920,610           1,732,000
     Purchased research and development expense                5,200,000                   -
                                                        -------------------  -------------------
  Operating loss                                             (27,412,339)         (7,477,132)

  Interest income, net                                           199,274             151,869
                                                        -------------------  -------------------
  Loss before taxes on income                                (27,213,065)         (7,325,263)
  Provision for income taxes                                     339,834             245,900
                                                        -------------------  -------------------
  Net loss                                                $  (27,552,899)      $  (7,571,163)
                                                        ===================  ===================
  Net loss per share-basic and diluted                            $(4.36)             $(1.63)
                                                        ===================  ===================

</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                      F-5
<PAGE>


                     THINK New Ideas, Inc. and Subsidiaries

                 Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>


                                                                                             
                                                                                             Retained
                                                        Common Stock         Additional      Earnings
                                                  -------------------------   Paid In       Accumulated
                                                     Shares       Amount      Capital        Deficit)        Total
                                                  ---------------------------------------------------------------------
<S>                                               <C>                <C>       <C>            <C>           <C>
Balance at June 30, 1996                             2,894,673       289       1,334,630      (105,315)     1,229,604
   Issuance of common stock in connection with
     private placement                                 938,667        94       4,947,968             -      4,948,062
   Conversion of convertible debt                      433,327        44         189,452             -        189,496
   Issuance of common stock pursuant to initial
     public offering                                 2,150,000       215      11,972,636             -     11,972,851
   Issuance of common stock in connection with
     acquisition -Fathom                               120,000        12         442,488             -        442,500
   Issuance of stock options to nonemployee                  -         -         163,000             -        163,000
     directors
   Net loss for the year                                     -         -               -    (7,571,163)    (7,571,163)
                                                  ---------------------------------------------------------------------
Balance at June 30, 1997                             6,536,667       654      19,050,174    (7,676,478)    11,374,350
   Issuance of common stock for services rendered       75,000         8         359,368             -        359,376
   Issuance of stock options for consulting                  -         -          86,500             -         86,500
     services
   Issuance of common stock in connection with
     acquisitions                                    1,416,867       141      23,538,845             -     23,538,986
   Issuance of common stock on exercise
     of stock options                                  181,713        18       1,065,665             -      1,065,683
   Conversion of convertible promissory note            79,697         8         587,958             -        587,966
   Issuance of common stock on exercise
     of warrants                                       143,712        14             (14)            -              -
   Acceleration of stock option vesting                      -         -       1,387,200             -      1,387,200
   Common stock released from escrow to founders             -         -      21,656,250             -     21,656,250
   Net loss for the year                                     -         -               -   (27,552,899)   (27,552,899)
                                                  =====================================================================
Balance at June 30, 1998                             8,433,656      $843     $67,731,946  $(35,229,377)  $ 32,503,412
                                                  =====================================================================

</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                      F-6
<PAGE>


                     THINK New Ideas, Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                          Year Ended June 30
                                                                        1998              1997
                                                                  -----------------  ----------------
<S>                                                               <C>                <C>
 Cash flows from operating activities
 Net loss                                                           $(27,552,899)      $ (7,571,163)
 Adjustments to reconcile net loss to net cash provided by (used in)
    operating activities:
    Depreciation and amortization                                      1,341,470            322,085
    Amortization of intangibles and deferred financing costs           1,485,921          1,297,019
    Deferred income taxes                                                      -            140,000
    Bad debt expense                                                     317,588            428,137
    Restructuring charges                                                920,610          1,732,000
    Consulting fees                                                            -            369,250
    Stock compensation expense                                        23,043,450                  -
    Purchased research and development                                 5,200,000                  -
    Changes in assets and liabilities, excluding effects of acquisitions:
      Accounts receivable                                                945,404         (4,335,664)
      Unbilled receivables                                              (878,611)        (2,200,486)
      Accounts payable and accrued expenses                            6,094,396          1,842,772
      Accrued restructuring                                           (1,706,867)                 -
      Media payable                                                      984,182            500,597
      Income tax payable                                                (161,627)                 -
      Other assets and liabilities                                        15,897           (373,492)
                                                                    ---------------    --------------
 Net cash provided by (used in) operating activities                  10,048,914         (7,848,945)
                                                                    ---------------    --------------

 Cash flows from investing activities
 Additions to software development costs                                (577,770)          (518,315)
 Purchases of property and equipment                                  (2,240,529)        (1,487,435)
 Sales and (purchases) of marketable securities                        1,321,722         (1,321,722)
 Acquisitions, net of cash acquired                                   (3,441,744)                 -
                                                                    ---------------    --------------
 Net cash (used in) investing activities                              (4,938,321)        (3,327,472)
                                                                    ---------------    --------------

 Cash flows from financing activities
 Proceeds from issuance (repayment) of promissory notes                        -         (1,880,505)
 Deferred offering costs                                                       -           (272,240)
 Net Repayments on operating lines of credit and short-term debt        (203,861)           (70,000)
 Proceeds from private placement                                               -          4,948,062
 Issuance of common stock                                              1,065,683                  -
 Proceeds from initial public offering                                         -         11,972,851
 Payments on capital leases                                             (455,620)                 -
 Payments on amounts due to related party                             (1,314,566)          (500,000)
                                                                    ---------------    --------------
 Net cash (used in) provided by financing activities                    (908,364)        14,198,168

 Net increase in cash and cash equivalents                             4,202,229          3,021,751
 Cash and cash equivalents, beginning of year                          3,451,347            429,596
                                                                    ===============    ==============
 Cash and cash equivalents, end of year                              $ 7,653,576       $  3,451,347
                                                                    ===============    ==============

 Supplemental cash flow information Cash paid during the year for:
    Income taxes                                                     $   264,232       $    153,010
    Interest                                                              74,958            180,949
 Noncash investing and financing activities:
    Issuance of common stock for acquisitions                         23,538,986            442,500
    Conversion of convertible promissory notes into common stock         587,966            189,496
    Purchase of equipment by capital leases                              988,645            421,439
    Issuance of common stock and options as finders fee to
      consultant for acquisitions                                        445,868                  -
</TABLE>


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                      F-7


<PAGE>





                    THINK NEW IDEAS, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The Company was  incorporated in January 1996, and commenced  operations on June
30, 1996 upon  combination  of the  Company  with the  Mednick  Group,  Creative
Resources,  the Goodman Group, Internet One, and NetCube, each of which had been
previously engaged in providing various marketing and  communications  services.
The  combination of these five companies into the Company was accounted for as a
pooling of interests, and, accordingly, the consolidated financial statements of
the Company are  prepared as if each of these  companies  had been a part of the
Company  from  inception  of such  companies.  As  hereinafter  used,  the  term
"Company" shall include the Company's subsidiaries, as the context may require.

The  Company  provides   marketing  and  communication   services  that  include
traditional  services,  such as advertising,  graphic design (discontinued April
1998; see Note 12) and "new media" advertising services including the design and
development of internet web sites and related tools.  The company  considers its
operation to comprise a single  business  segment  under  Statement of Financial
Accounting Standards ("SFAS") No. 14.

The consolidated  financial  statements  include the accounts of the Company and
all of its  subsidiaries,  which are  wholly  owned,  (See  Note 2  below).  All
intercompany accounts and transactions are eliminated in consolidation.

The Company reports on a June 30 fiscal year.

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-8
<PAGE>



1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with remaining maturities of
three months or less when purchased to be cash equivalents.

PROPERTY AND EQUIPMENT

The  Company  uses  the  straight-line  method  of  depreciation.  Property  and
equipment includes certain assets utilized pursuant to capital leases, which are
recorded at the present value of the minimum  noncancellable  lease  payments at
the inception of the lease. 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 on a straight-line  basis over the term of
the lease or the estimated useful life of the improvement, whichever is shorter.

CAPITALIZED SOFTWARE

In  accordance  with  Statement  of  Financial   Accounting  Standards  No.  86,
"Accounting  for Costs of  Computer  Software  to be Sold,  Leased or  Otherwise
Marketed,"  the Company  capitalizes  costs  incurred  to develop  new  software
products after determination that technological feasibility has been established
for the product.  Costs incurred  prior to the  establishment  of  technological
feasibility are charged to expense. Amortization of the costs capitalized begins
when the  related  product is  available  for  general  release  and is based on
current and anticipated future revenues for each product or enhancement, with an
annual minimum  charge equal to  straight-line  amortization  over the remaining
estimated  economic life of the product or enhancement.  The Company utilizes an
estimated life of three years for capitalized software.




                                      F-9
<PAGE>




1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

GOODWILL AND OTHER INTANGIBLES

Goodwill and other  intangibles are amortized on a  straight-line  basis ranging
from 2 to 15 years. The Company periodically  assesses the recoverability of the
cost of its goodwill based upon estimated  future  profitability  of the related
operating  entities.  The  agreements  pursuant  to which the  Company  acquired
certain companies (see Note 2) include provisions that would require the Company
to issue additional shares (or release additional shares from escrow established
at the time of the acquisition) if the acquired company meets certain goals. The
value of any such shares issued or released,  as of the date issued or released,
will be added to the goodwill related to such acquisition and amortized over the
remainder of that goodwill's useful life.

REVENUE RECOGNITION

Revenues from the design and development of Internet web sites,  interactive and
traditional marketing services are recognized using the percentage-of-completion
method.  Unbilled  receivables  represent time and costs incurred on projects in
progress in excess of amounts billed, and are recorded as assets. Amounts billed
in excess of costs incurred  are  recorded as  liabilities.  To the extent costs
incurred  and  anticipated   costs  to  complete  projects  in  progress  exceed
anticipated  billings,  a loss is recognized in the period such determination is
made for the excess.

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

Revenue from  advertising  and related  services is comprised of commissions and
fees  derived  from  billings  to clients for media and  production  activities.
Commission  revenue is  recognized  primarily  when media  placements  appear on
television,  radio,  or in print.  Fee revenue is  recognized  when services are
rendered.

STOCK COMPENSATION

The Company measures  compensation expense related to the grant of stock options
and  stock-based  awards to  employees  in  accordance  with the  provisions  of
Accounting  Principles  Board ("APB")  Opinion No. 25, under which  compensation
expense, if any, is generally based on the difference between the exercise price
of an option,  or the  amount  paid for an award,  and the market  price or fair
value  of the  underlying  common  stock  at the  date  of the  award  or at the
measurement  date for variable  awards.  Stock-based  compensation  arrangements



                                      F-10
<PAGE>




1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

STOCK COMPENSATiON (CONTINUED)

involving  nonemployees  are accounted for under SFAS No. 123,  under which such
arrangements  are  accounted for based on the fair value of the option or award.
As required by SFAS No. 123 the Company  discloses  pro forma net income and net
income per share information reflecting the effect of applying SFAS No. 123 fair
value measurement to employee arrangements.

INCOME TAXES

The Company  determines its deferred tax provision  under the liability  method,
whereby  deferred tax assets and liabilities are recognized for the expected tax
consequences  of  temporary  differences  between  the tax bases of  assets  and
liabilities and their reported  amounts using presently  enacted tax rates.  The
effect  on  deferred  tax  assets  and  liabilities  of a change in tax rates is
recognized in income in the period that includes the enactment date.

EARNING PER SHARE

The  Company  adopted the  provisions  of SFAS No.  128,  "Earnings  Per Share,"
effective  July 1, 1997. In accordance  with the  requirements  of SFAS No. 123,
earnings  per  share  amounts  for  prior  periods  have  been  restated;   such
restatement had no affect on the previously reported amounts.  All share and per
share amounts in the consolidated financial statements reflect the effect of the
Company's  June 1996 stock split and  September  1996 and November  1996 reverse
stock splits.

Under SFAS No. 128 basic  earnings  per share  excludes  any dilution for common
stock  equivalents  and is  computed  on the basis of net income  divided by the
weighted average number of common shares outstanding during the relevant period.
Diluted  earnings per share reflects the potential  dilution that could occur if
options or other securities or contracts  entitling the holder to acquire shares
of common  stock were  exercised  or  converted,  resulting  in the  issuance of
additional  shares of common stock that would then share in  earnings.  However,
diluted  earnings per share does not consider  such dilution if its affect would
be to reduce the loss per share ("anti-dilutive").

FAIR VALUES OF FINANCIAL INSTRUMENTS

The fair value of cash and cash  equivalents,  marketable  securities,  accounts
receivables,  accounts and notes payable,  and short-term debt  approximate book
value.



                                      F-11
<PAGE>




1. 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  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.  Two customers
each separately accounted for 13% of consolidated revenues in 1998. During 1997,
two customers accounted for 10% and 13%, respectively, of total revenues.

Concentrations  of credit risk with respect to receivables is limited due to the
geographically  diverse  customer  base.  The  Company  routinely  assesses  the
financial  strength of its  customers  and does not require  collateral or other
security to support customer receivables.  Credit losses are provided for in the
consolidated  financial  statements  in the form of an  allowance  for  doubtful
accounts.

RECLASSIFICATIONS

Certain  balances in prior fiscal years have been  reclassified  to conform with
the presentation adopted in the current fiscal year.

NEW ACCOUNTING PRONOUNCEMENTS

      In June 1997,  Financial  Accounting  Standards Board issued  Statement of
Financial  Accounting  Standards ("SFAS") No. 131, "Disclosure About Segments of
an Enterprise and Related  Information,"  which is effective for years beginning
after December 15, 1997. SFAS 131 establishes  standards for the way that public
enterprises  report  information  about operating  segments in annual  financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports.  It also establishes  standards
for related disclosures about products and services, geographic areas, and major
customers.  SFAS 131 is  effective  for  financial  statements  for fiscal years
beginning  after December 15, 1997, and therefore the Company will adopt the new
requirements  retroactively  in fiscal 1999.  Management  has not  completed its
review of SFAS 131, but does not anticipate  that the adoption of this statement
will have a significant effect on the Company.

      In June  1998, the Financial  Accounting  Standards  Board issued SFAS No.
133,  "Accounting for Derivative  Instruments and Hedging  Activities." SFAS No.
133 must first be applied in the first  quarter of fiscal years that begin after
June 15, 1999, and in general,  requires that entities  recognize all derivative
financial  instruments  as assets or  liabilities,  measured at fair value,  and


                                      F-12
<PAGE>





1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)

include  in  earnings  the  changes  in  the  fair  value  of  such  assets  and
liabilities. SFAS No. 133 also provides that changes in the fair value of assets
or liabilities being hedged with recognized derivative instruments be recognized
and included in earnings.  The Company does not utilize derivative  instruments,
either  for  hedging  or other  purposes,  and  therefore  anticipates  that the
adoption of the  requirements of SFAS No. 133 will not have a material affect on
its consolidated financial statements.

2. BUSINESS ACQUISITIONS

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


                                                      NUMBER OF
                                                    SHARES ISSUED
         ENTITY/DATE OPERATIONS COMMENCED             TO EFFECT
                                                     ACQUISITION
--------------------------------------------------------------------

Scott A. Mednick & Associates, Inc./October 1982       208,084
Creative Resources Agency, Inc./November 1994            3,970
The S.D. Goodman Group/July 1993                        49,623
Internet One, Inc./November 1993                        34,736
NetCube, Inc./February 1978                            195,182

Mednick  Group,  Creative  Resources and Goodman Group 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.

On June 30, 1996, the Company acquired all of the outstanding  shares of capital
stock of On Ramp,  a provider of new media  services,  in  exchange  for 231,572
shares of Common Stock. The purchase price of $1,338,000  (includes  transaction
costs of  approximately  $750,000,  including  a $500,000  finder's  fee paid to
Benchmark Equity Group, Inc.,  formerly a principal  stockholder of the Company)
has been  allocated to the assets  purchased and the  liabilities  assumed based
upon  their  estimated  fair  values at the date of  acquisition.  The  carrying
amounts of the tangible assets and liabilities acquired and assumed approximated
their fair values,  and the excess  $2,310,000  of the  purchase  price over the
carrying amounts of net assets acquired as follows:



                                      F-13
<PAGE>




2. BUSINESS ACQUISiTIONS (CONTINUED)

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


Goodwill related to this acquisition was amortized over a two year period and is
fully amortized at June 30, 1998.

FISCAL 1997 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.,  a  wholly-owned
subsidiary of Omnicom Group Inc.  ("Omnicom"),  a principal  stockholder  of the
Company,  in exchange for 120,000  shares of the  Company's  common  stock.  The
purchase price of $442,500,  was  classified as goodwill and is being  amortized
over two years.

In  November  1997,  the  Company  purchased  all of the issued and  outstanding
capital stock of BBG New Media, Inc., a Massachusetts  corporation ("BBG") which
provides  interactive  marketing  services.  As consideration,  the Company paid
$175,000  in cash and  issued  303,334  shares  of  Common  Stock to the  former
stockholders of BBG, valued at $3,602,000.  In addition, the Company is required
to issue additional  shares of Common Stock if BBG achieves certain sales growth
rates during the period from November 1, 1998 through  October 31, 1999. If such
shares of Common Stock are issued,  such issuance will  increase  goodwill.  The
aggregate  purchase price of  approximately  $4,800,000,  including  acquisition
costs,  exceeded  the  fair  value  of  the  net  tangible  assets  acquired  by
approximately  $4,233,000  and was recorded as goodwill  and is being  amortized
using the straight line method over 15 years.

In April 1998, the Company acquired all of the issued and outstanding  shares of
capital   stock   of    Herring/Newman,    Inc.,   a   Washington    corporation
("Herring/Newman")  engaged in the  business  of full  service  advertising.  As
consideration,  the  Company  issued an  aggregate  of 127,799  shares of Common
Stock,  valued at  $1,655,000,  and paid $400,000 in cash. The Company issued an
additional  77,220 shares of common stock,  which is being held in escrow.  Such
escrowed shares shall be released to the former  stockholders of  Herring/Newman
on the first  anniversary  of the closing  date upon the  occurrence  of certain
conditions,  including retention of Herring/Newman's largest clients. The amount
of such escrow shares will increase goodwill if released. The aggregate purchase
price of  $3,006,000,  which  excludes  consideration  of the escrow  shares and
includes  acquisition costs,  exceeded the fair value of the net tangible assets
acquired by $2,102,000 and was recorded as goodwill and is being amortized using
the straight line method over 15 years. 



                                      F-14
<PAGE>




2. BUSINESS ACQUISITIONS (CONTINUED)

On June 3, 1998, the Company  acquired all of the issued and outstanding  shares
of capital stock of Interweb,  Inc., an Atlanta  corporation  ("Interweb") which
provides  web-based  solutions to clients.  As consideration for the purchase of
Interweb,  the  Company  issued  600,000  shares  of  Common  Stock,  valued  at
$11,625,000 and paid $200,000 in cash. The aggregate  purchase price,  including
acquisition costs,  exceeded Interweb's net assets  (approximately  $669,000) by
$11,304,000.  Of such amount,  $4,700,000 was immediately  charged to expense as
the fair value for software related research and development  efforts in process
at Interweb for products that had not yet reached technological  feasibility and
which efforts, except for such products,  would have no other alternative future
use. The remaining $6,604,000 was allocated as follows:

       Software (developed)                      $1,149,000
       Goodwill                                   5,165,000
       Other                                        290,000
                                                 =============
                                                 $6,604,000
                                                 =============

Goodwill is being amortized using the straight line method over 15 years.

On June 29, 1998, UbiCube Acquisition Corp.,  ("UAC"), a wholly owned subsidiary
of the Company,  acquired  all of the issued and  outstanding  capital  stock of
UbiCube Group, Inc., a Delaware interactive  marketing company ("UbiCube") which
has offices in London and San Francisco. As a result of the acquisition, UbiCube
was merged with and into UAC in exchange for the  issuance of 154,257  shares of
Common  Stock  having  an  aggregate  value  of  approximately  $4,000,000,  and
guaranteed future payments of $2,250,000  through January 15, 2000. In addition,
154,257  shares of Common Stock were placed in escrow and will be released based
on the  attainment of certain  milestones at January 15, 1999,  January 15, 2000
and March 1, 2001. In addition,  the Company may issue additional  shares to the
former  stockholders  of UbiCube  of  approximately  $9,000,000,  subject to the
attainment of certain  revenue and profit  targets during the three years ending
June 2001. The aggregate  purchase price,  which excludes shares held in escrow,
but includes  acquisition costs,  exceeded  UbiCube's net assets  (approximately
$600,000) by approximately  $6,100,000. Of such amount, $500,000 was immediately
charged  to  expense  as  the  fair  value  of  software  related  research  and
development   efforts  in  process  for  products   that  had  not  yet  reached
technological  feasibility  and which efforts,  except for such products,  would
have no other alternative future use. The remaining $5,600,000 exceeded the fair
value of the net tangible  assets acquired and was recorded as goodwill which is
being amortized using the straight line method over 15 years.



                                      F-15
<PAGE>




2. BUSINESS ACQUISITIONS (CONTINUED)

Each of the acquisitions of Fathom, On Ramp, BBG,  Herring/Newman,  Interweb and
UbiCube  has been  accounted  for  using  the  purchase  method  of  accounting.
Accordingly,  the results of operations  of these  companies are included in the
consolidated financial statements from their respective dates of acquisition.

The following unaudited pro forma information is presented as if the Company had
completed  the  acquisitions  as of the  beginning of the  preceding and current
fiscal years. Such pro forma results exclude,  due to their nonrecurring nature,
the  $4,700,000  and $500,000  charges for in process  research and  development
recorded in connection with the  acquisitions  of Interweb and UbiCube.  The pro
forma  information  is  not  necessarily  indicative  of  what  the  results  of
operations would have been had the  acquisitions  taken place at July 1, 1996 or
1997, or of the future results of operations.

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

   Revenue                       $ 53,797,480      $33,024,339
                                 =============     =============
   Net loss                      $(28,958,059)     $(9,333,204)
                                 =============     =============
   Net loss per common shares
     basic and diluted           $      (4.59)     $     (2.01)
                                 =============     =============
   Weighted-average common
     shares outstanding             6,315,087        4,638,337
                                 =============     =============

3. PROPERTY AND EQUIPMENT

Property and equipment consists of the following at June 30:

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

Equipment                                  $6,176,440   $3,065,576
Furniture and fixtures                      1,307,047      660,137
Leasehold improvements                      1,963,924    1,127,519
                                           --------------------------
                                            9,447,411    4,853,232
Less accumulated depreciation and           
  amortization                              3,765,352    2,567,612
                                           ==========================
Property and equipment, net                $5,682,059   $2,285,620
                                           ==========================

Included  in  capital  leases is  equipment  of  $1,353,145  and  $465,855  with
accumulated depreciation of $503,174 and $16,796 under capital leases for fiscal
years ended June 30, 1998 and June 30, 1997, respectively.



                                      F-16
<PAGE>




4. CAPITALIZED SOFTWARE

Capitalized  software costs consist of $1,200,000  relating to software acquired
on June 3, 1998 in  connection  with the  Interweb  acquisition.  The  remaining
$658,370 were for various software products developed during the year.

The  estimated  useful  life for  capitalized  software  costs  is three  years.
Amortization expense for software is approximately $92,400 for fiscal year ended
June 30,  1998.  Amortization  related to  Interweb's  capitalized  software  of
$1,200,000 will be amortized starting July 1, 1998.

5. CONVERTIBLE PROMISSORY NOTES

During  fiscal  1996,  Dan  Carlisle,  the father of the former  stockholder  of
NetCube,   extended  credit  to  NetCube.   In  connection  with  the  Company's
combination  with  NetCube  in June  1996,  the  Company  issued  a  convertible
promissory  note for the  repayment  of the  principal  amount of $515,760  with
accrued  interest at 8% per annum.  The  principle  and interest on the note was
convertible into shares of Common Stock at a conversion price of $7.00 per share
with respect to principal and $12.00 per share with respect to accrued  interest
on the note.  Principal  and  interest  on the note,  which was due on March 31,
1998, was converted into 73,680 shares of Common Stock (for principal) and 6,017
shares of Common Stock (for interest).

6. BANK PAYABLE

      On April 24, 1998, the Company  established a line of credit with the Bank
of New York  ("BONY"),  pursuant  to which BONY  agreed to permit the Company to
borrow $5,000,000 through March 31, 1999. Amounts  outstanding from time to time
under the line of credit  accrue  interest at a floating rate based on the prime
lending rate of the bank are due and payable (together with interest) on demand.
The  line of  credit  is  evidenced  by a  promissory  note  and is  secured  by
substantially all of the assets of the Company. In addition, amounts outstanding
under the line of credit have been  guaranteed  by each of the Mednick Group and
On Ramp. As of June 30, 1998, there was $400,000 outstanding under the agreement
with BONY.

      In November 1997, in connection  with its  acquisition of BBG, the Company
entered  into an agreement  with  Medford  Bank,  which  agreement  provides for
repayment of a loan of $117,000. Amounts outstanding on the loan accrue interest
at a rate of 10% per annum and are due and payable on May 13, 1999. The loan was
personally  guaranteed  by the former  officers of BBG who are  employees of the
Company. The outstanding balance under the loan as of June 30, 1998 was $91,915.



                                      F-17
<PAGE>




7. INCOME TAXES

Taxes on income consist of the following:

                                  1998        1997
                               ------------------------
Current:
  Federal                        $      -    $      -
  State                           339,834     105,900
                               ------------------------
                                  339,834     105,900
                               ------------------------

Deferred:
  Federal                               -     120,000
  State                                 -      20,000
                               ------------------------
                                        -     140,000
                               ========================
Taxes on income                  $339,834    $245,900
                               ========================

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

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

Federal statutory tax rate        (34.0)%     (34.0)%
Nondeductible compensation
  and research and                 
  development expense              32.2           -
State income taxes, net of
  Federal tax benefit                .8         1.4
Change in valuation allowance      (4.3)       39.4
Other items, net                     .5        (3.4)
                               ========================
Effective tax rate                  1.2%        3.4%
                               ========================



                                      F-18
<PAGE>




7. INCOME TAXES (CONTINUED)

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

                                               1998            1997
                                           -------------------------------
Current:
  Accounts receivable                       $       -     $ (95,250)
  Allowance for doubtful accounts             235,000       253,655
  Accounts payable                                  -       176,250
  Nondeductible reserves                      178,000             -
  Accrued compensation                        572,000             -
  Other                                             -        21,600
                                           -------------------------------
Total current                                 985,000       356,255
                                           -------------------------------

Noncurrent:
  Depreciation                                168,000        98,830
  Software development costs and other
   intangibles                               (697,000)      (17,000)
  Net operating loss carryforwards          1,745,000     3,223,600
                                           -------------------------------
Total noncurrent                            1,216,000     3,305,430
                                           -------------------------------

Net deferred tax assets before valuation    
allowance                                   2,201,000     3,361,685
Deferred tax asset valuation allowance     (2,201,000)   (3,361,685)
                                           -------------------------------
Net deferred tax asset                      $       -    $        -
                                           ===============================




                                      F-19
<PAGE>




7. INCOME TAXES (CONTINUED)

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 and 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, 1998,  the Company had federal net operating loss  carryforwards  of
approximately  $4,229,000.  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.

8. 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, 1998:

                                     OPERATING   CAPITAL
                                       LEASES     LEASES      TOTAL
                                    ------------------------------------

   1999                             $1,666,478   $728,187   $ 2,394,665
   2000                              1,392,456    244,603     1,637,059
   2001                              1,429,396     16,800     1,446,196
   2002                              1,455,404      9,800     1,465,204
   2003                              1,373,649          -     1,373,649
   Thereafter                        2,624,561          -     2,624,561
                                    =============----------=============
   Total minimum lease payments     $9,941,944    999,390   $10,941,334
                                    =============          =============
   Amount representing interest                    45,126
                                                 ----------
   Present value of net minimum
      lease payments                              954,264
   Less current portion                           693,619
                                                 ==========
   Long term portion                             $260,645
                                                 ==========

Total rent expense under operating  leases amounted to $990,019 and $654,268 for
fiscal 1998 and 1997, respectively.




                                      F-20
<PAGE>




8. COMMITMENTS AND CONTINGENCIES (CONTINUED)

(b) CONSULTING AGREEMENTS

On June 30, 1997, the Company entered into a one year consulting  agreement (the
"Consulting  Agreement") pursuant to which the Company was obligated to issue up
to 200,000  shares of Common Stock,  and options to acquire up to 150,000 shares
of Common Stock to the consultant in exchange for rendering  certain  consulting
services to the Company, including  acquisitions, investor  relations and market
analysis.

In fiscal 1998, the Consulting Agreement was terminated, thereby eliminating the
issuance of any remaining  shares of Common Stock or stock options due under the
original Consulting Agreement.  In connection  therewith,  the Company agreed to
pay the consultant  finders fees for successful  acquisitions  introduced to the
Company by the  consultant.  Fees of $1,520,000 paid to the consultant in fiscal
1998 have been recorded as acquisition costs.

(c) EMPLOYMENT AGREEMENTS

The Company is a party to  employment  agreements  with certain of its officers.
The  agreements  have  terms for one to three  years and  include,  among  other
things,  noncompete  agreements  and  salary  and  benefits  continuation.  Some
employment  agreements  provide for bonuses based on division  profitability and
other milestones.  Minimum salary  commitments under the agreements equal in the
aggregate $1,486,000 as of June 30, 1998.

(d) LITiGATION

The Company is not a party to any  pending  litigation.  However,  in the normal
course of business, the Company may be subject to certain claims and litigation,
including  unasserted  claims.  The  Company is of the  opinion  that,  based on
information presently available, any such legal matters will not have a material
adverse  effect on the  financial  position  or  results  of  operations  of the
Company.

9. SHAREHOLDERS' EQUITY

(a) EARNINGS PER SHARE

Shares of Common Stock held in escrow related to  acquisitions  are not included
in the  calculation  of  weighted  average  shares  outstanding  for the periods
presented,  as the  conditions  required  to  release  escrow  shares  for these
acquisitions were not fulfilled at the end of the applicable periods presented.




                                      F-21
<PAGE>




9. SHAREHOLDERS' EQUITY (CONTINUED)

(a) EARNINGS PER SHARE (CONTINUED)

                                                            JUNE 30
                                                       1998        1997
                                                    ------------------------
    Weighted average shares outstanding used 
      in computation of basic and diluted 
      earnings per share                            6,315,087   4,638,337
      
      

Securities  for issuance of common  shares  excluded  from diluted  earnings per
share due to antidilutive effect are as follows:

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

    Stock options                     2,204,907   1,137,796
    Convertible debt                          -      79,697
    Common stock purchase warrants       71,288     215,000

(b) COMMON STOCK ISSUANCE

In  August  1996,  the  Company  issued  Common  Stock to  Omnicom  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  Common  Stock in  exchange  for net  proceeds  (after  transaction  costs of
approximately $50,000) of $4,948,000.  Additionally, certain stockholders of the
Company  transferred  to Omnicom an  additional  124,667  shares of Common Stock
owned by them for no additional consideration.

On November 26,  1996,  the Company  completed  its initial  public  offering of
2,150,000  shares of Common  Stock at a price of $7.00 per share  (the  "Initial
Public  Offering")  which  resulted in the  Company  receiving  net  proceeds of
approximately $11,973,000.

In  connection  with the Initial  Public  Offering,  the  Company  issued to the
underwriters of the Initial Public Offering  warrants to purchase 215,000 shares
of Common Stock. Such warrants,  which became exercisable in November 1997 at an
exercise  price of $9.80 per  share,  contain  "cashless  exercise"  provisions,
whereby the holders  thereof,  in lieu of paying the exercise price in cash, may
exercise the warrants with shares issuable  thereunder as consideration for part
or all of the remaining shares issuable under the warrants.  During fiscal 1998,
warrants  to  purchase   approximately  144,000  shares  of  common  Stock  were
exercised.




                                      F-22
<PAGE>




9. SHAREHOLDERS' EQUITY (CONTINUED)

(c) ESCROW SHARES

In connection with the Initial Public offering,  certain  stockholders placed an
aggregate  of 825,000  shares into escrow (the  "Escrow  Shares") to be released
upon the  Company's  attainment of any one of certain  performance  targets (the
"Targets") pursuant to an escrow agreement (the "Escrow Agreement") between such
holders  and  Continental  Stock  Transfer  & Trust  Company,  as escrow  agent.
Pursuant to the Escrow  Agreement,  the Escrow Shares were not  transferable  or
assignable, but could be voted by the holders thereof. During the fourth quarter
of fiscal 1998, one of the Targets (a closing price of at least $20 per share of
Common Stock for forty  consecutive  business day from November 1996 to November
1999 as quoted by Nasdaq) was fulfilled and the Escrow Shares were released. The
Company  therefore,  recorded a non-cash  charge to  earnings  of  approximately
$21,700,000,  equal  to the fair  market  value of the  Escrow  Shares  on April
24,1998, the date of release.

(d) ACCELERATED STOCK OPTIONS

In the  fourth  quarter  of  fiscal  1998,  the  Company  reached  a  settlement
agreement,  as  amended,  with Scott A.  Mednick,  the  Company's  former  Chief
Executive Officer and Chairman of the Board of Directors,  who left the Company.
Pursuant to the terms of the amended agreement, the Company agreed to accelerate
the exercise dates of Mr.  Mednick's  options to acquire 60,000 shares of Common
Stock. The acceleration of Mr. Mednick's  options resulted in the recognition of
a charge of  $1,400,000  for the  difference  between the exercise  price of the
options and the market value of the  underlying  Common Stock on the date of the
settlement.

10. EMPLOYEE COMPENSATION PLANS

(a) 401(K) PLAN

The  Company  sponsors a defined  contribution  retirement  plan which cover all
employees  meeting  minimum  service  requirements.  Employees of the  companies
acquired  by the  Company  become  eligible  to join the plan over a period  not
exceeding  one year  from  the date of  acquisition.  The  Plan  qualifies  as a
deferred salary  arrangement  under Section 401(k) of the Internal Revenue Code.
The Company's contributions to the plan is based on percentages of the


                                      F-23
<PAGE>





10. EMPLOYEE COMPENSATION PLANS (CONTINUED)

(b) STOCK COMPENSATION PLAN

employees'  contributions.  Employer  contributions to the Plan during the years
ended  June  30,  1998  and  1997  were   approximately   $86,000  and  $52,000,
respectively.

In June 1996,  the  stockholders  of the  Company  authorized  adoption of stock
option plans. In July 1996, the Board of Directors adopted 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 to officers,  directors,
employees and  consultants  of the Company.  A total of 966,667 shares of common
stock  were  reserved  for  issuance  under the 1996 Plan.  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  generally  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 to officers,  directors,
employees  and  consultants  of the  Company.  All of the  persons  entitled  to
participate  in the 1996 Plan were given the  opportunity  to participate in the
1997 Plan and, in exchange for the  cancellation  of the  outstanding  1996 Plan
options,  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.

In June 1998,  the Board of  Directors  adopted the 1998 Stock  Option Plan (the
"1998  Plan") which  provides  for the grant of options to new  employees of the
Company to acquire up to 1,500,000 shares of Common Stock.

The stock  options  granted  under the 1997 Plan and the 1998 Plan are generally
intended to be "incentive"  stock options under the Internal  Revenue Code. Such
options are  granted  with an  exercise  price equal to the market  price of the
underlying common stock on the date of grant and vest ratably over four years.




                                      F-24
<PAGE>



10. EMPLOYEE COMPENSATION PLANS (CONTINUED)

(b) STOCK COMPENSATION PLAN (CONTINUED)

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

As of June 30, 1998, there were outstanding  options  exercisable to purchase up
to 2,204,907 shares of common stock under both the 1997 and 1998 Plan.

A summary of the  activity in the  Company's  stock option plans for fiscal 1998
and 1997 is as follows:
<TABLE>
<CAPTION>

                                                              1998                               1997
                                                                      Weighted                       Weighted Average
                                                Number of Shares      Average      Number of Shares   Exercise Price
                                                                   Exercise Price
                                                -----------------------------------------------------------------------
<S>                                             <C>                    <C>          <C>                 <C>

   Options outstanding at beginning of year         1,137,796            $3.97                 -         $     -
   Granted                                          1,576,216            12.68         2,104,463            5.59
   Exercised                                          181,713             4.07                 -               -
   Forfeited/canceled                                 327,392             5.09           966,667            7.50
                                                                                   ------------------
                                                ------------------
   Options outstanding at end of year               2,204,907             9.99         1,137,796            3.97
                                                                                   ==================
                                                ==================
   Options exercisable at end of year                 411,600             5.39                 -               -
                                                ==================
</TABLE>

Pro forma  information  regarding net income and earnings per share  required by
SFAS No.  123,  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  assumptions  for vested and non vested
options:



                                      F-25
<PAGE>





10. EMPLOYEE COMPENSATION PLANS (CONTINUED)

(b) STOCK COMPENSATION PLAN (CONTINUED)

                                            PERIOD ENDED JUNE 30
                                             1998          1997
                                         ---------------------------
        ASSUMPTIONS
        Risk-free interest rate           5.93%-6.12%  5.53% -6.51%
        Volatility                            .55          .35
        Average life                        2 YEARS      10 years

For purpose of pro forma  disclosures,  the estimated  fair value of the options
are amortized to expense over the vesting  period of the options.  The pro forma
net loss and loss per share is as follows:

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

Pro forma net loss                            $28,298,355           $8,129,163
Pro forma net loss per common share:
   Basic                                            $4.48                $1.75

The following table summarizes  information  about stock options  outstanding at
June 30, 1998.

<TABLE>
<CAPTION>



                          Options Outstanding                 Options Exercisable
                      ----------------------------       ----------------------------
                                        Weighted
                                        Average                          Weighted
                                       Remaining                          Average
  Exercise Price        Number        Contractual           Number    Exercise Price
                     Outstanding          Life            Exercisable

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

-------------------------------------------------------------------------------------
<S>                 <C>                <C>              <C>           <C>
        3.69              250,000           8.9            125,000              3.69
        4.05              497,016           8.6            166,600              4.05
        6.00                1,000           9.2            100,000              8.88
        6.19               84,250           9.2             20,000              9.77
        8.25              122,875           9.5
        8.88              220,000           9.3
        9.77               80,000           9.3
       11.88              477,250           9.5
       18.69              394,216          10.0
       20.00               23,800          10.0
       23.67               51,500           9.8
       24.13                3,000           9.9
                   -----------------                 -------------------
                        2,204,907                          411,600              5.39
                   =================                 ===================
</TABLE>



                                      F-26
<PAGE>




11. RELATED PARTY TRANSACTIONS

In March 1996,  the Company  entered into a two year  consulting  agreement with
Benchmark Equity Group, Inc., a founding and former  significant  stockholder of
the Company.  Under the  agreement,  the Company was  required to pay  Benchmark
$35,000 upon execution and a monthly fee of $7,000. The Company paid $56,000 for
the  fiscal  year  ended  June 30,  1997 to  Benchmark  in  connection  with the
agreement.  During fiscal 1998,  Benchmark ceased performing  services under the
agreement and, as a result thereof, the Company discontinued payment thereunder.

On March 17, 1998, the Company  entered into a loan agreement with Omnicom,  a
shareholder of the Company,  whereby the Company borrowed $500,000 at 8 %. The
loan is payable on January 31, 1999.

During fiscal 1998, the Company  recorded  revenues of $600,000 from Omnicom for
certain consulting  services.  Such amounts were included in accounts receivable
at June 30,1998, which were collected in August 1998.

12. RESTRUCTURING COSTS

1997 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.  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 Company in fiscal  1997  recorded a  restructuring  charge of
$1,732,000 comprised of the following:

Write-down of capitalized software costs     $ 597,000
Severance benefits and employee                
termination costs                              681,000
Disposal of fixed assets and other assets      454,000
                                           -------------
                                            $1,732,000
                                           =============

The accrued  liability for severance,  disposal and other costs of $1,135,000 at
June 30, 1997 was  eliminated  in fiscal 1998  through  charges for the costs as
incurred.  The aggregate  revenues and operating losses for NetCube and Internet
One for fiscal 1997 were $1,253,000 and $1,746,000, respectively.

There is no remaining  reserve  balance as of June 30, 1998 related to the prior
year reserve to close the operations of NetCube and Internet One.



                                      F-27
<PAGE>




12. RESTRUCTURING COSTS (CONTINUED)

1998 COSTS

As part of the Company's strategic focus on providing  interactive marketing and
business solutions,  the Company in April, 1998 formalized a decision to dispose
of its traditional graphic design departments.  The Company recorded a charge of
$921,000  in order to reflect  the  anticipated  costs to dispose of the graphic
design departments.

The  charge,  recorded  pursuant  to EITF  94-3,  includes  severance  and other
personnel related costs of $500,000 and lease and other occupancy and facilities
related costs of $421,000.

The  remaining  reserve  balance of  approximately  $307,000 at June 30, 1998 is
available for costs relating to facility and machinery leases.




                                      F-28
<PAGE>





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

      During  the fiscal  year ended June 30,  1998,  the  Company  changed  its
independent  auditors from BDO Seidman,  LLP to Ernst & Young, LLP as previously
reported on Form 8-K/A filed with the Securities and Exchange  Commission on May
27,  1998  (File No.  000-21775).  There were no  disagreements  with any of the
Company's independent accountants during the fiscal year ended June 30, 1998.


                                   PART III


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

      The following table sets forth, as of June 30, 1998,  certain  information
with respect to the directors and executive officers of the Company:

<TABLE>
<CAPTION>

                Name                       Age            Position with the Company
                -----                      ---            -------------------------
<S>                                       <C>           <C>
Ronald Bloom........................      45           Chairman and Chief Executive Officer
Melvin Epstein......................      53           Chief Financial Officer and Secretary
Adam Curry..........................      34           Chief Technology Officer and Director
Larry Kopald........................      44           Chief Creative Officer and Director
Susan Goodman.......................      43           Executive Vice President
James Grannan.......................      35           Executive Vice President
James Carlisle......................      51           Executive Vice President
Richard Char........................      39           Director
Marc Canter.........................      41           Director
Barry Wagner........................      58           Director
</TABLE>

      RONALD BLOOM has been a Director  since June 1996.  He served as President
and Chief  Operating  Officer of the Company from June 1996 until May, 1998 when
he was appointed Chairman of the Board and Chief Executive Officer.  Previously,
Mr. Bloom was Chief Operating Officer and General Manager of On Ramp, one of the
Subsidiaries,  primarily  engaged in the  provision  of  Internet  and  intranet
systems and  services,  from 1995 to 1996.  Prior to joining On Ramp,  Mr. Bloom
founded and served as  President of MediaTime  Advertising  and  Communications,
Chicago,  Illinois  from 1979 to 1981;  President  of Prototype  Computer  Aided
Design from 1980 to 1983; Vice President and Creative Director of Jeffrey Nemetz
and Associates  Advertising,  Chicago,  Illinois from 1983 to 1985; President of


                                       26
<PAGE>




TMF Communications,  Los Angeles, California from 1986 to 1989; 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
August 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 and is a Certified
Public Accountant.

      ADAM CURRY has been a  Director  and the Chief  Technology  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.  Mr. Curry
hosted and produced the nationally broadcast radio program "CountDown" from 1983
to 1987.  From 1987 to 1992, Mr. Curry served as an On-Air  Personality  for MTV
Networks in New York.

      LARRY  KOPALD has been a Director  and the Chief  Creative  Officer 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  from  Northwestern
University.

      SUSAN GOODMAN has been  Executive Vice President of the Company since June
1996. Ms. Goodman founded the Goodman Group, one of the Subsidiaries,  primarily
engaged  in the  provision  of  strategic  marketing  and  corporate  and  brand
positioning services, in 1993 as a strategic marketing consultancy, specializing
in  direct  marketing  and new  media.  Previously  she was  Director  of Client
Services at Chiat Day Direct  Marketing  from  February  1992 through July 1992.
Prior to that time, she spent 10 years in  merchandising in the apparel industry
with  companies such as IZOD and Merona Sport  (division of Oxford  Industries).
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 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.



                                       27
<PAGE>




      JAMES  CARLISLE has been  Executive  Vice  President of the Company  since
1996. Dr. Carlisle  founded NetCube  Corporation,  a Company which was 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.

      RICHARD CHAR has been a Director of the Company  since  August  1997.  Mr.
Char joined Cowen & Company in May 1997 and is a Managing  Director and the Head
of  Technology  Investment  Banking  at Cowen & Company.  In July 1998,  Cowen &
Company merged with Societe Generale and became SG Cowen Securities  Corporation
("SG  Cowen").  Prior to joining SG Cowen,  Mr. Char was an attorney with Wilson
Sonsini  Goodrich & Rosati  for  thirteen  years.  Mr.  Char holds an A.B.  from
Harvard University and 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.

      BARRY WAGNER has been a Director of the Company since  September 1996. Mr.
Wagner has been an employee of Omnicom and its predecessor  companies 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.

      SCOTT  MEDNICK,  formerly  Chairman  of the Board of  Directors  and Chief
Executive Officer of the Company,  resigned from all of his positions  effective
May 15, 1998 pursuant to the terms of a Settlement Agreement.  See "Management -
Employment and Related Agreements."

      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.


BOARD COMMITTEES

      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


                                       28
<PAGE>




statements.  Currently  Messrs.  Char and  Wagner  serve as members of the Audit
Committee.  The Audit  Committee held two meetings  during the fiscal year ended
June 30, 1998.

      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 Certificate
of Incorporation and the Bylaws of the Company. Currently, Messrs. Bloom, Wagner
and Curry  serve as members  of the  Executive  Committee.  The  Company  has no
nominating committee,  but the Executive Committee currently serves the function
that a nominating  committee would be created to serve. The Executive  Committee
held ten meetings during the fiscal year ended June 30, 1998.

      COMPENSATION   COMMITTEE.   The  Company's   compensation  committee  (the
"Compensation  Committee")  approves the compensation for executive  officers 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  Stock Option Plans.  Currently,  Messrs.
Char and Canter serve as members of the Compensation Committee. The Compensation
Committee held ten meetings during the fiscal year ended June 30, 1998.


COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

      Section  16(a) of 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  of the Company with the  Commission.  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.

      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.

      One Form 4 covering the sale of 9,166 shares of Common Stock in April 1998
was not timely filed by Susan Goodman, an executive officer of the Company.  The
transaction was reported on a Form 5 filed on behalf of Ms.
Goodman in August 1998.





                                       29
<PAGE>




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 three
fiscal years by each person who served as the Company's chief executive  officer
during the  Company's  fiscal  year ended June 30,  1998 and the four other most
highly compensated  executive officers of the Company whose salary and bonus for
fiscal 1998 was in excess of $100,000 (the "Named Executive Officers").



<TABLE>
<CAPTION>


                                                                              Long-Term Compensation
                                                                       -----------------------------------------
                             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>
Ronald E. Bloom(1)       1998    192,375       67,125            --            --       80,000(2)         --              764(10)
Chairman of              1997    125,000       69,696            --            --       20,000(3)         --              237(10)
Board and Chief          1996    106,250       58,234            --            --           --            --            1,250(10)
Executive Officer

Adam C. Curry(4)         1998    192,375       67,125            --            --        80,000(2)        --            3,676(10)
Chief Technology         1997    125,000       81,480            --            --        20,000(3)        --               --
Officer                  1996    125,000        2,500            --            --            --           --               --

Melvin Epstein(5)        1998    180,000           --            --            --        25,000(2)        --            2,521(10)
Chief Financial          1997    156,923           --            --            --       133,333(3)        --
Officer                  1996         --           --            --            --            --

Susan Goodman(6)         1998    203,330           --            --            --        25,000(2)        --            5,160(10)
Executive Vice           1997    195,000       46,825            --            --        26,667(3)        --               --
President                1996    138,000      130,000(7)         --            --            --           --               --

Larry Kopald(8)          1998    304,166      150,000(11)        --            --            --           --               --
Chief Creative           1997     25,000           --            --            --       250,000(3)        --               --
Officer and              1996         --           --            --            --            --           --               --
President, The                 
Mednick Group

Scott Mednick(9)         1998    268,508       20,000            --            --        80,000(2)        --            2,192(10)
Former Chairman of       1997    225,000       28,782            --            --        20,000(3)        --            4,750(10)
the Board and Chief      1996    225,000       11,376            --            --            --           --            4,598(10)
Executive Officer
</TABLE>

--------------------------
(1)      Mr. Bloom  commenced his employment  with the Company in June 1996, was
         appointed  President  in July 1996 and  Chairman  and  Chief  Executive
         Officer on May 24, 1998 upon the resignation of Scott A. Mednick.
(2)      Represents  shares of Common Stock  issuable  upon  exercise of options
         granted to the noted officers pursuant to the 1997 Stock Option Plan at
         an exercise  price of $8.88 per share for each  individual,  other than
         Mr. Bloom,  who owned in excess of 10% of the outstanding  Common Stock
         on the date of grant and whose  options,  therefore,  have an  exercise
         price of $9.77 per share.
(3)      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 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,  therefore,  have an exercise
         price of $3.69 per share  (representing  the fair  market  value of the


                                       30
<PAGE>




         Common Stock at the time of grant as determined in accordance  with the
         provisions of such plan).
(4)      Mr. Curry  commenced his employment with the Company and was  appointed
         Chief  Technology  Officer in June 1996.
(5)      Mr. Epstein commenced his employment with the Company in August 1996.
(6)      Ms. Goodman commenced her employment with the Company in June 1996.
(7)      Represents  distributions  to the noted  executive  as the former  sole
         stockholder of the Goodman Group.
(8)      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.
(9)      Mr. Mednick commenced his employment with the Company and was appointed
         Chairman  and  Chief  Executive  Officer  in March  1996.  Mr.  Mednick
         resigned as Chairman and Chief  Executive  Officer in May 1998 pursuant
         to the terms of a settlement,  as amended.  See "Certain  Relationships
         and  Related  Transactions."  
(10)     Represents  contributions to the Company's 401(k) plan on behalf of the
         named individual.
(11)     Represents  a  bonus  earned  pursuant  to  Mr.   Kopald's   employment
         agreement. See - "Employment and Related Agreements."

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR (1998)

      The  following  table sets forth certain  information  with respect to the
options  granted  during  the  fiscal  year  ended  June 30,  1998 to the  Named
Executive  Officers.  No stock appreciation rights ("SARs") have been granted by
the Company.

<TABLE>
<CAPTION>

                                                            Individual Grants
                      -----------------------------------------------------------------------------------------------
                                                           Percent of Total
                           Number of Securities        Options/SARs Granted to
                         Underlying Options/SARs             Employees in          Exercise or Base      Expiration
        Name                   Granted (#)                   Fiscal Year             Price ($/Sh)           Date
        ----                   -----------                   -----------             ------------       --------
<S>                      <C>                           <C>                          <C>                  <C>
Ronald Bloom                      80,000                         5.1%                     9.770          1/28/2008
Adam Curry                        80,000                         5.1%                     8.880          1/28/2008
Melvin Epstein                    25,000                         1.6%                     8.880          1/28/2008
Susan Goodman                     25,000                         1.6%                     8.880          1/28/2008
Scott Mednick                     80,000                         5.1%                     8.880          1/28/2008
</TABLE>

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

      Set  forth  below  is the  number  of  options  exercised  by the  Named
Executive  Officers during the fiscal year ended June 30,  1998 and the number
and value of exercisable  and  unexercisable  options as of June 30,  1998. No
SARs have been granted by the Company.


<TABLE>
<CAPTION>


                                                    Number of Securities Underlying
                                                    Unexercised Options/SARs at FY-         Value of Unexercised In-the-Money
                       Shares                                   End (#)                       Options/SARs at FY-End ($)(1)
                    Acquired on       Value       -----------------------------------     ------------------------------------
Name               Exercise (#)    Realized ($)    Exercisable        Unexercisable        Exercisable        Unexercisable
----               ------------    ------------    --------------     ----------------     ---------------    -----------------
<S>                 <C>            <C>             <C>                <C>                      <C>             <C>
Ronald Bloom               0               0              40,000             60,000            $760,400           $981,300
Adam Curry                 0               0              40,000             60,000             786,400          1,034,700
Melvin Epstein             0               0             133,333             25,000           2,943,326            431,125
Susan Goodman          9,166        $224,659                   0             27,501                              1,038,210
Larry Kopald               0               0             125,000            125,000           2,804,375          2,804,375
Scott Mednick              0               0             100,000                  0           1,821,100                  0 
</TABLE>               
                


                                       31
<PAGE>




--------------------------
(1)   The  calculations  of the value of  unexercised  options  are based on the
      difference  between  the  closing  sales  price of  $26.125,  as quoted by
      Nasdaq,  of the Common  Stock on June 30, 1998 and the  exercise  price of
      each option  multiplied by the number of shares of Common Stock covered by
      such option.

EMPLOYMENT AND RELATED AGREEMENTS

      On June 30, 1996,  the Company  entered into an employment  agreement with
each of Scott Mednick,  Ronald Bloom, Adam Curry,  Susan Goodman,  James Grannan
and James Carlisle. Each of the Company's agreements with Messrs. Mednick, Curry
and Bloom  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.  

      In  connection  with Mr.  Mednick's  resignation  as  Chairman  and  Chief
Executive  Officer of the  Company,  in May 1998,  the  Company  entered  into a
settlement  agreement  with Mr.  Mednick  in May 1998,  as amended in July 1998,
thereby terminating Mr. Mednick's employment  agreement.  Under the terms of the
settlement agreement,  as amended, the Company agreed to accelerate the exercise
dates of the options to acquire up to 60,000  shares of Common Stock  granted to
owned by Mr. Mednick in exchange for Mr. Mednick's  agreement to be bound by the
non-compete  and  confidentiality  provisions  of such  agreement.  Although the
original terms of the settlement  agreement  provided for payment to Mr. Mednick
of $936,130  over a 24 month  period,  payment of such amount was  eliminated by
amendment to the agreement.  Acceleration of Mr.  Mednick's  options resulted in
recognition of a charge of $1,400,000  for the  difference  between the exercise
price of the options  and the market  value of the  underlying  shares of Common
Stock  on the  date of  settlement.  See  Note 9 to the  Consolidated  Financial
Statements of the Company and "Certain Relationships and Related Transactions."

      Pursuant  to the  terms  of their  respective  employment  agreements,  as
amended, each of Messrs. Bloom and Curry is entitled to receive an annual salary
of $260,000 and bonuses as determined by the Board of Directors.

      The employment  agreement with Ms. Goodman provides for an initial term of
three years and entitles Ms. Goodman to receive an annual salary of $215,000 and
bonuses as determined by the Board of Directors.

      The employment  agreement with Mr. Grannan provides for an initial term of
one  year,  with the  option  to renew  for  successive  one year  periods.  Mr.
Grannan's  employment  agreement was renewed on June 30, 1997 and June 30, 1998.
Under the terms of the agreement, as amended, Mr. Grannan is entitled to receive
an  annual  salary  of  $125,000  and  bonuses  as  determined  by the  Board of
Directors.

      The employment agreement with Dr. Carlisle provides for an initial term of
three years, with the option to renew for a two year period.  Under the terms of
the agreement,  as amended, Dr. Carlisle is entitled to receive an annual salary
of $195,000 and bonuses as determined by the Board of Directors.



                                       32
<PAGE>




      In August 1996, the Company entered into an employment  letter with Melvin
Epstein.  Pursuant  to the terms of such  letter,  Mr.  Epstein is  entitled  to
receive an annual salary of $180,000,  subject to annual review and  evaluation.
The contract may be terminated by either party upon prior notice.

      In May 1997,  in  connection  with the  Fathom  Acquisition,  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: (i) earned
a bonus of $150,000 in the first year of his employment based upon a significant
client's  agreement to enter into an  advertising  services  agreement  with the
Company;  and (ii) received 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 on the date of
grant. In addition,  in the second year of his employment Mr. Kopald is entitled
to  receive  bonuses of up to 10% of profits  on  billings  on the  account of a
significant client in excess of $20 million dollars.

      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,  other than Mr. Epstein's,  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 a  consulting  agreement  with
Benchmark Equity Group,  Inc.  ("Benchmark")  pursuant to which the Company paid
Benchmark $35,000 upon execution and agreed to pay Benchmark $7,000 per month in
consulting fees. Frank DeLape,  formerly a principal stockholder and director of
the Company, is a principal and director of Benchmark.  The consulting agreement
expired by its terms on March 28, 1998.  Benchmark ceased providing  services to
the Company prior  thereto,  at which time the Company  discontinued  payment to
Benchmark.

      In June 1997, the Company entered into a consulting agreement, pursuant to
which the  consultant  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 therefore,
the Company agreed to issue an aggregate of up to 150,000 shares of Common Stock
and  options to acquire up to 150,000  shares of Common  Stock,  at an  exercise
price per share ranging from $8.64 to $11.56, based upon the closing transaction
price of the  Common  Stock  at the end of each  month  that  the  corresponding
options were issued.



                                       33
<PAGE>




      Pursuant to an  agreement  to  terminate  the  consulting  agreement,  the
Company  agreed  to  pay  the  consultant  finders  fees  upon  consummation  of
transactions  with companies  introduced to the Company by the consultant.  Such
fees are to be negotiated on a case-by-case basis. To date, the Company has paid
$1,520,000 in fees pursuant to this agreement.

LOANS

      During the fiscal year ended June 30, 1998,  Mr. Bloom  received  advances
for  expenses of  $68,340,  for which  approximately  $18,000 had been offset by
expense reports as of June 30, 1998. As of the date hereof approximately $15,000
remains outstanding.  To the extent the same remains  outstanding,  Mr. Bloom is
responsible to reimburse the Company.

DIRECTOR COMPENSATION

      Employee  directors of the Company receive no cash 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.  All directors are entitled
to  reimbursement of reasonable  expenses  related to attending  meetings of the
directors.

      In addition,  on June 30 of each year each director is entitled to receive
an option to purchase an aggregate of up to 20,000 shares of Common  Stock.  The
exercise price of each such option is the last  transaction  price of the Common
Stock as  quoted  on  Nasdaq  on the  date of  grant  or on the day  immediately
preceding  the date of grant.  The options are  generally  exercisable  one year
after the date of grant,  and are exercisable over a four-year period and expire
five  years  from the  date of  grant.  Notwithstanding  the  Company's  general
practice of annually granting options to directors,  based on agreements between
the Company and each  director,  there are no options for  directors  for fiscal
1998. In addition,  all directors are eligible to receive options under the 1997
Plan (as defined below).

STOCK OPTION PLANS

      In June 1996,  the  stockholders  of the Company  authorized the Company's
implementation  of  stock  option  plans  to  compensate  management  and  other
employees.  In July 1996, the Board of Directors adopted and the stockholders of
the Company ratified the THINK New Ideas, Inc. 1996 Stock Option Plan (the "1996
Plan"). Subsequently, in February 1997, by resolution of the Board of Directors,
the 1996 Plan was terminated and the  participants  therein were granted options
(identical to those held in the 1996 Plan) in the THINK New Ideas,  Inc. Amended
and  Restated  1997 Stock  Option Plan (the "1997  Plan"),  which was adopted by
resolution  of the Board of  Directors  in  September  1997 and  ratified by the
stockholders of the Company in December 1997.



                                       34
<PAGE>



      The 1997 Plan  provides for the grant of options that qualify as incentive
stock options  ("Incentive  Options") under Section 422 of the Internal  Revenue
Code of 1986, as amended ("Code"), to officers and employees of the Company (and
its subsidiaries) and options that do not so qualify  ("Non-Qualified  Options")
to  officers,  directors,  employees  and  consultants  of the Company  (and its
subsidiaries).  Pursuant  to the terms of the 1997 Plan,  the  Company may grant
options  exercisable to purchase up to 2,000,000  shares of Common Stock.  As of
June 30, 1998,  the Company had granted  options  exercisable  to purchase up to
1,932,086  shares of Common Stock,  which options had an aggregate market value,
based on the closing sales price of the Common Stock  underlying such options as
quoted by the Nasdaq National Market on such date, of $50,475,747.  Such options
become  exercisable one year after the date of grant and are exercisable  over a
four-year period in equal annual increments. Options to purchase an aggregate of
343,737 shares of Common Stock are currently exercisable.  The exercise price of
the options granted to date range from $3.69 to $28.44.

      Pursuant to its terms,  the 1997 Plan is administered by the  Compensation
Committee. The Compensation Committee determines the persons to whom options are
granted,  the number of shares of stock subject to an option,  the period during
which options may be exercised and the exercise  price  thereof.  Under the 1997
Plan, the exercise price for any Incentive Option may not be less than the "fair
market  value" of the shares of Common Stock at the time of grant.  In addition,
if an  Incentive  Option to  purchase  shares of Common  Stock is  granted to an
optionee who owns more than 10% of the voting power of the capital  stock of the
Company,  the minimum exercise price of such option may be not less than 110% of
the "fair market value" of the shares of Common Stock on the date of grant.

      In May 1998, the Board of Directors adopted the THINK New Ideas, Inc. 1998
New Employee Stock Option Plan (the "1998 Plan"). The 1998 Plan provides for the
grant of options that qualify as incentive stock options  ("Incentive  Options")
under the Code and options that do not so qualify  ("Non-Qualified  Options") to
induce  individuals to become  employees of the Company (and its  subsidiaries).
Pursuant  to the  terms  of  the  1998  Plan,  the  Company  may  grant  options
exercisable to purchase up to 1,500,000  shares of Common Stock.  As of June 30,
1998,  the  Company had granted  options  exercisable  to purchase up to 394,250
shares of Common Stock,  which options had an aggregate  market value,  based on
the closing sales price of the Common Stock underlying such options as quoted by
the Nasdaq  National  Market on such date, of  $10,299,781.  Such options become
exercisable  one  year  after  the  date of  grant  and are  exercisable  over a
four-year period in equal annual  increments.  None of the options are currently
exercisable. The exercise price of the options granted to date is $18.69.

      Pursuant to its terms,  the 1998 Plan is administered by the  Compensation
Committee. The Compensation Committee determines the persons to whom options are
granted,  the number of shares of stock subject to an option,  the period during
which options may be exercised and the exercise price  thereof.  Pursuant to the
1998 Plan, the exercise price for any Incentive  Option may not be less than the
"fair  market  value" of the  shares of  Common  Stock at the time of grant.  In


                                       35
<PAGE>




addition,  if an Incentive  Option to purchase shares of Common Stock is granted
to an optionee who owns more than 10% of the voting  power of the capital  stock
of the Company,  the minimum  exercise price of such option may be not less than
110% of the "fair  market  value" of the  shares of Common  Stock on the date of
grant.


LIMITATION ON LIABILITY; INDEMNIFICATION OF DIRECTORS AND OFFICERS

      The  Certificate  of  Incorporation   limits  the  personal  liability  of
directors to the fullest extent  permitted by Section  102(b)(7) of the Delaware
General  Corporation Law.  Section 145 of the Delaware  General  Corporation Law
provides  that a  corporation's  certificate  of  incorporation  may  limit  the
personal  liability of its  directors  for monetary  damages for breach of their
fiduciary  duties as directors  except for liability:  (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders; (ii) for acts
or omissions  not in good faith or which  involve  intentional  misconduct  or a
knowing  violation  of law;  (iii)  arising  under  Section 174 of the  Delaware
General  Corporation  Law; or (iv) for any  transaction  from which the director
derived an improper personal benefit.

      The effect of the  foregoing  is to require the Company to  indemnify  the
officers and directors of the Company for any claim arising against such persons
in their official  capacities if such person acted in good faith and in a manner
that he reasonably believed to be in or not opposed to the best interests of the
corporation,  and,  with respect to any criminal  action or  proceeding,  had no
reasonable cause to believe his conduct was unlawful.

      Insofar as  indemnification  for liabilities  arising under the Securities
Act  may  be  permitted  to  directors,  officers  or  persons  controlling  the
registrant  pursuant  to the  foregoing  provisions,  the  registrant  has  been
informed that in the opinion of the Commission such  indemnification  is against
public policy as expressed in the Securities Act and is therefore unenforceable.



                                       36
<PAGE>




ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
            MANAGEMENT

      The  following  table sets forth certain  information  as of June 30, 1998
with respect to the beneficial  ownership of the Company's  Common Stock by: (i)
each of the  Company's  directors;  (ii) each of the Named  Executive  Officers;
(iii) each person or entity who is known to the Company to  beneficially  own 5%
or more of the  outstanding  Common Stock;  and (iv) all directors and executive
officers of the Company as a group.

<TABLE>
<CAPTION>

                                                  Number of Shares             Percentage of
                                                                            Outstanding Shares
                                                    Beneficially               Beneficially
         of Beneficial Owner                            Owned                      Owned
---------------------------------------------     ------------------     --------------------------
<S>                                               <C>                     <C>

Ronald Bloom................................             832,933(1)                9.82%
 45 West 36th Street
 New York, New York 10018
Adam Curry .................................             190,075(2)                2.24%
 45 West 36th Street
 New York, New York 10018
James Carlisle..............................             213,849(3)                2.53%
 45 West 36th Street
 New York, New York 10018
Susan Goodman...............................              49,623(4)                  *
 45 West 36th Street
 New York, New York 10018
Melvin Epstein..............................             135,333(5)                1.58%
 45 West 36th Street
 New York, New York 10018
James Grannan...............................              12,637(6)                  *
 45 West 36th Street
 New York, New York 10018
Larry S. Kopald.............................             125,000(7)                1.46%
 45 West 36th Street
 New York, New York 10018
Omnicom Group Inc...........................              1,183,333               14.02%
 437 Madison Avenue
 New York, New York 10022
Barry Wagner................................              20,000(8)                  *
 437 Madison Avenue
 New York, New York 10022
Marc Canter.................................              20,000(8)                  *
 45 West 36th Street
 New York, New York 10018
Richard Char................................              20,000(8)                  *
 45 West 36th Street
 New York, New York 10018
All Directors and Executive Officers                      1,619,450
 as a Group (10 persons)....................
-------------------
*  denotes less than one percent.
</TABLE>


                                       37
<PAGE>




(1)   Includes  40,000 shares of Common Stock  issuable upon exercise of options
      that are presently  exercisable or that become  exercisable within 60 days
      of June 30, 1998 ("Presently Exercisable"). Does not include 80,000 shares
      of Common Stock  issuable  upon exercise of options that are not Presently
      Exercisable.
(2)   Includes 40,000 shares of Common Stock,  issuable upon exercise of options
      that are Presently  Exercisable.  Does not include 80,000 shares of Common
      Stock,   issuable   upon  exercise  of  options  that  are  not  Presently
      Exercisable.
(3)   Includes 2,000 shares owned by the members of the  individual's  immediate
      family.
(4)   Does not include 52,501 shares of Common Stock,  issuable upon exercise of
      options that are not Presently Exercisable.
(5)   Includes 133,333 shares of Common Stock, issuable upon exercise of options
      that are Presently  Exercisable.  Does not include 25,000 shares of Common
      Stock,   issuable   upon  exercise  of  options  that  are  not  Presently
      Exercisable.
(6)   Includes  8,667 shares of Common Stock,  issuable upon exercise of options
      that are Presently  Exercisable.  Does not include 27,333 shares of Common
      Stock that are not Presently Exercisable.
(7)   Includes 125,000 shares of Common Stock, issuable upon exercise of options
      that are Presently Exercisable.  Does not include 125,000 of Common Stock,
      issuable  upon   exercise  of  options   shares  that  are  not  Presently
      Exercisable.
(8)   Includes 20,000 shares of Common Stock,  issuable upon exercise of options
      that are Presently Exercisable.


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
therefore.

      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 was a
founding stockholder, officer and director of the Company.

      In connection  with the Company's  acquisition  On Ramp in June 1996,  the
Company issued to Adam Curry,  as the sole  stockholder of On Ramp, an aggregate
of 231,572 shares of Common Stock. Mr. Curry is a founding stockholder,  officer
and 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 the
10% 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,
formerly a principal  stockholder  and director of the  Company,  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  nonconvertible  promissory  note.  Principal and interest  outstanding
under the 10% Notes and the $75,000  nonconvertible  promissory note were repaid
out of the proceeds of the Omnicom  Transaction  in August  1996,  as more fully
described elsewhere herein.

      In March 1996,  the  Company  entered  into a  consulting  agreement  with
Benchmark (the "Benchmark  Agreement"),  pursuant to which  Benchmark  agreed to
render to the Company for a period of two years  certain  management  consulting
services,  including  among  other  things,  rendering  advice  in the  areas of


                                       38
<PAGE>




strategic  planning,  business  strategy,   acquisition  planning  and  business
administration.  In  exchange  therefore,  the Company  agreed to pay  Benchmark
$35,000 upon  execution and a monthly fee of $7,000.  Prior to expiration of the
Benchmark  Agreement on March 28, 1998,  Benchmark ceased providing  services to
the  Company,  at which time the  Company  discontinued  payment  to  Benchmark.
Benchmark  was a founding  stockholder  of the  Company and Frank M.  DeLape,  a
director of Benchmark, was a director of the Company and an officer and director
of Oak Tree  Capital,  Inc.,  which is the  manager  and a member of Trident II,
L.L.C.,  which was a principal  stockholder  of the Company.  See Note 11 to the
Consolidated Financial Statements of the Company and "Management" and "Principal
Stockholders."

      In April 1996, 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).  The  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 made available to On
Ramp an  additional  $600,000.  Such loans were  evidenced by  promissory  notes
executed on behalf of On Ramp in favor of the Company in the  principal  amounts
of  $1,000,000  and  $600,000,  respectively  (the  "On  Ramp  Notes").  Amounts
outstanding  under the On Ramp  Notes  accrued  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.  Such loan was eliminated
upon consolidation. See Note 1 to the Consolidated Financial Statements.

      In May 1996, pursuant to the terms of a certain loan agreement between the
Company and Internet One, the Company  loaned  $50,000 to Internet One. The loan
was  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 accrued interest at the rate of 12% per
annum.  Payment of  principal  and  interest on the Internet One Note was 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.   Such  loan  was  eliminated   upon
consolidation. See Note 1 to the Consolidated Financial Statements.



                                       39
<PAGE>




      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 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 paid in full as of March 17, 1997; the $515,760  promissory
note issued to Dan Carlisle was converted  into 73,680 shares of Common Stock in
March 1998 and the interest was converted into 6,017 shares of Common Stock.

      During the fiscal year ended June 30, 1998,  Mr. Bloom  received  advances
for  expenses of  $68,340,  for which  approximately  $18,000 had been offset by
expense reports as of June 30, 1998. As of the date hereof approximately $15,000
remains outstanding.  To the extent the same remains  outstanding,  Mr. Bloom is
responsible to reimburse the Company.

      In November 1996, in connection with the Initial Public Offering,  certain
stockholders  placed an aggregate of 825,000 shares into the IPO Escrow pursuant
to an escrow  agreement  (the  "Escrow  Agreement")  between  such  holders  and
Continental  Stock  Transfer & Trust Company,  as escrow agent.  Pursuant to the
Escrow  Agreement,  the Escrow Shares were not  transferable or assignable,  but
could be voted by the holder thereof.  During the fourth quarter of fiscal 1998,
one of the Targets (a closing  price of $20 per share of Common  Stock for forty
consecutive  business  day from  November  1996 to  November  1999 as  quoted by
Nasdaq) was achieved and the Escrow  Shares were  released.  Upon release of the
IPO Escrow, the stockholders received their Escrow Shares as follows:  Benchmark
- 204,645;  Christopher  Efird - 27,906 shares;  Scott Mednick - 188,043 shares;
Ronald  Bloom - 261,256  shares;  Adam Curry - 59,774  shares;  Susan  Goodman -
14,801 shares;  David Hieb - 10,360 shares;  and James Carlisle - 58,215 shares.
See  Note  9 to  the  Consolidated  Financial  Statements  of  the  Company  and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."

      On March 17, 1998, the Company  entered into a loan agreement with Omnicom
pursuant  to which  Omnicom  agreed to lend  $500,000  to the  Company.  Amounts
outstanding from time to time under the loan accrue interest at 8% per annum and
are due and  payable  (together  with  interest)  on  January  31,  1999.  As of
September 3, 1998 there was  outstanding  $500,000 under the loan agreement with
Omnicom. See Note 11 to the Consolidated Financial Statements of the Company and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."

      On April 24, 1998, the Company established a line of credit with the BONY,
pursuant  to which  BONY  agreed to make  available  to the  Company  $5,000,000
through April 28, 1999. Amounts  outstanding from time to time under the line of
credit accrue interest at a floating rate based on the prime lending rate of the



                                       40
<PAGE>




bank are due and payable (together with interest) on demand.  The line of credit
is evidenced  by a  promissory  note and is secured by the assets of the Mednick
Group and On Ramp.  In addition,  amounts  outstanding  under the line of credit
have been  guaranteed  by each of the Mednick Group and On Ramp. As of September
3, 1998, there was approximately  outstanding  $400,000 under the line of credit
with BONY. See Note 6 to the  Consolidated  Financial  Statements of the Company
and "Management's  Discussion and Analysis of Financial Condition and Results of
Operations."

      In  connection  with Mr.  Mednick's  resignation  as  Chairman  and  Chief
Executive  Officer  of the  Company  in May 1998,  the  Company  entered  into a
settlement  agreement  with Mr.  Mednick  in May 1998,  as amended in July 1998,
thereby terminating Mr. Mednick's employment  agreement.  Under the terms of the
settlement agreement,  as amended, the Company agreed to accelerate the exercise
dates of the options to acquire up to 60,000  shares of Common Stock  granted to
Mr.  Mednick  in  exchange  for  Mr.  Mednick's  agreement  to be  bound  by the
non-compete  and  confidentiality  provisions  of such  agreement.  Although the
original terms of the settlement  agreement  provided for payment to Mr. Mednick
of $936,130  over a 24 month  period,  payment of such amount was  eliminated by
amendment to the agreement.  See Note 9 to the Consolidated Financial Statements
of the Company and "Executive Compensation."


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.

      2.2         Agreement and Plan of Merger dated June 27, 1998 between THINK
                  New Ideas,  Inc.,  UbiCube Group,  Inc.,  Ubicube  Acquisition
                  Corp. and the Stockholders of UbiCube Group.  Inc., filed with
                  the Securities  and Exchange  Commission on September 11, 1998
                  as an exhibit to the Company's Form 8-K/A (File No. 000-21775)
                  and incorporated herein by reference.

      2.3         Agreement  and Plan of Merger dated June 2, 1998 between THINK
                  New  Ideas,  Inc.,  Interweb,  Inc.  and the  Stockholders  of
                  Interweb,   Inc.,  filed  with  the  Securities  and  Exchange
                  Commission  on August 14, 1998 as an exhibit to the  Company's
                  Form 8-K/A (File No. 000-21775) and incorporated
                  herein by reference.



                                       41
<PAGE>




      2.4*        Agreement and Plan of Merger dated April 1, 1998 between THINK
                  New Ideas,  Inc.,  Herring/Newman,  Inc.,  Phil  Herring,  and
                  Daniel Gross.

      2.5         Agreement  and Plan of Merger dated  November 11, 1997 between
                  THINK New Ideas,  Inc., BBG New Media, Inc., Daniel McCartney,
                  and Joseph  Nicholson,  filed with the Securities and Exchange
                  Commission  on January 16, 1998 as an exhibit to the Company's
                  Form 8-K/A (File No.  000-21775)  and  incorporated  herein by
                  reference.

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

      2.7         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.

      2.8         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.

      2.9         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.

      2.10        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.

      2.11        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


                                       42
<PAGE>




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

      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         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.

      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         Amended and Restated  THINK New Ideas,  Inc. 1997 Stock Option
                  Plan.

      4.5*        THINK New Ideas, Inc. 1998 New Employee 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


                                       43
<PAGE>




                  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(a)     Amendment to Ron Bloom Employment  Agreement dated October 28,
                  1996, 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(b)     Amendment to Ron Bloom Employment  Agreement dated October 23,
                  1997, filed with the Securities and Exchange  Commission as an
                  exhibit to the Company's  Quarterly  Report on Form 10-QSB for
                  the quarter ended March 31, 1998 (File No.
                  000-21775).

      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.

      10.3(a)     Amendment to Adam Curry Employment Agreement dated October 28,
                  1996, 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(b)     Amendment to Adam Curry Employment Agreement dated October 23,
                  1997, filed with the Securities and Exchange  Commission as an
                  exhibit to the Company's  Quarterly  Report on Form 10-QSB for
                  the quarter ended March 31, 1998 (File No.
                  000-21775).

      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.

      10.4(a)     Amendment to Susan Goodman Employment  Agreement dated October
                  23, 1997, filed with the Securities and Exchange Commission as
                  an exhibit to the  Company's  Quarterly  Report on Form 10-QSB
                  for the quarter ended March 31, 1998 (File No. 000-21775).



                                       44
<PAGE>




      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.

      10.5(a)     Amendment to James Carlisle Employment Agreement dated October
                  28, 1996, 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(b)*    Amendment to James Carlisle  Employment  Agreement dated March
                  18, 1998.

      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.

      10.6(a)     Letter  Amendment to  Employment  Agreement  of James  Grannan
                  dated July 30, 1997,  filed with the  Securities  and Exchange
                  Commission  as an exhibit to the  Company's  Annual  Report on
                  Form  10-KSB for the fiscal year ended June 30, 1997 (File No.
                  000-21775) and incorporated herein by reference.

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

      10.8(a)     Employment  Letter  between  THINK New Ideas,  Inc.  and Larry
                  Kopald,  filed with the Securities and Exchange  Commission as
                  an exhibit to the  Company's  Annual Report on Form 10-KSB for
                  the fiscal year ended June 30, 1997 (File No.  000-21775)  and
                  incorporated herein by reference.

      10.8(b)     Employment  Agreement  between THINK New Ideas, Inc. and Larry
                  Kopald,  filed with the Securities and Exchange  Commission as
                  an exhibit to the Company's Annual Report on Form 10-KSB/A for
                  the fiscal year ended June 30, 1997 (File No.  000-21775)  and
                  incorporated herein by reference.



                                       45
<PAGE>




      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       Termination  Agreement between THINK New Ideas, Inc. and David
                  Hieb,  dated  May 20,  1997,  filed  with the  Securities  and
                  Exchange  Commission  as an  exhibit to the  Company's  Annual
                  Report on Form  10-KSB for the fiscal year ended June 30, 1997
                  and incorporated herein by reference.

      10.11*      Settlement Agreement, dated as of May 15, 1998, by and between
                  the Company and Scott Mednick.

      10.12*      Settlement  Agreement,  dated  as of  July  28,  1998,  by and
                  between the Company and Scott Mednick.

      10.13       Letter  Agreement  between the Company and Scott Mednick dated
                  May  15,  1998,   filed  with  the   Securities  and  Exchange
                  Commission as an exhibit to the Company's  Quarterly Report on
                  Form  10-QSB for the  quarter  ended  March 31, 1998 (File No.
                  000-21775).

      10.14(a)*   Loan Agreement by and between  Omnicom  Finance Inc. and THINK
                  New Ideas, Inc. dated March 17, 1998.

      10.14(b)*   Promissory Note in favor of Omnicom Finance Inc.

      10.15(a)*   Letter Agreement by and between The Bank of New York and THINK
                  New Ideas, Inc., dated April 24, 1998.

      10.15(b)*   Promissory Note in favor of The Bank of New York.

      10.16*      Form of General  Guarantee to Bank of New York Loan  Agreement
                  provided by On Ramp,  Inc. and Scott A. Mednick &  Associates,
                  Inc.

      10.17*      Form of Security  Agreement to Bank of New York Loan Agreement
                  provided by On Ramp, Inc., Scott A. Mednick & Associates, Inc.
                  and THINK New  Ideas,  Inc.

      13.1        Quarterly  Report on Form 10-QSB for  quarter  ended March 31,
                  1998 filed with the Securities and Exchange  Commission on May
                  21, 1998 and incorporated herein by reference.



                                       46
<PAGE>




      16.1        Letter  Certifying  Change  of  Accountants,  filed  with  the
                  Securities  and Exchange  Commission on the Company's  Current
                  Report  on Form 8-K  filed on  February  27,  1998  (File  No.
                  000-21775).

      27*         Financial Data Schedule.
-------------
* Denotes documents filed herewith.  Other documents are incorporated  herein by
reference as noted above.

(b)   REPORTS ON FORM 8-K.

      On April 16,  1998,  the  Company  filed a  Current  Report on Form 8-K to
report the acquisition of Herring/Newman, Inc.

      On May 27, 1998, the Company filed an Amended and Restated  Current Report
on Form 8-K/A to report the change in auditors.

      On June 16, 1998, the Company filed a Current Report on Form 8-K to report
the acquisition of Interweb, Inc.



                                       47
<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:  September 17, 1998          By:   /s/ Ronald E. Bloom
                                         ----------------------
                                         Ronald E. Bloom, 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/ Ronald E. Bloom                   Chief Executive Officer, Chairman            September 17, 1998
-----------------------------         of the Board and Director
Ronald E. Bloom                       


/s/ Adam Curry                        Chief Technology Officer and                 September 17, 1998
-----------------------------         Director
Adam Curry


/s/ Melvin Epstein                    Chief Financial Officer                      September 17, 1998
-----------------------------
Melvin Epstein


/s/ Barry Wagner                      Director                                     September 17, 1998
-----------------------------
Barry Wagner


/s/ Richard Char                      Director                                     September 17, 1998
-----------------------------
Richard Char


/s/ Marc Canter                       Director                                     September 17, 1998
-----------------------------
Marc Canter


/s/ Larry Kopald                      Chief Creative Officer and Director          September 17, 1998
-----------------------------
Larry Kopald


</TABLE>