SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB/A
                                 AMENDMENT NO. 1
(Mark One)

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
     1934. For the fiscal year ended December 31, 1998 OR

[ ]  TRANSITION  REPORT UNDER SECTION 13 or 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF  1934  For  the  transition  period  from  _____________________  to
     _____________________

                        Commission file number 000-22611

                                MyTurn.com, Inc.
                                ----------------
                 (Name of Small Business Issuer in its Charter)

         Delaware                                             11-3344575
         --------                                            ----------
(State or Other Jurisdiction of                            (I.R.S. Employer
Incorporation or Organization)                           Identification Number)

 333 North First Street, Jacksonville Beach                        32250
 ------------------------------------------                       -----
(Address of Principal Executive Offices)                        (Zip Code)

                                  (904)249-5756
                                  -------------
                (Issuer's telephone number, including area code)

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 ($.01 par value per share)
                     ---------------------------------------
                                (Title of Class)

                                Compu-DAWN, Inc.
                                ----------------
                                  (former name)

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

Check if 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. [ ]

As of  February  28,  1999,  the  aggregate  market  value of the shares held by
non-affiliates was approximately $13,875,345.

The  issuer's  revenues  for the  fiscal  year  ended  December  31,  1998  were
$1,248,489.

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS.

The  number of shares  outstanding  of each of the  issuer's  classes  of common
equity as of February 28, 1999 is  3,428,269  shares of Common  Stock,  $.01 par
value per share.

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

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None


<PAGE>




                                    INDEX                            Page No.
                                    -----                            --------


Explanatory Note . . . . . . . . . . . . . . . . . . . . . . . . . . .  1
Forward Looking Statements . . . . . . . . . . . . . . . . . . .  . . . 1

PART II

Item 6.  Management's Discussion and Analysis or Plan of Operation . .  2
Item 7.  Financial Statements . . . . . . . . . . . . . . . . . . . . . 4

PART IV

Item 13.  Exhibits, Lists and Reports on Form 8-K . . . . . . . . . . . 5


<PAGE>



                                EXPLANATORY NOTE

     MyTurn.com,  Inc., a Delaware corporation ("MyTurn.com" or the "Company" or
"Compu-  DAWN"),  which was formerly known as Compu-DAWN,  Inc., is amending its
Annual  Report on Form  10-KSB for the fiscal  year ended  December  31, 1998 in
order to amend its audited  financial  statements for such year and to amend its
Management's   Discussion   and   Analysis  or  Plan  of  Operation  to  reflect
discontinued operations in 1999.

     The  disclosure  herein is as of March 31, 1999, the date the Annual Report
on Form 10-KSB for the fiscal year ended December 31, 1998 was filed.

                           FORWARD LOOKING STATEMENTS

     Certain  information  contained in this Annual Report are  "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995,  and is subject to the safe  harbor  created by that act.  The  Company
cautions readers that certain  important factors may affect the Company's actual
results  and  could   cause  such   results  to  differ   materially   from  any
forward-looking  statements which may be deemed to have been made in this Annual
Report or which are  otherwise  made by or on  behalf of the  Company.  For this
purpose,  any statements contained in this Annual Report that are not statements
of  historical  fact may be deemed  to be  forward-looking  statements.  Without
limiting the generality of the foregoing, words such as "may," "will," "expect,"
"believe,"  "anticipate," "intend," "could," "estimate," "plan" or "continue" or
the  negative  variations  thereof or  comparable  terminology  are  intended to
identify  forward-looking  statements.  Factors  which may affect the  Company's
results include, but are not limited to, the risks and uncertainties  associated
with the Internet and Internet-related  technology and products,  new technology
developments,  developments and regulation in the  telecommunications  industry,
the  competitive   environment   within  the  Internet  and   telecommunications
industries, the ability to enter into agreements with mass merchandise retailers
and develop other sales outlets for its products,  the ability of the Company to
partner with a hardware  manufacturer to produce the GlobalPC personal computing
device,  the ability of the Company to secure  agreements with content providers
for its  Internet  portal,  the  ability of the  Company  to  finalize a network
services  agreement with a national  Internet  Service Provider (ISP) to provide
network access,  the ability of the Company to expand its operations,  the level
of costs incurred in connection with the Company's  planned  expansion  efforts,
unascertainable  risks  related  to  possible  unspecified   acquisitions,   the
competence required and experience of management, the risk of loss of management
and  personnel,  economic  conditions,  and the  ability of the Company to raise
additional capital which will be required within the next six months to continue
to develop and  sustain its  business  at current  levels and to  implement  the
Company's  business  plan and generate  revenue.  The Company is also subject to
other  risks  detailed  herein or  detailed  from time to time in the  Company's
Securities and Exchange  Commission  ("SEC") filings.  Readers are also urged to
carefully review and consider the various  disclosures made by the Company which
attempt to advise  interested  parties of the factors which affect the Company's
business,  including, without limitation, the disclosures made under the caption
"Management's  Discussion  and Analysis or Plan of  Operation" in Item 6 of this
Annual Report.  All references to a fiscal year are to the Company's fiscal year
which ends December 31.




<PAGE>



                                     PART II

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

     The Company changed its name from Compu-DAWN,  Inc. to MyTurn.com,  Inc. on
January 21, 2000.  Accordingly,  references to  Compu-DAWN,  Inc. in this Annual
Report on Form 10KSB/A, Amendment No. 1 is to the Company.

     The  amendments  to  Item  6.  "Management's  Discussion  and  Analysis  of
Financial Conditions and Results of Operations" are to reflect amendments to the
financial  statements contained in this Annual Report on Form 10-KSB/A Amendment
No. 1, which amendments reflect discontinued  operations in 1999. The disclosure
herein is as of March 31, 1999,  the date the  Company's  Annual  Report on Form
10-KSB for the fiscal year ended December 1998 was filed.

Results of Operations:

     The Company  discontinued  its subsidiary e.TV Commerce,  Inc. and divested
itself  of  its  public  safety  software   business  in  June  and  July,  1999
respectively.  Accordingly,  the Results of Operations discussed below represent
only the continuing operations of the Company.

Revenues:

     Revenues for the twelve  months ended  December 31, 1999,  from  continuing
operations,  were  $336,955 as compared to $111,156 for the twelve  months ended
December 31, 1997. The revenue was primarily comprised of Internet  subscription
fees and interest income.

Costs and Expenses:

     The total costs and expenses for the twelve-month period ended December 31,
1998 were $314,411 as compared to $1,610,505 for the  comparative  period of the
prior year.

     The Company's  consolidated operating income from continuing operations for
1998 was  $22,544 as  compared  to a loss of  $1,499,349  for the same period in
1997. The variance is largely attributable to the subsequent write-off and of an
impaired loan (see Note 3 of the Financial Statements).

     The Company's consolidated loss from discontinued continuing operations for
1998 was  $2,806,096 as compared to $2,937,396  for the same period in 1997. The
losses were largely  attributable  to the subsequent  decision of the Company to
discontinue  its public safety  software  business (see Note 13 of the Financial
Statements).

Income (Loss)

     For the twelve months ended  December 31, 1998 the Company  reflected a net
loss of $2,783,552  ($.95 per share) as compared to a loss of $4,436,745  ($1.95
per share) for the corresponding period of the previous year.

                                       2



<PAGE>



     These losses were primarily a result of the operating  losses  sustained by
the discontinued  businesses  which reflected  aggregate loss $1,656,096 for the
twelve month period ended December 31, 1998.

Liquidity and Capital Resources

     In January 1997, the Company  entered into a secured  credit  facility loan
agreement  (the  "Credit  Agreement")  with Mark  Honingsfeld,  Chief  Executive
Officer  and then  Chairman of the Board of the  Company,  pursuant to which the
Company borrowed  $200,000.  The Company and Mr.  Honingsfeld  agreed to convert
this loan into 40,000 Common Shares (an effective  conversion price of $5.00 per
share) upon the closing of the Company's  initial public offering which occurred
in June, 1997. In April 1997, the Company and Mr. Honingsfeld amended the Credit
Agreement  to provide  for a new line of credit of  $500,000.  In May 1997,  the
Company  borrowed an  additional  $200,000  under the Credit  Agreement of which
$50,000 was  outstanding  at  December  31,1998  ($150,000  was  outstanding  at
December 31, 1997).  The repayment of up to $200,000 under the Credit  Agreement
was secured by a first priority security interest in all the assets owned by the
Company.

     In June 1997, the Company successfully completed an initial public offering
of its Common Shares. The Company sold 1,380,000 of its Common Shares at a price
of $5.00 per share and realized net proceeds of approximately $5,626.000.

     At December 31, 1998,  the Company had cash and  marketable  securities  of
$4,378,000,  accounts receivable of $319,000, a current ratio of 13.8 to 1 and a
net  worth  of  $5,298,000.  At  December  31,  1997,  the  Company  had cash of
$3,081,000,  accounts receivable of $72,000, a current ratio of 8.3 to 1 and net
worth of $3,206,000.  The overall improvement from 1997 to 1998 is the result of
a private  offering of preferred  stock (which is described  below),  net of the
losses incurred during 1998 as described above.

     In June 1998, the Company completed a private placement of securities.  The
Company  sold 3,250  units  (consisting,  in the  aggregate,  of 3,250  Series A
Preferred  Shares and warrants to acquire  57,497  Common  Shares) at a price of
$1,000 per unit and 1,750 units (consisting, in the aggregate, of 327,103 Common
Shares and warrants to acquire  32,710 Common  Shares) also at a price of $1,000
per unit.  The Common  Shares were  subsequently  exchanged  for 1,750  Series B
Preferred Shares. From this private placement, the Company realized net proceeds
of approximately $4,723,000.

Cash Flows

     For the years ended December 31, 1998 and 1997,  cash utilized by operating
activities was $1,278,214 and $2,311,314,  respectively. The primary reasons for
the  decrease  in cash used for  operating  activities  were an increase in cash
collected from customers and an increase in interest and other income  mentioned
previously.

     For the year ended  December  31,  1997,  $135,205 of cash was  utilized by
investing activities, primarily for fixed asset purchases. For 1998, the Company
used $3,913,517 of cash in this category.

                                        3



<PAGE>




     In  1997,  the  Company   generated  cash  from  financing   activities  of
$5,241,275,  principally as a result of the completion of the IPO offering.  For
1998, the Company generated cash of $4,638,878 in this category, principally due
to the completion of the private offering.

Forward Looking Statements

     Except for historical  information  contained herein, the matters set forth
above  contain  forward  looking  statements  that  involve  certain  risks  and
uncertainties  that  could  cause  actual  results  to differ  from those in the
forward  looking  statements.  Potential  risks and  uncertainties  include such
factors  set  forth  on page 1 of this  Annual  Report  on Form  10-KSB/A  under
"Forward Looking Statements."

Item 7.   Financial Statements

     The audited financial statements of the Company as at December 31, 1998 and
1997 and for the years then ended are  included  in this  Annual  Report on Form
10-KSB/A following Item 13 hereof.




















                                        4


<PAGE>





                                     PART IV

Item 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K

(a)   Exhibits      Description of Exhibit
      --------      ----------------------

         11         Computation of Earnings Per Common Share

         23         Consent of Lazar, Levine & Felix LLP, independent auditors.

         27         Financial Data Schedule.























                                        5

<PAGE>



                                Compu-DAWN, Inc.
                 FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997


<TABLE>
<CAPTION>


                        - INDEX TO FINANCIAL STATEMENTS -


                                                                                                 Page(s)
                                                                                                 -------

<S>                                                                                                  <C>
Independent Auditors' Report                                                                     F - 2

Financial Statements:

    Balance Sheets as of December 31, 1998 and 1997                                              F - 3

    Statements of  Operations for the Years Ended December 31, 1998 and 1997                     F - 4

    Statement of Shareholders' Equity for the Two Years in the Period Ended December 31, 1998    F - 5

    Statements of Cash Flows for the Yeed December 31, 1998 and 1997                             F - 6

Notes to Financial Statements                                                                    F - 8
</TABLE>




















                                      F - 1


<PAGE>



                          INDEPENDENT AUDITORS' REPORT




To the Shareholders
Compu-DAWN, Inc.
Cedarhurst, New York


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

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position  of Compu-  DAWN,  Inc. as of
December 31, 1998 and 1997 and the results of its  operations and its cash flows
for the years ended  December 31, 1998 and 1997,  in conformity  with  generally
accepted accounting principles.


                                       /s/ Lazar Levine & Felix LLP
                                       LAZAR LEVINE & FELIX LLP

New York, New York
February 25, 1999
except for Note 12, the
date of which is
March 4, 1999 and Note 13
the date of which is
July 2, 1999

                                      F - 2




<PAGE>




                                Compu-DAWN, Inc.
                                 BALANCE SHEETS

                               - ASSETS (Note 6) -


<TABLE>
<CAPTION>
                                                                                                    December 31,
                                                                                           1998                    1997
                                                                                          --------                ------

<S>                                                                                     <C>                 <C>
CURRENT ASSETS:
     Cash                                                                                 $2,528,400        $  3,081,253

     Marketable securities                                                                 1,850,000              -

     Income tax refund receivable (Note 10)                                                    -                  29,868

     Net assets of discontinued operations (Note 13)                                         919,520              94,453
                                                                                           ---------          ----------


     TOTAL CURRENT ASSETS                                                                  5,297,920           3,205,574
                                                                                           =========           =========

     OTHER ASSETS                                                                            -                       -
                                                                                           ----------        -----------
                                                                                           $5,297,920       $  3,205,574
                                                                                           ==========       ============


                    - LIABILITIES AND SHAREHOLDERS' EQUITY -


     CURRENT LIABILITIES                                                               $       -            $       -
                                                                                        -------------      -------------

     COMMITMENTS AND CONTINGENCIES (Notes 11 and 12)

     SHAREHOLDERS' EQUITY (Notes 7 and 8):

     Preferred stock, $.01 par value; 1,000,000 shares authorized:
       Series A Convertible Preferred; 3,250 shares issued and outstanding for 1998               33                 -
       Series B Convertible Preferred; 1,750 shares issued and outstanding for 1998               17                 -
     Common stock, $.01 par value, 20,000,000 shares authorized, 3,265,448 and                32,654              28,385
       2,838,450 shares issued for 1998 and 1997, respectively
     Additional paid-in capital                                                           13,661,649           8,061,443
     Retained earnings (deficit)                                                          (7,620,721)         (4,837,169)
     Accumulated other comprehensive income (loss)                                          (150,000)                -
                                                                                          ----------          -----------
                                                                                           5,923,632           3,252,659
     Less: treasury stock, 340,044 and 8,561 shares at cost, for 1998 and 1997,             (625,712)            (47,085)
                                                                                          ----------          -----------
       respectively
                                                                                           5,297,920           3,205,574
                                                                                           ---------          ----------

                                                                                          $5,297,920       $   3,205,574
                                                                                          ==========       =============
</TABLE>




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

                                      F - 3

<PAGE>



                                Compu-DAWN, Inc.
                            STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>

                               For the Year Ended
                                  December 31,

                                                                                  1998                     1997
                                                                                 --------                 ------
INCOME:
<S>                                                                             <C>                    <C>
     Interest and other income                                                  $ 336,955              $  111,156
                                                                                 --------               ----------


EXPENSES:

     Interest expense and financing loss (Note 5)                                  17,459               1,610,505

     Loss due to terminated investment transaction (Note 9)                       296,952                     -



                                                                                  314,411               1,610,505

INCOME/(LOSS) FROM CONTINUING OPERATIONS                                           22,544              (1,499,349)

(LOSS) FROM DISCONTINUED OPERATIONS (Note 13)                                  (2,806,096)             (2,937,396)
                                                                               -----------            ------------
(LOSS) BEFORE PROVISION (CREDIT) FOR INCOME TAXES                              (2,783,552            $(4,436,745)


NET LOSS                                                                      $(2,783,552)             (4,436,745)
                                                                              ============            ============

BASIC INCOME (LOSS) PER COMMON SHARE:

     Continuing operations                                                   $      0.01              $     (0.66)
     Discontinued operations                                                       (0.96)                   (1.29)
                                                                                --------               -----------
                                                                                   (0.95)             $     (1.95)
                                                                                =========             ============

DILUTED INCOME (LOSS) PER COMMON SHARE:

     Continuing operations                                                    $    0.01               $    (0.66)
     Discontinued operations                                                      (0.74)                   (1.29)
                                                                                 -------                ----------
                                                                               $  (0.73)              $    (1.95)
                                                                                ========               ==========

WEIGHTED AVERAGE OF BASIC COMMON SHARES OUTSTANDING                             2,937,724               2,270,047
                                                                                =========               =========

WEIGHTED AVERAGE OF DILUTED COMMON SHARES OUTSTANDING                           3,814,259               2,270,047
                                                                                =========               =========
</TABLE>


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

                                      F - 4



<PAGE>

                                Compu-DAWN, Inc.
                        STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                  Preferred Stock                    Additional    Retained     Other                        Total
                                     Shares         Common Stock       Paid-in     Earnings  Comprehensive  Treasury   Shareholders'
                                     Amount         Shares Amount      Capital     (Deficit)  Income (Loss)   Stock  Equity(Deficit)
                                     ------         -------------      -------     ---------  -------------   -----  ---------------

<S>                                   <C>  <C>     <C>       <C>      <C>         <C>             <C>        <C>        <C>
Balance at December 31, 1996            -   $-    986,700  $ 9,867   $1,670,258  $ (400,424)      $ -        $ -         $1,279,701
 Options issued below fair value        -    -         -         -      374,500      -              -          -            374,500
 Exercise of stock options              -    -    408,750    4,088      122,297      -              -          -            126,385
 Treasury stock, 8,561 shares at cost   -    -         -         -           -       -              -      (47,085)         (47,085)
 Conversion of debt                     -    -     40,000      400      199,600      -              -          -            200,000
 Conversion of accrued compensation     -    -     23,000      230      114,770      -              -          -            115,000
 Initial public offering                -    -  1,380,000   13,800    5,612,074      -              -          -          5,625,874
 Cancellation of options                -    -         -         -      (32,056)     -              -          -            (32,056)
 Net loss                               -    -         -         -          -    (4,436,745)        -          -         (4,436,745)
                                       ---  --- ---------   ------    ---------  -----------     -----     --------      -----------
Balance at December 31, 1997            -    -  2,838,450   28,385    8,061,443  (4,837,169)        -      (47,085)       3,205,574


     Exercise of stock options          -    -     24,895      248       68,339      -             -       (47,085)          21,502

     Private offering of shares -    3,250   33   327,103    3,271    4,719,842      -             -           -          4,723,146
       Preferred Series A

     Exchange of 327,103 common      1,750   17        -        -       531,525      -             -      (531,542)            -
       shares for Preferred Series B

     Shares issued for professional     -     -    75,000      750      280,500      -             -            -           281,250
        fees

     Unrealized loss on investment      -     -       -         -           -        -         (150,000)        -          (150,000)

     Net loss                           -     -       -         -           -     (2,783,552)      -            -        (2,783,552)
                                    -----   ---- ---------  ------    ----------   ----------  ---------  --------       ----------

    BALANCE AT DECEMBER 31, 1998    5,000   $50  3,265,448  $32,654  $13,661,649 $(7,620,721) $(150,000) $(625,712)     $ 5,297,920
                                    =====   ==== =========  =======  ===========  ===========  =========  =========     ===========

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

                                      F - 5
</TABLE>


<PAGE>
                                Compu-DAWN, Inc.
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                        Page 1 of 2
                                                                                    December 31,

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

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                              <C>                 <C>
     Net cash used in discontinued operations                                    $  (1,330,626)      $   (2,406,501)

     Payments in connection with terminated investment transaction                    (296,952)                 -

     Interest paid                                                                     (17,459)             (22,105)

     Interest and other income received                                                336,955              111,156

     Income tax refund received                                                         29,868                6,136
                                                                                     ---------            ----------

     Net cash (utilized) by operating activities                                    (1,278,214)          (2,311,314)
                                                                                     ----------           ----------



     CASH FLOWS FROM INVESTING ACTIVITIES:

     Net cash used by discontinued operations                                       (1,913,517)            (135,205)

     Purchase of marketable securities                                              (2,000,000)                 -
                                                                                     ----------            --------

     Net cash (utilized) by investing activities                                    (3,913,517)            (135,205)
                                                                                     ----------            --------



     CASH FLOWS FROM FINANCING ACTIVITIES:

     Net cash used by discontinued operations                                         (105,770)            (429,189)

     Payments for common stock and options acquired                                    -                    (34,710)
     Net proceeds from sale of shares                                                4,723,146            5,625,874
     Proceeds from exercise of stock options                                            21,502               79,300
                                                                                     ---------
     Net cash provided by financing activities                                       4,638,878            5,241,275
                                                                                     ---------

     NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                            (552,853)            2,794,756


     Cash and cash equivalents, at beginning of year                                 3,081,253              286,497
                                                                                     ---------         ------------

     CASH AND CASH EQUIVALENTS, END OF YEAR                                    $     2,528,400      $     3,081,253
                                                                                  ============         ============

    The accompanying notes are an integral part of these financial statements
</TABLE>

                                      F - 6

<PAGE>


<TABLE>
<CAPTION>

                                Compu-DAWN, Inc.
                            STATEMENTS OF CASH FLOWS
                                   Page 2 of 2

                                                                                          December 31,

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

RECONCILIATION OF NET LOSS TO NET CASH (UTILIZED) BY
OPERATING ACTIVITIES:
<S>                                                                               <C>                 <C>
     Net loss                                                                     $ (2,783,552)       $  (4,436,745)

     Adjustments  to  reconcile  net loss to net cash  (utilized)  by
     operating activities:

       Loss from discontinued operations                                             1,656,096             2,937,396
       Write-off of impaired loan                                                    1,150,000                 -
       Financing charge                                                                  -                 1,588,400
     Changes in assets and liabilities:
       Decrease in tax refund receivable                                                29,868                 6,136
                                                                                     ---------            ----------

         NET CASH FROM CONTINUING OPERATIONS                                            52,412                95,187


         NET CASH UTILIZED BY DISCONTINUED OPERATIONS                               (1,330,626)           (2,406,501)
                                                                                     ----------            ----------


         NET CASH UTILIZED BY OPERATING ACTIVITIES                                 $(1,278,214)        $  (2,311,314)
                                                                                     ==========            ==========
</TABLE>

         SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
         FINANCING ACTIVITIES:

     (a)  During 1997,  an officer of the Company  converted  $200,000 of a loan
          payable to him into 40,000 shares of common stock.

     (b)  During 1997, two officers of the Company converted $115,000 of accrued
          compensation into 23,000 shares of common stock.





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


                                      F - 7



<PAGE>





                                Compu-DAWN, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1998 AND 1997


NOTE   1   - DESCRIPTION OF COMPANY:

                 Compu-DAWN,  Inc., the Company, was incorporated under the name
                 of Coastal  Computer  Systems,  Inc.,  in New York on March 31,
                 1983, and was reincorporated in Delaware under its present name
                 on October 18, 1996. Until May 1999, the Company was engaged in
                 the business of designing,  developing,  licensing,  installing
                 and   servicing   computer   software   products   and  systems
                 predominantly  for public safety and law enforcement  agencies.
                 The  Company's  limited  number  of  customers,  to  date,  are
                 primarily located in New York State.

                 Subsequent to the year end, through a newly formed  subsidiary,
                 e.TV  Commerce,  Inc.,  the  Company  began  operations  in the
                 internet,  e-commerce and telecommunications business (see Note
                 3).

                 See  Note 13 re:  Subsequent  Event -  Discontinued  Operations
                 regarding a transaction on July 2, 1999.


NOTE   2   - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

                 The  Company's  accounting  policies  are  in  accordance  with
                 generally accepted  accounting  principles.  Outlined below are
                 those policies which are considered particularly significant.

        (a)      Use of Estimates:

                 In preparing financial  statements in accordance with generally
                 accepted  accounting   principles,   management  makes  certain
                 estimates and assumptions,  where  applicable,  that affect the
                 reported  amounts of assets and  liabilities and disclosures of
                 contingent  assets and liabilities at the date of the financial
                 statements,  as well as the  reported  amounts of revenues  and
                 expenses  during the  reporting  period.  While actual  results
                 could differ from those  estimates,  management does not expect
                 such  variances,  if any,  to  have a  material  effect  on the
                 financial statements.

        (b)      Concentration of Credit Risk /Fair Value:

                 Financial  instruments that potentially  subject the Company to
                 concentration  of  credit  risk  consist  principally  of  cash
                 investments and accounts receivable.

                 The Company maintains,  at times, deposits in federally insured
                 financial  institutions in excess of federally  insured limits.
                 Management   monitors   the   soundness   of  these   financial
                 institutions and feels the Company's risk is negligible.

        (c)      Marketable Securities:

                 At  December  31,  1998,   marketable   securities   have  been
                 categorized as available for sale and, as a result,  are stated
                 at fair  value  in  accordance  with  AStatement  of  Financial
                 Standards No. 115,  "Accounting for Certain Investments in Debt
                 and  Equity  Securities".   Unrealized  gains  and  losses  are
                 included in  shareholders'equity  as other comprehensive income
                 (loss).


                                      F -8



<PAGE>


                                Compu-DAWN, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1998 AND 1997



NOTE   2   - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

        (d)      Fixed Assets (see Note 13 re: Discontinued Operations):

                 Fixed assets are recorded at cost. Depreciation of fixed assets
                 is provided on a straight-line basis as follows:

                       Computer equipment                              3 years
                       Furniture and fixtures                          5 years
                       Motor vehicles                                  5 years

                Maintenance  and repairs are  expensed  as  incurred.  Leasehold
                improvements  are amortized over the useful life of the asset or
                the lease,  whichever is shorter.  Capital  leases are amortized
                over the term of the  respective  leases or the useful  lives of
                the related assets, whichever is shorter.

                Depreciation  and  amortization  expense  for  the  years  ended
                December  31,  1998 and 1997  aggregated  $82,674  and  $64,529,
                respectively,  and is  included  in the loss  from  discontinued
                operations.

         (e)    Revenue Recognition (see Note 13 re: Discontinued Operations):

                The   Company   generates   revenues   from  the   granting   of
                non-exclusive,  non-transferable and non-assignable  licenses to
                use software it has  developed,  through fixed price  contracts.
                Revenues from such fixed price  contracts are  recognized  using
                the percentage of completion  method of accounting.  The Company
                retains  title  to the  software  and  warranties  that  it will
                provide technical support and repair any defects in the software
                at  no  charge.   The  warranty  period  for  each  contract  is
                negotiated  individually,  for periods  ranging  from 90 days to
                three  years.  To date,  repair  costs  have  been  minimal  and
                therefore  the  Company has not  established  a reserve for such
                warranty costs.

                In addition, the Company provides post-contract customer support
                to licensees of its  software.  Revenues  from such services are
                recognized  ratably over the period of performance.  Fees billed
                and/or  received  prior to performance of services are reflected
                as deferred revenue.

         (f)    Software Development Costs (see Note 13 re: Discontinued
                Operations):

                The  Company   reflects  costs  incurred  in  establishing   the
                technological  feasibility of a computer  software product to be
                leased or sold, as research and development  costs, and expenses
                such  costs in the period  incurred.  Research  and  development
                costs for the years ended December 31, 1998 and 1997  aggregated
                $515,788  and  $935,804,  respectively,  and are included in the
                loss from discontinued operations.

                 After technological feasibility has been established, all costs
                 incurred  on the  software  product are to be  capitalized  and
                 amortized  on a product by  product  basis.  Capitalization  of
                 computer  software  costs is  discontinued  when the product is
                 available to be sold or leased.

                 To date, the Company has only sold or leased software which has
                 been  developed  for  specific  customers.  As such,  all costs
                 incurred have been expensed as research and development costs.

                 Costs   associated   with   post-contract    customer   support
                 (maintenance)  are charged to expense when  related  revenue is
                 recognized or when those costs are incurred,  whichever  occurs
                 first.


                                      F -9



<PAGE>


                                Compu-DAWN, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1998 AND 1997



NOTE   2   - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

        (g)      Advertising Costs (see Note 13 re: Discontinued Operations):

                 Advertising costs, which are included in loss from discontinued
                 operations,  are  expensed  as  incurred.  For the years  ended
                 December  31,  1998  and  1997,  advertising  costs  aggregated
                 $19,449 and $131,868, respectively.

        (h)      Income Taxes:

                 Deferred  tax assets and  liabilities  are  recognized  for the
                 future tax consequences  attributable to temporary  differences
                 between the financial  statement  carrying  amounts of existing
                 assets and liabilities and their  respective tax bases,  and to
                 net operating  loss and tax credit  carryforwards,  measured by
                 enacted tax rates for years in which  taxes are  expected to be
                 paid or recovered.

                 Deferred taxes are provided for temporary  differences  between
                 financial and tax  accounting,  principally  for differences in
                 the basis of fixed assets,  allowance for doubtful accounts and
                 other nondeductible expenses, as well as for net operating loss
                 carryforwards.

                 See also Note 10.

        (i)      Earnings Per Share:

                 In 1997, the Financial  Accounting  Standards Board issued SFAS
                 No.  128,  "Earnings  Per  Share."  SFAS No. 128  replaced  the
                 previously  reported  primary and fully  diluted  earnings  per
                 share with basic and diluted earnings per share,  respectively.
                 Unlike the  previously  reported  primary  earnings  per share,
                 basic earnings per share excludes the dilutive effects of stock
                 options.   Diluted   earnings  per  share  is  similar  to  the
                 previously reported fully diluted earnings per share.  Earnings
                 per  share  amounts  for  all  periods   presented   have  been
                 calculated in accordance with the requirements of SFAS No. 128.

        (j)      Statements of Cash Flows:

                 For  purposes  of the  statements  of cash  flows,  the Company
                 considers  all  highly  liquid  investments  purchased  with  a
                 remaining   maturity  of  three  months  or  less  to  be  cash
                 equivalents.

        (k)      Comprehensive Income:

                 Effective  January 1, 1997,  the Company  adopted  Statement of
                 Financing    Accounting    Standards   No.   130,    "Reporting
                 Comprehensive Income" ("SFAS 130"), which establishes new rules
                 for the reporting and display of  comprehensive  income and its
                 components. SFAS 130 requires unrealized gains or losses on the
                 Company"s available-for-sale securities to be included in other
                 comprehensive income.

                 The components of comprehensive income were as follows:
<TABLE>
<CAPTION>

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

<S>                                                                    <C>                  <C>
                 Net income (loss)                                     $(2,783,552)         $(4,436,745)
                 Unrealized holding losses on marketable securities       (150,000)             -
                                                                       ------------         ------------
                 Comprehensive income (loss)                           $(2,933,552)         $(4,436,745)
                                                                       ===========          ===========
</TABLE>

                                      F -10



<PAGE>


                                Compu-DAWN, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1998 AND 1997




NOTE   2   - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

        (l)      Operating Segments (see Note 13 re: Discontinued Operations):

                 In June 1997, SFAS No. 131,  "Disclosures  about Segments of an
                 Enterprise and Related  Information",  was issued effective for
                 fiscal  years ending after  December  15, 1998.  The  statement
                 allows for early  adoption.  The Company does not believe that,
                 as  of  December  31,  1998,  it  operated  in  more  than  one
                 identifiable segment.

        (m)      Impact of the Year 2000 Issue:

                 The Year 2000 ("Y2K") issue is the result of computer  programs
                 being  written  using a  two-digit  format  rather than four to
                 define  the  applicable  year.  Any of the  Company's  computer
                 programs  that have date-  sensitive  software may  recognize a
                 date  using  A00" as the year 1900  rather  than the year 2000.
                 This  could   potentially   result  in  a  system   failure  or
                 miscalculations  causing disruptions of operations,  including,
                 among  other   things,   a  temporary   inability   to  process
                 transactions,  send invoices, or engage in other similar normal
                 business activities.

                 The Company's accounting software was purchased "off-the-shelf"
                 and the  Company  intends to timely  update  such  software  by
                 purchasing  Y2K  compliant  software and  hardware  from retail
                 vendors at reasonable cost.  Software developed and marketed by
                 the Company is already Y2K  compliant.  Other  companies'  upon
                 whose services the Company  depends have not yet been contacted
                 to determine whether such companies' systems are Y2K compliant.
                 If the systems of such companies are not Y2K  compliant,  there
                 could be a material  adverse effect on the Company's  financial
                 condition or results of operations.


NOTE   3   - LOAN RECEIVABLE (see Note 13 re: Discontinued Operations):

                 Through  December  1998,  the Company  loaned an  aggregate  of
                 $1,900,000 to LocalNet  Communications,  Inc. ("LocalNet"),  an
                 unaffiliated Florida corporation in the  telecommunications and
                 internet  services  marketing  business.  LocalNet  signed 12%,
                 secured  promissory  notes due in one year,  at which  time all
                 interest and  principal is payable.  The notes are secured by a
                 collateral   interest  in  all  of   LocalNet's   tangible  and
                 intangible assets and a pledge of the common stock owned by its
                 Chief  Executive  Officer and the Chairman of its Board,  which
                 represents  a 63.1%  ownership  interest  in  LocalNet,  in the
                 aggregate.

                 On January 7, 1999,  subsequent to the balance sheet date,  the
                 Company  assigned its  interest in this loan to e.TV  Commerce,
                 Inc., a newly-formed  subsidiary.  On January 8, 1999, LocalNet
                 peacefully  surrendered the assets  representing the collateral
                 underlying  this loan. The fair value of the assets at the time
                 of  surrender  was  determined  to be  approximately  $750,000.
                 Accordingly,  the Company has written down the loan  receivable
                 by $1,150,000,  in order to reflect this receivable at its fair
                 value.

                 Through e.TV Commerce,  Inc.,  the Company began  operations in
                 various businesses similar to that of LocalNet in January 1999,
                 subsequent to the balance sheet date.


                                      F -11


<PAGE>


                                Compu-DAWN, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1998 AND 1997


NOTE   4   - CAPITALIZED LEASE OBLIGATIONS (see Note 13 re: Discontinued
             Operations):

                 The  Company  has  entered  into  various  capital  leases  for
                 furniture, fixtures and equipment which expire in years through
                 2001.  The assets and liability  under these capital leases are
                 recorded at the lower of the present value of the minimum lease
                 payments or the fair market value of the assets. The assets are
                 depreciated over their estimated useful lives.  Depreciation of
                 assets under  capital  leases for the years ended  December 31,
                 1998 and 1997 aggregated $9,349 for each year.

                 Minimum  future  lease  payments  under  capital  leases  as of
                 December 31, 1998 are as follows:

                      1999                                $  9,474
                      2000                                   9,474
                      2001                                   8,684
                                                         ---------
                      Total minimum lease payments          27,632
                      Less: amount representing interest     5,191
                                                          --------
                                                           $22,441
                                                           =======
NOTE   5   - DEBT OFFERING:

                 In October 1996, the Company successfully completed the sale of
                 77 units in a  private  offering,  each  unit  consisting  of a
                 $10,000  principal  amount 12% promissory  note ("bridge note")
                 and a redeemable stock purchase warrant to acquire 5,600 shares
                 of the Company's  common stock for aggregate  gross proceeds of
                 $770,000.  The warrants were exercisable at a price of $.50 per
                 share only upon the successful  completion of an Initial Public
                 Offering ("IPO"), of the Company's common stock.

                 The  agreement  stated that each of the bridge notes is due and
                 payable  upon the closing of the IPO. In the event such closing
                 occurs on or before  September  15, 1997,  no interest  will be
                 payable on these notes. In the event that the Company closes an
                 IPO after September 15, 1997 but before September 15, 1999, the
                 notes  shall  bear  interest  at a rate of 8% per  annum and be
                 payable  upon the  closing of the IPO. In the event the Company
                 does not close an IPO by  September  15, 1999,  interest  shall
                 accrue  at a rate of 12% per  annum  through  such date and the
                 notes shall be payable in 120 equal monthly  installments  with
                 interest  at a rate of 8% per  annum  beginning  September  16,
                 1999.

                 In accordance with APB No. 14, the proceeds of debt issued with
                 stock purchase  warrants  should be allocated based on the fair
                 values of the debt  without the  warrants  and of the  warrants
                 themselves  when  issued.  Accordingly,  the Company  reflected
                 deferred  financing costs and additional  paid-in capital based
                 upon  the  difference  between  the  deemed  fair  value of the
                 warrants ($4.00) and the warrant exercise price.

                 Financing  costs,  which represent costs incurred in connection
                 with this private offering,  are to be charged to operations as
                 additional interest expense over the term of the bridge notes.

                 In April 1997,  the holders of the bridge  notes  agreed to (i)
                 increase the exercise price of the five year warrants issued to
                 them  from  $.50 per  warrant  to $3.00  per  warrant  and (ii)
                 increase the holding  period of these  warrants from six months
                 to two years from the effective date of the IPO.

                 In June 1997, the Company  successfully  completed its IPO (see
                 Note 7) and repaid these  promissory  notes. In connection with
                 this repayment,  the Company fully amortized deferred financing
                 costs originally capitalized in connection with the notes. This
                 amount  has been  reflected  as a  non-recurring  charge in the
                 statement of operations.

                                      F -12

<PAGE>

                                Compu-DAWN, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1998 AND 1997



NOTE   6   -    NOTE PAYABLE - OFFICER (see Note 13 re:Discontinued Operations):

                 In April 1997,  the Chairman of the Board of the Company agreed
                 to convert a $200,000  loan  payable to him by the Company into
                 common shares at a conversion price of $5.00 per share (the IPO
                 price) upon the  consummation  of such IPO. In  addition,  this
                 officer agreed to provide a $500,000 credit line to the Company
                 for a  period  of  two  years,  secured  by all  assets  of the
                 Company.  As  of  December  31,  1998  and  1997,  the  balance
                 outstanding  under this credit  line was $50,000 and  $150,000,
                 respectively which amount is payable in quarterly  installments
                 of $25,000 plus interest at 10% per annum.  For the years ended
                 December 31, 1998 and 1997,  the interest  expense  relating to
                 these loans aggregated $10,208 and $11,191.

NOTE   7   -     CAPITAL STOCK AND EQUIVALENTS:

                 In October 1996, simultaneously with its reincorporation in the
                 State of  Delaware,  (see  Note 1) the  Company  increased  its
                 authorized  capital to 20,000,000  shares of common stock, $.01
                 par value, and 1,000,000  shares of preferred  stock,  $.01 par
                 value.  The Company  also  effected a stock split of its issued
                 and outstanding common stock on a 325 for 1 basis, resulting in
                 1,157,000 shares. This stock split was reflected  retroactively
                 in the financial statements and accordingly,  all references to
                 the  number  of  common  shares  issued  and  outstanding  were
                 restated.

                 During April 1997,  options were exercised to purchase  408,750
                 shares of common stock for which the Company  received  $79,300
                 in cash proceeds and 8,561 shares of Company  common stock with
                 a fair market value of $47,085.

                 In April 1997,  two officers (the President and the Chairman of
                 the Board) agreed to convert  $115,000 of accrued  compensation
                 into  common  shares at a  conversion  price of $5.00 per share
                 (the IPO price), such conversion to occur upon the consummation
                 of the IPO.

                 In  June  1997,   the   Company,   through   its   underwriter,
                 successfully completed an initial public offering of its common
                 stock.  The  Company  sold  1,380,000  shares of  common  stock
                 (including  180,000 shares in the Underwriter's  over allotment
                 option)  at a price  of  $5.00  per  share  for  aggregate  net
                 proceeds of $5,625,874.

                 On June 5, 1998,  the Company  completed a private  offering of
                 its   securities,   whereby  it  sold  to  the  purchasers  the
                 following:

                        (a) 3,250 shares of the  Company's  series A convertible
                            preferred  stock,  par  value  $.01 per  share  (the
                            "Series  A  Preferred  Stock"),   which  shares  are
                            convertible   into  Common  Shares  of  the  Company
                            (maximum of 650,000  shares,  subject to  adjustment
                            under certain circumstances);
                        (b) 327,103 Common Shares of the Company; and
                        (c) warrants to acquire an  aggregate  of 90,207  Common
                            Shares at an  exercise  price of $8.025  per  share,
                            subject to adjustment under certain circumstances.

                 The aggregate  purchase price for the foregoing  securities was
                 $5,000,000; net proceeds from this private placement aggregated
                 approximately $4,723,000.

                 On  September  26,  1998,  pursuant  to a  Securities  Exchange
                 Agreement  between the Company and the purchasers,  the Company
                 issued to the  purchasers  1,750 shares of Series B convertible
                 preferred  stock,  par  value  $.01 per  share  (the  "series B
                 preferred  shares"),  in  exchange  for the  327,103  shares of
                 common stock previously issued. Subject to certain adjustments,
                 the Series B  preferred  shares  (1,750) are  convertible  into
                 327,103 common shares.

                                      F -13


<PAGE>


                                Compu-DAWN, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1998 AND 1997



NOTE   7   -     CAPITAL STOCK AND EQUIVALENTS (Continued):

                 During 1998, options were exercised to acquire 24,895 shares of
                 common stock,  for which the Company  received  $21,502 in cash
                 proceeds and 4,380  shares of Company  common stock with a fair
                 market value of $47,085.

NOTE   8   -     STOCK OPTIONS:

                 In October  1996,  the Company  established a Stock Option Plan
                 under  which  options  (including   non-statutory  options)  to
                 purchase  up to  2,000,000  shares may be  granted to  eligible
                 persons.  As of  December  31,  1996,  the  Company had granted
                 options to purchase an  aggregate  of 491,950  shares of common
                 stock  at  prices  ranging  from  $.30  to  $4.00,  aggregating
                 $221,485. In connection therewith the Company recorded deferred
                 compensation  (measured  as the excess of the fair value of the
                 underlying  stock over the exercise price of the option at date
                 of grant) of $37,000. During 1997, prior to the consummation of
                 the IPO, the Company granted  additional options to purchase an
                 aggregate  of  187,250  shares of common  stock at an  exercise
                 price of $3.00 aggregating  $561,750,  and recorded  additional
                 deferred compensation costs of $374,500.  Deferred compensation
                 costs  are  being  amortized  over the  vesting  period  of the
                 related options. Amortization of such costs for the years ended
                 December 31, 1998 and 1997,  aggregated  $98,270 and  $278,230,
                 respectively.

                 The Company has elected to follow  Accounting  Principles Board
                 Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
                 25) and related  interpretations in accounting for its employee
                 stock options because, as discussed below, the alternative fair
                 value  accounting  provided for under FASB  Statement  No. 123,
                 "Accounting  for  Stock-Based  Compensation"  requires  use  of
                 option  valuation  models  that were not  developed  for use in
                 valuing  employee stock options.  Under APB 25, if the exercise
                 price of the Company's employee stock options equals the market
                 price  of  the  underlying  stock  on the  date  of  grant,  no
                 compensation expense is recognized.

                 Pro forma  information  regarding  net income and  earnings per
                 share is required by Statement 123, and has been  determined as
                 if the Company had  accounted  for its employee  stock  options
                 under the fair value method of that  Statement.  The fair value
                 for these  options was  estimated  at the date of grant using a
                 Black-   Scholes   option  pricing  model  with  the  following
                 weighted-average  assumptions for 1998 and 1997,  respectively:
                 risk-free  interest  rates of 5% and 6.1%;  dividend  yields of
                 1.5% and 2.6%;  volatility factors of the expected market price
                 of  the   Company's   common  stock  of  60%  and  65%;  and  a
                 weighted-average expected life of the options of seven years.

                 The Black-Scholes  option valuation model was developed for use
                 in  estimating  the fair value of traded  options which have no
                 vesting  restrictions and are fully transferable.  In addition,
                 option valuation models require the input of highly  subjective
                 assumptions including the expected stock price volatility.

                 Because   the   Company's    employee    stock   options   have
                 characteristics  significantly  different  from those of traded
                 options,   and  because   changes  in  the   subjective   input
                 assumptions can materially  affect the fair value estimate,  in
                 management's  opinion,  the existing  models do not necessarily
                 provide a  reliable  single  measure  of the fair  value of its
                 employee stock options.


                                      F -14



<PAGE>


                                Compu-DAWN, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1998 AND 1997



NOTE   8   -     STOCK OPTIONS (Continued):

                 For purposes of pro forma disclosures, the estimated fair value
                 of the options is amortized to expense over the options vesting
                 period. The Company's pro forma information follows:

                                            1998                   1997
                                       ---------------       -----------
        Net loss:
           As reported                   $(2,783,552)       $(4,436,745)
           Pro forma                      (3,140,736)        (4,883,470)

        Basic loss per share:
           As reported                       $(0.95)           $(1.95)
           Pro forma                          (1.07)            (2.15)

                 A summary of stock option activity, and related information for
                 the two years in the period ended December 31, 1998 follows:

                                                                Weighted Average
                                                                   Exercise
                                            Options                 Price

              Granted                       491,950                 $0.45
              Exercised                        -                      -
              Canceled                         -                      -
                                        -------------              -------

     Outstanding, December 31, 1996         491,950                  0.45

              Granted                       278,311                  4.04
              Exercised                    (410,417)                 0.32
              Canceled                      (55,000)                 1.69
                                           ---------                ------

     Outstanding, December 31, 1997         304,844                  3.69

              Granted                       490,100                  5.82
              Exercised                     (24,895)                 2.76
              Canceled                     (265,083)                 6.56
                                           --------                 ------

     Outstanding, December 31, 1998         504,966                  4.22
                                           ========                 ======

     Weighted average fair value of options granted during the
              year ended:

              December 31, 1996                                     $8.62
              December 31, 1997                                     $7.67
              December 31, 1998                                     $4.31

     Options exercisable:
              December 31, 1996           389,950
              December 31, 1997            49,533
              December 31, 1998           320,919


                                      F -15



<PAGE>

                                Compu-DAWN, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1998 AND 1997


NOTE   8   -   STOCK OPTIONS (Continued):

               Exercise  prices for options  outstanding as of December 31, 1998
               ranged  from  $.50  to  $5.00  per  share.  The  weighted-average
               remaining contractual life of these options is seven years.

               In 1997,  the Company  established  the 1997  Qualified  Employee
               Stock Purchase Plan which provides for the grant of up to a total
               of 250,000  options  intended  to qualify as  employee  incentive
               stock options.  The exercise price of options  granted under this
               plan  shall  be the  lesser  of 85% of fair  market  value of the
               Company's  common  shares  at date of  grant  or 85% of the  fair
               market value on the exercise  date. In December  1997,  this plan
               was amended to commence on January 1, 1999.

               Effective January 8, 1999,  subsequent to the balance sheet date,
               the Company adopted its 1999  Restricted  Stock Rights Grant Plan
               (the "Rights Plan"). The Rights Plan provides for the issuance of
               up to  2,000,000  common  shares to the Rights Plan  participants
               based on a formula which provides for the  participants  to share
               up to 2,000,000 common shares (the  "Performance  Shares") if the
               Company  generates up to $10,000,000 in earnings  before taxes by
               December  31,  2001,  including  making up any losses  during the
               years 1999 through  2001,  if any. If the Company earns less than
               $10,000,000,  the number of Performance  Shares will be pro rated
               based on one share for each $5.00 in earnings  before taxes.  The
               Rights Plan  participants  include certain officers and employees
               and any other person who is employed by or is providing  services
               to the  Company  or its  subsidiaries  and  who is  elected  as a
               participant.  The  participants  will be issued  the  Performance
               Shares  based  on their  respective  pro  rata  ownership  of the
               Company  securities  on the date  the  Rights  Plan was  adopted.
               However,  each  participant  must  be  employed  by or  providing
               services to the Company or its  subsidiaries  in connection  with
               the e.TV  business on  December  31, 2001 in order to receive any
               Performance Shares. In addition,  the issuance of the Performance
               Shares is subject to, among other things, any consent or approval
               of any regulatory  body or the  stockholders  of the Company,  if
               such consents or approvals are necessary.


NOTE  9   -    TERMINATION OF INVESTMENT TRANSACTION:

               On April 22,  1998,  the Company  entered  into an  agreement  to
               acquire an indirect  50%  beneficial  interest in  Press-Loto,  a
               Russian company which has the right to operate the first national
               on-line  lottery in Russia pursuant to a license from the Russian
               Ministry  of Finance to the Union of  Journalists  of Russia (the
               "Union").  The agreement  provided  that, at the closing,  40% of
               Press-Loto  was to be owned by the Union and its  charity  with a
               private group holding a minority interest.

               On  September  1,  1998,  the  Company  issued  a  press  release
               announcing  that it had terminated the  aforementioned  agreement
               after  conditions  to close,  which were required by the Company,
               were not  satisfied by August 31,  1998,  the date by which those
               conditions had to be fulfilled under the agreement.

               In accordance with the termination of the agreement,  the Company
               has written off all costs  incurred  regarding  this  transaction
               during the current period, aggregating approximately $297,000.

               See also Note 12 re: Subsequent Litigation.



                                      F -16



<PAGE>


                                Compu-DAWN, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1998 AND 1997



NOTE  10   -   INCOME TAXES:

               The Company has net operating loss  carryforwards  as of December
               31, 1998, of approximately $7,100,000 ($4,400,000 at December 31,
               1997),  which may be applied against future taxable  income,  and
               which expire in various years beginning  after 2011.  Since there
               is no assurance  that the Company will  generate  future  taxable
               income to utilize the deferred tax asset  resulting  from its net
               operating loss carryforwards, the Company has not recognized this
               asset.


NOTE 11   -    COMMITMENTS (see Note 13 re: Discontinued Operations):

          (a)  In  October  1996,  the  Company  entered  into a lease,  for its
               current executive offices,  which provides for base annual rental
               of  $85,000.  This  lease,  which is for an initial  term of five
               years, has scheduled annual increases,  and can be renewed for an
               additional  five year  period.  The total amount of the base rent
               payments  is being  charged to expenses  using the  straight-line
               method over the term of the lease.  The  Company  has  recorded a
               deferred  credit to reflect the excess of rent  expense over cash
               payments  since the  inception  of this  lease.  Previously,  the
               Company was occupying  space pursuant to a lease which expired in
               March 1997.  Rent  expense for the years ended  December 31, 1998
               and 1997 aggregated $78,354 and $99,770, respectively.

               At December 31, 1998, future minimum rentals are as follows:


                       1999      $  87,975
                       2000         93,075
                       2001         72,675
                                 ---------
                       Total     $ 253,725

        (b)      The  Company  also  leases  certain  types of  equipment  under
                 operating  leases which expire at various  dates  through 1999.
                 Lease  payments,  which are  charged to  operations,  aggregate
                 approximately $1,100 per month.

        (c)      Effective   October  1,  1996,  the  Company   entered  into  a
                 three-year   employment  agreement  with  the  Chief  Executive
                 Officer of the  Company.  This  agreement  provides  for annual
                 compensation  of $250,000  and a  performance  bonus based on a
                 fixed  formula.  Subsequent  to the balance  sheet  date,  this
                 officers'  employment  agreement  was amended to terminate  the
                 existing  bonus  compensation   terms.  This  officer  will  be
                 entitled to a  performance  based  bonus,  the details of which
                 have not yet been  determined.  In addition to the above,  this
                 officer was granted 200,000 common stock purchase  warrants and
                 was included in the Company's new 1999 Stock Rights Grant Plan.

                 Effective   October  1,  1996,  the  Company   entered  into  a
                 three-year  employment  agreement  with its President and Chief
                 Operating   Officer.   This   agreement   provided  for  annual
                 compensation  of $125,000  and a signing  bonus of $15,000.  In
                 December 1997, the Company entered into  negotiations with this
                 officer  with  regards  to  a  proposed   termination   of  his
                 employment agreement. Under the proposed termination agreement,
                 this  officer  would  receive  severance  pay of  approximately
                 $216,000  and would  sell a  substantial  portion of his equity
                 share  holdings  in  the  Company  pursuant  to  the  Company's
                 Registration  Statement  on Form S-8 and  Rule 144  promulgated
                 under the  Securities  Act of 1933,  as  amended  and/or to the
                 current  Chairman  and  Chief  Executive   Officer  and/or  his
                 designee.  This termination agreement was executed on March 17,
                 1998.


                                      F -17



<PAGE>


                                Compu-DAWN, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1998 AND 1997



NOTE 11   -      COMMITMENTS (Continued):

                 In  January  1997,  the  Company   entered  into  a  three-year
                 employment agreement with an employee to serve as the Company's
                 Chief Technology Officer. Such agreement provides for an annual
                 base salary of  $200,000,  $225,000  and $250,000 in the first,
                 second and third years,  respectively.  For the 12 month period
                 beginning  March 1, 1999,  this officer waived his increase and
                 his salary will remain at the  $225,000  level.  Other terms of
                 this employment  agreement conform in structure to the material
                 provisions of the employment  agreement for the Chief Executive
                 Officer as  described  above,  including  the 1999 Stock Rights
                 Grant Plan.

                 Subsequent  to the balance sheet date,  and in connection  with
                 e.TV Commerce, Inc. (see Note 3) the Company entered into three
                 year employment  agreements with a new Chairman of the Board of
                 Directors  of the Company and an  individual  who will serve as
                 the Company's  Executive  Vice  President and President of e.TV
                 Commerce, Inc. Each of these agreements provide for a salary of
                 $208,000  per annum,  an  issuance  of options  for 200,000 and
                 650,000  common shares,  respectively  and bonuses all on terms
                 similar to those of the chief executive  officer,  as described
                 above.  These two officers were also included in the 1999 Stock
                 Rights Grant Plan (see Note 8).


NOTE  12   -     SUBSEQUENT LITIGATION:

                 In connection  with the  termination of a potential  investment
                 transaction  (see Note 9), on March 4, 1999  (subsequent to the
                 balance  sheet  date),  the Company  became  aware of an action
                 brought in the Supreme  Court of the State of New York,  Nassau
                 County. The plaintiffs, Rugby National Corp., ("Rugby"), Harvey
                 Weinstein and Credomarka National Corp., have filed a complaint
                 against the Company and the Company's Chief Executive  Officer,
                 alleging that the Company wilfully failed,  without good cause,
                 to consummate a plan of merger  agreement dated April 22, 1998.
                 The  complaint  states  that  Rugby's  business  was  allegedly
                 damaged  after the Company  consummated  a  $5,000,000  private
                 placement and subsequently terminated the merger agreement, and
                 that the Company's  chief  executive  officer  falsely  induced
                 Rugby  and  Weinstein  to give  their  consent  to the  private
                 placement. The plaintiffs are claiming damages of $6,000,000.

                 Counsel to the  Company has stated  that no  discovery  has yet
                 been  conducted and that due to the inherent  uncertainties  in
                 litigation  in general,  they cannot  predict or guarantee  the
                 outcome of this litigation at this time.

                 The Company believes it has meritorious defenses and intends to
                 vigorously defend this action.


NOTE  13   -     SUBSEQUENT EVENT - DISCONTINUED OPERATIONS:

                 In May 1999, the Company decided to divest itself of its public
                 safety  software  business and on July 2, 1999  consummated the
                 sale  of  certain  of  the  assets  of  this   division  to  an
                 unaffiliated  third  party.  The Company  received  $500,000 in
                 cash, and is entitled to receive  software royalty payments for
                 five  years  ranging  from  6.25%  to 10% of  future  sales  of
                 products containing the Company's technology or sales to former
                 customers of the public safety software business.

                 The accompanying financial statements have been reclassified to
                 reflect the effect of the discontinued operations.


                                      F -18



<PAGE>


                                Compu-DAWN, Inc.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1998 AND 1997



NOTE  13   -     SUBSEQUENT EVENT - DISCONTINUED OPERATIONS (Continued):

                 Net sales for the public safety software  business for 1998 and
                 1997 were $1,248,489 and $591,375,  respectively. These amounts
                 are not  included  as revenues  in the  accompanying  financial
                 statements.

                 Net assets of the discontinued  operations have been separately
                 classified  in the  accompanying  balance sheet at December 31,
                 1998.  The 1997 balance sheet has been restated to conform with
                 the current year's presentation.

                 In  addition  to  the  above,   the  Company  also  decided  to
                 discontinue  the operations of its only other  subsidiary  (see
                 Note 3).  Accordingly,  all assets and liabilities  relating to
                 both operating  segments have been reclassified to discontinued
                 operations.

                 Net assets of the discontinued operations consisted of the
                 following at December 31,
<TABLE>
<CAPTION>

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

  NET ASSETS TO BE DISPOSED OF:
<S>                                                     <C>                  <C>
     Accounts receivable - net                          $    319,392         $     72,454

     Less:  Deferred revenue                                (173,953)             (12,000)
                                                             --------              -------

                                                             145,439               60,454

     Fixed assets - net                                      218,374              278,737
                                                             -------

 ASSETS TO BE SOLD                                           363,813              339,191
                                                              -------

 ASSETS:

     Loan receivable (Note 3)                                736,318                 -

     Prepaid expenses                                         68,272              121,802

     Security deposits                                        21,525               21,525

     Deferred compensation                                      -                  98,270


 LIABILITIES:
     Accounts payable and accrued expenses                  (169,519)            (278,722)
     Note payable - officer                                  (50,000)            (150,000)
     Capitalized lease payable                               (22,441)             (28,211)
     Deferred rent liability                                 (28,448)             (29,402)
                                                             -------              --------
                                                             555,707             (244,738)
                                                           ---------              --------

 NET ASSETS OF DISCONTINUED OPERATIONS                    $  919,520          $    94,453
                                                           ==========          ===========
</TABLE>





                                     F - 19



<PAGE>







                                   SIGNATURES

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

                                     COMPU-DAWN, INC.

February 11, 2000                    By:/S/ Paul K. Danner
                                        ---------------------------------------
                                        Paul K. Danner, Chief Executive Officer


<PAGE>