UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
                                   (Mark One)
                [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                     For the fiscal year ended June 30, 2000
                                       OR
          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

         For the transition period from           to
                                        ----------  ----------

                         Commission File Number 1-15161

                                 3Dshopping.com
             (Exact name of registrant as specified in its charter)
              California                                95-4594029
(State or other jurisdiction                (I.R.S. Employer Identification No.)
                        of incorporation or organization)

                            308 Washington Boulevard
                        Marina del Rey, California 90292
               (Address of principal executive offices)(Zip Code)

       Registrant's telephone number, including area code:  (310) 301-6733
                                  -------------
           Securities registered pursuant to Section 12(b) of the Act:
                                  Common Stock
                        Warrants to Purchase Common Stock

           Securities registered pursuant to Section 12(g) of the Act:
                                      None
                              (Title of each class)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  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 [ ]

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [ X ]

     As of September 21, 2000,  the aggregate  market value of the  registrant's
Common Stock held by  non-affiliates  of the registrant was $33,893,682.  Solely
for  purposes  of this  calculation,  the  registrant  has  treated its Board of
Directors and executive officers as affiliates.

     As of September 21, 2000, the number of shares of the  registrant's  Common
Stock outstanding was 5,196,748.

     DOCUMENTS INCORPORATED BY REFERENCE:

     Items 11, 12 and 13 of  registrant's  Proxy  Statement  for the 2000 annual
meeting of  shareholders  are  incorporated  by reference  into Part III of this
report.


<PAGE>

                                 3DSHOPPING.COM
                                TABLE OF CONTENTS


<TABLE>
<CAPTION>

Item                                                                                                            Page
No.
---

Part I

<S>                   <C>                                                                                           <C>
Item 1.               Business........................................................................................1
Item 2.               Properties......................................................................................7
Item 3.               Legal Proceedings...............................................................................7
Item 4.               Submission Of Matters To A Vote Of Security Holders.............................................7

Part II

Item 5.               Market For Registrant's Common Equity And Related Stockholder Matters...........................8
Item 6.               Selected Financial Data........................................................................10
Item 7.               Management's Discussion And Analysis Of Financial ...............................................
                      Condition And Results Of Operations............................................................11
Item 7(A).            Quantitative And Qualitative Disclosures About
                      Market Risk....................................................................................15
Item 8.               Financial Statements And Supplemental Data.....................................................15
Item 9.               Changes In And Disagreements With Accountants On ................................................
                      Accounting And Financial Disclosure............................................................15

Part III

Item 10.              Directors And Executive Officers Of The Registrant.............................................16
Item 11.              Executive Compensation.........................................................................18
Item 12.              Security Ownership Of Certain Beneficial Owners And .............................................
                      Management.....................................................................................18
Item 13.              Certain Relationships And Related Transactions.................................................18

Part IV

Item 14.              Exhibits, Financial Statement Schedules, And Reports On
                      Form 8-K.......................................................................................19

</TABLE>
<PAGE>


                                     PART I

ITEM 1.   BUSINESS

COMPANY OVERVIEW

     We  currently  provide  online  merchants  with the  ability  to give their
customers interactive, three-dimensional (3D) online shopping experiences. Using
our proprietary  technology,  we are able to create web sites for our clients on
which  high-quality  3D images of products  they offer are  displayed.  Web site
users  are able to view  these  3D  product  images  through  a full  360-degree
rotation  around the product image.  Our technology also provides motion imagery
and zoom  capabilities,  allowing  users to  interactively  examine  products in
detail. Our technology ensures that images,  including motion-based imagery, are
accessible  from the  simplest  computers,  without end users having to download
cumbersome  plug-ins  or  software  applications.  We  also  are  expanding  our
offerings  to provide our clients with content  management  solutions  and other
products and services  designed to help them use the Internet to market and sell
their products and services efficiently and cost effectively.

     We believe  that online  merchants  are seeking  dynamic,  interactive  and
detailed ways to present their products in order to differentiate themselves and
increase  customer  interest.  We believe that our products and services provide
online  merchants  with  an  attractive  solution.   By  using  our  interactive
technologies,  merchants  can fuel  impulse  purchasing  and  consumer  emotion,
thereby increasing sales.

     Our company was formed under the laws of the State of  California  in 1996.
Our principal offices are located at 308 Washington  Boulevard,  Marina del Rey,
California  90292 and our phone number is (310)  301-6733.  We conduct  business
under  the  name  "O2  Essential  Marketing  Technologies."  We  intend  to seek
shareholder  approval to change our corporate name from  "3Dshopping.com" to "O2
Essential  Marketing   Technologies,   Inc."  at  our  2000  annual  meeting  of
shareholders as part of our overall corporate identity and branding efforts.

INDUSTRY BACKGROUND

     General

     A growing percentage of consumers and businesses are accepting the Internet
as a viable means of  commerce.  Companies  in a broad range of  industries  are
realizing  that  eBusiness  initiatives  are  critical  to the  success of their
businesses.  A large  majority of these  companies  are  developing or licensing
applications  that enable them to market and sell their products and services to
consumers online.  However,  in order to effectively compete in an ever-crowding
market, businesses must present their products and services in ways that capture
buyers' interest and imagination.

     Companies are seeking to  differentiate  their online presence  through the
use of  sophisticated  Internet-based  applications  that  are  interactive  and
content-rich.  As a result,  web sites have rapidly  evolved from simple  online
corporate   brochures  to  complex  online   storefronts.   International   Data
Corporation  estimates that spending on software  applications  and services for
eBusiness will grow from $7.8 billion in 1998 to $53.8 billion in 2002.

<PAGE>

     3D Technology

     In the past, 3D applications  for the Internet were viewed as slow,  clunky
and expensive.  Many  applications  required the  time-consuming  downloading of
software   by  the  end  user  and   subsequent,   repetitive   downloading   of
bandwidth-intensive content. These characteristics, coupled with the slow spread
of broadband telecommunications  capacity,  diminished merchants' willingness to
adopt 3D online applications for their marketing efforts. However, the evolution
of 3D technologies  and the increasing  availability  of broadband  capacity and
faster modems have  increased the rate at which  businesses are adopting the use
of 3D technologies for various commercial applications.

     E-mail Technology

     As one of the most popular Internet  applications,  e-mail has grown from a
simple personal text-messaging tool to a sophisticated strategic visual business
tool.  In addition to simply  building  web sites and waiting for  consumers  to
come,  companies  utilize the Internet  for direct  marketing  through  targeted
e-mail  campaigns.  Forrester  Research  projects that  business-related  e-mail
applications   will  account  for  66%,  or  $3.2  billion,   of  e-mail-related
expenditures  in 2004,  compared to 49% in 1999.  A large part of this growth is
being fueled by use of e-mail for direct marketing to target buyers.

     The advantages of using e-mail for direct marketing initiatives compared to
other  direct  marketing  techniques  include  instantaneous  delivery of highly
interactive  content that can be customized  and directed to specific and unique
recipients   at   relatively   low  cost.   Customers   can  react  and  respond
instantaneously to e-mail campaigns,  with 90% of responses occurring within two
or three days from when the e-mail was sent.  The cost to develop  and deliver a
traditional  direct mail piece  ranges from $0.50 to $5.00.  A large  portion of
that  cost  relates  to  printing  and  postage,  which can be  eliminated  when
companies  use  e-mail.  Total  cost per e-mail  ranges  from as low as $0.01 to
approximately $0.15.

     Content Management Systems

     As more  businesses  have  adopted the  Internet in  connection  with their
operations,  there has been a  corresponding  growth in the  amount and types of
online content.  International Data Corporation estimates that the number of web
pages  will grow from 925  million  in 1998 to 13.1  billion  in 2003.  This has
created a strong need for content management solutions. Every company with a web
presence has a need for content management  software to help publish content and
conduct  eBusiness on the web.  Content  management  systems enable companies to
collect content from various sources, organize the content, manage it centrally,
and deliver it to the web efficiently.

                                       2
<PAGE>

OPPORTUNITY AND STRATEGY

     We believe that our proprietary 3D technology and related expertise provide
us  with  significant  opportunities  to  capitalize  on  demand  trends  in the
eBusiness marketplace. Key elements of our strategy include:

     Capitalizing on our 3D Technology.  Our 3D technology  allows us to address
merchants'  apprehension  with  respect  to the use of 3D  technology  in  their
marketing initiatives.  Our 3D technology does not require plug-ins and does not
slow down the  loading  of an  Internet  page.  It is  therefore  a system  that
merchants can embrace for the marketing of products on their web sites. Further,
our  technology  is  easily  embedded  into  e-mails,   allowing   merchants  to
differentiate and enhance their online direct marketing efforts.

     Establishing  Strategic Alliances.  We have established strategic alliances
with, among others, Yahoo!, Inc., ClickAction, Inc. and Goodspeed Communications
PLC. These  companies  integrate our 3D technology  into their own web sites and
product  offerings.  We regularly seek additional  alliances with companies that
can  facilitate  the  introduction  of our  products  and  services to companies
operating  online and whose own products and services are  complimentary  to our
own.

     Acquisition of Content Management and Other Complementary Technologies.  We
regularly seek to acquire  technologies that are complementary to our own. These
acquisitions focus on products that will enable us to provide our customers with
a broader range of solutions for their online  marketing and sales  initiatives.
For  example,  we are  currently  in the process of  acquiring  and  integrating
technologies relating to the management of online content. We believe there is a
significant  opportunity  to  commercialize  cost-effective  content  management
applications  that are targeted to small and medium-sized  companies that either
do not have  large  information  technology  staffs or cannot  afford  the large
up-front  license and monthly  maintenance fees associated with existing content
management products.

     Creating and exploiting generic image libraries.  We are creating expanding
libraries  of 3D images of generic  products  that are sold by  multiple  online
vendors,  such  as  electronics  and  computer  hardware.   Our  libraries  will
concentrate on commodity  goods where the images can be produced once and stored
in an image bank and  thereafter  licensed to resellers of the product  type. By
doing  this,  many  of our  clients  will be  able  to  pick  their  merchandise
presentations at minimum cost and effort.  Our objective is to offer an image at
a price that is low enough that the client would  prefer to offer the  enhanced,
3D media  presentation  of the product rather than the typical  two-dimensional,
static version.  Ultimately,  we intend to offer the 3D images below the current
market price of 2D images.

PRODUCTS AND SERVICES

     Our 3D  proprietary  technology  and digital  photographic  techniques  are
capable of delivering a complete  visual display over the Internet or comparable
private  computer  networks  for  purposes of  eBusiness  and  advertising.  Our
technology  is used to design,  install  and  maintain  web sites  that  feature
products  which require rich visual  displays to capture  buying  interest.  Our
technology  is  interactive,  allowing the viewer to freeze the frame,  select a
desired angle and then zoom in on selected details.  We strive to bring shoppers
as close as possible to the experience of actually visiting a store.

                                       3
<PAGE>

     Our products include:

     3D  Image  Store  -  We  create  "3D  image  store"  using  our  3Dshopping
System.(TM)  3D content is  created  using  actual  products  or models  through
digital  photography  and proprietary  programming  techniques  that,  together,
produce a fluid  full-range  rotational view (VR) of products to be displayed on
the  Internet.  The  3Dshopping  SystemTM does not require end users to download
special software or plug-ins,  making the online shopping experience hassle-free
and fast.  The 3Dshopping  SystemTM is a combination of marketing  solutions and
technology that, we believe, bridges the gap between the traditional "see, touch
and  feel"  off-line  shopping  experience  and  the  "static"  online  shopping
experience.

     O2VM Movies - We also use our  proprietary  technology  to create  virtual,
full-motion  (VM)  imagery on web  browsers  that can be  accessed  by end users
without  the  need for any  additional  plug-in  downloads.  Our 3D  movies  are
exciting additions to e-commerce, educational, entertainment, and commercial web
sites.

     O2ZOOM - Our O2Zoom system provides zoom magnification that is limited only
by the quality and size of the original artwork. Images can be zoomed and panned
in real time,  providing  the  viewer the unique  ability to select and view any
portion of the image.  O2Zoom is  configurable  in three ways:  as mouse  driven
magnifying glass; a "click to zoom;" or a combination of the two. The technology
offers the viewer the  ability to examine  details of images  without the use of
plug-ins and without pixel distortion.

     O2 Accelerator - The O2Accelerator is a hardware/software  system installed
in front of Internet servers that  dramatically  reduces  consumers' "wait" time
during  web page  downloads  by  reducing  image  file  size.  This  technology,
typically  called "image  compression,"  can reduce raw image files sizes of 40K
bytes down to 12K bytes without any degradation in image quality.

     O2Magic  Mail - The 3D  Shopping  System(TM)  can be  effectively  imbedded
inside e-mails.  This provides our clients with the ability to differentiate and
enhance their e-mail campaigns. Our E-mail services include:

          *    Designing customized e-mail based marketing campaigns;
          *    Integrating  our VR and VM imagery into the e-mail element of the
               campaign;
          *    Building and managing e-mail address databases;
          *    Maintaining and updating customer lists; and
          *    Tracking and analyzing responses.

     Commercial Builder - Our Commercial Builder enables Internet sites to build
custom-designed   commercials  for  end  users  on  an  automated  basis.  Using
identifiable  end-user  information,  online  advertising  targeted  toward  the
demographic  group to which the end-user  belongs can be developed and delivered
to that end user  during his or her visit to the site.  This  allows for instant
creation of revenue-generation  opportunities for both the Internet site and the
site's advertisers.

                                       4
<PAGE>

     Traditional  Catalogs - We also  offer  traditional  hard-copy  advertising
production services.  By doing so, we believe we can increase our client base by
offering  traditional  clients the  opportunity  to produce  the digital  images
necessary to support a web site at little additional cost.

     O2  WEB  Strategy  - In  addition  to our  technology  based  products  and
services, we leverage our Internet,  marketing,  financial, public relations and
entrepreneurial  skills to provide  strategic  advice to  businesses  looking to
transition to the Internet or improve their Internet presence.

RECENT ACQUISITIONS

     We have  recently  acquired  or will  acquire  interests  in the  following
companies:

     LookSonic, LLC - In September 2000, we entered into an agreement to acquire
50.1% interest in this entity, with the right to purchase the remaining 49.9% at
our discretion. LookSonic develops commercial builder technology that enables an
Internet business to build and implement Internet  commercials on their web site
quickly and efficiently.

     eCMS  - In  September  2000,  we  entered  into  an  agreement  to  acquire
"electronic  Content  Management  System" (eCMS)  technology  from  ChannelSpace
Entertainment,  Inc., a company  that  operates  websites.  eCMS is a technology
developed  by  ChannelSpace  Entertainment  to manage  content for its  affinity
channels.  This content  management  technology works with virtually any content
source to automate  manual  processes such as web production  (including  audio,
video, image and text content),  auditing,  access control,  site versioning and
accounting.  We intend to utilize  this  technology  to  provide  cost-effective
content management applications to small to medium-sized companies.

STRATEGIC ALLIANCES

     We have established several strategic  alliances with technology  partners.
These alliances include:


     Yahoo!  - We have entered into an agreement  with Yahoo!  to introduce  and
market our 3D technology to all of Yahoo!  Shopping's merchants.  Initially,  we
are focusing our licensing  efforts on computer and electronics  merchants,  and
intend to extend our  licensing  efforts to merchants  in all  relevant  product
categories  within Yahoo!  Shopping.  Yahoo!  will receive a portion of revenues
generated  by us through  these  efforts.  Yahoo!  also  intends to utilize  our
technology  to provide 3D images to its own  customers.  Our  technology  is the
first Java-based visual  enhancement  technology allowed to reside inside of the
Yahoo!  Shopping system. We believe our relationship with Yahoo provides us with
a valuable  and  immediate  sales  channel  and a  potentially  large  installed
customer base. Yahoo! currently has more than 13,000 merchants offering millions
of products.

     ClickAction  -  ClickAction  is  an  e-marketing  services  company.   With
ClickAction,  we offer an integrated  solution  that is marketed to  ClickAction
clients  as  Click3D(TM).  This  solution  allows  marketers  to  integrate  key
components of our 3D technology into their e-mail  campaigns.  ClickAction  will
pay us commissions based upon revenues  generated by customers referred by us to
ClickAction through the co-marketed service.

                                       5
<PAGE>

     Goodspeed  Communications  - Goodspeed is a London-based  digital  solution
marketing  company.  Goodspeed will market our  proprietary VR and VM imagery as
well as our O2Zoom  technology to its customer base.  Goodspeed will be entitled
to a  significant  share of the  revenues  generated  through  the sale of these
products.


     AGA - AGA is a catalog design and production company based in New York. Our
relationship with AGA gives us access to its base of large customers,  including
American  Express  Travel,  Avon,  Nike  and  Dayton  Hudson.  As  part  of this
relationship,  we are establishing a digital,  3D production studio in AGA's New
York City facility. A commission is paid based upon customer  introductions that
directly results in the generation of revenue.


SALES AND MARKETING STRATEGY

     We currently have a sales and marketing staff of 15 full-time employees. We
market and sell our products utilizing the following strategies:

     3D Image  Store - We market and sell our 3D image store  solutions  through
in-house  personnel  and  strategic  alliances.  We also are  producing and will
market  mass-produced images on a complimentary basis for major manufacturers of
consumer products.  These images will then be licensed to online retailers to be
used on their sites. The multiple licensing of the images will allow for greater
distribution  and  for  relationships  to be  established  with a  multitude  of
Internet sites.

     O2  Magic  Mail  -  We  market  and  sell  our  e-mail  solutions   through
affiliations  with  online  portals,   advertising  agencies,   web  development
companies,  ISPs and catalogers  seeking to provide rich-media email services to
their customers.  We conduct these efforts through our internal sales personnel.
We also believe that we can cross-sell our e-mail services to our 3D image store
clients.

     Commercial Builder - We will initially market and sell this product through
LookSonic's  established  sales  channels.  We will also offer  this  product to
affinity   organizations  for  distribution  to  their  members.  We  also  will
cross-market this product to clients for our other services.

     Content  Management  - We will utilize  email,  seminars,  trade-shows  and
targeted periodical advertising to make corporate "decision makers" in small and
medium-sized  businesses  aware of the dramatic cost savings this product offers
to web businesses.

COMPETITION

     We compete with a broad range of  marketing,  web page design and eBusiness
alternatives  available to our potential clients.  Noted competitive formats are
Flash, Metacreations, QuickTime VR, and IBM's Hotmedia. We also compete with all
of  the  traditional  marketing  resources,  including  print  and  other  media
advertising,  mail order  catalogs,  and in-store  displays.  Competitors in our
industry  differentiate  themselves  on the  basis  of  creativity,  quality  of
service,  technical  innovation and price.  A large majority of our  competitors
have greater financial resources and brand name recognition than us. Competition
in our target markets is extremely intense.

                                       6
<PAGE>

     Most  of  the 3D  technology  utilized  by  our  competitors  is  based  on
renderings,  not  actual  digital  photography,  and  requires  the end  user to
download  software in order to view the image.  We believe  that the strength of
our 3D technology lies in the clarity and  interactivity  of the imagery and the
speed at which the imagery downloads to the end-user's computer.

EMPLOYEES

     As of September 21, 2000, we had 41 employees; 16 are involved in web site
design,  research and development,  15 in sales and marketing,  6 in finance and
administration  and 4 in catalog  operations.  We also  supplement our permanent
staff with  independent  contractors and consultants who perform various skilled
and  professional  level tasks.  Our future  success  depends,  in part,  on our
continuing  ability to attract,  train and retain  highly  qualified  technical,
sales and managerial  personnel.  Competition for such personnel is intense, and
we do not  assure  you that we will be able to  recruit  and  retain  sufficient
numbers of qualified personnel.  None of our employees is represented by a labor
union.  We have not  experienced  any work  stoppages and consider our relations
with employees to be good.


ITEM 2.   PROPERTIES

     Our offices are located in a 25,000 square foot facility in Marina del Rey,
California,  pursuant to a six-year  lease  expiring July 2005. We pay an annual
rental of $586,236 for these premises.  This amount will increase  annually to a
maximum of $658,733 for the year ended June 30, 2005.  We believe this  facility
is adequate for our current operations.


ITEM 3.   LEGAL PROCEEDINGS

     We are  not  engaged  in  any  legal  proceedings  that,  singly  or in the
aggregate,  will  have a  material  adverse  effect on our  business,  financial
condition or results of operations.


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

     Not applicable.


                                       7
<PAGE>



                                     PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     From June 1997 until  July 19,  1999,  our  common  stock was traded on the
Nasdaq  OTC  Bulletin  Board  under our the name "Pi  Graphix,  Inc." and symbol
"PGRX." Our common  stock and warrants  have been traded on the  American  Stock
Exchange  since July 20, 1999 under the symbols "THD" and "THDW,"  respectively.
The following  table sets forth the high and low bid prices for the common stock
and warrants for the quarters  indicated.  Prices  reflect bids posted by market
makers and may not necessarily reflect actual transactions.

<TABLE>
<CAPTION>
Common Stock                                                                              High           Low
------------                                                                              ----           ---

<S>                                                                                    <C>               <C>
YEAR ENDED JUNE 30, 1999
First Quarter......................................................................      5.5000         1.6250
Second Quarter.....................................................................     19.7500         4.0625
Third Quarter......................................................................     19.2500        13.0000
Fourth Quarter.....................................................................     18.0000         8.5000
YEAR ENDED JUNE 30, 2000
First Quarter......................................................................     15.8750         6.0000
Second Quarter.....................................................................     15.0000         5.8750
Third Quarter......................................................................     15.8125        10.6250
Fourth Quarter.....................................................................     13.5000         5.7500

Warrants                                                                                  High           Low
--------                                                                                  ----           ---

YEAR ENDED JUNE 30, 2000
First Quarter......................................................................      2.8750         1.1250
Second Quarter.....................................................................      3.1250         1.0000
Third Quarter......................................................................      3.5000         1.8750
Fourth Quarter.....................................................................      2.6250         0.8125

</TABLE>
     At September 21, 2000,  there were 86  shareholders of record of our common
stock and 5,196,748  shares of our common stock were  outstanding.  Also,  there
were 8 warrant  holders of record and 1,100,000  warrants were  outstanding.  We
believe the number of beneficial owners is substantially greater than the number
of record holders  because a large portion of our  outstanding  common stock and
warrants  is held of  record  in  broker  "street  names"  for  the  benefit  of
individual investors.

     We never have declared or paid cash dividends on our common stock.  Payment
of any  cash  dividends  will  depend  on the  results  of our  operations,  our
financial  condition and our capital expenditure plans, as well as other factors
our board of directors may consider relevant.  We presently intend to retain any
earnings for use in our business and,  therefore,  do not anticipate  paying any
cash dividends in the foreseeable future.

                                       8
<PAGE>


RECENT SALES OF UNREGISTERED SECURITIES

     Since  October  1999,  we have issued and sold the  following  unregistered
securities on the dates and for the consideration indicated:

     From October 1999 to June 2000, we issued an aggregate of 267,299 shares of
common stock to Don Westland,  Shareholders  Solutions,  Inc., Vista Quest, Rick
Emery, and Silhouette  Investments,  Ltd. pursuant to the exercise of options at
exercise  prices  ranging  from  $1.25 to  $1.75  per  share.  The  options  and
underlying  shares of common stock were issued in reliance on an exemption  from
registration provided by Section 4(2) under the Securities Act.

     In  April  2000,  we  issued  75,000  shares  of  common  stock  to Del Mar
Consulting at a price of $7.50 per share in exchange for services.  These shares
of common  stock were  issued in  reliance  on an  exemption  from  registration
provided by Section 4(2) under the Securities Act.






                                       9
<PAGE>


ITEM 6.   SELECTED FINANCIAL DATA

     The following  selected  statement of operations data for the eleven months
ended June 30, 1997 and the fiscal years ended June 30, 1998, 1999, and 2000 and
the selected  balance  sheet data is derived from the financial  statements  for
such periods and as of such dates examined by Friedman, Minsk, Cole & Fastovsky,
independent auditors.  The financial statements as of June 30, 1999 and June 30,
2000 and for each of the three years ended June 30, 2000 are included  elsewhere
in this report and contain all material financial  information about us. We urge
you to read them  carefully.  The data shown below should be read in conjunction
with the financial statements and related notes and "Management's Discussion and
Analysis of Financial  Condition and Results of Operations"  and other financial
information appearing elsewhere in this report.

     Amounts for the eleven months ended June 30, 1997 reflect  eleven months of
operations from the date of inception (August 13, 1996) to June 30, 1997.

     The line item  "Weighted  average  shares  used in  computing  net loss per
share" is based on the  weighted  average  number  of  shares  of  common  stock
outstanding  for the eleven  months ended June 30, 1997 and the years ended June
30, 1998, 1999 and 2000. It excludes 0, 32,609, 32,609,  and  2,497,532  shares,
respectively,  of common stock  issuable upon exercise of  outstanding  options,
warrants and convertible debt. Note 1 of Notes to Financial  Statements includes
an  explanation of the  determination  of the number of shares used in computing
net loss per share.
<TABLE>
<CAPTION>

                                             Eleven Months
                                             Ended June 30,                      Year Ended June 30,
                                             --------------                      -------------------
Statement of Operations Data:                    1997              1998               1999             2000
                                            ----------------  ----------------   ---------------  ----------------
<S>                                         <C>               <C>                <C>              <C>
Net revenues.............................   $           ---   $        18,404    $      191,191   $       858,624
Operating expenses:
     Sales and marketing.................           973,283           473,665           682,575         3,014,436
     Production and development..........           294,360           170,259           513,382         2,441,325
     General and administrative                     644,993           460,220         2,992,480         3,846,795
                                            ----------------  ----------------   ---------------  ----------------
     Total costs and expenses............         1,912,636         1,104,144         4,188,437         9,302,556
                                            ----------------  ----------------   ---------------  ----------------
Loss from operations.....................        (1,912,636)       (1,085,740)       (3,997,246)      (8,443,932)
Interest expense.........................            (3,089)          (10,373)         (436,025)        (112,758)
Other income.............................            10,000            13,500             4,756               --
Interest income..........................                --                --                --           354,504
Rental income............................                --                --                --            73,850
                                            ----------------  ----------------   ---------------  ----------------
Net loss.................................   $   (1,905,725)  $     (1,082,613)   $   (4,428,515)  $    (8,128,336)
                                            ================  ================   ===============  ================
Net loss per share.......................   $         (.59)  $           (.28)   $        (1.09)  $        (1.69)
                                            ================  ================   ===============  ================
Weighted average shares used in
     computing net loss per share........         3,210,651         3,823,228         4,045,746         4,811,623

Balance Sheet Data:              June 30, 1997        June 30, 1998         June 30, 1999         June 30, 2000
                              -------------------- --------------------- --------------------- --------------------
Cash and cash equivalents...  $            (2,569) $            144,564  $             116,918  $         3,927,953
Working capital (deficit)...             (106,674)             (165,096)            (1,373,253)           3,995,618
Total assets.............. ..             104,678               229,529              1,314,186            5,840,417
Accumulated deficit.........           (1,905,725)           (2,988,338)            (7,416,853)         (15,545,189)
Shareholders' equity
(deficit)...................               (8,781)              (98,626)              (355,438)           5,101,464

</TABLE>

                                       10
<PAGE>

ITEM 7.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
          RESULTS OF OPERATIONS

     The following  discussion and analysis provides information that we believe
is relevant to an assessment and  understanding of our results of operations and
financial condition for the fiscal years ended June 30, 1998, 1999 and 2000. The
following discussion should be read in conjunction with the financial statements
and related notes appearing elsewhere in this report.

Overview

     Since  beginning  operations in August 1996, we have devoted  substantially
all of our resources to designing,  implementing  and  introducing our marketing
and display system, the 3Dshopping  System(TM).  From inception through June 30,
2000, we raised total equity capital in the form of cash of $14,161,240  and had
an accumulated deficit of $15,545,189,  including $7,019,138 in non-cash charges
for common stock issued as compensation.  While still developing our technology,
we  began  to  receive   revenues   from  sales  of   services  in  April  1998.
Notwithstanding these revenues, we operated at a loss from inception to date and
we are  continuing  to  operate  at a loss as our  expenditures  for  marketing,
product  development  and  general  and  administrative  costs  exceed our gross
revenues.  We expect the  operating  losses to continue and to increase  over at
least the next six months as we incur increasing levels of expense to market our
services,  implement  our new business  plan,  support  growth and integrate our
acquisitions.

     We believe that our  historical  operating  results are not  indicative  of
future performance for the following reasons, among others:

          *    The receipt of the  proceeds  of our public  offering of units on
               July 23,  1999 and their use to fund our  anticipated  growth has
               materially  changed expense levels in all major categories.  They
               are also  expected to support  substantial  increases in revenues
               from operations in the next fiscal year;

          *    The  acquisition of DBLA in May 1999 has enhanced and diversified
               the scope of our  business  to  include  the  catalog  production
               business;

          *    We  have  recently   emerged  from  the  development   stage  and
               anticipate  substantial  increases  in the  number  and  size  of
               customer orders and revenues from operations; and

          *    We intend to implement  our new  business  model very rapidly and
               leverage  our  strategic  alliances  with  Yahoo!,   ClickAction,
               Goodspeed and AGA.

     Although we expect  substantial  growth in both revenues and  expenses,  we
anticipate that, in the near term, increases in expenses will occur more rapidly
than corresponding increases in revenues. Also, while we are committed, at least
in the short term, to  substantial  increases in expenses,  we cannot  guarantee
that revenues will increase  correspondingly.  We expect to follow a strategy of
establishing   market  share  by  making  expenditures  for  marketing  and  the
development of our infrastructure, exceeding estimated revenues for at least the
next six months, resulting in operating losses.

                                       11
<PAGE>

     The catalog  business,  which we acquired  through the  acquisition of DBLA
effective April 1, 1999, is more traditional than our core Internet business and
it had been fully  operational  for several  years  before we acquired  it. As a
result, the catalog business recorded larger revenues than our Internet business
in 1998 and 1999 (approximately $108,000 for the quarter ended June 30, 1999 and
$414,000 for the year ended June 30, 2000).  If our business  development  plans
are  successful,  we expect  that  revenues  from our new  business  model  will
increase more rapidly than catalog sales.  Because our catalog  clients may also
be good prospects for other services, we may also develop business involving all
aspects of our  business  for a single  client.  Future  income from the catalog
business will contribute to earnings and profits at the corporate level.

     In July 1999,  we  completed a public  offering of  1,100,000  units,  each
consisting of one share of common stock and one warrant to purchase one share of
common  stock.  As a result of the  offering,  we received  net  proceeds  after
deducting underwriting  discounts and offering expenses of $11,933,648.  We used
$200,595  of  this  amount  to  repay  principal  and  interest  on  outstanding
indebtedness.

     In September 2000, we entered into an agreement to acquire a 50.1% interest
in LookSonic,  LLC. In consideration of that equity position,  we issued options
to purchase  150,000  shares of our common stock,  with one-third of this option
vesting on the closing  date and the  remaining  portion  vesting  when  certain
revenue targets are achieved.

     In September  2000,  we entered  into an  agreement to acquire  "electronic
content management  system"  technology (eCMS) from Channelspace  Entertainment,
Inc. We will issue 833,333 shares of our common stock in  consideration  of this
purchase.  We will pay additional  consideration  in shares on a quarterly basis
for six  quarters,  beginning  four months after the  closing,  based upon gross
revenue generated through the eCMS technology, up to a maximum of $12.5 million.

RESULTS OF OPERATIONS

Fiscal year 1999 as compared to fiscal year 1998

     Revenues for 1999 were $191,191, reflecting the inclusion of fourth quarter
catalog revenues  ($108,000) and Internet revenues from web site development and
billings for  maintenance  and sales fees.  Expenses for the year ended June 30,
1999 were  $4,624,462,  primarily  consisting  of $513,382  for  production  and
development expenses, $682,575 for sales and marketing expenses,  $2,992,480 for
general and administrative  expenses,  and $436,025 for interest  expenses.  The
increase in expenses of  $3,509,945  over the preceding  year  reflects  greater
levels of activity as we refined and  actively  marketed  our  Internet  service
offerings. Of that increase, $2,682,663 was due to the values ascribed to option
grants to employees and consultants under the Black-Scholes option-pricing model
recommended  by the  Financial  Accounting  Standards  Board in its Statement of
Financial  Accounting Standards 123, and $399,225 was due to the amortization of
warrants  issued for  interest  on debt.  The net loss for fiscal  year 1999 was
$4,428,515,  or $1.09  per  share of common  stock,  compared  to a net loss for
fiscal year 1998 of $1,082,613, or $0.28 per share.



                                       12
<PAGE>

Fiscal year 2000 as compared to fiscal year 1999

     Revenues  for 2000 were  $858,624,  reflecting  the  inclusion  of  catalog
revenues ($414,316) and Internet revenues from web site development and billings
for maintenance  and sales fees.  Expenses for the year ended June 30, 2000 were
$9,415,314,  primarily  consisting of $2,441,325 for production and  development
expenses,  $3,014,436 for sales and marketing  expenses,  $3,846,795 for general
and administrative expenses, and $112,758 for interest expenses. The increase in
expenses of  $4,790,852  over the  preceding  year  reflects  greater  levels of
activity as we refined and actively marketed our Internet service offerings.  Of
that increase,  approximately  $4,111,000  was due to  incremental  increases in
production,  sales and administration required to support the growth of revenues
during 2000,  and  approximately  $680,000 was due to an increase in rent as the
Company moved into larger  facilities to support the growth of the Company.  The
net loss for  fiscal  year  2000 was  $8,128,336,  or $1.69  per share of common
stock,  compared to a net loss for fiscal year 1999 of $4,428,515,  or $1.09 per
share.

     As  of  June  30,  2000,  we  had  net  operating  loss   carryforwards  of
approximately  $10,503,000  and research and  development tax credits of $39,000
for  federal  income tax  purposes,  which  amount  will expire over a four-year
period  beginning  2012 if not used.  For state income tax purposes,  we had net
operating  loss  carryforwards  of $7,546,000 and research and  development  tax
credits of $16,300,  which will expire beginning in 2012. As a result of changes
in ownership, including changes resulting from our July 1999 public offering, as
defined in Section 282 of the  Internal  Revenue Code of 1986,  as amended,  the
annual deductibility of net operating loss carryforwards is limited. A valuation
allowance  has been  recorded  against  total  deferred tax assets of $5,115,000
because  realization  is primarily  dependent on generating  sufficient  taxable
income prior to  expiration of the net operating  loss  carryforwards  and other
deferred expenses.

LIQUIDITY AND CAPITAL RESOURCES

     We have funded our  operations  primarily  through the sale of common stock
and to a lesser extent,  by issuing notes and other  borrowings.  From inception
through  June 30, 2000,  we raised cash  proceeds of  $14,161,240  from sales of
common  stock.  In some  cases,  we issued  common  stock in return for goods or
services.  As of June 30, 2000, we had cash and cash  equivalents  of $3,927,953
and working capital of $3,995,618.  We did not have any credit arrangements with
any banks as of June 30, 2000.  We did not have any  outstanding  notes or other
obligations  for money borrowed as of June 30, 2000. As a result of the proceeds
from the unit offering on July 23, 1999, all  liabilities  for borrowed money as
of June 30, 1999 were repaid and a working  capital  surplus was  achieved as of
June 30, 2000.

     Our  liquidity and capital  needs relate  primarily to working  capital and
other general corporate requirements.  Since inception, we have not received any
significant  cash flow from  operations  or investing  activities.  Based on our
current  plans,  we believe the proceeds  from our unit offering will provide us
with sufficient  capital  resources to fund our operations for at least the next
six months.  Expectations about our long-term  liquidity may prove inaccurate if
our plans  change.  As we increase  sales,  we expect  increased  cash flow from
operations.

     In August 2000,  we engaged H. C.  Wainwright & Co. as  investment  banker,
financial  advisor  and  exclusive  agent to  arrange  a  private  placement  of
preferred stock in the amount of $10,400,000.  We anticipate the closing of this
private placement in October 2000. However, we cannot assure you that we will be
able to consummate this or any alternative financing. Our auditors have included
a going  concern  comment  in their  opinion.  If we are  unable to  secure  the
proceeds of the current financing or proceeds from an alternative financing, our
operations could be materially impaired.

                                       13
<PAGE>

     In March 1999, we borrowed  $500,000 from an  institutional  lender to fund
expenditures  associated  with our unit offering and to cover interim  operating
expenses pending receipt of the offering proceeds.  We also issued to the lender
common stock purchase warrants that were exercisable  during a three-year period
beginning on July 20, 2000. The warrants were  exercisable  to purchase  100,000
units  and were  redeemable  by us  between  July 1, 1999 and July 1, 2000 for a
price  increasing from $400,000 to $500,000 over the period.  In September 1999,
we exercised our option to repurchase the warrants for $400,000.

     We also borrowed $100,000 from the Paulson Investment Company, Inc. in June
1999,  under an  unsecured  promissory  note.  The note was payable on or before
August 31, 1999,  together with interest at the rate of 7% per annum.  This note
plus  interest  was  paid  off in July  1999  from the  proceeds  of our  public
offering.

     Net cash used in operating  activities was $751,091 in 1998,  $1,285,631 in
1999 and $5,335,974 in 2000.  The net cash used in operating  activities in each
year was primarily  attributable  to our net loss, as adjusted for common stock,
options and warrants issued for services and compensation. Such losses, together
with the increases in prepaid offering costs, accounts receivable,  and property
and equipment,  and the decrease in accounts payable, were funded principally by
the net  proceeds  received  from the sales of stock  (1998 -  $671,000;  1999 -
$934,000;  2000 - $11,090,000)  and the balances through  additional  borrowings
under the shareholders loan and two loans from third parties.

     Net cash used in investing  activities was $10,736 in 1998, $96,468 in 1999
and  $916,690  in  2000  primarily  reflecting   acquisitions  of  property  and
equipment,  as well as $442,000 in 2000 pledged as collateral on an  outstanding
letter of credit related to the Company's current facility lease.

     Net cash provided by financing activities was $908,960 in 1998,  $1,354,453
in 1999 and $10,063,699 in 2000  representing the net proceeds from the issuance
of common stock and debt.

FORWARD-LOOKING STATEMENTS

     Information in "Management's Discussion and Analysis of Financial Condition
and Results of Operations"  and elsewhere in this report and about our goals and
plans and future  business  operations  constitutes  forward-looking  statements
within the meaning of Section 27A of the  Securities Act of 1933 and Section 21E
of the  Securities  Exchange Act of 1934.  Factors that could  adversely  affect
these  forward-looking  statements  include,  but are not limited  to,  business
conditions in the market areas we target,  competitive factors,  customer demand
for our  services,  and our  ability  to  execute  our plans  successfully.  Any
forward-looking statements should be considered in light of these factors.

                                       14
<PAGE>

ITEM 7(a).    QUANTITATIVE AND QUALITATIVE DISCLOSURES
              ABOUT MARKET RISK

     We do not have any financial instruments that are subject to market risk.


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

     The financial  statements required by this item are included in this report
commencing on page F-1. The following information  represents selected quarterly
financial data for the years ended June 30, 1999 and June 30, 2000:

<TABLE>
<CAPTION>

                                                                Year ended June 30, 1999
                                   -----------------------------------------------------------------------------------
                                         3 months            3 months             3 months            3 months
                                          ended                ended               ended                ended
                                         09/30/98            12/31/98             03/31/99            06/30/99
                                         --------            --------             --------            --------
<S>                                <C>                 <C>                  <C>                 <C>
Net Sales                          $       15,591      $        11,948      $        22,772     $        140,880
Income before extraordinary items        (201,752)          (2,542,195)            (335,432)          (1,349,136)
Net Income                               (201,752)          (2,542,195)            (335,432)          (1,349,136)
Earnings Per Share                 $        (0.05)     $         (0.63)     $         (0.08)    $          (0.33)

                                                                Year ended June 30, 2000
                                   -----------------------------------------------------------------------------------
                                         3 months            3 months             3 months            3 months
                                          ended                ended               ended                ended
                                         09/30/99            12/31/99             03/31/00            06/30/00
                                         --------            --------             --------            --------
Net Sales                          $       35,666      $       216,924      $       174,940     $        431,094
Income before extraordinary items      (1,372,376)          (1,678,672)          (1,852,235)          (3,225,053)
Net Income                             (1,372,376)          (1,678,672)          (1,852,235)          (3,225,053)
Earnings Per Share                 $        (0.31)     $         (0.35)     $         (0.38)    $          (0.65)

</TABLE>



ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

     Not applicable.

                                       15
<PAGE>

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The  following  table sets forth  certain  information  with respect to our
current executive officers and directors.

Name                  Age      Position
----                  ---      --------

Terry L. Gourley      38       Chairman of the Board and Chief Executive Officer
Joel P. Gayner        56       President, Chief Operating Officer and Director
Jacalyn A. Hughes     48       Executive Vice President of Operations and Chief
Howard A. Cohn        60       Senior Vice President of Administration and Chief
Brian A. Smith        54       Executive Vice President of Marketing
David C. Williams     43       Executive Vice President of Business Development
C. James Jensen       59       Director
Maryann O'Donnell     49       Director


TERRY L.  GOURLEY  became our  Chairman of the Board in  September  2000 and has
served as our Chief Executive  Officer since May 2000.From  November 1999 to May
2000, he served as our Director of Marketing Communications.  From February 1998
until  November  1999,  Mr.  Gourley served as President and Branch Manager of a
financial  services business at NLSB Bank Financial  Service Center.  From March
1993 until February  1998,  Mr.  Gourley was an  independent  business owner and
Branch Manager for FLPL Financial  Services.  From 1991 to 1993, Mr. Gourley was
Personal  Accounts  Director for a branch office of Chase  Manhattan  Investment
Services.  From 1985 to 1991,  Mr.  Gourley was an Associate  Vice President and
Branch  Manager at Dean  Witter  Reynolds.  Mr.  Gourley  received  his B.S.  in
Business/Financial Management from Southwest Missouri State University.

JOEL P. GAYNER has served as our President and Chief Operating Officer since May
2000,  and became a member of our Board of  Directors in  September  2000.  From
February 2000 to May 2000,  he served as our Senior Vice  President of Sales and
Marketing.  From 1990 until February 2000, Mr. Gayner was the President of Group
6 Associates, Inc., a marketing company. From 1989 to 1990, Mr. Gayner served as
Executive Vice President of Business  Development  for the 1928 Jewelry Co. From
1986 to 1989,  Mr.  Gayner  was the  Executive  Vice  President  and  founder of
Advanced Marketing Technology Corporation.

JACALYN A. HUGHES has served as our Executive  Vice  President of Operations and
Chief  Technology  Officer since May 2000.  From  February 2000 to May 2000, she
served as our Senior Vice President of Technology and Chief Technology  Officer.

                                       16
<PAGE>

From January 1998 to February 2000, Ms. Hughes was Vice President of Information
Technology  and Chief  Information  Officer at Specialty  Laboratories,  Inc., a
reference laboratory serving hospitals and specialist  physicians.  From 1989 to
1998, Ms. Hughes served as Director of Management  Information Systems at Candle
Corporation,  a supplier of networked business applications.  From 1985 to 1989,
Ms.  Hughes was a Director  with  Source  EDP,  a national  technical  placement
agency.  Ms. Hughes  currently  serves on boards for the Society for Information
Management,  Southern California,  and the Organization of Women Executives. She
received her B.S. in Math from the  University of Minnesota.

HOWARD A. COHN has served as our Senior Vice  President  of  Administration  and
Chief Financial Officer since May 2000. From November 1999 to May 2000 he served
as our Controller  and Treasurer.  From 1995 to November 1999, Mr. Cohn was Vice
President of Strategic Planning and Corporate Development at West LA Music. From
1991 to 1995, Mr. Cohn owned and operated Monograms Plus. From 1990 to 1991, Mr.
Cohn served as Vice  President/Operations of Silo California,  Inc. From 1988 to
1990,  Mr.  Cohn served as Vice  President  and Chief  Financial  Officer of the
Federated  Group/Atari.  From  1986 to  1988,  Mr.  Cohn  held the  position  of
Executive Vice President and Chief Financial Officer with Leo's Stereo, and from
1983 to 1986,  he was  Executive  Vice  President of Ken Crane's.  Mr. Cohn is a
Certified   Public   Accountant   and  holds  a  Masters   Degree  in   Business
Administration from Woodbury  University.  Mr. Cohn declared personal bankruptcy
under  Chapter 7 of the  federal  Bankruptcy  Code in 1996.

BRIAN A. SMITH has served as our Executive Vice President of Marketing since May
2000.  From May 1999 to May 2000,  Mr. Smith served as our President of Creative
Services.  From 1993 to May 1999,  Mr. Smith was President  and Chief  Executive
Officer of DBLA, our direct mail and catalog marketing division. He managed DBLA
as an independent  business from January 1995 until the sale of its assets to us
in May 1999. From 1990 to 1993, Mr. Smith was Vice President of Nobart,  Inc., a
catalog design and production company,  where he was in charge of all West Coast
operations.  From 1987 to 1990,  Mr.  Smith  served as Vice  President,  General
Merchandise Manager and Creative Director of Life Force  Technologies,  a direct
mail catalog  company.  From 1983 to 1987, Mr. Smith served as Vice President of
Creative Services for Harrison Service, a catalog design and production company.

DAVID C. WILLIAMS became our Executive Vice President of Business Development in
June 2000.  From 1997 to June 2000, Mr. Williams was a Director and Principal in
The Management  Group, a management  consulting firm  specializing in e-commerce
strategy. From 1991 to 1997, he was Managing Director of Hudson Hill Consulting,
a business  development  and strategic  planning  consulting  firm. From 1988 to
1991,  Mr.  Williams  was  Vice  President  of  Sales  &  Marketing  of the  Los
Angeles-based  gourmet  coffee  roaster,  Cafe Au Lait.  From 1986 to 1987,  Mr.
Williams  served as Regional  Manager with Pepsi USA, and from 1983 to 1986, Mr.
Williams was part of the management  team of Barton Beers,  Ltd.  Before joining
Barton,  from 1981 to 1983,  Mr.  Williams  was a  District  Manager  with Pabst
Brewing  Company.  Mr. Williams  graduated from The Ohio State University with a
degree in Marketing and Organizational Communications.

C. JAMES JENSEN  became a member of our Board of  Directors in June 2000.  Since
1999 Mr. Jensen has been the President and co-founder of SWD Holdings,  Inc., an
investment  company.  Prior to founding  SWD  Holdings in 1999,  Mr.  Jensen was
President of J.J. Consulting  Corporation,  a marketing company  specializing in
planned  residential  communities.  From  1980 to 1998,  Mr.  Jensen  served  as
Chairman  and Chief  Executive  Officer of  Thousand  Trails,  Inc.,  a national
network of private campground resorts, and from 1973 to 1979 he was President of
Grantree Furniture Rental Corporation.

MARYANN  O'DONNELL  became a member of our Board of Directors in June 2000.  Ms.
O'Donnell  is  currently a partner and  investor  in  O'Donnell & Ganns,  LLC, a
venture  capital  investment and  e-commerce  incubation  firm.  From 1996 until
January 2000,  Ms.  O'Donnell  served as the President of ETI, LLC, a television
production  company.  From 1994 until 1996,  Ms.  O'Donnell  was a co-founder of
Earthlink  Network,  an  Internet  Service  Provider.  From  1981 to  1991,  Ms.
O'Donnell served as Vice President of Sales for Government  Technology Services,
Inc., a technology  sales company serving  federal,  state and local  government
agencies.

                                       17

<PAGE>


ITEM 11.  EXECUTIVE COMPENSATION

     Information  with  respect to executive  compensation  is  incorporated  by
reference to the information to be included under  "Executive  Compensation"  in
our 2000 proxy statement.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Information with respect to security ownership of certain beneficial owners
and management is  incorporated  by reference to the  information to be included
under "Security  Ownership of Certain  Beneficial  Owners and Management" in our
2000 proxy statement.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information with respect to certain  relationships and related transactions
with  management is  incorporated by reference to the information to be included
under "Certain Transactions" in our 2000 proxy statement.



                                       18
<PAGE>


                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>


    (a)   1.  Financial Statements                                                                 Page in this Report.
                                                                                                   --------------------

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

              Balance Sheets as of June 30, 1999 and June 30, 2000                                         F-3

              Statements of Operations for the years ended
               June 30, 1998, 1999 and 2000                                                                F-4

              Statements of Shareholders' Equity (Deficit) for the years
               ended June 30, 1998, 1999 and 2000                                                          F-5

              Statements of Cash Flows for the years
               ended June 30, 1998, 1999 and 2000                                                          F-6

              Notes to Financial Statements                                                                F-7

          2.  Financial Statement Schedules

          Not applicable

          3.  Exhibits

          The exhibits listed below are filed as part of this report
</TABLE>

Exhibit
Number    Description
------    -----------


 2.1      Agreement and Plan of Reorganization dated as of April 1, 1999 between
          the  Registrant,  Design Base Los Angeles  Inc.,  Brian Smith and Todd
          Hosaka.  Incorporated by reference to Exhibit 10.7 to our Registration
          Statement on Form S-1 (File No. 333-74795).

 3.1      Amended and  Restated  Articles of  Incorporation  of the  Registrant.
          Incorporated by reference to Exhibit 3.1 to our Registration Statement
          on Form S-1 (File No. 333-74795).

 3.2      Amended  and  Restated  Bylaws  of  the  Registrant.  Incorporated  by
          reference  to Exhibit 3.2 to our  Registration  Statement  on Form S-1
          (File No. 333-74795).

 4.1      Specimen  Common  Stock  Certificate.  Incorporated  by  reference  to
          Exhibit  4.1 to our  Registration  Statement  on Form  S-1  (File  No.
          333-74795).

 4.2      Warrant  Agreement  dated  July 20,  1999  among  the  Registrant  and
          ChaseMellon Shareholder Services, LLC, as Warrant Agent, including the
          form of Warrant.

                                       19
<PAGE>

 4.3      Form  of  Representative's  Warrants.  Incorporated  by  reference  to
          Exhibit  4.3 to our  Registration  Statement  on Form  S-1  (File  No.
          333-74795).

 4.4      Purchase  Warrant  dated March 18, 1999  between  the  Registrant  and
          Generation  Capital.  Incorporated  by reference to Exhibit 4.4 to our
          Registration Statement on Form S-1 (File No. 333-74795).

 4.5      Promissory  Note dated March 18, 1999 from the  Registrant in favor of
          Generation  Capital  Associates.  Incorporated by reference to Exhibit
          4.5 to our Registration Statement on Form S-1 (File No. 333-74795).

 4.6      Substitute   Purchase   Warrant  dated  March  18,  1999  between  the
          Registrant  and  Generation   Capital   Associates.   Incorporated  by
          reference  to Exhibit 4.6 to our  Registration  Statement  on Form S-1
          (File No. 333-74795).

 4.7      Promissory  Note in the amount of $25,000 dated May 2, 2000 granted by
          the Registrant in favor of Joel Gayner.

 4.8      Promissory  Note in the amount of $25,000 dated March 21, 2000 granted
          by the Registrant in favor of Terry Gourley.

 4.9      Promissory Note in the amount of $60,000 dated May 10, 2000 granted by
          the Registrant in favor of Terry Gourley.

 4.10     Secured  Promissory  Note in the amount of $50,000 dated June 23, 2000
          granted by the Registrant in favor of Gregory Hartwell.

 10.1     Letter Agreement, dated September 12, 2000, between the Registrant and
          ChannelSpace Entertainment, Inc.

 10.2     Consulting Agreement between the Registrant and The Del Mar Consulting
          Group, Inc., dated April 14, 2000.

 10.3     Independent  Contractor/Referral  Agreement between the Registrant and
          Alex Gayner, dated July 14, 2000.

 10.4     Employment Offer Letter to Joel Gayner, dated February 7, 2000.

 10.6     Amendment to  Employment  Offer  Letter to Joel Gayner,  dated May 18,
          2000.

 10.9     Amendment to Employment  Offer Letter to Terry Gourley,  dated May 18,
          2000.

 10.10    Consultant  Employment/Engagement Agreement between the Registrant and
          Communications  Options,  LLC f/s/o Gregory  Hartwell,  dated March 1,
          2000.

 10.11    Security/Pledge Agreement dated March 1, 2000 between Gregory Hartwell
          and Communications  Options,  LLC, on the one hand, and the Registrant
          as the Secured Party, on the other hand.

 10.12    Amendment No. 1 to Consultant  Employment/Engagement Agreement between
          the Registrant and Communications Options, LLC f/s/o Gregory Hartwell,
          dated June 5, 2000.

 10.14    Mutual  General  Release  dated  as  of  May  25,  2000,  between  the
          Registrant and Robert J. Vitamante.

 10.15    Management  Change  Agreement  between  the  Registrant  and  Lawrence
          Weisdorn, dated May 30, 2000.


                                       20
<PAGE>

 10.16    Mutual  General  Release  dated as of September  1, 2000,  between the
          Registrant and Lawrence Weisdorn.

 10.17    1999 Employee Stock Purchase  Plan.  Incorporated  by reference to our
          Registration  Statement  on Form S-8 (File No.  333-40830).  10.181999
          Stock Option  Plan.  Incorporated  by  reference  to our  Registration
          Statement on Form S-8 (File No. 333-40828).

 10.19    Letter  Agreement,  dated August 25, 2000,  between the Registrant and
          LookSonic, LLC.

 11.1     Statement re computation of per share earnings

 24.1     Power of Attorney (see signature page of this report)

 27.1     Financial Data Schedule

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

(b)  Reports on Form 8-K

     The Company did not file any Reports on Form 8-K during the period  covered
by this report.

                                       21

<PAGE>

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned,  thereunto duly authorized, in Venice, California
on September 28, 2000.

                                   3DSHOPPING.COM

                                   By:  TERRY GOURLEY
                                        -------------
                                        Terry Gourley
                                        Chairman and Chief Executive Officer

                                POWER OF ATTORNEY

     KNOW ALL  PERSONS  BY THESE  PRESENTS,  that each  person  whose  signature
appears below  constitutes  and appoints  Terry Gourley and Howard A. Cohn,  and
each of them, his attorney-in-fact,  with the power of substitution,  for him in
any and all capacities,  to sign any amendments to this Report,  and to file the
same, with exhibits  thereto and other documents in connection  therewith,  with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact,  or his substitute or substitutes,  may do or cause to be
done by virtue hereof.

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report has been signed below by the  following  persons on September 28, 2000 on
behalf of the Registrant and in the capacities indicated:

<TABLE>
<CAPTION>
Signature                                                 Title
---------                                                 -----

<S>                                                       <C>
TERRY GOURLEY                                             Chairman, Chief Executive Officer and Director
-------------------------------------------------        (Principal Executive Officer)
Terry Gourley

HOWARD A. COHN                                            Senior Vice President, Administration
-------------------------------------------------         And Chief Financial Officer
Howard A. Cohn                                            (Principal Financial and Accounting Officer)


JOEL P. GAYNER                                            President, Chief Operating Officer and Director
-------------------------------------------------
Joel P. Gayner


C. JAMES JENSEN                                           Director
-------------------------------------------------
C. James Jensen


MARYANN O'DONNELL                                         Director
-------------------------------------------------
Maryann O'Donnell

</TABLE>

                                       22
<PAGE>

                          INDEX TO FINANCIAL STATEMENTS





                                                                          PAGE
                                                                          ----
3Dshopping.com

INDEPENDENT AUDITORS' REPORT                                              F-2

Balance Sheets as of June 30, 1999 and June 30, 2000                      F-3

Statements of Operations
     For the years ended June 30, 1998, 1999 and 2000                     F-4

Statements of Shareholders' Equity (Deficit)
     For the years ended June 30, 1998, 1999 and 2000                     F-5

Statements of Cash Flows
     For the years ended June 30, 1998, 1999 and 2000                     F-6


NOTES TO FINANCIAL STATEMENTS                                             F-7








                                      F-1

<PAGE>
                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------





To the Board of Directors
3Dshopping.com


We have audited the accompanying Balance Sheets of 3Dshopping.com as of June 30,
1999 and June 30, 2000 and the related  Statements of Operations,  Stockholders'
Equity  (Deficit),  and Cash Flows for the years ended June 30,  1998,  1999 and
2000.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial position of 3Dshopping.com as of June 30,
1999 and June 30, 2000 and the results of its  operations and its cash flows for
the years  ended  June 30,  1998,  1999 and 2000 in  conformity  with  generally
accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial  statements,  the Company has  suffered  losses from  operations  that
raises  substantial doubt about its ability to continue as a going concern.  The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.





-------------------------------------------
FRIEDMAN, MINSK, COLE & FASTOVSKY
Los Angeles, California

August 29, 2000,  except Note 11 as to which
the date is September  12, 2000 and Note 19
as to which the date is September 21, 2000

                                      F-2
<PAGE>


<TABLE>
<CAPTION>
                                 3Dshopping.com

                                 BALANCE SHEETS



                                                                                                        June 30          June 30

                                                                                                          1999             2000
                                                                                                   --------------    --------------
                                     ASSETS
Current assets:
<S>                                                                                                     <C>           <C>
   Cash and cash equivalents                                                                            $116,918      $3,927,953
   Accounts receivable, net of allowances of $2,991 and $20,500                                          113,669         189,222
   Related party receivable                                                                               25,000         100,510
   Other receivables                                                                                      12,323         325,829

   Contracts in progress                                                                                     -           101,596
   Prepaid expenses                                                                                       16,143          80,104
                                                                                                   --------------    --------------
     Total current assets                                                                                284,053       4,725,214


Restricted cash                                                                                              -           442,000
Property and equipment, net of accumulated
    depreciation of $124,687 and $234,764                                                                144,004         481,991
Patents, net of accumulated amortization
    of $0 and $1,208                                                                                         -            22,945

Prepaid offering costs                                                                                   702,998            -
Goodwill, net                                                                                            183,131         116,539

Deposits                                                                                                     -            51,728
                                                                                                   --------------    --------------

   Total assets                                                                                       $1,314,186      $5,840,417
                                                                                                   ==============    ==============


                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                                                                     $669,851        $100,816
   Accrued payroll & taxes                                                                               104,629         191,530
   Accrued Expenses                                                                                       66,178         236,202
   Notes payable                                                                                         625,000            -
   Note payable - related parties                                                                         70,723            -
   Obligation under line of credit                                                                        54,000            -
   Customer deposits                                                                                      53,846         182,617
   Current maturities of capitalized lease obligations                                                    13,079          18,431
                                                                                                   --------------    --------------
     Total current liabilities                                                                         1,657,306         729,596

Noncurrent portion of capital lease obligations                                                           12,318           9,357


Commitments and contingencies                                                                               -               -

Shareholders' equity (deficit)
   Preferred Stock, no par value: 5,000,000 shares
      authorized; no shares issued and outstanding.
   Common stock, no par value: 10,000,000 shares
      authorized; issued and outstanding: 3,685,747, and
      5,129,448 respectively                                                                          7,063,915       20,646,653
   Stock subscription receivable                                                                         (2,500)            -
   Accumulated deficit                                                                               (7,416,853)     (15,545,189)
                                                                                                   --------------    --------------
      Total shareholders' equity (deficit)                                                             (355,438)       5,101,464
                                                                                                   --------------    --------------

Total liabilities and shareholders' equity                                                           $1,314,186       $5,840,417
                                                                                                   ==============    ==============
</TABLE>

    The accompanying notes are an integral part of these financial statements.
                                       F-3
<PAGE>

                                 3Dshopping.com

                            STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>



                                                         Fiscal Years Ended June 30,
                                        -------------------------------------------------------------
                                            1998                     1999                      2000
                                        --------------          --------------            --------------

<S>                                        <C>                     <C>                       <C>
Revenues, net                              $18,404                 $191,191                  $858,624
                                        --------------          --------------            --------------

Costs and expenses:
   Sales and marketing                     473,665                  682,575                 3,014,436
   Production and development              170,259                  513,382                 2,441,325
   General and administrative              460,220                2,992,480                 3,846,795
                                        --------------          --------------            --------------
Total costs and expenses                 1,104,144                4,188,437                 9,302,556
                                        --------------          --------------            --------------


Loss from operations                    (1,085,740)              (3,997,246)               (8,443,932)



Interest expense                           (10,373)                (436,025)                 (112,758)
Other income                                 3,500                    4,756                         -
Interest income                                  -                        -                   354,504
Rental Income                                    -                        -                    73,850
                                        --------------          --------------            --------------


    Net loss                           ($1,082,613)             ($4,428,515)              ($8,128,336)
                                        --------------          --------------            --------------

Net loss per share                          ($0.28)                  ($1.09)                   ($1.69)
                                        ==============          ==============           ==============


Weighted average number of
shares used in computing
net loss per share                       3,823,228                4,045,746                 4,811,623

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

                                      F-4
<PAGE>

                                 3Dshopping.com

                   STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                                             Stock             Stock
                                                      Common Stock        Subscriptions     Subscriptions   Accumulated
                                                       ------------
                                                 Shares          Amount    Receivable        in Advance      Deficit         Total
                                               -----------    -----------  -----------      -----------    -----------   -----------

<S>                                            <C>             <C>           <C>              <C>          <C>               <C>
Balance at June 30, 1997                       2,527,333       1,940,819     (83,375)         39,500       (1,905,725)       (8,781)

Fiscal Year 1998
Stock subscription payments received                                          83,375                                         83,375
 Issuances of Common Stock
     in exchange for services                     68,700         195,602                                                    195,602
 Sales of Common Stock                           595,367         763,997    (107,400)        (39,500)                       617,097
 Costs of stock offering                                         (29,374)                                                   (29,374)
 Fair market value of
     stock options granted                                       126,068                                                    126,068
 Net loss for year                                     -               -           -               -       (1,082,613)   (1,082,613)
                                               -----------    -----------  -----------      -----------    -----------   -----------

Balance at June 30, 1998                       3,191,400       2,997,112    (107,400)              -       (2,988,338)      (98,626)

Fiscal Year 1999
 Stock subscriptions received                                                107,400                                        107,400
 Stock options exercised                         233,000         611,750      (2,500)                                       609,250
 Issuance of Common Stock                                                                                                         -
     in exchange for services                     25,000         306,250                                                    306,250
 Exercise of cashless warrants                    30,347              -                                                           -
 Employee stock options granted                                2,021,938                                                  2,021,938
 Non-employee stock options granted                              354,500                                                    354,500
 Conversion of notes payable                     196,000         217,200                                                    217,200
 Amortizaton of Warrants
     for interest on debt                                       399,225                                                     399,225
 Issuance of Common Stock on acquisition of
     DBLA net assets                              10,000         155,940                                                    155,940
 Net loss for year                                     -               -           -               -       (4,428,515)   (4,428,515)
                                               -----------    -----------  -----------      -----------    -----------   -----------

Balance at June 30, 1999                       3,685,747       7,063,915      (2,500)              -       (7,416,853)     (355,438)

Fiscal Year 2000
Sales of Common Stock - IPO                    1,100,000      13,200,000                                                 13,200,000
Underwriting Costs related to IPO                             (1,266,352)                                                (1,266,352)
Offering Costs                                                  (758,055)                                                  (758,055)
Repurchase of Warrants                                          (400,000)                                                  (400,000)
Amortizaton of Warrants
     for interest on debt                                        100,774                                                    100,774
Receipt of Subscription Receivable                                             2,500                                          2,500
Issuance of Common Stock
    in exchange for services                      75,000         562,500                                                    562,500
Exercise of cashless warrants                    230,299                                                                          -
Exercise of employee stock options                38,402          56,591                                                     56,591
Employee stock options granted                                 1,345,627                                                  1,345,627
Non-employee stock options granted                               741,653                                                    741,653
Net Loss for year                                      -               -           -               -       (8,128,336)   (8,128,336)
                                               -----------    -----------  -----------      -----------    -----------   -----------

Balance at June 30, 2000                      $5,129,448     $20,646,653   $       -        $      -      $(15,545,189)  $5,101,464
                                              ============   ===========   ==========       ===========   ============   ===========

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

                                      F-5
<PAGE>

                                 3Dshopping.com

                             STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                              Year Ended
                                                                                               June 30,
                                                                          ---------------------------------------------------
                                                                                1998             1999            2000
                                                                          ---------------------------------------------------
Cash flows from operating activities:
<S>                                                                        <C>              <C>                   <C>
Net loss                                                                   $(1,082,613)     $(4,428,515)          (8,128,336)
Adjustments to reconcile net loss to net cash used in operating activities
  Depreciation and amortization                                                 43,208           82,796              202,877
  Gain on sale of assets                                                        (1,049)               -               -
  Common Stock issued for services                                             103,213                -              562,500
  Amortization of value of warrants issued for financing                             -          399,225              100,774
  Options and warrants issued for services and compensation                    218,455        2,682,663            2,087,280
Changes in assets and liabilities
  Accounts receivable, net of allowances                                        (4,280)         (17,342)             (75,553)
  Related party receivables                                                          -                -              (75,510)
  Other receivables                                                                  -          (12,323)            (313,506)
  Contracts in progress                                                              -           17,249             (101,596)
  Prepaid expenses                                                              (7,430)           1,201              (62,835)
  Prepaid offering costs                                                             -         (702,998)             702,998
  Deposits paid                                                                      -                -              (51,728)
  Accounts payable and other liabilities                                       (20,595)         641,567             (312,110)
  Customer deposits                                                                  -           50,846              128,771
                                                                          ---------------------------------------------------
    Net cash used in operating activities                                     (751,091)      (1,285,631)          (5,335,974)
                                                                          ---------------------------------------------------
Cash flows from investing activities
  Letter of Credit obtained                                                                                         (442,000)
  Acquisition of property and equipment                                        (13,250)         (96,468)            (450,537)
  Acquisition of patents and trademarks                                              -                -              (24,153)
  Proceeds from sale of property                                                 2,514                -                    -
                                                                          ---------------------------------------------------
    Net cash used in investing activities                                      (10,736)         (96,468)            (916,690)
                                                                          ---------------------------------------------------

Cash flows from financing activities
  Proceeds from issuance of Common Stock                                       700,474          322,125           13,200,000
  Costs of issuance of Common Stock                                            (29,374)               -           (2,024,407)
  Proceeds from exercise of options                                                             611,750               56,591
  Proceeds from issuance of debt                                               237,860          425,135              100,000
  Payment of loans from proceeds of stock offering                                                                  (849,723)
  Repurchase of warrants                                                                                            (400,000)
  Stock Subscription Receivable                                                                                        2,500
  Payment of capitalized lease obligations                                           -           (4,557)             (21,262)
                                                                          ---------------------------------------------------
    Net cash provided by financing activities                                  908,960        1,354,453           10,063,699
                                                                          ---------------------------------------------------

Net change in cash and cash equivalents                                        147,133          (27,646)           3,811,035
Cash and cash equivalents at beginning of period                                (2,569)         144,564              116,918
                                                                          ---------------------------------------------------
Cash and cash equivalents at end of period                                 $   144,564          116,918            3,927,953
                                                                          ===================================================

Cash paid during period for:
Interest                                                                   $     3,001      $    36,800         $     11,984
Income taxes                                                                     1,600              800                  800

Supplemental schedule of non-cash investing and financing activities:
The Company acquired the assets of Design Bas, Incorporated effective
  April 1, 1999. In conjunction  with the  acquisition,  assets and  liabilities
  were assumed as follows:
    Fair value of assets acquired                                          $         -      $   166,880
    Liabilities assumed                                                                         210,720
    Value of Common Stock issued in connection with acquisition                                 155,940
Stock and options issued as compensation and for services                      321,668        2,682,663            2,649,780
Capital Leases                                                                                   17,758               18,531


</TABLE>
   The accompanying notes are an integral part of these financial statements.
                                      F-6
<PAGE>
                                 3Dshopping.com
                          NOTES TO FINANCIAL STATEMENTS
                       -----------------------------------


Note 1        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

              THE COMPANY

              3Dshopping.com,  (the "Company"),  commenced  operations effective
              August 1, 1996.  The  Company  was  formed to design  and  develop
              innovative  marketing  and display  applications  for the Internet
              using 3D modeling software and interactive databases.  The Company
              has  developed  and  is  beginning  to  implement  and  market  to
              retailers and manufacturers,  an interactive  marketing technology
              utilizing  media  rich  content  that  incorporates  sophisticated
              graphics and other audio-visual features.

              Commencing  with  the  acquisition  of  Design  Bas,  Incorporated
              ("DBLA") on April 1, 1999,  the Company  also designs and produces
              mail order  catalogs,  brochures  and  similar  printed  media for
              department  stores and apparel  retailers.  DBLA also fulfills the
              digital photographic requirements of Web site development.

              PROPERTY & EQUIPMENT

              Property and equipment are stated at cost. The Company depreciates
              its property and equipment using the straight-line method over the
              following periods:

                         Asset                               Useful Life
                 ------------------                          -----------

                 Machinery and equipment                     3 - 5 Years
                 Furniture and fixtures                      5 Years
                 Software                                    1 - 3 Years
                 Leasehold Improvements                      3 - 6 Years

              PATENTS, TRADEMARKS & COPYRIGHTS

              Patents and trademarks  are stated at cost. The Company  amortizes
              patents and trademarks over 20 years.

              INCOME TAXES

              The  Company  accounts  for income  taxes in  accordance  with the
              provisions of Statement of Financial Accounting Standards No. 109,
              "Accounting  for Income  Taxes"  (SFAS 109).  SFAS 109  requires a
              company to recognize  deferred tax  liabilities and assets for the
              expected future tax consequences of temporary  differences between
              the financial  statement  carrying amounts and tax basis of assets
              and  liabilities and operating  losses  available to offset future
              taxable income,  using enacted tax rates in effect in the years in
              which the differences are expected to reverse.

              DEVELOPMENT COSTS

              Expenditures   during  the  research  and  development  stage  are
              expensed as incurred.  Development costs,  including direct labor,
              incurred subsequent to establishing  technological feasibility are
              capitalized. Development costs for each product are carried on the
              balance sheet at the lower of  unamortized  cost or net realizable
              value.

              ORGANIZATION COSTS

              In accordance  with the  provisions of Statement of Position 98-5,
              the Company expensed organization costs in the year ended June 30,
              1998.  The effect of this change of accounting was not material to
              that year.


                                      F-7
<PAGE>
                                 3Dshopping.com
                          NOTES TO FINANCIAL STATEMENTS
                       -----------------------------------

              ESTIMATES

              The  preparation  of  financial   statements  in  conformity  with
              generally accepted  accounting  principles  requires management to
              make estimates and  assumptions  that directly affect the reported
              amounts of assets and  liabilities,  the disclosures 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.

              LOSS PER SHARE OF COMMON STOCK

              The  loss  per  share of  common  stock  is based on the  weighted
              average number of common shares outstanding during each period, in
              conformity  with  SFAS  Statement  128  issued  by  the  Financial
              Accounting  Standards  Board and nominal  issuances  of  potential
              common  shares  for the  years  ended  June  30,  1998 and 1999 as
              required  by the  Securities  and  Exchange  Commission.  Loss per
              common  share  assuming  dilution  has not been  presented  as the
              effect would be anti-dilutive.

              CASH EQUIVALENTS

              The Company considers all highly liquid debt instruments purchased
              with a maturity of three months or less to be cash equivalents.

              REVENUE RECOGNITION

              The Company's revenues from Internet Web site design and operation
              services is  recognized  when an  arrangement  exists,  the fee is
              determinable,   collectibility  is  probable,   and  delivery  has
              occurred.   Revenues  from  Web  site  maintenance   services  are
              recognized over the period  services are performed.  Revenues from
              mail order  catalog  design and  production  are  recognized  upon
              completion of the project. On certain projects,  progress payments
              are  received  from  clients  and such  payments  are  reported as
              customer deposits.  Costs incurred on projects prior to completion
              are reported as contracts in progress.

              STOCK-BASED COMPENSATION

              The  Company  has  adopted  SFAS  Statement  123  for  stock-based
              compensation plans. This statement encourages companies to adopt a
              fair value  approach to valuing  stock  options and requires  that
              compensation  cost be recognized  based on the fair value of stock
              options granted.

              This  statement  also  establishes  fair value as the  measurement
              basis  for  transactions  in which  an  entity  acquires  goods or
              services from non-employees in exchange for equity instruments.

              RECLASSIFICATIONS

              Certain prior year amounts have been  reclassified to conform with
              current  year  presentation.  The  effects of the  changes are not
              material.


Note 2        GOING CONCERN

              The  accompanying  financial  statements  have been  prepared on a
              going concern basis,  which contemplates the realization of assets
              and the  satisfaction  of  liabilities  in the  normal  course  of
              business.  As shown in financial statements during the years ended
              June 30,  1998,  1999 and 2000,  the  Company  incurred  losses of
              $1,082,613, $4,428,515 and $8,128,336, respectively. These factors
              among  others  may  indicate  that the  Company  will be unable to
              continue as a going concern for a reasonable period of time.

                                      F-8
<PAGE>
                                 3Dshopping.com
                          NOTES TO FINANCIAL STATEMENTS
                       -----------------------------------


              The Company's  continuation  as a going concern is dependent  upon
              its  ability  to  generate  sufficient  cash  flow,  to  meet  its
              obligations on a timely basis, to obtain  additional  financing as
              may be  required,  and  ultimately  to attain  profitability.  The
              Company  is  actively  pursuing  equity  financing  through a best
              efforts  agreement  with  H.C.  Wainwright  & Co.  to place  $10.4
              million in preferred stock in a private placement. (Note 19)


Note 3        RESTRICTED CASH

              In July 1999  $442,000  of cash was  pledged as  collateral  on an
              outstanding letter of credit related to the facility lease and was
              classified as restricted cash on the balance sheet.


Note 4        CONCENTRATIONS OF RISK

              Financial  instruments,  which potentially  subject the Company to
              credit risk, are trade accounts  receivable.  Management  believes
              that their credit risk from Web site sales is not  concentrated in
              any  specific  region,  activity  or economic  characteristics  of
              specific   industries   because  The  Company  performs   services
              throughout the country and for different  industries.  Receivables
              arising from catalog production services have been concentrated in
              the apparel industry.

              Bank balances at any one institution are insured by the FDIC up to
              $100,000. At June 30, 1999, and 2000, the Company's uninsured bank
              balances total $19,479 and $873,474 respectively.

              In addition, the Company has a money market mutual fund investment
              in the amount of $1,000,000 at June 30, 2000 which is not insured.

              Two  customers  represented  25% and 20% of revenues  for the year
              ended June 30, 1999. The customer  representing 20% did not supply
              any  revenues  in the year  ended  June 30,  2000.  Two  customers
              represented  44% and 22% of  revenues  for the year ended June 30,
              2000. The customer  representing  22% will not supply any revenues
              in future years,  as the revenues  generated  were from a one-time
              transaction. The loss of the customer representing 44% of revenues
              in 2000 could have an adverse effect on the Company.


Note 5        PUBLIC OFFERING

              On July 23, 1999, the Company completed a public offering in which
              the Company sold 1,100,000 units,  each consisting of one share of
              common  stock and one  warrant  for the  purchase  of one share of
              common stock.  The common stock and warrants  underlying the units
              trade separately on the American Stock Exchange.  The warrants are
              exercisable at a purchase price of $18 per share at any time until
              they  expire on July 20,  2004,  and may be called by the  Company
              following any  consecutive  ten-day  period in which the Company's
              common stock trades over $24 per share. The following is a summary
              of net proceeds of the offering:

                  Sales of Shares                      $13,200,000
                  Underwriting discount                   (990,000)
                  Fees                                    (276,352)
                  Loan Principal
                    and interest                          (200,595)
                                                       ------------
                  Net Proceeds                         $11,733,053
                                                       =+==========



                                      F-9
<PAGE>
                                 3Dshopping.com
                          NOTES TO FINANCIAL STATEMENTS
                       -----------------------------------




Note 6        COMMON STOCK

              During fiscal year 1998 the Company  issued 56,600 shares at $1.25
              per share, 233,333 shares at $ 1.50 per share and 50,000 shares at
              $1.00 per  share  for cash,  and  32,700  shares in  exchange  for
              services  at $1.19 to $1.88 per share.  The  Company  also  issued
              255,434 shares for $1.15 per share from February  through June 30,
              1998 to  shareholders  who  also  received  warrants  to  purchase
              127,717  additional  common  shares  at  $1.50  per  share.  These
              warrants were exercised in July 2000.

              During  fiscal  year 1999 the  Company  issued  233,000  shares of
              common  stock  upon  exercises  of  outstanding  options at prices
              ranging  from $1.25 to $9.00 per share  between  November 18, 1998
              and January 21,  1999.  The Company also issued  25,000  shares at
              $.001 per share in exchange for  financial  and advisory  business
              services on December 21,  1998,  30,347  shares upon  exercises of
              cashless  warrants on December 7, 1998,  196,000  shares at prices
              ranging  from  $1.00 to $1.15 per share upon  conversion  of notes
              payable on February 12, 1999, and 10,000 shares for the net assets
              of DBLA valued at $15.594 per share.

              During  fiscal year 2000 the Company  issued  1,100,000  shares of
              common  stock to the public  upon the  completion  of its  Initial
              Public Offering (Note 5). The Company also issued 38,402 shares of
              common  stock  upon  exercises  of  outstanding  options at prices
              ranging from $1.25 to $9.19 per share between October 27, 1999 and
              May 15, 2000, and issued 230,299 shares upon exercises of cashless
              warrants  between  December 3, 1999 and May 10, 2000.  The Company
              also  issued  75,000  shares at $7.50 per  share in  exchange  for
              financial and advisory business services on April 14, 2000.

              PREFERRED STOCK

              The Company authorized  5,000,000 shares of Preferred Stock during
              the year ended June 30, 1999. No shares have been issued.


Note 7        STOCK OPTIONS

              (a) EMPLOYEE OPTIONS

              During the years ended June 30, 1998,  1999,  and 2000 the Company
              granted options to employees and recognized  compensation  expense
              of  $15,378,  $2,021,938,  and  $1,345,627  respectively,  as  the
              options were granted.

              A summary of the status of the Company's employee stock options as
              of June 30, 1998,  1999 and 2000,  and changes during the years is
              as follows:


<TABLE>
<CAPTION>
                                 June 30, 1998                  June 30, 1999                  June 30, 2000
                                 -------------                  -------------                  -------------
                                                  Weighted                       Weighted                     Weighted
                                                   Average                       Average                       Average
                                   Shares        Exercise Price   Shares        Exercise Price   Shares      Exercise Price
                                               ----------------                 --------------               --------------
<S>                                <C>           <C>                 <C>          <C>             <C>      <C>
Outstanding at Beginning of Year   $    -        $         -         36,000       $     1.75      479,940  $    7.97
Granted                            36,000               1.75        503,940             7.61      872,500       9.43
Exercised                               -                  -        (60,000)           (1.25)     (38,402)     (1.47)
Forfeited                               -                  -              -                -     (274,223)     (9.95)
                                 ----------       ----------     ----------        ----------   ----------  ----------
Outstanding at End of Year        36,000         $      1.75        479,940             7.97    1,039,815       8.92

</TABLE>
                                      F-10
<PAGE>
                                 3Dshopping.com
                          NOTES TO FINANCIAL STATEMENTS
                       -----------------------------------

<TABLE>
<CAPTION>



                                                                        June 30, 1998        June 30, 1999        June 30, 2000
                                                                        -------------        -------------        -------------
<S>                                                                     <C>                      <C>                <C>
               Options exercisable at year-end                                 -                   196,000            325,324
               Weighted average fair value of
                options granted during the year
               Exercise price at market price                                  -                 $    5.41        $      9.66
               Exercise price above market price                               -                         -               7.70
               Exercise price below market price                             .43                      7.24                  -

         The following  summarizes  information about employee stock options at June 30, 2000:
</TABLE>

<TABLE>
<CAPTION>
                              Options Outstanding                                            Options Exercisable
---------------------------------------------------------------------------------    ------------------------------------

                                       Weighted-Average                                               Weighted Average
   Range of            Number             Remaining           Weighted-Average         Number             Exercise
Exercise Prices      Outstanding       Contractual Life        Exercise Price        Exercisable            Price
----------------    --------------    -------------------    --------------------    ------------    --------------------
<S>                    <C>                   <C>                  <C>                 <C>                  <C>
$ 1.25                 128,000               3.39 years           $  1.25             128,000              $  1.25
  6.063-7.70           388,000               9.79 years              7.0918            10,000                 6.063
  9.1875-13.688        426,940               9.38 years             11.3175           164,355                11.0277
 14.00-15.875           96,875               8.79 years             15.7782            22,969                15.8748
</TABLE>

              The fair values of option  grants were  estimated  on the dates of
              grant  using  the  Black-Scholes  option  pricing  model  with the
              following  assumptions for 1998:  Risk-free interest rate of 5.32%
              to 5.83%;  Dividend yield of 0%;  Expected life of 2.0 years;  and
              Volatility of 61.4%. Assumptions for 1999: Risk-free interest rate
              of 4.43% to 6.01%;  Dividend yield of 0%;  Expected life of 1.0 to
              4.0 years; and Volatility of 61.0% to 61.4%. Assumptions for 2000:
              Risk-free  interest rate of 5.73% to 6.78%;  Dividend yield of 0%;
              Expected  life of 1.0 to 4.0  years;  and  Volatility  of 65.0% to
              67.0%.

              On February 21, 1999 the directors  authorized  the adoption of an
              employee  stock  option  plan and  reserved  a total of  1,000,000
              common  shares.  On  September  21,  1999 the  Board of  Directors
              adopted  an  amendment   to  the  Plan,   which  was  approved  by
              shareholders,  to reserve an additional  1,000,000  shares for the
              Plan, thereby increasing the total number of shares reserved under
              the  Plan to  2,000,000  common  shares.  A total of  278,940  and
              872,500  options,  respectively  were issued to  employees  in the
              years ended June 30, 1999 and 2000 under the Plan.

              The Board of Directors has also adopted an Employee Stock Purchase
              Plan (the "ESPP") for the benefit of the  Company's  employees and
              others who provide services to the company,  which was approved by
              the  shareholders.  A total of 2,000,000 shares have been reserved
              for issuance under the ESPP.

              (b) NON-EMPLOYEE OPTIONS

              During the years ended June 30, 1998,  1999,  and 2000 the Company
              granted  options  and  warrants  to  certain   non-employees   and
              recognized   $203,077,   $354,500   and   $741,653   of   expense,
              respectively, as the options or warrants were granted.

                                      F-11
<PAGE>
                                 3Dshopping.com
                          NOTES TO FINANCIAL STATEMENTS
                       -----------------------------------



              A  summary  of the  status  of the  Company's  non-employee  stock
              options  and  warrants  as of June 30,  1998,  1999 and 2000,  and
              changes during the years is as follows:

<TABLE>
<CAPTION>
                                 June 30, 1998                  June 30, 1999                  June 30, 2000
                                 -------------                  -------------                  -------------
                                                  Weighted                       Weighted                     Weighted
                                                   Average                       Average                       Average
                                   Shares        Exercise Price   Shares        Exercise Price   Shares      Exercise Price
                                               ----------------                 --------------               --------------
<S>                                <C>           <C>                 <C>          <C>             <C>      <C>
Outstanding at Beginning of Year        -        $         -        497,717       $     1.85      369,333  $    2.06
Granted                           497,717               1.85         45,000             7.75      266,500      13.16
Exercised                               -                  -       (173,384)           (2.94)    (230,299)     (1.53)
Forfeited                               -                  -              -                -      (47,817)      1.64
                                 ----------       ----------     ----------        ----------   ----------  ----------
Outstanding at End of Year        497,717        $      1.85        369,333       $     2.06      357,717  $   10.16

</TABLE>
<TABLE>
<CAPTION>



                                                                        June 30, 1998        June 30, 1999        June 30, 2000
                                                                        -------------        -------------        -------------
<S>                                                                     <C>                      <C>                <C>
               Options exercisable at year-end                              497,717                 369,333           357,717
               Weighted average fair value of
                 options granted during the year
               Exercise price at market price                                  -                  $     -         $     13.06
               Exercise price above market price                               -                        -               15.37
               Exercise price below market price                             .41                       7.88               -


 The following summarizes information about non-employee stock options and warrants at June 30, 2000:
</TABLE>
<TABLE>
<CAPTION>

                              Options Outstanding                                            Options Exercisable
---------------------------------------------------------------------------------    ------------------------------------

                                       Weighted-Average                                               Weighted Average
   Range of            Number             Remaining           Weighted-Average         Number             Exercise
Exercise Prices      Outstanding       Contractual Life        Exercise Price        Exercisable            Price
----------------    --------------    -------------------    --------------------    ------------    --------------------
<S>                    <C>                   <C>                  <C>                 <C>                  <C>
$ 1.50                 127,717               .44 years            $ 1.50              127,717                $ 1.50
  8.00-12.00            70,000              2.59 years             10.64               70.000                 10.64
 12.875-19.00          120,000              3.09 years             14.65              120,000                 14.65
 20.00-27.00            40,000               .42 years             23.50               40,000                 23.50
</TABLE>

               The fair values of the options or warrants granted were estimated
               on the dates of grant  using  the  Black-Scholes  option  pricing
               model with the following assumptions for 1998: Risk-free interest
               rate of 5.32% to 5.45%;  Dividend  yield of 0%;  Expected life of
               .6667 to 2.4 years;  and  Volatility  of 61.4%.  Assumptions  for
               1999:  Risk-free  interest rate of 4.51%;  Dividend  yield of 0%;
               Expected life of .1667 to .3333 years;  and  Volatility of 61.4%.
               Assumptions for 2000:  Risk-free interest rate of 6.15% to 6.18%;
               Dividend  yield of 0%;  Expected  life of 4.0 to 5.0  years;  and
               Volatility of 65.0% to 67.0%.


                                      F-12

<PAGE>
                                 3Dshopping.com
                          NOTES TO FINANCIAL STATEMENTS
                       -----------------------------------


Note 8         INCOME TAXES

               Deferred tax assets are comprised of the following:



                                            June 30, 1999         June 30, 2000
                                            -------------         -------------

         Federal net operating loss         $1,013,000            $3,571,000
         State net operating loss              404,000               667,000
         R & D credit carryforward              51,000                55,000
         Property and equipment                (11,000)               (4,000)
         Stock Compensation                    288,000               816,000
         Bad Debt Reserve                            -                 8,000
         Other                                     155                 2,000
                                            -------------         -------------
                                             1,745,155             5,115,000
         Less valuation allowance           (1,745,155)           (5,115,000)
                                            -------------         -------------
         Net deferred tax asset                     $0                    $0







               The valuation  allowance  increased by $299,000,  $1,261,000  and
               $3,369,845  for the years  ended  June 30,  1998,  1999 and 2000,
               respectively.

               At June 30, 2000 the Company has incurred loss  carryforwards for
               income tax purposes and earned research and development  credits,
               which expire as follows:


<TABLE>
<CAPTION>

                                                                            Federal            State
                                                                            -------            -----
               Net Operating Losses
<S>                                                            <C>                           <C>
                 Expiring....................................  2002                          $531,000
                                                               2003                           865,000
                                                               2004                         3,175,000
                                                               2005                         2,975,000
                                                               2012        $518,000
                                                               2013         858,000
                                                               2014       3,176,000
                                                               2015       5,951,000

               Research and Development Credits
                 Expiring....................................  2012          17,000             4,000
                                                               2013          17,000             9,000
                                                               2014           2,000             1,000
                                                               2015           3,000             2,000

</TABLE>
                                      F-13
<PAGE>
                                 3Dshopping.com
                          NOTES TO FINANCIAL STATEMENTS
                       -----------------------------------




               The Company's provision for income taxes differed from the amount
               computed by applying the statutory  U.S.  federal income tax rate
               to losses as follows:
<TABLE>
<CAPTION>

                                                             1998              1999               2000
                                                             ----              ----               ----
<S>                                                   <C>                <C>                 <C>
Tax benefit determined by applying the U.S.
  statutory rate to loss before income taxes            $(772,000)       $(1,913,000)       $(2,764,000)
Change in valuation allowances                            299,000          1,261,000          3,369,845
Stock Compensation                                        167,000             73,000            348,000
Tax rate differences and State tax                        306,000            555,000           (330,000)
Change in estimated effective tax rates                         -                  -           (636,000)
Other                                                           -             24,000             12,155
                                                           ------             ------             ------
Provision (credit) for income taxes                            $0                $0                  $0
</TABLE>
                The Internal  Revenue Code contains  provisions  which may limit
                the loss  carryforwards  available  if  significant  changes  in
                stockholder ownership of the Company occur.


Note 9         SHORT-TERM BORROWINGS

               Unsecured  promissory notes payable at June 30, 1999 and 2000 are
               comprised of:
<TABLE>
<CAPTION>

                                                                               June 30
                                                                       --------------------------
                                                                       1999                  2000
                                                                       ----                  ----


               Note due upon  completion of
               public  offering with interest at 7%
               per annum.
              <S>                                                     <C>                     <C>
               Paid July 1999                                          100,000                  -

               Note due on demand with interest at 12% per annum.
               Paid August 2, 1999                                      25,000                  -

               Note due August 31, 1999 with
               interest at 9% per annum(1)
               Paid July 26, 1999                                      500,000                  -
                                                                       -------             ------

                                                                      $625,000             $   -
                                                                       =======             ======
</TABLE>

(1)                The note holder also received warrants to acquire  $2,000,000
                   of the Company's  Common Stock for  $1,500,000.  The $500,000
                   difference  between  the value of the stock to be issued  and
                   the  consideration  to be  paid  is  accounted  for  as  loan
                   origination  costs and was  amortized  over the period of the
                   loan. Accordingly,  $399,225 and $100,775,  respectively, are
                   included  in  interest  expense  for the years ended June 30,
                   1999 and 2000.

              On April 1, 1999 the Company assumed a $65,000 revolving bank line
              of credit  from DBLA which  bears  interest  of 10.25% at June 30,
              1999.  Minimum  monthly  interest  payments were calculated on the
              average daily balance.  The outstanding  principal balance at June
              30, 1999 was $54,000, which was repaid along with accrued interest
              on August 9, 1999.






                                      F-14

<PAGE>
                                 3Dshopping.com
                          NOTES TO FINANCIAL STATEMENTS
                       -----------------------------------





Note 10       RELATED PARTY TRANSACTIONS

              The principal  shareholder and a minor shareholder  advanced funds
              to the Company,  at 7% per annum interest.  Upon completion of the
              public offering in July 1999,  these notes were paid in full (Note
              5).

              Advances by  shareholders  to the Company  were  $60,135 and $0 at
              June  30,  1999  and  2000,   respectively,   and   repayments  to
              shareholders  were $50,000 and $70,723 during the years ended June
              30, 1999 and 2000, respectively.

              Interest expense on these advances amounted to $2,427,  $5,447 and
              $0  for  the  years  ended  June  30,   1998,   1999,   and  2000,
              respectively.  The balance due on the  advances was $70,723 and $0
              at June 30, 1999 and 2000 respectively.

              In March and May 2000,  the  Company  loaned  $85,000 to the Chief
              Executive Officer under promissory notes. The two promissory notes
              for $25,000 and  $60,000,  respectively  bear  interest at 10% per
              annum and,  along with any accrued  interest  are  repayable  upon
              demand by the Company. The CEO may make prepayments of the loan in
              whole or in part without penalty.

              In May 2000,  the Company  loaned $25,000 to the President & Chief
              Operating  Officer under a promissory note. The promissory note is
              a  non-interest  bearing  note that  serves as an advance  against
              future sales commissions earned. If the President/COO remains with
              the company for one year after the date of the offer  letter,  the
              Company  shall  forgive  the note or any balance  therein,  net of
              previously applied  commissions,  in full. If the  President/COO's
              employment  with the  Company  is  terminated,  the note  shall be
              forgiven  at a rate of  $7,500  per  month  over a period  of 3.33
              months.  Through June 30, 2000, the Company has amortized  $9,794,
              which was charged to compensation expense.

              Notes due to the Company from shareholders or officers were $0 and
              $100,510 at June 30 1999 and 2000, respectively.


Note 11       OTHER RECEIVABLES

              In  July  1999,  the  Company  loaned  $225,000  to a key  Company
              employee under a secured  promissory note with interest at 10% per
              annum and  secured by a deed of trust on a  residential  property.
              The  borrower is no longer an employee  of the  company.  The note
              plus accrued  interest became due on September 1, 2000 and was not
              repaid.   Foreclosure   proceedings   began  September  12,  2000.
              Management  believes  that the value of the  security  exceeds the
              outstanding indebtedness.



                                      F-15
<PAGE>
                                3Dshopping.com
                          NOTES TO FINANCIAL STATEMENTS
                       -----------------------------------



<TABLE>
<CAPTION>

Note 12       PROPERTIES AND EQUIPMENT

              Property and Equipment is comprised of:
                                                           June 30, 1999         June 30, 2000
                                                           -------------         -------------

<S>                                                          <C>                    <C>
              Machinery and Equipment                        $  125,576             $  417,411
              Furniture and Fixtures                             54,964                 78,057
              Leasehold Improvements                                  -                 73,854
              Software                                           58,197                 93,825
              Leased computers                                   29,954                 53,608
                                                           -------------         -------------
                                                                268,691                716,755
              Accumulated Depreciation                          124,687                234,764
                                                           -------------         -------------
              Net                                             $ 144,004             $  481,991
                                                           =============         =============

</TABLE>
              Depreciation  expense for the years ended June 30, 1998,  1999 and
              2000 amounted to $43,208, $66,148 and $135,077, respectively.


Note 13       CAPITAL LEASE OBLIGATION

              Property held under capital  leases,  included with owned property
              on the balance  sheets at June 30,  1999 and 2000  consists of the
              following:

                                                            June 30,
                                                      1999           2000
                                                      ----           ----
              Computer Equipment                    29,954          53,608
              Less: Accumulated Depreciation        (4,222)        (22,642)
                                                    -------        --------

                         Net                        25,732          30,966



              Depreciation  of these  assets for the year  ended June 30,  1998,
              1999 and 2000 totaled $0, $4,222 and $18,420, respectively, and is
              included in depreciation expense.

              Capital lease obligation consists of the following:


                                                               June 30,
                                                         -------------------
                                                         1999           2000
                                                         ----           ----
              Non-cancelable equipment leases
              expiring through January 2002 payable
              in monthly installments aggregating $2,285
              including interest at rates ranging from
              12% to 32% secured by certain equipment    25,397         27,788

              Less: Current portion of capital lease
              obligation                                 (13,079)       (18,431)
                                                         --------       --------

              Non-current portion of capital lease
              obligation                                  12,318          9,357


                                      F-16
<PAGE>
                                3Dshopping.com
                          NOTES TO FINANCIAL STATEMENTS
                       -----------------------------------

              The future  annual lease  payments  under these leases at June 30,
              2000 are as follows:

              Years ending June 30,          2001          22,775
                                             2002          10,065
                                                      -----------
              Total lease payments                         32,840
              Less amount representing interest            (5,052)
                                                      -----------

              Total obligation under capital lease         27,788

Note 14       COMMITMENTS AND CONTINGENT LIABILITIES

              LEASES

              The  Company  executed  a lease  agreement  on July  22,  1999 for
              property in Marina Del Rey, California in order to consolidate its
              sales and technology development offices and its studio production
              facility.  Occupancy  commenced in September 1999. The term of the
              lease is six years  and  terminates  in July  2005.  Monthly  rent
              expense is $48,853  from lease  commencement  to January 31, 2002;
              $53,481 from  February 1, 2002 to July 31, 2004,  and $55,024 from
              August 1, 2004 to July 3,  2005.  There is an option to extend the
              lease for an additional sixty months.

              Future minimum lease payments for the next five years of the lease
              and in the aggregate are:

                                        June 30, 2001          586,236
                                                 2002          609,371
                                                 2003          641,760
                                                 2004          641,760
                                                 2005          658,733
                                                           -------------
                                                           $ 3,137,860
                                                           =============

              The  lease   required   the  Company  to  provide  the  lessor  an
              unconditional irrevocable letter of credit in amounts that decline
              from $442,000 to $277,166  during the initial lease term.  Subject
              to various terms and  conditions,  upon a material  default by the
              lessee, the lessor may draw on the letter of credit to satisfy the
              lease terms.

              The monthly rent includes a standard  charge for  utilities.  Rent
              expense for the years ended June 30, 1998,  1999 and 2000 amounted
              to $35,325, $56,383 and $736,562 respectively.

              During the year ended June 30, 2000,  The Company  terminated  its
              two previous facility leases.

              LITIGATION

              The  Company  is engaged in legal  proceedings  incidental  to its
              normal business activities. In the opinion of management,  none of
              these  proceedings  are  material  in  relation  to the  Company's
              financial position.

Note 15       LOSS PER SHARE

              The loss per common share is  determined  by dividing the net loss
              for each period by the weighted  average  number of common  shares
              outstanding during each period.

                                      F-17
<PAGE>
                                3Dshopping.com
                          NOTES TO FINANCIAL STATEMENTS
                       -----------------------------------

<TABLE>
<CAPTION>


                                                                   Years Ended June  30,
                                                                   ---------------------
                                                           1998              1999           2000
                                                           -----            ------          -----

              Common Stock Outstanding
              Beginning of
             <S>                                       <C>              <C>              <C>
              Period (1)                                 2,432,666        3,119,800        3,685,747

              Issued during
              the period (1)                               687,134          565,947        1,443,701

              End of the
              Period (1)                                 3,119,800        3,685,747        5,129,448

              Weighted
              Average number
              of shares                                  3,823,228        4,045,746        4,811,623
              (1) Net of stock subscriptions
</TABLE>

              The Securities and Exchange  Commission requires nominal issuances
              of  potential  common  shares  issued  within one year prior to an
              Initial Public Offering filing date to be included in earnings per
              share  calculations as if outstanding  for all periods  presented.
              These calculations for 1998 and 1999 include all such shares.

              Loss per common share assuming  dilution has not been presented as
              the result would have been anti-dilutive.


Note 16       FAIR VALUES OF FINANCIAL INSTRUMENTS

              The carrying amounts for cash, receivables, contracts in progress,
              accounts  payable  and  accrued  expenses,   notes  payable,   the
              line-of-credit  and  customer  deposits   approximate  fair  value
              because of the short maturity of these instruments.


Note 17       NON-CASH FINANCING AND INVESTING ACTIVITIES

              Acquisition of DBLA

              Effective April 1, 1999, the Company  acquired  $166,880 in assets
              of DBLA in exchange for the assumption of its debt of $210,720 and
              the issuance of 10,000 shares of the Company's common stock valued
              at  $155,940.  The  excess  of the fair  value  of the net  assets
              acquired of $199,780 is being  amortized  over a three-year  term.
              Amortization  for the years ended June 30, 1999 and 2000  amounted
              to $16,648 and $66,572 respectively.

                                      F-18

<PAGE>
                                3Dshopping.com
                          NOTES TO FINANCIAL STATEMENTS
                       -----------------------------------


Note 18       BRIDGE LOAN

              In March 1999 the Company  received an unsecured  $500,000  bridge
              loan in the form of  promissory  notes due  August  31,  1999 with
              interest  at 9%.  That  note was  paid  upon  the  closing  of the
              Company's  public offering in July 1999. The note holders have the
              right to receive  warrants to acquire  $2,000,000 of the Company's
              Common Stock for $1,500,000.

Note 19       SUBSEQUENT EVENTS

              On  September  1, 2000  Lawrence  Weisdorn,  Chairman of the Board
              resigned his position.  On that date,  Weisdorn and 3Dshopping.com
              executed a mutual general  release whereby  Weisdorn  received two
              years of severance  pay in the gross  amount of $300,000,  payable
              $150,000 upon signing and the  remaining  gross amount of $150,000
              within  three  days   following   the  receipt  of  proceeds  from
              3Dshopping.com's next round of financing.

              On August 1, 2000,  3Dshopping.com  engaged H. C. Wainwright & Co.
              as investment  banker,  financial  advisor and exclusive  agent to
              arrange a private  placement of  preferred  stock in the amount of
              $10,400,000. (Note 2)

              On  September  21, 2000 the company  acquired a 50.1%  interest in
              Looksonic L.L.C. by issuance of options to purchase 150,000 shares
              of  3Dshopping.com  common stock with 50,000 shares vesting on the
              transaction  date  and  the  remaining  shares  vesting  based  on
              achievement of certain revenue targets.

              On September 13, 2000,  the company signed an agreement to acquire
              " electronic  content  management  system"  technology (eCMS) from
              Channelspace  Entertainment,  Inc. for an initial consideration of
              833,333  shares  of   3Dshopping.com   common  stock.   Additional
              consideration  to be paid in shares on a  quarterly  basis for six
              quarters,  beginning  four months  after the  closing,  based upon
              gross revenue to a maximum of $12.5 million.


                                      F-19