<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

            (X) Annual Report under Section 13 or 15(d) of the Securities
         and Exchange Act of 1934 for the fiscal year ended January 31, 1999
                                      - or-
             ( ) Transition Report under Section 13 or 15(d) of the
    Securities Exchange Act of 1934 for the transition period from ____ to ____

                          FINE.COM INTERNATIONAL CORP.
            Name of small business issuer as specified in its charter
                         Commission File Number 0-22805

         State of Washington                                91-1657402
       State or Other Jurisdiction of                    I.R.S. Employer
       Incorporation or Organization                   Identification Number

                          1525 Fourth Avenue, Suite 800
                            Seattle, Washington 98101
                     Address of Principal Executive Offices

                                 (206) 292-2888
                             Issuer Telephone Number

Securities registered under Section 12(b)         Common Stock, no par value
of the Exchange Act:

Securities registered under Section 12(g)         (None)
of the Exchange Act:                     

Check whether the registrant (1)                 Yes /X/        No / /
filed all reports required to be 
filed by Section or 15(d) of the 
Securities Exchange Act of 1934 during 
the past 12 months (or for such shorter 
period that the registrant was required 
to file such reports), and (2) has been 
subject to such filing requirements for 
the past 90 days.

Check if disclosure of delinquent                  Yes / /        No /X/
filers in response to Item 405 of 
Regulation S-B is not contained in this 
form, and no disclosure will be 
contained, to the best of 
Registrant's knowledge, in definitive 
proxy or information statements 
incorporated by reference in Part III 
of this Form 10-KSB or any amendment 
to this Form 10-KSB.

The registrant's revenues for its most recent 
fiscal year were $6,133,275

As of April 21, 1999, there were 2,669,590 shares of the Registrant's common
stock issued and outstanding and the aggregate market value of such common stock
held by non-affiliates was approximately $3,124,759 based on a price of $2.13
per share, representing the average of the closing bid ($2.06) and closing ask
($2.19) prices on that date.

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

                       DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of this Annual Report, to the extent not
set forth herein, is incorporated herein by reference from the registrant's
definitive proxy statement relating to the Company's 1999 annual meeting of
stockholders, which definitive proxy statement will be filed with the Securities
and Exchange Commission within 120 days after the end of the fiscal year to
which this Annual Report relates.


<PAGE>


                          FINE.COM INTERNATIONAL CORP.
                                   FORM 10-KSB

                                TABLE OF CONTENTS
<TABLE>
<S>                                                                                               <C>
PART I .......................................................................................... 1

     ITEM 1.  DESCRIPTION OF BUSINESS ........................................................... 1
         Forward-Looking Statements ............................................................. 1
         Overview ............................................................................... 1
         Business Strategy ...................................................................... 2
         The Internet and the Web ............................................................... 2
         Web Sites .............................................................................. 3
         Clients and Services ................................................................... 3
         Competition ............................................................................ 5
         Employees .............................................................................. 5
         Factors Affecting the Company's Business, Operating Results and Financial Condition .... 6

     ITEM 2.  PROPERTIES ........................................................................ 9

     ITEM 3.  LEGAL PROCEEDINGS .................................................................10

     ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ...............................10


PART II .........................................................................................10

     ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS ..........10
         Market Information .....................................................................10
         Holders ................................................................................11
         Dividends ..............................................................................11
         Changes in Securities and Use of Proceeds ..............................................11
         Recent Sales of Unregistered Securities ................................................11

     ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS
         OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS .......................................12
         Overview ...............................................................................12
         Results of Operations for the Fiscal Years Ended January 31, 1999 and 1998 .............13
         Liquidity and Capital Resources ........................................................14
         Seasonality and Inflation ..............................................................15
         Year 2000 Readiness Disclosure .........................................................15

     ITEM 7.  FINANCIAL STATEMENTS ..............................................................16

     ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
         ON ACCOUNTING AND FINANCIAL DISCLOSURE .................................................31

PART III ........................................................................................32

     ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K .................................................32

</TABLE>

<PAGE>


PART I

ITEM 1.  DESCRIPTION OF BUSINESS

FORWARD-LOOKING STATEMENTS

THIS ANNUAL REPORT ON FORM 10-KSB CONTAINS FORWARD-LOOKING STATEMENTS 
REGARDING THE COMPANY, ITS BUSINESS, PROSPECTS AND RESULTS OF OPERATIONS AND 
VIEWS WITH RESPECT TO FUTURE EVENTS AND PERFORMANCE. THESE FORWARD-LOOKING 
STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES POSED BY MANY FACTORS AND 
EVENTS THAT COULD CAUSE THE COMPANY'S ACTUAL BUSINESS, PROSPECTS AND RESULTS 
OF OPERATIONS TO DIFFER MATERIALLY FROM HISTORICAL RESULTS OR THOSE THAT MAY 
BE ANTICIPATED BY SUCH FORWARD-LOOKING STATEMENTS. WORDS USED IN THIS REPORT 
SUCH AS "ANTICIPATE," "BELIEVE," "EFFECT," "ESTIMATE," "EXPECT," "MAY," 
"WILL" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING 
STATEMENTS BUT ARE NOT EXCLUSIVE MEANS OF IDENTIFYING SUCH STATEMENTS. 
FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, 
THOSE DISCUSSED HEREIN AS WELL AS THOSE DISCUSSED UNDER THE CAPTIONS "FACTORS 
AFFECTING THE COMPANY'S BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION" 
AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
OF OPERATIONS" AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS REPORT. READERS 
ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING 
STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE OF THIS REPORT. THE COMPANY 
UNDERTAKES NO OBLIGATION TO REVISE ANY FORWARD-LOOKING STATEMENTS IN ORDER TO 
REFLECT EVENTS OR CIRCUMSTANCES THAT MAY SUBSEQUENTLY ARISE. IN ADDITION, THE 
DISCLOSURES UNDER THE CAPTION "FACTORS AFFECTING THE COMPANY'S BUSINESS, 
OPERATING RESULTS AND FINANCIAL CONDITION" CONSIST PRINCIPALLY OF A BRIEF 
DISCUSSION OF RISKS THAT MAY AFFECT FUTURE RESULTS AND ARE, IN THEIR 
ENTIRETY, FORWARD-LOOKING IN NATURE. READERS ARE URGED TO CAREFULLY REVIEW 
AND CONSIDER THE VARIOUS DISCLOSURES MADE BY THE COMPANY IN THIS REPORT, AS 
WELL AS THE COMPANY'S ANNUAL, PERIODIC AND CURRENT REPORTS FILED WITH THE 
COMMISSION, AND THOSE DESCRIBED FROM TIME TO TIME IN THE COMPANY'S PRESS 
RELEASES AND OTHER COMMUNICATIONS, WHICH ATTEMPT TO ADVISE INTERESTED PARTIES 
OF THE RISKS AND FACTORS THAT MAY AFFECT THE COMPANY'S BUSINESS.

OVERVIEW

fine.com International Corp. (the "Company") provides strategic consulting, 
technical development and graphic design services and solutions to allow its 
clients to utilize Web-based interactive technologies. The Company's Web 
application development process combines marketing expertise with 
state-of-the-art interactive database compilation and dissemination 
techniques and technologies.

The Company develops marketing-driven, interactive, database-oriented Web 
applications for business clients who seek to establish a commercial presence 
on, or conduct Internet commerce over, the Web. Corporate clients for whom 
the Company has built and implemented such Internet, Extranet and Intranet 
sites include: Amway Corporation, Fluke Corporation, Fuji Photo Film Co. 
Ltd., General Electric Company, Intel Corporation, Japan Airlines Company, 
Ltd., Mann Packing Company, Marriott International, Inc., Microsoft 
Corporation, Mitsui and Co., Ltd., the Nasdaq-Amex Stock Market, Optiva 
Corporation, Penford Corporation, Safeway Inc., Twentieth Century Fox Home 
Entertainment, Inc., Wall Data, Inc., the State of Washington, Windermere 
Services Company and WOWFactor.

The Company is a Solution Provider Partner (the highest attainable service 
level currently offered by Microsoft) and was the first Web development 
company to achieve this designation. The Company also believes it was the 
first Web developer featured in a direct mail campaign conducted by 
Microsoft. The Company has developed several significant client relationships 
from this association.


                                                                          1)

<PAGE>


BUSINESS STRATEGY

The Company specializes in producing complex, database driven and customer 
relationship marketing-oriented Web applications. The Company believes that 
such state-of-the-art Web applications--as compared to traditional, one-way 
broadcast media (such as television) or many first-generation Web sites--will 
become an essential means of conducting business for many commercial 
organizations.

The Company believes that successful Web sites require the effective 
utilization of database integration technologies or interactive database 
marketing techniques. The Company consults with each of its commercial Web 
site clients, first to establish specific database driven relationship 
marketing strategies, and then to develop unique Web site features designed 
to entice visitors to provide information useful to the client regarding the 
visitor's identity, interests and position in the customer lifecycle. Through 
such Web applications, the Company's clients obtain information-rich 
databases for use in the clients' overall sales and marketing efforts.

The Company's Web application developers, layout artists and graphic 
designers use third-party software (primarily Microsoft and UNIX), 
third-party hardware and internally developed and customized software to 
plan, develop and maintain Web applications for the Company's clients.

THE INTERNET AND THE WEB

The Internet is a worldwide electronic communications system, interconnecting 
millions of personal computers and network servers. The structure of the 
Internet allows for open communication between two or more parties at a low 
cost. As a result, it is dramatically changing the way businesses conduct 
commerce and people communicate.

The Internet uses the standard of inter-networking protocol software TCP/IP 
to transmit information. Using TCP/IP as a foundation, hardware and software 
developers have continuously invented new products and functions to enhance 
the end-user experience. The result is an expansion of applications for the 
Internet, which is drawing more people and businesses to use it as their 
primary commerce and communications tool. Introduced in 1992, the World Wide 
Web (the "Web") operates on the Internet and connects servers using Hypertext 
Transfer Protocol ("HTTP"). This computer network makes it possible for users 
to see text and images instead of computer code and for geographically 
disperse users to simultaneously view information stored at a single location.

The Company believes that the Internet and the Web offer new and powerful 
mediums for commercial organizations to communicate and conduct commerce with 
their customers, vendors and internal associates. There are three primary 
types of sites that are currently being developed: Internet, Extranet and 
Intranet. Internet sites can be viewed by anyone on the Internet and may 
contain informational pages or conduct e-commerce. Extranet sites are secured 
and viewable only by selected individuals, through a password or personal 
identification number. These sites are typically used as commerce and 
communication tools between businesses and their suppliers or businesses and 
their customers, if a membership is required. Intranet sites are also 
secured, but are typically characterized as a communication tool between a 
business and its internal associates. These sites are often used to provide 
the latest company information, such as employee and benefit handbooks as 
well as operating data. The Company believes that each of these above 
mentioned types of sites provide efficient and low-cost alternatives to 
current publishing and broadcasting models.



(2

<PAGE>

WEB SITES

A Web site is a compilation of computer documents at a specific address or 
Universal Resource Locator (URL). Each document within a Web site is called a 
page. A Web site may be static and contain only a few pages or it may be 
dynamic with hundreds of pages and constantly changing information.

The Company believes that certain technological advances have increased the 
acceptance of the Internet, including: faster and more efficient personal 
computers and modems, the introduction of easy-to-use Web browsers, the 
availability of informational, entertainment and commercial software 
applications and improved security features. As a result, many business and 
individual consumers are choosing to use it as their primary commerce and 
communications tool.

CLIENTS AND SERVICES

The Company designs, develops and implements customized software applications 
that allow its clients to gather and communicate business information through 
the Internet. The Company believes that an online presence should function as 
an integrated piece of an organization's overall marketing, commerce and 
business strategy. The Company's services with respect to a particular 
client's interactive Web site may fall within any combination of up to three 
major areas: Web site planning, Web site development and Web site maintenance.

WEB SITE PLANNING.  The Company's process of developing a Web site begins 
with planning.  Web site planning generally  consists of: 1) high level  
marketing  and  business  process  consultation  called the Scope  Analysis;  
and 2) detailed specifications of a site's feature set and functionality 
called the Blueprint.

1. SCOPE ANALYSIS. The Scope Analysis is the first step in the Planning Phase
and an integral part of the overall development process. In the Scope Analysis,
the client's business case is documented; goals, objectives and priorities are
outlined; the development team is identified; roles within the team are agreed
upon; and an initial architectural plan is presented. An essential component of
the Scope Analysis is the review or creation of the client's strategic plan for
its online endeavor. The Company engages in two principle forms of strategic
consultation.

     - INTERNET MARKETING CONSULTATION. The Company believes that one of its
     strengths is its knowledge and utilization of online marketing principles.
     Web sites created by the Company are designed with the idea that the end
     product should be an integrated part of the client's overall marketing
     plan. The Company believes that its use of marketing principles during
     development differentiates the Company from its competitors.

     - INTRANET BUSINESS PROCESS CONSULTATION. Many of the marketing principles
     used in designing an Internet Web site are also applied by the Company in
     designing Intranet Web sites for its clients. Utilizing online marketing
     principles, the Company and client identify the target audience and match
     applicable information with the appropriate recipient. In addition, the
     Company consults with its clients as to utilization of the Web for
     extensions of the client's internal information systems and enterprise
     applications to geographically dispersed facilities, remote offices and
     mobile employees. The Company seeks to design Web sites in a manner that
     will enable its clients to achieve operational efficiencies and cost
     reductions.

2. BLUEPRINT. The technical plan, or Blueprint, prepared by the Company for each
client describes in detail the Web site objectives, design strategy and tactics,
reporting requirements, technical specifications, review and testing processes,
program management and communication protocols, site promotion, future site
enhancements and project 

                                                                          3)

<PAGE>


timeline. In particular, the Company focuses its resources to design Web 
sites that will provide measurements of actual performance relative to each 
client's desired measurable results.

WEB SITE DEVELOPMENT.  The Company's process of developing interactive Web 
sites combines six elements:  graphic design; multimedia production; custom 
programming; database development; legacy systems integration; and quality 
assurance.

     - GRAPHIC DESIGN. The visual nature of the Web allows the Company to
     produce for its clients a Web site that communicates with the site visitor
     using both text and graphic design. The Company employs personnel skilled
     in presenting text which is consistent with the client's overall marketing
     strategy and in providing sophisticated art direction that is visually
     stimulating and capable of capturing the target audience's attention.

     - MULTIMEDIA PRODUCTION. The Company develops Web sites utilizing still
     photographs, full motion video, dynamically generated charts and graphs and
     animation. Any or all of these features may be used to appeal to a client's
     target audience on a Web site. Although these features are used routinely
     for marketing to parties external to the client, such features may also be
     used as part of a client's internal communications strategy.

     - CUSTOM PROGRAMMING. Developing Web sites that permit real-time,
     one-to-one interaction with site visitors requires specialized computer
     programming beyond simple HTML development skills. To address these
     programming needs, the Company employs a team of highly trained developers
     and information designers with specific expertise in developing customized
     Web applications, creating and testing the usability of Web applications
     and providing information design evaluation and implementation services.

     In addition to HTML development skills, Company personnel have expertise in
     and regularly use such tools and technologies as Microsoft-Registered 
     Trademark- Visual Basic-Registered Trademark- programming language, 
     Microsoft Visual Basic-Registered Trademark- Scripting Edition, 
     Microsoft Internet Information Server-Registered Trademark- Active Server 
     Pages, Microsoft Component Object Model (COM) Middleware platform, W3C
     Document Object Model (DOM) client scripting platform, Microsoft Visual
     J++(a), Microsoft Visual C++-Registered Trademark-, Microsoft FrontPage
     -Registered Trademark-, Microsoft Visual SourceSafe-Registered Trademark-,
     Microsoft Visual InterDev-Registered Trademark-, Microsoft Certificate
     Server-Registered Trademark-, Allaire ColdFusion-Registered Trademark-,
     JavaScript, VBScript-Registered Trademark-, ActiveX-Registered Trademark-
     components, Secure Sockets Layer (SSL) encryption, Virtual Private
     Networks (VPNs), Sun's Java-Registered Trademark- programming language, 
     UNIX, PERL and CGI Scripting.

     - DATABASE DEVELOPMENT. Sophisticated Web application development requires
     the collection and manipulation of online database information. To meet
     this need, the Company employs highly skilled personnel with specific
     expertise in analyzing business information needs, creating complex data
     models, mining databases for information that support business objectives
     and implementing complex relational database designs using the
     Microsoft-Registered Trademark- SQL Server-Registered Trademark- 
     Database Product. These database systems are designed to function in 
     conjunction with other server products including Microsoft Internet 
     Information Server-Registered Trademark- integrated with Microsoft Windows
     NT-Registered Trademark-, Apache Web Server on Linux and Solaris, Microsoft
     Exchange Server-Registered Trademark-, Microsoft Transaction 
     Server-Registered Trademark-, Microsoft Site Server-Registered Trademark-
     Enterprise Edition (including Microsoft Commerce Server-Registered 
     Trademark- and the Microsoft Personalization Server-Registered Trademark-)
     and UNIX.

     - LEGACY SYSTEMS INTEGRATION. A key component of a Web site is its ability
     to be integrated into a client's internal legacy information systems, both
     as those systems exist currently and as they change over time. The Company
     employs technical personnel with expertise in analyzing and documenting
     clients' existing internal systems, defining and developing data feeds as
     both output from, and input to, legacy systems and creating Web site
     designs that are versatile enough to facilitate a changing information
     landscape.

(4

<PAGE>

     - QUALITY ASSURANCE. Large and complicated Web applications require a
     significant effort to test. To this end, fine.com employs highly skilled
     test and quality assurance personnel to develop test plans; perform
     integration, systems and performance testing; and document system defects
     in the Company's internally developed test management systems.

WEB SITE MAINTENANCE. Maintaining and updating a Web site serves to protect a
client's investment in its site. Such maintenance may include supporting,
augmenting and enhancing the information collection and analysis efforts
provided for in the Web site's Blueprint. In some cases, certain maintenance
activities may be performed directly by the client due to features designed and
implemented by the Company when creating the Web site. The Company, pursuant to
written agreements with clients in addition to the original Web site development
agreement, will frequently provide ongoing marketing and business process
consultation, Web site content updates, refreshment of graphic and multimedia
content and database management.

     - CONTENT UPDATES AND GRAPHIC REFRESHES. Both content updates and graphic
     refreshment are driven by the interactive nature of a Web site. As an
     interactive media, a Web site provides a virtually instantaneous gauge of
     its communications effectiveness. This feedback allows the client to
     continuously modify the form and content of a Web site message to improve
     its effectiveness.

     - DATABASE  MANAGEMENT.  Databases experiencing large volumes of original
     input normally require periodic maintenance to ensure the integrity and 
     usefulness of the data.  The Company performs such functions for certain 
     of its clients.

COMPETITION

The Internet-related interactive marketing industry is highly competitive. The
Company expects competition for its services to intensify in the future. Due to
the rapidly evolving nature of the Internet, competition also is characterized
by pressures to adopt and utilize new capabilities and technologies to respond
rapidly to evolving client requirements.

The Company faces competition from a number of competitors, some or all of which
may provide Web site planning, creation or maintenance services. Direct
competitors include: (1) prospective clients that perform Web site develop ment
services in-house; (2) Web site service firms, such as K2 Design Inc., iXL
Corporation, Free Range Media, Razorfish Inc., Red Sky Interactive, Inc., and
USWeb/CKS Corp.; (3) Internet-oriented advertising agencies such as The Leap
Group and THINK New Ideas, Inc.; and (4) established online service companies,
advertising agencies, direct Internet access providers as well as specialized
and integrated marketing communication firms, all of which are entering the Web
site planning, creation, or maintenance markets in varying degrees and are
competing with the Company, and many of which have announced plans to offer
expanded Web site planning, development and/or maintenance services. Many of the
Company's competitors or potential competitors have longer operating histories,
longer customer relationships and significantly greater financial, management,
technological, development, sales, marketing and other resources than the
Company. The Company also competes on the basis of creative and technical
talent, price, customer service and responsiveness. There can be no assurance
that the Company will be able to compete effectively and its inability to do so
would have a material adverse impact on the Company.

EMPLOYEES

As of January 31, 1999, the Company had 69 full-time employees. The Company has
no labor contracts or collective bargaining agreements. The Company considers
its relations with its employees to be good.


                                                                           5)

<PAGE>

FACTORS AFFECTING THE COMPANY'S BUSINESS, OPERATING RESULTS AND FINANCIAL 
CONDITION

IN ADDITION TO THE OTHER INFORMATION IN THIS REPORT, THE FOLLOWING FACTORS
SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS BUSINESS. THIS
REPORT MAY CONTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. WHEN USED IN THIS REPORT, THE WORDS "ANTICIPATE," "BELIEVE,"
"EFFECT," "ESTIMATE," "EXPECT," "MAY," "WILL" AND SIMILAR EXPRESSIONS AS THEY
RELATE TO THE COMPANY OR ITS MANAGEMENT ARE INTENDED TO IDENTIFY SUCH
FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS COULD DIFFER MATERIALLY FROM THE RESULTS EXPRESSED IN OR IMPLIED BY
THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH DIFFERENCES
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW AND IN "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AS
WELL AS THOSE DISCUSSED ELSEWHERE IN THIS REPORT.

RECENT OPERATING RESULTS AND LIQUIDITY. For the 1999 fiscal year, the Company 
had losses of approximately $3.6 million. A portion of these losses were 
attributable to certain charges taken in the third and fourth quarters for 
office closure costs, write-offs for certain accounts receivable and 
work-in-progress considered by management to be uncollectible or unbillable, 
and cost overruns on fixed-fee projects. The Company believes that its cash 
and cash equivalents will be sufficient to fund its operations through 
January 31, 2000. The Company believes that it has taken appropriate action 
to realign and strengthen the Company's operations, including a plan to 
strategically grow sales, increase internal productivity and decrease its 
overhead cost structure. However, there can be no assurances that the Company 
will be able to achieve profitable operations. Further development and 
establishment of the Company's business may require additional financing. The 
Company believes that additional financing could be obtained from various 
sources, including certain existing shareholders and other investors and 
financial institutions not yet identified. In the event that additional 
financing is delayed or not able to be obtained on satisfactory terms, if at 
all, the Company may need to reduce its expenditures. There can be no 
assurance that additional capital, on a debt or equity basis, will be 
obtained or if obtained that it will be on economically viable terms.

UNCERTAINTIES REGARDING ADOPTION OF NEW MEDIA BY MARKETING COMMUNICATIONS 
INDUSTRY; LIMITED OPERATING HISTORY. The market for information gathering and 
dissemination through electronic media such as the Internet has only recently 
begun to develop. This rapidly evolving market is characterized by an 
increasing number of market entrants who have introduced or developed 
products and services for communication and commerce through new electronic 
media. Demand and market acceptance for recently introduced products and 
services are subject to a high level of uncertainty. Additionally, the 
Company has a limited operating history upon which an evaluation of the 
Company's prospects can be made. There can be no assurance that commerce and 
communication through new electronic media will continue to grow or that the 
Company will be successful in addressing the risks encountered by companies 
which are operating in rapidly evolving markets. The use of new electronic 
media in marketing, information gathering and dissemination, particularly by 
businesses that have historically relied upon traditional means of marketing, 
generally requires the acceptance of new methods of conducting business and 
exchanging information. If commerce and communication through new electronic 
media fail to gain widespread acceptance or develop more slowly than 
expected, the Company would be materially adversely affected.

RELIANCE ON MANAGEMENT AND KEY EMPLOYEES. The Company is dependent upon the 
services of certain key personnel, the loss of whose services would have a 
material adverse effect on the Company. In particular, the Company depends on 
the services of Daniel M. Fine, Chairman and Chief Executive Officer. The 
Company has obtained $100,000 of key person insurance on the life of Mr. 
Fine. In addition, the Company is dependent upon the services of qualified 
and experienced marketing, technical and creative personnel. The Company 
generally does not enter into employment agreements with such personnel, and 
such personnel are employed on an at-will basis. There can be no assurance 
that any of these persons will remain employed by the Company or that these 
persons will not participate in businesses that compete with the Company in 
the future. In seeking qualified personnel, the Company is required to 
compete with companies having greater financial and other resources and 
prospects than the Company. In particular, in the Seattle, Washington market, 
there are an increasing number of software and/or Internet companies that 
compete for the services of skilled developers and software designers. The 
Company's future success is dependent on its ability to attract and retain 
qualified personnel, and failure or inability to hire or retain key personnel 
would have a material adverse affect on its financial prospects and operations.

(6 
<PAGE>

COMPETITION. The market for the Company's services is highly competitive and 
is characterized by demands to adopt and utilize new capabilities and 
technologies, and to respond rapidly to evolving client requirements. The 
Company faces competition from a number of sources, including potential 
clients that perform Web site planning, creation and maintenance services 
in-house. Other sources of competition include Web site service firms, 
communications, telephone and telecommunications companies, computer hardware 
and software companies, established online services companies, direct 
Internet access providers, advertising agencies and specialized and 
integrated marketing communication firms, all of which are entering the Web 
site planning, creation and maintenance markets in varying degrees. Many of 
the Company's competitors have announced plans to offer expanded Web site 
planning, creation and/or maintenance services and many of such competitors 
or potential competitors have longer operating histories, longer customer 
relationships and significantly greater financial, management, technological, 
development, sales, marketing and other resources than the Company. The 
Company expects competition to intensify in the future, as anticipated growth 
in the industry attracts other participants. There can be no assurance that 
the Company will be able to compete effectively, if at all, and its inability 
to do so would have a material adverse effect on the Company.

PRICING OF SERVICES AND BIDDING ON WEB DEVELOPMENT PROJECTS. The Company 
attempts to price its services and bid on Web development projects in a 
manner which considers competitive factors, the value perceived by its 
clients and its internal cost structure. Certain projects are contracted on a 
time and materials basis where the Company bills for hours and costs incurred 
by its staff on client projects. Other projects are priced and billed on a 
fixed-fee basis or on a not-to-exceed ceiling in the contractual price. On 
fixed-bid contracts the Company attempts to take into account estimated 
direct and indirect costs associated with the project, associated allocations 
of overhead and factors related to specific technology or process risks 
associated with the complexity of the project. The Company believes that it 
has refined its internal processes to appropriately estimate the costs of 
performing on a fixed-fee basis. However, the failure to anticipate technical 
problems, estimate costs accurately or control costs during performance of a 
fixed-fee contract may reduce the Company's profit or cause a loss on a 
particular project. Unforeseen costs or other factors may arise that could 
materially delay the project or otherwise increase the Company's cost of 
performance. In addition, for fixed-fee or other similar projects, there can 
be no assurance that the Company's contractual revenues will exceed its 
direct and indirect costs attributable to such projects.

RISK OF INTERNATIONAL OPERATIONS. A portion of the Company's revenues are 
derived from its operations in Japan, through its relationship with Mitsui 
and Co., Ltd. In order to be successful in doing business in another country 
such as Japan, the Company is required to understand and adapt to different 
societal, business and cultural expectations and needs. The Company's ability 
to effectively manage its operations in Japan will depend, in part, on its 
ability to respond to differing cultural expectations and to develop and 
maintain relationships with its foreign clients. In addition, the Company's 
operations may be affected by changes in economic, political and governmental 
conditions in Japan or Asian Pacific countries.

LACK OF PROPRIETARY PROTECTION; INTELLECTUAL PROPERTY RIGHTS; RISK OF 
INFRINGEMENT; POSSIBLE LITIGATION. The Company believes that its business is 
not dependent upon any patents, copyrights or trademarks, and the Company 
does not currently have any registered patents, copyrights or trademarks. 
Consequently, the Company relies solely on a combination of common law and 
statutory law to protect its trademarks, proprietary information, know-how 
and trade secrets. The majority of the Company's current agreements with its 
clients contain provisions granting to the client intellectual property 
rights to certain of the Company's work product, including customized 
programming that is created during the course of a project. The Company 
anticipates that agreements with future clients may contain similar 
provisions. Other existing agreements to which the Company is a party are, 
and future agreements may be, silent as to the ownership of such rights. To 
the extent that the ownership of such intellectual property rights is 
expressly granted to a client or is ambiguous, the Company's ability to reuse 
or resell such rights will or may be limited.

                                                                          7)

<PAGE>


The Company utilizes technology developed by third parties. The Company 
believes that there are currently sufficient alternative sources of 
third-party technology which are available to it, if any particular 
third-party technology that it is currently using were to be discontinued or 
otherwise become unavailable. However, there can be no assurance that 
licenses for any technology owned or developed by third parties that might be 
required for provision of the Company's services will be available in the 
future on reasonable terms, or at all. The Company's inability to obtain any 
such licenses could have a material adverse effect on its business and 
operations. Although the Company does not believe that either its services or 
its utilization of technology owned by third parties infringes the 
proprietary rights of any third parties, there can be no assurance that third 
parties will not in the future assert claims against the Company based on 
such services or utilization or that any of those claims would not be 
successful. In addition, litigation may be necessary in the future to enforce 
the Company's intellectual property rights and to protect its proprietary 
information, to determine the validity and scope of the proprietary rights of 
third parties or to defend against claims of infringement or invalidity. 
Litigation of this nature, whether or not successful, could result in 
substantial costs and diversion of resources and management time, which could 
have a material adverse effect on the Company. Furthermore, third parties 
making claims against the Company could secure a judgment awarding 
substantial damages, as well as injunctive or other equitable relief that 
could directly or indirectly prohibit the Company from providing certain 
services. A judgment of this nature could have a material adverse effect on 
the Company.

Additionally, the Company and other Web site developers face potential 
liability for the actions of clients and others using their services, 
including liability for infringement of intellectual property rights, rights 
of publicity, defamation, libel and criminal activity under the laws of the 
United States and foreign jurisdictions. The Company has obtained errors and 
omissions insurance, although there can be no assurance that such insurance 
will be adequate. Any imposition of liability based on the actions of clients 
and others using the Company's services could have a material adverse effect 
on the Company.

DEPENDENCE UPON CONTINUED DEVELOPMENT OF ACCESS TO AND INFRASTRUCTURE OF THE 
INTERNET. The Company's ability to generate revenues from the planning, 
development and maintenance of commercial Web sites will depend upon the 
continued development of an infrastructure for providing Internet access and 
carrying Internet traffic. The Internet may not prove to be a viable 
commercial marketplace due to inadequate development of the necessary 
infrastructure or delays in the development of complementary products. 
Moreover, other critical issues concerning the commercial use of the Internet 
(including security, reliability, cost, ease of use and access, and quality 
of service) are being developed and delays or inabilities to find solutions 
may adversely impact the anticipated growth of Internet use. It is difficult 
to predict whether the Internet will prove to be and remain a viable 
commercial marketplace. If the infrastructure and complementary products 
necessary to support the Internet's commercial viability are not developed or 
if the Internet does not become a viable marketplace, the Company would be 
materially adversely affected.

RISK OF CHANGING TECHNOLOGY. The services that the Company offers, and the 
services that the Company expects to offer in the future, are impacted by 
rapidly changing technology, evolving industry standards, emerging 
competition and frequent service, software and other product introductions. 
There can be no assurance that the Company will be able to successfully 
identify new business opportunities and develop and bring new services to 
market in a timely and cost-effective manner or that services, products or 
technologies developed by others will not render the Company's services 
noncompetitive or obsolete.

YEAR 2000 EXPOSURE. The "Year 2000" issue concerns the potential exposures 
related to the automated generation of business and financial misinformation 
resulting from the application of computer programs which have been written 
using two digits, rather than four, to define the applicable year of business 
transactions. The Company is in the process of completing its review of the 
potential impact of Year 2000 issues on its internal and external systems and 
does not antici-


(8

<PAGE>

pate any significant costs, problems or uncertainties associated with the 
Year 2000 issue. The Company believes that its internally developed solutions 
are Year 2000 compliant. However, there can be no assurance that the 
Company's products do not contain undetected errors or defects associated 
with Year 2000. In addition, despite the Company's testing and other 
assurances, if any, the Company may receive from third-party providers of 
software or technology incorporated into the Company's products, the 
Company's products may contain undetected errors or defects associated with 
Year 2000 date functions, which may result in material costs to the Company. 
Failure of the Company or its software providers to adequately address the 
Year 2000 issues could adversely affect the Company's business operations.

In addition, the Company develops customized Web applications for its 
clients, some of which include date related data. The client and/or other 
vendors further customize many of the Company's applications after its 
involvement with the project has ended. While the Company believes that its 
current products are Year 2000 compliant, there can be no assurance that some 
of its previously completed applications continue to meet Year 2000 
compliance standards. Also, due to the fact that the Company's applications 
are owned and managed by its clients, there can be no assurance that the 
applications have been tested to verify for Year 2000 compliance.

DEPENDENCE ON MICROSOFT. The Company is dependent upon its expertise with 
Microsoft software and relies upon such software in creating Web sites for 
the Company's clients. Although the Company participates in the Microsoft 
Solution Provider Partner and Site Builders Network programs, there can be no 
assurance that its relationship with Microsoft will continue or that the 
Company will continue to derive benefits from that relationship. In addition, 
if Microsoft's products, standards or approach to the Internet or other 
markets were to fall into disfavor or other parties were able to develop 
products, standards or approaches which had greater market acceptance than 
those offered by Microsoft, the Company could be materially adversely 
affected. Although the Company has developed expertise in UNIX systems 
through its acquisition of Meta4 Digital Design, Inc., it is still primarily 
dependent on its expertise with Microsoft software. Accordingly, any failure 
of the Company to maintain its expertise in Microsoft systems or any negative 
changes to Microsoft or its operating systems could have a material adverse 
effect on the Company.

GOVERNMENT REGULATION. The Company is not currently subject to direct 
regulation by any government agency, other than regulations applicable to 
businesses generally. However, it is possible that laws and regulations may 
be adopted with respect to the Internet, covering issues such as user privacy 
and pricing, characteristics and quality of products and services. The 
adoption of any such laws or regulations may decrease the growth of the 
Internet (which could in turn decrease the demand for the Company's 
services), increase the Company's cost of doing business, cause the Company 
to modify its operations or otherwise have an adverse effect on the Company. 
Moreover, the applicability to the Internet of existing laws governing issues 
such as property ownership, libel and personal privacy is uncertain. The 
Company cannot predict the impact, if any, that any future laws or 
regulations, or the applicability of such existing laws, may have on its 
business.

FLUCTUATIONS IN MARKET PRICE. The market price of the Company's common stock, 
like that of other Web site development companies, is highly volatile and is 
subject to wide fluctuations in response to quarterly variations in operating 
results, announcements of activities by competitors and other events and 
factors. The Company's stock price may also be effected by broader market 
trends unrelated to the Company's performance.

ITEM 2.  PROPERTIES

The Company's headquarters currently occupy approximately 15,650 square feet of
an office building at 1525 Fourth Avenue, Seattle, Washington at a monthly rent
of approximately $22,105. Such payments include the Company's allocable share of
certain real property taxes and building operating expenses. The remaining lease
term expires on April 30, 2005. The Company leases approximately 7,100 square
feet of office space in Livingston, New Jersey for

                                                                           9)

<PAGE>


its NorthEast operations. The Livingston lease has an expiration of March 
2002 and has a monthly rent expense of approximately $11,538. The Company 
also leases approximately 550 square feet of office space on a month-to-month 
basis in Bethesda, Maryland for its Washington, D.C. office. The Bethesda 
lease has a monthly rent expense of approximately $6,035.

The Company continues to lease approximately 8,000 square feet at its prior 
headquarters at 1118 Post Avenue, Seattle, Washington at a monthly rent of 
approximately $8,608. The remaining lease term expires in April 2001; however 
the Company has sublet all of this space to a third party for the remainder 
of the term of the lease. In addition, following the Company's acquisition of 
Pacific Analysis and Computing Corporation in February 1998, the Company 
assumed Pacific Analysis' office lease for approximately 3,355 square feet in 
Bellevue, Washington at a monthly rent of approximately $5,462. The term of 
such lease expires on October 31, 2002. The Company has sublet all of this 
office space to a third party for the remainder of the term of the lease. 
Sublease income from the above two leases approximates $13,500 per month. See 
Note 6 in "Notes to Financial Statements" for a summary of future operating 
lease commitments.

ITEM 3.  LEGAL PROCEEDINGS

As of April 21, 1999, the Company was not involved in any legal proceedings. 
However, as is typical for companies in the ordinary course of business, the 
Company is from time to time the subject of lawsuits. Certain of such 
proceedings may be covered under insurance policies or indemnification 
agreements. Due to the inherent uncertainties of litigation, there is a risk 
that the outcome of any future litigation could materially harm the Company's 
business, financial condition or results of operations.

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

No matters were submitted to a vote of security holders during the fourth
quarter of the 1999 fiscal year.

PART II

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

MARKET INFORMATION

The common stock is traded on The Nasdaq SmallCap Market under the symbol 
"FDOT." The following table sets forth the high and low closing sale prices 
for the common stock, beginning on August 12, 1997, the date which the 
Company completed its initial public offering at a price of $6.50 per share, 
as reported by The Nasdaq SmallCap Market.

(10

<PAGE>


<TABLE>
<CAPTION>
                                                            High      Low
                                                     ------------------------
<S>                                                        <C>       <C>
Year ended January 31, 1998

    Third Quarter (from August 12) ..................      $8.88     $6.50
    Fourth Quarter ..................................      $7.25     $4.38

Year ended January 31, 1999

    First Quarter ...................................      $6.38     $4.50
    Second Quarter ..................................      $6.06     $3.50
    Third Quarter ...................................      $4.88     $1.38
    Fourth Quarter ..................................      $3.88     $1.88

</TABLE>


HOLDERS

As of April 21, 1999 there were 47 stockholders of record of the common  
stock, although there were a larger number of beneficial owners.

DIVIDENDS

The Company has never declared or paid cash dividends on its common stock. 
The Company intends to retain all future earnings to finance future growth 
and, therefore, does not anticipate paying any cash dividends in the 
foreseeable future.

CHANGES IN SECURITIES AND USE OF PROCEEDS

From August 12, 1997, the effective date of the Company's Registration 
Statement on Form SB-2, as amended (file number 333-26855), relating to the 
Company's initial public offering of the Company's common stock, through the 
end of the Company's fiscal year ended January 31, 1999, the Company has 
applied its net $6,228,000 proceeds as follows:

<TABLE>
     <S>                                                                                        <C> 
     Net proceeds from IPO ...................................................................  $ 6,228,000
     Accounts receivable, work-in-process and other working capital requirements .............   (2,367,000)
     Capital expenditures for fixed assets ...................................................   (1,916,000)
     Acquisition of Meta4 and other businesses ...............................................     (450,000)
     Repayment of indebtedness ...............................................................     (545,000)
                                                                                                -----------
     Unapplied proceeds held in money market funds at January 31, 1999 .......................  $   950,000
                                                                                                -----------
                                                                                                -----------
</TABLE>


RECENT SALES OF UNREGISTERED SECURITIES

None.


                                                                          11)

<PAGE>

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

The following discussion and analysis of the Company's financial condition 
and results of operations should be read in conjunction with the financial 
statements and accompanying notes appearing in this Annual Report.

OVERVIEW

The Company plans, develops and maintains Web sites for major national and 
international corporate clients and others. In addition, the Company provides 
consulting services to its clients as to the strategic uses of the Internet 
to further their corporate goals and objectives. Such services relate to 
e-commerce, Intranet and Extranet applications, and the intricacies of 
utilizing the Internet on an international basis.

The Company generates the majority of its revenues from fees associated with 
the planning and development of commercial Web applications for clients. 
These fees are generally earned pursuant to fixed-fee, time and materials or 
cost reimbursement contracts (with terms typically ranging from two to seven 
months). Revenues generated from these contracts are recognized under the 
percentage-of-completion method (based on the ratio of costs incurred to 
total estimated project costs). All other revenue is recorded on the basis of 
performance of services. The Company assumes greater financial risk on 
fixed-fee contracts than on either time and material or cost-reimbursable 
contracts. The failure to anticipate technical problems, estimate costs 
accurately or control costs during performance of a fixed-fee contract may 
reduce the Company's profit or cause a loss on a particular project.

The Company's Web site development process utilizes marketing expertise and 
state-of-the-art interactive database compilation and dissemination 
techniques and technologies. Through the planning, development and 
maintenance of interactive Web presentations, the Company enhances clients' 
marketing campaigns and fosters the collection of demographic data which is 
utilized by clients.

Through fiscal year 1998, the Company conducted all of its operations from 
its headquarters in Seattle, Washington. In fiscal 1999, the Company began a 
process of opening domestic and international offices, for the purposes of 
both better serving existing clients as well as expanding the Company's 
business in new markets. During the fiscal year, the Company opened and 
subsequently closed regional offices in Santa Monica, California and London, 
England, due to their inability to generate expected levels of revenues and 
earnings. In connection with the closure of these offices, the Company 
recorded closure costs and operating losses in fiscal 1999 of approximately 
$755,000.

On July 31, 1998, the Company merged with Meta4, a non-public company, that 
provides Internet-based business solutions in the north east and the Company 
has maintained operations at the Meta4 offices in New Jersey. At January 31, 
1999, the Company had 21 employees at its New Jersey office. The Company's 
major clients serviced through the New Jersey office include General Electric 
Company, Fuji Photo Film U.S.A., Inc., and WOWFactor. The Meta4 merger better 
enabled the Company to provide service to the New York and New Jersey areas, 
provide expertise in UNIX to complement the Company's historical Microsoft NT 
expertise and provide additional resources to execute large operating system 
projects. The merger was treated for accounting purposes as a 
pooling-of-interests.

As of January 31, 1999, the Company had regional offices located in Bethesda, 
Maryland and Livingston, New Jersey. The Company operates most of its 
business and derives most of its revenues from its headquarters in Seattle, 
Washington where it has 45 employees.

(12                                                                 

<PAGE>

In November 1998 the Company began implementation of an operational 
realignment focused on strategically growing sales, increasing its internal 
productivity, decreasing its overhead cost structure, analyzing its existing 
contracts and examining its receivable and asset base. As a result, the 
Company has refocused its sales initiatives on the high-end, interactive Web 
development market to leverage the skills and scale of its Internet 
development teams. In addition, the Company has taken steps to improve 
internal productivity and staff utilization levels and implemented a revised 
organizational structure including the hiring of a new Executive Vice 
President of Finance and Operations.

In connection with the realignment, the Company recorded certain charges to 
earnings in the third and fourth quarters of fiscal 1999 of approximately 
$628,000 and $358,000, respectively, consisting primarily of (a) severance 
payments and salary adjustments of $120,000, (b) an increase of $220,000 to 
the accounts receivable reserves for accounts considered by management to be 
uncollectable or unrealizable (c) write-offs in the amount of $308,000 for 
certain assets and work-in-progress considered by management to be 
uncollectable or unbillable and (d) $338,000 attributable to incremental 
office overhead and closure costs of the London office.

RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED JANUARY 31, 1999 AND 1998

GROSS REVENUE. Consolidated gross revenue for the fiscal year ended January 
31, 1999 and 1998 was $6,133,000 and $6,023,000, respectively. The 2% 
increase was due to a slight increase in the complexity of the projects 
undertaken.

DIRECT SALARIES AND COSTS. Direct salaries and costs include all internal 
labor costs and other direct costs related to project performance, such as 
project specific independent contractor fees, supplies and specific 
project-related expenditures. The Company's consolidated direct salaries and 
costs were $4,164,000 and $3,902,000 for the fiscal year ended January 31, 
1999 and 1998, respectively, representing a 7% increase from the prior 
period. As a percentage of gross revenues, direct salaries and costs were 68% 
for the fiscal year ended January 31, 1999, as compared to 65% for the prior 
period. This increase in direct salaries and costs to fiscal 1999 from fiscal 
1998 consisted primarily of an increase in amounts paid as direct salaries, 
payroll taxes and benefits to $3,638,000 from $2,272,000 for the fiscal years 
ended January 31, 1999 and 1998, respectively, due to an increase in the 
number of employees and new offices opened by the Company during fiscal 1999. 
In addition, direct salaries and costs included costs paid to independent 
contractors of $120,000 and $890,000 respectively for fiscal year 1999 and 
1998. This 87% decrease reflects reduced dependence on outside contractors as 
internal staffing resources increased in fiscal year 1999.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Consolidated selling, general 
and administrative expenses were $5,776,000 and $2,243,000 for the fiscal 
year ended January 31, 1999 and 1998, respectively. These expenses consisted 
of sales and administrative salaries, office rent and related occupancy 
costs, marketing and new business development costs, depreciation of fixed 
assets, professional fees, telephone and related Internet connectivity fees, 
computer network costs, office expenses and supplies. The amounts for the 
fiscal year ended January 31, 1999, include (a) $450,000 of merger and 
acquisition costs associated with the acquisition of Meta4 on July 31, 1998, 
(b) additional charges of approximately $648,000 incurred in the third and 
fourth quarters of fiscal 1999 relating to an operational realignment which 
included severance payments, an increase to the accounts receivable reserve 
and write-offs of certain assets and uncollectable or unbillable 
work-in-progress and (c) charges of approximately $338,000 incurred in fiscal 
1999 in connection with the incremental office overhead and closure costs of 
the London office. As a percentage of gross revenues, the selling, general 
and administrative expenses increased from 37% to 94% from fiscal 1998 to 
fiscal 1999. The increase in selling, general and administrative expenses was 
primarily a result of the charges in connection with the Company's 
operational realignment and office closures. The Company believes that its 
operational realignment and office closures should result in lower levels of 
selling, general and administrative costs in future periods. The increase in 

                                                                          13)

<PAGE>

expense in fiscal 1999 from 1998 was also attributable to increased sales and 
administrative salaries, marketing and new business development costs, 
depreciation of fixed assets, professional fees and office rent and related 
occupancy costs.

TAXES. During fiscal 1999, the Company recorded a tax benefit of $102,000, 
which represented the tax benefit associated with the carryback of the 
operating losses to previous years. No future income tax benefit has been 
recorded for remaining deferred tax assets due to the uncertainties of 
realization of these net operating loss carryforwards.

NET LOSS. The Company recognized a consolidated net loss of $3,566,000 for 
the fiscal year ended January 31, 1999 as compared to a net loss of $55,000 
for the same period in fiscal 1998. The decrease in profitability is due to 
the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically funded its capital requirements through 
borrowings from commercial lenders, proceeds from its initial public offering 
and private placements of its capital stock. The Company had cash, cash 
equivalents and marketable securities in the aggregate amount of $1,521,000 
at January 31, 1999. The Company's working capital decreased $1,625,000 from 
$3,309,000 at January 31, 1998 to $1,684,000 at January 31, 1999.

Operating activities for the fiscal year ended January 31, 1999 required net 
cash in the amount of $3,430,000, primarily due to the net loss incurred and 
increases in accounts receivable. Accounts receivable increased $856,000, 
from $1,097,000 at January 31, 1998 to $1,953,000 at January 31, 1999. As 
part of its operational realignment, the Company implemented a plan to 
examine its assets and receivables and to increase collections of its 
accounts receivable. Through April 15, 1999, the Company had collected 
approximately $1,700,000 of the fiscal 1999 year-end accounts receivable 
balance.

Net cash provided by investing activities of $2,962,000 during the fiscal 
year ended January 31, 1999 was primarily due to the proceeds from the sale 
of $3,948,000 of marketable securities offset by the purchase of certain 
equipment and furniture, requiring cash expenditures in the amount of 
$1,037,000. These equipment purchases were primarily for computer hardware 
and software, furniture, fixtures and leasehold improvements to accommodate 
an increase in Company personnel. Net cash provided from financing activities 
was $417,000, which was primarily due to a short-term borrowing of $500,000 
from the Company's Revolving Line of Credit.

At January 31, 1999, the Company had in place a Revolving Line of Credit with 
its bank in the amount of $750,000, of which $500,000 had been drawn upon. At 
fiscal 1999 year-end the Company was out of compliance with certain covenants 
contained in its Revolving Line of Credit with its bank, including 
requirements for minimum working capital, minimum tangible net worth and 
excess losses in the fourth quarter. On April 2, 1999 the Company received a 
waiver on its non-compliance with the bank covenants. The Company has 
renegotiated terms with its bank and has received a commitment letter from 
the bank to enter into a revised credit facility. The terms of the revised 
credit facility provide for a line of credit in the amount of $750,000, to 
expire on September 1, 1999. Amounts outstanding under the revised credit 
facility will bear interest at the bank's prime rate plus 0.25% per annum (an 
effective rate of 8% at April 22, 1999). The facility is secured by all 
accounts receivable of the Company and such other property and assets of the 
Company as the bank may require, and contains modified financial covenants 
and restrictions, including a restriction on payment of dividends.

The Company believes that its existing cash and cash equivalent balances, 
expected cash generated from operations and its revised credit facility will 
be sufficient to fund its operations through fiscal 2000. The Company 
believes that its cash and cash equivalents will be sufficient to fund its 
operations through January 31, 2000. The Company believes that it has taken 
appropriate action to realign and strengthen the Company's operations, 
including a plan to strategically grow sales, increase internal productivity 
and decrease its overhead cost structure. However, there can be no assurances 
that the Company will be able to achieve profitable operations. Further 
development and establishment of 

(14

<PAGE>


the Company's business may require additional financing. The Company believes 
that additional financing could be obtained from various sources, including 
certain existing shareholders and other investors and financial institutions 
not yet identified. In the event that additional financing is delayed or not 
able to be obtained on satisfactory terms, if at all, the Company may need to 
reduce its expenditures. There can be no assurance that additional capital, 
on a debt or equity basis, will be obtained or if obtained that it will be on 
economically viable terms.

SEASONALITY AND INFLATION

The Company does not believe that inflation or seasonality has had a 
significant effect on the Company's operations to date.

YEAR 2000 READINESS DISCLOSURE

The Year 2000 problem is the potential for system and processing failures of 
date-related data arising from the use of two digits by computer-controlled 
systems, rather than four digits, to define the applicable year for dates 
after December 31, 1999. This could result in system failure or 
miscalculations causing disruptions of operations, including, among other 
things, a temporary inability to process transactions, send invoices or 
engage in similar ordinary business activities. The Year 2000 problem is not 
limited to information technology systems, but may also impact embedded 
systems, such as those that control elevators, alarm systems and many other 
devices.

The Company has examined all of its internal systems, both hardware and 
software, that constitute core components of its operations, including both 
computer systems and elements of the office environment. The Company believes 
that its internal hardware and software systems will function properly with 
respect to dates in the year 2000 and thereafter. Nonetheless, there can be 
no assurance in this regard until such systems are operational in the year 
2000. In the judgement of management, the Company's exposure from its 
internal systems is minimal, the cost of recovery will be insignificant, and 
its business will not be materially adversely impacted.

As a general matter, the Company builds its software on third-party products, 
such as Microsoft's Windows NT and UNIX, which have been represented as Year 
2000 compliant. Despite the Company's testing and other assurances, if any, 
the Company may receive from third-party providers of software or technology 
incorporated into the Company's products, the Company's products may contain 
undetected errors or defects associated with Year 2000 date functions, which 
may result in material costs to the Company. The Company does not 
specifically warrant to clients that its work will be Year 2000 compliant, 
although certain clients have requested and received such warranties. In such 
cases, the Company does not warrant the compliance of third-party software; 
rather, the Company warrants only that software created by the Company will 
be Year 2000 compliant. In addition, the Company generally provides clients 
with a limited 90-day warranty on its services and products, and the Company 
believes that many clients provide further updates or additions to their Web 
sites after delivery by the Company and the Company cannot assess the Year 
2000 compliance of any such additions. However, even absent a specific Year 
2000 warranty or other warranty, there is a risk that clients for whom the 
Company has created or implemented software will attempt to hold the Company 
liable for any damages that result in connection with Year 2000 problems.

The Company is also examining Year 2000 issues as they relate to third-party 
vendors, suppliers and service providers with which it has a material 
relationship. In the judgement of management, internally used third-party 
tools, such as operating systems, databases and other design and development 
applications, are materially Year 2000 compliant. Management believes that 
any failures of these systems would have negligible impact on the Company's 
operations.

Historical and estimated future costs of Year 2000 remediation are not 
significant. The Company is in the process of establishing a contingency plan 
and expects it to be in place prior to December 31, 1999.

                                                                          15)

<PAGE>

ITEM 7.  FINANCIAL STATEMENTS


REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Shareholders
fine.com International Corp.

We have audited the accompanying consolidated balance sheets of fine.com 
International Corp. as of January 31, 1999 and 1998, and the related 
consolidated statements of operations, shareholders' equity and cash flows 
for the years then ended. These financial statements are the responsibility 
of the Company's management. Our responsibility is to express an opinion on 
these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the 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 consolidated financial position of fine.com 
International Corp. at January 31, 1999 and 1998, and the consolidated 
results of its operations and its cash flows for the years then ended, in 
conformity with generally accepted accounting principles.


                                                   /s/ ERNST & YOUNG LLP


Seattle, Washington
April 2, 1999, except for Note 5 as to
    which the date is April 22, 1999



(16

<PAGE>

                           FINE.COM INTERNATIONAL CORP.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                         January 31,
                                                                               ------------------------------
                                                                                    1999            1998
                                                                               ------------------------------
<S>                                                                            <C>              <C>
Assets
Current assets:
     Cash and cash equivalents ..............................................  $ 1,521,301      $ 1,571,861
     Marketable securities ..................................................           --        1,593,032
     Accounts receivable, less allowances of
         $108,000 in 1999 and $55,000 in 1998 ...............................    1,952,694        1,097,354
     Costs and profits in excess of billings or uncompleted contracts .......       14,292          191,841
     Prepaid expenses and other .............................................       68,830          157,780
     Notes receivable from officer ..........................................       21,794           26,686
                                                                               ------------------------------
         Total current assets ...............................................    3,578,911        4,638,554

Marketable securities .......................................................           --        2,325,236
Equipment and furniture, net ................................................    1,414,338          677,560
Other long-term assets ......................................................       76,850          103,561
Deferred income tax assets ..................................................           --          220,318
                                                                               ------------------------------
         Total assets .......................................................  $ 5,070,099      $ 7,965,229
                                                                               ------------------------------
                                                                               ------------------------------

Liabilities and Shareholders' Equity 
Current liabilities:

     Note payable to bank ...................................................  $   500,000      $        --
     Accounts payable .......................................................      427,420          395,267
     Accrued expenses .......................................................      332,963           48,581
     Advance payments .......................................................           --           70,500
     Billings or uncompleted contracts in excess of costs and profits .......      536,860          422,101
     Contract loss reserve ..................................................       40,218               --
     Deferred income tax liabilities ........................................           --          322,337
     Current portion of capital lease obligations ...........................       57,602           71,166
                                                                               ------------------------------
         Total current liabilities ..........................................    1,895,063        1,329,952

     Capital lease obligations, less current portion ........................       52,228           70,436
     Shareholders' equity:
         Common stock, no par value:
              10,000,000 shares authorized, 2,669,590 shares issued and
              outstanding at January 31, 1999; and 2,633,720 shares issued
              and outstanding at January 31, 1998 ...........................    6,906,409        6,737,929
     Accumulated deficit ....................................................   (3,783,601)        (143,592)
     Accumulated other comprehensive loss ...................................           --          (29,496)
                                                                               ------------------------------
     Total shareholders' equity .............................................    3,122,808        6,564,841
                                                                               ------------------------------
         Total liabilities and shareholders' equity .........................  $ 5,070,099      $ 7,965,229
                                                                               ------------------------------
                                                                               ------------------------------
</TABLE>

                                                                          17)

<PAGE>

                          FINE.COM INTERNATIONAL CORP.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                        Fiscal Year
                                                                                      Ended January 31,
                                                                                --------------------------
                                                                                    1999            1998
                                                                                --------------------------
<S>                                                                             <C>            <C> 
Gross revenue ...............................................................   $ 6,133,275    $ 6,023,402
Direct salaries and costs ...................................................     4,163,513      3,901,570
                                                                                --------------------------
Gross profit ................................................................     1,969,762      2,121,832

Selling, general and administrative expenses ................................     5,776,428      2,243,480
                                                                                --------------------------
Operating loss ..............................................................    (3,806,666)      (121,648)

Other income (expense):
     Interest income ........................................................       168,125        176,535
     Interest expense .......................................................       (29,301)       (63,725)
                                                                                --------------------------
Loss before income taxes ....................................................    (3,667,842)        (8,838)

Provision (benefit) for income taxes ........................................      (102,019)        46,567
                                                                                --------------------------
Net loss ....................................................................   $(3,565,823)   $   (55,405)
                                                                                --------------------------
                                                                                --------------------------
Basic and diluted net loss per share ........................................   $     (1.34)   $     (0.03)
                                                                                --------------------------
                                                                                --------------------------

Shares used in computation of basic and diluted net loss per share ..........     2,668,411      1,921,577
                                                                                --------------------------
                                                                                --------------------------
</TABLE>


(18

<PAGE>



                          FINE.COM INTERNATIONAL CORP.

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                    Convertible Preferred                                                    Other
                                      Stock - Series A           Common Stock                           Comprehensive   Total 
                                  ---------------------------------------------------   Accumulated         Income   Shareholders' 
                                    Shares       Amount     Shares          Amount        Deficit           (Loss)      Equity
---------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>         <C>        <C>             <C>           <C>            <C>           <C>
Balance at February 1, 1997         59,524      $239,918   1,309,196       $269,969      $(88,187)      $      -      $   421,700
   Conversion of Series A
     convertible preferred
     stock into common stock       (59,524)     (239,918)     59,524        239,918             -              -                -
   Issuance of shares in initial
     public offering, net of
     offering costs of $1,994,458        -             -   1,265,000      6,228,042             -              -        6,228,042
   Unrealized loss on
     marketable securities               -             -           -              -             -        (29,496)         (29,496)
   Net loss                              -             -           -              -       (55,405)             -          (55,405)
                                                                                                                      ------------
   Comprehensive loss                                                                                                     (84,901)
                                --------------------------------------------------------------------------------------------------
Balance at January 31, 1998              -             -   2,633,720      6,737,929      (143,592)       (29,496)       6,564,841
   Acquisition of Pacific Analysis
     and Computing                       -             -      35,870        143,480             -              -          143,480
   Adjustment for Meta4 net
     loss for the one month
     ended July 31, 1998                 -             -           -              -       (74,186)             -          (74,186)
   Stock-based compensation
     expense                             -             -           -         25,000             -              -           25,000
   Unrealized gain on marketable
     securities                          -             -           -              -             -         29,496           29,496
   Net loss                              -             -           -              -    (3,565,823)             -       (3,565,823)
                                                                                                                      ------------
   Comprehensive loss                                                                                                  (3,536,327)
                                --------------------------------------------------------------------------------------------------
Balance at January 31, 1999     $        -             -   2,669,590     $6,906,409   $(3,783,601)      $      -      $ 3,122,808
                                --------------------------------------------------------------------------------------------------
                                --------------------------------------------------------------------------------------------------
</TABLE>

                                                                          19)

<PAGE>


                          FINE.COM INTERNATIONAL CORP.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                        Fiscal Year
                                                                                      Ended January 31,
                                                                               ----------------------------
                                                                                   1999            1998
                                                                               ----------------------------
<S>                                                                            <C>              <C>
Cash Flows from Operating Activities:
Net loss ....................................................................  $(3,565,823)     $   (55,405)
Adjustments to reconcile net loss to net cash
used in operating activities:
     Depreciation and amortization ..........................................      345,476          181,332
     Deferred income taxes ..................................................     (102,019)          46,567
     Loss on disposal of property and equipment .............................      101,075               --
     Noncash stock-based compensation expense ...............................       25,000               --
     Net changes in operating assets and liabilities:
         Accounts receivable ................................................     (855,340)        (321,130)
         Costs and profits in excess of billings ............................      177,549         (174,021)
         Prepaid expenses and other assets ..................................       43,244         (163,193)
         Deferred offering costs ............................................           --           25,114
         Accounts payable ...................................................       32,153           (3,181)
         Accrued expenses ...................................................      284,382           20,311
         Advance payments ...................................................      (70,500)          70,500
         Billings in excess of costs and profits ............................      114,759          232,640
         Contract loss reserve ..............................................       40,218               --
                                                                               ----------------------------
Net cash used in operating activities .......................................   (3,429,826)        (140,466)

Cash Flows from Investing Activities:
Purchases of marketable securities ..........................................           --       (3,962,198)
Sales of marketable securities ..............................................    3,947,764               --
Purchases of equipment and furniture ........................................   (1,036,611)        (529,574)
Other assets ................................................................       50,711          (60,724)
                                                                               ----------------------------
Net cash provided by (used in) investing activities .........................    2,961,864       (4,552,496)

Cash Flows from Financing Activities:
Proceeds from issuance of common stock, net of issuance costs ...............           --        6,228,042
Increase (decrease) in notes payable to bank ................................      500,000         (140,286)
Payments on capital lease obligations .......................................      (87,490)         (70,887)
Increase (decrease) in note receivable from officer .........................        4,892            3,749
Decrease in note payable to director ........................................           --          (15,000)
                                                                               ----------------------------
Net cash provided by financing activities ...................................      417,402        6,005,618
                                                                               ----------------------------

Net increase (decrease) in cash and cash equivalents ........................      (50,560)       1,312,656
Cash and cash equivalents at beginning of period ............................    1,571,861          259,205
                                                                               ----------------------------
Cash and cash equivalents at end of period ..................................  $ 1,521,301      $ 1,571,861
                                                                               ----------------------------
                                                                               ----------------------------
Supplemental Cash Flow Information:
Interest paid ...............................................................  $    29,301      $    63,725
Equipment acquired through capitalized lease obligations ....................       55,718           59,206
Acquisition of Pacific Analysis and Computing, in February 1998,
     in exchange for 35,870 shares of common stock ..........................      143,480               --
</TABLE>

(20

<PAGE>


                          FINE.COM INTERNATIONAL CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS
fine.com International Corp. ("fine.com" or the "Company"), was incorporated in
the State of Washington on October 15, 1994. The Company plans, develops,
maintains and hosts World Wide Web ("Web") sites for major national and
international corporate clients and others, utilizing marketing expertise and
state-of-the-art interactive database compilation and dissemination techniques
and technologies.

PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.

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

REVENUE RECOGNITION
The Company accounts for long-term contracts under the percentage-of-completion
method. Estimated contract earnings are reviewed periodically as work
progresses. If such estimates indicate a loss would be incurred on the contract,
the estimated amount of such loss is recognized in the period the estimated loss
is determined. All other revenue is recorded on the basis of time and material
for the performance of services.

RISKS AND UNCERTAINTIES
Financial instruments which potentially subject the Company to a concentration
of credit risk consist principally of accounts receivable. The Company's
customer base is dispersed across many different geographic areas throughout the
United States in a variety of industries. The Company does not require
collateral or other security to support credit sales, but provides an allowance
for bad debts based on historical experience and specific identification. The
following is a detail of customers which accounted for greater than 10% of gross
revenue in the respective fiscal years:

<TABLE>
<CAPTION>
                                                              Fiscal Year
                                                            Ended January 31,
                                                          ---------------------
                                                            1999         1998
                                                          ---------------------
         <S>                                                <C>          <C>  
         Customer A                                          19%          29%
         Customer B                                          19            8
         Customer C                                           6           10
</TABLE>

                                                                          21)

<PAGE>


CASH AND CASH EQUIVALENTS
The Company considers highly liquid investments with an original maturity of
three months or less to be cash equivalents. Excess cash is primarily invested
in treasury bills, securities of government agencies, and commercial paper. Cash
equivalents are carried at amortized cost, which approximates fair market value.

MARKETABLE SECURITIES
Marketable securities, which consist primarily of U.S. Government agency
securities, are carried at market value. Market values are determined based on
quoted prices. Marketable securities are classified in the balance sheet as
current and non-current based on maturity dates and the Company's expectation of
sales and redemptions in the following year.

EQUIPMENT AND FURNITURE
Equipment and furniture are recorded at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of three to seven years. Leasehold improvements are amortized over
the lesser of the lease term or estimated useful life. Repairs and maintenance
that do not improve or extend the lives of the respective assets are expensed in
the period incurred.

INCOME TAXES
The Company accounts for income taxes under the liability method. Under the
liability method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities,
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts expected
to be realized.

STOCK-BASED COMPENSATION
The Company has elected to apply the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION
(SFAS No. 123). Accordingly, the Company accounts for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related
interpretations. Compensation cost for stock options is measured as the excess,
if any, of the fair value of the Company's common stock at the date of grant
over the stock option exercise price. The FASB has proposed certain amendments
to APB No. 25 which would require, among other things, (a) variable plan
accounting for stock options which have been repriced, and (b) that stock
options granted to outside directors would be treated similar to those granted
to an outside consultant.

ADVERTISING Advertising costs are expensed as incurred. Advertising expense 
was $171,158 and $37,474 in the fiscal years ended January 31, 1999 and 1998, 
respectively.

EARNINGS (LOSS) PER SHARE
Basic earnings per share is computed by dividing net income (loss) available to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution of
securities by including other common stock equivalents, including stock options,
warrants, and convertible preferred stock, in the weighted average number of
common shares outstanding for a period, if dilutive. For fiscal years ended
January 31, 1999 and 1998, all such potentially dilutive securities were not
included in earnings per share since they were antidilutive.

(22                                             

<PAGE>

OTHER COMPREHENSIVE INCOME (LOSS)
In June 1997, the FASB issued SFAS No. 130, REPORTING COMPREHENSIVE INCOME,
which establishes standards for reporting and display of comprehensive income
and its components in the financial statements. The only item of other
comprehensive income (loss) which the Company currently reports is unrealized
gain (loss) on marketable securities.

BUSINESS SEGMENTS
In June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION, which establishes standards for reporting
information about operating segments in annual financial statements. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. Information related to segment 
disclosures is contained in Note 11.

DERIVATIVES
In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVES AND
HEDGING ACTIVITIES, which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. Because the Company has never used nor currently intends to use
derivatives, management does not anticipate the adoption of this new standard
will have a significant effect on earnings or the financial position of the
Company.

LIQUIDITY
For the fiscal year ended January 31, 1999, the Company incurred a net loss of
$3,566,000. At January 31, 1999, the Company had cash and cash equivalents of
$1,521,000 and working capital of $1,684,000. The Company believes that its cash
and cash equivalents will be sufficient to fund its operations through January
31, 2000. The Company believes that it has taken appropriate action to realign
and strengthen the Company's operations, including a plan to strategically grow
sales, increase internal productivity and decrease its overhead cost structure.
However, there can be no assurances that the Company will be able to achieve
profitable operations. Further development and establishment of the Company's
business may require additional financing. The Company believes that additional
financing could be obtained from various sources, including certain existing
shareholders and other investors and financial institutions not yet identified.
In the event that additional financing is delayed or not able to be obtained on
satisfactory terms, if at all, the Company may need to reduce its expenditures.
There can be no assurance that additional capital on a debt or equity basis will
be obtained, or if obtained that it will be on economically viable terms.

2.  BUSINESS COMBINATIONS

ACQUISITION OF PACIFIC ANALYSIS AND COMPUTING CORPORATION
On February 13, 1998, Pacific Analysis and Computing Corporation ("Pacific
Analysis") merged with and into the Company. The Company issued 35,870 shares of
its common stock valued at $143,480 in exchange for all outstanding Pacific
Analysis shares. The transaction was a tax-free reorganization and was accounted
for under the purchase method of accounting. The purchase price was allocated to
assets acquired and liabilities assumed based on their fair value at the date of
acquisition as follows: (a) net current assets $27,850, (b) property and
equipment $85,630, and (c) goodwill $30,000. The goodwill is being amortized
over five years. Pro forma revenue and results of operations for the fiscal
year ended January 31, 1998 do not significantly vary from the amounts reported
in the historical financial statements.


                                                                          23)

<PAGE>

MERGER WITH META4 DIGITAL DESIGN, INC.
On July 31, 1998, Meta4 Digital Design, Inc. ("Meta4") was merged with and into
a wholly-owned subsidiary of the Company through the issuance of 253,655 shares
of Company common stock, which were exchanged for all of the outstanding shares
of Meta4. The merger qualified as a tax-free reorganization and was accounted
for as a pooling-of-interests. Accordingly, the Company's financial statements
have been restated to include the results of Meta4 for all periods presented.

Meta4 reported results on a calendar year basis. Accordingly, the restated
financial statements combine the December 31, 1997 financial statements of Meta4
with the January 31, 1998 financial statements of the Company. In addition, the
below table for fiscal 1999, combines Meta4 through June 30, 1998 with fine.com
through July 31, 1998. Net sales and the net loss of Meta4 for the one-month
period ended July 31, 1998 were $98,632 and ($74,186), respectively, with the
net loss reflected as an adjustment to retained earnings as of July 31, 1998.
Beginning August 1, 1999, results of operations for the merged entities are
combined for the same quarterly periods.

<TABLE>
<CAPTION>
                                                            Fiscal Year Ended January 31, 1999
                                          --------------------------------------------------------------------
                                              fine.com            Meta4       Adjustments(1)        Total
                                          --------------------------------------------------------------------
<S>                                        <C>               <C>               <C>              <C>    
Revenue
     February 1, 1998 to July 31, 1998     $  1,925,470      $    802,939      $         -      $  2,728,409
     August 1, 1998 to January 31, 1999       2,376,272         1,028,594                -         3,404,866
                                          --------------------------------------------------------------------
                                           $  4,301,742      $  1,831,533      $         -      $  6,133,275
                                          --------------------------------------------------------------------
                                          --------------------------------------------------------------------
Net income (loss)
     February 1, 1998 to July 31, 1998     $ (1,460,653)     $   (193,524)     $    11,221      $ (1,642,956)
     August 1, 1998 to January 31, 1999      (1,545,051)         (377,816)               -        (1,922,867)
                                          --------------------------------------------------------------------
                                           $ (3,005,704)     $   (571,340)     $    11,221      $ (3,565,823)
                                          --------------------------------------------------------------------
                                          --------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
                                                          Fiscal Year Ended January 31, 1998
                                          --------------------------------------------------------------------
                                              fine.com            Meta4       Adjustments(1)        Total
                                          --------------------------------------------------------------------
<S>                                        <C>               <C>               <C>              <C>    
Revenue.................................  $   3,448,084      $  2,575,318      $         -      $  6,023,402
Net income (loss).......................  $      80,682      $   (165,955)     $    29,868      $    (55,405)

</TABLE>

(1)  There were no transactions between fine.com and Meta4 during any period
     prior to the merger. Pro forma adjustments have been made to the historical
     statements of operations to reflect the reversal of certain fees earned and
     interest expense incurred by Meta4 related to transactions with one of its
     shareholders. In addition, the impact of conforming accounting policies is
     not material.

3.  MARKETABLE SECURITIES

Management determines the appropriate classification of debt securities at the
time of purchase and reevaluates such designation as of each balance sheet date.
Management has classified the Company's marketable securities as
available-for-sale, in accordance with the provisions of SFAS No. 115,
ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES. Accordingly
the securities are carried at fair value, with unrealized holding gains and
losses, net income taxes, excluded from net income and recorded as an adjustment
to shareholder's equity. Interest, dividends and realized gains and losses are
included in net income.

(24  

<PAGE>


The following is a summary of marketable securities at January 31, 1998, all of
which were classified as available-for-sale:

<TABLE>
<CAPTION>
                                                                  Gross            Gross
                                             Amortized         Unrealized        Unrealized        Estimated
                                                Cost              Gains            Losses         Fair Value
                                          --------------------------------------------------------------------
<S>                                        <C>               <C>               <C>              <C>    
     Due in one year or less               $  1,621,144      $          -      $   (28,112)     $  1,593,032
     Due after one year                       2,341,815             5,147          (21,726)        2,325,236
                                          --------------------------------------------------------------------
                                           $  3,962,959      $      5,147      $   (49,838)     $  3,918,268
                                          --------------------------------------------------------------------
                                          --------------------------------------------------------------------
</TABLE>


4.  EQUIPMENT AND FURNITURE

Equipment and furniture consists of the following:

<TABLE>
<CAPTION>
                                                                                         January 31,
                                                                               ------------------------------
                                                                                      1999            1998
                                                                               ------------------------------
     <S>                                                                        <C>             <C>         
     Computer equipment......................................................   $   1,137,418   $    758,027
     Office furniture and equipment..........................................         305,629        176,923
     Leasehold improvements..................................................         664,405         84,273
                                                                               ------------------------------
                                                                                    2,107,452      1,019,223

     Accumulated depreciation and amortization...............................        (693,114)      (341,663)
                                                                               ------------------------------
                                                                                $   1,414,338   $    677,560
                                                                               ------------------------------
                                                                               ------------------------------
</TABLE>



5.  NOTE PAYABLE TO BANK

At January 31, 1999, the Company had in place a Revolving Line of Credit with
its bank in the amount of $750,000, of which $500,000 had been drawn upon.
Amounts outstanding under the credit facility at year-end bore interest at the
bank's prime rate plus 0.25% per annum (an effective rate of 8% at January 31,
1999). At fiscal 1999 year-end the Company was out of compliance with certain
covenants contained in its Revolving Line of Credit with its bank, including
requirements for minimum working capital, minimum tangible net worth and excess
losses in the fourth quarter. On April 2, 1999 the Company received a waiver on
its non-compliance with the bank covenants. The Company has renegotiated terms
with its bank and has received a commitment letter from the bank to enter into a
revised credit facility. The terms of the revised credit facility provide for a
line of credit in the amount of $750,000, to expire on September 1, 1999.
Amounts outstanding under the revised credit facility will continue to bear
interest at the bank's prime rate plus 0.25% per annum (an effective rate of 8%
at April 22, 1999). The facility is secured by all accounts receivable of the
Company and such other property and assets of the Company as the bank may
require, and contains modified financial covenants and restrictions, including a
restriction on payment of dividends.

6.  LEASE COMMITMENTS

The Company leases certain equipment and facilities under capital and operating
leases. The operating leases contain annual escalation clauses based on
inflation. The Company sublets a portion of its office space and offsets rent
expense through sublease billings. Net rent expense under the operating leases
amounted to $506,152 and $255,466 in fiscal 1999 and 1998, respectively.

                                                                          25)

<PAGE>

Future minimum lease payments for operating and capital leases at January 31,
1999 are as follows:

<TABLE>
<CAPTION>
                                                      Operating Leases
                                      ----------------------------------------------------------    Capital
                                              Leases            Sublease            Net             Leases
                                      -----------------------------------------------------------------------
     <S>                                   <C>               <C>                <C>                <C>    
     2000.............................     $   598,095       $   (162,661)      $  435,434         $ 73,092
     2001.............................         584,143           (171,703)         412,440           31,103
     2002.............................         489,588            (73,467)         416,121           23,257
     2003.............................         297,542                  -          297,542            9,590
     2004.............................         283,439                  -          283,439                -
     Thereafter.......................         402,116                  -          402,116                -
                                      -----------------------------------------------------------------------
                                           $ 2,654,923       $   (407,831)     $ 2,247,092           137,042
                                      -----------------------------------------------------------
                                      -----------------------------------------------------------

     Less amount representing 
       interest.............................................................................         (27,212)
                                                                                                 -------------
     Present value of minimum capital 
       lease obligations....................................................................         109,830
     Less current portion...................................................................         (57,602)
                                                                                                 -------------
     Capital lease obligations, 
       less current portion...................................................................     $  52,228
                                                                                                 -------------
                                                                                                 -------------
</TABLE>



7.  INCOME TAXES

The provision (benefit) for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                                                     Fiscal Year Ended
                                                                                         January 31,
                                                                              --------------------------------
                                                                                      1999            1998
                                                                              --------------------------------
     <S>                                                                        <C>             <C>    
     Current.................................................................   $          -    $          -
     Deferred................................................................       (102,019)         46,567
                                                                               -------------------------------
                                                                                $   (102,019)   $     46,567
                                                                               -------------------------------
                                                                               -------------------------------
</TABLE>

The provision (benefit) for income taxes differs from the amount computed by
applying the federal statutory income tax rate to income before taxes as
follows:

<TABLE>
<CAPTION>
                                                                                     Fiscal Year Ended
                                                                                         January 31,
                                                                               -------------------------------
                                                                                      1999            1998
                                                                               -------------------------------
     <S>                                                                        <C>             <C>    
     Computed tax at federal statutory rate of 34%...........................   $  (1,247,066)  $     (3,005)
     Increase in valuation allowance.........................................       1,106,020              -
     Subchapter S losses not benefited.......................................          61,983         46,270

     Other items, net........................................................         (22,956)         3,302
                                                                               -------------------------------
                                                                                $    (102,019)  $     46,567
</TABLE>


(26

<PAGE>


The Company has elected to use the cash method of accounting for income tax
purposes because it currently qualifies for the small business exception. This
exception allows corporate taxpayers to use the cash method of accounting if
their gross receipts over the three immediately preceding tax table years do not
exceed $5,000,000 and they meet certain other requirements. The Company will
convert to the accrual method for income tax purposes when they no longer
satisfy the criteria for this exception. Deferred taxes reflect the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes.

Meta4 elected to be taxed as a subchapter S corporation prior to the business
combination with fine.com. Accordingly, Meta4 did not record any income tax
benefit because the individual shareholders received the benefit for Meta4's
taxable losses.

Significant components of the Company's net deferred income tax assets and
liabilities are as follows:

<TABLE>
<CAPTION>
                                                                                         January 31,
                                                                             -------------------------------
                                                                                      1999            1998
                                                                             -------------------------------
     <S>                                                                       <C>              <C>    
     Deferred tax assets:
         Net operating loss carryforward ....................................  $ 1,311,030      $   224,720
         Other ..............................................................       34,640           14,434
                                                                             -------------------------------
                                                                                 1,345,670          239,154

     Deferred tax liabilities:
         Accrual to cash basis adjustments ..................................     (239,650)        (336,771)
         Other ..............................................................            -           (4,402)
                                                                             -------------------------------
                                                                                  (239,650)        (341,173)
     Valuation allowance ....................................................   (1,106,020)               -
                                                                             -------------------------------
     Net deferred tax assets (liabilities) ..................................  $         -      $  (102,019)
                                                                             -------------------------------
                                                                             -------------------------------
</TABLE>


At January 31, 1999, the Company had net operating loss carryforwards of
approximately $3,856,000 which begin to expire in 2011. Utilization of these
carryforwards depends on the recognition of future taxable income. The Company's
ability to utilize net operating loss carryforwards may be limited in the event
that a change in ownership, as defined in the Internal Revenue Code, occurs in
the future. To the extent that any single-year loss is not utilized to the full
amount of the limitation, such unused loss is carried forward to subsequent
years until the earlier of its utilization or the expiration of the relevant
carryforward period.

8.  SHAREHOLDERS' EQUITY

CONVERTIBLE PREFERRED STOCK
On January 31, 1997, the Company completed a private placement for the issuance
and sale of 59,524 shares of Series A Preferred Stock of the Company for
$250,000 less offering costs of $10,082. Upon the effectiveness of the Company's
Registration Statement relating to the Company's initial public offering of the
common stock, all outstanding shares of the Series A Preferred Stock
automatically converted into shares of common stock, at a one-to-one conversion
ratio. In addition, upon the effective date of the Registration Statement, the
authority of the Company to issue preferred stock terminated and the number of
authorized shares of preferred stock were converted into additional authorized
shares of common stock.
                                                                              
                                                                            (27

<PAGE>

INITIAL PUBLIC OFFERING
On August 11, 1997, the Company's Registration Statement for its initial public
offering was declared effective by the Securities and Exchange Commission and
the Company issued 1,100,000 shares of common stock to the public at the initial
public offering price of $6.50 per share. On August 25, 1997, pursuant to the
exercise of an over-allotment option granted to the underwriters in the
Company's public offering, the Company issued an additional 165,000 shares of
common stock at a price of $6.50 per share. Proceeds to the Company, net of
offering expenses of $1,994,458, amounted to $6,228,042.

In connection with the initial public offering, the Company agreed to sell
warrants to the underwriters for $110. The underwriters' warrants entitle them
to purchase 110,000 shares at $8.775 per share. The warrants are limited to a
term of five years beginning August 11, 1997, and are exercisable for a four
year period commencing August 11, 1998.

STOCK OPTION PLANS
In February 1996, the Board of Directors approved the 1996 Incentive Stock
Option Plan (the "1996 Plan") and reserved 227,258 shares of common stock for
issuance thereunder. In April 1997, the Company adopted the 1997 Option Plan
(the "1997 Plan") and reserved 200,000 shares of common stock for issuance
thereunder. The Plans provide for the grant of both incentive stock options and
nonqualified stock options to officers, employees, and consultants. A committee
of the Board of Directors determines the terms and conditions of options granted
under the Plans, including the exercise price. The exercise price for incentive
stock options shall not be less than the fair market value of common stock at
the date of grant unless the incentive stock option is granted to a person who
owns greater than 10% of the Company for which the exercise price shall not be
less than 110% of the fair market value at the date of grant. The exercise price
of nonqualified stock options shall not be less than 85% of the fair market
value of the common stock at the date of grant. Pursuant to the terms of the
Underwriting Agreement with the Company's underwriters in the initial public
offering, the Company agreed to grant options under the stock option plans at
not less than the IPO price per share of $6.50 for a period of 18 months
following the effective date of the Registration Statement. In addition,
pursuant to the terms of the Underwriting Agreement, the Company was restricted
for a period of 18 months from the effective date of the Registration Statement
from granting options under the 1996 Plan in excess of 124,707. Options expire
between five and ten years from the date of grant. Options under the 1996 and
1997 Plans, excluding options to directors which vest upon grant, and subject to
the maintenance of a continuous relationship from the date of grant, vest
according to a schedule which provides that 5% of the total number of shares
granted will vest after one year, 15% will vest after two years, 30% after three
years, 50% is vested after four years, and the option grant is fully vested
after five years from the date of grant. Options which are granted under the
Plans and are subsequently cancelled, revert back to the option pool.

Effective February 26, 1999, the Company implemented a number of changes to its
stock option plans. These changes included: (a) the repricing of all stock
options granted after the IPO under either the 1996 Plan or 1997 Plan which were
held by current employees (but not officers and directors) of the Company to an
exercise price of $2.50, the fair market price at the date of the repricing, (b)
amendments to the existing stock option vesting schedules to provide for vesting
at a rate of 25% per year over four years relating back to the date of original
grant for all employees (excluding directors and officers) and all future option
grants, and (c) the implementation of a new Employee Bonus Plan which provides
for the issuance of up to 126,435 nonqualified stock options to employees or
consultants (but not officers and directors). In connection with the above stock
option plan changes: (a) 7,216 pre-IPO stock options were not repriced and
remained exercisable at $1.76 per share, (b) 99,000 employee options outstanding
were repriced to an exercise price of $2.50 per share, (c) 126,435 employee
options were granted at $2.50 per share under

(28

<PAGE>


the new Employee Bonus Plan in order to more equitably allocate options among 
employees based on their respective positions with the Company and (d) 
106,311 currently outstanding stock options to officers and directors were 
not repriced and remained at $6.50 per share.

A summary of stock option activity follows:

<TABLE>
<CAPTION>
                                                                            Outstanding Options
                                                              ----------------------------------------------
                                                                                                  Weighted-
                                                                  Shares                           Average
                                                               Available for      Number of       Exercise
                                                                   Grant           Shares          Prices
                                                              ----------------------------------------------
     <S>                                                      <C>              <C>                <C>     
     Balance at February 1, 1997...........................       102,551          124,707        $   1.76
     1997 Plan introduction................................       200,000                -               -
     Granted in fiscal 1998................................       (90,793)          90,793        $   6.50
     Cancelled in fiscal 1998..............................        31,642          (31,642)       $   4.11
                                                               -------------------------------
     Balance at January 31, 1998...........................       243,400          183,858        $   3.89
     Granted in fiscal 1999................................      (186,250)         186,250        $   6.50
     Cancelled in fiscal 1999..............................       116,595         (116,595)       $   4.47
                                                               -------------------------------
     Balance at January 31, 1999...........................       173,745          253,513        $   5.55
                                                               -------------------------------
                                                               -------------------------------
</TABLE>

The following table summarizes information concerning currently outstanding and
exercisable options at January 31, 1999:

<TABLE>
<CAPTION>
                           ---------------------------------  -------------------------------
                                             Outstanding                         Exercisable
                                              Weighted-                           Weighted-
                                               Average                             Average
              Exercise       Number of        Remaining          Number of        Exercise
               Prices         Options     Contractual Life        Options          Prices
           ----------------------------------------------------------------------------------
              <S>            <C>          <C>                    <C>              <C>    
               $1.76            50,977       7.33 years            47,456            $1.76
                            -------------                       ------------
               $6.50           202,536       9.34 years            46,861            $6.50
                            -------------                       ------------
                               253,513       8.94 years            94,317
</TABLE>


COMMON STOCK RESERVED FOR FUTURE ISSUANCE

The Company has reserved shares of common stock as of January 31, 1999 as
follows:

<TABLE>
     <S>                                                       <C>    
     Stock options..........................................   427,258
     Common stock warrants..................................   110,000
                                                            ------------
                                                               537,258
                                                            ------------
                                                            ------------
</TABLE>

The above table excludes an additional 126,435 shares of common stock which were
reserved for future issuance pursuant to the new Employee Bonus Plan, of which
stock options for all 126,435 shares were granted on February 26, 1999.

                                                                        29)

<PAGE>


PRO FORMA DISCLOSURE UNDER SFAS NO. 123
Pro forma information regarding earnings per share is required by SFAS No. 123,
and has been determined as if the Company had accounted for its employee stock
options under the fair value method of that Statement. The value for these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted average assumptions:

<TABLE>
<CAPTION>
                                                                                    Fiscal Year Ended
                                                                                        January 31,
                                                                              -------------------------------
                                                                                    1999             1998
                                                                              -------------------------------
     <S>                                                                      <C>              <C>
     Expected dividend yield...............................................               0%              0%
     Expected stock price volatility.......................................   0.878 - 01.401   0.437 - 0.676
     Risk-free interest rate...............................................      4.5% - 5.7%     5.7% - 6.5%
     Expected life of options..............................................          5 years         5 years

</TABLE>

For purposes of pro forma disclosures, the estimated weighted average value of
the options granted of $3.12 and $2.32 per share during 1999 and 1998,
respectively, is amortized to expense over the options' vesting period. The
effects of applying the Statement for providing pro forma disclosure are not
indicative of future amounts until the new rules are applied to all outstanding
nonvested awards. The Company's pro forma information is as follows:

<TABLE>
<CAPTION>
                                                                                    Fiscal Year Ended
                                                                                        January 31,
                                                                              -------------------------------
                                                                                    1999             1998
                                                                              -------------------------------
     <S>                                                                       <C>              <C>         
     Net loss-as reported....................................................  $(3,565,823)     $   (55,405)
     Net loss-pro forma......................................................  $(3,713,149)     $   (84,405)

     Diluted loss per share-as reported......................................  $     (1.34)     $     (0.03)
     Diluted loss per share-pro forma........................................  $     (1.39)     $     (0.04)
</TABLE>

During fiscal 1999, the Company recorded a noncash stock-based compensation
charge of $25,000 related to the modification of stock options in connection
with the termination benefits to an employee.

9.  TRANSACTIONS WITH OFFICERS AND DIRECTORS

At January 31, 1999 and 1998, the Company had a note receivable from an officer
which was non-interest bearing.

10.  EMPLOYEE BENEFIT PLAN

The Company has a 401(k) savings plan covering substantially all of its
employees. Eligible employees may contribute through payroll deductions. The
Company matches employees' contributions at the discretion of the Company's
Board of Directors. To date, the Company has not matched employee contributions
to the 401(k) savings plan.

(30

<PAGE>

11.  BUSINESS SEGMENTS

The Company markets its services through direct and indirect channels throughout
the world. Information regarding revenues in different geographic regions is as
follows:

<TABLE>
<CAPTION>
                                                                                        Fiscal Year
                                                                                      Ended January 31,
                                                                              -------------------------------
                                                                                      1999            1998
                                                                              -------------------------------
     <S>                                                                        <C>             <C>         
     North America...........................................................   $   5,892,129   $  6,023,402
     Rest of world...........................................................         241,146              -
                                                                              -------------------------------
     Total revenues..........................................................   $   6,133,275   $  6,023,402
                                                                              -------------------------------
                                                                              -------------------------------
</TABLE>

The Company reports operating results based on geographic areas which are
primarily its PacWest (headquarters) and NorthEast (Meta4) office locations. The
"Other" segment below includes the operations of its MidAtlantic office as well
as offices which were closed during fiscal 1999. A summary of key financial data
by segment is as follows:

<TABLE>
<CAPTION>
                                                PacWest          NorthEast          Other             Total
                                           ------------------------------------------------------------------
<S>                                        <C>               <C>               <C>              <C>    
Fiscal Year Ended January 31, 1999:
     Revenues                              $  3,655,798      $  1,831,533      $   645,944      $  6,133,275
     Operating loss                          (2,432,664)         (544,312)        (829,690)       (3,806,666)
     Interest, net                              164,766           (27,028)           1,086           138,824
     Depreciation and amortization              225,088           105,541           14,847           345,476
     Purchases of property and equipment        878,735            91,963           65,913         1,036,611
     Long-lived assets                        1,228,981           262,207                -         1,491,188
     Total assets                             4,454,846           548,178           67,075         5,070,099
Fiscal Year Ended January 31, 1998:
     Revenues                              $  3,448,084      $  2,575,318      $         -      $  6,023,402
     Operating loss                             (12,898)         (108,750)               -          (121,648)
     Interest, net                              140,147           (27,337)               -           112,810
     Depreciation and amortization               88,286            93,046                -           181,332
     Purchases of property and equipment        443,180            86,394                -           529,574
     Long-lived assets                          496,145           284,976                -           781,121
     Total assets                             7,351,508           613,721                -         7,965,229

</TABLE>


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

None.

                                                                          31)

<PAGE>


PART III



The information called for by Items 9 through 12 of Part III is included in the
Registrant's Proxy Statement and is incorporated herein by reference. The
information appears in the Proxy Statement under the captions "Election of
Directors," "Security Ownership of Directors, Executive Officers and Certain
Beneficial Owners," "Executive Compensation" and "Certain Transactions."

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

a.   EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NUMBER                                       DESCRIPTION
<S>                 <C>
      3.1*          Articles of Incorporation, as amended
      3.1A**        Amendment to Articles of Incorporation filed April 2, 1998
      3.2*          Bylaws
      4.1+          Specimen Common Stock Certificate
      4.2*          Form of Representative's Warrant (included as Exhibit A to
                    Representative's Warrant Agreement filed as Exhibit 10.12)
     10.1*          Incentive Stock Option Plan
     10.2*          1997 Stock Option Plan
     10.3           Employee Bonus Plan
     10.4*          Employment Agreement dated May 9, 1997 with Daniel M. Fine
     10.4A+         First Amendment to Employment Agreement with Daniel M. Fine 
     10.5+          Employment Agreement dated November 24, 1998 with Timothy J. Carroll 
     10.6+          Employment Agreement dated July 31, 1998 with Kathy L. Berni
     10.7           Employment Agreement dated February 13, 1998 with Bill Poole 
     10.8A          Commitment Letter dated April 22, 1999 with U.S. Bank of Washington
     10.8B*         Commercial Security Agreement dated March 31, 1997 for $750,000
                    revolving line of credit
     10.9A*         Office Lease Agreement dated February 28, 1996 with Grand Pacific 
                    Limited Partnership (former corporate headquarters)
     10.9B*         Personal Guaranty of Daniel M. Fine dated February 29, 1997
     10.9C*         First Amendment to Office Lease Agreement dated March 1997
     10.9D*         Sublease Agreement dated September 15, 1997 with Data Base Designs, Inc.
     10.10A*        Lease Agreement dated November 19, 1997 with Third Avenue
                    Associates (current corporate headquarters)
     10.10B*        Amendment No. 1 to Lease Agreement, dated December 29, 1997
     10.10C*        Personal Guaranty of Daniel M. Fine for Office Lease, dated November 20, 1997
     10.11A*        Agreement dated August 31, 1995 between Pacific Analysis and Computer Corporation and
                    Amber Jack Ltd.
     10.11B*        Sublease Agreement dated July 31, 1997 with Haralson & Co., P.C.
     10.12*         Form of Representative's Warrant Agreement
     10.13***       Agreement and Plan of Merger (exclusive of schedules and exhibits) dated as of July 29, 1998
                    with Meta4 Digital Design, Inc.
</TABLE>

(32

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NUMBER                                       DESCRIPTION
<S>                 <C>
     21.1+          List of Subsidiaries of fine.com International Corp.
     27.1           Financial Data Schedule
</TABLE>
 ----------------------------------------------
     *   Incorporated herein by reference from Item 27 of the Company's Form 
         SB-2 (No. 333-26855).
    **   Incorporated herein by reference from exhibit to Form 8-K filed 
         April 13, 1998.
   ***   Incorporated herein by reference from exhibit to Form 8-K filed August
         13, 1998.
    +    Incorporated herein by reference from exhibit filed with the Company's
         Form 10-QSB for the quarter ended July 31, 1998.
   ++    Incorporated herein by reference from exhibit filed with the Company's
         Form 10-QSB for the quarter ended October 31, 1998.

B.  REPORTS ON FORM 8-K

No reports were filed by the Company during the fiscal quarter ended January 31,
1999.
















                                                                         33)


<PAGE>


SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant 
caused this Report to be signed on its behalf by the undersigned, thereunto 
duly authorized on April 28, 1999.

                                              fine.com International Corp.

                                              By:  /s/ Daniel M. Fine
                                              ---------------------------------
                                              Daniel M. Fine, Chairman and
                                              Chief Executive Officer

In accordance with the Exchange Act, this Report has been signed below by the 
following persons on behalf of the registrant and in the capacities indicated 
on April 28, 1999.

/s/ Daniel M. Fine                      /s/ Timothy J. Carroll
------------------------------          -----------------------------------
Daniel M. Fine                          Timothy J. Carroll
Chairman, Chief Executive               Executive Vice President of Finance 
Officer and Director                    and Operations (principal financial 
(principal executive officer)           and accounting officer)

/s/ Herbert L. Fine                     /s/ Frank Hadam
------------------------------          -----------------------------------
Herbert L. Fine                         Frank Hadam
Director                                Director

/s/ Anthony C. Naughtin
------------------------------
Anthony C. Naughtin
Director













(34