QUOKKA SPORTS INC, 10-K, 2000-03-29

QUOKKA SPORTS INC
10-K, 2000-03-29
MISCELLANEOUS AMUSEMENT & RECREATION

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

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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

COMMISSION FILE NUMBER #000-26311

QUOKKA SPORTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
DELAWARE 94-3250045
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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525 BRANNAN STREET
SAN FRANCISCO, CALIFORNIA 94107
(415) 908-3800
(ADDRESS OF REGISTRANTS PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE,
AND TELEPHONE NUMBER, INCLUDING AREA CODE)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $233,000,000 as of March 13, 2000, based upon
the closing sale price on the Nasdaq National Market reported for such date.
Shares of Common Stock held by each officer and director and by each person who
owns 5% or more of the outstanding Common Stock have been excluded in that such
persons may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.

The number of shares of the Registrant's Common Stock, $.0001 par value per
share, outstanding at March 13, 2000 was 44,430,295.

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DOCUMENTS INCORPORATED BY REFERENCE

Quokka Sports, Inc. has incorporated by reference into Part III of this
report on Form 10-K portions of its definitive Proxy Statement for the Annual
Meeting of Stockholders to be filed by April 30, 2000.

SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

This report on Form 10-K contains forward-looking statements of Quokka
Sports, Inc. within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 that are subject to the "safe
harbor" created by those sections. The forward-looking statements include, but
are not limited to: statements related to industry trends and future growth in
the markets for digital sports entertainment; our ability to develop multiple
revenue streams and for reducing our costs of generating revenues; our ability
to attract new sponsors and advertisers and to retain existing sponsors and
advertisers; our ability to materially increase the audience of the Quokka
Sports Network; our future research and development; the timing of our
introduction of new programming; our ability to develop content for emerging
digital media platforms; and future profitability.

Discussions containing such forward-looking statements may be found in
"Business and Management's Discussion and Analysis of Financial Condition and
Results of Operations." These forward-looking statements involve certain risks
and uncertainties that could cause our actual results to differ materially from
those in such forward-looking statements. We disclaim any obligation to update
these forward-looking statements as a result of subsequent events. The business
risks discussed on "Factors That May Affect Our Results" on pages 19 through 30,
among other things, should be considered in evaluating our prospects and future
financial performance.

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PART I

ITEM 1. BUSINESS

This description contains certain forward-looking statements that involve
risks and uncertainties. When used in this report, the words "intend,"
"anticipate," "believe," "estimate," "plan" and "expect" and similar expressions
as they relate to us are included to identify forward-looking statements. Our
actual results could differ materially from the results discussed in the
forward-looking statements as a result of certain of the risks set forth herein
and elsewhere in this report on Form 10-K. We assume no obligation to update any
forward-looking statements contained in this report.

OVERVIEW

Quokka Sports is a leading provider of sports entertainment for the digital
world.

Around the world, sports enthusiasts immerse themselves in their favorite
sports, both as spectators and as participants. This passion for sports
translates into billions of dollars of spending on sports entertainment and
related sporting products and services. We believe that this market will
continue to expand as advances in technology create more opportunities to fuel
the passions of sports enthusiasts.

We use the power of emerging digital media to bring sports enthusiasts
closer to their favorite sports. We leverage our digital technology to offer
live event coverage, race viewers, news and information, audio and text
dispatches from athletes, games, community forums and content created by fans,
as well as opportunities for the fan to purchase premium content and products
and services in order to provide our audience a complete sports experience. We
believe that media coverage is most effective when it allows the viewer to feel
a real connection to other individuals, events and venues. As a result, the
sports experiences on the Quokka Sports Network and for our distribution
partners are intended to allow our viewers to reach halfway around the world in
real time to experience all of the excitement of a major sporting event direct
from wherever they happen to be.

Through this immersive approach, we seek to win the "hearts and minds" of
enthusiasts of the sports we offer and create ongoing communities around these
sports. The properties of the Quokka Sports Network are designed to become the
destinations for followers of these sports. We call these destinations for
specific sport communities "sport verticals."

The Quokka Sports Network is designed to appeal to a global audience. We
currently cover motor racing, sailing, adventure and key Olympic summer sports,
such as track and field, swimming and gymnastics. The Quokka Sports Network also
includes coverage of some of the world's largest sporting events like the
biennial Olympic Games, the America's Cup yacht match, Fed Ex Championship Auto
Racing (CART) Series and the Moto Grand Prix championship as a result of our
relationships with our strategic partners like NBC Olympics, Inc., CART, Dorna
Promocion del Deporte, S.A., National Geographic and The North Face. The
properties of the Quokka Sports Network have attracted a community of sports
enthusiasts that averaged over one million unique visitors per month in January
and February 2000, according to our internal tracking systems.

We recognize that sports enthusiasts are tribal in nature and we seek to
deliver content that reflects the fan's zeal for coverage of their favorite
event, sport, nation, team or athlete. For example, in addition to targeting the
English-speaking audience, we are beginning to localize content for non-English
speaking fans of the sports that we cover in order to most effectively engage a
global audience. We also understand that sports enthusiasts often want an
individualized experience. We are therefore focusing on methods of customizing
our content to further satisfy the individual needs of the members of our
growing community.

Since our inception, we have sought to lead our industry with innovations
that allow for the delivery of this content across a wide variety digital
platforms, from wireless to narrowband Internet to broadband Internet to true
converged media. We call this "allband." To help us achieve this multi-platform
approach, we have entered into strategic relationships with some major players
in the media and communications industries. Our strategic investors and
distribution partners include British Telecom Holdings, B.V., Comcast
Interactive
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Investments, Inc., Excite@Home Corporation, Hearst Communications, Inc., Intel,
Liberty QS, Inc., MediaOne Interactive Services, Inc., Microsoft Corporation,
Nokia Corporation, Roadrunner, Terra Networks, S.A., and Yahoo Europe.

We seek to generate revenue from three sets of customers, each of which is
described in greater detail below:

- from business customers through sales of sponsorships and advertising;

- from media companies through revenue from content syndication; and

- from consumers through sales of premium content, sports memorabilia,
officially-licensed merchandise and other products and services.

Sponsorship and Advertising. We believe sponsors and advertisers are
attracted to our passionate sports audiences for several reasons. First, this
audience comprises an attractive demographic, including male professionals who
are often a difficult segment to reach. Second, our sports fan base tends to be
emotionally attached to the content that we offer. Finally, we believe the rich
interactive media environment allows for compelling brand messaging
opportunities. As a result of these and other factors, we have a number of
relationships with large multi-national advertisers, including Compaq Computer
Corporation, Intel Corporation, Computer Associates International, Inc., IBM,
General Motors, Qwest Communications, Anheuser Busch, Ford Motor Corporation,
Visa International, and Adidas America.

Content Syndication. Content syndication is also emerging as a significant
source of revenue for us. Our exclusive rights allow us to create content that
is attractive to our media customers as these media companies seek unique and
engaging content for their users. Currently, we are syndicating content to
narrowband Internet and broadband Internet.

Revenue from Consumers. The impassioned sports fan is likely to spend money
on a variety of products and services to become further connected to a favorite
sport, event, team or athlete. For example, a fan may purchase a hat or print
autographed by a favorite America's Cup skipper, purchase a pay-per-view
experience or travel to a destination to meet a famous athlete or experience an
event from the front row. We integrate opportunities to purchase these types of
products and services into the Quokka Sports Network.

Finally, we are developing an adaptable technology and business
infrastructure that will support a fully localized global network. We believe
that our technology platform, our distribution network and our business
infrastructure will permit us to rapidly achieve economies of scale as we build
out new sport verticals.

In August 1996, we adopted our current business model and incorporated in
Delaware under the name Quokka Productions, Inc. Shortly thereafter in September
1996, we changed our name to Quokka Sports, Inc. Prior to August 1996, we
operated as an Australian software development and consulting company, Ozware
Development Unit Trust, an Australian unit trust. References in this report to
"Quokka Sports," "Quokka," "we," "our" and "us" refer to Quokka Sports, Inc. and
its subsidiaries.

INDUSTRY BACKGROUND

THE SPORTS ENTHUSIAST

Sports enthusiasts are found in a myriad of shapes and sizes and live in
every corner of the world -- men and women, young and old, spectators and
participants. A 23 year-old "petrol head" from Milan who lives to know
everything there is to know about "air-to-fuel ratios" is quite different from a
38 year-old businesswoman from Seattle who does technical big-wall climbing on
the weekends. However, these people share a common passion for achievement in
sport. This primal zeal for achievement, whether in the form of competition or
inspiration, is at the core of all sport and it drives the sports enthusiast to
great lengths to fulfill this passion for a particular sport, team, event or
national interest.

This enthusiasm for sports is an almost universal phenomenon. It seems that
almost everyone has a strong attachment to at least one sport. For example, the
ESPN Chilton Sports Poll estimates that 86.6% of the

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general United States population 12 years of age or older are sports fans. They
further estimate that currently 19.7% of this population accesses sports
information with their computer.

THE GLOBAL SPORTS INDUSTRY

A huge industry has emerged to serve the passions of sports enthusiasts.
Sports broadcasting and publishing, athletic and outdoor gear, team apparel,
travel services, training, and venue access comprise several billion-dollar
industry segments. The Georgia Institute of Technology estimates that revenue
streams derived from spectator sports, sporting goods and sporting publications
in the United States alone exceeded $130 billion in 1995. The industry continues
to grow at a robust rate. For example, Paul Kagan Associates Inc. estimates that
U.S. advertisers will increase their investment in sports-related TV advertising
by 38% between 1998 and 2003.

The emergence of the Internet has added to the expansion of the sports
entertainment industry. Jupiter Communications, Inc. estimates that global
consumers will spend approximately $3.0 billion per year online on sporting
goods, apparel, footwear and tickets by 2003. In addition, Forrester Research,
Inc. projects that total U.S. online ad spending on advertisements will grow to
$22 billion in 2004.

ADVANCE OF DIGITAL MEDIA PLATFORMS

We believe that the world is currently undergoing a revolution in the way
it enjoys entertainment. The growth of the Internet is well documented, but
broadband delivery of content is also advancing quickly. Forrester Research
projects that 22 million U.S. households will have high-speed broadband access
by 2003. Other digital media platforms are also emerging. Jupiter Communications
estimates that the total user base of mobile personal internet appliances such
as "smart" phones, pagers and PDAs will reach almost 26 million by 2002.
Converged media devices are starting to develop as well. Forrester Research
projects that so-called "Interactive TV" applications like enhanced broadcast TV
and web on TV will reach a total of 37 million households by 2004. Advances in
digital media platforms will someday allow sports enthusiasts to follow their
favorite sports 24 hours a day, 7 days per week, whether they are on the road,
at the office, on the golf course or at home in the living room.

NEED FOR A CENTRALIZED SOURCE OF ENTERTAINMENT FOR THE SPORTS ENTHUSIAST

We believe sports enthusiasts seek to fully immerse themselves in their
sport of choice. The sports fan that travels to a sports venue often desires the
most complete experience possible. Of course, he will watch the live
competition -- but the experience does not end there. The fan also might buy a
program to learn which athletes are competing, watch replays on the "big
screen," talk to other fans about the competition, pick-up a magazine for more
in-depth stories, buy an official event jacket and try to get "behind the
scenes" to meet the athletes. This multi-faceted experience could describe a
motor racing track, a soccer match, a golf tournament, a sailing regatta or
almost any sports experience. Similarly, a climber on a rock face can check out
the weather conditions, take in the view, gauge the progress of the climb or
share stories with fellow climbers. When the climber leaves the mountain, she is
likely to continue to seek out ways to replicate this "complete" experience.

While there are numerous traditional and on-line sources of sports
information, products and services, we believe that sports enthusiasts do not
have a single location that fulfills all of their needs for experiencing a
particular sport. Currently, a sports fan must weave together a patchwork of
media and experiences by doing all or most of the following: subscribe to
magazines, newspapers or newsletters to get the latest news and information; be
near a TV at the right time to catch the live coverage of their sport or event
(if it's being covered at all); head to the local bar to debate the latest
events in their sport; get to the store to grab the latest gear; and ask someone
who's going to the venue to pick up an event souvenir. Furthermore, there are
some experiences that are extremely difficult to replicate via traditional
outlets, such as: getting the inside story directly from the athlete during
competition; enjoying real-time coverage of events that are not covered in a
particular region or at all; or having an individual question directly answered
by an athlete, expert or another fan who is located halfway around the world.

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QUOKKA SPORTS -- THE COMPLETE SPORTS EXPERIENCE

Since our inception, we have had a simple goal: to bring the sports
enthusiast the most complete sports experience possible -- regardless of where
he or she is located. This effort began with our coverage of the Whitbread Race
for the Volvo Trophy in 1997, an around-the-world yacht race, and continues
today for the tribal followers of a number of sports. We strive to leverage the
power of digital media to bring a 24x7, 360-degree experience to sports
enthusiasts. This complete experience is designed to utilize virtually every
aspect of emerging media, combining live event coverage, new narrative
techniques, rich content, community functions, audio and text dispatches from
athletes, games, opportunities to purchase premium content, travel services and
official event merchandise. We employ a variety of techniques to achieve what we
call "Quokka Sports Immersion."

We start with the individual sports enthusiast. We give fans the
opportunity to create their own experience by tailoring our interactive media to
their own interests and level of understanding. If the sports enthusiast wants
to watch live coverage of an event, she can launch a Quokka RaceViewer that
delivers images, audio, telemetry, and results data. If a fan wants to learn
more about a sport, he can access that information. He can also follow related
human-interest stories through in-depth features or strike up an argument with
other fans about some controversy through our often-intense bulletin-board
forums. An enthusiast can get to know the athletes through biographies, and more
intimately through regular diary-entries and live chats. She can experience
competition by joining a fantasy league or competing in a virtual race.
Furthermore, fans can bring a tangible piece of their sport home by purchasing
licensed merchandise in our online stores or by bidding for one-of-a-kind gear
and memorabilia through our auction services. We also provide updates on where
to participate in a sport and how to get there. Finally, we provide information
on gear and create an opportunity for fans to buy it. Enthusiasts can share "war
stories" or recommendations on locations, gear, and training. They can take
advantage of the unique perspectives provided by our sports coverage that
leverages the available assets to create a complete and compelling view of the
action.

We seek to do more than just attain the "eyeballs" of sports enthusiasts.
Rather, we want to win their "hearts and minds." Our properties in the Quokka
Sports Network are designed to be the destinations for fans of those sports, and
we intend to leverage the value of this engaged audience. We call these
destinations for specific sports communities "sport verticals."

THE QUOKKA SPORTS NETWORK

At the core of our business is a commitment to strive for deep coverage of
specific sports in each of our sport verticals, including key events, teams and
athletes associated with those sports. This approach forms the basis for our
scalable network strategy to build a network of sports communities. It is
designed to form the deepest -- and most valuable -- relationship with the
tribal communities that follow these sports. With this approach, we believe that
we will be well positioned to leverage the entire value chain associated with
these passionate communities -- from sponsorship and advertising to merchandise
to travel services, and more.

The Quokka Sports Network has been created to extend the value of each of
our sport verticals by implementing the following strategies:

1. Aggregation of the best of the Quokka Sports Network at Quokka.com,

2. Localization of content for regional fan-bases throughout the world, and

3. Multi-platform delivery of content across various digital media devices.

SPORT VERTICALS -- EVENTS, TEAMS AND ATHLETES

We have created a network of discreet sport verticals that focus on the
interests and passions of specific sports communities. Since the beginning of
1999, the Quokka Sports Network has grown from two properties, the Whitbread
Race and the Around Alone yacht race, to over a dozen properties as of March
2000, including the 2000 America's Cup, the BT Global Challenge, CART, Climbing
Cameroon, Everest 2000, Great Trango Tower, Key West Race Week, Marathon des
Sables, NBCOlympics.com and Surfing Antarctica. We are

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pursuing three primary strategies to build out our network. First, we seek to
secure official rights to particular events or circuits, such as the 2000
America's Cup Match and the CART racing series. Additionally, we look for
opportunities to add existing sport verticals by acquiring other companies.
Finally, we intend to leverage our expertise from our coverage of Olympic sports
by developing some of the 35 sports sites and Quokka Wired Athlete sites in our
Olympic Games property. Currently, the Quokka Sports Network includes:

- Destinations for a number of sports with truly global fan-bases such as
motor racing, sailing, adventure racing, climbing, hiking and Olympic
summer sports like track and field, swimming, and gymnastics.

- Live coverage of some of the world's largest sporting events, including
the biennial Olympic Games, the America's Cup 2000 yacht match, the CART
racing series, and the Moto Grand Prix motorcycle championships.

- Relationships with some of the world's top athletes, including: Michael
Johnson, Dan O'Brien, Amy Van Dyken, Dominique Moceaneau, and Karch
Kiraly.

QUOKKA.COM

The most engaging stories and features from the Quokka Sports Network are
aggregated at Quokka.com. Quokka.com also provides a sampler of "broadband"
content for those visitors with high-speed connections who want to explore our
most innovative presentation techniques. Community, gaming, and shopping
experiences are also unified at Quokka.com. For example, fans who enjoy virtual
games in one sport, for example, often look for similar opportunities in other
events. We believe Quokka.com provides an effective way to cross-promote our
varied sports coverage to fans with multiple interests.

INTERNATIONAL NETWORK

We have forged a relationship with eTranslate, Inc. to localize some of our
content into multiple languages. We also work with athletes and local writers
from various countries to tell their own stories in their own language with
their local perspective. We believe that this capability makes our global sports
and event properties more valuable because they are being made relevant for
regional audiences around the world, including Europe and Latin America. A
localized global strategy is critical for our goal of becoming the leading
provider of sports entertainment for the digital world because we recognize that
the tribal nature of sports fans across the globe requires that the story be
relevant and engaging for this diverse audience.

Advancements in new media platforms and communications bandwidth capacity
have presented us with the opportunity to distribute these experiences in a
variety of ways to our diverse audience. We are creating our products with this
"all band" environment in mind because we believe that digital distribution
platforms will continue to evolve and afford richer entertainment experiences
and far greater accessibility across multiple platforms. We have established a
diverse group of distribution partners to execute this vision, including:
YahooEurope, Excite@Home, Roadrunner, Microsoft, Terra Networks, British Sky
Broadcasting Limited, and Nokia.

MULTIPLE ENTRY POINTS TO THE NETWORK

A fan can become immersed in his passion for sports by accessing the Quokka
Sports Network from a variety of different entry points. For example, a senior
executive in London can access the Quokka RaceViewer for live race coverage of
the America's Cup finals over her office LAN. An 18-year old gymnastics fan can
check out the gymnastics Olympic coverage over her DSL service from her bedroom
while her friend with Roadrunner broadband service can relive a climb in the
Himalayas. A CART fan from Gary, Indiana will someday experience true
interactive broadcast coverage of a race through a new set-top device. A
stay-at-home mother from White Plains, NY can follow our most compelling "360
degree" sports story of the day at Quokka.com over her AOL dial-up service. In
the future, we intend to provide access to our coverage via hand-held wireless
devices such as PDAs and cell phones.

Once on the network, sports enthusiasts have the opportunity to go deeper
into their favorite sport or explore other sports. We aggressively cross-promote
our properties through targeted e-mails, on-site promotion and contests. We
believe that a "network effect" will create great leverage for us because every
new visitor

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to one of our properties will immediately be exposed to all of our other
properties on the Quokka Sports Network, and is a potential visitor of another
of our sport verticals.

COMPELLING CONTENT

We combine our deep coverage for the passionate fan and our network of
sport verticals in order to try to capture the hearts and minds of an engaged
audience. Our sailing vertical represents one example of our commitment to
provide a complete experience that contains immersive and engaging content.
Sailing enthusiasts can follow live coverage of the BT Global Challenge, keep up
with smaller scale events like the Sydney to Hobart race or Key West Race Week,
debate the strategies of the America's Cup skippers on our forums, bid for
one-of-a-kind America's Cup memorabilia in our sailing auctions, build a virtual
boat, compete in a fantasy challenge to guess the America's Cup winners, or find
out what's going on in-and-around Auckland, New Zealand, the site of the 2000
America's Cup. The result is a deeply engaged sports enthusiast that can obtain
the complete sports experience.

MULTIPLE REVENUE STREAMS

We have identified three distinct sets of customers for our 360-degree
sports experience. These customers include advertisers looking to connect with
our highly valued audience, media companies seeking compelling and unique
content, and the individual fans who seek out premium gear, memorabilia and
services to complete their experience with their favorite sport. As our business
matures over time, we expect our revenues to be split evenly among these three
segments.

Sponsorship and Advertising Revenue. In 1999, sponsors and advertisers
provided approximately 90% of our revenue. We have established multi-year
sponsorship arrangements with some of the largest consumer marketers and
technology providers in the world, including Compaq, Computer Associates and
Intel. These companies have established long-term partnerships with us because
we offer them multi-dimensional marketing opportunities across the Quokka Sports
Network. In addition, we also have sponsors and advertisers that are interested
in particular sport verticals in our network, such as IBM, Ford Motor
Corporation, Qwest Communications, Visa International, Adidas America and
Anheuser Busch.

We believe these advertisers find our primary audience, the hard-to-reach
male professional, to be extremely attractive. This audience enjoys our rich
content at home, and even in the office, one of the toughest places to get the
attention of these professionals. Because of their passion for sport, we believe
the audience is also emotionally engaged in the content. The emergence of the
sports media and sponsorship industry demonstrates the value that marketers see
in these intense relationships.

We intend to present our sponsors' and advertisers' brands and products as
an integral part of the sports content, and rich media presentations of these
messages to help bring their brands to life. Some of our sponsorship partners
leverage our content on their own web sites. The technology sponsors also work
with us to develop new infrastructure solutions that enable our coverage. These
"custom solutions" then become marketing tools for the technology providers as
they look to expand their presence in the new digital media marketplace.

Three customers accounted for approximately 65% of our revenues in 1999,
three customers accounted for approximately 81% of our revenues in 1998 and
three customers accounted for 91% of our revenues in 1997. In 1999 our
sponsorship with Compaq accounted for 27% of our revenues, our sponsorship with
Computer Associates accounted for 23% of our revenues, and our sponsorship with
Intel accounted for 15% of our revenues. As of March 13, Intel owned
approximately 9.4% of our outstanding common stock. In 1998 our sponsorship with
Compaq (through Tandem Computer) accounted for 52% of our revenues, sponsorships
with CompuServe accounted for 16% of our revenues and work for the International
Olympic Committee accounted for 13% of our revenues. In 1997 our sponsorship
with Tandem Computer accounted for 48% of our revenues, sponsorships with
CompuServe accounted for 14% of our revenues and work for the International
Olympics Committee accounted for 29% of our revenue.

Content Syndication. Media companies are emerging as significant customers
of ours. Our primary media customers today are Internet companies, but wireless
and converged media customers are also

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emerging. The Internet content providers -- often portals -- are interested in
our content, because they believe it will help them create longer user visits.
Our exclusive access to event properties and our rich media presentations have
attracted these companies. Current narrowband "portal" customers include Excite
and Terra Networks. In February 2000, we produced content for wireless devices
with Nokia, our initial development partner for this product. In March 2000, we
partnered with WebTV Networks, Inc. to develop content for their interactive
television platform. Broadband partners, including Microsoft, Roadrunner and
@Home, have also presented our content on their networks.

As proprietary digital entertainment content becomes available to new media
companies, we expect this trend toward content syndication to continue. The
historical growth of the cable television industry is an example of how content
syndication models develop. For instance, ESPN commanded subscription fees from
cable providers as the ESPN television business matured. We believe that a
similar business model will progress as the Internet evolves from a pure news
and information medium to one that also provides exclusive entertainment
experiences.

Revenue from Consumers. One of the characteristics of a tribal culture is
that the tribe's members often follow the same rituals, value the same objects
and wear the same clothing. We believe sports enthusiasts are no different. They
go to great lengths to wear the uniforms and use the gear authentic to their
sports, and wear the marking and colors of their favorite teams or athletes.
Further, many fans want to obtain an authentic artifact from a memorable sports
event, which may be passed down from generation to generation.

We have developed several features in the properties of the Quokka Sports
Network to fulfill the needs of this tribe-like dynamic of our audience. We seek
to leverage our relationships with event owners to establish exclusive
partnerships with the merchandise partners for these events. We offer
exclusively licensed event merchandise, high-end sports equipment, venue-based
travel services, fantasy sports experiences, and one-of-a-kind sports
collectibles and memorabilia. Commerce-focused businesses like Adidas and
Boatscape.com, Inc. have purchased tenancies in the electronic shopping areas of
our network in order to capitalize on our fans' desire for products and services
related to our sport verticals.

We also auction unique merchandise and experiences on the Quokka Sports
Network to allow rabid fans the opportunity to fulfill their need for a complete
sports experience. On our QuokkaAuctions.com site, we auction one-of-a-kind
autographed memorabilia from athletes, event art, fantasy sports experiences,
equipment and limited edition team uniforms. For example, during the America's
Cup 2000, we offered for auction the 17th seat on the America One boat, which
allows a fan to sit on an America's Cup yacht during a race and watch the action
first hand, a fantasy trip to watch the finals from the water with former
America's Cup champion skipper (and Quokka co-founder) John Bertrand, a jade
replica of the actual America's Cup trophy, which was offered for bid for tens
of thousands of dollars, and a number of autographed items from Paul Cayard, the
renowned skipper from the America One syndicate.

Furthermore, we use contextual selling opportunities to maximize our
ability to offer our products and services to a highly qualified and targeted
audience. For example, when a team or driver in the CART series wins a race, we
often juxtapose the story about that victory with links to the merchandise of
that athlete or team. Excited fans can make immediate purchases while still
focused on the thrill of the latest race or match. Consumer purchasing
opportunities are presented throughout relevant content on our properties such
as athlete's pages, relevant news items, and team pages.

SCALABLE NETWORK INFRASTRUCTURE

We are developing a scalable technology and business infrastructure with
global capabilities.

We are building a common "chassis" for all our properties across all
possible media platforms. This chassis provides the technological framework for
each of our properties. This chassis will incorporate common user interfaces,
publishing tools, live event viewers, asset management systems, ad servers,
community functionality, commerce engines and game engines that are functional
across the Quokka Sports Network properties. As an early innovator in the
digital entertainment space, we will continue to place great emphasis on
evolving its chassis to maximize the power of the digital medium as new
platforms emerge. Each new

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<PAGE> 10

property will be outfitted with this chassis to best leverage our innovations,
create a common user experience, and afford efficiencies in production.

We have developed a localization strategy in order to derive the greatest
value from our global sporting events. Once we have invested in the production
of a global sporting event or sport site, we can leverage that investment by
making that content accessible and relevant to sports enthusiasts around the
world. Translations are executed through an arrangement with E-Translate, and
more importantly, local relevance is created through diaries from athletes and
stories from local writers. Every new property that we add to our network can be
made readily available to each of these audiences, which we believe will
increase the audience size and lower the production cost per unique visitor.

JOINT VENTURES AND RIGHTS AGREEMENTS

We plan to secure rights to cover sporting events through a variety of
methods, including direct acquisition and the formation of joint ventures with
rights holders or other entities having established relationships with rights
holders. We have experience with both methods. To date, we have acquired the
rights to events such as FIM Motorcycle racing directly from the rights holders
and we have entered into a joint venture with NBC Olympics, Inc. in connection
with the Olympic Games. We originally created a joint venture with Forsythe
Racing, Inc. in connection with CART, but subsequently dissolved the joint
venture and derive our right to our coverage of CART racing directly from CART.

Joint Venture with NBC. In February 1999, we formed NBC/Quokka Ventures,
LLC with NBC Olympics, Inc., a wholly owned subsidiary of National Broadcasting
Company, Inc. In connection with the formation of the joint venture, we
contracted with the joint venture to provide the services necessary for the
joint venture to provide interactive digital coverage. Consequently, we expect
that the joint venture's interactive digital coverage of the Olympics on its web
site will showcase Quokka's distinctive style of programming and will complement
NBC's television coverage.

NBC Olympics, Inc. granted the joint venture the following interactive
media rights, subject to limitations, in connection with the Olympic Games and
certain United States qualifying events through 2004:

- United States interactive rights to incorporate limited highlights of NBC
video into its coverage;

- an exclusive license to produce the official NBC interactive media
coverage of the Games;

- a license to incorporate still photographs and sequential still
photographs taken from video produced from the Games by NBC Olympics into
the joint venture's coverage;

- a license to incorporate into the joint venture's coverage historical
Games footage, non-competition video and all research and other
materials, whether text, audio, video, still footage, written or fixed in
any other medium relating to the Games produced by NBC Olympics;

- the right to distribute the joint venture's coverage in interactive media
throughout the United States; and

- a license to use the composite NBC/Olympic logo on the joint venture's
web site in connection with the production, operation, promotion,
marketing and distribution of the joint venture's coverage of the Games.

In order to protect its broadcast rights and brand, however, NBC Olympics,
Inc. can restrict the joint venture's use of any of the foregoing interactive
media rights if:

- NBC lacks the ability to grant such rights to the joint venture as a
result of contractual limitations or restrictions imposed by, or
conflicts with any legal rights held by the International Olympic
Committee or any other person or entity possessing intellectual property
or other rights in the still photographs, sequential still photographs or
video, whether Games, non-competition or historical;

- a use conflicts with NBC's current sponsors or advertisers or the
sponsors or advertisers of the International Olympic Committee, United
States Olympic Committee, Sydney Organizing Committee

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<PAGE> 11

of the Olympic Games, Salt Lake Olympic Organizing Committee or the 2004
Games Organizing Committee;

- the digital assets are involved in any transaction by us or the joint
venture with any NBC Competitor, as defined below;

- a use competes with NBC's broadcast, cable or direct broadcast satellite
coverage of the Games; or

- a use violates NBC's, NBC Sports', the International Olympic Committee's,
the United States Olympic Committee's or other Olympic organizations'
editorial policies and practices.

NBC/Quokka Ventures, LLC is owned 51% by us and 49% by NBC Olympics, Inc.,
and management is vested in a board of directors, three of whom are currently
appointed by us and two of whom are currently appointed by NBC Olympics, Inc.
Under the terms of the venture's operating agreement, Quokka is solely
responsible for making cash capital contributions to the venture. The terms of
the operating agreement for the venture require us to make quarterly capital
contributions in amounts necessary to fund the venture's operations on an
ongoing basis in accordance with the annual operating plan. Accordingly, the
amounts and timing of these capital contributions will be based on the actual
activities of the venture and are unknown at this time. Additionally, we issued
warrants to purchase 2,100,000 shares of our common stock. Based on the
Noreen-Wolfson fair value model with a volatility of 70%, these warrants have a
fair value of $4.9 million. NBC Olympics, Inc.'s obligation to the joint venture
is to contribute interactive media rights as described above as well as on-air
promotion of the site, access to NBC personalities and research.

NBC Olympics, Inc. has the right to terminate the joint venture in the
event an NBC Competitor:

- merges or otherwise consolidates with us in a transaction where we are
not the surviving entity;

- becomes the beneficial owner of 15% or more of our outstanding equity
securities;

- becomes entitled to elect, appoint or replace a member or members of our
board of directors unless NBC Olympics, Inc. is also granted the same
right; or

- acquires all or substantially all of our assets.

For these purposes, an "NBC Competitor" includes any media company that is
significantly engaged in any of the primary businesses of NBC Olympics, Inc.,
National Broadcasting Company, Inc. or its subsidiaries or any
telecommunications, Internet or similar company that is significantly engaged in
any of the primary businesses of NBC Olympics, Inc., National Broadcasting
Company, Inc., its subsidiaries or Snap! LLC or successor entities. However, an
NBC Competitor shall not include any entity identified by Quokka in writing to
NBC Olympics, Inc. that NBC Olympics, Inc. does not designate as an NBC
Competitor in writing to Quokka within 30 days of our written notice.

CART Digital Media Enterprises, LLC. In January 1999, we established CART
Digital Media Enterprises, LLC or "CDME," a joint venture with Forsythe Racing,
Inc. Forsythe owns two of the teams that compete as part of the Championship
Auto Racing Teams circuit.

In March 1999, CDME secured the exclusive worldwide interactive media
rights for all CART events through December 31, 2003 with a right of first
negotiation beyond that date. In connection with this digital coverage, the
joint venture also secured exclusive worldwide rights to:

- use CART's marks in its digital coverage as well as in connection with
any derivative products;

- use data and content from the events;

- syndicate content; and

- sell commercial partnerships, advertising, official merchandise,
electronic commerce products and services, official photographs and
derivative products.

The right to sell advertising and commercial partnerships is subject to
obligations to honor category exclusivity rights of current CART sponsors or to
first negotiate with those sponsors and the right to sell

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<PAGE> 12

derivative products and syndicate content is subject to CART's reasonable
approval. The right to sell official merchandise, official photographs and other
electronic commerce products and services is subject to receiving approval of
other third parties.

CART has the ability to terminate the agreement if:

- the joint venture materially breaches any term of the agreement,
including failure to pay amounts owing under the agreement, subject to
notice and an opportunity to cure;

- the joint venture fails to maintain state of the art quality and
technological enhancements, subject to notice and an opportunity to cure;

- the web site fails to achieve certain minimum levels of traffic, subject
to notice and an opportunity to cure;

- if the joint venture or we provide similar services to an open wheel
professional auto racing sanctioning body, league or series currently
domiciled in the United States that promotes products or services
competitive with those of CART; or

- if more than 49% of the ownership or beneficial interest in the joint
venture or in Quokka is transferred, sold or assigned to an entity whose
products or services are competitive to or in conflict with those of
CART.

We issued to Championship Auto Racing Teams, Inc. warrants to purchase
76,366 shares of our common stock. Based on the Noreen-Wolfson fair value model
with a volatility of 70%, these warrants have a fair value of $400,841.

In December 1999, we dissolved our joint venture with Forsythe. As a
result, we now own 100% of CDME.

FIM Motorcycle Racing

We have acquired from Dorna Promocion del Deporte, S.A. the exclusive,
worldwide interactive media rights for all FIM Road Racing World Championship
Grand Prix events from January 1, 2000 through December 31, 2003. In connection
with our coverage rights, we have secured the exclusive worldwide rights to:

- use FIM Motorcycling World Championships' trademarks as part of our
coverage as well as in connection with any derivative products;

- use data and content from the events;

- syndicate content; and

- sell sponsorships, advertising, official merchandise, electronic commerce
products and services and derivative products.

Our right to sell advertising and sponsorships is subject to obligations to
honor category exclusivity rights of current FIM Motorcycling World
Championships sponsors or to first negotiate with those sponsors and our right
to sell derivative products is subject to Dorna's reasonable approval. Our right
to syndicate content is subject to a restriction that certain assets may not be
syndicated alone without Dorna's consent. Our right to sell official merchandise
and other electronic commerce products and services is subject to receiving
approval of certain other third parties. Dorna has the ability to terminate the
agreement if we fail to pay the required rights fee.

Commitments Relating to Rights Acquisition

In connection with securing the rights to cover various events, we agree to
pay rights holders minimum annual guaranteed amounts, profit participation or
up-front fees, or a combination of these payments. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and

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<PAGE> 13

Capital Resources" for a discussion of our future aggregate financial
obligations relating to existing rights agreements.

COMPETITION

The market for Internet services and products is relatively new, intensely
competitive and rapidly changing. Since the Internet's commercialization in the
early 1990's, the number of web sites on the Internet competing for consumers'
attention and spending has proliferated. We expect that competition will
continue to intensify.

We believe that our programming does not compete directly with traditional
media, primarily because traditional media frequently do not provide substantial
coverage of the sports that we cover and because we believe our programming can
substantially enhance coverage provided by traditional media.

We expect that the number of our direct and indirect competitors will
increase in the future. We anticipate that, as the Internet and other
interactive systems, such as cable and satellite systems, converge with
traditional television broadcasting and traditional cable networks, significant
competition may come from the cable arena, including such sports-oriented cable
networks as the ESPN networks.

We believe that the principal competitive factors in attracting and
retaining audience are the ability to offer compelling and entertaining sports
programming, the depth, breadth and timeliness of coverage, the completeness of
the experience, and brand recognition. We believe that the principal competitive
factors in securing and retaining long-term digital rights to cover sporting
events include the ability to do the following:

- offer high-quality coverage;

- establish and maintain relationships with rights holders;

- deliver an audience with attractive demographics;

- maintain credibility as a leading and enduring company; and

- pay substantial rights fees.

We may be unable to compete successfully with respect to one or all of
these factors. To review the risks we face from competitors, see "Factors That
May Affect Our Results -- The online digital sports entertainment industry is
intensely competitive, and we may be unable to compete successfully against
current and future competitors."

INFRASTRUCTURE, OPERATIONS AND TECHNOLOGY

The properties of the Quokka Sports Network are hosted by Intel's Online
Services group in Santa Clara, California and with Frontier GlobalCenter in
Sunnyvale, California, except that our NBCOlympics.com web site is hosted by IBM
in Redwood City, California, Bethesda, Maryland and Schaumburg, Illinois. In the
next few months we intend to host our content, other than the Olympics site,
with two Intel hosting facilities. All of our network operations are controlled
from our headquarters in San Francisco, California with the ability to operate
from remote facilities. We provide multiple web servers that run the Microsoft
Internet Information Server on the Microsoft Windows NT Server operating system
upon Compaq server hardware that we own, as well as hardware that our
distribution channels use. Currently, Internet access is maintained by Intel and
Frontier GlobalCenter.

Our network infrastructure is composed of Cisco Systems, Inc. products in
fully redundant configurations. Network connectivity is provided through
multiple routes through redundant providers from our headquarters in San
Francisco. The computer and networking equipment used to operate our properties
is configured with redundant network interfaces, disk configurations, and power
supplies. Both Intel and Frontier GlobalCenter provide generator backup power
for at least two weeks.

Our operations depend upon our ability to protect systems against damage
from fire, earthquakes, power loss, telecommunications failure, break-ins,
computer viruses, hacker attacks and other events beyond our

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<PAGE> 14

control. A disaster or malfunction that disables either our San Francisco
production facility or the Intel facility or the Frontier GlobalCenter facility
could significantly interrupt our programming, limit the quantity or timeliness
of updates to our productions or limit the speed at which our audience can
access our content. Although we do not currently have the disaster recovery plan
completely documented, we are working to finalize this documentation to reflect
the on-going alterations in our configuration.

The market for digital media is characterized by rapid growth, rapidly
changing technology, evolving industry standards and frequent announcements of
new developments. To be successful, we must adapt to our rapidly changing
environment by continually improving the performance, features and reliability
of our services as well as adapting to new technologies. We may also incur
substantial costs if we need to modify our programming or distribution processes
to adapt to these changes. Our business could be adversely affected if we incur
significant costs without adequate results or cannot adapt to these changes.

INTELLECTUAL PROPERTY

We also cannot guarantee that infringement or other claims will not be
asserted or prosecuted against us in the future whether resulting from our
internally developed intellectual property or licenses or content from third
parties. For a description of our intellectual property practices and potential
risks, see "Factors That May Affect Our Results -- We may be unable to
adequately protect or enforce our intellectual property rights, and our efforts
to do so could be time-consuming and expensive and could divert management
attention from executing our business strategy."

GOVERNMENT REGULATION

We are qualified to do business in eight states in the United States, and
failure by us to comply with foreign laws or to qualify as a foreign corporation
in a jurisdiction where we are required to do so could subject us to taxes and
penalties for the failure to qualify and could result in the inability to
enforce contracts in such jurisdictions. Any such new legislation or regulation,
or the application of laws or regulations from jurisdictions whose laws do not
currently apply to our business, could have a negative effect on our business.

EMPLOYEES

As of December 31, 1999, we had 284 employees, including 122 in production
and programming, 62 in engineering, software development and network operations,
19 in marketing, 27 in sales and 54 in administration. We consider our relations
with our employees to be good. We believe that our future success will depend in
part on our continued ability to attract, integrate, retain and motivate highly
qualified technical and managerial personnel and upon the continued service of
our senior management and key creative personnel, none of whom is bound by an
employment agreement except for Mssrs. Gough and Saralegui. Our growth has
required us to continually hire, train and manage new employees at a rapid rate,
although competition for qualified personnel in our industry and geographical
location is intense. There can be no assurance that we will be successful in
attracting, integrating, retaining and motivating a sufficient number of
qualified personnel to conduct our business in the future.

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<PAGE> 15

EXECUTIVE OFFICERS

The following table sets forth certain information regarding our executive
officers and certain other key employees as of February 29, 2000:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Alan S. Ramadan..... 41 President, Chief Executive Officer and Director
John Bertrand 53
A.M. ............. Vice Chairman of the Board of Directors
Alvaro J. 43
Saralegui......... Chief Operating Officer
Les Schmidt......... 45 Executive Vice President, Chief Financial Officer and
Secretary
Michael W. Gough.... 44 Chief Creative Officer and Executive Producer
Thomas P. Newell.... 42 Senior Vice President, Olympics
David A. Riemer..... 41 Senior Vice President, Marketing
Pascal Wattiaux..... 39 Senior Vice President, Engineering
Mark J. Ellis....... 41 Vice President, Sales
Marc P. Erzberger... 32 Vice President, Motor Racing and General Manager
G. Michael 35
Novelly........... Vice President, Finance and Controller
Timo Lumme.......... 38 General Manager, Europe
Brian J. 36
Terkelsen......... Vice President, Programming and Production
</TABLE>

Alan S. Ramadan has served as our President and Chief Executive Officer and
as a director since August 1996, when we incorporated in Delaware under the name
Quokka Productions, Inc. Additionally, Mr. Ramadan served as Managing Director
of our Company from 1990 to August 1996, during which period we were known as
Ozware Developments Unit Trust and operated in Australia. In January 1993, Mr.
Ramadan joined Fluid Thinking, Pty. Ltd. in Melbourne, Australia as that
company's Chief Executive Officer until June 1995. As Chief Executive Officer of
Fluid Thinking, Pty. Ltd., Mr. Ramadan was responsible for drawing together a
team of specialists that, together with the Technology Foundation, developed key
technology used by oneAustralia in the America's Cup challenge. Mr. Ramadan also
founded Best Knowledge Systems, a consulting company, and worked as a research
scientist at BHP Steel and as a computer scientist at Monash University in
Melbourne, Australia. Mr. Ramadan holds a B.Sc. in Computer Science and Applied
Mathematics from Monash University and is a 1995 graduate of the Stanford
Business School's Executive Program for Growing Companies.

John Bertrand A.M. has served as a director since August 1996 when we
incorporated in Delaware under the name Quokka Productions, Inc. Since April
1997, Mr. Bertrand has served as our Vice Chairman of the Board. From September
1992 to June 1995, Mr. Bertrand was the Chairman of the Board of Fluid Thinking,
Pty. Ltd. and the skipper of oneAustralia, the 1995 America's Cup Challenge team
that received technological support from Fluid Thinking, Pty. Ltd. From
September 1995 to October 1998, Mr. Bertrand was Chairman of the Australian
Government's Industry Research and Development Board. From June 1993 to the
present, Mr. Bertrand has been the Chairman of the Southern Cross Foundation, an
Australian scholarship foundation for engineering and applied science students.
Mr. Bertrand holds a B.S. in Mechanical Engineering from Monash University and a
M.S. in Naval Architecture from M.I.T. During his twenty-nine year international
sailing career, from 1970 to the present, Mr. Bertrand has represented Australia
in five America's Cups and two Olympic Games. Mr. Bertrand won the America's Cup
for Australia in September 1983 and is a life member of the Australia's Sports
Hall of Fame as well as the International America's Cup Hall of Fame.

Alvaro J. Saralegui joined Quokka in April 1999 as our Chief Operating
Officer. From March 1998 to April 1999, Mr. Saralegui was employed by the People
Magazine Group where he initially served as Vice President of People Weekly
until he was promoted to Group Publisher in January 1999. From September 1983 to
March 1998, Mr. Saralegui was employed at Sports Illustrated, Inc., where he
served as General Manager from November 1992 to March 1998. During his fifteen
years at Sports Illustrated, Inc., Mr. Saralegui also served as that company's
Business Manager, Director of Marketing and Sales Development and Advertising
Sales Director. Mr. Saralegui holds a B.A. in History and Economics from
Dartmouth and an M.B.A. from Columbia University.

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<PAGE> 16

Les Schmidt joined Quokka in February 1998 as our Senior Vice President,
Quokka Productions, Chief Financial Officer and Secretary and was promoted to
Executive Vice President, Chief Financial Officer and Secretary in February
1999. From September 1996 to June 1997, Mr. Schmidt served as the Chief
Executive Officer of MECON, a healthcare benchmarking company. Mr. Schmidt
joined The Learning Company in 1987 and served as that company's Chief Financial
Officer until September 1994 when he was promoted to Chief Operating Officer. He
served as Chief Operating Officer of The Learning Company and its successor, The
Learning Company, Inc., a publicly traded developer and publisher of
educational, foreign language and home office productivity software, until
September 1996. Prior to that, Mr. Schmidt served as the Controller for Applied
ImmuneSciences, Inc., a venture-backed biotech start-up. Before joining Applied
ImmuneSciences, Inc., Mr. Schmidt was employed by Coopers & Lybrand, an
accounting firm, during which time he became a CPA. Mr. Schmidt holds a B.A. in
Political Economics from Antioch College and an M.S. in Taxation from Golden
Gate University.

Michael W. Gough joined Quokka in July 1997 as our Vice President, Design
and Creative Director and was promoted to Chief Creative Officer and Executive
Producer in September 1998. In August 1995, Mr. Gough co-founded Construct
Internet Design, a digital media design firm, where he served as Creative
Director until July 1997. Prior to that, Mr. Gough co-founded Jones, Partners:
Architecture, a design-focused architecture firm, where he served as Managing
Partner from December 1994 to August 1995. Earlier in his career, Mr. Gough was
an architect for Holt Hinshaw Pfau Jones and, before that, an architect for the
San Jose Redevelopment Agency. Mr. Gough studied Architecture at California
Polytechnic State University.

Thomas P. Newell joined Quokka in March 1998 as Vice President of Business
Affairs and was promoted to Senior Vice President, Business and Legal Affairs in
October 1998. In October 1999, he was promoted to Senior Vice President,
Olympics and General Manager, NBC/Quokka Ventures, LLC, our joint venture with
NBC Olympics, Inc. From May 1994 to August 1997, Mr. Newell served as Executive
Vice President and General Counsel for GGP Productions, LP, an independent
sports television production, syndication and sports marketing company. There,
he handled the company's financial and business operations for three and a half
years until its sale to International Management Group, a sports marketing,
event management and television company. From April 1992 to April 1994, Mr.
Newell served as Vice President, Business Affairs and Operations of CBS
Enterprises for CBS, Inc. During his seven years at CBS, Inc., Mr. Newell also
served as Litigation Counsel, then as Broadcast Counsel and as Director of
Business Affairs of CBS Sports, in which capacity he conducted negotiations that
resulted in CBS Sports' opportunity to cover the 1992 Olympic Winter Games. Mr.
Newell holds a B.A. from Stanford University and a J.D. from USC Law School.

David A. Riemer joined Quokka in November 1998 as our Senior Vice
President, Marketing. Prior to joining us, Mr. Riemer spent 13 years at J.
Walter Thompson, where he served as President, JWT/West from May 1997 to
September 1998. While serving as President, JWT/West, Mr. Riemer oversaw the
JWT/Digital Unit and developed an agency specialization in telecommunications,
technology, retail and service marketing. Over the course of his career, Mr.
Riemer has written two musical comedies, two books and directed various
theatrical productions. Mr. Riemer holds a B.A. in Urban Studies and History
from Brown University and an M.B.A. from Columbia University.

Pascal Wattiaux joined Quokka in June 1999 as our Senior Vice President,
Engineering. From August 1996 to June 1999, Mr. Wattiaux served as Director of
Technology at the International Olympic Committee in Lausanne, Switzerland,
where he was responsible for all Olympic technology functions, including timing,
scoring, telecommunications and information systems, as well as managing
relationships with strategic technology partners. From January 1996 until August
1996, he served as senior manager at Price Waterhouse LLP, which has been
renamed PricewaterhouseCoopers LLP, and was responsible for developing a systems
integration practice in Europe. From August 1993 until January 1996, Mr.
Wattiaux served as Information Technology Director for International Operations
at Reebok International Ltd., having previously served as Management Information
Systems Director for Reebok France since January 1993. Prior to that, Mr.
Wattiaux worked at Andersen Consulting for nine years in Paris, France, first as
a consultant and then as a director. Mr. Wattiaux holds a Diplome d'Ingenieur
from Ecole Nationale Superieure des Telecommunications.

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Mark J. Ellis joined Quokka in May 1999 as our Vice President, Sales. From
March 1998 to April 1999, Mr. Ellis served as a Vice President/Publisher for
Time Inc. New Media. From November 1997 to March 1998, Mr. Ellis served as the
Publishing Director for Sports Illustrated Presents. From July 1991 to November
1997, Mr. Ellis served as the Detroit Advertising Director for Sports
Illustrated. Mr. Ellis holds a B.A. in Marketing from the University of Notre
Dame and an M.B.A. from the University of Detroit.

Marc P. Erzberger joined Quokka in August 1998 as our Vice President, Motor
Racing. From June 1991 to June 1998, Mr. Erzberger served as a consultant for
the Boston Consulting Group in London where he worked extensively in the
financial services and consumer/retail sectors. Mr. Erzberger worked on issues
of strategy and implementation in several product areas, including household
products, spirits and beverages, food, automotive and credit cards. Mr.
Erzberger holds a B.Sc. in Mathematics and Management from the University of
London, King's College, and an M.B.A. from the Harvard Graduate School of
Business Administration. Mr. Erzberger is an avid sportsman, having represented
Switzerland in the windsurfing event at the 1984 Olympic Games in Los Angeles.

G. Michael Novelly joined Quokka in August 1998 as our Controller and was
promoted to Vice President, Finance and Controller in January 1999. From March
1995 to August 1998, Mr. Novelly served as the Senior Vice President and Chief
Financial Officer of PolyGram Television, a division of the publicly traded
global music and entertainment group, PolyGram, N.V. During his years at
PolyGram, Mr. Novelly oversaw all financial and administrative aspects of the
Company's film production, acquisition and worldwide distribution of its library
of over 10,000 hours of filmed entertainment programming. Before joining
PolyGram Television, Mr. Novelly was employed by KPMG Peat Marwick LLP, an
accounting firm, where he provided auditing and consulting services to film
production and distribution companies, including Metro-Goldwyn-Mayer Inc,
Ticketmaster Corporation and Gramercy Pictures. Mr. Novelly is a CPA and holds a
B.S. in Accounting and Finance from the University of Colorado at Boulder.

Timo Lumme joined Quokka in October 1999 as Assistant General Manager,
Europe and was promoted to General Manager, Europe, in January 2000. Prior to
joining us, Mr. Lumme worked for Nike Europe as its Business Affairs Director
from November 1996 to April 1997 and as its Europe Sports Marketing Director
from April 1997 to October 1999. From June 1994 to October 1996, he served as
Vice President, Business Development for the European division of International
Management Group, and prior to that, he served in various capacities for IMG
from May 1988 to June 1994. In addition, Mr. Lumme served as the Manager,
Olympic Marketing for the Organizing Committee of the 1992 Winter Olympic Games
in Albertville, France from April 1989 through March 1992. Mr. Lumme holds a
degree in Law from King's College, London University.

Brian J. Terkelsen joined Quokka in June 1998 as our Vice President,
Programming and Production. In January 1993, Mr. Terkelsen co-founded
Eco-Challenge Lifestyles, Inc., an adventure racing company, where he served as
Chief Operating Officer from that company's inception to January 1998. During
that period, Mr. Terkelsen also served as Executive Producer for several
adventure racing television productions, including productions for MTV and The
Discovery Channel. From May 1985 to June 1992, Mr. Terkelsen was employed as an
investment banker for Barclay's Bank and Bankers Trust, Co. Mr. Terkelsen holds
a B.S. in Business Administration, Finance from Bryant College.

ITEM 2. PROPERTIES

Our principal administrative, marketing, production and research and
engineering facilities are located in approximately 40,000 square feet of office
space in San Francisco, California under a lease that expires in March 2006. We
have options to renew this lease for two successive five-year terms. We have
entered into two additional office leases in San Francisco, California covering
an aggregate of approximately 120,000 square feet at two additional sites to
accommodate additional personnel. Approximately 88,000 square feet of this space
is not expected to be available until Fall 2000. We also have small sales
offices located in Troy, Michigan; La Jolla, California; Schaumburg, Illinois;
Bethesda, Maryland and Norwalk, Connecticut for local sales activities. Finally,
we have entered into a long-term lease covering approximately 5,000 square feet
of

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<PAGE> 18

office space in London, England that serves as the center for our European
operations. We believe that our existing facilities are adequate to meet our
current and near-term needs.

ITEM 3. LEGAL PROCEEDINGS

We are not currently subject to any material legal proceedings. We may from
time to time become a party to various legal proceedings arising in the ordinary
course of our business.

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

None.

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FACTORS THAT MAY AFFECT OUR RESULTS

In addition to the other information in this report, the following factors
should be considered carefully in evaluating our business and prospects:

WE HAVE A HISTORY OF OPERATING LOSSES, EXPECT TO INCUR LOSSES FOR AT LEAST THE
NEXT EIGHT QUARTERS AND MAY BE UNABLE TO ACHIEVE OR SUSTAIN PROFITABILITY OR
GENERATE POSITIVE CASH FLOW.

We expect to incur losses for at least the next eight quarters, largely due
to substantial planned increases in marketing expenses and expenses associated
with our digital sports entertainment programming. We may be unable to generate
sufficient revenues or control operating expenses to achieve or sustain
profitability or generate positive cash flow. We adopted our current business
model in August 1996 and began generating revenues in connection with this model
during the first quarter of 1997. As of December 31, 1999, we had an accumulated
deficit of $72.9 million. Our net operating losses were $56.9 million for the
year ended 1999, $9.5 million for year ended December 31, 1998 and $4.9 million
for year ended December 31, 1997. Cash used in operating activities was $48.3
million for year ended December 31, 1999, $10.9 million for year ended December
31, 1998 and $3.9 million for year ended December 31, 1999.

WE HAVE A LIMITED OPERATING HISTORY UPON WHICH YOU CAN EVALUATE OUR BUSINESS AND
PROSPECTS.

Our limited operating history makes it difficult to evaluate our business
and prospects. As a digital sports entertainment company in an early stage of
development, we face significant risks, uncertainties, expenses and
difficulties. In order to succeed, we must do most, if not all, of the
following:

- develop programming to attract and retain our audience;

- secure and retain additional sponsors and advertisers;

- retain existing sponsors and advertisers;

- acquire rights on commercially feasible terms to cover additional
sporting events;

- acquire and integrate other media and technology companies;

- develop, enhance and carefully manage our brand;

- deliver multiple programming events simultaneously to one or more global
distribution networks;

- promote our name in the sports and media markets;

- respond appropriately to competitive developments;

- develop and implement a successful electronic commerce strategy;

- develop a successful line of product merchandise;

- secure additional distribution systems for our content;

- continue to develop and improve our know-how, to enhance our web sites to
meet the needs of a changing market and to adapt to changing technology;

- successfully execute our business and marketing strategies; and

- attract, integrate, retain and motivate qualified personnel.

Our business operations and revenues will suffer if we are unable to
accomplish these things.

OUR QUARTERLY OPERATING RESULTS ARE EXPECTED TO FLUCTUATE AND OUR FAILURE TO
MEET EARNINGS ESTIMATES COULD CAUSE OUR STOCK PRICE TO SUFFER.

Our quarterly operating results have varied in the past, and we expect them
to fluctuate in future periods. For example, our revenues for the quarter ended
December 31, 1999 were $6.7 million compared to revenues of $766,000 for the
quarter ended December 31, 1998 and revenues of $3.0 million for the prior
quarter ended
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September 30, 1999. These fluctuations depend on a number of factors described
below and elsewhere in this "Factors That May Affect Our Results" section of
this report, many of which are outside our control. We may be unable to predict
our future revenues accurately or adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. In particular, because digital
entertainment sponsorships have a lengthy sales cycle, it is difficult to
predict when new sponsorship agreements will be completed and, consequently,
when revenue from new agreements will first be recognized. Any significant
shortfall of revenues would have a negative impact on our results of operations.
For these and other reasons, we may not meet the earnings estimates of
securities analysts or investors and our stock price could suffer. Our revenues
in any quarter depend on the sports programming we offer, the sponsorship
arrangements we have in place at that time and finalize during the quarter and,
to a lesser extent, the advertising, content syndication and consumer revenue
transactions we execute. We expect that our consumer revenues will be higher
leading up to and during our major sports programming. It is likely that
sponsorship deals will have a long sales cycle and may be unevenly distributed
across fiscal quarters. We expect our expenses to increase over time for
production and other operational costs. The timing of these expenses, as well as
our obligations under existing and future contracts, could fluctuate from
quarter to quarter and intensify leading up to and during significant sporting
events such as the Olympic Games.

WE NEED TO ACQUIRE RIGHTS TO KEY SPORTING EVENTS TO DEVELOP MORE PROGRAMMING AND
GROW OUR BUSINESS, BUT THE COST AND COMPETITION FOR THESE RIGHTS COULD PREVENT
US FROM DOING SO.

We need to acquire rights to key sporting events to succeed. If we are
unable to acquire these rights, our ability to broaden our programming and grow
our business will be limited. Our limited operating history makes it difficult
to assess our ability to acquire rights in the future. Holders of rights may not
be willing to enter into strategic relationships with us or sell rights to us at
prices we can afford, or at all. We expect the cost of acquiring rights to
increase significantly as competition for these rights increases. We may not be
successful in acquiring the rights we need, especially if third parties, such as
traditional media companies, which have significantly greater resources,
experience and bargaining leverage than we do, compete for those rights.

WE DEPEND ON A SMALL NUMBER OF SPONSORS, THE LOSS OF WHICH COULD HARM OUR
REVENUES.

To date, we have depended on a limited number of sponsors for a majority of
our revenues. In 1999, three sponsors accounted for 65% of our revenues. In
1998, two sponsors accounted for 68% of our revenues. We anticipate that our
results of operations will continue to depend, to a significant extent, upon
revenues from a small number of digital entertainment sponsors. The loss of one
or more sponsors could negatively affect our business. Although we seek to enter
into multi-year agreements with sponsors, we cannot guarantee that these
sponsors will maintain their association with us. Certain of our sponsors have
the right to terminate our agreement with them if they are dissatisfied with our
performance, and certain digital entertainment sponsors have the right to
terminate our agreements after a specified period of time as set forth in the
applicable contract. The termination of any sponsorship agreement could
materially affect our sponsorship revenue backlog, and our business and
financial results would suffer.

A DISASTER OR MALFUNCTION THAT DISABLES OUR COMPUTER SYSTEMS COULD HARM OUR WEB
SITES AND REDUCE THE APPEAL OF OUR PROGRAMMING.

Substantially all of our communications hardware and computer hardware
operations are located in our facilities in San Francisco, California and at
Intel in Santa Clara, California and Frontier GlobalCenter in Sunnyvale,
California, where our web sites are hosted. Our Olympics web site is hosted by
IBM at their facilities located in Redwood City, California, Bethesda, Maryland
and Schaumburg, Illinois. Our operations depend on our ability to protect these
systems against damage from fire, earthquakes, power loss, telecommunications
failures, break-ins and similar events. Additionally, computer viruses,
electronic break-ins or other similar disruptive problems could harm our web
sites. A disaster or malfunction that disables either our San Francisco
production facility or any of our hosting services facilities could cause an
interruption in the production and distribution of our programming, limit the
quantity or timeliness of updates to our productions or limit the speed at which
our audience can access our content. Any of these occurrences could reduce the

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appeal of our programming. Our insurance policies may not adequately compensate
us for any losses that may occur due to any failures or interruptions in our
systems. We do not have a formally documented disaster recovery plan for major
disasters.

Our web sites have experienced significant increases in traffic during
coverage of some sporting events. As we deliver additional programming, we
expect our audience base to increase significantly. This will require our web
sites to accommodate a high volume of traffic and deliver frequently updated
information. Failure of our systems to accommodate higher volumes of traffic
could reduce the performance and appeal of our web sites and harm our results of
operations. For example, on some weekends during which we were covering multiple
motor sports events, our servers have suffered service disruptions.
Additionally, our web sites in the past have experienced slower response times
or other problems for a variety of reasons, including delays or malfunctions as
a result of third-party distributors on which we rely. Interruptions and
malfunctions related to the access to our web sites could materially damage our
relationships with our audience and rightsholders, and our business could
suffer.

OUR BRAND MAY NOT ACHIEVE THE BROAD RECOGNITION NECESSARY TO SUCCEED.

We believe that broad recognition and a favorable audience perception of
the Quokka brand will be essential to our success. If our brand does not achieve
favorable broad recognition, our success will be limited. We intend to build
traffic and brand recognition by aggressively marketing the Quokka Sports
Network brand as well as the brands of individual sport verticals within our
network. We plan to continue to market each of these brands through extensive
traditional media campaigns employing advertising on television, printed
publications, outdoor signage and radio. We also plan to continue to conduct a
simultaneous online advertising campaign and to seek exposure through our
co-branded initiatives. During 1999, we spent $7.7 million for advertising. We
expect to significantly increase our advertising expenses in future periods as
we build the Quokka brands and awareness of our properties in our network. We
may lack the resources necessary to accomplish these initiatives. Even if the
resources are available, we cannot be certain that our multi-brand enhancement
strategy will deliver the brand recognition and favorable audience perception
that we seek for any of our brands. If our strategy is unsuccessful, these
expenses may never be recovered and we may be unable to increase future
revenues. Even if we achieve greater recognition of our brands, competitors with
greater resources or a more recognizable brand could reduce our market share of
the emerging digital sports entertainment market.

THE LOSS OF ANY STRATEGIC RELATIONSHIPS WITH MEDIA ENTITIES AND SPORTS GOVERNING
BODIES COULD NEGATIVELY IMPACT THE BREADTH OF OUR SPORTS PROGRAMMING AND OUR
ABILITY TO ACQUIRE ADDITIONAL RIGHTS TO COVER SPORTS OR SECURE SPONSORSHIPS.

We depend on agreements with certain established media entities and sports
governing bodies, such as NBC Olympics, Inc. and Championship Auto Racing Teams,
Inc. The loss of any of these strategic relationships could impact the breadth
of our sports programming and affect our ability to acquire additional rights or
secure sponsorships. Our agreements with these parties enable development of
certain Olympic and motor sports programming. Additionally, these strategic
relationships, among others, provide us with credibility in the marketplace to
negotiate sponsorships and acquire rights to cover additional sports. While
these strategic relationships are grounded in contractual agreements, these
parties can terminate the agreements for various reasons, including contractual
breaches and a change in control of our company. For example, NBC Olympics, Inc.
can terminate its strategic relationship with us if a competitor of NBC acquires
us. We cannot guarantee that our strategic partners will perform their
contractual obligations. Even if the contracts run for the full term, we may not
be able to renew the agreements on comparable terms, if at all.

OUR COMPETITIVE POSITION IN THE DIGITAL SPORTS ENTERTAINMENT INDUSTRY COULD
DECLINE IF WE ARE UNABLE TO ACQUIRE BUSINESSES OR TECHNOLOGY THAT ARE STRATEGIC
FOR OUR SUCCESS OR IF WE FAIL TO SUCCESSFULLY INTEGRATE ANY ACQUISITIONS WITH
OUR CURRENT BUSINESS.

If appropriate opportunities arise, we intend to acquire businesses,
technologies, services or products that we believe are strategic for our
success. For example, we recently signed an agreement to acquire
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ZoneNetworks.com, Inc. We may be unable to complete that transaction if any of
the conditions set forth in that agreement, such as the approval of that
transaction by ZoneNetworks.com's shareholders, are not met. The digital sports
entertainment industry is new, highly competitive and rapidly changing. We
believe these industry dynamics could result in a high level of acquisition
activity as companies seek to gain competitive advantage. Competitive forces
could require us to acquire companies or technology. Our competitive position in
the industry could decline if we are unable to acquire businesses or technology
that are strategic for our success or if we fail to successfully integrate any
acquisitions with our current business. We may be unable to identify, negotiate
or finance future acquisitions successfully, or to integrate successfully any
acquisitions with our current business. The process of integrating an acquired
business, technology, service or product into our business and operations may
result in unforeseen operating difficulties and expenditures, including the
allocation of significant management time and company resources that would
otherwise be available for ongoing development of our business. Moreover, the
anticipated benefits of any acquisition may not be realized.

FAILURE BY THIRD PARTIES ON WHOM WE DEPEND FOR INTERNET ACCESS, DELIVERY OF OUR
PROGRAMMING AND GENERATION OF MULTIPLE REVENUE STREAMS COULD HARM OUR OPERATIONS
AND REVENUES.

Our audience depends on Internet service providers, online service
providers and other web site operators for access to our web sites. Many of them
have experienced significant outages in the past, and could experience outages,
delays and other difficulties due to system failures unrelated to our systems.
Access by our audience outside the United States could also be delayed or
interrupted due to the uncertainty of the telecommunications infrastructure in
foreign countries.

We depend on various domestic and international third parties for software,
systems and delivery of much of our programming. Many of these third parties
have limited operating histories, early generation technology and are themselves
dependent on reliable delivery from others. Any delays or malfunctions in the
distribution of our content would limit our ability to deliver our programming.
We also depend on IBM, Intel and Frontier GlobalCenter, each of which hosts some
of our web sites. From time to time, service of our servers at the Frontier
GlobalCenter hosting facility has been temporarily disabled or has
malfunctioned, and access to our web sites was limited or eliminated. Our
history with the IBM and Intel facilities is very short and we cannot be certain
that similar problems will be avoided at these other facilities.

Our plans to generate multiple revenue streams also depend on third
parties. In particular, we depend on encryption technology provided by others to
enable secure consumer revenue transactions. In addition, our ability to obtain
sponsorship and advertising interest will depend on whether third parties we
hire can generate meaningful and accurate data to measure the demographics of
our audience and the delivery of advertisements on our web sites. Companies may
choose not to advertise on our web sites or may pay less if they do not perceive
these measurements made by third parties to be reliable. Also, our ability to
generate content syndication revenue depends on whether other media companies
value our content and are willing to pay for that content.

OUR LIMITED EXPERIENCE DEVELOPING AND COORDINATING A COMPREHENSIVE PROGRAMMING
SCHEDULE COULD RESULT IN DELAYS OR SETBACKS THAT REDUCE THE APPEAL OF OUR WEB
SITES.

We have limited experience developing and coordinating a comprehensive
programming schedule and may experience delays or setbacks that reduce the
appeal of our web sites. The programming we have developed in the past required
significantly fewer resources and technical skills than the major sports
programming we are scheduled to produce, including the Olympic Games. Our
programming may not keep pace with technological developments, evolving industry
standards or competing programming alternatives. We have only recently begun to
develop multiple large-scale programming events simultaneously and may lack the
financial and technical resources to develop effectively content for multiple
simultaneous sporting events. Even if the resources are available, we may be
unable to coordinate a comprehensive programming schedule. To be successful, we
will need to staff and operate 24-hour production facilities that are capable of
collecting, repackaging and distributing digital coverage to a global audience.

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OUR SPONSORSHIP MODEL IS UNPROVEN AND OUR REVENUES AND RESULTS OF OPERATIONS
WILL SUFFER IF WE ARE UNABLE TO MAINTAIN OUR EXISTING SPONSORS AND SECURE
ADDITIONAL SPONSORSHIPS.

Our revenues and results of operations will suffer if we are unable to
maintain our existing sponsors and secure additional sponsors. Our revenue model
is primarily based on securing long-term digital entertainment sponsorships that
provide each sponsor with the right to be named as the exclusive sponsor of our
network within a particular industry category. We have limited experience with
this sponsorship model. Prospective sponsors may not be interested in entering
into these digital entertainment sponsorships at the rates we set, if at all.

Additionally, our sponsorship agreements typically require the delivery of
a specified number of brand impressions, which refers to the number of times the
sponsor's brand appears on a user's screen while the user is connected to our
web sites. Our fulfillment of these commitments assumes that we will be able to
deliver these brand impressions on sports programming that we acquire or create.
Owners of rights to sporting events often have pre-arranged sponsor lists they
require us to honor. Pre-existing sponsorship relationships may prevent us from
meeting the minimum commitments we have to our exclusive digital entertainment
sponsors and other sponsors and advertisers, and could cause us to allocate
impressions to our sponsors that were otherwise available for additional revenue
generating purposes. These pre-existing sponsorship relationships could also
negatively affect our business by limiting our ability to attract new sponsors.
We might acquire or create additional programming that would allow us to provide
our sponsors with sufficient brand impressions for which we would incur
additional expenses.

OUR SPONSORSHIP MODEL COULD PREVENT US FROM ACQUIRING CRITICAL TECHNOLOGY, WHICH
COULD AFFECT THE QUALITY OF OUR PROGRAMMING.

As a significant feature of some of our sponsorships we offer the exclusive
right to be the sole sponsor of a sponsorship category, such as computing,
database software, web site hosting, digital distribution, consumer electronics
or wireless communications. While we expect this exclusivity feature to be
central to our marketing strategy for securing and retaining these particular
sponsorships, it may bind us to undesirable sponsorship arrangements and limit
our ability to acquire technology we may otherwise want or need. Exclusive
sponsors acquire multi-year rights to a sponsorship category and sometimes
provide us with equipment or technical expertise to enable us to develop and
distribute our programming. We are limited in our ability to terminate an
existing sponsor relationship if a sponsor fails to provide us with necessary
equipment and expertise, or is otherwise less desirable than a prospective
sponsor in the same sponsorship category. An existing sponsor also may prevent
us from acquiring desirable technology from competitors of the sponsor, which
could harm our programming.

OUR PROGRAMMING AND OPERATIONS WILL SUFFER IF WE ARE UNABLE TO ADAPT IN A TIMELY
MANNER TO TECHNOLOGICAL DEVELOPMENTS, EVOLVING INDUSTRY STANDARDS, CHANGING
MARKET CONDITIONS OR CUSTOMER REQUIREMENTS.

The market for digital sports programming is characterized by rapid
technological change. To be successful, we must adapt to this rapidly changing
market by continually improving the features we offer and developing new
features. Our programming and operations will suffer if we are unable to adapt
in a timely manner in response to technological developments, evolving industry
standards, changing market conditions or customer requirements. We may not
maintain our competitive position in the digital sports entertainment market for
a number of reasons, including the following:

- our technology infrastructure may not provide high-quality, reliable
programming or adequately scale to support multiple simultaneous events;

- we may be unable to afford substantial expenditures to adapt our service
to changing technologies;

- we may be unable to license leading technologies or develop new
proprietary technologies; and

- we may fail to use new technologies effectively or adapt to technological
changes.

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OUR BUSINESS IS SUBJECT TO MANY RISKS ASSOCIATED WITH WORLDWIDE SPORTS EVENT
COVERAGE AND OTHER INTERNATIONAL ACTIVITIES, WHICH COULD PREVENT OR DELAY OUR
COVERAGE OR CAUSE US TO INCUR ADDITIONAL EXPENSES.

Our coverage of sports events, particularly adventure sports, is not
limited geographically and is therefore subject to many risks associated with
worldwide sports event coverage and other international activities that could
prevent or delay our coverage. We have developed, and expect to continue to
develop, programming covering sporting events throughout the world and across
the oceans. For example, our coverage of yachting races and of adventure sports,
such as mountaineering in the Karakoram range in China, expeditions to Mount
Everest and treks across deserts in Morocco, require us to traverse
international borders. Coverage of these events requires that we deploy
production staff to locations throughout the world. Additionally, we expect to
maintain offices in several foreign countries, including Great Britain and
Australia. As a result, we are subject to numerous risks associated with doing
business internationally, including the following:

- regulatory requirements, including export requirements, tariffs and other
barriers, health and safety requirements and labor and immigration laws;

- difficulties in staffing and managing foreign operations;

- differences in reliability of telecommunications infrastructure and
Internet access;

- varying technological standards and capabilities;

- differences in standards of protection for intellectual property;

- political instability;

- hostile action against event participants or our employees;

- currency fluctuations;

- potentially adverse tax consequences; and

- restrictions against the repatriation of earnings from a foreign country.

Additionally, regional events that we choose to cover may fail to attract a
global audience. In that case, we would incur the significant expenses inherent
in the coverage of an international event without achieving the audience
exposure we have committed or may commit to provide to our sponsors.

OUR BUSINESS WILL NOT OPERATE EFFICIENTLY AND OUR RESULTS OF OPERATIONS WILL BE
NEGATIVELY AFFECTED IF WE ARE UNABLE TO EFFECTIVELY MANAGE OUR GROWTH.

We are experiencing a period of significant expansion. We had 284 employees
at December 31, 1999, compared to 118 employees at December 31, 1998 and 40
employees at December 31, 1997. This growth is placing, and we expect any
further growth to continue to place, a significant strain on our management,
operational and financial resources. This will require us to implement
additional management information systems and to develop additional operating,
administrative, financial and accounting systems and controls. If we are unable
to develop these systems and manage our growth effectively, our business will
not operate efficiently and our results of operations could be negatively
affected.

Many of our senior management have only recently joined us. Four of our
fourteen most senior officers have worked for us for less than one year. These
individuals have not previously worked together and are becoming integrated as a
management team. Our operations and personnel relations will suffer if our
senior management is unable to successfully manage our growth.

IF WE FAIL TO ATTRACT AND RETAIN KEY PERSONNEL WE WILL BE UNABLE TO EXECUTE OUR
BUSINESS STRATEGY.

Our success will depend on the continued services of our senior management
and other key personnel, as well as our ability to attract, train, retain and
motivate other highly skilled technical, managerial, marketing and customer
service personnel. The loss of the services of any of our executive officers,
particularly Alan

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Ramadan, our president and chief executive officer, or other key employees could
prevent us from executing our business strategy. Competition for these personnel
is intense, and we may not be able to successfully attract, integrate or retain
sufficiently qualified personnel. Our anticipated programming schedule in the
near future will require that we attract and retain personnel who are skilled in
production, computer and other technical fields. Skilled technical personnel are
in high demand and have multiple employment opportunities, especially in the San
Francisco Bay Area, where our headquarters are located. As a matter of practice,
we do not generally enter into employment agreements with our employees.

WE WILL NEED TO RAISE ADDITIONAL CAPITAL, WHICH MAY NOT BE AVAILABLE ON
FAVORABLE TERMS AND COULD RESULT IN ADDITIONAL DILUTION

We currently anticipate that the net proceeds of our 1999 initial public
offering, together with our available funds, will be sufficient to meet our
anticipated needs for working capital, capital expenditures and business
expansion through at least the next 12 months. Thereafter, we will need to raise
additional capital. Additional financing may not be available on favorable terms
or at all. If adequate funds are not available or are not available on
acceptable terms, we may not be able to fund our expansion, take advantage of
unanticipated opportunities or respond to competitive pressures. We may seek to
raise additional capital sooner than the next 12 months to fund unanticipated
opportunities or respond to competitive pressures. If additional funds are
raised through the issuance of equity or convertible debt securities, the
percentage ownership of our stockholders will be reduced and the securities
issued may have rights, preferences and privileges senior to those of our common
stock.

DELAYS IN THE ACCESSIBILITY OR GROWTH OF DIGITAL MEDIA NETWORKS COULD ADVERSELY
AFFECT OUR PROGRAMMING AND REDUCE THE LEVEL OF TRAFFIC ON OUR WEB SITES.

Our success will depend on the continued development and growth of digital
media networks, including the Internet and broadband networks. Our programming
will suffer if the necessary infrastructure, standards or protocols or
complementary products, services or facilities for the Internet are not
developed in a timely manner. While digital media technologies have been
evolving rapidly in recent years, future growth may not continue at comparable
rates. As the Internet continues to experience increased numbers of users and
increased frequency of use, the Internet infrastructure may be unable to support
the demands of a global audience or the requirements of consumers for faster
access. The Internet has experienced a variety of outages, hacker attacks and
other delays as a result of damage to portions of its infrastructure, and it
could face outages and delays in the future. This might include outages and
delays resulting from the year 2000 problem. These outages and delays could
adversely affect the level of Internet usage as well as the level of traffic on
our web sites. In addition, the Internet could lose its viability due to delays
in the development or adoption of new standards and protocols to handle
increased levels of activity or due to regulation by governments, businesses or
other organizations.

Our programming is designed to operate on today's Internet platform as well
as other interactive systems that transmit digitized data, such as cable and
satellite systems, in the future. These future systems are commonly referred to
as "broadband" systems and are expected to enable transmission of large amounts
of digitized material, such as video clips, within a relatively short time
frame. Delays in the development of broadband systems could harm our ability to
distribute our programming through subscription services and pay-per-view
events, which could adversely affect our ability to generate revenues from these
types of programming.

THE ONLINE DIGITAL SPORTS ENTERTAINMENT INDUSTRY IS INTENSELY COMPETITIVE, AND
WE MAY BE UNABLE TO COMPETE SUCCESSFULLY AGAINST CURRENT AND FUTURE COMPETITORS.

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Many of our current and potential competitors have significantly longer
operating histories, greater financial, technical and marketing resources,
greater name recognition and larger user or membership bases than us and,
therefore may have a significantly greater ability to attract advertisers and
users. In addition, many of these competitors may be able to respond more
quickly to new or emerging technologies and changes in Internet user
requirements and to devote greater resources to the development, promotion and
sale of their services. Our current or potential competitors may develop
products and services comparable or superior to those developed by us. Increased
competition could result in price reductions, reduced margins or loss of market
share, any of which would harm our business. In addition, as we expand
internationally, we may face new competition.

We compete, directly and indirectly, for sponsors, rights and the attention
of sports viewers with the following categories of companies:

- web sites targeted to sports enthusiasts generally, such as
www.cbs.sportsline.com, www.cnnsi.com and www.espn.com, many of which
have been established by traditional media companies, and web sites
targeted to enthusiasts of particular sports, such as
www.majorleaguebaseball.com, www.nascar.com, www.nba.com, www.nfl.com and
www.nhl.com;

- publishers and distributors of traditional media targeted to sports
enthusiasts, such as the ESPN networks, the FoxSports network and Sports
Illustrated;

- online services such as America Online and the Microsoft Network, which
provide access to sports-related content and services;

- vendors of sports information, merchandise, products and services
distributed through other means, including retail stores, mail, facsimile
and private bulletin board services; and

- web search and retrieval services, such as Excite, Infoseek, Lycos and
Yahoo! and other high-traffic web sites, such as those operated by Cnet
and Netscape.

We expect that the number of our direct and indirect competitors will
increase in the future. We anticipate that, as the Internet and other
interactive distribution systems converge with traditional television
broadcasting and cable, significant competition may come from the cable arena,
including such sports-oriented cable networks as the ESPN networks.

OUR COMMON STOCK PRICE IS LIKELY TO BE VOLATILE, WHICH COULD HURT INVESTORS AND
EXPOSE US TO LITIGATION.

The stock markets in general, and the Nasdaq National Market and the market
for Internet-related and technology companies in particular, have experienced
extreme price and volume fluctuations in recent months. These fluctuations often
have been unrelated or disproportionate to the operating performance of these
companies. These broad market and industry factors could harm the market price
of our common stock, regardless of our performance. Market fluctuations, as well
as general political and economic conditions such as a recession or interest or
currency rate fluctuations, also could harm the market price of our common
stock.

The trading prices of many technology company stocks, particularly Internet
company stocks, have recently been at or near historical highs, reflecting
valuations substantially above historical levels. Our stock price could be
subject to wide fluctuations in response to a variety of factors, including
factors that may be beyond our control. These include:

- actual or anticipated variations in our quarterly operating results;

- announcements of technological innovations or new sports entertainment
programming by us or our competitors;

- changes in financial estimates by securities analysts;

- conditions or trends in the Internet and online entertainment industries;

- changes in the market valuations of other Internet companies;
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- announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments;

- additions or departures of key personnel; and

- sales of substantial amounts of our common stock or other securities in
the open market.

Volatility in the market price of our common stock could result in
securities class action litigation. This type of litigation could result in
substantial costs and a diversion of management's attention and resources.

SALES OF OUR SHARES COULD NEGATIVELY AFFECT THE MARKET PRICE OF OUR STOCK,
IMPAIR OUR ABILITY TO RAISE CAPITAL THROUGH THE SALE OF ADDITIONAL EQUITY
SECURITIES AND RESULT IN FURTHER DILUTION.

Sales of a substantial number of shares in the public market after our
initial public offering could negatively affect the market price of our common
stock and could impair our ability to raise capital through the sale of
additional equity securities. Although our 180-day underwriters' lock-up expired
in January 2000, some of our stockholders beneficially owning in the aggregate
approximately 30.6 million shares of common stock have entered into lock-up
agreements with us generally providing that, with certain limited exceptions,
the stockholder will not offer, sell, contract to sell grant any option to
purchase or otherwise dispose of any shares of common stock held by those
stockholders, without our prior written consent until July 21, 2000. Any shares
subject to these lock-up agreements may be released at any time by us, with or
without notice.

ACCEPTANCE OF PROPERTY OR SERVICES AS PAYMENT MAY PROVIDE LESS WORKING CAPITAL
FLEXIBILITY THAN A CASH PAYMENT WOULD PROVIDE.

We have received property or services, including computer equipment,
Internet access, digital cameras and telecommunications equipment and services
as payment for some of our sponsorships. While these property and services allow
us to develop and distribute our programming content, they do not provide us
with the same working capital flexibility that a cash payment would provide. We
expect to reduce the amount of property and services accepted as payment in
future periods, but may not be successful in doing so.

WE MAY BE SUBJECT TO NEGATIVE PUBLICITY AND LIABILITY FOR ATHLETES OR OUR
EMPLOYEES ASSOCIATED WITH OUR EVENTS, WHICH WOULD DISRUPT OUR PROGRAMMING AND
REDUCE SPONSORSHIPS AND PARTICIPATION IN FUTURE EVENTS.

Many of our events, including sailing and mountain climbing, involve
significant risks to athletes and our employees that participate in or document
the events. Additionally, many of our events take place in regions of the world
where there may be increased danger of external threats such as terrorism. We
will experience adverse publicity, and may be subject to liability claims by
athletes, employees or their relatives, for injuries or deaths that occur as a
result of our events. Any incidents like this during our events could disrupt
our programming and reduce sponsorships and athlete and employee participation
in future events. Liability claims, regardless of merit, could require us to
expend significant resources. Additionally, while we obtain insurance coverage
with respect to each event based on the risks and exposure we face in that
event, our insurance coverage may be inadequate to protect us against any
claims.

WE MAY BE UNABLE TO ADEQUATELY PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY
RIGHTS, AND OUR EFFORTS TO DO SO COULD BE TIME-CONSUMING AND EXPENSIVE AND COULD
DIVERT MANAGEMENT ATTENTION FROM EXECUTING OUR BUSINESS STRATEGY.

We regard the protection of our copyrights, service marks, trademarks,
trade dress and trade secrets as critical to our success. We rely on a
combination of copyright, trademark, service mark, patent and trade secret laws
and contractual restrictions to protect our proprietary rights in products and
services. While we actively protect and enforce our intellectual property
rights, we may be unable to prevent others from misappropriating our technology
and may be subject to claims of infringement by others. The enforcement of our
intellectual property rights could be time-consuming, result in costly
litigation and the diversion of technical and management personnel. We have
entered into confidentiality and invention assignment

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agreements with our employees and contractors and nondisclosure agreements with
parties with which we conduct significant business to limit access to and
disclosure of our proprietary information. These contractual arrangements and
the other measures taken by us to protect our intellectual property may not
prevent misappropriation of our technology or deter independent third-party
development of similar technologies. In addition, we may need to engage in
litigation to enforce our intellectual property rights in the future or to
determine the validity and scope of the proprietary rights of others. This
litigation could result in substantial costs and diversion of management and
other resources.

We pursue the registration of our trademarks and service marks in the
United States and internationally. We have also filed four patent applications
in the United States Patent and Trademark Office. Effective trademark, service
mark, copyright, patent and trade secret protection may not be available in
every country in which our programming is accessible online. We have licensed in
the past, and expect to license in the future, some of our proprietary rights,
including trademarks or copyrighted material, to third parties. These licensees
may take actions that might adversely affect the value of our proprietary rights
or reputation. We also rely on off-the-shelf technologies that we license from
third parties. "Off-the-shelf" technology refers to generally commercially
available software that is not customized for a particular user. These
third-party licenses may not continue to be available to us on commercially
reasonable terms or at all. The inability to use licensed technology important
to our business could require us to obtain substitute technology of lower
quality or performance standards or at greater cost. In the future, we may seek
to license additional technology or content to enhance our current programming
or to introduce new content. We cannot be certain that any such licenses will be
available on commercially reasonable terms or at all. The loss of or inability
to obtain or maintain any of these technology licenses could result in delays in
providing our programming until equivalent technology, if available, is
identified, licensed and integrated.

Because we license some data and content from third parties, we must rely
upon these third parties for information as to the origin and ownership of the
licensed content and our exposure to copyright infringement actions may
increase. We generally obtain representations as to the origins and ownership of
licensed content and obtain indemnification to cover any breach of any
representations. However, we cannot be certain that these representations are
accurate or that any indemnification amounts will be sufficient to provide
adequate compensation for any breach of representations.

We cannot guarantee that infringement or other claims will not be asserted
or prosecuted against us in the future whether resulting from our internally
developed intellectual property or licenses or content from third parties. Any
future assertions or prosecutions could be time-consuming, result in costly
litigation and diversion of technical and management personnel or require us to
introduce new content or trademarks, develop non-infringing technology or enter
into royalty or licensing agreements. These royalty or licensing agreements, if
required, may not be available on acceptable terms, if at all. Our ability to
execute on our business strategy will suffer if a successful claim of
infringement is brought against us and we are unable to introduce new content or
trademarks, develop non-infringing technology or license the infringed or
similar technology on a timely basis.

REVENUES FROM SUBSCRIPTION SERVICES MAY FAIL TO DEVELOP, WHICH WOULD HARM OUR
RESULTS OF OPERATIONS.

While we intend to generate revenues through subscription services that
provide access to premium content and pay-per-view events, we have no experience
in doing so and our failure to generate revenues from these sources would harm
our results of operations. While subscription services are a viable business
alternative to cover sporting events on television, subscription services for
our programming may not develop for a variety of reasons. These include:

- our failure to develop and implement a successful strategy for
subscription services;

- delays in the development of broadband systems that enable increased
bandwidth for content and provide faster access for consumers;

- consumers' unwillingness to pay for the programming offered through
subscription services;

- prohibitive costs of producing higher quality programming for
subscription services; and

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- security concerns in transmitting payment information for the
subscription services.

CHANGES IN REGULATION OF THE INTERNET COULD LIMIT OUR BUSINESS PROSPECTS. OUR
INTERNET ACTIVITIES MAY BECOME SUBJECT TO ADDITIONAL TAXES, WHICH COULD
NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS.

We are subject to the same federal, state and local laws as other
businesses on the Internet. Today there are relatively few laws directed towards
online services. However, due to the increasing popularity and use of the
Internet and other online services, it is possible that a number of laws and
regulations may be adopted with respect to the Internet or other online
services. Changes in regulation of the Internet could affect our results of
operations. These laws and regulations could cover issues such as user privacy,
freedom of expression, pricing, fraud, content and quality of products and
services, taxation, advertising, intellectual property rights and information
security. Applicability to the Internet of existing laws governing issues such
as property ownership, copyrights and other intellectual property issues,
taxation, libel, obscenity and personal privacy is uncertain. The vast majority
of these laws were adopted prior to the advent of the Internet and related
technologies and, as a result, do not contemplate or address the unique issues
of the Internet and related technologies. Those laws that do reference the
Internet, such as the recently passed Digital Millennium Copyright Act, have not
yet been interpreted by the courts and their applicability and reach are
therefore uncertain.

Several states have also proposed legislation that would limit the uses of
personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission has also initiated
action against at least one online service regarding the manner in which
personal information is collected from users and provided to third parties.
While we do not sell information about users on our sites, we have historically
collected demographic data about our users to assist us in marketing our
sponsorship arrangements. Changes to existing laws or the passage of new laws
intended to address these issues, including some recently proposed changes,
could directly affect the way we do business or could create uncertainty in the
marketplace.

In addition to government regulation of the Internet, businesses and other
organizations may restrict access to the Internet at work. Many users access the
Internet through computer terminals at work, either because they do not have
access at home or because the networks at work provide faster and more reliable
access. Access at work may increase if employers upgrade their technology more
quickly than individual consumers in response to the development of broadband
solutions. In response to Internet use by employees or consultants at work,
employers may impose regulations limiting or eliminating Internet or broadband
access on their equipment. To the extent that many of our users access our web
sites at work, our audience could diminish if businesses and other organizations
restrict Internet access at work.

WE HAVE LIMITED EXPERIENCE GENERATING CONSUMER REVENUES FROM THE SALE OF
PRODUCTS AND SERVICES, AND WE MAY NOT BE ABLE TO DO SO IF WE ARE UNABLE TO
DEVELOP AND IMPLEMENT A SUCCESSFUL STRATEGY, DEVELOP A SUCCESSFUL LINE OF
PRODUCT MERCHANDISE, OVERCOME INTERNET SECURITY CONCERNS OR RESPOND TO
COMPETITIVE PRICING.

A key component of our business model includes selling products associated
with our sports entertainment programming. We have only recently begun
generating revenues from the sale of products and services. If we are unable to
develop and implement a successful strategy, develop a successful line of
product merchandise that appeals to a broad audience, overcome Internet security
concerns or respond to competitive pricing, we may be unable to generate
consumer revenues.

The need to securely transmit confidential information over the Internet
has been a significant barrier to electronic commerce and communications over
the Internet. Any compromise of security could deter people from using the
Internet and our web sites to conduct transactions that involve transmitting
confidential information. We may need to expend significant resources to protect
against security breaches or to address problems caused by such breaches. Even
if we are able to overcome Internet security concerns, individuals may not buy
our products, resulting in revenues from consumer that fall short of the cost of
our strategy. Many Internet companies engaged in electronic commerce are losing
money. Additionally, many of our current and potential competitors may have
significantly greater resources and more favorable cost structures than we do

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and may be able to price comparable products at levels we are unable to match
without incurring unacceptable operating losses.

PROBLEMS RELATED TO THE YEAR 2000 ISSUE COULD ADVERSELY AFFECT OUR BUSINESS. WE
MAY BE SUBJECT TO LIABILITY FOR PUBLISHING OR DISTRIBUTING CONTENT, AND OUR
INSURANCE COVERAGE MAY BE INADEQUATE TO PROTECT US FROM THIS LIABILITY.

Although we have experienced no significant problems in the year 2000 with
our products and internal systems being year 2000 compliant, we could experience
problems in the future and we utilize third-party equipment and software that
may not be compliant. If any third-party equipment or software is not Year 2000
compliant, we may have to incur unanticipated expenses to remedy any problems.

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PART II

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

Price Range of Common Stock

Our common stock has been traded on the Nasdaq National Market under the
symbol QKKA since our initial public offering on July 28, 1999. The following
table shows the high and low sales prices of our common stock as reported by the
Nasdaq National Market for the periods indicated.

<TABLE>
<CAPTION>
1999 HIGH LOW
---- ---- ---
<S> <C> <C>
Third quarter............................. $15.875 $6.000
Fourth quarter............................ $18.750 $6.750
</TABLE>

The closing sale price of our common stock as reported on the Nasdaq
National Market on March 13, 2000 was $12.94 per share. As of that date, there
were 161 holders of record of our common stock. This does not include the number
of persons whose stock is in nominee or "street name" accounts through brokers.

The market price of our common stock has been and may continue to be
subject to wide fluctuations in response to a number of events and factors, such
as quarterly variations in our operating results, announcements of technological
innovations or new products by us or our competitors, changes in financial
estimates and recommendations by securities analysts, the operating and stock
performance of other companies that investors may deem comparable to Quokka, and
news reports relating to trends in our markets. In addition, the stock market in
recent years has experienced extreme price and volume fluctuations that have
particularly affected the market prices of many high technology and Internet
related companies that have often been unrelated or disproportionate to the
operating performance of companies. These fluctuations, as well as general
economic and market conditions, may adversely affect the market price for our
common stock.

Dividend Policy

We have never declared or paid any cash dividends on our capital stock or
other securities. We currently anticipate that we will retain all of our future
earnings for use in the expansion and operation of our business and do not
anticipate paying cash dividends in the foreseeable future.

Use of Proceeds

On July 28, 1999, in connection with our initial public offering, a
Registration Statement on Form S-1 (File No. 333-76981) was declared effective
by the Securities and Exchange Commission, pursuant to which 5,000,000 shares of
our common stock were offered and sold for our account at a price of $12.00 per
share, generating gross offering proceeds of $60.0 million. The managing
underwriters were Merrill Lynch & Co., Lehman Brothers and BancBoston Robertson
Stephens. After deducting approximately $4.2 million in underwriting discounts
and $1.3 million in other related expenses, the net proceeds of the offering
were approximately $54.5 million. As of December 31, 1999, we had used $5.5
million of the net proceeds of the offering for our capital contributions to
NBC/Quokka Ventures, LLC and CART Digital Media Enterprises, LLC, $1.1 million
in payments for our programming and distribution rights, $368,000 for repayments
of indebtedness and $11.6 for general corporate purposes. The remaining $35.9
million has been invested in investment grade, interest bearing securities.

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ITEM 6. SELECTED FINANCIAL DATA

Selected Consolidated Financial Data

The following selected consolidated financial data for the five years ended
December 31, 1999, have been derived from our consolidated financial statements.
The following information is qualified by reference to, and should be read in
conjunction with, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and related
notes thereto.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
1995 1996 1997 1998 1999
----------- ----------- --------- --------- ---------
(UNAUDITED) (UNAUDITED) (AUDITED) (AUDITED) (AUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues............................. $ 82 $ 39 $ 4,000 $ 8,635 $ 13,070
Cost of revenues:
Production and other............... 21 611 5,130 7,780 20,070
Amortization of acquired rights.... -- -- 3,441
------ ------- ------- ------- --------
Total cost of revenues..... 21 611 5,130 7,780 23,511
------ ------- ------- ------- --------
Gross profit(loss)......... 61 (572) (1,130) 856 (10,441)
Operating expenses:
Research and engineering........... 18 423 1,030 4,480 13,094
Sales and marketing................ 5 53 816 2,519 19,525
General and administration......... 56 508 1,827 3,184 11,069
Depreciation....................... -- -- 68 530 4,217
------ ------- ------- ------- --------
Total operating expenses... 79 984 3,741 10,714 47,906
------ ------- ------- ------- --------
Losses of associated venture......... -- -- 2,176
Minority interest in net loss on
consolidated sub................... -- -- (1,936)
Other income/(expense)............... 12 (4) (71) 320 1,702
------ ------- ------- ------- --------
Net loss................... $ (6) $(1,560) $(4,942) $(9,538) $(56,884)
====== ======= ======= ======= ========
Basic and diluted loss per share..... $(0.00) $ (0.41) $ (0.73) $ (0.99) $ (1.45)
Shares used in computation of basic
and diluted net loss per share..... 3,800 3,800 6,792 9,656 39,366
</TABLE>

<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------------------------------
1995 1996 1997 1998 1999
----------- ----------- --------- --------- ---------
(UNAUDITED) (UNAUDITED) (AUDITED) (AUDITED) (AUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and marketable
securities......................... $ -- $ 65 $ 4,027 $ 23,994 $ 68,757
Working capital...................... (8) (1,566) 1,444 23,218 72,560
Total assets......................... -- 113 4,651 28,212 99,880
Debt and leases, long-term portion... -- -- 83 501 11,493
Accumulated deficit.................. (8) (1,566) (6,508) (16,046) (72,930)
Total stockholders' equity........... (8) (1,566) 1,663 25,453 72,258
</TABLE>

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

The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements and Notes thereto included elsewhere in
this report on Form 10-K. This discussion contains certain forward-looking
statements that involve risks and uncertainties. Our actual results and the
timing of certain events could differ materially from those discussed in these
forward-looking statements as a result of certain factors, including, but not
limited to, those set forth herein and elsewhere in this Report.

OVERVIEW

Quokka Sports is a leading provider of sports entertainment for the digital
world.

We use the power of emerging digital media to bring sports enthusiasts
closer to their favorite sports. We leverage our digital technology to offer
live event coverage, race viewers, news and information, audio and text
dispatches from athletes, games, community forums and content created by fans,
as well as opportunities for the fan to purchase premium content, products and
services in order to provide our audience a complete sports experience. The
Quokka Sports Network is designed to appeal to a global audience. We currently
cover motor racing, sailing, adventure and key Olympic summer sports, such as
track and field, swimming and gymnastics. The Quokka Sports Network also
includes coverage of some of the world's largest sporting events like the
biennial Olympic Games, the America's Cup yacht match, Fed Ex Championship Auto
Racing (CART) Series and the Moto Grand Prix championship as a result of our
relationships with our strategic partners like NBC Olympics, Inc., CART, Dorna
Promocion del Deporte, S.A., National Geographic and The North Face.

We generate revenue from three sets of customers: from business customers
through sales of sponsorships and advertising; from media companies through
revenue from content syndication; and from consumers through sales of premium
content, sports memorabilia, officially-licensed merchandise and other products
and services. We currently derive the majority of our revenues from the sale of
sponsorship and advertising packages to corporations. In the past, we have
accepted property and services that we use in our business as payment for
sponsorships, including Internet access, computer equipment, digital cameras,
hosting services, and telecommunications equipment and services. Property and
services received as payment are valued at fair market value based on the
amounts normally charged to third parties for similar property and services. We
intend to reduce the proportion of property and services accepted for payment in
future periods, although we may not be successful in this regard.

Prior to 1999, our sponsorships were primarily short-term and associated
with two individual events, the Whitbread Race and Around Alone race. Our
sponsors for these events typically paid a fee for an exclusive sponsorship
category. We recognized these fees as revenue ratably over the duration of the
event based upon the actual number of impressions generated to date as compared
to an estimated total number of impressions for the entire event. Some sponsors
required that we guarantee a minimum number of impressions over the term of the
event. In these instances, we deferred a portion of the sponsorship revenues
until the minimum number of impressions was achieved. We also deferred a portion
of the revenues until other contractual obligations were satisfied and
collection of the related receivable was probable.

In 1999, we began to configure some of our sponsorships as multi-year,
multi-event and multi-benefit sponsorships. These broader, long-term
sponsorships, which we call digital entertainment sponsorships, may include a
variety of benefits such as category exclusivity, embedded product placement in
our programming, traditional sports sponsorship benefits and sales and marketing
assistance. We plan to sell digital entertainment sponsorships to technology and
communications companies. In addition, we plan to sell shorter-term, more
narrowly focused sponsorships and advertising packages, depending upon the needs
and demands of our corporate customers. Our sponsorship agreements provide for
periodic sponsorship fees that we recognize ratably as revenues over the
corresponding period during the term of the contract, provided that no
significant obligations remain and collection of the resulting receivable is
probable. Because digital entertainment sponsorships relate to our network of
events rather than a single event, we do not track the profitability of each
event. However, we do track production costs by event as well as the visitors to
our coverage of each event.

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As a direct result of having only a small number of live programs at any
time, revenues from sponsorships, advertising and consumer revenues have varied
on both a quarterly and annual basis during our short operating history.
Revenues may fluctuate from period to period in the future depending upon our
ability to attract and retain sponsors and advertisers, the number of live
events that are being produced and distributed simultaneously during any one
period, our ability to maintain a continuous programming calendar, our ability
to attract a worldwide audience for our sporting events, our ability to acquire
long-term digital and other intellectual property rights to global sporting
events, our ability to develop and produce sports programming that will attract
a global audience, our ability to acquire and integrate other companies, our
ability to select and offer the right merchandise and services for our audience
to buy, and our ability to obtain or create content that is valuable to other
media companies.

We also generate revenues by providing studio services that could lead to
digital sports entertainment programming and long-term sponsorship
opportunities. These revenues are recognized in the period the service is
provided. We intend to continue to offer studio services; however, we expect
studio services to decline substantially as a percentage of overall revenues in
future periods and ultimately we may chose to discontinue offering these
services.

We have incurred significant net losses and negative cash flows from
operations, and as of December 31, 1999, we had an accumulated deficit of $72.9
million. This accumulated deficit resulted from the production costs of our
network programming, the costs of developing new and enhancing existing tools
and techniques that enhance our Quokka Sports Platform technology, the costs of
expanding our sales and business development efforts and other costs related to
ongoing research and design. Due to the planned expansion of the Quokka Sports
Network, we expect to incur significant operating losses for the foreseeable
future. We may never achieve significant revenues or profitability; or if we
achieve significant revenues, they may not be sustained.

As of December 31, 1999 we had 284 employees compared to 118 at December
31, 1998.

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

Revenues

Revenues increased to $13.1 million in 1999 from $8.6 million in 1998 and
$4.0 million in 1997. In 1999, we recognized revenues for the first time from
our multi-year, multi-event and multi-benefit digital entertainment
sponsorships, other sponsorships and advertising, content distribution, consumer
revenues and other. Revenues increased from 1998 to 1999 primarily as a result
of sponsorship sales totaling $11.7 million during 1999 as compared to
sponsorship sales of $7.0 million in 1998. The increase in revenues from 1998 to
1997 is primarily attributable to a $4.3 million increase in sponsorship
revenues.

Production Costs

Production costs increased to $20.1 million in 1999 from $7.8 million in
1998 and $5.1 million in 1997. Production costs include costs of personnel and
consultants, computer hardware and software, travel, satellite transmission
costs, field gear, cameras, satellite phones, event marketing and an allocation
of general and administrative expenses. The $12.3 million increase in production
costs from 1998 to 1999 is due to increased programming of our sports coverage
of CART FedEx Championship Series and the FIM Racing World Championship Grand
Prix motorcycle races, America's Cup and Challenger Series yacht races, BT
Global Challenge, the World Track and Field Championships in Seville, Spain, the
U.S. Gymnastics Championships in Sacramento, California and the General Motors
Detroit Auto Show. Also included in 1999 production costs are costs associated
with producing www.quokka.com, which was launched in March 1999. The $2.7
million increase from 1997 to 1998 is attributable to an increase in the number
of programming events from September 1997 when we launched our first digital
sports entertainment program, the Whitbread Race.

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Amortization of Acquiring Programming and Distribution Rights

Acquired programming rights to sporting events and acquired distribution
rights are amortized over their respective license periods on a straight-line
basis. Total amortization of acquired programming and distribution rights were
$3.4 million for 1999. No such amortization costs were incurred during the
comparable 1998 or 1997 periods. Amortization pertains to licensing fees paid
for the acquisition of programming rights related to our joint venture with NBC
Olympics, Inc. for U.S. digital coverage of the Olympic Games and the exclusive
worldwide interactive media rights to FIM Road Racing World Championship Grand
Prix and for the America's Cup 2000 Yacht Race. Acquired distribution rights
represent licensing fees paid for the rights to distribute our programming on
Excite@Home and Terra Networks.

Research and Engineering

Research and engineering expenses increased to $13.1 million in 1999 from
$4.5 million in 1998 and $1.0 million in 1997. The increases represents the
costs of additional personnel, costs associated with network operations and
expenses incurred to improve and develop our Quokka Sports Platform and
broadband applications. Included in research and engineering expensed during
1999 is $1.2 million in non-cash compensation expenses related to the issuance
of 153,846 warrants to purchase common stock that were issued in connection with
certain broadband research initiatives. Research and engineering costs are
expensed as incurred.

Sales and Marketing

Sales and marketing expenses increased to $19.5 million in 1999 from $2.5
million in 1998 and $816,000 in 1997. Sales and marketing expenses include
personnel costs, consultants, sales sponsorships and advertising. During 1999,
we spent $7.7 million for advertising related to our marketing campaign, which
was designed to create brand recognition and drive internet traffic to
www.quokka.com. Expenses also increased as a result of increases in the number
of sales and marketing personnel. During 1998, we spent $554,000 for advertising
and $320,000 in 1997. We may significantly increase our advertising expenses in
future periods as we build the Quokka brand and awareness of our programming.

General and Administrative

General and administrative expenses increased to $11.1 million in 1999 from
$3.2 million in 1998 and $1.8 million in 1997. General and administrative
expenses include personnel associated with general management, business and
legal affairs, finance and accounting, facilities and human resources. The
increase in general and administrative expenses is attributable to increased
personnel and related facilities and other third-party expenses associated with
building our operational infrastructure.

Depreciation and Amortization

Depreciation and amortization expenses increased to $4.2 million in 1999
from $530,000 in 1998 and $68,000 in 1997. Depreciation and amortization
expenses consist of depreciation of computers, telecommunications equipment,
software, and furniture and fixtures associated with our operational
infrastructure. Amortization expense relates to leasehold improvements of our
facilities in San Francisco. The increase in depreciation and amortization
expenses is primarily due to increased purchases of equipment and amortization
of leasehold improvements in our expanded facilities.

LOSSES OF ASSOCIATED VENTURE

We incurred net losses of $2.2 million in CART Digital Media Enterprises,
LLC, our joint venture with Forsythe Racing, Inc. for the year ended December
31, 1999. We have accounted for our 50% interest in this joint venture under the
equity method of accounting since the inception of the venture in January 1999.
Expenses incurred during the period related primarily to production expenses for
CART programming. In December 1999, we dissolved our joint venture with
Forsythe. As a result, we own 100% of CDME.

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<PAGE> 36

Minority Interest in Net Loss of Consolidated Subsidiary

During the March 1999 quarter, we formed NBC/Quokka Ventures, LLC, a joint
venture with NBC Olympics, Inc. to provide interactive digital coverage of the
Olympic Games and related pre-games events. In connection with this venture, NBC
has contributed, among other things, certain programming and content in exchange
for a 49% minority interest. The fair market value of this content is being
amortized over the initial term of the venture agreement from inception in
February 1999 through October 2004 on a straight-line basis. For 1999, minority
interest expense of $1.9 million represents the minority interest's share of net
losses for the period.

Interest Income and Expense, Net

Net interest income was $1.7 million in 1999 and $320,000 in 1998. Net
interest expense was $71,000 in 1997. The increase from 1999 to 1998 was
primarily due to a higher investment balance throughout 1999 due to the issuance
of preferred stock and our initial public offering. Interest income in 1999 was
partially offset by increased interest expense due to borrowings under a line of
credit. Interest income recorded during these periods includes interest income
earned on cash and cash equivalents.

Net Losses

Based upon the foregoing information, we had net losses of $56.9 million
for the year ended December 31, 1999, $9.6 million for the year ended December
31, 1998 and $4.9 million for the year ended December 31, 1997.

LIQUIDITY AND CAPITAL RESOURCES

Since August 1996, we have financed our operations primarily through public
and private sales of our equity securities. On August 2, 1999, we completed our
initial public offering of common stock. Net proceeds to Quokka from that
offering were approximately $54.5 million, net of underwriters' discounts and
offering expenses. Total net proceeds from sales of our equity securities since
August 1996 were $137.2 million through December 31, 1999.

At December 31, 1999, we had $68.8 million in cash and cash equivalents and
marketable securities. Restricted cash associated with three office leases and
the employee stock purchase plan and certain cash funding requirements per the
NBC/Quokka Ventures, LLC operating agreement aggregated $7.2 million at December
31, 1999. Net cash used in operating activities was $48.3 million for the year
ended December 31, 1999 and $10.9 million for the year ended December 31, 1998.
Net cash used in operating activities resulted from our net operating losses,
adjusted for certain non-cash items including compensation expense related to
the issuance of warrants and options to attract key vendors and business
partners. Non-cash charges relating to the issuance of these warrants and
options were $1.4 million for the year ended December 31, 1999 and $450,000 for
the year ended December 31, 1998. Non-cash charges relating to depreciation
expense were $4.2 million for the year ended December 31, 1999 and $530,000 for
the year ended December 31, 1998. Non-cash charges relating to the amortization
of programming and distribution rights were $3.4 million for the year ended
December 31, 1999 with no comparable charges for the year ended December 31,
1998.

Net cash used in investing activities was $74.2 million for the year ended
December 31, 1999 and $2.7 for the year ended December 31, 1998. Net cash used
in investing activities resulted primarily from $64.9 million in investments in
short-term marketable securities from the proceeds from our initial public
offering and purchases of $9.3 million in equipment and leasehold improvements
in our expanded facilities.

Net cash provided by financing activities was $102.4 million for the year
ended December 31, 1999 and $33.6 million for the year ended December 31, 1998.
Net cash provided by financing activities for these periods included the
issuance of preferred stock and common stock related to our private financing
activity and our initial public offering.

We believe that our current cash and cash equivalent balances will be
sufficient to fund our operating requirements for working capital and capital
expenditures for at least the next twelve months. Thereafter, we
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will need to raise additional funds. To the extent that we encounter
unanticipated opportunities, we may seek to raise additional funds sooner, in
which case we may sell additional equity or debt securities or borrow funds from
banks. No assurances can be given that our efforts to raise these funds will be
successful. In the event we are unable to raise these funds, our operations
would suffer. Sales of additional equity or convertible debt securities would
result in additional dilution of our stockholders.

YEAR 2000 IMPLICATIONS

Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field and cannot distinguish
21st century dates from 20th century dates. These date code fields will need to
distinguish 21st century dates from 20th century dates and, as a result, many
companies' software and computer systems may need to be upgraded or replaced to
comply with year 2000 requirements.

We have completed a three-phase process of identifying both information
technology and non-information technology systems that are not year 2000
compliant, determining their significance to operations, and developing plans to
resolve issues where necessary. We have not incurred material costs to date in
this process and we do not believe that the cost of additional actions will have
a material effect on our operations. We presently believe that, based on this
review, our internal programs and systems are year 2000 compliant in all
material respects.

Although we currently believe that our systems and products are year 2000
compliant in all material respects, these systems and products may contain
undetected errors or defects with year 2000 date functions that may result in
material costs. Further, although we are not aware of any material operational
issues or costs associated with preparing our internal systems for the year
2000, we may experience serious unanticipated negative consequences, such as
significant downtime for one or more programming events, or material costs
caused by undetected errors or defects in the technology used in our internal
systems.

We use third-party equipment, software and content, including
non-information technology systems such as security systems, building equipment
and non-IT systems embedded microcontrollers that may not be year 2000
compliant. We have communicated with all of our hardware and software
developers, suppliers and other third parties to determine whether these third
parties are adequately addressing the year 2000 issue and whether any of their
non-IT systems have material year 2000 compliance problems. Based on the written
representations of these third parties, we believe that the third-party hardware
and software that we use is compliant or is expected to be compliant prior to
the year 2000. Failure of third-party equipment, software or content to operate
properly with regard to the year 2000 and thereafter could cause us to incur
unanticipated expenses to remedy any problems, which could have a material
adverse effect on our business, results of operations and financial condition.

To date, we have not experienced, nor do we anticipate any material
problems related to year 2000 compliance.

37
<PAGE> 38

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk for changes in interest rates relates primarily
to our investment portfolio. We maintain an investment policy that is intended
to ensure the safety and preservation of our invested funds by limiting default
risk, market risk and reinvestment risk. We do not currently use, nor has we
historically used, derivative financial instruments to manage or reduce market
risk. We mitigate default risk by investing in high credit quality securities
such as debt instruments of the United States government and its agencies and
high quality corporate issuers, as well as money market funds. The portfolio
includes only marketable securities with active secondary or resale markets to
ensure portfolio liquidity and maintains a prudent amount of diversification. As
of December 31, 1999, we had $3.9 million and $64.9 million of cash and cash
equivalents and marketable securities, respectively.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Part IV, Item 14 of this Form 10-K.

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

None

38
<PAGE> 39

PART III

Our Proxy Statement for our 2000 Annual Meeting of Stockholders, which,
when filed pursuant to Regulation 14A under the Securities Exchange Act of 1934,
will be incorporated by reference in this report on Form 10-K pursuant to
General Instruction G(3) of Form 10-K and will provide the information required
under Part III (Items 10, 11, 12 and 13), except for the information with
respect to our executive officers, which is included in "Item 1.
Business -- Executive Officers."

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) FINANCIAL STATEMENTS AND SCHEDULES

1. Consolidated Financial Statements:

The financial statements which are filed with this Form 10-K are set
forth in the Index to Consolidated Financial Statements at page F-1,
which immediately precedes such document.

(b) FINANCIAL STATEMENT SCHEDULES:

Financial Statements Schedules have not been included inasmuch as the
information required to be included has been adequately included in the
underlying financial statements.

None

(d) EXHIBITS

39
<PAGE> 40

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- -------- -------------
<C> <S>
10.11+* Operating Agreement of NBC/Quokka Ventures, LLC, dated
February 9, 1999, between Quokka and NBC Olympics, Inc., as
amended.
10.12+* Digital Entertainment Partnership Agreement, dated January
1, 1999, between Quokka and Compaq Computer Corporation.
10.13* Lease, dated April 23, 1999, between Quokka and 1301 Evans
Street Associates, LLC.
10.14* Office Lease Agreement, dated May 27, 1999, between Quokka
and EOP-Mission Street, L.L.C.
10.15* Lease, dated July 16, 1999, between SKS Brannan Associates,
LLC and Quokka.
10.16+** Memorandum of Agreement dated September 15, 1999 between
Quokka and Intel Corporation.
16.01* Letter from KPMG LLP regarding change in certifying
accountant.
21.01 List of Subsidiaries.
23.01* Consent of Cooley Godward LLP.
23.02* Consent of PricewaterhouseCoopers LLP, independent
accountants.
24.01* Power of Attorney (reference is made to page 41).
27.1 Financial Data Schedule.
</TABLE>

- ---------------
* Previously filed as an Exhibit to the Company's Registration Statement on
Form S-1 (File No. 333-76981) filed in connection with the Company's initial
public offering.

** Previously filed as an Exhibit to the Company's Report on Form 10-Q filed on
November 15, 1999 (File No. 000-26311).

+ Confidential treatment has been granted as to portions of this Exhibit. The
information omitted pursuant to such confidential treatment order has been
filed separately with the Securities and Exchange Commission.

40
<PAGE> 41

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, Quokka Sports, Inc. has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Francisco, State of California, on the 28th
day of March, 2000.

QUOKKA SPORTS, INC.

By: /s/ LES SCHMIDT
------------------------------------
Les Schmidt
Executive Vice President,
Chief Financial Officer and
Secretary

POWER OF ATTORNEY

Each individual whose signature appears below constitutes and appoints Alan
Ramadan and Les Schmidt, and each of them, his or her true and lawful
attorneys-in-fact and agents with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign any and
all amendments to this report on Form 10-K, and to file the same, with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or his, her or their substitute or substitutes, may lawfully do or cause
to be done or by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act, this report
has been signed by the following persons in the capacities and on the dates
indicated.

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <C> <S>

/s/ ALAN S. RAMADAN President, Chief Executive March 28, 2000
- ----------------------------------------------------- Officer and Director
Alan S. Ramadan (Principal Executive Officer)

/s/ LES SCHMIDT Executive Vice President, March 28, 2000
- ----------------------------------------------------- Chief Financial Officer and
Les Schmidt Secretary (Principal Financial
and Accounting Officer)

/s/ RICHARD H. WILLIAMS Director (Chairman of the March 28, 2000
- ----------------------------------------------------- Board of Directors)
Richard H. Williams

/s/ JOHN BERTRAND A.M. Director (Vice-Chairman of the March 28, 2000
- ----------------------------------------------------- Board of Directors)
John Bertrand A.M.

/s/ WALTER W. BREGMAN Director March 28, 2000
- -----------------------------------------------------
Walter W. Bregman

/s/ ROEL PIEPER Director March 28, 2000
- -----------------------------------------------------
Roel Pieper

/s/ JAMES G. SHENNAN, JR. Director March 28, 2000
- -----------------------------------------------------
James G. Shennan, Jr.

/s/ BARRY M. WEINMAN Director March 28, 2000
- -----------------------------------------------------
Barry M. Weinman
</TABLE>

41
<PAGE> 42

QUOKKA SPORTS, INC. AND SUBSIDIARIES

<TABLE>
<S> <C>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Accountants........................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Stockholders' Equity............. F-5
Consolidated Statements of Cash Flows....................... F-7
Notes to Consolidated Financial Statements.................. F-8
</TABLE>

F-1
<PAGE> 43

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Quokka Sports, Inc.

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Quokka Sports, Inc. and its subsidiaries, at December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. 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 of these statements in accordance with auditing standards generally
accepted in the United States which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

PRICEWATERHOUSECOOPERS LLP

San Francisco, California
January 19, 2000

F-2
<PAGE> 44

QUOKKA SPORTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 3,855 $ 23,994
Investments in marketable securities...................... 64,902 --
Accounts receivable, net.................................. 6,067 1,151
Acquired programming and distribution rights.............. 12,042 --
Prepaid and other expenses................................ 1,823 331
-------- --------
Total current assets................................... 88,689 25,476
Property and equipment, net................................. 10,551 2,736
Other assets................................................ 640 --
-------- --------
Total assets...................................... $ 99,880 $ 28,212
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable.......................................... $ 2,427 $ 289
Accrued expenses.......................................... 3,797 1,199
Current portion of long-term debt and capitalized lease
obligations............................................ 6,041 290
Deferred revenues......................................... 3,864 480
-------- --------
Total current liabilities.............................. 16,129 2,258
-------- --------
Long term debt and capitalized lease obligations, net of
current portion........................................... 11,493 501
Stockholders' equity
Preferred stock, $0.0001 par value; authorized: 10,000,000
at December 31, 1999; issued and outstanding at December
31, 1999, authorized: 26,700,000 at December 31, 1999;
issued and outstanding 23,736,016 at December 31, 1998.... -- 2
Common stock, voting, $0.0001 par value; authorized
120,000,000 at December 31, 1999 and 45,400,0000 at
December 31, 1998; issued and outstanding: 44,041,376 at
December 31, 1999 and 9,400,365 at December 31, 1998 and
non-voting, $0.0001 par value; authorized: 300,000 at
December 31, 1999 and 1998; issued and outstanding:
300,000 at December 31, 1999 and 1998..................... 4 1
Additional paid-in capital.................................. 137,460 41,019
Warrants and other.......................................... 7,831 477
Treasury stock, at cost 23,244 and 0 shares, respectively,
at December 31, 1999 and 1998............................. (107) --
Accumulated deficit......................................... (72,930) (16,046)
-------- --------
Total stockholders' equity............................. 72,258 25,453
-------- --------
Total liabilities and stockholders' equity........ $ 99,880 $ 28,212
======== ========
</TABLE>

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

F-3
<PAGE> 45

QUOKKA SPORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Revenues.................................................... $ 13,070 $ 8,635 $ 4,000
Cost of revenues
Production and other costs................................ 20,070 7,780 5,130
Amortization of programming and distribution rights....... 3,441 -- --
-------- ------- -------
Total cost of revenues............................ 23,511 7,780 5,130
-------- ------- -------
Gross profit/(loss).................................. (10,441) 855 (1,130)
Operating expenses
Research and engineering.................................. 13,094 4,480 1,030
Sales and marketing....................................... 19,525 2,519 816
General and administrative................................ 11,069 3,184 1,827
Depreciation.............................................. 4,217 530 68
-------- ------- -------
Total operating expenses.......................... 47,905 10,713 3,741
-------- ------- -------
Loss from operations................................. (58,346) (9,858) (4,871)
Losses of associated venture................................ 2,176 -- --
Minority interest in net loss of consolidated subsidiary.... (1,936) -- --
Interest income/(expense), net.............................. 1,702 320 (71)
-------- ------- -------
Net loss............................................. $(56,884) $(9,538) $(4,942)
======== ======= =======
Net loss per share:
Basic and diluted......................................... $ (1.45) $ (.99) $ (.73)
Weighted average shares outstanding -- basic and
diluted................................................ 39,366 9,656 6,792
======== ======= =======
</TABLE>

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

F-4
<PAGE> 46

QUOKKA SPORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES D
CONVERTIBLE CONVERTIBLE CONVERTIBLE CONVERTIBLE VOTING
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK
--------------- ---------------- --------------- --------------- ---------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ ------ ------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997............... -- -- -- -- -- -- -- -- 3,800 $380
Issuance of common stock to founder for
cash net of issuance costs...........
Issuance of common stock to founder for
cash net of issuance costs of
$31,000.............................. 1,900 0
Issuance of common stock for cash at
$.50 per share of issuance costs of
$18,000.............................. 3,652 0
Issuance of warrants in connection with
promissory notes.....................
Issuance of Series A Preferred Stock
for cash of $0.68 per share, net of
issuance costs of $18,000............ 7,721 $ 1
Net loss...............................
------ --- ------- --- ------ --- ------ --- ------ ----
Balance, December 31, 1997............. 7,721 $ 1 9,352 $ 1
Issuance of Series B Preferred Stock
for cash of $1.50 per share, net of
issuance costs of $76,000............ 10,737 $ 1
Issuance of warrants...................
Issuance of options for services
rendered.............................
Exercise of voting common stock options
to employees for cash of $0.50 per
share................................ 49 0
Issuance of Series C Preferred stock
for cash of $3.25 per share, net of
issuance costs of $36,000............ 4,939 $ 0
Issuance of warrants under joint
development agreement................
Exercise of warrants................... 146 0 170 0 24 0
------ --- ------- --- ------ --- ------ --- ------ ----
Balance as of December 31, 1998........ 7,866 1 10,907 1 4,963 0 -- -- 9,400 1
Exercise of voting common stock options
to employees for cash of $0.50 per
share................................ 600 0
Exercise of voting common stock
warrants at $.50 per share........... 163 0
Purchase of Treasury Stock.............
Issuance of common stock for services
rendered............................. 3 --
Issuance of warrants for
Subordinated-Debt agreement..........
Issuance of warrants for CART Rights
agreement............................
Issuance of warrants for Media One
Broadband agreement..................
Issuance of warrants for Excite
agreement............................
Issuance of warrants for NBC joint
venture agreement....................
Issuance of options for services
rendered.............................
Issuance of Series D Preferred Stock at
$9.00 per share less issuance costs
of $790,000.......................... 4,520 $ 0
Exercise of warrants................... 100 0 148 0 48 0
Initial Public Offering net of issuance
costs of $5,561,000.................. 5,000 1
Conversion of Preferred Stock to Common
Stock................................ (7,966) (1) (11,055) (1) (5,011) (1) (4,520) (0) 28,552 3
Cumulative Translation Adjustment......
Unrealized gain/(loss) on
available-for-sale securities........
Net Loss...............................
------ --- ------- --- ------ --- ------ --- ------ ----
Balance as of December 31, 1999........ -- $-- -- $-- -- $-- -- $-- 43,718 $ 4
====== === ======= === ====== === ====== === ====== ====
</TABLE>

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

F-5
<PAGE> 47

QUOKKA SPORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
NON-VOTING TREASURY
COMMON STOCK STOCK ADDITIONAL TOTAL
--------------- --------------- PAID-IN WARRANTS ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL AND OTHER DEFICIT EQUITY/(DEFICIT)
------ ------ ------ ------ ---------- --------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997............ -- -- -- -- $ (1,566) $(1,566)
Issuance of common stock to founder
for cash net of issuance costs.... 200 $0 $ 100 100
Issuance of common stock to founder
for cash net of issuance costs of
$31,401........................... 100 0 968 969
Issuance of common stock for cash at
$.50 per share of issuance costs
of $17,591........................ 1,808 1,808
Issuance of warrants in connection
with promissory notes............. $ 62 62
Issuance of Series A Preferred Stock
for cash of $0.68 per share, net
of issuance costs of $18,141...... 5,231 5,232
Net loss............................ (4,942) (4,942)
--- -- --- ----- -------- ------ -------- -------
Balance, December 31, 1997.......... 300 $0 -- -- $ 8,107 $ 62 $ (6,508) $ 1,663
Issuance of Series B Preferred Stock
for cash of $1.50 per share, net
of issuance costs of $75,543...... 15,988 15,989
Issuance of warrants................ 589 589
Issuance of options for services
rendered.......................... 34 34
Exercise of voting common stock
options to employees for cash of
$0.50 per share................... 24 24
Issuance of Series C Preferred stock
for cash of $3.25 per share, net
of issuance costs of $36,031...... 16,014 16,015
Issuance of warrants under joint
development agreement............. 264 264
Exercise of warrants................ 850 (438) 412
Net Loss............................ (9,538) (9,538)
--- -- --- ----- -------- ------ -------- -------
Balance as of December 31, 1998..... 300 $0 -- -- 41,019 477 (16,046) 25,453
Exercise of voting common stock
options to employees for cash of
$0.50 per share................... 850 850
Exercise of voting common stock
warrants at $.50 per share........ 143 (62) 81
Purchase of Treasury Stock.......... (23) $(107) (107)
Issuance of common stock for
services rendered................. 10 10
Issuance of warrants for
Subordinated-Debt agreement....... 572 572
Issuance of warrants for CART Rights
agreement......................... 401 401
Issuance of warrants for Media One
Broadband agreement............... 1,154 1,154
Issuance of warrants for Excite
agreement......................... 702 702
Issuance of warrants for NBC joint
venture agreement................. 5,001 5,001
Issuance of options for services
rendered.......................... 345 345
Issuance of Series D Preferred
Shares at $9.00 per share less
issuance costs of $790,344........ 39,959 39,959
Exercise of warrants................ 848 (415) 433
Initial Public Offering net of
issuance costs of $5,560,611...... 54,395 54,396
Conversion of Preferred Stock to
Common Stock...................... --
Cumulative Translation Adjustment... (53) (53)
Unrealized gain/(loss) on
available-for-sale securities..... (58) (58)
Net Loss............................ (56,884) (56,884)
--- -- --- ----- -------- ------ -------- -------
Balance as of December 31, 1999..... 300 $0 (23) $(107) $137,460 $7,831 $(72,930) $72,257
=== == === ===== ======== ====== ======== =======
</TABLE>

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

F-6
<PAGE> 48

QUOKKA SPORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(56,884) $ (9,538) $(4,942)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization of property and
equipment............................................ 4,217 530 68
Minority interest amortization of programming rights... (1,936) -- --
Amortization of acquired rights........................ 3,441 -- --
Non-cash compensation-related charges and other........ 1,433 450 106
Changes in operating assets and liabilities:
Accounts receivable.................................. (4,916) (1,074) (76)
Prepaid expenses and other........................... (920) (85) (199)
Other assets......................................... (640) -- --
Accounts payable..................................... 2,138 (433) 410
Accrued expenses..................................... 2,598 1,117 (1)
Acquired rights...................................... (200) -- --
Deferred revenues.................................... 3,385 (1,826) 781
-------- -------- -------
Net cash used in operating activities............. (48,286) (10,859) (3,853)
-------- -------- -------
Cash flows from investing activities:
Net sale/(purchases) of marketable securities............. (64,902) -- --
Purchase of property and equipment........................ (9,310) (2,723) (295)
-------- -------- -------
Net cash used in investing activities............. (74,212) (2,723) (295)
-------- -------- -------
Cash flows from financing activities:
Proceeds from long term financing arrangements............ 8,700 750
Proceeds from bridge loan................................. -- -- 532
Payments on notes, long-term capital leases and financing
arrangements........................................... (2,322) (79) --
Proceeds from the issuance of common stock, net of
issuance cost.......................................... 56,167 24 2,877
Purchase of Treasury Stock................................ (107) -- --
Proceeds from the issuance of Preferred Stock, net of
issuance cost.......................................... 39,920 32,854 4,700
-------- -------- -------
Net cash provided by financing activities......... 102,358 33,550 8,109
-------- -------- -------
Net increase/(decrease) in cash............................. (20,139) 19,968 3,961
Cash, beginning of period................................... 23,994 4,027 65
-------- -------- -------
Cash, end of period......................................... $ 3,855 $ 23,994 $ 4,027
======== ======== =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 49

QUOKKA SPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION:

Description of Business

Prior to August 1996, Quokka Sports, Inc. ("the Company") operated as an
Australian software development and consulting company known as Ozware
Developments Unit Trust. In August 1996, Quokka adopted its current business
model, incorporated in Delaware under the name Quokka Productions, Inc. and
relocated its headquarters to San Francisco. In September 1996, Quokka
Productions, Inc. changed its name to Quokka Sports, Inc.

Quokka is an independent digital sports network providing real-time
coverage of sporting events for worldwide audiences. Using digital assets
generated at sports venues, Quokka is building a digital sports network by
creating digital programming content that is specifically designed for
interactive distribution systems and other entertainment devices. Quokka
operates as a single segment business.

Revenues are generated from digital entertainment and other sponsorships,
advertising, electronic commerce, the sale of content and studio services. The
majority of revenues are derived from the sale of sponsorship packages to
corporations. Digital entertainment sponsors may embed their products in
Quokka's productions and obtain branding on the network or specific network
properties, access to development projects, the use of trademarks and logos and
participation in various print and media campaigns.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
Quokka, and all of its wholly and majority-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in the consolidated
financial statements. Investments in and advances to our joint venture in which
we have a 50% ownership interest are accounted for by the equity method.

Cash and Cash Equivalents

Quokka includes in cash and cash equivalents all highly liquid investments
that mature within three months of their purchase date. Cash equivalents consist
primarily of money market funds.

Marketable Securities

Marketable securities consist of municipal bonds and notes, corporate
bonds, commercial paper and money market funds. Marketable securities are stated
at market value as determined by the most recently traded price of each security
at the balance sheet date. All marketable securities are defined as
available-for-sale securities in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Any unrealized gains or losses are excluded from
earnings and are reported as a separate component of stockholders' equity until
realized.

Restricted Cash

Restricted cash associated with three office leases, the employee stock
purchase plan and certain cash funding requirements for the NBC/Quokka Ventures,
LLC operating agreement aggregated $7.2 million at December 31, 1999. There was
no restricted cash at December 31, 1998.

F-8
<PAGE> 50
QUOKKA SPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Property and Equipment

Property and equipment are stated at cost and are depreciated on a
straight-line basis over the estimated useful lives of the related assets that
range from three to five years. Leased assets are amortized on a straight-line
basis over the lesser of the estimated useful life or the lease term.
Maintenance and repairs are charged to operations as incurred. When assets are
retired or otherwise disposed of, the cost and accumulated depreciation are
removed from the accounts, and any resulting gain or loss is reflected in
operations in the period realized.

Income Taxes

Income taxes are accounted for in accordance with SFAS No. 109, "Accounting
for Income Taxes", which requires recognition of deferred tax liabilities and
assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
tax liabilities and assets are determined based on the difference between the
financial statements and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized.

Acquired media rights

Quokka and its subsidiaries and joint venture account for acquired
programming rights pursuant to SFAS No. 63 "Financial Reporting by
Broadcasters". Under SFAS No. 63, a licensee shall report an asset and a
liability for the rights acquired and obligations incurred under a license
agreement when the license period begins and other conditions, including
availability and acceptance, have been met. The assets are amortized using the
greater of the ratio of rights contributed during the period in relation to the
total rights expected or on a straight-line method over their estimated useful
life.

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.

Comprehensive Income

The functional currency of Quokka's subsidiaries is the local currency.
Accordingly, Quokka applies the current rate method to translate the
subsidiaries' financial statements into United States dollars. SFAS No. 130
"Reporting Comprehensive Income" establishes standards for reporting
comprehensive income and its components in a financial statement. Comprehensive
income as defined includes all changes in equity (net assets) during a period
from non-owner sources. Examples of items to be included in comprehensive
income, which are excluded from net income, include foreign currency translation
adjustments and unrealized gains/ losses on available-for-sale securities.
Translation adjustments are deemed immaterial and included as a component of
additional paid in capital in the accompanying financial statements.

Revenue Recognition

Quokka generates revenues from digital entertainment sponsorships,
advertising, electronic commerce, the sale of content, and studio services.
Digital entertainment sponsorships signed subsequently represent multi-year,
multi-event and multi-benefit sponsorships. Annual revenues from these new
sponsorships are

F-9
<PAGE> 51
QUOKKA SPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

recognized using the straight line method over the terms of the agreements.
Revenues from studio services are recognized in the period the service is
provided. Advertising and electronic commerce revenues, which have not been
material to date, are recognized when the commitment is met or product is
shipped and payment is assured. Quokka will recognize revenue from the sale of
its proprietary content in accordance with the provisions of SFAS No. 63. Quokka
has accepted property and services as payment for sponsorship. Property and
services received as payment are valued at fair market value based on the
amounts normally charged to third parties for similar property and services.

Cost of Revenues

Cost of revenues consists primarily of production costs, amortization of
acquired programming and distribution rights and other costs related to
e-commerce revenue including product fulfillment and inbound and outbound
shipping costs. Production costs include costs of personnel and consultants,
computer hardware and software, travel, satellite transmission costs, field
gear, cameras, satellite phones, marketing and an allocation of general and
administrative expenses.

Fair Value of Financial Instruments

Carrying amounts of certain of Quokka's financial instruments, including
cash and cash equivalents, accounts receivable, accounts payable, accrued
expenses and other liabilities, approximate fair value due to their short
maturities. Based upon borrowing rates currently available for Quokka for loans
with similar terms, the carrying value of capital lease obligations approximates
fair value.

Business Risk and Concentration of Credit Risk

Quokka operates in the Internet industry, which is rapidly evolving and
intensely competitive. Quokka potentially competes with other Internet
companies, large, established media companies and sports marketing
organizations.

Quokka performs ongoing credit evaluations, does not require collateral and
does not currently maintain any reserves for potential credit losses. For the
year ended December 31, 1999, four customers accounted for 27%, 23%, 14% and
15%, respectively, of all revenues generated by Quokka. At December 31, 1999,
four customers accounted for 43%, 15%, 14% and 11%, respectively, of total
outstanding accounts receivable.

For the year ended December 31, 1998, three customers accounted for 52%,
16% and 12%, respectively, of all revenues generated by Quokka. At December 31,
1998, 23% of the outstanding accounts receivable was attributable to the
smallest of the three largest customers. One additional customer accounted for
another 65% of total outstanding accounts receivable. The remaining accounts
receivable balance at December 31, 1998 was attributable to three additional
customers.

For the year ended December 31, 1997, three customers accounted for 52%,
21% and 15% of all revenues generated by Quokka. At December 31, 1997, there
were no receivables from these customers.

Research and Engineering

Research and engineering expenses include personnel costs, costs incurred
to improve and develop the "Quokka Sports Platform," broadband applications and
costs associated with network operations. The Company recognizes website
development costs in accordance with the Statement of Position ("SOP") 98-1
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." As such, the Company expenses all costs incurred in the planning
and post implementation phases of development. The Company also expenses costs
associated with the insignificant modifications to the existing site and the
development of website content as incurred.

F-10
<PAGE> 52
QUOKKA SPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Advertising

Advertising is expensed as incurred. Advertising expenses, which are
included in sales and marketing expenses, were $7,727,000 in 1999, $554,000 in
1998 and $62,000 in 1997.

Stock-Based Compensation

In 1997, Quokka adopted the disclosure provisions of SFAS No. 123,
"Accounting for Stock-based Compensation." Quokka has elected to continue
accounting for stock-based compensation issued to the employees using Accounting
Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to
Employees" and, accordingly, pro forma disclosures required under SFAS No. 123
have been presented (See Note 10). Under APB No. 25, compensation expense is
based on the difference, if any, on the date of the grant, between the fair
value of Quokka's common stock and the exercise price. Additionally, pursuant to
SFAS No. 123, stock issued to non-employees is accounted for at the fair value
of the equity instruments issued, or at the fair value of the consideration
received, whichever is more reliably measurable.

Reclassification

Quokka has reclassified the presentation of certain prior year information
to conform to the current year presentation. These changes had no effect on
previously reported financial position or results of operations.

Net Loss Per Share and Pro Forma Net Loss Per Share

Quokka computes net loss per share in accordance with SFAS No. 128,
"Earnings per Share", and SEC Staff Accounting Bulletin ("SAB") No. 98. Under
the provisions of SFAS No. 128 and SAB No. 98, basic net loss per share is
computed by dividing the net loss available to common stockholders for the
period by the weighted average number of common shares outstanding during the
period. Diluted net loss per share is computed by dividing the net loss for the
period by the weighted average number of vested common and common equivalent
shares outstanding during the period. However, as Quokka generated net losses in
all periods presented, common equivalent shares, composed of incremental common
shares issuable upon the exercise of stock options and warrants and upon
conversion of preferred stock, are not included in diluted net loss per share
because such shares are anti-dilutive.

Pro forma net loss per share is computed using the weighted average number
of common shares outstanding, including the pro forma effects of the automatic
conversion of Quokka's preferred stock and exercise of in the money warrants as
if such conversion and exercise occurred on January 1, 1998 or at the date of
original issuance, if later. The resulting pro forma adjustments result in an
increase in the weighted average shares used to compute basic and diluted net
loss per share. Pro forma common equivalent shares, composed of unvested
restricted common stock and incremental common shares issuable upon the exercise
of stock options and warrants, are not included in pro forma diluted net loss
per share because they would be anti-dilutive.

F-11
<PAGE> 53
QUOKKA SPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table sets forth the computation of historical and pro forma
basic and diluted net loss per share for the periods indicated.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Numerator:
Net loss available to common stockholders................. $(56,884) $(9,538) $(4,942)
Denominator:
Weighted average shares................................... 39,387 9,657 6,792
Weighted average unvested common shares subject to
repurchase agreements.................................. (21) (2) --
-------- ------- -------
Denominator for basic and diluted calculation............. 39,366 9,655 6,792
======== ======= =======
Net loss per share:
Basic and diluted......................................... $ (1.45) $ (0.99) $ (0.73)
Anti-dilutive securities including options, warrants and
preferred stock not included in historical net loss per
share calculations........................................ 11,840 17,755 1,643
======== ======= =======
Pro forma net loss per share:
Net loss.................................................... $(56,884) $(9,538) --
Shares used in computing net loss per share, basic and
diluted................................................... 39,366 9,655 --
Adjustment to reflect assumed conversion of preferred stock
and exercise of warrants.................................. -- 14,260 --
-------- ------- -------
Shares used in computing pro forma net loss per share, basic
and diluted............................................... 39,366 23,915 --
======== ======= =======
Pro forma net loss per share, basic and diluted............. $ (1.45) $ (0.40) --
</TABLE>

Recently Issued Accounting Pronouncements

In June 1998, the Financial Accounting Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133").
SFAS 133 establishes new accounting and reporting standards of derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. SFAS 133 is effective for fiscal years
beginning after June 15, 1999. The Company does not currently hold derivative
instruments or engage in hedging activities.

In July 1999, the Financial Accounting Board issued SFAS No. 137,
"Accounting with Derivative Instruments and Hedging Activities Deferral of the
Effective Date of FASB Statement No. 133" ("SFAS 137"). SFAS 137 deferred the
effective date until the fiscal quarter ending June 30, 2000. The Company has
not engaged in hedging activities or invested in derivative instruments.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101). "Revenue Recognition in Financial
Statements". SAB 101 provides guidance for revenue recognition under certain
circumstances. The Company is currently evaluating the impact of SAB 101 on its
financial statements and related disclosures. The accounting and disclosures
prescribed by SAB 101 will be effective for the quarter ended March 31, 2000.

F-12
<PAGE> 54
QUOKKA SPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. MARKETABLE SECURITIES

The amortized cost, gross unrealized holding gains, gross unrealized
holding losses and fair value of available-for-sale securities at December 31,
1999 is as follows (in thousands). There were no marketable securities as of
December 31, 1998.

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST HOLDING GAINS HOLDING LOSSES VALUE
-------------- ---------------- ---------------- ----------
<S> <C> <C> <C> <C>
At December 31, 1999
Cash and cash equivalents........... $ 428 $-- $ -- $ 428
Municipal bonds and notes........... 21,372 4 -- 21,376
Corporate bonds..................... 16,010 -- (50) 15,960
Commercial paper.................... 27,150 -- (12) 27,138
------- -- ---- -------
$64,960 $4 $(62) $64,902
======= == ==== =======
</TABLE>

4. ACQUIRED RIGHTS

Acquired programming rights pertain to licensing fees paid for programming
rights related to our joint venture with NBC Olympics, Inc. for U.S. Digital
Coverage of the Olympic Games, the exclusive worldwide interactive media rights
to the FIM 500cc Road Racing Championship Grand Prix and America's Cup 2000
Yacht Race. Acquired distribution rights represent licensing fees paid for the
rights to distribute our programming on Excite@Home and Terra Networks. Acquired
programming rights to sporting events and acquired distribution rights are
amortized over their respective license periods on a straight line basis.
Amortization associated with these rights amounted to $3,441,000 for the year
ended December 31, 1999. There was no amortization expense in 1998 or 1997.

5. PROPERTY AND EQUIPMENT

Property and equipment consists of:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1999 1998
------- ------
(IN THOUSANDS)
<S> <C> <C>
Computer, telecommunications, software and office
equipment............................................... $ 9,096 $2,242
Leasehold improvements.................................... 2,477 568
Furniture and fixtures.................................... 1,129 356
Production equipment...................................... 2,383 94
Leased equipment.......................................... 505 75
------- ------
15,590 3,335
Less accumulated depreciation and amortization............ (5,039) (598)
------- ------
Property and equipment, net.......................... $10,551 $2,736
======= ======
</TABLE>

Accumulated amortization related to leased equipment was $178,000 at
December 31, 1999 and $38,000 at December 31, 1998. There were no asset
disposals during 1999 or 1998.

F-13
<PAGE> 55
QUOKKA SPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. ACCRUED LIABILITIES

Accrued liabilities are comprised of:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1999 1998
------ ------
(IN THOUSANDS)
<S> <C> <C>
Accrued compensation and related expenses.................. $1,184 $ 579
Accrued accounts payable expenses.......................... 1,597 545
Accrued other.............................................. 1,016 75
------ ------
Total accrued liabilities........................ $3,797 $1,199
====== ======
</TABLE>

7. NOTES PAYABLE

Notes payable are summarized as follows:

<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------
1999 1998
------- ----
(IN THOUSANDS)
<S> <C> <C>
Notes payable to bank(a)................................... $ 458 $708
Notes payable to bank(b)................................... 2,000 --
Notes payable to third party(c)............................ 5,113 --
Notes payable associated with acquired distribution and
programming rights(d).................................... 7,244 --
Note payable to third party(e)............................. 1,538 --
Other notes payable........................................ 770 --
------- ----
17,123 791
Less current installments.................................. 5,921 290
------- ----
$11,202 $501
======= ====
</TABLE>

- ---------------
(a) Notes payable to bank represents an equipment financing loan that is secured
by furniture, fixtures and equipment. Terms of the loan calls for monthly
payments over 36 months commencing November 23, 1998. The note bears
interest at 0.75% over the prime rate as quoted by the bank (8.50% at
December 31, 1999). The agreement also requires the Company to be in
compliance with certain financial covenants including quick and liquidity
coverage ratios. The Company was in compliance with its covenants as of
December 31, 1999.

(b) Notes payable to bank represents an equipment financing loan that is secured
by furniture, fixtures and equipment. Terms of the loan calls for monthly
payments over 48 months commencing August 31, 1999. The note bears interest
at 0.75% over the prime rate as quoted by the bank (8.50% at December 31,
1999). The agreement also requires the Company to be in compliance with
certain financial covenants including quick and liquidity coverage ratios.
The Company was in compliance with its covenants as of December 31, 1999.

(c) Notes payable to third party represents subordinated debt and equipment
financing agreements, due in 36 monthly installments over the terms of the
agreements. In connection with these agreements, warrants were issued for
the purchase of 223,076 shares of Series C Preferred Stock at an exercise
price of $3.25, which were automatically converted into warrants to
purchase, on a one to one basis, shares of common stock. The fair value of
these warrants of $572,339 was calculated using the Noreen-Wolfson and has
been treated as a loan commitment fee and was amortized over the term of the
six month draw-down period as no further services are requested to earn the
warrants, and they are fully vested.

F-14
<PAGE> 56
QUOKKA SPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(d) Obligations under acquired programming and distribution rights pertain to
licensing fees paid for rights to certain sporting events and rights to
distribute our content. Acquired rights obligations are payable in quarterly
payments over the terms of the agreements ranging from two to three years.
(see note 3)

(e) Note payable to third party represents debt related to software licensing
fees which are payable in quarterly installments over the term of the two
year agreement.

Future minimum annual principal payments at December 31, 1999, are as
follows (in thousands):

<TABLE>
<S> <C>
2000............................................... $ 5,921
2001............................................... 5,764
2002............................................... 4,910
2003............................................... 528
2004............................................... --
Thereafter......................................... --
-------
$17,123
=======
</TABLE>

8. COMMITMENTS

Quokka leases office facilities and equipment under noncancelable operating
leases. Rental expense under these operating leases for 1999, 1998 and 1997 was
approximately $1,600,000, $233,000 and $150,000, respectively. Additionally,
Quokka leases certain office equipment under capital lease agreements. These
leases are due in monthly installments at various dates through 2004. Minimum
future payments under capital and operating lease agreements for the year ended
December 31, are as follows (in thousands):

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
2000...................................................... $154 $ 4,824
2001...................................................... 108 5,173
2002...................................................... 108 4,300
2003...................................................... 104 4,374
2004...................................................... 16 4,427
Thereafter................................................ -- 17,598
---- -------
$490 $40,696
=======
Less amount representing interest......................... 79
----
Present value of minimum lease payments under capital
lease................................................... 411
Less current portion...................................... 120
----
Non-current portion............................. $291
====
</TABLE>

F-15
<PAGE> 57
QUOKKA SPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. INCOME TAXES

The provision for income taxes are summarized as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
--------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current tax expense
Federal
State..................................................... $ 1 $ 1 $ 1
Foreign................................................... 36 12 --
Deferred tax expense
Federal................................................... $-- $-- $--
State..................................................... -- -- --
--- --- ---
Net tax provision........................................... $37 $13 $ 1
=== === ===
</TABLE>

The change in the valuation allowance was $21,512,094 during the year ended
December 31, 1999 and $3,332,030 during the year ended December 31, 1998.
General tax expenses, including franchise, personal property and business taxes,
which were insignificant, were recorded in general and administrative expenses.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income
and tax planning strategies in making this assessment. Management believes it is
more likely that not the Company will not realize the benefits of these
deductible differences. As a result, a full valuation allowance has been
provided for the total net deferred tax assets at December 31, 1999.

The primary components of the net deferred tax asset are:

<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Net operating loss carryforward...................... $ 22,681 $ 4,671 $ 1,527
Capitalized research and experimentation costs....... 219
Tax credits.......................................... 430
Deferred revenue..................................... 1,499
Other................................................ 1,582 228 40
-------- ------- -------
Total deferred tax asset........................ 26,411 4,899 1,567
Valuation allowance.................................. (26,411) (4,899) (1,567)
-------- ------- -------
$ -- $ -- $ --
======== ======= =======
</TABLE>

As of December 31, 1999, the Company has net operating loss carryforwards
of $61,088,580 for federal tax purposes expiring in 2011 through 2019, and
$32,755,305 for California income tax purposes which expire in 2003 through
2004. The Company has research and development credit carryforwards of $350,573
for federal purposes and $198,315 for state purposes. The credits expire in
2019. The issuance of class A preferred stock in December, 1997, resulted in a
change of ownership under Section 382 of the Internal Revenue Code. As a result
of the change, approximately $3.8 million in federal losses and $1.8 million in
California losses are subject to an annual limitation of $254,319. In addition,
due to changes in the Company's ownership after 1997, the amount of net
operating losses and research and development credits available to offset future
federal income tax liabilities may be limited. The amount of such limitation, if
any, has not been determined.

F-16
<PAGE> 58
QUOKKA SPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The losses incurred while operating as Ozware Developments Unit Trust in
Australia are not available for future utilization, therefore, no deferred
income taxes were recorded in the financial statements.

The effective income tax rate differs from the federal statutory income tax
rate of 34% primarily as a result of state income taxes and the change in the
valuation allowance. The difference between Quokka's effective income tax rate
and the Federal statutory rate is reconciled below:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Provision at Federal Rate............................ $(19,340) $(3,243) $(1,702)
State tax, net of Federal benefit.................... (1,914) (556) (291)
Change in valuation allowance........................ 21,512 3,332 1,567
Other................................................ (221) 480 427
-------- ------- -------
Net tax provision.................................... $ 37 $ 13 $ 1
======== ======= =======
</TABLE>

10. STOCKHOLDERS' EQUITY

Preferred Stock

In July 1999 and upon completion of the Company's initial public offering,
all 28,552,264 shares of Series A, B, C &D preferred stock were automatically
converted on a one to one basis into common stock of the Company.

Warrants

Outstanding warrants to purchase 3,115,336 shares of preferred and common
stock were automatically converted into warrants to purchase 3,113,252 shares of
common stock (after consideration of net exercises). Concurrent with the IPO,
warrants were exercised to purchase 452,048 share of common stock, resulting in
additional capital proceeds to the Company of $486,000.

At December 31, 1999 and 1998, the Company had 2,693,288 and 508,848 of
stock purchase warrants outstanding, respectively. These warrants were issued in
connection with private placements and other means of financing. The holders of
these warrants are entitled to receive one share of common stock of the Company
for one warrant exercised. The warrants have exercise prices ranging from $3.25
to $42.26 and expire ten years from the date of grant.

The estimated fair value of the above warrants have been determined based
on the Noreen-Wolfson fair value model with a volatility of 70% and is a
component of stockholders' equity in the accompanying financial statements.

Issuance of Stock Options to Non-employees for Services

The Company has recorded $3,208,000, $853,000 and $62,000 of compensation
expense in 1999, 1998 and 1997 respectively, relating to stock options issued to
non-employees for services rendered during those years.

11. STOCK OPTIONS

Pursuant to the Quokka Sports, Inc. 1997 Equity Incentive Plan ("the
Plan"), employees, directors and consultants of Quokka may be granted options to
purchase shares of common stock. At December 31, 1999, 13,350,000 shares of
common stock were reserved for issuance pursuant to the Plan. Incentive Stock
Options are granted to the extent permissible under IRS rules and generally vest
over a four-year term.

F-17
<PAGE> 59
QUOKKA SPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Concurrent with the IPO, the Company initiated the 1999 Non-Employee
Directors' Stock Option Plan. All non-employee directors as of the IPO date
received grants of 25,000 shares pursuant to the terms of the Plan. New
non-employee directors automatically receive grants of 25,000 shares upon their
appointment to the Board of Directors. Starting June 1, 2000, all non-employee
directors will automatically be granted an annual grant of 25,000 shares (or a
reduced pro rata for each full quarter prior to the date of grant during which
such person did not serve as a Non-Employee Director). All options granted under
this plan are non-qualified and immediately exercisable with a three-year term.

A summary of the activity under both Plans together with options granted
outside of the Plan is as follows:

<TABLE>
<CAPTION>
EXERCISE WEIGHTED
PRICE AGGREGATE AVERAGE
SHARES PER SHARE PRICE EXERCISE PRICE
---------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1996..... -- -- -- --
Granted............................ 1,340,000 $0.50 $ 670,000 $0.50
Cancelled.......................... (252,000) $0.50 (126,000) $0.50
---------- -------------- ----------- -----
Outstanding at December 31, 1997..... 1,088,000 $0.50 544,000 $0.50
Granted............................ 2,760,000 $0.50 - $ 2.60 3,736,200 $1.34
Exercised.......................... (48,799) $0.50 (24,400) $0.50
Cancelled.......................... (239,001) $0.50 - $ 1.50 (176,000) $0.74
---------- -------------- ----------- -----
Outstanding at December 31, 1998..... 3,560,200 $0.50 - $ 2.60 4,079,800 $1.12
---------- -------------- ----------- -----
Granted............................ 7,619,500 $3.25 - $17.00 62,270,500 $8.17
Exercised.......................... (557,617) $0.50 - $ 8.50 (587,900) $1.05
Cancelled.......................... (1,350,246) $0.50 - $12.00 (7,690,600) $5.70
---------- -------------- ----------- -----
Outstanding at December 31, 1999..... 9,271,837 $0.50 - $17.00 $58,071,800 $6.26
========== ============== =========== =====
</TABLE>

At December 31, 1999, options to purchase 1,322,830 shares were fully
vested.

The following table summarizes information with respect to stock options
outstanding at December 31, 1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
- --------------------------------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED ----------------------------
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE PRICES AT 12/31/99 CONTRACTUAL LIFE EXERCISE PRICE 12/31/99 EXERCISE PRICE
- --------------- ---------------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$0.50 930,965 7.85 $ 0.50 301,453 $0.50
$ 0.75 - $ 1.50 1,136,400 8.58 $ 1.25 235,727 $1.22
$ 2.25 - $ 3.25 781,200 8.97 $ 2.71 137,979 $2.52
$ 6.88 - $ 7.44 2,079,636 9.60 $ 7.02 308,013 $7.00
$ 8.00 - $ 8.50 2,924,536 9.57 $ 8.30 47,007 $8.60
$ 9.00 - $ 9.75 490,300 9.83 $ 9.10 20,751 $9.00
$10.00 - $12.00 896,300 9.00 $ 9.77 271,900 $6.33
$12.25 - $17.00 32,500 9.77 $12.55 --
--------- ---------
9,271,837 1,322,830
========= =========
</TABLE>

The following information concerning the Plan is provided in accordance
with Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS 123). Quokka accounts for the Plan in accordance
with Accounting Principles Board (APB) Opinion No. 25 and related
interpretations.

F-18
<PAGE> 60
QUOKKA SPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The fair value of each employee stock option grant has been estimated on
the date of grant using the minimum value method with the following weighted
average assumptions used for grants in 1999 and 1998:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1999 1998
---- ----
<S> <C> <C>
Risk-free interest rates............................... 5.69% 5.25%
Expected life of options............................... 3.25 years 5 years
Expected dividends..................................... $0 $0
</TABLE>

The weighted average fair value of options granted in 1999 was $4.04. Stock
options issued to consultants were valued utilizing the Black-Scholes option
pricing model with a volatility of 70%.

The following comprises the pro forma information pursuant to the provision
of SFAS No. 123:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Net loss -- historical....................... $(56,884) $(9,538) $(4,942)
Pro forma.................................... $(64,988) $(9,694) $(4,966)
Basic and diluted net loss per share
Historical................................. $ (1.45) $ (0.99) $ (0.73)
Pro forma.................................. $ (1.65) $ (1.00) $ (0.73)
</TABLE>

These pro forma amounts may not be representative of the effects on pro
forma net income (loss) for future years as options vest over several years and
additional awards are generally made each year.

12. 401(K) PLAN

On November 5, 1997, Quokka established a 401(k) plan, which took effect on
January 1, 1998. Under the plan, eligible employees are permitted to contribute
up to 15% of gross compensation, not to exceed the annual 402(g) limitation for
any plan year. Discretionary contributions may be made by Quokka. No
contributions have been made by Quokka since the adoption of the plan.

13. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information and non-cash activities for 1999, 1998
and 1997 (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
----------------------
1999 1998 1997
------ ---- ----
<S> <C> <C> <C>
Supplemental disclosure of cash:
Equipment financed through capital lease.................. $ 429 $ -- $120
------ ---- ----
Accounts payable related to purchase of property and
equipment.............................................. $ 611 $242 $ --
------ ---- ----
Issuance of Preferred warrants under joint development
agreement.............................................. $ -- $415 $ 62
------ ---- ----
Issuance of Preferred warrants for subordinated debt...... $ 572 $ -- $ --
------ ---- ----
Issuance of Preferred warrants for programming and
distribution rights.................................... $6,104 $ -- $ --
------ ---- ----
Issuance of Preferred warrants for MediaOne............... $1,154 $ -- $ --
------ ---- ----
Notes payable related to purchase of programming and
distribution rights.................................... $7,644 $ -- $ --
------ ---- ----
Notes payable related to purchase of property and
equipment.............................................. $2,293 $ -- $ --
------ ---- ----
Stock options issued as compensation for services
rendered............................................... $ 355 $ 35 $ --
------ ---- ----
Amortization of NBC....................................... $1,936 $ -- $ --
------ ---- ----
</TABLE>

F-19
<PAGE> 61
QUOKKA SPORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. SUBSEQUENT EVENTS (UNAUDITED)

On March 1, 2000, the Company entered into a definitive agreement to
acquire ZoneNetwork.com, Inc., a privately-held company that produces and owns a
leading mountain sports internet property, Mountainzone.com and its sister web
site SkiResorts.com. The acquisition will extend the reach of the Quokka Sports
Network further into the action sports community. This stock purchase
transaction is currently valued at $25 million and is expected to close by the
end of March 2000, subject to various conditions.

F-20
<PAGE> 62

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- -------- -------------
<C> <S>
03.01** Amended and Restated Certificate of Incorporation.
03.02* Amended and Restated Bylaws.
04.01* Form of Specimen Stock Certificate.
04.02* Amended and Restated Investors' Rights Agreement, dated May
27, 1999, among Quokka and certain investors named therein.
10.01* Form of Indemnity Agreement entered into by Quokka with each
of its directors and certain executive officers.
10.02* 1999 Non-Employee Directors' Stock Option Plan.
10.03* Form of Nonstatutory Stock Option Agreement under the 1999
Non-Employee Directors' Stock Option Plan.
10.04* 1999 Employee Stock Purchase Plan.
10.05* Form of 1999 Employee Stock Purchase Plan Offering.
10.06* Key Employee Agreement, dated March 25, 1999, between Alvaro
Saralegui and Quokka.
10.07* Subordinated Loan and Security Agreement, dated February 12,
1999, between Quokka and Comdisco, Inc.
10.08* Office Lease, dated February 18, 1999, between Tiffany M.
Gin and Stanton Lowe dba Spear Street Sapphire and Quokka.
10.09+* Master Venture Agreement, dated February 9, 1999, by and
among Quokka, NBC Olympics, Inc. and NBC/Quokka Ventures,
LLC.
10.10+* Agreement, dated January 1, 1999, between Championship Auto
Racing Teams, Inc. and CART Digital Media Enterprises, LLC.
10.11+* Operating Agreement of NBC/Quokka Ventures, LLC, dated
February 9, 1999, between Quokka and NBC Olympics, Inc., as
amended.
10.12+* Digital Entertainment Partnership Agreement, dated January
1, 1999, between Quokka and Compaq Computer Corporation.
10.13* Lease, dated April 23, 1999, between Quokka and 1301 Evans
Street Associates, LLC.
10.14* Office Lease Agreement, dated May 27, 1999, between Quokka
and EOP-Mission Street, L.L.C.
10.15* Lease, dated July 16, 1999, between SKS Brannan Associates,
LLC and Quokka.
10.16+** Memorandum of Agreement dated September 15, 1999 between
Quokka and Intel Corporation.
16.01* Letter from KPMG LLP regarding change in certifying
accountant.
21.01 List of Subsidiaries.
23.01* Consent of Cooley Godward LLP.
23.02* Consent of PricewaterhouseCoopers LLP, independent
accountants.
24.01* Power of Attorney (reference is made to page 41).
27.1 Financial Data Schedule.
</TABLE>

- ---------------
* Previously filed as an Exhibit to the Company's Registration Statement on
Form S-1 (File No. 333-76981) filed in connection with the Company's initial
public offering.

** Previously filed as an Exhibit to the Company's Report on Form 10-Q filed on
November 15, 1999 (File No. 000-26311).

<PAGE> 1
EXHIBIT 21.1

List Of Subsidiaries Of Quokka Sports, Inc.

1. Quokka Sports Ltd., A United Kingdom limited company.

2. NBC/Quokka Ventures, LLC, a Delaware limited liability company.

3. CART Digital Media Enterprises, LLC, a Delaware limited liability company.

4. QuokkaDNA, Inc., a Delaware corporation.

5. Quokka Exchange Incorporated, a Delaware corporation.

6. Montana Acquisition Corporation, a Washington corporation.

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,855
<SECURITIES> 64,902
<RECEIVABLES> 6,067
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 88,689
<PP&E> 10,551
<DEPRECIATION> 4,217
<TOTAL-ASSETS> 99,880
<CURRENT-LIABILITIES> 16,129
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 7,724
<TOTAL-LIABILITY-AND-EQUITY> 99,880
<SALES> 0
<TOTAL-REVENUES> 13,070
<CGS> 23,511
<TOTAL-COSTS> 47,905
<OTHER-EXPENSES> 240
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 458
<INCOME-PRETAX> (56,884)
<INCOME-TAX> 0
<INCOME-CONTINUING> (56,884)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (56,884)
<EPS-BASIC> (1.45)
<EPS-DILUTED> (1.45)

</TABLE>