SUNHAWK COM CORP, SB-2/A, 1999-12-23

SUNHAWK COM CORP
SB-2/A, 1999-12-23
BUSINESS SERVICES, NEC

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1999

REGISTRATION NO. 333-80849
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 4

FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

SUNHAWK.COM CORPORATION
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

<TABLE>
<S> <C> <C>
WASHINGTON 2741 91-1568830
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

223 TAYLOR AVENUE NORTH, SUITE 200
SEATTLE, WASHINGTON 98109
(206) 728-6063
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL PLACE
OF BUSINESS)

MARLIN ELLER
CHIEF EXECUTIVE OFFICER AND PRESIDENT
SUNHAWK.COM CORPORATION
223 TAYLOR AVENUE NORTH, SUITE 200
SEATTLE, WASHINGTON 98109
(206) 728-6063
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)

COPIES OF ALL COMMUNICATIONS TO BE SENT TO:

<TABLE>
<S> <C> <C>
THE OTTO LAW GROUP, PLLC RUSKIN, MOSCOU, KELLEY DRYE & WARREN LLP
DAVID M. OTTO, ESQ. EVANS & FALTISCHEK, PC M. RIDGWAY BARKER, ESQ.
999 THIRD AVENUE, SUITE 3210 STUART M. SIEGER, ESQ. TWO STAMFORD PLAZA
SEATTLE, WASHINGTON 98104 170 OLD COUNTRY ROAD 281 TRESSER BOULEVARD
(206) 262-9545 MINEOLA, NEW YORK 11501-4366 STAMFORD, CONNECTICUT 06901
(516) 663-6546 (203) 351-8032
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _____________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _____________

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _____________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.

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The information in this prospectus is not complete and may be changed.
Underwriters may not confirm sales of these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it
is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED DECEMBER 23, 1999

PROSPECTUS

1,400,000 Shares

[SUNHAWK.COM CORPORTION(TM) LOGO]

Common Stock
-------------------------

This is an initial public offering of 1,400,000 shares of common stock of
Sunhawk.com Corporation.

No public market currently exists for our shares.

It is expected that the initial public offering price will be between
$11.50 and $12.50 per share.

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF FACTORS THAT YOU
SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.

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

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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

<TABLE>
<CAPTION>
PER SHARE TOTAL
---------- ----------
<S> <C> <C>
Public offering price....................................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds, before expenses, to Sunhawk.com................... $ $
</TABLE>

The underwriters may, for 30 days after the date of this prospectus,
purchase up to an additional 210,000 shares of common stock from us at the
initial public offering price less the underwriting discount.

The representative holds a warrant, which is exercisable upon the close of
this offering, to acquire 140,000 shares of our common stock at a purchase price
equal to 120% of the initial public offering price.

The selling shareholders hold warrants, which are exercisable upon the
close of this offering, to purchase 42,000 shares of common stock from us at the
initial public offering price.

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

The underwriters are separately underwriting the shares being offered. The
underwriting agreement provides that the shares are being offered on a
firm-commitment basis, such that the underwriters will purchase all of the
shares if any of the shares are purchased. The underwriters expect to deliver
the shares against payment in New York, New York on January , 2000.

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

JOSEPH GUNNAR & CO., LLC

, 2000

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[Inside Cover Page]

Fore front: Various screens from Sunhawk.com's web site depicting different
screens and features of the Sunhawk.com web site

Background: Sheet music and sampling of sheet music covers

Text: Sunhawk.com.
Digital Print Audio
The complete solution for delivering music on-line.

[Inside Back Cover]

Sampling of sheet music covers representing a few of the currently available
sheet music titles offered by Sunhawk.com

Text: Sunhawk.com
Your Interactive Music Store
<PAGE> 4

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information regarding our company and the common stock being sold in this
offering and our financial statements and notes to those statements appearing
elsewhere in this prospectus.

SUNHAWK.COM CORPORATION

We have developed and are operating an Internet based digital rights
management ("DRM") distribution system for the secure publishing, enhancing and
preparing of digital content.

The expansion of the Internet has offered a world wide opportunity for the
low cost distribution of information. Virtually anything that can be copyrighted
can also be digitized and distributed over the Internet, including text, audio,
video, photographic images, film, sheet music, literature, and software
("Proprietary Digital Products"). While most information available on the
Internet is intended to be free, Proprietary Digital Products are expected to be
sold or licensed, and new systems are required to allow these transactions to
take place securely over the Internet, to account for them, and to restrict
copying.

Our DRM distribution system is based upon proprietary software that
encrypts Proprietary Digital Products so that they can be viewed and heard, if
applicable, only by the customer. We distribute our Solero(R) viewer via the
Internet, which identifies the customer and allows the Proprietary Digital
Products which are downloaded to the customer to be viewed, heard, if
applicable, and printed out, after payment. We also provide accounting for each
transaction. Our system has the flexibility to vary the rules of payment and use
to maximize revenues. Our DRM distribution system has application to sales of
Proprietary Digital Products originated in both the United States and abroad.
For two years we have been efficiently conducting secure international
distribution of certain Proprietary Digital Products on behalf of our business
partners, as either a principal or service provider, and will market our DRM
technology to others for their use, as appropriate.

In addition to our ability to securely distribute Proprietary Digital
Products, we are, with patented technology, enhancing copyrighted materials to
add significant value to them. We have applied such technology initially for
digitally enhancing sheet music, and these enhanced products have been sold
successfully since 1997. Sheet music is digitized and enhanced by us to animate
the notes played while hearing them, allowing for variations in tempo, allowing
the user to add or subtract instruments and showing notes being played on a
keyboard or other instrument being scored, all in a real-time interactive
manner. Our business partners in the digitized sheet music activities to date,
with which we have long term licenses, include Warner Bros. Publications U.S.
Inc. ("Warner") (also a 7% equity owner of Sunhawk.com) and EMI Christian Music
Publishing ("EMIC") a subsidiary of EMI Music Publishing.

We are also securely distributing music in the MP3 compressed format using
our DRM distribution for our partners system and are planning enhancements to
add value to that product (animated video etc.) as well. Additionally,
discussions are underway with book publishers and other owners of text to
digitize and distribute the Proprietary Digital Product.

We also intend to act as a publisher of Proprietary Digital Products in
which we own the rights. Our DRM distribution system, together with our website
and our links to other, compatible websites, allows for efficient and
inexpensive marketing, sales and direct distribution of Proprietary Digital
Products.

Our website, www.sunhawk.com, is our primary distribution point of
Proprietary Digital Products. We also distribute Proprietary Digital Products to
customers who link to us from our clients' and

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third party websites. The use of websites allows for worldwide promotion and
distribution with relatively low cost.

We are committed to all aspects of secure digital publishing including
developing, directly operating and, as appropriate, licensing our secure
technology infrastructure, enhancing client Proprietary Digital Products and
producing our own Proprietary Digital Products. We believe that Internet based
marketing and sale of Proprietary Digital Products will rapidly expand because
lower costs, increased selling opportunities and real time information exchange
will broaden distribution of established products (music, movies, books). We
believe that Proprietary Digital Products will become a leading form of Internet
commerce content when secure distribution methods such as our DRM distribution
system are available.

We were incorporated in the State of Washington on August 20, 1992. Our
principal executive offices are located at 223 Taylor Avenue North, Suite 200,
Seattle, Washington 98109, and our telephone and fax numbers are (206) 728-6063
and (206) 728-6416, respectively. Our e-mail address is [email protected], and
our web site address is www.sunhawk.com. Information accessed on or through our
web site does not constitute a part of this prospectus.

THE OFFERING

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<S> <C>
Common stock offered by us.............. 1,400,000 shares
Common stock outstanding immediately
prior to the date of this offering.... 1,399,380 shares
Common stock to be outstanding after
this offering......................... 2,799,380 shares
Over-allotment option................... 210,000 shares
Use of proceeds......................... We anticipate that the net proceeds from this offering will
be used for:
- sales, marketing, brand building and website enhancement
activities;
- general working capital purposes;
- production of Protected Digital Products;
- acquisition of licenses for production of Protected
Digital Products;
- research and development of additional features of our
distribution system;
- debt repayment; and
- upgrading existing facilities and acquisition of
equipment, including leasehold improvements.
Proposed Nasdaq SmallCap(R) Market
Symbol................................ "SNHK"
Proposed Pacific Stock Exchange
Symbol................................ "SHA"
</TABLE>

Except as otherwise indicated, all information in this prospectus assumes
that the underwriters do not exercise the option granted by Sunhawk.com to
purchase additional shares in this offering.

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SUMMARY FINANCIAL INFORMATION

The following table summarizes the financial data of our business and
should be read in conjunction with "Management's discussion and analysis of
financial condition and results of operations."

<TABLE>
<CAPTION>
FISCAL YEAR
ENDED SEPTEMBER 30,
-------------------------------------
1999 1998 1997
----------- ----------- ---------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales................................................ $ 100,575 $ 27,263 $ 15,066
Gross profit (loss).................................. (71,150) 4,746 10,052
Loss from operations................................. (2,732,083) (1,349,125) (844,406)
Net loss............................................. (2,834,337) (1,475,579) (910,983)
Net loss per share --
basic and diluted.................................. $ (2.46) $ (1.66) $ (1.04)
Weighted average common shares for net loss per share
computations -- basic and diluted.................. 1,154,214 887,689 875,424
</TABLE>

The following table provides a summary of our balance sheet as of September
30, 1999. The "as adjusted" column reflects the sale of 1,400,000 shares of
common stock in this offering at an assumed initial public offering price of
$12.00 per share after deducting the estimated underwriting discounts,
commissions and estimated offering expenses payable by us. The "with
overallotment" column reflects the sale of 1,400,000 shares of common stock plus
the underwriters overallotment of 210,000 shares of common stock at an initial
public offering price of $12.00 per share after deducting the estimated
underwriting discounts, commissions and estimated offering expenses payable by
us.

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1999
-----------------------------------------
WITH
ACTUAL AS ADJUSTED OVERALLOTMENT
----------- ----------- -------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................................... $(1,337,009) $12,360,991 $14,578,591
Total assets....................................... 3,130,128 15,765,033 17,982,633
Total shareholders' equity......................... 1,745,510 14,380,415 16,598,015
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30,
---------------------- TOTALS AS OF
1999 1998 1997 SEPTEMBER 30, 1999
------ ----- ----- ------------------
<S> <C> <C> <C> <C>
SUMMARY OPERATING DATA:
Solero song titles published...................... 4,959 1,516 538 7,013
Solero pages published............................ 27,146 5,778 2,429 35,353
Total online digital products sold................ 16,931 3,404 125 20,460
</TABLE>

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RISK FACTORS

OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED OPERATING
HISTORY.

We were incorporated in August 1992 but did not go online with our web site
until February 1997 and did not make our first sale online until March 1997.
Accordingly, we have a limited operating history upon which you can evaluate our
business and prospects, which makes it difficult to forecast our future
operating results. The new and evolving nature of using e-commerce for the
distribution of Protected Digital Products increases these uncertainties. You
must consider our business in light of the risks, uncertainties and problems
frequently encountered by companies with limited operating histories.

WE HAVE INCURRED LOSSES SINCE INCEPTION AND MAY INCUR FUTURE LOSSES.

To date, we have had limited revenues and have not shown a profit from
operations. We incurred net losses of $2,834,337, $1,475,579, and $910,983 for
the years ended 1999, 1998, and 1997, respectively. The aggregate amount of our
accumulated deficit as of September 30, 1999 was $1,599,709 after adjustment for
the change in tax status from an "S" Corporation to a "C" Corporation. We expect
to continue to devote substantial resources to the production of Solero digital
sheet music and Sunhawk Audio files, sales and marketing activities and the
acquisition of rights to additional sheet music, recorded music and other
digital content. As we expand our technology to address electronic distribution
of other types of content we expect to incur additional significant increases in
research and development costs as well as in sales and marketing. We may find
that these efforts are more expensive than we currently anticipate, which would
further increase our losses. As a result, we will need to generate significant
revenues to achieve and maintain profitability. Our business strategy may not be
successful, and we cannot predict when, or if, we will become profitable. If we
achieve profitability, we may not be able to sustain it.

WE WILL NEED ADDITIONAL FINANCING

Our capital requirements have been and will continue to be significant. In
the past, we have been substantially dependent upon loans and contributions from
our shareholders. The proceeds of this offering together with existing funds are
expected to be sufficient to meet our cash requirements for the next 12 months.
Beyond that period, we will require additional funds in order to meet our
strategic business objectives and remain competitive. This capital may not be
available on acceptable terms, if at all. If we raise additional funds by
issuing equity or convertible debt securities, the percentage ownership of our
shareholders will be reduced, and these securities may have rights, preferences
or privileges senior to those of our shareholders. If we cannot obtain
sufficient funds, we may not be able to grow our operations, make technological
developments or compete effectively and there would be a substantial doubt as to
our ability to continue as a going concern.

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WE MIGHT NOT BE SUCCESSFUL IN THE DEVELOPMENT AND INTRODUCTION OF NEW
PROPRIETARY DIGITAL PRODUCTS.

We must continue to develop new or enhanced Proprietary Digital Products in
a timely manner in order to take advantage of rapid technological change and new
business opportunities. We may fail to successfully identify new product
opportunities and develop and bring new or enhanced Proprietary Digital Products
to market in a timely manner or these Proprietary Digital Products may fail to
achieve the market acceptance or price stability necessary for profitability. In
order to remain competitive we may change our business model to take advantage
of new business opportunities, including business areas in which we do not have
extensive experience. For example, we intend to extend our technology to digital
content types other than music, and may start licensing our DRM technology. If
we fail to successfully develop these or other business opportunities, our
business would be harmed.

WE RELY ON KEY EMPLOYEES, WHOSE KNOWLEDGE OF OUR TECHNOLOGY, DIGITAL SHEET MUSIC
AND THE MUSIC PRODUCTS INDUSTRY WOULD BE DIFFICULT TO REPLACE.

Our success depends substantially on the continued services of our
executive officers and key employees, in particular Marlin Eller, our chairman
of the board, chief executive officer and president. The loss of the services of
Mr. Eller or any of our other executive officers or key employees could harm our
business. We have obtained a $1,000,000 key man life insurance policy on the
life of Mr. Eller. None of our executive officers or key employees currently has
a contract that guarantees employment. There can be no assurance that any of
these persons will remain employed by us or that these persons will not
participate in businesses that compete with us in the future.

WE MAY FACE PATENT INFRINGEMENT AND OTHER INTELLECTUAL PROPERTY INFRINGEMENT
CLAIMS RELATED TO OUR TECHNOLOGY WHICH COULD MATERIALLY AND ADVERSELY AFFECT OUR
BUSINESS.

We depend, to a very material extent, on our patents and other technology
related to our DRM system and related to our sheet music Proprietary Digital
Products. We understand that the patenting of digital and Internet technologies
has increasingly become a major focus of e-commerce companies. Patents are
perceived as a means of barring competition and adding value. While we attempt
to avoid infringing known proprietary rights of third parties, there is no
assurance that we will not be found to infringe upon the proprietary and other
rights of others. We generally have not conducted, and do not conduct
comprehensive patent searches to determine whether the technology used in our
products infringe third party patents. Since the United States patenting process
takes an extended period of time, during which there is usually no disclosure of
the patent application, we would generally not know about a patent that blocks
the use of one or more aspects of our technology until the patent is granted. It
can be expected that patents granted in key areas of Internet commerce will be
subject to vigorous challenge. There is no assurance as to what blocking patents
may be granted, or as to how a challenge to such patents would be resolved. In
any event, we expect that the process will be time consuming and expensive, and
potentially materially adverse to our business.

At the present time, patents have been issued to third parties relating,
for example, to the Internet and e-commerce in general, as well as to the secure
distribution of digital information over the Internet, and the downloading of
music over the Internet in

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particular. Other DRM and online music distribution companies have received
letters from companies alleging infringement of their patents. In the future,
we, or if we decide to license our technology, our licensees, could be found to
infringe upon these and other patent rights.

ASSERTING OUR INTELLECTUAL PROPERTY RIGHTS MAY INVOLVE US IN LITIGATION, WHICH
COULD HARM OUR OPERATING RESULTS.

Circumstances may arise that would cause us to pursue legal remedies in
order to protect our rights and interests in our intellectual property. Any such
litigation, while in our best interests, may be lengthy and expensive. In
addition, any such litigation may be against parties better able than we are to
afford the extensive costs often associated with such litigation. We cannot
assure you that we will be able to bear the expense required to pursue prolonged
litigation to the best conclusion for us.

WE WILL NEED TO PROMOTE OUR WEBSITE AND PROPRIETARY DIGITAL PRODUCTS IN ORDER TO
ATTRACT CUSTOMERS

In addition to providing quality products and customer service, we will
need to increase our advertising and marketing expenditures to increase
awareness of our website and create and maintain brand loyalty among our
customers. Our marketing strategy may include traditional print advertising and
promotions as well as Internet strategies such as the placement of banner ads on
third party websites, the purchase of words on search engines, and the creation
of distribution relationships with high-traffic websites. There can be no
assurance that we will be able to execute such strategies or that they will be
successful. If we fail to effectively promote and maintain our website, brands
and products in a way that increases our revenues and attracts customers, our
business, results of operations and financial condition could be materially
adversely affected.

IF WE FAIL TO CONTINUOUSLY UPGRADE OUR WEBSITE, WE WILL NOT ATTRACT AND RETAIN
CUSTOMERS

If our potential or existing customers do not find our website an
attractive and convenient place to shop, we will not attract or retain customers
and our sales will suffer. If our competitors' websites are easier to use or
better able to satisfy customer needs, our customer traffic and our business
could be adversely affected. In order to keep our website competitive and
encourage its use we must continuously increase and improve its accessibility,
music titles and other content, and ease of use. Developing and integrating new
Proprietary Products, features, content, services or technologies into our
website on a timely basis could be expensive and time consuming and there can be
no assurance that our efforts will be successful, meet with market acceptance or
enhance our brand loyalty.

BECAUSE WE ARE AN EXCLUSIVELY ONLINE-BASED BUSINESS, SYSTEMS FAILURE AT OUR
PRIMARY FACILITY COULD DISRUPT OUR ABILITY TO SELL AND DISTRIBUTE OUR PRODUCTS
AND SATISFY CUSTOMER ORDERS.

Substantially all of our computer hardware for operating Sunhawk.com is
currently located at a single facility in Seattle, Washington. Because our
customers can only access our products online, our ability to sell Proprietary
Digital Products over the Internet successfully and provide high quality
customer service depends on the efficient and uninterrupted operation of our
computer and communications systems at that facility. We

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are in the process of installing a redundant system and designing a formal
disaster recovery plan. However, should a disaster occur prior to the completion
of the foregoing, it could harm our business. In addition, our systems are
vulnerable to damage from fires, earthquakes, floods and other natural hazards
as well as telecommunications failures, power losses, computer viruses,
vandalism and similar events. The occurrence of any of the foregoing could lead
to interruptions, delays, loss of data or the inability to sell our products.
Our customers may become dissatisfied by any system failure or delay that
interrupts our ability to provide service. Sustained or repeated system failures
could affect our reputation, which would harm our business.

THE TAXATION OF INTERNET-BASED TRANSACTIONS MAY BE INSTITUTED, AND OUR SALES AND
OTHER TAX OBLIGATIONS MAY THEREFORE INCREASE IN THE FUTURE.

As a Washington-based company, we collect sales taxes for transactions in
the State of Washington only. However, the future taxation requirements for
online transactions are uncertain. One or more local, state, federal or foreign
jurisdictions may seek to impose additional sales or other tax obligations on
us. Proposals have been made at various state and local levels that would impose
additional taxes on the sale of goods and services over the Internet. None of
these has been adopted as of this date. If adopted, however, such taxes could
impair the growth of e-commerce and our business could be harmed. In 1998,
Congress passed the Internet Freedom Act, which imposes a three-year moratorium
on state and local taxes on Internet-based transactions. We cannot assure you
that this moratorium will be extended. Failure to renew this moratorium would
allow various states to impose taxes on e-commerce, which could harm our
business.

THE FAILURE OF OUR SERVICE PROVIDERS TO PROVIDE NECESSARY INTERNET SERVICES
COULD HARM OUR BUSINESS.

Our success depends, in large part, upon third parties maintaining the
Internet infrastructure to provide a reliable network with the speed, ease of
use, data capacity, security and hardware necessary for reliable Internet access
and services. The failure by these parties to provide the necessary services to
maintain the viability of the Internet could harm our business.

THERE IS NO EXISTING INDUSTRY STANDARD FOR THE DISTRIBUTION OF PROPRIETARY
DIGITAL PRODUCTS.

There is currently no generally adopted industry standard, and one may
never materialize, for the creation, storage and distribution of interactive
Proprietary Digital Products. Some of our competitors distribute sheet music and
other Proprietary Digital Products in a non-interactive, non-playable format
that is significantly less expensive to produce. While we also have the ability
to produce sheet music and other Proprietary Digital Products in a non-playable,
non-interactive format, our business will be harmed if this format becomes the
standard adopted by publishers and consumers. We cannot assure you that our
Solero format will be a successful format for the creation, storage and
distribution of interactive Proprietary Digital Products, or that it will be
adopted by customers in sufficient numbers for us to be successful. Further, if
another format for the creation, storage and delivery of interactive digital
sheet music and other Proprietary Digital Products emerges, we cannot assure you
that we will be able to obtain a license to such technology on favorable terms
or at all, or that it will be possible to convert our digital sheet music and
other Proprietary Digital Products into that alternate format.

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EXISTING EFFORTS TO ESTABLISH A STANDARD NOT COMPATIBLE WITH OURS FOR THE
DISTRIBUTION OF PROPRIETARY DIGITAL PRODUCTS, IF SUCCESSFUL, COULD HARM OUR
BUSINESS.

The market for digital music products is characterized by new developments
in technology and evolving industry standards. For example, some of the major
recording studios have recently announced a plan to develop a universal standard
for the electronic delivery of recorded music called the Secure Digital Music
Initiative, or SDMI, and have announced their intention to make this delivery
method available in the future. To our knowledge, however, SDMI has not yet
issued a complete standard. Widespread industry and consumer acceptance of these
and other standards could significantly harm our business if we are not able to
adapt and respond to these and other standards.

SECURITY BREACHES TO OUR DRM SYSTEM, PROPRIETARY DIGITAL PRODUCTS AND OTHER
SYSTEMS AND SOFTWARE MAY HARM OUR REPUTATION AND BUSINESS AND MAY CAUSE US TO
EXPEND SIGNIFICANT ADDITIONAL RESOURCES TO PROTECT AGAINST FUTURE BREACHES.

A party who is able to circumvent our security measures could
misappropriate Proprietary Digital Products without paying the required license
fees, disrupt our operations, erase or modify purchase transaction and other
information, or gain unauthorized access to proprietary information. Security
breaches could also harm our reputation and expose us to litigation and
liability. We may be required to expend significant capital and other resources
to address problems caused by attempts to compromise our security. We cannot
assure you that our security measures will prevent security breaches or that a
failure to prevent such security breaches will not seriously harm our business.

WE MAY EXPERIENCE DELAYS IN THE DEVELOPMENT OF NEW PROPRIETARY DIGITAL PRODUCTS
AND THESE PROPRIETARY DIGITAL PRODUCTS MIGHT CONTAIN ERRORS.

In order to remain competitive we must continue to innovate and develop new
versions of our software to distribute and enhance Proprietary Digital Products.
Software development is inherently difficult to manage and keep on schedule. Our
failure to manage and keep development projects on schedule might hurt our
business. In addition, complex software products like ours often contain errors
or defects, including errors relating to security, particularly when first
introduced or when enhancements or new versions are released. Defects or errors
in current or future products could result in delayed or failed introduction of
our products, negative publicity, a delay or failure to achieve market
acceptance, lost revenues, or products liability and other claims, any of which
could seriously harm our business and operating results.

WE MAY BE SUBJECT TO CHANGES IN GOVERNMENT REGULATIONS AND THE LAW WHICH, IF
ADOPTED, COULD HARM OUR BUSINESS.

As commerce on the Internet continues to evolve, federal, state or foreign
agencies may adopt laws and regulations that cover our business. Moreover, the
applicability to the Internet of existing laws governing issues such as property
ownership, content, taxation, defamation and personal privacy is uncertain. We,
for example, distribute music which include lyrics which some may find
objectionable. It is possible that governments will enact legislation that may
be applicable to us to regulate areas such as content, privacy, pricing,
security, encryption, illegal and harmful content, access charges and
retransmission

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activities. The introduction of such laws and regulations could expose us to
significant liability. In addition, any such new legislation or regulation or
governmental enforcement of existing regulations may limit the growth of the
Internet, increase our cost of doing business or increase our legal exposure,
which could have a material adverse effect on the our business, financial
condition and results of operations.

THE DRM BUSINESS IS HIGHLY COMPETITIVE, AND THE FAILURE OF OUR DRM SYSTEM TO
COMPETE EFFECTIVELY WITH OUR COMPETITORS SYSTEMS WOULD HARM OUR BUSINESS.

Many of our current and potential competitors in the DRM business are well-
established companies that have greater financial, marketing, distribution,
brand recognition and other resources than we have. There can be no assurance
that we will be able to compete effectively against these companies.
Additionally, larger, well-established and well-financed entities such as AT&T,
IBM, Liquid Audio, Microsoft, Xerox, Intertrust Technologies and Preview Systems
may acquire, invest in, or form joint ventures with our e-commerce competitors
or other publishers or suppliers of Proprietary Digital Product.

If these or other companies successfully develop competing technologies or
acquire significant ownership in Proprietary Digital Products, our business
could be harmed.

NEW SOURCES OF PUBLISHING RIGHTS MAY COST US MORE, WHICH COULD REDUCE OUR GROSS
MARGINS.

We may be required to pay substantial royalty advances or be required to
make payments to acquire proprietary product conversion and distribution rights
from new sources in the future. We cannot assure you that we will be able to
recoup advances or payments, if any, that may be payable for such rights. Our
failure to make such payments could harm our relationships with our licensors,
including, but not limited to, cancellation of our license agreements. In
addition, license fees payable to publishers and other owners of proprietary
product may increase as we continue to expand our Proprietary Digital Products
and as competition for these products increases. Publishers, record companies,
copyright owners, performance rights societies, and other owners of proprietary
product may make claims for royalties in addition to those we are currently
paying. If we are required to pay increased or additional licensing fees, these
increased payments could reduce our margins and could harm our business.

WE DEPEND ON TWO MUSIC PUBLISHERS FOR A MAJORITY OF OUR CATALOG

A majority of our catalog of Solero digital song titles are licensed from
Warner and EMIC. Although our agreements with Warner and EMIC are for remaining
terms of approximately eight and three years, respectively, from the date of
execution, the agreements could be terminated prior to the normal expiration of
their terms in the event of any uncured material breach or default. Any
termination of the Warner or EMIC agreements would decrease the availability of
digital sheet music that we offer customers and would harm our business.

WE WILL NEED TO ENTER NEW LICENSE AGREEMENTS TO GROW OUR CATALOG

Our success will depend in part on our ability to build relationships with
music publishers. The rights to a substantial number of the commercially
significant sheet music titles are owned by Warner/Chappel, EMI Music
Publishing, BMG Music Publishing,

11
<PAGE> 13

MCA Music Publishing and Sony/ATV Music Publishing in the United States. While
we expect to continue to seek to obtain the necessary rights to convert and
distribute Solero sheet music, there can be no assurance that we will secure
such rights on commercially reasonable terms. Our failure to grow our catalog of
music titles may affect our sales, which would have a material adverse effect on
our sheet music business.

DIGITAL SHEET MUSIC IS AN UNPROVEN PRODUCT, AND IF IT IS NOT WIDELY ADOPTED, OUR
BUSINESS WOULD BE HARMED.

Our future success in sheet music distribution will depend on our ability
to significantly increase sales of our Solero digital sheet music over the
Internet, while successfully managing costs. If music publishers, other music
content providers and consumers do not adopt the Internet as a means of
distributing digital sheet music in general, and our products, in particular,
our sheet music business would be harmed.

THE MUSIC PRODUCTS BUSINESS IS FRAGMENTED AND HIGHLY COMPETITIVE, AND THE
FAILURE OF OUR SOLERO SHEET MUSIC AND SUNHAWK AUDIO PRODUCTS TO COMPETE
EFFECTIVELY WITH OUR COMPETITORS' PRODUCTS WOULD HARM OUR BUSINESS.

Our competition includes:

- traditional retail sheet music merchants, including conventional
mail-order companies;

- various music merchandisers that sell instruments and related music
products over the Internet;

- music publishers that sell products directly over the Internet on a
mail-order basis; and

- assorted e-commerce web sites selling books and music over the Internet,
including print sheet music at lower prices in some cases than we
currently offer.

Many of our current and potential competitors are well-established
companies that have greater financial, marketing, distribution, brand
recognition and other resources than we have. There can be no assurance that we
will be able to compete effectively against these companies. Additionally,
larger, well-established and well-financed entities such as major music
publishers may acquire, invest in, or form joint ventures with our e-commerce
competitors or other sheet music publishers or suppliers who develop their own
Internet distribution channels, any of which could harm our business.

Companies that are currently in similar or potentially competing businesses
include Sheet Music Direct, which is affiliated with Hal Leonard Corporation and
Music Sales Corporation, Infomusique S.A., Net4music, Musicnotes and Coda Music
Technology. If these or other companies successfully develop competing
technologies or acquire significant catalogs of music, our business could be
harmed. In addition, in expanding the Sunhawk Audio portion of our business, we
will face significantly increased competition and different competitive
challenges from other Internet audio providers than we currently experience.

WE MAY NOT BE ABLE TO RECOUP OUR FIXED MUSIC CONVERSION COSTS

We expect to devote substantial resources to converting music into the
Solero and Sunhawk Audio format. There can be no assurance that we will be able
to generate

12
<PAGE> 14

sufficient revenues from product sales to recoup our fixed conversion costs for
all or any portion of the music that we convert.

WE DEPEND UPON OUR INTELLECTUAL PROPERTY RIGHTS, WHICH IF INFRINGED UPON, COULD
SUBJECT US TO LITIGATION AND HARM OUR BUSINESS.

We consider our patents, trademarks, trade secrets and other similar
intellectual property to be a valuable part of our business. To protect our
intellectual property rights, we rely upon copyright, trademark, patent and
trade secret laws and generally enter into confidentiality agreements with our
employees, consultants, vendors and corporate business partners. We cannot
assure you that applicable U.S. or foreign laws or our use of confidentiality
agreements will provide sufficient protection from misappropriation or
infringement of our intellectual property rights or the unauthorized use or
distribution of our products, particularly in foreign countries where laws or
law enforcement practices may not protect our intellectual property rights as
fully as in the United States. If third parties were to use or otherwise
misappropriate our copyrighted materials, trademarks or other intellectual
property rights without our consent or approval, independently develop products
utilizing our technologies or breach the security provided by our encryption and
e-commerce technology, our competitive position could be harmed, or we could
become involved in litigation to enforce our rights. Our failure or inability to
protect our intellectual property rights could harm our business.

WE MAY BE EXPOSED TO LIABILITY FOR MUSIC AND OTHER CONTENT ON OUR WEB SITE AND
ELSEWHERE THAT IS DEFAMATORY OR VIOLATES A THIRD PARTY'S COPYRIGHT, TRADEMARK OR
OTHER RIGHTS.

We may be subject to claims for copyright or trademark infringement,
negligence, defamation, obscenity or on other grounds related to the music and
information available for download or use on our web site and distributed on
CD-ROMS, enhanced CDs and elsewhere. The area of law relating to the digital
distribution of music and other materials over the Internet is unsettled, and we
face risks associated with, for example, content appearing on sites to which we
link, content appearing on sites created by members of our associates program,
and a failure by us to obtain all necessary rights to distribute our music
products. Any liability incurred as a result of such claims or from the loss of
the rights to distribute our music products could harm our business.

WE DEPEND ON THE CONTINUED GROWTH OF E-COMMERCE, AND ANY DECREASE IN CONSUMER
USE OF THE INTERNET OR THE GROWTH OF E-COMMERCE IN GENERAL COULD HARM OUR
BUSINESS.

Our future revenues and any potential future profits are dependent upon
widespread acceptance and increased use of the Internet as a medium for
commerce. We cannot predict whether customers who have used traditional means of
commerce will instead purchase digital and pre-printed sheet music or digitally
recorded music over the Internet. Customer concerns over the security of
transactions conducted on the Internet, together with concerns over the privacy
of users, may inhibit the growth of the Internet and e-commerce. If use of the
Internet does not continue to grow, or if the necessary Internet infrastructure
or complementary services are not developed and maintained to effectively
support any growth that may occur, our business could be harmed.

13
<PAGE> 15

A FAILURE TO ACCOMMODATE UNANTICIPATED INCREASES IN CUSTOMER TRAFFIC COULD
RESULT IN THE LOSS OF EXISTING OR POTENTIAL CUSTOMERS AND HARM OUR BUSINESS.

Our success will depend in part on our ability to quickly and effectively
scale our operations to accommodate any significant increase in customer traffic
and orders. If we do not successfully scale our operations to accommodate
increased customer demands for our products, our business could be harmed.

WE WILL NEED TO PROMOTE OUR WEBSITE AND PRODUCTS IN ORDER TO ATTRACT CUSTOMERS.

THE UNAVAILABILITY OF OUR FOREIGN SUBCONTRACTORS ON WHOM WE DEPEND TO CONVERT
SHEET MUSIC INTO THE SOLERO FORMAT COULD DISRUPT OR INCREASE THE COST OF OUR
DIGITAL SHEET MUSIC PRODUCTION AND HARM OUR BUSINESS.

While our encryption, quality control and Internet operations are located
at our offices in Seattle, Washington, substantially all of our "raw" digital
sheet music is produced by third-party subcontractors overseas. These
relationships may be affected by political or economic uncertainties,
termination of our existing agreements or personnel shortages. Although domestic
third-party providers of these services are available, we believe that such
services are more costly. If the supply of music converted into our Solero
format from foreign third-party subcontractors is disrupted for any reason, our
ability to produce additional Solero music titles will be disrupted until other
service providers are contracted with, and our business could be harmed.

THE FAILURE OF THIRD PARTIES ON WHOM WE RELY TO FULFILL ORDERS FOR TRADITIONAL
PRINTED SHEET MUSIC COULD PREVENT US FROM SATISFYING CUSTOMER ORDERS AND RESULT
IN THE LOSS OF EXISTING OR POTENTIAL CUSTOMERS AND THUS HARM OUR BUSINESS.

Although we have accounts with several distributors, we obtain
substantially all of our traditional printed sheet music directly from an
unaffiliated third-party distributor with whom we do not have a written
agreement. There can be no assurance that if our distributor relationship were
terminated, we would be able to find an alternative, comparable supplier capable
of providing printed sheet music on terms that we would find satisfactory. To
the extent our distributor does not have sufficient capacity or is otherwise
unable to fulfill orders on a timely basis, such capacity constraints could harm
our business. We also rely on third-party carriers for traditional printed sheet
music shipments and are therefore subject to the risks, including employee
strikes and inclement weather, associated with these carriers' ability to
provide delivery services to meet our shipping needs. If we fail to adequately
address these and other order fulfillment risks, our business would be harmed.

14
<PAGE> 16

OUR TECHNOLOGY IS SUSCEPTIBLE TO YEAR 2000 RISKS.

Our software, products and information systems were developed using a
four-digit year code. As a result, we believe that our software, products and
information systems will function properly with respect to dates in the Year
2000 and thereafter. We cannot assure you, however, that our technology will do
so. Any resulting system failures could harm our business. We are in the process
of establishing our contingency plans. The failure by us to successfully
implement our contingency plans could harm our business.

THIRD-PARTY PRODUCTS AND SERVICES ON WHICH WE RELY ARE SUSCEPTIBLE TO YEAR 2000
RISKS.

There can be no assurance that the products, software and systems of other
companies on which our products, software, systems and operations rely will
function properly with respect to dates in the Year 2000 and thereafter. We have
identified our critical vendors and are monitoring their Year 2000 compliance
programs. The failure of any of our critical vendors to adequately address the
Year 2000 problem could harm our business.

OUR OFFICERS AND DIRECTORS WILL CONTINUE TO HAVE SUBSTANTIAL CONTROL OVER
SUNHAWK.COM AFTER THIS OFFERING.

Immediately after the closing of this offering, the Eller and McConney 1995
Family Living Trust, of which Mr. Eller, our chairman of the board, chief
executive officer and president, and Mary McConney, our treasurer, serve as the
trustees, will own 1,024,285 shares of our outstanding common stock, which will
represent 36.6% of our outstanding common stock or 34.0% if the underwriters'
over-allotment option is exercised in full. Accordingly, the Eller and McConney
1995 Family Living Trust will have significant influence over the election of
directors and other matters submitted to a vote of our shareholders. Moreover,
our executive officers, directors and entities affiliated with them will, in the
aggregate, beneficially own 40.2% of our outstanding common stock, or 37.3% if
the underwriters' over-allotment option is exercised in full, upon the
completion of this offering. As a result, these shareholders will possess
significant influence over us, with the ability to significantly influence all
matters requiring approval by our shareholders.

ANTI-TAKEOVER PROVISIONS CONTAINED UNDER WASHINGTON LAW MAY MAKE IT MORE
DIFFICULT FOR A THIRD PARTY TO ACQUIRE US.

Provisions of Washington law, could make it more difficult for a third
party to acquire us, even if doing so would be beneficial to our shareholders.
Specifically, Chapter 19 of the Washington Business Corporation Act generally
prohibits a "target corporation" from engaging in certain significant business
transactions with a defined "acquiring person" (a person acquiring 10% or more
of the capital stock of the target corporation) for a period of five years after
the acquisition, unless the transaction or acquisition of shares is approved by
a majority of the members of the target corporation's board of directors prior
to the time of acquisition. This provision may have the effect of delaying,
deterring or preventing a change in control of our company. The existence of
these antitakeover provisions could limit the price that investors might be
willing to pay in the future for shares of our common stock.

15
<PAGE> 17

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. These forward-looking
statements include statements about our plans, objectives, expectations and
intentions and other statements that are not historical facts. When we use the
words "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates" and similar expressions, we are generally identifying
forward-looking statements. Because these forward-looking statements involve
risks and uncertainties, there are many factors that could cause actual results
to differ materially from those expressed or implied by these forward-looking
statements, including the factors discussed above.

16
<PAGE> 18

USE OF PROCEEDS

The estimated net proceeds to us of this offering, assuming an initial
public offering price of $12.00 per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by us, will be approximately $13,698,000, or $15,915,600 if the underwriters'
over-allotment option is exercised in full. We currently expect to apply the
estimated net proceeds as follows:

<TABLE>
<CAPTION>
USE AMOUNT PERCENTAGE
- ------------------------------------------------------ ----------- ----------
<S> <C> <C>
Sales and Marketing, including sales force
enhancement; brand building program development and
implementation; marketing and advertising programs
and upgrading and maintaining our DRM technology and
website............................................. $ 8,000,000 59%
General working capital purposes...................... 1,120,000 8%
Production of Protected Digital Products including
Solero digital sheet music and Sunhawk Audio Music
files............................................... 1,078,000 8%
Research and development of additional features for
our DRM distribution system......................... 1,000,000 7%
Acquisition of additional licenses for the production
of Protected Digital Products....................... 1,000,000 7%
Debt repayment........................................ 1,000,000 7%
Acquisition and upgrade of equipment for our DRM
distribution system................................. 250,000 2%
Reconfiguration of headquarters facilities............ 250,000 2%
----------- ---
Total....................................... $13,698,000 100%
=========== ===
</TABLE>

We cannot assure you that the above dollar amounts will be specifically
allocated as set forth in the foregoing table. As a result, our management will
have discretion in the application of the proceeds. Allocation of net proceeds
is further subject to future events including general economic conditions,
changes in our strategy and response to competitive pressures and consumer
preferences associated with the music industry and Internet commerce. Pending
ultimate application, the net proceeds will be invested in interest-bearing
securities guaranteed by the U.S. government or its agencies.

17
<PAGE> 19

CAPITALIZATION

The following table sets forth our capitalization as of September 30, 1999:

- on an actual basis; and

- on an "as adjusted" basis to reflect the receipt by us of the
estimated net proceeds from this offering; and

- on a "with overallotment" basis to reflect the receipt by us of the
estimated net proceeds from this offering including the underwriter's
overallotment.

You should read this information together with our financial statements and
the notes to those statements included elsewhere in this prospectus.

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1999
-----------------------------------------
WITH
ACTUAL AS ADJUSTED OVERALLOTMENT
----------- ----------- -------------
<S> <C> <C> <C>
Shareholders' equity:
Common stock, no par value; 10,000,000 shares
authorized; 1,399,380 shares issued and
outstanding, actual; 2,799,380 shares issued
and outstanding, as adjusted; 3,009,380 shares
issued and outstanding, with overallotment.... $ 3,345,219 $15,980,124 $18,197,724
Accumulated deficit........................... (1,599,709) (1,599,709) (1,599,709)
----------- ----------- -----------
Total shareholders' equity............... 1,745,510 14,380,415 16,598,015
----------- ----------- -----------
Total capitalization................ $ 1,745,510 $14,380,415 $16,598,015
=========== =========== ===========
</TABLE>

The foregoing table assumes no exercise of any outstanding stock options.
In addition to the shares of common stock to be outstanding after this offering,
we may issue additional shares of common stock under the following plans and
arrangements:

- 17,932 shares of common stock subject to options outstanding under our
1996 Stock Option Plan and 266,210 shares available for future issuance
under the plan as of September 30, 1999;

- 140,000 shares of common stock reserved for issuance upon exercise of the
representative's warrants; and

- 42,000 shares of common stock reserved for issuance upon exercise of the
warrants as part of the bridge financing agreement.

18
<PAGE> 20

DILUTION

Our net tangible book value at September 30, 1999 was $(659,781), or $(.47)
per share. Net tangible book value per share represents the amount of our total
tangible assets less our total liabilities divided by the number of shares of
common stock outstanding as of September 30, 1999. After giving effect to the
sale of the 1,400,000 shares of common stock offered in this prospectus at an
assumed initial public offering price of $12.00 per share, after deducting
estimated underwriting discounts and commissions and estimated offering expenses
payable by us, our as adjusted net tangible book value at September 30, 1999
would have been $13,038,219, or $4.66 per share. This represents an immediate
increase in net tangible book value of $5.13 per share to existing shareholders
and an immediate dilution of $7.34 per share, or 65.3% of the assumed initial
public offering price of $12.00, to new investors purchasing shares of common
stock in this offering. The following table illustrates the per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price....................... $12.00
Net tangible book value per share at September 30, 1999..... $(.47)
Increase per share attributable to new investors.......... 5.13
-----
As adjusted net tangible book value per share after this
offering.................................................. 4.66
------
Dilution per share to new investors......................... $ 7.34
======
</TABLE>

The table below sets forth on an adjusted basis at September 30, 1999,
after giving effect to the sale of the 1,400,000 shares of common stock offered
in this prospectus at an assumed initial public offering price of $12.00 per
share, the following information both for our existing shareholders and for
investors purchasing shares of common stock in this offering:

- the number of shares of common stock purchased from us;

- the total consideration paid to us; and

- the average price paid per share.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders..... 1,399,380 50% $ 5,883,497 25.9% $ 4.20
New investors............. 1,400,000 50% 16,800,000 74.1% 12.00
--------- ----- ----------- -----
Total........... 2,799,380 100.0% $22,683,497 100.0%
========= ===== =========== =====
</TABLE>

The foregoing table assumes no exercise of any outstanding stock options.
As of September 30, 1999, there were outstanding options to purchase 17,932
shares of common stock under the 1996 Stock Option Plan, at a weighted average
exercise price of $10.77 per share. To the extent that outstanding options are
exercised, there will be further dilution to new investors.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our common stock, and
we do not anticipate paying cash dividends in the foreseeable future. Any future
determination with regard to the payment of dividends will be at the sole
discretion of our board of directors.

19
<PAGE> 21

SELECTED FINANCIAL DATA

The following selected financial data for the years ended September 30,
1999, 1998, and 1997 are derived from our financial statements, which have been
audited by Ernst & Young LLP, independent auditors. The financial statements
include all adjustments, consisting of normal recurring adjustments, which we
consider necessary for a fair presentation of our financial position and results
of operations for these periods. When you read the selected financial data
below, it is important that you also read the historical financial statements
and related notes to those statements appearing elsewhere in this prospectus, as
well as the section of this prospectus entitled "Management's discussion and
analysis of financial condition and results of operations." The historical
results and the results for the year ended September 30, 1999 are not
necessarily indicative of the results that may be expected of future results.

<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30,
---------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Sales..................................... $ 100,575 $ 27,263 $ 15,066
Cost of goods sold...................... 171,725 22,517 5,014
----------- ----------- -----------
Gross profit (loss)..................... (71,150) 4,746 10,052
Selling, general and administrative
expenses............................. 2,660,933 1,353,871 854,458
----------- ----------- -----------
Loss from operations.................... (2,732,083) (1,349,125) (844,406)
Interest income......................... 13,140 -- --
Interest expense on notes payable to
shareholders......................... (115,394) (126,454) (66,577)
----------- ----------- -----------
Net loss................................ $(2,834,337) $(1,475,579) $ (910,983)
=========== =========== ===========
Net loss per share -- basic and
diluted.............................. $ (2.46) $ (1.66) $ (1.04)
=========== =========== ===========
Weighted average common shares for net
loss per share computations -- basic
and diluted.......................... 1,154,214 887,689 875,424
</TABLE>

<TABLE>
<CAPTION>
AT SEPTEMBER 30,
---------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)................. $(1,337,009) $(3,213,584)$(1,602,704)
Total assets.............................. 3,130,128 508,516 212,831
Total shareholders' equity (deficit)...... 1,745,510 (2,807,902) (1,432,323)
</TABLE>

20
<PAGE> 22

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of
operations should be read in conjunction with the financial statements and the
notes to those statements and other financial information included elsewhere in
this prospectus.

OVERVIEW

We were incorporated in August 1992 and began distributing and selling
digital sheet music over the Internet in March 1997. From the date of
incorporation until March 1997, our operating activities consisted principally
of the following:

- creating our digital sheet music catalog;

- developing and patenting our technology;

- establishing international operations for the production of digital sheet
music;

- negotiating for the rights to distribute and sell sheet music;

- developing a corporate infrastructure for the management of data;

- producing digital sheet music;

- creating and distributing CD-ROM collections; and

- developing the Sunhawk.com web site.

In September 1996, we began selling CD-ROMs of the complete works of Scott
Joplin, and in July 1997, we began selling CD-ROMs of Handel's Messiah, both
containing digital sheet music in our Solero format. We launched our web site in
February 1997 and made our first sale of digital sheet music in March 1997. In
1998, we established our strategic alliances and entered into contracts with
Warner and EMIC for the right to sell and distribute selected portions of their
sheet music catalogs. From March 1997 through September 30, 1999, we sold
approximately 20,500 digital sheet music products and approximately 1,400
traditional printed sheet music products and CD-ROMs. Through September 30,
1999, substantially all of our sales have been derived from the sale of digital
or printed sheet music and CD-ROMs through our web site and from special
promotions and services for our strategic partners.

Sales are primarily derived from digital and printed sheet music offered
over the Internet and either downloaded directly from our web site or ordered
from our web site and delivered via regular mail or overnight courier. Sales are
net of any applicable discounts, and sales of traditional printed sheet music
include shipping and handling charges. A customer's account is settled by
directly charging his credit card. For digital sheet music downloaded over the
Internet, revenues are recognized upon execution of the order. Revenues from
sales of traditional printed sheet music are recognized upon shipment of the
printed sheet music from our offices in Seattle, Washington.

Cost of goods sold consists principally of the costs associated with
royalty payments, materials, amortization of the cost of producing digital
masters, shipping costs and credit card processing fees. In order to expand our
digital sheet music catalog, we entered into contracts with Warner and EMIC for
initial terms of ten and five years, respectively, from the date of execution.
These contracts provide us with access to selected portions of the music
catalogs of Warner and EMIC. Upon the sale of any digital title licensed from
Warner or EMIC, we are required to remit the appropriate royalty to the
respective

21
<PAGE> 23

publisher. Royalty payments range from 10% to 70% and are based on actual sales,
less credit card processing fees and shipping costs, if any. Inventory consists
of CD-ROMs and the cost of the printed sheet music books. Amortization of the
cost of producing digital masters relates to the digital sheet music and is
based on the shorter of estimated useful lives or the term of the distribution
contracts for the digital masters. Shipping costs and credit card processing
fees include costs related to the shipping of traditional printed sheet music
and the processing of credit card payments for printed and digital sheet music.
We expect that our cost of goods sold will increase significantly as we
accelerate our production of digital sheet music and enter into additional
strategic partnerships to further develop and expand our catalog of digital
sheet music and recorded music. Furthermore, amortization of the music catalog
distribution rights began in the quarter ended June 30, 1999, resulting in an
increase in cost of goods sold. The amortization of music catalog distribution
rights is approximately $38,000 per quarter through the remaining term of the
Warner contract, which ends December 31, 2007.

Selling expenses consist primarily of promotional and advertising
expenditures, including payroll and payroll-related expenses. We have incurred
minimal advertising expenditures to date as we have focused our efforts on
creating our digital sheet music catalog and securing strategic alliances and
the rights to digitize sheet music. We expense all advertising costs as
incurred, and we expect selling expenses to increase significantly as we seek to
increase the number of Solero Viewers downloaded from our web site or
distributed on CD-ROMs and enhanced CDs, drive customer traffic to our web site,
enhance our brand name awareness and otherwise promote the sale of our products.
General and administrative expenses consist primarily of management salaries and
expenses, insurance premiums, rent, telephone costs, travel expenses for general
business, legal and professional fees, staff salaries, other payroll expenses
and other related expenses for general corporate functions.

To date we have incurred and expect to continue to incur substantial costs
in order to:

- expand our sheet music catalog;

- produce, distribute and sell digital and printed sheet music;

- develop our technologies;

- acquire patents and other intellectual property rights;

- acquire the rights to sheet music;

- secure and maintain relationships with Warner and EMIC;

- further develop our operational infrastructure and web site;

- distribute and sell certain recorded music;

- increase the size of our staff;

- expand our sales and marketing efforts; and

- upgrade our software and hardware.

RESULTS OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 1999 COMPARED TO THE YEAR
ENDED SEPTEMBER 30, 1998

Sales

Sales for the year ended September 30, 1999, were $100,575 compared to
$27,263 for the year ended September 30, 1998. This increase in sales resulted
from entering into

22
<PAGE> 24

strategic alliances with Warner and EMIC, offering printed sheet music on our
web site and providing a wider selection of music titles in our Solero format.
We also benefitted from the overall increase in Internet shopping. In addition,
in order to increase customer traffic to our web site, we offered a variety of
promotional features on our web site and provided special services for our
strategic partners.

Cost of goods sold

Cost of goods sold for the year ended September 30, 1999 were $171,725
compared to $22,517 for the year ended September 30, 1998. The increase in cost
of goods sold was primarily due to commencement of the amortization of the music
catalog distribution rights during the third quarter of fiscal year 1999. The
increase was also due to an increase during the year ended September 30, 1999 in
the proportion of royalty-bearing sales to sales of public domain titles which
do not bear royalties. Additionally, amortization of digital sheet music masters
during the year ended September 30, 1999 increased as the number of digital
sheet music titles produced during that period increased. For the year ended
September 30, 1999, royalty payments accounted for $38,159, or 38% of sales.
Costs associated with the amortization of digital sheet music masters accounted
for $20,946, or 21% of sales and costs associated with the amortization of music
catalog distribution rights were $75,378, or 75% of sales. For the year ended
September 30, 1998, royalty payments accounted for $4,183, or 15% of sales, and
costs associated with the amortization of digital sheet music masters accounted
for $8,347, or 31% of sales.

Selling, general and administrative expenses

Selling expenses for the year ended September 30, 1999, were $547,694,
including advertising costs of $218,403, compared to $82,915, with advertising
costs of $36,005, for the year ended September 30, 1998. Selling expenses for
both periods consisted primarily of expenditures incurred in connection with
advertising, attending trade shows, establishing and maintaining our strategic
alliances with Warner and EMIC, expansion of our web site and payroll-related
expenses. In the third quarter of 1999, we initiated our strategic marketing
plan. As part of this plan, we experienced a significant increase in advertising
costs as part of the new strategic marketing plan. General and administrative
expenses for the year ended September 30, 1999 were $2,113,239 compared to
$1,270,956 for the year ended September 30, 1998. The increase was primarily due
to the expansion of our production capabilities to grow our digital sheet music
catalog, hiring key management personnel, increases in corporate facility
expenses necessary to operate the business, and the relocation of our office.

Interest expense on notes payable to shareholder

Interest expense for the year ended September 30, 1999, was $115,394
compared to $126,454 for the year ended September 30, 1998. On October 1, 1999,
the accrued interest amount of $113,928 was converted to a note payable to
shareholder and began accruing interest. The interest expense was attributable
to loans made to us by the Eller and McConney 1995 Family Living Trust, which
loans were converted into common stock on March 31, 1999.

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<PAGE> 25

RESULTS OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 1998 COMPARED TO THE YEAR
ENDED SEPTEMBER 30, 1997

Sales

Sales for the year ended September 30, 1998 were $27,263 compared to
$15,066 for the year ended September 30, 1997. Sales for the year ended
September 30, 1997 consisted of sales over the Internet of sheet music converted
into Solero format and CD-ROMs. The increase in sales was principally due to the
expansion of our music catalog and customer base, which resulted from the
inclusion of song titles from the Warner and EMIC catalogs and the addition of
traditional printed sheet music on our web site.

Cost of goods sold

Cost of goods sold for the year ended September 30, 1998 was $22,517
compared to $5,014 for the year ended September 30, 1997. The increase in cost
of goods sold was due to an increase in the proportion of royalty-bearing sales
to sales of public domain titles which do not bear royalties and an increase in
the amortization of digital sheet music masters due to the increase in the
number of digital sheet music titles from $1,804, or 12% of the sales for the
year ended September 30, 1997, to $8,347, or 31% of sales for the year ended
September 30, 1998.

Selling, general and administrative expenses

Selling expenses for the year ended September 30, 1998 were $82,915
compared to $65,021 for the year ended September 30, 1997. This increase was due
primarily to our attendance at more trade shows and general advertising. General
and administrative expenses for the year ended September 30, 1998 were
$1,270,956 compared to $789,437 for the year ended September 30, 1997. This
increase was primarily due to the expenses associated with operating a larger
office, improvements and upgrades to our facilities and software and hardware,
increases in the number of personnel necessary to support the growth of our
business and operations, and costs incurred in connection with adding production
and programming functions and enhancing the features and functionality of our
web site and related technology.

Interest expense on notes payable to shareholder

Interest expense for the year ended September 30, 1998 was $126,454
compared to $66,577 for the year ended September 30, 1997. This increase was due
to the additional debt we incurred in order to satisfy our operating costs and
expenses.

LIQUIDITY AND CAPITAL RESOURCES

We have financed our operations since inception primarily with funds
received from the sale of equity to and loans from the Eller and McConney 1995
Family Living Trust. As of September 30, 1999, we had cash of $18,300 and a
working capital deficiency of $1,337,009. We are currently financing our daily
operations primarily through a line of credit with a financial institution.

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<PAGE> 26

Net cash used in operating activities totaled $1,711,433 for the year ended
September 30, 1999 compared to $1,210,904 for the year ended September 30, 1998.
The increase for the year ended September 30, 1998, as compared to the prior
year, was primarily attributable to increases in advertising and production
staff.

Net cash used in investing activities was $511,490 for the year ended
September 30, 1999 compared to $267,533 for the year ended September 30, 1998.
The increase in cash used in investing activities for the year ended September
30, 1998, as compared to the prior year, was primarily for the acquisition of
property, equipment, digital sheet music masters, patents and trademarks.

Net cash provided by financing activities was $2,182,130 for the year ended
September 30, 1999 compared to $1,513,902 for the year ended September 30, 1998.
The increase in net cash for financing activities for the year ended September
30, 1999 was primarily derived from proceeds from the sale of common stock to
the Eller and McConney 1995 Family Living Trust in the aggregate amount of
$1,500,000 and proceeds from notes payable in the aggregate amount of $1,645,000
issued to the Eller and McConney 1995 Family Living Trust which, along with
other notes payable to the Eller and McConney 1995 Family Living Trust, were
converted into common stock at a conversion price of $13.31 per share on March
31, 1999. This was offset by an increase of $1,063,095 in deferred offering
costs in the year ended September 30, 1999 compared to the prior year. Net cash
provided by financing activities for the year ended September 30, 1998 was
primarily derived from proceeds from notes payable issued to the Eller and
McConney 1995 Family Living Trust in the aggregate amount of $1,413,902, which,
along with other loans by the Eller and McConney 1995 Family Living Trust, were
converted into common stock at $13.31 per share on March 31, 1999.

On December 22, 1999, Sunhawk.com entered into bridge financing loan
agreements, "the Loans" with third parties for loans in varying amounts totaling
$1,000,000. The Loans bear interest at a rate of 8.5% per annum and are due at
the earlier of the closing of the initial public offering or 8 months. The Loans
hold a second security on Sunhawk.com's assets as collateral. The Loans have a
50% warrant coverage, which equates to 1,050 warrants per $25,000 of loan
proceeds for a total of 42,000 warrants. The warrants may be adjusted for stock
splits, recapitalization, or reorganization of Sunhawk.com. The warrants will be
exercisable immediately upon the closing of the initial public offering but may
not be sold for six months following the closing date of the offering. The
underwriter will receive a ten percent commission to effect the financing.

We believe that the net proceeds from our prior financing, the debt to
equity conversion by the Eller and McConney 1995 Family Living Trust, and this
offering will provide us with the necessary cash proceeds to allow Sunhawk.com
to continue operations through at least January, 2001. We have no current
arrangements with respect to, or potential sources of, additional financing. If
we seek to raise additional capital, we cannot assure you that any future
financing will be available to us if needed, on commercially reasonable terms,
or at all. Any inability to obtain additional financing if needed may cause us
to be unable to continue as a going concern and it would be necessary to
consider other alternatives such as substantially curtailing our operations.

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<PAGE> 27

YEAR 2000 COMPLIANCE

Our software, products and information systems were developed using a
four-digit year code. As a result, we believe that our software, products and
information systems will function properly with respect to dates in the Year
2000 and thereafter. We have identified our critical vendors and are monitoring
their Year 2000 compliance programs. We are also in the process of establishing
our contingency plans, which we expect to substantially complete by December
1999. The cost of the Year 2000 monitoring of our critical vendors is not
expected to be material to our results of operations or financial position.

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<PAGE> 28

BUSINESS

OVERVIEW

We are a digital rights management and digital publishing company. We
provide DRM technology, Protected Digital Products preparation and enhancement
and a digital distribution infrastructure for the secure digital delivery of
Protected Digital Products over the Internet. Our DRM technology enables us to
securely distribute licensed copyright-protected digital content on behalf of
our strategic partners and, ultimately, on behalf of any owner of such material.
We prepare, enhance and distribute digital content through our website and to
customers who link to us from the websites of our strategic partners, Warner and
EMIC. We pay a royalty on each sale of Proprietary Digital Products content that
occurs on our website or through the websites of our strategic partners or
affiliates.

Our DRM technology, digital content preparation and enhancement and digital
distribution infrastructure provide the foundation for our operations. This
structure enables us to provide a full spectrum of value added services to
copyright owners and other publishers of Protected Digital Products for sale of
such items over the Internet.

INTERNET BACKGROUND

The Internet has emerged not only as the fastest growing communications
medium in history, but also as one of the most efficient distribution channels
for commerce. According to International Data Corporation, total worldwide
Internet commerce spending was $50.4 billion in 1998 and is estimated to grow to
$1.3 trillion in 2003.

While most Internet commerce to date has involved the delivery of physical
goods like books and compact discs ordered online, the Internet is also becoming
a leading distribution channel for Protected Digital Products. Today, most
content is in, or can be put into, digital form. This content includes music,
videos, games, books, software, publications, business information, and images.
The Internet can be used to disseminate this digital information efficiently to
broad audiences across geographic boundaries, and eliminates many of the
traditional costs associated with manufacturing, packaging, and distribution.
The growing number of households and businesses connected to the Internet, and
the widespread use of electronic devices other than personal computers, such as
set-top boxes, portable music players, mobile phones, and other hand-held
devices, all of which are becoming connected to the Internet, make the Internet
an ideal channel for the distribution of Protected Digital Products. In
addition, downloading digital content is becoming significantly easier with the
emergence and adoption of broadband technologies including digital subscriber
lines and cable modems, and enhanced compression technologies including MP3 for
music and MPEG-4 for video. The Internet also complements the existing channels
for distributing Protected Digital Products on physical media like compact discs
and DVDs.

TRADITIONAL PHYSICAL METHOD OF SALE AND DISTRIBUTION OF PROTECTED DIGITAL
PRODUCTS

Protected Digital Products are characterized by two elements: copyrighted
digital content and associated licensing or sale rights. Copyrighted products
have traditionally been distributed through a physical distribution chain. The
book text or sheet music is copied onto physical media (e.g. paper), inserted
into physical packaging (e.g. cardboard boxes) and physically distributed
through a multi-party distribution chain that eventually

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<PAGE> 29

delivers the goods to a retail store or a corporate reseller where they are
ultimately purchased by the customer.

LIMITATIONS OF THE TRADITIONAL PHYSICAL METHOD OF SALE AND DISTRIBUTION OF
PROTECTED DIGITAL PRODUCTS

Each participant in the physical distribution of Protected Digital Products
must manage independently the costs of manufacturing, warehousing and shipping
physical inventory. In addition, the physical distribution process imposes
significant time delays and geographic constraints on the delivery of products.
These numerous and complex inter-relationships pose challenges to the timely and
accurate sharing of information about customers, products, pricing, inventory
and order status. Further, limitations on warehousing, transportation systems
and retail shelf space restrict the number of products that publishers can make
available to customers and discourage distributors from carrying low volume
products.

SALE AND DISTRIBUTION OF PROTECTED DIGITAL PRODUCTS OVER THE INTERNET

The Internet provides an efficient platform for the electronic distribution
of Protected Digital Products. The electronic distribution of Protected Digital
Products can:

Reduce costs. Electronic distribution can reduce manufacturing, packaging,
inventory and shipping costs associated with physical media alternatives.
For sheet music and other Protected Digital Products distributed
electronically, businesses can reduce costs incurred managing physical
product and improve asset management through the electronic use reporting.
Secure electronic management of distribution and analysis of compliance
with licensing rights can also reduce illegal distribution and piracy.

Increase selling opportunities. Because electronic inventory requires no
physical shelf space, retailers, such as Sunhawk.com, can offer a virtually
unlimited number of products. Publishers, authors, artists and other
digital content owners can deliver new products and upgrades to retailers
or customers worldwide immediately upon their release. Retailers and
original equipment manufacturers can also expand distribution by providing
customers with encrypted digital content stored on computer hard drives,
DVDs or CDs and by allowing customers to complete the sales process through
the subsequent purchase of the Protected Digital Product over the Internet.

Facilitate real-time information exchange. Electronic distribution can
provide publishers and retailers access to sales information on a real time
basis.

NEED FOR THE SECURE SALE AND DISTRIBUTION OF PROTECTED DIGITAL PRODUCTS OVER THE
INTERNET AND SUNHAWK.COM'S SOLUTION

The characteristics that make the Internet ideal for distributing Protected
Digital Products also make it susceptible to piracy and misuse. Digital content,
if not properly protected and managed, can be easily copied without any
degradation in quality, altered and defaced, and distributed with the touch of a
button to a large number of recipients. As the number of users connected to the
Internet and the amount of digital content transmitted over the Internet
increases, these users and this information become more vulnerable to parties
who wish to interfere with the integrity of digital information anddigital
transactions. As a result, owners of Protected Digital Products, including text,

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<PAGE> 30

music and video publishers, are concerned about the ability to protect the
digital distribution of their content.

Recent events in the music industry provide the most visible example of an
industry facing the problem of protecting and managing its rights related to
digital information. MP3 technology (which compresses music with near-compact
disc quality) has rapidly become recognized as a major threat to the music
industry. With readily available MP3-enabled software, music can be copied from
compact discs into computers, compressed to under 10% of its former size,
redistributed, played, and even copied back onto a blank compact disc for
private use or pirated resale. Songs in the MP3 format can be moved from
personal computers to portable consumer devices and then played through
headphones or stereo speakers. Every compact disc published and distributed is
at risk of being copied. Already, many popular titles have been digitized in the
MP3 format and widely distributed throughout the Internet. As a result, the
Internet is the principal channel of direct MP3 distribution.

Sunhawk.com's solution to the unauthorized sale and distribution of protected
digital products over the Internet.

Our DRM distribution system uses encryption as the centerpiece for securely
protecting, distributing and managing digital data sold over the Internet.
Encryption is the process of changing data into a format that can be accessed
only by the intended recipient. The following is a description of how our
system, protected by a patent entitled "Encryption System with Transaction Coded
Decryption Key," works:

- A customer identifies himself/herself. In our system this is the
registration of the Solero(R) Viewer whereby each download Solero(R)
Viewer is assigned a unique identifier.

- A customer downloads data. When a customer requests data for download,
the data is uniquely encrypted for that customer's Solero(R) Viewer based
on the customer's unique identifier.

- A customer purchases data. When a customer purchases a license to use the
data, we also distribute the unique digital "key" necessary to unlock the
data.

- The data remains encrypted. The distributed file remains encrypted at all
times, and each time the digital content is used, it is decrypted
"on-the-fly" using the key provided to that Solero(R) Viewer system.

Since each digital file is uniquely encrypted and can only be decrypted by
the specific Solero(R) Viewer which was used to purchase the digital content,
unauthorized redistribution of the digital content is limited. Specifically,
digital rights are protected and managed at numerous levels:

- If a user passes a digital file to a friend, because the file remains
encrypted at all times and can only be decrypted by the unique "key"
provided upon purchase, the recipient cannot open the encrypted file and
therefore it cannot be used.

- If a user is able to identify the key and decrypt a file, and then
attempts to pass the decrypted file along to a friend, the friend's
Solero(R) Viewer will not read the decrypted file because only the
original user's key enabled Solero(R) Viewer works with that particular
decrypted file.

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<PAGE> 31

- If a user illegally passes a decrypted file along with a purchased key to
a friend the key identifies the user and can be used to track users who
illegally provide files to other users.

Our DRM distribution system includes a download-then-pay feature. The
download-then-pay feature allows a customer to first download the file onto his
PC and preview a portion of the product before paying for it. This feature
minimizes online transaction failures, such as customer cancellations and
download malfunctions. Upon receipt of the customer's credit card information,
the digital content is "unlocked" with the digital key described above and the
customer can then view, play and print the content.

Our DRM distribution system provides a total solution to the concerns of
publishers that their copyrighted content be protected when distributed over the
Internet. Further, this distribution system and other proprietary technology
provides publishers and content owners with a method for efficiently monitoring
the distribution of content so that royalties due and owed to the publisher are
paid in a timely manner.

STRATEGY

Our business strategy is to use our patented and operational DRM
distribution system to empower artists, authors, musicians, publishers and other
owners of Protected Digital Products to sell their digital content on the
Internet through us in a secure and efficient manner and to become a leading
secure digital distribution solution provider. The key elements of our strategy
are:

Extend the application of our DRM distribution system -- We will target
leading technology and device companies that can, on an OEM basis, incorporate
our DRM technology in computers, consumer electronics and portable devices,
including lap tops and music players, so that it is readily available for
applications over the Internet. We are in the process of establishing strategic
relationships with certain of these companies to achieve "Sunhawk Inside"
status.

Apply our DRM distribution system to other Protected Digital Products
markets -- To date, we have focused predominantly on the sheet music market
because we believe it is a finite, identifiable and manageable market for
Protected Digital Products. As electronic distribution of other digital goods
such as audio, video, books and music develops commercially, we will build our
presence in these markets. We believe the security, distribution and piracy
concerns of these markets are similar to those of the music industry, in
general, and the sheet music industry, in particular, and we believe that our
solution will allow us to address these needs successfully.

Expand strategic partnerships -- We will expand our strategy of providing
our DRM distribution system to artists, authors, musicians, publishers and
owners of Protected Digital Products to enable them to achieve greater control
over the distribution of their digital content and receive larger revenue
streams from the sale of their content. We are targeting relationships that will
establish our DRM distribution system initially in several specific markets,
including sheet music, audio, video and book publishing. We intend to leverage
our activities in the sheet music market to help encourage adoption and usage in
other markets, including establishing relationships with one or more artists.

Promote content preparation and enhancement services -- We have developed
interactive, animated and content rich sheet music on behalf of our strategic
partners Warner and EMIC. We intend to continue entering into direct
relationships with premier and emerging

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publishers, artists, musicians and other owners of digital content and
developing various features for this content that enhance both the content
owner's presentation and the user's experience. In addition, we will encourage
content providers to use our DRM distribution system for the secure delivery of
their content.

Provide electronic commerce services -- We enable our strategic partners to
sell their Protected Digital Products on our website and refer customers and
benefit from sales which originate from our strategic partners' websites. In
either case, our DRM distribution system securely manages all aspects of every
transaction.

By providing a combination of DRM technology, digital content preparation
and enhancement services and electronic commerce technology in multiple markets,
we will be able to offer a wide variety of services and technology to strategic
partners desiring to securely distribute Protected Digital Products over the
Internet.

PRODUCTS AND SERVICES

Sunhawk.com's sheet music catalog, DRM distribution system, preparation and
enhancement services and e-commerce technology

We have used sheet music as the initial product for the application of our
DRM distribution system, preparation and enhancement services and e-commerce
technology. In converting traditional printed sheet music into a digital
encrypted format that can be delivered over the Internet through our DRM
distribution system and then viewed, listened to, stored on and printed from a
customer's computer, we have changed the manner in which sheet music is
published, distributed and purchased. We are replacing traditional printed sheet
music with a playable, interactive digital format containing security and
educational features. Our products offer customers a highly efficient and more
complete and enjoyable musical experience while providing music publishers with
a means to limit the unauthorized redistribution of their digital sheet music
and efficiently monitor the royalties due upon purchase.

DIGITAL AND PRINTED SHEET MUSIC CATALOG Our web site provides customers
with easy access to our catalog of print and digital sheet music products. Our
current customers include musicians, composers, educators, recreational
musicians and other individuals interested in music. A customer can access our
store front at www.sunhawk.com or through referrals from the Warner and EMIC web
sites. Once a customer has entered our web site, he may search for a song by
composer, artist, title or keyword. In addition, our titles are arranged by
music type such as rock, classical, Christian and country, and a customer can
browse these pages based on his own music preferences and interests. Our site
also features "top ten" lists, new releases and editor's picks to further
stimulate customer interest in our products.

Our library of interactive digital sheet music in the Solero format
contains numerous song titles and represents many genres of classical and
popular music. Customers may also purchase traditional printed sheet music on
our web site by ordering the selected song titles online and having the sheet
music delivered in print form by mail or courier service.

DRM DISTRIBUTION SYSTEM. Our DRM distribution system delivers digital sheet
music over the Internet to individuals and businesses in a manner that is
user-friendly and protects the copyrighted content of composers, owners, authors
and publishers. Utilizing our proprietary technology, we are able to convert
scanned images of printed music into interactive digital music, which customers
are then able to download, play and purchase.

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Through our DRM distribution system, we are able to limit the unauthorized
distribution by the end-user of the music files and efficiently track the
royalty payments to be paid to the publisher and others. As a result, our
offerings are attractive both to end-user consumers as well as to composers,
authors, owners, publishers and other strategic partners.

PREPARATION AND ENHANCEMENT. Our preparation and enhancement services
provide publishers and customers with a content rich digital product. We have
the ability to digitize large amounts of content that, heretofore, has not been
converted into a digital format (e.g., out-of-print books, sheet music, old
manuscripts) and to add features to this content (e.g., playback, speed
variation, animation, audio, video) that create a unique and enhanced user
experience. We are currently digitizing significant portions of Warner's and
EMIC's sheet music catalogs and creating and selling an interactive sheet music
product that provides the customer with a variety of features not otherwise
available from the traditional paper product.

SUNHAWK SOFTWARE. Our Sunhawk software allows us to create a library of
digital content. The Solero software provides a digital format for the
conversion, creation, completion, storage and distribution of digital sheet
music as well as other digital content. This format can capture standard music
notation, audio, lyrics, guitar tablature and chords, big note formats and other
forms of digital content. The digital information is then stored in a
sophisticated relational database, which allows for advanced searches and
efficient distribution to end-users.

Converting. The Solero musical optical character recognition software
performs "musical OCR" by converting scanned images of printed music into
digital music. We have a proprietary technology for electronically storing the
musical symbols contained in a musical score, such as note heads and stems, in a
nonsequential format. This process, which is protected by a patent entitled
"Method and Apparatus for Nonsequential Storage of and Access to Digital Musical
Score and Performance Information," works as follows:

- The digital music technology assigns a different table for each type of
symbol, such as a table for stems.

- Each table contains cross-references that enable the musical score to be
quickly and accurately generated in visual or audio form.

- The nonsequential format facilitates forward and backward compatibility
of different versions of the format and produces files that are highly
compressible.

Creating. The Solero Editor is used to complete the conversion to digital
music initiated by the Solero OCR software and is also used by composers to
create and engrave, the process of typesetting music notation and original
music. The Solero Editor was specifically developed with the needs of music
publishers in mind in order to encourage its adoption as a standard for music
engraving. The Solero Editor enables us to finalize and refine our digital sheet
music.

Enjoying. The Solero Viewer is used to play and print the music and view
the animation of the Solero format files that have been created with the Solero
OCR software and the Solero Editor, and to play the Sunhawk Audio files.

SOLERO VIEWER. We provide our Solero Viewer free of charge on our web site.
Simply by clicking the "download" button on the Sunhawk.com web site, customers
can download our Solero Viewer, thus gaining the ability to download and view
our digital sheet music products. As of September 30, 1999, approximately 50,000
Solero Viewers had been downloaded and registered.

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Once a customer has selected a title that is available in our Solero
format, he can download the digitized music file onto his PC and listen to a
portion of the music before paying for the title, thus allowing him to preview
various selections before electing to purchase. In addition, our Solero Viewer
allows the customer, upon purchase, to view and print the music, or, when
listening to its audio playback, change its tempo, instruments or sing or play
his own musical instrument along with it. A screen shot of our Solero Viewer and
its various features is set forth below:

[SOLERO VIEWER PICTURE]

1) Open the music index
2) Purchase music
3) Print the score
4) Move from page to page
5) Select one or two page view
6) Visit Sunhawk.com
7) Change the instruments
8) Adjust the tempo
9) Start, stop or pause playback
10) Notes are highlighted on playback
11) Optional player piano view
12) View of the music index

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Sunhawk.com's additional Proprietary Digital Product

SUNHAWK AUDIO. Our e-commerce technology enables us to compress recorded
music files utilizing MP3 technology, encrypt these files and deliver them to
customers in our Sunhawk Audio format. These Sunhawk Audio files can be
downloaded from our web site and stored on the customer's PC. When Sunhawk Audio
files are delivered and downloaded, they can only be played using our Solero
Viewer and, by virtue of our encryption technology, can be accessed only by the
purchasing customer. In addition, as with digital sheet music, our DRM
distribution system facilitates the purchase of the music, limits any
unauthorized redistribution of this digital music and tracks royalty payments
owed to publishers and others.

ENHANCED CDS. We also enhance traditional audio CDs by including our Solero
Viewer on these CDs. By including our Solero Viewer on the CD, a record company
can include digital liner notes, graphics, text or any other information on the
enhanced CD. At the same time, the record company can include on the CD a
digital sheet music version of one of the songs featured on the CD as well as
links to our web site where the customer can download other digital sheet music
versions of the songs included on the audio CD. To date, EMIC has distributed
approximately 85,000 enhanced CDs containing our Solero Viewer.

DIGITAL BOOKS. We are in discussions with publishers and other owners of
books to acquire the rights to digitize and distribute this content as
Proprietary Digital Products through our DRM system.

THE SUNHAWK.COM WEBSITE

Our website offers a variety of benefits to publishers, customers, artists,
musicians and other owners of digital content. We update our website frequently
to address expressed needs of our strategic partner publishers, customers,
musicians and artists and continue to seek to improve the user experience. The
following table describes some of the features of our current website:

FEATURES FOR CUSTOMERS

<TABLE>
<CAPTION>
NAME OF FEATURE DESCRIPTION
--------------- -----------
<S> <C>
- - Search................... Quick search by artist/composer, title, keyword;
advance search by product type.
- - Browse................... Browse catalog by genre, artist, title,
publisher.
- - Free Software............ Free Solero Viewer, regular free songs.
- - New Releases............. Master list for current month and preceding
month; featured list.
- - Special Selections....... Cover art and description on home page and 8
genre pages, 10 selections on each page, updated
regularly.
- - Special Offers........... Regular and seasonal special offers for both
Solero and print products.
- - Collections.............. Solero and print collections with significant
savings over individual titles.
- - Help..................... Instructions on how to shop.
</TABLE>

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<TABLE>
<CAPTION>
NAME OF FEATURE DESCRIPTION
--------------- -----------
<S> <C>
- - Music Lovers Club........ Discount incentive plan and other benefits of
membership.
- - Sponsored Links.......... Links to our strategic partners and special
interest music pages.
</TABLE>

FEATURES FOR PUBLISHERS

<TABLE>
<CAPTION>
NAME OF FEATURE DESCRIPTION
--------------- -----------
<S> <C>
- - Tracking................. Publishers can track downloads and sales on
secure publisher-specific pages.
- - Cross-Links.............. Links to publisher sites.
- - Catalog.................. Separate listings and search by publisher
catalog.
- - Associates Program....... Publisher revenue opportunities by referring
customers from publisher website.
- - Cross-Promotions......... Opportunities for publishers to feature new music
and special promotions on the Sunhawk.com
website.
</TABLE>

SALES AND MARKETING

We employ several concurrent Internet and traditional marketing strategies
in an effort to drive traffic to our web site, increase customer interest in our
products and generate sales. As part of this multi-prong marketing approach, we
are expanding our program of establishing inbound links to our web site from
other third-party sites, such as portals, search engines, musical instrument
sites and related web sites. In addition, we have launched a related associates
program in which web site owners receive sales-based referral fees when they
link customers to us from their web sites. We also intend to augment our online
advertising efforts on industry-specific sites, such as music e-commerce,
publisher, artist and special interest music sites. Finally, we intend to
increase our use of one-to-one customer relationship marketing by continuing our
efforts of sending periodic informational and promotional emails to our current
Solero registrants and expanding the number of individuals in our target market
who receive such online materials.

In addition to driving traffic to our web site through the use of Internet
advertising, we intend to strengthen our brand name and increase customer appeal
through the use of traditional marketing methods. Moreover, we intend to utilize
numerous forms of advertising to promote the Sunhawk and Solero names and
products, including advertising in industry-specific publications, direct
mailing efforts to our target market, distributing CD-ROMs and enhanced audio
CDs containing our Solero Viewer, and participation in trade show events. These
techniques will enable us to target existing and prospective customers in a
cost-efficient manner.

We believe that many traditional retail music stores prefer to carry very
little sheet music in order to avoid the expense of maintaining inventory. We
intend to structure alliances with retail music stores that will allow the music
store to access our web site directly at the store location. We believe this
on-site capability will both generate sales and increase our exposure to our
target market. In addition, we see an opportunity for reciprocal advertising
efforts between our web site and traditional retailers whereby these retailers
agree to promote our web site to their customers in exchange for free or
low-cost

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advertising of their stores on our web site. We also intend to penetrate the
music education market by establishing relationships with private and public
schools and music institutions, thereby increasing our target customer base and
expanding our distribution channels.

INTELLECTUAL PROPERTY

Our success will depend in large part on our ability to protect our
proprietary software and other intellectual property. To protect our proprietary
rights, we rely generally on patent, copyright, trademark and trade secret laws
and generally require our employees, consultants, vendors and corporate business
partners to execute confidentiality agreements. Despite these protections, a
third party could, without authorization, copy or otherwise obtain and use our
products or technology to develop similar technology. Moreover, our agreements
with employees, consultants and others who participate in product and service
development activities may be breached, we may not have adequate remedies for
any breach, and our trade secrets may become known or independently developed by
competitors.

Patents. We have been issued two patents and have two patent applications
and one continuation application pending in the United States relating to our
product architecture and technology. Specifically, we have been issued a patent
relating to our e-commerce technology, "Encryption System with Transaction Coded
Decryption Key," Patent Number 5,889,860, for which a continuation has been
filed to pursue the broader applications of this invention, as well as, a patent
relating to our relational database storage of music information, "Method and
Apparatus for Nonsequential Storage of and Access to Digital Musical Score and
Performance Information," Patent Number 5,773,741. Two other patents relating to
music notation and music notation input, respectively, are pending.

Despite these efforts, our pending or future patent applications may not be
granted and our existing or future patents may be challenged, invalidated or
circumvented. Many of our current and potential competitors dedicate
substantially greater resources to protection and enforcement of intellectual
property rights, especially patents. If a blocking patent has been issued or is
issued in the future, we would need either to obtain a license or to design
around the patent. We may not be able to obtain a required license on acceptable
terms, if at all, or to design around the patent.

We attempt to avoid infringing known proprietary rights of third parties in
our product and service development efforts. We have not, however, conducted and
do not conduct comprehensive patent searches to determine whether the technology
used in our products infringes patents held by third parties. In addition, it is
difficult to proceed with certainty in a rapidly evolving technological
environment in which there may be numerous patent applications pending, many of
which are confidential when filed, with regard to similar technologies. If we
were to discover that our products violate third-party proprietary rights, we
may not be able to obtain licenses on commercially reasonable terms to continue
offering these products, and efforts to re-engineer these products may not be
successful. Any subsequent litigation could involve substantial expense and
possible damages awards.

Trademarks. Sunhawk(R), Sunhawk.com, the Sunhawk.com logo and Solero(R) are
our trademarks and registered trademarks. We intend to continue to pursue the
registration of our other trademarks in the United States and in other
countries. However, we cannot assure you that we can prevent all third-party use
of our trademarks. All other trademarks and trade names appearing in this
prospectus are the property of their respective holders.

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Copyrights and other proprietary rights. The underlying music we distribute
in digital and print form is protected by copyright law, unless the music has
become part of the public domain. Even if the underlying music has become part
of the public domain, we take steps to add copyrightable and other proprietary
elements in creating our Solero editions. There is no assurance that the steps
we take will be adequate to protect these rights or that we will be successful
in preventing the illegal duplication, distribution or other use of our
products. Our failure to adequately limit the unauthorized redistribution of our
music products could result in litigation or liability, which could harm our
business.

We generally procure licenses for the music distributed in digital and
print form from third-party licensors, including music publishers and composers,
on a non-exclusive basis. Some of our competitors offer, or could offer, the
same sheet music song titles that we have licensed from these music publishers.
In some cases we own the copyrights in the underlying music. The underlying
music may be owned by a single copyright owner or have multiple copyright
owners. We have different licensing arrangements with these parties depending on
what rights we acquire. These arrangements range from formal contracts to
informal agreements based on the nature of the subject matter. We often rely on
our positive working relationships with copyright owners to obtain licenses on
favorable terms. Any changes in the nature or terms of these arrangements,
including any requirement that we pay significant fees for the use of the
content, or if such arrangements are found to be unenforceable, could have a
negative impact on the availability of content and could harm our business.

We currently hold various Internet domain names relating to our brands,
including the "Sunhawk.com" domain name. Domain names generally are regulated by
Internet regulatory bodies. The manner in which domain names are regulated in
the United States and in foreign countries is subject to change, and any adverse
change in these regulations could harm our business.

The laws of some foreign countries do not protect our proprietary rights to
the same extent as do the laws of the United States, and effective patent,
copyright, trademark and trade secret protection may not be available in these
jurisdictions.

We rely on technology that we license from third parties, including
software that is integrated with internally developed software and used in our
products and services, to perform key functions. Third-party technology licenses
may not continue to be available to us on commercially reasonable terms. The
loss of any of these technologies could harm our business. Moreover, although we
are generally indemnified against claims that our third-party technology
infringes the proprietary rights of others, this indemnification may be
unavailable or inadequate for all types of intellectual property rights. These
claims, even if not meritorious, could result in the expenditure of significant
financial and managerial resources in addition to potential product service
redevelopment costs and delays, all of which could harm our business.

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COMPETITION

As an operator of a DRM distribution system for digital publishing and, in
particular, the distribution of digital sheet music over the Internet, we
currently or potentially compete with a variety of companies. With respect to
the market for DRM solutions, we believe competition is intense and rapidly
evolving. We expect competition to continue to increase both from existing
competitors and new market entrants. The DRM market is new and we are not aware
of any one competitor that has established a dominant position in the market.
However, it is possible that one or more companies could become a dominant,
competitive force in the future. Our primary competition currently comes from or
is anticipated to come from:

- companies offering secure digital distribution systems, including AT&T,
IBM, Liquid Audio, Microsoft, Preview Systems, Xerox and Intertrust
Technologies; and

- companies offering hardware-based content metering and copy protection
systems, including Sony, Wave Systems, and the 4C Entity, comprised of
IBM, Intel, Matsushita, and Toshiba.

In addition to these two categories, in the future, operating system
manufacturers are likely to attempt to develop or license digital rights
management solutions for inclusion in their operating systems.

Some of our competitors have longer operating histories and significantly
greater financial, technical, marketing, and other resources than we do. Many of
these companies have broader customer relationships that could be leveraged,
including relationships with many of our customers. These companies also have
more established customer support and professional services organizations than
we do. Nonetheless, we believe our DRM distribution system has operated in a
reliable and commercial manner over an extended period of time for Warner and
EMIC.

With respect to the market for the preparation, enhancement and secure
distribution of digital sheet music, we do not believe any of our competitors
have converted substantial portions of sheet music into an interactive digital
format that can be stored, encrypted, previewed, played and printed on a PC.
However, companies that are currently in similar or potentially competing
businesses include:

- Sheet Music Direct. SMD has developed an Internet-based,
purchase-on-demand delivery system for digital sheet music, but their
music is non-interactive and does not allow the user to play the music,
choose instruments or select tempo. The web site is affiliated with sheet
music distributors Hal Leonard Corporation and Music Sales Corporation.

- Infomusique S.A. Infomusique operates a web site that permits online
printing of non-interactive sheet music purchased from the web site as
well as the purchase of pre-printed sheet music by mail order.

- Net4Music. Net4Music has developed an Internet-based system that enables
publishers to digitize their sheet music from multiple sources into
Adobe's PDF format, and then distribute these scores through customized
orders.

- Coda Music Technology. Coda has announced that it has developed an alpha
version of a product that would allow online transmission and viewing of
musical scores.

- Musicnotes. Musicnotes has developed an Internet-based,
purchase-on-demand delivery system for digital sheet music. The music is
interactive with notes that light up on playback. The user also has the
ability to change tempo and select

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instruments. In the current version, files must be purchased before
download, and the program indicates that printing of the files must be
done at the time of download.

As we expand the Sunhawk Audio portion of our business as well as apply our
DRM distribution system and digital content preparation and enhancement services
to other digital content, we will face significantly increased competition and
different competitive challenges from other DRM and Internet content providers
than we currently experience.

We believe that we have established a variety of barriers to entry to
discourage others from entering into the business of online sale and
distribution of digital music over the Internet, including the following:

- We have developed proven technologies for encrypting and managing the
rights to digital content.

- This technology enables us to provide publishers with the comfort and
security that the digital music files will be used as authorized and that
they will receive the royalties for the purchase of the copyrighted
material.

- We have built a digital production process designed to create what we
believe is one of the largest interactive digital sheet music catalogs
available.

- We have developed and deployed a proven method of digital distribution
which has been adopted by Warner and EMIC, two important music
publishers.

- We have developed a process for creating additional features for, and
enhancing the customer's experience with a traditional media form (i.e.
sheet music) and believe we can extend this process into other digital
content.

- We have secured two patents to a portion of our technology and have
developed significant other proprietary software for the conversion and
distribution of digital content.

Despite these potential barriers to entry, many of our current and
potential competitors are well-established companies that have greater
financial, marketing, distribution, brand recognition and other resources than
we have, and there can be no assurance that we will be able to compete
effectively against these companies.

RESEARCH AND DEVELOPMENT

Since our inception, all of the time and financial resources dedicated to
research and development activities to develop our technology and digital sheet
music catalog have been expensed. Accordingly, we have not capitalized any
research and development expenditures. However, we estimate that we spent
approximately $220,000 in research and development activities during the last
three fiscal years. We cannot assure you that we will successfully develop new
technology or that competitors will not develop products, services or other
technology that are superior to ours.

GOVERNMENT REGULATION

As commerce on the Internet continues to evolve, federal, state, local or
foreign agencies may adopt laws and regulations that may impact our business,
including legislation and regulations relating to the distribution of music and
other content over the Internet and privacy and encryption issues. Moreover, the
applicability to the Internet of existing laws governing issues such as property
ownership, content, taxation, defamation and personal privacy is uncertain.
Further, the growing use of the Internet has burdened the existing
telecommunications infrastructure and has caused interruptions in telephone
service. Telephone carriers have petitioned the government to regulate the
Internet and

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impose usage fees on Internet service providers. The imposition of such laws and
regulations could expose us to significant liability. In addition, any such new
legislation or regulation or government enforcement of existing regulations may
limit the growth of the Internet, increase our cost of doing business or
increase our legal exposure, any of which could harm our business.

FACILITIES

We lease approximately 20,000 square feet of office space in Seattle,
Washington at an annual rent of approximately $327,000. The remaining lease term
expires on September 1, 2001. These facilities currently house our employees,
and we conduct general corporate and administrative matters, software
development, cataloging, scanning, quality control, music editing, web site
development, server operations and data warehousing from this location. We
believe that our current leasehold facilities are adequate for our intended use
for the foreseeable future.

EMPLOYEES

As of September 30, 1999, we had 47 full-time and 3 part-time employees.
None of our employees is represented by a labor union, and we believe that our
employee relations are good.

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MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table sets forth information about our directors, executive
officers and certain key employees.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Marlin Eller 46 Chairman of the board, chief executive
officer and president
Tricia Parks-Holbrook 44 Chief financial officer
Jill Ohara 43 Vice president of operations
Theodore Grabowski, Jr. 44 Vice president of legal and business affairs
Gary Martin 46 Vice president of publishing
Mary E. McConney, Ph.D 45 Treasurer
Fred Anton 52 Director
Luis F. Talavera 34 Director
Patricia Tangora 45 Director
</TABLE>

Marlin Eller is a co-founder of Sunhawk.com and is currently our chairman
of the board, chief executive officer and president, positions he has held from
time to time since our inception in 1992. From 1982 to 1995, Mr. Eller held the
position of manager, software development, at Microsoft Corporation. At
Microsoft, Mr. Eller was the development lead for GDI, the graphics subsystem of
Windows 1.0; development lead for Pen Windows; and the designer of handwriting
recognition software. While at Microsoft, he was named as the inventor on six
patents. He also led groups involved in video and data compression and
encryption and started the Microsoft online services. He received his bachelor
of arts, phi beta kappa and magna cum laude, in mathematics/physics from Whitman
College in 1974 and his master of science in mathematics from the University of
Washington in 1979. Mr. Eller also co-authored the book, Barbarians Led by Bill
Gates, published by Henry Holt, Inc. in 1998, and co-authored the article,
Multiple-Scattering Calculations of X-Ray Absorption Spectra, published by The
American Physical Society in 1995. He was a visiting instructor in computer
sciences at Williams College for two years prior to joining Microsoft. Mr. Eller
is married to Ms. McConney, our treasurer.

Tricia Parks-Holbrook joined Sunhawk.com in June 1999 as our chief
financial officer. From 1989 to 1998, Ms. Parks-Holbrook was with KPMG Peat
Marwick, LLP as senior manager and was responsible for supervising the planning
and performance of attest engagements with clients in a variety of industries.
From 1988 to 1989, she was with CP National Corporation in their external
reporting department. From 1979 to 1988, Ms. Parks-Holbrook worked with PGL
Corporation, a subsidiary of F.H. Tompkins, PLC, a public company in the United
Kingdom, serving the last three years in the capacity of controller. Ms.
Parks-Holbrook received her bachelor of science, cum laude, in business
administration with an accounting option from California State University at
Hayward, California in 1988. While there she received the San Francisco
Financial Executive Institutes Medallion Award. She is licensed and certified as
a public accountant in California (1991) and Washington (1998), and is a member
of the American Institute of Certified Public Accountants and the Washington
Society of Certified Public Accountants.

Jill Ohara joined Sunhawk.com in February 1998 as music production manager,
was promoted to vice president of production in April 1998 and has served as
vice president of operations since June 1999. From 1981 to 1997, Ms. Ohara
served with the U.S. National

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Academy of Sciences and was assigned to the Radiation Effects Research
Foundation, a multicultural research foundation in Japan, where she served as
chief of the information technology department. Ms. Ohara received outstanding
service awards from NAS in 1995 and 1996. In other management and research roles
at RERF, she engaged in hardware/ software support, statistical programming,
data analysis and support of a dosimetry system used in the setting of worldwide
radiation protection standards. From 1979 to 1981, she served as statistician in
the Jonsson Comprehensive Cancer Center at the University of California at Los
Angeles, performing extensive programming for database management and
statistical analysis. Ms. Ohara received her bachelor of arts, magna cum laude,
in mathematics from UCLA in 1977 and her master of science in biostatistics from
UCLA in 1979. She has published articles in Biometrics, Radiation Research and
the American Journal of Roentgenology.

Theodore Grabowski, Jr. joined Sunhawk.com as our general counsel in July
1998 and assumed the position of vice president of legal and business affairs in
June 1999. From 1989 to 1997, Mr. Grabowski worked for Mindscape, Inc., a
developer of entertainment and educational software, and held the position of
vice president and associate general counsel when he left the company. Prior to
that, he was in private practice with an emphasis on intellectual property and
licensing law. Mr. Grabowski received a bachelor of arts degree, magna cum
laude, in psychology and in philosophy, from California State University at
Northridge in 1979, and a juris doctorate from Loyola Marymount University of
Los Angeles in 1984.

Gary Martin joined Sunhawk.com in January 1995 as our program manager and
has served as our vice president of publishing since June 1999. Mr. Martin
developed our digital music production operations and set up the initial Russia
music production facility. He also created the engraving specifications for our
Solero Editor and the proprietary graphical font used in our Solero music
scores. Mr. Martin currently oversees the quality of music production, promotes
and maintains new contracts with music publishers and coordinates the
development of our marketing team. From 1993 to 1994, while serving as vice
president of MacArthur Publishers, Inc., a desktop publishing company, Mr.
Martin worked with the Ancient Biblical Manuscript Center in California and
typeset The Dead Sea Scrolls Catalog (Scholars Press, 1994), one of the most
comprehensive database compilations on this topic to date. Mr. Martin earned a
bachelor of arts, cum laude, in physics-astronomy from Whitman College in 1975.

Mary E. McConney, Ph.D is a co-founder of Sunhawk.com and is currently our
treasurer. From 1992 until June 1999, Ms. McConney served as our chief financial
officer, secretary and treasurer and as a director. In addition, from 1988 to
the present, Ms. McConney has served as the president of HiroSoft International
Corporation, a corporation she founded that writes statistical programs for
modeling different kinds of risk functions. From 1985 to 1988, Ms. McConney was
employed in the fields of applied statistics and database design and
implementation by NAS. From 1977 to 1985, she was employed in the fields of
applied statistics, database design and policy analysis by the University of
Washington and the University of Pennsylvania. Ms. McConney received her
bachelor of arts in physics and environmental studies from Whitman College in
1976. While at the University of Pennsylvania, she received two master degrees,
one in economics in 1979 and one in urban planning in 1980, and a Ph.D in
spatial economics in 1983. Ms. McConney's duties at HiroSoft do not interfere
with her duties at Sunhawk.com since she devotes substantially all of her time
to her duties at Sunhawk.com. She has published articles in the Annals of the
New York Academy of Sciences, Urban Studies, Circulation and the Journal of the
American College of Cardiology.

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Fred Anton has been a director of Sunhawk.com since July 1998. Since March
1998, Mr. Anton has served as the president/chief operating officer of Warner
Bros. Publications, where he also served as the chief financial officer/chief
operating officer from September 1996 to March 1998. From 1994 to September
1996, Mr. Anton served as vice president of finance for the Warner Music Group
and subsequently was made executive vice president/chief operating officer for
Warner Vision Entertainment. From July 1990 to 1994, he served as the vice
president international finance and administration at Time Warner, Inc. Mr.
Anton has a bachelor of arts degree in economics from Clark University in
Worcester, Massachusetts and a master of business administration degree from
Washington University in St. Louis, Missouri. He is a member of the American
Institute of Certified Public Accountants and the New York State Society of
Certified Public Accountants. He is also on the board of directors of the Music
Publisher's Association.

Luis F. Talavera has been a director of Sunhawk.com since June 1999. Since
1998, Mr. Talavera has overseen seed-capital funding by N.S.L., an international
venture capital fund specializing in computer and communications ventures. Mr.
Talavera also currently serves as a board member for various technology
companies, including Global Product Channel, a Norwegian e-commerce solutions
company, and Poseidon, a French developer of swimming pool safety technology.
From 1988 to 1997, Mr. Talavera was employed by Microsoft Corporation, most
recently as a director of research and development. At Microsoft, Mr. Talavera
was one of the first members of the Pen Windows computing team and the co-author
of Microsoft's first handwriting recognition software. As a director of research
and development for Softimage, a subsidiary of Microsoft, from 1995 to 1997, Mr.
Talavera was responsible for the development and launch of Softimage IDS, the
first non-linear professional post-production system. Mr. Talavera received a
bachelor of science degree in computer engineering from the University of
California at San Diego in 1987. He also holds two patents that have been issued
and three patents that are pending.

Patricia Tangora has been a director of Sunhawk.com since June 1999. Ms.
Tangora is currently a member of Dethman & Tangora, LLC, an environmental
consulting firm. From 1989 to 1998, Ms. Tangora was a senior project manager at
R.W. Beck, Inc., a national consulting and engineering firm. She was made an
owner in that firm in 1997. At R.W. Beck, her work included conducting due
diligence reviews for project financing, negotiating long-term, multi-million
dollar service contracts and advising clients on development and environmental
compliance strategies for major projects. She was also responsible for
approximately $1 million in annual sales and participated in strategic planning
and marketing efforts within her area of practice. Ms. Tangora received her
bachelor of arts degree in english from Whitman College in 1976 and a bachelor
of science degree in civil/environmental engineering from the University of
Washington in 1979.

We currently have authorized five directors; however, one board seat
currently remains vacant. We are in the process of identifying a fifth director.
Both Ms. Tangora and Mr. Talavera are independent directors. We intend to
maintain at least two independent directors in the future. Directors are elected
by the shareholders at each annual meeting of shareholders to serve until the
next annual meeting of shareholders or until their successors are duly elected
and qualified.

AUDIT COMMITTEE AND COMPENSATION COMMITTEE

Our board of directors has established an audit committee and a
compensation committee. The audit committee, which currently consists of
Patricia Tangora and Luis Talavera, is responsible for reviewing our internal
accounting procedures and consulting

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with and reviewing the services provided by our independent auditors. The
compensation committee, which currently consists of Fred Anton and Patricia
Tangora, is responsible for reviewing and recommending to our board of directors
the compensation and benefits of all officers of Sunhawk.com and establishing
and reviewing general policies relating to the compensation and benefits of our
employees.

EXECUTIVE COMPENSATION AND OTHER INFORMATION

Directors' compensation. Effective as of the date of the completion of this
offering, as an inducement to joining our board of directors, each of our
non-employee directors has been granted, at the initial public offering price,
an immediately exercisable option under our 1996 Stock Option Plan to purchase
2,500 shares of common stock. In addition, we pay each non-employee director
$2,500 per board meeting attended. All directors are entitled to reimbursement
for expenses incurred in traveling to and from meetings of our board of
directors.

Executive officers' compensation. During the fiscal year ended September
30, 1999, and prior to the closing this offering, Mr. Eller was not paid a
salary. Brent Mills, our former chief executive officer, received a salary of
$55,000 during the fiscal year ended September 30, 1998, and a salary of $23,163
during the fiscal year ended September 30, 1999 prior to the termination of his
employment with us in March 1999. None of our other executive officers received
total annual salary and bonus during the fiscal year ended September 30, 1999 in
excess of $100,000. To date, we have not granted Mr. Eller any stock options or
other equity-based compensation. Effective October 1, 1999, Mr. Eller entered
into an employment agreement with us with an initial three-year term. This
employment agreement entitles Mr. Eller to an annual salary of $95,000 for the
first year, which will be increased by 10% during each of the two subsequent
years. Mr. Eller is also entitled to receive options under our 1996 Stock Option
Plan to purchase 30,000 shares of our common stock vesting over five years at an
exercise price equal to the initial public offering price and an annual bonus to
be determined by our compensation committee on an annual basis.

KEY MAN INSURANCE

We have obtained a $1,000,000 key man life insurance policy on the life of
Mr. Eller.

STOCK OPTION PLAN

Our board of directors adopted our 1996 Stock Option Plan in June 1996, and
our shareholders approved it in June 1996. There are currently 17,932 options to
purchase common stock outstanding as of September 30, 1999. We have reserved a
total of 303,526 shares of common stock for issuance under the plan, of which
266,210 shares were available for issuance as of September 30, 1999. The plan
provides for the granting to employees, including officers and directors, of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986 and for the granting to employees, consultants and
nonemployee directors of nonstatutory stock options. Unless terminated earlier,
the plan will terminate in June 2006. Generally, options granted under the plan
vest over five years and have a term of ten years and are nontransferable.

After this offering, the plan will be administered by our compensation
committee, known as the "administrator." The administrator determines the terms
of options granted under the plan, including the number of shares subject to an
option, the vesting terms, the exercise price, and the term and exercisability
of options. The exercise price of all

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incentive stock options granted under the plan generally must be at least equal
to the fair market value of our common stock on the date of grant, and the
exercise price of non-statutory options granted under the plan must be at least
equal to 85% of the fair market value of our common stock on the date of grant.
Payment of the purchase price of options may be made in cash or other
consideration as determined by the administrator. If an optionee would have the
right in any calendar year to exercise for the first time incentive stock
options for shares having an aggregate fair market value in excess of $100,000,
determined for each share as of the date the option to purchase the shares was
granted, any such excess options shall be treated as nonstatutory stock options.

In the event that we are acquired by another company, we expect that awards
outstanding under the plan will be assumed or equivalent awards substituted by
our acquiror. If an acquiror did not agree to assume or substitute awards, the
vesting of outstanding options will accelerate prior to consummation of the
transaction.

The board of directors has the authority to amend or terminate the plan as
long as such action does not materially and adversely affect any outstanding
options and provided that shareholder approval for any amendments to the plan
shall be obtained to the extent required by applicable law.

RELATED-PARTY TRANSACTIONS

On March 31, 1999, the Eller and McConney 1995 Family Living Trust
converted $3,568,406 of debt owed to it by Sunhawk.com into 267,968 shares of
our common stock at a price per share of $13.31. On this same date, the Eller
and McConney 1995 Family Living Trust forgave $1,000,000 of long-term debt owed
to it by Sunhawk.com and purchased an additional 112,659 shares of our common
stock for $1,500,000, at a price per share of $13.31.

We currently receive for review approximately 4,100 pages of digital sheet
music per month from Avtograf, a Russian joint stock company in which Eller
McConney LLC holds a 94% ownership interest, under a five-year agreement, and
accrue and expect to pay to Eller McConney LLC $7.00 per page upon acceptance.
Mr. Eller and Ms. McConney are the sole members of Eller McConney LLC. This
sheet music is sold to us under an agreement between us and Eller McConney LLC,
which has an agreement with Avtograf to receive production services for digital
sheet music. Upon the closing of this offering, we will enter into an assignment
and assumption agreement with Avtograf, Eller McConney LLC and an independent
Russian production company ("Newco") which will require that Eller McConney LLC
assign to us all of its rights to receive from Avtograf its services for the
production of digital sheet music in exchange for a promissory note payable to
Eller McConney LLC in the amount of $1,000,000. Payment of the principal and
interest is based on the number of pages received and accepted from Newco over a
period of five years and is to be paid quarterly in arrears with a maximum
principal payment of $200,000 per annum. The note will bear interest at the
applicable federal short-term rate, which was approximately 5% at September 30,
1999. In connection with this agreement, Avtograf will transfer to Newco its
obligation to provide production services for digital sheet music. Thereafter,
Newco will be obligated to provide production services for digital sheet music
to us at a rate of a minimum of 4,500 pages per month totaling 270,000 pages
over a period of five years, for a cost of $3.70 per page, at no additional cost
to us. The note payable of $1,000,000 to Eller McConney LLC is expected to be
accounted for as a prepayment for digital sheet music production services from
Newco over a period of ten years, with recourse to Eller McConney LLC in the
event of non-performance. Neither

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Eller McConney LLC, Mr. Eller, Ms. McConney nor Sunhawk.com will have an
interest in the new Russian production company.

On May 18, 1998, we entered into a distribution agreement with Warner. As
part of the consideration paid by us for the rights granted to us under the
distribution agreement, we agreed to issue 99,073 shares of our common stock to
Warner, contingent upon the occurrence of an initial public offering or the sale
of a specified percentage of our common stock. Consequently, on March 31, 1999,
as a result of the sale of shares of our common stock to the Eller McConney 1995
Family Living Trust, we issued Warner 99,073 shares of our common stock.
Further, under the terms of the Warner distribution agreement, Mr. Eller and
Brent Mills, one of our former directors, officers and employees, agreed to vote
any shares of our common stock held or controlled by them for the election of an
individual to be designated by Warner to our board of directors. This right will
continue for so long as Warner owns shares representing at least 2% of our
outstanding common stock. Warner has currently designated Fred Anton to serve as
its representative on our board of directors. A breach by either party may be
cured within thirty days, or ten days if the breach relates to the payment of
money or the rendition of accounting, of notice from the other party.

Each of the above transactions was entered into on terms that were as
favorable to us and our affiliates as those that were generally available from
unaffiliated parties. At the time these transactions were entered into, our
board lacked sufficient independent directors to ratify them. We currently have
two independent directors. There are no affiliated transactions presently
planned or contemplated. Should there be any future material affiliated
transactions or loans, these transactions will be made or entered into on terms
that are no less favorable to us than those that can be obtained from
unaffiliated third parties. In addition, all affiliated transactions and any
forgiveness of loans must be approved by a majority of our independent directors
who do not have an interest in the transaction and who have access, at our
expense, to our independent legal counsel.

46
<PAGE> 48

PRINCIPAL SHAREHOLDERS

The following table sets forth information regarding the beneficial
ownership of our common stock as of the date of this prospectus, including
options that are immediately exercisable or exercisable within 60 days of the
date of this prospectus under our stock option plan, and as adjusted to reflect
this offering, by:

- each person or group that we know owns 5% or more of our common stock;

- each of the named executive officers and each of our directors; and

- our executive officers and directors as a group.

Unless otherwise noted, we believe that each of the shareholders has sole
investment and voting power with respect to the common stock indicated, except
to the extent shared by spouses under applicable law. Mr. Eller, our chairman of
the board, chief executive officer and president, and Ms. McConney, our
treasurer, are the trustees of the Eller and McConney Family 1995 Living Trust
and, as such, retain voting and investment power with respect to these shares.

<TABLE>
<CAPTION>
BENEFICIALLY OWNED SHARES
-------------------------------------
PRIOR TO OFFERING AFTER OFFERING
------------------- --------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT PERCENT
------------------------------------ --------- ------- --------------
<S> <C> <C> <C>
Eller and McConney 1995 Family Living Trust........ 1,024,284 73.1% 36.6%
c/o Sunhawk.com Corporation
223 Taylor Avenue North, Suite 200
Seattle, Washington 98109
Marlin Eller....................................... 1,024,284 73.1% 36.6%
Mary E. McConney, Ph.D............................. 1,024,284 73.1% 36.6%
Brent R. Mills(1).................................. 266,658 19.0% 9.5%
7720 39th Avenue N.E.
Seattle, Washington 98105
Judy E. McOstrich(2)............................... 266,658 19.0% 9.5%
7720 39th Avenue N.E.
Seattle, Washington 98105
Warner Bros. Publications U.S., Inc. .............. 99,073 7.1% 3.5%
15800 N.W. 48th Avenue
P.O. Box 4340
Miami, Florida 33014
Fred Anton(3)...................................... 99,073 7.1% 3.5%
Gary Martin(4)..................................... 2,384 * *
Patricia Tangora................................... -- -- --
Luis F. Talavera................................... -- -- --
Jill Ohara......................................... -- -- --
Theodore Grabowski, Jr. ........................... -- -- --
All directors and executive officers as a group (8
persons)......................................... 1,125,741 80.3% 40.2%
</TABLE>

- -------------------------
* Less than 1%

(1) Includes 36,780 shares of common stock held by Mr. Mills' spouse, Judy E.
McOstrich.

(2) Includes 229,878 shares of common stock held by Ms. McOstrich's spouse,
Brent R. Mills.

(3) Includes 99,073 shares of our common stock owned by Warner, of which Mr.
Anton is president and chief operating officer. Mr. Anton disclaims
beneficial ownership of these shares.

(4) Represents options to purchase shares of common stock issued under our stock
option plan that are immediately exercisable.

47
<PAGE> 49

LOCK-UP AGREEMENT

Under the underwriting agreement between us and the underwriters of this
offering, shareholders who hold shares of our common stock issued prior to the
date of the closing or have been granted options to purchase shares of our
common stock prior to such date will not be able to, directly or indirectly,
offer, sell, announce an intention to sell, contract to sell, pledge,
hypothecate, grant any option to purchase or otherwise dispose of any shares of
our common stock or any securities convertible into or exchangeable or
exercisable for shares of our common stock for a period of 24 months following
the closing of this offering without the prior written consent of the
representative.

48
<PAGE> 50

DESCRIPTION OF SECURITIES

The following summary description of our capital stock is not intended to
be complete and is subject to and qualified in its entirety by reference to our
amended and restated articles of incorporation and our amended and restated
bylaws, copies of each of which are filed as exhibits to the registration
statement of which this prospectus forms a part.

On March 30, 1999 our board of directors approved a transaction to issue
one share for every 6.007 shares of our common stock then outstanding, giving
effect to a 1-for-6.007 reverse stock split effective March 31, 1999.

On December 23, 1999, Sunhawk.com's Board of Directors approved a
transaction to give 0.716 shares for every 1 share of common stock thereby
giving effect to a 1.397 to 1 reverse stock split effective December 23, 1999.
All outstanding common and common equivalent shares and per-share amount in the
accompanying financial statements and related notes to the financial statement
have been retroactively adjusted to give effect to the reverse stock split.

GENERAL

Immediately prior to the date of this prospectus, we had authorized capital
stock consisting of 10,000,000 shares of common stock, no par value, of which
1,399,380 shares were issued and outstanding. Immediately prior to the date of
this prospectus, there were six holders of record of our common stock.

We have reserved 303,526 shares of common stock for issuance under our 1996
Stock Option Plan, of which 266,210 shares were available for issuance as of
September 30, 1999.

COMMON STOCK

Holders of outstanding shares of our common stock are entitled to one vote
per share on all matters submitted to a vote of our shareholders. Except as may
be required by applicable law, holders of outstanding shares of our common stock
vote together as a single class. Holders of a majority of the outstanding shares
of our common stock constitute a quorum at any meeting of our shareholders, and
the vote by the holders of a majority of our common stock is required to effect
specific fundamental corporate changes, including liquidation, merger or sale of
substantially all of our assets.

Holders of our common stock are entitled to receive dividends if and when
declared by our board of directors out of funds legally available for that
purpose. In the event of our liquidation, dissolution or winding up, holders of
our common stock are entitled to share ratably in all assets remaining after
payment of liabilities. Holders of our common stock have no preemptive rights or
other rights to subscribe for unissued or treasury shares or securities
convertible into or exercisable or exchangeable for shares of our common stock.
The outstanding shares of common stock are, and the shares of common stock being
offered in this prospectus when issued will be, duly authorized and validly
issued and, upon payment of the purchase price, fully paid and nonassessable.

SELLING SHAREHOLDERS' WARRANTS

In December, we issued warrants to certain persons who have provided bridge
financing loans of $1,000,000 to us. The warrants, which are exercisable upon
the closing of this offering, entitle the holders to purchase an aggregate of
42,000 shares of common

49
<PAGE> 51

stock at an exercise price equal to the initial public offering price per share
for five years. The shares underlying the warrants are being registered in this
offering and may not be resold prior to six months after the close of this
offering.

REGISTRATION RIGHTS

Under the terms of our distribution agreement with Warner, Warner is
entitled to have its shares registered by us under the Securities Act.
Specifically, following the expiration of the "lock-up" period to be agreed to
by existing shareholders, Warner may request that we register all or a part of
its shares. Warner may make this request no more than twice. Under the terms of
Warner's agreement, we will bear all registration expenses other than
underwriting discounts and commissions in connection with any such registration.

ANTI-TAKEOVER LAW

Washington law contains provisions which could make our acquisition by a
third party more difficult. These provisions, summarized below, are expected to
discourage coercive takeover practices and inadequate takeover bids and to
encourage persons seeking to acquire control of Sunhawk.com to negotiate with us
first.

Chapter 19 of the Washington Business Corporation Act generally prohibits a
"target corporation" from engaging in a "significant business transaction" with
an "acquiring person," which is defined as a person or group of persons that
beneficially owns or acquires 10% or more of the voting securities of the target
corporation, for a period of five years after such acquisition, unless the
"significant business transaction" or the acquisition of shares is approved by a
majority of the members of the target corporation's board of directors prior to
the time of acquisition. Prohibited "significant business transactions" include,
among other things:

- a merger or consolidation with, disposition of assets to or issuance or
redemption of stock to or from the acquiring person;

- termination of 5% or more of the employees of the target corporation as a
result of the acquiring person's acquisition of 10% or more of the
shares; or

- allowing the acquiring person to receive any disproportionate benefits as
a shareholder.

After the five-year period, a "significant business transaction" may occur, as
long as it complies with the "fair price" provisions of the statute. A
corporation may not "opt out" of this statute.

50
<PAGE> 52

DIRECTOR AND OFFICER LIABILITY AND INDEMNIFICATION

Our amended and restated articles of incorporation currently limit the
liability of directors to the fullest extent permitted by the Washington
Business Corporation Act. Consequently, subject to the Washington Business
Corporation Act, no director will be personally liable to us or our shareholders
for monetary damages resulting from his or her conduct as a director of
Sunhawk.com, except liability for:

- acts or omissions involving intentional misconduct or knowing violations
of law;

- unlawful distributions; or

- transactions from which the director personally receives a benefit in
money, property or services to which the director is not legally
entitled.

Our amended and restated bylaws provide for indemnification of our directors,
officers, employees and agents to the maximum extent permitted by Washington
law. Our directors and officers also may be indemnified against liability they
may incur for serving in those capacities pursuant to our liability insurance
policy maintained for such purpose.

To the extent the provisions of our corporate governance documents provide
for indemnification of directors or officers for liabilities arising under the
Securities Act those provisions are, in the opinion or the Securities and
Exchange Commission, against public policy as expressed in the Securities Act
and are therefore unenforceable.

51
<PAGE> 53

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common
stock. Sales of a substantial amount of common stock in the public market, or
the perception that such sales may occur, could adversely affect the market
price of the common stock prevailing from time to time in the public market and
could impair our ability to raise additional capital through the sale of our
equity securities in the future.

Upon completion of this offering, there will be 2,799,380 shares of our
common stock outstanding, 3,009,380 shares if the underwriters' over-allotment
option is exercised in full, consisting of 1,400,000 shares of common stock
being offered in this prospectus, or 1,610,000 shares if the underwriters'
over-allotment option is exercised in full, and 1,399,380 restricted shares of
common stock. In addition, we have reserved 303,526 shares of common stock for
issuance under our 1996 Stock Option Plan, of which 17,932 shares were subject
to outstanding options and 266,210 shares were available for future issuance as
of September 30, 1999.

The shares of common stock currently being offered will be freely tradable
without restriction or further registration under the Securities Act by persons
other than our affiliates. The restricted shares will be freely tradable if
subsequently registered under the Securities Act or to the extent permitted by
Rules 144 or 701 or some other exemption from registration under the Securities
Act, subject to the "lock-up" provisions to be agreed to by existing
shareholders.

In general, under Rule 144 as currently in effect, if one year has elapsed
since the date of acquisition of restricted shares from Sunhawk.com or an
affiliate of Sunhawk.com, the holder is entitled to sell, in the public market,
within any three-month period, that number of shares of common stock which does
not exceed the greater of 1% of the total number of then outstanding shares of
common stock or the average weekly trading volume of shares of common stock
during the four calendar weeks preceding the date on which notice of the sale is
filed with the Securities and Exchange Commission. Sales under Rule 144 are also
subject to requirements as to the manner of sale, notice and availability of
current public information about Sunhawk.com. If two years have elapsed, a
holder, other than an affiliate of Sunhawk.com, is entitled to sell restricted
shares in the public market under Rule 144(k) without regard to the volume
limitations, manner of sale requirements, public information requirements or
notice requirements.

Rule 701, as currently in effect, permits our employees, officers,
directors or consultants who purchased shares under a written compensatory plan
or contract to resell such shares in reliance upon Rule 144 but without
compliance with specific restrictions. Rule 701 provides that affiliates may
sell their Rule 701 shares under Rule 144 without complying with the holding
period requirement and that non-affiliates may sell such shares in reliance on
Rule 144 without complying with the holding period, public information, volume
limitation or notice provisions of Rule 144.

Of the restricted shares, 8,829 shares of common stock will be eligible for
sale under Rule 144 under the Securities Act 90 days after the date of this
prospectus, subject to the lock-up provisions described below.

Under the underwriting agreement between us and the underwriters of this
offering, shareholders who hold shares of our common stock issued prior to the
date of the closing of this offering or have been granted options to purchase
shares of our common stock prior to such date will not be able to, directly or
indirectly, offer, sell, announce an intention to

52
<PAGE> 54

sell, contract to sell, pledge, hypothecate, grant any option to purchase or
otherwise dispose of any shares of our common stock or any securities
convertible into or exchangeable or exercisable for shares of our common stock
for a period of 24 months following the closing of this offering without the
prior written consent of the representative. The shares of common stock
currently being offered will not be subject to this "lock-up" provision and will
be freely tradable. We have also agreed not to file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to any of these shares during this 24-month "lock-up" period. Additionally, in
accordance with the policy statements promulgated by the North American
Securities Administrators Association, Inc., three of our shareholders have
agreed to enter into a promotional share escrow agreement. Under this agreement,
these shareholders agree, with respect to an aggregate of 910,315 shares of our
common stock owned by them prior to this offering, not to transfer or dispose of
all of those shares for the first two years, and 2 1/2% of those shares for each
of years three and four, after the completion of this offering.

53
<PAGE> 55

UNDERWRITING

Subject to the terms and conditions set forth in the underwriting agreement
among us and the underwriters named below, each of the underwriters has
separately agreed to purchase from us, and we have agreed to sell to the
underwriters, the number of shares of common stock set forth below opposite each
underwriter's name, at the initial public offering price per share less the
underwriting discounts and commissions set forth on the cover page of this
prospectus.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
------------ ---------
<S> <C>
Joseph Gunnar & Co., L.L.C..................................
---------
________________________ ..................................
---------
Total....................................................... 1,400,000
=========
</TABLE>

The underwriting agreement sets forth the obligations of the underwriters
to pay for and accept delivery of the shares and provides that the underwriters
will purchase all of the shares, if any of the shares are purchased.

Joseph Gunnar & Co., L.L.C., as representative of the underwriters, has
advised us that the underwriters initially propose to offer the shares of common
stock directly to the public at the initial public offering price per share set
forth on the cover page of this prospectus and to selected dealers at such price
less a concession not in excess of $ per share. The underwriters may allow,
and these dealers may reallow, a concession not in excess of $ per share to
other dealers. After this offering, the public offering price, concession and
re-allowance may be changed.

We have granted to the underwriters an option, exercisable during the
30-day period after the date of this prospectus, to purchase up to an aggregate
of 210,000 additional shares of common stock at the initial public offering
price per share less the underwriting discounts and commissions set forth on the
cover page of this prospectus. The underwriters may exercise this option only to
cover over-allotments, if any, made in connection with the sale of the shares of
common stock offered in this prospectus. To the extent that the underwriters
exercise this option, each underwriter will be obligated to purchase the number
of additional shares of common stock proportionate to the underwriter's initial
commitment reflected in the preceding table.

We have agreed to pay the representative a non-accountable expense
allowance equal to 2% of the gross proceeds of this offering, of which $25,000
has already been paid, to cover the underwriting costs and due diligence
expenses relating to this offering. We have also agreed to pay the reasonable
expenses of underwriters counsel.

We have agreed to permit the representative to have an observer attend
meetings of our board of directors for a period of three years from the
effective date of the registration statement of which this prospectus forms a
part. The representative's observer will be reimbursed for all out-of-pocket
expenses incurred in connection with the observer's attendance at meetings of
our board of directors and will receive cash compensation equal to the cash
compensation payable by us to our outside directors for attendance at meetings
of our board of directors, provided, however, that the per meeting fees payable
to the representative's observer shall not be less than $1,500 and that there
shall be a minimum of four meetings per year. The representative shall also
receive the same coverage under

54
<PAGE> 56

our directors and officers insurance policy that is extended to our officers and
directors. Additionally, the representative has been retained as our investment
banking advisor for a 18-month period commencing upon the closing of this
offering, and, for such services, we have agreed to pay the representative a fee
of $4,000 per month.

In connection with this offering, we have agreed to sell warrants to the
representative for a nominal price. The representative's warrants entitle the
representative to purchase 140,000 shares, excluding shares subject to the
underwriters' over-allotment option. The shares issuable upon exercise of the
representative's warrants will be in all respects identical to the shares
offered to you. The representative's warrants will be limited to a term of five
years from the date of this prospectus and will be exercisable immediately, at a
per share exercise price equal to 120% of the initial public offering price per
share set forth on the cover page of this prospectus. The representative's
warrants may not be sold, assigned, transferred, pledged or hypothecated except
to the underwriters' officers and employees. In accordance with the terms of the
underwriting agreement, we are registering the shares issuable upon exercise of
the representative's warrants under the registration statement of which this
prospectus forms a part, and we have agreed to use our best efforts to permit
the public sale of the shares issued or issuable upon exercise of the
representative's warrants and to include all or part of the shares underlying
the representative's warrants in future registration statements at our expense.
For the term of the representative's warrants, the holders of the warrants are
given the opportunity to profit from a rise in the market price of the common
stock, which may result in a dilution of the interest of other shareholders. As
a result, we may find it more difficult to raise additional equity capital if it
should be needed for our business while the representative's warrants are
outstanding. The holders of the representative's warrants might be expected to
exercise them at a time when we would, in all likelihood, be able to obtain
additional equity capital on terms more favorable to us than those provided by
the representative's warrants. Any profit realized on the sale of the shares
issuable upon the exercise of the representative's warrants may be deemed
additional underwriting compensation.

The representative has been granted a right of first refusal to act as our
underwriter, placement agent or investment banker in connection with any
financings, acquisitions or dispositions occurring within three years after the
closing, for fees customarily paid in connection with such activities. If the
representative declines to act in such capacity and the transaction is not
closed within a fixed period or is modified, such transaction would again have
to be submitted to the representative.

We and the underwriters have agreed to indemnify each other against, or to
contribute to losses arising out of, untrue statements or omissions of material
facts contained in this prospectus and the registration statement of which it is
a part in connection with this offering. We and the underwriters are each aware
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.

The representative, on behalf of the underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act.
Over-allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase shares so long as the stabilizing bids do not exceed a specified
maximum. Syndicate covering transactions involve purchases of shares in the open
market after the distribution has been completed in order to cover syndicate
short positions. Penalty bids permit the representative, on behalf of the
underwriters, to reclaim

55
<PAGE> 57

a selling concession from a syndicate member when the shares originally sold by
the syndicate member are purchased in a syndicate covering transaction to cover
syndicate short positions. Such over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids may cause the price of the
common stock to be higher than it would otherwise be in the absence of such
transactions. These transactions may be effected on the Nasdaq SmallCap(R)
Market or the Pacific Stock Exchange and, if commenced, may be discontinued at
any time.

Application has been made for quotation of the common stock on the Nasdaq
SmallCap(R) Market under the symbol "SNHK," and listing on the Pacific Stock
Exchange under the symbol "SHA."

Prior to this offering, there has been no public trading market for our
common stock. The public offering price of the shares of common stock offered in
this prospectus will be determined by negotiation between us and the
representative. Factors to be considered in determining the initial public
offering price, in addition to prevailing market conditions, include the history
of and prospects for the industry in which we operate, an assessment of our
management, our prospects, our capital structure and such other factors as are
deemed relevant. We cannot assure you that an active trading market will develop
and be sustained upon the completion of this offering or that the market price
of our common stock will not decline below the initial public offering price.

The stock market and Internet stocks specifically have experienced
significant price and volume fluctuations that have affected the market price of
common stock for many companies engaged in industries similar to that of
Sunhawk.com. In addition, sheet music purchases have traditionally been subject
to seasonality fluctuations. We expect our future quarterly operating results to
experience significant fluctuations caused by a variety of factors, many of
which are outside of our control. Period-to-period comparisons of our results of
operations may not be meaningful and should not be relied upon as an indication
of our future performance. As a result, investors purchasing in this offering
may not be able to resell their shares at or above the initial public offering
price and could lose all of their investment.

The preceding description includes a summary of the principal terms of the
underwriting agreement and the representative's warrant agreement and does not
purport to be complete. The underwriting agreement and the representative's
warrant agreement are filed as exhibits to the registration statement of which
this prospectus forms a part and should be referenced for the complete contents
of these documents. Each statement is qualified in all respects by reference to
these documents.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is Continental Stock
Transfer and Trust Company.

LEGAL MATTERS

The validity of the shares of common stock being sold in this offering will
be passed on for us by The Otto Law Group, PLLC of Seattle, Washington.
Effective upon the closing of this offering, The Otto Law Group has been granted
options under our 1996 Stock Option Plan to purchase 7,500 shares of our common
stock vesting over five years at

56
<PAGE> 58

an exercise price equal to the initial public offering price per share of the
shares offered in this prospectus.

Legal matters related to this offering will be passed on for the
underwriters by Ruskin, Moscou, Evans & Faltischek, PC and Kelley Drye & Warren
LLP of New York, New York.

EXPERTS

The financial statements of Sunhawk.com at September 30, 1999 and 1998, and
for each of the three years in the period ended September 30, 1999, appearing in
this prospectus and registration statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon [(which contain
an explanatory paragraph describing conditions that raise substantial doubt
about the Sunhawk.com's ability to continue as a going concern as described in
Note 1 to the financial statements)] appearing elsewhere in this prospectus, and
are included in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2 under the Securities Act with respect to the common stock
being sold in this offering. This prospectus, filed as a part of such
registration statement, does not contain all the information set forth in the
registration statement, portions of which have been omitted in accordance with
the rules and regulations of the Securities and Exchange Commission. For further
information with respect to us and our common stock we are offering, reference
is made to the registration statement. Statements made in this prospectus as to
the contents of any contract or document are not necessarily complete and, in
each instance, reference is made to the copy of such contract or other document
filed as an exhibit to the registration statement and each such statement is
qualified in its entirety by such reference. The registration statement,
including exhibits and schedules, may be inspected without charge at the Public
Reference Room of the Securities and Exchange Commission, Judiciary Plaza
Building, 450 Fifth Street, N.W., Washington D.C. 20549, and the regional
offices of the Securities and Exchange Commission at Seven World Trade Center,
Suite 1300, New York, New York 10048, and at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material may be
obtained at prescribed rates from the Public Reference Room of the Securities
and Exchange Commission at Room 1024, Judiciary Plaza Building, 450 Fifth
Street, N.W. Washington D.C. 20549. You may obtain information regarding the
Public Reference Room by calling the Securities and Exchange Commission at
1-800-SEC-0330. The Securities and Exchange Commission maintains a web site that
contains registration statements, reports, proxy statements and other
information regarding registrants (including Sunhawk.com) that file
electronically with the Securities and Exchange Commission. The address of the
Securities and Exchange Commission's web site is www.sec.gov.

As a result of this offering, we will be subject to the informational
requirements of the Exchange Act. So long as we are subject to the informational
reporting requirements of the Exchange Act, we will provide our shareholders
with annual reports containing audited financial statements and interim
quarterly reports containing unaudited financial information.

57
<PAGE> 59

SUNHAWK.COM CORPORATION

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Ernst and Young LLP, independent auditors......... F-2
Audited financial statements

Balance sheets as of September 30, 1999 and 1998............ F-3
Statements of operations for the years ended September 30,
1999, 1998, and 1997...................................... F-4
Statements of shareholders' equity (deficit) for the years
ended September 30, 1999, 1998, and 1997.................. F-5
Statements of cash flows for the years ended September 30,
1999, 1998, and 1997...................................... F-6
Notes to financial statements............................... F-7
</TABLE>

F-1
<PAGE> 60

REPORT OF ERNST AND YOUNG LLP, INDEPENDENT AUDITORS

Board of Directors
Sunhawk.com Corporation

We have audited the accompanying balance sheets of Sunhawk.com Corporation as of
September 30, 1999 and 1998, and the related statements of operations,
shareholders' equity (deficit), and cash flows for each of the three years in
the period ended September 30, 1999. These financial statements are the
responsibility of Sunhawk.com Corporation management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sunhawk.com Corporation as of
September 30, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1999, in
conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that
Sunhawk.com will continue as a going concern. As more fully described in Note 1,
Sunhawk.com incurred recurring net losses, has both a working capital deficiency
and an accumulated deficit at September 30, 1999. These conditions raise
substantial doubt about Sunhawk.com's ability to continue as a going concern.
Management's plans in regard to these matters are described in Note 1. The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.

Seattle, Washington

November 24, 1999 except for Note 7 (second section, second paragraph)

and Note 13 which is as of December 23, 1999

F-2
<PAGE> 61

SUNHAWK.COM CORPORATION

BALANCE SHEETS

<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash.................................................. $ 18,300 $ 59,093
Accounts receivable................................... 7,649 --
CD-ROMs and printed sheet music....................... 17,091 16,507
Prepaid expense....................................... 4,569 27,234
----------- -----------
Total current assets.......................... 47,609 102,834
----------- -----------

Property and equipment, net............................. 253,840 195,880

Other assets:
Digital sheet music masters (net of accumulated
amortization of $31,097 and $10,151 in 1999 and
1998, respectively)................................ 396,154 69,868
Patent and trademarks, at cost (net of accumulated
amortization of $9,228 and $3,926, in 1999 and
1998, respectively)................................ 98,456 77,240
Music catalog distribution rights (net of accumulated
amortization of $75,378 in 1999)................... 1,243,740 --
Deferred offering costs............................... 1,063,095 --
Deposits.............................................. 27,234 62,694
----------- -----------
Total other assets............................ 2,828,679 209,802
----------- -----------
Total assets.................................. $ 3,130,128 $ 508,516
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Line of credit........................................ $ 100,000 $ --
Accounts payable and accrued expenses................. 709,267 92,162
Payable to Eller McConney LLC......................... 169,957 10,850
Notes payable to shareholder.......................... 290,000 2,927,367
Accrued interest to shareholder....................... 115,394 286,039
----------- -----------
Total current liabilities..................... 1,384,618 3,316,418
----------- -----------
Shareholders' equity (deficit):
Common stock, no par value:
Authorized shares -- 10,000,000
Outstanding shares -- 1,399,380 and 891,559 at
September 30, 1999 and 1998, respectively........ 3,345,219 197,221
Accumulated deficit................................... (1,599,709) (3,005,123)
----------- -----------
Total shareholders' equity
(deficit)................................... 1,745,510 (2,807,902)
----------- -----------
Total liabilities and shareholders' equity
(deficit)................................... $ 3,130,128 $ 508,516
=========== ===========
</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE> 62

SUNHAWK.COM CORPORATION

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------
1999 1998 1997
----------- ----------- ---------
<S> <C> <C> <C>
Sales................................... 100,575 $ 27,263 $ 15,066
Cost of goods sold:
Royalties, materials, shipping, and
credit card processing fees........ 75,401 14,170 3,210
Amortization of digital sheet music
and music catalog distribution
rights............................. 96,324 8,347 1,804
----------- ----------- ---------
171,725 22,517 5,014
----------- ----------- ---------
Gross profit (loss)..................... (71,150) 4,746 10,052
Selling, general and administrative..... 2,660,933 1,353,871 854,458
----------- ----------- ---------
Loss from operations.................... (2,732,083) (1,349,125) (844,406)
Interest income......................... 13,140 -- --
Interest expense on notes payable to
shareholders.......................... (115,394) (126,454) (66,577)
----------- ----------- ---------
Net loss................................ (2,834,337) $(1,475,579) $(910,983)
=========== =========== =========
Net loss per share:
Basic and diluted..................... (2.46) $ (1.66) $ (1.04)
=========== =========== =========
Weighted average common shares for net
loss per share computations:
Basic and diluted.................. 1,154,214 887,689 875,424
=========== =========== =========
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE> 63

SUNHAWK.COM CORPORATION

STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
TOTAL
COMMON STOCK SHAREHOLDERS'
----------------------- ACCUMULATED EQUITY
SHARES AMOUNT DEFICIT (DEFICIT)
--------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Balance, October 1, 1996....... 643,657 $ 901 $ (618,561) $ (617,660)
Exercise of common stock
options................... 9,195 -- -- --
Sale of common stock......... 229,878 4 -- 4
Compensation related to sale
of common stock........... -- 96,316 -- 96,316
Net loss..................... -- -- (910,983) (910,983)
--------- ---------- ----------- -----------
Balance, September 30, 1997.... 882,730 97,221 (1,529,544) (1,432,323)
Sale of common stock......... 8,829 100,000 -- 100,000
Net loss..................... -- -- (1,475,579) (1,475,579)
--------- ---------- ----------- -----------
Balance, September 30, 1998.... 891,559 197,221 (3,005,123) (2,807,902)
Exercise of common stock
options................... 28,121 225 -- 225
Issuance of common stock to
acquire music catalog
distribution rights....... 99,073 1,319,118 -- 1,319,118
Sale of common stock......... 112,659 1,500,000 -- 1,500,000
Conversion of notes payable
to shareholders, including
accrued interest of
$286,039.................. 267,968 3,568,406 -- 3,568,406
Forgiveness of note payable
to shareholder............ -- 1,000,000 -- 1,000,000
Recapitalization of
accumulated deficit due to
termination of "S"
corporation status
effective April 1, 1999... -- (4,239,751) 4,239,751 --
Net loss..................... -- -- (2,834,337) (2,834,337)
--------- ---------- ----------- -----------
Balance, September 30, 1999.... 1,399,380 $3,345,219 $(1,599,709) $ 1,745,510
========= ========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE> 64

SUNHAWK.COM CORPORATION

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------
1999 1998 1997
------------ ----------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................................................. $ (2,834,337) $(1,475,579) $(910,983)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation............................................. 79,780 79,683 42,944
Amortization............................................. 101,626 11,182 2,895
Stock compensation....................................... -- -- 96,316
Loss on disposal of property and equipment............... -- 4,061 16,270
Changes in operating assets and liabilities:
Increase in accounts receivable........................ (7,649)
Decrease (increase) in CD-ROMs and printed sheet
music................................................ (584) 2,315 (2,424)
Decrease (increase) in prepaid expense................. 22,665 (27,234) --
Decrease (increase) in deposits........................ 35,460 (62,694) --
Increase in accounts payable and accrued expenses...... 617,105 47,960 33,940
Increase in payable to Eller McConney LLC.............. 159,107 10,850 --
Increase (decrease) in accrued interest on notes
payable to shareholder............................... 115,394 198,552 66,577
------------ ----------- ---------
Net cash used in operating activities.................... (1,711,433) (1,210,904) (654,465)
INVESTING ACTIVITIES
Purchases of property and equipment...................... (137,740) (153,014) (97,216)
Purchase of digital sheet music masters.................. (347,232) (60,830) (19,189)
Cost of patents and trademarks........................... (26,518) (53,689) (27,301)
------------ ----------- ---------
Net cash used in investing activities.................... (511,490) (267,533) (143,706)
FINANCING ACTIVITIES
Proceeds from line of credit............................. 100,000
Proceeds from notes payable issued to shareholders....... 1,645,000 1,413,902 794,377
Increase in deferred offering costs...................... (1,063,095) -- --
Proceeds from sale of common stock to existing
shareholders........................................... 1,500,000 100,000 4
Exercise of options...................................... 225
------------ ----------- ---------
Net cash provided by financing activities................ 2,182,130 1,513,902 794,381
------------ ----------- ---------
Net increase (decrease) in cash.......................... (40,793) 35,465 (3,790)
Cash at beginning of period.............................. 59,093 23,628 27,418
------------ ----------- ---------
Cash at end of period.................................... $ 18,300 $ 59,093 $ 23,628
============ =========== =========
NON-CASH SUPPLEMENTARY DISCLOSURE
Issuance of common stock in conjunction with the
acquisition of music catalog distribution rights....... $ 1,319,118 $ -- $ --
Conversion of notes payable and accrued interest to
shareholders of common stock........................... (3,568,406) -- --
Forgiveness of notes payable to shareholder.............. (1,000,000)
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE> 65

SUNHAWK.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND LIQUIDITY

BUSINESS AND ORGANIZATION

Sunhawk.com Corporation (Sunhawk.com) was incorporated in the state of
Washington on August 20, 1992. Sunhawk.com sells interactive digital sheet music
in its proprietary format, traditional printed sheet music, and CD-ROMs on their
internet retail site at www.sunhawk.com. Sunhawk.com's internally developed
proprietary technology, Solero(R), allows customers to view, play, print and
store the encrypted digital sheet music files.

NAME CHANGE

On June 10, 1999, Sunhawk.com's Articles of Incorporation were amended to change
the company's name to Sunhawk.com Corporation.

LIQUIDITY

At September 30, 1999, Sunhawk.com had cash of $18,300 available to fund
operations. For the year ended September 30, 1999, Sunhawk.com recorded a net
loss of $2,834,337, had a working capital deficiency of $1,337,009 and an
accumulated deficit of $1,599,709. These factors raise substantial doubt about
Sunhawk.com's ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

Since inception, Sunhawk.com has financed its operations and capital
expenditures through sales of common stock, borrowings from the Eller and
McConney 1995 Family Living Trust, and more recently through borrowing from the
line of credit of $500,000 of which $100,000 was outstanding at September 30,
1999. Sunhawk.com's business will require additional equity or debt financing to
continue operations. Sunhawk.com has entered into bridge-financing loan
agreements "the Loans" to allow it to operate until it is able to raise
additional equity financing through an initial public offering or a private
equity investor. Currently, Sunhawk.com plans to file a registration statement
to obtain such funding, or part thereof, during the second quarter of fiscal
year 2000.

Management believes that proceeds from the loans, initial public offering,
and/or a private equity investor will provide Sunhawk.com with the necessary
cash proceeds to allow Sunhawk.com to have the wherewithal to continue
operations through at least September 30, 2000. However, if Sunhawk.com is not
otherwise able to raise sufficient capital in order to continue its current
operations, it may be unable to meet its obligations as they become due. As a
result, Sunhawk.com might be unable to continue as a going concern, and it would
then be necessary to consider other alternatives, such as substantially
curtailing its operations.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost less accumulated depreciation.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the related assets, which range from three to seven years.

F-7
<PAGE> 66
SUNHAWK.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

CD-ROMS

CD-ROMs are stated at the lower of cost, determined by the first-in, first-out
method, or market.

DIGITAL SHEET MUSIC MASTERS

Digital sheet music masters are valued at cost less accumulated amortization.
Digital sheet music masters are amortized over the shorter of (1) the estimated
useful life of the music category, or (2) the estimated useful life of the
related electronic medium, or (3) the remaining term of the underlying music
licensing agreement (for licensed music). The amortization periods generally
range from five to fifteen years. Amortization expense is included in cost of
goods sold and was $20,946, $8,347 and $1,804 for the years ended September 30,
1999, 1998, and 1997, respectively. Sunhawk.com periodically evaluates the
digital sheet music masters for impairment.

PATENTS AND TRADEMARKS

Patents and trademarks are stated at cost less accumulated amortization.
Amortization is calculated on a straight-line basis over fifteen years.
Amortization expense is included in selling, general and administrative expense
and was $5,302, $2,835, and $1,091 for the years ended September 30, 1999, 1998
and 1997, respectively. Sunhawk.com periodically evaluates these intangible
assets for impairment.

MUSIC CATALOG DISTRIBUTION RIGHTS

Music Catalog Distribution rights are stated at cost less accumulated
amortization. Amortization is calculated on a straight-line basis over the
remaining term of the underlying distribution agreement, approximately eight and
one-half years. Amortization expense is included in the cost of goods sold and
was approximately $75,400 for the year ended September 30, 1999. Sunhawk.com
periodically evaluates these music catalog distribution rights for impairment.

DEFERRED OFFERING COSTS

Deferred offering costs represent costs incurred in conjunction with
Sunhawk.com's proposed initial public offering. Deferred offering costs will be
applied against new proceeds, if successful, or expensed if the initial public
offering is unsuccessful.

REVENUE RECOGNITION

Revenue from product sales is recorded when products are purchased and
downloaded by customers via Sunhawk.com's web site or shipped via regular mail
or overnight courier. Shipping charges are separately charged to the customers
and are included in sales.

ROYALTIES

In conjunction with the various distribution agreements, Sunhawk.com is required
to pay royalties ranging from 10% to 70% on gross receipts less credit card
processing fees to the

F-8
<PAGE> 67
SUNHAWK.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

respective music publishers on each digital music title sold. Total royalty
expense incurred during the years ended September 30, 1999, 1998 and 1997
amounted to $38,159, $4,183 and $0, respectively, and is recorded in cost of
goods sold.

ADVERTISING COSTS

Advertising costs, including promotional materials, are expensed as incurred.
Costs for placement of advertising are prepaid and charged to expense at the
time the advertisement is initially publicized. Advertising expense totaled
$218,043, $36,005, and $21,557 during the years ended September 30, 1999, 1998
and 1997, respectively.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are expensed as incurred. Research and
development expenses totaled $0, $93,529, and $126,017 during the years ended
September 30, 1999, 1998, and 1997, respectively.

INCOME TAXES

The shareholders of Sunhawk.com changed their election from an "S" corporation
to a "C" corporation effective April 1, 1999. As an "S" corporation, any tax
liability or benefit is passed directly to the shareholders. Accordingly,
Sunhawk.com did not realize any tax provision or benefit prior to April 1, 1999.

Subsequent to March 31, 1999, Sunhawk.com accounts for income taxes under the
liability method. Under the liability method, deferred tax assets and
liabilities are determined based on differences between financial reporting and
tax bases of assets and liabilities and are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to be
recovered. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amounts expected to be realized.

STOCK-BASED COMPENSATION

Sunhawk.com accounts for stock-based compensation using the intrinsic value
method and provides pro forma footnote disclosure of the impact of the fair
value method.

NET LOSS PER SHARE

Basic and diluted net loss per share is computed based on the weighted-average
number of common shares outstanding during each period.

USE OF ESTIMATES

These financial statements have been prepared in conformity with generally
accepted accounting principles, which require management to make estimates and
assumptions that impact amounts reported in the financial statements and
accompanying notes. Actual results could differ from those amounts reported and
disclosed herein.

F-9
<PAGE> 68
SUNHAWK.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
Computers and equipment................................ $ 398,728 $ 302,574
Furniture.............................................. 55,051 39,295
Software............................................... 41,446 15,649
Other.................................................. 1,854 1,820
--------- ---------
497,079 359,338
Less accumulated depreciation.......................... (243,239) (163,458)
--------- ---------
$ 253,840 $ 195,880
========= =========
</TABLE>

4. DISTRIBUTION AGREEMENTS

In May and June 1998, Sunhawk.com entered into distribution agreements with
Warner Bros. Publications U.S. Inc. (Warner) and EMI Christian Music Publishing
(EMIC), respectively. These agreements provide Sunhawk.com with nonexclusive
rights to distribute selected digital sheet music from the respective music
catalogs maintained by Warner and EMIC. The terms of the agreements are
approximately ten and five years, respectively.

The Warner agreement provides Sunhawk.com with nonexclusive right to distribute
selected digital sheet music from the Warner music catalog. As a nonforfeitable
part of the consideration and as inducement to enter into the agreement,
Sunhawk.com agreed to issue 99,073 shares of its common stock to Warner,
contingent upon either the closing of a firmly underwritten public offering or
the private sale or other disposition of 15% or more of Sunhawk.com's common
stock then authorized and outstanding.

As a result of the sale of common stock to certain founders on March 31, 1999,
the contingency was removed, the shares were issued to Warner and became fully
vested and non-forfeitable under the terms of the agreement. The value of the
shares of common stock issued to Warner were measured at the fair value of
common stock on issuance date and capitalized as a long-term asset, which will
be amortized over the remaining life of the distribution agreement.

5. NOTES PAYABLE TO SHAREHOLDER

On September 30, 1998, Sunhawk.com entered into two demand note payable
agreements with a shareholder. On March 31, 1999, the shareholder exchanged
these notes, including interest accrued through September 30, 1998 for 267,968
shares of common stock. Interest accrued during the six-month period ended March
31, 1999 of $113,928 was not converted to shares of common stock and is included
in accrued interest on notes payable to shareholder. On August 17, 1999 and
September 21, 1999, Sunhawk.com entered into note payable agreements in the
amount of $80,000 and $210,000, respectively, with a shareholder. The notes are
due on February 1, 2000, and carry interest at the federal applicable short-term
rate, or approximately 5%.

F-10
<PAGE> 69
SUNHAWK.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6. LINE-OF-CREDIT

On September 29, 1999, Sunhawk.com entered into a $500,000 line-of-credit
agreement with a financial institution. As of September 30, 1999, borrowings
totaling $100,000 were outstanding. Borrowings under the line of credit bear
interest at 5.64% and are due on demand, or if no demand is made, on December
29, 1999. On November 1, 1999, the line-of-credit was increased to $1,000,000
with an applicable interest rate of 6.35%. The line-of-credit remains due on
demand, or if no demand is made, on April 29, 2000. A shareholder of Sunhawk.com
has guaranteed payment on the line-of-credit.

7. SHAREHOLDERS' EQUITY

In October 1996, in conjunction with the sale of 229,878 shares of common stock
to an employee for past services for $4.00, Sunhawk.com recorded compensation
expense of $96,316. The compensation expense represented the difference between
the value of consideration paid for the common stock and the fair market value
at the date of issuance.

On March 30, 1999, the Board of Directors of Sunhawk.com approved the sale of
380,627 shares of common stock to the Eller and McConney 1995 Family Living
Trust in exchange for cash of $1,500,000 and the exchange of outstanding notes
payable to a shareholder of $3,568,406 outstanding at March 31, 1999,
($2,213,406 of notes payable to shareholder, including accrued interest, as of
September 30, 1998 plus additional borrowings provided to Sunhawk.com during the
six months ended March 31, 1999 of $1,355,000). In addition, on March 31, 1999,
the Eller and McConney 1995 Family Living Trust contributed capital of
$1,000,000 by forgiving the remaining notes payable to shareholder outstanding
at that date.

On August 25, 1999, Sunhawk.com's Board of Directors and its shareholders
amended its Articles of Incorporation to decrease the total number of shares of
common stock which Sunhawk.com has the authority to issue from 20,000,000 to
10,000,000.

REVERSE STOCK SPLIT

On March 30, 1999, Sunhawk.com's Board of Directors approved a transaction to
give one share for every 6.007 shares of common stock, thereby giving effect to
a 1-for-6.007 reverse stock split effective March 31, 1999.

On December 23, 1999, Sunhawk.com's Board of Directors approved a transaction to
give 0.716 shares for every 1 share of common stock, thereby giving effect to a
1.397 to 1 reverse stock split effective December 23, 1999. All outstanding
common and common equivalent shares and per-share amounts in the accompanying
financial statements and related notes to the financial statements have been
retroactively adjusted to give effect to the reverse stock split.

All outstanding common and common equivalent shares and per-share amounts in the
accompanying financial statements and related notes to the financial statements
have been retroactively adjusted to give effect to the reverse stock split.

F-11
<PAGE> 70
SUNHAWK.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

8. STOCK OPTIONS

STOCK OPTION PLAN

Under the terms of Sunhawk.com's 1996 Stock Option Plan, the Board of Directors
(the "Board") was authorized to issue 513,374 shares of common stock through
incentive and nonqualified stock options to any former, current, or future
employees, officers, directors, agents or consultants, including members of
technical advisory boards, and any independent contractors of Sunhawk.com. On
March 30, 1999, the Board amended the 1996 Stock Option Plan to reduce the
number of shares the Board is authorized to issue to 303,526. Generally, stock
compensation, if any, is measured as the difference between the exercise price
of a stock option and the fair market value of Sunhawk.com's stock at the date
of grant, which is then amortized over the related service period. Options are
granted with exercise prices equal to the fair market value of the common stock
on the date of the grant, as determined by Sunhawk.com's Board. Options vest
over a five-year period and expire ten years from the date of grant.

A summary of the status of Sunhawk.com's stock option plan is presented
below:

<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
-----------------------
WEIGHTED-
NUMBER AVERAGE
OF EXERCISE
SHARES PRICE
------- ------------
<S> <C> <C>
Balance at October 1, 1996............................ 0 $--
Options granted, at estimated fair value.............. 65,286 1.52
Options exercised................................... (9,195) 0.00001341
-------
Balance at September 30, 1997......................... 56,091 1.77
Options granted, at estimated fair value............ 12,984 17.66
Options canceled.................................... (8,224) 9.32
-------
Balance at September 30, 1998......................... 60,851 4.14
Options exercised................................... (28,121) 0.0080186
Options canceled.................................... (14,798) 3.95
-------
Balance at September 30, 1999......................... 17,932 10.77
=======
</TABLE>

At September 30, 1999 options to acquire 246,847 shares of common stock were
available for future grant.

F-12
<PAGE> 71
SUNHAWK.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

8. STOCK OPTIONS (CONTINUED)

The following table summarizes information about stock options outstanding
at September 30, 1999:

<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
------------------------------------------------------------------------
WEIGHTED-AVERAGE
REMAINING
NUMBER OF WEIGHTED-AVERAGE CONTRACTED LIFE
EXERCISE PRICE SHARES EXERCISE PRICE (YEARS)
--------------- --------- ---------------- --------------------
<S> <C> <C> <C>
$0.42 7,153 $ .42 7.02
$0.42 - $11.33 4,765 $11.33 8.20
$11.33 - $22.65 6,014 $22.65 8.79
------
17,932
======
</TABLE>

As of September 30, 1999, in connection with the stock option plan, 266,210
shares of common stock were available for future issuance. At September 30,
1999, 3,159 options were exercisable at an exercise price of $2.07 per share.

Sunhawk.com applies Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its stock option plan. Accordingly, no
compensation cost has been recognized for its stock options issued to employees
in the accompanying financial statements because the fair value of the
underlying common stock equals the exercise price of the stock options granted.
Had the stock compensation expense for Sunhawk.com's stock option plan been
determined based on the fair value at the grant dates for options granted in
1999, 1998, and 1997, consistent with the fair value method of Statement of
Financial Accounting Standards No. 123, Sunhawk.com's net loss for the years
ended September 30, 1999, 1998, and 1997 would have been increased to the
following pro forma amount:

<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- --------
<S> <C> <C> <C>
Net loss:
As reported........................ $2,834,337 $1,475,579 $910,983
Pro forma........................ 2,859,040 $1,486,649 $911,609
Net loss per share, basic and
diluted:
As reported...................... $ 2.46 $ 1.66 $ 1.04
Pro forma........................ 2.48 1.67 1.04
</TABLE>

The fair value of each option grant was estimated on the date of grant using the
Minimum Value Option Pricing model using the following weighted-average
assumptions: risk-free interest rate of 4.77%, 5.49%, and 6.11% for 1999, 1998,
and 1997, respectively; expected life of five years; and dividend yield of 0%.

F-13
<PAGE> 72
SUNHAWK.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

9. COMMITMENTS

Sunhawk.com leases office space and equipment under operating lease agreements
expiring in 2001 and 2002, respectively. Future minimum lease payments under
noncancelable operating leases at September 30, 1999 are as follows:

<TABLE>
<S> <C>
Year ending September 30:
2000........................................................ $343,749
2001........................................................ 344,436
2002........................................................ 686
--------
Total minimum lease payments................................ $688,871
========
</TABLE>

Total rent expense paid during the years ended September 30, 1999, 1998, and
1997 amounted to $334,494, $54,686 and $9,216, respectively.

10. FEDERAL INCOME TAXES

Sunhawk.com, with the consent of its shareholders, elected to be taxed under the
provisions of Subchapter S of the Internal Revenue Code from August 20, 1992
(date of inception) through March 31, 1999, when it became no longer eligible to
be taxed as such. Accordingly, through March 31, 1999, the shareholders of
Sunhawk.com were entitled to report on their personal income tax returns their
proportionate share of Sunhawk.com's operating losses. Effective April 1, 1999,
Sunhawk.com became subject to federal corporate income taxes and therefore began
to account for income taxes in accordance with Statement of Financial Accounting
Standard No. 109 "Accounting for Income Taxes." There was no income tax
provision in 1999 due to the net loss.

A reconciliation of the income tax provision is as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
------------------
<S> <C>
Income tax benefit based on federal statutory rate of
34%.................................................. $(964,000)
Loss allocated to shareholders under the provision of
subchapter S........................................... 482,000
Unrealized net operating loss benefits................. 533,000
Other.................................................. (51,000)
---------
Income tax provision................................. $ 0
=========
</TABLE>

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts

F-14
<PAGE> 73
SUNHAWK.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

10. FEDERAL INCOME TAXES (CONTINUED)

used for income tax purposes. Significant components of Sunhawk.com's deferred
tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
-------------
<S> <C>
Deferred tax assets:
Net operating loss carryforwards........................... $ 533,000
Payable to Eller McConney LLC............................ 58,000
Accrued interest......................................... 39,000
Accrued expense.......................................... 16,000
---------
Total deferred tax assets.................................. 646,000
Valuation allowance for deferred tax assets.............. (639,000)
---------
Total deferred tax asset less valuation allowance.......... 7,000
---------
Deferred tax liabilities:
Depreciation and amortization............................ (5,000)
Prepaid expense.......................................... (2,000)
---------
Total deferred tax liability............................... (7,000)
---------
Net deferred tax asset..................................... $ 0
=========
</TABLE>

At September 30, 1999, Sunhawk.com had net operating loss carryforwards (NOLs)
of approximately $1,567,000, which, if not utilized, will expire in the year
2019. Utilization of NOLs may be limited in any given year by alternative
minimum tax (AMT) restrictions, depending upon each year's AMT calculation.

11. RELATED-PARTY TRANSACTIONS

Sunhawk.com pays to Eller McConney LLC, which is wholly owned by Marlin Eller
and Mary McConney, executive officers and trustees of a trust which owns a
majority of shares of Sunhawk.com, for certain services in connection with the
production of digital sheet music masters. Avtograf, a Russian joint stock
company in which Eller McConney LLC has a 94% interest, provides these services
under an informal agreement with Eller McConney LLC. At September 30, 1999,
Sunhawk.com owed $169,957 to Eller McConney LLC for these services. The digital
sheet music masters for which production services were provided represented
approximately 64% and 10% of the digital sheet music acquired by Sunhawk.com
during the year ended September 30, 1999 and 1998, respectively.

During the year ended September 30, 1999, Sunhawk.com's Board of Directors
approved entering into a ten-year assignment and assumption agreement with
Avtograf, Eller McConney LLC, and a newly formed independent Russian production
company (Newco). The assumption and assignment agreement will require that Eller
McConney LLC assign to Sunhawk.com all of its rights to receive from Avtograf
its services for the production of digital sheet music in exchange for a
promissory note payable to Eller McConney LLC in the amount of $1,000,000.
Payment of the principal and interest is based on the number of pages received
and accepted from Newco over a period of five years and is to be paid

F-15
<PAGE> 74
SUNHAWK.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

11. RELATED-PARTY TRANSACTIONS (CONTINUED)

quarterly in arrears with a maximum principal payment of $200,000 per annum. The
promissory note payable will bear interest at the applicable federal short-term
rate, which was approximately 5% at September 30, 1999. The promissory note
payable of $1,000,000 to Eller McConney LLC is expected to be accounted for as a
prepayment for services to be provided for the production of digital sheet music
from Newco, with recourse to Eller McConney LLC in the event of non-performance.
In connection with this agreement, Avtograf will assign to Newco its obligation
to provide production services for digital sheet music. Thereafter, Newco will
be obligated to provide production services for digital sheet music for
Sunhawk.com at an anticipated minimum rate of 4,500 pages per month totaling
270,000 pages over a period of five years, at no additional cost to Sunhawk.com.
Neither Eller McConney LLC, Mr. Eller, Ms. McConney nor Sunhawk.com will have an
ownership interest in Newco.

Marlin Eller, Chairman of the Board, Chief Executive Officer, and President, and
Mary McConney, Treasurer (Chief Financial Officer until June 10, 1999), of
Sunhawk.com provided services to Sunhawk.com as officers of Sunhawk.com. They
have received no compensation for these services since the inception of
Sunhawk.com.

12. OTHER

INITIAL PUBLIC OFFERING

On June 10, 1999, Sunhawk.com's Board of Directors authorized Sunhawk.com to
file a Registration Statement under the Securities Act of 1933, as amended, to
permit Sunhawk.com to proceed with an initial public offering of its common
stock.

13. SUBSEQUENT EVENTS

BRIDGE FINANCING LOAN AGREEMENTS

On December 22, 1999, Sunhawk.com entered into bridge financing loan agreements
with third parties for loans in varying amounts totaling $1,000,000. The Loans
bear interest at a rate of 8.5% per annum and are due at the earlier of the
closing of the initial public offering or 8 months. The Loans hold a second
security on Sunhawk.com's assets as collateral. The Loans have a 50% warrant
coverage, which equates to 1,050 warrants per $25,000 of loan proceeds for a
total of 42,000 warrants. The warrants may be adjusted for stock splits,
recapitalization, or reorganization of Sunhawk.com. The warrants will be
exercisable immediately upon the closing of the initial public offering but may
not be sold for six months following the closing date of the offering.

F-16
<PAGE> 75

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

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF OUR COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK. IN THIS PROSPECTUS,
"SUNHAWK.COM," "WE," "US" AND "OUR" REFER TO SUNHAWK.COM CORPORATION.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus summary................... 3
Risk factors......................... 6
Forward-looking statements........... 16
Use of proceeds...................... 17
Capitalization....................... 18
Dilution............................. 19
Dividend policy...................... 19
Selected financial data.............. 20
Management's discussion and analysis
of financial condition and results
of operations...................... 21
Business............................. 27
Management........................... 41
Related-party transactions........... 45
Principal shareholders............... 47
Description of securities............ 49
Shares eligible for future sale...... 52
Underwriting......................... 54
Transfer agent and registrar......... 56
Legal matters........................ 56
Experts.............................. 57
Where you can find more
information........................ 57
Index to financial statements........ F-1
</TABLE>

UNTIL , 2000 ALL DEALERS THAT BUY, SELL OR TRADE SHARES OF OUR
COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

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

1,400,000 Shares

LOGO

Common Stock
-----------------
PROSPECTUS
-----------------
JOSEPH GUNNAR & CO., L.L.C.
, 2000
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 76

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act (the "WBCA") authorize a court to award, or a corporation's
board of directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"). Section 10 of the registrant's Amended and Restated Bylaws
(Exhibit 3.3 hereto) provides for indemnification of the registrant's directors,
officers, employees and agents to the maximum extent permitted by Washington
law. The directors and officers of the registrant also may be indemnified
against liability they may incur for serving in those capacities pursuant to a
liability insurance policy maintained by the registrant for such purpose.

Section 23B.08.320 of the WBCA authorizes a corporation to limit a
director's liability to the corporation or its shareholders for monetary damages
for acts or omissions as a director, except in certain circumstances involving
intentional misconduct, knowing violations of law or illegal corporate loans or
distributions, or any transaction from which the director personally receives a
benefit in money, property or services to which the director is not legally
entitled. Article VII of the registrant's Amended and Restated Articles of
Incorporation (Exhibit 3.1 hereto) contains provisions implementing, to the
fullest extent permitted by Washington law, such limitations on a director's
liability to the registrant and its shareholders.

The underwriting agreement (Exhibit 1.1 hereto) provides for reciprocal
indemnification between the underwriters and the registrant from and against
certain liabilities arising in connection with the offering which is the subject
of this registration statement.

II-1
<PAGE> 77

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses, other than the
underwriting discounts, payable by the registrant in connection with the sale of
the securities being registered. All amounts are estimates except the Securities
and Exchange Commission registration fee, the NASD filing fee, the Nasdaq
SmallCap(R) listing fee and the Pacific Stock Exchange listing fee.

<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee........ $ 4,435
NASD Filing Fee............................................ 1,604
Nasdaq SmallCap(R) Listing Fee............................. 17,500
Pacific Stock Exchange Listing Fee......................... 19,500
Printing Costs............................................. 200,000
Legal Fees and Expenses.................................... 324,500
Accounting Fees and Expenses............................... 350,000
Blue Sky Fees and Expenses (including legal fees).......... 50,000
Transfer Agent and Registrar Fees.......................... 20,000
Miscellaneous.............................................. 12,461
----------
Total............................................ $1,000,000
==========
</TABLE>

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

The following is a description of all securities that the registrant has
sold within the past three years without registering the securities under the
Securities Act:

1. On October 9, 1996, the registrant sold 229,878 shares of the
registrant's common stock at a price of $0.00001566 per share for an
aggregate purchase price of $3.60 to one accredited investor in a private
transaction which was exempt from registration pursuant to Section 4(2) of
the Securities Act.

2. On December 4, 1996 and October 5, 1998, 9,195 and 18,390 shares of
the registrant's common stock, respectively, were issued to one individual
upon the exercise of stock options granted pursuant to the registrant's
1996 Stock Option Plan at a per share exercise price of $0.00001341 for
total exercise prices of $0.12 and $0.25, respectively. Such issuances were
exempt from registration pursuant to Rule 701 under the Securities Act.

3. On March 10, 1998, the registrant sold 8,829 shares of the
registrant's common stock at a price of $11.33 per share for an aggregate
purchase price of $100,004.41 to one accredited investor in a private
transaction which was exempt from registration pursuant to Section 4(2) of
the Securities Act.

4. On April 1, 1999, the registrant issued 99,073 shares of the
registrant's common stock pursuant to the distribution agreement by and
between the registrant and Warner Bros. Publications U.S. Inc. in
consideration for music catalog distribution rights provided by Warner to
the registrant. The transaction was exempt from registration pursuant to
Section 4(2) of the Securities Act.

5. On March 31, 1999, the Eller and McConney 1995 Family Living Trust,
an accredited investor, converted $3,568,406 of debt owed to it by the
registrant into 267,968 shares of the registrant's common stock at a price
per share of $13.32. On this same date, the Eller and McConney 1995 Family
Living Trust forgave $1,000,000 of long-term debt owed to it by the
registrant and purchased an additional 112,659 shares of the registrant's
common stock for an aggregate of $1,500,000, at a price per

II-2
<PAGE> 78

share of $13.32 per share. Such issuance was exempt from registration
pursuant to Section 4(2) of the Securities Act.

6. On June 18, 1999, 9,195 shares of the registrant's common stock
were issued to one individual upon the exercise of stock options granted
pursuant to the registrant's 1996 Stock Option Plan at a per share exercise
price of $0.00001341 for a total exercise price of $0.12. Such issuance was
exempt from registration pursuant to Rule 701 under the Securities Act.

7. On July 6, 1999, 536 shares of the registrant's common stock were
issued to one individual upon the exercise of stock options granted
pursuant to the registrant's 1996 Stock Option Plan at a per share exercise
price of $0.42 for a total exercise price of $224.70. Such issuance was
exempt from registration pursuant to Rule 701 under the Securities Act.

ITEM 27. EXHIBITS

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
1.1# Form of Underwriting Agreement.
1.2# Form of Representative's Warrant Agreement.
3.1# Amended and Restated Articles of Incorporation.
3.2** Certificate of Incorporation (Delaware).
3.3# Amended and Restated Bylaws.
3.4** Form of Bylaws (Delaware).
4.1# Specimen Stock Certificate.
4.2 See Exhibits 3.1 and 3.3 for provisions defining the rights
of the holders of common stock.
5.1+ Opinion of The Otto Law Group, PLLC (including the consent
of such firm)regarding legality of the securities being
issued.
10.1# 1996 Stock Option Plan.
10.2*# Distribution Agreement dated May 18, 1998 by and between
Sunhawk.com Corporation and Warner Bros. Publications U.S.
Inc., as amended.
10.3*# Distribution Agreement dated as of June 12, 1998 by and
between EMI Christian Music Publishing and Sunhawk.com
Corporation.
10.4*# Music Conversion Agreement dated as of April 1, 1998 by and
between Sunhawk.com Corporation and International Music
Engraving Company, as amended.
10.5# Lease dated August 10, 1998 by and between 223 Taylor Corp.
and Sunhawk.com Corporation.
10.6# Form of Employment Agreement between Sunhawk.com and Marlin
Eller.
10.7# Form of Lock-Up Agreement.
10.8# Form of Agreement Regarding the Assignment and Assumption of
the Right to Receive Sheet Music.
10.9# Executed Lock-Up Letters.
10.10# Promotional Share Lock-In Agreement.
10.11# Form of Agreement Regarding the Assignment and Assumption of
Sheet Music Production.
</TABLE>

II-3
<PAGE> 79

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
23.1++ Consent of Ernst & Young, LLP, Independent Auditors.
23.2 Consent of The Otto Law Group, PLLC (contained in Exhibit
5.1).
24.1 Power of Attorney (See Page II-5).
27.1# Financial Data Schedule.
</TABLE>

- -------------------------
* Confidential treatment requested.
+ To be filed by amendment.
++ Filed herewith.
** No longer applicable.
# Previously filed.

ITEM 28. UNDERTAKINGS

The registrant will provide to the underwriters at the closing specified in
the underwriting agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to each
purchaser.

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

In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

The registrant will:

For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant under Rule 424(b)(1), or (4), or
497(h) under the Securities Act as part of the registration statement as of
the time the Securities and Exchange Commission declared it effective.

For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and the offering of the securities at that time as the initial
bona fide offering of those securities.

II-4
<PAGE> 80

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Amendment No. 4
to the registration statement to be signed on its behalf by the undersigned, in
the City of Seattle, State of Washington, on the th day of December, 1999.

SUNHAWK.COM CORPORATION

By: /s/ MARLIN ELLER
-----------------------------------
Marlin Eller,
President and Chief Executive
Officer

In accordance with the requirements of the Securities Act of 1933, this
Amendment No. 4 to the registration statement has been signed by the following
persons in the capacities indicated below on the th day of December, 1999.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ MARLIN ELLER Chairman of the Board, Chief Executive
- ------------------------------------------------ Officer and President (Principal
Marlin Eller Executive Officer)

/*/ TRICIA PARKS-HOLBROOK Chief Financial Officer (Principal
- ------------------------------------------------ Financial and Accounting Officer)
Tricia Parks-Holbrook

/*/ FRED ANTON Director
- ------------------------------------------------
Fred Anton

/*/ PATRICIA TANGORA Director
- ------------------------------------------------
Patricia Tangora

/*/ LUIS F. TALAVERA Director
- ------------------------------------------------
Luis F. Talavera

*By /s/ MARLIN ELLER
-----------------------------------------------
As Attorney-In-Fact
</TABLE>

II-5
<PAGE> 81

EXHIBIT INDEX

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
1.1# Form of Underwriting Agreement.
1.2# Form of Representative's Warrant Agreement.
3.1# Amended and Restated Articles of Incorporation.
3.2** Certificate of Incorporation (Delaware).
3.3# Amended and Restated Bylaws.
3.4** Form of Bylaws (Delaware).
4.1# Specimen Stock Certificate.
4.2 See Exhibits 3.1 and 3.3 for provisions defining the rights
of the holders of common stock.
5.1+ Opinion of The Otto Law Group, PLLC (including the consent
of such firm) regarding legality of the securities being
issued.
10.1# 1996 Stock Option Plan.
10.2*# Distribution Agreement dated May 18, 1998 by and between
Sunhawk.com Corporation and Warner Bros. Publications U.S.
Inc., as amended.
10.3*# Distribution Agreement dated as of June 12, 1998 by and
between EMI Christian Music Publishing and Sunhawk.com
Corporation.
10.4*# Music Conversion Agreement dated as of April 1, 1998 by and
between Sunhawk.com Corporation and International Music
Engraving Company, as amended.
10.5# Lease dated August 10, 1998 by and between 223 Taylor Corp.
and Sunhawk.com Corporation.
10.6# Form of Employment Agreement between Sunhawk.com and Marlin
Eller.
10.7# Form of Lock-Up Agreement.
10.8# Form of Agreement Regarding the Assignment and Assumption of
the Right to Receive Sheet Music.
10.9# Executed Lock-Up Agreements.
10.10# Promotional Share Lock-In Agreement.
10.11# Form of Agreement Regarding the Assignment and Assumption of
Sheet Music Production.
23.1++ Consent of Ernst & Young, LLP, Independent Auditors.
23.2 Consent of The Otto Law Group, PLLC (contained in Exhibit
5.1).
24.1 Power of Attorney (See Page II-5).
27.1# Financial Data Schedule.
</TABLE>

- -------------------------
* Confidential treatment requested.
+ To be filed by amendment.
++ Filed herewith.
** No longer applicable.
# Previously filed.

<PAGE> 1

EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our report dated November 24,
1999, except for note 7 (second section, second paragraph) and note 13, as to
which the date is December 23, 1999 in Amendment No. 4 to the Registration
Statement (Form SB-2) and related prospectus of Sunhawk.com Corporation for the
registration of 1,400,000 shares of its common stock.

ERNST & YOUNG LLP

Seattle, Washington

December 23, 1999