ON LINE PRODUCTION SERVICES INC, 10SB12G/A, 2000-01-05

ON LINE PRODUCTION SERVICES INC
10SB12G/A, 2000-01-05
BUSINESS SERVICES, NEC

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U.S. Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-SB/A3

GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of the Securities Exchange Act of 1934

ONLINE PRODUCTION SERVICES INC.

(Name of Small Business Issuer in its Charter)

(Commission File No. 0-27111)
Nevada 91-1833963
(State of Incorporation) (IRS Employee Identification No.)

Suite 210-2323
Boundary Road
Vancouver, B.C. Canada V5M 4V8
(Address of Principal executive Offices)

(604) 205-5107
(Issuer's Telephone Number:)

Common Shares, $.001 par value per share
(Securities to be Registered Under Section 12(g) of the Act)

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TABLE OF CONTENTS

PAGE

Currency Exchange Rate Information 3

Item 1. Description of Business 3

Item 2. Management's Discussion and Analysis or Plan of Operation 24

Item 3. Description of Property 30

Item 4. Security Ownership of Certain Beneficial Owners and Management 31

Item 5. Directors, Executive Officers, Promoters and Control Persons 33

Item 6. Executive Compensation 35

Item 7. Certain Relationships and Related Transactions 36

Item 8. Legal Proceedings 36

Item 9. Market for Common Equity and Related Stockholder Matters 36

Item 10. Recent Sales of Unregistered Securities 37

Item 11. Description of Securities 41

Item 12. Indemnification of Directors and Officers 41

Item 13. Financial Statements 43

Item 14. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 58

Item 15. Financial Statements and Exhibits 59

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CURRENCY EXCHANGE RATE INFORMATION

The Company's accounts are maintained in United States dollars. However,
the Company's subsidiaries maintain their accounts in Canadian dollars. In this
Registration Statement all dollar amounts are expressed in United States dollars
except where otherwise indicated, To the extent such dollar amount refers to the
Subsidiaries' accounts, the US dollar amount was obtained by converting the
Canadian dollar account to US Dollars using average rates of exchange for each
period of operations, and end of period rates for balance sheet presentations.

As of November 30, 1999, the exchange rate for conversion to US dollars was
Cdn$1.00 = US$.67787. The following table sets forth, for each of the periods
indicated, the high and low rates of exchange of Canadian dollars into US
dollars, the average of such exchange rates during each period, and the end of
period rates. Exchange rates represent the noon buying rate in New York City for
cable transfers payable in foreign currencies as certified for customs purposes
by the Federal Reserve Bank of New York. The average rates presented in the
table below represent the average of the exchange rates on the last day of each
month during a year for the past five years.

<TABLE>
<CAPTION>
======================================================================================
1999(1) 1998 1997 1996 1995 1994
============================---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
High $.66072 $.63111 $.69551 $.72348 $.70234 $.71033
- -------------------------------------------------------------------------------------------------------------------

Low $.68908 $.68908 $.74239 $.73855 $.75272 $.76318
- -------------------------------------------------------------------------------------------------------------------
Average for Period $.67272 $.68662 $.72463 $.73281 $.73051 $.72998
- -------------------------------------------------------------------------------------------------------------------
End of Period $.67787 $.65040 $.69793 $.73367 $.71275 $.75443

===================================================================================================================
</TABLE>

(1) Through November 30, 1999.

ITEM 1. DESCRIPTION OF BUSINESS

CORPORATE ORGANIZATION

On Line Productions Services, Inc. ("ONPS" or the "Company") was organized
under the laws of the State of Nevada on February 18, 1999, for the purpose of
completing a reorganization and change of domicile of Earth Industries, Inc. a
corporation formed under the laws of the State of Texas on August 26, 1996.
Please also refer to "Item 1. Description of Business--Reorganization and
Acquisition of On-Line Film Services Inc."

ONPS, through its subsidiary Online, provides software applications for the
film, television and entertainment industry. Please also refer to "Item 1.
Description of Business--the Company's Business."

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Reorganization and Acquisition of On-Line Film Services, Inc.

The results of the Plan of Reorganization were:

Earth Industries completed a 30 to 1 "reverse split" of its 51,360,000
issued and outstanding shares; by doing so, it reduced the number of its
issued and outstanding shares to 1,712,000.

Earth Industries merged with and into ONPS thereby effecting a move
from Texas to Nevada and a change to its corporate name.

ONPS issued 1,711,926 post-reverse shares of its Class A Common Stock
to the shareholders of Earth Industries. Please also refer to "Item 11.
Description of Securities."

Following the Reorganization and in accordance with the terms and
conditions of the Plan of Reorganization, ONPS:

On March 4, issued 5,714,284 shares of Class A Common Stock in
consideration of the payment of an aggregate of $663,740, pursuant to
Regulation D, Rule 504, as promulgated by the Securities Exchange
Commission, pursuant to ss.3(b) of the Securities Act of 1933;

On March 3, issued 2,763,598 shares of Class A Common Stock, at a
deemed price of $1.00 per share, to shareholders of OnLine in exchange for
all of such shareholders shares of Online, pursuant to ss.4(2) of the
Securities Act;

On March 4, issued 3,673,292 Class B Special Non-Equity Voting Shares
(the "Class B Shares") to 4 shareholders of affiliates of OnLine in
connection with such shareholder's exchanging then common share of Online
for Preferred Equity Shares of Online. The Class B Shares are convertible
to shares of Class A Common Stock upon cancellation of the corresponding
Preferred Equity Shares of OnLine.

Upon completion of the Reorganization, and as at October 31, 1999, the
Company had 10,480,614 shares of Class A Common Stock and 3,673,292 Class B
Shares issued and outstanding. Please refer to "Item 10. Recent Sales of
Unregistered Securities."

On March 4, 1999 the then officers and directors of Earth Industries
resigned. Mr. Aerock Fox and Terry Roycroft were appointed directors of the
Company. Please refer to "Item 5. Directors, Executive Officers, Promoters and
Control Persons."

THE COMPANY'S BUSINESS

OnLine, the Company's operating subsidiary was formed in 1995 for the
purpose of developing effective software solutions for operations within the
film and television industry to replace time consuming, inefficient and costly
pre-internet models of operation. Since its formation, OnLine has focused its
efforts on the development of unique, proprietary, internet based technology,
which the Company believes will change the global production community's access
to available resources in the critical areas of casting, locations and
production.

Rights to use its software in specific applications in the entertainment
field and in specified geographical areas were sold in order to finance, in
part, OnLine's continuing activities in a manner that would minimize shareholder
dilution. Please refer to "Item 1. Description of Business - Other Products -
MailCard" and "Recent Financing Transactions." OnLine now helps casting
directors and

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talent agents fill roles for the film and television industry "online". It is a
technology permitting business to business communication, through the Internet,
thereby allowing for efficient searches and movement of data between
professionals.

As a complete turnkey solution, this new technology focuses all production
tasks into one system and allows industry personnel not only immediate access to
the widest possible choice of such resources but also the ability to interact
with selected resources within a secure, password protected electronic
environment from any Internet accessible computer. On-Line, through two
wholly-owned subsidiaries, On-Line Distributing, Inc. and Prairie On-Line
Management Services, Inc., provides computer distribution and management
services.

OnLine has implemented a three-stage development strategy to be completed
by the year 2000. The first stage ("Phase I") was to produce an online casting
database. This has been accomplished with the success of the Casting Workbook.
The second stage ("Phase II"), the production database is currently in beta
testing(1). The third stage ("Phase III") will be the execution of the Company's
existing locations database. The integration of these databases will form a
complete communication system.

o Phase I: The Casting Workbook

The first component of this communication system is the Casting Workbook,
containing the resumes and images of thousands of performing artists. The
Casting Workbook provides selective search techniques through which casting
directors can quickly locate and preview performers meeting predetermined
criteria. Broadcasts from e-mail and faxes go directly to hundreds of agents
instantly. Direct communication with a selected performer's agent can then be
established on the system's password secured network. Talent searches, which
traditionally might have required hours or days to complete, can now be
accomplished in a matter of minutes. Conversely, performance and technical
artists, whose exposure to casting directors and producers traditionally has
been restricted to their individual agency's limited contact base, now have an
opportunity to achieve a global presence.

Description of How the Casting Workbook Works

The Casting Workbook is a secure password protected computer network that
is connected to the Company's database, which contains casting information about
thousands of actors, models and entertainers. The in-house production crew at
OnLine developed the database and is using this technology to develop other
products.

The interactive system of the Casting Workbook is fast, easy and an
innovative means for casting directors to find and preview talent. It contains
text resume photographs and video and audio samples for actors. Once the desired
talent is located by using the database search techniques, the casting director
can communicate directly with agents over a secure network.

Direct Response

Casting directors from around the world can type their script breakdown
into the Casting Workbook, select the city or cities for transmission and press
send. The script breakdown which provides details about a project including
location dates and character descriptions is sent via the

- ----------

(1) A beta test is the second phase of software testing in which a sampling of
the intended audience tries the product; it can be considered "pre release
testing".

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Internet, converted to faxes and transmitted to the over 300 talent agents in 15
cities in Canada and the United States currently subscribing to the Company's
services, for the purpose of auditioning actors for the roles described.

Agents with their roster of actors on the database use the fax as an alert
to go to the Casting Workbook and select actors' photos and resumes to send to
the corresponding casting director instantly over the Internet. The casting
director then has access to the current resume and photograph of each suggested
actor. The casting director simply needs to select the actor they wish to
audition and the agent is instantly informed. The Company attempts to limit
access to the database to bona fide casting directors and talent agents as
confirmed, in part, by industry and professional association membership (such as
(i) the Casting Society of America and the Association for Talent Agents in the
United States and (ii) Casting Directors of Canada and TAMAC in Canada). In
addition each must provide two reference letters. Each is given an individual
identification and password in order to access the database.

From the actors perspective not only does this system eliminate tedious and
costly tasks, such as sending materials by courier and updating binders for
agencies, it also provides them with potentially greater exposure.

A Comparison of the Casting Workbook with Existing Systems

Casting professionals around the world have been using the hand delivery
and facsimile relay system supported by the telephone to transport script
breakdown information, scripts, actor photographs, resumes, video cassettes,
audio cassettes and casting requests. All of this information is contained on
different mediums requiring constant and costly reproduction. All of this
information now can be contained digitally in the Casting Workbook allowing a
central information source.

Prior to the availability of the Casting Workbook, talent agents would have
to make up three ring binders that contained 8 x 10 photos and resumes of their
entire roster for each casting director as well as many of the production
companies. These were expensive to create due to duplication, assembly, courier
and maintenance charges involved and were constantly out of date as actors
change agencies or require resume updates frequently. In addition, casting
directors would have to thumb through hundreds of binders to find special skills
or traits that can now be searched efficiently on the Casting Workbook.

By digitizing(2) this collection of information and sorting it accordingly
in a searchable database, OnLine provides an affordable and highly efficient
alternative. Instead of duplicating text, images, audio and videocassette and
then shipping this information to multiple destinations across the city, country
or even planet, the Company is able to post the information once, in one place,
for casting professionals to access resulting in significant cost savings to
both the actors and talent agencies.

Breakdowns

Script breakdowns are created by or for casting directors for each project
they are involved in. The breakdowns include essential details such as project
description, characters information, shoot dates and audition times. The Pre
Casting Workbook system requires a casting director to send the script or a
completed breakdown to a separate company (for example, Breakdown Services in
Los

- ----------

(2) The process of digitizing information involves taking all types of
information (print, sound, and image) and feeding it into a computer which in
turn, electronically changes it into a series of ones and zeroes that it can
efficiently read. This simple transformation enables a person to make material
changes to the information and to instantly transfer it across computer
networks.

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Angeles and Vancouver and Tracy Productions in Toronto) who, in turn, would fax
the information to each selected agent at a cost per month to those receiving
agents. These agents then respond by sending casting suggestions by facsimile
and/or courier to the original casting director. Subsequent communications
continue by telephone or facsimile at cost to both individuals. Unlike
electronic communication, the telephone demands both parties be available
simultaneously. Even e-mail has advantages over the facsimile process because of
the editing properties.

The old breakdown system is crude and full of redundancies that slow
the process. A script breakdown requires manipulation of highly detailed
information. By digitizing the content, ease of transfer via computers is
enabled. The old system involves a slow chain where each party is dependent on
the other's performance and availability. The Casting Workbook allows fast and
easy information manipulation and immediate transfer at a fraction of the
conventional cost.

Agency Representation

Currently, actors are only represented by agencies in their surrounding
area. That means when a Los Angeles or Vancouver actor, represented by a local
agency, works in Toronto for an extended period of time he/she will have to find
new representation through a Toronto agency. This limitation is due to an
agency's inability, generally, to physically exist in all places at once. The
Casting Workbook allows agencies to represent actors regardless of where they
are located. This prevents the agencies from losing valued clients and
eliminates the need for actors to find other agencies, which saves both parties
time and money.

Continuing Refinements to the Casting Workbook

The Casting Workbook is continuing to develop, as users request new
features. The Casting Workbook has become the industry standard for electronic
distribution of information in the Canadian casting industry.

EBinder

Traditionally, agents were required to produce photo album "binders" which
had photos and resumes for each of their actors. These were for the benefit of
casting directors, producers or any other professional who needed to view the
agent's roster. The binders quickly became out of date the minute they were
produced and were maintained only once or twice a year because of the time and
expense required to produce and courier them to every casting professional.

The EBinder replaces the traditional binder. Now, an agent need only
provide a password to any production professional who requests to see their
EBinder via the Internet. Having their information on the Internet, the agents
allow anyone in the world to access their information at any time, provided they
have been assigned a password.

Most importantly, the EBinder is tied to the agent's roster and is updated
as regularly as the agent updates his roster. Instead of the old style of
updating twice a year, this can now be done twice a day. In addition, the agents
can write personal messages on the front page of the EBinder to welcome viewers
and to draw attention to specific actors.

Now, producers also have the ability to quickly search and sort rosters in
a way that was never possible before. Controlled access of information via
passwords, gives the agents control and flexibility through the EBinder never
available through traditional hard copy binders.

Sides Online

Sides OnLine is a secure, fast and efficient way for casting directors to
distribute their scripts

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and sides to agents. Scripts contain the entire story line, the character lines
as well as the different settings. Sides are the specific parts of a script that
involve any one character. Any actor auditioning for a role in a script requires
the sides for that individual character.

Scripts OnLine replaces the tedious action of casting directors sending
scripts by courier and faxing to talent agents. Talent agents no longer have to
create cover sheets and distribute them to their appropriate actors.

With Sides OnLine, the Sides are integrated right into their Workbook. They
simply click on the word, "SIDES" to instantly download the Sides and Script.
Cover sheets no longer require typing. The information for each character is
automatically formatted by the database. Agents click on the word, "COVER
SHEETS" and a prewritten form is produced complete with all of the specific
breakdown elements.

Products in Development

Sound and Video Production Services

A voice-over database, which would include any form of recorded voice, is
anticipated to attract additional actors from across North America. One such
application would include live voice auditions over the Internet, which would
save long distance charges and courier costs. This is expected to be online by
the end of 1999.

In addition to sound, video production services will also be incorporated
into the service. Most professional agencies have videotapes for all of their
actors and would save the high-end cost of duplication and courier costs.
Digitally recorded sound and video is quickly gaining popularity due to the
editing efficiency and the convenience of transporting electronically.

Industry Advertising

Once the Casting Workbook has attained a significant level of acceptance in
the North American market, we intend to target industry advertisers, such as
acting schools, photographers, make-up artists, dance schools and production
crews. In addition, corporate advertisers from ancillary industries such as
travel, food and beverage, and sporting goods will be sought.

Market Analysis and Size

In 1995, OnLine began creating sophisticated communication tools and
databases for a film and television production Internet site in anticipation of
the rapid technological growth in this area. As OnLine began to market and
distribute these products, it became apparent that the production community was
eager to use computers and to get on the Internet, but required assistance and
support.

From constant industry communication, we have discovered that the
technological progression in this market follows a typical systematic evolution
as follows:

Businesses acquire computer systems for automating tasks.

Membership with an Internet Service Provider (ISP) is bought.

Internet skills are mastered and services are exercised (e.g. e-mail).

An Internet presence is obtained by creating a web page.

A domain name is secured, which assures a permanent presence.

The company optimizes their computer system to enhance communications
through a

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network.

High speed Internet connections are utilized to transmit large files of
information between global locations.

The Casting Workbook was designed for and is currently being utilized by
casting industry members in Canada and the United States to electronically cast
actors and performers for their film, television, and commercial productions.
The system was created by working closely with industry professionals in order
to design software that reflects the needs of the most discerning audience. By
meeting the needs of the casting industry, the Company is positioning the
Casting Workbook as the industry standard.

The production aspects of the entertainment industry are large and global
in nature. The entertainment industry is one of the leading commercial export
sectors of the United States. OnLines' internet direct audience, including
professional and participant/subscriber market, is defined as those who are
employed or want to be employed in the entertainment industry. This includes,
but is not limited to, actors, models, musicians, dancers, extras and other
entertainers worldwide (collectively "Entertainers").

Marketing

Although OnLine has participated in local events and trade shows, the
market growth has taken place primarily by word of mouth. OnLine intends to
increase its profile in a widespread promotional campaign, which will include:
print advertising in industry publications; radio clips; trade-show exhibits;
seminars; and industry activities to network with industry professionals.

Advertisements have appeared in the Hollywood Reporter and other trade
related publications. Some examples of trade shows, events and exhibits that
OnLine has participated in to-date, include: The Stephen J. Cannell Golf
Classic; local film festivals; Cineposium; Cinexpo; and Locations Expo in Los
Angeles 1995, 1996 and 1998.

In addition, OnLine is working with several organizations in the community
through cross-promotional activities to enhance its corporate good will. Some of
these organizations like Film Union locals and Women in Film, and regional
organizations such as producer organizations and the Academy of Motion Picture
Arts and Sciences.

Security Consciousness

Employees and contractors are required to sign a confidentiality agreement
to prevent them from sharing company and/or product information with
competitors. Management protects the company's assets through special efforts in
concert with its technology advisors. The nature of the developing proprietary
knowledge based products, demand a high level of security to ensure market
leadership.

An external breach of OnLine's computer system is regarded as an important
concern. OnLine has incorporated Windows NT passwords and software/hardware
firewalls as primary and secondary security measures. The firewalls are special
software that is set up on a network to prevent intruders from stealing or
destroying confidential files or information.

By using the NT 4.0 Server, 128-bit(3) security is enhanced. The Company
monitors access to

- ----------
(3) A computer server uses a security system to prevent unauthorized access to
files on the computer. The security information is protected in the computer
with encryption. Encryption protects data by taking data, converting it with an
encryption algorithm (a mathematical formula) and saving or transmitting the
encrypted data. The greater the number of `bits' used in the encryption, the
stronger the protection. A bit is a small unit of computer data. 128-bit is the
biggest and strongest encryption commercially available in the United States and
Canada.

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the system and regularly conduct checks for unauthorized activity. Implementing
protection like hardware and software firewalls has increased protection of
sensitive information.

Intellectual Property Protection

The production and distribution of software has many benefits over other
conventional products. It can be constructed virtually anywhere and once
designed, it can be mass-produced very easily. These cost-effective factors for
production are also attractive to others who see the opportunity.

The products being produced at OnLine however, are unique in the fact that
they are highly complex software databases of information that are
interdependent and act as an information hub. Simply trying to copy the
information is of little use without the complex communication network.

The software that OnLine has produced is protected through authoring
rights. OnLine has also protected its proprietary digital assets such as images
by Using Watermarking Technology by Digimarc, Adobe.

A digital watermark is best described by comparing it to a traditional
watermark. Traditional watermarks are added to some types of paper to offer
proof of authenticity. They are imperceptible, except when the paper is held up
to the light for inspection. Similarly, Digimarc digital watermarks are added to
still images in a way that can only be seen by a computer but is imperceptible
to the human eye. A Digimarc watermark carries a message indicating the true
creator or distributor of the image.

Digital watermarking has provided OnLine with three main benefits:

Protects valuable images by communicating copyright information;

Tracks down uses of the images in the Web; and

Generates incremental revenue by embedding company information in
every image (in case of resale of the images).

Support

OnLine offers complete technical support to its customers. By so doing,
OnLine enables users to make a smooth transition from the conventional work
process.

OnLine believes that an essential factor for success is providing
networking consultation, software support and superior personal service. As a
pioneer in the Internet technology industry, OnLine has discovered that by
providing an appropriate level of service the company's products are quickly
becoming the communication standard for the film and television industry.

Database Development

Databases for models, dancers, extras, and musicians are under development
and expected to be completed in 1999.

Database for Extras

An "extra" is normally a person used in the background of television and
movie productions. Unlike actors, extras do not require acting skills. This
makes the extra profession open to anyone who has the interest. This has allowed
the extra market to grow enormously over the last few years.

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OnLine's new system will include automated telephone contact to indicate
availability to the extras' agent who would then fill the casting director
requests (breakdowns).

The extra business is much larger and therefor much faster paced than that
of principal actors. Since extras do not require the experience or training of
actors and are only used in non-essential positions, (usually in the scene
background) there is a large turnover. Most of the individuals doing extra work
only do so for a short time. However, the customer force is much larger and
potentially more profitable than principle actors and it's shear size is ideally
suited for computer database management.

Talent Scout

There is no system, digital or otherwise, that is currently available to
assist actors who are looking for agency representation. OnLine is working to
create an area in the database that will post actors' photographs and resumes
for agent perusal. For a fee of Cdn.$42 ($42US for listings in the United
States) per year, an actor can be located and short-listed by casting directors
as a self represented actor during their search for an agent. Representation is
simply transferred in the system once an agent has been secured for the actor.

Pricing and Entertainers using OnLine

ONPS charges each Canadian entertainer who wants to have his/her file
included in the Casting Workbook database a flat fee of Cdn.$42 ($42US for
listings in the United States), which entitles the actor to a resume and one
photograph. Additional services, such as, multiple photographs, an audit
voice-over tape, or video reel, each come with an additional charge. The fees
are paid by the entertainer either directly to the Company or through their
agents. Approximately one-third of the entertainers using the Casting Workbook
were placed on the system on a free "trial basis." The Company's current policy
permits a free trial period of up to 90 days. The Company's current marketing
strategy permits casting directors and talent agents access to this system at no
charge.

Currently there are approximately 15,000 entertainers using some or all of
OnLine's available services and products. Most of these are concentrated in the
Canadian marketplace. However, OnLine is poised to expand into the larger Los
Angeles market.

The Company believes that the Casting Workbook has emerged as a field
leader where it counts most, the number of roles cast. In August 1999, the
Casting Workbook posted 279 breakdowns with 36,621 agent submissions resulting
in 1,258 roles being cast in major films, television and commercial productions.

Expansion

OnLine currently has offices in Los Angeles, Vancouver and Toronto.

The entertainment internet technology sector is highly fragmented with
several internet entities providing various services. OnLine is aggressively
seeking market dominance by way of mergers and acquisitions of production based
software and internet related companies. These companies are in various stages
of development, some of which would be a perfect fit and value-added additions
to the OnLine vision. The Company has developed a long-term plan for acquiring
several of these companies. The Company plan is to acquire and integrate these
various other types of services into a comprehensive site for producers, agents,
directors, casting directors, actors and other production professionals. These
acquisitions will greatly enhance the company's revenue projections by enabling
it to grow more rapidly by expanding its internet audience and potential market.

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Strategic Alliances

OnLine and Columbus Entertainment, Inc. ("Columbus") recently signed a
Production Services Agreement whereby OnLine and Columbus will cross-promote and
consult toward joint efforts in production software. Columbus recently signed a
3 year deal with 20th Century Fox to provide software services to its
productions worldwide. The Company's agreement will place the Casting Workbook
before Hollywood Studio executives on a daily basis. Please also refer to Item
1. Description of Business - The Company's Business.

Competition

The Company's management is not aware of any other company in Canada that
has the same type of database and/or service to film and television
professionals as it is currently providing. There are several small companies
who offer various television and film services but they are without a direct
response element and accordingly do not, in the Company's view, present a
competitive risk to the Company's operations

Competitors who do offer services similar to the Company's include:
Breakdown Services Ltd., "The Link" and CastNet(EINI) ("Castnet").

Since neither Castnet for Breakdown Services has a reporting obligation
under the Securities Act of 1934, the information presented below regarding
Castnet and Breakdown Services is based on information derived primarily from
their respective web sites.

CASTNET

CastNet is a U.S. company that over the past 1.5 years has attempted to
develop a software and database technology similar to Online's Casting Workbook
having been developed over the past 4 years. CastNet has announced further
development of products which OnLine has are already completed or has in
advanced design

CastNet's software design is considerably less robust and interactive
compared to the Casting Workbook. For example, CastNet's breakdowns are "open
fields", so information in those fields is incapable of being retrieved,
organized and managed in as much detail and as easily as it can be with the
Casting Workbook. Furthermore, the CastNet breakdown is faxed during office
hours and redistribution to the agents by CastNet personnel, while with the
Casting Workbook, breakdowns can be sent instantly from the casting director's
computer 24 hours per day, 7 days per week. In addition, CastNet provides
limited security, as scripts and sides are distributed in mass to everyone, and
cannot be sent to pre-selected recipients, as is the case with the Casting
Workbook.

Another of the many differences between the two products is in searching.
When a search is performed on CastNet, the results can only be viewed one page
at a time and in a linear fashion, so a casting director who has 100 pages of
results and wants to read page 100 would have to go through the first 99 pages
to get there. With the Casting Workbook, the director can instantaneously go to
any page he chooses.

The CastNet system uses an expensive ISDN line and requires high
maintenance. In the Company's opinion, the CastNet database is not as easy to
use and lacks complexity.

BREAKDOWN SERVICES

Breakdown Services is a U.S. company, with a similar database software to
that of Online's Casting Workbook, but in the Company's view offering less
flexibility. Again, unlike the 4 years of development behind the Casting
Workbook, Breakdown Services has only developed their product for

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the past 1.5 years. More specifically, the software and database are not as user
friendly. Their software is "nonrelational" sitting on five different servers,
which means the user must go through considerably more steps in the program to
access certain information or perform a task. Like CastNet, casting directors
can only send breakdowns during office hours. Unlike the Casting Workbook,
Breakdown's technology lacks the flexibility to allow a casting director to
selectively choose which talent agents he wants his scripts and sides sent.
Equally important, and unlike the Casting Workbook, actors cannot immediately
update their information on the database, to ensure casting directors always
receive their most up to date profile.

Breakdown Services has offered a hand delivery system for script breakdowns
in the United States and Canada for more than four years.

Although CastNet and Breakdown Services may not be the Company's only
competitors, they are the only ones the Company is aware of that electronically
broadcast script breakdowns for use on the internet.

o Phase II: Production

OnLine has recently acquired, pursuant to an agreement with Columbus, dated
August 31, 1998 as amended on February 19, 1999, the worldwide rights to the
Columbus Software Suite for all aspects of commercial production pursuant to an
agreement dated as of August 31, 1998 with Columbus. The Software Suite is a
relational database application which is able to run locally or on a group of
computers located in a relatively limited area (like an office building) and
connected by a communications link that allows them to interact with each other
(a "Local Area Network" or "LAN"). Please also refer to "Item 2. Management's
Discussion and Analysis or Plan of Operation."

Production management has a requirement for up-to-date information on the
status of feature film, television and commercial productions. OnLine
specializes in the beginning-to-end management and delivery of that information.
Through its use of hardware, specially designed software, customer oriented
service and an intimate, hands-on knowledge of the production industry, we
believe that OnLine is positioned to deliver the only complete data management
service for the film and television industry. It includes hardware (where
necessary), software and management of data that delivers up-to-the minute
information directly from the production office to production management in the
commercial production sector.

This service provides everything the commercial production needs for
electronic communications:

The installation of hardware and software by Online ensures that
everything is fully functional from day one.

Specifically designed software mirrors the way the commercial
production office people work today. It just makes life easier by
eliminating the repeated capture of the same information.

The movement and formatting of data collected from the commercial
production office, through OnLines' own communications servers and
delivered directly into the corporate Internet is handled by Online.

Above all, Online takes responsibility for delivering the information
at a time and in the format demanded by senior commercial production
management. Such deliveries include: Cost Reports; Budgets; Hot Costs; Call
Sheets/Production Reports; Shooting Schedules; Deals/Start Close Paperwork;
Staff & Crew Lists; Purchase Orders; Travel Authorizations;

13
<PAGE>

Time Cards; Daily Labor Sheets; and much more. Basically, anything that is
generated by each department can be sent and tracked in the OnLine system.

The OnLine system is not designed to replace an existing accounting system.
Rather, it enables departmental coordinators to produce their cost reports for
use by the production accountant more efficiently and with less wasted time than
is possible today. Repetitive data entry is avoided and at the same time key
data is extracted and made available to the executives responsible for the show
in a more timely manner than is possible through the production accounting
system.

In addition, all of the reports that are generated out of a customer's
current accounting system are also made available, thus enabling easy trend
analysis and deal comparisons across productions.

The benefits of the OnLine system include: faster identification of trends,
schedule slip pages can be flagged, expenditures can be more tightly controlled
and above all clear, relevant and timely information can be shared across the
system; and the elimination of the need for paper reports and associated costs.

Competition

Competition for the production software is spotty at best, and consists of
the studios and production companies in house computer staff who have designed
pieces of the program to be used in house. There is no known competitor with a
package as comprehensive as the commercial suite.

o Phase III: Locations

The third phase of the Company's communications model for the film and
television industry is evolving with many of the characteristics that were
developed and learned in the development of the casting database. This new
database technology uses digital photography, archives and regularly updates
potential locations for film and television use.

Technical Description

OnLine developed a searchable database containing thousands of location
files that can be viewed by using the OnLine Internet site. Once the desired
images have been previewed, a hard copy of the file can be requested by e-mail
on a transaction basis.

Production companies spend thousands of dollars per week on scouts, film
development and couriers that send photographs around the country. By using
digital technology, OnLine is able to greatly reduce or eliminate film and
development costs, scout production time and courier fees. After the digital
camera takes the picture, it simply feeds the image into a computer without
having to produce a hard copy on paper.

The Location Database service allows directors, producers and location
managers to view an up-to-date library of files without leaving their office. If
a production company is unable to find the location they require from OnLine's
existing files, they can use the service as a communication tool to send the
criteria to a location scout, production company or film company. This is
especially effective for producers trying to access remote and hard to reach
locations.

o Other Products

MailCard

The MailCard is an application software computer program. It consists of
copyrightable sequences of computer instructions that enable its customers to
effectively access their personal

14
<PAGE>

mailboxes by way of an application program that resides on a floppy disk,
thereby allowing the user to access his or her e-mail from any location with a
PC or Windows PC computer and a modem and ISP. The MailCard is an integrated and
sophisticated product that focuses on providing e-mail services to a wide range
of users, including those who do not own a computer or have ISP service. The
MailCard may be customized to accommodate niche markets. The MailCard is capable
of running from either a floppy disk or a hard drive. It is self contained and
self running, having configuration information (i.e. in the "in" files) stored
within the application to allow it to be moved easily between computers. The
Program consists of approximately 15,000 lines of Pascal computer code.

Traditional e-mail allows people to exchange messages by computer with
employees, clients and potential customers anywhere in the world. It is a
flexible and rapid form of communication with only one drawback, you need a
configure base computer. The MailCard helps clients overcome this problem by
providing a portable e-mail client. Instead of trying to reconfigure another
computer, a user can simply insert the MailCard diskette into the drive and run
the program. Their e-mail will be downloaded to the disk with no trace of either
the program or their e-mail left on the computer.

In light of the many forms of competitive free Web based programs such as
"HOT MAIL" and "FREE MAIL," the Company is currently assessing the status of the
MailCard and its potential application to the film and television industries.

o Financing Transactions

MailCard

During the fiscal year ended August 31, 1998, OnLine entered into a
business transaction in connection with MailCard software. It sold, in separate
agreements with 5 individuals, worldwide territorial rights to the MailCard.

The permitted uses covered by the sale agreements include the following:

1. MailCard use by individuals and companies in the TV and motion picture
industry;

2. MailCard use by individuals and companies in the trucking industry;

3. MailCard use by individuals and companies that are clients of companies in
the financial services industry;

4. MailCard use by individuals and companies that are customers of companies
in the convenience store and chain retail store industry;

5. MailCard use by individuals and companies in the filed of education,
including schools and universities;

6. MailCard use be members of the general public for general non-industry
specific uses, accessing e-mail through public access facilities to be
found at financial institutions, convenience stores, chain retail stores,
markets, gas stations, restaurants, cyber cafes, etc.; and

7. MailCard use provided by large and medium size corporations for their
employees, customers or clients.

These agreements generated immediate revenues of $523,000 used to fund
operations of OnLine; it also generated contingent revenue of $2,828,000.

Except the purchase price, which varied from Cdn.$700,000 to
Cdn.$1,550,000, depending on the geographic areas covered by the sale
agreements, all of the sale agreements and have identical

15
<PAGE>

terms.

Simultaneously, OnLine's wholly owned subsidiary On-Line Distributing, Inc.
("OLD") entered into a "Distribution Agreement" with each of these individuals
pursuant to which it received the right to distribute and market MailCard for
the listed uses in the geographic areas covered by the Distribution Agreement.
The initial term of the Distribution Agreement is 10 years (expiring December
31, 2007) and is renewable by OLD, in its sole discretion, for another 10 years
provided that it satisfies certain minimum sales criteria. Except of the sales
territories covered, each of the Distribution Agreements have identical terms.
Please refer to "Item 13. Financial Statements" and "Note 10 of the Notes to the
Audited Financial Statements."

Casting Workbook

In each of the fiscal years ended August 31, 1999 and 1998, OnLine entered
into a business transaction in connection with the Casting Workbook software. It
sold, in separate agreements, rights to 5 individuals for the use of the Casting
Workbook in certain geographical areas (excluding New Brunswick, Nova Scotia,
Arizona, California, Hawaii, Massachusetts, Michigan, New Hampshire, Washington
and Rhode Island).

The permitted uses covered by the Sales Agreement include use in the
entertainment industry in North America by members of the following groups:

(a) users seeking to present themselves to casting directors and agencies;

(b) individuals looking for talented people, such as talent agencies and
casting directors; and

(c) individuals from both of the above groups looking for value added
services as further described in the emc Valuation.

These Sale Agreements generated immediate revenues of $587,000 and $655,000
in fiscal 1998 and 1999 respectively; they also generated contingent revenue of
$ 2,476,000 and $2,912,000 in fiscal 1998 and 1999 respectively. Except for the
purchase price, which varied from Cdn.$645,000 to Cdn.$2,865,000, depending on
the geographic areas covered by the agreements, all of the Sale Agreements have
identical terms.

Simultaneously, OnLine's wholly owned subsidiary Prairie On-Line Management
Services, Inc. ("Prairie") entered into a "Facilities Management Agreement" with
each of these individuals pursuant to which it was retained to operate, promote
and manage computer facilities incorporating data generated by the Casting
Workbook in the geographic areas covered by the Sale Agreements for the purposes
of providing talent agencies, their actors, casting directors and others in the
designated geographic areas with access to casting requirements, talent
information and related services, by means of the Internet. The initial term of
the Facilities Management Agreements is 10 years and are renewable by Prairie,
in its sole discretion, for an additional 10 years provided that it satisfies
certain criteria. Except for the geographic areas covered, all of the Facilities
Management Agreements have identical terms. Please also refer to "Item 13.
Financial Statements" and "Note 10 of the Notes to the Audited Financial
Statements".

The foregoing transactions permitted OnLine to fund its operations without
further dilution to its shareholders and to retain effective control over the
distribution and use of each of the MailCard and Casting Workbook.

16
<PAGE>

The following three tables provide specific information as to the territory
sales:

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

Table 1. Mailcard Territories Software Sales

- ------------------------------------------------------------------------------------------------------------------------------------
Expiration of
Company's
Name of Purchaser Purchase Price Distribution Rights Territories
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Saunder Sheinin $1,000,000 Year 2008 British Columbia, Yukon, Europe, Texas, Oklahoma, Louisiana,
Option to renew Arkansas, Mississippi, Alabama, Kansas, Missouri, Tennessee,
to year 2018 Kentucky
- ------------------------------------------------------------------------------------------------------------------------------------
James Bruce $1,000,000 Year 2008 Maine, New Hampshire, Vermont, Massachusetts, Connecticut,
Option to renew Rhode Island, New York, New Jersey, Pennsylvania, South America
to year 2018
- ------------------------------------------------------------------------------------------------------------------------------------
Tim Deholke $1,550,000 Year 2008 Ontario, West Virginia, Virginia, Maryland, Delaware, North
Option to renew Carolina, South Carolina, Georgia, Florida, D.C., Asia
to year 2018
- ------------------------------------------------------------------------------------------------------------------------------------
Michael Dickinson $800,000 Year 2008 Quebec, Indiana, Nevada, Arizona, Utah, Wyoming, Colorado, New
Option to renew Mexico, Oregon, Idaho, Washington, Alaska, Hawaii,
to year 2018 Australasian, North Dakota, South Dakota, Nebraska, Minnesota,
Iowa, Wisconsin, Michigan, Montana, Ohio, Illinois
- ------------------------------------------------------------------------------------------------------------------------------------
Pierre Faber $700,000 Year 2008 Nova Scotia, New Brunswick, P.E.I., Newfoundland, N.W.T.,
Option to renew California, Central America, Caribbean
to year 2018
- ------------------------------------------------------------------------------------------------------------------------------------

Table 2. Casting Working Fiscal 1998 Territory Software Sales

- ------------------------------------------------------------------------------------------------------------------------------------
Expiration of
Name of Purchaser Purchase Price Company's Management Territories Sold
- ------------------------------------------------------------------------------------------------------------------------------------
Michael Dickinson $2,257,705 Year 2007 British Columbia, Yukon, Arkansas Colorado, Kansas, Louisiana,
Option to renew Missouri, Montana, Nebraska, New Mexico, North Dakota,
to year 2017 Oklahoma, South Dakota, Texas, Utah, Wyoming

Idaho is excluded
from Facilities
Management Agreements
- ------------------------------------------------------------------------------------------------------------------------------------
Saunder Sheinin $2,282,736 Year 2007 Alberta, Saskatchewan, Manitoba, Northwest , Territories,
Option to renew Alabama, Delaware, Georgia, Kentucky, Maryland, Mississippi,
to year 2017 North Carolina, South Carolina, Tennessee, Virginia, West
Virginia
West Virginia is
excluded from
Facilities
Management Agreement
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

17
<PAGE>

<TABLE>
<CAPTION>
Table 3. Casting Workbook Fiscal 1999 Territory Software Sales

Alaska is excluded
from Facilities
Management Agreement
- ------------------------------------------------------------------------------------------------------------------------------------
Irwin Nathanson $1,825,000 Year 2008 Ontario, Connecticut, Illinois, Ohio, Nevada, Oregon
Option to renew
to year 2018

Oregon is excluded
from Facilities
Management Agreement
- ------------------------------------------------------------------------------------------------------------------------------------
Doug Holby $2,865,000 Year 2008 Quebec, Indiana, Maine, Minnesota, New Jersey, New York,
Option to renew Pennsylvania, Vermont, Wisconsin, Iowa
to year 2018

Iowa is excluded
from the Facilities
Management Agreement
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

o Risk Factors Associated With The Company's Business

Risks Associated Changing and Expanding Business.

The Company has experienced substantial changes in and expansion of the
Company's business and operations since it commenced operations, and expects to
continue to experience periods

18
<PAGE>

of change. The Company's past changes have placed, and any future changes would
place, significant demands on the Company's administrative, operational,
financial and other resources. The Company expects operating expenses and
staffing levels to increase in the future. In particular, the Company intends to
hire a number of additional skilled personnel, including persons with experience
in both the computer and film industries. Competition for such personnel is
intense, and there can be no assurance that the Company will be able to attract,
assimilate or retain additional highly qualified senior managers and technical
and production personnel in the future. The Company also expects to expend
resources with respect to future expansion of its technology, accounting and
internal management systems. This expansion will continue to challenge the
Company's ability to hire, train, motivate and manage its personnel. If the
Company's revenues do not increase in proportion to the Company's operating
expenses, the Company's management systems do not expand to meet increasing
demands, the Company fail to attract, assimilate and retain qualified personnel,
or the Company's management otherwise fails to manage the Company's expansion
effectively, there would be a material adverse effect on the Company's business,
financial condition and operating results. The implementation of the Company's
strategy for rapid growth in the use of the Company's services may strain its
ability to adequately expand technologically. In addition, the Company relies on
a number of third parties to process the Company's transactions, including
on-line and Internet service providers, all of which will need to expand the
scope of the operations they perform for the Company. Any backlog or inability
to use the Company's services caused by a third party's inability to meet the
Company's needs could have a material adverse effect on the Company's business,
financial condition and operating results.

Risk of Error and of Systems Failure.

The Company's business is subject to various risks associated with systems
errors and malfunctions and employee errors. Heavy stress placed on the systems
during peak "breakdown" times could cause the Company's systems to operate at
unacceptably low speeds or systems could fail altogether.

The Company has experienced incidents of system failure in the past and
there can be no assurances that such incidents will not reoccur in the future.
If such system failure, or if access to the internet is disputed, it may
preclude the Company from conducting normal operation for an undetermined period
of time. The Company may also experience losses in connection with employee
errors. Although expenses incurred by the Company in connection with employee
errors have not been significant in the past, there can be no assurance that
these expenses will not increase in the future.

Significant Fluctuations in Quarterly Operating Results.

The Company expects to experience significant fluctuations in future
quarterly operating results that may be caused by many factors, including the
following: the timing of introductions or enhancements of services and products
by the Company or the Company's competitors; changes in pricing policies by the
Company or the Company's competitors; changes in strategy; the success of or
costs associated with acquisitions or other strategic relationships; changes in
key personnel; seasonal trends; changes in the level of operating expenses to
support projected growth; and general economic conditions. In addition, the
Company has experienced fluctuations in the average number of customer
transactions per day and expects that its rate of growth in customer
transactions at any given time is not necessarily indicative of future
transaction activity.

Due to the foregoing factors, quarterly revenues and operating results are
difficult to forecast, and the Company believes that period-to-period
comparisons of its operating results will not necessarily be meaningful and
should not be relied upon as any indication of future performance. It is likely
that the Company's future quarterly operating results from time to time will not
meet the expectations of

19
<PAGE>

securities analysts or investors, which may have an adverse effect on the market
price of the Company's Class A Common Stock.

Competition.

There can be no assurance that the Company will be able to compete
effectively with current or future competitors or that the competitive pressures
faced by the Company will not have a material adverse effect on the Company's
business, financial condition and operating results.

Early Stage of Market Development; Dependence on the Internet.

As is typical for new and rapidly evolving industries, demand and market
acceptance for recently introduced services and products are subject to a high
level of uncertainty. The Internet may not prove to be a viable commercial
marketplace because of inadequate development of the necessary infrastructure,
such as a reliable network backbone, or timely development of complementary
services and products, such as high speed modems and high speed
communication-lines. The Internet has experienced, and is expected to continue
to experience, significant growth in the number of users and amount of traffic.
There can be no assurance that the Internet infrastructure will continue to be
able to support the demands placed on it by this continued growth. In addition,
the Internet could lose its viability due to delays in the development or
adoption of new standards and protocols to handle increased levels of Internet
activity or due to increased governmental regulation. Moreover, critical issues
concerning the commercial use of the Internet (including security, reliability,
cost, ease of use, accessibility and quality of service) remain unresolved and
may negatively affect the growth of Internet use or the attractiveness of
commerce and communication on the Internet. Because global commerce and on-line
exchange of information on the Internet and other similar open wide area
networks are new and evolving, there can be no assurance that the Internet will
prove to be a viable commercial marketplace. If critical issues concerning the
commercial use of the Internet are not favorably resolved, if the necessary
infrastructure is not developed, or if the Internet does not become a viable
commercial marketplace, the Company's retail business, financial condition and
operating results will be materially adversely affected. Adoption of on-line
commerce, particularly by those individuals that have historically relied upon
traditional means of commerce, will require a broad acceptance by such
individuals of new and substantially different methods of conducting business.

Technical Changes.

The information and financial services and communications industries are
characterized by rapid technological change, changes in customer requirements,
frequent new service and product introductions and enhancements, and emerging
industry standards. The introduction of services or products embodying new
technologies and the emergence of new industry standards and practices can
render existing services or products obsolete and unmarketable. The Company's
future success shall depend, in part, on its ability to develop leading
technologies, enhance its existing services and products, develop new services
and products that address the increasingly sophisticated and varied needs of its
prospective customers, and respond to technological advances and emerging
industry standards and practices on a timely and cost-effective basis. The
development of new services and products or enhanced versions of existing
services and products entails significant technical risks. There can be no
assurance that the Company will be successful in effectively using new
technologies,

20
<PAGE>

adapting its services and products to emerging industry standards, developing,
introducing and marketing service and product enhancements, or new services and
products, or that it will not experience difficulties that could delay or
prevent the successful development, introduction or marketing of these services
and products, or that its new service and product enhancements will adequately
meet the requirements of the marketplace and achieve market acceptance. If the
Company is unable to develop and introduce new services and products or
enhancements of existing services and products in a timely manner in response to
changing market conditions or customer requirements, or if new services and
products do not achieve market acceptance, the Company's business, financial
condition and operating results will be materially adversely affected.

Proprietary Rights and Risk of Infringement.

The Company's success and ability to compete are dependent to a significant
degree on its proprietary technology and on the proprietary technology licensed
by it. The Company relies primarily on copyright, trade secret and trade-mark
law to protect its technology and the technology licensed by it from third
parties. Notwithstanding the precautions taken by the Company, it may be
possible for a third party to copy or otherwise obtain and use the Company's
software or other proprietary information without authorization or to develop
similar software independently. Policing unauthorized use of the Company's
technology is difficult, particularly because the global nature of the Internet
makes it difficult to control the ultimate destination or security of software
or other data transmitted.

The laws of other countries may afford the Company little or no effective
protection of its intellectual property. There can be no assurance that the
steps taken by the Company will prevent misappropriation of its technology or
that agreements entered into for that purpose would be enforceable. In addition,
litigation may be necessary in the future to enforce the Company's intellectual
property rights, to protect the Company's trade secrets, to determine the
validity and scope of the proprietary rights of others, or to defend against
claims of infringement or invalidity. Such litigation, whether successful or
unsuccessful, could result in substantial costs and diversions of resources,
either of which could have a material adverse effect on the Company's business,
financial condition and operating results.

The Company may in the future receive notices of claims of infringement of
other parties' proprietary rights. There can be no assurance that claims for
infringement or invalidity (or claims for indemnification resulting from
infringement claims) will not be asserted or prosecuted against the Company. Any
such claims, with or without merit, could be time consuming to defend, result in
costly litigation, divert the Company's management's attention and resources or
require the Company to enter into royalty or licensing agreements. There can be
no assurance that such licenses would be available on reasonable terms, if at
all, and the assertion or prosecution of any such claims could have a material
adverse effect on the Company's business, financial condition and operating
results.

Future Capital Needs; Uncertainty of Additional Financing.

The Company currently anticipates that its available cash resources and
credit facilities, will be sufficient to meet its presently anticipated working
capital and capital expenditure requirements for at least the next 12 months.
However, the Company may need to raise additional funds in order to support more
rapid expansion, develop new or enhanced services and products, respond to
competitive pressures, acquire complementary businesses or technologies or take
advantage of unanticipated opportunities. The Company's future liquidity and
capital requirements will depend upon numerous factors, including the costs and
timing of expansion of research and development efforts and the success of such
efforts, the success of the Company's existing and new service offerings and
competing technological and market developments.

21
<PAGE>

The Company may be required to raise additional funds through public or
private financing, strategic relationships or other arrangements. There can be
no assurance that such additional funding, if needed, will be available on terms
attractive to the Company, or at all. Furthermore, any additional equity
financing may be dilutive to shareholders, and debt financing, if available, may
involve restrictive covenants. If additional funds are raised through the
issuance of equity securities, the percentage ownership of the Company's
shareholders will be reduced, shareholders may experience additional dilution in
net book value per share, or such equity securities may have rights, preferences
or privileges senior to those of the holders of the Common Stock. If adequate
funds are not available on acceptable terms, the Company may be unable to
develop or enhance its services and products, take advantage of future
opportunities or respond to competitive pressures, any of which could have a
material adverse effect on the Company's business, financial condition and
operating results.

Risks Associated with Acquisitions and Strategic Relationships.

The Company may make acquisitions of other companies or technologies in the
future, or may enter into strategic relationships, and the Company regularly
evaluate such opportunities. Acquisitions and the implementation of strategic
relationships entail numerous risks, including difficulties in the assimilation
of acquired operations and products, diversion of management's attention from
other business concerns, amortization of acquired intangible assets and
potential loss of key employees of acquired companies. No assurance can be given
that the Company will be able to integrate successfully any operations,
personnel, services or products that might be acquired in the future, and the
Company's failure to do so could have a material adverse effect on business,
financial condition and operating results.

The Company has established a number of relationships with on-line and
Internet service providers and software, information and financial service
providers. The Company will continue to seek out similar strategic opportunities
in the future. Examples of the Company's strategic relationships include its
relationships with Columbus. There can be no assurance that any such
relationships will be maintained, that if such relationships are maintained,
they will be successful or profitable, or that the Company will develop any new
such relationships. Further, the Company's success in any of its strategic
relationships is dependent on the reputation of its strategic partners. Should
any of the Company's strategic partners experience damage to their reputation,
the Company may be materially adversely affected.

Limited Operating History. The Company has not achieved profitability and
there is no guarantee that the Company will be able to achieve profitability in
the future. The Company has never paid a dividend on the Company's Class A
Common Stock and does not expect to do so in the foreseeable future.

Potential Future 144 Sales.

Of the 106,000,000 authorized shares of the Class A Common Stock, there are
presently issued and outstanding (or reserved for issuance) 14,153,906 shares;
all of which, except for 5,714,284 shares, are "restricted securities" as that
term is defined under the Securities Act of 1933, as amended (the "Act"), and in
the future may be sold in compliance with Rule 144 of the Act, pursuant to a
registration statement filed under the Act, or other applicable exemptions from
registration thereunder. In addition, the Company has an obligation to issue
1,000,000 Warrants (permitting the holder to purchase up to 1,000,000 shares of
the Company's common stock at $.50 per share) which may be due to ACC Axis, an
outside consulting firm.

The Company is presently assessing its arrangement with Axis.

22
<PAGE>

Rule 144 provides, in essence, that a person holding restricted securities
for a period of one year may sell those securities in unsolicited brokerage
transactions or in transactions with a market maker, in an amount equal to one
percent of the Company's outstanding Class A Common Stock every three months.
Additionally, Rule 144 requires that an issuer of securities make available
adequate current public information with respect to the issuer. Such information
is deemed available if the issuer satisfies the reporting requirements of
Sections 13 or 15(d) of the Exchange Act and of Rule 15c2-11 thereunder. Rule
144 also permits, under certain circumstances, the sale of shares by a person
who is not an affiliate of the Company and who has satisfied a two year holding
period without any quantity limitation and whether or not there is adequate
current public information available. Investors should be aware that sales under
Rule 144, or pursuant to a registration statement filed under the Act, may have
a depressive effect on the market price of the Company's Class A Common Stock in
any market that may develop for such shares.

The restricted shares, currently outstanding, will not be subject to Rule
144 until at least March, 2000.

Limited Market For the Company's Class A Common Stock.

There is only a limited trading market for the Company's Class A Common
Stock on the National Association of Securities Dealers, Inc. ("NASD")
over-the-counter Bulletin Board (the "OTCBB"), which may limit the marketability
and liquidity of the shares of the Class A Common Stock. Please also refer to
"Item 9. Market for Common Equity and Related Stockholder Matters."

Penny Stock Rules.

Under Rule 15g-9 of the Exchange Act, a broker or dealer may not sell a
"penny stock" to, or effect the purchase of a penny stock by, any person unless:

(a) such sale or purchase is exempt from Rule 15g-9;

(b) prior to the transaction the broker or dealer has (1) approved the
person's account for transactions in penny stocks in accordance with
Rule 15g-9, and (2) received from the person a written agreement to
the transaction setting forth the identity and quantity of the penny
stock to be purchased; and

The United States Securities and Exchange Commission (the "Commission") has
adopted regulations that generally define a penny stock to be any equity
security other than a security excluded from such definition by Rule 3a51-1.
Such exemptions include, but are not limited to (1) an equity security issued by
an issuer that has (i) net tangible assets of at least $2,000,000, if such
issuer has been in continuous operations for at least three years, (ii) net
tangible assets of at least $5,000,000, if such issuer has been in continuous
operation for less than three years, or (iii) average revenue of at least
$6,000,000 for the preceding three years; (2) except for purposes of Section
7(b) of the Exchange Act and Rule 419, any security that has a price of $5.00 or
more; and (3) a security that is authorized or approved for authorization upon
notice of issuance for quotation on the NASDAQ Stock Market, Inc.'s Automated
Quotation System.

Currently shares of the Company's Class A Common Stock will be subject to
the regulations on penny stocks; consequently, the market liquidity for the
Company's Class A Common Stock may be adversely affected by such regulations
limiting the ability of broker/dealers to sell the Company's Class

23
<PAGE>

A Common Stock and the ability of shareholders to sell their securities in the
secondary market.

Moreover, the Company's shares may only be sold or transferred by its
stockholders in those jurisdictions in which an exemption for such "secondary
trading" exists or in which the shares may have been registered.

Adequate Labor and Dependence Upon Key Personnel; No Employment Agreements.

The Company will depend upon recruiting and maintaining qualified personnel
to staff the Company's operations. The Company believes that such personnel are
currently available at reasonable salaries and wages. There can be no assurance,
however, that such personnel will always be available in the future. Loss of the
services of any of this management team and key employees could have a material
adverse effect on the Company's operations. The Company does not have any
employment agreements with any of the Company's officers and/or employees.
Please also refer to "Item 5. Directors, Executive Officers, Promoters and
Control Persons."

Conflicts of Interest.

From time to time certain of the Company's directors and executive officers
may serve as directors or executive officers of other companies and, to the
extent that such other companies may participate in the industries in which the
Company may participate, such directors and officers may have a conflict of
interest. In addition, the Company's dependence on directors and officers who
devote time to other business interests may create conflicts of interest, i.e.
that the fiduciary obligations of an individual to the other company conflict
with the individual fiduciary obligations of the Company and visa versa.
Directors and officers must exercise their judgment to resolve all conflicts of
interest in a manner consistent with their fiduciary duties to the Company. In
the event that such a conflict of interest arises at a meeting of the directors
of the Company, a director who has such a conflict will abstain from voting for
or against the approval of such a participation or such terms. In appropriate
cases, the Company will establish a special committee of independent directors
to review a matter in which several directors, or management, may have a
conflict. The Company is not aware of the existence of any conflict of interest
as described herein.

Control by Management.

The Company's current officers and directors, as a group, beneficially own
4,323,292 or 31% of the then issued and outstanding common stock; and,
accordingly may be able to exercise effective control over the Company's
operations, including but not limited to, the election of directors.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion and analysis of the Company's and OnLine's
financial condition and results of operations should be read in conjunction with
the Company's financial statements and notes thereto included elsewhere.

Overview

Prior to its acquisition of OnLine, the Company was virtually inactive and
had no revenues from operations. Please also refer to "Item 1. Description of
Business--Corporate Organization." Accordingly, the following discussion focuses
on the development of OnLine's business since its formation in 1995.

From inception through OnLine's fiscal year ended August 31, 1998 (Fiscal
1998) OnLine's

24
<PAGE>

primary focus was the development of software solutions, specifically the
Casting Workbook, Locations, Productions and the MailCard for the film and
television industry. See "Item 1. Description of Business-The Company's
Business." During this period, OnLine actively tested, redesigned and refined
its product lines, in smaller more controlled market environments, to better
suit industry requirements. The development of its business was financed, in
part, through the sale of certain rights to some "fields of use" of the MailCard
and Casting Workbook software it has developed.

OnLine's marketing and sales efforts to present have been toward a very
selected and narrow focus. The objective was, and continues to be, to secure the
majority of key professionals using the Casting Workbook on a daily basis for
television, commercial and feature film projects. When most of these
professionals use the Casting Workbook to cast roles it is anticipated that
performers will seek to avail themselves of OnLine's products and services.
OnLine is well under way to accomplishing its goal. In the month of May, 1999
more than 850 roles were cast through the Casting Workbook system.

OnLine now has approximately 12,000 entertainers (of which approximately
one-third are on a "free trial" or "test" basis and do not pay fees) using some
or all of its available Casting Workbook Products which has resulted in revenues
of approximately $209,000 through August 31, 1999. These entertainers are
situated primarily in Toronto and Vancouver, Canada.

OnLine is now poised to expand its plan of operations to encompass a larger
and more concentrated performer market in Los Angeles. In May of 1999 the
Company commenced its marketing efforts in the United States by hosting a
product demonstration and reception for casting directors and agents on the 20th
Century Fox Studios production lot.

OnLine is currently expanding operations in Los Angeles to support this
market. The staff that is currently being implemented in Los Angeles consists
of: a manager to oversee the development of the Los Angeles actor and modeling
database; reception, technical support for casting director turnkey equipment
installation and set up of agency accounts as well as second level support to
the sales team, a sales team capable of doing database seminars, and ongoing
first-line technical support and writers/scanners for handling script breakdowns
as well as incidental photo scans.

Results of Operations

August 31, 1999 Compared to August 31, 1998

In the year ended August 31, 1999 revenues from operations decreased to
$958,000 from $1,201,000 from the year ended August 31, 1998. The decreased
revenue of $243,00 was due primarily to the one time sale in 1998 of the
MailCard which generated revenues of $523,000, offset by an increase in revenues
of $174,000 from the Casting Workbook in 1999. Other income increased from
$238,000 to $388,000 due to an increase in interest income of $150,000. However,
the Company experienced a net loss of $328,000 as compared to a net loss of
$118,000 for the comparable period. This was due to increased direct costs of
$161,000 from $759,000 to $920,000, due in part to the exclusivity payment of
$203,000 for the Casting Workbook Agreement which was effective toward the end
of 1998, increases in direct subcontract and selling expenses offset by a
decrease of $227,000 in development costs. Increased and administrative expenses
of $41,000 from $796,000 to $755,000 was due to a decrease in management fees of
$270,000 offset by increases in other general and administrative expenses of
$229,000.

Liquidity and Capital Resources

The Company's principal capital requirements are expected to be (a)
software development costs and purchase of computer hardware, (b) maintain and
improve our web servers and (c) provide

25
<PAGE>

continued customer support. To date, funding has been provided through equity
financing, sale of certain of its software territories, and operations.

At the end of the prior fiscal year, the Company purchased software for use
in the production of commercials. The purchase price of the software was
$3,950,000. The payment of the purchase price consists of two payments of
$100,000 (paid), the issuance of 250,000 common shares at a value of $1 per
share (issued) and the issuance of a note payable, dated February 19, 1999, of
$3,500,000. In the current year, the Company expended an additional $8,000
relating to this software purchase. The agreement is with Columbus Software Inc.
The note payable is due only if the Company achieves specified sales objectives
on or before August 31, 2008. The note bears interest at the rate of 3% per
annum from and after January 1, 1999 payable within 30 days of the end of year
calendar year. Accordingly, the first payment of interest will be due January
30, 1999. Failure to cure any default within 90 days of written notice thereof,
gives the holder of the note the right to accelerate payment.

The Company has available a $60,000 line of credit with the Royal Bank in
Vancouver, British Columbia. The line of credit bears interest at the rate of
Royal Bank prime plus 1.75% per annum. As at August 31, 1999 the Company had
used $30,000 of this available line of credit.

The Company has a mortgage payable to Vancity Credit Union bearing interest
at 8.75% per annum with monthly payments of $632. The Mortgage is renewable May
2001. The Mortgage is secured by real estate (office) at 208-2323 Boundary Road,
Vancouver, British Columbia. The balance at August 31, 1999 was $76,014. The
Company expensed $6,500 in interest relating to this loan in the year ended
August 31, 1999 versus $7,600 in the prior year. This was the only loan interest
paid in the year ended August 31, 1999. The Company expects to make principal
payments of $8,184 on this loan in the fiscal year ending August 31, 2000.

Absent a default, none of the notes, loans or lines of credit to which the
Company is a party contain any term or provisions which curtail the Company's
ability to conduct it business operations.

At August 31, 1999 the company had liquid assets of $578,000. Cash flow
from the Casting Workbook is expected to increase with the launch of the US
version in October, 1999.

Operating Plan

In the first quarter of the fiscal year ending August 31, 2000, the Company
plans to continue its recruiting drive for casting directors and talent agents.
As part of this drive, the Company will furnish computer hardware and software
to key casting directors in the Los Angeles market. The Company will install
additional servers in the Los Angeles office to support the launch of the
Casting Workbook in late October. In addition, the Company is planning to expand
its marketing efforts in Los Angeles to include trade shows, seminars and print
advertising. The Company will also launch its model and talent scout databases
in the Los Angeles area from which the Company anticipates further revenues.
Consequently, staffing the Los Angeles office will be a major priority in the
first quarter, with an emphasis on sales and marketing personnel.

Also in the first quarter the Company plans to complete its development and
release of the MasterCaster software for casting directors, finalize its
e-commerce development for automated registration and payment for its customers,
and finalize casting notices for non-represented actors.

Towards the end of the first quarter the Company intends to begin closing
sales of its Production Workbook to commercial producers.

26
<PAGE>

Efforts in the second quarter will focus on continued growth of the Casting
Workbook database, as well as the Model and Talent Scout databases in the Los
Angeles area. The Company believes that the integration of the Master Caster
software with the Casting Workbook will solidify wide casting director
acceptance in Los Angeles.

The third and fourth quarters will be focused on marketing its databases to
actors and agents, and promoting its additional revenue sources on the Casting
Workbook and Model database such as audio and video clips. It also intends to
actively search for a US Distribution partner, and expand its marketing efforts
to universities, acting schools, and performers in live theater. In addition,
the company anticipates adding a production crew and staff database, and
integrate its Talent Agent software into the Casting Workbook.

During the year, the Company intends to break into the New York market
initially by distributing breakdowns via fax even if it does not establish an
office facility there. The Company also plan to focus on promoting electronic
video reels to actors and models.

Financial Plan

The Company anticipates expenditures for the fiscal year ending August 31,
2000 to be:

General and Administrative $909,000
Computer Hardware 132,400
Computer Software/Development 108,700
Marketing and Promotion 550,000

General and Administrative expenses consist of payroll and related expenses
for executive, accounting, and administrative personnel, professional fees, and
other general corporate expenses. General and Administrative expenses for the
fiscal year ended August 31, 1999 were $755,000. These expenses are expected to
continue to increase as we expand our staff and support functions to support the
anticipated growth of the Company.

The Company is anticipating an increase in marketing and promotional costs
as it grows, and to maintain and expand its recognition in the marketplace.
These costs are expected to increase over the year to approximately 10% of
revenues.

The Company anticipates revenue growth in the next 12 months to come from
the US Casting Workbook in Los Angeles, and revenues from the sales of the
commercial suite software.

Long Term Investments

Long term investments consists of British Columbia Savings Bonds in a principal
amount of $2,878,800 with, accrued interest of $38,800 unpaid at the balance
sheet date. These bonds earn interest at 6% per annum paid semi-annually and are
locked in to June 9, 2008. These bonds serve as registered collateral on the
MailCard contingent sales agreement dated September 17, 1997. The amount of the
collateral claim registered against these bonds is $2,878,800 which is locked in
until June 9, 2008. Also included in long term investments is the amount of
$2,491,600 of which $2,475,600 serves as registered collateral relating to the
Casting Workbook software contingent sales agreement dated December 31, 1997,
with the principal to be locked in until December 31, 2007. From the agreement
date to the balance sheet date, these funds have been placed in seven day CIBC
GIC's earning interest revenue at variable rates through the period. Also
included in long term investments is

27
<PAGE>

the amount of $2,931,000 of which $2,912,300 serves as registered collateral
relating to the Casting Workbook software contingent sales agreement dated
December 31, 1998, with the principal to be locked in until December 31, 2008.
From the agreement date to the balance sheet date, these funds have been placed
in seven day CIBC GIC's earning interest revenue at variable rates through the
period.

o Financing Planned Expansion

Although the Company raised $663,740 in March, 1999 through a private
placement of 5,714,284 shares, there is no assurance that the Company will be
able to obtain additional financing as, if and when required. The company's
plans to expand the Los Angeles office and open an office in New York are
underway. If the company cannot meet its expansion needs through operations
and/or other financing methods, the Los Angeles expansion and any new area
expansion will be placed on hold until such time as the financing is available.
The company is launching its US Casting Workbook from Los Angeles on October 25,
1999. The results of the US Casting Workbook will determine the company's
expansion schedule.

Year 2000 Issues

The Year 2000 issue results from computer systems using two digits rather
than four to represent the year so that a date using "00" is recognized as the
year 1900 rather than the year 2000. This situation may disrupt the smooth
operation of both the Company and third party's computer systems.

The Company's State of Readiness

In order to reach the Company's internal Year 2000 readiness it is
proceeding through four phases. First it evaluated its IT computer systems and
non-IT systems for Year 2000 compliance. IT computer systems and non-IT systems
have been purchased in the last few years and most have been designed and built
with Year 2000 compliance in mind. As a result, a minimal number of computer
systems required software patches to third party software. The Company did not
discover any non-compliance in its non-IT systems and has not had to replace any
to date.

In the second phase the Company planned fixes in the form of software
patches created and tested by he third party software vendors. It then applied
the patches on test computer systems and evaluate their results. The Company is
scheduled to complete this phase by December 15, 1999.

In the third phase the Company will implement these patches on secondary
computer systems, test the results and then implement the third party software
patches as necessary to the primary computer systems and test those results.
This phase is scheduled for completion by December 10, 1999.

Year 2000 compliance software will be used to further verify the
reliability of the computer systems on an ongoing basis.

In the fourth phase the Company will finalize its Year 2000 contingency
plans. To date, initial contingency plans have been created. These are currently
being evaluated and are scheduled for final approval on December 10, 1999.

Most of the Company's key systems are built with redundancy to ensure that
its material services are supported by multiple vendors. Any material disruption
by one vendor will be automatically backed up by another vendor's services,
minimizing the Company's dependency on any one vendor. The Company has canvassed
its vendors to determine their year 2000 compliance. To

28
<PAGE>

date, the Company has not identified any significant risks or material
disruptions.

As the Company has assisted many of its clients with the recent
computerization of their businesses, their systems are also new and largely Year
2000 compliant with minimal legacy computer systems. Once the Company completes
its internal Year 2000 compliance the Company plans to assist its clients in
achieving their own Year 2000 compliance. On December 10, 1999, the Company will
provide its clients documentation to assist them with identifying any Year 2000
issues they may have and providing addresses of support material and third party
software patches.

The cost to the Company

The Company does not separately track the internal costs incurred for the
Year 2000 project, and these costs are principally the related payroll costs for
its information systems group. As its software has been developed recently, it
was originally developed with the Year 2000 issue in mind and thus has required
no modifications. The risks associated with updating the Company's system to
Year 2000 compliance are minimal. The normal redundancy of the Company's
internal staff computer systems ensures that any issues arising from the
staggered Year 2000 upgrades to the Company's staff computer systems can be
solved without resulting in loss of operations.

The Company's non-IT systems, equipment with embedded chips, have been
purchased in the last few years. The Company has not had to replace any non-IT
systems.

The risks to the Company's Year 2000 Issues

The most likely worst case Year 2000 scenarios that the Company expects to
face include unexpected disruptions to our internal computer systems or to those
of our vendors. These could cause material disruptions of the Company's
operations.

Other possible worst case Year 2000 scenarios include unexpected material
disruptions from one or more of the Company's clients. If a computer system or
fax machine of one of our clients fails to operate they could experience
difficulty accessing the Company's computer systems or faxing material to us.
Short term disruptions of this nature would not have a significant effect on the
Company's operations.

The Company's contingency plans

The Company's contingency plan to handle unexpected disruptions to its
computer systems or those of its vendor(s) is three fold.

Firstly, the Company has previously designed redundancy into our computer
systems and our key systems are supported by multiple vendors. If a given system
experiences and unexpected disruption many systems will automatically fall over
to back up systems.

Secondly, IT staff will be on the job to ensure the success of the final
data backups on 1999. On January 1st, 2000, IT staff will evaluate all systems
for any disruptions, and manually switch any necessary system to a backup system
and contact vendors as required to determine estimated repair times in the event
of any system failure(s). As the casting industry does not work until the first
week of January, most of the Company's clients will not be accessing its systems
during the first few days of January, 2000. This should give the Company enough
time to deal with any other problems.

Lastly, with trained staff in offices in Los Angeles, Vancouver and
Toronto, the Company will be able to shift workloads from one office to another
as necessary to assist with correcting any disruptions in any other Online
office.

29
<PAGE>

The Company is also taking a proactive approach to handling possible
disruptions to its clients operations. In November 1999 it will be providing
information and assistance to its clients to evaluate their Year 2000 readiness
and assist them in accomplishing their Year 2000 compliance. The Company will
also be dedicating technical and client support staff to assist its clients in
January 2000 with any disruptions they may encounter.

The Company intends to monitor the progress of its vendors, customers or
others with whom it transacts business, including financial institutions, in
becoming Year 2000 compliant. The Company has not formulated a contingency plan
to deal with the potential non-compliance of vendors, customers and others with
whom it transacts business, including financial institutions, but will be
considering whether such a plan would be feasible.

ITEM 3. DESCRIPTION OF PROPERTY

Real Property

Vancouver

The Company owns a 1,400 square foot commercial condominium unit (No. 208)
at 2323 Boundary Road, Vancouver, British Columbia which presently serves as the
Company's corporate headquarters. The Company purchased the unit on May 22, 1996
for $101,963. The Company has a $75,300 balance on an initial $79,148 mortgage
on the property. The Company's payments are $632 per month.

On July 1, 1999 we expanded the Company's corporate headquarters by leasing
the adjacent unit No. 207 at 2323 Boundary Road, Vancouver, British Columbia, on
the basis of a 6 month renewable term. The premises are approximately 1,300
square feet. The rent is $805 per month.

Toronto

As of March 1, 1999 the Company also lease approximately 677 square foot
office at #1303 of 2 Carlton Street, Toronto, Ontario. The Company's rent is
$663 per month. The term is for two years.

Los Angeles

As of May 7, 1999 the Company rented a 1,200 square foot office at #201
1529 S. Bundy Drive, LA CA 90025. The Company's rent is $1,250. The term is for
one year.

Equipment

The Company owns and/or leases a variety of office equipment consisting
primarily of photocopying machines, personal computers and telephone equipment.

30
<PAGE>

ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial
ownership of the Class A Common Stock as of October 31, 1999, (1) each person
who is known by the Company to own beneficially more than five percent (5%) of
the Class A Common Stock; (2) each of the Company's directors and officers; and
(3) all of the Company's directors and officers as a group.

================================================================================
NAME AND ADDRESS OF BENEFICIAL OWNER NO. OF

VOTING

SHARES BENEFICIALLY %

OWNED
- --------------------------------------------------------------------------------
Aerock Fox (President & Director)

2390 W. Queens Ave.

Vancouver, BC Canada V6V 2Y6 2,488,316 (1)(3) 18%
- --------------------------------------------------------------------------------
Terry Roycroft (Secretary-Treasurer & Director)

5120 Bessborough Drive

Burmaby BC Canada V5B 4N9 1,834,976 (2)(4) 13%
- --------------------------------------------------------------------------------
Susan Fox

2390 W. Queens Ave.

Vancouver, BC Canada V6V 2Y6 2,488,316 (3)(1) 18%
- --------------------------------------------------------------------------------
Sharon Fox

5120 Bessborough Drive

Burmaby BC Canada V5B 4N9 1,834,976 (4)(2) 13%
- --------------------------------------------------------------------------------
Kirt W. James

34861 Spinnaker

Dana point CA 92629 1,381,000 13%
- --------------------------------------------------------------------------------

All Officers & Directors as a Group (2 persons) 4,323,292 31%

================================================================================

(1) The 2,488,316 shares of Class A Common Stock beneficially owned by Mr. Fox
consists of (i) 300,000 shares owned directly by his wife, Susan Fox, (ii)
1,967,516 shares of Class B Shares, owned directly by Mr. Fox, and (iii)
220,800 shares of Class B Shares owned by his wife, Susan Fox.

(2) The 1,834,976 shares of the Company's Class A Common Stock owned
beneficially by Mr. Roycroft consists of (i) 350,000 shares of Class A
Common Stock owned directly by Mr. Roycroft, (ii) 1,104,976 shares of Class
B Shares owned directly by Mr. Roycroft and (iii)

31
<PAGE>

380,000 shares of Class B Shares owned directly by his wife, Sharon Fox.

(3) The 2,488,316 shares of Class A Common Stock beneficially owned by Susan
Fox, Mr. Fox's wife, consist of (i) 300,000 shares of Class A Common Stock
owned directly by Mrs. Fox; (ii) 220,800 shares of Class B Shares owned
directly by Mrs. Fox; and (iii) 1,967,516 shares of Class B Shares owned
directly by Mrs. Fox's husband, Aerock Fox. Susan Fox and Sharon Fox are
not related.

(4) The 1,834,976 shares of Class A Common Stock beneficially owned by Sharon
Fox consist of (i) 350,000 shares owned directly by her husband Terry
Roycroft; (ii) 380,000 shares of Class B Shares owned directly by Mrs. Fox;
and (iii) 1,104,976 shares of Class B Shares owned directly by her husband,
Terry Roycroft. Susan Fox and Sharon Fox are not related.

32
<PAGE>

ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The following persons are the directors, executive officers and/or key
employees of the Company:

AEROCK FOX

President & Chief Executive Officer, Director since March 1999

Since December 1994 Mr. Fox, who is 53 years old, has served as President
and director of Online. Prior thereto Mr. Fox founded and served (and continues
to serve) as president of Fox Productions Inc., a privately owned production
company. Mr. Fox's degrees in Education and Business at McGill University; he
also received Masters Degree in Psychology while majoring in Business and
Education at the University of British Columbia. Aerock Fox is married to Susan
Fox.

TERRY ROYCROFT

Vice President Investor & Corporate Relations, Director since March 1999

Since December 1994 Mr. Roycroft, who is 43 years old, has served as a Vice
President and director of Online. Prior thereto Mr. Roycroft founded and served
(and continues to serve) as president and director of Croft Entertainment Inc. a
privately held company.

SUSAN FOX

Vice President of Marketing & Sales since March 1999

Since December 1994, Mrs. Fox, who is 42 years old, has served as a Vice
President of Online. Prior thereto she served as an executive producer of Fox
Productions Inc. Mrs. Fox is Aerock Fox' wife. Mrs. Fox has four years of post
secondary education that includes Arts and Literature from Douglas College,
Business, Architectural design and Contract Law from BCIT and Fine Arts from
Langara College. Susan Fox is married to Aerock Fox.

CHUCK BUCKLEY

Vice President of Information Systems since March 1999

Since December, 1995 Mr. Buckley, who is 34 years old, has served as a Vice
President of Online. Prior thereto Mr. Buckley's fifteen years of experience
with computers has given him the opportunity to work on mainframe, mini,
workstations, and personal computers. He has mastered operating systems such as
DOS, Windows, Windows NT, Macintosh System 7.x, UNIX and Linux. Some of the
software Mr. Buckley is competent with include MS Office (Word, Excel, etc.),
Word Perfect, Lotus 123, Ami Pro, Corel Draw, Page Maker, Quark Xpress, Adobe
PhotoShop, Strata Studio Pro, Paradox, Filmmaker Pro, Adobe SiteMill, WebStar,
Web Server, Tango ACGI, Fulcrum, Netscape and most Internet clients and
Protocols.

Prior thereto Mr. Buckley was employed by the West Coast Vitamin House,
where he was in charge of the networked accounting programs.

All directors and officers of the Company are elected annually to serve for
one year or until their successors are duly elected and qualified.

The Company currently has nine full time personnel and is supported to the
extent required by outside consultants. Additional staff will be recruited as
required to support the Company's growth and development. All of the full time
personnel are contracted consultants. Key personnel also have equity positions
and have executed confidentiality and non-competition agreements. Compensation

33
<PAGE>

levels are, and will continue to be commensurate with industry standards with
incentive programs extended to the key personnel.

During the past five years no director, executive officer, promoter or
control person of the Company:

(1) was the subject of any bankruptcy petition filed by or against any
business of which such person was a general partner or executive officer either
at the time of the bankruptcy or within two years prior to that time;

(2) was convicted in a criminal proceeding or is subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);

(3) was subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; or

(4) was found by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law.

34
<PAGE>

ITEM 6. EXECUTIVE COMPENSATION

The following table sets forth information concerning the compensation, in
Canadian dollars, of the named executive officers from July1, 1995 through
August 31, 1999.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
--------------------------------- ------------------------- ----------------------
Awards Payments
----------------------- -----------------------

Other Securities All
Year Annual Restricted Under- other
Name And or Compen- Stock Lying LTIP Compen-
Principal Position Period Salary Bonuses sation Award(s) Options/ Payouts sation
Ended ($)(1) ($) ($) ($) SARs ($) ($)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aerock Fox 8/31/99 160,725
President and Director
- ----------------------------------------------------------------------------------------------------------------------------------
8/31/98 117,014 - - - - - -
--------------------------------------------------------------------------------------------------
8/31/97 23,672
--------------------------------------------------------------------------------------------------
8/31/96 59,358(2) - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Terry Roycroft 8/31/99 121,645
Secretary, Treasurer and
Director
- ----------------------------------------------------------------------------------------------------------------------------------
8/31/98 128,282(3) - - - - - -
--------------------------------------------------------------------------------------------------
8/31/97 10,808
--------------------------------------------------------------------------------------------------
8/31/96 7,328(4) - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Chuck Buckley 8/31/99 40,116
Vice President
- ----------------------------------------------------------------------------------------------------------------------------------
8/31/98 28,888 - - - - - -
--------------------------------------------------------------------------------------------------
8/31/97 21,470
--------------------------------------------------------------------------------------------------
8/31/96 22,900 - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Susan Fox 8/31/99 62,800
Vice President
- ----------------------------------------------------------------------------------------------------------------------------------
8/31/98 41,152 - - - - - -
--------------------------------------------------------------------------------------------------
8/31/97 24,443
--------------------------------------------------------------------------------------------------
8/31/96 24,289
--------------------------------------------------------------------------------------------------
Total 900,761(5) - - - - -
==================================================================================================================================
</TABLE>

(1) These payments were made respectively as follows:
As to Mr. Fox, to Fox Productions, Inc., a corporation wholly owned by Mr.
Fox.
As to Mr. Roycroft, to Croft Entertainment, Inc., a corporation wholly
owned by Mr. Roycroft.
As to Mrs. Fox, to Snow Lions Entertainment, Inc., a corporation wholly
owned by Mrs. Fox.
As to Mr. Buckley, to Electric Sprocket, Inc., a corporation wholly owned
by Mr. Buckley.
(2) Includes $59,358 of restricted stock awards.

35
<PAGE>

(3) Includes $65,229 of restricted stock awards.
(4) Includes $7,328 of restricted stock awards.
(5) Includes $131,915 of restricted stock awards.

The Company does not have any employee stock option or other compensatory
plans.

ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Except for management fees paid as disclosed in Note 17 to the August 31,
1999 audited financial statements, there has been no transaction during the last
two years, or proposed transactions, to which the Company is or will be a party
and in which any of its officers, directors principal stockholders or any family
member of such person has a direct or indirect material interest.

ITEM 8. LEGAL PROCEEDINGS

The Company is not a party to any litigation, and has no knowledge of any
threatened or pending litigation against the Company.

ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Class A Common Stock has been quoted on the OTC BB since March 4, 1999
(and prior thereto the common stock of the Company's predecessor, Earth
Industries,) under the symbol ONPS. The following table sets forth high and low
bid prices for the Class A Common Stock for the calendar quarters indicated as
reported by the OTC BB from November 27, 1998 through September 30, 1999. These
prices represent quotations between dealers without adjustment for retail
markup, markdown or commission and may not represent actual transactions.

1998: High Low Volume
- ---- ---- --- ------
November 27, 1998 through Unpriced No Sales
December 31, 1998

1999:
January-February $5 $1 14,500
March - (after $4 $2 2,953,600
1 for 30 reverse split)
April-June $3.28 $1.43 6,803,600
July $2.12 $1.50 950,646
August $1.43 $.68 2,179,862
September $1.06 $.68 1,376,341

36
<PAGE>

As of October 12, 1999 there were 131 registered holders of the Class A
Common Stock and 4 registered holders of Class B Shares.

The Company has paid no dividends to date and does not expect to pay any
dividends in the foreseeable future.

ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES

Pursuant to the Plan of Reorganization, the Company issued 1,711,926 shares
to the shareholders of Earth Industries in reliance on Section 4(2) of the
Securities Act.

Following the Reorganization and in accordance with the terms and
conditions of the Plan of Reorganization:

On March 4, the Company issued 5,714,284 shares of Class A Common Stock in
consideration of the payment of an aggregate of $663,740, pursuant to
Regulation D, Rule 504, as promulgated by the SEC, pursuant to ss.3(b) of
the Securities Act of 1933; the shares were issued to 10 non US persons (7
corporations, 2 individuals and one retirement account), none of whom were
or are affiliated with the Company, as follows:

- --------------------------------------------------------------------------------
Shareholder: # Shares % of Total (1)
------------ -------- --------------
- --------------------------------------------------------------------------------
Multi Million Investments Limited 857,143 8.74
Suite 805 Queens Place
74 Queens Road Central
Hong Kong
- --------------------------------------------------------------------------------
Reulcap International Limited 857,142 8.74
3 Trilogy Court
Paget Close, Paget Bermuda
- --------------------------------------------------------------------------------
Strand Management Corporation 285,714 2.91
2160-650 West Georgia Street
Vancouver, BC V6B 4N7 Canada
- --------------------------------------------------------------------------------
Pacific Growth Ventures Ltd. 857,143 8.74
1000-409 Granville Street
Vancouver, BC V6C 1T2 Canada
- --------------------------------------------------------------------------------
Neil Linder RRSP Acct. #200-0635-4 571,429 5.83
C/o Canaccord Capital Corp.
220-609 Granville Street
Vancouver, BC V7Y 1H2 Canada
- --------------------------------------------------------------------------------

37
<PAGE>

- --------------------------------------------------------------------------------
Shareholder: # Shares % of Total (1)
------------ -------- --------------
- --------------------------------------------------------------------------------
1034706 Ontario Ltd. 571,429 5.83
3384 Four Bentall
1055 Dunsmuir Street
Vancouver, BC V7X 1L3 Canada
- --------------------------------------------------------------------------------
Windsor Management Services Inc. 571,429 5.83
2001 Leeward Highway
P.O. Box 62
Providenciales
Turks and Caicos Islands, B.W.L.
- --------------------------------------------------------------------------------
Clarence and Brenda DeBelle As Joint Tenants 571,429 5.83
1872 Westview Drive
North Vancouver, BC V7M 3A8 Canada
- --------------------------------------------------------------------------------
Pan Star Capital Corp. 571,429 5.83
Craigmuir Chambers 571,426
Road Town, Tortola BVI
- --------------------------------------------------------------------------------
Sub-Total this Requested 504 Issuance 5,714,284 58.26
- --------------------------------------------------------------------------------

(1) These percentages are calculated upon the total expected issued after the
issuance requested herein, and concerns only Class A Common Stock, and not Class
B Special Voting Shares. The percentages are however calculated treating the
2,382,778 Class A reorganization shares as reserved for issuance.

On March 3, 1999 the Company issued 2,763,598 shares of Class A Common
Stock, at a deemed price (an agreed to value by the parties) of $1.00 to the
existing shareholders of Online, in exchange for all of such shareholders shares
of Online. The Company believes that the issuance of these shares was exempt
from registration under the Securities Act by virtue of the exemption from
registration provided by ss.4(2) of the Securities Act and Rule 145 promulgated
thereunder for offers and sales not involving a public offering.

The Company issued 3,673,292 Class B Shares to 4 individual shareholders
(Messrs. Fox and Roycroft and their respective spouses) of Online in
consideration of the exchange by such shareholders of their common shares of
Online for Preferred Equity Shares of Online. The Class B Shares are convertible
to shares of Class A Common Stock at any time, upon cancellation of the
corresponding Preferred Equity Shares of OnLine. The Company believes that the
issuance of these shares was exempt from the registration requirements of the
Securities Act by virtue of the exemption afforded by Section 4(2) of the
Securities Act for offers and sales not involving a public offering.

On March 10, 1999, the Company also issued an additional 40,756 shares of
Class A Common Stock in settlement of debts (accrued and unpaid wages) in the
aggregate amount of approximately $27,600, to 6 persons who were employees (but
not officers or directors) of the Company. The Company believes that the
issuance of these shares was exempt from the registration requirements of the
Securities Act by virtue of the

38
<PAGE>

exemption afforded pursuant to ss.4(2) of the Securities Act for offers and
sales not involving a public offering.

The Company also issued, on March 22, 1999, 250,000 shares of Class A
Common Stock, at a deemed value (an agreed to value by the parties) of $1.00 per
share, in partial satisfaction of OnLine's obligation under OnLine's agreement
to purchase the commercial software suite from Columbus. The Company believes
that the issuance of these shares was exempt from the registration requirements
of the Securities Act by virtue of the exemption afforded pursuant to ss.4(2) of
the Securities Act for offers and sales not involving a public offering.

Upon completion of the Reorganization, and as at October 31, 1999 the
Company had 10,480,614 shares of Class A Common Stock and 3,673,292 Class B
Shares issued and outstanding.

39
<PAGE>

Table 1 summarizes the issuances of Class A Common Stock through October
31, 1999: Table 1

Class A Common Stock

================================================================================
Issuance of Class A Common Stock to: No. of Shares Issued

- --------------------------------------------------------------------------------
1. Shareholders of Earth Industries 1,711,976(1)
- --------------------------------------------------------------------------------
2. Private Placement 5,714,284
- --------------------------------------------------------------------------------
3. Shares issued to OnLine shareholders 2,763,598
- --------------------------------------------------------------------------------
4. For debt settlement(2) 40,756
- --------------------------------------------------------------------------------
5. Asset Purchase(3) 250,000
- --------------------------------------------------------------------------------
TOTAL CLASS A COMMON STOCK 10,480,614
================================================================================

(1) The 1,712,000 shares of Class A Common Stock became 1,711,976 after
rounding off fractional shares.

(2) These shares were issued to unaffiliated individuals in settlement of debts
approximating $27,600.

(3) Please refer to "Item 1. Description of Business-- Recent Transactions."

Table 2 sets forth the Company's currently issued and outstanding voting
securities:

Table 2

All Issued and Outstanding Voting Securities

================================================================================
CLASS OF VOTING SHARES NO. SHARES % OF VOTING
SECURITIES
- --------------------------------------------------------------------------------
CLASS A COMMON STOCK 10,480,614 74
- --------------------------------------------------------------------------------
CLASS B SHARES 3,673,292 26
- --------------------------------------------------------------------------------
Total shares and issued and outstanding 14,153,906 100.00
================================================================================

The Company believes that all of the issuances of the Class A Common Stock
and the Class B Shares were exempt from the registration requirements of the
Securities Act by virtue of Section 4(2) of the Securities Act and/or Regulation
D or S under the Securities Act.

40
<PAGE>

ITEM 11. DESCRIPTION OF SECURITIES

The Company's Capital Authorized and Issued. The Company is authorized to
issue 100,000,000 shares of Class A COMMON EQUITY VOTING STOCK ("Class A Common
Stock"), and 6,000,000 shares of Class B SPECIAL NON-EQUITY VOTING STOCK ("Class
B Shares"), both of par value $0.001. Only the Class A Common Stock is being
registered.

Class A Common Stock. All issued shares of Class A Common Stock and Class A
Shares, when issued, were fully paid for and nonassessable. Each holder of Class
A Common Stock and Class B Shares is entitled to one vote per share on all
matters submitted for action by the stockholders. All shares of voting stock are
equal to each other with respect to the election of directors and cumulative
voting is not permitted; therefore, the holders of more than 50% of the
outstanding voting stock can, if they choose to do so, elect all of the
directors. The terms of the directors are not staggered. Directors are elected
annually to serve until the next annual meeting of shareholders and until their
successor is elected and qualified. There are no preemptive rights to purchase
any additional Class A Common Stock or other securities of the Company. The
owners of a majority of the voting stock may also take any action without prior
notice of or meeting which a majority of shareholders could have taken at a
regularly called shareholders meeting, giving notice to all shareholders
thereafter of the action taken. In the event of liquidation or dissolution,
holders of Class A Common Stock are entitled to receive, pro rata, the assets
remaining, after creditors, and holders of any class of stock having liquidation
rights senior to holders of shares of Class A Common Stock, have been paid in
full.

Class B Shares. Certain shareholders (the "Canadian Preference Holders") of
Online, did not convert their Common shares to Class A Common Stock, but rather
converted to Preferred Equity Shares of Online subsidiary. Class B Shares have
been issued to those shareholders, share for share so that Canadian Preferred
Holders might vote as the Company's shareholders. These shares of Class B Stock
have no equity or liquidation rights, other than voting rights, but upon
liquidation of the Company, these Class B Shares may enjoy preference with
respect to the assets of Online. The Class B Shares are the voting equivalent of
Preferred Equity Shares of OnLine. While no plan for conversion exists, the
Class B Shares may be exchanged for Class A Common Stock, at any time the
Canadian Preferred Holders might elect, and the Board of Directors may allow,
subject to the cancellation of the corresponding Preferred Equity Shares.

ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Except as hereinafter set forth there is no charter provision, bylaw,
contract, arrangement or statute under which any officer or director of the
Company is insured or indemnified in any manner against any liability which he
may incur in his capacity as such.

The Company's By-laws provides that that Company shall indemnify any
director, officer, employee or agent of the Company, or any person serving in
any such capacity of any other entity or enterprise at the request of the
Company, against any and all legal expenses (including attorney's fees),

41
<PAGE>

claims and/or liabilities arising out of any action, suit or proceeding, except
an action by or in the right of the Company.

Expenses incurred in defending any action, suit or proceeding may be paid
by the Company in advance of the final disposition, when authorized by the Board
of Directors.

The Company does not have nor does it anticipate obtaining any directors'
and officers' liability insurance. Section 78.751 of the Nevada Revised Statutes
permits the indemnification of directors and officers of a corporation against
certain liabilities, which would include liabilities arising under the
Securities Act.

The Securities and Exchange Commission's Policy on Indemnification

Insofar as indemnification for liabilities arising under the Act may be
permitted to any of the Company's directors, officers and controlling persons
pursuant to any provisions contained in the Company's Certificate of
Incorporation, or by-laws, or otherwise, the Company has been advised that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a directors, officers or controlling
persons 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 Company 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 indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

42
<PAGE>

ITEM 13. FINANCIAL STATEMENTS

Page
----

Auditors Report dated October 29, 1999.................................45
Consolidated Audited Balance Sheet as at August 31, 1999 and 1998......46
Consolidated Audited Statement of Loss and Deficit for
the Years ended August 31, 1999 and 1998.............................47
Consolidated Audited Cash Flow Statement for the Years
ended August 31, 1999 and 1998.......................................48
Comprehensive Years Ended August 31, 1999 and 1998 (Note 15)...........49
Notes to the Audited Consolidated Financial Statements.................50-57

43
<PAGE>

Rains & Associates, LLC
Certified Public Accountants

Independent Auditor's Report

Board of Directors and Stockholders
OnLine Production Services, Inc.

We have audited the consolidated balance sheet of OnLine Production Services,
Inc. as of August 31, 1999, and the related consolidated statements of income,
retained earnings, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express and opinion on these financial statements based on
our audit. The financial statements on OnLine Film Services, Inc. (the operating
subsidiary of OnLine Production Services, Inc.) as of August 31, 1998, were
audited by other auditors whose report dated July 15, 1999, expressed an
unqualified opinion on those statements.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the 1999 financial statements referred to above present fairly,
in all material respects, the financial position of OnLine Production Services,
Inc. as of August 31, 1999, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.

Rains & Associates, LLC

December 2, 1999
Costa Mesa, California

44
<PAGE>

BABCOCK & COMPANY
Certified General Accountant

AUDITORS REPORT

To the Shareholders of ON-LINE FILM SERVICES INC.

I have audited the consolidated balance sheet of ON-LINE FILM SERVICES INC. as
at August 31, 1998 and the consolidated statements of loss and deficit and cash
flow for the years then ended. These financial statements are the responsibility
of the company's management. My responsibility is to express an opinion on these
financial statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform an audit to obtain reasonable
assurance whether the financial statements are free from 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 principals used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.

In my opinion, these financial statements present fairly in all material
respects the financial position of the company as at August 31, 1998, and the
results of operations and changes in cash flow for the year then ended in
accordance with generally accepted accounting principals.

This auditors report replaces the auditors report dated July 15, 1999.

The July 15, 1999 auditors report has been withdrawn and the attached financial
statements have been revised. An adjustment relating to a material software
rights purchase has been made to the current year financial statements to remove
a contingent amount payable from liabilities and reduce the book value of the
related asset by the same amount (See note 7 for details). The July 15, 1999
report and financial statements, while conforming to Canadian GAAP, required
additional disclosure in certain areas to conform with the requirements of
United States GAAP. The revised financial statements have had additional
disclosure provided in order to support additional US GAAP reporting
requirements.

Jeff Babcock
CERTIFIED GENERAL ACCOUNTANT

Surrey, B.C.
July 15, 1999, except for revisions discussed above dated November 6, 1999

45
<PAGE>

OnLine Production Services, Inc.
Balance Sheet
Years Ended August 31, 1999 and 1998 (Note 15)

Amounts in 1,000's of Dollars US

<TABLE>
<CAPTION>
ASSETS

1999 1998
------------------
<S> <C> <C>
Current Assets
Cash and Cash Equivalents $ 514 $ 51
Accounts Receivable - Note 3 64 4
Current Portion of Deferred Taxes - Note 6 4 3
Accrued Interest - Note 5 39 37
------------------
Total Current Assets 621 95

Property, Plant and Equipment Net of Depreciation - Note 4 184 169
Other Assets
Investments - Note 5 8,303 5,130
Intangible Assets-Net of Amortization - Note 10(d)) 305 452
Other - Note 6 2 1
------------------
Total Other Assets 8,610 5,583
------------------
Total Assets $ 9,415 $ 5,846
==================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Accounts Payable and Accrued Liabilities - Note 8 $ 169 $ 87
Bank Line of Credit - Note 7 30 --
Current Portion of Mortgage Payable 1 1
------------------
Total Current Liabilities 200 88

Mortgage Payable - Note 9 75 73

Other Liabilities
Contingent Revenue - Note 10 8,268 5,110
Payable Columbus Software, Inc. - Note 10(d) -- 450
Loan Payable - Shareholders -- 17
------------------
Total Other Liabilities 8,268 5,576

Stockholders' Equity - Note 11
Capital Stock
Class A Common Stock, $0.001 par, 100,000,000 shares authorized,
10,480,614 issued 7 4
Preference Shares, 10,000,000 shares authorized
3,673,292 issued 2 --
------------------
Total Capital Stock 9 4

Additional Paid in Capital
Issued price in excess of par value - Class A 1,318 567
Issued price in excess of par value - Preference Shares 180 --
------------------
Total Paid In Capital 1,498 567
Accumulated Deficit (943) (452)
Comprehensive Income (Loss) 308 (10)
------------------
Total Stockholders' Equity 872 109
------------------
Total Liabilities and Stockholders' Equity $ 9,415 $ 5,846
==================
</TABLE>

46
<PAGE>

OnLine Production Services, Inc.
Income Statement
Years Ended August 31, 1999 and 1998 (Note 15)

Amounts in 1,000's dollars US

1999 1998
------------------------
Revenue
Sales $ 229 $ 91
Territory Sales 655 1,111
Other 74 --
------------------------
Total Revenue 958 1,202
Cost of Sales 920 759
------------------------
Gross Profit 38 443
General & Administrative Expenses 713 769
Depreciation/Amortization 195 27
------------------------
Loss From Operations (870) (353)
Other Income/Expense
Interest Income 388 238
------------------------
Loss Before Taxes (482) (115)
Deferred Taxes 1 (3)
------------------------
Net Loss Applicable to Common Stock $ (481) $ (118)
========================

Weighted Average Shares - Common Stock 10,170 5,994
------------------------
Loss Per Share of Common Stock $ (0.05) $ (0.02)
------------------------
Statement of Accumulated Deficit
Balance - Beginning of Year $ (462) $ (334)
Net Loss for Year (481) (118)
------------------------
Balance - End of Year $ (943) $ (452)
========================

47
<PAGE>

OnLine Production Services, Inc.
Consolidated Statement of Cash Flows
Years Ended August 31, 1999 and 1998 (Note 15)

Amounts in 1,000's of Dollars US

1999 1998

OPERATING ACTIVITIES

Cash Used In Operations:

Net Loss $ (481) $ (118)

Add (deduct) charges to items not involving cash:
Expense settled for shares 27
Amortization 195 27
Deferred Taxes (1) 3
$ (260) $ (89)

Non-cash working capital items:
Accounts Receivable (64) (4)
Current Portion of Deferred Taxes (1) (1)
Accounts Payable & Accruals 82 69
Contingent Revenue Security Received 3,158 5,110
$ 2,915 $ 5,085
FINANCING ACTIVITIES

Change in Bank Operating Loan $ 30 $ (42)
Related Party Loans (17) 8
Capital Stock Issuances 5 57
Additional Paid In Capital 654 --
Note Payable (200) 450
Increase in Long Term Debt 3 --
Reduction in Opening Long Term Debt (1) (23)
$ 474 $ 451

INVESTING ACTIVITIES
Software Rights $ -- $ (450)
Change in Deferred Costs -- 232
Change in Long Term Investments (3,173) (5,167)
Proceeds of Ppty, Plant & Equip Sales 16 --
Capital Asset Purchases (77) (80)
$(3,234) $(5,465)
Translation Adjustment $ 308 $ (10)
Change In Cash $ 463 $ 59
Cash, start of year 51 (8)
Cash, end of year $ 514 $ 51

SCHEDULE OF NON-CASH INVESTING & FINANCING ACTIVITIES:

Accrued Wages Settled for Shares (Note 11) $ 27 $ --
Reduction in Debt to Columbus Software
through share issuance (Note 11) 250 --
$ 277 $ --

48
<PAGE>

OnLine Production Services, Inc.
Comprehensive
Years Ended August 31, 1999 and 1998 (Note 15)

Amounts in 1,000's dollars US

1999 1998
-----------------
Foreign Currency Translation Gain (Loss) For Year $ 318 $ (10)
-----------------
Change in Other Comprehensive Income For Year $ 318 $ (10)

Other Comprehensive Income (Loss), Start of period $ (10) --
-----------------
Other Comprehensive Income (Loss), End of period $ 308 $ (10)
=================

49
<PAGE>

OnLine Production Services, Inc.
Notes to the Consolidated Financial Statements
Augusts 31, 1999

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Foreign currency translation

All balances relating to On-Line Film Services Inc. (Canadian subsidiary) have
been converted to United States dollars using the current rate method of
currency conversion. The use of this method resulted in a cumulative translation
adjustment gain of $309,000 at the current balance sheet date and $10,000 loss
at the prior year balance sheet date.

(b) Investments

Investments are held to maturity investments and are recorded at their amortized
cost at the balance sheet date. These investments are strictly interest bearing
deposits in the form of savings bonds and guaranteed interest certificates at
the current and prior balance sheet dates. (Note 5) Subsidiaries are
consolidated in these financial statements (Note 2).

Deferred corporate taxes arise due to temporary timing differences arising from
depreciation rates used for financial statement purposes and the depreciation
rates prescribed for taxation purposes. Deferred taxes are divided into a
current portion, which is expected to be utilized within one fiscal year and a
non-current portion, which is expected to be utilized in a future period in
excess of one fiscal year. (See note 6)

(d) Revenue Recognition Policy

Sales (excludes Mailcard and Casting Software rights) revenue is recognized when
realized. Realization occurs when the earning process is complete, or virtually
complete and revenue is evidenced by the existence of an exchange transaction
which provides significant certainty as to the ultimate collectibility of the
revenue amount. This policy applies to all fee and general revenue but does not
apply to the realization of Mailcard and Casting Software rights sales.

Revenue relating to Casting Workbook fees is generated strictly from actors and
entertainers who wish to subscribe following the free trial period (the free
trial period varies at the discretion of the company management, depending on
the circumstances, but has tended to be 60 to 90 days with some exceptions)
provided by the company, at which time the fee is invoiced for the next twelve
month period. Once invoiced, the invoiced amount is recorded as fee revenue.

The company also uses a digital watermarking system to protect its digitally
created images against unauthorized resale. In the event that an unauthorized
distribution of an image containing this watermark is found, the company may
charge a fee for the use of this image. In this scenario, collection of the fee
charged is very uncertain. As such, any revenue generated through charges for
unauthorized distribution of company images will be realized when collected. At
the balance sheet date, there has been no charges or collections relating to
unauthorized distribution of company images.

Mailcard and Casting Software rights revenue is recognized on the collection
method. The ultimate collection of agreed amounts relating to the mailcard and
casting software rights is contingent on future sales of the software by the
company. This contingency creates a significant degree of uncertainty
surrounding the ultimate collection of this contingent revenue, which is based
on the service of selling the software over a ten year period. As such, revenue
is only recognized at such time as the funds are collected. (See note 11 )

50
<PAGE>

OnLine Production Services, Inc.
Notes to the Consolidated Financial Statements
Augusts 31, 1999

(e) Cash and cash equivalents

Cash and cash equivalents include cash on hand, demand deposits with banks or
other high credit quality financial institutions and other highly liquid
investments which are immediately convertible into cash.. Due to the short term
nature of these instruments, the carrying value approximates fair value.

(f) Accounting impairment for long lived assets

The company considers impairment of value to occur when the book value of fixed
assets is determined not to be recoverable. If this happens, the company has a
policy of reducing the carrying value of the long lived asset to the recoverable
amount and recording this reduction loss amount on the income statement in the
year in which the write down has occurred. There has been no impairment of any
long lived assets in the current or prior year.

(g) Reorganization and reverse acquisition

The company, in fiscal year 1999, completed a reorganization and reverse merger.
At the time of the merger, neither OnLine Production Services Inc., or its
predecessor Earth Industries Inc., had any financial activity. With the
exception of the stock of Earth Industries, which had a book value of $0 at the
time of the merger, the only entity with activity was On-Line Film Services,
Inc., which became the operating subsidiary company as a result of the merger.
Therefore, the consolidated financial statements of On-Line Film Services Inc.
for the year ending August 31, 1998 are presented as comparable statements.

2. CONSOLIDATED FINANCIAL STATEMENTS

These financial statements show the consolidated results of operations for
OnLine Production Services Inc. and its wholly owned Canadian subsidiary On-Line
Film Services Inc..

3. ACCOUNTS RECEIVABLE

The accounts receivable balance at August 31, 1999 are shown net of allowance
for doubtful accounts of $ 1,688 . The 1998 accounts receivable balance is shown
net of allowance for doubtful accounts of $6,862

4. PROPERTY, PLANT AND EQUIPMENT

Asset Accum. Depreciation
Description Amount Deprec. Net Method
--------------------------------------------------------------------------
Office Furn & Fixtures $ 19 $ 5 $ 14 20% Declining Balance
Computer Software 13 13 nil 100% Declining Balance
Computer Equipment 141 63 78 30% Declining Balance
Building 105 13 92 4% Declining Balance
--
$184
====

51
<PAGE>

OnLine Production Services, Inc.
Notes to the Consolidated Financial Statements
Augusts 31, 1999

5. INVESTMENTS

Long term investments consists of British Columbia Savings Bonds in a principal
amount of $2,878, 800 with an unamortized bond premium of $1,150 to be amortized
over the remaining eight year period of the bonds. Accrued interest of $38,800
was unpaid at the balance sheet date. These bonds earn interest at 6% per annum
(effective interest rate of 5.992%) paid semi-annually and are locked in to June
9, 2008. The accrued interest amount is calculated based on 6% of the principal
for an accrual period of 82 days. The last interest payment date was June 10,
1999. The next interest payment date is expected on or around December 9, 1999.
These bonds serve as registered collateral on the Mailcard contingent sales
agreement dated September 17 1997. The amount of the collateral claim registered
against these bonds is $2,878,000 which is locked in until June 9, 2008. All of
the interest earned on this bond during the current fiscal year ($171 000),
included in interest income line on the consolidated statement of loss and
accumulated deficit, was used to fund the minimum required Mailcard software
purchase guarantee for the year. (See notes 10 & 13).

Also included in long term investments is the guaranteed interest savings amount
of $5,422,700 held at the Canadian Imperial bank of Commerce, of which
$5,387,900 serves as registered collateral relating to the Casting Workbook
software contingent sales agreements dated December 31, 1997 and December 31,
1998, with the principal to be locked in until December 31, 2007 and 2008
respectively . From the agreement date to the balance sheet date, these funds
have been placed in seven day CIBC GICs earning interest revenue at variable
rates throughout the period. At he balance sheet date there was no accrued
interest relating to the GIC investments. For the current fiscal year, all
interest earned on these investments have been used to fund the Casting Workbook
exclusivity payments of $203,000 for the current year (See notes 10 & 13). The
funding of the exclusivity payments is included in interest income line on the
consolidated statement of loss and accumulated deficit

The above investments are considered to be held to maturity debt investments
where the principal will be fully recovered when the investments come due.
Included in interest expense is $143 which relates to bond premium amortization
on the BC Savings bonds over a ten year period.

6. DEFERRED TAXES - NON CURRENT

Total deferred corporate taxes $ 4,677
Less: Current Portion (3,934)
-------
Non current portion $ 743 included in "Other Assets"
-------

7. BANK LINE OF CREDIT

The company has available a $40,000 line of credit with the Royal Bank in
Vancouver, British Columbia. The line of credit bears interest at the rate of
Royal Bank prime plus 1.75% per annum. At the balance sheet date, the company
has used $30,000 of this available line of credit.

8. ACCOUNTS PAYABLE & ACCRUED LIABILITIES

Included in accounts payable and accruals is accrued distribution and
exclusivity fees of $73,000 relating to the Mailcard and Casting Workbook
contractual agreements . The remaining amount relates to trade payables and
operating accruals (Note 13).

52
<PAGE>

OnLine Production Services, Inc.
Notes to the Consolidated Financial Statements
Augusts 31, 1999

9. MORTGAGE PAYABLE

Mortgage payable consists of the following:

Mortgage payable to Vancity Credit Union bearing interest at 8.75% per annum
with monthly payments of $632 (Renewal May 2001) Secured by real estate (office)
at 208-2323 Boundary Road, Vancouver, British Columbia. The balance at August
31, 1999 is $76,014. The company expensed $6 500 in interest relating to this
loan in the current year ($7 600 in prior year). This was the only loan interest
paid in the current fiscal year

Future principal payments are:

Fiscal Year Principal
- ----------- ---------
2000 $ 682
2001 $ 744
2002 $ 812
2003 $ 885
2004 $ 966
Thereafter $ 71,925

10. CONTINGENCIES

(a) In the 1998 fiscal year, the company entered into a contingent sale
agreement for the sale of Mailcard software territory rights to unrelated third
parties. The company received and realized $523,000 in revenue as well as
$2,878,000 in funds which are secured by the purchasing party as collateral
against the purchasers portion of the projected minimum sales guaranteed by the
company over a ten year period (See note 5). If and when the 3.2 million minimum
sales units over the ten year period is met by the company, it shall receive the
collateral funds as income at a rate of approx. 97% of the gross sales amount
for the units sold in excess of 3.2 million units. Once all of the collateral
funds have been released and realized as income by the company, it will earn
100% of the Mailcard sales revenue less a perpetual fee of 3% - 5% of gross
revenue (depending on unit sale price) to the software rights purchasers. In the
event that the projected minimum sales over the ten year period is not met, the
company must make up this shortfall from the collateral funds and/or revenue
generated by the $2,878,000 held as collateral.

The amount of future revenue relating to this contingency agreement is not
determinable until its ten year expiration date or until such time as the
minimum required sales level is met. As a result, revenue is realized on the
collection method, whereby deferred revenue is realized as income when funds are
released from collateral. At the balance sheet date, the cumulative minimum
sales has not yet been obtained, resulting in $2,878,000 included in unrealized
contingent revenue relating to this agreement on the balance sheet.

The collateral funds are registered and are not accessible by the company until
such time as these funds (or portion thereof) are released by the secured
parties. The term ending date is December 28, 2007. The contingent (deferred)
revenue amount above is secured by a claim against the ten year BC Savings bonds
held by the company (See note 5).

53
<PAGE>

OnLine Production Services, Inc.
Notes to the Consolidated Financial Statements
Augusts 31, 1999

10. CONTINGENCIES continued

(b) In the 1998 fiscal year, the company also entered into a contingent sale
agreement for the Casting Workbook software territories rights to unrelated
third parties. The company received and realized $587,000 in revenue as well as
$2,476,000 in funds which are secured by the purchasing party as collateral
against the purchasers portion of minimum projected revenue of approximately
$5.895 million provided by the company over a ten year period (See note 5). If
and when the minimum casting revenue over the ten year period is met by the
company, it shall receive the collateral funds as income at a rate of approx.
97% of the gross revenue amount for aggregate revenue generated in excess of the
approx. $5.895 million. Once all of the collateral funds have been released and
realized as income by the Company, the Company shall earn 100% of the Casting
software sales revenue less a perpetual fee of 3% to 5% of gross revenue
(depending on sales price) to the software rights purchasers. In the event that
the projected minimum revenue over the ten year period is not met, the company
must make up purchasers portion of these shortfall from the collateral funds
held as contingent revenue.

The amount of future revenue relating to this contingency agreement is not
determinable until its ten year expiration date or until such time as the
minimum required revenue level is met. As a result, revenue is realized on the
collection method, whereby deferred revenue is realized as income when funds are
released from collateral. At the balance sheet date, the cumulative minimum has
not yet been obtained, resulting in $2,476,000 included in unrealized contingent
revenue relating to this agreement at the balance sheet date.

The collateral funds are registered and are not able to be used by the company
until such time as these funds (or portion thereof) are released by the secured
parties. The term ending date is December 31, 2007. These collateral funds are
in the form of CIBC weekly GICs (See note 5)

(c) In the current fiscal year, the company also entered into a contingent sale
agreement for additional Casting Workbook software territories rights to
unrelated third parties. The company received and realized $655,000 in revenue
as well as $2,912,000 in funds which are secured by the purchasing party as
collateral against the purchaser's portion of the minimum projected revenue
amount of approximately $6.9 million provided by the company over a ten year
period (See note 5). If and when the minimum casting revenue over the ten year
period is met by the company, it shall receive the collateral funds as income at
a rate of approx. 97% of the gross revenue amount for aggregate revenue
generated in excess of the approx. $6.9 million. Once all of the collateral
funds have been released and realized as income by the Company, the Company
shall earn 100% of the Casting software sales revenue less a perpetual fee of 3%
to 5% of gross revenue (depending on sales price) to the software rights
purchasers. In the event that the projected minimum revenue over the ten year
period is not met, the company must make up the purchaser's portion of the
shortfall from the collateral funds from the collateral funds held as contingent
revenue.

The amount of future revenue relating to this contingency agreement is not
determinable until its ten year expiration date or until such time as the
minimum required revenue level is met. As a result, revenue is realized on the
collection method, whereby deferred revenue is realized as income when funds are
released from collateral. At the balance sheet date, the cumulative minimum has
not yet been obtained, resulting in $2,912,000 included in unrealized contingent
revenue relating to this agreement at the balance sheet date.

The collateral funds are registered and are not able to be used by the company
until such time as these funds (or portion thereof) are released by the secured
parties. The term ending date is December 31, 2008. These collateral funds are
in the form of CIBC weekly GICs (See note 5).

54
<PAGE>

OnLine Production Services, Inc.
Notes to the Consolidated Financial Statements
Augusts 31, 1999

10. CONTINGENCIES continued

(d) At the end of the prior fiscal year, the company purchased the rights to
software for use in the production of commercials. The agreement gives the
company the right to the sale of commercial production service worldwide. The
total purchase price was $3,950,000 . The payment of the purchase price consists
of two payments of $100,000 (paid), the issuance of 250,000 common shares at a
value of $1 per share (issued) and the issuance of a note payable of $
3,500,000. In the current year, the company expended an additional $8,000
relating to this agreement. The agreement is with Columbus Software Inc. The
note payable is due only if the company achieves specified sales objectives on
or before August 31, 2008.

Due to the contingent nature of the note payable, the purchase price
attributable to the note amount of $3,500,000 is not presented in the financial
statements. Instead, the amount of the purchase price actually expended of $450
000 and the additional $8,000 cost is classified as an other asset and will be
amortized over the estimated useful life of three years. This resulted in a
charge for amortization of $152,667 in 1999, the first year of the purchase. The
remaining purchase price of $3,500,000 will be recognized dollar for dollar
against revenues generated by this service. The agreement also calls for a
percentage of gross revenues to be paid to Columbus Software, Inc., on revenues
generated over and above the purchase price.

11. STOCKHOLDERS' EQUITY

Statement of Changes in Stockholders' Equity (Including Accumulated Deficit
Statement)

<TABLE>
<CAPTION>
Class A Common Preference Shares Paid In
-------------- ----------------- -------
Shares Amount Shares Amount Capital Deficit
------ ------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance 8/31/98 6,158,910 $ 4,088 -- -- $ 540,998 ($ 452,074)
Shares Issued Prior to
Reorganization 277,980 185 -- -- 19,680 --
Shares Issued
To Earth Ind
Shareholders 1,711,976 1,136 -- -- -- --
Reorganization (6,436,890) (4,276) -- -- (560,678) --
Issue Shares to
OnLine Film SH 2,763,598 1,835 -- -- 380,889 --
Issue Class B
Common Shares -- -- 3,673,292 2,439 179,789 --
Private Placement
Shares Issues 5,714,284 3,793 -- -- 659,947 --
Shares Issued
For Debt 40,756 27 -- -- 27,024 --
Shares Issued
To Columbus
Software Inc. 250,000 250 -- -- 249,750 --
Net Loss ($ 481,120)
------------ ------------ ------------ ------------ ------------ ------------
Balance 8/3199 10,480,614 $ 7,041 3,673,292 $ 2,439 $ 1,497,399 ($ 933,194)
------------ ------------ ------------ ------------ ------------ ------------
Translation Adjustment Current Period $ 298,832
------------
Balance In Retained Earnings(Deficit)
August 31, 1999 ($ 634,362)
------------
</TABLE>

55
<PAGE>

OnLine Production Services, Inc.
Notes to the Consolidated Financial Statements
Augusts 31, 1999

11. STOCKHOLDERS' EQUITY continued

The 40 756 Class A shares issued for Debt above, were issued to company
employees in lieu of certain wages accrued during the current fiscal year. These
shares were issued to employees who were neither officers nor directors of the
company.

The preference shares above are non-voting, redeemable and retractable on or
before March 1, 2004. These shares are non-cumulative and do not have a fixed
dividend rate. These preferred shares earn dividends at the same rate as the
class A common shares when a dividend on the class A common shares is declared.
These shares may be converted to common shares at the discretion of either the
company or the shareholders at a conversion rate of one common share for each
preference share converted.

12. LEASE OBLIGATIONS

The company has the following estimated future lease obligations based on
current and projected lease agreements.

DESCRIPTION 2000 2001 2002 2003 2004
--------------------------------------------------------------------------
Computer & Office Equip 63,000 66,000 68,000 70,000 72,000
Vancouver Office Lease 9,500 10,000 10,500 11,000 11,500
Toronto Office Lease 8,500 9,000 9,500 10,000 10,500
LA Office Lease 15,000 16,000 17,000 18,000 19,000
--------------------------------------------------------------------------
TOTALS 96,000 101,000 105,000 109,000 113,000

In the current year computer and office equipment leases totaled $48 000 (1998
$34 000). Aggregate office rent totaled $24,000 (1998 $17 000).

13. OTHER OBLIGATIONS

(a)The company is obligated purchase a minimum of approximately $171 000 per
calendar year of Mailcard software for purposes of distribution on behalf of the
software vendors. This obligation remains in effect until at least December 28,
2007, at which time, the agreement may be terminated or renewed, depending on
circumstances at that time. The company is also required to purchase an
additional 2 560 000 copies at an estimated price of approximately $4 per copy
of the Mailcard Software on or before December 28, 2007. Included in accounts
payable and accruals is an accrual of $38 000 representing the portion of the
obligation payable but not yet due or paid at the balance sheet date. This
amount was based on the interest accrued on the collateralized BC Savings Bonds
Investment (Note 6) which is to be paid directly to the collateralized party to
cover the guaranteed purchase amount. This amount is paid semi-annually on or
around June 10 and December 9 of each calendar year. For the fiscal year ended
August 31, 1999, the company has paid $133 000 from interest generated by the
collateral amount with $38 000 remaining to be paid at the balance sheet date,
to be paid from the interest accrued on the collateral bonds.

(b)The company is also obligated to pay minimum exclusivity fees, which is the
interest earned on the CIBC weekly GICs (note 6), per calendar year for the
right to provide management services related to the Casting Workbook. This
minimum obligations remains in effect until December 28, 2007 and 2008 (note
10), at which time, the agreements may be terminated or renewed, depending on
the circumstances at that time. Included in accounts payable and accrued
liabilities is an accrual of approximately $35,000, which is the interest earned
on the collateralized GICs from July 1, 1999 to August 31, 1999, which has not
yet been paid to the Casting Workbook purchasers.

In the event that sales are not sufficient to meet the minimum requirements in a
& b above, any shortfall will be covered by interest generated by the security
held at the discretion of the company. See above.

56
<PAGE>

OnLine Production Services, Inc.
Notes to the Consolidated Financial Statements
Augusts 31, 1999

14. INCOME TAXES

The company has approximate income tax losses in the Canadian subsidiary which
may in certain circumstances be applied against taxable income of the Canadian
subsidiary in future years to reduce taxes otherwise payable as follows:

Year of Expiry Amount of Loss
2002 10,000
2003 87,000
2004 138,000
2005 82,000
2006 148,000
--------
$465,000

The estimated net operating loss resulting from the operations of the American
parent company total approximately $180 000 which may in certain circumstances
be applied against taxable income of the parent company in future years. This
loss carryforward expires in 2019.

15. PRIOR YEAR COMPARATIVE FIGURES

The prior year comparative audited figures, previously in Canadian dollars, have
been restated to US dollars, with a translation loss adjustment of $10 US in the
prior year. Certain of the prior year comparative figures have been restated to
conform with current year presentation. Other than the results of the conversion
of the prior year comparative figures and the resulting currency translation
adjustment, there have been no other prior period adjustments.

16. DEVELOPMENT COSTS

Expenditures relating to Casting Workbook enhancements and refinements,
including Ebinder, Sides Online and Scripts Online are expensed in the period in
which they are incurred. These costs consist primarily personnel related costs
for programming work to maintain and improve the existing Casting Workbook
software. These costs are not believed to have any alternative future uses, as
such they are expensed as incurred and included in cost of sales as they relate
to continuing Revenue.

Costs relating to development of Casting Workbook enhancements which are still
in development at the balance sheet date, such as; a voice over database and a
database for models, dancers, extras, musicians and commercial modules are
considered to be unfinished enhancements to the Casting Workbook at the balance
sheet date. As such, these development costs (primarily personnel related) are
expensed in the period in which they are incurred. These enhancements are
thought to be necessary to keep the Casting Workbook software useful in the
current market. As such, these costs are included in cost of sales, as they
relate to the continuing usefulness of the Casting Workbook and the related
Revenue earned through the use of the Casting Workbook software.

17. RELATED PARTY TRANSACTIONS

During the current fiscal year, the company had the following related party
transactions included in General & Administrative Expenses on the Consolidated
Statement of Loss and Accumulated Deficit:

Management Fees: $255,700
========

57
<PAGE>

ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

The Company's acquisition of OnLine (the accounting acquiror) in the fiscal year
ending August 31, 1999 has required the engagement of a United States accounting
firm to perform the examination of the Company's financial statements as at
August 31, 1999 and for the year then ended. Accordingly, in October, 1999, the
Company's board of directors approved the retention of Rains & Associates, LLC.
to perform such examination in place of its prior auditor, Babcock & Company,
who had been the Company's auditor for the fiscal year ended August 31, 1998. In
connection with that audit and through October, 1999, there were no
disagreements between the Company, OnLine, and Babcock & Company on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreement, if not resolved to the
satisfaction of Babcock & Company, would have caused them to make reference in
their report to the subject matter of the disagreements.

The Company requested Babcock & Company to furnish it with a letter addressed to
the Commission stating whether such firm agrees with the statements made above
and, if not, stating the respects in which they do not agree. Such letter is
attached as an exhibit hereto.

58
<PAGE>

ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS

I. Financial Statements

Auditors Report dated October 29, 1999 and July 15, 1999
Consolidated Audited Balance Sheet as at August 31, 1999 and 1998
Consolidated Audited Statement of Loss and Deficit for

the Years ended August 31, 1999 and 1998
Consolidated Audited Cash Flow Statement for the Years
ended August 31, 1999 and 1998
Notes to the Audited Consolidated Financial Statements

II Exhibits
- -- --------

2.1 Plan of Reorganization and Merger for Change of Status dated February
18, 1999*
2.2 Plan of Reorganization and Acquisition date February 19, 1999*

3(i).1 Articles of Incorporation of Earth Industries, Inc. dated August 7,
1996*
3(i).2 Articles of Correction of Earth Industries, Inc. *
3(i).3 Articles of Amendment of Earth Industries, Inc. dated August 22, 1996*
3(i).4 Articles of Incorporation of OnLine dated February 18, 1999*

3(ii) ByLaws of Online Production Services, Inc. *

10.1 Asset Purchase Agreement dated between OnLine and Columbus
Entertainment, Inc. August 31, 1998*
10.2 Amending Asset Purchase Agreement dated August 31, 1998*

10.3 Promissory Note dated August 31, 1998*
10.4 Management Agreement dated August 31, 1998*
10.5 Form of Asset Purchase Agreement - MailCard*
10.6 Form of Distribution Agreement - MailCard*
10.7 Form of Asset Purchase Agreement - Casting Workbook*
10.8 Form of Facilities Management Agreement - Casting Workbook*
16 Letter from Babcock & Company dated December 6, 1999*

27 Financial Data Schedule*

- ----------

* Previously Filed.

59
<PAGE>

SIGNATURES

In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant has caused this amendment no. 3 to its registration statement to be
signed on its behalf by the undersigned, thereunder duly authorized.

Dated: December 31, 1999 ONLINE PRODUCTION SERVICES INC.

By: /s/ Aerock Fox
--------------------------------
Aerock Fox