ENTERTAINMENT INTERNATIONAL LTD, 10-K405, 2000-04-14

ENTERTAINMENT INTERNATIONAL LTD
10-K405, 2000-04-14
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM 10-K

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

FOR THE YEAR ENDED DECEMBER 31, 1999 COMMISSION FILE NO. 001-14646

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

ENTERTAINMENT INTERNATIONAL LTD.
-------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)

<TABLE>
<S> <C>
New York 06-1113228
- -------------------------------------- -----------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)

7380 Sand Lake Road, Suite 350, Orlando, Florida 32819
- ------------------------------------------------- ------------------------------
(Address of principal executive offices) (Zip Code)

(407) 351-0011
- ------------------------------
Registrant's telephone number

</TABLE>

Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.01 par value per share
------------------------------------------------------------------
(Title of Class)

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

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

The aggregate market value of the voting stock held by non-affiliates
of the Registrant as of April 11, 2000 was $16,845,979 using the closing bid
price of $.34 on April 11, 2000.

The number of shares of Common Stock outstanding as of April 11, 2000
was 69,597,282.

DOCUMENTS INCORPORATED BY REFERENCE:

None.

A list of Exhibits to this Annual Report on Form 10-K begins on page 15.

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ENTERTAINMENT INTERNATIONAL LTD.
2000 FORM 10-K REPORT

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I Page
-----

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

PART II

Item 5. Market For Registrant's Common Equity And Related Stockholder Matters . 2
Item 6. Selected Financial Data ............................................... 3
Item 7. Management's Discussion And Analysis Of Financial
Condition And Results Of Operations ................................... 3
Item 8 Financial Statements And Schedules .................................... 9
Item 9. Changes In And Disagreements With Accountants On Return Accounting
And Financial Disclosure .............................................. 9

PART III

Item 10. Directors And Executive Officers Of The Registrant .................... 10
Item 11. Executive Compensation ................................................ 11
Item 12. Security Ownership Of Certain Beneficial Owners And Management ........ 13
Item 13. Certain Relationships And Related Transactions ........................ 14
Item 14. Exhibits, Financial Statements And Reports On Form 8-K ................ 15

</TABLE>

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

The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements. This Annual Report contains certain
forward-looking statements and information that are based on the beliefs of
management as well as assumptions made by and information currently available
to management. The statements contained in this Annual Report relating to
matters that are not historical facts, are forward-looking statements that
involve risks and uncertainties, including, but not limited to, future demand
for the Company's products and services, general economic conditions,
government regulation, competition and customer strategies, capital deployment,
the impact of pricing and reimbursement and other risks and uncertainties.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated or expected.

<PAGE>

PART I

ITEM 1. BUSINESS

GENERAL

Entertainment International Ltd. (the "Company") operated
lighter-than-air airships, which were used to advertise and promote the products
and services of the Company's clients through 1995. Since that time, the Company
generally has had no operations and no opportunity to commence operations in the
airship industry in which it had conducted its business operations. As a result,
the Company has experienced significant losses and negative cash flow since 1996
and has been funded by affiliated entities.

The Company's strategy for the future is to acquire new business
operations or merge (through a direct, indirect, reverse or other form of
merger) with an entity that has ongoing business operations. In connection with
this strategy, the Company changed its name to "Entertainment International,
Ltd." to reflect the new direction for the Company's operations, which the
Company currently believes will involve the entertainment industry or an
Internet-based business. Except as set forth below, as of the date hereof, the
Company has no agreements with any third party to effect any such acquisition or
merger, and no assurances can be given that any such acquisition or merger will
in fact be effected in the future or that any such transaction will involve an
entity in either of these industries.

On March 28, 2000, the Company signed a letter of intent to acquire
WeBeCD.com, Inc., a private New York software company whose technology transfers
regular CD's, DVD's and other electronic media into intelligent e-commerce
vehicles.

WebeCD enables consumers to effect intelligent interaction with its Web
site, allowing consumers to archive their personal media collections and access
them over the World Wide Web. This technology, called the personal digital
jukebox, or "dj," will revolutionize an individual's media experience by
providing consumers with a personal digital jukebox playing potentially
thousands of CDs or videos from anywhere on the World Wide Web. The Company has
proprietary technology that allows intelligent interaction with a consumer's
archived media vault and the WebeCD disks that will replace traditional music
CDs in the marketplace. The WebeCD technology will be available for free to the
music industry.

This provides the Company with a new entertainment operating paradigm
for the music, film, and media industries with significant application for the
Fortune 1000. With strong backing from members of the music industry, most
notably Trans Continental Records, WebeCD is poised to begin shipping on several
record labels after the closing. With a disk-based consumer traffic driving
model and an intelligent e-commerce center, the Company expects to create an
exciting and formidable presence in the software and entertainment industries.
Upon the closing of the transaction, as to which there can be no assurance, the
Company will work with Trans Continental Records, an affiliate of eNTI, to
deploy WebeCD technology on Trans Continental album releases, rebroadcast Trans
Continental artists' content via video and audio streaming from the WebeCD Web
site, as well as sell CDs, DVDs and other merchandise from the Trans Continental
Web sites as available.

Although a letter of intent has been signed between the parties, no
binding agreement or commitment has yet been executed. Any such agreement or
commitment that is reached may be on terms that substantially differ from those
set forth in the letter of intent. Consummation of any such agreement or
commitment would be subject to the satisfaction of various conditions and there
can be no assurance that any transaction will occur.

The Company was incorporated in New York on June 9, 1982 and commenced
operations in August 1985 following the completion of the Company's initial
public offering in June 1985.

The Company's principal executive offices are located at 7380 Sand Lake
Road, Suite 350, Orlando, Florida 32819 and its telephone number is (407)
351-0011. The Company also maintains a small office in New York, New York.

ITEM 2. PROPERTIES

Since May 7, 1996, the Company has subleased approximately 500 square
feet of office space from Trans Continental Airlines, Inc. on a month-to-month
basis for monthly rental payments of approximately $770.

ITEM 3. LEGAL PROCEEDINGS

From time to time, the Company is a party to various legal proceedings
arising in the ordinary course of business. As of April 14, 2000 the Company was
not a party to any legal proceeding which would have a material adverse effect
on its financial condition.

On April 7, 1999, U.S. Airship Leasing, Inc. f/k/a WDL Airship, Inc.
("US Airship") commenced a suit in the Florida Circuit Court of the Ninth
JudicialCircuit, Orange County, entitled U.S. Airship Leasing, Inc. f/k/a WDL
Airship,Inc. v. Louis J. Pearlman, Airship International Ltd. Corporation and
Trans Continental Airlines Travel Services, Inc. a/k/a Trans Continental
Airlines

<PAGE>

Service, Inc. US Airship sought damages of $1,488,613.90 plus interest,
costs and other relief. On April 8, 1999, WDL Luftschiffgesellschaft MBH
("WDL"), an affiliate company, commenced a suit in the same court, entitled WDL
Luftschiffgesellschaft MBH v. Airship International Ltd. and Louis J. Pearlman.
The suit sought $148,558.49 in damages plus prejudgment interest, costs and
other relief. These cases were both settled on July 28, 1999 for $1,030,000.

In June 1999, Gulf Oil Limited Partnership f/n/a Catamount Petroleum
Limited Partnership ("Gulf Oil"), commenced an action in the United States
District Court, District of Massachusetts against the Company, captioned Gulf
Oil Limited Partnership f/n/a Catamount Petroleum Limited Partnership, by its
General Partner, Catamount Management Corporation vs. Entertainment
International Ltd. f/n/a Airship International Ltd. The parties reached a
settlement on December 16, 1999, pursuant to which the Company paid to Gulf Oil
$100,000 and issued to Gulf Oil 1,500,000 shares of the Company's common stock.

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

During the fourth quarter of the year ended December 31, 1999, no
matters were submitted by the Company to a vote of its stockholders.

PART II

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

The Company's Common Stock currently trades under the symbol "ENTI."
Prior to the Company changing its name to "Entertainment International Ltd," the
Company's Common Stock and Preferred Stock traded under the symbols "BLMP" and
"BLMPP," respectively.

Since July 5, 1995 (when the Company's securities were de-listed from
the Nasdaq SmallCap Market) the Company's Common Stock (and Preferred Stock,
until its conversion into Common Stock in June 1998 pursuant to the vote of the
Company's shareholders at the Company's Annual Meeting) have traded on the
over-the-counter market. The price ranges presented below represent the highest
and lowest quoted bid prices during each quarter for 1998 and 1999 reported by
the National Quotation Bureau, Inc. and Nasdaq. The quotes represent prices
between dealers and do not reflect mark-ups, markdowns or commissions and
therefore may not necessarily represent actual transactions.

COMMON STOCK

<TABLE>
<CAPTION>
Year Period Bid Information
- ---- ------ ----------------
High Low
---- ---

<S> <C> <C> <C>
1998 1st Quarter $ .0475 $.02
2nd Quarter $ .087 $.044
3rd Quarter $ .08 $.06
4th Quarter $0.26 $.0

1999 1st Quarter $ .39 $.09
2nd Quarter $ .455 $.12
3rd Quarter $ .34 $.165
4th Quarter $ .195 $.10

2000 1st Quarter (through
March 31, 2000) $ .745 $.12

</TABLE>

<PAGE>

As reported by the Nasdaq OTC Bulletin Board, on April 11, 2000 the
closing bid price of the Common Stock was $.34 per share.

As of April 11, 2000 there were 1,716 holders of record of the
Company's Common Stock.

No dividends were declared or paid on the Common Stock during the
foregoing periods and the Company does not anticipate paying any dividends on
its Common Stock in the foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction
with the Company's financial statements and related notes and Management's
Discussion and Analysis of Financial Condition and Results of Operation
appearing elsewhere herein.

OPERATING STATEMENT DATA:

<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C>
Gross Revenues.................. $- $- $- $ - $ 2,620,000
Net loss........................ ($4,569,000) $(996,000) $(2,294,000) $(2,506,000) $(4,867,000)
Net earnings (loss) per
share $(.07) $.10 $(.09) $(.10) $(0.18)

</TABLE>

BALANCE SHEET DATA:

<TABLE>
<CAPTION>
At December 31,
---------------

1999 1998 1997 1996 1995
---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C>
Total Assets.......................... $1,952,000 $3,772,000 $ 4,374,000 $ 4,496,000 $ 5,073,000
Long-Term Obligations......... - $ 10,000 $ 4,080,000 $ 3,016,000 $ 3,348,000
Obligations under capital lease. $839,000 $1,692,000 $ 2,477,000 $ 3,158,000 $ 3,689,000
Total Liabilities...................... $4,832,000 $3,911,000 $ 22,057,000 $14,680,000 $14,680,000
Stockholders' deficit................ $(2,880,000) $ (139,000) $(17,683,000) $(9,607,000) $(9,607,000)
</TABLE>

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

NOTE REGARDING FORWARD-LOOKING INFORMATION

Certain statements under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in
this Annual Report constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company,
or industry results, to be materially different

<PAGE>

from any future results, performance, or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
Company's limited operating history over the past five years, its ability to
attract acquisition candidates, general economic and business conditions with
respect to the Internet and online commerce, changes in government regulations,
competition and the ability of the Company to implement its business strategy
and other risks discussed in section entitled "Factors That May Affect Our
Business, Financial Condition and Results of Operation" in this Form 10-K.

Forward-looking statements speak only as of the date of this Form 10-K.
Moreover, whether or not stated in connection with a forward-looking statement,
the Company undertakes no obligation to correct or update a forward-looking
statement should the Company later become aware that it is not likely to be
achieved. If the Company were to update or correct a forward-looking statement,
investors and others should not conclude that the Company will make additional
updates or corrections thereafter.

The following discussion should be read in conjunction with the
financial statements contained in Item 8 of Part IV of this Form 10-K.

OVERVIEW

The Company commenced operations in August 1985 following the
completion of the Company's initial public offering in June 1985. Historically,
substantially all of the Company's revenues were derived from the operation of
the airships pursuant to aerial advertising contracts with its clients. Since
1995, the Company generally has had no operations and no opportunity to commence
operations in the airship industry in which it had conducted its business
operations. As a result, the Company has experienced significant losses and
negative cash flow since 1995 and has been funded by affiliated entities. The
Company's strategy for the future is to acquire new business operations or merge
(through a direct, indirect, reverse or other form of merger) with an entity
that has ongoing business operations.

In connection with this strategy, the Company changed its name in
October 1998 to "Entertainment International, Ltd." to reflect the new direction
for the Company's operations, which the Company currently believes will involve
the entertainment industry or a media/Internet-based business. On March 28,
2000, the Company signed a letter of intent to acquire WeBeCD.com, Inc., a
private New York software company whose technology transfers regular CD's, DVD's
and other electronic media into intelligent e-commerce vehicles.

Although a letter of intent has been signed between the parties, no
binding agreement or commitment has yet been executed. Any such agreement or
commitment that is reached may be on terms that substantially differ from
those set forth in the letter of intent. Consummation of any such agreement or
commitment would be subject to the satisfaction of various conditions and there
can be no assurance that any transaction will occur. As noted in the auditor's
report, there exists substantial doubt that the Company has the ability to
continue as a going concern.

In addition, during the past several years, the Company has been
approached by other entities, which have expressed an interest in effecting an
acquisition or merger of the Company primarily due to the fact that the Company
is a publicly-held corporation. In addition, the Company has incurred Net
Operating Losses ("NOLs") which, to a lessor degree, may make the Company
attractive to a prospective suitor.

<PAGE>

Year Ended December 31, 1999, as compared to Year Ended December 31, 1998

Overall Financial Situation. The Company had a stockholder's deficit at
December 31, 1999 in the amount of $2,880,000, an increase of $2,741,000 from
the stockholders' deficit at December 31, 1998 of $139,000. This increase is
primarily due to the net loss of $4,569,000 offset by the issuance of common
stock totaling $1,697,000 in the form of employee compensation, consultant
services and for the arrangement of continued financing from related parties.
The Company did not have revenues during 1999 or 1998. Operating costs were
substantially higher in 1999 than in 1998 by approximately $180,000 or 257%. In
addition, selling general and administrative expenses increased significantly
from 1998 by $1,182,000 or 221%, resulting in a loss from operations of
$1,966,000 for 1999. Interest expense increased by more than $125,000 or 23% for
1999 from 1998 due to the stock issued for the arrangement of continued
financing from related parties in 1998.

Results of Operations.

Revenues: The Company did not have any revenues from operations during
1999 or 1998.

Operating costs for 1999 were $250,000, an increase of $180,000 or
257% compared to operating costs of $70,000 for 1998, primarily as a result of
a substantial credits that were posted to accounts payable during 1998.

Selling, general and administrative costs for 1999 were $1,716,000,
an increase of $1,182,000 or 221% compared to costs of $534,000 for 1998. This
increase is primarily attributable to common stock issued as employee
compensation in the amount $616,375 and as consulting compensation in the
amount of $574,000 during 1999.

Interest expense: Interest expense for 1999 was $667,000, an increase
of $125,000 or 23% from interest expense of $542,000 in 1998. This increase was
due to the common stock issued for the arrangement of continued financing during
1998 from Trans Continental Airlines, Inc. ("Trans Continental") and Louis
J. Pearlman.

Year Ended December 31, 1998, as compared to Year Ended December 31, 1997

Overall Financial Situation. The Company had a stockholder's deficit at
December 31, 1998 in the amount of $139,000, a decrease of $17,544,000 from the
stockholders' deficit at December 31, 1997 of $17,683,000. This decrease is
primarily due to the accrual of dividends on the outstanding shares of preferred
stock in the amount of $647,000 and a net loss for 1998 of $996,000, offset by
capital contributions of $11,886,000 received from stockholders in the form of
an extinguishment of debt and the abolishment of dividends accrued on preferred
stock in the amount of $6,508,000 (See Note B in Financial Statements). The
Company did not have revenues during 1998 or 1997. As was expected, operating
costs were substantially lower in 1998 than in 1997 by approximately $287,000 or
80%. In addition, selling general and administrative expenses decreased
significantly from 1997 by $203,000 or 28%, resulting in a loss from operations
of $604,000 for 1998. Interest expense decreased by more than $703,000 or 57%
for 1998 from 1997 due to the stock issued for the arrangement of continued
financing from related parties.

Results of Operations.

Revenues: The Company did not have any revenues from operations
during 1998 or 1997.

Operating costs for 1998 were $70,000, a decrease of $287,000 or 81%
compared to operating costs of $357,000 for 1997. The primary reason that
operating expenses decreased from 1997 is a result of having no

<PAGE>

airships in operation during any part of 1998. Operating costs primarily relate
to usage of the Company's one operational gondola and the utilization of the
support vehicles.

Selling, general and administrative costs for 1998 were $534,000, a
decrease of $203,000 or 28% compared to costs of $737,000 for 1997. The Company
incurred an increase of $263,000 in professional fees during 1997 with respect
to the Company's filing of its 1994, 1995 and 1996 annual reports with the
Securities Exchange Commission.

Interest expense: Interest expense for 1998 was $542,000, a decrease
of $703,000 or 57% from interest expense of $1,245,000 in 1997. This decrease
was due to the decrease in debt during 1998 to Trans Continental Leasing, Inc.
("TC Leasing") and advances from Trans Continental Airlines, Inc. ("Trans
Continental") and Louis J. Pearlman.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

As shown in the accompanying financial statements, the Company has
experienced significant operating losses and negative cash flow from operations
in recent years and has an accumulated deficit of $139,000 at December 31,
1998. During the years ended December 31, 1999, 1998 and 1997, the Company did
not generate any revenues from airship operations. The Company also reported
net losses of $4,149,000, $999,000 and $2,294,000 for the years ended December
31, 1999, 1998 and 1997, respectively and had working capital deficiencies of
$4,389,000 and $3,047,000 at 1999 and 1998, respectively. The Company's auditor
noted in its report in each year that these conditions raise substantial doubt
about the Company's ability to continue as a going concern.

Management's plan to improve the financial position and operation with
the goal of sustaining the Company's operations for the next twelve months and
beyond include:

Arranging with Trans Continental or other related parties to provide
funds on a monthly basis as a loan, and separately, acquiring assets and
operations of one or more entities, with which the Company has been in
negotiation. At this time, there are no agreements relating to any such
acquisition or transaction, and there can be no assurance that any such
transactions will be consummated. The expectation is that such a business
combination, if completed, would provide additional cash flow and net income
to the Company.

Though management believes the Company will secure additional capital
and/or attain one or more of the above goals, there can be no assurance that any
acquisition, financing, or other plan will be effected. Any acquisition or
securities offering is subject to the Company's due diligence, the state of the
general securities markets, and of the specific market for the Company's
securities, and any necessary regulatory review.

While the Company believes that its plans for additional funding or for
obtaining a possible business combination have a reasonable possibility of
improving the Company's financial situation and ensuring the continuation of its
business, there can be no assurance that the Company will be successful in
carrying out its plans and the failure to achieve them could have a material
adverse effect on the Company. On March 28, 2000, the Company signed a letter of
intent to acquire WeBeCD.com, Inc., a private New York software company whose
technology transfers regular CD's, DVD's and other electronic media into
intelligent e-commerce vehicles. Although a letter of intent has been signed
between the parties, no binding agreement or commitment has yet been executed.
Any such agreement or commitment that is reached may be on terms that
substantially differ from those set forth in the letter of intent. Consummation
of any such agreement or commitment would be subject to the satisfaction of
various conditions and there can be no assurance that any transaction will
occur.

During 1999, the Company's operations used $1,827,000 compared to using
approximately $1,319,000 during 1998. This decrease in cash used by operations
was primarily attributable to the net loss during 1999 in the amount of
$4,569,000 and a reduction in accounts payable during 1999 in the amount of
$818,000. This was offset by noncash transactions during 1999 for impairment of
long lived assets in the amount of $1,677,000 and the issuance of common stock
as compensation and services in the amount of $1,408,000.

During 1998, the Company's operations used $1,319,000 compared to using
approximately $2,283,000 during 1997. This decrease in cash used by operations
was primarily attributable to the net loss during 1999 and decrease in accounts
payable during 1998 in the amount of $491,000.

<PAGE>

Cash was provided by investing activities in the amount of $261,000
and used by investing activities in the amount of $159,000 in 1998 and 1997,
respectively for working capital loans to certain related parties. See "Certain
Relationships and Related Transactions."

Cash was provided by financing activities in the amount of $1,828,000
and $1,056,000 in 1999 and 1998, respectively. Cash provided by financing
activities in 1999 and 1998 was primarily from the working capital financing
provided by Trans Continental.

Cash was provided by financing activities in the amount of $1,056,000
and $2,442,000 in 1998 and 1997, respectively. Cash provided by financing
activities in 1998 and 1997 was primarily from the working capital financing
provided by Trans Continental. Also in 1997, the Company obtained additional
financing from TC Leasing in the amount of 4,787,000. This financing was
obtained by TC Leasing from Norwest Equipment Finance, Inc. The Company used
these funds to repay debt owed to Senstar Capital Corporation in the amount of
$3,003,000 and for working capital.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," which
requires recognition of the fair value of derivatives in the statement of
financial position, with changes in the fair value recognized either in
earnings or as a component of other comprehensive income dependent upon the
nature of the derivative. SFAS No. 133 will be adopted by the Company in 1999
and is not expected to have a material effect on the consolidated financial
statements.

In December 1999, the SEC issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" (SAB 101). The Company is
required to adopt SAB 101 no later than its quarter ended June 30, 2000. The
Company does not believe that the adoption of SAB 101 will have a material
effect on its financial position or results of operations.

YEAR 2000 SYSTEM COSTS

For the purposes of Year 2000 compliance, the corporate MIS
department has managed the task of verifying that all of the Company's internal
transaction processing systems are date compliant. This process was initiated in
order to ensure the Company would be able to continue operations without
disruption after January 1, 2000. As of the date of this filing, the Company's
principal transaction processing software through which nearly all of the
Company's business is transacted has not experienced any significant problems
associated with Year 2000 date compliance. The Company also utilizes electronic
data exchange systems operated by third parties, as well as computers, software,
telephone systems and other equipment used internally. None of these systems
have experienced any significant Year 2000 compliance problems.

Historical and estimated costs in preparation for Year 2000 compliance
to this point have not been material. Although future anticipated costs are
difficult to estimate with any certainty, the Company does not anticipate any
future material expenditures related to Year 2000 compliance.

At the current time, the Company's anticipates that all systems and
applications will remain Year 2000 compliant. There can be no assurance,
however, of complete compliance based on the status to date. It is

<PAGE>

unlikely that any single system will have an adverse effect on the Company as a
whole. If a problem were to occur, contingency plans will involve the
procurement of standardized commercial off-the-shelf replacement modules for
internal applications and business functions as well as replacing noncompliant
third party software with software that is Year 2000 compliant. At present there
are no indications that contingency plans will be necessary or that there will
be revenue disruptions, however, there can be no assurances that future
disruptions will not occur.

INFLATION

Since the formation of the Company in August 1985, the rate of
inflation has remained low and the cost of the Company's operations has not been
significantly affected by inflationary trends in the economy.

ITEM 8. FINANCIAL STATEMENTS AND SCHEDULES

The report of the Company's Independent Auditor, the Company's
financial statements and notes to financial statements appear herein commencing
on Page F-1.

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

Grant Thornton LLP ("Grant Thornton") had served as the Company's
independent accountants from 1993 through June 24, 1997, when Grant Thornton was
dismissed as a result of the Company's budgetary concerns. There had been no
reports issued by Grant Thornton for the year ended December 31, 1994 and any
subsequent interim period prior to the date of such dismissal. Prior to the date
of dismissal, the Company did not have any disagreements with Grant Thornton on
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure, nor had there been a "reportable event" with
Grant Thornton, as described in Items 304(a)(1)(iv) and (v) of Regulation S-K.
Grant Thornton's report on the financial statements for the year ended December
31, 1993 included a modification paragraph as to uncertainty, including matters
giving rise to substantial doubt as to the Company's ability to continue as a
going concern. Upon recommendation of the Audit Committee of the Board of
Directors, the Board selected Meeks, Dorman & Company, PA as its new independent
accountant with respect to the fiscal years ending December 31, 1994 and
thereafter.

<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth information, as of December 31, 1999,
concerning each director and executive officer of the Company.

<TABLE>
<CAPTION>
Positions with
Name Age the Company Position Held Since
- ---- --- ----------- -------------------
<S> <C> <C> <C>
Louis J. Pearlman 45 Chairman of the Board of June 1982
Directors, President and
Chief Executive and
Operating Officer and
Treasurer

Alan A. Siegel 36 Secretary and Director October 1989

James J. Ryan 51 Director July 1986

</TABLE>

The following sets forth the business experience of each director,
executive officer, including principal occupations, at present and for at least
the past five years.

Louis J. Pearlman has been Chairman of the Board, President, Chief
Executive and Operating Officer and Treasurer of the Company, and a Director of
the Company, since June 1982. Since November 1976, Mr. Pearlman has been
President and Chief Operating Officer, a director and a 21% shareholder of Trans
Continental Airlines, Inc. ("Trans Continental"). Mr. Pearlman currently devotes
approximately 50% of his time to the affairs of Trans Continental and the
remainder of his time to the affairs of the Company. See "Certain Relationships
and Related Transactions."

Alan A. Siegel has been Secretary of the Company since October 1989 and
a director of the Company since December 1991. From 1985 to 1989, Mr. Siegel was
Senior Account Manager of the Company and since 1989 has served as the Company's
General Manager. Mr. Siegel has also been Senior Account Manager for Trans
Continental since 1986. Mr. Siegel currently devotes approximately 50% of his
time to the affairs of Trans Continental and the remainder of his time to the
affairs of the Company. See "Certain Relationships and Related Transactions."

James J. Ryan has been a director of the Company since July 1986. Mr.
Ryan served as Executive Director of Sedgwick Aviation of North America, an
international insurance brokerage firm, from 1994 until 1999. Until 1994, for
more than 20 years, he had been employed with Alexander and Alexander Inc., an
international insurance brokerage firm (and its predecessor firm), where he most
recently held the title of Senior Vice President of the Aviation and Aerospace
Division.

The Company's directors are elected for a period of one year and until
their successors are duly elected and qualified. There are currently three
members of the Board of Directors who were elected at the Company's Annual
Meeting of Shareholders held on June 10, 1998. The Company and its principal
shareholders had agreed to use their best efforts to elect two designees of the
underwriters of the 1993 offering to the Company's Board of Directors which
right expired in April 1998.

<PAGE>

To the knowledge of management of the Company, except as set forth
above, no director of the Company holds any directorship in any other company
with a class of securities registered pursuant to Section 12, or subject to the
requirements of Section 15(d), of the Securities Exchange Act of 1934 or in any
company registered as an investment company under the Investment Company Act of
1940.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers, directors and persons who own more
than ten percent of a registered class of the Company's equity securities to
file certain reports regarding ownership of, and transactions in, the Company's
securities with the Securities and Exchange Commission (the "SEC"). These
officers, directors and stockholders are also required by SEC rules to furnish
the Company with copies of all Section 16(a) reports that are filed with the
SEC. Based solely on a review of copies of such forms received by the Company,
and written representations received by the Company from certain reporting
persons, the Company believes that for the year ended December 31, 1998 all
Section 16(a) reports required to be filed by the Company's executive officers,
directors and 10% stockholders were filed on a timely basis, other than (i)
Trans Continental which failed to timely file a Form 4 with respect to 1,000,000
shares of Common Stock issued in July 1998 for consideration of extending to the
Company a line of credit of $150,000; and (ii) Mr. Alan Siegel, who failed to
timely file a Form 4 with respect to 1,000,000 shares of Common Stock issued to
him in January 1999 in consideration for services rendered and the waiver and
deduction of salary payable by the Company to Mr. Siegel during the period from
1985 through 1998.

ITEM 11. EXECUTIVE COMPENSATION

The following table summarizes all compensation earned by or paid to
the Company's Chief Executive Officer for services rendered in all capacities to
the Company for the three years ended December 31, 1999 and all officers who
earned over $100,000 (the "Named Executive Officers"). No other executive
officer's or employee's annual salary and bonus exceeded $100,000 during the
Company's past three fiscal years.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------------ ---------------
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) OPTIONS/SARs(#)
--------------------------- ---- ---------- --------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Louis J. Pearlman 1999 -- -- (1) --
Chairman, President, Chief 1998 -- -- -- --
Executive and Operating 1997 -- -- -- --
Officer and Treasurer

Alan A. Siegel 1999 $25,000 -- (2) --
Secretary and 1998 -- -- -- --
Director 1997 -- -- -- --
</TABLE>

- ----------
1. Represents 3,000,000 shares of the Company's common stock issued to Mr.
Pearlman in consideration of services rendered and the waiver and deduction
of salary payable by the Company.

2. Represents 1,000,000 shares of the Company's common stock issued to Mr.
Siegel in consideration of services rendered and the waiver and deduction of
salary payable by the Company. The Company also issued 1,000,000 shares of
common stock to Frank Sicoli, an employee of the Company, in consideration
of services rendered.

<PAGE>

DIRECTOR'S COMPENSATION

Directors who are not employees of the Company are compensated at a
rate of $500 for each meeting of the full Board of Directors which they attend
in person, up to a maximum of $2,000 in any one year, plus expenses for
attending such meetings. Officers are appointed annually by the Board of
Directors and serve at the discretion of the Board.

OPTIONS/SAR GRANTS IN 1999

There were no option grants in 1999.

AGGREGATE OPTION EXERCISES IN 1999 AND
1999 FISCAL YEAR-END OPTION VALUES

There were no option exercises in 1999.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board of Directors of the Company does not have a compensation
committee. The Board of Directors determines executive compensation, based on
corporate performance and market conditions. Mr. Pearlman and Mr. Siegel are
members of the Board of Directors and together represent a majority of the
Board. See "Employment Agreements."

EMPLOYMENT AGREEMENTS

The Company had an employment agreement with Louis J. Pearlman which
expired in 1994. The Company and Mr. Pearlman have not entered into a new
employment agreement. Mr. Pearlman's compensation is determined by the Company's
Board of Directors, of which Mr. Pearlman is the Chairman, and together with Mr.
Siegel constitutes a majority of the Board.

The Company entered into an employment agreement as of December 31,
1992 with Alan A. Siegel. Mr. Siegel's agreement expired on January 1, 1998. Mr.
Siegel's agreement provided for an annual salary of $75,000 for the first year
of the agreement and for annual increases thereafter in an amount equal to the
greater of 5% of his previous year's salary or the increase, if any, in the
Consumer Price Index for All Urban Consumers, Central Florida 1967100. The
agreement also provides for an annual bonus payable to Mr. Siegel in an amount
equal to 1 1/2% of the Company's net after-tax profits for such fiscal year plus
an amount determined in the discretion of the Board. The Company has not entered
into a new employment agreement with Mr. Siegel. The Board of Directors
determines Mr. Siegel's compensation. Mr. Siegel is a member of the Board of
Directors, and together with Mr. Pearlman constitutes a majority of the Board.

1994 EMPLOYEE SHARE PURCHASE PLAN

The Company has an employee share purchase plan (the "Plan") for
employees of the Company and any present or future "subsidiary corporations."
The Company intends for the Plan to be an "employee stock purchase plan" as
defined in Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code"). The Plan, approved by the Company's shareholders on April 11, 1995, was
effective November 1, 1994. All employees are eligible to participate in the
Plan, except that the Company's appointed committee may exclude any or all of
the following groups of employees from any offering: (i) employees who have been
employed for less than 2 years; (ii) employees whose customary

<PAGE>

employment is 20 hours or less per week; (iii) employees whose customary
employment is not more than 5 months in any calendar year; and (iv) highly
compensated employees (within the meaning of Code Section 414(q)). The shares
issuable under the Plan shall be common shares of the Company subject to certain
restrictions up to a maximum of 1,000,000 shares. The committee shall determine
the length of each offering but no offering may exceed 27 months. The option
price for options granted in each offering may not be less than the lessor of
(i) 85% of the fair value of the shares on the day of the offering, or (ii) 85%
of the fair market value of the shares at the time the option is exercised.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the number and percentage of shares of
Common Stock beneficially owned, as of April 11, 2000, by (i) all persons known
by the Company to be the beneficial owner of more than 5% of the Company's
outstanding Common Stock, (ii) each of the Company's directors, (iii) the
Company's Chief Executive Officer and the Named Executive Officers, and (iv) all
executive officers and directors of the Company as a group (3 persons).

<TABLE>
<CAPTION>
Name and Address Number of Shares Percent of Class
---------------- ---------------- ----------------
<S> <C> <C>
Louis J. Pearlman(1)(2)(4)........... 18,469,153 26.5%
Alan A. Siegel(1).................... 1,051,130 1.5%
James J. Ryan(1)(3).................. 530,000 *
Trans Continental Airlines, Inc.(4).. 7,666,862 11%
All officers and directors as a
group (3 persons).................... 20,050,283 28.8%
</TABLE>

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

(1) The business address of each person is c/o Entertainment International Ltd.,
7380 Sand Lake Road, Suite 350, Orlando, Florida 32819.

(2) Represents: (i) 8,802,291 shares of the Company's common stock; (ii)
warrants exercisable for 2,000,000 shares of the Company's Common Stock; and
(iii) 7,666,562 shares of the Company's common stock owned of record by
Trans Continental Airlines, Inc. ("Trans Continental"). Mr. Pearlman is the
President and Chief Operating Officer, a director and an approximately 21%
owner of the issued and outstanding shares of Trans Continental.

(3) Includes options to purchase 500,000 shares of the Company's common stock.

(4) Represents: (i) 3,666,862 shares of common stock issued to Trans Continental
in consideration for its guaranty of certain loans to the Company; and (ii)
1,000,000 shares of common stock issued to Trans Continental for entering
into a line of credit of $150,000 with the Company in July 1998, and (iii)
3,000,000 shares of the Company's common stock issued to Trans Continental
in consideration for continuing to provide lines of credit and funding the
ongoing costs and expenses of the Company. The 3,666,862 shares of common
stock were granted to Trans Continental in consideration for its guaranty of
the Company's obligations under the loans with Allstate Financial
Corporation, Phoenixcor., Inc. Senstar Capital Corporation, the Argentina
Lease Agreement and the Argentina Operations Agreement with Mastellone Hnos,
S.A., and a corporate credit card issued for the Company's benefit. See
"Certain Relationships and Related Transactions."

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In April 1999, the Company issued to Louis J. Pearlman 3,000,000 shares
of the Company's common stock in consideration for services rendered and the
waiver and deduction of salary payable by the Company to Mr. Pearlman.

In January 2000, the Company granted James J. Ryan the option to
purchase 500,000 shares of the Company's common stock at a price of $.01 per
share in consideration for services rendered to the Company by Mr. Ryan.

In January 1999, the Company issued to Alan Siegel 1,000,000 shares of
the Company's common stock in consideration for services rendered and the waiver
and deduction of salary payable by the Company to Mr. Siegel during the period
from 1985 through 1998. In addition, 1,000,000 shares, 500,000 shares and
250,000 shares of the Company's common stock was issued to Frank Sicoli, Scott
Bennett and Francisco Vasquez, respectively, for services rendered to the
Company.

In April, 1999, the Company issued to Trans Continental 3,000,000
shares of the Company's common stock in consideration for continuing to provide
lines of credit and funding the ongoing costs and expenses of the Company. On
July 29, 1998, the Company issued to Trans Continental 1,000,000 shares of the
Company's common stock in consideration of Trans Continental granting to the
Company a $150,000 line of credit. Mr. Louis J. Pearlman owns 21% of Trans
Continental and is Trans Continental's Chairman of the Board, President and
principal shareholder.

On June 10, 1998, a majority of the Company's shareholders voted to
approve the conversion of each outstanding share of preferred stock into three
shares of common stock. Shareholders also waived their rights to accrued but
undeclared dividends, and the authorized but unissued shares of preferred stock
were removed from authorization. In connection with the shareholders' approval
of such conversion, Louis Pearlman, Trans Continental and Trans Continental
Leasing, Inc. each agreed to waive approximately $2 million, $5.5 million and
$4.0 million, respectively, for advances to the Company, as well as accrued and
unpaid salaries in the case of Mr. Pearlman.

On December 24, 1996, Trans Continental Leasing, Inc. obtained a loan
with Norwest Equipment Finance, Inc. in the amount of $4,709,000. The proceeds
of this refinancing were used to repay the Company's debt to Senstar and to
provide working capital to the Company. TC Leasing is a wholly owned subsidiary
of Trans Continental. The Company owed to TC Leasing the aggregate amount of
approximately $4,090,000, which amount was waived in connection with the June
1998 shareholders' meeting.

Trans Continental serves as the Company's travel agent for
substantially all of its travel arrangements and the Company is its principal
customer. In the opinion of management, the terms and prices received from the
corporation are similar to those available from other travel agencies. During
1998, 1997 and 1996, the Company utilized the travel agency services for
reservations, while primarily paying certain costs directly to the provider.

<PAGE>

The Company has purchased hull insurance for the Company's airships
through Sedgwick Aviation of North America, an international insurance brokerage
firm of which Mr. James J. Ryan is the Executive Director.

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

Page
----
(a)(1) The following financial statements of the Company are filed
herewith:

A. Report of Independent Certified
Accountant....................................... F-1

B. Balance Sheets for the years ended December 31,
1999 and 1998.................................... F-2

C. Statements of Operations for the years
ended December 31, 1999, 1998 and 1997........... F-3

D. Statements of Changes in Stockholders'
Deficit for the years ended December 31, 1999,
1998 and 1997.................................... F-4

E. Statements of Cash Flows for the years
ended December 31, 1999, 1998 and 1997........... F-5

F. Notes to Financial Statements.................... F-6 to F-15

(2) The following exhibits of the Company are filed
herewith, unless otherwise

EXHIBIT INCORPORATED BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<S> <C> <C>
3.1 Certificate of Incorporation of the Company filed
June 9, 1992....................................... Exhibit 2(12)

3.2 Amendment to Certificate of Incorporation filed
September 18, 1984................................. Exhibit 3(2)

3.3 Amendment to Certificate of Incorporation filed
April 8, 1985...................................... Exhibit 4(12)

3.4 Amendment to Certificate of Incorporation filed
August 1, 1986..................................... Exhibit 5(12)

3.5 Amendment to Certificate of Incorporation filed
January 27, 1989................................... Exhibit 6(12)

3.6 Amendment to Certificate of Incorporation filed
August 5, 1992..................................... Exhibit 7(12)

3.7 Certificate of Correction to Amendment of
Certificate of Incorporation filed on
February 26, 1993.................................. Exhibit 8(12)

3.8 Amendment to Certificate of Incorporation filed
February 26, 1993.................................. Exhibit 9(12)

3.9 Certificate of Amendment to Certificate of
Incorporation filed on June 18, 1998............... Exhibit 3.1(20)

3.10 Certificate of Amendment to Certificate of
Incorporation filed on October 16, 1998............ Exhibit 3.10(21)

3.11 By-laws of the Company............................. Exhibit 3.9(19)

4.1 Warrant Agreement dated February 14, 1991 between
the Company and American Securities Transfer, Inc.
including form of Class A Warrant and Form of
Class B Warrant.................................... Exhibit 4.1(4)
</TABLE>

<PAGE>

4.2 Warrant dated February 7, 1991 issued to
Stephen M. Bathgate................................ Exhibit 4.2(4)

4.3 Two warrants dated respectively December 31, 1991
and February 25, 1992 issued to Julian M. Benscher. Exhibit 4.3(4)

4.4 Two warrants dated respectively February 7, 1991 and
March 23, 1991 issued to Kenneth S. Bernstein...... Exhibit 4.4(4)

4.5 Two warrants dated respectively February 7, 1991 and
May 23, 1991 issued to Chatfield Dean & Co., Inc... Exhibit 4.5(4)

4.6 Warrant dated September 26, 1991 issued to
Dr.Joseph C.F. Chow and Cynthia B. Chow............ Exhibit 4.6(4)

4.7 Warrant dated September 26, 1991 issued to Cohig &
Associates, Inc.................................... Exhibit 4.7(4)

4.8 Warrant dated May 1, 1991 issued to Daliz
Associates......................................... Exhibit 4.8(4)

4.9 Two warrants dated respectively February 8, 1990,
and February 21, 1991 issued to Emanuel and
Company............................................ Exhibit 4.9(4)

4.10 Warrant dated December 10, 1991 issued to After
Falkowitz.......................................... Exhibit 4.10(4)

4.11 Four warrants dated respectively June 5, 1990,
December 5, 1990, December 17, 1990, and
February 21, 1991 issued to Alfonso Figlioia....... Exhibit 4.11(4)

4.12 Two warrants dated respectively, May 23, 1991 and
February 7, 1992 issued to Sanford D. Greenberg.... Exhibit 4.12(4)

4.13 Warrant dated December 7, 1991 issued to Edward C.
Larkin............................................. Exhibit 4.13(4)

4.14 Warrant dated December 4, 1991 issued to David
Mathis............................................. Exhibit 4.14(4)

4.15 Warrant dated February 7, 1991 issued to Eugene
McColley........................................... Exhibit 4.15(4)

4.16 Warrant dated February, 1992 issued to Nour
Collection, Inc.................................... Exhibit 4.16(4)

4.17 Warrant dated November 3, 1989 issued to ORIX
Commercial Credit Corporation ("ORIX")............. Exhibit 10.29(5)

4.18 Warrant date February, 1992 issued to Chahram
Pahlavi............................................ Exhibit 4.18(4)

4.19 Warrant dated April 7, 1992 issued to Jim
Ryan............................................... Exhibit 4.19(4)

4.20 Warrant dated May 1, 1992 issued to Sterling Capital
Group, Inc......................................... Exhibit 4.20(4)

4.21 Warrant dated May 1, 1991 issued to Jonathan
Turk............................................... Exhibit 4.21(4)

4.22 Warrant dated February 7, 1991 issued to Steven R.
Hinkle............................................. Exhibit 4.22(4)

4.23 Warrant dated April 1, 1992 issued to Simon
Zamet.............................................. Exhibit 4.23(4)

4.24 Warrant dated May 8, 1992 issued to Louis J.
Pearlman........................................... Exhibit 4.24(6)

4.25 Two Warrants dated April 17, 1992 issued to Emanuel
and Company........................................ Exhibit 4.25(6)

4.26 Representatives' Preferred Stock Warrant issued to
Emanuel and Company and Chatfield Dean & Co., Inc.. Exhibit 4.26(6)

4.27 Action by Written Consent of the Board of Directors
dated April 15, 1997 extending warrant granted to
Louis J. Pearlman.................................. Exhibit 4.27

10.1 Amended and Restated Loan Agreement dated as May 8,
1992 between the Company and Louis J. Pearlman..... Exhibit 10.1(6)

10.2 Form of Subscription Agreement between the Company
and certain investors relating to the 1992
Private Placement.................................. Exhibit 10.2(6)

10.3 Letter Agreement dated April 17, 1992 between the
Company and Emanuel and Company in connection with
the 1992 Private Placement......................... Exhibit 10.3(6)

10.4 Incentive Stock Option Plan as amended, of the
Company............................................ Exhibit 10.2(1)

<PAGE>

10.5 Amendment to Incentive Stock Option Plan dated
December 9, 1991................................... Exhibit 10.2(4)

10.6 Aerial Airship Agreement dated October 26, 1987 by
and between the Company and the Metropolitan Life
Insurance Company ("MetLife")...................... Exhibit 10.29(7)

10.7 Amendment dated as of March 15, 1988 to the
Advertising Agreement between the Company and
MetLife............................................ Exhibit B.1(3)

10.8 Amendment dated as of March 15, 1988 to the Aerial
Advertising Agreement between the Company and
MetLife............................................ Exhibit 10.14(5)

10.9 Amendment dated as of March 15, 1988 to the Aerial
Advertising Agreement between the Company and
MetLife............................................ Exhibit 10.15(5)

10.10 Amendment dated as of March 15, 1988 to the Aerial
Advertising Agreement between the Company and
MetLife............................................ Exhibit 19.4(8)

10.11 Airship Advertising Agreement dated as to April 27,
1990 between the Company, Airship Industries (USA),
Inc. ("AIUSA") and Anheuser Busch Companies, Inc.
("Anheuser")....................................... Exhibit 10.8(4)

10.12 Termination Agreement dated as of January 1, 1991
between the Company, Anheuser, and AIUSA........... Exhibit 19.2(8)

10.13 Airship Advertising Agreement dated as of January 1,
1951 between the Company and Anheuser.............. Exhibit 19.3(8)

10.14 Amendment to Airship Advertising Agreement dated
May 31, 1991 between the Company and Anheuser...... Exhibit 10.11(4)

10.15 Passenger Airship Agreement dated May 31, 1991
between the Company and Anheuser................... Exhibit 19.12(4)

10.16 Airship Advertising Agreement dated March 12, 1992
between the Company and Anheuser................... Exhibit 10.13(4)

10.17 Term Loan Agreement dated as of February 27, 1990
between State Bank of South Australia and the
Company in the principal amount of $250,000........ Exhibit 10.3(9)

10.18 Airship Lease dated February 27, 1990 between the
Company and the State Bank of South Australia
together with Lease Supplement No. 1 thereto....... Exhibit 10.23(5)

10.19 Subordination Agreement dated February 27, 1990,
between the Company, State Bank of South
Australia and Louis J. Pearlman.................... Exhibit 10.16(4)

10.20 Line of Credit Agreement dated December 31, 1991
between Julian Benscher and the Company in the
amount of $1,000,000, as amended on February 20,
1992 and Secured and Credit Note dated December 31,
1991 from the Company to Julian Benscher in the
principal amount of $1,000,000..................... Exhibit 10.17(4)

10.21 Loan Agreement dated December 8, 1988 between the
Company and Louis J. Pearlman relating to a loan
of $500,000........................................ Exhibit C.1(3)

10.22 Promissory note dated December 8, 1988 of the
Company............................................ Exhibit D.1(3)

10.23 Demand Note dated as of December 31, 1988 of the
Company to Louis J. Pearlman, in the principal
amount of $324,929.76.............................. Exhibit H.1(3)

10.24 Term Note for the principal amount of $850,000 dated
January 31, 1990 from the Company to Louis J.
Pearlman........................................... Exhibit 10.21(4)

10.25 Stock Option Agreement dated January 1, 1989 between
the Company and Louis J. Pearlman to purchase
1,000,000 shares................................... Exhibit E.1(3)

<PAGE>

10.26 Amendment to Stock Option Agreement between the
Company and Louis J. Pearlman dated as of
February 7, 1991................................... Exhibit 10.24(4)

10.27 Exchange Agreement dated January 29, 1992 between
Slingsby Aviation Limited and the Company.......... Exhibit 10.28(4)

10.28 Purchase Agreement Assignment dated November 2, 1989
between the Company and ORIX and Consent by
Airship UK......................................... Exhibit 10.26(5)

10.29 Letter of Credit dated November 2, 1989 between the
Company and ORIX................................... Exhibit 10.309(5)

10.30 Assignment of (MetLife) Aerial Advertising Agreement
and Consent dated as of November 2, 1989 between
the Company and Airship (UK)....................... Exhibit 10.27(5)

10.31 Guaranty of Louis J. Pearlman in favor of ORIX dated
as of November 2, 1989............................. Exhibit 10.28(5)

10.32 Note and Warrant Purchase Agreement dated as of
November 2, 1989 between the Company and ORIX...... Exhibit 109.33(5)

10.33 Agreement dated November 12, 1990 among the Company,
the Receiver for Airship UK, AIUSA and others...... Exhibit 10.30(10)

10.34 Corporate Financial Consulting Agreement dated
February 14, 1991 between the Company and
Cohig & Associates................................. Exhibit 10.38(4)

10.35 Engagement Letter dated September 22, 1988 between
Emanuel and Company and the Company................ Exhibit K.1(3)

10.36 Agreement dated August 28, 1992 between Seoul
Olympic Sports Promotion Foundation and the
Company............................................ Exhibit 10.45(11)

10.37 Fifth Amendment to Aerial Advertising Agreement
effective as of September 1, 1992 between
Metropolitan Life and the Company.................. Exhibit 10.46(11)

10.38 Loan Agreement dated October 14, 1992 between Sequel
Capital Corporation and the Company................ Exhibit 10.47(11)

10.39 Agreement dated December 17, 1992 between J&B
Enterprises Limited (UK) Corp., Julian Benscher
and the Company.................................... Exhibit 10.48(11)

10.40 Airship Mortgage dated December 17, 1992 between the
Company and J&B Enterprises Limited (UK) Corp...... Exhibit 10.49(11)

10.41 Employment Agreement dated as of December 31, 1992
between the Company and Seth Bobet................. Exhibit 10.50(11)

10.42 Employment Agreement dated as of December 31, 1992
between the Company and Alan Siegel................ Exhibit 10.51(11)

10.43 Employment Agreement dated as of December 31, 1992
between the Company and Frank Sicoli............... Exhibit 10.52(11)

10.44 Amended Employment Agreement dated as of
February 15, 1993 between the Company and
Louis J. Pearlman.................................. Exhibit 10.53(11)

10.45 Second Amendment to Stock Option Agreement between
the Company and Louis J. Pearlman dated as of
February 15, 1993.................................. Exhibit 10.54(11)

10.46 Mast Sale Agreement dated December 30, 1992 between
J&B Enterprises Limited (UK) Corp., Julian
Benscher and the Company........................... Exhibit 10.55(11)

10.47 Mortgage dated December 30, 1992 between the Company
and J&B Enterprises Limited (UK) Corp.............. Exhibit 10.56(11)

10.48 Subscription Agreements between the Company and
certain investors relating to the 1992 Private
Placement.......................................... Exhibit 10.57(11)

<PAGE>

10.49 Sublease Agreement between Westinghouse Airships,
Inc. and the Company dated November 9, 1992........ Exhibit 10.58(13)

10.50 Amendment to Sublease Agreement between Westinghouse
Airships, Inc. and the Company dated November 9,
1992............................................... Exhibit 10.59(13)

10.51 Lease Agreement between Sand Lake IV-A Limited
Partnership and the Company dated February 25,
1991............................................... Exhibit 10.60(13)

10.52 Lease Agreement between T&L Leasing and the Company
dated January 13, 1992............................. Exhibit 10.61(13)

10.53 Lease Agreement between Westdeutsche Luftwerbung
Theodor Wullenkemper GMBH and the Company dated
May 16, 1993....................................... Exhibit 10.52(15)

10.54 Manufacturers Agreement between WDL
Luftschiffgesellschaft MBH and the Company dated
May 16, 1993....................................... Exhibit 10.53(15)

10.55 Escrow Agreement between and among Westdeutsche
Lufterbung Theodor Wullenkemper GMBH & Co.,
WDL Luftschiffgesellschaft MBH, Trans
Continental Airlines Inc., and the Company
dated May 15, 1993................................. Exhibit 10.54(15)
Exhibit 10.55(15)

10.56 Aerial Advertising Agreement between the Company and
Catamount Petroleum Limited Partnership dated
May 28, 1993....................................... Exhibit 10.56(15)

10.57 Amendment to Aerial Advertising Agreement between
the Company and Catamount Petroleum Limited
Partnership dated July 27, 1993.................... Exhibit 10.57(15)

10.58 Second Amendment to Aerial Advertising Agreement
between the Company and Catamount Petroleum
Limited Partnership dated August 9, 1993........... Exhibit 10.58(15)

10.59 Third Amendment to Aerial Advertising Agreement
between the Company and Catamount Petroleum
Limited Partnership dated October 13, 1993......... Exhibit 10.59(15)

10.60 Fourth Amendment to Aerial Advertising Agreement
between the Company and Catamount Petroleum
Limited Partnership dated November 9, 1993......... Exhibit 10.60(15)

10.61 Aerial Advertising Agreement between Kingstreet
Tours Limited and the Company dated as of
January 18, 1994................................... Exhibit 10.61(15)

10.62 Passenger Airship Agreement between Anheuser-Busch
Companies, Inc. and the Company dated as of
January 2, 1994.................................... Exhibit 10.62(15)

10.63 Amendment to Airship Advertising Agreement dated
March 12, 1992, between the Company and
Anheuser-Busch Companies, Inc. dated March 4,
1994 and related letter agreement dated
February 11, 1994.................................. Exhibit 10.63(15)

10.64 Amendment to note agreement dated as of November 2,
1989 between the Company and ORIX dated January 11,
1994............................................... Exhibit 10.64(15)

10.65 Loan Agreement between Don Golden and the Company
dated June 30, 1993................................ Exhibit 10.65(15)

10.66 Guarantee of Louis J. Pearlman in favor of the
Company dated as of June 30, 1993.................. Exhibit 10.66(15)

10.67 Loan Agreement between Superboard Limited and the
Company dated December 7, 1997..................... Exhibit 10.67(15)

<PAGE>

10.68 Guarantee of James Stuart Tucker in favor of the
Company dated as of December 7, 1993............... Exhibit 10.68(19)

10.69 Kingstreet Tours Limited Aerial Advertising
Agreement dated January 18, 1994, by and between
the Company and Kingstreet Tours Limited........... Exhibit 10.69(19)

10.70 Amended and Restated Airship Advertising Agreement,
dated July 8, 1994, by and between the Company
and Anheuser-Busch Companies, Inc.................. Exhibit 10.70(19)

10.71 Aircraft Lease Agreement, dated December 15, 1994,
by and between the Company and Mastellone
Hnos., S.A......................................... Exhibit 10.71(19)

10.72 Airship Operations Agreement, dated December 15,
1994, by and between Airship Operations (USA),
Inc. and Mastellone Hnos, S.A...................... Exhibit 10.72(19)

10.73 Passenger Airship Agreement. Dated as of January 2,
1994, by and between the Company and Anheuser-
Busch Companies, Inc............................... Exhibit 10.73(19)

10.74 Letter Agreement Modification, dated January 11,
1994, by and between the Company and ORIX USA
Corporation........................................ Exhibit 10.74(19)

10.75 Amendment to Lease, dated May 12, 1994, by and
between the Company and ORIX USA Corporation....... Exhibit 10.75(19)

10.76 Collateral and Security Agreement, dated as of
May 10, 1994, by and between the Company and ORIX
USA Corporation.................................... Exhibit 10.76(19)

10.77 Aircraft Collateral Funding Repayment Agreement,
dated as of November 16, 1994, by and between
the Company and Allstate Financial Corporation..... Exhibit 10.77(19)

10.78 Guaranty, dated December 6, 1994, of Louis J.
Pearlman........................................... Exhibit 10.78(19)

10.79 Guaranty, dated December 6, 1994, of
Trans-Continental Airlines. Inc.................... Exhibit 10.79(19)

10.80 Aircraft Lease Agreement, dated as of May 31, 1995,
by and between Trans Continental Leasing, Inc.,
as Lessor and the Company, as Lessee............... Exhibit 10.80(19)

10.81 Full Warranty Bill of Sale, dated as of May 31,
1994, by the Company to Trans Continental
Leasing, Inc....................................... Exhibit 10.81(19)

10.82 Credit Agreement, dated November 30, 1995, by and
between the Company and Senstar Capital
Corporation........................................ Exhibit 10.82(19)

10.83 Term Note, dated November 30, 1995, of the Company
to Senstar Capital Corporation..................... Exhibit 10.83(19)

10.84 Aircraft Mortgage and Security Agreement, dated
November 30, 1995, by and between the
Company and Senstar Capital Corporation............ Exhibit 10.84(19)

10.85 Assignment of Contract Rights, dated November 30,
1995, by and between the Company and Senstar
Capital Corporation................................ Exhibit 10.85(19)

10.86 Agreement of Guaranty and Suretyship, dated
November 30, 1995, by and between Trans Continental
Airlines and Senstar Capital Corporation........... Exhibit 10.86(19)

10.87 Release and Settlement Agreement, dated
September 20, 1993, by and between the Company and
Sequel Capital Corporation and Louis J. Pearlman... Exhibit 10.87(19)

10.88 Promissory Note, dated October 1994, of Louis J.
Pearlman to Airship Airways, Inc................... Exhibit 10.88(19)

<PAGE>

10.89 Promissory Note, dated October 26, 1994, of Louis J.
Pearlman to Airship Airways, Inc................... Exhibit 10.89(19)

10.90 Form of Share Subscription Agreement, dated
August 11, 1994, between the Company and........... Exhibit 10.90(19)

10.91 List of Purchasers in the 1994 Private
Placement.......................................... Exhibit 10.91(19)

10.92 Secured Promissory Note, dated October 26, 1994, of
Airship Airways, Inc. to the Company............... Exhibit 10.92(19)

10.93 Option Agreement, dated as of August 11, 1994,
between the Company and Louis J. Pearlman.......... Exhibit 10.93(19)

10.94 Airship International Ltd. Employee Share Purchase
Plan............................................... Exhibit 1(18)

10.95 Amended and Restated Lease Agreement, dated June 2,
1995, between Orix USA Corporation and The
Company............................................ Exhibit 10.95(21)

10.96 Letter of Intent with WeBeCD.com, Inc. dated
March 28, 2000..................................... *

10.97 Settlement Agreement, dated as of July 27, 1999
between the Company and WDL LUFTSCHIFFGESELLSCHAFT,
MBH, U.S. Airship Leasing Incorporated,
Theodor Wullenkemper, Walter Bohnke................ **

10.98 Settlement Agreement, dated as of December 16, 1999
between the Company and Gulf Oil Limited Partnership
f/n/a Catamount Petroleum Limited Partnership...... *

11.1 Statement re: Computation of Per Share
Earnings........................................... *

16.1 Letter of Wiss & Co. dated June 22,
1993............................................... Exhibit 16.1(14)

16.2 Letter of Grant Thornton dated July 7,
1997............................................... Exhibit 16(16)

16.3 Letter of Grant Thornton dated July 22,
1997............................................... Exhibit 16(17)

21.1 List of Subsidiaries............................... Exhibit 21.1(19)

27.1 Financial Data Schedule............................ *

- -------
* Filed herewith.
** To be filed by Amendment

(1) The Company's Registration Statement on Form S-18 Registration No. 2.96334
NY as filed with the Securities and Exchange Commission (the "SEC") on
March 9, 1985.

(2) The Company's Registration Statement on Form S-1 Registration No. 33-7830,
as filed with the SEC on August 7, 1986.

(3) The Company's Annual Report on Form 10-K for fiscal year ended December 31,
1988.

(4) The Company's Annual Report on Form 10-K for fiscal year ended December 31,
1991.

(5) The Company's Registration Statement on Form S-2, Registration No.
33-32619, as filed with the SEC on December 18, 1989.

(6) The Company's Post-effective Amendment No. 1 on Form S-3 to Form S-2,
Registration No. 33-38076, as filed with the SEC on May 14, 1992.

(7) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1987.

(8) The Company's Report on Form 8 dated August 14, 1991.

(9) The Company's Report on Form 8-K dated February 27, 1990.

(10) The Company's Registration Statement on Form S-2, Registration No.
33038076, as filed with the SEC on December 5, 1990.

(11) The Company's Registration Statement on Form S-1, Registration No.
33-56382, as filed with the SEC on February 16, 1993.

(12) The Company's Registration Statement on Form 8-A. as filed with SEC on
March 16, 1993.

<PAGE>

(13) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992.

(14) The Company's Report on Form 8-K dated July 9, 1993.

(15) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.

(16) The Company's Report on Form 8-K, as filed with the SEC on July 11, 1997.

(17) The Company's Report on Form 8-K/A, as filed with the SEC on July 22, 1997.

(18) The Company's Proxy Statement, as filed with the SEC on March 20, 1995.

(19) The Company's Annual Report on Form 10-K for the year ended December 31,
1994.

(20) The Company's Quarterly Report on Form 10-Q, as amended, for the quarter
ended June 30, 1998.

(21) The Company's Annual Report on Form 10-K for the year ended December 31,
1998.

(b) The Company did not file any Current Reports on Form 8-K during the
last quarter of 1998:

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, on April 14, 2000.

ENTERTAINMENT INTERNATIONAL LTD.

By: /s/ Louis J. Pearlman
---------------------------------------------
Louis J. Pearlman,
Chairman, President
and Chief Executive Officer

In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities indicated.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ Louis J. Pearlman
- ----------------------- Chairman of the Board and April 14, 2000
Louis J. Pearlman Chief Executive Officer
(Principal Executive and
/s/ Alan A. Siegel Financial Officer) and Director
- -----------------------
Alan A. Siegel Director April 14, 2000

/s/ James J. Ryan
- -----------------------
James J. Ryan Director April 14, 2000

<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
A. Report of Independent Certified Public Accountant .......... F-1

B. Balance Sheets as of December 31, 1999 and 1998 ............ F-2

C. Statements of Operations for the years ended
December 31, 1999, 1998, and 1997 .......................... F-3

D. Statements of Changes in Stockholders' Deficit for the
years ended December 31, 1999, 1998, and 1997 .............. F-4

E. Statements of Cash Flows for the years ended
December 31, 1999, 1998, and 1997 .......................... F-5

F. Notes to Financial Statements .............................. F-6 to F-15

</TABLE>

<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
Entertainment International Ltd.
Orlando, Florida

We have audited the accompanying balance sheets of Entertainment International
Ltd. as of December 31, 1999 and 1998, and the related statement of operations,
stockholders' deficit, and cash flows for the years ended December 31, 1999,
1998, and 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Entertainment International
Ltd. at December 31, 1999 and 1998, and the results of its operations and its
cash flows for the years ended December 31, 1999, 1998 and 1997, in conformity
with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note B to the
financial statements, the Company has experienced significant operating losses,
an accumulated deficit and negative working capital at December 31, 1999 and
1998. These conditions raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note B. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Meeks, Dorman & Company, P.A.
Longwood, Florida
February 3, 2000

F-1

<PAGE>

ENTERTAINMENT INTERNATIONAL LTD.
BALANCE SHEETS
DECEMBER 31,

<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Airships and Related Equipment:
Airships .......................................... $ 963,000 $ 2,294,000
Vehicles .......................................... 529,000 645,000
Parts and equipment ............................... 392,000 828,000
Airship components ................................ 674,000 1,606,000
- -----------------------------------------------------------------------------------
2,558,000 5,373,000
Less: Accumulated depreciation and amortization .... (629,000) 1,628,000
- -----------------------------------------------------------------------------------
1,929,000 3,745,000
Cash and cash equivalents ........................... 1,000 --
Prepaid expenses .................................... 16,000 21,000
Other assets ........................................ 6,000 6,000
- -----------------------------------------------------------------------------------
1,952,000 $ 3,772,000
- -----------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities:
Accounts payable .................................. 226,000 $ 1,034,000
Customer payment on future services ............... 514,000 514,000
Insurance financing ............................... 3,000 31,000
Accrued expense and other liabilities ............. 29,000 90,000
Obligations under capital leases .................. 839,000 1,692,000
Notes payable ..................................... -- 10,000
Due to related parties ............................ 3,221,000 540,000
- -----------------------------------------------------------------------------------
Total liabilities ............................... 4,832,000 3,911,000

Contingencies and commitments
- -----------------------------------------------------------------------------------

Stockholders' Deficit:
Common stock, $.01 par value: Authorized--
110,000,000, issued and outstanding--68,097,000
shares in 1999 and 55,047,000 in 1998 .......... 681,000 550,000
Capital in excess of par value .................... 50,788,000 49,091,000
Accumulated deficit ............................... (54,349,000) (49,780,000)
- -----------------------------------------------------------------------------------
Total stockholders' deficit ..................... (2,880,000 (139,000)
- -----------------------------------------------------------------------------------
$ 1,952,000 $ 3,772,000
- -----------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these statements.

F-2

<PAGE>

ENTERTAINMENT INTERNATIONAL LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,

Airship Revenue -- -- --
- -----------------------------------------------------------------------------------------------------------------
Costs and expenses:
Operating costs 250,000 70,000 357,000
Selling, general and administrative expenses 1,716,000 534,000 737,000
- -----------------------------------------------------------------------------------------------------------------
1,966,000 604,000 1,094,000

Loss from operations (1,966,000) (604,000) (1,094,000)
- -----------------------------------------------------------------------------------------------------------------
Other income (expense):
Write-down of impaired assets (1,677,000) -- --

Gain (Loss) on sale of airship components to
Stockholder -- (22,000) --
Loss on retirement of airship components (2,000) -- --

Loss on settlement (258,000) -- --

Forgiveness of debt by stockholder 88,000 --
Realized gain on sale leaseback 44,000 45,000
Interest expense (677,000) (542,000) (1,245,000)
Interest, royalties and other income 11,000 40,000 --
- -----------------------------------------------------------------------------------------------------------------
(2,603,000) (392,000) (1,200,000)
- -----------------------------------------------------------------------------------------------------------------
Net loss (4,569,000) $ (996,000) $(2,294,000)
- -----------------------------------------------------------------------------------------------------------------

Weighted average number of common shares 62,262,000 46,736,000 42,181,000
- -----------------------------------------------------------------------------------------------------------------

Net loss applicable to common shares:
Net loss (4,569,000) $ (996,000) $(2,294,000)
Abolishment of accrued preferred dividends -- 6,508,000
Preferred stock dividend -- (647,000) (1,551,000)
- -----------------------------------------------------------------------------------------------------------------

Net income (loss) applicable to common shares (4,569,000) $ 4,865,000 $(3,845,000)
- -----------------------------------------------------------------------------------------------------------------

Net income (loss) per common share (.07) $.10 $(.09)
- -----------------------------------------------------------------------------------------------------------------

SIGNIFICANT AMOUNTS APPLICABLE TO
RELATED PARTIES:

Selling, general and administrative:
Interest expense $574,000 $334,000 $437,000
</TABLE>

The accompanying notes are an integral part of these statements.

F-3

<PAGE>

ENTERTAINMENT INTERNATIONAL LTD.
STATEMENTS OF STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>
Capital in Excess of
Par Value
Preferred Stock Common Stock -------------------------
--------------- ------------ Preferred Common Accumulated
Shares Par Value Shares Par Value Stock Stock Deficit
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 2,712,000 $27,000 41,002,000 $410,000 $14,444,000 $22,081,000 $(50,800,000)

Conversion of preferred stock into
Common stock (253,000) (3,000) 1,521,000 15,000 3,000 (15,000) --
Dividends accrued on preferred stock -- -- -- - -- -- (1,551,000)
Net loss -- -- -- - -- -- (2,594,000)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 2,459,000 24,000 42,523,000 425,000 14,447,000 22,066,000 (54,645,000)
- -----------------------------------------------------------------------------------------------------------------------------------

Conversion of preferred stock into
Common stock (2,459,000) (24,000) 11,524,000 115,000 (14,447,000) 14,356,000 --
Reimbursement of 1993 stock
Subscriptions -- -- -- -- -- (22,000)
Common stock issued to Trans
Continental for obtaining line of Credit -- -- 1,000,000 10,000 -- 32,000 --
Write-off of underwriter compensation -- -- -- -- -- 51,000
Capital contributions from
Stockholders due to
Extinguishment of debt -- -- -- -- -- 11,886,000 --
Dividends accrued on preferred stock -- -- -- -- -- -- (647,000)
Abolishment of dividends accrued on
Preferred stock -- -- -- -- -- -- 6,508,000
Net loss -- -- -- -- -- -- (996,000)
Prior period adjustment -- -- -- -- -- 722,000 --
- -----------------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1998, as adjusted -- -- 55,047,000 550,000 49,091,000 (49,780,000)
- -----------------------------------------------------------------------------------------------------------------------------------
Stock issued for compensation -- -- 5,950,000 60,000 -- 774,000
Stock issued for services -- -- 4,100,000 41,000 533,000
Stock issued for arrangement of additional
financing -- -- 3,000,000 30,000 -- 390,000
Net Loss (4,569,000)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 -- -- 68,097,000 681,000 -- 50,788,000 (54,349,000)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these statements.

F-4

<PAGE>

ENTERTAINMENT INTERNATIONAL LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Cash flows from operating activities
Net loss (4,569,000) $ (996,000) $(2,294,000)
Adjustments to reconcile net loss to net
Cash flows used in operating activities:
Depreciation and amortization 136,000 143,000 219,000
Realized gain on sale leaseback -- (44,000) (45,000)
Proceeds from issuance of common stock 92,000 --
Loss (gain) on disposition of airships and
related equipment 3,000 22,000 79,000
Impairment of long lived assets 1,677,000 -- --
Issuance of common stock for services 1,408,000 -- --
Issuance of common stock for interest 420,000
Changes in operating assets and liabilities:
Prepaid insurance 5,000 1,000 (22,000)
Other assets -- -- 6,000
Accounts payable--trade (818,000) (491,000) (90,000)
Customer payments on future services -- -- (39,000)
Insurance financing (28,000) (14,000) 7,000
Accrued expenses and other liabilities (61,000) (32,000) (104,000)
--------------------------------------------
Net cash flows used in operating activities (1,827,000) (1,319,000) (2,283,000)

Cash flows from investing activities:
Net change in due from related parties -- 261,000 (159,000)
--------------------------------------------
Net cash flows provided by (used in) investing
activities -- 261,000 (159,000)
Cash flows from financing activities:
Proceeds from issuance of notes payable -- -- 4,787,000
Principal payments on capital leases and loans (853,000) (1,101,000) (4,404,000)
Reimbursement of 1993 stock subscriptions -- (22,000) --
Changes in loans from stockholders 2,681,000 2,179,000 2,059,000
--------------------------------------------
Net cash flows provided by financing activities 1,828,000 1,056,000 2,442,000
--------------------------------------------
Net changes in cash and equivalents 1,000 (2,000) --
Cash and cash equivalents, beginning of year -- 2,000 2,000
--------------------------------------------
Cash and equivalents, end of year $ 1,000 $ -- $ 2,000
============================================
Supplemental information:
Interest paid $ 263,000 $ 542,000 $ 679,000
--------------------------------------------
Non-cash accrual of dividend on preferred stock $ -- $ 647,000 $ 1,551,000
--------------------------------------------
Non-cash abolishment of accrued preferred dividends $ -- $ 6,508,000 $ --
--------------------------------------------
Non-cash extinguishment of debt due to stockholders $ -- $ 11,886,000 $ --
--------------------------------------------
</TABLE>

The accompanying notes are an integral part of these statements.

F-5

<PAGE>

ENTERTAINMENT INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997

NOTE A -- NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business -- The Company operated lighter-than-air airships also
commonly known as blimps, which were used to advertise and promote the products
and services of the Company's clients. The Company has not operated any airships
since 1995.

Cash and Equivalents -- The Company considers unrestricted short-term, highly
liquid investments with maturities of three months or less at the time of
purchase to be cash equivalents.

Airships and Related Equipment -- Property and Equipment are stated at cost.
Depreciation is provided by the straight line method over the estimated useful
lives of the assets - 10 to 20 years (airships), 4 to 8 years (vehicles), 3 to 5
years (parts and equipment) and 2 to 3 years (improvements). Airship components
are not depreciated until placed in service. Depreciation expense for the years
ended December 31, 1999, 1998 and 1997 was $136,000, $143,000 and $219,000,
respectively.

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

Income Taxes -- The Company follows the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting For Income Taxes", which requires the
recognition of deferred tax liabilities and assets for expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect when these
differences are expected to reverse. Valuation allowances are established when
appropriate, to reduce deferred tax assets to the amount expected to be
realized.

Fair Market Value of Financial Statements -- Unless otherwise noted, the fair
value of financial instruments approximates book value.

F-6

<PAGE>

NOTE A -- NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

Net Loss Per Common Share -- The Company has adopted Statement of Financial
Accounting Standards No. 128, "Earnings per share," ("SFAS 128"). This
pronouncement establishes standards for computing and presenting earnings per
share ("EPS") for entities with publicly-held common stock or potential common
stock. SFAS 128 simplifies the standards for computing EPS and makes them
comparable to international EPS standards. The pronouncement requires the
presentation of net loss per common share based on the weighted average number
of shares outstanding during the periods. SFAS 128 also requires presentation of
diluted EPS. When losses have been incurred, warrants and options are not
included since the effect would dilute loss per share, however, preferred stock
dividends are included in the loss per share calculation. Therefore, diluted EPS
is not presented for the Company for the years ended December 31, 1999 and 1998
because there were net losses in both years. When net income applicable to
common stock is reported, warrants and options are included using the treasury
stock method, provided exercise prices are less than the average market price,
and when such inclusion results in further dilution. The options and warrants
outstanding at December 31, 1999 all provided for exercise prices higher than
the average market price.

New Accounting Standards -- In June 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities," ("SFAS No. 133"). This
statement establishes accounting and reporting guidelines for derivatives and
requires an establishment to record all derivatives as assets or liabilities on
the balance sheet at fair value. Additionally, this statement establishes
accounting treatment for four types of hedges: hedges of changes in the fair
value of assets or liabilities, firm commitments, forecasted transactions and
hedges of foreign currency exposures of net investments in foreign operations.
Any derivative that qualifies as a hedge, depending upon the nature of that
hedge, will either be offset against the change in fair value of the hedged
assets, liabilities or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. SFAS No.
133 is effective for years beginning after June 15, 2000. The Company does not
currently participate in these types of financing activities and does not
anticipate that the adoption of this statement will have a material impact on
its consolidated balance sheets, statements of operations, or cash flows. In
December 1999, the SEC issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" (SAB 101). The Company is required to adopt
SAB 101 no later than its quarter ended June 30, 2000. The Company does not
believe that the adoption of SAB 101 will have a material effect on its
financial position or results of operations.

F-7

<PAGE>

NOTE B -- SIGNIFICANT UNCERTAINTIES AND MANAGEMENT'S PLANS TO OVERCOME OPERATING
DIFFICULTIES AND MEET CASH REQUIREMENTS

As shown in the accompanying financial statements, the Company has experienced
significant operating losses and negative cash flow from operations in recent
years and has an accumulated deficit of $53,929,000 at December 31, 1999. During
the years ended December 31, 1999, 1998 and 1997, the Company did not generate
any revenues from airship operations and it reported net operating losses and
negative cash flows from operating activities for each of the three years. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern.

The Company has relied on loans, cash advances, and guarantees from Louis
Pearlman, the Company's Chairman, President and principal stockholder, and Trans
Continental Airlines, Inc. ("Trans Continental") an affiliated company of which
Mr. Pearlman is the Chairman, President and 21% stockholder. There can be no
assurance that Mr. Pearlman and Trans Continental will make additional loans,
cash advances, and guarantees on an ongoing basis. At December 31, 1999, the
Company owed Trans Continental $2,821,000 (see Note C). Trans Continental has
deferred repayment of such amounts for an indefinite period.

Management's plans to improve the financial position of the Company, with the
goal of sustaining the Company's operations for the current year and beyond
include: (1) establishing continued arrangements with Trans Continental, a
company related through common directorship and ownership, to provide funding on
a monthly basis, and (2) establishing goals for the acquisition of assets and
operations of one or more entities, with the expectation that such business
combinations, if completed, would provide additional cash flow and net income.
The Company is continuing to seek candidates engaged in the entertainment
industry or a media/Internet-based business for an acquisition or merger.

While the Company believes that its plans to secure additional funding or enter
into a possible business combination have the reasonable capability of improving
the Company's financial situation and ensuring the continuation of its business,
there can be no assurance that the Company will be successful in carrying out
its plans and the failure to achieve them could have a material adverse effect
on the Company.

F-8

<PAGE>

NOTE C -- RELATED PARTY TRANSACTIONS

The Company has the following net liabilities for expenses paid by related
entities on behalf of the Company:

<TABLE>
<CAPTION>
1999 1998
---------- --------

<S> <C> <C>
Due to TransContinental Airlines $3,241,000 $713,000
Due to TransContinental Leasing 30,000 --
Due to Shape CD 22,000 25,000
Due from TransContinental Records (69,000) (190,000)
Due from Chippendales Properties LLC (3,000) (45,000)
Due from Chippendales USA -- 37,000
---------- --------
Total $3,221,000 $540,000
========== ========
</TABLE>

Office Lease -- Since May 7, 1996, the Company has subleased approximately 500
square feet of office space from Trans Continental Records, Inc. on a
month-to-month basis for monthly rental payments of approximately $770. Rent
plus operating expenses totaled $12,000 and $9,240 for the years ended December
31, 1999 and 1998, respectively.

Airship Storage Lease -- The Company leases space for the storage of the
airships and related equipment from Mr. Julian Benscher ("Mr. Benscher").
Mr. Benscher beneficially owns less than 5.0% of the common stock of the
Company at December 31, 1999. The Company has agreed to allow Mr. Benscher
to use an airship, along with certain related components and equipment,
in exchange for storage space at his facility. Rent expense is
estimated at $4,000 per month and is offset by estimated rent income of the
same amount.

Line of Credit -- On July 29, 1998, the Company issued 1,000,000 shares of
common stock to Trans Continental in exchange for extending the Company a
$150,000 line of credit. On April 19, 1999, the Company issued 3,000,000
shares of common stock to Trans Continental in consideration for continuing to
provide lines of credit and funding the operating costs of the Company. As of
December 31, 1999 and 1998, the Company had $3,241,000 and $713,000 outstanding
debt with Trans Continental, respectively. The balances included interest
accrued at 8.3% for each year. The Company has paid interest expense on related
party debt in the amount of $574,000, $334,000 and $437,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.

F-9

<PAGE>

NOTE C -- RELATED PARTY TRANSACTIONS (CONTINUED)

Extinguishment of Debt -- On September 30, 1998, the Company signed agreements
with Trans Continental Airlines, Inc., Transcontinental Leasing, Inc. ("TC
Leasing") and Louis Pearlman, to waive certain amounts owed by the Company as of
June 10, 1998. TC Leasing, Inc. is a wholly owned subsidiary of Trans
Continental. In these agreements, Mr. Pearlman agreed to waive $1,265,000,
consisting of advances to the Company for working capital, deferred salary,
bonuses and interest. Trans Continental waived $6,868,000 advanced to the
Company for lease payments, working capital, and interest. TC Leasing, Inc.
waived $3,753,000, consisting of principal and interest. The extinguishment of
debt by the three related parties was recorded as an addition to capital in
excess of par value because all are direct or indirect shareholders.

Employee Salaries -- The Company and certain affiliates employ common employees.
A portion of such employees' salaries and related benefits are allocated to the
Company and such affiliated entities based on the approximate amount of time
such employees devote to the Company and its affiliates. As of December 31, 1999
and 1998, the Company's allocated portion of such costs amounted to $284,000 and
$228,000, respectively.

Rental Arrangement and Travel Agency Service -- Trans Continental serves as the
Company's travel agent for substantially all of its travel arrangements and the
Company is its principal customer. In the opinion of management, the terms and
prices received from the corporation are similar to those available from other
travel agencies. During 1998, the Company utilized the travel agency services
for reservations, while primarily paying certain costs directly to the provider.

F-10

<PAGE>

NOTE D -- INCOME TAXES

At December 31, 1999, the Company had net operating loss carryforwards for
income tax purposes of approximately $47,428,000 available as offsets against
future taxable income. During 1991, the Company experienced changes in the
Company's ownership as defined in Section 382 of the Internal Revenue Code. The
effect of these changes in ownership is to limit the utilization of certain
existing net operating loss carryforwards for income tax purposes. Operating
losses incurred after the ownership change are not limited. As a result,
approximately $31,773,000 of the operating losses, which occurred after the
ownership change are not limited. The operating losses incurred prior to the
ownership change are limited to a specified dollar amount each year. The net
operating loss carryforwards expire during the years 2000 to 2015. The company
also has unused investment tax credits of $140,000 which expire principally in
the year 2000.

The tax effect of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities, consist of the
following at December 31:

<TABLE>
<CAPTION>
1999 1998
- ------------------------------------------------------------------------

<S> <C> <C>
Deferred tax assets
Net operating loss $18,734,000 $14,980,000
Investment tax creditd 140,000 140,000
- ------------------------------------------------------------------------
18,874,000 15,120,000
Less: Valuation allowance 18,188,000 14,723,000
- ------------------------------------------------------------------------
686,000 397,000
Deferred tax liabilities:
Airships and related equipment (686,000) (397,000)
(686,000) (397,000)
- ------------------------------------------------------------------------
Net deferred tax asset $ -- $ --
- ------------------------------------------------------------------------
</TABLE>

The net change in the valuation allowance was approximately $4,837,000 relating
to net operating losses from 1999.

F-11

<PAGE>

NOTE E -- CAPITAL LEASE

In 1989, the Company purchased a new Skyship 600 Series airship (the "MetLife
airship") from Airship UK. The airship and related equipment were financed
primarily by net proceeds of $6,200,000 from a capital lease obtained through
ORIX Commercial Credit Corp. ("ORIX").

In 1995, the ORIX lease was renegotiated calling for payments of principal only
of $20,000 for twelve months. At the end of the initial twelve-month period, the
Company began to make principal and interest payments at the rate of prime plus
1% of $40,000 for the next six months, followed by payments of $60,000 for the
next six months and finally payments equaling the higher of $80,000 or 50% of
the annual cash flows for the fiscal year immediately prior to the commencement
of each applicable twelve-month period for the remaining term of the lease until
the lease is fully amortized or a larger payment is made based upon the annual
cash flow of the year. The balance under this capital lease amounted to $839,000
and $1,692,000 at December 31, 1999 and 1998, respectively.

During 1994, the leased airship was damaged and taken out of service. The
remaining net book value was analyzed, written down in accordance with SFAS 121
as described in Note A, and transferred to spare parts and airship components
valued at $964,000 and $2,152,000 at December 31, 1999 and 1998.

The capital lease is guaranteed by Mr. Pearlman and Trans Continental.

At December 31, 1999, future minimum lease payments of $874,000 were due in 2000
with $35,000 representing interest.

NOTE F -- OPERATING LEASE AND SETTLEMENT

Pursuant to an agreement effective May 16, 1993 (the "WDL Lease"), the Company
leased a used type WDL airship to fulfill its obligations under a Gulf Oil
Contract. The Company began operating this airship as the Gulf Oil Airship on
June 25, 1993. On September 11, 1994, the Gulf Oil Airship was damaged in an
accident and its operations ended.

On April 7, 1999, U.S. Airship Leasing, Inc. f/k/a WDL Airship, Inc. ("US
Airship") commenced a suit in the Florida Circuit Court of the Ninth Judicial
Circuit, Orange County, alleging that the Company entered into a lease agreement
with US Airship and breached the lease by failing to make all payments due under
the lease. US Airship was seeking damages of $1,488,614 plus interest, costs and
other relief.

F-12

<PAGE>

NOTE F -- OPERATING LEASE AND SETTLEMENT (CONTINUED)

On April 8, 1999, WDL Luftschiffgesellschaft MBH ("WDL"), an affiliate of US
Airship also commenced a suit alleging that the Company entered into a lease
agreement pursuant to which the Company leased an airship from WDL. The suit
sought $148,558 in damages plus prejudgement interest, costs and other relief.

These cases were settled on July 28, 1999 for $1,033,000. This amount was paid
by Trans Continental on behalf of the Company.

NOTE G -- STOCKHOLDERS' EQUITY

Preferred Stock -- On June 10, 1998, the Company's common and preferred
stockholders approved the conversion of each share of the Company's outstanding
Class A 8% Cumulative Convertible Voting preferred stock, par value $.01 per
share, into three shares of the Company's Common Stock, par value $.01 per
share, and all outstanding preferred shares were converted to common shares. In
addition, the stockholders waived their rights to the accrued but undeclared
preferred dividends. The authorized but unissued shares of preferred stock were
cancelled, and the number of authorized shares of common stock was increased to
110,000,000. The Company accrued $647,000 in dividends from January 1, 1998
through June 10, 1998 which brought the total dividends waived to $6,508,000.

Common Stock -- In January 1999, the Company issued to Alan Siegel 1,000,000
shares of the Company's common stock in consideration for services rendered and
the waiver and deduction of salary payable by the Company to Mr. Siegel during
the period from 1995 through 1998. In addition, the Company issued to other
employees of the Company 1,750,000 shares of stock as compensation in
connection with services rendered to the Company. The Company also issued to
Louis J. Pearlman 3,000,000 shares of the Company's common stock in
consideration of services rendered and the waiver of salary payable to
Mr. Pearlman during the period from 1995 through 1998. (See Directors and
Executive Officers of the Registrant) and 4,000,000 shares of common stock
were issued to TSI Global Consultants, Ltd., a non-affiliate of the Company, in
consideration of financial consulting services rendered during
1997 though March 1999. Trans Continental, an affiliate of the Company, was
also issued 3,000,000 shares of common stock in consideration for continuing
to provide lines of credit and funding the operating costs of the Company.

F-13

<PAGE>

NOTE G -- STOCKHOLDERS' EQUITY (CONTINUED)

Employee Share Purchase Plan -- The Company has an employee share purchase plan
(the "Plan") for employees of the Company and any present or future "subsidiary
corporations." The Company intends the Plan to be an "employee stock purchase
plan" as defined in Section 423 of the Internal Revenue Code. The Plan was
effective November 1, 1994. All employees are eligible to participate in the
Plan, except that the Company may exclude any or all of the following groups of
employees from any offering: (i) employees who have been employed for less than
2 years; (ii) employees whose customary employment is 20 hours or less per week;
(iii) employees whose customary employment is not more that 5 months in any
calendar year; and (iv) highly compensated employees. The shares issuable under
the Plan shall be common shares of the Company subject to certain restrictions
up to a maximum of 1,000,000 shares. The committee shall determine the length of
each offering but no offering may exceed 27 months. The option price for options
granted in each offering may not be less than the lesser of (i) 85% of the fair
value of the shares on the day of the offering, or (ii) 85% of the fair market
value of the shares at the time the option is exercised.

Options -- Outstanding options at December 31, 1999, all of which are currently
exercisable, after giving effect to adjustments through such date for
anti-dilution provisions and exercisable price reductions are as follows:

<TABLE>
<CAPTION>
Exercise
Shares Price Expiration
Issuable Per Share Date
---------------------------------------------------------------------------------------------

<S> <C> <C> <C>
Warrants:
Issued to Company President in May
1992 in consideration of restructuring
Terms of loans due, extended through
May 2001. 2,000,000 $ .10 Through May
2001
Options:
Issued to officers and others
in 1989 and 1991 through the Company's Through
Employee Share Purchase Plan 165,000 $0.01 to $1.28 October 2001
</TABLE>

F-14

<PAGE>

NOTE H -- PRIOR PERIOD ADJUSTMENTS

Stockholders' equity has been adjusted by $763,000 for two errors in the
December 31, 1998 financial statements. In 1998, the Company extinguished
$11,886,000 of debt, which was treated as a capital contribution to the Company.
This extinguishment of debt should also have included the recapture of deferred
gain on a sale leaseback transaction from prior years. This resulted in a
$722,000 gain, which should have offset the loss on the extingushment of debt.
Also included in prior period adjustments is a payable of $41,000 that was
discovered during the 1999 audit that related to a prior year liability.

NOTE I -- SUBSEQUENT EVENTS

In January 2000, the Company paid $100,000 and issued 1,500,000 shares of common
stock to settle liabilities under an agreement with Gulf Oil Limited
Partnership. The 1,500,000 shares of par value $.01 common stock were valued at
$.14 per share on the date of grant or $213,872.

In January 2000, the Company granted to James J. Ryan, a director of the
Company, the option to purchase 500,000 shares of the Company's $.01 par value
common stock for a period of five years at a price of $.01 per share, in
consideration of services rendered to the Company.

On March 28, 2000, the Company announced its letter of intent to acquire
WeBeCD.com, Inc. WeBeCD.com, Inc. is a private New York software company whose
technology transforms regular CD's, DVD's and other electronic media into
intelligent e-commerce vehicles. The transaction is subject to, but not limited
to, satisfactory due diligence, receipt of necessary approvals, and the
execution of a stock purchase agreement.

F-15

<PAGE>

EXHIBIT 10.96

ENTERTAINMENT INTERNATIONAL LTD.
7380 SAND LAKE ROAD
SUITE 350
ORLANDO, FLORIDA 32819
(407) 351-0011

Privileged & Confidential

March 28, 2000

WeBeCD.com, Inc.
25 West 36th Street
10th Floor
New York, New York 10019
Attention: Robert L. Kelly

Gentlemen:

This letter of intent ("Letter of Intent") will confirm the
discussions that we have had relating to the contemplated transaction between
WeBeCD.com, Inc., a Nevada corporation ("WeBeCD"), and Entertainment
International, Limited, a New York corporation ("ENTI"), pursuant to which ENTI
shall acquire all of the capital stock of WeBeCD in exchange for shares of the
common stock of ENTI (the "Transaction"). This letter embodies our proposal for
the Transaction and outlines certain of the terms and conditions upon which the
Transaction would be effected.

1. Structure of Transaction. The Transaction will be structured as a
purchase by ENTI of all of the issued and outstanding shares of WeBeCD pursuant
to which all of the holders of the shares of WeBeCD's capital stock (and
securities convertible into WeBeCD capital stock, including options and warrants
issued and to be issued) will receive a to be negotiated number of unregistered
shares of the common stock of ENTI, par value $.01 per share (the "ENTI Common
Stock") for every one share of WeBeCD common stock owned on the effective date
of the Transaction. ENTI represents and warrants that as of the date of this
Letter of Intent, the issued and outstanding shares of capital stock of ENTI
consists of 69,597,282 shares of ENTI Common Stock and warrants and options to
purchase 2,500,000 shares of ENTI Common Stock. In addition,

<PAGE>

WeBeCD.com, Inc.
March 28, 2000
Page 2

WeBeCD represents and warrants that as of the date of this Letter of Intent, the
issued and outstanding shares of capital stock of WeBeCD consists of ____ shares
of Common Stock, par value $____ per share, and warrants and options to purchase
____ shares of WeBeCD common stock.

2. Conditions to Closing. The closing of the Transaction is subject to
the satisfaction or waiver of customary conditions including, but not limited
to, the following: (a) the negotiation and execution of a definitive stock
purchase agreement (the "Stock Purchase Agreement") and related agreements
acceptable in form and substance to ENTI and WeBeCD, (b) the completion by ENTI
and WeBeCD of a due diligence investigation and the satisfactory results of such
investigation to ENTI and WeBeCD in all respects, (c) the receipt of all
necessary approvals, consents, waivers and clearances, if any, from governmental
authorities and others, (d) the delivery to ENTI of the balance sheet of WeBeCD
as of December 31, 1999 and the income statement of WeBeCD for the fiscal year
ended December 31, 1999 (the "Financial Statement Date") and the receipt of a
"cold comfort letter" confirming the absence of any material adverse change in
the respective conditions of ENTI and WeBeCD for the period between the
Financial Statement Date and the closing of the Transaction, (e) the approval of
the Stock Purchase Agreement and the Transaction by the Board of Directors and
stockholders of ENTI and WeBeCD to the extent required by applicable law or
regulation, (f) the execution of a voting agreement among Louis J. Pearlman,
TransContinental Airlines, Inc. and the management and directors of ENTI
(together, the "ENTI Group"), the existing shareholders of WeBeCD (the "WeBeCD
Group") and the WeBeCD outside investors (the "Outside Investors"), pursuant to
which the Outside Investors, for a period of three years, will agree to vote the
shares of ENTI Common Stock they acquire pursuant to the Transaction
proportionate to the manner in which the ENTI Group and the WeBeCD Group vote
their shares of ENTI Common Stock, and (g) the execution of a registration
rights agreement among ENTI, the WeBeCD Group and the WeBeCD Outside Investors,
pursuant to which the WeBeCD Group and the WeBeCD Outside Investors shall be
granted customary demand and piggyback registration rights with respect to the
ENTI Common Stock. In addition, the ENTI Group, the WeBeCd Group and the WeBeCD
Outside Investors shall agree to restrict their rights to dispose of their
shares of ENTI Common Stock for a period to be mutually agreed upon. The Stock
Purchase Agreement shall also contain customary representations and warranties
as to ENTI and WeBeCD and the businesses of ENTI and WeBeCD prior to the
Closing. The Stock Purchase Agreement shall also contain customary
indemnification provisions pursuant to which each of ENTI and WeBeCD will agree
to indemnify and hold harmless the other and each of their respective directors,
officers, employees and agents from any loss resulting from the breach of any
representation, warranty, covenant or agreement contained in the Stock Purchase
Agreement

<PAGE>

WeBeCD.com, Inc.
March 28, 2000
Page 3

3. Licensing and Distribution Agreements. (a) Upon the consummation of
the Transaction, the existing business of WeBeCD will be operated as a wholly
owned subsidiary of ENTI. WEBeCD will have a working relationship with Trans
Continental Records, Inc. ("Trans Continental") and other affiliated music and
film labels ("Affiliated Labels") and Louis J. Pearlman will personally use his
best efforts to facilitate the remastering of all CD's and/or DVD's of the
Affiliated Labels with the technology acquired a result of the Transaction which
includes the logo and hyperlink described in Section 3(b), below, including both
new releases and existing titles. The remastering costs and design costs would
be the responsibility of WeBeCD, while all packaging, replication and normal
distribution expenses of the Affiliated Labels shall continue to be the
responsibility of the Affiliated Labels.

(b) Upon the consummation of the Transaction, Trans
Continental and Louis J. Pearlman will use their best efforts to establish
WeBeCD as the exclusive merchandise e-tailer on Trans Continental and affiliated
artist web sites of CD's, DVD's, hats, t-shirts and accessories at the
Affiliated Label Web sites with a "WeBeCD" logo and hyperlink prominently placed
at the Affiliated Label Web sites. In addition, ENTI will use its best efforts
to enable WeBeCD to have a prominent link and graphic on all CD and DVD releases
from the Affiliated Labels. ENTI will also use its best efforts to obtain a
nonexclusive right to promote the Affiliated Label's artists and releases on its
Web site via the use of the streaming of video, audio and the likeness and
images of the Affiliated Labels' artists.

4. Appointment of Louis J. Pearlman. Upon the consummation of the
Transaction, Louis J. Pearlman will remain the Chairman of the Board of
Directors of ENTI (the "Board"). The Board shall consist of three (3) nominees
from ENTI and three (3) nominees from WeBeCD.

5. Management of ENTI; Employment Agreements. Upon the consummation of
the Transaction, the Management of ENTI shall consist of the following:

<TABLE>
<S> <C>
Louis J. Pearlman Chairman of the Board of Directors
Alan Siegel President and Chief Operating Officer
Scott Bennett Vice President and Secretary
Frank Sicoli Vice President
Michael Stewart Vice President -- Sales and Marketing
</TABLE>

In addition, ENTI will enter into employment agreements with each of the above
individuals, such agreements to be substantially in the form of Exhibit 1
hereto.

<PAGE>

WeBeCD.com, Inc.
March 28, 2000
Page 4

6. ENTI Counsel. Upon the consummation of the Transaction, Baer Marks &
Upham LLP shall remain as corporate counsel to ENTI for three years.

7. Conduct of Business. (a) During the period from the date hereof
through the expiration of this Letter of Intent by its terms as provided in
paragraph 12 hereof, WeBeCD and its board of directors agree that: (a) WeBeCD's
business will be conducted in the ordinary course of business and in accordance
with all applicable laws, rules and regulations (the violation of which would
have a material adverse effect on WeBeCD or any significant portion of its
business), (b) WeBeCD will not enter into any transaction other than in the
ordinary course of business without the prior written approval of ENTI (which
approval shall not be unreasonably withheld), (c) pursuant to its current
capital raising activities, WeBeCD will not, without the prior written approval
of ENTI (which approval shall not be unreasonably withheld), sell any of its
common stock at a price below $3 per share (and any such new shares issued by
WeBeCD prior to the consummation of the Transaction will have a pari pasu
dilutive effect on the post-Transaction capitalization of ENTI); (d) WeBeCD will
not pay any dividend or make any similar distribution or redeem, purchase or
otherwise acquire, directly or indirectly, any of WeBeCD's outstanding stock;
and (e) neither WeBeCD nor its board of directors will take, or permit any of
its subsidiaries to take, any action which would, or which might reasonably be
expected to, hinder the Transaction or render it less desirable to ENTI.

(b) During the period from the date hereof through the expiration of
this Letter of Intent by its terms as provided in paragraph 12 hereof, ENTI and
its board of directors agree that: (a) ENTI's business will be conducted in the
ordinary course of business and in accordance with all applicable laws, rules
and regulations (the violation of which would have a material adverse effect on
ENTI or any significant portion of its business), (b) ENTI will not enter into
any transaction other than in the ordinary course of business without the prior
written approval of ENTI (which approval shall not be unreasonably withheld),
(c) ENTI will not pay any dividend or make any similar distribution or redeem,
purchase or otherwise acquire, directly or indirectly, any of ENTI's outstanding
stock; and (d) neither ENTI nor its board of directors will take, or permit any
of its subsidiaries to take, any action which would, or which might reasonably
be expected to, hinder the Transaction or render it less desirable to WeBeCD.

8. Due Diligence. (a) Immediately following the execution of this
Letter of Intent, and for a period of thirty (30) days thereafter (the "Due
Diligence Period"), ENTI and its officers, directors, employees, affiliates,
attorneys, accountants, financial advisers, consultants, representatives and
agents (collectively, "ENTI Agents") shall be provided reasonable access to
undertake a complete investigation of the business, affairs, operations,
properties, assets and liabilities of WeBeCD including, but not limited to, a
complete examination of all books and records, contractual commitments,
obligations and

<PAGE>

WeBeCD.com, Inc.
March 28, 2000
Page 5

assets. The Due Diligence Period can be extended upon the mutual agreement of
ENTI and WeBeCD.

(b) During the Due Diligence Period, WeBeCD and its officers,
directors, employees, affiliates, attorneys, accountants, financial advisers,
consultants, representatives and agents (collectively, "WeBeCD Agents") shall be
provided reasonable access to undertake a complete investigation of the
business, affairs, operations, properties, assets and liabilities of ENTI
including, but not limited to, a complete examination of all books and records,
contractual commitments, obligations and assets.

(c) Either party may, in its discretion, require the execution of a
confidentiality agreement between ENTI and WeBeCD, in form and substance
mutually satisfactory to ENTI and WeBeCD.

9. Announcements/Disclosure. No public announcements or disclosure to
third parties concerning this Letter of Intent or the Transaction shall be made
without the prior written approval of ENTI and WeBeCD; provided, however, that
ENTI may make public announcements or disclosure to third parties without the
prior written approval of WeBeCD to the extent ENTI has concluded in its
reasonable discretion after consultation with counsel for WeBeCD that disclosure
is required under applicable law or regulation.

10. Negotiations with Others. Each of ENTI and WeBeCD and their
respective boards of directors agree that (with the exception of the
capital-raising activities presently contemplated by WeBeCD and disclosed in
paragraph 8, above) during the Due Diligence Period, neither they nor any of
their respective affiliates, directors, representatives, employees or agents
will (i) solicit, encourage or discuss a sale of all or any substantial part of
the assets of their respective companies or a sale of any equity or debt
security of their respective companies or any subsidiary, or any merger,
consolidation, liquidation, dissolution, recapitalization, reorganization, or
similar transaction involving their respective companies or any subsidiary with
any other party (all of the foregoing are collectively referred to as
"Transaction Proposals") or (ii) provide any information regarding their
respective companies to any third party (other than information which is
traditionally provided in the regular course of its business operations to third
parties where such persons have no reason to believe that such information may
be used to evaluate a Transaction Proposal). ENTI, WeBeCD and their respective
boards of directors (and their respective affiliates, directors,
representatives, employees and agents) will immediately cease and cause to be
terminated any and all contacts, discussions and negotiations with third parties
regarding any Transaction Proposal and will promptly notify the other party
hereto if any Transaction Proposal, or any inquiry or contact with any person or
any entity with respect thereto, is made.

<PAGE>

WeBeCD.com, Inc.
March 28, 2000
Page 6

11. Authority. Each of ENTI and WeBeCD hereby represents and warrants
that it has the full power, legal right and authority to execute and deliver
this Letter of Intent and to enter into the transactions contemplated herein.

12. Expenses. Each party hereto shall be responsible for their own
costs and expenses related relating to this Letter of Intent, the Stock Purchase
Agreement and the transactions contemplated herein and therein.

13. Termination. This Letter of Intent shall terminate (a) at the
option of either ENTI or WeBeCD, upon written notice given to the other if the
Stock Purchase Agreement shall not have been executed by WeBeCD and ENTI by the
end of the Due Diligence Period, or (b) automatically upon the execution of the
Stock Purchase Agreement. Notwithstanding the foregoing, it is specifically
understood and agreed that (i) this Letter of Intent may be extended by mutual
agreement of the parties hereto and (ii) if so extended, the provisions of
paragraphs 7, 9, 10, and 11 shall remain in full force and effect.

14. Amendments. This Letter of Intent may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by each of the parties hereto. No party to this letter may
assign any of its rights or obligations under this Letter of Intent without the
prior written consent of the other party hereto.

15. Counterparts. This Letter of Intent may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same document.

16. Entire Agreement. This Letter of Intent constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof.

17. Scope of Letter. Upon execution and delivery of Letter of Intent,
counsel for ENTI will prepare a formal and definitive Stock Purchase Agreement
for the parties hereto containing appropriate terms and conditions as the
parties may mutually agree upon. It is understood that: (i) this Letter of
Intent is intended, and will be construed only, as a letter of intent
summarizing and evidencing our discussions to the date hereof; (ii) this letter
does not constitute a binding agreement nor does it constitute a binding
agreement to enter into an agreement; provided however, that the terms and
provisions set forth in paragraphs 7, 9, 10, and 11 hereof shall be binding as
of the date hereof when this letter is executed and delivered by each party;
(iii) the terms and provisions of this letter shall be governed by and construed
in accordance with the laws of the State of New York (regardless of the laws
that might otherwise govern under applicable New York principles of conflicts of
law); and (iv) the respective rights and obligations of the parties hereto which
remain to be defined shall be defined in the executed Stock Purchase

<PAGE>

WeBeCD.com, Inc.
March 28, 2000
Page 7

Agreement into which this Letter of Intent and all discussions prior to the date
of such Stock Purchase Agreement will merge.

Please indicate your agreement and acceptance of the terms and
conditions of this letter by executing this letter in the designated space below
whereupon this letter shall constitute a letter of intent between the parties in
accordance with the terms and provisions set forth herein. This offer will
expire at 5:00 p.m. (EDST) on March __, 2000 unless earlier accepted as
evidenced by your delivery to us of a fully executed copy of this Letter of
Intent prior to such time.

Very truly yours,

ENTERTAINMENT INTERNATIONAL, LIMITED

By: /s/ Louis J. Pearlman
------------------------
Name: Louis J. Pearlman
Title: President

ACCEPTED AND AGREED:

WEBECD, INC.

By: /s/ Robert Kelly
-------------------
Name: Robert Kelly
Title: President

<PAGE>

EXHIBIT 10.98

SETTLEMENT AGREEMENT

Settlement Agreement, dated as of December 16, 1999 (the "Settlement
Agreement"), by and between Gulf Oil Limited Partnership f/n/a Catamount
Petroleum Limited Partnership, a Delaware limited partnership with a usual place
of business at 90 Everett Avenue, Chelsea, Massachusetts 02150, by its General
Partner, Catamount Management Corporation ("Gulf"), and Entertainment
International Ltd. f/n/a Airship International Ltd., a New York corporation with
a usual place of business at 7380 Sand Lake Road, Orlando, Florida 32819
("Entertainment International").

WHEREAS, in or about June 1999, Gulf commenced an action in the United
States District Court, District of Massachusetts against Entertainment
International, captioned Gulf Oil Limited Partnership f/n/a Catamount Petroleum
Limited Partnership, by its General Partner, Catamount Management Corporation
vs. Entertainment International Ltd. f/n/a Airship International Ltd., Civil
Action No. 99-11227-GAO (the "Action"); and

WHEREAS, Gulf and Entertainment International are entering into this
Settlement Agreement to settle all Claims (as such term is defined herein) that
have been asserted or might have been asserted in the Action.

NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties, intending to be legally bound, agree as
follows:

1. Definition of Claims Being Settled. For purposes of this Settlement
Agreement, "Claims" shall be defined as, in the case of any person or entity,
any and all actions, causes of action, suits, debts, liabilities, losses,
obligations, expenses, dues, sums of money, accounts,

<PAGE>

reckonings, bonds, bills, specialties, covenants, contracts, controversies,
agreements, promises, variances, trespasses, damages, judgments, liens,
executions, claims, counterclaims and demands of every kind and nature
whatsoever, in law, admiralty or equity, whether known or unknown, suspected or
unsuspected, fixed or contingent, whether or not asserted, threatened, alleged
or litigated, which such person or entity has, owns or holds, or might have had
or owned or held or hereafter might have, own, or hold, individually,
representatively, derivatively or in any other capacity, for, upon, or by reason
of, any matter, cause or thing whatsoever from the beginning of the world to the
date of this Settlement Agreement, including, without limitation, any claims
that are asserted in the Action, or which arise out of, relate to, or are in any
way respecting any of the acts, facts, events, circumstances, matters, claims,
transactions or occurrences alleged in the Action or in any discovery or other
proceedings in connection therewith.

2. Settlement Terms and Amount. The parties agree that any and all
Claims by Gulf against Entertainment International and all Claims by
Entertainment International against Gulf shall be fully, finally and forever
settled, satisfied, released and discharged upon the execution and delivery of
this Settlement Agreement. In that regard, concurrently with the execution and
delivery, and as a condition, of this Settlement Agreement:

(a) Entertainment International shall pay the sum of One Hundred
Thousand ($100,000) Dollars (the "Settlement Payment") to Gulf by wire transfer
of immediately available funds to such account as Gulf shall direct;

(b) Entertainment International shall deliver to Gulf a certificate
representing One Million Five Hundred Thousand (1,500,000) shares of the common
stock, par value $.01 per share, of Entertainment International (the "EI
Stock");

<PAGE>

(c) Entertainment International and Gulf shall execute and deliver
to each other releases in the forms annexed hereto as Exhibits A&B, respectively
(the "Releases"); and

(d) Counsel for Gulf shall execute a Voluntary Dismissal with
Prejudice (the "Stipulation") in the form annexed hereto as Exhibit C. Upon
payment of the Settlement Payment, delivery of the EI Shares and execution and
delivery of the Releases, Gulf shall cause the Stipulation to be filed with the
Court.

3. Repurchase of EI Shares by Entertainment International.
Entertainment International shall have the option to repurchase from Gulf the
number of EI Shares indicated below for a purchase price of $250,000, in
accordance with the following schedule:

(a) One Million Two Hundred Fifty Thousand (1,250,000) EI Shares for
a period of up to One Hundred Fifty (150) days after the date hereof; or

(b) If not exercised pursuant to Paragraph (a), above, One Million
(1,000,000) EI Shares for a period starting One Hundred Fifty One (151) days
after the date hereof and ending Two Hundred Seventy (270) days after the date
hereof; or

(c) If not exercised pursuant to paragraph (a) or (b), above, Seven
Hundred Fifty Thousand (750,000) EI Shares for a period starting Two Hundred
Seventy One (271) days after the date hereof and ending one (1) year after the
date hereof.

4. Representations and Warranties of Authorization. Each party and
signatory to this Settlement Agreement hereby represents and warrants to the
other party hereto that it has full power, authority and legal right, on its own
behalf and on behalf of its heirs, executors, administrators, successors and
assigns heretofore and hereafter, to execute, deliver

<PAGE>

and perform all actions required under this Settlement Agreement. Entertainment
International and the signatory executing this document on its behalf further
represent and warrant that the issuance of the EI Shares to Gulf was done in
accordance all applicable laws, regulations and by-laws and that the required
action of the directors and/or shareholders of Entertainment International
authorizing such issuance has taken place. Entertainment International shall
deliver a certified copy of such authorization to Gulf with this Agreement.

5. Representations and Warranties of Legal Representation.
Each party and signatory to this Settlement Agreement hereby represents and
warrants to the other party hereto that, in entering into this Settlement
Agreement, it has relied upon the legal advice of their respective attorneys,
who are the attorneys of its own choice, and that the terms of this Settlement
Agreement have been completely read and explained to it by its attorneys and
that those terms are fully understood and voluntarily accepted by it.

6. Heirs and Successors Bound. Except as otherwise specifically
provided herein, this Settlement Agreement shall be binding upon and inure to
the benefit of the parties and their respective heirs, executors, estates,
successors, assigns and legal representatives.

7. Use of This Settlement Agreement. The parties hereto acknowledge
that this Settlement Agreement is a compromise resolution of disputed claims and
that neither the Releases contained herein nor the settlement in respect to
which the Releases are executed constitutes an acknowledgement or admission of
liability in any way on the part of any party hereto, all of whom expressly deny
any liability for any and all claims of whatsoever nature. Nor shall this
Settlement Agreement be construed, offered or received in evidence as an
admission or concession of any liability or wrongdoing by any party hereto.

8. Continuing Jurisdiction; Choice of Law. The parties hereto submit

<PAGE>

themselves to the continuing jurisdiction of the United States District Court,
District of Massachusetts for the purposes of the enforcement of this Settlement
Agreement. This Settlement Agreement shall be governed and shall be construed,
interpreted and enforced in accordance with the laws of the State of New York
without regard to its conflict of laws provisions.

9. Entire Agreement. This Settlement Agreement, including all exhibits
hereto, constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes any prior and contemporaneous oral or
written agreements, negotiations and discussions with respect to the subject
matter hereof. This Settlement Agreement may not be altered, modified or
amended, unless by writing executed by counsel for all parties hereto and/or
their representatives, nor any of its provisions waived, unless in writing by
the party granting such waiver.

10. Execution In Counterparts. This Settlement Agreement may be
executed in two or more counterparts, all of which taken together shall
constitute one and the same instrument, and any of the parties hereto may
execute this Settlement Agreement by signing any such counterpart.

[REMAINDER OF PAGE INTENIONALLY LEFT BLANK]

<PAGE>

IN WITNESS WHEREOF, this Settlement Agreement is executed by
the undersigned parties as of the date first set forth above.

GULF OIL LIMITED PARTNERSHIP F/N/A CATAMOUNT
PETROLEUM LIMITED PARTNERSHIP

By: Catamount Management Corporation, General Partner

By: /s/ Gary Kaneb
-------------
Name: Gary Kaneb
Title: President

ENTERTAINMENT INTERNATIONAL, LTD.
F/N/A AIRSHIP INTERNATIONAL, LTD.

By: /s/ Louis J. Pearlman
---------------------
Name: Louis J. Pearlman
Title: President

<PAGE>

EXHIBIT 11.1

STATEMENT RE: COMPUTATION OF
PER SHARE EARNINGS

<TABLE>
<CAPTION>
A. Years Ended December 31,
----------------------------------------------------
1999 1998 1997
----------------------------------------------------
<S> <C> <C> <C>
Average shares outstanding 62,262,000 46,736,000 42,181,000
Average common and common equivalent
shares outstanding 62,262,000 46,736,000 42,181,000
Net loss $(4,569,000) $ (996,000) $(2,294,000)
Abolishment of accrued preferred dividends -- $ 6,508,000 --
Preferred stock dividend $ (647,000) $(1,551,000)
Computation of Earnings Per Share = Net
Income (Loss)/Average common equivalent shares $(4,569,000) $ 4,865,000 $(3,845,000)
62,262,000 46,736,000 42,181,000
Earnings (Loss) Per Share $(.07) $0.10 $(0.09)

</TABLE>

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<PERIOD-TYPE> 12-MOS
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,000
<PP&E> 2,558,000
<DEPRECIATION> 629,000
<TOTAL-ASSETS> 1,952,000
<CURRENT-LIABILITIES> 4,832,000
<BONDS> 0
<COMMON> 681,000
0
0
<OTHER-SE> 50,788,000
<TOTAL-LIABILITY-AND-EQUITY> 1,952,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 250,000
<TOTAL-COSTS> 1,966,000
<OTHER-EXPENSES> 1,937,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 677,000
<INCOME-PRETAX> 4,569,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,569,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,569,000
<EPS-BASIC> .07
<EPS-DILUTED> .07

</TABLE>