PIRANHA INC, SB-2, 2000-12-14

PIRANHA INC
SB-2, 2000-12-14
PREPACKAGED SOFTWARE

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As filed with the Securities and Exchange Commission on December 14, 2000.

REGISTRATION NO. 333-

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

FORM SB-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

PIRANHA, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)

Delaware 7372 36-3859518
(State or Other Jurisdiction of (Primary Standard (I.R.S. Employer
Incorporation or Organization) Industrial Classification Identification Number)
Code Number)

2425 N. Central Expressway, Suite 480, Richardson, Texas 75080
(972) 739-0373
(Address and Telephone Number of Principal Executive Offices and Principal Place
of Business)

RICHARD S. BERGER
Piranha, Inc.

33 N. LaSalle Street, 33rd Floor, Chicago, Illinois 60602
(312) 664-7852
(Name, Address and Telephone Number of Agent for Service)

Copy to:

Bruce P. Golden, Esq.
Bruce P. Golden & Associates
4137 N. Hermitage Avenue
Chicago, Illinois 60613
(773) 248-4905

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]

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

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

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

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

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CALCULATION OF REGISTRATION FEE
<TABLE>
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<S> <C> <C> <C> <C>

Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered(1) offering price per aggregate offering Registration
Unit (2) Price(2) Fee

Common Stock 875,862 shares $ 2.875 $ 2,518,104 $665
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Total

(1) The amount of securities being registered represents the maximum amount of
securities which are expected to be offered for resale by the selling
stockholder. These securities represent 875,862 shares of Common Stock which are
presently issued and outstanding or have been authorized for issuance.

(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and based on $ 2.875 per share, the average high and
low sales prices of the common stock in the over-the-counter market on December
13,2000.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.

<PAGE>

SUBJECT TO COMPLETION DATED DECEMBER 14, 2000

PROSPECTUS

PIRANHA, INC.

875,862 SHARES OF COMMON STOCK

Three holders of shares of Common Stock of Piranha, Inc. (the
"Company") named under "Selling Stockholders" on pages 36-37 are offering and
selling a maximum of 875,862 shares of Company Common Stock pursuant to this
Prospectus. These shares were acquired in private purchases during November and
December 2000.

The selling stockholders will determine when they will sell their
shares and will sell their shares at current market prices or at negotiated
prices at the time of the sale. The Company will pay the expenses incurred to
register the shares for resale, but the selling stockholders will pay any
underwriting discounts, concessions, or brokerage commissions associated with
the sale of their shares. The selling stockholders and the broker/dealers that
they utilize may be deemed to be "underwriters" within the meaning of the
securities laws and any commissions received and any profits realized on the
sale of their shares of Common Stock may be considered to be underwriting
compensation.

The Company will not receive any of the proceeds of sales by the
selling stockholders. Securities laws and Securities and Exchange Commission
regulations may require the selling shareholders to deliver this Prospectus to
purchasers when they resell their shares of Common Stock.

Shares of Company Common Stock are traded in the over-the-counter
market under the symbol "BYTE." On December 13, 2000, the last sale price of
Company Common Stock as reported in the over-the-counter market was $2.9375 per
share.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 5.

The date of this Prospectus is 2000

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No person has been authorized to give information or make any representation not
contained or incorporated by reference in this Prospectus in connection with the
offer made hereby. If given or made, such information or representation must not
be relied upon as having been authorized by the Company or any underwriter,
agent or dealer. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer in such
jurisdiction. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date hereof.

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS 3

THE COMPANY 3

RISK FACTORS 5

PRICE RANGE OF COMMON STOCK 14

DIVIDEND POLICY 15

USE OF PROCEEDS 15

MANAGEMENT'S PLAN OF OPERATIONS
FOR NEXT TWELVE MONTHS 15

BUSINESS 17

MANAGEMENT 26

SELLING STOCKHOLDERS 36

DESCRIPTION OF CAPITAL STOCK 37

PLAN OF DISTRIBUTION 38

LEGAL MATTERS 39

EXPERTS 39

AVAILABLE INFORMATION 39

INDEX TO FINANCIAL STATEMENTS F-1

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FORWARD-LOOKING STATEMENTS

Statements contained in or incorporated by reference into this
Prospectus which are not historical in nature are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve certain risks and uncertainties that may
cause actual future results to differ materially from those contemplated,
projected, estimated or budgeted in such forward-looking statements. Factors
that may impact forward looking statements include, but are not limited to, the
following: (i) the effects of competition from other companies engaged in the
development of compression technologies; (ii) the capital intensive nature of
the business of Piranha, Inc (the "Company" or "Piranha"); (iii) the economic
climate and growth in the business sectors in which the Company does business;
(iv) the uncertainty of the continued development of the Internet as a viable
enterprise; (v) the nature, availability and projected profitability of
potential projects and other investments available to the Company; (vi)
conditions of capital markets and equity markets; and (vii) the effects of
changes in governmental policies and regulatory actions.

THE COMPANY

Piranha is a technology-based company with a line of digital asset
management products and services being developed for sale and/or licensing.
Piranha is in the business of providing enabling technologies in the areas of
data compression, product output routing, universal file format recognition,
data manipulation and custom application feature development in both the lossy
data compression and lossless data compression market segments. Additionally,
Piranha provides digital image acquisition services which are intended to
incorporate its core data compression technologies. Piranha's data compression
software products and digital asset service are designed to enhance digital
workflow processes and improve data transfer speeds across the Internet and to
provide high quality image clarity at compression rates which the Company
believes are higher than those presently available in the marketplace on a
variety of platforms. These compression products are directed to digital images
and Internet applications such as full motion streaming video, lossless image
and text string compression, and highly compressed, high resolution static
images.

The Company's products are designed to support business-to-business,
e-commerce and Internet related activities associated with professional digital
archival storage, digital workflow optimization and advanced
business-to-consumer on-line shopping applications. Piranha technology and its
resulting application developments are expected to provide a methodology to
support the emerging e-commerce market demand for solutions to the traditional
bottlenecks and time delays associated with the e-commerce shopping experience
that the Company believes are superior to those presently available. The Company
believes that its products and services provide measurable quantatitive and
qualitative advantages over related products and services. Products currently
available include:

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o Piranha Net - This web based product is expected to allow commercial
web sites to download significantly faster than what is currently
available. Piranha Net utilizes Piranha's proprietary lossless and
lossy data compression algorithms.

o Piranha Byte- This Streaming FTP lossless and modified bit "ultra high
fidelity" data compression product is used for downloading files to or
from a server or individual user. A multitude of file types can be
delivered for archival or immediate use at compression rates and data
transfer speeds substantially greater than current competitive
products. The first shipments of this product occurred during the week
of June 19, 2000.

o Piranha Stream - This product is a plug-in or browser-based full-motion
video product with several audio codecs available, including Piranha
Audio featuring low bandwidth and high quality. Piranha Stream's
advanced component input compression process produces the highest
quality streaming video in the market place. The first products using
this technology were distributed to stockholders at the annual meeting
on August 18, 2000.

Products that are expected to debut in the future:

o An e-commerce application covering transaction, data mining, and
other e-commerce disciplines.

o A product combining all Piranha technologies into one suite of tools to
handle enterprise solutions for the largest customer. This product will
include data base interfacing with Oracle and other enterprise data
warehouse software.

o An affordable software rental that offers a variety of solutions from a
full suite of products to a smaller version designed to meet the
specific needs of the customer.

o Increased processing power delivered through custom DSP chip
integration for tailored hardware/software solutions.

o An advance image database product providing multifunctional search
capabilities.

Piranha products have been developed on the Linux operating system and
have been successfully ported to Microsoft and Apple operating platforms.

Piranha is a Delaware corporation with its principal executive offices
at 2425 N. Central Expressway, Suite 480, Richardson, Texas 75080. Its telephone
number is 972-739-0373. It principal financial offices are located at 33 N.
LaSalle Street, 33rd Floor, Chicago, Illinois 60602; telephone number is
312-664-7852. It was incorporated in 1992 but did not engage in its current
business operations until December 1999. Its prior business operations, the
retail distribution of classic books, ceased all material operations in March
1996. See, "RISK FACTORS."

<PAGE>

RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY BEFORE DECIDING TO INVEST
IN COMMON STOCK. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVED RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH BELOW.

LIMITED OPERATING HISTORY; HISTORY OF LOSSES AND ANTICIPATION OF FUTURE
LOSSES. While the Company was founded in 1992 it did not engage in its current
business operations until December 1999 when it became a technology-based
company through the acquisitions of IBP, Inc. and Zideo.com, Inc. and obtained
the services, among others, of its current Chief Executive Officer, President
and Chief Operating Officer, Chief Information Officer and Chief Science
Officer: Messrs. Edward W. Sample, Don Ashley, Michael Steele and Carey Lotzer.
See, "MANAGEMENT." In February 2000 the Company changed its name from Classics
International Entertainment, Inc. to Piranha, Inc. As of September 30, 2000, the
Company had an accumulated deficit of $24,319,882 and no net earnings from
operations. Accordingly, the Company has a limited operating history on which to
base an evaluation of its business and prospects.

The Company and its prospects must be considered in light of the risks,
difficulties and uncertainties encountered by companies in the early stages of
development, particularly companies operating in new and rapidly evolving
markets like the Internet. In order to achieve and sustain profitability the
Company believes that it will have to, among other things (i) successfully
develop, market and sell compression techniques that are widely accepted by the
Internet community, (ii) develop and extend the Piranha brand, (iii) obtain
broad acceptance of its products, (iv) anticipate and adapt to the developing
Internet market, (v) respond promptly and adequately to changes in laws that
could adversely affect the Company's business, (vi) provide compelling and
unique services to Internet users, (vii) effectively develop new and maintain
existing relationships with customers, (viii) continuously update its
technology, (ix) adapt to meet changes in its markets and respond to competitive
developments and (x) attract, retain and motivate qualified personnel. There can
be no assurance that the Company will be successful in addressing these risks
and failure to do so would have a materially adverse effect on its business,
results of operations and financial condition.

For these and other reasons, and even though the Company hopes to achieve
positive cash flow for the quarter ended March 31, 2001, there can be no
assurance that this will occur or that the Company will ever achieve
profitability or, if profitability is achieved, that it will be sustained.

UNPREDICTABILITY OF FUTURE REVENUES. The Company's limited operating
history and the emerging nature of the markets in which it competes makes
prediction of future revenue growth difficult if not impossible. There can be no
assurance that the Company will generate revenue or if generated that the

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Company will achieve or maintain profitability. Accordingly, the Company cannot
predict what future growth may develop, if any.

Furthermore, the market for the Company's products and the long-term
acceptance of the Internet are uncertain. The Company therefore intends to
closely monitor its operating expenses while attempting, among other things, to
(i) fund increased sales and marketing activities and (ii) develop and upgrade
technology. Such expenses are based in part on its expectations regarding future
revenues and to a substantial degree such expenses are readily ascertainable.
While the Company hopes that future quarterly results of operations will reflect
positive cash flow, if the Company is unable to increase its revenues it may be
unable to adjust spending patterns in a timely manner to compensate for any
unexpected revenue shortfall or may have to reduce its operating expenses,
causing it to forego potential revenue generating activities, either of which
could have a materially adverse effect on the Company's business, results of
operations and financial condition.

DEPENDENCE ON KEY EMPLOYEES. The Company's success will depend to a
large degree on the efforts and abilities of a few key management employees. In
particular, the Company is almost exclusively dependent on the continued
services and experience of Messrs. Sample, Ashley, Steele, Lotzer, and Berger.
The loss, incapacity or unavailability of any of these persons at the present
time or in the foreseeable future before qualified replacements were obtained
would have a materially adverse effect on the Company's future. While Messrs.
Sample, Ashley, Steele and Lotzer are covered by employment contracts with the
Company and the Company has secured key person life insurance policies on its
executive officers, competition for senior management, experienced marketing
personnel, qualified scientists and engineers and other employees is intense,
and there can be no assurance that the Company will be successful in attracting
and retaining such personnel. The failure of the Company to successfully manage
its personnel requirements would have a materially adverse effect on the
Company's business, results of operations and financial condition.

Furthermore, the Company may experience rapid growth, which would place
a significant strain on the Company's managerial, financial and operational
resources. The Company is required to manage multiple relationships with
numerous outside parties. These requirements will be exacerbated in the event of
further growth of the Company or in the number of third party relationships, and
there can be no assurance that the Company's systems, procedures or controls
will be adequate to support the Company's operations or that Company management
will be able to manage any growth effectively. To effectively manage its
potential growth, the Company must continue to implement and improve its
operational, financial and management information systems and to expand, train
and manage its employee base.

The Company's management team has not worked together for any extended
period of time and are only now in the process of integrating as a cohesive
group. There can be no assurance that they will be able to work together
effectively or successfully manage any growth experienced by the Company. In

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addition, while certain members of the Company's management have had previous
experience in managing public companies and/or large operating companies, such
experience has not been in the Internet industry. Accordingly, there can be no
assurance that they will quickly adapt to the Internet marketplace or that the
Company will be able to effectively manage any expansion of its operations.

INTENSE COMPETITION. The Company is in a highly competitive market. The
Company competes with major software developers as well as numerous smaller
companies producing one or more competitive products. The Company's products
compete with those of PKZip, Stuffit, WinZip, Sorensson, MPEG, Real, Cinepak,
Indeo and others. Most if not all of the Company's existing and potential
competitors have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than the Company. Such competitors are able to undertake more
extensive marketing campaigns for their brands, adopt more aggressive pricing
policies and make more attractive offers to potential customers and employees.
Accordingly, there can be no assurance that the Company will be able to compete
successfully against its current or future competitors or that competition will
not have a materially adverse effect on the Company's business, results of
operations and financial condition.

Competition for Internet products and services is intense. As the
market for e-commerce grows, the Company expects that competition will
intensify. Barriers to entry are minimal and competitors can offer products and
services at a relatively low cost. The market in which Piranha competes is
significantly affected and is characterized by rapidly changing technology,
evolving industry standards, frequent new product and service announcements and
enhancements, other market activities of industry participants and changing
customer demands. Accordingly, the Company's success will depend on its ability
to adapt to such changes and its ability to continually improve the speed,
performance, features, ease of use and reliability of its products in response
to both evolving demands of the marketplace and competitive service and product
offerings. Any failure to rapidly adapt in a changing environment would have a
materially adverse effect on the Company's business, results of operations and
financial condition.

The Company's financial and operating success depends, among other
things, on the success of its products and services. If those products and
services fail to keep pace with the rapid changes in technology and customer and
supplier demands, the Company may not become or remain profitable. There can be
no assurance that the products and services of the Company will achieve market
acceptance or commercial success or that the Company will be successful. The
Company expects competition to persist and intensify in the future.

<PAGE>

industry, core technology, ability to implement a solution with existing
technology and financial capacity of its potential customers. Although the
Company believes that its solutions currently compete favorably with respect to
several of these factors, the Company's market is relatively new and is evolving
rapidly. The Company may not be able to maintain any significant competitive
position against current and potential competitors, especially those with
significantly greater financial, marketing, service, support, technical and
other resources.

The Company continually strives to incorporate new technology into its
products. Introducing new technology involves numerous technical challenges,
substantial amounts of personnel resources and frequently requires months to
complete. There can be no assurance that the Company will be successful at
integrating new technology on a timely basis or without degrading the
responsiveness and speed of its existing products or that, once integrated, such
technology will function as expected.

GOVERNMENT REGULATION AND LEGAL UNCERTAINTY. The Company is not
currently subject to direct regulation by any government agency, other than
regulations applicable to businesses generally, and there are currently few laws
or regulations directly applicable to access to or distribute information on the
Internet. However, due to the Internet's increasing popularity and use, a number
of legislative and regulatory proposals are under consideration by federal,
state, local and foreign governmental organizations, and it is possible that a
number of laws or regulations may be adopted with respect to the Internet
relating to such issues as user privacy; user screening to prevent inappropriate
uses of the Internet by, for example, minors or convicted criminals; taxation;
infringement; pricing; content regulation; quality of products and services; and
intellectual property ownership and infringement. The adoption of any such laws
or regulations may decrease the growth in the use of the Internet, which could
in turn decrease the demand for the Company's products, increase the Company's
cost of doing business, or otherwise have a materially adverse effect on the
Company's business, results of operations and financial condition. Moreover, the
applicability to the Internet of existing laws governing issues such as property
ownership, copyright, trademark, trade secret, obscenity, libel and personal
privacy is uncertain and developing. Any new legislation or regulation, or
application or interpretation of existing laws, could have a materially adverse
effect on the Company's business, results of operations and financial condition.

The Communications Decency Act of 1996 (the "CDA") was enacted in 1996.
Although those sections of the CDA that, among things, proposed to impose
criminal penalties on anyone distributing indecent material to minors over the
Internet were held to be unconstitutional by the U.S. Supreme Court, there can
be no assurance that similar laws will not be proposed and adopted in the
future. Similar types of legislation and the manner in which they may be
interpreted and enforced cannot be fully determined and could subject the
Company to potential liability. Such legislation could also impact on the growth
of the Internet generally and decrease the demand for the Company's products.

RISKS ASSOCIATED WITH BRAND DEVELOPMENT. The Company believes that
establishing and maintaining the Piranha brand is a critical aspect of its
business and that the importance of brand recognition will increase due to the

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growing number of competitors and the minimal barriers to entry. Promotion and
enhancement of the Company's brand will depend, in part, on the Company's
success in providing a high-quality product which success cannot be ensured. If
the Company does not generate a corresponding increase in revenues as a result
of its branding efforts or otherwise fails to promote its brand successfully, or
if the Company incurs excessive expenses in an attempt to promote and maintain
its brand, its business, results of operations and financial condition will be
materially and adversely affected. If customers do not perceive the Company's
products to be of high quality or if the Company introduces products or enters
into business ventures that are not favorably received the value of the
Company's brand could be diluted.

SECURITY RISKS. The Company may experience attempts by experienced
programmers or "hackers" to penetrate the Company's network. A party who is able
to penetrate the Company's network security could misappropriate proprietary
information. Advances in computer capabilities, discoveries in the field of
cryptography and other discoveries, events, or developments could lead to a
compromise of the systems that the Company uses to protect such confidential
information. If such a compromise occurs, it could have a materially adverse
effect on the Company's business, results of operations and financial condition.
The Company may be required to expend significant capital and resources to
protect against the threat of security breaches or to alleviate problems caused
by such breaches. Concerns over the security of Internet transactions and the
privacy of users may also inhibit the growth of the Internet generally,
particularly as a means of conducting commercial transactions. Security breaches
or the inadvertent transmission of computer viruses could expose the Company to
a risk of loss or litigation and possible liability. There can be no assurance
that contractual provisions attempting to limit the Company's liability in such
areas will be successful or enforceable or that other parties will accept such
contractual provisions as part of the Company's agreements, which could have a
materially adverse effect on the Company's business, results of operations and
financial condition.

INTELLECTUAL PROPERTY. The Company regards its copyrights, trademarks,
trade secrets and similar intellectual property as critical to its success and
attempts to protect its rights by relying on trademark, service mark, copyright
and trade secret laws and restrictions on disclosure and transferring title and
other methods. The Company has filed trademark applications for Piranha, Piranha
Byte, Piranha Stream, Piranha Net and Piranha Web in the United States and
trademark applications for Piranha in Argentina, Australia, Bolivia, Brazil,
Canada, China, European Union, India, Indonesia, Israel, Japan, Korea, Mexico,
New Zealand, Philippines, Poland, Russia, Singapore, Taiwan and Venezuela. In
addition, trademark applications are expected to be filed in several additional
overseas venues. There can be no assurance that these steps will be adequate,
the Company will be able to secure trademark registrations for all of its marks
in the United States or other countries or third parties will not infringe upon
or misappropriate the Company's copyrights, trademarks, service marks and
similar proprietary rights. The Company currently has no patents but has filed
for certain provisional patents. The Company is also examining whether further
patent protection will be sought. There can be no assurance that patents will
become a significant part of the Company's intellectual property in the

<PAGE>

foreseeable future. Effective trademark, service mark, copyright, trade secret
and patent protection may not be available in every country in which the
Company's products may be distributed and policing unauthorized use of the
Company's proprietary information will be difficult if not impossible.

The Company generally enters into confidentiality agreements with its
employees and consultants and generally controls access to and distribution of
its documentation and other proprietary information. It may be possible for a
third party to copy or otherwise obtain and use the Company's proprietary
information without authorization to develop similar technology independently.

Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related businesses are
uncertain and still evolving and no assurance can be given as to the future
viability or value of any proprietary rights of the Company or other companies
within this market. There can be no assurance that the steps taken by the
Company will prevent misappropriation or infringement of its proprietary
information. Any such infringement or misappropriation could have a materially
adverse effect on the Company's business, results of operations and financial
condition

In addition, litigation may be necessary to enforce the Company's
intellectual property rights, to protect its trade secrets or to determine the
validity and scope of the proprietary rights of others. Such litigation might
result in substantial costs and diversion of resources and management attention
and could have a materially adverse effect on the Company's business, results of
operations and financial condition. Furthermore, there can be no assurance that
the Company's business activities will not infringe upon the proprietary rights
of others or that other parties will not assert infringement claims against the
Company. The Company may become subject to claims of alleged infringement of the
trademarks, service marks and other intellectual property rights of third
parties. Although no such claims have occurred to date, such claims and any
resultant litigation might subject the Company to significant liability for
damages and might result in invalidation of the Company's proprietary rights and
even if not meritorious could be time consuming and expensive to defend and
could result in the diversion of management time and attention, any of which
might have a material adverse effect on the Company's business, results of
operations and financial condition.

CONTINUED GROWTH OF THE INTERNET. The Company's future success is
dependent upon continued growth in the use of the Internet. There can be no
assurance that the number of Internet users will continue to grow or that
commerce over the Internet will become more widespread. As is typical in the
case of a new and rapidly evolving industry, demand and market acceptance for
recently introduced services are subject to a high level of uncertainty. The
Internet may not prove to be a viable commercial marketplace for a number of
reasons, including lack of acceptable security technologies, lack of access and
ease of use, congestion of traffic, inconsistent quality of service, lack of
availability of cost-effective service, potentially inadequate development of
the necessary infrastructure, excessive governmental regulation, uncertainty

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regarding intellectual property ownership or timely development and
commercialization of performance improvements.

The Company's success will depend in large part upon the continued
development of the Internet as a reliable network with the necessary security
and timely development of complementary products such as high speed modems for
providing reliable access. Because global commerce and online exchange of
information on the Internet and other similar open wide area networks are new
and evolving, it is difficult to predict with any assurance whether the Internet
will support increasing use or will prove to be a viable commercial marketplace.
The Internet has experienced and is expected to continue to experience
significant growth in the number of users and the amount of content. To the
extent that the Internet continues to experience increased numbers of users,
frequency of use or increased bandwidth requirements of users, there can be no
assurance that the Internet infrastructure will continue to be able to support
the demands placed on it by this continued growth or that the performance or
reliability of the Internet will not be adversely affected by this continued
growth. In addition, the Internet could lose its viability or effectiveness due
to delays and the development or adoption of new standards and protocols to
handle increased levels of activities or due to increased government regulation.
There can be no assurance that the infrastructure or complementary products or
services necessary to make the Internet a viable commercial marketplace will be
developed, or, if they are developed, that the Internet will achieve broadening
acceptance. If the necessary infrastructure standards, protocols or
complementary products, services or facilities are not developed, or if the
Internet does not become a viable commercial marketplace, the Company's
business, results of operations and financial condition will be materially
adversely affected. Even if such infrastructure, standards or protocols or
complementary products, services or facilities are developed and the Internet
becomes a viable commercial marketplace, there can be no assurance that the
Company will not be required to incur substantial expenditures in order to adapt
its products to the ever-changing technologies, which could have a materially
adverse effect on the Company's business, results of operations and financial
condition.

RELIANCE ON THE INTERNET BEING AN EFFECTIVE INFORMATION DISTRIBUTION
METHOD. One of the Companies primary assumptions is that the Internet will
increasingly become a viable method of distributing information whether in the
form of raw data, media and/or advertising. The Company is therefore highly
dependent on the Internet continuing to develop as a major information
distribution channel. However, the Internet has not been in existence for a
sufficient period of time to gauge its effectiveness as compared with
traditional distribution channels such as hard copy and telecommunications. Many
of the Company's prospective clients are believed to have only limited
experience with the Internet as an information distribution medium, have not yet
devoted a significant portion of their budgets to Internet-based distribution
and may not find such a method to be effective for distributing information or
promoting their products and services relative to traditional approaches.

The adoption of Internet-based information distribution methods,
particularly by those entities that have historically relied upon traditional

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<PAGE>

methods, requires the acceptance of a new way of conducting business and
exchanging information. Entities that already have invested substantial
resources in other methods of doing so may be reluctant to adopt a new strategy
that may limit or compete with their existing efforts. There can be no assurance
that the market for Internet-based information distribution will continue to
emerge or become sustainable. If the market develops more slowly than expected,
the Company's business, results of operations and financial condition could be
materially and adversely affected. Further, no established standards have been
widely accepted for the measurement of the effectiveness of Internet-based
information distribution and there can be no assurance that such standards will
develop sufficiently to support the Internet as an effective alternative. There
can be no assurance that prospective clients will accept the Company's or other
third-party measurement standards, which could have a materially adverse effect
on the Company's business, results of operations and financial condition.

CONTROL BY CERTAIN STOCKHOLDERS. The Company's directors and executive
officers beneficially own approximately 39% of the outstanding shares of Common
Stock. As a result, these stockholders, if they act as a group, have a
significant influence on all matters requiring stockholder approval, including
the election of directors and approval of significant corporate transactions.
Such control may have the effect of delaying or preventing a change in control
of the Company, impeding a merger, consolidation, takeover or other business
combination involving the Company or discourage a potential acquiror from making
a tender offer or otherwise attempting to obtain control of the Company which
could have a materially adverse effect on the market price of the Company's
Common Stock.

FUTURE CAPITAL NEEDS; UNCERTAINTY OF FUTURE ADDITIONAL FINANCING. The
Company currently anticipates that its available funds and resources, including
product sales which commenced the week of June 19, 2000, will be sufficient to
meet its anticipated needs for working capital and capital expenditures for the
next twelve months. The Company may need to raise additional funds in the future
in order to fund more aggressive brand promotion and more rapid expansion, to
develop new or enhanced products, to respond to competitive pressures or to
acquire complementary businesses or technologies. If additional funds are raised
through the issuance of equity or convertible debt securities, the percentage
ownership of the stockholders of the Company will be reduced, stockholders may
experience dilution and such securities may have rights, preferences or
privileges senior to those of the rights of the Company's Common Stock. There
can be no assurance that additional financing will be available on terms
favorable to the Company, or at all. If adequate funds are not available or not
available on acceptable terms, the Company may not be able to fund its
expansion, promote its brand names as the Company desires, take advantage of
unanticipated acquisition opportunities, develop or enhance products or respond
to competitive pressures. Any such inability could have a material adverse
effect on the Company's business, results of operations and financial condition.

ACQUISITION RISKS. As part of its business strategy, the Company
expects to pursue the acquisition of businesses, services or technologies to

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<PAGE>

complement its existing business and/or enhance its technological capabilities.
There can be no assurance, however, that the Company will be able to locate
suitable acquisition opportunities. Future acquisitions by the Company could
result in potentially dilutive issuances of equity securities, large and
immediate write-offs, the incurrence of debt and contingent liabilities or
amortization expenses related to goodwill and other intangible assets, any of
which could materially and adversely affect the Company's results of operations.
Furthermore, acquisitions entail numerous risks and uncertainties, including
difficulties in the assimilation of operations, personnel, technologies,
products and the information systems of the acquired companies, diversion of
management's attention from other business concerns, risks of entering
geographic and business markets in which the Company has no or limited prior
experience and potential loss of key employees of acquired organizations. The
Company has made several material acquisitions in the recent past. No assurance
can be given as to the ability of the Company to successfully integrate any
businesses, products, technologies or personnel that might be acquired in the
future, and the failure of the Company to do so could have a materially adverse
effect on the Company's business, results of operations and financial condition.

INTERNATIONAL EXPANSION. The Company may determine to expand its
international operations. To do so the Company would likely have to enter into
relationships with foreign business partners. This strategy contains risks,
including difficulty in managing international operations due to distance,
language and cultural differences; inability to successfully market and operate
services in foreign markets; need to implement business strategy quickly in
international markets to obtain a significant share of the market; and the need
to quickly react to changing international standards. There are also risks
inherent in doing business on an international level, including unexpected
changes in regulatory requirements; trade barriers; difficulties in staffing and
managing foreign operations; fluctuations in currency exchange rates and the
introduction of the euro; longer payment cycles in general; problems in
collecting accounts receivable; difficulty in enforcing contracts; political and
economic instability; seasonal reductions in business activity in certain other
parts of the world; and potentially adverse tax consequences.

LIMITED PUBLIC MARKET FOR COMMON STOCK; VOLATILITY OF STOCK PRICE.
Prior to this offering there has been only a limited public market for shares of
Company Common Stock in the over-the-counter market. There can be no assurance
that a more active trading market for the Common Stock will develop or be
sustained.

Trading in the Company's Common Stock has been subject to wide
fluctuations in price and such fluctuations are expected to continue in response
to numerous factors such as variations in the Company's results of operations,
changes in earnings estimates, announcements of technological innovations or new
solutions by the Company or its competitors, general conditions in the
technology Internet sectors and in Internet-related industries, the operating
and stock price performance of other companies that investors may deem
comparable, news relating to trends in the Company's markets and other risk
factors discussed elsewhere herein and other events or factors, many of which
are beyond the Company's control.

<PAGE>

In addition, the stock market in general and the technology and
Internet sectors in particular have recently experienced extreme price and
volume fluctuations which have affected the market price for many companies in
industries similar or related to that of the Company and which have been
unrelated to the operating performance of these companies. These market
fluctuations, as well as general economic, political and market conditions, may
have a materially adverse effect on the market price of the Company's Common
Stock. In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against such companies. Such litigation, if instituted, and
irrespective of the outcome of such litigation, could result in substantial
costs and a diversion of management's attention and resources and have a
material adverse effect on the Company's business, results of operations and
financial condition.

SHARES ELIGIBLE FOR FUTURE SALE. Sales of significant amounts of Common
Stock in the public market after the offering or the perception that such sales
will occur could materially and adversely affect the market price of the Common
Stock or the future ability of the Company to raise capital through an offering
of its equity securities. Of the 11,292,476 shares of Common Stock issued and
outstanding as of November 30, 2000 (which excludes 800,000 of the shares
covered by this Registraton Statement which have been authorized for issuance
but not yet issued) ), 6,683,717 are eligible for immediate sale in the public
market without restriction (after giving effect to this Registration Statement).
The remaining 4,608,759 shares of Common Stock (including 75,862 of the shares
covered hereby until this Registration Statement is effective) are "restricted
securities" as that term is defined in Rule 144 under the Securities Act.
Restricted securities may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rules 144, 144(k) or 701
promulgated under the Securities Act. If a large number of these restricted
shares become free of their restrictions and are sold in the public market such
sales could have a materially adverse effect on the market price for the
Company's Common Stock.

ABSENCE OF DIVIDENDS. The Company does not anticipate paying any cash
dividends in the foreseeable future. See, "DIVIDEND POLICY."

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is traded in the over-the-counter market
under the symbol "BYTE." The following table sets forth the range of high and
low bid prices for the Common Stock for the periods shown (reflecting the 1:3.49
reverse stock split effective February 2000) as reported by the National
Quotation Bureau:

High Low
1998

1st Quarter ........................ $ .140 $ .105
2nd Quarter ........................ .105 .070
3rd Quarter ........................ .070 .035
4th Quarter ........................ .035 .017

<PAGE>

1999

1st Quarter ........................ 1.012 1.012
2nd Quarter ........................ .820 .558
3rd Quarter ........................ 2.478 2.408
4th Quarter ........................ 13.303 8.404

2000

First Quarter.................. 65.00 10.00
Second Quarter............... 26.00 7.50
Third Quarter................ 15.00 6.938
Fourth Quarter (to date).... 7.375 2.75

These prices reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions. On December
13, 2000, the last sale price of the Common Stock as reported by the National
Quotation Bureau was $2.9375 per share. As of July 14, 2000, the Company had 232
stockholders of record. As of November 30, 2000 there were 11,292,496 shares of
Common Stock issued and outstanding.

DIVIDEND POLICY

The Company has never paid cash dividends on its Common Stock and has
no present intention to pay cash dividends. In addition, the Company's
outstanding preferred stock prohibits the payment of cash dividends on its
Common Stock. It is the Company's intention to retain earnings to finance the
expansion of its business.

USE OF PROCEEDS

The Company will not receive any of the proceeds from the sales of the
Common Stock by the selling stockholders. See "Selling Stockholders" for those
holders of Company equity securities entitled to receive net proceeds from the
sales of the Common Stock. Any proceeds received by the Company would be added
to working capital. The selling stockholders will receive all of the net
proceeds from the sale of the Common Stock pursuant to this Prospectus. See,
"DESCRIPTION OF CAPITAL STOCK."

MANAGEMENT'S PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS

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<PAGE>

believes are higher than those presently available in the marketplace on a
variety of platforms. These compression products are directed to digital images
and Internet applications such as full motion streaming video, lossless image
and text string compression, and highly compressed, high resolution static
images.

The Company needs to raise funds in the next twelve months in order to
meet its cash requirements and fund its current operations as well as to engage
in more aggressive brand promotion and more rapid expansion, to develop new or
enhanced products, to respond to competitive pressures or to acquire
complementary businesses or technologies. If additional funds are raised through
the issuance of equity or convertible debt securities, the percentage ownership
of the stockholders of the Company will be reduced, stockholders may experience
dilution and such securities may have rights, preferences or privileges senior
to those of the rights of the Company's Common Stock. There can be no assurance
that additional financing will be available on terms favorable to the Company,
or at all. If adequate funds are not available or not available on acceptable
terms, the Company may not be able to meet its cash requirements and fund its
current operations as well as to engage in more aggressive brand promotion and
more rapid expansion, to develop new or enhanced products, to respond to
competitive pressures or to acquire complementary businesses or technologies.
Any such inability would have a material adverse effect on the Company's
business, results of operations and financial condition.

The Company is continuously involved in the development of new products
and related technology. The Company's products are designed to support
business-to-business, e-commerce and Internet related activities associated with
professional digital archival storage, digital workflow optimization and
advanced business-to-consumer on-line shopping applications. Piranha technology
and its resulting application developments are expected to provide a methodology
to support the emerging e-commerce market demand for solutions to the
traditional bottlenecks and time delays associated with the e-commerce shopping
experience that the Company believes are superior to those presently available.
The Company believes that its products and services provide measurable
quantatitive and qualitative advantages over related products and services. For
products currently under development see "BUSINESS."

The Company may experience rapid growth, which would place a
significant strain on the Company's managerial, financial and operational
resources. The Company is required to manage multiple relationships with
numerous outside parties. These requirements WILL BE EXACERBATED IN THE EVENT OF
FURTHER growth of the Company or in the number of third party relationships, and
there can be no assurance that the Company's systems, procedures or controls
will be adequate to support the Company's operations or that Company management
will be able to manage any growth effectively. To effectively manage its
potential growth, the Company must continue to implement and improve its
operational, financial and management information systems and to expand, train
and manage its employee base.

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<PAGE>

To date, the Company has not incurred any significant problems associated
with the inability of software applications and operational programs not
properly recognizing calendar dates in the year 2000 in the following areas: (1)
accounting and reporting systems, (2) office automation and contact management
software, (3) systems of third party vendors incorporated into the Company's
developmental products, and (4) the Company's developmental products.

BUSINESS

The Company was formed in 1992. From 1996 through November 1999 the Company
essentially was a non-operating entity, even though two of its four prior
subsidiaries (First Classics, Inc. and Classics Media Group, Inc.) remain in
existence. Beginning with the acquisition of Zideo.com, Inc. on December 8, 1999
and IBP, Inc. on December 30, 1999, the Company effectively changed its business
operations. In February 2000 it changed its name to Piranha, Inc., effected a
1:3.49 reverse stock split and increased its authorized Common Stock to 100
million shares.

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<PAGE>

Products that are expected to debut in the future:

o An e-commerce application covering transaction, data mining, and
other e-commerce disciplines.

o An affordable software rental that offers a variety of solutions from a
full suite of products to a smaller version designed to meet the
specific needs of the customer.

o Increased processing power delivered through custom DSP chip
integration for tailored hardware/software solutions.

o An advance image database product providing multifunctional search
capabilities.

Piranha products have been developed on the Linux operating system and
have been successfully ported to Microsoft and Apple operating platforms.

The Company maintains three separate websites:

o www.piranha.com for investor and general Company information.

o www.zideo.com for Internet-related activities.

o www.impact-s.com for the pre-press, printing and publishing industries.

Piranha believes that it is different from current industry leaders in
that it is a solutions-based organization not limited to a specific operating
platform, to a specific type of data file or to either video or audio or
lossless or lossy sciences.

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<PAGE>

Market Need

The Company's product and service line is intended to fill what the
Company believes to be a market need for digital image acquisition, data
compression, product output routing, custom user interfaces, and universal file
format recognition with particular applicability in five distinct problem areas:

o Bandwidth Limitations: data pipes are too small to accommodate huge
multi-format data files. This is most notable in the critical areas
of video, audio, and high resolution graphics and pictures.

o Digital Storage Limitations: vast amounts of audio, video, text and
graphics have been converted from their original analog state to more
manageable digital storage files. This conversion from analog to
digital has created enormous data storage requirements.

o Data Transmission Speed: more speed, the most common cry in cyberspace.
Ideally, large pipes and small data files would result in lightning
speeds. In actuality consumers have small pipes and huge data files
resulting in very slow data communication rates.

o Security Concerns: digital information must be safely stored, securely
transmitted and accessible to encryption or safeguarding to protect
privacy and provide assurances of safety.

o Data Routing: ability to easily control the asset delivery and archival
process with definable network and Internet delivery addresses.

The Company believes that a technology focusing on "digital asset
management" will address each of these five major challenges and believes that
its preliminary demonstrations have reflected significant improvements over the
technologies of current industry leaders.

Market Segments

Digital Workflow Solutions

The Company's wholly-owned subsidiary, Impact Solutions, Inc., focuses
upon providing digital workflow solutions specifically directed toward lossless
and modified bit "ultra high fidelity" data compression sciences for the
pre-press, printing and publishing industries. Over the last decade these
industries have started to consider moving away from traditional consumable
materials to digital file handling. Certain printing and publishing industry
organizations such as Time, Inc., R.R. Donnelley and Sons, Quad/Graphics, Inc.
and Quebecor World have begun utilizing digital workflows in the last several
years. Certain publications are using digital solutions to produce most, if not
all, of their product.

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<PAGE>

The Company estimates, however, that less than one-fourth of the pages
produced by publications such as news magazines are digital. The Company
believes that factors such as cost and evolving technologies will accelerate the
movement to the digital world within three to five years but that file size,
storage size, transmission costs and security concerns are major impediments.
Piranha's expectations are that its compression technology will overcome certain
if not all of these hurdles.

The Company also believes that any technology it develops will be
useful in other industries, such as medical imaging technology (which needs to
assemble, track, transmit, archive and often output high resolution x-ray,
sonograms and other application-critical high fidelity images in a secure
environment) as well as the financial, government, insurance and real estate
industries (which require large document storage capabilities) and the banking
and financial services industries (which require business to business support
for their transactional services).

Major competitors in this market segment are believed to be PKZip,
Aladdin Industries, Inc. and document workflows presented by such companies as
Adobe, AGFA and Heidelberg.

As a result of the acquisition of JJT, Inc., Impact Solutions also
operates a digital image capture service. JJT, Inc. provides digital image
archive services for several clients including the United States Library of
Congress, the New York Public Library and the University of Texas at Austin.

Digital Distribution Solutions

Zideo.com, Inc., another Piranha subsidiary, is the Company's
Internet-directed sales and marketing organization that utilizes Piranha
technologies to provide a streaming media encoding service bureau for such
source material as music videos, movie trailers, pay-per-view movies,
educational content, e-greeting cards, gaming, video conferencing, e-commerce,
and research and development for the entertainment industry.

The Company believes its technology is suitable for streaming and
downloading audio and video on-demand at ratios and resolution qualities
previously not available. Zideo.com is also seeking to satisfy emerging needs in
the security, video-conferencing and distance learning arenas.

Zideo.com is currently engaged in the following pre-marketing efforts:

o Film & Video - Zideo.com is soliciting content providers with
materials ranging from movie trailers to independent films for
encoding services utilizing the Piranha Stream streaming
audio/video solution. The Company believes that Piranha Stream
provides a qualitative and quantitative improvement over the
current industry leaders, Sorensson, Fronhoeffer and MPEG 4.

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<PAGE>

o Web pages - Piranha products are also expected to be applicable to
on-line web page development of graphic, animation or image
presentations. The multiple discipline approach of Piranha Net is
expected to allow for significantly increased download speeds and
dramatically reduced files sizes.

In addition, Zideo.com expects to continue development of technology that can be
applied to the Internet in the computer games area.

The Zideo.com web site uses Cobalt RAQ3 web servers on twin OC3 backbones,
with a top tier connection. The Internet service provider is The Planet.com.

Business Development

In December 1999 the Company acquired all of the capital stock of
Zideo.com, Inc., a wholly-owned subsidiary of Digibyte Corporation, an Illinois
corporation, for cash in the aggregate amount of $750,000. The Company acquired
Zideo in order to obtain certain licensing rights to technology owned by
DigiByte as well as to obtain the Zideo.com brandname and the acquisition of
certain personnel associated with Zideo and DigiByte including Messrs. Sample,
Ashley and Mr. Larry Greybill.

In December 1999, the Company acquired all of the capital stock of IBP,
Inc., a privately-held corporation owned by Messrs. Steele and Lotzer, the
Company's Chief Information Officer and Chief Science Officer, respectively. The
Company's acquired IBP to obtain certain technology regarding proprietary
lossless and lossy data compression algorithms. None of the technology was
subject to a patent or trademark.

In connection with the acquisition Messrs. Lotzer and Steele entered into
employment agreements with the Company. Mr. Lotzer entered into a two-year
employment contract at an annual salary of $150,000 in year one and $200,000 in
year two. Mr. Lotzer is the Company's Chief Science Officer and is expected to
be appointed to the Board of Directors in an annual alternation with Mr. Steele
at some time in the future. Mr. Steele entered into a two-year employment
contract at an annual salary of $150,000 per year. Mr. Steele is the Company's
Chief Information Officer and has been appointed to the Board of Directors in an
annual alternation with Mr. Lotzer.

In February 2000 the Company acquired the services of Edward Falk, Robert
Newton, Craig Westveer, Thomas Lenartz and Kevin Rahe through the acquisition of
Grand Rapids Science Group, Inc. (now known as Rogue River Software Group,
Inc.). The purpose of the acquisition was to add to the expertise of the
Company's science group in the areas of graphic arts, image processing, color
sciences and database design and modeling.

In March 2000 the Company purchased all ordinary shares of Online Marketing
(UK) Ltd. from Mr. Alan Fairnington and Mr. Joseph H. Sherrill, Jr. The primary

21
<PAGE>

purpose of the acquisition was to obtain the services of Messrs. Fairnington.
Mr. Sherrill is currently an independent director of the Company.

In October 2000 the Company purchased all of the outstanding shares of
Comsight Imaging, Inc. and acquired the services of Dr. Xiaolin Wu. The Company
entered into a three-year employment contract with Dr. Wu as Director of
Research and Development. Dr. Wu receives a base annual salary of $160,000.

In November 2000 the Company acquired the business and assets of JJT, Inc.
The primary purpose of this acquisition was to obtain the imaging technology of
JJT, Inc. and the services of Mr. John T. Stokes.

See, "MANAGEMENT."

Competition

The Company is in a highly competitive market. The Company competes
with major software developers as well as numerous smaller companies producing
one or more competitive products. The Company's products compete with those of
PKZip, Stuffit, WinZip, Sorensson, MPEG, Real, Cinepak, Indeo and others. Most
if not all of the Company's existing and potential competitors have longer
operating histories, greater name recognition, larger customer bases and
significantly greater financial, technical and marketing resources than the
Company. Such competitors are able to undertake more extensive marketing
campaigns for their brands, adopt more aggressive pricing policies and make more
attractive offers to potential customers and employees. Accordingly, there can
be no assurance that the Company will be able to compete successfully against
its current or future competitors or that competition will not have a materially
adverse effect on the Company's business, results of operations and financial
condition.

Competition for Internet products and services is intense. As the
market for e-commerce grows, the Company expects that competition will
intensify. Barriers to entry are minimal, and competitors can offer products and
services at a relatively low cost. The market in which the Company competes is
significantly affected and is characterized by rapidly changing technology,
evolving industry standards, frequent new product and service announcements and
enhancements, other market activities of industry participants and changing
customer demands. Accordingly, the Company's success will depend on its ability
to adapt to such changes and its ability to continually improve the speed,
performance, features, ease of use and reliability of its products in response
to both evolving demands of the marketplace and competitive service and product
offerings. Any failure to rapidly adapt in a changing environment would have a
materially adverse effect on the Company's business, results of operations and
financial condition.

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<PAGE>

no assurance that the products and services of the Company will achieve market
acceptance or commercial success or that the Company will be successful. The
Company expects competition to persist and intensify in the future.

The Company believes that the principal competitive factors affecting
companies seeking to develop, market and sell compression technology are
critical mass, technical competence, market acceptability, functionality, brand
recognition, market include speed of implementation, price, knowledge of the
industry, core technology, ability to implement a solution with existing
technology and financial capacity of its potential customers. Although the
Company believes that its solutions currently compete favorably with respect to
several of these factors, the Company's market is relatively new and is evolving
rapidly. The Company may not be able to maintain any significant competitive
position against current and potential competitors, especially those with
significantly greater financial, marketing, service, support, technical and
other resources.

Intellectual Property

The Company regards its copyrights, trademarks, trade secrets and
similar intellectual property as critical to its success and attempts to protect
its rights by relying on trademark, service mark, copyright and trade secret
laws and restrictions on disclosure and transferring title and other methods.
The Company has filed United States trademark applications for Piranha, Piranha
Byte, Piranha Stream, Piranha Net, Piranha Web, Webbot, Netbot and trademark
applications for Piranha in numerous overseas venues. There can be no assurance
that these steps will be adequate, that the Company will be able to secure
trademark registrations for all of its marks in the United States or other
countries or that third parties will not infringe upon or misappropriate the
Company's copyrights, trademarks, service marks and similar proprietary rights.
The Company currently has no patents but has filed for certain provisional
patents. The Company is also examining whether further patent protection will be
sought. There can be no assurance that patents will become a significant part of
the Company's intellectual property in the foreseeable future. Effective
trademark, service mark, copyright, trade secret and patent protection may not
be available in every country in which the Company's products may be distributed
and policing unauthorized use of the Company's proprietary information will be

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<PAGE>

difficult if not impossible.

Government Regulation and Legal Uncertainty

The Company is not currently subject to direct regulation by any
government agency, other than regulations applicable to businesses generally,
and there are currently few laws or regulations directly applicable to access to
or distribute information on the Internet. However, due to the Internet's
increasing popularity and use, a number of legislative and regulatory proposals
are under consideration by federal, state, local and foreign governmental
organizations, and it is possible that a number of laws or regulations may be
adopted with respect to the Internet relating to such issues as user privacy;
user screening to prevent inappropriate uses of the Internet by, for example,
minors or convicted criminals; taxation; infringement; pricing; content
regulation; quality of products and services; and intellectual property
ownership and infringement. The adoption of any such laws or regulations may
decrease the growth in the use of the Internet, which could in turn decrease the
demand for the Company's products, increase the Company's cost of doing
business, or otherwise have a materially adverse effect on the Company's
business, results of operations and financial condition. Moreover, the
applicability to the Internet of existing laws governing issues such as property
ownership, copyright, trademark, trade secret, obscenity, libel and personal
privacy is uncertain and developing. Any new legislation or regulation, or

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<PAGE>

application or interpretation of existing laws, could have a materially adverse
effect on the Company's business, results of operations and financial condition.

Properties

The Company's principal executive offices are located at 2425 N.
Central Expressway, Suite 480, Richardson, Texas 75080. Its principal financial
offices are located at 33 North LaSalle Street, 33rd Floor, Chicago, Illinois
60602. Its research and development facilities are located in Richardson, Texas
and additional research and development offices are located in Grand Rapids,
Michigan. Sales and marketing activities are conducted throughout the Company's
various offices and its Impact Solutions, Inc. and Zideo.com, Inc. subsidiaries
located in Freehold, New Jersey, London, England and Richardson, Texas.

Legal Proceedings

In July 1994, the Company discharged four officers of its Dream Factory
subsidiary. The officers who were discharged commenced actions against the
Company seeking damages arising out of the alleged wrongful termination of their
employment. The Company subsequently settled the claims of two of the officers.
The Company has from time to time been engaged in settlement negotiations with
the two remaining officers, a husband and wife, and has accrued a provision of
$700,000 in its consolidated financial statements. No settlement negotiations
are currently taking place and the Company is preparing to go to trial in early
2001. The remaining cases are pending in Connecticut state court.

The Company was a defendant in the case of Benjamin B. LeCompte, III, a
stockholder, v. Classics International Entertainment, Inc., in the United States
District Court for the Northern District of Illinois, Eastern Division. This
case involved a claim by LeCompte that the Company owed him 573,066 shares of
Common Stock pursuant to an alleged conversion of a promissory note into said
shares. The note, in the principal amount of $200,000, and the accrued interest
thereon, are included in the Company's consolidated financial statements. On
April 3, 2000, this case was dismissed for lack of jurisdiction. On April 12,
2000, LeCompte filed an action against the Company in the Circuit Court of Cook
County, Illinois, asserting substantially the same claims as in the case which
was dismissed. That action was dismissed on October 18, 2000. Subsequently an

25
<PAGE>

amended complaint was filed. The Company believes this action is without merit,
has filed another motion to dismiss and intends to vigorously defend itself in
this matter.

Employees

As of December 11 2000, the Company employed 68 full-time employees, 31
of whom were employed in research and development, 16 in sales and marketing and
21 in general and administrative capacities. None of the Company's employees are
subject to collective bargaining agreements and the Company considers its
relationships with its employees to be good.

MANAGEMENT

Directors, Executive Officers and Significant Employees

The following table sets forth the names and positions of the Company's
executive officers, directors and key employees. Each director serves until the
next annual meeting of the stockholders or until his/her successor is duly
elected and qualified. The Company's executive officers and key employee are
appointed by and serve at the discretion of the Board of Directors.

Name Birthday Position

Edward W. Sample 9/19/51 Chairman, Chief Executive Officer and
Director

Richard S. Berger 2/1/34 Chief Financial Officer, Secretary and
Director

R. Don Ashley 12/15/53 President and Chief Operating Officer

Michael Steele 8/18/55 Chief Information Officer and Director

Carey L. Lotzer 12/11/63 Chief Science Officer

Larry Greybill 5/25/44 President and Chief Operating Officer,
Impact Solutions, Inc.

Nathan McClintock 3/17/50 President and Chief Operating Officer,
Zideo.com, Inc.

Joseph H. Sherrill, Jr. 3/27/41 Director

W. Barger Tygart 8/16/35 Director

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<PAGE>

Mr. Sample joined the Company in December 1999 after a 29 year career with
$30 billion retailer, JC Penney. Most recently Sample directed JC Penney's
participation in the Massachusetts Institute of Technology "News in the Future"
consortium. The News in the Future (NiF) research consortium provides a forum
for the MIT Media Laboratory and member companies to explore and exploit
technologies that will affect the collection and dissemination of news. Sample
is credited with a number of technology "firsts" for the retailer, such as: In
1999, under Sample's direction, JC Penney unveiled the "World's First Commercial
Electronic Ink Display" (USA Today, 5/3/99). Some of Mr. Sample's other notable
accomplishments include: the introduction of the industry's first "web based"
kiosk system; the implementation of one of the countries largest distance
learning systems; the introduction of a digital imaging capture system for the
retailer's enormous merchandise operation; the implementation of an
international digital image transmission system for merchandise procurement, and
the first commercial introduction of the Sony SEPS 2000 camera, utilizing HDTV
technology, in 1992.

Mr. Berger founded Classics International Entertainment, Inc. (now known as
Piranha, Inc.) in 1992, and after making several acquisitions, took it public
through an IPO in October 1993. Mr. Berger served in various executive
capacities including the Company's CEO, CFO, Secretary, and Chairman of the
Board until December 1999 when he reorganized the business into a technology
company. Prior to 1992, Mr. Berger served as a CEO, CFO, and Chairman of the
Board of several companies while preparing them for public offerings, private
placements and/or reverse mergers. Some of the industries served by Mr. Berger
were factoring (account receivable financing and billing for physicians and
dentists), cable television, publishing, environmental (waste water treatment,
contaminated soil removal), machining (NASA space shuttle program), retailing,
kiosk development, design and sales, and high technology and Internet related
entities.

Mr. Ashley joined the Company in January 2000 after over 25 years
experience in the entertainment industry and has achieved exceptional success as
artist, technician and manager. As former president of the Texas Music Group, an
entertainment content provider, Mr. Ashley worked with industry leaders,
American Airlines, McGraw Hill, Southwest Airlines and Convex Computers. Mr.
Ashley was directly responsible for the design, implementation and management of
the post-production services operation of the $46 million television operations
facility within the 2 million square foot World Headquarters of JC Penney in
Plano, Texas. Additionally, Mr. Ashley has had a celebrated career in Marketing
and Communications with the $30 billion retailer. Mr. Ashley directed the
technical operations team of the retail giant that managed the development and
implementation of the co-op advertising system that supports JC Penney's $800
million advertising program. Mr. Ashley served as Vice President of Stonebriar
Communications, Inc. a new media business operating company of JCPenney. Most
recently, Mr. Ashley served as President and Chief Operating Officer of
Zideo.com, Inc.

Mr. Steele was the co-founder of IBP, Inc., a technology corporation
dealing in data compression technology built upon the Linux operating system.

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<PAGE>

Previously, Mr. Steele served as a Financial Planner with Texas Instruments,
Financial Analyst for W.R.Grace and, since 1997, Infrastructure Building and
Project Manager for Ernst and Young. Mr. Steele has done extensive work in
compression software sciences and has participated in professional training in
Java, metrics development and documentation, new product planning/enhancements,
business plan and market development. Mr. Steele graduated from Texas Tech
University, BS 1978, MS 1985. MS MIS at UTD (in progress).

Mr. Lotzer was the co-founder of IPB, Inc., a technology corporation
dealing in data compression technology built upon the Linux operating system.
Mr. Lotzer has over 13 years experience in the area of distributed computing
environment systems as an architect and developer and, most recently, the senior
software analyst at PrimeCo PCS. Mr. Lotzer has served as Chief Information
Officer of IT Staffing Solutions and has provided consulting services for
companies such as Fidelity Investments, Meridian Oil, Arco Oil and Gas, MCI
International, America Airlines SABRE Decision Technologies, Reliance Comm/Tec,
Nations Bank, Union Pacific Resources Company, Wal-Mart Inc., NEC America, AT&T
Long Distance Services, and Texas Instruments. Mr. Lotzer graduated from the
University of Texas at Dallas in August 1986 with Bachelor of Science degrees in
Geophysics and Analytical Mathematics and brings extensive educational and
skills sets to the Company. Mr. Lotzer has had advanced professional training
in; Structured Software Design Object Oriented Design Methodology; Structured
Software Design; PC-Based Simulation & Mathematical Modeling; Software Standards
and Code Ethics; Advanced Application and Systems Development. Mr. Lotzer has
published a number of scientific papers including;

o Fully Automatic Matched Triplet Selection Using Bernoulli's Eq.
o Over-The-Air Activation Technologies for CDMA
o A Java Real-Time Video/Audio CODEC with Bandwidth Auto-Sizing
o Client / Server Software Examples with Mathematics
o Detailed Design Description for Nexus, OTA, PRL and AKEY

Mr. Greybill is a veteran of more than 30 years as a manager and
executive in the printing and publishing industries. In his most recent position
as Director of the Seven Solutions Group for Seven Worldwide, Mr. Greybill was
responsible for helping to define business needs and solutions for customers as
well as developing new business. Mr. Greybill was a project manager for the
Associated Press for Business Development. As a project manager for AP's
communications department, he started and was responsible for the implementation
of AdSEND, the delivery service of digital ads to more than 1,400 sites. Mr.
Greybill spent most of his career in the newspaper industry, including 14 years
at the Chicago Tribune where he was associate sports editor and features editor
before moving to editorial operations where he was responsible for the
implementation of digital imaging technology. Mr. Greybill is a member of
Graphics Communication Association planning committees for Spectrum (prepress
and production) and Primex (Print and Publishing Executives), the NAA color
reproduction taskforce, the Publisher's Symposium planning committee in New
York, the American National Standards Institute's TC130 committee, which deals

28
<PAGE>

with technical specifications for the graphics arts industry, as well as other
industry and community organizations. Mr. Greybill is a graduate of Penn State.

Mr. McClintock joins Zideo.com after most recently serving as an executive
of BankLeasing.com in Dallas, Texas. BankLeasing.com, a private company, has a
considerable sales and marketing organization and has an outstanding reputation
and track record in the industry. Prior to BankLeasing.com, Mr. McClintock
directed the nationwide Gift Certificate operation for Dallas-based retailer, JC
Penney. While at Penney, Mr. McClintock was also responsible for the
establishment of the retailer's in-store entertainment operation which involved
high level relationships with all leading music and entertainment companies. Mr.
McClintock was also responsible for source media relationships with the National
Football League, the Major League Baseball Association, the National Hockey
League, the National Basketball Association, the World Soccer League and others.
For a 12 year period Mr. McClintock served as the Regional Vice President of
Primerica Corporation, Atlanta, Georgia where he managed a 600 person sales and
marketing organization and won numerous awards for sales performance and
leadership. From 1976 to 1980 Mr. McClintock served as the Chief of Staff for
the Governor of Mississippi and had the distinction of being one of the youngest
senior cabinet officers ever appointed in U.S. history.

Joseph H. Sherrill, Jr. is the retired President and CEO of R.J. Reynolds
Asia Pacific. He retired in December 1994 from R.J. Reynolds International after
17 years overseas as a senior executive. Mr. Sherrill last served as President
and CEO of R.J. Reynolds Asia Pacific, based in Hong Kong. Previous positions
included Senior Vice President of Marketing, R.J. Reynolds International;
President and CEO of R.J. Reynolds Tabacos do Brazil; and President and General
Manager of R.J.R. Puerto Rico. Prior experience included sales and marketing
research positions in the domestic company. Since 1994, Mr. Sherrill has been
active as Board Member, advisor, and investor in numerous small companies.
Currently, Mr. Sherrill serves on the Board of Directors of Biocryst
Pharmaceuticals, Lineshark.com and several private companies.

W. Barger Tygart is the retired Vice Chairman of the Board, President and
Chief Operating Officer of JCPenney. Mr. Tygart joined the JCPenney Company,
Inc. in 1960 advancing to increased levels of responsibility in various store
and district positions and in 1976 was promoted to the company's New York Office
Headquarters. In 1995, Mr. Tygart was elected to the position of President,
Chief Operating Officer and Vice Chairman of the Board and remained in that
position until his retirement in 1998. Mr. Tygart currently serves as a member
of the Board of Directors of Burlington Industries, one of the world's largest
and most diversified manufacturers of softgoods for apparel and interior
furnishings. Mr. Tygart also is a member of the Board of Directors of Monarch
Dental and is active as a consultant in a number of Internet related companies.

Executive Compensation

The following table sets forth for the Company's executive officers noted
below all cash compensation received, being the total compensation received,

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<PAGE>

during the fiscal year ended December 31, 1999. No compensation was paid or
payable to any executive officer for the fiscal years ended December 31, 1997 or
1998 except for Mr. Berger who received $8,000 in 1998 and $32,000 in 1997.

Annual Compensation

Name and Title Salary Other(a)

Edward W. Sample $11,667 $ 22,378
Chairman and
Chief Executive Officer

Richard S. Berger -0- -0-
Chief Financial Officer
and Director

R. Don Ashley 10,000 10,646
President and
Chief Operating Officer

Carey Lotzer 27,500 -0-
Chief Science Officer

Michael Steele 26,250 -0-
Chief Information Officer
and Director
--------------------------------------------------------------------------
(a) Represents amounts received in connection with the Company's acquisition of
Zideo.com.

Mr. Sample has entered into a contract, dated January 7, 2000, with
the Company which provides for his employment as Chief Executive Officer for an
annual salary of $140,000. The contract provides for a two-year term which is
automatically extended for additional one-year periods unless either the Company
or Mr. Sample elects not to renew. Mr. Sample is entitled to participate in the
Company's insurance and benefit plans on terms available to other senior
executives and is reimbursed for expenses reasonably incurred in performance of
his duties under the contract. Under the contract the Company became committed
to issue Mr. Sample options to acquire 1,500,000 shares of Common Stock at an
exercise price of $.01 per share and additional options to acquire 1,000,000
shares of Common Stock at an exercise price of $1.35 per share. The contract
provides the Company with protection for its intellectual property rights and
Mr. Sample has agreed not to compete with the Company during his period of
employment and for a period of two years thereafter.

Mr. Ashley has entered into a contract, dated January 7, 2000, with
the Company which provides for his employment as President and Chief Operating
Officer for an annual salary of $130,000. The contract provides for a two-year

30
<PAGE>

term which is automatically extended for additional one-year periods unless
either the Company or Mr. Ashley elects not to renew. Mr. Ashley is entitled to
participate in the Company's insurance and benefit plans on terms available to
other senior executives and is reimbursed for expenses reasonably incurred in
performance of his duties under the contract. Under the contract the Company
became committed to issue Mr. Ashley options to acquire 350,000 shares of Common
Stock at an exercise price of $.01 per share and additional options to acquire
350,000 shares of Common Stock at an exercise price of $1.35 per share. The
contract provides the Company with protection for its intellectual property
rights and Mr. Ashley has agreed not to compete with the Company during his
period of employment and for a period of two years thereafter.

Mr. Lotzer has entered into a contract, dated November 16, 1999,
with the Company which provides for his employment as Chief Science Officer for
an annual salary of $150,000 in the first year and $200,000 in the second year
plus discretionary additional compensation if the Company reaches certain levels
of gross sales. The two-year contract is automatically extended for additional
one-year periods unless either the Company or Mr. Lotzer elects not to renew.
Mr. Lotzer is entitled to participate in the Company's insurance and benefit
plans on terms available to other senior executives and is reimbursed for
expenses reasonably incurred in performance of his duties under the contract.
The Company has agreed to purchase $2,500,000 worth of key man life insurance on
Mr. Lotzer's life with $700,000 payable on his death to his surviving family
members. Under the contract the Company became committed to issue Mr. Lotzer
options to acquire 200,000 shares of Common Stock at an exercise price of $1.35
per share and 100,000 shares of Common Stock at an exercise price of $5.00 per
share if certain gross sales levels are met. The contract provides the Company
with protection for its intellectual property rights and Mr. Lotzer has agreed
not to compete with the Company during his period of employment and for a period
of two years thereafter.

Mr. Steele has entered into a contract, dated November 17, 1999,
with the Company which provides for his employment as Chief Information Officer
for an annual salary of $150,000. The contract provides for a two-year term
which is automatically extended for additional one-year periods unless either
the Company or Mr. Steele elects not to renew. Mr. Steele is entitled to
participate in the Company's insurance and benefit plans on terms available to
other senior executives and is reimbursed for expenses reasonably incurred in
performance of his duties under the contract. The Company has agreed to purchase
$2,500,000 worth of key man life insurance on Mr. Steele's life with $700,000
payable on his death to his surviving family members. Under the contract the
Company became committed to issue Mr. Steele options to acquire 200,000 shares
of Common Stock at an exercise price of $1.35 per share and 100,000 shares of
Common Stock at an exercise price of $5.00 per share if certain gross sales
levels are met. The contract provides the Company with protection for its
intellectual property rights and Mr. Steele has agreed not to compete with the
Company during his period of employment and for a period of two years
thereafter.

For the year 2000 each Company director will receive $ 3,000 for each
director's meeting attended in person and $ 300 for each director meeting

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<PAGE>

attended by telephone conference call as well as reasonable hotel, airfare and
miscellaneous expenses with a per diem meal allowance of $50. During the fiscal
years ended December 31, 1999, 1998 and 1997 no such fees were paid.

Stock Ownership of Management and Other Persons

The following table sets forth certain information as of November 30,
2000 with respect to (1) each person known by the Company to be the beneficial
owner of more than five percent of its outstanding shares of Common Stock, (2)
of each director and executive officer and (3) all directors and executive
officers as a group. Except as shown below the address for each such person is
the Company's principal executive offices. All shares reflected below are owned
of record and beneficially by the named person or group and each such person or
group has sole investment power with respect to all such shares. power with
respect to securities.

Name Amount(1) Percent of Class(1)

Edward W. Sample 2,000,000 (2) 17.0%

Richard S. Berger 2,559,062 (3) 20.8

R. Don Ashley 525,000 (4) 4.4

Michael Steele 440,000 (5) 3.9

Carey L. Lotzer 760,000 (5) 6.7

Joseph H. Sherrill, Jr. 376,000 (6) 3.3

W. Barger Tygart 51,000 (4) .4

FAI General Insurance
Company Ltd.
Level 42, So. Bridge Street
Sydney NSW 2000 Australia 853,041 7.6

All executive officers and
directors as a group
(seven persons) 6,711,062 49.3
----------------------------------------------------------------
(1) The numbers and percentages shown include the shares of Common Stock
actually owned as of November 30, 2000 and the shares of Common Stock that the
person or group had the right to acquire within 60 days of November 30, 2000. In
calculating the percentage of ownership, all shares of Common Stock that the
identified person or group had the right to acquire within 60 days of November
30, 2000 upon the exercise of options are deemed to be outstanding for the

32
<PAGE>

purpose of computing the percentage of the shares of Common Stock owned by such
person or group, but are not deemed to be outstanding for the purpose of
computing the percentage of the shares of Common Stock owned by any other
person.

(2) Includes 500,000 shares represented by stock options exercisable within 60
days of November 30, 2000.

(3) Includes 1,000,000 shares represented by stock options exercisable within 60
days of November 30, 2000. Number shown excludes shares owned by spouse as to
which beneficial ownership is disclaimed. (4) All shares are represented by
stock options exercisable within 60 days of November 30, 2000. (5) Includes
100,000 shares represented by stock options exercisable within 60 days of
November 30, 2000. (6) Of these shares, 51,000 are represented by stock options
exercisable within 60 days of November 30, 2000. Number shown excludes 10,000
shares owned by spouse as to which beneficial ownership is disclaimed.

The 2000 Stock Incentive Plan

The 2000 Plan is administered by the Company's Stock Option Committee,
currently comprised of Messrs. Tygart and Sherrill. Officers and other key
employees of the Company or any of its subsidiaries and Company consultants and
advisors are eligible to participate in the 2000 Plan. The selection of
participants is within the discretion of the committee. There are approximately
forty-five employees and others who are eligible to participate in the 2000
Plan.

The 2000 Plan provides for the grant of any or all of the following types
of awards: (1) stock options, including incentive stock options and
non-qualified stock options; (2) stock appreciation rights; and (3) stock
awards, including restricted stock. Awards may be granted singly, in
combination, or in tandem, as determined by the committee. If there is a lapse,
expiration, termination, or cancellation of any option or right prior to the
issuance of shares or the payment of the equivalent thereunder, or if shares are
issued and thereafter are reacquired by the Company pursuant to rights reserved
upon issuance thereof, those shares may again be used for new awards under the
2000 Plan.

During April 2000 non-qualified stock options were granted to the following
executive officers of the Company in the amounts noted: Mr. Sample - 2,700,000;
Mr. Berger - 1,000,000, Mr. Ashley - 800,000, Mr. Steele - 300,000 and Mr.
Lotzer - 300,000.

The Stock Option Plan for Non-Employee Directors

The Director Plan is also administered by the Company's Stock Option
Committee. Only non-employee directors are eligible to participate in the
Director Plan. No director may participate in any decision relating exclusively
to an option granted to that director. Both independent Company directors
currently participate.

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<PAGE>

The Director Plan provides for the grant of two forms of options: (1)
election and annual stock options and (2) deferred compensation options. If
there is a lapse, expiration, termination, or cancellation of any option or
right prior to the issuance of shares or the payment of the equivalent
thereunder, or if shares are issued and thereafter are reacquired by the Company
pursuant to rights reserved upon issuance thereof, those shares may again be
used for new awards under the Director Plan.

The Director Plan provides that each non-employee director of the Company
will be granted a non-qualified stock option to purchase 50,000 shares of Common
Stock upon election or appointment to the Board of Directors (the "Election
Options"). Commencing June 30, 2000 and each June 30th thereafter, each
non-employee director of the Company will be granted a non-qualified stock
option to purchase 1,000 shares of Common Stock (the "Annual Options").The
Director Plan also provides that each non-employee director of the Company may
elect to receive during any plan year or specified portion thereof non-qualified
stock options (the "Deferred Compensation Options") in lieu of all or part of
the retainers and fees payable for service on the Board and the board of any
Company subsidiary or any of their committees.

During April 2000 Messrs. Sherrill and Tygart (as well as a prior
non-employee director) each were granted 50,000 Election Options. On June 30,
2000 each was also granted 1,000 Annual Options.

Board Committees

The Board of Directors has four standing committees: The Executive
Committee, The Personnel and Compensation Committee, The Stock Option Committee,
The Audit Committee and The Corporate Governance Committee. The functions of
these committees and their current members are described below.

Executive Committee. This committee oversees the operations of the Board;
often acts on behalf of the board during on-demand activities that occur between
meetings, and these acts are later presented for full board review. This
committee also develops agenda items for Board Meetings. The Executive Committee
is comprised of Messrs. Sample (Chairman) and Berger.

Personnel and Compensation Committee. This committee reviews and
administers the Company's annual and long-term incentive compensation plans,
makes recommendations in areas concerning personnel relations, and takes action
or makes recommendations with respect to the compensation of Company executive
officers, including those who are directors. The Personnel and Compensation
Committee is comprised of Messrs. Tygart (Chairman), Sherrill and Steele.

Stock Option Committee. This committee is responsible for the
administration of the Company's two stock option plans. The Stock Option
Committee is comprised of Messrs. Tygart and Sherrill.

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<PAGE>

Audit Committee. This committee recommends to the Board of Directors for
stockholder approval the independent auditors for the annual audit of the
Company's consolidated financial statements. The committee also reviews the
independent auditors' audit strategy and plans, the scope of their audit, their
fees, the results of their audits as well as non-audit services and related
fees, internal audit reports on the adequacy of internal accounting controls,
the Company's ethics program, the status of significant legal matters, the scope
of the internal auditors' plans and budgets and the results of their audits and
the effectiveness of the Company's program for correcting audit findings. The
Audit Committee is comprised of Messrs. Sherrill and Tygart.

Corporate Governance Committee. This committee considers matters of
corporate governance and reviews developments in the governance area as they
affect relations between the Company and its stockholders. It also makes
recommendations to the Board with respect to the size, composition,
organization, responsibilities and functions of the Board and its directors, the
qualifications of directors, candidates for election as directors and the
compensation of directors. The Corporate Governance Committee is comprised of
Messrs. Sherrill (Chairman) and Tygart.

For the year 2000 each Company director will receive $ 3,000 for each
director's meeting attended in person and $ 300 for each director meeting
attended by telephone conference call as well as reasonable hotel, airfare and
miscellaneous expenses with a per diem meal allowance of $50. During the fiscal
years ended December 31, 1999, 1998 and 1997 no such fees were paid.

Certain Transactions

In December 1999 the Company acquired all of the capital stock of
Zideo.com, Inc. for cash in the aggregate amount of $750,000. A portion of the
purchase price was used to pay back salaries due, inter alia, Messrs. Sample,
Ashley and Greybill. In connection with this acquisition Messrs. Sample, Ashley
and Greybill also entered into employment contract with the Company as described
elsewhere herein.

In December 1999, the Company acquired all of the capital stock of IBP,
Inc., a privately-held corporation owned by Messrs. Steele and Lotzer in
exchange for 1,000,000 shares of Company Common Stock. In connection with the
acquisition Messrs. Lotzer and Steele also entered into employment agreements
with the Company as described elsewhere herein.

In March 2000 the Company purchased all ordinary shares of Online Marketing
(UK) Ltd. from Messrs. Fairnington and Sherrill and others in exchange for
55,556 shares of Company Common Stock. Mr. Sherrill is a director of the
Company.
35
<PAGE>

In October 2000 the Company purchased all of the outstanding shares of
Comsight Imaging, Inc. and acquired the services of Dr. Xiaolin Wu. The Company

entered into a three-year employment contract with Dr. Wu as Director of
Research and Development.

SEE, "BUSINESS-BUSINESS DEVELOPMENT." All persons referred to above also
received stock options.

Indemnification

Pursuant to the Company's Certificate of Incorporation, as amended, the
Company has to the full extent permitted by Section 145 of the Delaware General
Corporation Law, as amended from time to time, indemnified all persons whom it
may indemnify pursuant thereto including for liability under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted for directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.

SELLING STOCKHOLDERS

The shares offered hereby are owned by and offered for the account of Mr.
Paul Stankowski, Mr. Jeffrey Blakemore and City National Bank of Taylor, Taylor,
Texas. The Company will not receive any of the proceeds from the sale of the
shares sold by this stockholder. The Bank acquired its 75,862 shares in November
2000 and Messrs. Stankowski abd Blakemore acquired their shares in December
2000. Pursuant to the terms of the investment, the Company agreed to file a
registration statement to register all such shares. Accordingly, the Company has
caused to be prepared and filed with the Securities and Exchange Commission the
Registration Statement of which this Prospectus is a part.

The Company will pay all expenses in connection with this Registration
Statement, including, without limitation, registration and filing fees, printing
expenses, and fees and disbursements of counsel and accountants. All selling
expenses, such as taxes, selling commissions, and fees and disbursements for
seller's counsel will be paid by the selling stockholders.

The following sets forth for each selling stockholder (i) the number of
shares to be sold for his or its account, (ii) the number shares owned prior to
this offering and (iii) the amount and percent of shares of Company Common Stock
to be owned after this offering (including the 800,000 shares covered by this
Registraton Statement which have been authorized for issuance but not yet
issued).

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<PAGE>

Number of Shares Number of Shares Owned
Name To Be Sold Prior to Offering After Offering (%)

Paul Stankowski 500,000 540,000 40,000 (.33%)

Jeffrey Blakemore 300,000 329,000 29,000 (.23%)

City National Bank
of Taylor 75,862 75,862 --- (0%)

DESCRIPTION OF CAPITAL STOCK

The Company is authorized to issue 100,000,000 shares of Common Stock,
par value $.001 per share, and 5,000,000 shares of Preferred Stock in series. As
of November 30, 2000 there were 11,292,476 shares of Common Stock issued and
outstanding and an aggregate of 423,000 shares of Preferred Stock outstanding.

Holders of Common Stock are entitled to cast one vote for each share
held of record at all stockholder meetings for all purposes. Holders of Common
Stock do not have cumulative voting rights in the election of directors and do
not have preemptive rights. Holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared from time to time by the
Board of Directors in its sole discretion from funds legally available therefor.
Upon the liquidation, dissolution or winding-up of the Company, the holders of
shares of Common Stock would be entitled to share ratably in the distribution of
all of the Company's assets remaining available for distribution after
satisfaction of all of its liabilities and obligations. The Company has not
declared or paid any cash dividends on its capital stock since its inception and
does not expect to pay any cash dividends for the foreseeable future. The
Company currently intends to retain future earnings, if any, to finance the
operations and expansion of its business. All outstanding shares of Common Stock
are, and all shares of Common Stock to be outstanding upon completion of this
offering will be, fully paid and non-assessable.

The Company's transfer agent and registrar is Continental Stock
Transfer & Trust Company, New York, New York. The Company's Common Stock is
traded in the over-the-counter market under the symbol "BYTE."

The Board of Directors is authorized to issue from time to time,
without shareholder authorization, up to 5,000,000 shares of preferred stock in
one or more designated series, with such voting, dividend, redemption,
conversion and exchange provisions as are provided in the particular series. To
date the Board has authorized for issuance shares of Series A through D
preferred stock, of which there are as of the date of this Prospectus 10,000
shares of Series A issued and outstanding and owned by one stockholder and
412,500 shares of Series B issued and outstanding and owned by one stockholder.
The shares of Series C preferred stock were converted to shares of Common Stock
in June 2000. No shares of Series D preferred stock were ever issued. The issued
and outstanding shares of Preferred Stock are convertible into an aggregate of
168,310 shares of Company Common Stock. None of the outstanding shares of
Preferred Stock carry any voting rights. No dividends or other distributions are
to be payable on the Common Stock unless dividends are paid in full on any then
outstanding preferred stock and all sinking fund obligations for any then
outstanding preferred stock, if any, are fully funded. In the event of a
liquidation or dissolution of the Company, the outstanding shares of any then
outstanding preferred stock would have priority over the Common Stock to receive

37
<PAGE>

the amount specified in each particular series out of the remaining assets of
the Company. Any future issuance of preferred stock may have the effect of
deferring, delaying or preventing a change in control of the Company, or
decreasing the market price of the Common Stock, and may adversely affect the
voting and other rights of the holders of Common Stock.

PLAN OF DISTRIBUTION

This Prospectus relates to a total of 875,862 shares of Common Stock
currently outstanding. These shares may be sold from time to time by the selling
stockholders. The Common Stock is being registered to permit public secondary
trading of the Common Stock by the selling stockholders from time to time after
the date of this Prospectus. The Company has agreed to bear all the expenses
(other than selling commissions) in connection with the registration and sale of
the Common Stock covered by this Prospectus.

The Common Stock offered by the selling stockholders pursuant to this
Prospectus may be sold from time to time by the selling stockholders. The sale
of the Common Stock offered hereby by the selling stockholders may be effected
in one or more transactions that may take place on the over-the-counter market,
including ordinary `brokers' transactions, privately negotiated transactions or
through sales to one or more dealers for resale of such securities as
principals. Usual and customary or specifically negotiated brokerage fees or
commissions may be paid by the selling stockholders.

The Company will not receive any of the proceeds from the sale of the
Common Stock by the selling stockholders. The selling stockholders will receive
all of the net proceeds from the sale of their respective shares of Common Stock
and will pay all selling commissions, if any, applicable to such sale of shares
of Common Stock. The Company is responsible for all other expenses incident to
the offer and sale of the Common Stock.

In order to comply with the securities laws of certain states, if
applicable, the Common Stock will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states, the
Common Stock may not be sold unless it has been registered or qualified for
resale by the selling stockholder in the applicable state or an exemption from
the registration or qualification requirement is available and complied with.

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<PAGE>

The selling stockholders and any broker-dealers, agents, or underwriters
that participate with the selling stockholders in the distribution of Common
Stock offered hereby may be deemed to be "underwriters" within the meaning of
the Securities Act. Accordingly, the selling stockholderS will be subject to the
prospectus delivery requirements of the Securities Act. Any commissions paid or
any discounts or concessions allowed to any such persons, and any profits
received on the resale of the Common Stock offered hereby and purchased by them,
may be deemed to be underwriting commissions or discounts under the Securities
Act. The Company will not pay any compensation to any NASD member in connection
with this offering. Brokerage commissions, if any, attributable to the sale of
the Common Stock offered hereby will be borne by the selling stockholders.

The selling stockholders also may resell all or a portion of their shares
of Common Stock in open market transactions in reliance upon Rule 144 under the
Securities Act, provided they meet the criteria and conform to the requirements
of Rule 144.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Bruce P. Golden & Associates, Chicago, Illinois. Mr.
Golden owns of record and beneficially 8,596 shares of Company Common Stock and
has options to acquire an additional 100,000 shares of Company Common Stock.

EXPERTS

The consolidated financial statements of the Company at December 31, 1999
and for each of the two years in the period ended December 31, 1999, appearing
in this Prospectus and Registration Statement have been audited by Feldman Sherb
& Co., P.C.(formerly Feldman Sherb Horowitz & Co., P.C.), independent auditors,
as set forth in their reports thereon appearing elsewhere herein, and are
included in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.

AVAILABLE INFORMATION

Piranha is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "SEC"). Reports, proxy statements and other information
concerning Piranha can be inspected and copied at the SEC's Public Reference
Room, 450 Fifth Street, N.W., Washington, DC 20549, as well as the following
Regional Offices of the SEC: 7 World Trade Center, Suite 1300, New York, New
York 10048; and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can be obtained from the
Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, DC
20549, at prescribed rates. The public may obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants, such as the Company, that file
electronically with the SEC. The address of such site is http://www.sec.gov.

This Prospectus constitutes a part of a Registration Statement on Form SB-2
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by Piranha with the SEC under the Securities Act. This
Prospectus does not contain all of the information set forth in such
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the SEC. Reference is made to such Registration
Statement and to the exhibits relating thereto for further information with

39
<PAGE>

respect to Piranha. Any statements contained herein concerning the provisions of
any document filed as an exhibit to the Registration Statement or otherwise
filed with the SEC or incorporated by reference herein are not necessarily
complete, and in each instance reference is made to the copy of such document so
filed for a more complete description of the matter involved. Each such
statement is qualified in its entirety by such reference.

40
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<PAGE>

PIRANHA, INC.

FORMERLY CLASSICS INTERNATIONAL ENTERTAINMENT, INC.
AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS F-1

INDEPENDENT AUDITORS' REPORT F-2

CONSOLIDATED BALANCE SHEET F-3

CONSOLIDATED STATEMENTS OF OPERATIONS F-4

CONSOLIDATED STATEMENTS OF CHANGES IN F-5
STOCKHOLDERS' EQUITY

CONSOLIDATED STATEMENTS OF CASH FLOWS F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7 - F-12

F-1

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of Piranha, Inc.,
Chicago, Illinois

We have audited the accompanying consolidated balance sheet of Piranha,
Inc., (formerly Classics International Entertainment, Inc.and Subsidiaries)as of
December 31, 1999 and the related consolidated statements of operations, changes
in stockholders' equity and cash flows for the years ended December 31, 1999 and
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present
fairly, in all material respects the financial position of Piranha Inc.,
(formerly Classics International Entertainment Inc. and Subsidiaries) as of
December 31, 1999 and the results of their operations and cash flows for the
years ended December 31, 1999 and 1998 in conformity with generally accepted
accounting principles.

/s/ Feldman Sherb Horowitz & Co., P.C.
Feldman Sherb Horowitz & Co., P.C.
Certified Public Accountants

New York , NY
April 3, 2000

F-2

<PAGE>

PIRANHA, INC, FORMERLY CLASSICS INTERNATIONAL ENTERTAINMENT, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

DECEMBER 31, 1999

ASSETS

CURRENT ASSETS

Cash $ 333,879
U.S. Government Securities 1,291,508
Stock subscriptions receivable 800,000
Prepaid expenses 13,395
-----------

TOTAL CURRENT ASSETS 2,438,782

PROPERTY AND EQUIPMENT 48,243

INTANGIBLES 11,538,125

-----------
$ 14,025,150

===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable $ 1,388,225
Dividends payable 652,650
Accrued liabilities 1,125,954
Stockholder loans and other notes payable 827,161
-----------
TOTAL CURRENT LIABILITIES 3,993,990

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:

Preferred stock $ 2,012,488
Common stock, $.001 par value,
100,000,000 shares authorized;

6,695,455 shares issued and outstanding 6,695
Additional paid-in capital 26,192,299
Stock subscription receivable (44,500)
Accumulated deficit (18,135,822)

------------
TOTAL STOCKHOLDERS' EQUITY 10,031,160

----------
14,025,150
==========

See notes to the consolidated financial statements

F-3

<PAGE>

PIRANHA, INC, AND SUBSIDIARIES

(FORMERLY CLASSICS INTERNATIONAL ENTERTAINMENT, INC. AND SUBSIDIARIES)

CONSOLIDATED STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31,
-----------------------
1999 1998
------------- -----------
<S> <C> C>

REVENUES $ 0 $ 0

COSTS AND EXPENSES

General and administrative 360,164
Provision for settlement of litigation 700,000
Interest expense - net 44,741
Depreciation 422
------------- ------------
TOTAL COSTS AND EXPENSES 1,105,327 0

Loss from continuing operations (1,105,327) 0

Loss from discontinued operations 0 (21,882)

Extraordinary gain - extinguishment of debt 51,132 218,515
------------- ------------
Net gain (loss) (1,054,195) 196,633

Preferred stock dividends (163,800) (163,800)
------------- ------------

Net income (loss) applicable to common stock $ (1,217,995) $ 32,833
============= ===========

Basic and Diluted Income (Loss) Per Common Share:

Loss from continuing operations $ (0.29) $ (0.04)

Loss from discontinued operations 0.00 0.00

Extraordinary gain - extinguishment of debt 0.01 0.05

------------- ------------
Net income (loss) per common share - basic and diluted $ (0.28) $ 0.01
============= ============

Weighted average common shares outstanding 4,415,577 4,406,566
============= ============

</TABLE>

See notes to the consolidated financial statements

F-4

<PAGE>
PIRANHA, INC. AND SUBSIDIARIES
(FORMERLY CLASSICS INTERNATIONAL ENTERTAINMENT, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

Additional
Preferred Common Stock Paid-in Subscription Accumulated
Stock Shares Amount Capital Receivable Deficit Total
---------- ---------- --------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>

BALANCE - JANUARY 1, 1998 $ 2,012,488 $15,378,916 $ 15,379 $ 12,495,490 $ (44,500) $ (16,950,660) $ (2,471,803)

Effect of reverse stock split 10,972,350 (10,972) 10,972

Net income 196,633 196,633

---------- ---------- ---------- ----------- ---------- ------------- --------------
Restated - January 1, 1998 2,012,488 4,406,566 4,407 12,506,462 (44,500) (16,950,660) (2,471,803)

Preferred dividends (163,800) (163,800)

Net income 196,633 196,633

---------- ---------- ---------- ----------- ---------- ------------- --------------
BALANCE - DECEMBER 31, 1999 2,012,488 4,406,566 4,407 12,506,462 (44,500) (16,917,827) (2,438,970)

Stock issuances - acquistion 1,000,000 1,000 10,487,125

Stock issuances - cash 1,288,889 1,288 3,198,712 3,200,000

Preferred dividends (163,800) (163,800)

Net loss (1,054,195) (1,054,195)
------------------------------------------------------------------------------------------------
Balance - December 31, 1999 $ 2,012,488 $ 6,695,455 $ 6,695 $26,192,299 $(44,500) $(18,135,822) $10,031,160
========= ========= ===== ========== ======== ========== ==========

</TABLE>

See notes to consolidated financial statements

F-5

<PAGE>

PIRANHA, INC. AND SUBSIDIARIES
(FORMERLY CLASSICS INTERNATIONAL ENTERTAINMENT, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31,
-----------------------------------
1999 1998
---------------- ----------------

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss) $ (1,054,195) $ 196,633
Depreciation 422
Loss from discontinued operations 21,882
Provision for settlement of debt 700,000
Extraordinary gain -extinguishment of debt (51,132) (218,515)
Adjustments to reconcile net income (loss) to net cash used in operations:

Increase in prepaid expenses (13,395)
Increase in accounts payable and accrued liabilities 67,036
---------------- ----------------

NET CASH USED IN OPERATING ACTIVITIES (351,264) 0
---------------- ----------------

CASH FLOWS USED IN INVESTING ACTIVITIES:

Purchase of property and equipment (48,665)
Cash payments in connection with acquisitions (400,000)

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

TOTAL CASH FLOWS USED IN INVESTING ACTIVITIES (448,665) 0
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:

Investment in U.S. Government Securities (1,291,508)
Increase in stockholder loans and other notes payable 25,316
Proceeds from the sale of common stock 2,400,000
---------------- ----------------
TOTAL CASH FLOWS FROM FINANCING ACTIVITES 1,133,808 0

NET INCREASE IN CASH 333,879 0

CASH AT BEGINNING OF YEAR 0 0
---------------- ----------------

CASH AT END OF YEAR $ 333,879 $ 0
================ ================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

No cash paid during the year for interest and income taxes $ 0 $ 0
================ ================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Issuance of stock and notes for acquisitions $ 11,138,125 $ 0
================ ================

Issuance of stock for subscriptions receivable $ 800,000 $ 0
================ ================

</TABLE>

See notes to the consolidated financial statements

F-6

<PAGE>
YEARS ENDED DECEMBER 31, 1999 AND 1998
1. THE COMPANY
Piranha, Inc. (previously known as Classics International
Entertainment, Inc.) (the "Company") was incorporated under the
laws of the State of Delaware on November 20, 1992. By 1994, the
Company had four subsidiaries: Moondog's, Inc., which on August
5, 1997, filed for protection under Chapter 7 of the Bankruptcy
laws; Dream Factory, Inc., which on May 2, 1996, filed for
protection under Chapter 7 of the Bankruptcy Laws; First
Classics, Inc., the holder of a license for the exclusive use of
the Classics Illustrated copyrights, trade names and other
intangibles, excluding non-print media rights; and Classics Media
Group, Inc., the exclusive licensee of the Classics Illustrated
properties for non-print media purposes.

The Dream Factory, Inc. and Moondog's, Inc. Bankruptcy cases
were brought to closure in September, 1996 and January, 1997,
respectively. First Classics, Inc. has limited activity, while
Classics Media Group, Inc. is currently dormant.

The Company essentially has been a non-operating entity
since it discontinued its operations at the end of 1996.
Beginning with the acquisition of Zideo on December 8, 1999 and
IBP, Inc. on December 30, 1999, the Company effectively changed
its business emphasis.

Upon changing its name to Piranha, Inc.(TM), the Company has
become a technology company with a line of digital asset
management products being developed for sale and/or licensing.
The data compression software products under the new Piranha(TM)
brand are designed to improve Internet speed and to provide image
clarity at high compression rates.

In January, 2000 the Board of Directors received written
consents from a majority of stockholders authorizing (i) a change
in the name from Classics International Entertainment Inc. to
Piranha, Inc., (ii) an increase in the authorized Common Stock
from 30,000,000 shares to 100,000,000 shares, and (iii) a reverse
stock split so that each 3.49 outstanding shares were converted
into one share of Common Stock outstanding.

Through February 25, 2000 quotes for the Company's Common
Stock were available under the symbol CIEI. Effective with the
Reverse Stock Split on February 28, 2000, quotes for the
Company's Common Stock were available under the symbol BYTE.
These financial statements and the notes herein give retroactive
effect to the reverse stock split.

2. SIGNIFICANT ACCOUNTING POLICIES

a. Principles of consolidation - The accompanying
consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All intercompany
transactions and balances have been eliminated in consolidation.

b. 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 amounts reported in the financial statements and
disclosure of contingent assets and liabilities at the date of
the financial statements. Actual results could differ from these
estimates.

c. Net Income (Loss) Per Share - Basic income (loss) per
share was computed using the weighted average number of shares of
outstanding common stock. Diluted per share amounts when
applicable also include the effect of dilutive common stock
equivalents from the assumed exercise of stock options.

d. Income Taxes - Income taxes are accounted for under
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes", which is an asset and liability approach that
requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been
recognized in the Company's financial statements or tax returns.

e. Amortization of Intangibles - Amortization of the
algorithms underlying the acquired intellectual property/trade
secrets, as well as the brand name, and other trade secrets and
intangibles, are recognized over a five year period beginning in
the month of first commercial application.

f. Property and Equipment - Property and equipment is stated
at cost. Depreciation is computed using the straight-line method
over the estimated useful lives. Depreciation expense for the
years ended December 31, 1999 and 1998 was $422 and $0,
respectively.
F-7
<PAGE>

g. Long-lived Assets - The Company reviews long-lived assets
for impairment whenever circumstances and situations change such
that there is an indication that the carrying amounts may not be
recovered. At December 31, 1999 the Company believes that there
has been no impairment of its long-lived assets.

h. Stock Based Compensation - The Company accounts for its
stock option plan under APB Opinion No. 25 "Accounting for Stock
Issued to Employees," ("APB 25"). The Company has also adopted
Statement of Accounting Standards No. 123, "Accounting for Stock
Based Compensation," (SFAS 123 ) for disclosure purposes, and has
adopted the proforma disclosure requirements of SFAS 123, which
was not applicable in 1999 and 1998.

3. ACQUISITIONS

a. ACQUISITION OF IBP, INC.

On December 30, 1999, the Company acquired all of the capital
stock of IBP through a merger of its subsidiary with and into IBP. As
a result of the acquisition, IBP became a wholly-owned subsidiary of
the Company. The two stockholders of IBP received an aggregate of
1,000,000 shares of Common Stock in exchange for all of the
outstanding capital stock of IBP. The purchase price of $10,788,125
consisted of the assumption of liabilities in the amount of $100,000
and the issuance of the aforementioned stock, valued at $10,688,125.

In connection with the acquisition, the Company entered into a
two year employment agreement with each of the selling stockholders of
IBP at an annual salary to each individual of $150,000 in the first
year and $200,000 in the second year. In addition, the Company
committed to grant the sellers options to purchase an aggregate of
400,000 performance based stock options at the strike price of $1.35
per share as well as 200,000 incentive based stock options at a strike
price of $5.00 per share. The options, when granted, may result in
compensation expense being recorded to the extent the market price,
when granted, exceeds the excise price.

F-8
<PAGE>
b. ACQUISITION OF ZIDEO.COM, INC.

On December 8, 1999 the Company acquired all of the capital stock
of Zideo.com, Inc. ("Zideo") from DigiByte Corporation ("DigiByte") of
Chicago, Illinois. The purchase price of $750,000 consisted of cash in
the amount of $250,000 and a note for $500,000, of which $100,000 was
paid by December 31, 1999; the balance was paid in full as of February
16, 2000.

The aforementioned acquisitions resulted in the Company
acquiring intangible assets consisting of data compression technology
of approximately $11,5000. The acquired companies had no previous
revenue nor net income or loss and therefore pro forma financial
information as if the companies were combined at the beginning of 1998
are not presented.

4. ACCRUED LIABILITIES

At December 31, 1999, accrued liabilities consisted of the
following:

Consulting fees $ 134,583

Interest 142,900

Provision for settlement of litigation 700,000

Other 148,471
----------
TOTAL $1,125,954
==========

5. STOCKHOLDER'S LOANS AND OTHER NOTES PAYABLE

At December 31, 1999, stockholder loans and other notes
payable consisted of the following:

Stockholder loans, interest free,
unsecured and payable on demand $ 95,161

Notes payable with interest at 12% per annum,
unsecured and payable on demand 332,000

Acquisition note payable with interest
at 4% per annum, secured and payable in two
installments, due in January and February, 2000 400,000
--------

TOTAL $ 827,161
=========
F-9
<PAGE>

6. PREFERRED STOCK

At December 31, 1999, Preferred Stock consisted of 5,000,000
authorized shares of which the following were issued and outstanding:

Common Shares
Issuable on
Preferred Stock Amount Conversion
----------------- ---------- -------------

Series A, 9% cumulative,
convertible, redeemable; 220,000
shares issued and outstanding
$1,100,000 63,038

Series B, 9% cumulative,
convertible, redeemable; 412,500
shares issued and outstanding
529,988 165,445

Series C, 4% cumulative,
convertible, redeemable; 500
shares issued and outstanding
382,500 229,227
--------- -------

TOTAL $ 2,012,488 555,950
========= =======

At December 31, 1999, the Company had 555,950 common shares
reserved for issuance upon conversion of Preferred Stock.

7. EMPLOYEE STOCK OPTION PLAN

In November 1992, the Company adopted the 1992 Employee Stock
Option Plan (the "Option Plan"). The Option Plan provides for the grant
of options to qualified employees (including officers and directors) of
the Company to purchase an aggregate of 1,000,000 shares of Common
Stock. The Option Plan is administered by the Board of Directors or a
committee of the Board of Directors (the "Option Committee") whose
members are not entitled to receive options under the Option Plan. The
Option Committee has complete discretion to select the optionee and to
establish the terms and conditions of each option, subject to the
provisions of the Option Plan. Options granted under the Option Plan
may or may not be "incentive stock options" as defined in Section 422
of the Code ("Incentive Options") depending upon the terms established
by the Option Committee at the time of grant, but the exercise price of
options may not be less than 100% of the fair market value of the
Company's Common Stock as of the date of grant (110% of the fair market
value if the grant is an Incentive Option to an employee who owns more
than 10% of the outstanding Common Stock). Options may not be exercised
more than ten years after the grant. Options granted under the Option
Plan are not transferable and may be exercised only by the respective
grantees during their lifetimes or by their heirs, executors or
administrators in the event of death. Under the Option Plan, shares
subject to canceled or terminated options are reserved for subsequently
granted options. The number of options outstanding and the exercise
price thereof are subject to adjustment in the case of certain
transactions such as mergers, recapitalizations, stock splits or stock
dividends. No options are outstanding as of December 31, 1999.

F-10

<PAGE>

8. INCOME TAXES

The following is a reconciliation of income taxes and amounts
computed using the U.S. Federal statutory rate and the effective tax
rate for the years ended December 31, 1999 and 1998:

1999 1998
---------- -------

Consolidated pre-tax income (loss) $(1,054,000) $ (197,000)
========== ========

Tax (benefit) at Federal statutory rate 369,000 69,000

Effect of permanent differences 8,000 0

Effect of temporary differences 277,000 6,000

Tax benefit not recognized 654,000 75,000
-------- -------
Taxes per financial statements $ - $ -
======== =======

The Company has adopted Statements of Financial Accounting
Standards No. 109, "Accounting for Income Taxes". Under this standard,
the Company records as an asset its net operating loss carryforward
("NOL") based upon current tax returns, and establishes a valuation
allowance to the extent of any NOL which will not be utilized in the
foreseeable future.

At this time, the Company can not reliably predict future
profitability. Accordingly, the deferred tax asset has been reduced in
its entirety by the valuation allowance.

As of December 31, 1999, the Company had net operating loss
carry forwards of approximately $14,600,000 expiring beginning in the
year 2007. A significant portion of these carry forwards are subject to
limitations on annual utilization due to "equity structure shifts" or
"owner shifts" involving "5 percent stockholders" (as defined in the
Internal Revenue Code), which result in more than a 50 percent change
in ownership.

9. RELATED PARTY TRANSACTIONS

The Company was provided with office and administrative
facilities under an informal arrangement with a principal shareholder.
Amounts charged to operations for such services in 1999 and 1998 were
$7,500 and $10,500, respectively.

F-11
<PAGE>

10. LICENSE AGREEMENTS

The Company has the exclusive and perpetual right to use
certain trade names, copyrights, logos, trademarks and other intangible
property related to Classics Illustrated and Classics Illustrated
Juniors. The Company is obligated to remit royalties ranging from 3
percent to 10 percent, with a minimum of $3,000 per annum, of revenues
derived from such rights.

11. LITIGATION

In July 1994, the Company discharged four officers of its
Dream Factory subsidiary. The officers who were discharged commenced an
action against the Company seeking damages arising out of the alleged
wrongful termination of their employment. The Company subsequently
settled the claims of two officers for $600,000. The Company is
currently engaged in settlement negotiations with the remaining
officers, and has accrued a provision of $700,000 in the accompanying
consolidated financial statements, but will vigorously defend this case
in the absence of a settlement, and believes that it is without merit.

The Company was a defendant in the case of Benjamin B.
LeCompte, III v. Classics International Entertainment, Inc., in the
United States District Court for the Northern District of Illinois,
Eastern Division. This case involved a claim by LeCompte that the
Company owed him 573,066 shares of Common Stock pursuant to an alleged
conversion of a promissory note into said shares. The note, in the
principal amount of $200,000, and the accrued interest thereon, are
included in the accompanying consolidated financial statements. As of
April 3, 2000 this case has been dismissed for a lack of jurisdiction.

12. EXTRAORDINARY GAIN - EXTINGUISHMENT OF DEBT

In January 1998, Moondog's bankruptcy case was closed
resulting in the cancellation of liabilities of $218,515. The
transaction is reflected in the 1998 financial statements as an
extraordinary gain from the extinguishment of debt.

In October 1999, the Company settled certain outstanding
accounts payable for $15,000, resulting in an extraordinary gain of
$51,132 from the extinguishment of debt.

13. STOCK SUBSCRIPTIONS RECEIVABLE

Stock subscriptions receivable at December 31, 1999 of $800,000,
were collected in full as of March 14, 2000.

14. CONCENTRATION OF RISK

The company maintained cash balances in excess of the Federally
insured ("FDIC") limit of $100,000. Such excess approximated $230,000
at December 31, 1999.

15. SUBSEQUENT EVENT

On March 23, 2000, 851,421 shares of Common Stock were issued
upon the exercise of warrants. There are additional warrants
outstanding which provide for the issuance of 143,267 shares, upon
exercise, at a price of $1.74 per share. These warrants expire in
February 2001.

F-12

INDEX TO QUARTERLY REPORT ON FORM - 10QSB

PAGE NO.

PART I FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Balance Sheet F-14

Statements of Operations F-15

Statements of Cash Flows F-16

Notes to Consolidated Financial Statements F-17 - F-19

F-13

<PAGE>
PIRANHA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(UNAUDITED)

ASSETS

CURRENT ASSETS
Cash $ 958,147
U.S. Government securities 1,061,343
Marketable securities 167,900
Accounts receivable 943,015
Prepaid expenses and deposits 285,281
------------------
TOTAL CURRENT ASSETS 3,415,686

PROPERTY AND EQUIPMENT, NET 1,843,453

GOODWILL 1,750,000

INTANGIBLE AND OTHER ASSETS 11,555,638
------------------
$ 18,564,777
==================

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable $ 848,316
Dividends payable 207,206
Accrued liabilities 1,030,584
Deferred income 791,667
Stockholder loans and other notes payable 254,579
------------------
TOTAL CURRENT LIABILITIES 3,132,352
------------------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Preferred stock 462,500
Common stock, $.001 par value, 100,000,000 shares authorized;
9,478,881 shares issued and outstanding 9,479
Additional paid-in capital 39,324,828
Stock subscription receivable (44,500)
Accumulated deficit (24,319,882)
------------------
TOTAL STOCKHOLDERS' EQUITY 15,432,425
------------------
$ 18,564,777
==================

See notes to the consolidated financial statements

F-14

<PAGE>

PIRANHA, INC, AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION> THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------------
2000 1999 2000 1999
------------ ---------- ------------- -----------

REVENUES $ 290,258 $ $ 338,343 $
------------ ---------- ------------ ------------

COSTS AND EXPENSES

General and administrative 2,393,266 6,184,636
Depreciation 40,848 90,556
------------ ----------- ------------ -----------
Total Costs and Expenses 2,434,114 6,275,192
------------ ----------- ------------ -----------

Loss before other expense (2,143,856) (5,936,849)

Loss on marketable securities, net (203,752) (173,065)
Interest expense (10,260) (31,840)
------------ ----------- ------------ -----------
Loss from continuing operations (2,357,868) (6,141,754)

Loss from discontinued operations 0 (7,139) 0 (21,321)
------------ ----------- ------------ -----------

Net loss (2,357,868) (7,139) (6,141,754) (21,321)

Preferred stock dividends (10,406) (40,950) (42,306) (122,850)
------------ ----------- ------------ -----------

Net loss applicable to common stock $ (2,368,274) $ (48,089) $ (6,184,060) $ (144,171)
============ =========== ============ ===========

Basic and Diluted Loss Per Common Share:

Loss from continuing operations $ (0.25) $ (0.01) $ (0.71) $ (0.02)

Loss from discontinued operations 0.00 0.00 0.00 0.00

Net loss per common share
------------ ----------- ------------ -----------
- basic and diluted $ (0.25) $ (0.01) $ (0.71) $ (0.02)
============ =========== ============ ===========

Weighted average common shares outstanding 9,296,590 4,979,632 8,698,986 4,979,632
============ =========== ============ ===========

</TABLE>

See notes to the consolidated financial statements

F-15
<PAGE>

PIRANHA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>

NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------
2000 1999
---------------- ---------------
<S> <C> <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (6,141,754) $ (21,321)
Adjustments to reconcile net loss
to net cash used in operations:
Depreciation 90,556
Loss on sale of securities 173,065
Loss from discontinued operations 21,321
Changes in assets and liabilities:
Increase in accounts receivable (943,015)
Increase in prepaid expenses (271,886)
Decrease in accounts payable and accrued liabilities (463,874)
Increase is deferred revenue 791,667
---------------- ---------------
NET CASH USED IN OPERATING ACTIVITIES (6,765,241) 0
---------------- ---------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisition of property and equipment (1,885,766)
Investment in marketable securities (378,215)
Proceeds from the sale of U.S. Government securities 267,415
---------------- ---------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (1,996,566) 0
---------------- ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Collection of stock subscription receivable 800,000
Acquisition of intangibles (17,513)
Payment of stockholder loans and other notes payable (572,582)
Proceeds from issuance of common stock 9,176,170
---------------- ---------------
NET CASH FLOWS FROM FINANCING ACTIVITES 9,386,075 0
---------------- ---------------
NET INCREASE IN CASH 624,268 0

CASH AT BEGINNING OF YEAR 333,879 0
---------------- ---------------
CASH AT END OF PERIOD $ 958,147 $ 0
================ ===============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for interest $ 2,210 $ 0
================ ===============
Cash paid during the period for income taxes $ 0 $ 0
================ ===============

NON-CASH FINANCING AND INVESTING ACTIVITIES:

Issuance of common stock upon conversion of accounts payable $ 171,405 $ 0
================ ===============
Issuance of common stock for acquisitions $ 1,750,000 $ 0
================ ===============
Issuance of common stock upon conversion of preferred stock $ 2,037,750 $ 0
================ ===============

</TABLE>

See notes to the consolidated financial statements

F-16
<PAGE>

PIRANHA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2000

(UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION:

The accompanying unaudited financial statements reflect all adjustments which,
in the opinion of management, are necessary for a fair presentation of financial
position and the results of operations for the interim periods presented. The
results of operations for any interim periods are not necessarily indicative of
the results attainable for a full fiscal year.

These statements have been prepared by the Company and are unaudited. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principals have been
omitted. As such, these financial statements should be read in conjunction with
the audited financial statements and notes thereto included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1999.

NOTE 2 - LITIGATION

In July 1994, the Company discharged four officers of its Dream Factory
subsidiary. The officers who were discharged commenced actions against the
Company seeking damages arising out of the alleged wrongful termination of their
employment. The Company subsequently settled the claims of two of the officers.
The Company has from time to time been engaged in settlement negotiations with
the two remaining officers, a husband and wife, and has accrued a provision of
$700,000 in its consolidated financial statements. No settlement negotiations
are currently taking place and the Company is preparing to go to trial in early
2001. These remaining cases are pending in Connecticut state court.

The Company was a defendant in the case of Benjamin B. LeCompte, III, a
stockholder, v. Classics International Entertainment, Inc., in the United States
District Court for the Northern District of Illinois, Eastern Division. This
case involved a claim by LeCompte that the Company owed him 573,066 shares of
Common Stock pursuant to an alleged conversion of a promissory note into said
shares. The note, in the principal amount of $200,000, and the accrued interest
thereon, are included in the accompanying consolidated financial statements. On
April 3, 2000, this case was dismissed for lack of jurisdiction. On April 12,
2000, LeCompte filed an action against the Company in the Circuit Court of Cook
County, Illinois, asserting substantially the same claims as in the case which
was dismissed. That action was dismissed on October 18, 2000. Subsequently an
amended complaint was filed. The Company believes this action is without merit,
and intends to vigorously defend itself in this matter.

The Company is subject to various federal, state and local laws affecting its
business, and believes that it is in material compliance with all applicable
laws and regulations.

F-17
<PAGE>

NOTE 3 - PREFERRED STOCK

At September 30, 2000 Preferred Stock consisted of 5,000,000 authorized shares
of which the following were issued and outstanding:

Common Shares
Preferred Stock Amount Issuable on
Conversion
------------------------------------------------------ ------------ -----------
Series A, 9% cumulative, convertible, redeemable;
10,000 shares issued and outstanding $ 50,000 2,866
------------------------------------------------------ ------------ ------------
Series B, 9% cumulative, convertible, redeemable;
412,500 shares issued and outstanding 412,500 165,445
------------------------------------------------------ ------------ ------------
TOTAL $ 462,500 168,311
======= =======

NOTE 4 - CHANGES IN COMMON STOCK

During the period covered by this Report an aggregate of 2,783,426 shares of
Company Common Stock were offered and sold without registration under the
Securities Act of 1933, as amended ("Act"), as not involving any public offering
in reliance upon the exemption from registration contained in Section 4(2) of
the Act.

On January 21, 2000, an aggregate of 57,307 shares of Common Stock were issued
on conversion of 200,000 shares of the Company's Series A 9% Convertible
Cumulative Redeemable Preferred Stock.

On February 24, 2000, 89,892 shares of Common Stock, the fair market value of
which was one million dollars ($1,000,000), were issued in exchange for all of
the capital stock of Rogue River Software, Inc., formerly Grand Rapids Science
Group, Inc.

On March 24, 2000, 55,556 shares of Common Stock, the fair market value of which
was seven hundred fifty thousand dollars ($750,000), were issued in exchange for
all of the capital stock of On-Line Marketing, Inc.

During March 2000, an aggregate of 851,421 shares of Common Stock were issued on
exercise of the Company's outstanding Class A and Class B warrants.

On March 31, 2000, an aggregate of 836,000 shares of Common Stock were issued to
various parties pursuant to the receipt of five million two hundred eighty
thousand dollars ($5,280,000) in cash during the quarter.

On March 13, 2000 an aggregate of 2,866 shares of Common Stock were authorized
for issuance on conversion of 10,000 shares of the Company's Series A 9%
Convertible Cumulative Redeemable Preferred Stock.

On March 15, 2000 an aggregate of 10,000 shares of Common Stock were authorized
for issuance to Piranha Propellers in exchange for the domain name
"piranha.com."

On March 15, 2000 an aggregate of 10,500 shares of Common Stock were authorized
for issuance to two individuals for services previously rendered.

In May 2000 an aggregate of 133,333 shares of Common Stock were issued to The
Interpublic Group of Companies, Inc.

On or about June 15, 2000 an aggregate of 324,224 shares of Common Stock were
issued to an individual on conversion of $500,000 of the Company's Series C 4%
Convertible Cumulative Redeemable Preferred Stock.

On June 19, 2000 an aggregate of 19,500 shares of Common Stock were issued to
four persons or entities in exchange for the cancellation of amounts due for
services.

F-18
<PAGE>

In August, 2000 an aggregate of 20,000 shares of Common Stock were issued in
exchange for $100,000 cash which was received by the Company in May, 2000.

In August, 2000 an aggregate of 372,827 shares of Common Stock were issued to
various parties in exchange for $2,796,170 cash.

NOTE 5 - SUBSEQUENT EVENTS

In October, 2000, the Company acquired all of the capital stock of Comsight
Imaging, Inc. in exchange for 47,733 shares of the Company's common stock, the
fair market value of which was $319,498 and three hundred thousand dollars
($300,000) in cash, of which $150,000 had been paid as a deposit prior to
September 30, 2000. Of the 47,733 shares, 37,733 shares were issued at the time
of this report, and 10,000 shares were authorized for issuance on or about
January 2, 2001.

In connection with the Comsight Imaging, Inc. acquisition, the Company committed
to grant a principal of Comsight performance based stock options to purchase up
to 40,000 shares of Common Stock at a price of $7.50 per share as well as
incentive based stock options to purchase 50,000 shares of common stock at a
price of $5.00 per share, each of which is dependent upon the Company achieving
certain sales volumes.

In October, 2000 the Company issued 1,500,000 shares of Common Stock to Edward
W. Sample, the Company's Chairman and CEO, and 150,000 shares of Common Stock to
two other employees, pursuant to the exercise of non-qualified stock options.

In November, 2000 the Company acquired all of the assets of JJT, Inc. in
exchange for 50,000 shares of the Company's Common Stock, the fair market value
of which was $300,000, and the assumption of JJT's bank debt. The Company has
agreed to repay the bank debt by the issuance of 75,862 shares of Common Stock,
the fair market value of which was $455,172 on the date of the agreement. Such
shares have been authorized for issuance, but have not yet been issued.

F-19

<PAGE>

PIRANHA, INC.

SHARES OF COMMON STOCK

PAR VALUE $.001 PER SHARE

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of Directors and Officers.

Section 145 of the Delaware General Corporation Law provides that a
Delaware corporation has the power to indemnify its offers and directors in
certain circumstances (including for reasonable amounts paid by them in
settlement).

Section 145(a) empowers a corporation to indemnify any director or
officer, or former director or officer, who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation), against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with such action, suite or proceeding provided
that such director or officer acted in good faith in a manner reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, provided that such director
or officer had no cause to believe his or her conduct was unlawful.

Section 145(b) empowers a corporation to indemnify any director or
officer, or former director or officer, who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the corporation to procure a judgment in its favor by reason of
the fact that such person acted in any of the capacities set forth above,
against expenses actually and reasonably incurred in connection with the defense
or settlement of such action or suit provided that such director or officer
acted in good faith and in a manner reasonably believed to be in or not opposed
to the best interests of the corporation, except that no indemnification may be
made in respect of any claim, issue or matter as to which such director or
officer shall have been adjudged to be liable for negligence or misconduct in
the performance of his or her duty to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action was brought
shall determine that despite the adjudication of liability such director or
officer is fairly and reasonably entitled to indemnity for such expenses which
the court shall deem proper.

Section 145 further provides that to the extent a director or officer
of a corporation has been successful in the defense or any action, suit or
proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue or matter therein, he or she shall be indemnified against expenses
(including attorney's fees) actually and reasonably incurred by him or her in
connection therewith; that indemnification provided for by Section 145 shall not
be deemed exclusive of any other rights to which the indemnified party may be
entitled; and empowers the corporation to purchase and maintain insurance on
behalf of a director or officer of the corporation against any liability
asserted against him or her or incurred by him or her in any such capacity or

<PAGE>

arising out of his or her status as such whether or not the corporation would
have the power to indemnify him or her against such liabilities under Section
145.

Pursuant to the Company's Certificate of Incorporation, as amended, and
By-laws the Company has to the full extent permitted by Section 145 indemnified
all persons whom it may indemnify pursuant thereto.

The Company carries directors and officers liability insurance covering
all directors and officers of the Company against claims arising out of the
performance of their duties.

Item 25. Other Expenses of Issuance and Distribution.

The following is an itemized statement of the estimated amounts of all
expenses payable by the Registrant in connection with the registration of the
Common Stock.

SEC Registration Fee $ 665.00
Blue sky fees and expenses 500.00
Accounting Fees and Expenses 2,000.00
Legal Fees and Expenses 5,000.00
Miscellaneous 835.00
---------------
Total $ 9,000.00
===============
Item 26. Recent Sales of Unregistered Securities.

During the three years immediately preceding the date of the filing of
this Registration Statement, the following securities were issued by the Company
without registration under the Securities Act of 1933, as amended ("Act"). All
of such issuances were made in reliance upon the exemption contained in Section
4(2) of the Act as not involving any public offering.

In December 1999 in connection with the IBP, Inc. acquisition, the
Company issued 1,000,000 shares of stock to the two principals of IBP, Carey
Lotzer and Michael Steele, in exchange for all of their capital stock of IBP.

In November and December 1999, the Company entered into various
subscription agreements for the issuance of 1,288,889 shares of Common Stock for
an aggregate purchase price of $3,200,000 all of which has been received.

On January 21, 2000, an aggregate of 57,307 shares of Common Stock were
issued on conversion of 200,000 shares of the Company's Series A 9% Convertible
Cumulative Redeemable Preferred Stock.

2
<PAGE>

On February 24, 2000, 89,892 shares of Common Stock, having a market
value of $1,000,000, were issued in exchange for all of the capital stock of
Rogue River Software, Inc., formerly Grand Rapids Science Group, Inc.

During March 2000, an aggregate of 851,421 shares of Common Stock were
issued on exercise of the Company's outstanding Class A and Class B warrants.

On March 13, 2000, an aggregate of 2,866 shares of Common Stock were
authorized for issuance on conversion of 10,000 shares of the Company's Series A
9% Convertible Cumulative Redeemable Preferred Stock.

On March 15, 2000 an aggregate of 10,000 shares of Common Stock were
authorized for issuance to Piranha Propellers in exchange for the domain name
"piranha.com."

On March 15, 2000 an aggregate of 10,500 shares of Common Stock were
authorized for issuance to two individuals for services previously rendered.

On March 24, 2000, 55,556 shares of Common Stock, the fair market value
of which was $750,000, were issued in exchange for all of the capital stock of
On-Line Marketing (UK), Ltd.

On March 31, 2000, an aggregate of 836,000 shares of Common Stock were
issued to various parties as a result of various subscription agreements
pursuant to the receipt of $5,280,000 in cash during the quarter then ended.

In May 2000 an aggregate of 133,333 shares of Common Stock were issued
to The Interpublic Group of Companies, Inc.

On or about June 15, 2000 an aggregate of 324,224 shares of Common
Stock were issued to an individual on conversion of $500,000 of the Company's
Series C 4% Convertible Cumulative Redeemable Preferred Stock.

On June 19, 2000 an aggregate of 19,500 shares of Common Stock were
issued to four persons or entities in exchange for the cancellation of amounts
due for services.

On August 9, 2000, an aggregate of 20,000 shares of Common stock were
issued to one person in exchange for cash in the amount of $100,000.

On August 11, 2000, an aggregate of 294,827 shares of Common Stock were
issued to eight persons or entities in exchange for cash in the amount of
$2,211,200.

On August 22, 2000, an aggregate of 78,000 shares of Common stock were
issued to one person in exchange for cash in the amount of $585,000.

3
<PAGE>

In October 2000 an aggregate of 37,733 shares of Common Stock were issued
to the stockholders of Comsight Imaging Inc. in connection with the Company's
acquisition of this company. In addition, an additional 10,000 shares of Common
Stock were authorized for issuance on or about January 2, 2001.

In November 2000 an aggregate of 50,000 shares of Common Stock were issued
to JJT, Inc. in connection with the acquisition of the assets and business of
JJT, Inc. In addition, in November 2000 an aggregate of 75,862 shares of Common
Stock were issued to City National Bank of Taylor, Taylor, Texas, in repayment
of the outstanding debt owed to the bank by JJT, Inc.

In December 2000 an aggregate of 800,000 shares of Common Stock were
authorized for issuance to Paul Stankowski and Jeffrey Blakemore in connection
with equity investments in the Company aggregating $800,000.

Item 27. Exhibits.

The exhibits filed and incorporated by reference herein are as
specified on the Exhibit Index included herein.

Item 28. Undertakings

(A) The undersigned registration hereby undertakes that it will:

(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:

(i) Include any prospectus required by Section 10(a)(3)
of the Securities Act ("Act");

(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change
in the information in the registration statement.
Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar
value of securities offered would not exceed that which
was registered) and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in
the effective Registration Statement; and

(iii) Include any material information on the plan of
distribution.

4
<PAGE>
(2) For determining liability under the Act, treat each
post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at
that time to be the initial bona fide offering.

(3) File a post-effective to remove from registration any of
the securities that remain unsold at the end of the offering.

(B) Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
by the Act and is therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the small
business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

5
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED ON THIS 14TH day of
December, 2000.

PIRANHA, INC.

By: /s/ Edward W. Sample
-------------------------------------------------
Edward W. Sample
Chairman of the Board and Chief Executive Officer

By: /s/ Richard S. Berger
-------------------------------------------------
Richard S. Berger
Chief Financial Officer and Secretary

POWER OF ATTORNEY

We, the undersigned officers and directors of Piranha, Inc., hereby
severally constitute Richard S. Berger and Edward W Sample, and each of them
singly, our true and lawful attorneys with full power to them, and each of them
singly, to sign for us and in our names in the capacities indicated below, the
Registration Statement on Form SB-2 filed herewith and any and all amendments
(including post-effective amendments) to said Registration Statement, and
generally to do all such things in our name and behalf in the capacities
indicated below to enable Piranha, Inc. to comply with the provisions of the
Securities Act of 1933, as amended, and all requirements of the Securities and
Exchange Commission, hereby ratifying and confirming our signatures as they may
be signed by our said attorneys, or any of them, to said Registration Statement
and any and all amendments thereto.

Pursuant to the Securities Act of 1933, as amended, this Registration
Statement has been signed by the following persons in the capacities indicated
on December, 2000.

Signature Title
-------------- ----------

/s/ Edward W. Sample Chairman of the Board and Chief Executive Officer
Edward W. Sample (Principal Executive Officer)

/s/ Richard S. Berger Chief Financial Officer, Secretary and Director
Richard S. Berger (Principal Financial and Accounting Officer)

/s/ Michael Steele Director
Michael Steele

<PAGE>

/s/ Joseph H. Sherrill, Jr. Director
Joseph H. Sherrill, Jr.

/s/ W. Barger Tygart Director
W. Barger Tygart

7
<PAGE>

PIRANHA, INC. EXHIBIT INDEX

Exhibit Number Description
-------------- -----------

3.1. Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 of the Registrant's Form SB-2, File No.
33-62762).

3.2. Amendment to Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 of the Registrant's
Form 8-K, filed March 15, 2000).

3.3. Amended and Restated By-laws of the Registrant (incorporated by
reference to Exhibit 3.4 of the Registrant's Form SB-2, File No.
33-62762).

4. Form of Common Share certificate (incorporated by reference to
Exhibit 4 of the Registrant's Form SB-2, Registration No.
333-41042).

5. Opinion of Bruce P. Golden & Associates (including consent).

10.1. Merger Agreement with IBP and Classics Acquisition Corp.,
(incorporated by reference to Exhibit 10.1 of the Registrant's
Form 8-K filed March 15, 2000).

10.2. Acquisition of Zideo.com, Inc. (incorporated by reference to the
Registrant's Schedule 14C filed February 9, 2000).

10.3. The Piranha, Inc. 2000 Stock Incentive Plan (incorporated by
reference to the Registrant's Schedule 14C Appendix filed May 4,
2000).

10.4. The Piranha, Inc. Stock Option Plan for Non-Employee Directors
(incorporated by reference to the Registrant's Schedule 14C
Appendix filed May 4, 2000).

10.5. Employment Contract for Edward W. Sample (incorporated by
reference to Exhibit 10.5 of the Registrant's Form SB-2,
Registration No. 333-41042).

8
<PAGE>

10.6. Employment Contract for R. Don Ashley(incorporated by reference
to Exhibit 10.6 of the Registrant's Form SB-2, Registration No.
333-41042).

10.7. Employment Contract for Carey Lotzer (incorporated by reference
to Exhibit 10.7 of the Registrant's Form SB-2, Registration No.
333-41042).

10.8. Employment Contract for Michael Steele (incorporated by reference
to Exhibit 10.8 of the Registrant's Form SB-2, Registration No.
333-41042).

10.9. Employment Contract for Larry Greybill (incorporated by reference
to Exhibit 10.9 of the Registrant's Form SB-2, Registration No.
333-41042).

10.10 Lease Agreement for 2425 N. Central Expressway, Richardson, Texas
(incorporated by reference to Exhibit 10.10 of the Registrant's
Form SB-2, Registration No. 333-41042).

10.11 Lease Agreement for 33 N. LaSalle, Chicago, Illinois
(incorporated by reference to Exhibit 10.11 of the Registrant's
Form SB-2, Registration No. 333-41042).

10.12 Lease Agreement for 4400 Route 9 South, Freehold, New Jersey
(incorporated by reference to Exhibit 10.12 of the Registrant's
Form SB-2, Registration No. 333-41042).

10.13 Lease Agreement for 5250 Northland Drive, Grand Rapids, Michigan
(incorporated by reference to Exhibit 10.13 of the Registrant's
Form SB-2, Registration No. 333-41042).

10.14 Lease Agreement for 23 Jacob Street, London, England
(incorporated by reference to Exhibit 10.14 of the Registrant's
Form SB-2, Registration No. 333-41042).

10.15 Lease Agreement for 6060 N. Central Expressway, Dallas, Texas
(incorporated by reference to Exhibit 10.15 of the Registrant's
Form SB-2, Registration No. 333-41042).

10.16 Agreement by and among Piranha, Inc., Xiaolin Wu, Howard Wu,
Linlin Zhao and Comsight Imaging Inc. dated September 26, 2000.

10.17. Employment Contract for Xiaolin Wu.

9
<PAGE>

10.18 Agreement and Plan of Reorganization By and Between Piranha, Inc.
and JJT, Inc. dated November 1,2000.

21. Subsidiaries of the Registrant.

23.1. Consent of Bruce P. Golden & Associates (included in Exhibit 5).

23.2. Consent of Feldman Sherb & Co., P.C., Certified Puiblic
Accountants.

24. Power of Attorney (included on Signature Page).

27. Financial Statement Schedule

<PAGE>

Exhibit 5

Bruce P. Golden & Associates

4137 N. Hermitage Avenue

Chicago, Illinois 60613

December 14, 2000

Piranha, Inc.
2425 N. Central Expressway
Richardson, Texas 75080

Re: 75,862 Shares of Common Stock, par value $.001 per share

Gentlemen:

We have acted as counsel for Piranha, Inc. (the "Company") in connection with
its Registration Statement on Form SB-2 (the "Registration Statement") including
as part thereof a prospectus ("Prospectus") for the registration under the
Securities Act of 1933, as amended (the "Act"), of 75,862 shares of Company
Common Stock, par value $.001 per share (the "Shares"), which are proposed to be
sold from time to time by a stockholder of the Company.

We have examined or considered:

1. The Company's Certificate of Incorporation, as amended.
2. The Company's Amended and Restated By-Laws.
3. Resolutions duly adopted by the Board of Directors of the Company.

In addition to the examination outlined above, we have conferred with officers
of the Company and have ascertained or verified to our satisfaction such
additional facts as we deemed necessary for the purposes of this opinion.

Based on the foregoing, we are of the opinion that the Shares have been validly
issued, and are fully paid and nonassessable.

We hereby consent to the use of this opinion as an Exhibit to the Registration
Statement and to the reference to us under "Legal Matters" in the Prospectus
forming part of the Registration Statement. In giving this consent, we do not
admit that we come within the category of persons whose consent is required
under Section 7 of the Act or the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.

Very truly yours,
/s/ Bruce P. Golden & Associates
Bruce P. Golden & Associates

<PAGE>

Exhibit 21 Subsidiaries of the Registrant

Name Jurisdiction of Incorporation

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

First Classics, Inc. Delaware

Classics Media Group, Inc. New York

IBP, Inc. Nevada

Zideo.com, Inc. Delaware

Impact Solutions, Inc. Delaware

Impact Solutions and Science Limited United Kingdom

Comsight Imaging Inc. Ontario

JJT, Inc. Delaware