<PAGE>
     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 14, 1999
                                               REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------
                              WEBSTAKES.COM, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                       <C>                                       <C>
                DELAWARE                                    7311                                    13-38989
    (STATE OR OTHER JURISDICTION OF             (PRIMARY STANDARD INDUSTRIAL                     (IRS EMPLOYER
     INCORPORATION OR ORGANIZATION)             CLASSIFICATION CODE NUMBER)                   IDENTIFICATION NO.)
</TABLE>

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

                        11 WEST 19TH STREET, 10TH FLOOR
                            NEW YORK, NEW YORK 10010
                                 (212) 481-3600
              (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
       INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                            ------------------------

                                STEVEN H. KREIN
                              WEBSTAKES.COM, INC.
                        11 WEST 19TH STREET, 10TH FLOOR
                            NEW YORK, NEW YORK 10010
                                 (212) 481-3600
           (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
                   INCLUDING AREA CODE, OF AGENT FOR SERVICE)
                            ------------------------

                                   Copies to:

<TABLE>
<S>                                                             <C>
                   MICHAEL B. POLLACK, ESQ.                                          JULIE M. ALLEN, ESQ.
                     BARI S. KREIN, ESQ.                                      O'SULLIVAN GRAEV & KARABELL, LLP
                REED SMITH SHAW & MCCLAY LLP                                   30 ROCKEFELLER PLAZA, 41ST FLOOR
                    2500 ONE LIBERTY PLACE                                         NEW YORK, NEW YORK 10112
            PHILADELPHIA, PENNSYLVANIA 19103-7301                                      (212) 408-2400
                       (215) 851-8182
</TABLE>

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

     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 of
1933, check the following box. / /

     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 Securities
Act registration statement for the same offering. / / ____________
     If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
                            ------------------------

                      CALCULATION OF THE REGISTRATION FEE

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                            PROPOSED
                        TITLE OF EACH CLASS                              MAXIMUM AGGREGATE          AMOUNT OF
                  OF SECURITIES TO BE REGISTERED                      OFFERING PRICE(1),(2)      REGISTRATION FEE
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                        <C>
Common Stock, $0.01 par value per share............................        $57,500,000               $15,985
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Includes shares that the Underwriters have the option to purchase from the
    Company solely to cover over-allotments, if any.

(2) Estimated pursuant to Rule 457(o) under the Securities Act of 1933, as
    amended, solely for the purpose of computing the amount of the registration
    fee.
                            ------------------------

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


<PAGE>

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

                   SUBJECT TO COMPLETION, DATED JUNE 14, 1999

PROSPECTUS

                                                   SHARES
                              WEBSTAKES.COM, INC.
                                  COMMON STOCK

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

This is an initial public offering of our common stock. We are selling all of
the              shares offered under this prospectus. We anticipate that the
initial public offering price will be between $      and $   per share.

We will apply to have our common stock approved for quotation on the Nasdaq
National Market under the symbol "IWIN."

SEE "RISK FACTORS" BEGINNING ON PAGE 5 TO READ ABOUT RISKS THAT YOU SHOULD
CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.

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

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

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

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

The underwriters may purchase up to an additional                 shares from us
at the initial public offering price less the underwriting discount to cover
over-allotments.

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

BEAR, STEARNS & CO. INC.
                      ING BARING FURMAN SELZ LLC
                                           THOMAS WEISEL PARTNERS LLC
                                                         WIT CAPITAL CORPORATION

                 THE DATE OF THIS PROSPECTUS IS        , 1999.


<PAGE>
                               PROSPECTUS SUMMARY

     This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus carefully, especially the risks of
investing in our common stock discussed under "Risk Factors," before investing
in our common stock.

OUR BUSINESS

     Webstakes.com, Inc. is a leading online sweepstakes promotion company. We
integrate sweepstakes, contests and similar promotional events with direct
marketing tools and a proprietary membership database of more than 1.3 million
consumers. We make our promotions available without charge to consumers through
our web site, webstakes.com, our clients' web sites and consumers' personal home
pages. We generate revenues through the sale of promotion sponsorships and
services that allow our clients to cost-effectively identify and communicate
with potential customers, increase sales and foster brand awareness. We are
building on our sweepstakes expertise to provide an integrated, comprehensive
online promotion solution. We have recently entered into strategic relationships
with Excite and NBC, which we believe will increase awareness of the
Webstakes.com brand and attract additional visitors to webstakes.com. Some of
our recent clients include CBS Sportsline, Citibank, CDW, Disney, MapQuest.com,
PC Flowers & Gifts.com, PC World and ShopNow.com.

     We believe that our promotions are informative and entertaining, creating
an engaging online experience for consumers. Our sweepstakes run continuously,
providing consumers with the opportunity to enter each day to win more than 100
prizes with retail values typically between $150 and $400. Since 1996, consumers
have entered our sweepstakes more than 44 million times and we have awarded over
5,500 prizes with a total retail value of more than $1,000,000. Once consumers
enter any of our sweepstakes by providing required demographic information, they
become lifetime Webstakes.com members and can enter additional sweepstakes
without having to resubmit this information. We believe that eliminating
requests for redundant information increases the likelihood that consumers will
participate more often in our promotions. We currently have approximately
1.3 million members and, over the last three months, we have added new members
at the rate of over 1,100 per day.

     Our proprietary technology enables us to present tailored direct marketing
offers to our members based upon their demographic profiles each time they enter
one of our promotions. We respect the privacy rights of our members. Our privacy
policy precludes the sale of any individual member information collected from
promotions hosted on webstakes.com without the consent of our members. Members
may choose to receive our weekly electronic newsletter, the Webstakes Update.
Our members control whether and how often they receive email from our clients or
us.

     We believe that the Internet is a compelling medium for direct marketing
promotions. The Internet enables marketers to collect extensive demographic
information and feedback from consumers and to use this information to tailor
and quickly adjust campaigns. According to Forrester Research, Inc., online
promotions generate three to five times the response rates of traditional
promotions. Forrester also reports that 88% of retailers and marketers surveyed
found that online promotional efforts have met or exceeded their expectations
and 80% of those surveyed planned to increase their online promotional spending
in the next year. Based on this survey, Forrester estimates that 50% to 70% of
total Internet marketing budgets will be spent on promotions over the next five
years, compared to less than 15% of Internet marketing budgets currently being
spent on promotions.

OUR STRATEGY

     Our objective is to be the leading full-service online promotion company
and to make webstakes.com the leading Internet promotion destination. Key
elements of our strategy include:

          o building on our sweepstakes expertise to provide an integrated,
            comprehensive online promotion solution, including points and
            loyalty programs, coupons, samples, premium incentives and instant
            win games;

          o growing our membership base;

          o building strong brand awareness through online and traditional
            marketing campaigns;

          o enhancing our database of information about our members; and

                                       1
<PAGE>
          o expanding internationally.

RECENT DEVELOPMENTS

     In March 1999 we entered into a strategic relationship with NBC Multimedia,
Inc. Under this relationship, we have the right to be the exclusive third-party
provider of online sweepstakes and contests for the NBC.com and NBC Interactive
Neighborhood web sites. During the term of the agreement, Webstakes-managed
promotions will be prominently displayed on the NBC.com home page and the NBC
Interactive Neighborhood menu. We also entered into an agreement with NBC to
advertise on national television.

     In June 1999, we entered into a strategic relationship with Excite, Inc., a
wholly owned subsidiary of At Home Corporation, allowing us to market our
promotions on Excite.com. Given the similarity between the topical channels of
Excite and webstakes.com, we believe this relationship will enhance our
visibility and membership base.

     In connection with the Excite relationship, we also entered into a services
agreement with its subsidiary, MatchLogic. Under this agreement, MatchLogic will
provide services to us which will enable us to more effectively conduct our
promotions and analyze information regarding webstakes.com visitors and members.

     In June 1999, we redeemed all outstanding shares of class A mandatorily
redeemable convertible preferred stock and 1,714,608 shares of common stock for
an aggregate amount of $24.0 million. To finance the redemption and to provide
working capital, we issued shares of class B mandatorily redeemable convertible
preferred stock to a group of investors, including, among others, At Home
Corporation, XL Ventures, a subsidiary of Big Flower Holdings and Travelers
Insurance Company, for an aggregate purchase price of $40.0 million. At the same
time as the closing of this offering, the outstanding class B mandatorily
convertible redeemable preferred stock will automatically convert into 6,666,667
shares of common stock. The class A mandatorily redeemable convertible preferred
stock and the class B mandatorily redeemable convertible preferred stock will be
unavailable for reissue.

CORPORATE INFORMATION

     We were incorporated in New York on January 8, 1996 as Webstakes, Inc. We
reincorporated in Delaware as Netstakes, Inc. on June 5, 1996 and we continued
doing business under the name Webstakes. We changed our name to Webstakes.com,
Inc. on June 11, 1999. Our principal executive offices are at 11 West 19th
Street, 10th Floor, New York, New York 10011. Our telephone number at that
location is (212) 242-8800. INFORMATION CONTAINED ON OUR WEB SITE DOES NOT
CONSTITUTE PART OF THIS PROSPECTUS.

                                  THE OFFERING

<TABLE>
<S>                                                       <C>
Common stock offered....................................  shares
Common stock outstanding after this offering............  shares
Use of proceeds.........................................  We intend to use a portion of the net proceeds to make
                                                          aggregate payments of $15.5 million to Excite and
                                                          MatchLogic, and the balance of the net proceeds for
                                                          working capital and general corporate purposes. See "Use
                                                          of Proceeds."
Proposed Nasdaq National Market symbol..................  IWIN
</TABLE>

     You should be aware that we may issue additional shares of our common stock
after this offering upon the exercise of options. If and when we issue these
shares or any other shares, the percentage of common stock that you own will be
diluted. The following is a summary of the additional shares of common stock
that we may issue:

          o 493,385 shares issuable upon the exercise of options outstanding at
            a weighted average exercise price of $7.43;

          o 64,000 shares issuable upon the exercise of options to be granted to
            our non-employee directors at the closing of this offering at an
            exercise price equal to the initial public offering price;

          o 1,892,615 additional shares available for issuance under our equity
            compensation plans; and

          o 221,683 shares issuable upon the exercise of warrants outstanding at
            an exercise price of $6.00.

                                       2
<PAGE>
     Unless otherwise indicated, all pro forma information in this prospectus
gives effect to:

          o the repurchase by us of 50,000 shares of class A mandatorily
            redeemable convertible preferred stock and 1,714,608 shares of
            common stock in June 1999;

          o the issuance in June 1999 of 6,666,667 shares of class B mandatorily
            redeemable convertible preferred stock, and the conversion of these
            shares into common stock at the same time as the closing of this
            offering;

          o the issuance in March and June 1999 of warrants to purchase
            221,683 shares of common stock at an exercise price of $6.00 per
            share in exchange for financial advisory services by a non-employee
            consultant; and

          o the issuance upon the closing of this offering of options to
            purchase 64,000 shares of common stock at an exercise price equal to
            the initial public offering price to non-employee directors.

     In addition, unless otherwise indicated, all information in this prospectus
assumes that the underwriters do not exercise their option to purchase
           additional shares from us after the closing of this offering.

                                       3
<PAGE>
                             SUMMARY FINANCIAL DATA

     The following table sets forth our summary financial data. This table does
not present all of our financial information. You should read this information
together with our financial statements and the notes to those statements
beginning on page F-1 of this prospectus and the information under "Selected
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

<TABLE>
<CAPTION>
                                                                                              THREE MONTHS ENDED
                                          JANUARY 8, 1996       YEAR ENDED DECEMBER 31,            MARCH 31,
                                          (INCEPTION) TO        -----------------------     -----------------------
                                          DECEMBER 31, 1996        1997         1998           1998         1999
                                          -----------------     ----------   ----------     ----------   ----------
                                                       (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                       <C>                   <C>          <C>            <C>          <C>
STATEMENT OF OPERATIONS DATA:
  Revenues...............................    $        80        $    1,618   $    4,799     $    1,067   $    1,319
  Loss from operations...................           (213)             (190)      (1,338)           (52)        (898)
  Net loss...............................           (221)             (227)      (1,414)           (62)        (884)
  Basic and diluted net loss per
     share ..............................    $     (0.06)       $    (0.05)  $    (0.27)    $    (0.01)  $    (0.15)
  Weighted average shares of common stock
     used in computing basic and diluted
     net loss per share..................      3,999,576         4,278,916    5,181,356      4,999,176    5,714,184
  Pro forma basic and diluted net loss
     per share...........................             --                --   $                      --   $
  Shares of common stock used in
     computing pro forma basic and
     diluted net loss per share..........             --                --                          --
</TABLE>

     The following table is a summary of our balance sheet at March 31, 1999.
The pro forma as adjusted column gives effect to the sale of the
shares of common stock in this offering after deducting underwriting discounts
and commissions and estimated offering expenses, assuming an initial public
offering price of $      per share.

<TABLE>
<CAPTION>
                                                                                    AS OF MARCH 31, 1999
                                                                        --------------------------------------------
                                                                                                        PRO FORMA AS
                                                                          ACTUAL       PRO FORMA         ADJUSTED
                                                                        ----------    --------------    ------------
                                                                                       (IN THOUSANDS)
<S>                                                                     <C>           <C>               <C>
BALANCE SHEET DATA:
  Cash...............................................................   $    2,813
  Working capital....................................................        2,699
  Total assets.......................................................        4,237
  Notes payable (excluding current portion)..........................           50
  Class A mandatorily redeemable convertible preferred stock.........        5,000
  Total stockholders' equity (deficit)...............................       (1,615)
</TABLE>

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

     This prospectus contains forward-looking statements that are not based on
historical facts. The outcome of the events described in these forward-looking
statements is subject to risks and uncertainties. There are important factors
that could cause actual results to differ materially from those expressed or
implied by these forward-looking statements, including those discussed under
"Risk Factors" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
                            ------------------------

     Webstakes, iDialog and our logo are our trademarks. Each other trademark,
trade name or service mark appearing in this prospectus belongs to its holder.

                                       4

<PAGE>
                                  RISK FACTORS

     Any investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks, together
with the other information contained in this prospectus, before you decide to
purchase our common stock. If any of the following risks actually occur, our
business, results of operations and financial condition would likely suffer. In
this case, the market price of our common stock could decline, and you may lose
all or part of the money you paid to purchase our common stock.

RISKS RELATED TO OUR BUSINESS

OUR LIMITED OPERATING HISTORY MAKES EVALUATING OUR BUSINESS DIFFICULT.

     We were incorporated, and launched our first promotion, in January 1996.
Accordingly, we have a limited operating history upon which to evaluate our
operations and future prospects. In addition, our revenue model is evolving and
relies substantially upon the growth of promotion spending on the Internet and
our ability to become a full-service Internet promotion company. As an early
stage company in a new and rapidly evolving market, we face risks and
uncertainties relating to our ability to successfully implement our business
plan, which are described in more detail below. We may not successfully address
these risks.

WE HAVE NOT BEEN PROFITABLE, AND WE MAY NOT BECOME PROFITABLE.

     To date, we have not been profitable. We may never be profitable, or, if we
become profitable, we may be unable to sustain profitability. We expect to
continue to incur losses for the foreseeable future because we expect to
continue to spend significant resources to expand our business. Although we have
experienced revenue growth in recent periods, these growth rates may not be
sustainable or indicative of future growth. We reported a loss of $884,000 for
the three months ended March 31, 1999. As of March 31, 1999, our accumulated
deficit was approximately $2.7 million. For us to make a profit, our revenues
will need to increase sufficiently to cover our costs and expenses.

A SIGNIFICANT PORTION OF OUR REVENUES HAVE BEEN DERIVED FROM BARTER
TRANSACTIONS, AND WE MAY NOT BE SUCCESSFUL IN GENERATING SUFFICIENT CASH
REVENUES TO COVER OUR COSTS AND EXPENSES IN THE FUTURE.

     For the year ended December 31, 1998, approximately 42% of our revenues
were derived from the trading of promotion services for advertising, prizes and
visitors to webstakes.com without the exchange of any cash payments, and for the
three months ended March 31, 1999, approximately 33% of our revenues were
derived from these barter agreements. We expect that barter agreements will
continue to account for a significant portion of our revenues in the future.

OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE, WHICH MAY CAUSE THE PRICE OF OUR
COMMON STOCK TO DECREASE.

     We expect our operating results to vary significantly from quarter to
quarter due to many factors, some of which are beyond our control. It is
possible that in future periods our results of operations will be below the
expectations of public market analysts and investors. In this event, the price
of our common stock would likely decrease. You should not rely on
quarter-to-quarter comparisons of our results of operations as an indication of
future performance. Factors that may affect our quarterly results include:

          o demand for our promotion services;

          o our ability to attract visitors to our promotions;

          o the amount and timing of our expenses;

          o the length of our sales cycle;

          o the size and timing of new agreements with our clients;

          o our ability to expand our sales force;

          o changes in rates paid for promotion services; and

          o the announcement of new or enhanced web sites and services by us or
            our competitors.

                                       5
<PAGE>
     These factors, together with the rapidly evolving market in which we
operate, make it difficult to forecast our revenues accurately. Our operating
expenses are based on our expectations of future revenues and are relatively
fixed in the short term. Accordingly, we may not be able to adjust our spending
in a timely manner to compensate for any unexpected revenue shortfall. If we
have a shortfall in revenues in relation to our expenses, or if our expenses
precede expected revenues, then our results of operations and financial
condition would be materially adversely affected.

OUR BUSINESS MAY BE AFFECTED BY SEASONAL FLUCTUATIONS IN PROMOTION SPENDING AND
INTERNET USE.

     Our limited operating history and rapid growth make it difficult to assess
the impact of seasonal factors on our business. We expect our business to be
subject to seasonal fluctuations that reflect the seasonality in traditional
promotion spending and Internet use. Traditional promotion spending tends to be
highest in the second and fourth quarters of each calendar year. Our experience
is that Internet use is generally lower during the summer and year-end vacation
and holiday periods. Because the market for Internet promotion services is
emerging, additional seasonal patterns may develop in the future as the market
matures.

THE DEMAND FOR OUR INTERNET PROMOTION SERVICES IS UNCERTAIN.

     The market for Internet promotion services has only recently begun to
develop and is evolving rapidly. Most businesses have little or no experience
using the Internet for promotion purposes. As a result, many businesses have
allocated only a limited portion of their marketing budgets to Internet
promotion spending. Due to these factors, it is difficult to predict promotion
spending on the Internet in general, or demand for our promotion services in
particular. Demand for our promotion services is subject to a high level of
uncertainty and is dependent upon many factors, including:

          o recognition of the value of Internet promotions by businesses;

          o the ability of our clients to reliably measure the effectiveness of
            Internet promotions;

          o the ability of Internet promotions to attract consumers; and

          o the ability of our clients to sell their products and services to
            the consumers participating in our promotions.

     The market for Internet promotion services may not continue to grow or be
sustainable. If Internet promotion services do not achieve market acceptance,
our business, results of operations and financial condition would be materially
adversely affected.

WE MAY NOT BE ABLE TO CONTINUE TO ATTRACT VISITORS TO WEBSTAKES.COM AND THE WEB
SITES OF OUR CLIENTS.

     Our future success depends upon our ability to continue to attract and
retain visitors with demographic characteristics desired by our clients to
webstakes.com and the web sites of our clients. If we are unable to attract
these visitors, the effectiveness of our promotions would be reduced, and our
business, results of operations and financial condition would be materially
adversely affected. In addition, we guarantee our clients that visitors will
view their pages and/or link to their web sites a minimum number of times. If we
are unable to meet these minimum guarantees, we will be required to defer
recognition of the related revenues until the guaranteed minimum is achieved. In
addition, we will be required to provide services to the client for free until
we are able to meet our guaranteed minimum, which may reduce our promotion
inventory in future periods.

WE MAY BE UNSUCCESSFUL IN LEVERAGING OUR SWEEPSTAKES EXPERTISE TO BECOME A
FULL-SERVICE ONLINE PROMOTION COMPANY.

     To date, substantially all of our revenue has been derived from conducting
sweepstakes on the Internet. Our growth is largely dependent upon our ability to
leverage our sweepstakes expertise to become a full-service Internet promotion
company. In the event that we are unable to successfully implement our growth
strategy, our business, results of operations and financial condition would be
materially adversely affected.

                                       6
<PAGE>
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY IN OUR MARKET.

     The market for Internet promotion services is intensely competitive. We
expect competition in our market to continue to intensify as a result of
increasing market size, greater visibility of the market opportunity for
Internet promotion services and minimal barriers to entry. Industry
consolidation may also increase competition. We compete with many types of
companies, including both online and offline promotion companies, large Internet
publishers, search engine and other Internet portal companies, a variety of
Internet-based advertising networks and other companies that facilitate the
marketing of products and services on the Internet. Many of our existing
competitors, as well as a number of potential new competitors, have longer
operating histories, greater name recognition, larger client bases and
significantly greater financial, technical and marketing resources than we do.
This may allow them to compete more effectively and be more responsive to
industry and technological change than us. We may not be able to compete
successfully and competitive pressures may materially adversely affect our
business, results of operations and financial condition.

     Our ability to compete depends on many factors both within and beyond our
control. These factors include:

          o the success of the sales and marketing efforts of us and our
            competitors;

          o the ease of use, performance, price and reliability of promotions
            offered by us and our competitors; and

          o the timing and market acceptance of new promotion services developed
            by us and our competitors.

WE MAY BE UNABLE TO RETAIN CLIENTS.

     Our agreements with clients generally have terms ranging from one to
12 months. In addition, substantially all of our agreements permit our clients
to terminate their relationships with us on relatively short notice. Our clients
may not remain clients for the full term of their agreements or renew such
agreements when they expire.

OUR BRAND MAY NOT ACHIEVE THE RECOGNITION NECESSARY TO INCREASE OUR MEMBERSHIP
BASE AND ATTRACT CLIENTS.

     To be successful, we must continue to build our corporate brand identity.
We believe that the importance of brand recognition will increase as more
companies enter our market. We may not be successful in our marketing efforts or
in increasing our brand awareness.

SWEEPSTAKES REGULATIONS MAY MATERIALLY ADVERSELY AFFECT OUR BUSINESS.

     The sweepstakes industry is subject to extensive regulation on the local,
state and national levels, regardless of whether promotions are conducted online
or offline. Congress and many state attorneys general and legislatures recently
have announced regulatory initiatives aimed at the sweepstakes industry. The
publicity generated by these initiatives may adversely affect demand for our
services. Although we believe that additional laws and regulations are likely to
be enacted, we cannot predict what they will be. Any new sweepstakes regulations
may have a material adverse affect on our business, results of operations and
financial condition. Additionally, the Internet is a new medium for sweepstakes,
and it is difficult to predict how existing laws and regulations will be
interpreted. See "Business -- Government Regulation and Legal Uncertainties."

WE MAY NOT EFFECTIVELY MANAGE OUR GROWTH.

     In order to successfully implement our business plan, we must grow
significantly. Our anticipated future growth will likely place a significant
strain on our management resources and systems. To manage our growth
effectively, we will need to continue to improve our operational, financial and
managerial controls and reporting systems and procedures, and we will need to
continue to expand, train and manage our

                                       7
<PAGE>
workforce. If we do not manage our growth effectively, our business, results of
operations and financial condition would be materially adversely affected.

WE MAY BE UNABLE TO INCREASE OUR SALES FORCE, WHICH WOULD HAVE A MATERIAL
ADVERSE EFFECT ON THE GROWTH OF OUR BUSINESS.

     We need to substantially expand our sales force to increase market
awareness and sales of our promotion services. Competition for qualified sales
personnel is intense, and we might not be able to hire the quality and number of
sales personnel we require. New hires require extensive training and typically
take several months to achieve productivity. If we fail to effectively increase
our sales force, our business, results of operations and financial condition
would be materially adversely affected.

WE DEPEND ON OUR KEY PERSONNEL.

     Our future success is substantially dependent upon the continued service of
our founders, Steven H. Krein, Chief Executive Officer, and Daniel J. Feldman,
President, and other senior officers. The loss of the services of any of our
executive officers could have a material adverse affect on our business. Many of
our executive officers, including Christopher F. Bragas, our Chief Financial
Officer, have only been employed by us for a short time. We do not currently
have "key person" life insurance policies on any of our employees. Competition
for senior management is intense, and we may not be successful in attracting and
retaining personnel.

WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY RIGHTS, AND WE MAY INFRINGE THE
PROPRIETARY RIGHTS OF OTHERS.

     Third parties may infringe or misappropriate our patents, trademarks or
other proprietary rights, which could have a material adverse effect on our
business, results of operations or financial condition. The actions we take to
protect our trademarks and other proprietary rights may not be adequate. In
addition, the validity, enforceability and scope of protection of proprietary
rights in Internet-related industries is uncertain and still evolving.

     Third parties may assert infringement claims against us. Any claims and any
resulting litigation, should they occur, could subject us to significant
liability for damages. In addition, even if we prevail, litigation could be
time-consuming and expensive to defend, and could result in the diversion of our
time and attention. Any claims from third parties may also result in limitations
on our ability to use the intellectual property subject to these claims unless
we are able to enter into contractual arrangements with the third parties making
these claims, which arrangements may not be available on commercially reasonable
terms.

POTENTIAL ACQUISITIONS INVOLVE CERTAIN RISKS.

     We have no experience in making acquisitions or investments. If we make an
acquisition, we could have difficulty in assimilating the acquired company's
personnel and operations. In addition, the key personnel of the acquired
business may not continue to work for us. These difficulties could disrupt our
ongoing business, distract our management and employees, increase our expenses
and adversely affect our results of operations. Any acquisitions we make may not
be successful.

INTERNATIONAL EXPANSION INVOLVES CERTAIN RISKS.

     Our growth strategy depends, in part, on international expansion. We may
not be successful in expanding our operations internationally. We currently have
no experience in developing localized versions of webstakes.com or in marketing
or selling our promotion services internationally. International operations are
subject to risks that may materially adversely affect our business, results of
operations and financial condition. In particular, privacy regulations in some
other countries, including the European Union, are more stringent than in the
United States. These regulations may prohibit the collection of demographic data
on

                                       8
<PAGE>
visitors to our promotions, which would have a material adverse affect on our
business. Other risks of international operations are:

          o regulatory requirements;

          o reduced protection for intellectual property rights in some
            countries;

          o difficulties and costs of staffing and managing foreign operations;

          o political and economic instability; and

          o fluctuations in currency exchange rates.

WE FACE A NUMBER OF UNKNOWN RISKS ASSOCIATED WITH THE YEAR 2000 PROBLEM, ANY OF
WHICH MAY HARM OUR BUSINESS.

     The failure of our internal systems, or any material third-party systems,
to be Year 2000 compliant would have a material adverse effect on our business,
results of operations and financial condition. Although Frontier GlobalCenter,
Inc., our production server provider, has represented to us that its internal
systems are Year 2000 compliant, their failure to be compliant would adversely
affect our ability to deliver our service. We have not yet devised a Year 2000
contingency plan. Please see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Impact of the Year 2000."

WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS FOR PRODUCTS GIVEN AS PRIZES IN
OUR PROMOTIONS AND FOR PRODUCTS SOLD BY OUR CLIENTS OVER THE INTERNET.

     Consumers may sue us if any of the products we give as prizes are
defective, fail to perform properly or injure the user. We may also be sued by
consumers who purchase products that are offered or marketed through
webstakes.com. Although our agreements with our clients typically contain
provisions intended to limit our exposure to these product liability claims,
these limitations may not completely eliminate our liability. Liability claims
could require us to spend significant time and money in litigation or pay
significant damages. As a result, any of these claims, whether or not
successful, could have a material adverse effect on our business, results of
operations and financial condition.

RISKS RELATED TO THE INTERNET

PRIVACY AND SECURITY CONCERNS MAY CAUSE CONSUMERS NOT TO PARTICIPATE IN OUR
PROMOTIONS, WHICH WOULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

     An important feature of the service we provide our clients is our ability
to develop and maintain demographic and other information about consumers
participating in our promotions. Privacy and other security concerns may cause
consumers to resist providing us with personal data, which would reduce the
value of our service. Moreover, privacy and security concerns may inhibit
consumer acceptance of the Internet as a means of commerce. If privacy and other
security concerns of consumers are not adequately addressed, our business would
be materially adversely affected.

OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION WOULD BE MATERIALLY
ADVERSELY AFFECTED IF INTERNET USAGE DOES NOT GROW.

     We depend on continued growth in the use of the Internet by businesses and
consumers. If electronic commerce does not grow or grows more slowly than
expected, the use of the Internet by businesses may decline or grow more slowly
than anticipated. In addition, the acceptance and growth in the use of the
Internet by consumers could be negatively affected by consumer concerns about
the security of electronic commerce transactions and privacy. Even if Internet
usage grows, the Internet infrastructure may not be able to support the demands
placed on it and its performance or reliability may decline.

                                       9
<PAGE>
WE MAY BE UNABLE TO RESPOND TO TECHNOLOGICAL CHANGE EFFECTIVELY.

     Our industry is characterized by rapid technological change, frequent new
service introductions, changing consumer demands and evolving industry standards
and practices. Our inability to anticipate and effectively respond to these
changes on a timely basis would materially adversely affect our business,
results of operations and financial condition. Our future success will depend,
in part, on our ability to cost-effectively adapt to rapidly changing
technologies, to enhance existing services and to develop and introduce a
variety of new services to address changing demands of consumers and our clients
on a timely basis.

SYSTEM FAILURES MAY ADVERSELY AFFECT OUR BUSINESS.

     Our business depends on the efficient and uninterrupted operation of our
computer and communications systems. Any system failure, including network,
software or hardware failure, that causes an interruption in our service or
decreases the responsiveness of webstakes.com or the web sites of our clients
could materially adversely affect our business. webstakes.com could also be
affected by computer viruses, electronic break-ins or other similar disruptions.
Our insurance policies have low coverage limits and therefore our insurance may
not adequately compensate us for any losses that may occur due to any
interruptions in our service.

     In February 1999, we entered into an Internet hosting agreement with
Frontier GlobalCenter, Inc. to maintain all of our production servers at
Frontier's Manhattan Data Center. Our operations depend on Frontier's ability to
protect its own systems and our systems against damage from fire, power loss,
water, telecommunications failures, vandalism and other malicious acts, and
similar unexpected adverse events. Any disruption in the Internet access
provided by Frontier could have a material adverse effect on our business,
results of operations and financial condition.

     Visitors to our web site depend on their Internet service providers and
other web site operators for access to promotions on webstakes.com and on the
web sites of our clients. Each of these providers has experienced significant
outages in the past, and could experience outages, delays and other difficulties
due to system failures unrelated to our systems. The inability of a substantial
number of Internet users to reach our promotions due to these outages could have
a material adverse effect on our business, results of operations and financial
condition.

LAWS AND REGULATIONS PERTAINING TO THE INTERNET MAY ADVERSELY AFFECT OUR
BUSINESS.

     There are an increasing number of laws and regulations pertaining to the
Internet. These laws and/or regulations may relate to liability for information
retrieved from or transmitted over the Internet, online content regulation, user
privacy, taxation and the quality of products and services. Moreover, the
applicability to the Internet of existing laws governing intellectual property
ownership and infringement, copyright, trademark, trade secret, obscenity,
libel, employment, personal privacy and other issues is uncertain and
developing. Any new law or regulation pertaining to the Internet, or the
application or interpretation of existing laws, could decrease the demand for
our promotion services, increase our cost of doing business or otherwise have a
material adverse effect on our business, results of operations and financial
condition. Please see "Business--Government Regulation and Legal Uncertainties."

RISKS RELATED TO THIS OFFERING

THIS OFFERING WILL BENEFIT OUR CURRENT STOCKHOLDERS.

     Our current stockholders, including members of management, will benefit
from this offering. This offering will result in the creation of a public market
for our common stock, which will enable existing stockholders to liquidate their
investments. Upon the closing of this offering, the unrealized appreciation in
the value of the common stock held by existing stockholders will be $       ,
assuming an initial public offering price of $        per share.

                                       10
<PAGE>
AFTER THIS OFFERING, OUR OFFICERS AND DIRECTORS MAY STILL CONTROL US.

     Our executive officers and directors will, in the aggregate, beneficially
own approximately    % of the common stock following this offering. These
stockholders may be able to effectively exercise control over all matters
requiring approval by our stockholders, including the election of directors and
approval of significant corporate transactions. This concentration of ownership
may also have the effect of delaying or preventing a change in control of us,
which could have a material adverse effect on our stock price.

WE MAY REQUIRE ADDITIONAL FINANCING.

     We may need to raise additional funds in the future in order to fund more
aggressive brand promotion or more rapid expansion, to develop new or enhanced
services, to respond to competitive pressures or to make acquisitions.
Additional financing may not be available on terms favorable to us, and may not
be available at all. If adequate funds are not available on acceptable terms, we
may be unable to fund our expansion, successfully promote our brand, take
advantage of acquisition opportunities, develop or enhance services or respond
to competitive pressures, any of which could have a material adverse effect on
our business, results of operations and financial condition. If additional funds
are raised by our issuing equity securities, stockholders may experience
dilution of their ownership interest and the newly issued securities may have
rights superior to those of the common stock. If additional funds are raised by
our issuing debt, we may be subject to limitations on our operations, including
limitations on the payment of dividends. Please see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."

FUTURE SALES OF OUR COMMON STOCK BY OUR EXISTING STOCKHOLDERS MAY ADVERSELY
AFFECT THE MARKET PRICE OF OUR COMMON STOCK.

     The market price of our common stock could decline as a result of sales of
shares of common stock by our existing stockholders after this offering, or the
perception that these sales could occur. These sales also might make it more
difficult for us to sell equity securities in the future at a time and at a
price that we deem appropriate. Please see "Shares Eligible for Future Sale."

OUR COMMON STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE.

     There has not been a public market for our common stock. We cannot predict
the extent to which investor interest will lead to the development of a trading
market or how liquid that market might become. The initial public offering price
of the shares will be determined by negotiations between us and the
representatives of the underwriters and may not be indicative of prices that
will prevail in the trading market. The stock market has experienced significant
price and volume fluctuations and the market prices of securities of technology
companies, particularly Internet-related companies, have been highly volatile.
Investors may not be able to resell their shares at or above the initial public
offering price. 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 the company issuing the securities. This type of litigation
could result in substantial costs and a diversion of our management's attention
and resources.

                                       11

<PAGE>
                                USE OF PROCEEDS

     We estimate that the net proceeds from this offering will be approximately
$   million, or $   million if the underwriters exercise their over-allotment
option in full, assuming an initial public offering price of $     per share and
after deducting underwriting discounts and commissions and estimated expenses of
this offering.

     We will use approximately $15.5 million of the net proceeds from this
offering to make payments due to Excite and MatchLogic. Please see "Management's
Discussion and Analysis--Liquidity and Capital Resources" and "Certain
Transactions." We expect to use the balance of the net proceeds for working
capital and general corporate purposes, including advertising and marketing our
brand and expanding our sales and marketing staff. A portion of the net proceeds
may be used to acquire or invest in complementary businesses, technologies,
products or services or to invest in geographic expansion. Although we are not
contemplating any specific acquisitions at this time and no portion of the net
proceeds has been allocated for any acquisition, we evaluate acquisition
opportunities on an ongoing basis. Our management will have broad discretion in
the application of the net proceeds. Pending use, we intend to invest the net
proceeds in interest-bearing, investment-grade instruments, certificates of
deposit or direct or guaranteed obligations of the United States.

                                DIVIDEND POLICY

     We have never declared or paid any dividends on our common stock. We do not
anticipate paying any cash dividends in the foreseeable future. We currently
intend to retain future earnings, if any, to finance operations and the
expansion of our business. Any future determination to pay cash dividends will
be at the discretion of the board of directors and will be dependent upon our
financial condition, operating results, capital requirements and other factors
that the board of directors deems relevant.

                                       12
<PAGE>
                                   CAPITALIZATION

     The following table sets forth our capitalization as of March 31, 1999. Our
capitalization is presented:

          o on an actual basis;

          o on a pro forma basis; and

          o on a pro forma as adjusted basis to reflect the sale of
            shares of common stock in this offering, after deducting
            underwriting discounts and commissions and estimated offering
            expenses, assuming an initial public offering price of $     per
            share.

<TABLE>
<CAPTION>
                                                                              AS OF MARCH 31, 1999
                                                                       ----------------------------------
                                                                                              PRO FORMA
                                                                       ACTUAL    PRO FORMA    AS ADJUSTED
                                                                       ------    ---------    -----------
                                                                                 (IN THOUSANDS)
<S>                                                                    <C>       <C>          <C>
Notes payable (excluding current portion)...........................   $   50    $              $
Class A mandatorily redeemable convertible preferred stock, par
  value $100, 50,000 shares authorized; and 50,000 shares issued and
  outstanding (actual), 0 shares authorized or issued (pro forma and
  pro forma as adjusted)............................................    5,000           --           --
Stockholders' equity (deficit):
  Preferred stock, no par value, 1,000,000 shares authorized
     (actual, pro forma and pro forma as adjusted); 0 shares issued
     (actual, pro forma and pro forma as adjusted)..................
  Common stock, par value $.01, 10,000,000 shares authorized
     (actual), 50,000,000 shares authorized (pro forma and pro forma
     as adjusted); 5,714,184 shares issued and outstanding (actual);
               shares issued and outstanding (pro forma);
                 shares issued and outstanding (pro forma as
     adjusted)......................................................       57
  Additional paid-in capital........................................    1,167
  Accumulated deficit...............................................   (2,746)
  Unearned compensation.............................................      (93)
                                                                       ------    ---------      -------
     Total stockholders' equity (deficit)...........................   (1,615)
                                                                       ------    ---------      -------
       Total capitalization.........................................   $3,435    $              $
                                                                       ------    ---------      -------
                                                                       ------    ---------      -------
</TABLE>

     We expect there to be             shares of common stock outstanding after
this offering. In addition to the shares of common stock to be outstanding after
this offering, we may issue additional shares of common stock. See "Prospectus
Summary--The Offering."

                                       13
<PAGE>
                                      DILUTION

     As of March 31, 1999, our pro forma net tangible book value was
$   million, or $     per share of common stock. Pro forma "net tangible book
value" per share equals our total tangible assets minus our total liabilities,
divided by the pro forma number of shares of common stock outstanding. As of
March 31, 1999, our pro forma net tangible book value, as adjusted for the sale
of the             shares in this offering, assuming an initial public offering
price of $     per share and after deducting the underwriting discounts and
commissions and estimated offering expenses, would have been approximately
$            , or $     per share. This represents an immediate increase of
$     per share to existing stockholders and an immediate dilution of $     per
share to new investors purchasing shares in this offering. The following table
illustrates this per share dilution:

<TABLE>
<S>                                                                        <C>        <C>
Assumed initial public offering price per share.........................              $
  Pro forma net tangible book value per share as of
     March 31, 1999.....................................................   $
  Increase per share attributable to new investors......................
                                                                           -------
Net tangible book value per share after this offering...................
                                                                                      -------
Dilution per share to new investors.....................................              $
                                                                                      -------
                                                                                      -------
</TABLE>

     The following table summarizes, on a pro forma basis as of March 31, 1999,
the differences between the total consideration paid and the average price per
share paid by existing stockholders (excluding purchasers of the class B
mandatorily redeemable convertible preferred stock), purchasers of the class B
mandatorily redeemable convertible preferred stock as converted into common
stock upon the completion of this offering and new investors purchasing shares
in this offering with respect to the number of shares of common stock purchased
from us, assuming an initial public offering price of $     per share:
<TABLE>
<CAPTION>
                                                  SHARES PURCHASED                           TOTAL CONSIDERATION
                                        ------------------------------------      ------------------------------------------
                                           NUMBER             PERCENT                 AMOUNT                PERCENT
                                        ----------------    ----------------      -------------------    -------------------
<S>                                     <C>                 <C>                   <C>                    <C>
Existing stockholders (excluding
  class B purchasers)................                                  %               $                              %
Purchasers of class B mandatorily
  redeemable convertible preferred
  stock..............................
New investors........................
                                            --------             ------                ---------               -------
  Total..............................                               100%               $                           100%
                                            --------             ------                ---------               -------
                                            --------             ------                ---------               -------

<CAPTION>
                                       AVERAGE PRICE
                                       PER SHARE
                                       -------------
<S>                                     <C>
Existing stockholders (excluding
  class B purchasers)................     $
Purchasers of class B mandatorily
  redeemable convertible preferred
  stock..............................     $
New investors........................     $
  Total..............................     $
</TABLE>

     None of the foregoing tables or calculations assume that any options or
warrants outstanding as of March 31, 1999 will be exercised. New investors in
this offering will suffer further dilution to the extent that these options or
warrants are exercised. If all outstanding options and warrants were exercised
on the date of the closing of this offering, new investors purchasing shares in
this offering would suffer total dilution of $      per share.

                                       14

<PAGE>
                            SELECTED FINANCIAL DATA

     The following selected financial data should be read together with the
financial statements and the notes to those statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in this prospectus. The statement of operations data for the period
from January 8, 1996 (inception) through December 31, 1996 and for the years
ended December 31, 1997 and 1998, and the balance sheet data as of December 31,
1997 and 1998, are derived from our audited financial statements included in
this prospectus. The balance sheet data as of December 31, 1996 has been derived
from our audited financial statements not included in this prospectus. Our
historical financial statements for the three months ended March 31, 1998 and
1999 are unaudited, and in our opinion include all adjustments, consisting of
normal and recurring adjustments, necessary for a fair presentation of the
results for the unaudited period. You should not rely on interim results as
being indicative of results we may expect for the full year. Historical results
are not necessarily indicative of the results to be expected in the future.

<TABLE>
<CAPTION>
                                                                                             THREE MONTHS ENDED
                                         JANUARY 8, 1996      YEAR ENDED DECEMBER 31,            MARCH 31,
                                         (INCEPTION) TO       ------------------------    ------------------------
                                         DECEMBER 31, 1996       1997          1998          1998          1999
                                         -----------------    ----------    ----------    ----------    ----------
                                                      (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                      <C>                  <C>           <C>           <C>           <C>
STATEMENT OF OPERATIONS DATA:
  Revenues............................      $        80       $    1,618    $    4,799    $    1,067    $    1,319
  Operating expenses:
     Product development..............               59              181           549           102            13
     Selling and marketing............              125            1,091         3,619           691         1,371
     General and administrative.......              109              536         1,969           326           833
                                            -----------       ----------    ----------    ----------    ----------
          Total operating expenses....              293            1,808         6,137         1,119         2,217
                                            -----------       ----------    ----------    ----------    ----------
  Loss from operations................             (213)            (190)       (1,338)          (52)         (898)
  Other income (expense)..............               (8)             (37)          (76)          (10)           14
                                            -----------       ----------    ----------    ----------    ----------
  Net loss............................      $      (221)      $     (227)   $   (1,414)          (62)         (884)
                                            -----------       ----------    ----------    ----------    ----------
                                            -----------       ----------    ----------    ----------    ----------
  Basic and diluted net loss per
     share............................      $     (0.06)      $    (0.05)   $    (0.27)   $    (0.01)   $    (0.15)
                                            -----------       ----------    ----------    ----------    ----------
                                            -----------       ----------    ----------    ----------    ----------
  Weighted average shares of common
     stock used in computing basic and
     diluted net loss per share.......        3,999,576        4,278,916     5,181,356     4,999,176     5,714,184
                                            -----------       ----------    ----------    ----------    ----------
                                            -----------       ----------    ----------    ----------    ----------
  Pro forma basic and diluted net loss
     per share........................               --               --    $                     --    $
                                                                            ----------                  ----------
                                                                            ----------                  ----------
  Shares of common stock used in
     computing pro forma basic and
     diluted net loss per share.......               --               --                          --
                                                                            ----------                  ----------
                                                                            ----------                  ----------
</TABLE>

<TABLE>
<CAPTION>
                                                               AS OF AS OF DECEMBER 31,       AS OF MARCH 31, 1999
                                                             -----------------------------    --------------------
                                                              1996       1997       1998      ACTUAL    PRO FORMA
                                                             -------    -------    -------    ------    ----------
                                                                                (IN THOUSANDS)
<S>                                                          <C>        <C>        <C>        <C>       <C>
BALANCE SHEET DATA:
  Cash....................................................    $  24      $  85     $    18    $2,813    $
  Working capital.........................................     (249)      (149)     (1,124)    2,699
  Total assets............................................      134        476       1,196     4,237
  Notes payable (excluding current portion)...............       --         --          67        50
  Class A mandatorily redeemable convertible preferred
     stock................................................       --         --          --     5,000
  Stockholders' equity (deficit)..........................     (191)       125        (753)   (1,615)
</TABLE>

                                       15

<PAGE>
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion of our financial condition and results of
operations should be read in conjunction with the financial statements included
in this prospectus. This discussion includes forward-looking statements that
involve risks and uncertainties. Please see "Risk Factors."

OVERVIEW

     To date, substantially all of our revenues have been derived from the sale
of promotion services. We expect to derive substantially all of our revenues
from the sale of promotion services for the foreseeable future.

     Revenues from promotion services are recognized ratably in the period
during which we run the promotion, provided that no significant Webstakes.com
obligations remain and collection of the resulting receivable is reasonably
assured. Payments received from clients prior to our running their promotions
are recorded as deferred revenue and are recognized as revenue ratably as the
promotions are run. We generally guarantee a minimum number of impressions, or
times that the client's name, logo or other identifier appears in pages viewed
by visitors to webstakes.com, and/or times that our visitors are delivered to
our client's web site. To the extent that these minimum guarantees are not met,
we defer recognition of the corresponding revenues until the guaranteed levels
are achieved.

     Revenues include revenues from barter transactions in which we exchange
promotion services for advertising, prizes and visitors delivered to
webstakes.com. Revenues from these barter transactions are recorded as promotion
revenues at the lower of the estimated fair value of the goods or services
received or delivered and are recognized when we deliver the promotion services.
Barter expenses, principally advertisements, are recognized when our
advertisements are run on the reciprocal web site, which is typically in the
same period as the corresponding barter revenues are recognized. In 1998, barter
revenues were 42% of our total revenues, and for the three months ended
March 31, 1999, 33% of total revenues. In the future, we expect barter revenue
to decrease as a percentage of total revenue.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998

     Revenues.  Revenues primarily result from the sale of promotion services.
Revenues increased from approximately $1.1 million for the three months ended
March 31, 1998 to $1.3 million for the three months ended March 31, 1999. We
recorded $446,000 and $435,000 of barter revenues during these same periods,
representing approximately 42% and 33% of total revenues during those periods.
The period-to-period growth in revenues was primarily attributable to an
increase in promotion services sold.

     Product Development Expenses.  Product development expenses include the
personnel costs associated with the design and development of webstakes.com, our
promotions infrastructure and technology, as well as software licensing costs.
Product development costs were $102,000 for the three months ended March 31,
1998, or 9.6% of total revenues as compared to approximately $13,000 for the
three months ended March 31, 1999, or 1.0% of total revenues. Historically, we
expensed our product development costs as incurred. However, in the first
quarter of 1999, we began to capitalize the labor costs of improvements and
betterments to our software under Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use."
Therefore, we have capitalized $161,000 of product development expenses for the
three months ended March 31, 1999 and are amortizing these costs over three
years. We believe that timely deployment of new and enhanced promotional tools
and technology is critical to attaining our strategic objectives. Accordingly,
we intend to continue recruiting and hiring experienced product development
personnel and to make additional investments in product development.

     Sales and Marketing Expenses.  Sales and marketing expenses consist
primarily of online advertising costs, salaries and commissions of sales and
marketing personnel, public relations costs, barter expense and other marketing
expenses. Sales and marketing expenses were approximately $691,000 for the three
months

                                       16
<PAGE>
ended March 31, 1998, or 64.7% of total revenues, and approximately
$1.4 million for the three months ended March 31, 1999, or 103.9% of total
revenues. The period-to-period increase in sales and marketing expenses was
primarily attributable to the initiation of online advertising and other
promotional expenditures, as well as an increase in the number of sales and
marketing personnel and related expenses and an increase in barter expense. The
increase in barter revenue resulted in the related increase in barter expense.
We expect that sales and marketing expenses will continue to increase in
absolute dollars for the foreseeable future as we increase expenditures for
sales, marketing and brand promotion, and we hire additional sales and marketing
personnel.

     General and Administrative Expenses.  General and administrative expenses
consist primarily of salaries and related costs for general corporate functions,
including finance, accounting and facilities, and fees for professional
services. General and administrative expenses were approximately $326,000 for
the three months ended March 31, 1998, or 30.6% of total revenues, and $833,000
for the three months ended March 31, 1999, or 63.2% of total revenues. The
increase in general and administrative expenses was primarily attributable to
increased salaries and related expenses associated with hiring additional
personnel in the finance and operations departments, and increased professional
fees and facility expenses to support the growth of our operations. We expect to
incur additional general and administrative expenses as we hire additional
personnel and to incur additional costs related to the growth of our business
and operation as a public company. We expect these expenses to include
facilities expansion, directors' and officers' liability insurance, investor
relations programs and professional service fees. Accordingly, we anticipate
that general and administrative expenses will continue to increase in absolute
dollars in future periods.

     Interest, Net.  Interest income, net of expense, consists primarily of
interest earned on cash balances and the interest expense on our outstanding
debt. We incurred net interest expense of $10,000 for the three months ended
March 31, 1998 and net interest income of $14,000 for the three months ended
March 31, 1999.

     Deemed Dividend.  In June 1999, we issued 6,666,667 shares of class B
mandatorily redeemable convertible preferred stock for an aggregate purchase
price of $40.0 million, or $6.00 per share. In accordance with Emerging Issues
Task Force No. D-60 "Accounting for the Issuance of Convertible Preferred Stock
and Debt Securities with a Nondetachable Conversion Feature," the $   million
difference between the purchase price of the class B mandatorily redeemable
convertible preferred stock and the fair market value on the date of issuance
will be accounted for as a deemed dividend and amortized using the effective
interest method from the date of issuance through the date the securities are
first convertible. This will occur in the quarter in which this offering is
completed.

INCEPTION PERIOD AND YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1998

     Revenues.  Revenues were approximately $80,000 for the period from January
8, 1996 to December 31, 1996 (the "Inception Period"), $1.6 million for 1997 and
$4.8 million for 1998. We recorded no barter revenues during the Inception
Period and approximately $485,000 and $2.0 million of barter revenues during
1997 and 1998, representing approximately 30% and 42% of total revenues during
those periods. The period-to-period growth in revenues was primarily
attributable to an increase in promotion services sold.

     Product Development Expenses.  Product development expenses were
approximately $59,000 for the Inception Period, or 74.2% of total revenues,
$181,000 for 1997, or 11.2% of total revenues, and $549,000 for 1998, or 11.4%
of total revenues. The increase in these expenses was primarily attributable to
increased staffing levels required to support the development and enhancement of
webstakes.com and related back-office systems.

     Sales and Marketing Expenses.  Sales and marketing expenses were
approximately $125,000 for the Inception Period, or 156.8% of total revenues,
$1.1 million for 1997, or 67.4% of total revenues, and $3.6 million for 1998, or
75.4% of total revenues. The period-to-period increases in sales and marketing
expenses were primarily attributable to the increase in barter expense, the
initiation of online advertising and other promotional expenditures, as well as
an increase in the number of sales and marketing personnel and related expenses.

                                       17
<PAGE>
     General and Administrative Expenses.  General and administrative expenses
were approximately $109,000 for the Inception Period, or 136.5% of total
revenues, $536,000 for 1997, or 33.1% of total revenues, and $2.0 million for
1998, or 41.0% of total revenues. The increases in general and administrative
expenses were primarily attributable to increased salaries and related expenses
associated with hiring additional personnel, and increased professional fees and
facility expenses to support the growth of our operations.

     Interest Expense, Net.  We incurred net interest expense of approximately
$8,000 for the Inception Period, $37,000 for 1997 and $76,000 for 1998. The
increase was primarily attributable to the increase in the principal amount of
outstanding debt obligations incurred to fund our expanding operations.

     Income Taxes.  No income tax benefit is reflected in the financial
statements as a valuation allowance was provided for deferred tax assets
relating to net operating losses. As of December 31, 1998, we had approximately
$1.6 million of federal net operating loss carryforwards for tax reporting
purposes to offset future taxable income. Our federal net operating loss
carryforwards expire in the years 2011 through 2018.

QUARTERLY RESULTS OF OPERATIONS DATA

     The following table sets forth certain unaudited quarterly statement of
operations data for each of the nine quarters preceding March 31, 1999. In our
opinion, this data has been prepared on the same basis as the audited financial
statements appearing in this prospectus, and reflect all necessary adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of this data. The results of operations for any quarter are not
necessarily indicative of the results of operations for a full year or any
future period. We expect our quarterly operating results to vary significantly
in the future. See "Risk Factors--Our quarterly operating results may fluctuate,
which may cause the price of our common stock to decrease."

<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED
                                   ---------------------------------------------------------------------------------------------
                                   MARCH 31,  JUNE 30,  SEPT. 30,  DEC. 31,  MARCH 31,  JUNE 30,  SEPT. 30,  DEC. 31,  MARCH 31,
                                    1997       1997      1997       1997       1998      1998       1998      1998       1999
                                   ---------  --------  ---------  --------  ---------  --------  ---------  --------  ---------
                                                                          (IN THOUSANDS)
<S>                                <C>        <C>       <C>        <C>       <C>        <C>       <C>        <C>       <C>
Revenues..........................   $ 130      $314      $ 281      $893     $ 1,067    $1,196    $ 1,250    $1,286    $ 1,319
Operating expenses:
  Product development.............      46        12         24        99         102       120        166       161         13
  Selling and marketing...........     130       217        266       478         691       800      1,094     1,034      1,371
  General and administrative......      58        41        187       250         326       447        529       667        833
                                     -----      ----      -----      ----     -------    ------    -------    ------    -------
Total operating expenses..........     234       270        477       827       1,119     1,367      1,789     1,862      2,217
                                     -----      ----      -----      ----     -------    ------    -------    ------    -------
Income (loss) from operations.....    (104)       44       (196)       66         (52)     (171)      (539)     (576)      (898)
Other income (expense), net.......     (18)      (15)       (12)        8         (10)      (15)       (25)      (26)        14
                                     -----      ----      -----      ----     -------    ------    -------    ------    -------
Net income (loss).................   $(122)     $ 29      $(208)     $ 74     $   (62)   $ (186)   $  (564)   $ (602)   $  (884)
                                     -----      ----      -----      ----     -------    ------    -------    ------    -------
                                     -----      ----      -----      ----     -------    ------    -------    ------    -------
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

     Since inception, we have financed our operations primarily through the
private placement of equity securities and the incurrence of indebtedness. As of
March 31, 1999, we had $2.8 million in cash and cash equivalents.

     Net cash used in investing activities was approximately $203,000 for 1997,
$301,000 for 1998 and $143,000 for the three months ended March 31, 1999. As of
March 31, 1999, our principal capital commitments consisted of obligations
outstanding under operating and capital leases. All net cash used in investing
activities was used for capital expenditures, primarily the acquisition of
equipment. We have spent approximately $713,000 on capital expenditures since
inception through March 31, 1999. We estimate that our capital expenditures will
be approximately $7.0 million for 1999. We currently expect that our principal
capital expenditures through 1999 will relate to improvements to our technical
infrastructure and expansion of our headquarters.

                                       18
<PAGE>
     Net cash provided by financing activities was approximately $1.7 million
for 1998 and $3.7 million for the three months ended March 31, 1999. Net cash
provided by financing activities in 1998 was primarily attributable to
incurrence of indebtedness and, to a lesser extent, borrowings under a secured
credit facility related to equipment financing. We borrowed $200,000 available
under a credit facility in December 1997 in order to purchase equipment. The
loan bears interest at an annual rate equal to the prime rate plus 3%. Payments
of principal and any accrued interest are due and payable in 36 monthly
installments beginning January 1, 1998. To date, we have made all payments due
under this equipment loan.

     In March 1999, we entered into a financing agreement with a leasing company
for the leasing of equipment in an amount up to $1.0 million in operating and/or
capital leases, secured by certain accounts receivable and the equipment
purchased pursuant to the agreement. To date, we have leased approximately
$812,000 of equipment under the agreement. We expect the leases to have terms of
up to three years and the interest rates under the leases to range from 8 1/2%
to 13%. We are required to make monthly payments of interest and principal under
the leases.

     In June 1999, we entered into a two-year sponsorship agreement with Excite
under which Excite agreed to promote webstakes.com through ad banner placements
and links to webstakes.com and its promotions on Excite.com, WebCrawler.com and
Classified2000.com and through the use of a webstakes.com personalized front
page made available by Excite. As part of this agreement, we received a
guarantee of a total number of impressions per year. The fee to be paid to
Excite under this agreement is $5.6 million, $685,000 of which has been paid,
and the balance of which is due 10 days following the completion of this
offering. At Home Corporation, the parent company of Excite, is one of our
stockholders.

     In June 1999, we entered into a services agreement with MatchLogic, Inc., a
wholly owned subsidiary of Excite pursuant to which MatchLogic will provide ad
serving and targeting, data processing, analysis and enhancement services to
Webstakes.com. The term of the agreement is two years. The fee to be paid to
MatchLogic under this agreement is $13.1 million, $2.5 million of which has been
paid and the balance of which is due 10 days following completion of this
offering. See "Use of Proceeds."

     In June 1999, we redeemed all outstanding shares of class A mandatorily
redeemable convertible preferred stock and 1,714,608 shares of common stock for
an aggregate amount of $24.0 million. To finance the redemption and to provide
working capital, we issued shares of new class B mandatorily redeemable
convertible preferred stock to a group of investors, including among others, At
Home Corporation, XL Ventures, a subsidiary of Big Flower Holdings, and
Travelers, for an aggregate purchase price of $40.0 million. Upon completion of
this offering, the class B mandatorily redeemable convertible preferred stock
will automatically convert into 6,666,667 shares of common stock. The class A
mandatorily redeemable convertible preferred stock and class B mandatorily
redeemable convertible preferred stock will not be available for reissue.

     Our ability to generate significant revenues is uncertain. We have incurred
substantial costs and expenses to create, launch and enhance webstakes.com and
to grow our business. We incurred net losses of approximately $221,000 for the
Inception Period, $227,000 for 1997, $1.4 million for 1998 and $884,000 for the
three months ended March 31, 1999. At March 31, 1999, we had an accumulated
deficit of approximately $2.7 million. We expect losses from operations and
negative cash flow from operating activities to continue for the foreseeable
future. As a result of our expansion plans, we expect our operating expenses to
increase significantly in the next several years. Although we have experienced
revenue growth in recent periods, our revenues may not remain at their current
level or increase in the future. If our revenues do not increase and if our
spending levels are not adjusted accordingly, we may not generate sufficient
revenues to achieve profitability or otherwise obtain additional equity, debt or
lease financing. Even if we achieve profitability, we may not sustain or
increase profitability on a quarterly or annual basis in the future.

     We believe that the net proceeds of this offering, together with available
funds, will be sufficient to meet our anticipated needs for at least the next
12 months. We may need to raise additional funds in the future in order to fund
more aggressive brand promotion or more rapid expansion, to develop new or
enhanced promotional services, to respond to competitive pressures or to make
acquisitions. There can be no assurance that any required additional financing
will be available on terms favorable to us, or will be available at all. If
additional funds are raised through the issuance of our equity securities,
stockholders may

                                       19
<PAGE>
experience dilution of their ownership interest and the new securities may have
rights superior to those of the holders of the common stock. If additional funds
are raised by the issuance of debt, we may be subject to certain limitations on
our operations and our ability to pay dividends. If adequate funds are not
available or not available on acceptable terms, we may be unable to fund our
expansion, successfully promote our brand name, develop or enhance our services,
respond to competitive pressures or take advantage of acquisition opportunities.
Any of these events could have a material adverse effect on our business,
results of operations or financial condition.

IMPACT OF THE YEAR 2000

     Many currently installed computer systems and software products are coded
to accept or recognize only two digit entries in the date code field. These
systems may recognize a date using "00" as the year 1900 rather than the year
2000. As a result, computer systems and/or software may need to be upgraded to
comply with the Year 2000 requirements or risk system failure or miscalculations
causing disruptions of normal business activities.

     State of Readiness.  We have begun to assess the Year 2000 readiness of our
information technology systems, including the hardware and software that enable
us to provide and deliver webstakes.com, as well as our other systems. Our
assessment and remediation plan consists of:

          o quality assurance testing of our internally developed proprietary
            software;

          o contacting third-party vendors and licensors of material hardware,
            software and services that we use both directly and indirectly;

          o contacting vendors of material non-information technology systems;

          o assessment of repair or replacement requirements;

          o repair or replacement;

          o implementation; and

          o creation of contingency plans in the event of Year 2000 failures.

     We have determined that our own internal systems are Year 2000 compliant,
and Frontier GlobalCenter, Inc. has informed us that its systems are Year 2000
compliant. In addition, we have been informed by many of the vendors of the
material hardware and software components of our systems that the products we
use are currently Year 2000 compliant. We will require vendors of our other
material hardware and software components of our systems to provide assurances
of their Year 2000 compliance by June 30, 1999. We will not be able to
completely evaluate whether systems will need to be revised or replaced until
our testing is complete and our vendors respond to our inquiries.

     Costs.  To date, we have not incurred any material costs in identifying or
evaluating Year 2000 compliance issues. Most of our expenses have related to,
and are expected to continue to relate to, the operating costs associated with
time spent by employees in the evaluation process and Year 2000 compliance
matters generally. At this time, we do not possess the information necessary to
estimate the potential costs of revisions to our software should these revisions
be required or the replacement of third-party software, hardware or services
that are determined not to be Year 2000 compliant. Although we do not anticipate
that these expenses will be material, such expenses, if higher than anticipated,
could have a material adverse effect on our business, results of operations or
financial condition.

     Risks.  We are not currently aware of any Year 2000 compliance problems
relating to our systems that would have a material adverse effect on our
business, results of operations and financial condition. However, we may
discover Year 2000 compliance problems in our systems that require substantial
revision. In addition, third-party software, hardware or services incorporated
into our material systems may need to be revised or replaced, all of which could
be time-consuming and expensive. Our failure to fix or replace our internally
developed proprietary software or third-party software, hardware or services on
a timely basis could result in lost revenues, increased operating costs, the
loss of customers and other business interruptions, any of which could have a
material adverse effect on our business, results of operations and financial
condition. Moreover,

                                       20
<PAGE>
the failure to adequately address Year 2000 compliance issues in our internally
developed proprietary software could result in claims of mismanagement,
misrepresentation or breach of contract and related litigation, which could be
costly and time-consuming to defend.

     We are heavily dependent on a significant number of third-party vendors to
provide both network services and equipment. A significant Year 2000-related
disruption of the network, services or equipment that third-party vendors
provide to us could cause visitors to webstakes.com and our clients to consider
seeking alternate providers or cause an unmanageable burden on our technical
support, which in turn could materially adversely affect our business, financial
condition and results of operations.

     In addition, governmental agencies, utility companies, Internet access
companies, third-party service providers and others outside of our control may
not be Year 2000 compliant. The failure by these entities to be Year 2000
compliant could result in a systemic failure beyond our control, such as a
prolonged Internet, telecommunications or electrical failure, which could also
prevent us from delivering our services to our clients and visitors, decrease
the use of the Internet or prevent users from accessing our web site, which
could have a material adverse effect on our business, results of operations and
financial condition.

     Contingency Plan.  We are engaged in an ongoing Year 2000 assessment and we
have not developed any contingency plans. The results of our Year 2000 testing
and the responses received from third-party vendors and service providers will
be taken into account in determining the need for and nature and extent of any
contingency plans.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

     In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities." Statement of Position 98-5, which is effective for fiscal years
beginning after December 15, 1998, provides guidance on the financial reporting
of start-up costs and organization costs. It requires costs of start-up
activities and organization costs to be expensed as incurred. Since we have
historically expensed these costs as incurred, the adoption of this standard is
not expected to have a significant impact on our results of operations or
financial position.

     In February 1998, FASB issued SFAS No. 132, "Employer's Disclosures about
Pension and Other Postretirement Benefits" ("SFAS No. 132"), which revises
employers' disclosures about pension and other postretirement benefit plans.
SFAS No. 132 does not change the measurement or recognition of those plans. SFAS
No. 132 is effective for fiscal years beginning after December 15, 1997. The
adoption of SFAS No. 132 has not had an impact on our results of operations,
financial position or cash flows.

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivatives and Hedging
Activities," which establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities. Statement of Financial Accounting
Standards No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. We do not expect the adoption of this statement to have a
significant impact on our results of operations or financial position.

                                       21

<PAGE>
                                    BUSINESS

OVERVIEW

     Webstakes.com, Inc. is a leading online sweepstakes promotion company. We
integrate sweepstakes, contests and similar promotional events with direct
marketing tools and a proprietary membership database of more than 1.3 million
consumers. We make our promotions available without charge to consumers through
our web site, webstakes.com, our clients' web sites and consumers' personal home
pages. We generate revenues through the sale of promotion sponsorships and
services that allow our clients to cost-effectively identify and communicate
with potential customers, increase sales and foster brand awareness. We are
building on our sweepstakes expertise to provide an integrated, comprehensive
online promotion solution. We have recently entered into strategic relationships
with Excite and NBC, which we believe will increase awareness of the
Webstakes.com brand and attract additional visitors to webstakes.com. Our
clients include CBS Sportsline, Citibank, CDW and MapQuest.

INDUSTRY BACKGROUND

  Promotions and Direct Marketing

     Promotions and direct marketing are used to stimulate consumer spending.
Historically, most marketing communications dollars were spent on mass
advertising, but in recent years marketers have shifted their spending toward
direct marketing activities.

     Promotions are designed to stimulate an immediate action which could
include a product sale, a request for further information or a visit to a place
of business for the purchase of a specific product or service. American
businesses spent $79.4 billion on promotion marketing in 1997, an 11% increase
over 1996, according to Promo Magazine. Promotions include:

        o sweepstakes
        o premium incentives
        o product samples
        o coupons
        o points and loyalty programs
        o rebates (cash incentives paid upon a purchase)
        o games
        o contests

     Direct marketing is the delivery of a customized message to a defined
audience. Unlike mass advertising (such as television, print and radio), direct
marketing enables the measurement of the response to a message. Companies can
measure the response to specific direct marketing programs or promotions and
analyze the financial return on marketing expenditures. Direct marketing
programs can then be improved and tailored with a degree of precision that is
generally not possible with mass marketing.

     According to the Direct Marketing Association, direct marketing
expenditures in the United States reached approximately $163 billion in 1998 and
are estimated to increase at a compound annual rate of over 6% from 1998 to
2003. Forrester Research, Inc. projects that by 2000 direct marketing
expenditures will be three times larger than expenditures for brand advertising.

  Promotions and Direct Marketing on the Internet

     The Internet has emerged as an important medium for collecting and
exchanging information, communicating and conducting business worldwide.
International Data Corporation estimates that the number of Internet users will
grow from approximately 100 million worldwide in 1998 to approximately 320
million worldwide by the end of 2002, and that the value of transactions on the
Internet will increase from approximately $12 billion in 1997 to approximately
$426 billion in 2002.

     We believe that the Internet is a compelling medium for direct marketing
promotions. The Internet has introduced tools for collecting consumer data,
measuring results, interacting with customers and marketing on

                                       22
<PAGE>
a personalized basis that are not available in traditional media. Direct
marketing traditionally has been conducted through telemarketing or printed
mail, which require significant investments in paper, printing, postage and/or
personnel. Use of the Internet reduces these costs. The Internet also allows
marketers to track consumers' demographic characteristics, purchasing histories
and product preferences in order to tailor their product offerings to consumers
more likely to respond to these offerings. We believe that marketers can achieve
higher consumer response rates online than through traditional media. The
Internet enables marketers to change promotional messages rapidly and
cost-effectively. For example, online marketers can measure the response rate of
a promotion by sending out several sample test promotions with variable prices,
graphics and text to small groups of consumers. Based on the responses to a
sample, an online promotion can be modified quickly for much less than the cost
to modify a printed promotion.

     Forrester Research, Inc. estimates that online promotions generate three to
five times the consumer response rates of traditional promotions. Forrester also
reports that 88% of retailers and marketers surveyed found that online
promotional efforts have met or exceeded their expectations and 80% of those
surveyed planned to increase their online promotional spending in the next year.
Based on this survey, Forrester estimates that 50% to 70% of total Internet
marketing budgets will be spent on promotions over the next five years, compared
to less than 15% of Internet marketing budgets currently being spent on
promotions.

WEBSTAKES SERVICES FOR CONSUMERS

     We offer consumers the opportunity to win free merchandise and receive
discounts and special offers from our clients. Consumers can access these
opportunities from webstakes.com where a variety of weekly sweepstakes and
contests are available 24 hours a day, seven days a week. Consumers can also
access our promotions on the web sites of many of our clients. Additionally, our
Affiliate Program gives consumers the opportunity to offer visitors to their
personal home pages the chance to enter a special monthly sweepstakes.

  Our Web Site

     webstakes.com is our web site where consumers interact with our clients.
Through our promotions, consumers have an opportunity to explore products and
special offers presented by our clients and to enter sweepstakes to win product
and cash prizes, free travel, coupons and gift certificates. At their request,
consumers may also receive additional offers and information about clients'
products through our weekly electronic newsletter, the Webstakes Update, and
individual emails. Approximately 550,000 of our members have opted to receive
our newsletter. Our proprietary technology, which we have branded "iDialog,"
allows us to tailor emails based on the demographic profiles and interests of
the members to whom they are sent.

     Our Prize Club page on webstakes.com offers a variety of prizes in
different interest categories. Each category is designed to appeal to consumers
with a specific interest and includes sweepstakes for prizes related to the
theme of the interest category. Presently, there are twelve Prize Club interest
categories:

          o Auto
          o Books & Music
          o Business & Finance
          o Campus
          o Computing Products
          o Family & Kids

          o Games & Casino
          o Gifts, Flowers & Food
          o House & Home
          o Sports & Health
          o TV, Movies & Video
          o Travel & Outdoors

In addition, several special promotions run at different times throughout the
year on webstakes.com. These include promotions designed around holidays such as
Mother's Day and Christmas and events such as the Super Bowl, movie premiers and
the Academy Awards.

     Visitors to webstakes.com enter a sweepstakes either by selecting a prize,
by selecting a special promotion or by selecting an interest category and then
selecting a sponsor within that category. At any given

                                       23
<PAGE>
time, there are typically sweepstakes for over 100 prizes available on
webstakes.com. The following is a representative list of prizes in each
category:

AUTO

F1 Racing Simulation Video Game
Nascar Collectible Diecast
Sony Car Stereo
Immobilizer Car Alarm
Pair Of Revo Shades
Infant/Toddler Car Seat

COMPUTING PRODUCTS

$150 CDW Gift Certificate
Minolta Digital Camera
Creative PC-DVD Player
Microtek Scanner

HOUSE & HOME

$150 Home Depot Gift Certificate
Panasonic Microwave
Cuisinart Coffee Pot
$150 Crabtree & Evelyn Gift Certificate
$150 Lillian Vernon Gift Certificate
$150 Sharper Image Gift Certificate

BOOKS & MUSIC

H.G. Wells Reading Lamp
$150 Barnes & Noble Gift Certificate
Yamaha Keyboard
$150 Music Boulevard Gift Certificate
Panasonic CD Player
JVC 200-Disc Changer

FAMILY & KIDS

$150 Bed Bath & Beyond Gift Certificate
$150 KB Toys Gift Certificate
$150 Warner Bros. Gift Certificate
$150 Sears Gift Certificate
$150 Marshall Field's Gift Certificate

SPORTS & HEALTH

$250 Universal Golf Gift Certificate
$150 Spa Finders Gift Certificate
Sony Portable CD Stereo
$150 REI Gift Certificate
27" Samsung TV
AIWA CD Player
$150 Foot Locker Gift Certificate
Circuit3 Watch

BUSINESS & FINANCE

Canon Personal Copier
$150 Dayton's Gift Certificate
Panasonic Fax Machine
Palm Pilot Professional
Panasonic Cordless Phone
Iomega Zip Drive
Epson Stylus Color Printer
$150 Staples Gift Certificate

GAMES & CASINO

Polaroid Instant Camera
Sony Playstation
Samsung Television
$150 Spiegel Gift Certificate
$160 Universal Amusement Gift Certificate

TV, MOVIES & VIDEO

Panasonic Television/VCR
Samsung Camcorder
Audible Mobileplayer
$150 Sony Theatres Gift Certificate

CAMPUS

$150 Eddie Bauer Gift Certificate
Minolta Digital Camera
$150 Sam Goody Gift Certificate
Sanyo Refrigerator
Aiwa Stereo System

GIFTS, FLOWERS & FOOD

Kitchen Aid Mixer
Godiva Chocolates
Omaha Steaks
Digital Espresso Machine
Harry & David Fruits

TRAVEL & OUTDOORS

$100 Planet Hollywood Gift Certificate
Olympus Binoculars
Kodak Digital Video Camera
Sony Stereo

     The Savings Club is a section of webstakes.com that provides consumers with
savings opportunities in different interest categories. Recently, the Savings
Club has been expanded to integrate Prize Club promotions with special savings
on products related to a particular theme, such as an event or holiday. For
example, when visitors entered a recent Mother's Day prize promotion, they were
taken to a collection of special offers for Mother's Day products from a number
of clients.

  Membership Registration and Prize Entry

     Visitors to webstakes.com must register as members to participate in our
promotions. Visitors become members by completing our one-time registration form
that requires them to provide certain demographic information. Once this
information is provided, a visitor becomes a lifetime member and never has to
provide the registration information again, other than to update any changed
information.

     To enter a promotion, members click on an interest category, a prize or a
special promotion, and they are presented with a page that displays the logos
and text messages of our clients that are sponsoring the particular interest
category, prize or promotion. After selecting one of these logos, members are
offered the opportunity to enter a sweepstakes for any of the products in the
category. At this point in the entry process, members may be asked if they want
to receive offers for products or services from the client whose logo they
selected when entering the sweepstakes or another question related to the chosen
prize or client. Responses to these questions are stored in our database.
Members may enter the sweepstakes by answering the question and clicking on the
prize entry button. This final mouse click takes members to the web site of the
chosen sponsoring client.

                                       24
<PAGE>

  The Webstakes Update Newsletter, Email Offers and Tell-a-Friend

     During registration, new members are asked if they want to receive the
weekly Webstakes Update newsletter, emails from our clients that relate to their
interests or occasional special offers. This information will be provided only
if it is requested by the member. During the process of entering sweepstakes,
members that meet certain demographic criteria may be asked if they want to
receive offers for products or services. When a member gives us permission, he
or she is sent an individual email message often containing a special product
offer. In addition, our Tell-a-Friend Program enables recipients of our email
and Webstakes Update, as well as visitors to webstakes.com, to forward any
promotion to friends and family via email, and provides incentives to members
who tell others about webstakes.com.

  Affiliate Program

     Our Affiliate Program allows a member to put a free link to the
webstakes.com Affiliate Program sweepstakes on their personal home page. Members
with their own personal web site can request the information necessary to
install a webstakes.com banner on their web page. We have received more than
8,300 requests for this information. A visitor to a member's personal home page
can click on the webstakes.com banner, register as a webstakes.com member and
enter a monthly $1,000 sweepstakes run exclusively for the Affiliate Program.
After entering the special sweepstakes, the visitor is taken to the
webstakes.com home page and can then enter other webstakes.com promotions. Every
affiliate is automatically entered into a special monthly $500 sweepstakes we
conduct to encourage participation in the Affiliate Program. This program can
make personal home pages more fun while at the same time increase the exposure
of webstakes.com.

  Privacy

     Webstakes.com believes that it is important to build and maintain the trust
of its members. We are committed to maintaining the privacy of our members and
their personally-identifiable information. We are a member of TRUSTe, an
independent, non-profit initiative whose mission is to build users' trust and
confidence in the Internet by promoting the principles of disclosure and
informed consent. As a member of TRUSTe, we disclose our information practices
on webstakes.com and in our promotions and we comply with specified information
disclosure practices. As a general policy, we do not sell individual member
information collected from promotions on webstakes.com. During the registration
process and thereafter, webstakes.com visitors must grant us permission to send
them the Webstakes Update and email offers from us or our clients. If users do
not specifically authorize us to send them information, they will not receive
email from us. We seek to ensure that our privacy policy satisfies consumer
expectations and evolving Internet practices. If a member grants us permission,
we may share specific information with our clients or service providers, but we
strictly prohibit the sale of this information.

WEBSTAKES.COM SERVICES FOR BUSINESSES

     We provide clients with the ability to build relationships with consumers
through webstakes.com, direct emails, the Webstakes Update and the use of their
products as prizes for our sweepstakes. We can direct a client's product offer
based on either the demographic profile of a visitor or the visitor's responses
to personalized questions generated by our proprietary technology. We provide
promotional research and client service expertise before, during and after a
promotion to help clients effectively use these tools to meet their goals. We
use our membership database to help clients identify potential customers more
effectively and to enable them to use the results of their promotions in other
sales and marketing efforts.


                                       25
<PAGE>
     We provide the technological, business and creative infrastructure
necessary to effectively produce and conduct online promotions, including
sweepstakes, on a cost-effective basis. These capabilities include the
following:

        Creative Services

          o Theme, naming and concept development of promotions--create
            appropriate prize interest categories; create theme-based and
            private label promotions

          o Promotion design and production--create and produce visually
            attractive, easy-to-use promotions

        Automation of Process

          o Collection and maintenance of demographic information--manage data
            provided by member registration, prize selection and other member
            activity

          o Promotion research--measure effectiveness of promotions; suggest
            alternatives to better satisfy client goals

          o Winner selection, notification and affidavit collection--select
            winners in compliance with sweepstakes law; collect affidavits;
            verify accuracy of information provided by winner

          o Customer service--respond to email questions

          o Promotion support services--handle postal entries; provide lists of
            winners

          o Legal compliance services--distribute IRS Form 1099's as required;
            create and provide official rules

        Fulfillment

          o Prize selection and acquisition--select appropriate prizes; acquire
            prizes from suppliers

          o Prize fulfillment--arrange for shipment of prizes

     The Internet and our technology allow us to deliver promotions at a lower
cost than traditional offline promotions. Unlike traditional direct marketing
promotion campaigns, which typically use paper-based materials delivered by
mail, our promotions do not require postage or printing because they are all
delivered electronically. It is also unnecessary for us to manually enter online
response information because participants enter their own information when they
register as a member or participate in a promotion. Lastly, all of the online
winner selection, notification and processing functions are automated. This high
degree of automation will allow us to increase our promotion volume without the
need to add a significant number of employees to handle these functions.

     We provide our services to businesses through webstakes.com and directly on
client web sites through syndicated versions of our promotions or through
private label promotions. webstakes.com is our largest distribution channel. We
use webstakes.com to host promotions, to gather demographic information and to
serve as a gateway for access to our clients' web sites. Syndicated versions of
our promotions are designed to run on our clients' web sites at the same time as
they are running on webstakes.com. Private label promotions run exclusively on
our clients' web sites. These promotions have a customized appearance and
client-specific prizes or offers but use our technology and infrastructure.

  Promotions on webstakes.com

     We currently offer a variety of promotional services built around our
sweepstakes. Our services are most typically sold in sponsorship packages, each
of which includes a combination of Webstakes.com services tailored to satisfy a
client's objectives. The choice and level of the services included in a
sponsorship package is determined by the level of sponsorship selected by the
client. Our sponsorship packages vary by:

          o the number of interest categories in which a client's logo appears;

                                       26
<PAGE>

          o the size of the client's logo, and whether a text message
            accompanies the logo;

          o the number of guaranteed impressions or visitors delivered to a
            client's logo, advertisement or web site;

          o the number of times a client's offer appears in the Webstakes Update
            newsletter; and

          o the number of email campaigns.

Anchor sponsors receive the most prominent placement in the interest categories
of their choice. Anchor sponsors have included CDW, Golden Palace, iMALL,
Internet Shopping Network, Speedy Click and Spree.com. Tenant and Affiliate
sponsorship packages include fewer logo placements and other services. Tenant
and Affiliate sponsors have included FortuneCity, Net Market, PC World and Value
America.

     The promotional tools we use to help clients meet their marketing
objectives include:

          Exposure on webstakes.com.  Clients receive exposure in the
     webstakes.com interest categories they select. We feature client logos,
     advertisements and text messages on the selected web pages. Each interest
     category provides clients with the opportunity to direct their marketing
     efforts to consumers most likely to be interested in their products.
     Interest categories may be added as clients request additional
     exposure on webstakes.com or the ability to direct offers to consumers with
     other specific interests. We generally guarantee the minimum number of
     visitors who will view a client's advertisement and/or be delivered to the
     client's web site during the term of its sponsorship.

          Lead Generation.  Clients may extend special email offers to
     webstakes.com members based on information gained using our technology.
     These offers can be directed to members who meet pre-determined demographic
     profiles. Members who request information about a client or client's offer
     later receive an email describing a special offer that is sent
     automatically using our iDialog technology. Each email includes a link to
     the client's web site that allows the recipient to take advantage of the
     offer. Finally, our iDialog technology allows us to measure the response
     rates to these emails.

          The Webstakes Update Newsletter.  The Webstakes Update is an
     electronic newsletter that is sent to more than 550,000 registered members
     each week. The Webstakes Update features products, services and special
     promotions from our clients. Each offer featured in The Webstakes Update
     includes a link to the web site of the client making the offer, enabling
     newsletter recipients to access the offer directly from the Webstakes
     Update.

          Loyalty Program.  Our clients have the opportunity to place a banner
     on their web site linking it directly to webstakes.com. A webstakes.com
     banner on a client's web site provides the client with sweepstakes content
     to build traffic and loyalty to the web site and provide value to its
     visitors.

          Management Reports.  We make detailed daily reports available to our
     clients. These reports include aggregated demographic information and
     consumer preferences regarding our members that select a client's logo and
     responses to each client's promotions on webstakes.com. A client can use
     this information to tailor its promotions to reach its desired audience.

          Special Promotions.  Clients also may participate in special
     promotions we run that relate to seasonal and special events, like the
     Super Bowl or movie premiers, or major holidays, like Christmas or Mother's
     Day. These special promotions provide a further opportunity for our clients
     to make special merchandise offers relating to the featured event or
     holiday.

  Promotions on Client Web Sites

     We provide a comprehensive outsourcing solution for clients who want to
host a promotion on their own web site to increase traffic. These promotions
range from a special promotion run only on the client's web site to a modified
version of a sweepstakes running concurrently on webstakes.com. We offer all of
the other services available in our sponsorship package to our private label and
syndication promotion clients at an additional cost.

                                       27
<PAGE>

     We conceive, design and produce private label promotions for a variety of
clients. A private label promotion gives a client the opportunity to run a
promotion on its own web site that has an appearance that is unique and
consistent with its own web site design, while using our infrastructure and
technology to avoid the cost of developing the promotion in-house. A client can
choose a complete promotion package or any one or a combination of the specific
services we offer. We guide private label clients through the promotion-
creation process and allow clients to choose those features appropriate for
their promotion. We will generally work with the client to design the appearance
of the promotion on its web site. Clients generally select their own prizes or
offers for the promotion and we tailor the other aspects of the promotion to
help clients meet their goals. Private label promotions generally include lead
generation through email campaigns and management reports.

     Web site visitors entering private label promotions register for prizes
through our proprietary technology and registration process. This enables our
private label promotion clients to use our technology to offer our one-time
lifetime registration, which makes it easier for their visitors to enter our
sweepstakes. Private label clients have included Hyundai, NBC Multimedia,
Netscape, Panasonic, Toshiba and Universal Studios.

     We provide syndicated versions of our webstakes.com promotions which may be
run on our clients' web sites at the same time as they are running on
webstakes.com. These promotions serve the same purpose as a private label
promotion but require less customization. Syndicated promotions have an initial
appearance consistent with the host client's web site. We display the client's
logo and/or color scheme on the various pages of the promotion. While the
appearance of the promotion is customized, the process for entering the
promotion is the same as the visitor would experience on our web site had he or
she selected the logo of the syndicated promotion client on webstakes.com. The
prizes offered in a syndicated promotion are the same as those being offered on
webstakes.com. Syndicated promotions may include promotions in all interest
categories, as well as seasonal, special event and major holiday promotional
programs. Syndicated promotion clients have included Internet Broadcast System
and JOBTRAK.

OUR STRATEGY

     Our objective is to be the leading full-service online promotion company
and to make webstakes.com a leading Internet promotion destination. Key elements
of our strategy include:

     Build on our Sweepstakes Expertise to Provide an Integrated, Comprehensive
     Online Promotions Solution

     We intend to build on our expertise, technology, membership base, web site
and client relationships to expand our offerings to include a broad range of
promotion services including instant win and other games, premium incentive
tools, points and loyalty programs, coupons, promotion fulfillment and product
sampling. Our goal is to provide clients with a one-stop promotion outsourcing
solution that provides a full range of promotions and promotion support services
that can be integrated to maximize effectiveness.

     Grow our Membership Base

     A larger membership base provides more potential customers with whom we can
test the effectiveness of our clients' promotions. We plan to increase our
membership base and membership usage by:

          o increasing awareness of webstakes.com among Internet users;

          o increasing the number of promotions available to members;

          o increasing the number of destinations at which Internet users can
            enter our promotions; and

          o improving the attractiveness of webstakes.com by adding new
            promotional opportunities such as games and points and loyalty
            programs.

                                       28
<PAGE>

     Build Strong Brand Awareness through Online and Traditional Marketing
     Campaigns

     Brand recognition will help increase our membership base and help improve
visibility with potential clients. We plan to establish and expand the
recognition of our brand identity and service offerings through our web site,
other web sites, direct mail, promotional activities, trade show participation
and other media events. We have entered into an agreement with Excite to market
our promotions on Excite.com and with NBC to advertise on national television
and on the Internet.

     Enhance Our Database of Information About Our Members

     We believe we can enhance the effectiveness of our promotions by learning
more about our membership base. As more members enter our promotions, and with
each additional contact with our members, the extent and precision of our
information continues to grow. We intend to use our growing database and our
knowledge and experience to assist clients to tailor offers and encourage future
participation in our promotions.

     Expand Internationally

     We believe that our products and technology can both help U.S.-based
businesses to reach international consumers and help international businesses to
reach U.S. and international consumers. We intend to open sales offices in
selected foreign countries and to employ non-exclusive sales agents to expand
international sales. We also intend to create foreign language web sites to
increase foreign sales.

SALES AND MARKETING

     We believe that a strong sales and marketing organization is essential to
effectively sell our Internet promotion services and to promote webstakes.com.

     We sell our promotion services through a sales and marketing team that has
grown over the past three years to include 31 employees as of May 31, 1999.
These employees are located at Webstakes.com's offices in New York and San
Francisco. The sales organization is dedicated to developing and maintaining
close relationships with our clients. We intend to increase our sales force and
open additional sales offices in the United States. We also intend to expand our
sales effort internationally.

     Customer service is an important part of our sales effort. Once a sale is
made, our strategy group develops a plan to execute the promotions to help
assure that the client's objectives are met. We are committed to providing a
high level of client satisfaction. Sometimes a client will first use a private
label or syndicated promotion as an introduction to our promotion services. Once
we can demonstrate the effectiveness of our promotions, these clients may
purchase full sponsorship packages.

     Our marketing of webstakes.com to consumers initially was primarily through
word-of-mouth and by promotions by clients. In March 1999, we entered into an
agreement with NBC under which we advertise on the NBC television network. In
June 1999, we began an on-line promotion campaign through Excite. Ads promoting
Webstakes.com and our clients will appear on many of Excite's topical channels
including the Money and Investing channel, the Home & Real Estate channel, the
Games channel and many others. We are also advertising our web site and the
promotions run by our clients in The Net's Best, a Sunday newspaper insert. We
also use our Affiliate Program and our Tell-a-Friend Program to expand our
consumer reach at little or no cost.

CLIENTS

     During 1998, we served approximately 125 clients. In 1998, our five largest
clients, iVillage.com, Jam TV, PC World, SonicNet and Virtual Vegas accounted
for approximately 24% of our revenues. Our clients have also included CBS
Sportsline, CDW, Cyberian Outpost, Internet Shopping Network, iMALL, Netscape,
Spree.com, The Gist, uBid and Xoom.

                                       29
<PAGE>

OPERATING INFRASTRUCTURE

     Our operating infrastructure is designed to support the creation and
delivery of millions of page views each day. This infrastructure currently uses
30 web servers, application servers and database servers to provide timely and
efficient delivery of our services to clients and members. Our servers run on
Sun Solaris and Microsoft NT operating systems and our database systems are
standardized in Oracle products.

     We have developed a broad array of information systems to perform site
management, user interaction, tracking, search, transaction processing and
fulfillment functions. When available, our systems use third-party licensed
technologies to augment internally-developed software. We focus our development
efforts on improving and enhancing our specialized proprietary tools with the
goal of automating as many processes as possible to increase member and client
satisfaction.

     Our proprietary iDialog technology consists of three integrated systems; a
publishing system, an online promotion engine and a data processing system, all
of which are supported by relational databases.

  Publishing System

     The publishing system contains the relevant information about our
promotions, including prizes, interest categories and clients. Once a client's
offer or advertisement has been designed, each component, such as color, text
and graphics, is published as datasets in our Oracle relational database
management systems. Various combinations of these datasets are accessed and
published to webstakes.com.

  Online Promotion Engine

     When a member visits our web site, the online promotion engine creates a
web page of various datasets by accessing the online Oracle databases. The
components of each web page are dynamically generated based on the demographic
characteristics and preferences of the member user. The online promotion engine
also deploys email campaigns to members based on the same information stored in
the Oracle databases. The online promotion engine uses a combination of Sun
MicroSystems' NetDynamics Application Servers, Standard Java servlets and
Netscape and Apache Webservers as the front-end development tools to connect
with the Oracle databases. This software handles all transactional events and
queries, updates the Oracle databases and manages webstakes.com, which is
designed to give members a convenient and safe environment to register for
offers.

  Data Processing System

     Our data processing system retrieves member demographic data from the
Oracle databases through the online promotion engine, processes the data,
creates and issues offers to members and manages all winner selections. The
system was designed to give employees and clients instant online access to
information related to specific promotions. Our salespeople can access member
profiles to search and analyze demographics and usage patterns to suggest
promotions and offers to clients. Generally, only aggregate data, and not
individual member profiles, is available to our clients.

     The structure of our hardware and software is designed to allow for rapid
expansion while maintaining our desired user performance standards. In the
rapidly changing Internet environment, we believe that the ability to update an
application to stay current with new technologies is important. Our system
design allows for the addition, modification or replacement of applications in a
cost-efficient and expeditious manner. We continually evaluate emerging
technologies and new developments in web technologies with the objective of
optimizing our member and client interfaces, web site features and operational
systems.

     We use high-capacity telephone communication lines to connect with the
Internet. These communication lines are currently one-third to one-half
utilized. As we grow, communications lines with increased capacity and higher
capacity routers will need to be added. We maintain redundant communication
lines with the Internet to protect against the loss of connectivity and we
safeguard our information using large storage devices. We have back-up copies of
all of our programs and data in an off-site location.

                                       30
<PAGE>

     Our Internet connectivity is provided by Frontier GlobalCenter. We have
entered into an Internet-hosting agreement with Frontier to maintain all of our
production servers at Frontier's Manhattan data center. Frontier provides
comprehensive facilities management services, including human and technical
monitoring of all production servers 24 hours per day, seven days per week.
Frontier provides the means of connectivity from webstakes.com servers to
end-users via the Internet. The facility has two independent uninterruptible
power supplies, as well as two independent diesel generators designed to provide
power to the systems within seconds of a power outage.

COMPETITION

     Competition in the Internet promotion services market is intense. We expect
competition in our market to continue to intensify as a result of increasing
market size, greater visibility of the market opportunity for Internet promotion
services and minimal barriers to entry. Competition may also increase as a
result of industry consolidation, particularly among narrowly-focused promotion
companies. We believe that our ability to compete depends on many factors both
within and beyond our control, including the following:

          o the success of the sales and marketing efforts of us and our
            competitors;

          o the ease of use, performance, price and reliability of promotions
            developed by us and our competitors; and

          o the timing and market acceptance of new services developed by us and
            our competitors.

     The online promotion services market is highly fragmented, with many
companies focusing generally on only one aspect of the promotions market. We
also compete with offline promotion companies, large Internet
publishers, search engine and other portal companies, a variety of Internet
advertising networks and other companies that facilitate the marketing of
products and services on the Internet.

     Please see "Risk Factors--We may not be able to compete successfully in our
market" for a more detailed description of the risks of our competition.

PROPRIETARY RIGHTS

     We protect our technology and proprietary rights through a combination of
patent, copyright, trade secret and trademark law. We have filed one patent
application in the United States. In addition, we have a pending registration
for the Webstakes trademark in the United States. Our patent applications and
trademark registration may not be approved.

     We generally enter into confidentiality or license agreements with our
employees, consultants and corporate partners, and generally control access to
and distribution of our technologies, documentation and other proprietary
information. Despite our efforts to protect our proprietary rights from
unauthorized use or disclosure, parties may attempt to disclose, obtain or use
our proprietary rights. We cannot be certain that the steps we have taken will
prevent misappropriation of our proprietary rights, particularly in foreign
countries where the laws or law enforcement may not protect our proprietary
rights as fully as in the United States.

     Our technology collects and utilizes data derived from user activity on
webstakes.com. This data is used primarily for promotion targeting and measuring
the effectiveness of different promotions. Although we believe that we have the
right to compile and use this data, there can be no assurance that any trade
secret, copyright or other protection will be available for this information. In
addition, others may claim rights to this information or to the technology that
we use to collect this information, tailor advertisements and measure
promotional performance.

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES

  Regulation of Sweepstakes

     The sweepstakes industry is subject to extensive regulation on the local,
state and national levels, regardless of whether the promotions take place over
the Internet, through the mail or otherwise. Thus, the same regulations that
apply to traditional sweepstakes promotions apply to each of our online
sweepstakes

                                       31
<PAGE>

promotions. Regulations governing the conduct of sweepstakes promotions vary
from state to state and from country to country. Although the state and national
sweepstakes laws and regulations generally are similar in nature, they and their
application vary. We use various methods to achieve compliance with these laws.

     We seek to protect ourself by placing restrictions on who may enter our
sweepstakes. We generally prohibit minors from entering our sweepstakes.
Further, our sweepstakes generally are limited to United States residents, and
residents of Florida typically are prohibited from entering certain of our
sweepstakes to comply with local laws, regulations or administrative rulings.
However, because it is sometimes difficult to verify entries over the Internet,
it is possible that minors or residents of these restricted states are entering
our sweepstakes promotions using misinformation.

     Deceptive practices in direct mail sweepstakes promotions have recently
been the subject of hearings in the United States Senate and certain states.
While these hearings did not focus on online sweepstakes, it is unclear whether
any new laws or regulations will result from these hearings and whether or not
these laws or regulations will affect online sweepstakes. Similar attention is
expected from state legislatures and regulators. See "Risk Factors--Sweepstakes
regulations may materially adversely affect our business."

  Regulation Concerning Privacy

     Congress has passed the Children's Online Privacy Protection Act, and the
Federal Trade Commission has issued a Notice of Proposed Rulemaking regarding
the adoption of regulations regarding the collection and use of personal
identifying information obtained from individuals when accessing web sites, with
particular emphasis on access by minors. These regulations may include
requirements that companies establish certain procedures to, among other things:

          o give adequate notice to consumers regarding information collection
            and disclosure practices;

          o provide consumers with the ability to have personal identifying
            information deleted from a company's database;

          o provide consumers with access to their personal information and with
            the ability to rectify inaccurate information; and

          o obtain express parental consent prior to collecting and using
            personal identifying information obtained from children under
            13 years of age.

These regulations may also include enforcement and redress provisions. While we
have a privacy policy designed to enhance the protection of the privacy of our
users, there can be no assurance that these programs will conform with any
regulations adopted by the FTC. Moreover, even in the absence of those
regulations, the FTC has begun investigations into the privacy practices of
companies that collect information on the Internet. One investigation resulted
in a consent decree pursuant to which an Internet company agreed to establish
programs to implement the principles noted above. We may become subject to a
similar investigation, or the FTC's regulatory and enforcement efforts may
adversely affect our ability to collect demographic and personal information
from users, which could have an adverse effect on our ability to provide
effective promotions. Any of these developments would have a material adverse
effect on our business, results of operations and financial condition.

     It is also possible that cookies, or information keyed to a specific
server, file pathway or directory location that is stored on a user's hard
drive, possibly without the user's knowledge, which are used to track
demographic information and to target advertising, may become subject to laws
limiting or prohibiting their use. A number of Internet commentators, advocates
and governmental bodies in the United States and other countries have urged the
passage of laws limiting or abolishing the use of cookies. Limitations on or
elimination of our use of cookies could limit the effectiveness of our
promotions, which could have a material adverse effect on our business, results
of operations and financial condition.

     The European Union has adopted a directive that imposes restrictions on the
collection and use of personal data. Under the directive, EU citizens are
guaranteed rights to access their data, rights to know where the data
originated, rights to have inaccurate data rectified, rights to recourse in the
event of unlawful processing and rights to withhold permission to use their data
for direct marketing. The directive could,

                                       32
<PAGE>


among other things, affect U.S. companies that collect information over the
Internet from individuals in EU member countries, and may impose restrictions
that are more stringent than current Internet privacy standard in the United
States. In particular, companies with offices located in EU countries will not
be allowed to send personal information to countries that do not maintain
adequate standards of privacy. The directive does not, however, define what
standards of privacy are adequate. As a result, the directive may adversely
affect the activities of entities such as Webstakes that engage in data
collection from users in EU member countries.

     We are taking steps to prepare for the institution of any safeguards to
privacy and procedures that could limit access, storage, use and transport of
individual data elements. These steps include:

          o carefully identifying the source, timing and classification of each
            data element collected;

          o segregating data elements with matching identifiers in our data
            warehouse to allow for separate processes, regulations and
            treatments by type of data; and

          o making the maintenance of members' elections with respect to the
            receipt of information a priority in the handling and conveyance of
            information from and to members.

  Regulation of the Internet

     We are currently subject to federal and state laws and regulations that are
applicable to specific activities on the Internet. Although there are currently
few laws or regulations directly governing access to or commerce on the
Internet, due to the increasing popularity and use of the Internet, a number of
laws and regulations may be adopted regarding user privacy, pricing, acceptable
content, taxation and quality of products and services. In addition, the
government has been requested to regulate and impose fees on Internet service
providers and online service providers in a manner similar to long distance
telephone carriers. This regulation may place our activities under increased
regulation, increase our cost of doing business, decrease the growth in Internet
use or otherwise have a material adverse effect on our business. See "Risk
Factors-- Laws and regulations pertaining to the Internet may adversely affect
our business.

EMPLOYEES

     As of May 31, 1999, we employed 62 people including 31 in sales and
marketing, 17 in engineering and product development and 14 in accounting, human
resources, business operations and administration. We are not subject to any
collective bargaining agreements and believe that our relationship with our
employees is good.

FACILITIES

     Our principal executive offices are currently located in two separate
facilities in New York, New York. These facilities consist of a total of
approximately 11,250 square feet and are under leases which expire in March 2000
and February 2002. We also lease approximately 3,400 square feet of space for
our sales and marketing efforts in San Francisco, California. We will need
additional space in the near future, and we believe that suitable additional
space will be available on commercially reasonable terms.

LEGAL PROCEEDINGS

     We are not a party to any material legal proceedings.

                                       33

<PAGE>
                                   MANAGEMENT

     The following table sets forth our directors and executive officers, their
ages and the positions held by them with us.

<TABLE>
<CAPTION>
NAME                                   AGE                       POSITION
------------------------------------   ---   -------------------------------------------------
<S>                                    <C>   <C>
Steven H. Krein.....................   29    Chairman of the Board of Directors and
                                             Chief Executive Officer
Daniel J. Feldman...................   29    President and Director
Christopher F. Bragas...............   39    Vice President of Finance and
                                             Chief Financial Officer
Joseph Lamport......................   42    Vice President of Partnership Services and
                                             Product Development
Kenneth J. Grosso...................   31    Vice President of Partnership Development
Alfonzso Holmes.....................   34    Chief Technology Officer
Arnold Greenberg....................   66    Director
Lisa Z. Crane.......................   40    Director*
Kristopher A. Wood..................   27    Director*
            ........................         Director*
</TABLE>

------------------
* Nominee

     Steven H. Krein, a founder of Webstakes.com, has been our Chief Executive
Officer and Chairman of the Board of Directors since January 1999. From our
inception to January 1999, he served as President and director. Prior to
founding Webstakes.com, from October 1994 to May 1996, Mr. Krein was Assistant
Publisher of Law Journal EXTRA!, an online service for lawyers from American
Lawyer Media, Inc. In 1993, Mr. Krein co-founded LINK, an online service for
lawyers in Delaware. Mr. Krein received his J.D. degree from Widener University
School of Law and his B.A. degree from the University of Maryland.

     Daniel J. Feldman, a founder of Webstakes.com, has been President since
January 1999 and a director since our inception. Mr. Feldman served as Vice
President of Webstakes.com from January 1998 until January 1999. He was
Webstakes.com's Director of Operations from January 1996 to December 1996 and
Director of Sales and Marketing from January 1997 to December 1997. Prior to
founding Webstakes.com, from 1995 through 1996, Mr. Feldman was employed by Law
Journal EXTRA!, where he was Director of Product Development. Previously,
Mr. Feldman founded Closeout Network, Inc., a directory service for the closeout
industry. Mr. Feldman received his B.A. degree in International Business from
George Washington University.

     Christopher F. Bragas has been Vice President of Finance and Chief
Financial Officer of Webstakes.com since September 1998. From August 1989
through August 1998, Mr. Bragas was the Senior Vice President of Finance at Don
Jagoda Associates, Inc., an international promotions agency. From July 1981
through August 1989, Mr. Bragas was in public accounting, serving with
PricewaterhouseCoopers, LLP from February 1983 to July 1988. Mr. Bragas is a
C.P.A. and received his B.S. degree from State University of New York at
Oneonta.

     Joseph Lamport has been Vice President of Partnership Services and Product
Development since September 1998. Mr. Lamport is responsible for client service.
From 1992 to 1998, Mr. Lamport served as Publisher of Law Journal EXTRA! for
American Lawyer Media, Inc. During his tenure, Mr. Lamport established and
served as publisher of both Counsel Connect, an online interactive service for
lawyers, and Law Journal EXTRA! From 1987 to 1992, Mr. Lamport was an attorney
with the law firm Cleary, Gottlieb, Stern and Hamilton. Mr. Lamport received his
J.D. degree from Cardozo Law School and his B.A. degree from Yale University.
Mr. Lamport served as a director of Webstakes.com from its inception in January
1996 through June 1999.

     Kenneth J. Grosso joined Webstakes.com in August 1997 as Director of Sales.
Mr. Grosso has served as Vice President of Partnership Development, responsible
for sales, since May 1998. From 1992 to 1997, Mr. Grosso was employed with KPMG,
L.L.P., as an audit manager. Mr. Grosso founded Zonk Productions,

                                       34
<PAGE>
a New York promotions company, in 1994 and served as its president through 1996.
Mr. Grosso is a C.P.A. and received his B.A. degree in Accounting from Pace
University.

     Alfonzso Holmes joined Webstakes.com in August 1997 as Director of Systems
Architecture and was Vice President of Technology from January 1998 until May
1998. In March 1999, Mr. Holmes returned to Webstakes.com as Chief Technology
Officer. From October 1998 to March 1999, Mr. Holmes was employed by Advanced
Solutions Inc. as Vice President of Technology Development. From 1995 to 1997,
Mr. Holmes was Director of Technology at Comedy Central, a subsidiary of Viacom
and Time Warner/HBO. Prior to that time, Mr. Holmes was employed by
Communications Workers of America in various positions, including application
developer, network administrator and director of operations. Mr. Holmes has over
14 years of technology experience. Mr. Holmes received his B.A. degree in
English from West Virginia University.

     Arnold Greenberg has served as a director of Webstakes.com since June 1999.
Mr. Greenberg co-founded Snapple Beverages in 1972, and he served as Chief
Operating Officer and Vice Chairman of the Board of Snapple until 1994. He is a
trustee of Mount Sinai-New York University Medical Center and Health Service and
a trustee of the New York University Medical School. Mr. Greenberg is also a
director of Volatile Media, a seller of custom compilation music compact discs,
and of the Lipper/Lumi High Income Bond Fund, Ltd.

     Lisa Z. Crane has agreed to serve as a director of Webstakes.com upon
completion of this offering. Since January 1999, Ms. Crane has served as Vice
President of NBC Interactive and general manager of NBC.com. Prior to joining
NBC Interactive, Ms. Crane served as Vice President of Sales and Marketing of
Universal Studios Online from May 1997 to December 1998, Vice President of
Marketing of the New Media Group from September 1996 to May 1997, and Vice
President of the Consumer Products Group from August 1995 to September 1996. She
was also director of Corporate Sales and Sponsorships for ECO Expo from 1992 to
1993 and was President of Zola Fine Art from 1986 to 1992. Ms. Crane received
her M.B.A. degree from Pepperdine University and her B.A. degree from the
University of California, Los Angeles.

     Kristopher A. Wood has agreed to serve as a director of Webstakes.com upon
completion of this offering. Since September 1997, Mr. Wood has served as
Managing Director of XL Ventures, Inc., the venture capital investment
subsidiary of Big Flower Holdings, Inc., an advertising, marketing and
information services company. Since September 1995, Mr. Wood has also served as
Managing Director--Mergers & Acquisitions of Big Flower Holdings, Inc. (and its
predecessor, Big Flower Press Holdings, Inc.). From July 1993 to May 1995,
Mr. Wood was a member of the Global Finance Group at BT Alex. Brown
Incorporated. Mr. Wood also serves on the boards of directors of About.com, Inc.
and Andromedia, Inc. Mr. Wood received his B.S. degree in economics from The
Wharton School of the Univerisity of Pennsylvania.

RIGHT OF INVESTORS TO DESIGNATE BOARD MEMBERS

     The terms of the purchase agreement executed in conjunction with our
June 1999 sale of class B mandatorily redeemable convertible preferred stock
permit the holders of a majority of these shares, or the majority of the shares
of common stock into which these shares are converted, to designate two
directors to serve on our board. We are required to appoint these designees to
the board and to have them elected. This right to designate directors expires
three years after the closing of this offering. Mr. Wood and           have been
designated by these holders.

OBSERVATION RIGHTS OF INVESTORS

     Under the terms of the stock purchase agreement executed in conjunction
with the sale of our class B mandatorily redeemable convertible preferred stock,
any purchaser who purchased $5.0 million or more of that stock is entitled to
have an agent present at all meetings of our board of directors, for a period of
three years from the closing of this offering, unless that purchaser has one or
more of its nominees placed on our board of directors as described above.

                                       35
<PAGE>
CLASSES OF THE BOARD OF DIRECTORS

     Our board of directors is divided into three classes that serve staggered
three-year terms as follows:

<TABLE>
<CAPTION>
CLASS                                             EXPIRATION OF TERM          MEMBERS
-----------------------------------------------   ------------------    -------------------
<S>                                               <C>                   <C>
Class I........................................          2000           Daniel J. Feldman,
                                                                        Arnold Greenberg
Class II.......................................          2001           Steven H. Krein,
                                                                        Lisa Z. Crane*
Class III......................................          2002           Kristopher A. Wood*
                                                                                          *
</TABLE>

------------------
* Nominee

COMMITTEES OF THE BOARD OF DIRECTORS

     The board of directors recently established a compensation committee and an
audit committee. The compensation committee evaluates our compensation policies,
determines compensation for our executive officers and administers our stock
option plans. The members of the compensation committee are
                  . The audit committee reviews the scope of our audit, the
engagement of our independent auditors and their audit reports. The audit
committee also meets with the financial staff to review accounting procedures
and reports. The audit committee currently consists of                   .

DIRECTOR COMPENSATION

     We do not pay directors cash compensation. Directors are reimbursed for the
expenses they incur in attending meetings of the board or board committees.
Non-employee directors are eligible to receive options to purchase common stock
awarded under our 1999 Equity Compensation Plan.

     Each non-employee director will be granted, upon the closing of this
offering, an option to purchase 16,000 shares that will have an exercise price
equal to the offering price in this offering. After this offering, each director
who is not an employee will receive an option to purchase 16,000 shares upon his
or her election to the board and will receive an option to purchase 5,000 shares
upon his or her reelection to the board. The exercise price of options granted
after this offering will be the fair market value of the stock on the date of
the grant.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Prior to our completion of this offering, our board of directors as a whole
made decisions relating to the compensation of our executive officers. During
this time, Messrs. Krein, Feldman and Lamport participated in all discussions
concerning the compensation of our executive officers, except that each was
excluded from discussions regarding their own compensation. None of our officers
serves as a member of the board of directors or compensation committee of any
entity that has one or more executive officers serving on our compensation
committee.

EXECUTIVE COMPENSATION

     The following table sets forth information for the fiscal year ended
December 31, 1998 concerning compensation we paid to our Chief Executive
Officer. No other executive officer received more than $100,000 in compensation
for 1998.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                              ANNUAL COMPENSATION
                                                                                            -----------------------
NAME AND PRINCIPAL POSITION                                                                 FISCAL YEAR     SALARY
-----------------------------------------------------------------------------------------   -----------    --------
<S>                                                                                         <C>            <C>
Steven H. Krein
  Chairman of the Board and Chief Executive Officer......................................       1998       $131,250
</TABLE>

     No stock options were granted to Mr. Krein in 1998 nor did he exercise any
options in 1999 or hold any unexercised stock options as of December 31, 1998.
In connection with employment agreements which will

                                       36
<PAGE>
become effective upon completion of this offering, Messrs. Krein and Feldman
will receive a base annual salary of $175,000 and $150,000 per year,
respectively, and a bonus of up to $100,000 each based on the attainment of
certain performance objectives. In addition, upon completion of this offering,
Messrs. Krein and Feldman will each be paid a bonus of $175,000. At the time of
execution of the employment agreement in June 1999, as an inducement to Messrs.
Krein and Feldman to enter into their respective agreements, they were each
granted 62,000 options to purchase common stock at $6.00 per share. The options
are exercisable for a period of ten years beginning on the date of grant and
vest over a two year period.

STOCK OPTION PLANS

  1999 Equity Compensation Plan

     We adopted the 1999 Equity Compensation Plan on June 8, 1999. The plan
provides for grants of incentive stock options, nonqualified stock options and
restricted stock to designated employees, advisors and consultants, and to
non-employees directors. By encouraging stock ownership, we seek to motivate
these individuals to contribute to our success. No options have been granted
under the 1999 Equity Compensation Plan to date.

     The plan authorizes up to 2,000,000 shares of common stock for issuance
under the plan. If options granted under the plan expire or are terminated for
any reason without being exercised, or shares of restricted stock are forfeited,
the underlying shares of common stock will again be available for issuance under
the plan.

     The compensation committee of the board of directors administers and
interprets the plan. The compensation committee has the sole authority to
determine the type, size and terms of the grants, including the individuals to
whom grants shall be made.

     Grants may be made to any of our employees or any employee of our
subsidiaries and to any non-employee member of our board of directors. Key
consultants and advisors who perform services for us or any of our subsidiaries
are eligible if they render bona fide services, other than as part of the offer
or sale of securities in a capital-raising transaction. No more than 500,000
shares and/or options in the aggregate may be granted or awarded to any
individual in any calendar year.

     Incentive stock options may be granted only to employees. Non-qualified
stock options may be granted to employees, non-employee directors and key
consultants and advisors. The exercise price of an option is determined by the
compensation committee but in no event can the exercise price of an incentive
stock option be less than the fair market value of a share of common stock on
the date the incentive stock option is granted. The exercise price of an
incentive stock option granted to an employee who owns more than 10% of the
common stock may not be less than 110% of the fair market value of a share of
common stock on the date of grant.

     The compensation committee determines the term of each option, up to a
maximum of ten years from the date of grant, except that the term of an
incentive stock option granted to an employee who owns more than 10% of the
common stock may not exceed five years from the date of grant.

     The compensation committee shall determine the number of shares of
restricted stock granted to a participant. Grants of restricted stock may be
conditioned on such performance requirements, vesting provisions, transfer
restrictions or other restrictions and conditions as the compensation committee
determines in its sole discretion.

     The compensation committee may amend or terminate the plan at any time,
subject to stockholder approval if required. The plan will terminate in June
2009, unless the compensation committee terminates it earlier or extends it with
approval of the stockholders.

     In the event of a change of control, whether by merger or asset sale or a
sale by the stockholders of more than 50% of the total voting power of
Webstakes.com, the compensation committee may determine that all outstanding
options shall immediately vest, and the restrictions on all outstanding
restricted stock shall immediately lapse.

     Upon the occurrence of an event where we are not the surviving entity or
where we survive only as a subsidiary of another entity, unless the compensation
committee determines otherwise, all outstanding grants

                                       37
<PAGE>
shall be assumed by or replaced with comparable options or stock by the
surviving corporation. In addition, the compensation committee may require that
grantees surrender their outstanding options in exchange for payment by us, in
cash or common stock, at an amount equal to the amount by which the then fair
market value of the shares of common stock subject to the grantee's unexercised
options exceeds the exercise price of those options and/or after giving grantees
an opportunity to exercise their outstanding options, terminate any or all
unexercised options.

     Options to purchase 43,385 shares of common stock are outstanding under
this plan.

  Stock Option Plan

     Options to purchase 450,000 shares of common stock are outstanding under
the Stock Option Plan. Holders of these options were given the right to purchase
common stock at the market price on the date of grant as determined by the board
of directors. These options vest ratably on an annual basis over a four-year
period. The other terms of this predecessor plan are similar in all material
respects to the 1999 Equity Compensation Plan.

EMPLOYMENT AGREEMENTS

     We have entered into employment agreements which will become effective upon
completion of this offering with Messrs. Krein and Feldman pursuant to which
Mr. Krein will serve as Chairman of the Board and Chief Executive Officer and
Mr. Feldman will serve as President. In connection with these employment
agreements, Messrs. Krein and Feldman will receive base annual salaries of
$175,000 and $150,000 per year, respectively, and a bonus of up to $100,000 each
based on the attainment of certain performance objectives. In addition, upon
completion of this offering, Messrs. Krein and Feldman will each be paid a bonus
of $175,000. At the time of execution of the employment agreements in June 1999,
as an inducement to Messrs. Krein and Feldman to enter into their respective
agreements, they were each granted 62,000 options to purchase common stock at
$6.00 per share. The options are exercisable for a period of ten years beginning
on the date of grant and vest over a two year period. If either of
Messrs. Krein or Feldman is terminated for any reason other than for cause, the
employment agreements provide that he is entitled to a severance payment equal
to one year of his base salary. The employment agreements contain provisions
restricting the rights of Messrs. Krein or Feldman to compete with us under
certain events of termination. They also contain standard confidentiality
provisions. Please see "Management--Executive Compensation."

                              CERTAIN TRANSACTIONS

     In June 1999, we entered into a two-year sponsorship agreement with Excite
under which Excite agreed to promote webstakes.com through ad banner placements
and links to webstakes.com and its promotions on Excite.com, WebCrawler.com and
Classified 2000.com and through the use of a webstakes.com personalized front
page made available by Excite. As part of this agreement, we received a
guarantee of a total number of impressions per year. The fee to be paid to
Excite under this agreement is $5.6 million, $685,000 of which has been paid,
and the balance of which is due 10 days following the completion of this
offering. At Home Corporation, the parent company of Excite, is one of our
stockholders.

     In June 1999, we entered into a services agreement with MatchLogic, Inc., a
wholly owned subsidiary of Excite, pursuant to which MatchLogic will provide ad
serving and targeting, data processing, analysis and enhancement services to
Webstakes.com. The term of the agreement is two years. The fee to be paid to
MatchLogic under this agreement is $13.1 million, $2.5 million of which has been
paid and the balance of which is due 10 days following completion of this
offering. See "Use of Proceeds."

     In June 1999, we redeemed all outstanding shares of class A mandatorily
redeemable convertible preferred stock and 1,714,608 shares of common stock for
an aggregate amount of $24.0 million. To finance the redemption and to provide
working capital, we issued shares of new class B mandatorily redeemable
convertible preferred stock to a group of investors, including At Home
Corporation, XL Ventures, a subsidiary of Big Flower Holdings and Travelers, for
an aggregate purchase price of $40.0 million. Upon completion of this offering,
the class B mandatorily redeemable convertible preferred stock will
automatically convert into 6,666,667 shares of common stock.

                                       38

<PAGE>
                             PRINCIPAL STOCKHOLDERS

     The following table provides certain information regarding the beneficial
ownership of our common stock as of June   , 1999 and as adjusted to reflect the
sale of the                 shares of our common stock offered in this offering,
by:

          o each person or entity who beneficially owns more than 5% of our
     stock;

          o each of our directors and director nominees;

          o our named executive officer; and

          o all executive officers and directors as a group.

     Unless otherwise indicated, the address of each person named in the table
below is Webstakes.com, Inc. 11 West 19th Street, New York, New York 10010. The
amounts and percentages of common stock beneficially owned are reported on the
basis of regulations of the Securities and Exchange Commission governing the
determination of beneficial ownership of securities. Under the rules of the
Commission, a person is deemed to be a "beneficial owner" of a security if that
person has or shares "voting power," which includes the power to vote or to
direct the voting of such security, or "investment power," which includes the
power to dispose of or to direct the disposition of such security. A person is
also deemed to be a beneficial owner of any securities of which that person has
a right to acquire beneficial ownership within 60 days. Under these rules, more
than one person may be deemed a beneficial owner of the same securities and a
person may be deemed to be a beneficial owner of securities as to which such
person has no economic interest. The information set forth in the following
table (1) assumes that the over-allotment option by the underwriters has not
been exercised, (2) excludes any shares purchased in this offering by the
respective beneficial owner, and (3) reflects the conversion of all shares of
class B mandatorily redeemable convertible preferred stock upon completion of
this offering.

<TABLE>
<CAPTION>
                                                                                               PERCENT OF SHARES
                                                                                              BENEFICIALLY OWNED
                                                                 NUMBER OF SHARES      ---------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER                             BENEFICIALLY OWNED    BEFORE OFFERING    AFTER OFFERING
--------------------------------------------------------------   ------------------    ---------------    --------------
<S>                                                              <C>                   <C>                <C>
Steven H. Krein...............................................        1,470,000              13.4%                %
Daniel J. Feldman.............................................        1,470,000              13.4
At Home Corporation(1)........................................        1,166,667              10.7
XL Ventures, LLC(2)...........................................        1,166,667              10.7
The Travelers Insurance Company(3)............................          833,333               7.6
Invesco Private Capital Inc.(4)(5)............................          691,667               6.3
Joseph Lamport................................................          588,000               5.4
Arnold Greenberg(6)...........................................          166,667               1.5
Lisa Z. Crane(7)**............................................          166,667               1.5
Kristopher Wood(6)(8)**.......................................        1,166,667              10.7
            (6)(9)**..........................................
All executive officers and directors as a group (4 persons)..         3,694,667              34.8
</TABLE>

------------------
  * Less than 1% of total.

 ** Nominee

 (1) The address of At Home Corporation is 425 Broadway Street, Redwood, CA
     94063.

 (2) The address of XL Ventures, LLC is 1105 North Market Street, Suite 1300,
     Wilmington, DE 19801.

 (3) The address of The Travelers Insurance Company is 388 Greenwich Street,
     36th Floor, New York, NY 10013.

                                              (Footnotes continued on next page)

                                       39
<PAGE>
(Footnotes continued from previous page)
 (4) The address of Invesco is 1166 Avenue of the Americas, New York, NY 10036.

 (5) Includes 691,667 shares of which Invesco Private Capital Inc. has
     discretionary authority for five accounts, including dispositive and voting
     control. Invesco Private Capital Inc. disclaims beneficial ownership of
     these shares.

 (6) Does not include 16,000 shares issuable upon the exercise of stock options
     which will be granted upon completion of this offering.

 (7) Includes 166,667 shares held by National Broadcasting Company, Inc.
     Ms. Crane is an employee of National Broadcasting Company, Inc. Does not
     include 16,000 shares issuable upon the exercise of stock options
     transferred by Ms. Crane pursuant to a contractual obligation to National
     Broadcasting Company, Inc. Ms. Crane disclaims beneficial ownership of all
     of these shares.

 (8) Includes 1,166,667 shares held by XL Ventures, LLC. Mr. Wood is managing
     director of XL Ventures, Inc., an affiliate of XL Ventures, LLC. Mr. Wood
     disclaims beneficial ownership of these shares.

 (9) [New Director]

                                       40
<PAGE>
                          DESCRIPTION OF CAPITAL STOCK

GENERAL

     The following description of our capital stock and provisions of our
certificate of incorporation and our bylaws are summaries thereof and are
qualified by reference to our certificate of incorporation and our bylaws,
copies of which have been filed with the Commission as exhibits to our
registration statement, of which this prospectus forms a part.

     Upon the completion of this offering, our capital stock will consist of:

<TABLE>
<CAPTION>
                                                                                            PAR VALUE
TYPE OF CAPITAL STOCK                                                        AUTHORIZED     PER SHARE
--------------------------------------------------------------------------   ----------    ------------
<S>                                                                          <C>           <C>
Common....................................................................   50,000,000    $       0.01
Preferred Stock...........................................................    1,000,000    no par value
</TABLE>

COMMON STOCK

     The holders of the common stock are entitled to receive dividends and other
distributions in cash, stock or property from our assets that are legally
available for distribution, subject to any dividend preferences that may be
attributable to preferred stock that may be outstanding. The form, amount and
timing of dividends will be determined by our board of directors.

     Holders of the common stock may vote on all matters submitted for a vote of
our stockholders. Each share of common stock is entitled to one vote. Cumulative
voting is not authorized by our certificate of incorporation.

     Voting may be done by written consent when one or more stockholders have
enough votes to approve a particular issue by themselves. There are no
preemptive, conversion, redemption or sinking fund provisions applicable to the
common stock. Each outstanding share of common stock is, and all shares of
common stock to be outstanding upon completion of this offering will be, duly
and validly issued, fully paid and non-assessable. In the event of our
liquidation, dissolution or winding up, the holders of common stock are entitled
to share ratably in the assets available for distribution after the claims of
all senior security holders and creditors are satisfied.

PREFERRED STOCK

     Our board of directors, without further action by the stockholders, is
authorized to issue an aggregate of 1,000,000 shares of preferred stock in one
or more series. The issuance of preferred shares is subject to restrictions
under Delaware law. The board may fix the rights, preferences and privileges of
the preferred stock, along with any limitations or restrictions. The preferred
stock could have voting or conversion rights that could adversely affect the
voting power or other rights of common stock holders. The issuance of preferred
stock could also have the effect, under certain circumstances, of delaying,
deferring or preventing a change of control of Webstakes.com. We currently have
no plans to issue any shares of preferred stock.

COMMON STOCK WARRANTS

     As of the date of this prospectus, we have issued and outstanding warrants
to purchase a total of 221,683 shares of common stock, at an exercise price of
$6.00 per share. The warrants contain anti-dilution provisions providing for
adjustments of the exercise price and the number of shares of common stock
underlying the warrants upon the occurrence of any recapitalization,
reclassification, stock dividend, stock split, stock combination or similar
transaction. The warrants expire in 10 years.

DELAWARE ANTI-TAKEOVER LAW

     We are subject to the provisions of Section 203 of the Delaware General
Corporation Law regulating corporate takeovers. This section prevents certain
Delaware corporations, under certain circumstances, from engaging in a "business
combination" with:

          o a stockholder who owns 15% or more of our outstanding voting stock
            (otherwise known as an "interested stockholder"),

                                       41
<PAGE>
          o an affiliate of an interested stockholder or

          o an associate of an interested stockholder,

for three years following the date that the stockholder became an "interested
stockholder." A "business combination" includes a merger or sale of more than
10% of our assets.

     However, the above provisions of Section 203 do not apply if:

          o our board approves the transaction that made the stockholder an
            "interested stockholder," prior to the date of that transaction;

          o after the completion of the transaction that resulted in the
            stockholder becoming an "interested stockholder," that stockholder
            owned at least 85% of our voting stock outstanding at the time the
            transaction commenced, excluding shares owned by persons who are
            both Webstakes.com officers and directors; or

          o on or subsequent to the date of the transaction, the business
            combination is approved by our board and authorized at a meeting of
            our stockholders by an affirmative vote of at least two-thirds of
            the outstanding voting stock not owned by the "interested
            shareholder."

     This statute could prohibit or delay mergers or other change in control
attempts, and thus may discourage attempts to acquire us.

CLASSIFIED BOARD OF DIRECTORS

     Our bylaws divide our board of directors into three classes, with regular
three-year staggered terms and initial terms of three years for class III
directors, two years for class II directors and one year for class I directors.
This could prevent a party who acquires control of the majority of the
outstanding voting stock from immediately obtaining control of our board of
directors.

OUR BYLAWS

     Our bylaws provide that special meetings of our stockholders may only be
called by our president, board or the holders of at least one-fifth of all the
shares of any class outstanding and entitled to vote. This may have the effect
of delaying or preventing a change in control.

     Our bylaws provide that the vote of a majority of all our directors or a
vote of the majority of the outstanding stock entitled to vote is required to
amend or repeal our bylaws.

     Our bylaws provide that any action that may be taken at a meeting of the
stockholders may be taken without a meeting if:

          o the action is authorized by the unanimous written consent of all
            stockholders entitled to vote at a meeting for these purposes; or

          o the action is authorized by written consent of that number of
            stockholders entitled to vote on the issue as would be required to
            approve the action at a meeting of stockholders attended by all
            stockholders entitled to vote upon the issue.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

     Our Amended and Restated Certificate of Incorporation includes a provision
that eliminates the personal liability of its directors for monetary damages for
breach of fiduciary duty as a director, except for liability:

          o for any breach of the director's duty of loyalty to Webstakes.com or
            its stockholders;

          o for acts or omissions not in good faith or that involve intentional
            misconduct or a knowing violation of law;

          o under the section 174 of the Delaware General Corporation Law
            regarding unlawful dividends and stock purchases; or

          o for any transaction from which the director derived an improper
            personal benefit.

These provisions are permitted under Delaware law.

                                       42
<PAGE>
     Our bylaws provide that:

          o we must indemnify our directors and officers to the fullest extent
            permitted by Delaware law, subject to very limited exceptions;

          o we may indemnify our other employees and agents to the same extent
            that we indemnify our officers and directors, unless otherwise
            required by law, our Amended and Restated Certificate of
            Incorporation, our Bylaws or agreements; and

          o we must advance expenses, as incurred, to our directors and
            executive officers in connection with a legal proceeding to the
            fullest extent permitted by Delaware Law, subject to very limited
            exceptions.

     We have obtained directors' and officers' insurance for our directors,
officers and some employees for specified liabilities.

     The limitation of liability and indemnification provisions in our Amended
and Restated Certificate of Incorporation and Bylaws may discourage stockholders
from bringing a lawsuit against directors for breach of their fiduciary duty.
They may also have the effect of reducing the likelihood of derivative
litigation against directors and officers, even though an action of this kind,
if successful, might otherwise benefit us and our stockholders. Furthermore, a
stockholder's investment may be adversely affected to the extent we pay the
costs of settlement and damage awards against directors and officers pursuant to
these indemnification provisions. However, we believe that these indemnification
provisions are necessary to attract and retain qualified directors and officers.

     At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees regarding which indemnification is sought,
nor are we aware of any threatened litigation that may result in claims for
indemnification.

TRANSFER AGENT AND REGISTRAR

     The Transfer Agent and Registrar for our common stock is
                  .

                        SHARES ELIGIBLE FOR FUTURE SALE

     Sales of substantial amounts of our common stock in the public market or
the perception that these sales could occur could adversely affect prevailing
market prices of our common stock. They could also adversely affect our ability
to raise capital at a time and on terms favorable to us.

     Upon completion of this offering, we will have outstanding a total of
            shares of our common stock. Of these shares, all of the shares sold
in this offering will be freely tradable without restriction or further
registration under the Securities Act, unless such shares are purchased by
"affiliates" as that term is defined in Rule 144 under the Securities Act. The
remaining           shares of common stock held by existing stockholders 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 Rule 144
or Rule 701 under the Securities Act. These rules are summarized below.

     Subject to the lock-up agreements described below and the provisions of
Rules 144, 144(k) and 701, additional shares will be available for sale in the
public market as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES                                                       DATE
------------------------------------------  -----------------------------------------------------------

<S>                                         <C>
                                            After 180 days from the date of this prospectus (subject to
                                              volume limitations)

                                            Upon the filing of a registration statement to register for
                                              resale shares of common stock issuable upon the exercise
                                              of options granted under our stock option plans.

                                            At various times after 180 days from the date of this
                                              prospectus.
</TABLE>

                                       43
<PAGE>
LOCK-UP AGREEMENTS

     Our officers and directors, holders of                shares of our common
stock and holders of warrants to purchase        shares of our common stock,
have agreed not to sell or otherwise dispose of any shares of our common stock
for a period of 180 days after the date of this prospectus, without the prior
written consent of Bear, Stearns & Co. Inc. See "Underwriting."

RULE 144

     In general, under Rule 144, a person who has beneficially owned shares of
our common stock for at least one year can sell within any three-month period a
number of shares that does not exceed the greater of:

          o 1% of the number of shares of common stock then outstanding, which
            will equal approximately       shares immediately after this
            offering; or

          o the average weekly trading volume during the four calendar weeks
            preceding the filing of a notice on Form 144 with respect to the
            sale.

Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of public information about us.

RULE 144(K)

     Under Rule 144(k), a person who is not one of our affiliates at any time
during the 90 days preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least two years, can sell such shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.

RULE 701

     In general, under Rule 701, any of our employees, directors, consultants or
advisors who purchase shares from us in connection with a compensatory stock
option plan or other written agreement are eligible to resell these shares
90 days after the date of this offering in reliance on Rule 144, without
compliance with certain restrictions contained in Rule 144, including the
holding period.

REGISTRATION RIGHTS

     After this offering, holders of 6,666,667 shares of common stock will be
entitled to require us to register their shares for public sale, pursuant to a
Registration Rights Agreement between us and the purchasers of the class B
mandatorily redeemable convertible preferred stock (who will become holders of
common stock after this offering). Holders of 25% of these shares (and any
people who purchase shares of common stock from these holders in a private
transaction) have the right to require us to file up to three registration
statements to allow for the public sale of their common stock. The number of our
shares subject to these registration rights which may be registered in a
non-underwritten offering is limited to 15% of the number of shares of our
common stock outstanding at the time of that registration. This 15% limit may be
exceeded if a nationally-recognized investment bank determines that a greater
number of shares may be registered without a material adverse effect on the
market for our securities. These registration statements must be maintained
effective for up to 180 days. In addition, these holders (and their transferees)
and the holder of warrants to purchase 221,683 shares of common stock have the
right to include their shares in any registered offering of our securities
(other than in connection with some corporate transactions and employee benefit
plans). We are required to pay most of the expenses related to these
registrations, excluding underwriters' commissions and discounts.

     We intend to file registration statements to register shares of common
stock reserved for issuance under our Stock Option Plan and the 1999 Equity
Compensation Plan. These registration statements will permit the resale of
shares issued under these plans by non-affiliates in the public market without
restriction, subject to the lock-up agreements.

                                       44

<PAGE>
                                  UNDERWRITING

     The underwriters of this offering named below, for whom Bear, Stearns & Co.
Inc., ING Baring Furman Selz LLC, Thomas Weisel Partners LLC and Wit Capital
Corporation are acting as representatives, have severally agreed with us,
subject to the terms and conditions of the underwriting agreement, to purchase
from us the aggregate number of shares of common stock set forth opposite their
respective names below:

<TABLE>
<CAPTION>
                                                                                               NUMBER
UNDERWRITER                                                                                   OF SHARES
-------------------------------------------------------------------------------------------   ---------
<S>                                                                                           <C>
Bear, Stearns & Co. Inc....................................................................
ING Baring Furman Selz LLC.................................................................
Thomas Weisel Partners LLC.................................................................
Wit Capital Corporation....................................................................

                                                                                              ---------
     Total.................................................................................
                                                                                              ---------
                                                                                              ---------
</TABLE>

     The underwriting agreement provides that the obligations of the
underwriters are subject to approval of certain legal matters by counsel and to
various other conditions. We have agreed to indemnify the several underwriters
against certain liabilities, including liabilities under the Securities Act, and
where such indemnification is unavailable, to contribute to payments that the
underwriters may be required to make in respect of such liabilities. The nature
of the underwriters' obligations is that they are committed to purchase and pay
for all of the above shares of common stock if any are purchased.

     If the underwriters sell more than the total number set forth in the table
above, the underwriters have an option to buy up to an additional        shares
to cover such sales from us. The underwriters may exercise that option for
30 days. If any shares are purchased pursuant to this option, the underwriters
will severally purchase shares in the same proportion as set forth in the table
above.

     The underwriters, at our request, have reserved for sale at the initial
public offering price up to        of the shares of common stock to be sold in
this offering for sale to our employees and directors and other persons
designated by us. The number of shares available for sale to the general public
will be reduced to the extent that any reserved shares are purchased. Any
reserved shares not so purchased will be offered by the underwriters on the same
basis as the other shares offered hereby.

     The underwriters do not expect to confirm sales of common stock to any
accounts over which they exercise discretionary authority.

     We, all of our directors and officers and other stockholders holding an
aggregate of        shares of our common stock have agreed that, subject to
certain exceptions, for a period of 180 days from the date of this prospectus,
without the prior written consent of Bear, Stearns & Co. Inc., which may be
waived, will not, directly or indirectly, (i) issue, sell, offer or agree to
sell, grant any option for the sale of, pledge, make any short sale, establish
an open "put equivalent position" within the meaning of Rule 16a-1(h) under the
Exchange Act or otherwise dispose of any shares of our common stock (or
securities convertible into, exercisable for or exchangeable for our common
stock) or (ii) enter into any swap, derivative transaction or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of our common stock, whether any of the transactions described in
clause (i) or (ii) above is to be settled by delivery of our common stock or
those other securities, in cash or otherwise. This restriction does not apply to
bona fide gifts or, in the case of stockholders who are corporations, limited
liability companies or partnerships, transfers to these stockholders'
affiliates, shareholders, members or partners, provided that in each case, the
recipients agree in writing to abide (and in the case of non-individuals certify
in writing that they have always abided since the original date of the
agreement) by these restrictions. In addition, this restriction does not apply
to shares of our common stock purchased in the public market after this
offering.

                                       45
<PAGE>
     The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters by us. These amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.

<TABLE>
<CAPTION>
                                                                                NO EXERCISE    FULL EXERCISE
                                                                                -----------    -------------
<S>                                                                             <C>            <C>
Per Share....................................................................     $               $
Total........................................................................
</TABLE>

     Shares sold by the underwriters to the public will initially be offered at
the public offering price set forth on the cover of this prospectus. Any shares
sold by the underwriters to securities dealers may be sold at a discount of up
to $   per share from the public offering price. Any such securities dealers may
resell any shares purchased from the underwriters to certain other brokers or
dealers at a discount of up to $   per share from the public offering price. If
all the shares are not sold at the offering price, the representative may change
the offering price and the other selling terms.

     Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for the common stock will
be determined by negotiations between us and the representatives of the
underwriters. Among the factors to be considered in those negotiations will be:

          o Our results of operations in recent periods;

          o Estimates of our prospects and the industry in which we compete;

          o An assessment of our management;

          o The general state of the securities markets at the time of this
            offering; and

          o The prices of similar securities of generally comparable companies.

     We will apply to have our common stock approved for quotation on the Nasdaq
National Market under the symbol IWIN. However, there can be no assurance that
an active or orderly trading market will develop for the common stock or that
the common stock will trade in the public markets subsequent to this offering at
or above the initial offering price.

     In connection with this offering, certain persons participating in this
offering may purchase and sell shares of common stock in the open market. These
transactions may include short sales, stabilizing transactions and purchases to
cover positions created by short sales. Short sales involve the sale by the
underwriters of a greater number of shares than they are required to purchase in
this offering. Stabilizing transactions consist of certain bids or purchases
made for the purpose of preventing or retarding a decline in the market price of
the common stock while this offering is in progress. The underwriters also may
impose a penalty bid. This occurs when a particular underwriter repays to the
underwriters a portion of the underwriting discount received by it because the
representative has repurchased shares sold by or for the account of such
underwriter in stabilizing or short covering transactions.

     These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.

     We estimate that the total expenses of this offering, excluding
underwriting discounts and commissions, will be approximately $       .

     A prospectus in electronic format is being made available on an Internet
web site maintained by Wit Capital. In addition, all dealers purchasing shares
from Wit Capital in this offering have agreed to make a prospectus in electronic
format available on web sites maintained by each of these dealers.

     Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998, Thomas Weisel Partners LLC has been named as a lead or co-manager on 37
filed public offerings of equity securities, of which 17 have been completed,
and has acted as a syndicate member in an additional 10 public offerings of
equity securities.

                                       46
<PAGE>
Thomas Weisel Partners LLC does not have any material relationship with us or
any of our officers, directors or controlling persons, except with respect to
its contractual relationship with us under the underwriting agreement entered
into in connection with this offering.

     Wit Capital, a member of the National Association of Securities Dealers,
Inc., will participate in this offering as one of the underwriters. The National
Association of Securities Dealers, Inc. approved the membership of Wit Capital
on September 4, 1997. Since that time, Wit Capital has acted as an underwriter,
e-Manager or selected dealer in over 80 public offerings. Except for its
participation as a representative in this offering, Wit Capital has no
relationship with us or any of our founders or significant stockholders.

                                 LEGAL MATTERS

     The validity of the common stock offered by this prospectus will be passed
upon for us by Reed Smith Shaw & McClay LLP, Philadelphia, Pennsylvania and for
the underwriters by O'Sullivan Graev & Karabell, LLP, New York, New York.

                                    EXPERTS

     The financial statements of Webstakes.com as of December 31, 1998 and 1997
and for each of the two years in the period ended December 31, 1998 and the
period from January 8, 1996 (inception) to December 31, 1996 included in this
prospectus have been included in reliance upon the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

                       WHERE YOU CAN GET MORE INFORMATION

     We have filed a registration statement on Form S-1 with the SEC. This
prospectus, which forms a part of that registration statement, does not contain
all of the information included in the registration statement. Certain
information is omitted and you should refer to the registration statement and
its exhibits. With respect to references made in this prospectus to any contract
or other document, such references are not necessarily complete and you should
refer to the exhibits attached to the registration statement for copies of the
actual contract or document. You may review a copy of the registration statement
at the SEC's public reference room in Washington, D.C., and at the SEC's
regional offices in Chicago, Illinois and New York, New York. Please call the
SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. Our SEC filings and the registration statement can also be
reviewed by accessing the SEC's Internet site at http://www.sec.gov. As a result
of this offering, we will become subject to the information and reporting
requirements of the Securities Exchange Act and, in accordance therewith, will
file periodic reports, proxy statements and other information with the SEC. Upon
approval of the common stock for the quotation on the Nasdaq National Market,
such reports, proxy and information statements and other information may also be
inspected at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington,
D.C. 20006.

     This prospectus includes statistical data regarding Internet usage and the
advertising industry which were obtained from industry publications, including
reports generated by International Data Corporation, the Direct Marketing
Association, Forrester Research, Inc. and Promo Magazine. These industry
publications generally indicate that they have obtained information from sources
believed to be reliable, but do not guarantee the accuracy and completeness of
such information. While we believe those industry publications to be reliable,
we have not independently verified such data. We also have not sought the
consent of any of these organizations to refer to their reports in this
prospectus.

                                       47

<PAGE>
                              WEBSTAKES.COM, INC.
                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S>                                                                                                        <C>
Report of Independent Accountants........................................................................        F-2

Balance Sheets at December 31, 1997 and 1998 and the three months ended
  March 31, 1999 (unaudited).............................................................................        F-3

Statements of Operations for the period from January 8, 1996 (inception) to December 31, 1996,
  the years ended December 31, 1997 and 1998 and the three months ended March 31, 1998 (unaudited) and
  March 31, 1999 (unaudited).............................................................................        F-4

Statements of Stockholders' Equity (Deficit) for the period from January 8, 1996 (inception) to
  December 31, 1996, the years ended December 31, 1997 and 1998 and the three months ended March 31, 1999
  (unaudited)............................................................................................        F-5

Statements of Cash Flows for the period from January 8, 1996 (inception) to December 31, 1996, the years
  ended December 31, 1997 and 1998 and for the three months ended March 31, 1998 (unaudited) and March
  31, 1999 (unaudited)...................................................................................        F-6

Notes to Financial Statements............................................................................        F-7
</TABLE>

                                      F-1

<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Webstakes.com, Inc.:

In our opinion, the accompanying balance sheets and the related statements of
operations, stockholders' equity (deficit) and cash flows present fairly, in all
material respects, the financial position of Webstakes.com, Inc. at
December 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1998, and the period
from January 8, 1996, (inception) to December 31, 1996, in conformity with
generally accepted accounting principles. 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 which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

                                          PRICEWATERHOUSECOOPERS LLP

February 19, 1999
1301 Avenue of the Americas
New York, New York

                                      F-2

<PAGE>
                              WEBSTAKES.COM, INC.
                                 BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                  DECEMBER 31                             PRO FORMA
                                                            ------------------------     MARCH 31,      AS OF MARCH 31,
                                                              1997          1998           1999              1999
                                                            ---------    -----------    ------------    ---------------
                                                                                        (UNAUDITED)       (UNAUDITED)
                                                                                                         (SEE NOTE 2)
<S>                                                         <C>          <C>            <C>             <C>
                         ASSETS
Current assets:
  Cash and cash equivalents..............................   $  85,365    $    17,573    $  2,812,554
  Accounts receivable, less allowance of $12,700,
    $125,000 and $175,694................................     113,336        615,230         579,287
  Prepaid expenses and other current assets..............       2,751        125,174         109,326
                                                            ---------    -----------    ------------
    Total current assets.................................     201,452        757,977       3,501,167
                                                            ---------    -----------    ------------
Fixed assets, net........................................     232,858        437,759         567,369
Capitalized software development costs, net..............          --             --         147,958
Other assets.............................................      41,708             --          20,043
                                                            ---------    -----------    ------------
    Total assets.........................................   $ 476,018    $ 1,195,736    $  4,236,537
                                                            ---------    -----------    ------------
                                                            ---------    -----------    ------------

     LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Accounts payable.......................................   $ 155,257    $   221,745    $    480,583
  Accrued liabilities....................................      22,081        169,136          91,537
  Deferred revenues......................................      23,333        117,297         105,260
  Capital lease obligations..............................          --         31,764          57,710
  Notes payable-related party, current portion...........     150,000      1,342,222          66,667
                                                            ---------    -----------    ------------
    Total current liabilities............................     350,671      1,882,164         801,757
                                                            ---------    -----------    ------------
  Notes payable, net of current portion..................          --         66,667          50,000
                                                            ---------    -----------    ------------
    Total liabilities....................................     350,671      1,948,831         851,757
                                                            ---------    -----------    ------------
Class A mandatorily redeemable convertible preferred
  stock--par value $100, 50,000 shares authorized and no
  shares issued and outstanding at December 31, 1997,
  1998, 50,000 shares issued and outstanding at
  March 31, 1999 (unaudited).............................          --             --       5,000,000
Stockholders' equity (deficit):
  Common stock--par value $.01, 10,000,000 shares
    authorized, 4,999,176, 5,714,184 and 5,714,184 shares
    issued and outstanding at December 31, 1997, 1998 and
    March 31, 1999 (unaudited), respectively.............      49,992         57,142          57,142
  Additional paid-in capital.............................     526,914      1,140,624       1,167,321
  Accumulated deficit....................................    (447,934)    (1,861,977)     (2,746,323)
  Deferred compensation..................................      (3,625)       (88,884)        (93,360)
                                                            ---------    -----------    ------------
    Total stockholders' equity (deficit).................     125,347       (753,095)     (1,615,220)
                                                            ---------    -----------    ------------
      Total liabilities and stockholders' equity
         (deficit).......................................   $ 476,018    $ 1,195,736    $  4,236,537
                                                            ---------    -----------    ------------
                                                            ---------    -----------    ------------
</TABLE>

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

                                      F-3

<PAGE>
                              WEBSTAKES.COM, INC.
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                           JANUARY 8, 1996
                                           (INCEPTION) TO                                       THREE MONTHS ENDED
                                            DECEMBER 31,       YEAR ENDED DECEMBER 31,              MARCH 31,
                                           ---------------    --------------------------    --------------------------
                                               1996              1997           1998           1998           1999
                                           ---------------    ----------    ------------    -----------    -----------
                                                                                            (UNAUDITED)    (UNAUDITED)
<S>                                        <C>                <C>           <C>             <C>            <C>
Revenues................................     $    79,584      $1,618,277    $  4,798,893    $ 1,066,610    $ 1,318,628

Operating expenses:
  Product development...................          59,073         181,260         548,818        101,875         13,451
  Selling and marketing.................         124,754       1,090,721       3,618,557        690,309      1,370,489
  General and administrative............         108,665         535,963       1,969,214        326,111        833,116
                                             -----------      ----------    ------------    -----------    -----------
     Total operating expenses...........         292,492       1,807,944       6,136,589      1,118,295      2,217,056
                                             -----------      ----------    ------------    -----------    -----------

  Loss from operations..................        (212,908)       (189,667)     (1,337,696)       (51,685)      (898,428)

Interest income (expense), net..........          (8,187)        (37,172)        (76,347)       (10,142)        14,082
                                             -----------      ----------    ------------    -----------    -----------

Net loss................................     $  (221,095)     $ (226,839)   $ (1,414,043)   $   (61,827)   $  (884,346)
                                             -----------      ----------    ------------    -----------    -----------
                                             -----------      ----------    ------------    -----------    -----------

Basic and diluted net loss per share....     $     (0.06)     $    (0.05)   $      (0.27)   $     (0.01)   $     (0.15)
                                             -----------      ----------    ------------    -----------    -----------
                                             -----------      ----------    ------------    -----------    -----------
Weighted average shares of common stock
  used in computing basic and diluted
  net loss per share....................       3,999,576       4,278,916       5,181,356      4,999,176      5,714,184
                                             -----------      ----------    ------------    -----------    -----------
                                             -----------      ----------    ------------    -----------    -----------

Pro forma basic and diluted net loss per
  share (see Note 2)....................

Shares of common stock used in computing
  pro forma basic and diluted net loss
  per share (see Note 2)................
</TABLE>

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

                                      F-4

<PAGE>
                              WEBSTAKES.COM, INC.
                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                      COMMON STOCK
                                                   -------------------    ADDITIONAL        DEFERRED      ACCUMULATED
                                                    SHARES     AMOUNT    PAID-IN-CAPITAL   COMPENSATION     DEFICIT        TOTAL
                                                   ---------   -------   ---------------   ------------   -----------   -----------
<S>                                                <C>         <C>       <C>               <C>            <C>           <C>
Issuance of common stock to founders at
  January 8, 1996 (inception)...................   3,999,576   $39,996     $    (9,967)                                 $    30,029
    Net and comprehensive loss..................                                                          $ (221,095)      (221,095)
                                                   ---------   -------     -----------                    -----------   -----------
Balance December 31, 1996.......................   3,999,576    39,996          (9,967)                     (221,095)      (191,066)
                                                   ---------   -------     -----------                    -----------   -----------
                                                   ---------   -------     -----------                    -----------   -----------
  Debt to equity conversion at book value plus
    interest....................................     999,600     9,996         533,256                                      543,252
  Stock options to non-employees................                                 3,625       $ (3,625)                           --
    Net and comprehensive loss..................                                                            (226,839)      (226,839)
                                                   ---------   -------     -----------       --------     -----------   -----------
Balance December 31, 1997.......................   4,999,176    49,992         526,914         (3,625)      (447,934)       125,347
                                                   ---------   -------     -----------       --------     -----------   -----------
                                                   ---------   -------     -----------       --------     -----------   -----------
  Debt to equity conversion at book value plus
    interest....................................     715,008     7,150         524,826                                      531,976
  Amortization of deferred compensation.........                                                3,625                         3,625
  Stock options to non-employees................                                88,884        (88,884)                           --
    Net and comprehensive loss..................                                                          (1,414,043)    (1,414,043)
                                                   ---------   -------     -----------       --------     -----------   -----------
Balance December 31, 1998.......................   5,714,184    57,142       1,140,624        (88,884)    (1,861,977)      (753,095)
                                                   ---------   -------     -----------       --------     -----------   -----------
                                                   ---------   -------     -----------       --------     -----------   -----------
  Adjustment of deferred compensation to
    non-employees to current fair value
    (unaudited).................................                               (15,587)        15,587                            --
  Stock options to non-employees (unaudited)....                                42,284        (42,284)                           --
  Amortization of deferred compensation
    (unaudited).................................                                               22,221                        22,221
    Net and comprehensive loss (unaudited)......                                                            (884,346)      (884,346)
                                                   ---------   -------     -----------       --------     -----------   -----------
Balance March 31, 1999 (unaudited)..............   5,714,184   $57,142     $ 1,167,321       $(93,360)    $(2,746,323)  $(1,615,220)
                                                   ---------   -------     -----------       --------     -----------   -----------
                                                   ---------   -------     -----------       --------     -----------   -----------
</TABLE>

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

                                      F-5
<PAGE>
                              WEBSTAKES.COM, INC.
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                     JANUARY 8, 1996                                  THREE MONTHS ENDED
                                                     (INCEPTION) TO     YEAR ENDED DECEMBER 31,            MARCH 31,
                                                     DECEMBER 31,      -------------------------   -------------------------
                                                         1996             1997          1998          1998          1999
                                                     ---------------   ----------   ------------   -----------   -----------
                                                                                                   (UNAUDITED)   (UNAUDITED)
<S>                                                  <C>               <C>          <C>            <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss.........................................    $  (221,095)    $ (226,839)  $ (1,414,043)   $ (61,827)   $  (884,346)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
      Depreciation and amortization................          7,471         37,661        147,515       25,684         74,076
      Bad debt expense.............................          2,499         11,829        208,604       18,087         50,694
      Compensation expense.........................             --             --          3,625          906         22,221
      Interest payable converted into
         common stock..............................             --         33,256         24,826           --         35,000
    Changes in operating assets and liabilities:
      Increase in accounts receivable..............        (55,480)       (72,184)      (710,498)    (178,823)       (14,751)
      (Increase) decrease in prepaid expenses and
         other current assets......................             --         (2,751)      (122,423)     (75,122)        15,848
      Increase in capitalized software development
         costs.....................................             --             --             --           --       (161,409)
      (Increase) decrease in other assets..........             --        (41,708)        41,708           --        (20,043)
      Increase (decrease) in accounts payable......         48,161        107,096         66,488      (36,332)       258,838
      Increase (decrease) in accrued liabilities...         16,934          5,147        147,055       53,112        (77,599)
      Increase (decrease) in deferred revenue......             --         23,333         93,964       99,466        (12,037)
                                                       -----------     ----------   ------------    ---------    -----------
NET CASH USED IN OPERATING ACTIVITIES..............       (201,510)      (125,160)    (1,513,179)    (154,849)      (713,508)
                                                       -----------     ----------   ------------    ---------    -----------
CASH FLOWS FROM INVESTING ACTIVITY:
  Purchase of fixed assets.........................        (64,934)      (203,060)      (301,444)     (64,230)      (143,480)
                                                       -----------     ----------   ------------    ---------    -----------
NET CASH USED IN INVESTING ACTIVITY................        (64,934)      (203,060)      (301,444)     (64,230)      (143,480)
                                                       -----------     ----------   ------------    ---------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of notes payable..........        260,000        390,000      1,820,000      283,333        120,000
  Principal payments on notes payable                           --             --        (61,111)          --        (22,222)
  Proceeds from issuance of common stock...........         30,029             --             --           --             --
  Principal payments on capital lease
    obligations....................................             --             --        (12,058)          --        (20,809)
  Proceeds from issuance of class A mandatorily
    redeemable convertible preferred stock.........             --             --             --           --      3,575,000
                                                       -----------     ----------   ------------    ---------    -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES..........        290,029        390,000      1,746,831      283,333      3,651,969
                                                       -----------     ----------   ------------    ---------    -----------
NET INCREASE (DECREASE) IN CASH FOR THE PERIOD.....         23,585         61,780        (67,792)      64,254      2,794,981
CASH, BEGINNING OF PERIOD..........................             --         23,585         85,365       85,365         17,573
                                                       -----------     ----------   ------------    ---------    -----------
CASH, END OF PERIOD................................    $    23,585     $   85,365   $     17,573    $ 149,619    $ 2,812,554
                                                       -----------     ----------   ------------    ---------    -----------
                                                       -----------     ----------   ------------    ---------    -----------
CASH PAID DURING THE PERIOD FOR INTEREST...........                                 $     18,530    $   5,079    $     4,287
                                                                                    ------------    ---------    -----------
                                                                                    ------------    ---------    -----------
</TABLE>

Supplemental disclosure of non-cash investing and financing activities:

      During 1997, 1998 and the three months ended March 31, 1999 (unaudited),
      certain convertible notes and interest were converted into common stock
      and preferred stock (see Note 8).

      During 1998 and the three months ended March 31, 1999, the Company entered
      into capital leases for computer equipment with a cost of $43,822 and
      $46,755 (unaudited), respectively.

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

                                      F-6

<PAGE>
                              WEBSTAKES.COM, INC.

                         NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

     Webstakes.com, Inc. (the "Company"), formerly Netstakes, Inc., was
incorporated and commenced operations in the State of New York on January 8,
1996 and was reincorporated in the State of Delaware on June 5, 1996. The period
from January 8, 1996 to December 31, 1996 is referred to as the Inception
Period. The Company is an online sweepstakes promotion company. The Company
integrates sweepstakes, contests and similar promotional events with direct
marketing tools and a proprietary database. The Company makes promotions
available without charge to consumers through its web site, webstakes.com,
clients' web sites and consumers' personal home pages. The Company generates
revenues through the sale of promotion sponsorships and services that allow
clients to cost-effectively identify and communicate with potential customers,
increase sales and foster brand awareness.

     The Company has sustained net losses and negative cash flows from
operations since its inception. The Company's ability to meet its obligations in
the ordinary course of business is dependent upon its ability to establish
profitable operations or raise additional financing through public or private
equity financings, collaborative or other arrangements with corporate sources,
or other sources of financing to fund operations. During 1999, the Company has
raised additional financings through the issuance of class A mandatorily
redeemable convertible preferred stock (the "class A") and class B mandatorily
redeemable convertible preferred stock (the "class B"). Management believes that
its current funds will be sufficient to enable the Company to meet its planned
expenditures through at least June 2000. If anticipated operating results are
not achieved and additional financings are not available on terms acceptable to
the Company, management has the intent and believes it has the ability to delay
or reduce expenditures.

     The Company has a limited operating history and its prospects are subject
to the risks, expenses and uncertainties frequently encountered by companies in
the new and rapidly evolving markets for Internet products and services. These
risks include the failure to develop and extend the Company's online service
brand, the rejection of the Company's services by web consumers, vendors and/or
advertisers, the inability of the Company to maintain and increase the levels of
traffic on its online service, as well as other risks and uncertainties. In the
event that the Company does not successfully implement its business plan,
certain assets may not be recoverable.

2. SIGNIFICANT ACCOUNTING POLICIES

UNAUDITED INTERIM FINANCIAL INFORMATION

     The financial statements as of March 31, 1999 and for the three months
ended March 31, 1999 and 1998 are unaudited. In the opinion of management, this
unaudited information has been prepared substantially on the same basis as the
audited financial statements and all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 1999 are not necessarily
indicative of the results that may be expected for any future period.

REVENUE RECOGNITION

     Principally all of the Company's historical revenues have been derived from
promotion services. Promotion services revenues are derived principally from
contracts in which the Company typically guarantees a minimum number of
impressions, or times that the client's name, logo or other identifier appears
in pages viewed by visitors to webstakes.com, and/or times that visitors are
delivered to the client's web site, over a specified period of time for a fixed
fee. Promotion services revenues are recognized ratably in the period in which
the promotion is run, provided that no significant Company obligations remain.
To the extent that minimum guarantees are not met, the Company defers
recognition of the corresponding revenues until the guaranteed minimums are
achieved. Promotion services revenues were approximately 100%, 78% and 98% of
total revenues for the Inception Period and the years ended December 31, 1997
and 1998,

                                      F-7
<PAGE>
                              WEBSTAKES.COM, INC.
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
respectively. Promotion services revenues were approximately 81% (unaudited) and
97% (unaudited) of total revenues for the three months ended March 31, 1998 and
1999, respectively.

     Included in revenues are barter revenues from the exchange by the Company
with counterparties of promotion services for reciprocal advertising, or
applicable goods and services. Barter revenues are recorded as promotion service
revenues at the lower of the estimated fair value of goods and services received
or promotion services provided, and are recognized when the counterparty's
promotions are run by the Company. In cases where there is not objective
evidence of fair market value, no revenue is recognized. Barter revenues
represented 0%, 30% and 42% of total revenues for the Inception Period and the
years ended December 31, 1997 and 1998, respectively. Barter revenues
represented 42% (unaudited) and 33% (unaudited) of total revenues for the three
months ended March 31, 1998 and 1999, respectively. Barter expense is recognized
when the Company's promotions are run on the counterparty's web sites, which is
typically in the same period the related barter revenue is recognized.

CONCENTRATION OF CREDIT RISK

     In 1998, no one customer accounted for greater than 10% of total revenues.
Two customers individually accounted for 12% and 19% of total revenues in the
Inception Period and one customer accounted for 35% of total revenues in 1997.
In the Inception Period, 1997 and 1998, revenues from the Company's five largest
customers accounted for 56%, 53% and 24% of total revenues, respectively. At
December 31, 1996 and 1997, the receivable balances from its two largest
customers amounted to approximately 36% and 37%, respectively, of the Company's
net accounts receivable balance. For the three months ended March 31, 1999,
revenues from the Company's five largest customers accounted for 25% (unaudited)
of total revenues. At March 31, 1999 two customers individually accounted for
11% (unaudited) and 12% (unaudited) of the net accounts receivable balance.

FIXED ASSETS

     Depreciation of equipment, furniture and fixtures and purchased computer
software is provided for using the straight-line method over their estimated
useful lives of three years to five years. Amortization of leasehold
improvements is provided for over the lesser of the term of the related lease or
the estimated useful life of the improvement. Accumulated amortization includes
the amortization of assets recorded under capital leases. The cost of additions
and betterments are capitalized, and repairs and maintenance costs are charged
to operations in the periods incurred. Depreciation and amortization expense has
been included in general and administrative expense.

INCOME TAXES

     The Company recognizes deferred taxes by the asset and liability method of
accounting for income taxes. Under the asset and liability method, deferred
income taxes are recognized for differences between the financial statement and
tax basis of assets and liabilities at enacted statutory tax rates in effect for
the years in which the differences are expected to reverse. The effect on
deferred taxes of a change in tax rates is recognized in income in the period
that includes the enactment date. In addition, valuation allowances are
established when it is more likely than not that deferred tax assets will not be
realized.

                                      F-8
<PAGE>
                              WEBSTAKES.COM, INC.
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
CASH AND CASH EQUIVALENTS

     Cash and cash equivalents include money market accounts and all highly
liquid investments purchased with original maturities of three months or less.

FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying amounts of the Company's financial instruments, including
cash, accounts receivable, accounts payable and accrued liabilities, approximate
fair value because of their short maturities. The carrying amount of the
Company's note payable approximates the fair value of such instruments based
upon management's best estimate of interest rates that would be available to the
Company for similar debt obligations at December 31, 1996, 1997 and 1998.

USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates. Significant
estimates and assumptions made by the Company include those related to the
useful lives and recoverability of fixed assets, recoverability of deferred tax
assets and allowance for doubtful accounts.

NET LOSS PER SHARE

     Basic loss per share is computed using the weighted-average number of
common shares outstanding during the period. Diluted loss per share is computed
using the weighted-average number of common and common stock equivalent shares
outstanding during the period. Common equivalent shares are excluded from the
computation if their effect is antidilutive.

     As the Company reported net losses from inception to March 31, 1999, all
66,228 and 114,009 of the options outstanding at December 31, 1997 and 1998,
respectively, and 66,228 (unaudited) and 244,213 (unaudited) of the options
outstanding at March 31, 1998 and 1999, respectively, were antidilutive and
therefore, there were no reconciling items between basic and diluted loss per
share for the years then ended. There were no options outstanding as of
December 31, 1996.

PRO FORMA INFORMATION (UNAUDITED)

     The pro forma balance sheet as of March 31, 1999 gives effect to:

     (a) the repurchase in June 1999 of the 50,000 shares of class A and
         1,714,608 shares of common stock and the issuance of 6,666,667 shares
         of class B and assumed conversion upon the closing of the IPO into
         6,666,667 shares of common stock;

     (b) the issuance of 64,000 stock options to non-employee directors, and

     (c) the issuance of warrants to purchase 221,683 shares of common stock in
         exchange for financial advisory services from non-employee consultants.

     The pro forma net loss per share is computed by dividing the net loss by
the sum of the weighted average number of shares of common stock outstanding
giving effect for: (a) the issuance, in June 1999, and conversion, upon the
closing of the IPO of all 6,666,667 outstanding shares of class B to common
stock and the repurchase, in June 1999 of 50,000 shares of class A and 1,714,608
shares of common stock, (b) the issuance of 64,000 stock options to non-employee
directors, and (c) issuance in March and June 1999 of warrants to purchase
221,683 shares of common stock in exchange for financial advisory services from
non-employee consultants.

                                      F-9
<PAGE>
                              WEBSTAKES.COM, INC.
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
COMPREHENSIVE INCOME

     In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" ("SFAS No. 130"). This statement requires companies to
classify items of other comprehensive income by their nature in the financial
statements and display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. SFAS No. 130 is effective for
financial statements issued for fiscal years beginning after December 15, 1997.
The Company adopted SFAS No. 130 in fiscal year 1998. There was no difference
between net income and comprehensive income for the Inception Period and the
years ended December 31, 1997 and 1998, and for the three months ended
March 31, 1998 (unaudited) and 1999 (unaudited).

SEGMENT REPORTING

     In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS No. 131"), which established
standards for reporting information about operating segments in annual financial
statements. It also establishes standards for related disclosures about products
and services, geographic areas and major customers. SFAS No. 131 was adopted by
the Company at December 31, 1998. Adoption of SFAS No. 131 had no impact on the
Company's results of operations, financial position or cash flows.

CAPITALIZED SOFTWARE

     In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Cost of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1").
SOP 98-1 provides guidance over accounting for computer software developed or
obtained for internal use including the requirement to capitalize specified
costs and amortization of such costs. The Company adopted SOP 98-1 during the
first quarter of 1999. Costs associated with research and development are
expensed as incurred. Software development costs incurred subsequent to
establishing technological feasibility are capitalized. Technological
feasibility is established upon the completion of a detailed program design (in
the absence of any high risk issues or uncertainties). Amortization commences
upon beginning operations and utilization of the software title and is
recognized as a component of cost of sales by the straight-line method over the
shorter of three years or the remaining estimated useful life. It is reasonably
possible that the estimate of the remaining estimated economic life of the
software will be reduced significantly in the near term and that the
amortization of the capitalized software costs may be accelerated materially in
the near term. The Company evaluates the recoverability of capitalized software
costs on an on-going basis and immediately writes off any amounts determined to
be unrecoverable. Adoption resulted in capitalization of certain direct costs
related to enhancements of the Company's proprietary software of $161,409
(unaudited). During the first quarter of 1999, amortization expense was $13,451
(unaudited).

RECENT ACCOUNTING PRONOUNCEMENTS

     In April 1998, AICPA issued SOP 98-5, "Reporting on the Costs of Start-up
Activities" ("SOP 98-5"). SOP 98-5, which is effective for fiscal years
beginning after December 15, 1998, provides guidance on the financial reporting
of start-up costs and organization costs. It requires costs of start-up
activities and organization costs to be expensed as incurred. As the Company has
expensed these costs historically, the adoption of this standard is not expected
to have a significant impact on the Company's results of operations, cash flows
or financial position.

     In February 1998, FASB issued SFAS No. 132, "Employees' Disclosures about
Pension and Other Postretirement Benefits" ("SFAS No. 132"), which revises
employers' disclosures about pension and other postretirement benefit plans.
SFAS No. 132 does not change the measurement or recognition of those plans.

                                      F-10
<PAGE>
                              WEBSTAKES.COM, INC.
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
SFAS No. 132 is effective for fiscal years beginning after December 15, 1997.
The adoption of SFAS No. 132 has not had an impact on the Company's results of
operations, financial position or cash flows.

     In June 1998, FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities" ("SFAS 133"), which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities. SFAS No. 133 is
tentatively effective for all fiscal quarters of fiscal years beginning after
June 15, 1999. The Company does not expect the adoption of this statement to
have a significant impact on the Company's results of operations, cash flows or
financial position.

3. FIXED ASSETS

     Fixed assets consist of the following:

<TABLE>
<CAPTION>
                                                               DECEMBER 31,          MARCH 31,
                                                           ---------------------    -----------
                                                             1997        1998          1999
                                                           --------    ---------    -----------
                                                                                    (UNAUDITED)
<S>                                                        <C>         <C>          <C>
Computer and office equipment...........................   $266,264    $ 542,144     $ 671,591
Furniture and fixtures..................................     11,275       34,307        48,340
Leasehold improvements..................................        451       10,133        10,133
Capital leases..........................................         --       43,822        90,577
                                                           --------    ---------     ---------
                                                            277,990      630,406       820,641
  Less accumulated depreciation and amortization........    (45,132)    (192,647)     (253,272)
                                                           --------    ---------     ---------
                                                           $232,858    $ 437,759     $ 567,369
                                                           --------    ---------     ---------
                                                           --------    ---------     ---------
</TABLE>

     Depreciation and amortization of fixed assets was approximately $7,471,
$37,661 and $147,515 for the Inception Period and the years ended December 31,
1997 and 1998, respectively, and $25,684 (unaudited) and $60,625 (unaudited) for
the three months ended March 31, 1998 and 1999, respectively.

4. RELATED-PARTY TRANSACTIONS (SEE NOTE 8 AND "PRIVATE PLACEMENT" UNDER NOTE 11
(UNAUDITED))

     The Company entered into advertising transactions with a stockholder in the
amounts of $4,855, $81,239 and $35,070, for the Inception Period and the years
1997 and 1998, respectively.

5. STOCK OPTION PLAN:

  Stock Option Plan

     In 1997, the Company's Board of Directors and stockholders adopted the
Company's Stock Option Plan (the "Plan"). The Plan provides for the granting, at
the discretion of the Stock Option Committee of the Board of Directors (the
"SOC"), of: (i) options that are intended to qualify as incentive stock options,
within the meaning of Section 422 of the Internal Revenue Code, as amended (the
"Code"), to employees and (ii) options not intended to so qualify to employees,
officers, consultants and directors. The total number of shares of common stock
for which options may be granted under the Plan is 250,000.

     The exercise price of all stock options granted under the Plan is
determined by the SOC at the time of grant. The maximum term of each option
granted under the Plan is 10 years from the date of grant. Options generally
vest ratably over a four year period.

     As of December 31, 1997 and 1998, an aggregate of 183,772 and 135,991
shares were available for future grants under the Plan, respectively.

                                      F-11
<PAGE>
                              WEBSTAKES.COM, INC.
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

5. STOCK OPTION PLAN:--(CONTINUED)
Stock-Based Compensation

     The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock--Issued to Employees" and related interpretations in accounting for
its stock option issuances. The Company has adopted the disclosure-only
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation", whereby
compensation expense is recognized ratably over the vesting period. Had
compensation cost for the Company's stock options issued at the fair value of
the Company's stock been determined based on the fair value of the stock options
at the grant date for awards in 1998 consistent with the provisions of SFAS
No. 123, the Company's net loss would have been adjusted to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                                  1998
                                                               ------------
<S>                                                            <C>
Net loss
  As reported...............................................    $1,414,043
  Pro forma.................................................    $1,426,552
Net loss per share
  As reported--basic and diluted............................    $    (0.27)
  Pro forma--basic and diluted..............................    $    (0.28)
</TABLE>

     The fair value of each option grant is estimated using the minimum value
method of the Black-Scholes option pricing model which assumes no volatility.
The values were obtained using assumptions which were derived using information
supplied by the Company. Changes in the information would affect the assumptions
and the option prices derived from those assumptions. The weighted average
assumptions used for grants made in 1998 were as follows: Risk free interest
rate 5.6%; Expected option life 7 years; Dividend yield 0.0%. As the fiscal year
1997 option grants were made on December 31, 1997, no compensation cost would
have resulted for the fiscal year.

     In December 1997, the Board of Directors of the Company issued options to
non-employee consultants to purchase up to 27,028 shares of the Company's common
stock, which vest ratably over two years. In accordance with Emerging Issues
Task Force Abstract No. 96-18, "Accounting for Equity Investments That Are
Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services", the Company is recording the value of the services being
received based on the fair value of the options provided or the services
received which ever is more reliably measured. The fair value of these options
has been estimated using the Black-Scholes pricing model and has been recorded
as deferred compensation and is being amortized over the vesting period. Final
measurement will occur on the vesting date.

     The following table summarizes the activity in options under the plan:

<TABLE>
<CAPTION>
                                                                                        WEIGHTED AVERAGE
                                                                                        FAIR VALUE/EXERCISE
                                                                            OPTIONS/      PRICE PER
                                                                             SHARES     OPTION/PER SHARE
                                                                            --------    -------------------
<S>                                                                         <C>         <C>
Outstanding, January 1, 1997.............................................         --          $    --
Granted..................................................................     66,228          $  1.16

Outstanding, December 31, 1997...........................................     66,228          $  1.16
Granted..................................................................     73,081          $  3.02
Forfeited................................................................    (25,300)         $  2.82

Outstanding, December 31, 1998...........................................    114,009          $  1.98
Granted (unaudited)......................................................    130,704          $ 15.12

Outstanding, March 31, 1999 (unaudited)..................................    244,713          $  9.00
</TABLE>

                                      F-12
<PAGE>
                              WEBSTAKES.COM, INC.
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

5. STOCK OPTION PLAN:--(CONTINUED)
     No options were exercisable at December 31, 1997. As of December 31, 1998,
23,566 options were exercisable with a weighted average per share fair
value/exercise price of $1.19.

     At December 31, 1997 and 1998, the weighted average remaining contractual
life of the options outstanding was approximately 10 years and 9.47 years,
respectively.

6. DEFINED CONTRIBUTION PLAN

     The Company began sponsoring a defined contribution plan for its employees
which was effective January 1, 1998. Under the 401(K) Savings Plan (the "Plan"),
employees are allowed to contribute up to 15% of their salary to the Plan, as
defined. The Company makes voluntary contributions to the Plan matching 50% on
the first 6% of employee contributions, which vest over a period of 4 years at
25% per year starting in the second year of service. The total Company
contribution in 1998 was $24,556.

7. COMMITMENTS

LEASES:

     The Company leases office space in New York and California under
non-cancelable operating leases expiring at various dates through 2002. The
following is a schedule of future minimum lease payments under non-cancelable
operating leases as of December 31, 1998:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31
--------------------------------------------------------------
<S>                                                              <C>
1999..........................................................   $120,799
2000..........................................................     79,250
2001..........................................................     79,568
2002..........................................................     81,954
                                                                 --------
                                                                 $361,571
                                                                 --------
                                                                 --------
</TABLE>

     Rent expense was $5,332, $16,439 and $90,693 for the periods ended December
31, 1996, 1997 and 1998, respectively.

     The Company leases equipment under capital lease agreements which expire in
fiscal 1999. At December 31, 1998, future minimum lease payments due under
capital leases, together with the present value of such payments is $33,910,
less $2,146 representing interest.

8. CONVERTIBLE NOTES AND EQUIPMENT LOAN--RELATED PARTY

     In July 1996, the Company entered into a promissory note agreement with a
former holder of class A (the "holder"). Under the agreement, the Company
received $260,000 during 1996 and an additional $240,000 during 1997. At the
time of issuance, the note was equal to the fair value of shares received upon
conversion. This note, and the interest related thereto, was converted into
999,600 shares of common stock at $.54 per share in September 1997.

     In September 1997, the Company entered into a promissory note agreement
with the holder. Under the agreement, the Company received $150,000 during 1997
and an additional $350,000 during 1998. At the time of issuance, the note was
equal to the fair value of shares received upon conversion. This note, and the
interest related thereto, was converted into 715,008 shares of common stock at
$.73 per share in September 1998.

     In December 1997, the Company entered into a promissory note agreement with
the holder. Under this agreement, the Company received $200,000 during 1998. The
terms of the agreement call for 36 equal monthly payments of principal and
accrued interest. At December 31 1998, minimum future payments due under notes
payable were $72,222 and $66,667 for the years 1999 and 2000, respectively.

                                      F-13
<PAGE>
                              WEBSTAKES.COM, INC.
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

8. CONVERTIBLE NOTES AND EQUIPMENT LOAN--RELATED PARTY--(CONTINUED)
     In July 1998, the Company entered into an agreement with the holder under
which the holder agreed to purchase at a future date 50,000 shares of class A.
During the course of 1998, and in January 1999, the holder advanced the Company
$1,270,000 and $120,000, respectively, at an interest rate of prime plus 3%. At
the time of issuance, the face amount of the note was equal to the fair value of
shares to be received upon conversion. On January 20, 1999, the outstanding
principal balance of $1,390,000 plus interest was converted into the agreed upon
50,000 class A and the Company received additional cash of $3,575,000 for the
remaining class A. See Note 11, Subsequent Events (unaudited).

9. CAPITAL STOCK

     At December 31, 1998, the authorized capital stock of the Company consisted
of 10,000,000 shares of common stock, $.01 par value per share, 50,000 shares of
class A, $100 par value, and 1,000,000 shares of class B preferred stock, $.01
par value. No shares of class A or class B preferred stock were issued or
outstanding at December 31, 1998. The Board of Directors (the "Board") of the
Company has the authority to issue preferred stock in classes with rights and
privileges determined by the Board. Upon formation of the Company, 3,999,576
shares of $.01 par value common stock were issued to the founders.

     In 1997, the Board approved a 1 for 1,176 common stock split, which has
been retroactively restated to the inception date. However, the retroactive
restatement of the common stock, $.01 par value, at inception exceeded the
beginning capital infusion of $30,000, resulting in negative additional paid-in
capital at December 31, 1996 of $9,967.

10. INCOME TAXES

     There is no current provision for corporate income taxes as the Company
generated a net operating loss for tax purposes.

     The components of the net deferred tax asset as of December 31, 1996, 1997
and 1998 consist of the following:

<TABLE>
<CAPTION>
                                                                                DECEMBER 31,
                                                                    ------------------------------------
                                                                      1996         1997           1998
                                                                    --------    ------------    --------
<S>                                                                 <C>         <C>             <C>
Deferred tax assets:
  Operating loss carryforward....................................   $102,063      $206,169      $757,574
  Allowance for doubtful accounts................................      1,150         5,842        57,500
  Accrued expenses...............................................         --            --        33,120
  Other..........................................................         --            --         3,450
                                                                    --------      --------      --------
     Total deferred tax assets...................................    103,213       212,011       851,644
Deferred tax liabilities:
  Depreciation and amortization..................................      2,417        13,869        14,155
                                                                    --------      --------      --------
     Total deferred tax liabilities..............................      2,417        13,869        14,155
                                                                    --------      --------      --------
Net deferred tax asset...........................................    100,796       198,142       837,489
Less: valuation allowance........................................    100,796       198,142       837,489
                                                                    --------      --------      --------
Deferred tax asset...............................................   $     --      $     --      $     --
                                                                    --------      --------      --------
                                                                    --------      --------      --------
</TABLE>

     The net deferred tax asset has been fully reserved due to the uncertainty
of the Company's ability to realize this asset in the future.

     As of December 31, 1998, the Company had available for federal income tax
purposes net operating loss carryforwards of approximately $1,575,000 which
expire in the years 2011 through 2018.

                                      F-14
<PAGE>
                              WEBSTAKES.COM, INC.
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

11. SUBSEQUENT EVENTS (UNAUDITED):

PREFERRED STOCK

     The class A is convertible into common stock at prices and at times subject
to the provisions set forth in the Company's restated Certificate of
Incorporation. In the event of a public offering of the Company's shares with
gross proceeds and an offering price as defined, the class A will be
automatically converted into common stock at the conversion rates as stated in
the Company's restated Certificate of Incorporation. Convertible preferred
stockholders maintain voting rights equivalent to the number of shares of common
stock on an as if converted basis.

     In January 1999, the Company issued 50,000 shares of the class A through a
private placement, in consideration for net proceeds of approximately
$5,000,000, inclusive of the conversion of $1,390,000 of advances plus interest.
The holders of the class A are entitled to receive cumulative or noncumulative
dividends when and if declared by the Board. These dividends are in preference
to any declaration or payment of any dividend on the common stock of the
Company. All or any portion of the preferred shares are redeemable at the option
of the holders at any time after August 1, 2003 for $100 per share (par value),
plus accrued and unpaid dividends at the redemption date.

     In the event of liquidation, the holders of the class A have a liquidation
preference over holders of common stock. Such preference is equal to the
original cost of the class of preferred stock, plus any declared or unpaid
dividends.

     In June 1999, the Company repurchased all outstanding shares of the
class A. See "Private Placement" below.

WARRANTS

     In March 1999, the Company issued to Allen & Co. warrants to purchase
168,350 shares of the Company's common stock, (which was increased in June 1999
to a total of 221,683 shares of common stock), for services to be provided plus
three payments of $100,000 due on June 30, 1999, 2000 and 2001 in exchange for
services from non-employee consultants. In accordance with EITF 96-18, the
Company is recording the value of the services being received based on the fair
value of the warrants provided or the services received which ever is more
reliably measured. The fair value of these warrants is estimated using the
Black-Scholes pricing model and is recorded as compensation expense over the
vesting period. Final measurement will occur on the vesting date. Final vesting
will occur upon completion of the Company's IPO.

LEASE AGREEMENT

     In March 1999, the Company entered into a secured financing agreement with
a leasing company for the leasing of equipment in an amount up to $1,000,000.
The lease has a one-year availability period and a term of 36 months, with
interest and principal payable monthly. Through May 1999, the Company has leased
approximately $812,000 of equipment under the lease. These items have been
accounted for as a capital lease.

1999 EQUITY COMPENSATION PLAN

     In June 1999, the Company's Board of Directors and stockholders adopted the
Company's Equity Compensation Plan (the "1999 Plan"). The 1999 Plan provides for
the granting, at the discretion of the SOC, of: (i) options that are intended to
qualify as incentive stock options, within the meaning of Section 422 of the
Code, to employees and (ii) options not intended to so qualify to employees,
officers, consultants and directors. The Company has 2,000,000 shares of common
stock authorized for grants under the 1999 Plan. Options to purchase 43,385
shares of common stock have been granted under the 1999 Plan.

                                      F-15
<PAGE>
                              WEBSTAKES.COM, INC.
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

11. SUBSEQUENT EVENTS (UNAUDITED):--(CONTINUED)
     The exercise price of all stock options granted under the 1999 Plan is
determined by the SOC at the time of the grant. The maximum term of each option
granted under the 1999 Plan is 10 years from the date of grant. Options
generally vest ratably over a four-year period.

AUTHORIZED SHARES

     In June 1999, the Company's board of directors and stockholders amended the
Company's Certificate of Incorporation to create the class B, $.01 par value and
authorized 6,700,000 shares of the class B. The previously existing class B
preferred stock became the class C preferred stock, no par value. Additionally,
the number of authorized shares of common stock was increased to 50,000,000
shares.

PRIVATE PLACEMENT

     In June 1999, the Company completed a private placement and issued
6,666,667 shares of class B, in consideration for net proceeds of $40,000,000.
Subsequently, the Company repurchased all 50,000 shares of class A and 1,714,608
shares of common stock for $24,000,000. The repurchased class A was cancelled.

     Each share of the class B is convertible into one share of common stock and
automatically converts at this one for one ratio upon completion of the
Company's IPO assuming net proceeds of at least $20 million and a per share
price of at least $10.50.

     At any time after May 1, 2004, the class B is redeemable, at the option of
the holders, at a per share price equal to 125% of the per share purchase price,
adjusted for stock splits, dividends, stock options and the like, plus any
accrued but unpaid dividends as of the redemption date. The class B will be
accreted to its redeemable value over the five-year period from the date of
issuance to the redemption date. The accretion will be recorded as preferred
stockholder's dividend and included in the earnings per share calculation in
accordance with SFAS 128, "Earnings per Share."

     In accordance with EITF D-60 "Accounting for the Issuance of Convertible
Preferred Stock and Debt Securities with a Nondetachable Conversion Feature,"
the difference between the issuance price of the class B and the intrinsic value
of the common stock on the date of issuance will be accounted for as a preferred
stockholders' deemed dividend and amortized using the effective interest method
from the date of issuance to the date the securities are first convertible,
which is upon completion of the IPO.

     The holders of the class B will be entitled to receive dividends when and
if declared by the Board. These dividends are in preference to any declaration
or payment of any dividend on the common stock of the Company.

     In the event of liquidation, the holders of the class B have a liquidation
preference over holders of common stock. Such preference is equal to 125% of the
original cost of the class B, plus any declared or unpaid dividends.

     The class B stockholders maintain voting rights equivalent to the number of
shares of common stock on an as if converted basis.

SIGNIFICANT CONTRACTS

     In June 1999, the Company entered into a two-year sponsorship agreement
with Excite under which Excite agreed to promote webstakes.com through ad banner
placements and links to webstakes.com and its promotions on Excite.com,
WebCrawler.com and Classified2000.com and through the use of a webstakes.com
personalized front page made available by Excite. As part of this agreement, the
Company received a guarantee of a total number of impressions per year. The fee
to be paid to Excite under this agreement is $5.6 million, $685,000 of which has
been paid, and the balance of which is due 10 days following the completion of
the Company's IPO. At Home Corporation, the parent company of Excite, is a
stockholder of Webstakes.com. See "Use of Proceeds."

                                      F-16
<PAGE>
                              WEBSTAKES.COM, INC.
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

11. SUBSEQUENT EVENTS (UNAUDITED):--(CONTINUED)
     In June 1999, the Company entered into a services agreement with
MatchLogic, Inc., a wholly owned subsidiary of Excite, pursuant to which
MatchLogic will provide ad serving and targeting, data processing, analysis and
enhancement services to the Company. The term of the agreement is two years. The
fee to be paid to MatchLogic under this agreement is $13.1 million,
$2.5 million of which has been paid and the balance of which is due 10 days
following completion of the Company's IPO. See "Use of Proceeds."

     In June 1999, the Company prepaid $800,000 to National Broadcasting
Company, Inc. ("NBC"), for various advertisements that will appear on NBC
television.

     Additionally, in June 1999, the Company entered into an agreement with NBC
Multimedia, Inc. whereby the Company will provide online sweepstakes services
for NBC.com and NBC Interactive Neighborhood, in exchange for which the Company
will receive advertising on the NBC.com home page. This agreement is being
accounted for in accordance with the Company's barter revenue policy (Note 2).

STOCK OPTION PLAN

     In April 1999, the Company's board of directors and shareholders increased
the number of options issuable under the Stock Option Plan to 450,000.

     Upon closing of the Company's IPO, each non-employee director will receive
options to purchase up to 16,000 shares of the Company's common stock, which
vest ratably over four years. In accordance with EITF 96-18, "Accounting for
Equity Investments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services", the Company is recording the value
of the services being received based on the fair value of the options provided
or the services received whichever is more reliably measured. The fair value of
these options has been estimated using the Black-Scholes pricing model and has
been recorded as deferred compensation and is being amortized over the vesting
period. Final measurement will occur on the vesting date.

                                      F-17

<PAGE>

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

     PROSPECTIVE INVESTORS MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. NEITHER WEBSTAKES.COM, INC. NOR ANY UNDERWRITER HAS AUTHORIZED
ANYONE TO PROVIDE PROSPECTIVE INVESTORS WITH DIFFERENT OR ADDITIONAL
INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER
TO BUY THE SECURITIES IN ANY JURISDICTION WHERE SUCH OFFER OR SALE IS NOT
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY OF THIS
PROSPECTUS OR ANY SALE OF THESE SECURITIES.

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

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                         PAGE
                                                         ----
<S>                                                      <C>
Prospectus Summary.....................................     1
Risk Factors...........................................     5
Use of Proceeds........................................    12
Dividend Policy........................................    12
Capitalization.........................................    13
Dilution...............................................    14
Selected Financial Data................................    15
Management's Discussion and Analysis of Financial
  Condition and Results of Operations..................    16
Business...............................................    22
Management.............................................    34
Principal Stockholders.................................    39
Description of Capital Stock...........................    41
Shares Eligible for Future Sale........................    43
Underwriting...........................................    45
Legal Matters..........................................    47
Experts................................................    47
Where You Can Get More Information.....................    47
Index to Financial Statements..........................   F-1
</TABLE>

                     DEALER PROSPECTUS DELIVERY OBLIGATION

     Until           (25 days after the date of this prospectus), all dealers
effecting transactions in the common stock, whether or not participating in this
distribution, may be required to deliver a prospectus. This delivery requirement
is in addition to the obligation of dealers to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.

                                             SHARES
                              WEBSTAKES.COM, INC.
                                  COMMON STOCK
                             ---------------------
                                   PROSPECTUS
                             ---------------------
                            BEAR, STEARNS & CO. INC.
                           ING BARING FURMAN SELZ LLC
                           THOMAS WEISEL PARTNERS LLC
                            WIT CAPITAL CORPORATION

                                            , 1999

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

<PAGE>
                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of common stock being registered. All amounts are estimates.

<TABLE>
<S>                                                              <C>
SEC registration fee..........................................   $ 15,985
NASD filing fee...............................................   $  6,250
Nasdaq National Market listing fee............................          *
Printing and engraving expenses...............................    250,000
Legal fees and expenses.......................................    300,000
Accounting fees and expenses..................................          *
Blue Sky fees and expenses....................................     15,000
Transfer agent fees...........................................          *
Miscellaneous fees and expenses...............................          *
                                                                 --------
     Total....................................................   $      *
</TABLE>

------------------
* To be supplied by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors,
officers and certain other persons in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act").

     The Registrant's certificate of incorporation and by-laws provide that, to
the fullest extent permitted by the laws of the state of Delaware, no director
will be personally liable to the Registrant or its stockholders for monetary
damages for breach of fiduciary duty as a director. Furthermore, the
Registrant's certificate of incorporation provides that, except as prohibited by
law, each of the Registrant's directors and officers is entitled to be
indemnified by the Registrant against all expenses and liability incurred in
connection with any legal proceeding brought against him or her by virtue of his
or her position as a director or officer. This right to indemnification may
extend to a person serving as an employee or other representative of the
Registrant or a subsidiary of the Registrant. A person entitled to
indemnification is entitled to have the Registrant advance to him or her the
expenses of a legal proceeding brought against him or her.

     These provisions of the certificate of incorporation and the by-laws do not
eliminate the fiduciary duties of the directors and officers of the Registrant,
and in appropriate circumstances, equitable remedies such as injunctive or other
forms of relief will remain available under Delaware law. In addition, each
director will continue to be subject to liability for breach of the director's
duty of loyalty to the Registrant for acts or omissions not in good faith or
involving intentional misconduct, for knowing violations of law, and for
dividends or approval of stock repurchases or redemptions that are unlawful
under Delaware law. The provision does not affect a director's responsibilities
under any other law, such as the federal securities laws or state or federal
environmental laws.

     The Delaware General Corporation Law also allows the Registrant to purchase
insurance covering the Registrant's directors and officers against liability
asserted against them in their capacity as directors and officers. The
Registrant expects to obtain directors' and officers' liability insurance. The
Underwriting Agreement also provides for the indemnification of officers,
directors and controlling persons of the Registrant against certain liabilities.

     At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted. The Registrant is not aware of any threatened litigation
or proceeding that may result in a claim for such indemnification.

                                      II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

     Common Stock and Preferred Stock. The Registrant has issued and sold the
following securities since June 1996:

     In June, 1996, Webstakes, Inc., a New York corporation, reincorporated as
Netstakes, Inc., a Delaware corporation. In connection with the reincorporation,
the Registrant issued shares of its common stock to holders of Webstakes, Inc.
(New York) common stock. As part of that transaction, the three incorporating
shareholders received 3,528,000 shares of common stock of the Registrant.

     On September 20, 1997, the Registrant issued and sold an aggregate of
999,600 shares of common stock, par value $.01, to an investor in consideration
for cancellation of $543,243 in outstanding indebtedness. As part of the same
transaction, and in consideration for extension of a $500,000 line of credit,
the Registrant granted the investor options that were later exercised for
715,008 shares of the Registrant's common stock.

     On September 28, 1998, an investor exercised an option the Registrant had
granted to it as part of the earlier line of credit arrangement, and the
Registrant issued the investor 715,008 shares of common stock, par value $.01,
in consideration for cancellation of $524,826 in outstanding indebtedness.

     On January 20, 1999, the Registrant issued 50,000 shares of class A
mandatorily redeemable convertible preferred stock, par value $100.00, to an
investor in exchange for $3,575,000 in cash and approximately $1,390,000 in
additional loans made by the investor to Webstakes. Such shares were
subsequently redeemed by the Company.

     On March 2, 1999, in exchange for investment advisory services, the
Registrant issued warrants to an investment banking firm to purchase 168,350
shares (which was subsequently increased in June 1999 to 221,683 shares) of
common stock, par value $.01. The exercise price of the warrants is $6.00.

     On June 14, 1999, the Registrant issued 6,666,667 shares of class B
mandatorily redeemable convertible preferred stock, par value $.01, to a group
of investors for a total purchase price of $40,000,000.

     Options. The registrant from time to time has granted stock options to
employees and consultants. The following table sets forth certain information
regarding such grants.

<TABLE>
<CAPTION>
                                                                       NUMBER        EXERCISE
                                                                      OF SHARES       PRICE
                                                                      ---------    ------------
<S>                                                                   <C>          <C>
January 1, 1998 to December 31, 1998...............................     89,300     $ 1.16-14.96
January 1, 1999 to June 14, 1999...................................    404,085     $ 1.16-18.70
</TABLE>

None of these options have been exercised.

     All of the above-described sales were exempt from registration
(i) pursuant to Section 4(2) of the Securities Act as transactions not involving
a public offering or (ii) Rule 701 promulgated under the Securities Act. No
underwriters were involved in connection with the sales of securities referred
to in this Item 15.

ITEM 16(A). EXHIBITS AND FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER   DESCRIPTION
------   -----------------------------------------------------------------------------------------------------------
<S>      <C>   <C>
    1*    --   Form of Underwriting Agreement
  3.1*    --   Certificate of Incorporation
  3.2*    --   Certificate of Amendment to the Certificate of Incorporation, dated February 23, 1998
  3.3*    --   Certificate of Amendment to the Certificate of Incorporation, dated January 20, 1999
  3.4*    --   Certificate of Amendment to the Certificate of Incorporation, dated June 11, 1999
  3.5     --   Amended and Restated Bylaws
  4.1*    --   Specimen Certificate of Common Stock
  5.1*    --   Opinion of Reed Smith Shaw & McClay LLP
 10.1     --   Netstakes, Inc. Stock Option Plan
 10.2     --   1999 Equity Compensation Plan
</TABLE>

                                      II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER   DESCRIPTION
------   -----------------------------------------------------------------------------------------------------------
<S>      <C>   <C>
 10.3     --   Master Lease Agreement No. L6731 with Leasing Technologies International, Inc. dated November 19,
               1998.
 10.4*    --   Services Agreement between the Registrant and MatchLogic, Inc. dated June   , 1999
 10.5*    --   Sponsorship Agreement between the Registrant and Excite, Inc. dated June   , 1999
 10.6*    --   Letter Agreement between Registrant and Steven H. Krein, dated June   , 1999
 10.7*    --   Letter Agreement between Registrant and Daniel Feldman, dated June   , 1999
 11.1*    --   Statement re: computation of per share earnings
 23.1     --   Consent of PricewaterhouseCoopers LLP
 23.2*    --   Consent of Reed Smith Shaw & McClay LLP (included in Exhibit 5.1)
   25     --   Powers of Attorney (See Signature Page)
 27.1     --   Financial data schedule
 99.1     --   Consent of Nominee Director of Lisa  Crane
 99.2     --   Consent of Nominee Director of Kristopher Wood
</TABLE>

------------------
* To be filed by amendment.

ITEM 16(B). EXHIBITS AND FINANCIAL STATEMENTS

     The following financial statement schedule is filed herewith accompanied by
a report of independent accountants for such schedule: Schedule II--Valuation
and Qualifying Accounts.

ITEM 17. UNDERTAKINGS

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

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

     The undersigned Registrant hereby undertakes that:

          (1) For purposes of determining any liability under the Securities Act
     of 1933, the information omitted from the form of prospectus filed as part
     of this registration statement in reliance upon Rule 430A and contained in
     a form of prospectus filed by the registrant pursuant to Rule
     424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be
     part of this registration statement as of the time it was declared
     effective.

          (2) For the purpose of determining any liability under the Securities
     Act of 1933, each post-effective amendment that contains a form of
     prospectus shall be deemed to be a new registration statement relating to
     the securities offered therein, and the offering of such securities at that
     time shall be deemed to be the initial bona fide offering thereof.

                                      II-3

<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, in the City of New York, State of New
York, on June 14, 1999.

                                          WEBSTAKES.COM, INC.
                                          By: ________/s/ STEVEN H. KREIN_______
                                                       Steven H. Krein
                                                   Chief Executive Officer

     We, the undersigned directors and/or officers of Webstakes.com, Inc. (the
"Registrant"), hereby severally constitute and appoint Steven H. Krein and
Daniel J. Feldman, and each of them individually, with full powers of
substitution and resubstitution, our true and lawful attorneys, with full powers
to each of them to sign for us, in our names and in the capacities indicated
below, the Registration Statement on Form S-1 filed with the Securities and
Exchange Commission, and any and all amendments to said Registration Statement
(including post-effective amendments), and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, in
connection with the registration under the Securities Act of 1933, as amended,
of equity securities of the Registrant, and to file or cause to be filed the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection therewith, as fully to
all intents and purposes as each of them might or could do in person, and hereby
ratifying and confirming all that said attorneys, and each of them, or their
substitute or substitutes, shall do or cause to be done by virtue of this Power
of Attorney. This power of attorney may be executed in counterparts.

<TABLE>
<CAPTION>
                SIGNATURE                                         TITLE                              DATE
------------------------------------------  -------------------------------------------------   --------------
<C>                                         <S>                                                 <C>
           /s/ STEVEN H. KREIN              Chief Executive Officer and Director                 June 14, 1999
------------------------------------------  (Principal Executive Officer)
             Steven H. Krein

          /s/ DANIEL J. FELDMAN             President and Director                               June 14, 1999
------------------------------------------
            Daniel J. Feldman

        /s/ CHRISTOPHER F. BRAGAS           Vice President of Finance and                        June 14, 1999
------------------------------------------  Chief Financial Officer;
          Christopher F. Bragas             (Principal Accounting Officer)

           /s/ ARNOLD GREENBERG             Director                                             June 14, 1999
------------------------------------------
             Arnold Greenberg
</TABLE>

                                      II-4


<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Webstakes.com, Inc.:

In connection with our audits of the financial statements of Webstakes.com, Inc.
as of December 31, 1998 and 1997 and for each of the two years in the period
ended December 31,1998 and the period from January 8, 1996 (inception) to
December 31, 1996, which financial statements are included in the Prospectus, we
have also audited the financial statement schedule listed in Part II herein.

In our opinion, this financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.

                                          PRICEWATERHOUSECOOPERS LLP

February 19, 1999
1301 Avenue of the Americas
New York, N.Y.

                                      S-1

<PAGE>
                                  SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

                              WEBSTAKES.COM, INC.
                       VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                                         BALANCE AT      CHARGED TO                      BALANCE AT
                                                         BEGINNING       COSTS AND                          END
                                                         OF PERIOD       EXPENSES        DEDUCTIONS      OF PERIOD
                                                         ----------      ----------      ----------      ----------
<S>                                                      <C>             <C>             <C>             <C>
For the period from January 6, 1996 (inception)
  to December 31, 1996:
  Provision for doubtful accounts...................      $     --        $  2,499        $     --        $  2,499
                                                          --------        --------        --------        --------
                                                          --------        --------        --------        --------
For the year ended December 31, 1997:
  Provision for doubtful accounts...................      $  2,499        $ 10,880        $    679        $ 12,700
                                                          --------        --------        --------        --------
                                                          --------        --------        --------        --------
For the year ended December 31, 1998:
  Provision for doubtful accounts...................      $ 12,700        $208,604        $ 96,304        $125,000
                                                          --------        --------        --------        --------
                                                          --------        --------        --------        --------
For the three months ended March 31, 1999:
  Provision for doubtful accounts (unaudited).......      $125,000        $ 50,694        $     --        $175,694
                                                          --------        --------        --------        --------
                                                          --------        --------        --------        --------
</TABLE>

                                      S-2
<PAGE>
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 EXHIBIT                                                                                                    SEQUENTIAL
  NUMBER     DESCRIPTION                                                                                     PAGE NO.
----------   --------------------------------------------------------------------------------------------   -----------
<S>          <C>   <C>                                                                                      <C>
    1*        --   Form of Underwriting Agreement
    3.1*      --   Certificate of Incorporation
    3.2*      --   Certificate of Amendment to the Certificate of Incorporation, dated February 23, 1998
    3.3*      --   Certificate of Amendment to the Certificate of Incorporation, dated January 20, 1999
    3.4*      --   Certificate of Amendment to the Certificate of Incorporation, dated June 11, 1999
    3.5       --   Amended and Restated Bylaws
    4.1*      --   Specimen Certificate of Common Stock
    5.1*      --   Opinion of Reed Smith Shaw & McClay LLP
   10.1       --   Netstakes, Inc. Stock Option Plan
   10.2       --   1999 Equity Compensation Plan
   10.3       --   Master Lease Agreement No. L6731 with Leasing Technologies International, Inc. dated
                   November 19, 1998.
   10.4*      --   Services Agreement between the Registrant and MatchLogic, Inc. dated June   , 1999
   10.5*      --   Sponsorship Agreement between the Registrant and Excite, Inc. dated June   , 1999
   10.6*      --   Letter Agreement between Registrant and Steven H. Krein, dated June   , 1999
   10.7*      --   Letter Agreement between Registrant and Daniel Feldman, dated June   , 1999
   11.1*      --   Statement re: computation of per share earnings
   23.1       --   Consent of PricewaterhouseCoopers LLP
   23.2*      --   Consent of Reed Smith Shaw & McClay LLP (included in Exhibit 5.1)
   25         --   Powers of Attorney (See Signature Page)
   27.1       --   Financial data schedule
   99.1       --   Consent of Nominee Director of Lisa Crane
   99.2       --   Consent of Nominee Director of Kristopher Wood
</TABLE>

------------------
* To be filed by amendment.
[{"type": "S-1", "sequence": "1", "description": "REGISTRATION STATEMENT", "secsgml_size_bytes": 293138}]
{"company-data": {"conformed-name": "WEBSTAKES INC", "cik": "0001088024", "assigned-sic": "", "irs-number": "1338989", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-80593", "film-number": "99645733"}, "business-address": {"street1": "11 WEST 19TH STREET", "city": "NEW YORK", "state": "NY", "zip": "10010", "phone": "2124813600"}, "mail-address": {"street1": "11 WEST 19TH STREET", "city": "NEW YORK", "state": "NY", "zip": "10010"}}
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 14, 1999
                                               REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------
                              WEBSTAKES.COM, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE                                    7311                                    13-38989
    (STATE OR OTHER JURISDICTION OF             (PRIMARY STANDARD INDUSTRIAL                     (IRS EMPLOYER
     INCORPORATION OR ORGANIZATION)             CLASSIFICATION CODE NUMBER)                   IDENTIFICATION NO.)
------------------------

                        11 WEST 19TH STREET, 10TH FLOOR
                            NEW YORK, NEW YORK 10010
                                 (212) 481-3600
              (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
       INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                            ------------------------

                                STEVEN H. KREIN
                              WEBSTAKES.COM, INC.
                        11 WEST 19TH STREET, 10TH FLOOR
                            NEW YORK, NEW YORK 10010
                                 (212) 481-3600
           (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
                   INCLUDING AREA CODE, OF AGENT FOR SERVICE)
                            ------------------------

                                   Copies to:
MICHAEL B. POLLACK, ESQ.                                          JULIE M. ALLEN, ESQ.
                     BARI S. KREIN, ESQ.                                      O'SULLIVAN GRAEV & KARABELL, LLP
                REED SMITH SHAW & MCCLAY LLP                                   30 ROCKEFELLER PLAZA, 41ST FLOOR
                    2500 ONE LIBERTY PLACE                                         NEW YORK, NEW YORK 10112
            PHILADELPHIA, PENNSYLVANIA 19103-7301                                      (212) 408-2400
                       (215) 851-8182
------------------------

     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 of
1933, check the following box. / /

     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 Securities
Act registration statement for the same offering. / / ____________
     If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
                            ------------------------

                      CALCULATION OF THE REGISTRATION FEE
------------------------------------------------------------------------------------------------------------------------------------
                                                                            PROPOSED
                        TITLE OF EACH CLASS                              MAXIMUM AGGREGATE          AMOUNT OF
                  OF SECURITIES TO BE REGISTERED                      OFFERING PRICE(1),(2)      REGISTRATION FEE
------------------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par value per share............................        $57,500,000               $15,985
------------------------------------------------------------------------------------------------------------------------------------
(1) Includes shares that the Underwriters have the option to purchase from the
    Company solely to cover over-allotments, if any.

(2) Estimated pursuant to Rule 457(o) under the Securities Act of 1933, as
    amended, solely for the purpose of computing the amount of the registration
    fee.
                            ------------------------

     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

                   SUBJECT TO COMPLETION, DATED JUNE 14, 1999

PROSPECTUS

                                                   SHARES
                              WEBSTAKES.COM, INC.
                                  COMMON STOCK

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

This is an initial public offering of our common stock. We are selling all of
the              shares offered under this prospectus. We anticipate that the
initial public offering price will be between $      and $   per share.

We will apply to have our common stock approved for quotation on the Nasdaq
National Market under the symbol "IWIN."

SEE "RISK FACTORS" BEGINNING ON PAGE 5 TO READ ABOUT RISKS THAT YOU SHOULD
CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.

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

                            ------------------------
PER SHARE          TOTAL
                                                                      ---------------    -----------
Public offering price..............................................   $                  $
Underwriting discounts and commissions.............................   $                  $
Proceeds, before expenses, to us...................................   $                  $
------------------------

The underwriters may purchase up to an additional                 shares from us
at the initial public offering price less the underwriting discount to cover
over-allotments.

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

BEAR, STEARNS & CO. INC.
                      ING BARING FURMAN SELZ LLC
                                           THOMAS WEISEL PARTNERS LLC
                                                         WIT CAPITAL CORPORATION

                 THE DATE OF THIS PROSPECTUS IS        , 1999.
PROSPECTUS SUMMARY

     This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus carefully, especially the risks of
investing in our common stock discussed under "Risk Factors," before investing
in our common stock.

OUR BUSINESS

     Webstakes.com, Inc. is a leading online sweepstakes promotion company. We
integrate sweepstakes, contests and similar promotional events with direct
marketing tools and a proprietary membership database of more than 1.3 million
consumers. We make our promotions available without charge to consumers through
our web site, webstakes.com, our clients' web sites and consumers' personal home
pages. We generate revenues through the sale of promotion sponsorships and
services that allow our clients to cost-effectively identify and communicate
with potential customers, increase sales and foster brand awareness. We are
building on our sweepstakes expertise to provide an integrated, comprehensive
online promotion solution. We have recently entered into strategic relationships
with Excite and NBC, which we believe will increase awareness of the
Webstakes.com brand and attract additional visitors to webstakes.com. Some of
our recent clients include CBS Sportsline, Citibank, CDW, Disney, MapQuest.com,
PC Flowers & Gifts.com, PC World and ShopNow.com.

     We believe that our promotions are informative and entertaining, creating
an engaging online experience for consumers. Our sweepstakes run continuously,
providing consumers with the opportunity to enter each day to win more than 100
prizes with retail values typically between $150 and $400. Since 1996, consumers
have entered our sweepstakes more than 44 million times and we have awarded over
5,500 prizes with a total retail value of more than $1,000,000. Once consumers
enter any of our sweepstakes by providing required demographic information, they
become lifetime Webstakes.com members and can enter additional sweepstakes
without having to resubmit this information. We believe that eliminating
requests for redundant information increases the likelihood that consumers will
participate more often in our promotions. We currently have approximately
1.3 million members and, over the last three months, we have added new members
at the rate of over 1,100 per day.

     Our proprietary technology enables us to present tailored direct marketing
offers to our members based upon their demographic profiles each time they enter
one of our promotions. We respect the privacy rights of our members. Our privacy
policy precludes the sale of any individual member information collected from
promotions hosted on webstakes.com without the consent of our members. Members
may choose to receive our weekly electronic newsletter, the Webstakes Update.
Our members control whether and how often they receive email from our clients or
us.

     We believe that the Internet is a compelling medium for direct marketing
promotions. The Internet enables marketers to collect extensive demographic
information and feedback from consumers and to use this information to tailor
and quickly adjust campaigns. According to Forrester Research, Inc., online
promotions generate three to five times the response rates of traditional
promotions. Forrester also reports that 88% of retailers and marketers surveyed
found that online promotional efforts have met or exceeded their expectations
and 80% of those surveyed planned to increase their online promotional spending
in the next year. Based on this survey, Forrester estimates that 50% to 70% of
total Internet marketing budgets will be spent on promotions over the next five
years, compared to less than 15% of Internet marketing budgets currently being
spent on promotions.

OUR STRATEGY

     Our objective is to be the leading full-service online promotion company
and to make webstakes.com the leading Internet promotion destination. Key
elements of our strategy include:

          o building on our sweepstakes expertise to provide an integrated,
            comprehensive online promotion solution, including points and
            loyalty programs, coupons, samples, premium incentives and instant
            win games;

          o growing our membership base;

          o building strong brand awareness through online and traditional
            marketing campaigns;

          o enhancing our database of information about our members; and

                                       1
o expanding internationally.

RECENT DEVELOPMENTS

     In March 1999 we entered into a strategic relationship with NBC Multimedia,
Inc. Under this relationship, we have the right to be the exclusive third-party
provider of online sweepstakes and contests for the NBC.com and NBC Interactive
Neighborhood web sites. During the term of the agreement, Webstakes-managed
promotions will be prominently displayed on the NBC.com home page and the NBC
Interactive Neighborhood menu. We also entered into an agreement with NBC to
advertise on national television.

     In June 1999, we entered into a strategic relationship with Excite, Inc., a
wholly owned subsidiary of At Home Corporation, allowing us to market our
promotions on Excite.com. Given the similarity between the topical channels of
Excite and webstakes.com, we believe this relationship will enhance our
visibility and membership base.

     In connection with the Excite relationship, we also entered into a services
agreement with its subsidiary, MatchLogic. Under this agreement, MatchLogic will
provide services to us which will enable us to more effectively conduct our
promotions and analyze information regarding webstakes.com visitors and members.

     In June 1999, we redeemed all outstanding shares of class A mandatorily
redeemable convertible preferred stock and 1,714,608 shares of common stock for
an aggregate amount of $24.0 million. To finance the redemption and to provide
working capital, we issued shares of class B mandatorily redeemable convertible
preferred stock to a group of investors, including, among others, At Home
Corporation, XL Ventures, a subsidiary of Big Flower Holdings and Travelers
Insurance Company, for an aggregate purchase price of $40.0 million. At the same
time as the closing of this offering, the outstanding class B mandatorily
convertible redeemable preferred stock will automatically convert into 6,666,667
shares of common stock. The class A mandatorily redeemable convertible preferred
stock and the class B mandatorily redeemable convertible preferred stock will be
unavailable for reissue.

CORPORATE INFORMATION

     We were incorporated in New York on January 8, 1996 as Webstakes, Inc. We
reincorporated in Delaware as Netstakes, Inc. on June 5, 1996 and we continued
doing business under the name Webstakes. We changed our name to Webstakes.com,
Inc. on June 11, 1999. Our principal executive offices are at 11 West 19th
Street, 10th Floor, New York, New York 10011. Our telephone number at that
location is (212) 242-8800. INFORMATION CONTAINED ON OUR WEB SITE DOES NOT
CONSTITUTE PART OF THIS PROSPECTUS.

                                  THE OFFERING
Common stock offered....................................  shares
Common stock outstanding after this offering............  shares
Use of proceeds.........................................  We intend to use a portion of the net proceeds to make
                                                          aggregate payments of $15.5 million to Excite and
                                                          MatchLogic, and the balance of the net proceeds for
                                                          working capital and general corporate purposes. See "Use
                                                          of Proceeds."
Proposed Nasdaq National Market symbol..................  IWIN
You should be aware that we may issue additional shares of our common stock
after this offering upon the exercise of options. If and when we issue these
shares or any other shares, the percentage of common stock that you own will be
diluted. The following is a summary of the additional shares of common stock
that we may issue:

          o 493,385 shares issuable upon the exercise of options outstanding at
            a weighted average exercise price of $7.43;

          o 64,000 shares issuable upon the exercise of options to be granted to
            our non-employee directors at the closing of this offering at an
            exercise price equal to the initial public offering price;

          o 1,892,615 additional shares available for issuance under our equity
            compensation plans; and

          o 221,683 shares issuable upon the exercise of warrants outstanding at
            an exercise price of $6.00.

                                       2
Unless otherwise indicated, all pro forma information in this prospectus
gives effect to:

          o the repurchase by us of 50,000 shares of class A mandatorily
            redeemable convertible preferred stock and 1,714,608 shares of
            common stock in June 1999;

          o the issuance in June 1999 of 6,666,667 shares of class B mandatorily
            redeemable convertible preferred stock, and the conversion of these
            shares into common stock at the same time as the closing of this
            offering;

          o the issuance in March and June 1999 of warrants to purchase
            221,683 shares of common stock at an exercise price of $6.00 per
            share in exchange for financial advisory services by a non-employee
            consultant; and

          o the issuance upon the closing of this offering of options to
            purchase 64,000 shares of common stock at an exercise price equal to
            the initial public offering price to non-employee directors.

     In addition, unless otherwise indicated, all information in this prospectus
assumes that the underwriters do not exercise their option to purchase
           additional shares from us after the closing of this offering.

                                       3
SUMMARY FINANCIAL DATA

     The following table sets forth our summary financial data. This table does
not present all of our financial information. You should read this information
together with our financial statements and the notes to those statements
beginning on page F-1 of this prospectus and the information under "Selected
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
THREE MONTHS ENDED
                                          JANUARY 8, 1996       YEAR ENDED DECEMBER 31,            MARCH 31,
                                          (INCEPTION) TO        -----------------------     -----------------------
                                          DECEMBER 31, 1996        1997         1998           1998         1999
                                          -----------------     ----------   ----------     ----------   ----------
                                                       (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
  Revenues...............................    $        80        $    1,618   $    4,799     $    1,067   $    1,319
  Loss from operations...................           (213)             (190)      (1,338)           (52)        (898)
  Net loss...............................           (221)             (227)      (1,414)           (62)        (884)
  Basic and diluted net loss per
     share ..............................    $     (0.06)       $    (0.05)  $    (0.27)    $    (0.01)  $    (0.15)
  Weighted average shares of common stock
     used in computing basic and diluted
     net loss per share..................      3,999,576         4,278,916    5,181,356      4,999,176    5,714,184
  Pro forma basic and diluted net loss
     per share...........................             --                --   $                      --   $
  Shares of common stock used in
     computing pro forma basic and
     diluted net loss per share..........             --                --                          --
The following table is a summary of our balance sheet at March 31, 1999.
The pro forma as adjusted column gives effect to the sale of the
shares of common stock in this offering after deducting underwriting discounts
and commissions and estimated offering expenses, assuming an initial public
offering price of $      per share.
AS OF MARCH 31, 1999
                                                                        --------------------------------------------
                                                                                                        PRO FORMA AS
                                                                          ACTUAL       PRO FORMA         ADJUSTED
                                                                        ----------    --------------    ------------
                                                                                       (IN THOUSANDS)
BALANCE SHEET DATA:
  Cash...............................................................   $    2,813
  Working capital....................................................        2,699
  Total assets.......................................................        4,237
  Notes payable (excluding current portion)..........................           50
  Class A mandatorily redeemable convertible preferred stock.........        5,000
  Total stockholders' equity (deficit)...............................       (1,615)
------------------------

     This prospectus contains forward-looking statements that are not based on
historical facts. The outcome of the events described in these forward-looking
statements is subject to risks and uncertainties. There are important factors
that could cause actual results to differ materially from those expressed or
implied by these forward-looking statements, including those discussed under
"Risk Factors" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
                            ------------------------

     Webstakes, iDialog and our logo are our trademarks. Each other trademark,
trade name or service mark appearing in this prospectus belongs to its holder.

                                       4
RISK FACTORS

     Any investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks, together
with the other information contained in this prospectus, before you decide to
purchase our common stock. If any of the following risks actually occur, our
business, results of operations and financial condition would likely suffer. In
this case, the market price of our common stock could decline, and you may lose
all or part of the money you paid to purchase our common stock.

RISKS RELATED TO OUR BUSINESS

OUR LIMITED OPERATING HISTORY MAKES EVALUATING OUR BUSINESS DIFFICULT.

     We were incorporated, and launched our first promotion, in January 1996.
Accordingly, we have a limited operating history upon which to evaluate our
operations and future prospects. In addition, our revenue model is evolving and
relies substantially upon the growth of promotion spending on the Internet and
our ability to become a full-service Internet promotion company. As an early
stage company in a new and rapidly evolving market, we face risks and
uncertainties relating to our ability to successfully implement our business
plan, which are described in more detail below. We may not successfully address
these risks.

WE HAVE NOT BEEN PROFITABLE, AND WE MAY NOT BECOME PROFITABLE.

     To date, we have not been profitable. We may never be profitable, or, if we
become profitable, we may be unable to sustain profitability. We expect to
continue to incur losses for the foreseeable future because we expect to
continue to spend significant resources to expand our business. Although we have
experienced revenue growth in recent periods, these growth rates may not be
sustainable or indicative of future growth. We reported a loss of $884,000 for
the three months ended March 31, 1999. As of March 31, 1999, our accumulated
deficit was approximately $2.7 million. For us to make a profit, our revenues
will need to increase sufficiently to cover our costs and expenses.

A SIGNIFICANT PORTION OF OUR REVENUES HAVE BEEN DERIVED FROM BARTER
TRANSACTIONS, AND WE MAY NOT BE SUCCESSFUL IN GENERATING SUFFICIENT CASH
REVENUES TO COVER OUR COSTS AND EXPENSES IN THE FUTURE.

     For the year ended December 31, 1998, approximately 42% of our revenues
were derived from the trading of promotion services for advertising, prizes and
visitors to webstakes.com without the exchange of any cash payments, and for the
three months ended March 31, 1999, approximately 33% of our revenues were
derived from these barter agreements. We expect that barter agreements will
continue to account for a significant portion of our revenues in the future.

OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE, WHICH MAY CAUSE THE PRICE OF OUR
COMMON STOCK TO DECREASE.

     We expect our operating results to vary significantly from quarter to
quarter due to many factors, some of which are beyond our control. It is
possible that in future periods our results of operations will be below the
expectations of public market analysts and investors. In this event, the price
of our common stock would likely decrease. You should not rely on
quarter-to-quarter comparisons of our results of operations as an indication of
future performance. Factors that may affect our quarterly results include:

          o demand for our promotion services;

          o our ability to attract visitors to our promotions;

          o the amount and timing of our expenses;

          o the length of our sales cycle;

          o the size and timing of new agreements with our clients;

          o our ability to expand our sales force;

          o changes in rates paid for promotion services; and

          o the announcement of new or enhanced web sites and services by us or
            our competitors.

                                       5
These factors, together with the rapidly evolving market in which we
operate, make it difficult to forecast our revenues accurately. Our operating
expenses are based on our expectations of future revenues and are relatively
fixed in the short term. Accordingly, we may not be able to adjust our spending
in a timely manner to compensate for any unexpected revenue shortfall. If we
have a shortfall in revenues in relation to our expenses, or if our expenses
precede expected revenues, then our results of operations and financial
condition would be materially adversely affected.

OUR BUSINESS MAY BE AFFECTED BY SEASONAL FLUCTUATIONS IN PROMOTION SPENDING AND
INTERNET USE.

     Our limited operating history and rapid growth make it difficult to assess
the impact of seasonal factors on our business. We expect our business to be
subject to seasonal fluctuations that reflect the seasonality in traditional
promotion spending and Internet use. Traditional promotion spending tends to be
highest in the second and fourth quarters of each calendar year. Our experience
is that Internet use is generally lower during the summer and year-end vacation
and holiday periods. Because the market for Internet promotion services is
emerging, additional seasonal patterns may develop in the future as the market
matures.

THE DEMAND FOR OUR INTERNET PROMOTION SERVICES IS UNCERTAIN.

     The market for Internet promotion services has only recently begun to
develop and is evolving rapidly. Most businesses have little or no experience
using the Internet for promotion purposes. As a result, many businesses have
allocated only a limited portion of their marketing budgets to Internet
promotion spending. Due to these factors, it is difficult to predict promotion
spending on the Internet in general, or demand for our promotion services in
particular. Demand for our promotion services is subject to a high level of
uncertainty and is dependent upon many factors, including:

          o recognition of the value of Internet promotions by businesses;

          o the ability of our clients to reliably measure the effectiveness of
            Internet promotions;

          o the ability of Internet promotions to attract consumers; and

          o the ability of our clients to sell their products and services to
            the consumers participating in our promotions.

     The market for Internet promotion services may not continue to grow or be
sustainable. If Internet promotion services do not achieve market acceptance,
our business, results of operations and financial condition would be materially
adversely affected.

WE MAY NOT BE ABLE TO CONTINUE TO ATTRACT VISITORS TO WEBSTAKES.COM AND THE WEB
SITES OF OUR CLIENTS.

     Our future success depends upon our ability to continue to attract and
retain visitors with demographic characteristics desired by our clients to
webstakes.com and the web sites of our clients. If we are unable to attract
these visitors, the effectiveness of our promotions would be reduced, and our
business, results of operations and financial condition would be materially
adversely affected. In addition, we guarantee our clients that visitors will
view their pages and/or link to their web sites a minimum number of times. If we
are unable to meet these minimum guarantees, we will be required to defer
recognition of the related revenues until the guaranteed minimum is achieved. In
addition, we will be required to provide services to the client for free until
we are able to meet our guaranteed minimum, which may reduce our promotion
inventory in future periods.

WE MAY BE UNSUCCESSFUL IN LEVERAGING OUR SWEEPSTAKES EXPERTISE TO BECOME A
FULL-SERVICE ONLINE PROMOTION COMPANY.

     To date, substantially all of our revenue has been derived from conducting
sweepstakes on the Internet. Our growth is largely dependent upon our ability to
leverage our sweepstakes expertise to become a full-service Internet promotion
company. In the event that we are unable to successfully implement our growth
strategy, our business, results of operations and financial condition would be
materially adversely affected.

                                       6
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY IN OUR MARKET.

     The market for Internet promotion services is intensely competitive. We
expect competition in our market to continue to intensify as a result of
increasing market size, greater visibility of the market opportunity for
Internet promotion services and minimal barriers to entry. Industry
consolidation may also increase competition. We compete with many types of
companies, including both online and offline promotion companies, large Internet
publishers, search engine and other Internet portal companies, a variety of
Internet-based advertising networks and other companies that facilitate the
marketing of products and services on the Internet. Many of our existing
competitors, as well as a number of potential new competitors, have longer
operating histories, greater name recognition, larger client bases and
significantly greater financial, technical and marketing resources than we do.
This may allow them to compete more effectively and be more responsive to
industry and technological change than us. We may not be able to compete
successfully and competitive pressures may materially adversely affect our
business, results of operations and financial condition.

     Our ability to compete depends on many factors both within and beyond our
control. These factors include:

          o the success of the sales and marketing efforts of us and our
            competitors;

          o the ease of use, performance, price and reliability of promotions
            offered by us and our competitors; and

          o the timing and market acceptance of new promotion services developed
            by us and our competitors.

WE MAY BE UNABLE TO RETAIN CLIENTS.

     Our agreements with clients generally have terms ranging from one to
12 months. In addition, substantially all of our agreements permit our clients
to terminate their relationships with us on relatively short notice. Our clients
may not remain clients for the full term of their agreements or renew such
agreements when they expire.

OUR BRAND MAY NOT ACHIEVE THE RECOGNITION NECESSARY TO INCREASE OUR MEMBERSHIP
BASE AND ATTRACT CLIENTS.

     To be successful, we must continue to build our corporate brand identity.
We believe that the importance of brand recognition will increase as more
companies enter our market. We may not be successful in our marketing efforts or
in increasing our brand awareness.

SWEEPSTAKES REGULATIONS MAY MATERIALLY ADVERSELY AFFECT OUR BUSINESS.

     The sweepstakes industry is subject to extensive regulation on the local,
state and national levels, regardless of whether promotions are conducted online
or offline. Congress and many state attorneys general and legislatures recently
have announced regulatory initiatives aimed at the sweepstakes industry. The
publicity generated by these initiatives may adversely affect demand for our
services. Although we believe that additional laws and regulations are likely to
be enacted, we cannot predict what they will be. Any new sweepstakes regulations
may have a material adverse affect on our business, results of operations and
financial condition. Additionally, the Internet is a new medium for sweepstakes,
and it is difficult to predict how existing laws and regulations will be
interpreted. See "Business -- Government Regulation and Legal Uncertainties."

WE MAY NOT EFFECTIVELY MANAGE OUR GROWTH.

     In order to successfully implement our business plan, we must grow
significantly. Our anticipated future growth will likely place a significant
strain on our management resources and systems. To manage our growth
effectively, we will need to continue to improve our operational, financial and
managerial controls and reporting systems and procedures, and we will need to
continue to expand, train and manage our

                                       7
workforce. If we do not manage our growth effectively, our business, results of
operations and financial condition would be materially adversely affected.

WE MAY BE UNABLE TO INCREASE OUR SALES FORCE, WHICH WOULD HAVE A MATERIAL
ADVERSE EFFECT ON THE GROWTH OF OUR BUSINESS.

     We need to substantially expand our sales force to increase market
awareness and sales of our promotion services. Competition for qualified sales
personnel is intense, and we might not be able to hire the quality and number of
sales personnel we require. New hires require extensive training and typically
take several months to achieve productivity. If we fail to effectively increase
our sales force, our business, results of operations and financial condition
would be materially adversely affected.

WE DEPEND ON OUR KEY PERSONNEL.

     Our future success is substantially dependent upon the continued service of
our founders, Steven H. Krein, Chief Executive Officer, and Daniel J. Feldman,
President, and other senior officers. The loss of the services of any of our
executive officers could have a material adverse affect on our business. Many of
our executive officers, including Christopher F. Bragas, our Chief Financial
Officer, have only been employed by us for a short time. We do not currently
have "key person" life insurance policies on any of our employees. Competition
for senior management is intense, and we may not be successful in attracting and
retaining personnel.

WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY RIGHTS, AND WE MAY INFRINGE THE
PROPRIETARY RIGHTS OF OTHERS.

     Third parties may infringe or misappropriate our patents, trademarks or
other proprietary rights, which could have a material adverse effect on our
business, results of operations or financial condition. The actions we take to
protect our trademarks and other proprietary rights may not be adequate. In
addition, the validity, enforceability and scope of protection of proprietary
rights in Internet-related industries is uncertain and still evolving.

     Third parties may assert infringement claims against us. Any claims and any
resulting litigation, should they occur, could subject us to significant
liability for damages. In addition, even if we prevail, litigation could be
time-consuming and expensive to defend, and could result in the diversion of our
time and attention. Any claims from third parties may also result in limitations
on our ability to use the intellectual property subject to these claims unless
we are able to enter into contractual arrangements with the third parties making
these claims, which arrangements may not be available on commercially reasonable
terms.

POTENTIAL ACQUISITIONS INVOLVE CERTAIN RISKS.

     We have no experience in making acquisitions or investments. If we make an
acquisition, we could have difficulty in assimilating the acquired company's
personnel and operations. In addition, the key personnel of the acquired
business may not continue to work for us. These difficulties could disrupt our
ongoing business, distract our management and employees, increase our expenses
and adversely affect our results of operations. Any acquisitions we make may not
be successful.

INTERNATIONAL EXPANSION INVOLVES CERTAIN RISKS.

     Our growth strategy depends, in part, on international expansion. We may
not be successful in expanding our operations internationally. We currently have
no experience in developing localized versions of webstakes.com or in marketing
or selling our promotion services internationally. International operations are
subject to risks that may materially adversely affect our business, results of
operations and financial condition. In particular, privacy regulations in some
other countries, including the European Union, are more stringent than in the
United States. These regulations may prohibit the collection of demographic data
on

                                       8
visitors to our promotions, which would have a material adverse affect on our
business. Other risks of international operations are:

          o regulatory requirements;

          o reduced protection for intellectual property rights in some
            countries;

          o difficulties and costs of staffing and managing foreign operations;

          o political and economic instability; and

          o fluctuations in currency exchange rates.

WE FACE A NUMBER OF UNKNOWN RISKS ASSOCIATED WITH THE YEAR 2000 PROBLEM, ANY OF
WHICH MAY HARM OUR BUSINESS.

     The failure of our internal systems, or any material third-party systems,
to be Year 2000 compliant would have a material adverse effect on our business,
results of operations and financial condition. Although Frontier GlobalCenter,
Inc., our production server provider, has represented to us that its internal
systems are Year 2000 compliant, their failure to be compliant would adversely
affect our ability to deliver our service. We have not yet devised a Year 2000
contingency plan. Please see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Impact of the Year 2000."

WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS FOR PRODUCTS GIVEN AS PRIZES IN
OUR PROMOTIONS AND FOR PRODUCTS SOLD BY OUR CLIENTS OVER THE INTERNET.

     Consumers may sue us if any of the products we give as prizes are
defective, fail to perform properly or injure the user. We may also be sued by
consumers who purchase products that are offered or marketed through
webstakes.com. Although our agreements with our clients typically contain
provisions intended to limit our exposure to these product liability claims,
these limitations may not completely eliminate our liability. Liability claims
could require us to spend significant time and money in litigation or pay
significant damages. As a result, any of these claims, whether or not
successful, could have a material adverse effect on our business, results of
operations and financial condition.

RISKS RELATED TO THE INTERNET

PRIVACY AND SECURITY CONCERNS MAY CAUSE CONSUMERS NOT TO PARTICIPATE IN OUR
PROMOTIONS, WHICH WOULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

     An important feature of the service we provide our clients is our ability
to develop and maintain demographic and other information about consumers
participating in our promotions. Privacy and other security concerns may cause
consumers to resist providing us with personal data, which would reduce the
value of our service. Moreover, privacy and security concerns may inhibit
consumer acceptance of the Internet as a means of commerce. If privacy and other
security concerns of consumers are not adequately addressed, our business would
be materially adversely affected.

OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION WOULD BE MATERIALLY
ADVERSELY AFFECTED IF INTERNET USAGE DOES NOT GROW.

     We depend on continued growth in the use of the Internet by businesses and
consumers. If electronic commerce does not grow or grows more slowly than
expected, the use of the Internet by businesses may decline or grow more slowly
than anticipated. In addition, the acceptance and growth in the use of the
Internet by consumers could be negatively affected by consumer concerns about
the security of electronic commerce transactions and privacy. Even if Internet
usage grows, the Internet infrastructure may not be able to support the demands
placed on it and its performance or reliability may decline.

                                       9
WE MAY BE UNABLE TO RESPOND TO TECHNOLOGICAL CHANGE EFFECTIVELY.

     Our industry is characterized by rapid technological change, frequent new
service introductions, changing consumer demands and evolving industry standards
and practices. Our inability to anticipate and effectively respond to these
changes on a timely basis would materially adversely affect our business,
results of operations and financial condition. Our future success will depend,
in part, on our ability to cost-effectively adapt to rapidly changing
technologies, to enhance existing services and to develop and introduce a
variety of new services to address changing demands of consumers and our clients
on a timely basis.

SYSTEM FAILURES MAY ADVERSELY AFFECT OUR BUSINESS.

     Our business depends on the efficient and uninterrupted operation of our
computer and communications systems. Any system failure, including network,
software or hardware failure, that causes an interruption in our service or
decreases the responsiveness of webstakes.com or the web sites of our clients
could materially adversely affect our business. webstakes.com could also be
affected by computer viruses, electronic break-ins or other similar disruptions.
Our insurance policies have low coverage limits and therefore our insurance may
not adequately compensate us for any losses that may occur due to any
interruptions in our service.

     In February 1999, we entered into an Internet hosting agreement with
Frontier GlobalCenter, Inc. to maintain all of our production servers at
Frontier's Manhattan Data Center. Our operations depend on Frontier's ability to
protect its own systems and our systems against damage from fire, power loss,
water, telecommunications failures, vandalism and other malicious acts, and
similar unexpected adverse events. Any disruption in the Internet access
provided by Frontier could have a material adverse effect on our business,
results of operations and financial condition.

     Visitors to our web site depend on their Internet service providers and
other web site operators for access to promotions on webstakes.com and on the
web sites of our clients. Each of these providers has experienced significant
outages in the past, and could experience outages, delays and other difficulties
due to system failures unrelated to our systems. The inability of a substantial
number of Internet users to reach our promotions due to these outages could have
a material adverse effect on our business, results of operations and financial
condition.

LAWS AND REGULATIONS PERTAINING TO THE INTERNET MAY ADVERSELY AFFECT OUR
BUSINESS.

     There are an increasing number of laws and regulations pertaining to the
Internet. These laws and/or regulations may relate to liability for information
retrieved from or transmitted over the Internet, online content regulation, user
privacy, taxation and the quality of products and services. Moreover, the
applicability to the Internet of existing laws governing intellectual property
ownership and infringement, copyright, trademark, trade secret, obscenity,
libel, employment, personal privacy and other issues is uncertain and
developing. Any new law or regulation pertaining to the Internet, or the
application or interpretation of existing laws, could decrease the demand for
our promotion services, increase our cost of doing business or otherwise have a
material adverse effect on our business, results of operations and financial
condition. Please see "Business--Government Regulation and Legal Uncertainties."

RISKS RELATED TO THIS OFFERING

THIS OFFERING WILL BENEFIT OUR CURRENT STOCKHOLDERS.

     Our current stockholders, including members of management, will benefit
from this offering. This offering will result in the creation of a public market
for our common stock, which will enable existing stockholders to liquidate their
investments. Upon the closing of this offering, the unrealized appreciation in
the value of the common stock held by existing stockholders will be $       ,
assuming an initial public offering price of $        per share.

                                       10
AFTER THIS OFFERING, OUR OFFICERS AND DIRECTORS MAY STILL CONTROL US.

     Our executive officers and directors will, in the aggregate, beneficially
own approximately    % of the common stock following this offering. These
stockholders may be able to effectively exercise control over all matters
requiring approval by our stockholders, including the election of directors and
approval of significant corporate transactions. This concentration of ownership
may also have the effect of delaying or preventing a change in control of us,
which could have a material adverse effect on our stock price.

WE MAY REQUIRE ADDITIONAL FINANCING.

     We may need to raise additional funds in the future in order to fund more
aggressive brand promotion or more rapid expansion, to develop new or enhanced
services, to respond to competitive pressures or to make acquisitions.
Additional financing may not be available on terms favorable to us, and may not
be available at all. If adequate funds are not available on acceptable terms, we
may be unable to fund our expansion, successfully promote our brand, take
advantage of acquisition opportunities, develop or enhance services or respond
to competitive pressures, any of which could have a material adverse effect on
our business, results of operations and financial condition. If additional funds
are raised by our issuing equity securities, stockholders may experience
dilution of their ownership interest and the newly issued securities may have
rights superior to those of the common stock. If additional funds are raised by
our issuing debt, we may be subject to limitations on our operations, including
limitations on the payment of dividends. Please see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."

FUTURE SALES OF OUR COMMON STOCK BY OUR EXISTING STOCKHOLDERS MAY ADVERSELY
AFFECT THE MARKET PRICE OF OUR COMMON STOCK.

     The market price of our common stock could decline as a result of sales of
shares of common stock by our existing stockholders after this offering, or the
perception that these sales could occur. These sales also might make it more
difficult for us to sell equity securities in the future at a time and at a
price that we deem appropriate. Please see "Shares Eligible for Future Sale."

OUR COMMON STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE.

     There has not been a public market for our common stock. We cannot predict
the extent to which investor interest will lead to the development of a trading
market or how liquid that market might become. The initial public offering price
of the shares will be determined by negotiations between us and the
representatives of the underwriters and may not be indicative of prices that
will prevail in the trading market. The stock market has experienced significant
price and volume fluctuations and the market prices of securities of technology
companies, particularly Internet-related companies, have been highly volatile.
Investors may not be able to resell their shares at or above the initial public
offering price. 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 the company issuing the securities. This type of litigation
could result in substantial costs and a diversion of our management's attention
and resources.

                                       11
USE OF PROCEEDS

     We estimate that the net proceeds from this offering will be approximately
$   million, or $   million if the underwriters exercise their over-allotment
option in full, assuming an initial public offering price of $     per share and
after deducting underwriting discounts and commissions and estimated expenses of
this offering.

     We will use approximately $15.5 million of the net proceeds from this
offering to make payments due to Excite and MatchLogic. Please see "Management's
Discussion and Analysis--Liquidity and Capital Resources" and "Certain
Transactions." We expect to use the balance of the net proceeds for working
capital and general corporate purposes, including advertising and marketing our
brand and expanding our sales and marketing staff. A portion of the net proceeds
may be used to acquire or invest in complementary businesses, technologies,
products or services or to invest in geographic expansion. Although we are not
contemplating any specific acquisitions at this time and no portion of the net
proceeds has been allocated for any acquisition, we evaluate acquisition
opportunities on an ongoing basis. Our management will have broad discretion in
the application of the net proceeds. Pending use, we intend to invest the net
proceeds in interest-bearing, investment-grade instruments, certificates of
deposit or direct or guaranteed obligations of the United States.

                                DIVIDEND POLICY

     We have never declared or paid any dividends on our common stock. We do not
anticipate paying any cash dividends in the foreseeable future. We currently
intend to retain future earnings, if any, to finance operations and the
expansion of our business. Any future determination to pay cash dividends will
be at the discretion of the board of directors and will be dependent upon our
financial condition, operating results, capital requirements and other factors
that the board of directors deems relevant.

                                       12
CAPITALIZATION

     The following table sets forth our capitalization as of March 31, 1999. Our
capitalization is presented:

          o on an actual basis;

          o on a pro forma basis; and

          o on a pro forma as adjusted basis to reflect the sale of
            shares of common stock in this offering, after deducting
            underwriting discounts and commissions and estimated offering
            expenses, assuming an initial public offering price of $     per
            share.
AS OF MARCH 31, 1999
                                                                       ----------------------------------
                                                                                              PRO FORMA
                                                                       ACTUAL    PRO FORMA    AS ADJUSTED
                                                                       ------    ---------    -----------
                                                                                 (IN THOUSANDS)
Notes payable (excluding current portion)...........................   $   50    $              $
Class A mandatorily redeemable convertible preferred stock, par
  value $100, 50,000 shares authorized; and 50,000 shares issued and
  outstanding (actual), 0 shares authorized or issued (pro forma and
  pro forma as adjusted)............................................    5,000           --           --
Stockholders' equity (deficit):
  Preferred stock, no par value, 1,000,000 shares authorized
     (actual, pro forma and pro forma as adjusted); 0 shares issued
     (actual, pro forma and pro forma as adjusted)..................
  Common stock, par value $.01, 10,000,000 shares authorized
     (actual), 50,000,000 shares authorized (pro forma and pro forma
     as adjusted); 5,714,184 shares issued and outstanding (actual);
               shares issued and outstanding (pro forma);
                 shares issued and outstanding (pro forma as
     adjusted)......................................................       57
  Additional paid-in capital........................................    1,167
  Accumulated deficit...............................................   (2,746)
  Unearned compensation.............................................      (93)
                                                                       ------    ---------      -------
     Total stockholders' equity (deficit)...........................   (1,615)
                                                                       ------    ---------      -------
       Total capitalization.........................................   $3,435    $              $
                                                                       ------    ---------      -------
                                                                       ------    ---------      -------
We expect there to be             shares of common stock outstanding after
this offering. In addition to the shares of common stock to be outstanding after
this offering, we may issue additional shares of common stock. See "Prospectus
Summary--The Offering."

                                       13
DILUTION

     As of March 31, 1999, our pro forma net tangible book value was
$   million, or $     per share of common stock. Pro forma "net tangible book
value" per share equals our total tangible assets minus our total liabilities,
divided by the pro forma number of shares of common stock outstanding. As of
March 31, 1999, our pro forma net tangible book value, as adjusted for the sale
of the             shares in this offering, assuming an initial public offering
price of $     per share and after deducting the underwriting discounts and
commissions and estimated offering expenses, would have been approximately
$            , or $     per share. This represents an immediate increase of
$     per share to existing stockholders and an immediate dilution of $     per
share to new investors purchasing shares in this offering. The following table
illustrates this per share dilution:
Assumed initial public offering price per share.........................              $
  Pro forma net tangible book value per share as of
     March 31, 1999.....................................................   $
  Increase per share attributable to new investors......................
                                                                           -------
Net tangible book value per share after this offering...................
                                                                                      -------
Dilution per share to new investors.....................................              $
                                                                                      -------
                                                                                      -------
The following table summarizes, on a pro forma basis as of March 31, 1999,
the differences between the total consideration paid and the average price per
share paid by existing stockholders (excluding purchasers of the class B
mandatorily redeemable convertible preferred stock), purchasers of the class B
mandatorily redeemable convertible preferred stock as converted into common
stock upon the completion of this offering and new investors purchasing shares
in this offering with respect to the number of shares of common stock purchased
from us, assuming an initial public offering price of $     per share:
SHARES PURCHASED                           TOTAL CONSIDERATION
                                        ------------------------------------      ------------------------------------------
                                           NUMBER             PERCENT                 AMOUNT                PERCENT
                                        ----------------    ----------------      -------------------    -------------------
Existing stockholders (excluding
  class B purchasers)................                                  %               $                              %
Purchasers of class B mandatorily
  redeemable convertible preferred
  stock..............................
New investors........................
                                            --------             ------                ---------               -------
  Total..............................                               100%               $                           100%
                                            --------             ------                ---------               -------
                                            --------             ------                ---------               -------
AVERAGE PRICE
                                       PER SHARE
                                       -------------
Existing stockholders (excluding
  class B purchasers)................     $
Purchasers of class B mandatorily
  redeemable convertible preferred
  stock..............................     $
New investors........................     $
  Total..............................     $
None of the foregoing tables or calculations assume that any options or
warrants outstanding as of March 31, 1999 will be exercised. New investors in
this offering will suffer further dilution to the extent that these options or
warrants are exercised. If all outstanding options and warrants were exercised
on the date of the closing of this offering, new investors purchasing shares in
this offering would suffer total dilution of $      per share.

                                       14
SELECTED FINANCIAL DATA

     The following selected financial data should be read together with the
financial statements and the notes to those statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in this prospectus. The statement of operations data for the period
from January 8, 1996 (inception) through December 31, 1996 and for the years
ended December 31, 1997 and 1998, and the balance sheet data as of December 31,
1997 and 1998, are derived from our audited financial statements included in
this prospectus. The balance sheet data as of December 31, 1996 has been derived
from our audited financial statements not included in this prospectus. Our
historical financial statements for the three months ended March 31, 1998 and
1999 are unaudited, and in our opinion include all adjustments, consisting of
normal and recurring adjustments, necessary for a fair presentation of the
results for the unaudited period. You should not rely on interim results as
being indicative of results we may expect for the full year. Historical results
are not necessarily indicative of the results to be expected in the future.
THREE MONTHS ENDED
                                         JANUARY 8, 1996      YEAR ENDED DECEMBER 31,            MARCH 31,
                                         (INCEPTION) TO       ------------------------    ------------------------
                                         DECEMBER 31, 1996       1997          1998          1998          1999
                                         -----------------    ----------    ----------    ----------    ----------
                                                      (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
  Revenues............................      $        80       $    1,618    $    4,799    $    1,067    $    1,319
  Operating expenses:
     Product development..............               59              181           549           102            13
     Selling and marketing............              125            1,091         3,619           691         1,371
     General and administrative.......              109              536         1,969           326           833
                                            -----------       ----------    ----------    ----------    ----------
          Total operating expenses....              293            1,808         6,137         1,119         2,217
                                            -----------       ----------    ----------    ----------    ----------
  Loss from operations................             (213)            (190)       (1,338)          (52)         (898)
  Other income (expense)..............               (8)             (37)          (76)          (10)           14
                                            -----------       ----------    ----------    ----------    ----------
  Net loss............................      $      (221)      $     (227)   $   (1,414)          (62)         (884)
                                            -----------       ----------    ----------    ----------    ----------
                                            -----------       ----------    ----------    ----------    ----------
  Basic and diluted net loss per
     share............................      $     (0.06)      $    (0.05)   $    (0.27)   $    (0.01)   $    (0.15)
                                            -----------       ----------    ----------    ----------    ----------
                                            -----------       ----------    ----------    ----------    ----------
  Weighted average shares of common
     stock used in computing basic and
     diluted net loss per share.......        3,999,576        4,278,916     5,181,356     4,999,176     5,714,184
                                            -----------       ----------    ----------    ----------    ----------
                                            -----------       ----------    ----------    ----------    ----------
  Pro forma basic and diluted net loss
     per share........................               --               --    $                     --    $
                                                                            ----------                  ----------
                                                                            ----------                  ----------
  Shares of common stock used in
     computing pro forma basic and
     diluted net loss per share.......               --               --                          --
                                                                            ----------                  ----------
                                                                            ----------                  ----------
AS OF AS OF DECEMBER 31,       AS OF MARCH 31, 1999
                                                             -----------------------------    --------------------
                                                              1996       1997       1998      ACTUAL    PRO FORMA
                                                             -------    -------    -------    ------    ----------
                                                                                (IN THOUSANDS)
BALANCE SHEET DATA:
  Cash....................................................    $  24      $  85     $    18    $2,813    $
  Working capital.........................................     (249)      (149)     (1,124)    2,699
  Total assets............................................      134        476       1,196     4,237
  Notes payable (excluding current portion)...............       --         --          67        50
  Class A mandatorily redeemable convertible preferred
     stock................................................       --         --          --     5,000
  Stockholders' equity (deficit)..........................     (191)       125        (753)   (1,615)
15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion of our financial condition and results of
operations should be read in conjunction with the financial statements included
in this prospectus. This discussion includes forward-looking statements that
involve risks and uncertainties. Please see "Risk Factors."

OVERVIEW

     To date, substantially all of our revenues have been derived from the sale
of promotion services. We expect to derive substantially all of our revenues
from the sale of promotion services for the foreseeable future.

     Revenues from promotion services are recognized ratably in the period
during which we run the promotion, provided that no significant Webstakes.com
obligations remain and collection of the resulting receivable is reasonably
assured. Payments received from clients prior to our running their promotions
are recorded as deferred revenue and are recognized as revenue ratably as the
promotions are run. We generally guarantee a minimum number of impressions, or
times that the client's name, logo or other identifier appears in pages viewed
by visitors to webstakes.com, and/or times that our visitors are delivered to
our client's web site. To the extent that these minimum guarantees are not met,
we defer recognition of the corresponding revenues until the guaranteed levels
are achieved.

     Revenues include revenues from barter transactions in which we exchange
promotion services for advertising, prizes and visitors delivered to
webstakes.com. Revenues from these barter transactions are recorded as promotion
revenues at the lower of the estimated fair value of the goods or services
received or delivered and are recognized when we deliver the promotion services.
Barter expenses, principally advertisements, are recognized when our
advertisements are run on the reciprocal web site, which is typically in the
same period as the corresponding barter revenues are recognized. In 1998, barter
revenues were 42% of our total revenues, and for the three months ended
March 31, 1999, 33% of total revenues. In the future, we expect barter revenue
to decrease as a percentage of total revenue.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998

     Revenues.  Revenues primarily result from the sale of promotion services.
Revenues increased from approximately $1.1 million for the three months ended
March 31, 1998 to $1.3 million for the three months ended March 31, 1999. We
recorded $446,000 and $435,000 of barter revenues during these same periods,
representing approximately 42% and 33% of total revenues during those periods.
The period-to-period growth in revenues was primarily attributable to an
increase in promotion services sold.

     Product Development Expenses.  Product development expenses include the
personnel costs associated with the design and development of webstakes.com, our
promotions infrastructure and technology, as well as software licensing costs.
Product development costs were $102,000 for the three months ended March 31,
1998, or 9.6% of total revenues as compared to approximately $13,000 for the
three months ended March 31, 1999, or 1.0% of total revenues. Historically, we
expensed our product development costs as incurred. However, in the first
quarter of 1999, we began to capitalize the labor costs of improvements and
betterments to our software under Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use."
Therefore, we have capitalized $161,000 of product development expenses for the
three months ended March 31, 1999 and are amortizing these costs over three
years. We believe that timely deployment of new and enhanced promotional tools
and technology is critical to attaining our strategic objectives. Accordingly,
we intend to continue recruiting and hiring experienced product development
personnel and to make additional investments in product development.

     Sales and Marketing Expenses.  Sales and marketing expenses consist
primarily of online advertising costs, salaries and commissions of sales and
marketing personnel, public relations costs, barter expense and other marketing
expenses. Sales and marketing expenses were approximately $691,000 for the three
months

                                       16
ended March 31, 1998, or 64.7% of total revenues, and approximately
$1.4 million for the three months ended March 31, 1999, or 103.9% of total
revenues. The period-to-period increase in sales and marketing expenses was
primarily attributable to the initiation of online advertising and other
promotional expenditures, as well as an increase in the number of sales and
marketing personnel and related expenses and an increase in barter expense. The
increase in barter revenue resulted in the related increase in barter expense.
We expect that sales and marketing expenses will continue to increase in
absolute dollars for the foreseeable future as we increase expenditures for
sales, marketing and brand promotion, and we hire additional sales and marketing
personnel.

     General and Administrative Expenses.  General and administrative expenses
consist primarily of salaries and related costs for general corporate functions,
including finance, accounting and facilities, and fees for professional
services. General and administrative expenses were approximately $326,000 for
the three months ended March 31, 1998, or 30.6% of total revenues, and $833,000
for the three months ended March 31, 1999, or 63.2% of total revenues. The
increase in general and administrative expenses was primarily attributable to
increased salaries and related expenses associated with hiring additional
personnel in the finance and operations departments, and increased professional
fees and facility expenses to support the growth of our operations. We expect to
incur additional general and administrative expenses as we hire additional
personnel and to incur additional costs related to the growth of our business
and operation as a public company. We expect these expenses to include
facilities expansion, directors' and officers' liability insurance, investor
relations programs and professional service fees. Accordingly, we anticipate
that general and administrative expenses will continue to increase in absolute
dollars in future periods.

     Interest, Net.  Interest income, net of expense, consists primarily of
interest earned on cash balances and the interest expense on our outstanding
debt. We incurred net interest expense of $10,000 for the three months ended
March 31, 1998 and net interest income of $14,000 for the three months ended
March 31, 1999.

     Deemed Dividend.  In June 1999, we issued 6,666,667 shares of class B
mandatorily redeemable convertible preferred stock for an aggregate purchase
price of $40.0 million, or $6.00 per share. In accordance with Emerging Issues
Task Force No. D-60 "Accounting for the Issuance of Convertible Preferred Stock
and Debt Securities with a Nondetachable Conversion Feature," the $   million
difference between the purchase price of the class B mandatorily redeemable
convertible preferred stock and the fair market value on the date of issuance
will be accounted for as a deemed dividend and amortized using the effective
interest method from the date of issuance through the date the securities are
first convertible. This will occur in the quarter in which this offering is
completed.

INCEPTION PERIOD AND YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1998

     Revenues.  Revenues were approximately $80,000 for the period from January
8, 1996 to December 31, 1996 (the "Inception Period"), $1.6 million for 1997 and
$4.8 million for 1998. We recorded no barter revenues during the Inception
Period and approximately $485,000 and $2.0 million of barter revenues during
1997 and 1998, representing approximately 30% and 42% of total revenues during
those periods. The period-to-period growth in revenues was primarily
attributable to an increase in promotion services sold.

     Product Development Expenses.  Product development expenses were
approximately $59,000 for the Inception Period, or 74.2% of total revenues,
$181,000 for 1997, or 11.2% of total revenues, and $549,000 for 1998, or 11.4%
of total revenues. The increase in these expenses was primarily attributable to
increased staffing levels required to support the development and enhancement of
webstakes.com and related back-office systems.

     Sales and Marketing Expenses.  Sales and marketing expenses were
approximately $125,000 for the Inception Period, or 156.8% of total revenues,
$1.1 million for 1997, or 67.4% of total revenues, and $3.6 million for 1998, or
75.4% of total revenues. The period-to-period increases in sales and marketing
expenses were primarily attributable to the increase in barter expense, the
initiation of online advertising and other promotional expenditures, as well as
an increase in the number of sales and marketing personnel and related expenses.

                                       17
General and Administrative Expenses.  General and administrative expenses
were approximately $109,000 for the Inception Period, or 136.5% of total
revenues, $536,000 for 1997, or 33.1% of total revenues, and $2.0 million for
1998, or 41.0% of total revenues. The increases in general and administrative
expenses were primarily attributable to increased salaries and related expenses
associated with hiring additional personnel, and increased professional fees and
facility expenses to support the growth of our operations.

     Interest Expense, Net.  We incurred net interest expense of approximately
$8,000 for the Inception Period, $37,000 for 1997 and $76,000 for 1998. The
increase was primarily attributable to the increase in the principal amount of
outstanding debt obligations incurred to fund our expanding operations.

     Income Taxes.  No income tax benefit is reflected in the financial
statements as a valuation allowance was provided for deferred tax assets
relating to net operating losses. As of December 31, 1998, we had approximately
$1.6 million of federal net operating loss carryforwards for tax reporting
purposes to offset future taxable income. Our federal net operating loss
carryforwards expire in the years 2011 through 2018.

QUARTERLY RESULTS OF OPERATIONS DATA

     The following table sets forth certain unaudited quarterly statement of
operations data for each of the nine quarters preceding March 31, 1999. In our
opinion, this data has been prepared on the same basis as the audited financial
statements appearing in this prospectus, and reflect all necessary adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of this data. The results of operations for any quarter are not
necessarily indicative of the results of operations for a full year or any
future period. We expect our quarterly operating results to vary significantly
in the future. See "Risk Factors--Our quarterly operating results may fluctuate,
which may cause the price of our common stock to decrease."
THREE MONTHS ENDED
                                   ---------------------------------------------------------------------------------------------
                                   MARCH 31,  JUNE 30,  SEPT. 30,  DEC. 31,  MARCH 31,  JUNE 30,  SEPT. 30,  DEC. 31,  MARCH 31,
                                    1997       1997      1997       1997       1998      1998       1998      1998       1999
                                   ---------  --------  ---------  --------  ---------  --------  ---------  --------  ---------
                                                                          (IN THOUSANDS)
Revenues..........................   $ 130      $314      $ 281      $893     $ 1,067    $1,196    $ 1,250    $1,286    $ 1,319
Operating expenses:
  Product development.............      46        12         24        99         102       120        166       161         13
  Selling and marketing...........     130       217        266       478         691       800      1,094     1,034      1,371
  General and administrative......      58        41        187       250         326       447        529       667        833
                                     -----      ----      -----      ----     -------    ------    -------    ------    -------
Total operating expenses..........     234       270        477       827       1,119     1,367      1,789     1,862      2,217
                                     -----      ----      -----      ----     -------    ------    -------    ------    -------
Income (loss) from operations.....    (104)       44       (196)       66         (52)     (171)      (539)     (576)      (898)
Other income (expense), net.......     (18)      (15)       (12)        8         (10)      (15)       (25)      (26)        14
                                     -----      ----      -----      ----     -------    ------    -------    ------    -------
Net income (loss).................   $(122)     $ 29      $(208)     $ 74     $   (62)   $ (186)   $  (564)   $ (602)   $  (884)
                                     -----      ----      -----      ----     -------    ------    -------    ------    -------
                                     -----      ----      -----      ----     -------    ------    -------    ------    -------
LIQUIDITY AND CAPITAL RESOURCES

     Since inception, we have financed our operations primarily through the
private placement of equity securities and the incurrence of indebtedness. As of
March 31, 1999, we had $2.8 million in cash and cash equivalents.

     Net cash used in investing activities was approximately $203,000 for 1997,
$301,000 for 1998 and $143,000 for the three months ended March 31, 1999. As of
March 31, 1999, our principal capital commitments consisted of obligations
outstanding under operating and capital leases. All net cash used in investing
activities was used for capital expenditures, primarily the acquisition of
equipment. We have spent approximately $713,000 on capital expenditures since
inception through March 31, 1999. We estimate that our capital expenditures will
be approximately $7.0 million for 1999. We currently expect that our principal
capital expenditures through 1999 will relate to improvements to our technical
infrastructure and expansion of our headquarters.

                                       18
Net cash provided by financing activities was approximately $1.7 million
for 1998 and $3.7 million for the three months ended March 31, 1999. Net cash
provided by financing activities in 1998 was primarily attributable to
incurrence of indebtedness and, to a lesser extent, borrowings under a secured
credit facility related to equipment financing. We borrowed $200,000 available
under a credit facility in December 1997 in order to purchase equipment. The
loan bears interest at an annual rate equal to the prime rate plus 3%. Payments
of principal and any accrued interest are due and payable in 36 monthly
installments beginning January 1, 1998. To date, we have made all payments due
under this equipment loan.

     In March 1999, we entered into a financing agreement with a leasing company
for the leasing of equipment in an amount up to $1.0 million in operating and/or
capital leases, secured by certain accounts receivable and the equipment
purchased pursuant to the agreement. To date, we have leased approximately
$812,000 of equipment under the agreement. We expect the leases to have terms of
up to three years and the interest rates under the leases to range from 8 1/2%
to 13%. We are required to make monthly payments of interest and principal under
the leases.

     In June 1999, we entered into a two-year sponsorship agreement with Excite
under which Excite agreed to promote webstakes.com through ad banner placements
and links to webstakes.com and its promotions on Excite.com, WebCrawler.com and
Classified2000.com and through the use of a webstakes.com personalized front
page made available by Excite. As part of this agreement, we received a
guarantee of a total number of impressions per year. The fee to be paid to
Excite under this agreement is $5.6 million, $685,000 of which has been paid,
and the balance of which is due 10 days following the completion of this
offering. At Home Corporation, the parent company of Excite, is one of our
stockholders.

     In June 1999, we entered into a services agreement with MatchLogic, Inc., a
wholly owned subsidiary of Excite pursuant to which MatchLogic will provide ad
serving and targeting, data processing, analysis and enhancement services to
Webstakes.com. The term of the agreement is two years. The fee to be paid to
MatchLogic under this agreement is $13.1 million, $2.5 million of which has been
paid and the balance of which is due 10 days following completion of this
offering. See "Use of Proceeds."

     In June 1999, we redeemed all outstanding shares of class A mandatorily
redeemable convertible preferred stock and 1,714,608 shares of common stock for
an aggregate amount of $24.0 million. To finance the redemption and to provide
working capital, we issued shares of new class B mandatorily redeemable
convertible preferred stock to a group of investors, including among others, At
Home Corporation, XL Ventures, a subsidiary of Big Flower Holdings, and
Travelers, for an aggregate purchase price of $40.0 million. Upon completion of
this offering, the class B mandatorily redeemable convertible preferred stock
will automatically convert into 6,666,667 shares of common stock. The class A
mandatorily redeemable convertible preferred stock and class B mandatorily
redeemable convertible preferred stock will not be available for reissue.

     Our ability to generate significant revenues is uncertain. We have incurred
substantial costs and expenses to create, launch and enhance webstakes.com and
to grow our business. We incurred net losses of approximately $221,000 for the
Inception Period, $227,000 for 1997, $1.4 million for 1998 and $884,000 for the
three months ended March 31, 1999. At March 31, 1999, we had an accumulated
deficit of approximately $2.7 million. We expect losses from operations and
negative cash flow from operating activities to continue for the foreseeable
future. As a result of our expansion plans, we expect our operating expenses to
increase significantly in the next several years. Although we have experienced
revenue growth in recent periods, our revenues may not remain at their current
level or increase in the future. If our revenues do not increase and if our
spending levels are not adjusted accordingly, we may not generate sufficient
revenues to achieve profitability or otherwise obtain additional equity, debt or
lease financing. Even if we achieve profitability, we may not sustain or
increase profitability on a quarterly or annual basis in the future.

     We believe that the net proceeds of this offering, together with available
funds, will be sufficient to meet our anticipated needs for at least the next
12 months. We may need to raise additional funds in the future in order to fund
more aggressive brand promotion or more rapid expansion, to develop new or
enhanced promotional services, to respond to competitive pressures or to make
acquisitions. There can be no assurance that any required additional financing
will be available on terms favorable to us, or will be available at all. If
additional funds are raised through the issuance of our equity securities,
stockholders may

                                       19
experience dilution of their ownership interest and the new securities may have
rights superior to those of the holders of the common stock. If additional funds
are raised by the issuance of debt, we may be subject to certain limitations on
our operations and our ability to pay dividends. If adequate funds are not
available or not available on acceptable terms, we may be unable to fund our
expansion, successfully promote our brand name, develop or enhance our services,
respond to competitive pressures or take advantage of acquisition opportunities.
Any of these events could have a material adverse effect on our business,
results of operations or financial condition.

IMPACT OF THE YEAR 2000

     Many currently installed computer systems and software products are coded
to accept or recognize only two digit entries in the date code field. These
systems may recognize a date using "00" as the year 1900 rather than the year
2000. As a result, computer systems and/or software may need to be upgraded to
comply with the Year 2000 requirements or risk system failure or miscalculations
causing disruptions of normal business activities.

     State of Readiness.  We have begun to assess the Year 2000 readiness of our
information technology systems, including the hardware and software that enable
us to provide and deliver webstakes.com, as well as our other systems. Our
assessment and remediation plan consists of:

          o quality assurance testing of our internally developed proprietary
            software;

          o contacting third-party vendors and licensors of material hardware,
            software and services that we use both directly and indirectly;

          o contacting vendors of material non-information technology systems;

          o assessment of repair or replacement requirements;

          o repair or replacement;

          o implementation; and

          o creation of contingency plans in the event of Year 2000 failures.

     We have determined that our own internal systems are Year 2000 compliant,
and Frontier GlobalCenter, Inc. has informed us that its systems are Year 2000
compliant. In addition, we have been informed by many of the vendors of the
material hardware and software components of our systems that the products we
use are currently Year 2000 compliant. We will require vendors of our other
material hardware and software components of our systems to provide assurances
of their Year 2000 compliance by June 30, 1999. We will not be able to
completely evaluate whether systems will need to be revised or replaced until
our testing is complete and our vendors respond to our inquiries.

     Costs.  To date, we have not incurred any material costs in identifying or
evaluating Year 2000 compliance issues. Most of our expenses have related to,
and are expected to continue to relate to, the operating costs associated with
time spent by employees in the evaluation process and Year 2000 compliance
matters generally. At this time, we do not possess the information necessary to
estimate the potential costs of revisions to our software should these revisions
be required or the replacement of third-party software, hardware or services
that are determined not to be Year 2000 compliant. Although we do not anticipate
that these expenses will be material, such expenses, if higher than anticipated,
could have a material adverse effect on our business, results of operations or
financial condition.

     Risks.  We are not currently aware of any Year 2000 compliance problems
relating to our systems that would have a material adverse effect on our
business, results of operations and financial condition. However, we may
discover Year 2000 compliance problems in our systems that require substantial
revision. In addition, third-party software, hardware or services incorporated
into our material systems may need to be revised or replaced, all of which could
be time-consuming and expensive. Our failure to fix or replace our internally
developed proprietary software or third-party software, hardware or services on
a timely basis could result in lost revenues, increased operating costs, the
loss of customers and other business interruptions, any of which could have a
material adverse effect on our business, results of operations and financial
condition. Moreover,

                                       20
the failure to adequately address Year 2000 compliance issues in our internally
developed proprietary software could result in claims of mismanagement,
misrepresentation or breach of contract and related litigation, which could be
costly and time-consuming to defend.

     We are heavily dependent on a significant number of third-party vendors to
provide both network services and equipment. A significant Year 2000-related
disruption of the network, services or equipment that third-party vendors
provide to us could cause visitors to webstakes.com and our clients to consider
seeking alternate providers or cause an unmanageable burden on our technical
support, which in turn could materially adversely affect our business, financial
condition and results of operations.

     In addition, governmental agencies, utility companies, Internet access
companies, third-party service providers and others outside of our control may
not be Year 2000 compliant. The failure by these entities to be Year 2000
compliant could result in a systemic failure beyond our control, such as a
prolonged Internet, telecommunications or electrical failure, which could also
prevent us from delivering our services to our clients and visitors, decrease
the use of the Internet or prevent users from accessing our web site, which
could have a material adverse effect on our business, results of operations and
financial condition.

     Contingency Plan.  We are engaged in an ongoing Year 2000 assessment and we
have not developed any contingency plans. The results of our Year 2000 testing
and the responses received from third-party vendors and service providers will
be taken into account in determining the need for and nature and extent of any
contingency plans.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

     In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities." Statement of Position 98-5, which is effective for fiscal years
beginning after December 15, 1998, provides guidance on the financial reporting
of start-up costs and organization costs. It requires costs of start-up
activities and organization costs to be expensed as incurred. Since we have
historically expensed these costs as incurred, the adoption of this standard is
not expected to have a significant impact on our results of operations or
financial position.

     In February 1998, FASB issued SFAS No. 132, "Employer's Disclosures about
Pension and Other Postretirement Benefits" ("SFAS No. 132"), which revises
employers' disclosures about pension and other postretirement benefit plans.
SFAS No. 132 does not change the measurement or recognition of those plans. SFAS
No. 132 is effective for fiscal years beginning after December 15, 1997. The
adoption of SFAS No. 132 has not had an impact on our results of operations,
financial position or cash flows.

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivatives and Hedging
Activities," which establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities. Statement of Financial Accounting
Standards No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. We do not expect the adoption of this statement to have a
significant impact on our results of operations or financial position.

                                       21
BUSINESS

OVERVIEW

     Webstakes.com, Inc. is a leading online sweepstakes promotion company. We
integrate sweepstakes, contests and similar promotional events with direct
marketing tools and a proprietary membership database of more than 1.3 million
consumers. We make our promotions available without charge to consumers through
our web site, webstakes.com, our clients' web sites and consumers' personal home
pages. We generate revenues through the sale of promotion sponsorships and
services that allow our clients to cost-effectively identify and communicate
with potential customers, increase sales and foster brand awareness. We are
building on our sweepstakes expertise to provide an integrated, comprehensive
online promotion solution. We have recently entered into strategic relationships
with Excite and NBC, which we believe will increase awareness of the
Webstakes.com brand and attract additional visitors to webstakes.com. Our
clients include CBS Sportsline, Citibank, CDW and MapQuest.

INDUSTRY BACKGROUND

  Promotions and Direct Marketing

     Promotions and direct marketing are used to stimulate consumer spending.
Historically, most marketing communications dollars were spent on mass
advertising, but in recent years marketers have shifted their spending toward
direct marketing activities.

     Promotions are designed to stimulate an immediate action which could
include a product sale, a request for further information or a visit to a place
of business for the purchase of a specific product or service. American
businesses spent $79.4 billion on promotion marketing in 1997, an 11% increase
over 1996, according to Promo Magazine. Promotions include:

        o sweepstakes
        o premium incentives
        o product samples
        o coupons
        o points and loyalty programs
        o rebates (cash incentives paid upon a purchase)
        o games
        o contests

     Direct marketing is the delivery of a customized message to a defined
audience. Unlike mass advertising (such as television, print and radio), direct
marketing enables the measurement of the response to a message. Companies can
measure the response to specific direct marketing programs or promotions and
analyze the financial return on marketing expenditures. Direct marketing
programs can then be improved and tailored with a degree of precision that is
generally not possible with mass marketing.

     According to the Direct Marketing Association, direct marketing
expenditures in the United States reached approximately $163 billion in 1998 and
are estimated to increase at a compound annual rate of over 6% from 1998 to
2003. Forrester Research, Inc. projects that by 2000 direct marketing
expenditures will be three times larger than expenditures for brand advertising.

  Promotions and Direct Marketing on the Internet

     The Internet has emerged as an important medium for collecting and
exchanging information, communicating and conducting business worldwide.
International Data Corporation estimates that the number of Internet users will
grow from approximately 100 million worldwide in 1998 to approximately 320
million worldwide by the end of 2002, and that the value of transactions on the
Internet will increase from approximately $12 billion in 1997 to approximately
$426 billion in 2002.

     We believe that the Internet is a compelling medium for direct marketing
promotions. The Internet has introduced tools for collecting consumer data,
measuring results, interacting with customers and marketing on

                                       22
a personalized basis that are not available in traditional media. Direct
marketing traditionally has been conducted through telemarketing or printed
mail, which require significant investments in paper, printing, postage and/or
personnel. Use of the Internet reduces these costs. The Internet also allows
marketers to track consumers' demographic characteristics, purchasing histories
and product preferences in order to tailor their product offerings to consumers
more likely to respond to these offerings. We believe that marketers can achieve
higher consumer response rates online than through traditional media. The
Internet enables marketers to change promotional messages rapidly and
cost-effectively. For example, online marketers can measure the response rate of
a promotion by sending out several sample test promotions with variable prices,
graphics and text to small groups of consumers. Based on the responses to a
sample, an online promotion can be modified quickly for much less than the cost
to modify a printed promotion.

     Forrester Research, Inc. estimates that online promotions generate three to
five times the consumer response rates of traditional promotions. Forrester also
reports that 88% of retailers and marketers surveyed found that online
promotional efforts have met or exceeded their expectations and 80% of those
surveyed planned to increase their online promotional spending in the next year.
Based on this survey, Forrester estimates that 50% to 70% of total Internet
marketing budgets will be spent on promotions over the next five years, compared
to less than 15% of Internet marketing budgets currently being spent on
promotions.

WEBSTAKES SERVICES FOR CONSUMERS

     We offer consumers the opportunity to win free merchandise and receive
discounts and special offers from our clients. Consumers can access these
opportunities from webstakes.com where a variety of weekly sweepstakes and
contests are available 24 hours a day, seven days a week. Consumers can also
access our promotions on the web sites of many of our clients. Additionally, our
Affiliate Program gives consumers the opportunity to offer visitors to their
personal home pages the chance to enter a special monthly sweepstakes.

  Our Web Site

     webstakes.com is our web site where consumers interact with our clients.
Through our promotions, consumers have an opportunity to explore products and
special offers presented by our clients and to enter sweepstakes to win product
and cash prizes, free travel, coupons and gift certificates. At their request,
consumers may also receive additional offers and information about clients'
products through our weekly electronic newsletter, the Webstakes Update, and
individual emails. Approximately 550,000 of our members have opted to receive
our newsletter. Our proprietary technology, which we have branded "iDialog,"
allows us to tailor emails based on the demographic profiles and interests of
the members to whom they are sent.

     Our Prize Club page on webstakes.com offers a variety of prizes in
different interest categories. Each category is designed to appeal to consumers
with a specific interest and includes sweepstakes for prizes related to the
theme of the interest category. Presently, there are twelve Prize Club interest
categories:

          o Auto
          o Books & Music
          o Business & Finance
          o Campus
          o Computing Products
          o Family & Kids

          o Games & Casino
          o Gifts, Flowers & Food
          o House & Home
          o Sports & Health
          o TV, Movies & Video
          o Travel & Outdoors

In addition, several special promotions run at different times throughout the
year on webstakes.com. These include promotions designed around holidays such as
Mother's Day and Christmas and events such as the Super Bowl, movie premiers and
the Academy Awards.

     Visitors to webstakes.com enter a sweepstakes either by selecting a prize,
by selecting a special promotion or by selecting an interest category and then
selecting a sponsor within that category. At any given

                                       23
time, there are typically sweepstakes for over 100 prizes available on
webstakes.com. The following is a representative list of prizes in each
category:

AUTO

F1 Racing Simulation Video Game
Nascar Collectible Diecast
Sony Car Stereo
Immobilizer Car Alarm
Pair Of Revo Shades
Infant/Toddler Car Seat

COMPUTING PRODUCTS

$150 CDW Gift Certificate
Minolta Digital Camera
Creative PC-DVD Player
Microtek Scanner

HOUSE & HOME

$150 Home Depot Gift Certificate
Panasonic Microwave
Cuisinart Coffee Pot
$150 Crabtree & Evelyn Gift Certificate
$150 Lillian Vernon Gift Certificate
$150 Sharper Image Gift Certificate

BOOKS & MUSIC

H.G. Wells Reading Lamp
$150 Barnes & Noble Gift Certificate
Yamaha Keyboard
$150 Music Boulevard Gift Certificate
Panasonic CD Player
JVC 200-Disc Changer

FAMILY & KIDS

$150 Bed Bath & Beyond Gift Certificate
$150 KB Toys Gift Certificate
$150 Warner Bros. Gift Certificate
$150 Sears Gift Certificate
$150 Marshall Field's Gift Certificate

SPORTS & HEALTH

$250 Universal Golf Gift Certificate
$150 Spa Finders Gift Certificate
Sony Portable CD Stereo
$150 REI Gift Certificate
27" Samsung TV
AIWA CD Player
$150 Foot Locker Gift Certificate
Circuit3 Watch

BUSINESS & FINANCE

Canon Personal Copier
$150 Dayton's Gift Certificate
Panasonic Fax Machine
Palm Pilot Professional
Panasonic Cordless Phone
Iomega Zip Drive
Epson Stylus Color Printer
$150 Staples Gift Certificate

GAMES & CASINO

Polaroid Instant Camera
Sony Playstation
Samsung Television
$150 Spiegel Gift Certificate
$160 Universal Amusement Gift Certificate

TV, MOVIES & VIDEO

Panasonic Television/VCR
Samsung Camcorder
Audible Mobileplayer
$150 Sony Theatres Gift Certificate

CAMPUS

$150 Eddie Bauer Gift Certificate
Minolta Digital Camera
$150 Sam Goody Gift Certificate
Sanyo Refrigerator
Aiwa Stereo System

GIFTS, FLOWERS & FOOD

Kitchen Aid Mixer
Godiva Chocolates
Omaha Steaks
Digital Espresso Machine
Harry & David Fruits

TRAVEL & OUTDOORS

$100 Planet Hollywood Gift Certificate
Olympus Binoculars
Kodak Digital Video Camera
Sony Stereo

     The Savings Club is a section of webstakes.com that provides consumers with
savings opportunities in different interest categories. Recently, the Savings
Club has been expanded to integrate Prize Club promotions with special savings
on products related to a particular theme, such as an event or holiday. For
example, when visitors entered a recent Mother's Day prize promotion, they were
taken to a collection of special offers for Mother's Day products from a number
of clients.

  Membership Registration and Prize Entry

     Visitors to webstakes.com must register as members to participate in our
promotions. Visitors become members by completing our one-time registration form
that requires them to provide certain demographic information. Once this
information is provided, a visitor becomes a lifetime member and never has to
provide the registration information again, other than to update any changed
information.

     To enter a promotion, members click on an interest category, a prize or a
special promotion, and they are presented with a page that displays the logos
and text messages of our clients that are sponsoring the particular interest
category, prize or promotion. After selecting one of these logos, members are
offered the opportunity to enter a sweepstakes for any of the products in the
category. At this point in the entry process, members may be asked if they want
to receive offers for products or services from the client whose logo they
selected when entering the sweepstakes or another question related to the chosen
prize or client. Responses to these questions are stored in our database.
Members may enter the sweepstakes by answering the question and clicking on the
prize entry button. This final mouse click takes members to the web site of the
chosen sponsoring client.

                                       24
The Webstakes Update Newsletter, Email Offers and Tell-a-Friend

     During registration, new members are asked if they want to receive the
weekly Webstakes Update newsletter, emails from our clients that relate to their
interests or occasional special offers. This information will be provided only
if it is requested by the member. During the process of entering sweepstakes,
members that meet certain demographic criteria may be asked if they want to
receive offers for products or services. When a member gives us permission, he
or she is sent an individual email message often containing a special product
offer. In addition, our Tell-a-Friend Program enables recipients of our email
and Webstakes Update, as well as visitors to webstakes.com, to forward any
promotion to friends and family via email, and provides incentives to members
who tell others about webstakes.com.

  Affiliate Program

     Our Affiliate Program allows a member to put a free link to the
webstakes.com Affiliate Program sweepstakes on their personal home page. Members
with their own personal web site can request the information necessary to
install a webstakes.com banner on their web page. We have received more than
8,300 requests for this information. A visitor to a member's personal home page
can click on the webstakes.com banner, register as a webstakes.com member and
enter a monthly $1,000 sweepstakes run exclusively for the Affiliate Program.
After entering the special sweepstakes, the visitor is taken to the
webstakes.com home page and can then enter other webstakes.com promotions. Every
affiliate is automatically entered into a special monthly $500 sweepstakes we
conduct to encourage participation in the Affiliate Program. This program can
make personal home pages more fun while at the same time increase the exposure
of webstakes.com.

  Privacy

     Webstakes.com believes that it is important to build and maintain the trust
of its members. We are committed to maintaining the privacy of our members and
their personally-identifiable information. We are a member of TRUSTe, an
independent, non-profit initiative whose mission is to build users' trust and
confidence in the Internet by promoting the principles of disclosure and
informed consent. As a member of TRUSTe, we disclose our information practices
on webstakes.com and in our promotions and we comply with specified information
disclosure practices. As a general policy, we do not sell individual member
information collected from promotions on webstakes.com. During the registration
process and thereafter, webstakes.com visitors must grant us permission to send
them the Webstakes Update and email offers from us or our clients. If users do
not specifically authorize us to send them information, they will not receive
email from us. We seek to ensure that our privacy policy satisfies consumer
expectations and evolving Internet practices. If a member grants us permission,
we may share specific information with our clients or service providers, but we
strictly prohibit the sale of this information.

WEBSTAKES.COM SERVICES FOR BUSINESSES

     We provide clients with the ability to build relationships with consumers
through webstakes.com, direct emails, the Webstakes Update and the use of their
products as prizes for our sweepstakes. We can direct a client's product offer
based on either the demographic profile of a visitor or the visitor's responses
to personalized questions generated by our proprietary technology. We provide
promotional research and client service expertise before, during and after a
promotion to help clients effectively use these tools to meet their goals. We
use our membership database to help clients identify potential customers more
effectively and to enable them to use the results of their promotions in other
sales and marketing efforts.

                                       25
We provide the technological, business and creative infrastructure
necessary to effectively produce and conduct online promotions, including
sweepstakes, on a cost-effective basis. These capabilities include the
following:

        Creative Services

          o Theme, naming and concept development of promotions--create
            appropriate prize interest categories; create theme-based and
            private label promotions

          o Promotion design and production--create and produce visually
            attractive, easy-to-use promotions

        Automation of Process

          o Collection and maintenance of demographic information--manage data
            provided by member registration, prize selection and other member
            activity

          o Promotion research--measure effectiveness of promotions; suggest
            alternatives to better satisfy client goals

          o Winner selection, notification and affidavit collection--select
            winners in compliance with sweepstakes law; collect affidavits;
            verify accuracy of information provided by winner

          o Customer service--respond to email questions

          o Promotion support services--handle postal entries; provide lists of
            winners

          o Legal compliance services--distribute IRS Form 1099's as required;
            create and provide official rules

        Fulfillment

          o Prize selection and acquisition--select appropriate prizes; acquire
            prizes from suppliers

          o Prize fulfillment--arrange for shipment of prizes

     The Internet and our technology allow us to deliver promotions at a lower
cost than traditional offline promotions. Unlike traditional direct marketing
promotion campaigns, which typically use paper-based materials delivered by
mail, our promotions do not require postage or printing because they are all
delivered electronically. It is also unnecessary for us to manually enter online
response information because participants enter their own information when they
register as a member or participate in a promotion. Lastly, all of the online
winner selection, notification and processing functions are automated. This high
degree of automation will allow us to increase our promotion volume without the
need to add a significant number of employees to handle these functions.

     We provide our services to businesses through webstakes.com and directly on
client web sites through syndicated versions of our promotions or through
private label promotions. webstakes.com is our largest distribution channel. We
use webstakes.com to host promotions, to gather demographic information and to
serve as a gateway for access to our clients' web sites. Syndicated versions of
our promotions are designed to run on our clients' web sites at the same time as
they are running on webstakes.com. Private label promotions run exclusively on
our clients' web sites. These promotions have a customized appearance and
client-specific prizes or offers but use our technology and infrastructure.

  Promotions on webstakes.com

     We currently offer a variety of promotional services built around our
sweepstakes. Our services are most typically sold in sponsorship packages, each
of which includes a combination of Webstakes.com services tailored to satisfy a
client's objectives. The choice and level of the services included in a
sponsorship package is determined by the level of sponsorship selected by the
client. Our sponsorship packages vary by:

          o the number of interest categories in which a client's logo appears;

                                       26
o the size of the client's logo, and whether a text message
            accompanies the logo;

          o the number of guaranteed impressions or visitors delivered to a
            client's logo, advertisement or web site;

          o the number of times a client's offer appears in the Webstakes Update
            newsletter; and

          o the number of email campaigns.

Anchor sponsors receive the most prominent placement in the interest categories
of their choice. Anchor sponsors have included CDW, Golden Palace, iMALL,
Internet Shopping Network, Speedy Click and Spree.com. Tenant and Affiliate
sponsorship packages include fewer logo placements and other services. Tenant
and Affiliate sponsors have included FortuneCity, Net Market, PC World and Value
America.

     The promotional tools we use to help clients meet their marketing
objectives include:

          Exposure on webstakes.com.  Clients receive exposure in the
     webstakes.com interest categories they select. We feature client logos,
     advertisements and text messages on the selected web pages. Each interest
     category provides clients with the opportunity to direct their marketing
     efforts to consumers most likely to be interested in their products.
     Interest categories may be added as clients request additional
     exposure on webstakes.com or the ability to direct offers to consumers with
     other specific interests. We generally guarantee the minimum number of
     visitors who will view a client's advertisement and/or be delivered to the
     client's web site during the term of its sponsorship.

          Lead Generation.  Clients may extend special email offers to
     webstakes.com members based on information gained using our technology.
     These offers can be directed to members who meet pre-determined demographic
     profiles. Members who request information about a client or client's offer
     later receive an email describing a special offer that is sent
     automatically using our iDialog technology. Each email includes a link to
     the client's web site that allows the recipient to take advantage of the
     offer. Finally, our iDialog technology allows us to measure the response
     rates to these emails.

          The Webstakes Update Newsletter.  The Webstakes Update is an
     electronic newsletter that is sent to more than 550,000 registered members
     each week. The Webstakes Update features products, services and special
     promotions from our clients. Each offer featured in The Webstakes Update
     includes a link to the web site of the client making the offer, enabling
     newsletter recipients to access the offer directly from the Webstakes
     Update.

          Loyalty Program.  Our clients have the opportunity to place a banner
     on their web site linking it directly to webstakes.com. A webstakes.com
     banner on a client's web site provides the client with sweepstakes content
     to build traffic and loyalty to the web site and provide value to its
     visitors.

          Management Reports.  We make detailed daily reports available to our
     clients. These reports include aggregated demographic information and
     consumer preferences regarding our members that select a client's logo and
     responses to each client's promotions on webstakes.com. A client can use
     this information to tailor its promotions to reach its desired audience.

          Special Promotions.  Clients also may participate in special
     promotions we run that relate to seasonal and special events, like the
     Super Bowl or movie premiers, or major holidays, like Christmas or Mother's
     Day. These special promotions provide a further opportunity for our clients
     to make special merchandise offers relating to the featured event or
     holiday.

  Promotions on Client Web Sites

     We provide a comprehensive outsourcing solution for clients who want to
host a promotion on their own web site to increase traffic. These promotions
range from a special promotion run only on the client's web site to a modified
version of a sweepstakes running concurrently on webstakes.com. We offer all of
the other services available in our sponsorship package to our private label and
syndication promotion clients at an additional cost.

                                       27
We conceive, design and produce private label promotions for a variety of
clients. A private label promotion gives a client the opportunity to run a
promotion on its own web site that has an appearance that is unique and
consistent with its own web site design, while using our infrastructure and
technology to avoid the cost of developing the promotion in-house. A client can
choose a complete promotion package or any one or a combination of the specific
services we offer. We guide private label clients through the promotion-
creation process and allow clients to choose those features appropriate for
their promotion. We will generally work with the client to design the appearance
of the promotion on its web site. Clients generally select their own prizes or
offers for the promotion and we tailor the other aspects of the promotion to
help clients meet their goals. Private label promotions generally include lead
generation through email campaigns and management reports.

     Web site visitors entering private label promotions register for prizes
through our proprietary technology and registration process. This enables our
private label promotion clients to use our technology to offer our one-time
lifetime registration, which makes it easier for their visitors to enter our
sweepstakes. Private label clients have included Hyundai, NBC Multimedia,
Netscape, Panasonic, Toshiba and Universal Studios.

     We provide syndicated versions of our webstakes.com promotions which may be
run on our clients' web sites at the same time as they are running on
webstakes.com. These promotions serve the same purpose as a private label
promotion but require less customization. Syndicated promotions have an initial
appearance consistent with the host client's web site. We display the client's
logo and/or color scheme on the various pages of the promotion. While the
appearance of the promotion is customized, the process for entering the
promotion is the same as the visitor would experience on our web site had he or
she selected the logo of the syndicated promotion client on webstakes.com. The
prizes offered in a syndicated promotion are the same as those being offered on
webstakes.com. Syndicated promotions may include promotions in all interest
categories, as well as seasonal, special event and major holiday promotional
programs. Syndicated promotion clients have included Internet Broadcast System
and JOBTRAK.

OUR STRATEGY

     Our objective is to be the leading full-service online promotion company
and to make webstakes.com a leading Internet promotion destination. Key elements
of our strategy include:

     Build on our Sweepstakes Expertise to Provide an Integrated, Comprehensive
     Online Promotions Solution

     We intend to build on our expertise, technology, membership base, web site
and client relationships to expand our offerings to include a broad range of
promotion services including instant win and other games, premium incentive
tools, points and loyalty programs, coupons, promotion fulfillment and product
sampling. Our goal is to provide clients with a one-stop promotion outsourcing
solution that provides a full range of promotions and promotion support services
that can be integrated to maximize effectiveness.

     Grow our Membership Base

     A larger membership base provides more potential customers with whom we can
test the effectiveness of our clients' promotions. We plan to increase our
membership base and membership usage by:

          o increasing awareness of webstakes.com among Internet users;

          o increasing the number of promotions available to members;

          o increasing the number of destinations at which Internet users can
            enter our promotions; and

          o improving the attractiveness of webstakes.com by adding new
            promotional opportunities such as games and points and loyalty
            programs.

                                       28
Build Strong Brand Awareness through Online and Traditional Marketing
     Campaigns

     Brand recognition will help increase our membership base and help improve
visibility with potential clients. We plan to establish and expand the
recognition of our brand identity and service offerings through our web site,
other web sites, direct mail, promotional activities, trade show participation
and other media events. We have entered into an agreement with Excite to market
our promotions on Excite.com and with NBC to advertise on national television
and on the Internet.

     Enhance Our Database of Information About Our Members

     We believe we can enhance the effectiveness of our promotions by learning
more about our membership base. As more members enter our promotions, and with
each additional contact with our members, the extent and precision of our
information continues to grow. We intend to use our growing database and our
knowledge and experience to assist clients to tailor offers and encourage future
participation in our promotions.

     Expand Internationally

     We believe that our products and technology can both help U.S.-based
businesses to reach international consumers and help international businesses to
reach U.S. and international consumers. We intend to open sales offices in
selected foreign countries and to employ non-exclusive sales agents to expand
international sales. We also intend to create foreign language web sites to
increase foreign sales.

SALES AND MARKETING

     We believe that a strong sales and marketing organization is essential to
effectively sell our Internet promotion services and to promote webstakes.com.

     We sell our promotion services through a sales and marketing team that has
grown over the past three years to include 31 employees as of May 31, 1999.
These employees are located at Webstakes.com's offices in New York and San
Francisco. The sales organization is dedicated to developing and maintaining
close relationships with our clients. We intend to increase our sales force and
open additional sales offices in the United States. We also intend to expand our
sales effort internationally.

     Customer service is an important part of our sales effort. Once a sale is
made, our strategy group develops a plan to execute the promotions to help
assure that the client's objectives are met. We are committed to providing a
high level of client satisfaction. Sometimes a client will first use a private
label or syndicated promotion as an introduction to our promotion services. Once
we can demonstrate the effectiveness of our promotions, these clients may
purchase full sponsorship packages.

     Our marketing of webstakes.com to consumers initially was primarily through
word-of-mouth and by promotions by clients. In March 1999, we entered into an
agreement with NBC under which we advertise on the NBC television network. In
June 1999, we began an on-line promotion campaign through Excite. Ads promoting
Webstakes.com and our clients will appear on many of Excite's topical channels
including the Money and Investing channel, the Home & Real Estate channel, the
Games channel and many others. We are also advertising our web site and the
promotions run by our clients in The Net's Best, a Sunday newspaper insert. We
also use our Affiliate Program and our Tell-a-Friend Program to expand our
consumer reach at little or no cost.

CLIENTS

     During 1998, we served approximately 125 clients. In 1998, our five largest
clients, iVillage.com, Jam TV, PC World, SonicNet and Virtual Vegas accounted
for approximately 24% of our revenues. Our clients have also included CBS
Sportsline, CDW, Cyberian Outpost, Internet Shopping Network, iMALL, Netscape,
Spree.com, The Gist, uBid and Xoom.

                                       29
OPERATING INFRASTRUCTURE

     Our operating infrastructure is designed to support the creation and
delivery of millions of page views each day. This infrastructure currently uses
30 web servers, application servers and database servers to provide timely and
efficient delivery of our services to clients and members. Our servers run on
Sun Solaris and Microsoft NT operating systems and our database systems are
standardized in Oracle products.

     We have developed a broad array of information systems to perform site
management, user interaction, tracking, search, transaction processing and
fulfillment functions. When available, our systems use third-party licensed
technologies to augment internally-developed software. We focus our development
efforts on improving and enhancing our specialized proprietary tools with the
goal of automating as many processes as possible to increase member and client
satisfaction.

     Our proprietary iDialog technology consists of three integrated systems; a
publishing system, an online promotion engine and a data processing system, all
of which are supported by relational databases.

  Publishing System

     The publishing system contains the relevant information about our
promotions, including prizes, interest categories and clients. Once a client's
offer or advertisement has been designed, each component, such as color, text
and graphics, is published as datasets in our Oracle relational database
management systems. Various combinations of these datasets are accessed and
published to webstakes.com.

  Online Promotion Engine

     When a member visits our web site, the online promotion engine creates a
web page of various datasets by accessing the online Oracle databases. The
components of each web page are dynamically generated based on the demographic
characteristics and preferences of the member user. The online promotion engine
also deploys email campaigns to members based on the same information stored in
the Oracle databases. The online promotion engine uses a combination of Sun
MicroSystems' NetDynamics Application Servers, Standard Java servlets and
Netscape and Apache Webservers as the front-end development tools to connect
with the Oracle databases. This software handles all transactional events and
queries, updates the Oracle databases and manages webstakes.com, which is
designed to give members a convenient and safe environment to register for
offers.

  Data Processing System

     Our data processing system retrieves member demographic data from the
Oracle databases through the online promotion engine, processes the data,
creates and issues offers to members and manages all winner selections. The
system was designed to give employees and clients instant online access to
information related to specific promotions. Our salespeople can access member
profiles to search and analyze demographics and usage patterns to suggest
promotions and offers to clients. Generally, only aggregate data, and not
individual member profiles, is available to our clients.

     The structure of our hardware and software is designed to allow for rapid
expansion while maintaining our desired user performance standards. In the
rapidly changing Internet environment, we believe that the ability to update an
application to stay current with new technologies is important. Our system
design allows for the addition, modification or replacement of applications in a
cost-efficient and expeditious manner. We continually evaluate emerging
technologies and new developments in web technologies with the objective of
optimizing our member and client interfaces, web site features and operational
systems.

     We use high-capacity telephone communication lines to connect with the
Internet. These communication lines are currently one-third to one-half
utilized. As we grow, communications lines with increased capacity and higher
capacity routers will need to be added. We maintain redundant communication
lines with the Internet to protect against the loss of connectivity and we
safeguard our information using large storage devices. We have back-up copies of
all of our programs and data in an off-site location.

                                       30
Our Internet connectivity is provided by Frontier GlobalCenter. We have
entered into an Internet-hosting agreement with Frontier to maintain all of our
production servers at Frontier's Manhattan data center. Frontier provides
comprehensive facilities management services, including human and technical
monitoring of all production servers 24 hours per day, seven days per week.
Frontier provides the means of connectivity from webstakes.com servers to
end-users via the Internet. The facility has two independent uninterruptible
power supplies, as well as two independent diesel generators designed to provide
power to the systems within seconds of a power outage.

COMPETITION

     Competition in the Internet promotion services market is intense. We expect
competition in our market to continue to intensify as a result of increasing
market size, greater visibility of the market opportunity for Internet promotion
services and minimal barriers to entry. Competition may also increase as a
result of industry consolidation, particularly among narrowly-focused promotion
companies. We believe that our ability to compete depends on many factors both
within and beyond our control, including the following:

          o the success of the sales and marketing efforts of us and our
            competitors;

          o the ease of use, performance, price and reliability of promotions
            developed by us and our competitors; and

          o the timing and market acceptance of new services developed by us and
            our competitors.

     The online promotion services market is highly fragmented, with many
companies focusing generally on only one aspect of the promotions market. We
also compete with offline promotion companies, large Internet
publishers, search engine and other portal companies, a variety of Internet
advertising networks and other companies that facilitate the marketing of
products and services on the Internet.

     Please see "Risk Factors--We may not be able to compete successfully in our
market" for a more detailed description of the risks of our competition.

PROPRIETARY RIGHTS

     We protect our technology and proprietary rights through a combination of
patent, copyright, trade secret and trademark law. We have filed one patent
application in the United States. In addition, we have a pending registration
for the Webstakes trademark in the United States. Our patent applications and
trademark registration may not be approved.

     We generally enter into confidentiality or license agreements with our
employees, consultants and corporate partners, and generally control access to
and distribution of our technologies, documentation and other proprietary
information. Despite our efforts to protect our proprietary rights from
unauthorized use or disclosure, parties may attempt to disclose, obtain or use
our proprietary rights. We cannot be certain that the steps we have taken will
prevent misappropriation of our proprietary rights, particularly in foreign
countries where the laws or law enforcement may not protect our proprietary
rights as fully as in the United States.

     Our technology collects and utilizes data derived from user activity on
webstakes.com. This data is used primarily for promotion targeting and measuring
the effectiveness of different promotions. Although we believe that we have the
right to compile and use this data, there can be no assurance that any trade
secret, copyright or other protection will be available for this information. In
addition, others may claim rights to this information or to the technology that
we use to collect this information, tailor advertisements and measure
promotional performance.

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES

  Regulation of Sweepstakes

     The sweepstakes industry is subject to extensive regulation on the local,
state and national levels, regardless of whether the promotions take place over
the Internet, through the mail or otherwise. Thus, the same regulations that
apply to traditional sweepstakes promotions apply to each of our online
sweepstakes

                                       31
promotions. Regulations governing the conduct of sweepstakes promotions vary
from state to state and from country to country. Although the state and national
sweepstakes laws and regulations generally are similar in nature, they and their
application vary. We use various methods to achieve compliance with these laws.

     We seek to protect ourself by placing restrictions on who may enter our
sweepstakes. We generally prohibit minors from entering our sweepstakes.
Further, our sweepstakes generally are limited to United States residents, and
residents of Florida typically are prohibited from entering certain of our
sweepstakes to comply with local laws, regulations or administrative rulings.
However, because it is sometimes difficult to verify entries over the Internet,
it is possible that minors or residents of these restricted states are entering
our sweepstakes promotions using misinformation.

     Deceptive practices in direct mail sweepstakes promotions have recently
been the subject of hearings in the United States Senate and certain states.
While these hearings did not focus on online sweepstakes, it is unclear whether
any new laws or regulations will result from these hearings and whether or not
these laws or regulations will affect online sweepstakes. Similar attention is
expected from state legislatures and regulators. See "Risk Factors--Sweepstakes
regulations may materially adversely affect our business."

  Regulation Concerning Privacy

     Congress has passed the Children's Online Privacy Protection Act, and the
Federal Trade Commission has issued a Notice of Proposed Rulemaking regarding
the adoption of regulations regarding the collection and use of personal
identifying information obtained from individuals when accessing web sites, with
particular emphasis on access by minors. These regulations may include
requirements that companies establish certain procedures to, among other things:

          o give adequate notice to consumers regarding information collection
            and disclosure practices;

          o provide consumers with the ability to have personal identifying
            information deleted from a company's database;

          o provide consumers with access to their personal information and with
            the ability to rectify inaccurate information; and

          o obtain express parental consent prior to collecting and using
            personal identifying information obtained from children under
            13 years of age.

These regulations may also include enforcement and redress provisions. While we
have a privacy policy designed to enhance the protection of the privacy of our
users, there can be no assurance that these programs will conform with any
regulations adopted by the FTC. Moreover, even in the absence of those
regulations, the FTC has begun investigations into the privacy practices of
companies that collect information on the Internet. One investigation resulted
in a consent decree pursuant to which an Internet company agreed to establish
programs to implement the principles noted above. We may become subject to a
similar investigation, or the FTC's regulatory and enforcement efforts may
adversely affect our ability to collect demographic and personal information
from users, which could have an adverse effect on our ability to provide
effective promotions. Any of these developments would have a material adverse
effect on our business, results of operations and financial condition.

     It is also possible that cookies, or information keyed to a specific
server, file pathway or directory location that is stored on a user's hard
drive, possibly without the user's knowledge, which are used to track
demographic information and to target advertising, may become subject to laws
limiting or prohibiting their use. A number of Internet commentators, advocates
and governmental bodies in the United States and other countries have urged the
passage of laws limiting or abolishing the use of cookies. Limitations on or
elimination of our use of cookies could limit the effectiveness of our
promotions, which could have a material adverse effect on our business, results
of operations and financial condition.

     The European Union has adopted a directive that imposes restrictions on the
collection and use of personal data. Under the directive, EU citizens are
guaranteed rights to access their data, rights to know where the data
originated, rights to have inaccurate data rectified, rights to recourse in the
event of unlawful processing and rights to withhold permission to use their data
for direct marketing. The directive could,

                                       32
among other things, affect U.S. companies that collect information over the
Internet from individuals in EU member countries, and may impose restrictions
that are more stringent than current Internet privacy standard in the United
States. In particular, companies with offices located in EU countries will not
be allowed to send personal information to countries that do not maintain
adequate standards of privacy. The directive does not, however, define what
standards of privacy are adequate. As a result, the directive may adversely
affect the activities of entities such as Webstakes that engage in data
collection from users in EU member countries.

     We are taking steps to prepare for the institution of any safeguards to
privacy and procedures that could limit access, storage, use and transport of
individual data elements. These steps include:

          o carefully identifying the source, timing and classification of each
            data element collected;

          o segregating data elements with matching identifiers in our data
            warehouse to allow for separate processes, regulations and
            treatments by type of data; and

          o making the maintenance of members' elections with respect to the
            receipt of information a priority in the handling and conveyance of
            information from and to members.

  Regulation of the Internet

     We are currently subject to federal and state laws and regulations that are
applicable to specific activities on the Internet. Although there are currently
few laws or regulations directly governing access to or commerce on the
Internet, due to the increasing popularity and use of the Internet, a number of
laws and regulations may be adopted regarding user privacy, pricing, acceptable
content, taxation and quality of products and services. In addition, the
government has been requested to regulate and impose fees on Internet service
providers and online service providers in a manner similar to long distance
telephone carriers. This regulation may place our activities under increased
regulation, increase our cost of doing business, decrease the growth in Internet
use or otherwise have a material adverse effect on our business. See "Risk
Factors-- Laws and regulations pertaining to the Internet may adversely affect
our business.

EMPLOYEES

     As of May 31, 1999, we employed 62 people including 31 in sales and
marketing, 17 in engineering and product development and 14 in accounting, human
resources, business operations and administration. We are not subject to any
collective bargaining agreements and believe that our relationship with our
employees is good.

FACILITIES

     Our principal executive offices are currently located in two separate
facilities in New York, New York. These facilities consist of a total of
approximately 11,250 square feet and are under leases which expire in March 2000
and February 2002. We also lease approximately 3,400 square feet of space for
our sales and marketing efforts in San Francisco, California. We will need
additional space in the near future, and we believe that suitable additional
space will be available on commercially reasonable terms.

LEGAL PROCEEDINGS

     We are not a party to any material legal proceedings.

                                       33
MANAGEMENT

     The following table sets forth our directors and executive officers, their
ages and the positions held by them with us.
NAME                                   AGE                       POSITION
------------------------------------   ---   -------------------------------------------------
Steven H. Krein.....................   29    Chairman of the Board of Directors and
                                             Chief Executive Officer
Daniel J. Feldman...................   29    President and Director
Christopher F. Bragas...............   39    Vice President of Finance and
                                             Chief Financial Officer
Joseph Lamport......................   42    Vice President of Partnership Services and
                                             Product Development
Kenneth J. Grosso...................   31    Vice President of Partnership Development
Alfonzso Holmes.....................   34    Chief Technology Officer
Arnold Greenberg....................   66    Director
Lisa Z. Crane.......................   40    Director*
Kristopher A. Wood..................   27    Director*
            ........................         Director*
------------------
* Nominee

     Steven H. Krein, a founder of Webstakes.com, has been our Chief Executive
Officer and Chairman of the Board of Directors since January 1999. From our
inception to January 1999, he served as President and director. Prior to
founding Webstakes.com, from October 1994 to May 1996, Mr. Krein was Assistant
Publisher of Law Journal EXTRA!, an online service for lawyers from American
Lawyer Media, Inc. In 1993, Mr. Krein co-founded LINK, an online service for
lawyers in Delaware. Mr. Krein received his J.D. degree from Widener University
School of Law and his B.A. degree from the University of Maryland.

     Daniel J. Feldman, a founder of Webstakes.com, has been President since
January 1999 and a director since our inception. Mr. Feldman served as Vice
President of Webstakes.com from January 1998 until January 1999. He was
Webstakes.com's Director of Operations from January 1996 to December 1996 and
Director of Sales and Marketing from January 1997 to December 1997. Prior to
founding Webstakes.com, from 1995 through 1996, Mr. Feldman was employed by Law
Journal EXTRA!, where he was Director of Product Development. Previously,
Mr. Feldman founded Closeout Network, Inc., a directory service for the closeout
industry. Mr. Feldman received his B.A. degree in International Business from
George Washington University.

     Christopher F. Bragas has been Vice President of Finance and Chief
Financial Officer of Webstakes.com since September 1998. From August 1989
through August 1998, Mr. Bragas was the Senior Vice President of Finance at Don
Jagoda Associates, Inc., an international promotions agency. From July 1981
through August 1989, Mr. Bragas was in public accounting, serving with
PricewaterhouseCoopers, LLP from February 1983 to July 1988. Mr. Bragas is a
C.P.A. and received his B.S. degree from State University of New York at
Oneonta.

     Joseph Lamport has been Vice President of Partnership Services and Product
Development since September 1998. Mr. Lamport is responsible for client service.
From 1992 to 1998, Mr. Lamport served as Publisher of Law Journal EXTRA! for
American Lawyer Media, Inc. During his tenure, Mr. Lamport established and
served as publisher of both Counsel Connect, an online interactive service for
lawyers, and Law Journal EXTRA! From 1987 to 1992, Mr. Lamport was an attorney
with the law firm Cleary, Gottlieb, Stern and Hamilton. Mr. Lamport received his
J.D. degree from Cardozo Law School and his B.A. degree from Yale University.
Mr. Lamport served as a director of Webstakes.com from its inception in January
1996 through June 1999.

     Kenneth J. Grosso joined Webstakes.com in August 1997 as Director of Sales.
Mr. Grosso has served as Vice President of Partnership Development, responsible
for sales, since May 1998. From 1992 to 1997, Mr. Grosso was employed with KPMG,
L.L.P., as an audit manager. Mr. Grosso founded Zonk Productions,

                                       34
a New York promotions company, in 1994 and served as its president through 1996.
Mr. Grosso is a C.P.A. and received his B.A. degree in Accounting from Pace
University.

     Alfonzso Holmes joined Webstakes.com in August 1997 as Director of Systems
Architecture and was Vice President of Technology from January 1998 until May
1998. In March 1999, Mr. Holmes returned to Webstakes.com as Chief Technology
Officer. From October 1998 to March 1999, Mr. Holmes was employed by Advanced
Solutions Inc. as Vice President of Technology Development. From 1995 to 1997,
Mr. Holmes was Director of Technology at Comedy Central, a subsidiary of Viacom
and Time Warner/HBO. Prior to that time, Mr. Holmes was employed by
Communications Workers of America in various positions, including application
developer, network administrator and director of operations. Mr. Holmes has over
14 years of technology experience. Mr. Holmes received his B.A. degree in
English from West Virginia University.

     Arnold Greenberg has served as a director of Webstakes.com since June 1999.
Mr. Greenberg co-founded Snapple Beverages in 1972, and he served as Chief
Operating Officer and Vice Chairman of the Board of Snapple until 1994. He is a
trustee of Mount Sinai-New York University Medical Center and Health Service and
a trustee of the New York University Medical School. Mr. Greenberg is also a
director of Volatile Media, a seller of custom compilation music compact discs,
and of the Lipper/Lumi High Income Bond Fund, Ltd.

     Lisa Z. Crane has agreed to serve as a director of Webstakes.com upon
completion of this offering. Since January 1999, Ms. Crane has served as Vice
President of NBC Interactive and general manager of NBC.com. Prior to joining
NBC Interactive, Ms. Crane served as Vice President of Sales and Marketing of
Universal Studios Online from May 1997 to December 1998, Vice President of
Marketing of the New Media Group from September 1996 to May 1997, and Vice
President of the Consumer Products Group from August 1995 to September 1996. She
was also director of Corporate Sales and Sponsorships for ECO Expo from 1992 to
1993 and was President of Zola Fine Art from 1986 to 1992. Ms. Crane received
her M.B.A. degree from Pepperdine University and her B.A. degree from the
University of California, Los Angeles.

     Kristopher A. Wood has agreed to serve as a director of Webstakes.com upon
completion of this offering. Since September 1997, Mr. Wood has served as
Managing Director of XL Ventures, Inc., the venture capital investment
subsidiary of Big Flower Holdings, Inc., an advertising, marketing and
information services company. Since September 1995, Mr. Wood has also served as
Managing Director--Mergers & Acquisitions of Big Flower Holdings, Inc. (and its
predecessor, Big Flower Press Holdings, Inc.). From July 1993 to May 1995,
Mr. Wood was a member of the Global Finance Group at BT Alex. Brown
Incorporated. Mr. Wood also serves on the boards of directors of About.com, Inc.
and Andromedia, Inc. Mr. Wood received his B.S. degree in economics from The
Wharton School of the Univerisity of Pennsylvania.

RIGHT OF INVESTORS TO DESIGNATE BOARD MEMBERS

     The terms of the purchase agreement executed in conjunction with our
June 1999 sale of class B mandatorily redeemable convertible preferred stock
permit the holders of a majority of these shares, or the majority of the shares
of common stock into which these shares are converted, to designate two
directors to serve on our board. We are required to appoint these designees to
the board and to have them elected. This right to designate directors expires
three years after the closing of this offering. Mr. Wood and           have been
designated by these holders.

OBSERVATION RIGHTS OF INVESTORS

     Under the terms of the stock purchase agreement executed in conjunction
with the sale of our class B mandatorily redeemable convertible preferred stock,
any purchaser who purchased $5.0 million or more of that stock is entitled to
have an agent present at all meetings of our board of directors, for a period of
three years from the closing of this offering, unless that purchaser has one or
more of its nominees placed on our board of directors as described above.

                                       35
CLASSES OF THE BOARD OF DIRECTORS

     Our board of directors is divided into three classes that serve staggered
three-year terms as follows:
CLASS                                             EXPIRATION OF TERM          MEMBERS
-----------------------------------------------   ------------------    -------------------
Class I........................................          2000           Daniel J. Feldman,
                                                                        Arnold Greenberg
Class II.......................................          2001           Steven H. Krein,
                                                                        Lisa Z. Crane*
Class III......................................          2002           Kristopher A. Wood*
                                                                                          *
------------------
* Nominee

COMMITTEES OF THE BOARD OF DIRECTORS

     The board of directors recently established a compensation committee and an
audit committee. The compensation committee evaluates our compensation policies,
determines compensation for our executive officers and administers our stock
option plans. The members of the compensation committee are
                  . The audit committee reviews the scope of our audit, the
engagement of our independent auditors and their audit reports. The audit
committee also meets with the financial staff to review accounting procedures
and reports. The audit committee currently consists of                   .

DIRECTOR COMPENSATION

     We do not pay directors cash compensation. Directors are reimbursed for the
expenses they incur in attending meetings of the board or board committees.
Non-employee directors are eligible to receive options to purchase common stock
awarded under our 1999 Equity Compensation Plan.

     Each non-employee director will be granted, upon the closing of this
offering, an option to purchase 16,000 shares that will have an exercise price
equal to the offering price in this offering. After this offering, each director
who is not an employee will receive an option to purchase 16,000 shares upon his
or her election to the board and will receive an option to purchase 5,000 shares
upon his or her reelection to the board. The exercise price of options granted
after this offering will be the fair market value of the stock on the date of
the grant.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Prior to our completion of this offering, our board of directors as a whole
made decisions relating to the compensation of our executive officers. During
this time, Messrs. Krein, Feldman and Lamport participated in all discussions
concerning the compensation of our executive officers, except that each was
excluded from discussions regarding their own compensation. None of our officers
serves as a member of the board of directors or compensation committee of any
entity that has one or more executive officers serving on our compensation
committee.

EXECUTIVE COMPENSATION

     The following table sets forth information for the fiscal year ended
December 31, 1998 concerning compensation we paid to our Chief Executive
Officer. No other executive officer received more than $100,000 in compensation
for 1998.

                           SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
                                                                                            -----------------------
NAME AND PRINCIPAL POSITION                                                                 FISCAL YEAR     SALARY
-----------------------------------------------------------------------------------------   -----------    --------
Steven H. Krein
  Chairman of the Board and Chief Executive Officer......................................       1998       $131,250
No stock options were granted to Mr. Krein in 1998 nor did he exercise any
options in 1999 or hold any unexercised stock options as of December 31, 1998.
In connection with employment agreements which will

                                       36
become effective upon completion of this offering, Messrs. Krein and Feldman
will receive a base annual salary of $175,000 and $150,000 per year,
respectively, and a bonus of up to $100,000 each based on the attainment of
certain performance objectives. In addition, upon completion of this offering,
Messrs. Krein and Feldman will each be paid a bonus of $175,000. At the time of
execution of the employment agreement in June 1999, as an inducement to Messrs.
Krein and Feldman to enter into their respective agreements, they were each
granted 62,000 options to purchase common stock at $6.00 per share. The options
are exercisable for a period of ten years beginning on the date of grant and
vest over a two year period.

STOCK OPTION PLANS

  1999 Equity Compensation Plan

     We adopted the 1999 Equity Compensation Plan on June 8, 1999. The plan
provides for grants of incentive stock options, nonqualified stock options and
restricted stock to designated employees, advisors and consultants, and to
non-employees directors. By encouraging stock ownership, we seek to motivate
these individuals to contribute to our success. No options have been granted
under the 1999 Equity Compensation Plan to date.

     The plan authorizes up to 2,000,000 shares of common stock for issuance
under the plan. If options granted under the plan expire or are terminated for
any reason without being exercised, or shares of restricted stock are forfeited,
the underlying shares of common stock will again be available for issuance under
the plan.

     The compensation committee of the board of directors administers and
interprets the plan. The compensation committee has the sole authority to
determine the type, size and terms of the grants, including the individuals to
whom grants shall be made.

     Grants may be made to any of our employees or any employee of our
subsidiaries and to any non-employee member of our board of directors. Key
consultants and advisors who perform services for us or any of our subsidiaries
are eligible if they render bona fide services, other than as part of the offer
or sale of securities in a capital-raising transaction. No more than 500,000
shares and/or options in the aggregate may be granted or awarded to any
individual in any calendar year.

     Incentive stock options may be granted only to employees. Non-qualified
stock options may be granted to employees, non-employee directors and key
consultants and advisors. The exercise price of an option is determined by the
compensation committee but in no event can the exercise price of an incentive
stock option be less than the fair market value of a share of common stock on
the date the incentive stock option is granted. The exercise price of an
incentive stock option granted to an employee who owns more than 10% of the
common stock may not be less than 110% of the fair market value of a share of
common stock on the date of grant.

     The compensation committee determines the term of each option, up to a
maximum of ten years from the date of grant, except that the term of an
incentive stock option granted to an employee who owns more than 10% of the
common stock may not exceed five years from the date of grant.

     The compensation committee shall determine the number of shares of
restricted stock granted to a participant. Grants of restricted stock may be
conditioned on such performance requirements, vesting provisions, transfer
restrictions or other restrictions and conditions as the compensation committee
determines in its sole discretion.

     The compensation committee may amend or terminate the plan at any time,
subject to stockholder approval if required. The plan will terminate in June
2009, unless the compensation committee terminates it earlier or extends it with
approval of the stockholders.

     In the event of a change of control, whether by merger or asset sale or a
sale by the stockholders of more than 50% of the total voting power of
Webstakes.com, the compensation committee may determine that all outstanding
options shall immediately vest, and the restrictions on all outstanding
restricted stock shall immediately lapse.

     Upon the occurrence of an event where we are not the surviving entity or
where we survive only as a subsidiary of another entity, unless the compensation
committee determines otherwise, all outstanding grants

                                       37
shall be assumed by or replaced with comparable options or stock by the
surviving corporation. In addition, the compensation committee may require that
grantees surrender their outstanding options in exchange for payment by us, in
cash or common stock, at an amount equal to the amount by which the then fair
market value of the shares of common stock subject to the grantee's unexercised
options exceeds the exercise price of those options and/or after giving grantees
an opportunity to exercise their outstanding options, terminate any or all
unexercised options.

     Options to purchase 43,385 shares of common stock are outstanding under
this plan.

  Stock Option Plan

     Options to purchase 450,000 shares of common stock are outstanding under
the Stock Option Plan. Holders of these options were given the right to purchase
common stock at the market price on the date of grant as determined by the board
of directors. These options vest ratably on an annual basis over a four-year
period. The other terms of this predecessor plan are similar in all material
respects to the 1999 Equity Compensation Plan.

EMPLOYMENT AGREEMENTS

     We have entered into employment agreements which will become effective upon
completion of this offering with Messrs. Krein and Feldman pursuant to which
Mr. Krein will serve as Chairman of the Board and Chief Executive Officer and
Mr. Feldman will serve as President. In connection with these employment
agreements, Messrs. Krein and Feldman will receive base annual salaries of
$175,000 and $150,000 per year, respectively, and a bonus of up to $100,000 each
based on the attainment of certain performance objectives. In addition, upon
completion of this offering, Messrs. Krein and Feldman will each be paid a bonus
of $175,000. At the time of execution of the employment agreements in June 1999,
as an inducement to Messrs. Krein and Feldman to enter into their respective
agreements, they were each granted 62,000 options to purchase common stock at
$6.00 per share. The options are exercisable for a period of ten years beginning
on the date of grant and vest over a two year period. If either of
Messrs. Krein or Feldman is terminated for any reason other than for cause, the
employment agreements provide that he is entitled to a severance payment equal
to one year of his base salary. The employment agreements contain provisions
restricting the rights of Messrs. Krein or Feldman to compete with us under
certain events of termination. They also contain standard confidentiality
provisions. Please see "Management--Executive Compensation."

                              CERTAIN TRANSACTIONS

     In June 1999, we entered into a two-year sponsorship agreement with Excite
under which Excite agreed to promote webstakes.com through ad banner placements
and links to webstakes.com and its promotions on Excite.com, WebCrawler.com and
Classified 2000.com and through the use of a webstakes.com personalized front
page made available by Excite. As part of this agreement, we received a
guarantee of a total number of impressions per year. The fee to be paid to
Excite under this agreement is $5.6 million, $685,000 of which has been paid,
and the balance of which is due 10 days following the completion of this
offering. At Home Corporation, the parent company of Excite, is one of our
stockholders.

     In June 1999, we entered into a services agreement with MatchLogic, Inc., a
wholly owned subsidiary of Excite, pursuant to which MatchLogic will provide ad
serving and targeting, data processing, analysis and enhancement services to
Webstakes.com. The term of the agreement is two years. The fee to be paid to
MatchLogic under this agreement is $13.1 million, $2.5 million of which has been
paid and the balance of which is due 10 days following completion of this
offering. See "Use of Proceeds."

     In June 1999, we redeemed all outstanding shares of class A mandatorily
redeemable convertible preferred stock and 1,714,608 shares of common stock for
an aggregate amount of $24.0 million. To finance the redemption and to provide
working capital, we issued shares of new class B mandatorily redeemable
convertible preferred stock to a group of investors, including At Home
Corporation, XL Ventures, a subsidiary of Big Flower Holdings and Travelers, for
an aggregate purchase price of $40.0 million. Upon completion of this offering,
the class B mandatorily redeemable convertible preferred stock will
automatically convert into 6,666,667 shares of common stock.

                                       38
PRINCIPAL STOCKHOLDERS

     The following table provides certain information regarding the beneficial
ownership of our common stock as of June   , 1999 and as adjusted to reflect the
sale of the                 shares of our common stock offered in this offering,
by:

          o each person or entity who beneficially owns more than 5% of our
     stock;

          o each of our directors and director nominees;

          o our named executive officer; and

          o all executive officers and directors as a group.

     Unless otherwise indicated, the address of each person named in the table
below is Webstakes.com, Inc. 11 West 19th Street, New York, New York 10010. The
amounts and percentages of common stock beneficially owned are reported on the
basis of regulations of the Securities and Exchange Commission governing the
determination of beneficial ownership of securities. Under the rules of the
Commission, a person is deemed to be a "beneficial owner" of a security if that
person has or shares "voting power," which includes the power to vote or to
direct the voting of such security, or "investment power," which includes the
power to dispose of or to direct the disposition of such security. A person is
also deemed to be a beneficial owner of any securities of which that person has
a right to acquire beneficial ownership within 60 days. Under these rules, more
than one person may be deemed a beneficial owner of the same securities and a
person may be deemed to be a beneficial owner of securities as to which such
person has no economic interest. The information set forth in the following
table (1) assumes that the over-allotment option by the underwriters has not
been exercised, (2) excludes any shares purchased in this offering by the
respective beneficial owner, and (3) reflects the conversion of all shares of
class B mandatorily redeemable convertible preferred stock upon completion of
this offering.
PERCENT OF SHARES
                                                                                              BENEFICIALLY OWNED
                                                                 NUMBER OF SHARES      ---------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER                             BENEFICIALLY OWNED    BEFORE OFFERING    AFTER OFFERING
--------------------------------------------------------------   ------------------    ---------------    --------------
Steven H. Krein...............................................        1,470,000              13.4%                %
Daniel J. Feldman.............................................        1,470,000              13.4
At Home Corporation(1)........................................        1,166,667              10.7
XL Ventures, LLC(2)...........................................        1,166,667              10.7
The Travelers Insurance Company(3)............................          833,333               7.6
Invesco Private Capital Inc.(4)(5)............................          691,667               6.3
Joseph Lamport................................................          588,000               5.4
Arnold Greenberg(6)...........................................          166,667               1.5
Lisa Z. Crane(7)**............................................          166,667               1.5
Kristopher Wood(6)(8)**.......................................        1,166,667              10.7
            (6)(9)**..........................................
All executive officers and directors as a group (4 persons)..         3,694,667              34.8
------------------
  * Less than 1% of total.

 ** Nominee

 (1) The address of At Home Corporation is 425 Broadway Street, Redwood, CA
     94063.

 (2) The address of XL Ventures, LLC is 1105 North Market Street, Suite 1300,
     Wilmington, DE 19801.

 (3) The address of The Travelers Insurance Company is 388 Greenwich Street,
     36th Floor, New York, NY 10013.

                                              (Footnotes continued on next page)

                                       39
(Footnotes continued from previous page)
 (4) The address of Invesco is 1166 Avenue of the Americas, New York, NY 10036.

 (5) Includes 691,667 shares of which Invesco Private Capital Inc. has
     discretionary authority for five accounts, including dispositive and voting
     control. Invesco Private Capital Inc. disclaims beneficial ownership of
     these shares.

 (6) Does not include 16,000 shares issuable upon the exercise of stock options
     which will be granted upon completion of this offering.

 (7) Includes 166,667 shares held by National Broadcasting Company, Inc.
     Ms. Crane is an employee of National Broadcasting Company, Inc. Does not
     include 16,000 shares issuable upon the exercise of stock options
     transferred by Ms. Crane pursuant to a contractual obligation to National
     Broadcasting Company, Inc. Ms. Crane disclaims beneficial ownership of all
     of these shares.

 (8) Includes 1,166,667 shares held by XL Ventures, LLC. Mr. Wood is managing
     director of XL Ventures, Inc., an affiliate of XL Ventures, LLC. Mr. Wood
     disclaims beneficial ownership of these shares.

 (9) [New Director]

                                       40
DESCRIPTION OF CAPITAL STOCK

GENERAL

     The following description of our capital stock and provisions of our
certificate of incorporation and our bylaws are summaries thereof and are
qualified by reference to our certificate of incorporation and our bylaws,
copies of which have been filed with the Commission as exhibits to our
registration statement, of which this prospectus forms a part.

     Upon the completion of this offering, our capital stock will consist of:
PAR VALUE
TYPE OF CAPITAL STOCK                                                        AUTHORIZED     PER SHARE
--------------------------------------------------------------------------   ----------    ------------
Common....................................................................   50,000,000    $       0.01
Preferred Stock...........................................................    1,000,000    no par value
COMMON STOCK

     The holders of the common stock are entitled to receive dividends and other
distributions in cash, stock or property from our assets that are legally
available for distribution, subject to any dividend preferences that may be
attributable to preferred stock that may be outstanding. The form, amount and
timing of dividends will be determined by our board of directors.

     Holders of the common stock may vote on all matters submitted for a vote of
our stockholders. Each share of common stock is entitled to one vote. Cumulative
voting is not authorized by our certificate of incorporation.

     Voting may be done by written consent when one or more stockholders have
enough votes to approve a particular issue by themselves. There are no
preemptive, conversion, redemption or sinking fund provisions applicable to the
common stock. Each outstanding share of common stock is, and all shares of
common stock to be outstanding upon completion of this offering will be, duly
and validly issued, fully paid and non-assessable. In the event of our
liquidation, dissolution or winding up, the holders of common stock are entitled
to share ratably in the assets available for distribution after the claims of
all senior security holders and creditors are satisfied.

PREFERRED STOCK

     Our board of directors, without further action by the stockholders, is
authorized to issue an aggregate of 1,000,000 shares of preferred stock in one
or more series. The issuance of preferred shares is subject to restrictions
under Delaware law. The board may fix the rights, preferences and privileges of
the preferred stock, along with any limitations or restrictions. The preferred
stock could have voting or conversion rights that could adversely affect the
voting power or other rights of common stock holders. The issuance of preferred
stock could also have the effect, under certain circumstances, of delaying,
deferring or preventing a change of control of Webstakes.com. We currently have
no plans to issue any shares of preferred stock.

COMMON STOCK WARRANTS

     As of the date of this prospectus, we have issued and outstanding warrants
to purchase a total of 221,683 shares of common stock, at an exercise price of
$6.00 per share. The warrants contain anti-dilution provisions providing for
adjustments of the exercise price and the number of shares of common stock
underlying the warrants upon the occurrence of any recapitalization,
reclassification, stock dividend, stock split, stock combination or similar
transaction. The warrants expire in 10 years.

DELAWARE ANTI-TAKEOVER LAW

     We are subject to the provisions of Section 203 of the Delaware General
Corporation Law regulating corporate takeovers. This section prevents certain
Delaware corporations, under certain circumstances, from engaging in a "business
combination" with:

          o a stockholder who owns 15% or more of our outstanding voting stock
            (otherwise known as an "interested stockholder"),

                                       41
o an affiliate of an interested stockholder or

          o an associate of an interested stockholder,

for three years following the date that the stockholder became an "interested
stockholder." A "business combination" includes a merger or sale of more than
10% of our assets.

     However, the above provisions of Section 203 do not apply if:

          o our board approves the transaction that made the stockholder an
            "interested stockholder," prior to the date of that transaction;

          o after the completion of the transaction that resulted in the
            stockholder becoming an "interested stockholder," that stockholder
            owned at least 85% of our voting stock outstanding at the time the
            transaction commenced, excluding shares owned by persons who are
            both Webstakes.com officers and directors; or

          o on or subsequent to the date of the transaction, the business
            combination is approved by our board and authorized at a meeting of
            our stockholders by an affirmative vote of at least two-thirds of
            the outstanding voting stock not owned by the "interested
            shareholder."

     This statute could prohibit or delay mergers or other change in control
attempts, and thus may discourage attempts to acquire us.

CLASSIFIED BOARD OF DIRECTORS

     Our bylaws divide our board of directors into three classes, with regular
three-year staggered terms and initial terms of three years for class III
directors, two years for class II directors and one year for class I directors.
This could prevent a party who acquires control of the majority of the
outstanding voting stock from immediately obtaining control of our board of
directors.

OUR BYLAWS

     Our bylaws provide that special meetings of our stockholders may only be
called by our president, board or the holders of at least one-fifth of all the
shares of any class outstanding and entitled to vote. This may have the effect
of delaying or preventing a change in control.

     Our bylaws provide that the vote of a majority of all our directors or a
vote of the majority of the outstanding stock entitled to vote is required to
amend or repeal our bylaws.

     Our bylaws provide that any action that may be taken at a meeting of the
stockholders may be taken without a meeting if:

          o the action is authorized by the unanimous written consent of all
            stockholders entitled to vote at a meeting for these purposes; or

          o the action is authorized by written consent of that number of
            stockholders entitled to vote on the issue as would be required to
            approve the action at a meeting of stockholders attended by all
            stockholders entitled to vote upon the issue.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

     Our Amended and Restated Certificate of Incorporation includes a provision
that eliminates the personal liability of its directors for monetary damages for
breach of fiduciary duty as a director, except for liability:

          o for any breach of the director's duty of loyalty to Webstakes.com or
            its stockholders;

          o for acts or omissions not in good faith or that involve intentional
            misconduct or a knowing violation of law;

          o under the section 174 of the Delaware General Corporation Law
            regarding unlawful dividends and stock purchases; or

          o for any transaction from which the director derived an improper
            personal benefit.

These provisions are permitted under Delaware law.

                                       42
Our bylaws provide that:

          o we must indemnify our directors and officers to the fullest extent
            permitted by Delaware law, subject to very limited exceptions;

          o we may indemnify our other employees and agents to the same extent
            that we indemnify our officers and directors, unless otherwise
            required by law, our Amended and Restated Certificate of
            Incorporation, our Bylaws or agreements; and

          o we must advance expenses, as incurred, to our directors and
            executive officers in connection with a legal proceeding to the
            fullest extent permitted by Delaware Law, subject to very limited
            exceptions.

     We have obtained directors' and officers' insurance for our directors,
officers and some employees for specified liabilities.

     The limitation of liability and indemnification provisions in our Amended
and Restated Certificate of Incorporation and Bylaws may discourage stockholders
from bringing a lawsuit against directors for breach of their fiduciary duty.
They may also have the effect of reducing the likelihood of derivative
litigation against directors and officers, even though an action of this kind,
if successful, might otherwise benefit us and our stockholders. Furthermore, a
stockholder's investment may be adversely affected to the extent we pay the
costs of settlement and damage awards against directors and officers pursuant to
these indemnification provisions. However, we believe that these indemnification
provisions are necessary to attract and retain qualified directors and officers.

     At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees regarding which indemnification is sought,
nor are we aware of any threatened litigation that may result in claims for
indemnification.

TRANSFER AGENT AND REGISTRAR

     The Transfer Agent and Registrar for our common stock is
                  .

                        SHARES ELIGIBLE FOR FUTURE SALE

     Sales of substantial amounts of our common stock in the public market or
the perception that these sales could occur could adversely affect prevailing
market prices of our common stock. They could also adversely affect our ability
to raise capital at a time and on terms favorable to us.

     Upon completion of this offering, we will have outstanding a total of
            shares of our common stock. Of these shares, all of the shares sold
in this offering will be freely tradable without restriction or further
registration under the Securities Act, unless such shares are purchased by
"affiliates" as that term is defined in Rule 144 under the Securities Act. The
remaining           shares of common stock held by existing stockholders 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 Rule 144
or Rule 701 under the Securities Act. These rules are summarized below.

     Subject to the lock-up agreements described below and the provisions of
Rules 144, 144(k) and 701, additional shares will be available for sale in the
public market as follows:
NUMBER OF SHARES                                                       DATE
------------------------------------------  -----------------------------------------------------------
After 180 days from the date of this prospectus (subject to
                                              volume limitations)

                                            Upon the filing of a registration statement to register for
                                              resale shares of common stock issuable upon the exercise
                                              of options granted under our stock option plans.

                                            At various times after 180 days from the date of this
                                              prospectus.
43
LOCK-UP AGREEMENTS

     Our officers and directors, holders of                shares of our common
stock and holders of warrants to purchase        shares of our common stock,
have agreed not to sell or otherwise dispose of any shares of our common stock
for a period of 180 days after the date of this prospectus, without the prior
written consent of Bear, Stearns & Co. Inc. See "Underwriting."

RULE 144

     In general, under Rule 144, a person who has beneficially owned shares of
our common stock for at least one year can sell within any three-month period a
number of shares that does not exceed the greater of:

          o 1% of the number of shares of common stock then outstanding, which
            will equal approximately       shares immediately after this
            offering; or

          o the average weekly trading volume during the four calendar weeks
            preceding the filing of a notice on Form 144 with respect to the
            sale.

Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of public information about us.

RULE 144(K)

     Under Rule 144(k), a person who is not one of our affiliates at any time
during the 90 days preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least two years, can sell such shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.

RULE 701

     In general, under Rule 701, any of our employees, directors, consultants or
advisors who purchase shares from us in connection with a compensatory stock
option plan or other written agreement are eligible to resell these shares
90 days after the date of this offering in reliance on Rule 144, without
compliance with certain restrictions contained in Rule 144, including the
holding period.

REGISTRATION RIGHTS

     After this offering, holders of 6,666,667 shares of common stock will be
entitled to require us to register their shares for public sale, pursuant to a
Registration Rights Agreement between us and the purchasers of the class B
mandatorily redeemable convertible preferred stock (who will become holders of
common stock after this offering). Holders of 25% of these shares (and any
people who purchase shares of common stock from these holders in a private
transaction) have the right to require us to file up to three registration
statements to allow for the public sale of their common stock. The number of our
shares subject to these registration rights which may be registered in a
non-underwritten offering is limited to 15% of the number of shares of our
common stock outstanding at the time of that registration. This 15% limit may be
exceeded if a nationally-recognized investment bank determines that a greater
number of shares may be registered without a material adverse effect on the
market for our securities. These registration statements must be maintained
effective for up to 180 days. In addition, these holders (and their transferees)
and the holder of warrants to purchase 221,683 shares of common stock have the
right to include their shares in any registered offering of our securities
(other than in connection with some corporate transactions and employee benefit
plans). We are required to pay most of the expenses related to these
registrations, excluding underwriters' commissions and discounts.

     We intend to file registration statements to register shares of common
stock reserved for issuance under our Stock Option Plan and the 1999 Equity
Compensation Plan. These registration statements will permit the resale of
shares issued under these plans by non-affiliates in the public market without
restriction, subject to the lock-up agreements.

                                       44
UNDERWRITING

     The underwriters of this offering named below, for whom Bear, Stearns & Co.
Inc., ING Baring Furman Selz LLC, Thomas Weisel Partners LLC and Wit Capital
Corporation are acting as representatives, have severally agreed with us,
subject to the terms and conditions of the underwriting agreement, to purchase
from us the aggregate number of shares of common stock set forth opposite their
respective names below:
NUMBER
UNDERWRITER                                                                                   OF SHARES
-------------------------------------------------------------------------------------------   ---------
Bear, Stearns & Co. Inc....................................................................
ING Baring Furman Selz LLC.................................................................
Thomas Weisel Partners LLC.................................................................
Wit Capital Corporation....................................................................

                                                                                              ---------
     Total.................................................................................
                                                                                              ---------
                                                                                              ---------
The underwriting agreement provides that the obligations of the
underwriters are subject to approval of certain legal matters by counsel and to
various other conditions. We have agreed to indemnify the several underwriters
against certain liabilities, including liabilities under the Securities Act, and
where such indemnification is unavailable, to contribute to payments that the
underwriters may be required to make in respect of such liabilities. The nature
of the underwriters' obligations is that they are committed to purchase and pay
for all of the above shares of common stock if any are purchased.

     If the underwriters sell more than the total number set forth in the table
above, the underwriters have an option to buy up to an additional        shares
to cover such sales from us. The underwriters may exercise that option for
30 days. If any shares are purchased pursuant to this option, the underwriters
will severally purchase shares in the same proportion as set forth in the table
above.

     The underwriters, at our request, have reserved for sale at the initial
public offering price up to        of the shares of common stock to be sold in
this offering for sale to our employees and directors and other persons
designated by us. The number of shares available for sale to the general public
will be reduced to the extent that any reserved shares are purchased. Any
reserved shares not so purchased will be offered by the underwriters on the same
basis as the other shares offered hereby.

     The underwriters do not expect to confirm sales of common stock to any
accounts over which they exercise discretionary authority.

     We, all of our directors and officers and other stockholders holding an
aggregate of        shares of our common stock have agreed that, subject to
certain exceptions, for a period of 180 days from the date of this prospectus,
without the prior written consent of Bear, Stearns & Co. Inc., which may be
waived, will not, directly or indirectly, (i) issue, sell, offer or agree to
sell, grant any option for the sale of, pledge, make any short sale, establish
an open "put equivalent position" within the meaning of Rule 16a-1(h) under the
Exchange Act or otherwise dispose of any shares of our common stock (or
securities convertible into, exercisable for or exchangeable for our common
stock) or (ii) enter into any swap, derivative transaction or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of our common stock, whether any of the transactions described in
clause (i) or (ii) above is to be settled by delivery of our common stock or
those other securities, in cash or otherwise. This restriction does not apply to
bona fide gifts or, in the case of stockholders who are corporations, limited
liability companies or partnerships, transfers to these stockholders'
affiliates, shareholders, members or partners, provided that in each case, the
recipients agree in writing to abide (and in the case of non-individuals certify
in writing that they have always abided since the original date of the
agreement) by these restrictions. In addition, this restriction does not apply
to shares of our common stock purchased in the public market after this
offering.

                                       45
The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters by us. These amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.
NO EXERCISE    FULL EXERCISE
                                                                                -----------    -------------
Per Share....................................................................     $               $
Total........................................................................
Shares sold by the underwriters to the public will initially be offered at
the public offering price set forth on the cover of this prospectus. Any shares
sold by the underwriters to securities dealers may be sold at a discount of up
to $   per share from the public offering price. Any such securities dealers may
resell any shares purchased from the underwriters to certain other brokers or
dealers at a discount of up to $   per share from the public offering price. If
all the shares are not sold at the offering price, the representative may change
the offering price and the other selling terms.

     Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for the common stock will
be determined by negotiations between us and the representatives of the
underwriters. Among the factors to be considered in those negotiations will be:

          o Our results of operations in recent periods;

          o Estimates of our prospects and the industry in which we compete;

          o An assessment of our management;

          o The general state of the securities markets at the time of this
            offering; and

          o The prices of similar securities of generally comparable companies.

     We will apply to have our common stock approved for quotation on the Nasdaq
National Market under the symbol IWIN. However, there can be no assurance that
an active or orderly trading market will develop for the common stock or that
the common stock will trade in the public markets subsequent to this offering at
or above the initial offering price.

     In connection with this offering, certain persons participating in this
offering may purchase and sell shares of common stock in the open market. These
transactions may include short sales, stabilizing transactions and purchases to
cover positions created by short sales. Short sales involve the sale by the
underwriters of a greater number of shares than they are required to purchase in
this offering. Stabilizing transactions consist of certain bids or purchases
made for the purpose of preventing or retarding a decline in the market price of
the common stock while this offering is in progress. The underwriters also may
impose a penalty bid. This occurs when a particular underwriter repays to the
underwriters a portion of the underwriting discount received by it because the
representative has repurchased shares sold by or for the account of such
underwriter in stabilizing or short covering transactions.

     These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.

     We estimate that the total expenses of this offering, excluding
underwriting discounts and commissions, will be approximately $       .

     A prospectus in electronic format is being made available on an Internet
web site maintained by Wit Capital. In addition, all dealers purchasing shares
from Wit Capital in this offering have agreed to make a prospectus in electronic
format available on web sites maintained by each of these dealers.

     Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998, Thomas Weisel Partners LLC has been named as a lead or co-manager on 37
filed public offerings of equity securities, of which 17 have been completed,
and has acted as a syndicate member in an additional 10 public offerings of
equity securities.

                                       46
Thomas Weisel Partners LLC does not have any material relationship with us or
any of our officers, directors or controlling persons, except with respect to
its contractual relationship with us under the underwriting agreement entered
into in connection with this offering.

     Wit Capital, a member of the National Association of Securities Dealers,
Inc., will participate in this offering as one of the underwriters. The National
Association of Securities Dealers, Inc. approved the membership of Wit Capital
on September 4, 1997. Since that time, Wit Capital has acted as an underwriter,
e-Manager or selected dealer in over 80 public offerings. Except for its
participation as a representative in this offering, Wit Capital has no
relationship with us or any of our founders or significant stockholders.

                                 LEGAL MATTERS

     The validity of the common stock offered by this prospectus will be passed
upon for us by Reed Smith Shaw & McClay LLP, Philadelphia, Pennsylvania and for
the underwriters by O'Sullivan Graev & Karabell, LLP, New York, New York.

                                    EXPERTS

     The financial statements of Webstakes.com as of December 31, 1998 and 1997
and for each of the two years in the period ended December 31, 1998 and the
period from January 8, 1996 (inception) to December 31, 1996 included in this
prospectus have been included in reliance upon the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

                       WHERE YOU CAN GET MORE INFORMATION

     We have filed a registration statement on Form S-1 with the SEC. This
prospectus, which forms a part of that registration statement, does not contain
all of the information included in the registration statement. Certain
information is omitted and you should refer to the registration statement and
its exhibits. With respect to references made in this prospectus to any contract
or other document, such references are not necessarily complete and you should
refer to the exhibits attached to the registration statement for copies of the
actual contract or document. You may review a copy of the registration statement
at the SEC's public reference room in Washington, D.C., and at the SEC's
regional offices in Chicago, Illinois and New York, New York. Please call the
SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. Our SEC filings and the registration statement can also be
reviewed by accessing the SEC's Internet site at http://www.sec.gov. As a result
of this offering, we will become subject to the information and reporting
requirements of the Securities Exchange Act and, in accordance therewith, will
file periodic reports, proxy statements and other information with the SEC. Upon
approval of the common stock for the quotation on the Nasdaq National Market,
such reports, proxy and information statements and other information may also be
inspected at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington,
D.C. 20006.

     This prospectus includes statistical data regarding Internet usage and the
advertising industry which were obtained from industry publications, including
reports generated by International Data Corporation, the Direct Marketing
Association, Forrester Research, Inc. and Promo Magazine. These industry
publications generally indicate that they have obtained information from sources
believed to be reliable, but do not guarantee the accuracy and completeness of
such information. While we believe those industry publications to be reliable,
we have not independently verified such data. We also have not sought the
consent of any of these organizations to refer to their reports in this
prospectus.

                                       47
WEBSTAKES.COM, INC.
                         INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants........................................................................        F-2

Balance Sheets at December 31, 1997 and 1998 and the three months ended
  March 31, 1999 (unaudited).............................................................................        F-3

Statements of Operations for the period from January 8, 1996 (inception) to December 31, 1996,
  the years ended December 31, 1997 and 1998 and the three months ended March 31, 1998 (unaudited) and
  March 31, 1999 (unaudited).............................................................................        F-4

Statements of Stockholders' Equity (Deficit) for the period from January 8, 1996 (inception) to
  December 31, 1996, the years ended December 31, 1997 and 1998 and the three months ended March 31, 1999
  (unaudited)............................................................................................        F-5

Statements of Cash Flows for the period from January 8, 1996 (inception) to December 31, 1996, the years
  ended December 31, 1997 and 1998 and for the three months ended March 31, 1998 (unaudited) and March
  31, 1999 (unaudited)...................................................................................        F-6

Notes to Financial Statements............................................................................        F-7
F-1
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Webstakes.com, Inc.:

In our opinion, the accompanying balance sheets and the related statements of
operations, stockholders' equity (deficit) and cash flows present fairly, in all
material respects, the financial position of Webstakes.com, Inc. at
December 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1998, and the period
from January 8, 1996, (inception) to December 31, 1996, in conformity with
generally accepted accounting principles. 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 which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

                                          PRICEWATERHOUSECOOPERS LLP

February 19, 1999
1301 Avenue of the Americas
New York, New York

                                      F-2
WEBSTAKES.COM, INC.
                                 BALANCE SHEETS
DECEMBER 31                             PRO FORMA
                                                            ------------------------     MARCH 31,      AS OF MARCH 31,
                                                              1997          1998           1999              1999
                                                            ---------    -----------    ------------    ---------------
                                                                                        (UNAUDITED)       (UNAUDITED)
                                                                                                         (SEE NOTE 2)
ASSETS
Current assets:
  Cash and cash equivalents..............................   $  85,365    $    17,573    $  2,812,554
  Accounts receivable, less allowance of $12,700,
    $125,000 and $175,694................................     113,336        615,230         579,287
  Prepaid expenses and other current assets..............       2,751        125,174         109,326
                                                            ---------    -----------    ------------
    Total current assets.................................     201,452        757,977       3,501,167
                                                            ---------    -----------    ------------
Fixed assets, net........................................     232,858        437,759         567,369
Capitalized software development costs, net..............          --             --         147,958
Other assets.............................................      41,708             --          20,043
                                                            ---------    -----------    ------------
    Total assets.........................................   $ 476,018    $ 1,195,736    $  4,236,537
                                                            ---------    -----------    ------------
                                                            ---------    -----------    ------------

     LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Accounts payable.......................................   $ 155,257    $   221,745    $    480,583
  Accrued liabilities....................................      22,081        169,136          91,537
  Deferred revenues......................................      23,333        117,297         105,260
  Capital lease obligations..............................          --         31,764          57,710
  Notes payable-related party, current portion...........     150,000      1,342,222          66,667
                                                            ---------    -----------    ------------
    Total current liabilities............................     350,671      1,882,164         801,757
                                                            ---------    -----------    ------------
  Notes payable, net of current portion..................          --         66,667          50,000
                                                            ---------    -----------    ------------
    Total liabilities....................................     350,671      1,948,831         851,757
                                                            ---------    -----------    ------------
Class A mandatorily redeemable convertible preferred
  stock--par value $100, 50,000 shares authorized and no
  shares issued and outstanding at December 31, 1997,
  1998, 50,000 shares issued and outstanding at
  March 31, 1999 (unaudited).............................          --             --       5,000,000
Stockholders' equity (deficit):
  Common stock--par value $.01, 10,000,000 shares
    authorized, 4,999,176, 5,714,184 and 5,714,184 shares
    issued and outstanding at December 31, 1997, 1998 and
    March 31, 1999 (unaudited), respectively.............      49,992         57,142          57,142
  Additional paid-in capital.............................     526,914      1,140,624       1,167,321
  Accumulated deficit....................................    (447,934)    (1,861,977)     (2,746,323)
  Deferred compensation..................................      (3,625)       (88,884)        (93,360)
                                                            ---------    -----------    ------------
    Total stockholders' equity (deficit).................     125,347       (753,095)     (1,615,220)
                                                            ---------    -----------    ------------
      Total liabilities and stockholders' equity
         (deficit).......................................   $ 476,018    $ 1,195,736    $  4,236,537
                                                            ---------    -----------    ------------
                                                            ---------    -----------    ------------
The accompanying notes are an integral part of these financial statements.

                                      F-3
WEBSTAKES.COM, INC.
                            STATEMENTS OF OPERATIONS
JANUARY 8, 1996
                                           (INCEPTION) TO                                       THREE MONTHS ENDED
                                            DECEMBER 31,       YEAR ENDED DECEMBER 31,              MARCH 31,
                                           ---------------    --------------------------    --------------------------
                                               1996              1997           1998           1998           1999
                                           ---------------    ----------    ------------    -----------    -----------
                                                                                            (UNAUDITED)    (UNAUDITED)
Revenues................................     $    79,584      $1,618,277    $  4,798,893    $ 1,066,610    $ 1,318,628

Operating expenses:
  Product development...................          59,073         181,260         548,818        101,875         13,451
  Selling and marketing.................         124,754       1,090,721       3,618,557        690,309      1,370,489
  General and administrative............         108,665         535,963       1,969,214        326,111        833,116
                                             -----------      ----------    ------------    -----------    -----------
     Total operating expenses...........         292,492       1,807,944       6,136,589      1,118,295      2,217,056
                                             -----------      ----------    ------------    -----------    -----------

  Loss from operations..................        (212,908)       (189,667)     (1,337,696)       (51,685)      (898,428)

Interest income (expense), net..........          (8,187)        (37,172)        (76,347)       (10,142)        14,082
                                             -----------      ----------    ------------    -----------    -----------

Net loss................................     $  (221,095)     $ (226,839)   $ (1,414,043)   $   (61,827)   $  (884,346)
                                             -----------      ----------    ------------    -----------    -----------
                                             -----------      ----------    ------------    -----------    -----------

Basic and diluted net loss per share....     $     (0.06)     $    (0.05)   $      (0.27)   $     (0.01)   $     (0.15)
                                             -----------      ----------    ------------    -----------    -----------
                                             -----------      ----------    ------------    -----------    -----------
Weighted average shares of common stock
  used in computing basic and diluted
  net loss per share....................       3,999,576       4,278,916       5,181,356      4,999,176      5,714,184
                                             -----------      ----------    ------------    -----------    -----------
                                             -----------      ----------    ------------    -----------    -----------

Pro forma basic and diluted net loss per
  share (see Note 2)....................

Shares of common stock used in computing
  pro forma basic and diluted net loss
  per share (see Note 2)................
The accompanying notes are an integral part of these financial statements.

                                      F-4
WEBSTAKES.COM, INC.
                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
COMMON STOCK
                                                   -------------------    ADDITIONAL        DEFERRED      ACCUMULATED
                                                    SHARES     AMOUNT    PAID-IN-CAPITAL   COMPENSATION     DEFICIT        TOTAL
                                                   ---------   -------   ---------------   ------------   -----------   -----------
Issuance of common stock to founders at
  January 8, 1996 (inception)...................   3,999,576   $39,996     $    (9,967)                                 $    30,029
    Net and comprehensive loss..................                                                          $ (221,095)      (221,095)
                                                   ---------   -------     -----------                    -----------   -----------
Balance December 31, 1996.......................   3,999,576    39,996          (9,967)                     (221,095)      (191,066)
                                                   ---------   -------     -----------                    -----------   -----------
                                                   ---------   -------     -----------                    -----------   -----------
  Debt to equity conversion at book value plus
    interest....................................     999,600     9,996         533,256                                      543,252
  Stock options to non-employees................                                 3,625       $ (3,625)                           --
    Net and comprehensive loss..................                                                            (226,839)      (226,839)
                                                   ---------   -------     -----------       --------     -----------   -----------
Balance December 31, 1997.......................   4,999,176    49,992         526,914         (3,625)      (447,934)       125,347
                                                   ---------   -------     -----------       --------     -----------   -----------
                                                   ---------   -------     -----------       --------     -----------   -----------
  Debt to equity conversion at book value plus
    interest....................................     715,008     7,150         524,826                                      531,976
  Amortization of deferred compensation.........                                                3,625                         3,625
  Stock options to non-employees................                                88,884        (88,884)                           --
    Net and comprehensive loss..................                                                          (1,414,043)    (1,414,043)
                                                   ---------   -------     -----------       --------     -----------   -----------
Balance December 31, 1998.......................   5,714,184    57,142       1,140,624        (88,884)    (1,861,977)      (753,095)
                                                   ---------   -------     -----------       --------     -----------   -----------
                                                   ---------   -------     -----------       --------     -----------   -----------
  Adjustment of deferred compensation to
    non-employees to current fair value
    (unaudited).................................                               (15,587)        15,587                            --
  Stock options to non-employees (unaudited)....                                42,284        (42,284)                           --
  Amortization of deferred compensation
    (unaudited).................................                                               22,221                        22,221
    Net and comprehensive loss (unaudited)......                                                            (884,346)      (884,346)
                                                   ---------   -------     -----------       --------     -----------   -----------
Balance March 31, 1999 (unaudited)..............   5,714,184   $57,142     $ 1,167,321       $(93,360)    $(2,746,323)  $(1,615,220)
                                                   ---------   -------     -----------       --------     -----------   -----------
                                                   ---------   -------     -----------       --------     -----------   -----------
The accompanying notes are an integral part of these financial statements.

                                      F-5
WEBSTAKES.COM, INC.
                            STATEMENTS OF CASH FLOWS
JANUARY 8, 1996                                  THREE MONTHS ENDED
                                                     (INCEPTION) TO     YEAR ENDED DECEMBER 31,            MARCH 31,
                                                     DECEMBER 31,      -------------------------   -------------------------
                                                         1996             1997          1998          1998          1999
                                                     ---------------   ----------   ------------   -----------   -----------
                                                                                                   (UNAUDITED)   (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss.........................................    $  (221,095)    $ (226,839)  $ (1,414,043)   $ (61,827)   $  (884,346)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
      Depreciation and amortization................          7,471         37,661        147,515       25,684         74,076
      Bad debt expense.............................          2,499         11,829        208,604       18,087         50,694
      Compensation expense.........................             --             --          3,625          906         22,221
      Interest payable converted into
         common stock..............................             --         33,256         24,826           --         35,000
    Changes in operating assets and liabilities:
      Increase in accounts receivable..............        (55,480)       (72,184)      (710,498)    (178,823)       (14,751)
      (Increase) decrease in prepaid expenses and
         other current assets......................             --         (2,751)      (122,423)     (75,122)        15,848
      Increase in capitalized software development
         costs.....................................             --             --             --           --       (161,409)
      (Increase) decrease in other assets..........             --        (41,708)        41,708           --        (20,043)
      Increase (decrease) in accounts payable......         48,161        107,096         66,488      (36,332)       258,838
      Increase (decrease) in accrued liabilities...         16,934          5,147        147,055       53,112        (77,599)
      Increase (decrease) in deferred revenue......             --         23,333         93,964       99,466        (12,037)
                                                       -----------     ----------   ------------    ---------    -----------
NET CASH USED IN OPERATING ACTIVITIES..............       (201,510)      (125,160)    (1,513,179)    (154,849)      (713,508)
                                                       -----------     ----------   ------------    ---------    -----------
CASH FLOWS FROM INVESTING ACTIVITY:
  Purchase of fixed assets.........................        (64,934)      (203,060)      (301,444)     (64,230)      (143,480)
                                                       -----------     ----------   ------------    ---------    -----------
NET CASH USED IN INVESTING ACTIVITY................        (64,934)      (203,060)      (301,444)     (64,230)      (143,480)
                                                       -----------     ----------   ------------    ---------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of notes payable..........        260,000        390,000      1,820,000      283,333        120,000
  Principal payments on notes payable                           --             --        (61,111)          --        (22,222)
  Proceeds from issuance of common stock...........         30,029             --             --           --             --
  Principal payments on capital lease
    obligations....................................             --             --        (12,058)          --        (20,809)
  Proceeds from issuance of class A mandatorily
    redeemable convertible preferred stock.........             --             --             --           --      3,575,000
                                                       -----------     ----------   ------------    ---------    -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES..........        290,029        390,000      1,746,831      283,333      3,651,969
                                                       -----------     ----------   ------------    ---------    -----------
NET INCREASE (DECREASE) IN CASH FOR THE PERIOD.....         23,585         61,780        (67,792)      64,254      2,794,981
CASH, BEGINNING OF PERIOD..........................             --         23,585         85,365       85,365         17,573
                                                       -----------     ----------   ------------    ---------    -----------
CASH, END OF PERIOD................................    $    23,585     $   85,365   $     17,573    $ 149,619    $ 2,812,554
                                                       -----------     ----------   ------------    ---------    -----------
                                                       -----------     ----------   ------------    ---------    -----------
CASH PAID DURING THE PERIOD FOR INTEREST...........                                 $     18,530    $   5,079    $     4,287
                                                                                    ------------    ---------    -----------
                                                                                    ------------    ---------    -----------
Supplemental disclosure of non-cash investing and financing activities:

      During 1997, 1998 and the three months ended March 31, 1999 (unaudited),
      certain convertible notes and interest were converted into common stock
      and preferred stock (see Note 8).

      During 1998 and the three months ended March 31, 1999, the Company entered
      into capital leases for computer equipment with a cost of $43,822 and
      $46,755 (unaudited), respectively.

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

                                      F-6
WEBSTAKES.COM, INC.

                         NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

     Webstakes.com, Inc. (the "Company"), formerly Netstakes, Inc., was
incorporated and commenced operations in the State of New York on January 8,
1996 and was reincorporated in the State of Delaware on June 5, 1996. The period
from January 8, 1996 to December 31, 1996 is referred to as the Inception
Period. The Company is an online sweepstakes promotion company. The Company
integrates sweepstakes, contests and similar promotional events with direct
marketing tools and a proprietary database. The Company makes promotions
available without charge to consumers through its web site, webstakes.com,
clients' web sites and consumers' personal home pages. The Company generates
revenues through the sale of promotion sponsorships and services that allow
clients to cost-effectively identify and communicate with potential customers,
increase sales and foster brand awareness.

     The Company has sustained net losses and negative cash flows from
operations since its inception. The Company's ability to meet its obligations in
the ordinary course of business is dependent upon its ability to establish
profitable operations or raise additional financing through public or private
equity financings, collaborative or other arrangements with corporate sources,
or other sources of financing to fund operations. During 1999, the Company has
raised additional financings through the issuance of class A mandatorily
redeemable convertible preferred stock (the "class A") and class B mandatorily
redeemable convertible preferred stock (the "class B"). Management believes that
its current funds will be sufficient to enable the Company to meet its planned
expenditures through at least June 2000. If anticipated operating results are
not achieved and additional financings are not available on terms acceptable to
the Company, management has the intent and believes it has the ability to delay
or reduce expenditures.

     The Company has a limited operating history and its prospects are subject
to the risks, expenses and uncertainties frequently encountered by companies in
the new and rapidly evolving markets for Internet products and services. These
risks include the failure to develop and extend the Company's online service
brand, the rejection of the Company's services by web consumers, vendors and/or
advertisers, the inability of the Company to maintain and increase the levels of
traffic on its online service, as well as other risks and uncertainties. In the
event that the Company does not successfully implement its business plan,
certain assets may not be recoverable.

2. SIGNIFICANT ACCOUNTING POLICIES

UNAUDITED INTERIM FINANCIAL INFORMATION

     The financial statements as of March 31, 1999 and for the three months
ended March 31, 1999 and 1998 are unaudited. In the opinion of management, this
unaudited information has been prepared substantially on the same basis as the
audited financial statements and all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 1999 are not necessarily
indicative of the results that may be expected for any future period.

REVENUE RECOGNITION

     Principally all of the Company's historical revenues have been derived from
promotion services. Promotion services revenues are derived principally from
contracts in which the Company typically guarantees a minimum number of
impressions, or times that the client's name, logo or other identifier appears
in pages viewed by visitors to webstakes.com, and/or times that visitors are
delivered to the client's web site, over a specified period of time for a fixed
fee. Promotion services revenues are recognized ratably in the period in which
the promotion is run, provided that no significant Company obligations remain.
To the extent that minimum guarantees are not met, the Company defers
recognition of the corresponding revenues until the guaranteed minimums are
achieved. Promotion services revenues were approximately 100%, 78% and 98% of
total revenues for the Inception Period and the years ended December 31, 1997
and 1998,

                                      F-7
WEBSTAKES.COM, INC.
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
respectively. Promotion services revenues were approximately 81% (unaudited) and
97% (unaudited) of total revenues for the three months ended March 31, 1998 and
1999, respectively.

     Included in revenues are barter revenues from the exchange by the Company
with counterparties of promotion services for reciprocal advertising, or
applicable goods and services. Barter revenues are recorded as promotion service
revenues at the lower of the estimated fair value of goods and services received
or promotion services provided, and are recognized when the counterparty's
promotions are run by the Company. In cases where there is not objective
evidence of fair market value, no revenue is recognized. Barter revenues
represented 0%, 30% and 42% of total revenues for the Inception Period and the
years ended December 31, 1997 and 1998, respectively. Barter revenues
represented 42% (unaudited) and 33% (unaudited) of total revenues for the three
months ended March 31, 1998 and 1999, respectively. Barter expense is recognized
when the Company's promotions are run on the counterparty's web sites, which is
typically in the same period the related barter revenue is recognized.

CONCENTRATION OF CREDIT RISK

     In 1998, no one customer accounted for greater than 10% of total revenues.
Two customers individually accounted for 12% and 19% of total revenues in the
Inception Period and one customer accounted for 35% of total revenues in 1997.
In the Inception Period, 1997 and 1998, revenues from the Company's five largest
customers accounted for 56%, 53% and 24% of total revenues, respectively. At
December 31, 1996 and 1997, the receivable balances from its two largest
customers amounted to approximately 36% and 37%, respectively, of the Company's
net accounts receivable balance. For the three months ended March 31, 1999,
revenues from the Company's five largest customers accounted for 25% (unaudited)
of total revenues. At March 31, 1999 two customers individually accounted for
11% (unaudited) and 12% (unaudited) of the net accounts receivable balance.

FIXED ASSETS

     Depreciation of equipment, furniture and fixtures and purchased computer
software is provided for using the straight-line method over their estimated
useful lives of three years to five years. Amortization of leasehold
improvements is provided for over the lesser of the term of the related lease or
the estimated useful life of the improvement. Accumulated amortization includes
the amortization of assets recorded under capital leases. The cost of additions
and betterments are capitalized, and repairs and maintenance costs are charged
to operations in the periods incurred. Depreciation and amortization expense has
been included in general and administrative expense.

INCOME TAXES

     The Company recognizes deferred taxes by the asset and liability method of
accounting for income taxes. Under the asset and liability method, deferred
income taxes are recognized for differences between the financial statement and
tax basis of assets and liabilities at enacted statutory tax rates in effect for
the years in which the differences are expected to reverse. The effect on
deferred taxes of a change in tax rates is recognized in income in the period
that includes the enactment date. In addition, valuation allowances are
established when it is more likely than not that deferred tax assets will not be
realized.

                                      F-8
WEBSTAKES.COM, INC.
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
CASH AND CASH EQUIVALENTS

     Cash and cash equivalents include money market accounts and all highly
liquid investments purchased with original maturities of three months or less.

FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying amounts of the Company's financial instruments, including
cash, accounts receivable, accounts payable and accrued liabilities, approximate
fair value because of their short maturities. The carrying amount of the
Company's note payable approximates the fair value of such instruments based
upon management's best estimate of interest rates that would be available to the
Company for similar debt obligations at December 31, 1996, 1997 and 1998.

USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates. Significant
estimates and assumptions made by the Company include those related to the
useful lives and recoverability of fixed assets, recoverability of deferred tax
assets and allowance for doubtful accounts.

NET LOSS PER SHARE

     Basic loss per share is computed using the weighted-average number of
common shares outstanding during the period. Diluted loss per share is computed
using the weighted-average number of common and common stock equivalent shares
outstanding during the period. Common equivalent shares are excluded from the
computation if their effect is antidilutive.

     As the Company reported net losses from inception to March 31, 1999, all
66,228 and 114,009 of the options outstanding at December 31, 1997 and 1998,
respectively, and 66,228 (unaudited) and 244,213 (unaudited) of the options
outstanding at March 31, 1998 and 1999, respectively, were antidilutive and
therefore, there were no reconciling items between basic and diluted loss per
share for the years then ended. There were no options outstanding as of
December 31, 1996.

PRO FORMA INFORMATION (UNAUDITED)

     The pro forma balance sheet as of March 31, 1999 gives effect to:

     (a) the repurchase in June 1999 of the 50,000 shares of class A and
         1,714,608 shares of common stock and the issuance of 6,666,667 shares
         of class B and assumed conversion upon the closing of the IPO into
         6,666,667 shares of common stock;

     (b) the issuance of 64,000 stock options to non-employee directors, and

     (c) the issuance of warrants to purchase 221,683 shares of common stock in
         exchange for financial advisory services from non-employee consultants.

     The pro forma net loss per share is computed by dividing the net loss by
the sum of the weighted average number of shares of common stock outstanding
giving effect for: (a) the issuance, in June 1999, and conversion, upon the
closing of the IPO of all 6,666,667 outstanding shares of class B to common
stock and the repurchase, in June 1999 of 50,000 shares of class A and 1,714,608
shares of common stock, (b) the issuance of 64,000 stock options to non-employee
directors, and (c) issuance in March and June 1999 of warrants to purchase
221,683 shares of common stock in exchange for financial advisory services from
non-employee consultants.

                                      F-9
WEBSTAKES.COM, INC.
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
COMPREHENSIVE INCOME

     In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" ("SFAS No. 130"). This statement requires companies to
classify items of other comprehensive income by their nature in the financial
statements and display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. SFAS No. 130 is effective for
financial statements issued for fiscal years beginning after December 15, 1997.
The Company adopted SFAS No. 130 in fiscal year 1998. There was no difference
between net income and comprehensive income for the Inception Period and the
years ended December 31, 1997 and 1998, and for the three months ended
March 31, 1998 (unaudited) and 1999 (unaudited).

SEGMENT REPORTING

     In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS No. 131"), which established
standards for reporting information about operating segments in annual financial
statements. It also establishes standards for related disclosures about products
and services, geographic areas and major customers. SFAS No. 131 was adopted by
the Company at December 31, 1998. Adoption of SFAS No. 131 had no impact on the
Company's results of operations, financial position or cash flows.

CAPITALIZED SOFTWARE

     In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Cost of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1").
SOP 98-1 provides guidance over accounting for computer software developed or
obtained for internal use including the requirement to capitalize specified
costs and amortization of such costs. The Company adopted SOP 98-1 during the
first quarter of 1999. Costs associated with research and development are
expensed as incurred. Software development costs incurred subsequent to
establishing technological feasibility are capitalized. Technological
feasibility is established upon the completion of a detailed program design (in
the absence of any high risk issues or uncertainties). Amortization commences
upon beginning operations and utilization of the software title and is
recognized as a component of cost of sales by the straight-line method over the
shorter of three years or the remaining estimated useful life. It is reasonably
possible that the estimate of the remaining estimated economic life of the
software will be reduced significantly in the near term and that the
amortization of the capitalized software costs may be accelerated materially in
the near term. The Company evaluates the recoverability of capitalized software
costs on an on-going basis and immediately writes off any amounts determined to
be unrecoverable. Adoption resulted in capitalization of certain direct costs
related to enhancements of the Company's proprietary software of $161,409
(unaudited). During the first quarter of 1999, amortization expense was $13,451
(unaudited).

RECENT ACCOUNTING PRONOUNCEMENTS

     In April 1998, AICPA issued SOP 98-5, "Reporting on the Costs of Start-up
Activities" ("SOP 98-5"). SOP 98-5, which is effective for fiscal years
beginning after December 15, 1998, provides guidance on the financial reporting
of start-up costs and organization costs. It requires costs of start-up
activities and organization costs to be expensed as incurred. As the Company has
expensed these costs historically, the adoption of this standard is not expected
to have a significant impact on the Company's results of operations, cash flows
or financial position.

     In February 1998, FASB issued SFAS No. 132, "Employees' Disclosures about
Pension and Other Postretirement Benefits" ("SFAS No. 132"), which revises
employers' disclosures about pension and other postretirement benefit plans.
SFAS No. 132 does not change the measurement or recognition of those plans.

                                      F-10
WEBSTAKES.COM, INC.
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
SFAS No. 132 is effective for fiscal years beginning after December 15, 1997.
The adoption of SFAS No. 132 has not had an impact on the Company's results of
operations, financial position or cash flows.

     In June 1998, FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities" ("SFAS 133"), which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities. SFAS No. 133 is
tentatively effective for all fiscal quarters of fiscal years beginning after
June 15, 1999. The Company does not expect the adoption of this statement to
have a significant impact on the Company's results of operations, cash flows or
financial position.

3. FIXED ASSETS

     Fixed assets consist of the following:
DECEMBER 31,          MARCH 31,
                                                           ---------------------    -----------
                                                             1997        1998          1999
                                                           --------    ---------    -----------
                                                                                    (UNAUDITED)
Computer and office equipment...........................   $266,264    $ 542,144     $ 671,591
Furniture and fixtures..................................     11,275       34,307        48,340
Leasehold improvements..................................        451       10,133        10,133
Capital leases..........................................         --       43,822        90,577
                                                           --------    ---------     ---------
                                                            277,990      630,406       820,641
  Less accumulated depreciation and amortization........    (45,132)    (192,647)     (253,272)
                                                           --------    ---------     ---------
                                                           $232,858    $ 437,759     $ 567,369
                                                           --------    ---------     ---------
                                                           --------    ---------     ---------
Depreciation and amortization of fixed assets was approximately $7,471,
$37,661 and $147,515 for the Inception Period and the years ended December 31,
1997 and 1998, respectively, and $25,684 (unaudited) and $60,625 (unaudited) for
the three months ended March 31, 1998 and 1999, respectively.

4. RELATED-PARTY TRANSACTIONS (SEE NOTE 8 AND "PRIVATE PLACEMENT" UNDER NOTE 11
(UNAUDITED))

     The Company entered into advertising transactions with a stockholder in the
amounts of $4,855, $81,239 and $35,070, for the Inception Period and the years
1997 and 1998, respectively.

5. STOCK OPTION PLAN:

  Stock Option Plan

     In 1997, the Company's Board of Directors and stockholders adopted the
Company's Stock Option Plan (the "Plan"). The Plan provides for the granting, at
the discretion of the Stock Option Committee of the Board of Directors (the
"SOC"), of: (i) options that are intended to qualify as incentive stock options,
within the meaning of Section 422 of the Internal Revenue Code, as amended (the
"Code"), to employees and (ii) options not intended to so qualify to employees,
officers, consultants and directors. The total number of shares of common stock
for which options may be granted under the Plan is 250,000.

     The exercise price of all stock options granted under the Plan is
determined by the SOC at the time of grant. The maximum term of each option
granted under the Plan is 10 years from the date of grant. Options generally
vest ratably over a four year period.

     As of December 31, 1997 and 1998, an aggregate of 183,772 and 135,991
shares were available for future grants under the Plan, respectively.

                                      F-11
WEBSTAKES.COM, INC.
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

5. STOCK OPTION PLAN:--(CONTINUED)
Stock-Based Compensation

     The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock--Issued to Employees" and related interpretations in accounting for
its stock option issuances. The Company has adopted the disclosure-only
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation", whereby
compensation expense is recognized ratably over the vesting period. Had
compensation cost for the Company's stock options issued at the fair value of
the Company's stock been determined based on the fair value of the stock options
at the grant date for awards in 1998 consistent with the provisions of SFAS
No. 123, the Company's net loss would have been adjusted to the pro forma
amounts indicated below:
DECEMBER 31,
                                                                  1998
                                                               ------------
Net loss
  As reported...............................................    $1,414,043
  Pro forma.................................................    $1,426,552
Net loss per share
  As reported--basic and diluted............................    $    (0.27)
  Pro forma--basic and diluted..............................    $    (0.28)
The fair value of each option grant is estimated using the minimum value
method of the Black-Scholes option pricing model which assumes no volatility.
The values were obtained using assumptions which were derived using information
supplied by the Company. Changes in the information would affect the assumptions
and the option prices derived from those assumptions. The weighted average
assumptions used for grants made in 1998 were as follows: Risk free interest
rate 5.6%; Expected option life 7 years; Dividend yield 0.0%. As the fiscal year
1997 option grants were made on December 31, 1997, no compensation cost would
have resulted for the fiscal year.

     In December 1997, the Board of Directors of the Company issued options to
non-employee consultants to purchase up to 27,028 shares of the Company's common
stock, which vest ratably over two years. In accordance with Emerging Issues
Task Force Abstract No. 96-18, "Accounting for Equity Investments That Are
Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services", the Company is recording the value of the services being
received based on the fair value of the options provided or the services
received which ever is more reliably measured. The fair value of these options
has been estimated using the Black-Scholes pricing model and has been recorded
as deferred compensation and is being amortized over the vesting period. Final
measurement will occur on the vesting date.

     The following table summarizes the activity in options under the plan:
WEIGHTED AVERAGE
                                                                                        FAIR VALUE/EXERCISE
                                                                            OPTIONS/      PRICE PER
                                                                             SHARES     OPTION/PER SHARE
                                                                            --------    -------------------
Outstanding, January 1, 1997.............................................         --          $    --
Granted..................................................................     66,228          $  1.16

Outstanding, December 31, 1997...........................................     66,228          $  1.16
Granted..................................................................     73,081          $  3.02
Forfeited................................................................    (25,300)         $  2.82

Outstanding, December 31, 1998...........................................    114,009          $  1.98
Granted (unaudited)......................................................    130,704          $ 15.12

Outstanding, March 31, 1999 (unaudited)..................................    244,713          $  9.00
F-12
WEBSTAKES.COM, INC.
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

5. STOCK OPTION PLAN:--(CONTINUED)
     No options were exercisable at December 31, 1997. As of December 31, 1998,
23,566 options were exercisable with a weighted average per share fair
value/exercise price of $1.19.

     At December 31, 1997 and 1998, the weighted average remaining contractual
life of the options outstanding was approximately 10 years and 9.47 years,
respectively.

6. DEFINED CONTRIBUTION PLAN

     The Company began sponsoring a defined contribution plan for its employees
which was effective January 1, 1998. Under the 401(K) Savings Plan (the "Plan"),
employees are allowed to contribute up to 15% of their salary to the Plan, as
defined. The Company makes voluntary contributions to the Plan matching 50% on
the first 6% of employee contributions, which vest over a period of 4 years at
25% per year starting in the second year of service. The total Company
contribution in 1998 was $24,556.

7. COMMITMENTS

LEASES:

     The Company leases office space in New York and California under
non-cancelable operating leases expiring at various dates through 2002. The
following is a schedule of future minimum lease payments under non-cancelable
operating leases as of December 31, 1998:
YEAR ENDING
DECEMBER 31
--------------------------------------------------------------
1999..........................................................   $120,799
2000..........................................................     79,250
2001..........................................................     79,568
2002..........................................................     81,954
                                                                 --------
                                                                 $361,571
                                                                 --------
                                                                 --------
Rent expense was $5,332, $16,439 and $90,693 for the periods ended December
31, 1996, 1997 and 1998, respectively.

     The Company leases equipment under capital lease agreements which expire in
fiscal 1999. At December 31, 1998, future minimum lease payments due under
capital leases, together with the present value of such payments is $33,910,
less $2,146 representing interest.

8. CONVERTIBLE NOTES AND EQUIPMENT LOAN--RELATED PARTY

     In July 1996, the Company entered into a promissory note agreement with a
former holder of class A (the "holder"). Under the agreement, the Company
received $260,000 during 1996 and an additional $240,000 during 1997. At the
time of issuance, the note was equal to the fair value of shares received upon
conversion. This note, and the interest related thereto, was converted into
999,600 shares of common stock at $.54 per share in September 1997.

     In September 1997, the Company entered into a promissory note agreement
with the holder. Under the agreement, the Company received $150,000 during 1997
and an additional $350,000 during 1998. At the time of issuance, the note was
equal to the fair value of shares received upon conversion. This note, and the
interest related thereto, was converted into 715,008 shares of common stock at
$.73 per share in September 1998.

     In December 1997, the Company entered into a promissory note agreement with
the holder. Under this agreement, the Company received $200,000 during 1998. The
terms of the agreement call for 36 equal monthly payments of principal and
accrued interest. At December 31 1998, minimum future payments due under notes
payable were $72,222 and $66,667 for the years 1999 and 2000, respectively.

                                      F-13
WEBSTAKES.COM, INC.
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

8. CONVERTIBLE NOTES AND EQUIPMENT LOAN--RELATED PARTY--(CONTINUED)
     In July 1998, the Company entered into an agreement with the holder under
which the holder agreed to purchase at a future date 50,000 shares of class A.
During the course of 1998, and in January 1999, the holder advanced the Company
$1,270,000 and $120,000, respectively, at an interest rate of prime plus 3%. At
the time of issuance, the face amount of the note was equal to the fair value of
shares to be received upon conversion. On January 20, 1999, the outstanding
principal balance of $1,390,000 plus interest was converted into the agreed upon
50,000 class A and the Company received additional cash of $3,575,000 for the
remaining class A. See Note 11, Subsequent Events (unaudited).

9. CAPITAL STOCK

     At December 31, 1998, the authorized capital stock of the Company consisted
of 10,000,000 shares of common stock, $.01 par value per share, 50,000 shares of
class A, $100 par value, and 1,000,000 shares of class B preferred stock, $.01
par value. No shares of class A or class B preferred stock were issued or
outstanding at December 31, 1998. The Board of Directors (the "Board") of the
Company has the authority to issue preferred stock in classes with rights and
privileges determined by the Board. Upon formation of the Company, 3,999,576
shares of $.01 par value common stock were issued to the founders.

     In 1997, the Board approved a 1 for 1,176 common stock split, which has
been retroactively restated to the inception date. However, the retroactive
restatement of the common stock, $.01 par value, at inception exceeded the
beginning capital infusion of $30,000, resulting in negative additional paid-in
capital at December 31, 1996 of $9,967.

10. INCOME TAXES

     There is no current provision for corporate income taxes as the Company
generated a net operating loss for tax purposes.

     The components of the net deferred tax asset as of December 31, 1996, 1997
and 1998 consist of the following:
DECEMBER 31,
                                                                    ------------------------------------
                                                                      1996         1997           1998
                                                                    --------    ------------    --------
Deferred tax assets:
  Operating loss carryforward....................................   $102,063      $206,169      $757,574
  Allowance for doubtful accounts................................      1,150         5,842        57,500
  Accrued expenses...............................................         --            --        33,120
  Other..........................................................         --            --         3,450
                                                                    --------      --------      --------
     Total deferred tax assets...................................    103,213       212,011       851,644
Deferred tax liabilities:
  Depreciation and amortization..................................      2,417        13,869        14,155
                                                                    --------      --------      --------
     Total deferred tax liabilities..............................      2,417        13,869        14,155
                                                                    --------      --------      --------
Net deferred tax asset...........................................    100,796       198,142       837,489
Less: valuation allowance........................................    100,796       198,142       837,489
                                                                    --------      --------      --------
Deferred tax asset...............................................   $     --      $     --      $     --
                                                                    --------      --------      --------
                                                                    --------      --------      --------
The net deferred tax asset has been fully reserved due to the uncertainty
of the Company's ability to realize this asset in the future.

     As of December 31, 1998, the Company had available for federal income tax
purposes net operating loss carryforwards of approximately $1,575,000 which
expire in the years 2011 through 2018.

                                      F-14
WEBSTAKES.COM, INC.
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

11. SUBSEQUENT EVENTS (UNAUDITED):

PREFERRED STOCK

     The class A is convertible into common stock at prices and at times subject
to the provisions set forth in the Company's restated Certificate of
Incorporation. In the event of a public offering of the Company's shares with
gross proceeds and an offering price as defined, the class A will be
automatically converted into common stock at the conversion rates as stated in
the Company's restated Certificate of Incorporation. Convertible preferred
stockholders maintain voting rights equivalent to the number of shares of common
stock on an as if converted basis.

     In January 1999, the Company issued 50,000 shares of the class A through a
private placement, in consideration for net proceeds of approximately
$5,000,000, inclusive of the conversion of $1,390,000 of advances plus interest.
The holders of the class A are entitled to receive cumulative or noncumulative
dividends when and if declared by the Board. These dividends are in preference
to any declaration or payment of any dividend on the common stock of the
Company. All or any portion of the preferred shares are redeemable at the option
of the holders at any time after August 1, 2003 for $100 per share (par value),
plus accrued and unpaid dividends at the redemption date.

     In the event of liquidation, the holders of the class A have a liquidation
preference over holders of common stock. Such preference is equal to the
original cost of the class of preferred stock, plus any declared or unpaid
dividends.

     In June 1999, the Company repurchased all outstanding shares of the
class A. See "Private Placement" below.

WARRANTS

     In March 1999, the Company issued to Allen & Co. warrants to purchase
168,350 shares of the Company's common stock, (which was increased in June 1999
to a total of 221,683 shares of common stock), for services to be provided plus
three payments of $100,000 due on June 30, 1999, 2000 and 2001 in exchange for
services from non-employee consultants. In accordance with EITF 96-18, the
Company is recording the value of the services being received based on the fair
value of the warrants provided or the services received which ever is more
reliably measured. The fair value of these warrants is estimated using the
Black-Scholes pricing model and is recorded as compensation expense over the
vesting period. Final measurement will occur on the vesting date. Final vesting
will occur upon completion of the Company's IPO.

LEASE AGREEMENT

     In March 1999, the Company entered into a secured financing agreement with
a leasing company for the leasing of equipment in an amount up to $1,000,000.
The lease has a one-year availability period and a term of 36 months, with
interest and principal payable monthly. Through May 1999, the Company has leased
approximately $812,000 of equipment under the lease. These items have been
accounted for as a capital lease.

1999 EQUITY COMPENSATION PLAN

     In June 1999, the Company's Board of Directors and stockholders adopted the
Company's Equity Compensation Plan (the "1999 Plan"). The 1999 Plan provides for
the granting, at the discretion of the SOC, of: (i) options that are intended to
qualify as incentive stock options, within the meaning of Section 422 of the
Code, to employees and (ii) options not intended to so qualify to employees,
officers, consultants and directors. The Company has 2,000,000 shares of common
stock authorized for grants under the 1999 Plan. Options to purchase 43,385
shares of common stock have been granted under the 1999 Plan.

                                      F-15
WEBSTAKES.COM, INC.
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

11. SUBSEQUENT EVENTS (UNAUDITED):--(CONTINUED)
     The exercise price of all stock options granted under the 1999 Plan is
determined by the SOC at the time of the grant. The maximum term of each option
granted under the 1999 Plan is 10 years from the date of grant. Options
generally vest ratably over a four-year period.

AUTHORIZED SHARES

     In June 1999, the Company's board of directors and stockholders amended the
Company's Certificate of Incorporation to create the class B, $.01 par value and
authorized 6,700,000 shares of the class B. The previously existing class B
preferred stock became the class C preferred stock, no par value. Additionally,
the number of authorized shares of common stock was increased to 50,000,000
shares.

PRIVATE PLACEMENT

     In June 1999, the Company completed a private placement and issued
6,666,667 shares of class B, in consideration for net proceeds of $40,000,000.
Subsequently, the Company repurchased all 50,000 shares of class A and 1,714,608
shares of common stock for $24,000,000. The repurchased class A was cancelled.

     Each share of the class B is convertible into one share of common stock and
automatically converts at this one for one ratio upon completion of the
Company's IPO assuming net proceeds of at least $20 million and a per share
price of at least $10.50.

     At any time after May 1, 2004, the class B is redeemable, at the option of
the holders, at a per share price equal to 125% of the per share purchase price,
adjusted for stock splits, dividends, stock options and the like, plus any
accrued but unpaid dividends as of the redemption date. The class B will be
accreted to its redeemable value over the five-year period from the date of
issuance to the redemption date. The accretion will be recorded as preferred
stockholder's dividend and included in the earnings per share calculation in
accordance with SFAS 128, "Earnings per Share."

     In accordance with EITF D-60 "Accounting for the Issuance of Convertible
Preferred Stock and Debt Securities with a Nondetachable Conversion Feature,"
the difference between the issuance price of the class B and the intrinsic value
of the common stock on the date of issuance will be accounted for as a preferred
stockholders' deemed dividend and amortized using the effective interest method
from the date of issuance to the date the securities are first convertible,
which is upon completion of the IPO.

     The holders of the class B will be entitled to receive dividends when and
if declared by the Board. These dividends are in preference to any declaration
or payment of any dividend on the common stock of the Company.

     In the event of liquidation, the holders of the class B have a liquidation
preference over holders of common stock. Such preference is equal to 125% of the
original cost of the class B, plus any declared or unpaid dividends.

     The class B stockholders maintain voting rights equivalent to the number of
shares of common stock on an as if converted basis.

SIGNIFICANT CONTRACTS

     In June 1999, the Company entered into a two-year sponsorship agreement
with Excite under which Excite agreed to promote webstakes.com through ad banner
placements and links to webstakes.com and its promotions on Excite.com,
WebCrawler.com and Classified2000.com and through the use of a webstakes.com
personalized front page made available by Excite. As part of this agreement, the
Company received a guarantee of a total number of impressions per year. The fee
to be paid to Excite under this agreement is $5.6 million, $685,000 of which has
been paid, and the balance of which is due 10 days following the completion of
the Company's IPO. At Home Corporation, the parent company of Excite, is a
stockholder of Webstakes.com. See "Use of Proceeds."

                                      F-16
WEBSTAKES.COM, INC.
                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

11. SUBSEQUENT EVENTS (UNAUDITED):--(CONTINUED)
     In June 1999, the Company entered into a services agreement with
MatchLogic, Inc., a wholly owned subsidiary of Excite, pursuant to which
MatchLogic will provide ad serving and targeting, data processing, analysis and
enhancement services to the Company. The term of the agreement is two years. The
fee to be paid to MatchLogic under this agreement is $13.1 million,
$2.5 million of which has been paid and the balance of which is due 10 days
following completion of the Company's IPO. See "Use of Proceeds."

     In June 1999, the Company prepaid $800,000 to National Broadcasting
Company, Inc. ("NBC"), for various advertisements that will appear on NBC
television.

     Additionally, in June 1999, the Company entered into an agreement with NBC
Multimedia, Inc. whereby the Company will provide online sweepstakes services
for NBC.com and NBC Interactive Neighborhood, in exchange for which the Company
will receive advertising on the NBC.com home page. This agreement is being
accounted for in accordance with the Company's barter revenue policy (Note 2).

STOCK OPTION PLAN

     In April 1999, the Company's board of directors and shareholders increased
the number of options issuable under the Stock Option Plan to 450,000.

     Upon closing of the Company's IPO, each non-employee director will receive
options to purchase up to 16,000 shares of the Company's common stock, which
vest ratably over four years. In accordance with EITF 96-18, "Accounting for
Equity Investments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services", the Company is recording the value
of the services being received based on the fair value of the options provided
or the services received whichever is more reliably measured. The fair value of
these options has been estimated using the Black-Scholes pricing model and has
been recorded as deferred compensation and is being amortized over the vesting
period. Final measurement will occur on the vesting date.

                                      F-17
------------------------------------------------------------
    ------------------------------------------------------------

     PROSPECTIVE INVESTORS MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. NEITHER WEBSTAKES.COM, INC. NOR ANY UNDERWRITER HAS AUTHORIZED
ANYONE TO PROVIDE PROSPECTIVE INVESTORS WITH DIFFERENT OR ADDITIONAL
INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER
TO BUY THE SECURITIES IN ANY JURISDICTION WHERE SUCH OFFER OR SALE IS NOT
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY OF THIS
PROSPECTUS OR ANY SALE OF THESE SECURITIES.

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

                               TABLE OF CONTENTS
PAGE
                                                         ----
Prospectus Summary.....................................     1
Risk Factors...........................................     5
Use of Proceeds........................................    12
Dividend Policy........................................    12
Capitalization.........................................    13
Dilution...............................................    14
Selected Financial Data................................    15
Management's Discussion and Analysis of Financial
  Condition and Results of Operations..................    16
Business...............................................    22
Management.............................................    34
Principal Stockholders.................................    39
Description of Capital Stock...........................    41
Shares Eligible for Future Sale........................    43
Underwriting...........................................    45
Legal Matters..........................................    47
Experts................................................    47
Where You Can Get More Information.....................    47
Index to Financial Statements..........................   F-1
DEALER PROSPECTUS DELIVERY OBLIGATION

     Until           (25 days after the date of this prospectus), all dealers
effecting transactions in the common stock, whether or not participating in this
distribution, may be required to deliver a prospectus. This delivery requirement
is in addition to the obligation of dealers to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.

                                             SHARES
                              WEBSTAKES.COM, INC.
                                  COMMON STOCK
                             ---------------------
                                   PROSPECTUS
                             ---------------------
                            BEAR, STEARNS & CO. INC.
                           ING BARING FURMAN SELZ LLC
                           THOMAS WEISEL PARTNERS LLC
                            WIT CAPITAL CORPORATION

                                            , 1999

    ------------------------------------------------------------
    ------------------------------------------------------------
PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of common stock being registered. All amounts are estimates.
SEC registration fee..........................................   $ 15,985
NASD filing fee...............................................   $  6,250
Nasdaq National Market listing fee............................          *
Printing and engraving expenses...............................    250,000
Legal fees and expenses.......................................    300,000
Accounting fees and expenses..................................          *
Blue Sky fees and expenses....................................     15,000
Transfer agent fees...........................................          *
Miscellaneous fees and expenses...............................          *
                                                                 --------
     Total....................................................   $      *
------------------
* To be supplied by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors,
officers and certain other persons in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act").

     The Registrant's certificate of incorporation and by-laws provide that, to
the fullest extent permitted by the laws of the state of Delaware, no director
will be personally liable to the Registrant or its stockholders for monetary
damages for breach of fiduciary duty as a director. Furthermore, the
Registrant's certificate of incorporation provides that, except as prohibited by
law, each of the Registrant's directors and officers is entitled to be
indemnified by the Registrant against all expenses and liability incurred in
connection with any legal proceeding brought against him or her by virtue of his
or her position as a director or officer. This right to indemnification may
extend to a person serving as an employee or other representative of the
Registrant or a subsidiary of the Registrant. A person entitled to
indemnification is entitled to have the Registrant advance to him or her the
expenses of a legal proceeding brought against him or her.

     These provisions of the certificate of incorporation and the by-laws do not
eliminate the fiduciary duties of the directors and officers of the Registrant,
and in appropriate circumstances, equitable remedies such as injunctive or other
forms of relief will remain available under Delaware law. In addition, each
director will continue to be subject to liability for breach of the director's
duty of loyalty to the Registrant for acts or omissions not in good faith or
involving intentional misconduct, for knowing violations of law, and for
dividends or approval of stock repurchases or redemptions that are unlawful
under Delaware law. The provision does not affect a director's responsibilities
under any other law, such as the federal securities laws or state or federal
environmental laws.

     The Delaware General Corporation Law also allows the Registrant to purchase
insurance covering the Registrant's directors and officers against liability
asserted against them in their capacity as directors and officers. The
Registrant expects to obtain directors' and officers' liability insurance. The
Underwriting Agreement also provides for the indemnification of officers,
directors and controlling persons of the Registrant against certain liabilities.

     At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted. The Registrant is not aware of any threatened litigation
or proceeding that may result in a claim for such indemnification.

                                      II-1
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

     Common Stock and Preferred Stock. The Registrant has issued and sold the
following securities since June 1996:

     In June, 1996, Webstakes, Inc., a New York corporation, reincorporated as
Netstakes, Inc., a Delaware corporation. In connection with the reincorporation,
the Registrant issued shares of its common stock to holders of Webstakes, Inc.
(New York) common stock. As part of that transaction, the three incorporating
shareholders received 3,528,000 shares of common stock of the Registrant.

     On September 20, 1997, the Registrant issued and sold an aggregate of
999,600 shares of common stock, par value $.01, to an investor in consideration
for cancellation of $543,243 in outstanding indebtedness. As part of the same
transaction, and in consideration for extension of a $500,000 line of credit,
the Registrant granted the investor options that were later exercised for
715,008 shares of the Registrant's common stock.

     On September 28, 1998, an investor exercised an option the Registrant had
granted to it as part of the earlier line of credit arrangement, and the
Registrant issued the investor 715,008 shares of common stock, par value $.01,
in consideration for cancellation of $524,826 in outstanding indebtedness.

     On January 20, 1999, the Registrant issued 50,000 shares of class A
mandatorily redeemable convertible preferred stock, par value $100.00, to an
investor in exchange for $3,575,000 in cash and approximately $1,390,000 in
additional loans made by the investor to Webstakes. Such shares were
subsequently redeemed by the Company.

     On March 2, 1999, in exchange for investment advisory services, the
Registrant issued warrants to an investment banking firm to purchase 168,350
shares (which was subsequently increased in June 1999 to 221,683 shares) of
common stock, par value $.01. The exercise price of the warrants is $6.00.

     On June 14, 1999, the Registrant issued 6,666,667 shares of class B
mandatorily redeemable convertible preferred stock, par value $.01, to a group
of investors for a total purchase price of $40,000,000.

     Options. The registrant from time to time has granted stock options to
employees and consultants. The following table sets forth certain information
regarding such grants.
NUMBER        EXERCISE
                                                                      OF SHARES       PRICE
                                                                      ---------    ------------
January 1, 1998 to December 31, 1998...............................     89,300     $ 1.16-14.96
January 1, 1999 to June 14, 1999...................................    404,085     $ 1.16-18.70
None of these options have been exercised.

     All of the above-described sales were exempt from registration
(i) pursuant to Section 4(2) of the Securities Act as transactions not involving
a public offering or (ii) Rule 701 promulgated under the Securities Act. No
underwriters were involved in connection with the sales of securities referred
to in this Item 15.

ITEM 16(A). EXHIBITS AND FINANCIAL STATEMENTS
EXHIBIT
NUMBER   DESCRIPTION
------   -----------------------------------------------------------------------------------------------------------
1*    --   Form of Underwriting Agreement
  3.1*    --   Certificate of Incorporation
  3.2*    --   Certificate of Amendment to the Certificate of Incorporation, dated February 23, 1998
  3.3*    --   Certificate of Amendment to the Certificate of Incorporation, dated January 20, 1999
  3.4*    --   Certificate of Amendment to the Certificate of Incorporation, dated June 11, 1999
  3.5     --   Amended and Restated Bylaws
  4.1*    --   Specimen Certificate of Common Stock
  5.1*    --   Opinion of Reed Smith Shaw & McClay LLP
 10.1     --   Netstakes, Inc. Stock Option Plan
 10.2     --   1999 Equity Compensation Plan
II-2
EXHIBIT
NUMBER   DESCRIPTION
------   -----------------------------------------------------------------------------------------------------------
10.3     --   Master Lease Agreement No. L6731 with Leasing Technologies International, Inc. dated November 19,
               1998.
 10.4*    --   Services Agreement between the Registrant and MatchLogic, Inc. dated June   , 1999
 10.5*    --   Sponsorship Agreement between the Registrant and Excite, Inc. dated June   , 1999
 10.6*    --   Letter Agreement between Registrant and Steven H. Krein, dated June   , 1999
 10.7*    --   Letter Agreement between Registrant and Daniel Feldman, dated June   , 1999
 11.1*    --   Statement re: computation of per share earnings
 23.1     --   Consent of PricewaterhouseCoopers LLP
 23.2*    --   Consent of Reed Smith Shaw & McClay LLP (included in Exhibit 5.1)
   25     --   Powers of Attorney (See Signature Page)
 27.1     --   Financial data schedule
 99.1     --   Consent of Nominee Director of Lisa  Crane
 99.2     --   Consent of Nominee Director of Kristopher Wood
------------------
* To be filed by amendment.

ITEM 16(B). EXHIBITS AND FINANCIAL STATEMENTS

     The following financial statement schedule is filed herewith accompanied by
a report of independent accountants for such schedule: Schedule II--Valuation
and Qualifying Accounts.

ITEM 17. UNDERTAKINGS

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

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

     The undersigned Registrant hereby undertakes that:

          (1) For purposes of determining any liability under the Securities Act
     of 1933, the information omitted from the form of prospectus filed as part
     of this registration statement in reliance upon Rule 430A and contained in
     a form of prospectus filed by the registrant pursuant to Rule
     424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be
     part of this registration statement as of the time it was declared
     effective.

          (2) For the purpose of determining any liability under the Securities
     Act of 1933, each post-effective amendment that contains a form of
     prospectus shall be deemed to be a new registration statement relating to
     the securities offered therein, and the offering of such securities at that
     time shall be deemed to be the initial bona fide offering thereof.

                                      II-3
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, in the City of New York, State of New
York, on June 14, 1999.

                                          WEBSTAKES.COM, INC.
                                          By: ________/s/ STEVEN H. KREIN_______
                                                       Steven H. Krein
                                                   Chief Executive Officer

     We, the undersigned directors and/or officers of Webstakes.com, Inc. (the
"Registrant"), hereby severally constitute and appoint Steven H. Krein and
Daniel J. Feldman, and each of them individually, with full powers of
substitution and resubstitution, our true and lawful attorneys, with full powers
to each of them to sign for us, in our names and in the capacities indicated
below, the Registration Statement on Form S-1 filed with the Securities and
Exchange Commission, and any and all amendments to said Registration Statement
(including post-effective amendments), and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, in
connection with the registration under the Securities Act of 1933, as amended,
of equity securities of the Registrant, and to file or cause to be filed the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection therewith, as fully to
all intents and purposes as each of them might or could do in person, and hereby
ratifying and confirming all that said attorneys, and each of them, or their
substitute or substitutes, shall do or cause to be done by virtue of this Power
of Attorney. This power of attorney may be executed in counterparts.
SIGNATURE                                         TITLE                              DATE
------------------------------------------  -------------------------------------------------   --------------
/s/ STEVEN H. KREIN              Chief Executive Officer and Director                 June 14, 1999
------------------------------------------  (Principal Executive Officer)
             Steven H. Krein

          /s/ DANIEL J. FELDMAN             President and Director                               June 14, 1999
------------------------------------------
            Daniel J. Feldman

        /s/ CHRISTOPHER F. BRAGAS           Vice President of Finance and                        June 14, 1999
------------------------------------------  Chief Financial Officer;
          Christopher F. Bragas             (Principal Accounting Officer)

           /s/ ARNOLD GREENBERG             Director                                             June 14, 1999
------------------------------------------
             Arnold Greenberg
II-4
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Webstakes.com, Inc.:

In connection with our audits of the financial statements of Webstakes.com, Inc.
as of December 31, 1998 and 1997 and for each of the two years in the period
ended December 31,1998 and the period from January 8, 1996 (inception) to
December 31, 1996, which financial statements are included in the Prospectus, we
have also audited the financial statement schedule listed in Part II herein.

In our opinion, this financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.

                                          PRICEWATERHOUSECOOPERS LLP

February 19, 1999
1301 Avenue of the Americas
New York, N.Y.

                                      S-1
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

                              WEBSTAKES.COM, INC.
                       VALUATION AND QUALIFYING ACCOUNTS
BALANCE AT      CHARGED TO                      BALANCE AT
                                                         BEGINNING       COSTS AND                          END
                                                         OF PERIOD       EXPENSES        DEDUCTIONS      OF PERIOD
                                                         ----------      ----------      ----------      ----------
For the period from January 6, 1996 (inception)
  to December 31, 1996:
  Provision for doubtful accounts...................      $     --        $  2,499        $     --        $  2,499
                                                          --------        --------        --------        --------
                                                          --------        --------        --------        --------
For the year ended December 31, 1997:
  Provision for doubtful accounts...................      $  2,499        $ 10,880        $    679        $ 12,700
                                                          --------        --------        --------        --------
                                                          --------        --------        --------        --------
For the year ended December 31, 1998:
  Provision for doubtful accounts...................      $ 12,700        $208,604        $ 96,304        $125,000
                                                          --------        --------        --------        --------
                                                          --------        --------        --------        --------
For the three months ended March 31, 1999:
  Provision for doubtful accounts (unaudited).......      $125,000        $ 50,694        $     --        $175,694
                                                          --------        --------        --------        --------
                                                          --------        --------        --------        --------
S-2
EXHIBIT INDEX
EXHIBIT                                                                                                    SEQUENTIAL
  NUMBER     DESCRIPTION                                                                                     PAGE NO.
----------   --------------------------------------------------------------------------------------------   -----------
1*        --   Form of Underwriting Agreement
    3.1*      --   Certificate of Incorporation
    3.2*      --   Certificate of Amendment to the Certificate of Incorporation, dated February 23, 1998
    3.3*      --   Certificate of Amendment to the Certificate of Incorporation, dated January 20, 1999
    3.4*      --   Certificate of Amendment to the Certificate of Incorporation, dated June 11, 1999
    3.5       --   Amended and Restated Bylaws
    4.1*      --   Specimen Certificate of Common Stock
    5.1*      --   Opinion of Reed Smith Shaw & McClay LLP
   10.1       --   Netstakes, Inc. Stock Option Plan
   10.2       --   1999 Equity Compensation Plan
   10.3       --   Master Lease Agreement No. L6731 with Leasing Technologies International, Inc. dated
                   November 19, 1998.
   10.4*      --   Services Agreement between the Registrant and MatchLogic, Inc. dated June   , 1999
   10.5*      --   Sponsorship Agreement between the Registrant and Excite, Inc. dated June   , 1999
   10.6*      --   Letter Agreement between Registrant and Steven H. Krein, dated June   , 1999
   10.7*      --   Letter Agreement between Registrant and Daniel Feldman, dated June   , 1999
   11.1*      --   Statement re: computation of per share earnings
   23.1       --   Consent of PricewaterhouseCoopers LLP
   23.2*      --   Consent of Reed Smith Shaw & McClay LLP (included in Exhibit 5.1)
   25         --   Powers of Attorney (See Signature Page)
   27.1       --   Financial data schedule
   99.1       --   Consent of Nominee Director of Lisa Crane
   99.2       --   Consent of Nominee Director of Kristopher Wood
------------------
* To be filed by amendment.