SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

(Mark One)

                  [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                           THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

                  For the fiscal year ended DECEMBER 31, 1996

                  [  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                           THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

                  For the transition period from

                           Commission File No. 0-21051

                           CAPITAL MEDIA GROUP LIMITED
              (Exact name of small business issuer in its charter)

           NEVADA                                          87-0453100
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                         Identification No.)

      25 JAMES STREET, LONDON                                  W1M 5HY
(Address of principal executive offices)                      (Zip Code)

                                 44-171-224-4141
                           (Issuer's telephone number)

         SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT:

         TITLE OF EACH CLASS                   NAME OF EACH EXCHANGE ON
                                                  WHICH REGISTERED

           Not Applicable                                None

         SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:

                          COMMON STOCK, $.001 PAR VALUE

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter periods that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
YES __X__  NO _____

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this Form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this form 10-KSB or any
amendment to this form 10-KSB. [ ]

State issuer's revenues for its most recent fiscal year: $2,109,852

Because the Registrant's Common Stock has not been publicly traded on an active
basis during the preceding sixty days, the aggregate market value of the voting
stock held by non-affiliates of the Registrant cannot be determined with any
accuracy. As of April 15, 1997, there were 24,663,328 shares of the Registrant's
Common Stock outstanding, of which 16,763,328 shares were owned by
non-affiliates of the Company.

The following documents are incorporated by reference:        None.

Transitional Small Business Disclosure Format.  YES ____      NO __X__

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                                     PART I

ITEM 1.           DESCRIPTION OF BUSINESS

         UNLESS THE CONTEXT OTHERWISE REQUIRES, THE "COMPANY" REFERS
COLLECTIVELY TO CAPITAL MEDIA GROUP LIMITED, A NEVADA COMPANY ("CMG") AND ITS
WHOLLY AND/OR PARTIALLY OWNED SUBSIDIARIES, CAPITAL MEDIA (UK) LIMITED
("CM(UK)"), BLINK TV LIMITED ("BLINK"), ONYX TELEVISION GMBH ("ONYX") AND
TINERAMA INVESTMENTS AG ("TIAG").

GENERAL BUSINESS DESCRIPTION

         The Company currently has three media operations in its portfolio. The
Company's principal operation is a music television station operating in Germany
- Onyx Television. The Company also owns a 51% interest in a company which, in
turn, owns:(i) a 51% interest in a Romanian print media group and radio station
-Tinerama, and (ii) a 50% interest in a joint venture, launched in late 1996,
which is a specialist TV programming vehicle to provide lifestyle programming on
large video screens at U.K. concert events-Blink TV. See "Current Operations"
below.

         On March 14, 1997, the Company entered into an Agreement and Plan of
Reorganization (the "Unimedia Agreement") with Unimedia, S.A. ("Unimedia") and
certain of the shareholders of Unimedia. Unimedia develops media and online
solutions involving entertainment, education, gaming and electronic shopping for
business and consumer users. Pursuant to the Agreement, the Company will acquire
substantially all (not less than 90%) of the issued and outstanding securities
of Unimedia in exchange for an aggregate of up to 13,608,885 shares of the
authorized but unissued common stock of the Company, constituting 35.5% of the
to-be-outstanding common stock of the Company (the "Unimedia Exchange"). The
proposed acquisition of Unimedia was anticipated to close on or about April 7,
1997, but has not occurred at this date due, among other things, to the fact
that Unimedia has not yet met certain conditions to the closing of the
transaction. There can be no assurance as to whether the Company's
proposed acquisition of Unimedia will close. See "Proposed Acquisition of
Unimedia" below.

         The Company's long term strategy, subject to the availability of
capital, is to continue to make acquisitions and/or investments in the
television, media and other related fields and technologies, with the aim of
building a broad portfolio of interests in traditional, emerging and developing
markets.

NEED FOR SHORT AND LONG TERM CAPITAL AND CORPORATE HISTORY

         The Company was originally incorporated in Utah under the name Yellow
Line Capital, Inc. in February 1986. In March 1991, the Company changed its
corporate domicile to Nevada and changed its name to Cardinal Capital Corp. On
December 29, 1995, the Company entered into an Agreement and Plan of
Reorganization (the "Agreement") with the shareholders of Excalibur
Communications Limited, a United Kingdom corporation ("ECL"). Pursuant to the
Agreement, the

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<PAGE>
Company acquired all of the outstanding ordinary shares of ECL in exchange (the
"Exchange") for 5.5 million shares of the Company's authorized but unissued
common stock (constituting approximately 94% of the then outstanding common
stock of the Company). In connection with the closing of the Agreement, the
Company changed its name to Capital Media Group Limited (and the name of ECL,
which after the Exchange became a wholly-owned subsidiary of the Company, was
changed to Capital Media (UK) Limited ("CM (UK)")).

         In connection with the Exchange, and in early 1996, the Company
completed a private placement raising net proceeds of approximately $14.4
million. These funds were primarily used to launch the Company's German
television station, Onyx Television, and to operate the station during its first
year of operation. To fund the continued short term working capital requirements
of Onyx Television's operations into the first half of 1997, the Company
recently completed two financings: (i) during the fourth quarter of 1996, the
Company borrowed $2.0 million from Instar Holdings, Inc. ("Instar"). Certain
members of the Company's board of directors (Messrs Hauptman and Leitner) and a
former director of the Company (Barry Townsley) have an interest in the Instar
loan as part of the lending group. The Instar loan is due on June 1, 1997 and is
convertible into shares of the Company's authorized but unissued common stock at
a conversion rate of $.50 per share at the option of the lenders; and (ii) on
March 3, 1997, the Company completed a private placement of its securities in
which it raised net proceeds of approximately $5.85 million. For further
information about these financings, see Item 6. MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION."

         At the present time, the Company requires working capital of
approximately U.S. $1.0 million per month to continue its operations. The
Company believes that its current resources will allow the Company to continue
in operation until at least the end of May 1997. The Company is presently
seeking additional capital, or other acceptable alternatives, to continue its
operations beyond that date and to fund the continued short and long term
capital requirements for the further development of its business. In that
regard, the Company is engaged in discussions and intends to engage in
discussions with others regarding the possibility of obtaining additional equity
investments and/or loans to satisfy its short and long-term financing needs and
regarding the possibility of entering into strategic alliances with key industry
participants that would allow Onyx Television greater access to markets and
resources. Alternatively, the Company may consider selling all or a substantial
portion of its operations to a third party (including its interest in Onyx
Television). No definitive agreements have been entered into to date.

         There can be no assurance that the capital or other acceptable
arrangements required to continue the operations of the Company beyond the end
of May 1997 will be obtained.

         The Company intends in the future to redomesticate its corporate
domicile from Nevada to Bermuda or another non-U.S. jurisdiction (since all of
its business activities are presently conducted outside the United States). The
redomestication will be effectuated in accordance with applicable law and will
require approval of the holders of a majority of the Company's outstanding
common stock.

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<PAGE>

CURRENT OPERATIONS

         ONYX TELEVISION

         Onyx Television ("Onyx Television" or "Onyx") is an advertiser
supported music television network based in Germany that targets the 30 to
55-year old age group (the "Target Audience"). Since commencing operations in
January 1996, Onyx has achieved significant acceptance among German cable
systems and currently reaches approximately 8.2 million cable and satellite
homes.

         Onyx develops, acquires and exhibits on its network a variety of music
videos, interviews and topical specials that focus on a distinctive mix of jazz,
blues, classical and popular German music and current and recurrent pop and
rock. Programs are produced internally or, to a lesser extent, are acquired from
a variety of sources. Onyx's internal productions include interviews and topical
specials that range from profiles of specific artists to genre defined shows
such as JAZZ ONYX, ONYX COUNTRY CLUB, and ONYX OVERTURE (classical). Internal
productions are produced in the Company's studios in the Television
Communication Center located in Dortmund, Germany. Acquired programming includes
music videos, concert footage and other live performance material. Such
programming is supplied to Onyx by record companies and the music industry for a
variety of fees ranging from nominal handling charges plus royalty payments for
videos to negotiated license fees for live footage.

         Currently, music videos represent a substantial proportion of the
content utilized in ONYX's programming. Customarily, in the European record
industry, record companies provide the Company with music videos in exchange for
nominal handling charges plus royalty payments. The Company is aware that the
largest German copyright royalty collecting society ("GEMA") is currently
negotiating regarding the level of the royalty paid by programmers such as the
Company for videos. If the record industry were to change its current practice
and begin to charge for music videos or increase the level of royalty payments,
the Company's programming costs, as well as the programming costs of other music
television stations, could be adversely affected.

         Substantially all of Onyx's revenues are derived from the sale of spot
advertising time. Onyx also derives revenue from direct response advertising in
which advertisers pay Onyx based on the number of products sold by a particular
commercial. In addition to providing access to cable households in general, the
Company believes that Onyx will in the future be attractive to advertisers
because it offers one of the most cost effective means of reaching the Target
Audience. The Target Audience is believed to be one of the largest demographic
segments in Germany. The Company believes that the Target Audience watches more
television than any other demographic group in Germany and has high purchasing
power. However, to date, the Company has not obtained a substantial amount of
advertising revenue. The Company believes that distribution, marketing and
audience qualifications, and an effective advertising sales force, are key to
achieving success in the advertising sales market.

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<PAGE>

         Because Onyx's revenues derive from the sale of commercial advertising
time, the future profitability of Onyx will depend, in significant part, on the
acceptance of Onyx by advertisers as a venue that attracts the desired audience
and on the Company's ability to establish distribution of its programming
through cable systems to viewers. The demand by advertisers for advertising time
on Onyx, and therefore its operating results, will also be affected by general
economic conditions, the demographic characteristics of the audiences viewing
the Company's broadcasts, the activities of its competitors, the Company's
ability to provide evidence to advertisers with regard to the size of the
Company's viewing audience, and other factors, as well as trends in the
advertising industry. A reduction in advertising expenditures available for Onyx
could result from a general decline in economic conditions in particular markets
where Onyx is broadcast or a reallocation of advertising expenditures to other
available media.

         Germany is the largest cable television market in Europe, with a
population of over 82 million people and approximately 35.0 million households.
Cable television distribution systems covered approximately 24.0 million homes
and served over 17.0 million cable subscribers as of December 31, 1996. The
German cable television market is substantially built-out. As of December 31,
1996, cable television systems covered approximately 73% of the households in
Germany. Additionally, as of December 31, 1996, Germany had approximately 10.7
million homes served by direct-to-home satellite-delivered television services
and satellite master antenna television systems. Television is the fastest
growing media in Germany, with advertising revenues having increased from DM 1.4
billion ($0.9 billion) in 1984 to DM 6.3 billion ($4.1 billion) in 1995. During
this same period, television advertising revenue as a percentage of total
advertising revenue has increased from 9.8% in 1984 to 20.4% in 1995. Industry
sources estimate that television advertising will nearly double to DM 11.5
billion ($7.5 billion) by 2004. Since the introduction of cable and satellite
television programming to Germany in 1984, such programming's share of
television advertising revenue has increased to 87.3%.

         Unlike the United States and Great Britain, the selection of
programming on German cable stations does not rest with cable operators.
Instead, the programming lineups for individual cable systems are mandated by
committees formed under one of 15 LANDES MEDIENANSTALTEN (Local Media
Authorities or "LMAs"). Each LMA has authority over one of Germany's 16
autonomous regions (Berlin and Brandenburg have a joint operation, each region
is known as a "Bundeslander") and in turn are appointed by local governments.
Onyx has been awarded the right or partial right to distribute programming to
cable systems in 12 of the 15 Bundeslander. The majority of Germany's current
cable systems are analog networks, which limits the number of channels available
to 30 to 35 in any one region. Being awarded the right to distribute programming
through a Bundeslander's existing cable networks is highly significant since the
degree to which potential new competitors are able to enter the market is
currently limited. The Company believes that such barriers to entry will enable
Onyx to establish itself in the marketplace prior to the introduction of digital
technology in Germany and a corresponding expansion in channel capacity and
program offerings. There can be no assurance that Onyx will continue to receive
distribution rights in the future, including distribution rights on cable
systems where it has previously received distribution rights.

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<PAGE>

         Increased competition for viewers in the German cable industry may
result from the availability of additional channels and programming made
possible by technological advances, such as digital compression technology,
which allows cable systems to expand channel capacity, the deployment of fiber
optic cable, which has the capacity to carry a much greater number of channels
than coaxial cable, and "multiplexing," in which programming services offer more
than one feed of their programming. The increased number of choices available to
the Target Audience as a result of these technological advances may in the
future lead to a reduction of Onyx's market share. The Company is aware of a
number of efforts to launch digital television platforms in Germany. Most
notably, the Kirch Group has already launched a digital cable systems in
portions of Germany.

         Onyx competes or expects in the future to compete for advertising
revenues with the cable television networks described above, as well as with
other national cable programming services, broadcast television stations,
satellite and wireless programming services, radio, print media and the
Internet. In connection with its music programming, the Company competes with
other broadcast operators, which includes music channels, many of which the
Company believes have significantly greater resources than the Company.

         The Company's operating strategy with respect to Onyx is to (i) expand
the number of regional cable networks carrying Onyx, (ii) increase advertising
revenues through growth in both sellout and the prices paid per advertisement,
(iii) launch Onyx in other European countries, (iv) develop strategic
alliances/relationships in order to seek to increase Onyx's ability to penetrate
existing markets and enter new markets, and (v) syndicate Onyx's internally
produced programming to third-parties. There can be no assurance that these
strategies will be successfully implemented.

         The Company is presently negotiating with qualified individuals capable
of directing the next level of development of the overall strategy of Onyx
Television. The Company intends also to employ the services of an individual
with Pan-European experience in developing marketing and sales strategies for
emerging networks, such as Onyx. In addition, the Company is presently making
changes to its operations to improve the quality of its programming, the costs
of producing same and in order to seek to achieve increased levels of
advertising sales.

         Television broadcast operations in Germany are subject to extensive
government regulation as to the issuance, renewal, transfer and ownership of
station licenses, the timing and content of programming, the timing, content and
amount of commercial advertising permitted and the determination of which
stations will be permitted to broadcast on a particular cable system. There are
also regulations requiring that certain percentages of programming be produced
or originated in local markets. Further, countries into which Onyx may seek to
expand may expose Onyx to substantial government regulation. The cost of
programming could also increase as a result of political initiatives taken by
the European Union to increase the amount of European-produced programming
broadcast. Changes in the regulation of the Company's activities could have a
material adverse effect on the Company.

         Any change in the ownership of the Company or Onyx or the addition of
new shareholders who acquire a substantial interest in the Company or Onyx must
receive approval from the German media authorities regarding the effect of the
post-transaction ownership on the concentration of the


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overall German television industry. Such approval may only be sought following
the completion of a transaction.

         TINERAMA INVESTMENTS AG

         The Company owns a 51% interest in a holding company, Tinerama
Investments AG ("TIAG"), which has a 51% beneficial ownership interest in five
companies comprising a Romanian print media group and radio station.

         TIAG, a Luxembourg holding company owns a 51% interest in four
corporations and a 49% interest, with an option to purchase an additional 2% for
nominal value, in a fifth corporation (such corporation is a Romanian
broadcasting company which, under Romanian law, may not be majority-owned by a
non-Romanian entity, but as to which AG has voting control) (collectively, the
"Tinerama Companies") having media-related operations in Romania (collectively,
"Tinerama"). Tinerama, which is headquartered in Bucharest, Romania, owns (i)
eight newspapers and periodicals with a total monthly production of
approximately 1.0 million; (ii) a distribution network comprised of vans and
automobiles; (iii) a printing facility; and (iv) a radio station which
broadcasts to approximately one-third of the country.

         Conducting business in Romania involves certain considerations not
usually associated with conducting business in more established European
countries. The Romanian economy experienced five years of difficult reforms
following the overthrow of communist dictator Nicolae Ceacescu in December 1989.
The country has been ruled by a democratically elected government for the past
four years, and it is believed that the Romanian economy has begun to stabilize
to the point where it can support the growth of the private sector.

         There are still, however, problems which face the Romanian economy. Due
to the slow privatization process, Romanian workers have experienced a decline
in their living standards as compared with standards during the communist era.
The threat of labor unrest persists due to the heightened expectations of
Romanian workers.

         Further, during the post-communist political atmosphere, many
opposition parties have organized in Romania, adding political uncertainties to
the future of the country. There are currently over 200 new political parties,
many of which are gaining popularity.

         Last year, due mainly to the difficult economic situation in Western
Europe (Romania's main export market), the Romanian economy remained static and
the country's private sector accounted for only 50% of gross domestic product.
Foreign investment is beginning to expand to Romania as Daewoo, Coca-Cola,
Colgate-Palmolive and Kraft are among the multinational corporations which have
entered the country. Many investors remain deterred however, due to the highly
bureaucratic business environment and the uncertain political situation.



                                       7
<PAGE>

         Given the current fragmentation of the Romanian media market and the
Romanian economy's current period of transition from state-owned to
privately-owned business, Tinerama's advertising sales efforts may not be
successful. The Company believes that the Romanian market will eventually
support increased media advertising, but there can be no assurance that this
will be the case.

         Advertising-linked media ultimately displays cyclical characteristics.
Therefore, Tinerama will experience periods of both increasing and declining
revenues. There can be no assurance that advertising revenues will supply
Tinerama with a steady source of revenue.

         Because the Romanian media market is highly fragmented, there are no
clear market leaders and not a great amount of consumer loyalty. While the
Company believes that Tinerama will be able to establish itself as a market
leader, there can be no assurance that this will be the case.

         The Company owns 51% of TIAG. The remaining 49% of TIAG is owned by
Telor International Limited ("Telor"). See Item 12. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS. Pursuant to the terms of a shareholders agreement, dated
November 15, 1995 (the "Shareholders Agreement"), between the Company and Telor,
the Company acquired its 51% of TIAG for consideration of $376,000 paid to Telor
and agreed to loan TIAG $306,000. Such loan bears no interest and is repayable
upon resolution of the Board of Directors of TIAG. The Shareholders Agreement
further provides that the Board of Directors of TIAG shall initially be composed
of four persons, two appointed by each shareholder. The Shareholders Agreement
also provides that if either party wants to transfer its ownership in TIAG, it
must first offer such ownership interest to the other party. It also provides
that in the first four years, either shareholder may force a sale or purchase of
its shares at a price specified in the notice given from one shareholder to the
other.

         TIAG, in turn, owns 51% of each of the Tinerama Companies, except Radio
Tinerama S.r.l., as to which AG owns 49% and has an option to purchase an
additional 2% for nominal value. The remaining 49% of each of the Tinerama
Companies is owned by Tinerama's founder, Max Banush ("Banush") and by Robert
Perlitz. Banush continues to operate the business.

         Tinerama is dependent on the personal efforts and skills of Dr. Max
Banush for its daily operations. Dr. Banush will continue to serve as an
employee of Tinerama; however there can be no assurance that Dr. Banush will
continue to work for Tinerama for an extended period of time, nor can there be
any assurance that his efforts can produce profits for Tinerama. The loss,
incapacity or unavailability of Dr. Banush, at the present time or in the
foreseeable future, could result in a material adverse effect on Tinerama and
its future prospects.

         The parties also agreed that TIAG, for nominal consideration, would be
permitted to purchase up to an additional 10% of Tinerama in the event that
Tinerama's gross revenues are less than $3.0 million for the 1995 fiscal year.
TIAG has notified the minority shareholders that TIAG seeks to exercise its
option and it is anticipated that the exercise of this option will be completed
during 1997.

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         BLINK TV

         The Company has formed "Blink TV", which was launched in late 1996 as a
specialist TV programming vehicle to provide lifestyle programming on large
video screens at UK concert events. This programming consists of music videos,
style and fashion, and extreme sports, which is broadcast as a 30 minute segment
immediately prior to live performances. Blink TV has installed video screens and
projection equipment at five major UK concert venues for which contracts have
been signed.

         On November 6, 1996, the Company signed a joint venture agreement with
Mirror Group PLC ("Mirror"). Under the agreement, Mirror subscribed for 50% of
the share capital of Blink TV Limited ("Blink"). In return, Mirror has provided
working capital funding to Blink TV. In addition, Mirror has purchased
equipment, which is leased to Blink TV for use in its business. The Company now
owns 50% of Blink. Additionally, the Company and Mirror have granted a five-year
option to RCL Communications ("RCL") allowing RCL to acquire up to 33% of Blink
from the Company and Mirror, contingent upon Blink TV meeting certain objectives
over the term of the agreement. Pursuant to this agreement, the Company and
Mirror jointly control and manage Blink TV.

         In order to be successful, Blink Television must obtain the right to
broadcast its programming at rock and pop concerts and other events at the
arenas where Blink has installed its high spec audio-visual equipment. In order
to obtain these rights, Blink Television will have to negotiate successfully
with promoters of events, producers and managers of artists, as well as the
artists themselves. Further, Blink Television must successfully sell advertisers
on its concept. There can be no assurance that Blink will be successful in these
efforts.

         Since launching Blink in November 1986, Blink TV has already
transmitted 30 minutes of tailor-made programming at 65 concerts around the UK.
The concerts involving Blink TV have included Sting, Bryan Adams, 3T, Kenny G
and Status Quo. Advertising deals have been concluded with a variety of
companies, including Gillette, British Telecom, Volkswagen, Volvo, Duracell,
Kodak and Lee Jeans.

         Blink TV has also recently agreed to broadcast its programming in
conjunction with the Boyzone (a leading U.K. band) tour. This tour consists of
23 dates, five of which are in continental Europe. This is the first time that
Blink TV will have expanded its interests outside of the UK. Concerts outside
the five arenas in which Blink TV has installed its equipment will utilize
mobile equipment.

PROPOSED ACQUISITION OF UNIMEDIA

         On March 14, 1997, the Company entered into the Unimedia Agreement. The
Unimedia Agreement provides for the issuance in the Unimedia Exchange of up to
an aggregate of 13,608,885 (approximately 35.5%) of the outstanding capital
stock of the Company to the shareholders of Unimedia, subject to certain
adjustments. Additionally, the holders of the Unimedia securities will also
receive certain additional securities of the Company at a later date relating to
the Company's outstanding warrants (in order to allow such holders to maintain
their percentage ownership in the Company).

         Consummation of the Unimedia transaction is subject to a number of
conditions precedent including but not limited to (i) Unimedia having at the
closing of the Unimedia Exchange $7.0 million in cash or cash equivalents
resulting from new subscriptions to Unimedia shares by one or more persons in
Unimedia made subsequent to the date of the Agreement, (ii) the execution of the
Unimedia Agreement by the holders of not less than 90% of Unimedia's outstanding
securities, (iii) the delivery to the Company of Unimedia's audited financial
statements for 1995 and 1996, and (iv) the receipt by the Company and Unimedia
of fairness opinions from investment banking firms selected by their respective
Boards of Directors.

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         The Unimedia Agreement is cancelable by the Company if the holders of
not less than 90% of Unimedia's then outstanding securities have not entered
into the Unimedia Agreement by March 21, 1997, or, by either party, if the
closing of the Unimedia Exchange shall not have occurred by March 31, 1997 and,
accordingly, the Unimedia Agreement is subject to cancellation at this time.
Additionally, the Unimedia Agreement is cancelable by either party within five
days after delivery to the other party of the schedules to the Unimedia
Agreement which provide information which is material and adverse to the
information previously provided by such party to the other party. All required
schedules have not yet been delivered by Unimedia to CMG. The proposed
acquisition of Unimedia was anticipated to close on or about April 7, 1997, but
has not occurred at this date due, among other things, to the fact that Unimedia
has not yet met certain conditions to the closing of the transaction. There can
be no assurance as to whether the Company's proposed acquisition of Unimedia
will close.

         If the Unimedia transaction is completed, at a meeting of the Company's
Board of Directors (the "Board") held immediately after the closing of the
Unimedia transaction, the Board will take steps to add to the Board four persons
who are not currently directors of the Company and who shall be designated by
Unimedia for election to the Board. At the time of such meeting, the 8 member
Board of the Company shall be increased to 12 members. Additionally, the
Unimedia Agreement requires the Company to file a registration statement
covering the Company's securities issued in the Exchange and to use its
reasonable efforts to thereafter cause such registration statement to become
effective.

         MMP, S.A., acting for its principal, Groupe AB, owns 3.2 million shares
of the Company's outstanding Common Stock. The Company has been advised that
principals of Groupe AB own 18% of Unimedia's outstanding securities. Groupe AB
presently has the right to designate two directors to the Company's Board (Mark
Sillam and Jean-Francois Klein are presently serving on the Board as designees
of Group AB). See Item 9. DIRECTORS AND EXECUTIVE OFFICERS and Item 11. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         It is expected that Unimedia will raise the $7.0 million in new
proceeds which it is required to obtain as a condition precedent to the closing
of the Exchange by, in part, selling the 4.0 million shares of the Company's
outstanding common stock which it owns. It is also anticipated that $2.0 million
of the proceeds raised by Unimedia will be used to repay the loan it received to
purchase the 4.0 million shares of Common Stock. See Item 11. SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         Unimedia is engaged in the research and development of computer
software for providing, via multimedia vehicles such as the Internet, new online
services to business users and leisure consumers. In particular, Unimedia has
focused its efforts on seeking to develop interactive software that allows users
to work, shop, communicate, educate, gamble and amuse themselves. In addition,
Unimedia has acquired minority equity positions in other companies having
Internet technologies and applications and has entered into agreements to act as
distributor for certain computer software applications.

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ITEM 2.           DESCRIPTION OF PROPERTY

         The Company leases administrative offices for its corporate
headquarters in London. The Company through its subsidiary, Onyx Television
currently leases a post-production and editing facility in Dortmund, Germany and
a transmission uplink facility in Ingleheim, Germany. Onyx also leases
administrative offices in Munich, Germany. Tinerama owns a building and, in
addition, leases administrative offices and print works in Bucharest, Romania.
See the Notes to Consolidated Financial Statements for information regarding the
financial terms of these leases.

ITEM 3.           LEGAL PROCEEDINGS

ENGLISH PROCEEDINGS BETWEEN CM (UK), COM TV PRODUCTION UND VERTRIEB GMBH ("COM
TV") AND NEN TV LIMITED ("NEN TV")

         CM (UK) is engaged in dispute with COM TV and NEN TV and John Garmon,
personally, in the High Court of Justice, Queen's Bench Division in the United
Kingdom, seeking a declaration that the heads of agreement dated March 9, 1995
("the Heads of Agreement") and the letter of agreement dated March 31, 1995
(collectively, "the TV Agreements") entered into by CM (UK), COM TV and John
Garman, were discharged upon breach by COM TV.

         On November 24, 1995, COM TV and NEN TV filed a Defense and Counter
claim in response to CM (UK)'s Writ and Statement of Claim. In Defense and
Counter claim, COM TV and NEN TV denied that they are in breach of the TV
Agreements. Further, COM TV and NEN TV claim damages in an equal amount to the
alleged loss of future profits which would have been payable with respect to a
5% shareholding in Onyx Television. COM TV and NEN TV further claim that CM (UK)
has used confidential information, documentation, records, research and data
provided by COM TV and NEN TV, and that they are entitled to an account of any
profits realized by CM (UK) for use of such items.

         CM (UK) has filed a Reply and Defense to Counter claim and CM (UK)
believes the counter claim to be without merit and intends to vigorously contest
the same. The Company will shortly issue a summons for directions from the
court, which will set out a timetable for the steps to be taken by each party
through trial. There can be no assurance as to the outcome of this claim.

         The actions against COM-TV and NEN-TV and against Garmon personally
have been consolidated into one action and an Order for Directions was made on
March 13, 1997. Pursuant to the Order, discovery is to be concluded by May 2,
1997.

                                       11
<PAGE>

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

         No matters were submitted to a vote of the Company's securities holders
during the fourth quarter of 1996 or the first quarter of 1997.

                                       12
<PAGE>

                                     PART II

ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
                  MATTERS

TRADING MARKET FOR THE COMPANY'S SECURITIES

         The Company's common stock has been quoted on the NASDAQ Small Cap
System under the symbol "CPMG" since July 1996. Prior to that date, the Company
believes that its common stock was quoted on the NASD Electronic Bulletin Board
and on the pink sheets published by the National Quotations Bureau. The Company
does not believe that there is an active trading market for its securities at
the present time.

         The following table sets forth, for the calender quarters indicated,
the range of high and low bid prices per share of common stock as reported by
NASDAQ:

                                                             HIGH     LOW

         Third Quarter (commencing July 25, 1996)            6 1/4    3 1/4
         Fourth Quarter 1996                                 3 1/4    2 3/4
         First Quarter 1997                                  3 3/4    1 5/8
         Second Quarter 1997 (through April 24, 1997)        1 15/16  1 1/8

         Under the current NASDAQ rules, in order to qualify for continued
listing on the NASDAQ SmallCap Market, the Company, among other things, must
have total assets of at least $2.0 million, capital and surplus of at least $1.0
million, a market value of public float of at least $200,000, at least two
market makers and a minimum bid price of $1.00 per share. NASDAQ has recently
approved changes to the standards for companies to remain listed on the SmallCap
Market, including new corporate governance standards, a new requirement that the
Company have net tangible assets of $2.0 million, market capitalization of $35.0
million or net income of $500,000 and other qualitative requirements. The
Company did not meet the NASDAQ Small Cap capital and surplus requirement at
December 31, 1996.

         If the Company is unable to satisfy the requirements for continued
inclusion on the NASDAQ SmallCap Market, trading of the Company's common stock
would again be conducted in the over-the-counter market. In such event, holders
of outstanding common stock may find it more difficult to dispose of or obtain
accurate quotations as to the market price of the common stock. In addition, if
the common stock were no longer to be quoted on the NASDAQ SmallCap Market, than
it is likely that the Company's common stock would become subject to certain
regulations of the Securities and Exchange Commission which imposes sales
practice requirements on broker-dealers because the common stock of the Company
has a market price of less than $5.00 per share. For example, in such situation,
broker-dealers selling the securities, would be required, prior to effecting any
transaction, to provide their customers with a document which discloses the
risks of investing in the Company's common

                                       13
<PAGE>

stock. Furthermore, in such situation, if the person purchasing the securities
is someone other than an accredited investor or an established customer of the
broker-dealer, the broker-dealer must also approve the potential customer's
account by obtaining information concerning the customer's financial situation,
investment experience and investment objectives. The broker dealer must also
make a determination whether the transaction is suitable for the customer and
whether the customer has sufficient knowledge and experience in financial matter
to be reasonably expected to be capable of evaluating the risks of transactions
in the security, which could limit the number of potential purchasers of the
Common Stock.

HOLDERS OF OUTSTANDING COMMON STOCK AND SECURITIES OUTSTANDING

         As of April 24, 1997, there were 24,663,328 shares of Common Stock
outstanding held by approximately 325 holders of record. Some of these holders
are nominees of brokerage firms which hold the securities for the benefit of
their customers. Additionally, on the same date, there were outstanding the
following three-year warrants to purchase shares of the Company's common stock:

            NUMBER                 EXERCISE PRICE

            2,200,000                     $2.50
            2,033,328                     $3.125
            5,200,000                     $4.00

         Further, the Company is in the process of issuing the following
securities: (i) 300,000 shares of common stock and three-year warrants to
purchase an additional 100,000 shares of common stock at an exercise price of
$2.50 per share to Kornfeld Associates International, Inc. ("KAI") for services
rendered by Stephen Kornfeld through KAI as a consultant to the Company; and
(ii) 93,333 shares of common stock to be issued to International Capital Growth,
Ltd. ("ICG") for services. See Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT. In addition, the Board has the right to issue warrants to
members of the Company's management to purchase up to 1.5 million shares of
common stock (the "Management Warrants").

         For the respective terms of the warrants, the holders thereof are given
an opportunity to profit from the rise in the market price of the common stock
with the resulting dilution in the interests of the other shareholders. The
terms on which the Company may obtain financing may be adversely affected by the
existence of such warrants. The holders of the warrants may exercise them at a
time when the Company might be able to obtain additional capital through a new
offering of securities on more favorable terms.

SHARES ELIGIBLE FOR FUTURE SALE

         At the present date, all but 330,000 shares of the Company's
outstanding common stock are "restricted securities" as defined in Rule 144
under the Securities Act of 1933, as amended (the "Act") and may not be sold in
the future without registration under the Act or pursuant to an

                                       14
<PAGE>

applicable exemption therefrom (such as pursuant to Rule 144). The Company has
contractually agreed to register all of the outstanding common stock for resale
under the Act and intends to promptly file a registration statement for that
purpose. Additionally, 12,333,328 of the Company's outstanding shares became
eligible for sale under Rule 144 on April 29, 1997. However, all of the
Company's officers and directors (except Messrs. Sillam, Klein and Kornfeld)
have agreed not to transfer certain of their securities until nine months after
the effectiveness of a registration statement covering the resale of the
Company's outstanding securities (without the prior written consent of ICG). See
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

DIVIDEND POLICY

         The Company has never declared a cash dividend on its Common Stock. The
board of directors anticipates that, for the foreseeable future, earnings, if
any, will be retained for use in the business, and no cash distributions will be
made on the Company's common stock. The payment of future cash dividends, if
any, will be at the discretion of the board and will depend upon earnings,
financial requirements of the Company and such other factors as the board deems
relevant.

OTHER MATTERS

         The Company may in the future consider taking the following corporate
actions: (i) seeking shareholder approval to amend the Company's articles of
incorporation to increase the number of the Company's authorized shares of
capital stock, and (ii) making a self-tender offer to the holders of the
Company's outstanding warrants to exchange those warrants without further
consideration for a smaller number of shares of the Company's authorized, but
unissued common stock. To date, no actions with respect to these matters have
been taken.

ITEM 6.           MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
                  OPERATION

         THE FINANCIAL INFORMATION INCLUDED HEREIN SHOULD BE READ IN CONJUNCTION
WITH THE CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO. CERTAIN
OF THE DATA CONTAINED HEREIN INCLUDES FORWARD-LOOKING INFORMATION. THESE FORWARD
LOOKING STATEMENTS ARE BASED LARGELY ON THE COMPANY'S EXPECTATIONS AND ARE
SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES, MANY OF WHICH ARE BEYOND THE
COMPANY'S CONTROL. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE FORWARD
LOOKING STATEMENTS BASED UPON THE FACTORS DISCUSSED HEREIN, INCLUDING WITHOUT
LIMITATION THE AVAILABILITY OF REQUIRED CAPITAL FOR THE CONTINUATION OF THE
COMPANY'S OPERATIONS AND THE LEVEL OF ADVERTISING REVENUE ACHIEVED BY ONYX
TELEVISION.

INTRODUCTION

         The Company was organized in 1995 to acquire and operate media
properties. At the present time, the Company has three media operations in its
portfolio. The Company's principal operation

                                       15
<PAGE>

is a music television station operating in Germany (Onyx Television). The
Company also owns a 51% interest in a company which in turn, has a 51% interest
in a second company operating a Romanian print media group and radio station
(Tinerama) and a 50% interest in a joint venture which has recently launched a
specialist TV programming vehicle to provide lifestyle programming on large
video screens at U.K. concert events (Blink TV). The Company has also entered
into the Unimedia Agreement pursuant to which it has agreed, subject to the
satisfaction of certain conditions, to acquire Unimedia. For further information
on the Company's business, see Item 1. DESCRIPTION OF BUSINESS.

RESULTS OF OPERATIONS

         COMPARISON OF 1996 RESULTS TO 1995 RESULTS

         Operating revenues in the fiscal year ended December 31, 1996 ("Fiscal
1996") totaled $2.11 million, an increase of $1.68 million compared to operating
revenues of $430,142 for the period from inception, February 17, 1995, to
December 31, 1995 ("Fiscal 1995"). This increase in Fiscal 1996 operating
revenue was largely attributable to a full years income from the operations of
Tinerama.

         Advertising sales by Onyx during the year ended December 31, 1996 were
nominal and were substantially lower than was anticipated when Onyx was launched
in January 1996. This reflects the fact that Onyx has taken longer than
anticipated to establish itself in the advertising market, in part, because of
delays in obtaining more extensive distribution of its channel on various German
cable networks. At the present time, Onyx reaches 8.2 million cable and
satellite homes in Germany. See Item 1. DESCRIPTION OF BUSINESS.

         During Fiscal 1996, each of the Tinerama Companies continued to operate
at either a small profit or experienced a small loss.

         Operating costs, excluding depreciation and amortization, increased
$15.25 million from $3.37 million in Fiscal 1995 to $18.62 million in Fiscal
1996. This increase primarily reflects operating expenses of the Company in its
first full year of operation of Onyx Television. Operating expenses of Onyx
Television include programming costs, broadcast studio expenses, transmission
expenses, employee salaries and general and administrative expenses.

         Depreciation and amortization in Fiscal 1996 was $521,069, an increase
of $347,121, or 199% for Fiscal 1996 as compared to $173,948 in Fiscal 1995.
This increase was due primarily to depreciation and amortization on equipment
purchased in connection with the launch and operation of Onyx Television.

         The Company's operating loss was $16.51 million in Fiscal 1996, as a
result of the above factors, compared to an operating loss of $2.9 million in
Fiscal 1995. The loss before tax provision totaled $16.34 million in Fiscal
1996, compared to $2.8 million in Fiscal 1995 and the net loss for Fiscal 1996
was $16.19 million ($1.31 per share), compared to a net loss of $2.8 million
($1.55 per

                                       16
<PAGE>

share) in Fiscal 1995. Weighted average shares outstanding were 12,359,029 for
Fiscal 1996, compared to 1,830,000 for Fiscal 1995.

LIQUIDITY AND CAPITAL RESOURCES

         The ownership, development and operation of media interests, including
television and radio stations, television production facilities and publishing
requires substantial capital investment. To date, the Company has financed its
capital requirements through sales of its equity securities and through debt
financing. Since inception through December 31, 1996, the Company has incurred
an accumulated deficit of approximately $19.0 million, principally related to
the Company's launch and first year operation of Onyx television. The Company
anticipates that it will continue to incur losses from Onyx's operations until
at least the middle of 1998, although there can be no assurance that the Company
will be profitable after that time.

         In February 1996, the Company completed a private placement of its
securities (the "First Private Placement"). The Company received net proceeds of
approximately $14.4 million in the First Private Placement. These funds, along
with capital infusions to the Company from its founding shareholders in the
amount of $3.0 million, were primarily utilized to fund the startup, launch and
first year of operation of Onyx Television, and for general corporate purposes.

         In October 1996, the Company's UK subsidiary, CM (UK), entered into an
agreement to borrow up to US $2.0 million ("Bridge Loan") from Instar Holdings,
Inc. ("Instar") to fund the Company's working capital requirements (principally
related to the continuing operation of Onyx Television. The Bridge Loan is
guaranteed by the Company and Onyx and is secured by a charge on substantially
all of the Company's assets. Interest is payable monthly on the Bridge Loan, at
the rate of 2% above Lloyd Bank's base rate.

         The Bridge Loan was originally due on December 31, 1996. In January
1997, the Bridge Loan was amended to provide that (i) the principal repayment
date is now June 1, 1997, or if earlier, the date on which the Company makes a
private placement of its securities (other than the private placement completed
on March 3, 1997) in an amount equal to or greater than the amount outstanding
under the Bride Loan and (ii) the Bridge Loan is convertible, at the option of
the holder(s) thereof, into fully paid shares of Common Stock at a conversion
rate of one share of Common Stock for each US $.50 principal amount of the
Bridge Loan. See Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         On March 3, 1997, the Company closed a second private placement in
which it raised net proceeds of $5.85 million, which is being used to fund the
continuing operation of Onyx Television and for general corporate purposes. The
Company issued an aggregate of 12.0 million shares of its common stock in this
private placement.

         CM(UK) and the Company have also granted a charge against substantially
all of their assets to secure their obligations in connection with the guaranty
of the transponder lease. See Note 2 of

                                       17
<PAGE>

Notes to Consolidated Financial Statements with respect to the guaranty of the
transponder lease by Universal Independent Holdings Limited, a BVI corporation
("Universal"). CM(UK) under its transponder lease, was required to provide a
guaranty to PTT Telecom of its obligations under the lease. Universal agreed to
provide such guaranty, but required, among other things, (i) that CM(UK) enter
into, in favor of Universal, a deed of counter-indemnity ("Deed") to secure the
obligation of CM(UK) to repay Universal if Universal is called upon to make
payment on its transponder guaranty, (ii) that the Company and Onyx guarantee
the obligations of CM(UK) under the Deed, and (iii) that the Company pledge
substantially all of its assets to secure its obligations in connection
therewith. Instar and Universal have agreed that their liens on the Company's
assets shall rank PARI PASSU. If the Company were to default under either or
both of such guaranties and Instar and/or Universal were to foreclose on the
pledge of the Company's assets, it would likely have a significant and adverse
impact on the Company's financial position, and could result in the Company's
loss of its operating assets, including its interest in Onyx.

         At the present time, the Company requires working capital of
approximately U.S. $1.0 million per month to continue its operations. The
Company believes that its current resources will allow the Company to continue
its operations until at least the end of May 1997. The Company is presently
seeking additional capital, or other acceptable alternatives, to continue its
operations beyond that date and to fund the continued short and long term
development of its businesses. In that regard, the Company is engaged in
discussions and intends to engage in discussions with others regarding the
possibility of obtaining additional equity investments and/or loans to satisfy
its short and long-term financing needs and regarding the possibility of
entering into strategic alliances with key industry participants that would
allow Onyx Television greater access to markets and resources. Alternatively,
the Company may consider selling all or a substantial portion of its operations
to a third party (including its interest in Onyx Television). No definitive
agreements have been entered into to date.

         There can be no assurance that the capital or other acceptable
arrangements required to continue the operations of the Company beyond the end
of May 1997 will be obtained. The Company's failure to raise sufficient funds to
repay the Bridge Loan, or the Company's being called on the transponder
guaranty, or the Company's failure to obtain sufficient working capital for its
operations, will likely have a significant and adverse impact on the Company's
financial position, and could result in the Company's losing its operating
assets, including its interest in Onyx Television.

                                       18
<PAGE>

         To the extent that the Company finances its activities through the
issuance of additional equity securities, any such issuance would result in
dilution to the interests of the Company's shareholders. Additionally, to the
extent that the Company incurs indebtedness or issues debt securities in
connection with financing activities, the Company will be subject to all of the
risks associated with incurring substantial indebtedness, including risks
associated with pledging assets of the Company and the risks that interest rates
may fluctuate and cash flow may be insufficient to pay principal and interest on
any such indebtedness.

         For information regarding the financial terms of the agreement between
Blink TV and the Mirror, see Item 1. DESCRIPTION OF BUSINESS.

         The Company maintains its financial statements in dollars and holds the
majority of its funds in United States dollars, pounds sterling and German
Deutsche marks. Amounts paid to the Company are payable in various currencies,
which are subject to independent fluctuating exchange rates with the U.S.
dollar, the pound and the Deutsche Mark. In the event of a devaluation in a
particular currency between the time its income arises and the time such income
is received and converted by the Company into U.S. dollars, the Company would
suffer an exchange loss which could materially and adversely affect the
Company's revenues. The Company does not hedge against foreign currency exchange
rate risks. Because of the number of currencies involved, the constantly
changing currency exposures and the fact that all foreign currencies do not
fluctuate in the same manner against the United States dollar, the Company
cannot quantify the effect of exchange rate fluctuations on its financial
condition or results of operations.

                                       19
<PAGE>

ITEM 7.           FINANCIAL STATEMENTS

         The Financial Statements required by Item 7 are attached to this Form
10-KSB as follows:

                                                                     PAGE


Independent Auditors Report.......................................    F-1

Consolidated Balance Sheet at
December 31, 1995, 1996 and Pro Forma 1996........................    F-2

Consolidated Statement of Operations For Year Ended the
December 31, 1996 and for the Period from Inception

(February 17, 1995) to December 31, 1995..........................    F-3

Consolidated Statement of Stockholders' Equity For Year ended
December 31, 1996 and for the period from inception
(February 17, 1995) to December 31, 1995..........................    F-4

Consolidated Statement of Cash Flows For the Year Ended
December 31, 1996 and for the period from inception
(February 17, 1995) to December 31, 1995..........................    F-5

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

                                       20

<PAGE>


    INDEPENDENT AUDITORS' REPORT TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
    CAPITAL MEDIA GROUP LIMITED

    We have audited the accompanying consolidated balance sheet of Capital Media
    Group Limited and its subsidiaries ("the companies") as of December 31, 1996
    and 1995 and the related consolidated statements of operations,
    stockholders' equity and cash flows for the year ended December 31, 1996 and
    the period from inception (February 17, 1995) to December 31, 1995. These
    consolidated financial statements are the responsibility of the Company's
    management. Our responsibility is to express an opinion on these financial
    statements based on our audit. We did not audit the financial statements of
    Tinerama Investment AG (a consolidated subsidiary), which statements reflect
    total assets constituting 37% of consolidated total assets at December 31,
    1996 (1995 - 18%) and 1% of consolidated operating loss for the year then
    ended (period from inception (February 17, 1995) to December 31, 1995 - 2%).
    These statements were audited by other auditors whose report has been
    furnished to us, and our opinion, insofar as it relates to the amounts
    included for Tinerama Investment AG, is based solely on the report of such
    other auditors.

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

    In our opinion, such consolidated financial statements present fairly, in
    all material respects, the financial position of the companies at December
    31, 1996 and 1995 and the results of their operations and their cash flows
    for the year ended December 31, 1996 and period from inception (February 17,
    1995) to December 31, 1995 in conformity with generally accepted accounting
    principles in the United States of America.

    The accompanying financial statements have been prepared assuming that the
    company will continue as a going concern. As discussed in note 2 to the
    financial statements, the company's lack of cash being generated by trading
    and the uncertainty over its ability to raise further funds raise
    substantial doubt about its ability to continue as a going concern.
    Management's plans concerning these matters are also described in note 13.
    The financial statements do not include any adjustments that might result
    from the outcome of this uncertainty.

    As discussed in note 8 to the financial statements, the outcome of certain
    litigation against the company is unknown at this time.

    DELOITTE & TOUCHE

    Chartered Accountants
    London, England

    May 1, 1997
                                      F-1
<PAGE>
                                                     CAPITAL MEDIA GROUP LIMITED


CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>


                                                                                                          PROFORMA
                                                                     DECEMBER 31,     DECEMBER 31,       DECEMBER 31,
                                                                             1995             1996               1996
                                                          NOTE                                            SEE NOTE 14
                                                                                $                $                  $
ASSETS
<S>                                                       <C>           <C>               <C>              <C>
Cash                                                                    7,537,137           320,070        6,170,070
Accounts receivable, net of allowances for doubtful
  accounts of $10,399 (December 31, 1995 - $6,104)         6              530,515           754,103          754,103
Inventories                                                                80,414            38,455           38,455
Prepaid expenses and deposits                                             290,299         1,481,836        1,481,836
Amounts due from shareholders                                               3,679                 -                -
                                                                       ----------         ---------       ----------
TOTAL CURRENT ASSETS                                                    8,442,044         2,594,464        8,444,464
Investments                                                                34,805           217,213          217,213
Intangible assets, net of accumulated amortisation of
  $262,536 (December 31, 1995 - $33,272)                   5              871,747           803,821          803,821
Property, plant and equipment, net                         4            1,278,683         1,475,284        1,475,284
                                                                       ----------         ---------       ----------

TOTAL ASSETS                                                           10,627,279         5,090,782       10,940,782
                                                                       ==========         =========       ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable                                                          120,004         1,378,801        1,378,801
Accrued expenses                                                        1,711,050         2,310,261        2,310,261
Loan repayable within one year                             13                   -         2,016,568        2,016,568
Amounts due to minority shareholders                                      700,386           411,600          411,600
                                                                       ----------         ---------        ---------

TOTAL LIABILITIES                                                       2,531,440         6,117,230        6,117,230

COMMITMENTS AND CONTINGENCIES                             7,8                   -                 -                -

MINORITY INTEREST IN SUBSIDIARIES                                         673,828           615,795          615,795
                                                                       ----------         ---------        ---------

                                                                        3,205,268         6,733,025        6,733,025
                                                                       ----------         ---------        ---------

STOCKHOLDERS' EQUITY
Preferred stock - 5,000,000 shares authorised:
  $0.001 par value: no shares issued and outstanding                              -                 -                -
Common stock - 50,000,000 shares authorised:
  $0.001 par value 12,663,328 (December 31, 1995 -
  9,326,664) issued and outstanding                                         9,327            12,663           24,663
Additional paid in capital                                             10,309,314        17,117,651       22,955,651
Subscriptions receivable                                                   (5,000)           (5,000)          (5,000)
Cumulative translation adjustment                                         (59,963)          326,214          326,214
Accumulated deficit                                                    (2,831,667)      (19,093,771)     (19,093,771)
                                                                       -----------      ------------     ------------
TOTAL STOCKHOLDERS' EQUITY                                              7,422,011        (1,642,243)       4,207,757
                                                                       ----------        -----------     -----------
TOTAL LIABILITIES AND
  STOCKHOLDERS' EQUITY                                                 10,627,279         5,090,782       10,940,782
                                                                       ==========        ==========      ===========
</TABLE>


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

                                      F-2
<PAGE>


                                                     CAPITAL MEDIA GROUP LIMITED


CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>

                                                                       PERIOD FROM
                                                                         INCEPTION
                                                                     (FEBRUARY 17,
                                                                          1995) TO                        YEAR ENDED
                                       NOTE                           DECEMBER 31,                      DECEMBER 31,
                                                                              1995                              1996
                                                              $                  $               $                 $

<S>                                    <C>            <C>               <C>              <C>               <C>
Revenue                                                                    430,142                         2,075,407

Operating costs
  Staff costs                                           436,193                          3,705,972
  Depreciation and amortisation                         173,948                            521,069
  Operating expenses                                  2,763,339         (3,373,480)     14,125,947       (18,352,988)
                                                      ---------         -----------     ----------       ------------

Operating loss                                                          (2,943,338)                      (16,277,581)

Equity in net losses of investment in
  joint venture                          12                                      -                          (211,414)
Interest income net                                                          4,187                           132,950
Minority interest                                                           37,518                            58,033
Other income                                                                71,304                            42,531
                                                                        -----------                      ------------
Loss before taxation                                                    (2,830,329)                      (16,255,481)

Tax provision                             3                                 (1,338)                           (6,623)
                                                                        -----------                      ------------

Net loss                                                                (2,831,667)                      (16,262,104)
                                                                        ===========                      ============

Net loss per share                                                         ($1.55)                           ($1.32)

Weighted average shares outstanding                                      1,830,000                        12,359,029
                                                                        ==========                       ===========
</TABLE>

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

                                      F-3
<PAGE>
                                                     CAPITAL MEDIA GROUP LIMITED



CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>


                                                          ADDITIONAL                CUMULATIVE
                                                            PAID-IN   SUBSCRIPTION  TRANSLATION  ACCUMULATED
                                COMMON STOCK                CAPITAL    RECEIVABLE    ADJUSTMENT    DEFICIT           TOTAL
                                   SHARES         $            $             $               $               $             $

<S>                              <C>            <C>       <C>             <C>        <C>            <C>           <C>  
Balance at inception 
(February 17, 1995)                      -          -              -           -           -                -              -
Issuance of common stock         8,996,664      8,997     10,308,657      (5,000)          -                -     10,312,654
Reverse acquisition of
Capital Media Group Limited        330,000        330            657           -           -                -            987
Translation adjustment                   -          -              -           -     (59,963)               -        (59,963)
Net loss                                 -          -              -           -           -       (2,831,667)    (2,831,667)
                                 ---------      ------     ---------       ------     -------      -----------    ----------- 
Balance at December 31, 1995     9,326,664      9,327     10,309,314      (5,000)    (59,963)      (2,831,667)     7,422,011
Issuance of common stock         3,336,664      3,336      6,808,337           -           -                -      6,811,673
Translation adjustment                   -          -              -           -     386,177                -        386,177
Net loss                                 -          -              -           -           -      (16,262,104)   (16,262,104)
                                ---------      ------     ---------       ------     -------      -----------    ----------- 
Balance at December 31, 1996    12,663,328     12,663     17,117,651      (5,000)    326,214      (19,093,771)    (1,642,243)
                                ==========     ======     ==========      ======     =======      ===========     ========== 
</TABLE>


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

                                      F-4
<PAGE>

                                                     CAPITAL MEDIA GROUP LIMITED


CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>



                                                             PERIOD FROM
                                                               INCEPTION
                                                           (FEBRUARY 17,           YEAR
                                                                1995) TO          ENDED
                                                            DECEMBER 31,   DECEMBER 31,
                                                                    1995           1996
                                                                       $              $
CASH FLOWS FROM OPERATING ACTIVITIES

<S>                                                           <C>           <C>         
Net loss                                                      (2,831,667)   (16,262,104)
Adjustment to reconcile net loss to net cash
  used in operating activities:
    Depreciation and amortisation                                173,948        521,069
    Equity in net losses of investment in
      joint venture                                                 --          211,414
    Minority interest                                            (37,518)       (58,033)
Changes in assets and liabilities:
    Decrease/(increase) in inventories                           (50,114)        41,959
    Increase in accounts receivable                             (372,828)      (232,991)
    Increase in prepaid expenses                                (279,944)    (1,196,574)
    Increase in accrued expenses and accounts payable          1,491,757      2,252,550
    Increase/(decrease) in amounts due to
      minority shareholders                                       89,768       (288,786)
                                                              -----------   ------------
NET CASH USED IN OPERATIONS                                   (1,816,598)   (15,011,496)
                                                              -----------   ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment                    (349,057)      (501,396)
Acquisition of intangible assets                                (373,257)      (180,444)
Acquisition of investments                                       (34,805)          --
Investment in joint venture                                         --         (393,822)
Acquisition of subsidiary undertakings, net of
  cash acquired                                                     --
                                                                (201,800)          --
                                                              -----------   ------------
NET CASH USED IN INVESTING ACTIVITIES                           (958,919)    (1,075,662)
                                                              -----------   ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of shares                              10,312,654      7,181,673
Commission paid on issuance of shares                               --         (370,000)
Loans taken out in the year                                         --        2,000,000
                                                              -----------   ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                     10,312,654      8,811,673
                                                              -----------   ------------

NET INCREASE/(DECREASE) IN CASH                                7,537,137     (7,275,485)
Effect of exchange rate movements on cash                           --           58,418
Cash at start of period                                             --        7,537,137
                                                              -----------   ------------
Cash at end of period                                          7,537,137        320,070
                                                              ===========   ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW ACTIVITY:


Cash payments for interest                                         6,171         33,334
Cash paid for taxes                                               (1,338)          --

The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>

                                      F-5

<PAGE>

                                                     CAPITAL MEDIA GROUP LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996

1.     SIGNIFICANT ACCOUNTING POLICIES

       The consolidated financial statements are prepared in conformity with
       generally accepted accounting principles in the United States of America.

       PRINCIPLES OF CONSOLIDATION

       The consolidated financial statements include the accounts of Capital
       Media Group Limited ("the Company") and its wholly owned subsidiaries
       Capital Media (UK) Limited ("CM(UK)"), and Onyx Television GmbH ("Onyx")
       together with its 51% owned subsidiary Tinerama Investment AG
       ("Tinerama"), after the elimination of all significant intercompany
       balances and transactions. The company's investment in Blink TV Limited
       ("Blink"), a joint venture in which the company holds a 50% interest, has
       been accounted for using the equity method.

       BASIS OF PREPARATION

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

       INVENTORIES

       Inventories are stated at the lower of first-in, first-out cost and
       market value.

       INTANGIBLE ASSETS

       Intangible assets represent purchased broadcast licences, computer
       software and goodwill arising on acquisition of subsidiary undertakings.
       The amounts in the balance sheet are stated net of the related
       accumulated depreciation. Goodwill is amortised over ten years. Broadcast
       licences and computer software are amortised over their useful lives.

       PROPERTY, PLANT AND EQUIPMENT

       Property, plant and equipment are all stated at cost. Depreciation is
       recorded on a straight-line basis over the estimated useful lives of the
       assets as shown below:

       Buildings                                     25 to 50 years
       Fixtures, fittings and equipment              5 to 20 years

       FOREIGN CURRENCY

       Assets and liabilities of the Company's foreign subsidiaries in the
       United Kingdom and Germany are translated at year end exchange rates and
       the results of those subsidiaries at the average exchange rate for the
       year. The effects of these translation adjustments are reported in a
       separate component of shareholders' equity. Exchange gains and losses
       arising from transactions denominated in a currency other than the
       functional currency of the entity involved are included in net income.

       Assets and liabilities of the Company's foreign subsidiary in Romania are
       translated at historical exchange rates in accordance with the temporal
       method. This is due to the hyper-inflationary situation in Romania.

       INCOME TAXES

       Full provision is made for all deferred tax liabilities. Deferred income
       tax assets are recognised for deductible temporary differences and net
       operating losses, reduced by a valuation allowance if it is more likely
       than not that some portion of the benefit will not be recognised.

       LEASES

       Operating leases are charged to the statement of operations in equal
       annual amounts over the term of the lease.

                                      F-6
<PAGE>
                                                     CAPITAL MEDIA GROUP LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996


2.     GOING CONCERN

       The accompanying financial statements have been prepared on a going
       concern basis, which contemplates the realisation of assets and the
       satisfaction of liabilities in the normal course of business. As shown in
       the financial statements, during the year ended December 31, 1996 and the
       period from February 17, 1995 to December 31, 1995, the Company incurred
       net losses of $16,262,104 and $2,831,667, respectively. At December 31,
       1996 the Company had net current liabilities of $3,522,766 and its total
       liabilities exceeded its total assets by $1,026,448. These factors among
       others may indicate that the Company will be unable to continue as a
       going concern for a reasonable period of time.

       The financial statements do not include any adjustments relating to the
       recoverability and classification of recorded asset amounts or the
       amounts and classification of liabilities that might be necessary should
       the Company be unable to continue as a going concern. As described in
       note 13 the Company's continuation as a going concern is dependent upon
       its ability to obtain additional financing or refinancing as may be
       required, and ultimately to attain successful operations. Management is
       continuing its efforts to obtain additional funds so that the Company can
       meet its obligations and sustain operations from sources that are
       described in note 13 to the financial statements.

3.     INCOME TAXES

       The income tax provision consisted of the following:

                                               PERIOD FROM
                                                 INCEPTION
                                             (FEBRUARY 17,               YEAR
                                                  1995) TO              ENDED
                                              DECEMBER 31,       DECEMBER 31,
                                                      1995               1996

       Current tax expense                        $ (1,338)          $ (6,623)
                                                  =========          ========

       Net operating loss carry forwards which give rise to deferred tax assets
       at December 31, 1996 are as follows:


                                               PERIOD FROM
                                                 INCEPTION
                                             (FEBRUARY 17,             YEAR
                                                  1995) TO            ENDED
                                              DECEMBER 31,     DECEMBER 31,
                                                      1995             1996

       Unutilised tax losses                    $ 717,000       $ 4,757,000
       Valuation allowances                      (717,000)       (4,757,000)
                                                ---------       -----------

       Total deferred tax assets                       --                --
                                                =========       ===========


       The valuation allowance relates to deferred tax assets established under
       Statement of Financial Accounting Standard No. 109 and relate to the
       unutilised tax losses. These unutilised tax losses, substantially all of
       which do not expire, will be carried forward to future years for possible
       utilisation. Because the Company has not yet achieved profitability, it
       has not recognised the benefit for these unutilised tax losses in the
       financial statements.

                                      F-7
<PAGE>

                                                     CAPITAL MEDIA GROUP LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996



<TABLE>
<CAPTION>


4.     PROPERTY, PLANT AND EQUIPMENT

                                                         DECEMBER 31,      DECEMBER 31,
       Property, plant and equipment consists                    1995              1996
         of:                                                        $                 $

       <S>                                                  <C>               <C>    
       Buildings                                              191,550           191,550
       Fixtures, fittings and equipment                     1,322,979         1,817,170
                                                            ---------         ---------

       Total property, plant and equipment                  1,514,529         2,008,720

       Less accumulated depreciation                         (235,846)         (533,436)
                                                            ---------         --------- 
                                                            1,278,683         1,475,284
                                                            =========         =========
</TABLE>

5.     INTANGIBLE ASSETS
<TABLE>
<CAPTION>

                                                           DECEMBER 31,    DECEMBER 31,
                                                                   1995            1996
                                                                      $               $

<S>                                                         <C>               <C>    
       Purchased broadcast licences                            317,002          364,969
       Computer software                                             -          113,371
       Goodwill                                                588,017          588,017
                                                            ----------        ---------
                                                               905,019        1,066,357
       Less accumulated amortisation                           (33,272)        (262,536)
                                                            ----------        ---------
                                                               871,747          803,821
                                                            ==========        =========
</TABLE>

6.     ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>


                                                          DECEMBER 31,     DECEMBER 31,
                                                                  1995             1996
                                                                     $                $

       Accounts receivable comprise:

<S>                                                         <C>               <C>    
       Trade receivables                                             -          139,059
       VAT receivables                                               -          116,801
       Other debtors receivable within one year                347,209          498,243
       Other debtors receivable after one year                 183,306                -
                                                            ----------        ---------
                                                              530,515           754,103
                                                            ==========        =========
</TABLE>

                                      F-8

<PAGE>

                                                     CAPITAL MEDIA GROUP LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996

7.     COMMITMENTS AND CONTINGENCIES

       TRANSPONDER

       A bank guarantee was originally provided to PTT Telecom on November 30,
       1995 in the amount of ECU 2,000,000 in relation to an agreement to lease
       transponder capacity in order to broadcast a television channel in
       Germany. The guarantee required as at December 31, 1996 stood at ECU
       1,650,000 ($2,065,000 at December 31, 1996 exchange rates).

       The Company was not in a position to support the guarantee. As a result
       the guarantee has been provided by Universal Independent Holdings Limited
       ("Universal") (see Note 13).

       The Company is committed to paying ECU 5,359,000 ($6,705,000 at December
       31, 1996 exchange rates) over the next two years for use of the
       transponder capacity under the terms of the agreement.

       LEASE COMMITMENTS

       In August 1995 the Company entered into an agreement to lease studio,
       post production and editing facilities in Dortmund, Germany. Under the
       terms of the agreement the Company is committed to paying DM 991,000
       ($643,000 at December 31, 1996 exchange rates) per annum for the use of
       these facilities until February 1997. The Company is currently
       re-negotiating terms to remain in the facility at more beneficial terms.

       In January 1996 the Company entered into an agreement to lease master
       control and broadcast equipment and editing facilities at Ingleheim
       Germany. Under the terms of the agreement the Company is committed to
       paying DM 2,940,000 ($1,908,000 at December 31, 1996 exchange rates) per
       annum for the use of the equipment and facilities until January 2001. The
       lease can be terminated effective December 1998.

       In January 1996 the Company entered into an agreement to lease uplink
       capacity until January 1999, at a cost of approximately (pound)245,000
       ($419,000 at December 31, 1996 exchange rates) per annum.

       The Company has also entered into leases for other office space in
       Germany and the UK, expiring between 1997 and 2002 at an annualised cost
       of $213,000 (at December 31, 1996 exchange rates).

       TINERAMA

       The shareholders' agreement between the Company and Telor International
       Limited ("Telor"), provides that if either party wants to transfer its
       ownership in Tinerama, it must first offer such ownership interest to the
       other party. It also provides that in the first four years commencing
       November 15, 1995, either shareholder may force a sale or purchase of its
       shares at a price specified in the notice given from one shareholder to
       the other.

8.     LITIGATION

       On May 9, 1996 Com TV Production und Vertrieb GmbH ("Com") and Nen TV
       ("Nen") in relation to their litigation with the Company served Further
       and Better Particulars of the Defence and Counterclaim, which provide
       details of matters alleged in the Defence and Counterclaim. The most
       significant detail given is that Com and Nen have quantified their
       estimated damages at DM3,325,438 ($2,158,000 at December 31, 1996
       exchange rates) based on a 5% share in profits over a five year period.

       The Company has filed a Reply and Defence to the Counterclaim and
       believes that the Counterclaim is without merit and intends to vigorously
       contest the same.

       In connection with the same matter, the Company commenced proceedings
       against Mr John Garman. A Defence and Counterclaim has been served on the
       Company.

       Both actions have now been consolidated into one action and an Order for
       Directions was made on March 13, 1997 which sets out the steps to be
       taken up to and including the trial.

       The Company believes that both counterclaims are without merit, however,
       there can be no assurance as to the outcome of the claims.

                                      F-9

<PAGE>
                                                     CAPITAL MEDIA GROUP LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996

9.     TINERAMA

       Under the terms of the acquisition agreement, Tinerama had an option to
       acquire up to a further 10% of the total issued shares of each of its 51%
       owned Romanian subsidiary companies for a price of Lei 1,000,000 ($325 at
       December 31, 1996) conditional upon certain financial targets. The option
       was valid for a period of six months from the date of finalisation of the
       1995 financial statements of the Romanian subsidiaries on June 7, 1996.

       Tinerama considers that it is entitled to acquire the additional 10%
       shareholdings, but the share transfers have not been effected.
       Consequently, these accounts have been prepared on the basis of
       Tinerama's existing 51% shareholdings.

10.    WARRANTS

       The Company has the following warrants (all of which expire 36 months
       from the date of their effective future registration) outstanding at
       December 31, 1996.

       DESCRIPTION                                                   NUMBER

       Warrants for common stock exercisable at $4.00               5,200,000

       Warrants for common stock exercisable at $3.125              2,033,328

       Warrants for common stock exercisable at $2.50               2,200,000

       The warrants were issued in connection with a Private Placement Offering
       ("the Offering") which took place in December 1995 and January 1996.
       Warrants to purchase 4,200,000 and 1,000,000 shares of common stock at
       exercise prices of $4.00 and $2.50 per share were issued to investors in
       the Offering; warrants to purchase 1,000,000 and 433,328 shares of common
       stock at exercise prices of $4.00 and $3.125 per share respectively were
       issued to the placement agent and sub-distributors for the Offering; and
       warrants to purchase 1,600,000 and 1,200,000 shares of common stock at
       exercise prices of $3.125 and $2.50 respectively were issued to certain
       of the founding shareholders.

       On September 20, 1996, Mr Stephen Kornfeld was appointed to the Company's
       Board of Directors and became Co-Chairman at that time. In connection
       with Mr. Kornfeld providing services to the Company, the Company is in
       the process of issuing 300,000 shares of common stock and warrants to
       purchase 100,000 shares of common stock at an exercise price of $2.50 per
       share to Kornfeld Associates International Inc. Additionally, several of
       the Company's founding shareholders will transfer shares of common stock
       and warrants to Kornfeld Associates International Inc.

11.    RE-DOMESTICATION

       The Company intends to re-domesticate its legal status to Bermuda or
       another non-U.S. jurisdiction as soon as reasonably practicable.

12.    BLINK TV LIMITED

       The Company has invested $428,628 (at December 31, 1996 exchange rates)
       in Blink which is a joint venture arrangement with Mirror Group PLC
       ("Mirror"). Mirror owns 50% of the share capital of Blink and has
       financed the purchase of equipment for the use of Blink and provided
       working capital to Blink. The Company and Mirror jointly control and
       manage Blink. The investment in Blink has been accounted for in these
       financial statements by the equity method.

                                      F-10
<PAGE>

                                                     CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996

13.    LIQUIDITY AND CAPITAL RESOURCES

       The Company is currently using its cash reserves to fund its operations.
       Due to the poorer than expected advertising revenues at Onyx and higher
       than planned expenditures in connection with the launch and first year
       operation of Onyx, the funds raised by the Company in late 1995 and early
       1996 have been expended earlier than anticipated.

       To fund its operations beyond the end of 1996, the Company will need to
       raise significant additional capital. At present the Company is
       considering various options to raise additional funding for its capital
       resources, including potential direct investments by third parties into
       Onyx or sales of the company's investments. However, other than as set
       forth herein, no arrangements have been entered into to date. There can
       be no assurance that additional working capital will be available on
       terms acceptable to the Company. The failure to obtain the additional
       funding required will almost certainly have a material and adverse impact
       on the Company's operations and financial position.

       On October 31, 1996, CM (UK) entered into an agreement to borrow up to
       $2.0 million from Instar Holdings, Inc. ("Instar") to fund working
       capital requirements ("the Instar loan"). The loan was originally due for
       repayment on December 31, 1996, or such earlier date as the Company
       raises additional funds to repay the loan. The loan is guaranteed by the
       Company and Onyx, and is secured by a charge on substantially all of the
       Company's assets. Interest is payable monthly on the loan, at the rate of
       2% above Lloyds Bank's base rate.

       The terms of the Instar Loan were amended in January 1997 to provide
       that:

       (i)    the principal repayment date is now June 1, 1997, or if
              earlier, the date on which the Company makes a private placement
              of its securities (other than referred to in note 14 below) in an
              amount equal to or greater than the amount outstanding under the
              loan; and

       (ii)   the loan is now convertible, at the option of each holder of a
              portion of the loan, into fully paid shares of common stock at a
              conversion rate of one share of common stock for each $ 0.50
              principal amount of the loan.

       On October 31, 1996, CM (UK) entered into a deed of counter-indemnity
       ("Deed") with Universal, a BVI corporation. The Deed secures the
       obligation of CM (UK) to repay Universal if Universal is called upon to
       make payment on its transponder guarantee. (See note 7 to Notes to
       Consolidated Financial Statements.)

       CM (UK)'s obligations under the Deed are guaranteed by the Company and
       Onyx, and are secured by a charge on substantially all of the Company's
       assets.

       Instar and Universal have agreed that their liens on the Company's assets
       shall rank parri-passu.

14.    SUBSEQUENT EVENTS

       On January 13, 1997, the Company issued a Private Placement Memorandum
       offering of its securities to accredited investors including to all
       existing shareholders. In the offering, the Company sold an aggregate of
       12,000,000 shares of common stock, $0.001 par value per share, at a
       purchase price of $0.50 per share. On March 3, 1997, the offering closed
       and the aggregate net proceeds to the Company were approximately
       $5,850,000 after costs.

       The proforma balance sheet as at December 31, 1996 represents the
       company's intentions for the use of the additional funds raised by the
       private placement.

                                      F-11
<PAGE>
                                                     CAPITAL MEDIA GROUP LIMITED


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996

15.    RELATED PARTY TRANSACTIONS

       INSTAR HOLDINGS, INC

       Messrs. Hauptmann, Leitner and Townsley have interests of $200,000,
       $500,000 and $300,000 respectively in the $2.0 million loan provided by
       Instar and referred to in Note 13. Messrs. Hauptmann and Leitner are
       shareholders and directors of the Company. Mr Townsley resigned from the
       Company's Board of Directors in January 1997.

       TELOR INTERNATIONAL LIMITED

       Telor owns 49% of Tinerama and had an amount of $411,600 owing from that
       company at December 31, 1996. Mr Hauptmann, a director and shareholder of
       the Company, is a principal of Telor.

       TOWNSLEY & CO.

       Mr. Townsley, a director of the Company until January 1997, is Managing
       Director of Townsley & Co., a UK brokerage firm. which participated in
       the private placement in winter 1995/96, receiving direct commissions of
       $210,000, 86,665 shares of common stock and warrants to purchase 86,665
       shares and 218,750 shares of common stock at $3.125 and $4.00
       respectively.

       INTERNATIONAL CAPITAL GROWTH, LTD

       The predecessor of International Capital Growth, Ltd ("ICG") was the
       placement agent in connection with the winter 1995/96 private placement,
       for which it received direct commissions and expense allowances of an
       aggregate of $1,339,000, 346,663 shares of common stock and warrants to
       purchase 346,663 and 781,250 shares of common stock at $3.125 and $4.00
       respectively. Mr. Hollander, a director of the company, is Senior
       Vice-President and a director of ICG.

       KESTREL SA

       Kestrel SA ("Kestrel"), a Switzerland based investment firm, holds shares
       of common stock and warrants in the Company for the benefit of multiple
       owners. Clients of Kestrel control Universal which has arranged for the
       transponder guarantee referred to in note 7.

                                      F-12


<PAGE>

ITEM 8.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS OR
                  ACCOUNTING AND FINANCIAL DISCLOSURE

         None.


                                       21
<PAGE>


                                    PART III

ITEM 9.           DIRECTORS AND EXECUTIVE OFFICERS

         As of April 24, 1997, the directors and executive officers of the
Registrant are as follows:

<TABLE>
<CAPTION>
NAME                          AGE     POSITION
----                          ---     --------
<S>                           <C>    <C>

Charles Koppel                 30     Co-Chairman, President, Chief Executive Officer and
                                      Corporate Secretary
Stephen Kornfeld               57     Co-Chairman
Karl Hauptmann                 36     Director
James Leitner                  42     Director
Barry Llewellyn                35     Director and Director of Sales and Advertising
Stanley Hollander              59     Director
Marc Sillam                    39     Director
Jean-Francois Klein            32     Director
Stephen Coleman                50     Chief Financial Officer
</TABLE>

         MMP, S.A., a French corporation acting for its principal, Groupe AB,
which owns 3.2 million shares of the Company's Common Stock, has the right to
designate two members to the Board of Directors. Messrs. Sillam and Klein
currently serve as Groupe AB's nominees to the board.

         If the Unimedia acquisition is completed, the Board has agreed to take
steps to add four additional persons who are not currently directors of the
Company and who shall be designated by Unimedia for election to the Board. See
Item 1. DESCRIPTION OF BUSINESS -- PROPOSED ACQUISITION OF UNIMEDIA.

BUSINESS EXPERIENCE

         Charles Koppel has been the Co-Chairman of the Board, President, Chief
Executive Officer and Secretary of the Company since its inception in February
1995. Prior thereto: (i) from April 1994 to December 1994, he was the executive
director of Waverly International, Ltd., a media holding company; (ii) from
January 1993 to January 1994, he was a consultant; (iii) from January 1991 to
December 1992, he was an executive with the Flextech PLC, a media holding

                                       22

<PAGE>

company; and (iv) from June 1990 to December 1990, he was employed as a
derivatives intern by Merrill Lynch International.

         Stephen Kornfeld was appointed Co-Chairman of the Board of Directors on
September 20, 1996. From January 1989 until September 1993, Mr. Kornfeld was the
Chairman and Chief Executive Officer of JWP International, Inc. and its
subsidiaries, including Drake and Skull Engineering. JWP International was
during that period one of the worlds leading mechanical, electrical and
facilities management contractors. In 1992, JWP Corp., the parent company of the
foregoing entities, and of which Mr. Kornfeld was a vice president from 1992
until September 1993 but not a director, filed for protection under Chapter 11
of the United States Bankruptcy Code. None of the entities for which Mr.
Kornfeld had principal responsibility were involved in the bankruptcy proceeding
of JWP Corp. Such bankruptcy has since been discharged. Since September 1993, Mr
Kornfeld has acted as an investor and a consultant to several companies.

         Karl Hauptmann has been a director of the Company since September 29,
1995. Since 1992, Mr. Hauptmann has been the Managing Director of Europa Capital
Management, a Prague based investment bank which analyzes investment
opportunities in Central and Eastern Europe. Prior thereto, from April 1990 to
August 1991, Mr. Hauptmann was a Managing Director at Merrill Lynch, where he
oversaw its European derivative securities operation.

         James Leitner has been a director of the Company since November 15,
1995. Since June 1991, Mr. Leitner has been the President of Falcon Management,
a fund management group involved in both U.S.-based and offshore investment
funds. Mr. Leitner has been involved in the trading of currencies and fixed
income instruments during his employment with Bankers Trust Company from May
1986 to May 1991.

         Barry Llewellyn has been a director of the Company since May 1995 and
has been the Director responsible for Sales and Advertising activities and more
recently for the Blink TV operation. Prior to joining the Company, from October
1987 to May 1995, Mr. Llewellyn held various positions with MTV Europe. Most
recently, Mr. Llewellyn was a part of the launch team for VH-1 in the United
Kingdom.

         Stanley Hollander has been a director of the Company since January
1996. Since 1993, Mr. Hollander has been an executive officer and a director of
International Capital Growth, Ltd. ("ICG"), an investment banking firm, and its
predecessors. Prior thereto, from 1989 to 1993, he was a Managing Director and
joint head of Corporate Finance at Gruntal & Co. Incorporated, and from 1985 to
1989, he was a Managing Director at Ladenberg Thalman & Co., Inc. From 1979 to
1985, Mr. Hollander was a co-owner and Vice President of Zemex
Electronics-Stanlee, and from 1959 to 1975, he was President of All Brand
Appliance Brand Mart, both distributors of consumer electronics. Mr. Hollander
serves as a director of Specialized Health Products, Inc.

         Marc Sillam has been employed by Groupe AB for more than the last five
years and is currently Executive Vice President and Chief Operating Officer of
Groupe AB.


                                       23
<PAGE>



         Jean-Francois Klein has been employed by Groupe AB for more than the
last five years and is currently Vice President and Chief Financial Officer of
Groupe AB. 

         Stephen Coleman was appointed Chief Financial Officer of the Company in
November 1996. From March 1993 until November 1996, Mr. Coleman was Director of
Finance at Lightworks Editing Systems, a United Kingdom digital editing systems
designer and manufacturer which was acquired by Tektronix, Inc. in 1995. Prior
to February 1993, Mr. Coleman served as Senior Financial Analyst at BICC PLC and
Financial Director of Bennett & Fountain Group PLC. Mr. Coleman qualified as a
Chartered Certified Accountant in 1977.

         Barry Townsley and Martin Loat, who had previously been directors of
the Company, resigned from the Board in January 1997 and October 1996,
respectively.

         Montegue Koppel, the father of Charles Koppel, has from time to time
acted, and may in the future act, as an advisor to the Company with regard to
its business activities. Mr. Koppel has also assisted the Company, without
remuneration, in obtaining several of the investors who acquired shares in the
Company's recently completed private placement and in arranging the Instar loan
and the Universal transponder guaranty. Mr. Koppel has advised the Company that
he does not have a beneficial interest, either directly or indirectly, in any of
the shares of the Company's common stock owned by Charles Koppel and that he
does not beneficially own, either directly or indirectly, more than a five
percent beneficial interest in the Company's common stock.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 16c-3(d) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), during the Company's fiscal year
ended December 31, 1996 and any Forms 5 and amendments thereto furnished to the
Company with respect to its most recent fiscal year, and any written
representations referred to in subparagraph (b)(2)(i) of Item 405 of Regulation
S-B, except as set forth below, no person who at any time during the fiscal year
ended December 31, 1996 was a director, officer or, to the knowledge of the
Company, a beneficial owner of more than 10% of any class of equities securities
of the Company registered pursuant to Section 12 of the Exchange At failed to
file on a timely basis, as disclosed in Forms 3, 4 and 5, reports by Section
16(a) of the Exchange Act during the fiscal year ended December 31, 1996. All of
the Forms 3 and 4 required to be filed by executive officers and directors of
the Company during the fiscal year ended December 31, 1996 are believed by the
Company to have been filed late.

                                       24
<PAGE>

ITEM 10.          EXECUTIVE OFFICERS

         The following table sets forth information about the compensation paid
or accrued during 1996 to the Registrant's Chief Executive Officer and to each
of the other most highly compensated executive officers of the Company whose
aggregate direct compensation exceeded $100,000.
<TABLE>
<CAPTION>

                                           SUMMARY COMPENSATION TABLE
                                           --------------------------
                                                                                       LONG-TERM
                                                ANNUAL COMPENSATION                    COMPENSATION
                                  ------------------------------------------           ------------
                                                                       OTHER ANNUAL                  ALL OTHER
NAME                                YEAR         SALARY      BONUS    COMPENSATION(1)   OPTIONS    COMPENSATION
                                                   ($)        ($)           ($)           (#)           ($)
                                  ------        --------     -----    ---------------   -------    -------------


<S>                                <C>           <C>                                                          
Charles Koppel                     1996          160,000      --            --                --            --
Barry Llewellyn                    1996          160,000      --            --                --            --
</TABLE>


EMPLOYMENT AGREEMENTS

         Mr. Koppel has a service agreement with the Company under which he is
entitled to an annual base salary of (pound)100,000 ($160,000). In addition Mr.
Koppel's service agreement provides that Mr. Koppel is entitled to receive such
bonuses and employee benefits as the Company Board of Directors may determine.
The agreement provides for successive automatic one-year terms unless terminated
upon one year's prior notice in writing.

         Mr. Llewelyn has a service agreement with the Company under which he is
entitled to annual base salary of (pound)100,000 ($160,000). In addition, Mr.
Llewelyn's service agreement provides that Mr. Llewelyn is entitled to receive
such bonuses and employee benefits as the Company's Board of Directors may
determine. The agreement provides for successive automatic one-year terms unless
terminated upon one year's prior notice in writing.

         On September 20, 1996, Stephen Kornfeld was appointed to the Company's
Board of Directors. Mr. Kornfeld also became Co-Chairman of the Board at that
time. Kornfeld Associates International, Inc. ("KAI") has a consulting agreement
with the Company pursuant to which Mr. Kornfeld provides services. As
compensation for such services, KAI has received certain securities of the
Company. See Item 5. MARKET INFORMATION AND OTHER SHAREHOLDERS MATTERS and Item
11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         Mr. Coleman has an arrangement with the Company to serve as its Chief
Financial Officer, under which he is entitled to an annual base salary of
(pound)100,000 ($160,000). The agreement provides for successive automatic
one-year terms unless terminated upon one year's prior notice in writing. In
addition, Mr. Coleman may receive such other benefits as shall be determined by
the Board of Directors. The arrangement also contemplates that Mr. Coleman will
receive warrants to purchase 100,000 shares of the Company's Common Stock in
each of 1996,


                                       25
<PAGE>



1997 and 1998, subject to cancellation of the warrants upon Mr. Coleman's 
resignation or termination of his employment by the Company for cause.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth, as of April 24, 1997, certain
information regarding the Common Stock, owned of record or beneficially by (i)
each person who owns beneficially more than 5% of the outstanding Common Stock;
(ii) each of the Registrant's directors and named executive officers; and (iii)
all directors and executive officers as a group. At April 24, 1997, there were
24,663,328 shares of the Company's common stock, $.001 par value per share (the
"Common Stock") issued and outstanding. See Item 5. MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS for a description of the Company's outstanding
securities.
<TABLE>
<CAPTION>

                                                  SHARES            PERCENT OF OUTSTANDING
         NAME OF BENEFICIAL OWNER           BENEFICIALLY OWNED           COMMON STOCK
         ------------------------           ------------------      ----------------------

<S>                                             <C>                           <C>  
Charles Koppel(1)(2)                            2,671,000                     10.6%

Stephen Kornfeld(3)                               740,000                      3.1%

Barry Llewellyn(4)                                660,000                      2.6%

Karl Hauptmann(5)                               2,241,320                      8.9%

James Leitner(6)                                2,066,140                      8.1%

Stanley Hollander(7)                               90,000                       *

Edgeport Nominees(8)                            1,433,550                      5.7%

Unimedia, S.A.(9)                               4,000,000                     16.2%

Groupe AB(10)                                   5,000,000                     18.9%

Kestrel, S.A. (11)                              2,064,262                      8.2%

Instar Holdings, Inc.(12)                       4,000,000                     14.0%

Directors and Executive Officers
as a group (8 persons)                          8,433,460                     33.4%
</TABLE>

-----------------------------------
*  Less than 1%.
(footnotes on next page)



                                       26
<PAGE>

----------------------------------
(footnotes from prior page)

(1)      A portion of Mr. Koppel's shares are owned of record by Clifton
         Securities Limited ("Clifton"), a corporation controlled by Mr. Koppel.
         Also includes warrants to purchase 640,000 shares of Common Stock at an
         exercise price of $3.125 per share.

(2)      Mr. Koppel controls the power to vote and dispose of all of the shares
         of Common Stock owned by Clifton. However, Mr. Koppel is the beneficial
         owner of only 1,287,500 of the 1,750,000 shares of Common Stock owned
         by Clifton, and of all of the 560,000 warrants owned by Clifton. The
         balance are held for the account of third parties, including Messrs.
         Leitner and Hauptmann.

(3)      Includes 400,000 Shares of Common Stock to be issued to Kornfeld
         Associates International, Inc. ("KAI") and options to purchase an
         additional 200,000 Shares of Common Stock at an exercise price of $2.50
         per Share. Of these shares, 100,000 shares and 100,000 warrants are
         being transferred to KAI by current shareholders of the Company. Also
         includes shares held in various trusts of which Mr. Kornfeld is the
         trustee.

(4)      A portion of Mr. Llewellyn's shares are owned of record by Spencer
         Services Limited ("Spencer"), a corporation controlled by Mr.
         Llewellyn. Also includes warrants to acquire 160,000 shares of Common
         Stock at an exercise price of $3.125 per share.

(5)      Owned of record by Telor International Limited ("Telor"), a corporation
         controlled by Mr. Hauptmann. Includes warrants to acquire (i) 200,000
         shares of Common Stock at an exercise price of $2.50 per share, (ii)
         133,320 shares of Common Stock at an exercise price of $3.125 per
         share, and (iii) 67,500 shares of Common Stock at an exercise price of
         $4.00 per share. Excludes 62,500 shares owned by Clifton for Mr.
         Hauptmann's benefit and 400,000 shares issuable to Mr. Hauptmann upon
         the conversion of his portion of the Instar loan. See footnotes 2 and
         12.

(6)      A portion of Mr. Leitner's securities are owned of record by Bandesco
         Falcon, a corporation controlled by Mr. Leitner. Includes warrants to
         purchase (i) 400,000 shares of Common Stock at an exercise price of
         $2.50 per share, (ii) 266,640 shares of Common Stock at an exercise
         price of $3.125 per share, and (iii) 133,333 shares of Common Stock at
         an exercise price of $4.00 per share. Excludes 50,000 shares owned by
         Clifton for Mr. Leitner's benefit and 1,000,000 shares issuable to Mr.
         Leitner upon the conversion of his portion of the Instar loan. See
         footnotes 2 and 12.

(7)      Includes warrants to purchase (i) 15,000 shares at an exercise price of
         $4.00 per share, and (ii) 15,000 shares at an exercise price of $2.50
         per share. Does not include shares of Common Stock and warrants owned
         of record by ICG. Mr. Hollander disclaims beneficial ownership of such
         securities.

(8)      Edgeport Nominees holds these securities for the benefit of customers
         of Townsley & Co. Includes warrants to purchase 86,665 shares of common
         stock at an exercise price of $3.125 per share. Barry Townsley, the
         principal of Townsley & Co. and a former director of the Company, also
         owns an additional 105,000 shares of the Company's common stock,
         warrants to purchase 52,500 shares of the Company's Common stock at an
         exercise price of $4.00 per share and the right to receive 600,000
         shares upon the conversion of his portion of the Instar loan (see
         footnote 12 below), which are excluded.

(9)      Unimedia, S.A. purchased these shares with funds borrowed from
         Universal Independent Holdings Limited ("Universal"). Universal has
         guaranteed the Company's transponder lease (see Item 6. MANAGEMENT'S
         DISCUSSION AND ANALYSIS OR PLAN OF OPERATION and Note 11 of Notes to
         Consolidated Financial Statements). See Item 1. DESCRIPTION OF BUSINESS
         -- PROPOSED ACQUISITION OF UNIMEDIA for information regarding the
         Company's proposed acquisition of Unimedia.

(10)     Includes warrants to purchase 1,800,000 shares of Common Stock at an
         exercise price of $4.00 per share. Messrs. Klein and Sillam disclaim
         beneficial ownership over the shares and warrants owned by Groupe AB.

(11)     Kestrel, S.A., a Switzerland based investment firm, has advised the
         Company that it holds these shares of the Common Stock and warrants to
         purchase additional shares of Common Stock for the benefit of multiple
         owners. Clients of Kestrel also control Universal, which has arranged
         for the transponder guarantee and loaned funds to Unimedia, S.A. which
         were used by Unimedia to acquire its interest in the Company. See
         footnote 9 above. Kestrel has advised the Company that it holds these
         securities in non-discretionary accounts and that it does not have the
         power to vote or dispose of the shares of Common Stock held by it.
                                       27
<PAGE>

         Kestrel has also advised the Company that no affiliate of the Company
         has an interest in these securities and that none of the beneficial
         owners of these securities has a five percent or more direct or
         indirect beneficial interest in the Common Stock. Includes warrants to
         purchase (1) 200,000 shares of Common Stock at an exercise price of
         $2.50 per share, (ii) 133,320 shares of Common Stock at an exercise
         price of $3.125 per share, and (iii) 67,500 shares of Common Stock at
         an exercise price of $4.00 per share.

(12)     Shares of Common Stock issuable to Instar if it converts, at its
         option, the Instar loan into shares of Common Stock at a conversion
         rate of $.50 per share. A portion of the shares of Common Stock
         issuable to Instar if it were to convert its loan into shares of Common
         Stock would be issuable to Messrs, Hauptmann, Leitner and Townsley.
         Instar has advised the Company that other than Messrs. Hauptmann,
         Leitner and Townsley, no affiliate of the Company is part of the Instar
         lending group. Instar has also advised the Company that it holds the
         Instar loan for the benefit of multiple owners and that it does not
         have the power to vote or dispose of the shares which it holds. Instar
         has also advised the Company that none of the other holders of a
         portion of the Instar loan (other than Messrs. Leitner, Hauptmann and
         Townsely) would, upon conversion, hold more than a five percent
         interest in the Company's outstanding Common Stock. See Item 1.
         DESCRIPTION OF BUSINESS and Item 6. MANAGEMENT'S DISCUSSION AND
         ANALYSIS OR PLAN OF OPERATION - LIQUIDITY AND CAPITAL RESOURCES and
         footnotes 5, 6 and 8 above.

                                       28
<PAGE>



ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In October 1996, CM (UK) entered into the Bridge Loan to borrow US $2.0
million from Instar. Messrs. Hauptmann, Leitner and Townsley have an interest in
the Bridge Loan as part of the lending group. Messrs. Hauptmann and Leitner are
members of the Company's Board of Directors and Mr. Townsley resigned from the
Company's Board in January 1997. The Bridge Loan was originally due for
repayment on December 31, 1996. The Bridge Loan is guaranteed by the Company and
Onyx and is secured by a charge of substantially all of the Company's assets.
Interest is payable monthly on the Bridge Loan, at the rate of 2% above Lloyd
Bank's base rate.

         The terms of the Bridge Loan were amended in January 1997, to provide
that (i) the principal repayment date is now June 1, 1997, or if earlier, the
date on which the Company makes a private placement of its securities (other
than the private placement completed in March 1997) in an amount equal to or
greater than the amount outstanding under the Bride Loan and (ii) the Bridge
Loan is convertible, at the option of each holder thereof, into fully paid
shares of Common Stock at a conversion rate of one share of Common Stock for
each US $.50 principal amount of the Bridge Loan.

         Karl Hauptmann, a director and shareholder of the Registrant, is a
principal of Telor International Limited ("Telor"). CM(UK) owns 51% of Tinerama
Investments AG and Telor owns 49% of Tinerama Investments AG. Mr. Hauptmann is
also a director of Tinerama Investments AG. Tinerama Investments AG beneficially
owns 51% of five Romanian corporations which compose Tinerama.

         Townsley & Co., a U.K. brokerage firm, participated in the Company's
winter 1995/96 private placement for which it received direct commissions of
$210,000, 86,665 shares of Common Stock and warrants to purchase 86,665 shares
and 218,750 shares, respectively, of Common Stock at an exercise price of $3.125
and $4.00, respectively. Barry Townsley, Managing Director of Townsley & Co.,
was a Director of the Company until January 1997.

         Stanley Hollander, a director of the Company, is Senior Vice President
and a director of ICG. The predecessor of ICG was the placement agent in
connection with the Company's winter 1995/96 private placement, for which it
received direct commissions and expense allowances of an aggregate of
$1,339,000, 346,663 shares of Common Stock and warrants to purchase 346,663 and
781,250 shares of Common Stock at an exercise price of $3.125 and $4.00,
respectively. Of these amounts, a portion of the commmissions and warrants were
paid to subdistributors who participated in the placement, including Townsley &
Co.



                                       29
<PAGE>



ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K

         (A)    EXHIBITS

         2.1.     Agreement and Plan of Reorganization, dated December 29, 1995,
                  by and among Cardinal Capital Corp. and the shareholders of
                  ECL (1).

         2.2      Agreement and Plan of Reorganization, entered into effective
                  as of March 4, 1997 by and among the Company, Unimedia S.A., a
                  company organized under the laws of the Republic of France and
                  certain shareholders of Unimedia, S.A. (incorporated by
                  reference from the Company's Current Report on Form 8-K, dated
                  March 14, 1997).

         3.1      Amendment to Articles of Incorporation (incorporated by
                  reference from the Company's Current Report on Form 8-K, dated
                  December 29, 1995).

         4.1      Form of warrant issued in connection with Registrant's private
                  placement of securities (1).

         10.1     Service Agreement dated September 27, 1995, between the
                  Registrant and Charles Koppel (1).

         10.2     Service Agreement dated September 27, 1995, between the
                  Registrant and Barry Llewellyn (1).

         10.3     Shareholders Agreement dated November 15, 1995, among Telor
                  International Limited, Europa Capital Management Limited,
                  Tinerama Investments A.G. and the Registrant (1).

         10.4     Transponder Lease between PTT Telecom BV and the Registrant
                  (1).

         10.5     Contract for On-Site Satellite Uplink Service between BT
                  Telecom (Deutschland) GmbH and the Registrant (1).

         10.6     Service Agreement between Onyx Television and Wagner &
                  Taunusfilm Television GmbH (1).

         10.7     Letter Agreement dated December 6, 1995 between Onyx
                  Television GmbH and Studio Dortmund (1).

         10.8     Facility letter dated October 31, 1996 made between Instar
                  Holdings, Inc. and Capital Media (UK) Limited (2).



                                       30
<PAGE>



         10.9     Debenture dated October 31, 1996 made between Instar Holdings,
                  Inc. and Capital Media (UK) Limited (2).

         10.10    Security Assignment dated October 31, 1996 made between
                  Capital Media (UK) Limited and Instar Holdings, Inc. (2).

         10.11    Charge Over Shares and Securities dated October 31, 1996 made
                  between Capital Media Group Limited and Instar Holdings, (2).

         10.12    Guarantee dated October 31, 1996 made between Instar Holdings,
                  Inc. and the Guarantors (2).

         10.13    Deed of Counter -Indemnity dated October 31, 1996 made between
                  Capital Media (UK) Limited and Universal Independent Holdings
                  Limited(2).

         10.14    Side letter to the Deed of Counter-Indemnity dated October 31,
                  1996 from Universal Independent Holdings Limited to Capital
                  Media (UK) Limited (2).

         10.15    Debenture dated October 31, 1996 made between Universal
                  Independent Holdings Limited and Capital Media (UK) Limited
                  (2).

         10.16    Security Assignment dated October 31, 1996 made between
                  Capital Media (UK) Limited and Universal Independent Holdings
                  Limited (2).

         10.17    Charge Over Shares and Securities dated October 31, 1996 made
                  between Capital Media Group Limited and Universal Independent
                  Holdings Limited (2).

         10.18    Guarantee dated October 31, 1996 made between Universal
                  Independent Holding Limited and the Guarantors (2).

         10.19    Deed of priorities dated October 31, 1996 made between Instar
                  Holdings, Inc. and Universal Independent Holdings Limited and
                  Capital Media (UK) Limited.

         10.20    Deed of priorities dated October 31, 1996 made between Instar
                  Holdings, Inc. and Universal Independent Holdings Limited and
                  Capital Media Group Limited (2).



                                       31
<PAGE>



         21.1     Subsidiaries.*

         27.1     Financial Data Schedule.*

-------------------------
*  filed herewith

(1)      Incorporated by reference to the Company's Annual Report on Form 10-KSB
         for the year ended December 31, 1995.

(2)      Incorporated by reference to the Company's Quarterly Report on Form
         10-QSB for the quarter ended September 30, 1996.


(B)      REPORTS ON FORM 8-K

         (i)      A Current Report on 8-K relating to the completion of a
                  private placement of the Company's securities was filed on
                  March 14, 1997.

         (ii)     A Current Report on 8-K relating to the Company's entering
                  into the Agreement and Plan of Reorganization with Unimedia
                  was filed on March 25, 1997.



                                       32
<PAGE>



                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant certifies that it caused this Annual Report
to be signed on its behalf by the undersigned, thereunto duly authorized, on the
1st day of May, 1997.

                              CAPITAL MEDIA GROUP LIMITED

                              By:/s/ CHARLES KOPPEL
                                 ------------------------------------
                                Charles Koppel, Co-Chairman, President and
                                Chief Executive Officer (Principal Executive
                                Officer)

       In accordance with the Exchange Act of 1934, this report has been signed
by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

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

<S>                                       <C>                                           <C> 
 /s/ Charles Koppel                        Co-Chairman, President and Chief             May 1, 1997
----------------------------------         Executive Officer (Principal                       --
Charles Koppel                             Executive Officer 

 /s/ STEPHEN KORNFELD                      Co-Chairman and Director                     May 1, 1997
----------------------------------                                                            --
Stephen Kornfeld

 /s/ STEPHEN COLEMAN                       Chief Financial Officer (Principal           May 1, 1997
----------------------------------         Financial Officer)                                 --
Stephen Coleman


 /s/ BARRY LLEWELLYN                       Director of Sales and Advertising            April 30, 1997
----------------------------------         and Director                                       --
Barry Llewellyn

 /s/ KARL HAUPTMANN                        Director                                     April 28, 1997
----------------------------------                                                            --
Karl Hauptmann



                                       33
<PAGE>


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


---------------------------------
James Leitner                                    Director                                     April   , 1997
                                                                                                    --

/s/ STANLEY HOLLANDER                            Director                                     April 28, 1997
----------------------------------                                                                  --
Stanley Hollander


                                                 Director                                     April   , 1997
-------------------------------------                                                               --
Marc Sillam

                                                 Director                                     April   , 1997
-------------------------------------
Jean-Francois Klein

</TABLE>


                                       34