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, 1997

         [x]      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                             (I.R.S. Employer 
   of incorporation or organization)                         Identification No.)

        2 RUE DU NOUVEAU BERCY
       94220, CHARENTON, FRANCE
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(Address of principal executive offices)                         (Zip Code)

                               011-33-1-43-53-6999
                           ---------------------------
                           (Issuer's telephone number)

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

                                            NAME OF EACH EXCHANGE ON WHICH
         TITLE OF EACH CLASS                          REGISTERED
         -------------------                ------------------------------

           Not Applicable                                None

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

                          Common Stock, $.001 par value

Check whether the Company (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 ___ NO X

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 Company's revenues for its most recent fiscal year: $2,429,275

Because the Company'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 Company cannot be determined with any
accuracy. As of August 31, 1998, there were 39,026,223 shares of the Company's
Common Stock issued and outstanding, of which 25,186,558 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



<PAGE>



                                     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
SUBSIDIARIES: (I) UNIMEDIA, S.A. ("UNIMEDIA"), AND UNIMEDIA'S SUBSIDIARIES,
PIXEL, LTD. ("PIXEL") AND TOPCARD, S.A. ("TOPCARD") AND (II) CAPITAL MEDIA (UK)
LIMITED ("CM(UK)") BLINK TV LIMITED ("BLINK"), AND CM(UK)'S SUBSIDIARIES, BLINK
TV LIMITED ("BLINK"), ONYX TELEVISION GMBH ("ONYX") AND TINERAMA INVESTMENT AG
("TIAG").

GENERAL

         The Company's primary business is the broadcasting operation of Onyx
Television GmbH ("Onyx" or "Onyx Television"), which operates an advertiser
supported music television station in Germany. Onyx Television commenced
broadcast operations in January 1996, and its broadcasting signal is currently
received in approximately 8.7 million cable homes and an indeterminate number of
satellite homes in Germany. In July 1998, the Company entered into a strategic
alliance with a subsidiary of Groupe AB, a large French television production
company, with respect to the operation and future development of Onyx
Television's business. Pursuant to the agreement between the Company and Groupe
AB, Groupe AB will provide Onyx Television with significantly all of Onyx
Television's future broadcasting requirements over the next two years and will
work closely with Onyx Television to further develop and expand Onyx
Televisions' programming in Germany. Groupe AB operates nineteen thematic
television stations which are distributed on various cable and satellite pay-TV
services in France, Switzerland and Belgium.

         The agreement with Groupe AB was entered into simultaneously with an
agreement between the Company and Superstar Ventures Limited ("Superstar").
These new agreements provide the Company with $11.64 million of funding, $5.4
million in the form of cash investments to be infused over a one year period and
$6.24 million through AB providing operating services to Onyx Television over a
two year period. The new funding will be initially in the form of debt, but will
be automatically converted into equity at the rate of $0.10 per share upon and
after approval of an increase in the Company's authorized capital at the next
shareholders' meeting, which the Company is obligated to hold no later than
November 30, 1998. See Item 6. "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION." In the event that shareholder approval of an increase in the
authorized common stock of the Company is not obtained, then the debt as
incurred at that date, together with interest and penalties, will become
immediately due for repayment. Once these obligations are converted into Common
Stock, Superstar and Groupe AB will control a majority of the Company's
outstanding common stock and will control the Company. See Item 12. "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS."


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         Since the Company's acquisition of Unimedia S.A. in July 1997 and the
assumption by Unimedia's executive management of the executive management of the
Company, the Company has taken decisive measures to reduce Onyx Television's
operating costs and to refocus the strategy of the group. The ownership,
development and operation of television stations and other new-media interests
require substantial capital investment. To date, the Company has financed its
capital requirements through sales of equity securities and debt financing and
the Company has experienced substantial working capital shortfalls over the last
18 months.

         The Company believes that the agreements with AB and Superstar provide
the funding required to develop Onyx Television's operations more positively in
the future and allow the Company to implement a far more cost effective
broadcasting operation than would otherwise be available. The Company also
believes that these agreements provide Onyx Television with a strategic partner
with substantial experience in both television production and broadcasting and
with a partner interested in pursuing joint projects with Onyx Television (such
as teleshopping).

         The Company also has interests in several other businesses: (i)
Tinerama, which operates a Romanian print media group and radio station, (ii)
Blink TV, which is a specialist TV programming company which provides lifestyle
programming on large video screens at concert events, (iii) Pixel, which
specializes in computer graphics and 3D animation for TV packaging, digital
broadcasting and special effects, (iv) TopCard, a software development business
which is engaged in the development of applications based upon smart card
technology (including remote security Internet access and infrared contactless
smart-card technology) and (iv) Unimedia, which intends to develop in the future
a software platform for Internet entertainment and gaming.

ONYX TELEVISION

         PROGRAMMING

         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 acquired from a variety of sources or, to a lesser extent,
produced internally. 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. 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). Onyx
also broadcasts infomercials on its television station.

         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.


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         TARGET MARKET AND DISTRIBUTION

         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 17.4 million cable subscribers as of June 30, 1998. The German
cable television market is substantially built-out. As of December 31, 1997,
cable television systems covered approximately 75% of the households in Germany.
Additionally, as of August 31, 1998, Germany had approximately 11.4 million
homes served by direct-to-home satellite-delivered television services and
satellite master antenna television systems.

         As of August 31, 1998, Onyx's broadcast signal was distributed to 8.7
million cable homes in Germany, compared to 6.0 million homes as of August 31,
1997. In addition, Onyx's signal is received by an indeterminate number of homes
in Germany which are covered by direct-to-home satellite 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 1996. During this same period, television advertising
revenue as a percentage of total advertising revenue has increased from
approximately 10% in 1984 to approximately 22% in 1996. 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 approximately 90%.

         The target market for Onyx's programming is persons in the 20 to 55
year old age group (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.

         ADVERTISING REVENUE

         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 as a result of a
particular commercial or as a result of an infomercial which is broadcast on the
Company's station. 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 Company believes that distribution, marketing and
audience qualifications, and an effective advertising sales force, are key to
achieving success in the advertising sales market.

         In August 1998, Onyx entered into an agreement with a large independent
media company in Germany to act as Onyx's exclusive sales agent in Germany.
Pursuant to the agreement, which is for a four year period, the sales agent will
be paid commissions based upon the revenues derived from


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the commercials broadcast on the station. The agreement also establishes sales
objectives to be met by the sales agent on an annual basis in order for the
agreement to continue on an exclusive basis.

         The demand by advertisers for advertising time on Onyx, and therefore
its operating results, are and will be affected in the future by general
economic conditions, the demographic characteristics of the audiences viewing
the Company's broadcasts, the activities of the Company's competitors, the
Company's ability to provide evidence to advertisers with regard to the size of
the Onyx Televisions' viewing audience, and other factors, as well as trends in
the advertising industry. To date, Onyx Television has not obtained a
substantial amount of advertising revenue from commercials and there can be no
assurance that Onyx Television will ever achieve sufficient levels of
advertising revenue to make the station profitable and cash flow positive.

         GOVERNMENTAL REGULATION

         The Company's ability to distribute Onyx Television through German
cable systems is dependent upon obtaining and thereafter maintaining the
approval of German Landes Medienanstalten (Local Media Authorities or "LMAs"),
each of which has authority to approve programming lineups for cable systems in
the 15 German regions known as "Bundeslanders" and each of whose members are
appointed by local government. Currently, Onyx Television's channel has been
granted the right or partial right to distribute programming through cable
networks located in 13 of the 15 Bundeslanders.

         Because the number of channels available to a cable system is currently
limited by analog technology to 30 to 35, the success of Onyx Television is
dependent in part upon maintaining its approval and good relations with each of
the LMAs who have previously agreed to allow broadcast of Onyx Television on
their cable system (both to maintain existing distribution and to seek
additional distribution on those cable systems), and on creating a relationship
with additional LMAs in order to obtain additional distribution of Onyx
Television's programming. Since decisions on distribution are made annually by
each LMA, there can be no assurance as to the distribution which the Company
might obtain in any year and from year to year.

         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 Television
may in the future seek to expand may expose Onyx Television to substantial
additional government regulation.

         The types of programming which Onyx Television may broadcast and the
costs associated with any such programming could also be impacted by political
initiatives which are being taken by the European Union to increase the amount
of European-produced programming which is being broadcast. In that regard, the
German National Convention of Broadcast, based upon a recent


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application of the European Union, is expected by the end of 1998 to endorse and
authorize an increase in the time allowed for third party services such as
teleshopping from one hour per day to three hours daily. The Company believes
that if such amendment is adopted by the various LMAs whose cable systems carry
Onyx Television's station, it will have a positive effect on Onyx Television's
revenues. There can be no assurance as to the ultimate outcome of these matters
and their effect on Onyx Television.

         Any change in the ownership of the Company or Onyx Television or the
addition of new shareholders who acquire a substantial interest in the Company
or Onyx Television must receive approval from the German media authorities
regarding the effect of the transaction on the ownership concentration in the
overall German television industry. The Company has made application to the
German media authorities in respect of the changes to its ownership and
operations resulting from the Company's recent agreements with Groupe AB and
Superstar and the Company expects to receive such approvals. However, the
failure of the German media authorities to approve such changes in ownership
would likely result in the suspension and/or revocation of Onyx Television's
broadcast licenses, which would have an adverse effect on the financial
condition of the Company.

         COMPETITION

         Among companies providing programming services via cable television in
Germany, there is intense competition for both viewers and for the right to
distribute programming over the various cable television networks throughout
Germany. A number of German cable television networks provide programming that
targets the Target Audience targeted by Onyx Television. The competition for
viewers includes 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 other music channels. Many of the Company's competitors have
significantly greater resources than the Company.

         Additionally, 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 could impact the
number of persons watching Onyx's programming.

         LONG TERM STRATEGY

         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) continue to develop
strategic alliances/relationships in order to seek to increase Onyx's ability to
penetrate existing markets and enter new markets, and (v) if possible, syndicate
Onyx's internally


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produced programming to third-parties. There can be no assurance that these
strategies will be successfully implemented.

         STRATEGIC ALLIANCES

         In July 1998, the Company entered into a two-year services agreement
(the "Services Agreement") with a subsidiary of Groupe AB, which agreement by
its terms became effective on October 1, 1998, pursuant to which Groupe AB has
agreed to provide certain technical services to the Company, including, among
other services: (i) use of a transponder aboard a satellite of the EUTELSAT
type, (ii) uplink facilities, (iii) all transmission services to the cable head
ends of each of the German cable television networks over which the Company's
programming is broadcast, and (iv) use of a master control room and other
transmission facilities required to operate Onyx Television. Additionally,
Groupe AB will fund the Company $60,000 per month so that the Company may pay
the costs of transmitting its broadcast signal over telephone lines to decoders
at the cable ends.

         In return for these services and this investment, Onyx will be
obligated to accrue $200,000 per month for the benefit of Groupe AB, which will
initially be debt, but will be automatically converted into Common Stock at a
conversion rate of $0.10 per share if the Company's stockholders approve an
amendment to the Company's articles of incorporation increasing the Company's
outstanding common stock, thereby allowing such shares to be converted into
shares of the Common Stock (and will be repayable in full, with penalty
interest, in the event that the Company's shareholders' do not approve such an
amendment).

         In that regard, effective October 1, 1998, Onyx Television's signal
began to be broadcast on ABSAT, which is a digital satellite transponder
controlled by Groupe AB, and Groupe AB commenced providing Onyx Television with
an uplink facility and with the other services contemplated by the Services
Agreement.

         Over the last year, the Company's executive management have taken
significant steps to reduce the costs associated with the operations of Onyx
Television and the strategic alliance between Onyx Television and Groupe AB is
expected to result in an annual saving of approximately $2.0 million in overhead
expenses annually from the level of operating expenses previously incurred by
Onyx. Including the anticipated cost savings associated with the services
agreement with Groupe AB, Onyx Television's annual operating costs will have
been reduced by approximately 60% from the level of such costs incurred during
1997. See Item 6. "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION"
and Item 12. "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."

         The Company has applied to the German regulatory authorities to move
its principal television station license from Rheinland Pfalz to North Rhine
Westphalia, in order to allow the Company to take advantage of the benefits
associated with the services agreement with Groupe AB. The Company is hopeful 
that it will obtain the required approvals, although there can be no assurance.
The Company also expects that the Company and Groupe AB will work together to
develop new programming opportunities for Onyx, including increased teleshopping
programming, with the goal of increasing the revenues being derived from the
operation of Onyx Television.


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         On March 27, 1998, the Company, CM (UK) and Onyx entered into an
agreement (the "Sharing Agreement") with QVC Deutschland GmbH ("QVC Germany"), a
subsidiary of QVC, Inc. Under the terms of the Sharing Agreement, Onyx and QVC
Germany agreed to seek approval from the applicable German media authorities for
permission for QVC Germany to share broadcast time equally with Onyx in respect
of 5.8 million of the homes receiving the Onyx cable television broadcast and
not already receiving the QVC program. For a more detailed description of the
terms of the Sharing Agreement, see the Company's Current Report on Form 8-K
which was filed with the U.S. Securities and Exchange Commission on May 15,
1998.

         At the present time, the Sharing Agreement has expired by its terms,
since the regulatory approvals required under the Sharing Agreement have not
been obtained. However the Company and QVC Germany are continuing to explore
potential ventures from which they can mutually benefit.

OTHER BUSINESSES

         TINERAMA INVESTMENT AG

         The Company owns a 51% interest in a holding company, Tinerama
Investment AG ("TIAG"), which, in turn, owns a 61% interest in four corporations
and a 49% interest, with an option to purchase an additional 12% 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 TIAG has voting control) (collectively, the "Tinerama
Companies") having media-related operations in Romania (collectively,
"Tinerama"). The remaining 39% 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, which is headquartered in Bucharest, Romania, owns (i) seven
newspapers and periodicals with a total monthly production of approximately 1.0
million; (ii) a distribution network comprising of vans and automobiles; (iii) a
printing facility; and (iv) a radio station which broadcasts to approximately
one-third of the country.

         Successive governments since the overthrow of dictatorship in Romania
have built a viable democracy, but have failed to bring the economic benefits of
the transition from communism which have been seen elsewhere in the eastern
bloc. Tinerama has recently undergone some level of reorganization in order to
stem the continuing losses from its operations. See Item 6. "MANAGEMENT'S 
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION." Further actions are being
considered and a review is to be undertaken as to whether the Company should
continue its involvement with Tinerama.

         BLINK TV

         Blink TV is a specialist TV programming vehicle which provides
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


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performances. Blink TV has installed video screens and projection equipment at
five major UK concert venues in order to offer programming at these venues.

         The Company owns a 50% joint venture interest in Blink TV. The balance
is owned by RCL Communications, which purchased its interest in Blink during
1998 from Mirror Group PLC.

         In connection with its business, 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 has 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 approximately 150 hours of tailor-made programming at approximately
300 concerts in the United Kingdom and the United States. Concerts at which
Blink TV's programming has been played have included Boyzone, Sting, Bryan
Adams, 3T, Kenny G, Status Quo, the Disney Christmas Show and the Spice Girls.
Advertising deals have been concluded with a variety of companies, including
Gillette, British Telecom, Volkswagen, Volvo, Duracell, Kodak and Lee Jeans.

         Notwithstanding, Blink TV has taken longer than was originally
anticipated to be accepted as a new advertising median and to become profitable.
Advertising agencies have been cautious in using Blink as an alternative to
classical advertising and some artists have been reluctant to use Blink as a
support act in their shows. Blink has been successful in completing several
concerts outside the United Kingdom, but United Kingdom returns have not been as
optimistic as hoped, and management is currently reviewing the sales and
co-ordination of events to improve results.

         UNIMEDIA

         On July 31, 1997, the Company acquired 50.3% of the outstanding common
stock of Unimedia in exchange for 4,333,000 shares of the Company's authorized
but unissued common stock. Shareholders of Unimedia who did not participate in
the first closing of the Unimedia share exchange (the "Unimedia Share Exchange")
had until September 5, 1997 to convert their Unimedia securities into shares of
Common Stock and on September 5, 1997, the Company acquired an additional 31.3%
of Unimedia's common stock in exchange for an additional 2,693,600 shares of the
Company's authorized but unissued Common Stock. Shares issued in the Unimedia
Share Exchange were valued at their then fair market value ($0.57 per share).

         Unimedia intends to pursue the development of a software platform for
Internet gaming and entertainment. To date, in furtherance of this objective,
Unimedia has engaged the services of a consultant, SCP Valfab, which provides
the services of Jacque Dubost, a consultant to the casino industry and the
former manager of two famous casinos in Cannes, France and in Monte Carlo. Such


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business is extremely competitive and no assurance can be given that Unimedia
will be successful in entering this business.

         PIXEL, LTD.

         On February 12, 1998, the Company, Unimedia, and Pixel Multimedia Ltd.
("PMM") consummated the transactions contemplated by an agreement executed on
that date and effective as of January 1, 1998. PMM previously owed Unimedia
$2,700,000 for loans made to PMM and for other expenses. As part of the
transaction, Unimedia purchased the outstanding stock of Pixel Ltd., an Israeli
company ("Pixel") from PMM. Pixel specializes in computer graphic and 3D
animation for TV packaging, digital broadcasting and special effects. Pixel also
owns a 47.5% interest in Henry Communication Ltd., a service company operated in
a joint venture with Video Broadcast SB Ltd., an Israeli broadcasting company.
Pixel has, in addition, a contractual relationship with Israel Cable Programming
Company Ltd., providing TV packaging and animation programming for the cable
operators in Israel, utilizing Pixel's digital editing systems and located in
Israel Cable Programming's studio facilities. As part of the transaction, Pixel
also purchased certain software previously developed for Unimedia by PMM for use
in connection with the development of the Company's and Unimedia's proposed
entertainment and gaming software platform.

         The purchase price paid to acquire Pixel consisted of: (i) forgiveness
of $1.7 million of the debt owed by PMM to Unimedia and (ii) the assumption by
Pixel (guaranteed by Unimedia and the Company) of certain PMM debt not exceeding
$750,000 due to a financial institution. Additionally, PMM may receive up to
600,000 shares of the Company's Common Stock owned by Unimedia if certain
performance objectives are achieved by Pixel. These shares have been pledged by
Unimedia to the financial institution to secure Pixel's debt to the financial
institution. Finally, the remaining $1,000,000 owed by PMM to Unimedia will be
forgiven in the event that certain future performance objectives are achieved by
Pixel. Rami Weitz, the President of Pixel, continues to work with Pixel and
Unimedia on a consulting basis.

         TOPCARD, S.A.

         On November 1, 1997, Unimedia acquired an 80% interest in TopCard, a
French company engaged in the design and manufacture of infra-red contactless
smart card technology. Unimedia had previously owned 10% of the outstanding
stock of TopCard and, after this transaction, Unimedia owns 90% of the
outstanding stock of TopCard. The purchase price paid by Unimedia for the 80%
interest consisted of the transfer of 456,000 shares of the Company's Common
Stock owned by Unimedia to TopCard's shareholders and $150,000 in cash.

         TopCard is developing secure access smart card technology required for
processing online transactions. TopCard has agreements to export its smart card
technology and turnkey solutions to Russia and China for use in securing access
to mobile phone applications and prepaid Internet services, respectively, and is
presently in a pilot project with the European Union to develop a secure
decrementing value card system (an electronic purse).


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LONG TERM BUSINESS STRATEGY

         The Company's long term strategy is to become a leading provider in
Europe of digital interactive thematic multimedia entertainment programs and
on-line services through conventional mediums, such as television and cable, and
the Internet. The Company believes that over time, it will be able to maximize
its opportunities by cross fertilizing the conventional aspects of its media
business with its proposed new media development and activities by finding
applications for its programming in new arenas (such as the Internet). One
product, for example, might be the development of a web site where persons may
view music videos and programming shown on Onyx Television. The Company also
hopes in the future to develop new television programming formats in order to
become a company at the leading edge of the convergence between television and
PC Networks. The Company also intends to pursue a strategy of seeking to provide
Onyx Television's programming through expanding digital European television
networks and seeking to expand the Onyx Television and Blink TV concepts to
other countries.

PERSONNEL

         At June 30, 1998, the Company employed 76 persons, 22 of whom were
employed by Onyx Television, 24 of whom were employed by Tinerama, three of whom
were employed by Blink TV, 23 of whom are employed by Unimedia, Top Card and
Pixel, and four of whom were employed in administrative, financial and
managerial positions on behalf of the combined operation.


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ITEM 2.     PROPERTIES

         The Company's principal executive offices are located in France. At the
present time, the Company intends to organize a French subsidiary, CM
Development, which shall operate as an administrative services office for the
Company in France. CM Development will share office space with Unimedia, which
leases office space in Charenton, France. Prior to May 1998, the Company's
principal executive office was located in leased office space in London,
England. Onyx Television leases administrative offices in Dortmund, Germany.
Tinerama owns a building and, in addition, leases administrative offices and
print works in Bucharest, Romania. Blink TV leases offices in London. TopCard
leases office space in Aix-en-Provence, France and Pixel leases offices in Tel
Aviv, Israel. For information regarding the Company's financial obligations
under its leases, see Note 7 to Notes to Consolidated Financial Statements.

ITEM 3.     LEGAL PROCEEDINGS

         CM (UK) was sued in 1995 by COM TV Production Und Vertrieb GmbH and Nen
TV Limited ("NEN"). This suit sought an interest in Onyx Television pursuant to
an alleged agreement among the parties. For information regarding this suit, see
the Company's Annual Report on Form 10-KSB for 1996 and the Company's Quarterly
Report on Form 10-QSB for the quarter ended September 30, 1997.

         In December 1997, the parties entered into an agreement to settle this
suit. As part of the settlement, Onyx agreed to pay the plaintiffs DM50,000.
Additionally, the settlement allows NEN the right to introduce a client to Onyx
within one year of the settlement to use the broadcast downtime on the Onyx
Television station. In the event that a client is introduced, that client will
be required to pay Onyx a minimum monthly fee of DM40,000, plus a 22.5%
commission on all revenues earned by such client in connection with its
broadcasts on the channel to the extent that such revenue exceeds DM222,225. In
turn, NEN will receive 25% of all amounts paid to Onyx relating to such client,
up to a maximum of DM1,500,000. To date, no client has been introduced to Onyx
by NEN.

         In June 1997, a former managing director of Onyx Television whose
employment was terminated brought suit in Germany for alleged wrongful early
termination of his employment. The suit sought damages of DM750,000. Onyx
maintained that the action which it took with respect to this employee was
lawful and in July 1998, the court ruled in favor of the Onyx Television. The
plaintiff has the right to appeal and Onyx Television believes that it has valid
defenses to this claim. However, there can be no assurance as to the outcome of
this matter.

         In May 1998, TV Strategies, a Dallas based television services company,
obtained a default judgment against Onyx Television for DM300,000, plus
interest, relating to services which Television Concepts alleges that they
provided to Onyx. Onyx intends to seek to have the default judgment set aside in
Texas, and believes that it has the grounds to obtain relief from the default
judgment. Onyx


                                       12
<PAGE>



Television also believes that it has meritorious defenses to the suit. There can
be no assurance as to the outcome of this matter.

         In July 1998, the Company was sued in the U.S. District Court for the
District of Nevada by Fontal Limited ("Fontal") for breach of a promissory note.
Pursuant to the note, the Company owes Fontal $200,000, plus accrued but unpaid
interest. The Company had pledged the rights to international trademarks for the
Onyx name and branding outside of Germany to Fontal to secure repayment of this
note.

         The Company has filed a motion to dismiss this suit for FORUM NON
CONVENIENS, believing that the proper forum for this suit is England. The
Company also believes that it has meritorious defenses to this suit and intends
to vigorously defend same. No assurance can be given as to the ultimate outcome
of this matter.

         Unimedia has three minority shareholders (one of whom is the
shareholder who controls Fontal) who have previously advised Unimedia that they
do not believe that the reorganization of Unimedia with the Company was in the
best interest of Unimedia and its stockholders. These stockholders have brought
numerous legal actions against Unimedia and/or its management (which is also
now, in part, the senior executive management of the Company) contending that
the past and future activities of Unimedia are not in the best interest of
Unimedia's shareholders and were not being engaged in for the benefit of
Unimedia and its stockholders. To date, such suits have not been successful. In
addition, the French Courts have to date rejected all requests to appoint
experts in judgment to review Unimedia's management's actions.

         The Company, which owns 81.6% of Unimedia, intends to operate and
continue the future development of Unimedia's business in the best interest of
Unimedia's stockholders, including the Company. Additionally, the Company
believes that the Internet business which Unimedia had previously contemplated
developing, cannot be developed without funding provided by the Company and
without other resources provided by the Company. To the extent that such
minority holders disagree with the business decisions made by Unimedia in the
future, including the use by Unimedia of funds available to Unimedia which might
be used in joint projects between the Company and Unimedia, they may bring legal
actions against Unimedia and/or its management for breach of fiduciary duties or
based upon other legal theories. Such actions, if brought, may have an adverse
impact on the Company and Unimedia. Further, any such litigation would be time
consuming and costly to Unimedia (and thereby to the Company, based upon its
ownership of an 81.6% interest in Unimedia), even if such litigation were
decided in favor of Unimedia and/or its management.

         Charles Koppel, the former chairman and CEO of the Company, had a
service agreement with the Company under which he was entitled to an annual base
salary of (pound)100,000 ($160,000). The agreement provided for successive
automatic one-year terms unless terminated upon one year's prior notice in
writing. Mr. Koppel resigned his positions with the Company on August 6, 1997.
Mr. Koppel has advised the Company that he believes that the Board's selection
of a new President and


                                       13
<PAGE>



CEO of the Company in August 1997, constituted a constructive dismissal of Mr.
Koppel under his service agreement.

         On March 12, 1998, the Company resolved its dispute with Mr. Koppel in
regard to his claim for wrongful dismissal. Pursuant to the settlement, the
Company agreed to pay Mr. Koppel (pound)60,000 over an agreed period of time to
resolve outstanding claims under his service agreement with the Company.

         In August 1998, Onyx Television sued Mr. Koppel in Germany. The suit
alleges that certain of Mr. Koppel's actions as the managing director of Onyx
Television were improperly performed and that certain of his other actions were
taken for his own direct or indirect benefit and not for the benefit of Onyx
Television. The suit seeks damages in an unspecified amount. The Company intends
to vigorously pursue this action against Mr. Koppel.

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 1997 or the first three quarters of 1998.


                                       14
<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 was quoted on the NASDAQ Small Cap Market
under the symbol "CPMG" from July 1996 until June 8, 1998, when the Company's
Common Stock was delisted from the NASDAQ Small Cap Market. Since that date, the
Company's Common Stock has been quoted 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 Company intends to seek to have its Common Stock quoted in the
Bulletin Board maintained by the NASD once the Company has brought its filings
with the U.S. Securities and Exchange Commission up to date.

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

<TABLE>
<CAPTION>
                                                                 HIGH               LOW
                                                                 ----               ---
<S>                                                           <C>                 <C>    
         1996                                                    $                  $
         ----
         Third Quarter (commencing July 25, 1996)               6 1/4             3 1/4
         Fourth Quarter                                         3 1/4             2 3/4

         1997
         ----
         First Quarter                                          3 3/4             1 5/8
         Second Quarter 1997                                  1 15/16             1 1/8
         Third Quarter                                          1 5/8              9/16
         Fourth Quarter                                        1 1/32               1/4

         1998
         ----
         First Quarter                                          21/32              5/16
         Second Quarter                                           5/8              5/16
</TABLE>

         At December 31, 1997, the Company had approximately 325 stockholders of
record. Additionally, the Company had at that date an indeterminable number of
stockholders who owned their shares in street name through brokerage firms.

         Since the Common Stock is no longer to be quoted on the NASDAQ SmallCap
Market, the Company's Common Stock has become subject to certain regulations of
the Securities and Exchange Commission which impose sales practice requirements
on broker-dealers because the Common Stock


                                       15
<PAGE>



of the Company has a market price of less than $5.00 per share. For example, in
such situation, broker-dealers selling the securities, are required, prior to
effecting any transaction, to provide their customers with a document which
discloses the risks of investing in the Company's Common 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 matters 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 Company's
securities. The additional burdens imposed upon broker-dealers by such
requirements could, in the event the Common Stock were deemed to be a penny
stock, discourage broker-dealers from effecting transactions in the Common Stock
which could severely limit the market liquidity of the Common Stock.

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 intends in the near future to: (i) call a meeting of its
stockholders to seek approval of an increase in its authorized Common Stock to
permit the conversion of all of the Company's outstanding convertible debt, and
to provide the Company with sufficient authorized common stock to allow the
Company to sell additional shares to raise funds for corporate purposes in the
future, and (ii) file a registration statement to register for resale the shares
of common stock which have been sold by the Company during the last two years
and the shares underlying the Company's outstanding options, warrants and
convertible debt.

         The Company has agreed to offer to one of its warrant holders the right
to subscribe to purchase 1,566,156 shares on the basis of two shares for each of
the warrants which they hold, at an exercise of $.30 per share, effective upon
the Company's shareholders approving an increase in the Company's authorized
common stock. Additionally, subject to the compliance with applicable U.S.
securities laws and the approval of an increase in the Company's authorized
common stock to allow for such action, the Company intends in the future to
offer its other warrant holders the right to exercise their warrants and receive
two shares of common stock at an exercise price of $0.30 per share.


                                       16
<PAGE>



         Additionally, the Company may in the future consider taking the
following corporate actions: (i) to reverse split the Common Stock, and/or (ii)
to redomesticate the Company in a non-U.S. jurisdiction (since the Company has
no operations in the United States).  To date, no actions with respect to these
matters have been taken.


                                       17
<PAGE>



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

         THE FINANCIAL INFORMATION INCLUDED HEREIN SHOULD BE READ IN CONJUNCTION
WITH THE FINANCIAL STATEMENTS CONTAINED ELSEWHERE IN THIS FORM 10-KSB, INCLUDING
THE NOTES THERETO. THIS FORM 10-KSB CONTAINS FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT, AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WHICH ARE INTENDED TO BE COVERED BY
THE SAFE HARBORS CREATED THEREBY. ALL STATEMENTS, OTHER THAN STATEMENTS OF
HISTORICAL FACT, INCLUDED IN THIS FORM 10-KSB THAT ADDRESS ACTIVITIES, EVENTS OR
DEVELOPMENTS THAT THE COMPANY EXPECTS, BELIEVES OR ANTICIPATES WILL OR MAY OCCUR
IN THE FUTURE ARE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED THAT ALL
FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTY, INCLUDING, WITHOUT
LIMITATION, THE ABILITY OF THE COMPANY TO MAINTAIN OR INCREASE ITS DISTRIBUTION
OF ONYX TELEVISION ON GERMAN CABLE SYSTEMS, THE ABILITY TO INCREASE ONYX
TELEVISION'S ADVERTISING REVENUES, CHANGES IN COSTS OF PROGRAMMING, THE ABILITY
OF THE COMPANY TO DISTRIBUTE ONYX TELEVISION IN MARKETS OTHER THAN GERMANY, THE
ABILITY OF THE COMPANY TO DEVELOP THE SOFTWARE AND INTERNET TECHNOLOGIES HELD BY
UNIMEDIA OR PROPOSED TO BE DEVELOPED BY UNIMEDIA, AS WELL AS GENERAL MARKET
CONDITIONS AND COMPETITION. FUTURE EVENTS AND ACTUAL RESULTS, FINANCIAL AND
OTHERWISE, COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN OR CONTEMPLATED BY
THE FORWARD-LOOKING STATEMENTS HEREIN. ALTHOUGH THE COMPANY BELIEVES THAT THE
ASSUMPTIONS UNDERLYING THE FORWARD-LOOKING STATEMENTS HEREIN ARE REASONABLE, ANY
OF THE ASSUMPTIONS COULD BE INACCURATE AND, THEREFORE, THERE CAN BE NO ASSURANCE
THAT THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-KSB WILL PROVE TO
BE ACCURATE. IN LIGHT OF THE SIGNIFICANT UNCERTAINTIES INHERENT IN THE
FORWARD-LOOKING STATEMENTS INCLUDED HEREIN, INCLUSION OF SUCH INFORMATION SHOULD
NOT BE REGARDED AS A REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON THAT THE
OBJECTIVES AND PLANS OF THE COMPANY WILL BE ACHIEVED.

SUMMARY FINANCIAL DATA

         THE SUMMARY FINANCIAL DATA SET FORTH BELOW IS DERIVED FROM AND SHOULD
BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS, INCLUDING THE NOTES
THERETO.

<TABLE>
<CAPTION>
                                                 FISCAL YEAR ENDED              FISCAL YEAR ENDED
                                                 DECEMBER 31, 1996              DECEMBER 31, 1997
                                                 -----------------              -----------------
<S>                                                 <C>                         <C>          
STATEMENT OF INCOME DATA:

Operating revenues......................            $   2,075,407               $   2,429,275
Operating costs, including exceptional
   charges (1997-$4,202,737; 1996-
   $497,690)............................              (18,352,988)                (20,865,264)
Operating loss..........................              (16,277,581)                (18,435,989)
Loss before income tax provision........              (16,313,514)                (18,976,917)
Income tax provision....................                   (6,623)                      1,390
Net loss................................              (16,262,104)                (18,871,065)
Net loss per share......................                   ($1.32)                     ($0.67)
Weighted average shares outstanding.....               12,359,029                  27,966,383
</TABLE>



                                       18
<PAGE>

<TABLE>
<CAPTION>
BALANCE SHEET DATA:                                    DECEMBER 31, 1997
                                                    ---------------------
<S>                                                     <C>           
Working Capital(Deficit)...................             $  (9,514,501)
Current Assets.............................                 2,417,272
Investments................................                 2,014,917
Intangible Assets..........................                 3,452,976
Total Assets...............................                 8,905,983
Total Liabilities..........................                11,931,773
Minority Interests in Subsidiaries.........                   901,980
Stockholder's Equity.......................                (3,927,770)
</TABLE>


RESULTS OF OPERATIONS (1997 VS. 1996)

         The financial results include the consolidated accounts of the Company,
its wholly owned subsidiary CM(UK) and CM(UK)'s wholly owned subsidiary, Onyx
and CM(UK)'s 51% owned subsidiary, TIAG, and the Company's 81.6% owned
subsidiary Unimedia, and Unimedia's 90% owned subsidiary TopCard SA ("TopCard").
The Company's 50% joint venture investment interest in Blink TV Limited
("Blink") has been accounted for using the equity method. The results of
Unimedia and TopCard have been consolidated from September 1997 and November
1997, which are the respective dates of their acquisition. Pixel Ltd., which was
effectively acquired as of January 1, 1998, has not been consolidated into the
Company's Fiscal 1997 results.

         For the fiscal year ended December 31, 1997 ("Fiscal 1997"), the
Company reported a net loss of $18.87 million, compared to a net loss of $16.26
million for the fiscal year ended December 31, 1996 ("Fiscal 1996"). The net
loss for Fiscal 1997 includes exceptional charges of $4.2 million, as follows:
(1) a $1.69 million charge to write off additional goodwill and asset
amortization, and (ii) a $2.51 million non-cash currency exchange translation
charge (Fiscal 1996-$0.5 million) arising from changes in currency exchange
rates at December 31, 1997 compared to exchange rates at December 31, 1996.
Without these write-offs and non-cash charges, the net loss for Fiscal 1997
would have been $14.67 million.

         The net loss per share for Fiscal 1997 was $0.67, compared to a net
loss per share of $1.32 for Fiscal 1996. Weighted average shares outstanding
were 27,966,383 for Fiscal 1997 compared to 12,359,029 for Fiscal 1996. The
increase in the number of shares outstanding is primarily due to the Company's
private placements completed in March 1997 (12,000,000 shares) and June 1997
(7,017,543 shares), and the Company's acquisition of an 81.6% interest in
Unimedia in August 1997 (7,026,600 shares).

         Operating revenues in fiscal 1997 totaled $2.43 million, a net increase
of $0.35 million compared to revenues of $2.08 million in Fiscal 1996. While
sales at Tinerama decreased 37%, from $1.80 million in Fiscal 1996 to $1.14
million in Fiscal 1997, Onyx's advertising revenue increased to


                                       19
<PAGE>



$.65 million in Fiscal 1997 from $0.28 million in Fiscal 1996. There were also
first-time revenue contributions during Fiscal 1997 from Unimedia (from
September 1997) and TopCard (from November 1997) of $0.63 million and $0.19
million, respectively.

         Operating costs, including staff costs, depreciation and exceptional
items, totaled $20.87 million in Fiscal 1997, compared to $18.35 million in
Fiscal 1996. Costs of Onyx Television's operations decreased from $14.42 million
in Fiscal 1996 to $11.54 million in Fiscal 1997. Operating expenses of Onyx
include programming costs, broadcast studio expenses and transmission expenses.
There were also first-time operating costs included for Unimedia and TopCard of
$0.61 million and $0.17 million, respectively.

         Depreciation and amortization for Fiscal 1997 was $0.75 million,
compared to $0.52 million for Fiscal 1996. Operating expenses-exceptional
trading expenses of $4.2 million for Fiscal 1997 included: (i) additional
charges aggregating $1.69 million relating to: (A) the write down of goodwill
and assets based upon the Company's current evaluation of the valuation of
Tinerama, and (B) the write down of goodwill based upon the Company's current
evaluation of the valuation of Unimedia and TopCard; and (ii) the $2.51 million
non-cash currency translation charge described above.

         While advertising revenue at Onyx increased in Fiscal 1997, such
increase was substantially lower than was anticipated and reflects the fact that
Onyx has taken longer to establish its product in the German advertising market.
At the present time, Onyx's television station's signal reaches approximately
8.7 million cable homes and an indeterminate number of satellite homes in
Germany, an increase of 58% compared to approximately 5.5 million cable homes at
the end of 1996.

         During Fiscal 1997, each of the Tinerama companies continued to
generate losses. The combined loss of the Tinerama companies for Fiscal 1997
totaled $176,000 compared to a loss of $143,000 for Fiscal 1996.

         The Company's net loss for Fiscal 1997 included net profit
contributions from both Unimedia and TopCard of $0.39 million and $12,000,
respectively, which were consolidated with the Company's results from the dates
of their respective acquisitions.

         For the twelve months ended December 31, 1997, Unimedia, TopCard and
Pixel had operating revenues of $0.93 million, $0.96 million and $1.99 million,
respectively, and net profit of $0.73 million, $0.08 million and $0.38 million,
respectively. Part of Unimedia's operating revenue and non-operating profit were
non-recurring items relating to a change of investment strategy pursuant to
which Unimedia has determined not to take minority positions in its future
investments and to sell off the minority positions which it currently holds.
Full-year contributions from each of these companies will be consolidated for
Fiscal 1998.


                                       20
<PAGE>



FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

         The ownership, development and operation of media interests, and
particularly the operation of a television station, 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, 1997, the Company has incurred an accumulated deficit of
approximately $37.96 million, principally related to the Company's launch and
operation of Onyx Television. At December 31, 1997, the Company had a negative
working capital of approximately $9.5 million.

         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 US $2.0 million ("Convertible Debt" or the "Instar Loan")
from Instar Holdings, Inc. ("Instar") to fund the Company's working capital
requirements (principally related to the continuing operation of Onyx
Television). The Convertible Debt 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 Convertible Debt, at the rate of 2% above Lloyds Bank
base rate until December 31, 1997 and 13% per annum thereafter. The Instar Loan
has recently been renegotiated. For information regarding the historical terms
of the Instar Loan, see the Company's Annual Report on Form 10-KSB for 1996 and
the Company's Quarterly Report on Form 10-QSB for the quarter ended September
30, 1997.

         In July 1998, Instar entered into a letter agreement with the Company
reflecting the new terms of this loan, which letter agreement is currently being
more formally documented in the form of amended Instar Loan documents. In the
letter agreement, Instar agreed to a repayment schedule whereby the Company will
repay this loan at the rate of $50,000 per month commencing when the new
agreement is signed, for six months and $200,000 per month thereafter until paid
in full. The letter agreement also provides for certain prepayments to the
extent that the Company raises funds above the amounts already raised as
discussed in this Form 10-KSB. Under the terms of the new agreement, the Instar
Note will no longer be convertible, but would become convertible at Instar's
option in the future in the event that Instar agrees to convert any of the
outstanding debt at such price as the Company may agree to sell additional
shares of its common stock to a third party.

         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 7 of 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


                                       21
<PAGE>



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.

         On March 3, 1997, the Company closed a second private placement in
which the Company raised net proceeds of $5.85 million. The funds from this
placement were 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 Common Stock in this private placement ($0.50 per share), including 4
million shares of Common Stock subscribed by Unimedia.

         On June 25, 1997, the Company accepted a subscription for $4.0 million
from Unimedia, on behalf of certain investors. In the subscription, the Company
agreed to issue an aggregate of 7,017,543 shares of Common Stock at a purchase
price of $0.57 per share. On June 30, 1997, $1,500,000 of the proceeds of the
subscription was received by the Company and the balance of $2,500,000 was
released to the Company from escrow on July 31, 1997 at the closing of the
Unimedia Acquisition. In connection with the private placement, the Company paid
Unimedia a fee of $240,000, which was netted against the purchase price of the
Shares. Unimedia, in turn, paid a fee to Valfab, S.A. for its services in
connection with introducing Unimedia to certain of the investors who purchased
the shares in the offering. The fee consisted of $192,000 in cash and 106,666
shares of the Common Stock acquired by Unimedia in this placement.

         On July 31, 1997, the Company acquired 50.3% of the outstanding common
stock of Unimedia in exchange for 4,333,000 shares of the Company's authorized
but unissued common stock. Shareholders of Unimedia who did not participate in
the first closing of the Unimedia share exchange (the "Unimedia Share Exchange")
had until September 5, 1997 to convert their Unimedia securities into shares of
Common Stock and on September 5, 1997, the Company acquired an additional 31.3%
of Unimedia's common stock in exchange for an additional 2,693,600 shares of the
Company's authorized but unissued Common Stock. Shares issued in the Unimedia
Share Exchange were valued at their then fair market value ($0.57 per share).

         At the closing of the Unimedia Share Exchange, Unimedia owned 5,564,913
shares of the Common Stock. Subsequent to the closing of the Share Exchange,
Unimedia has transferred 4,496,997 of these shares to investors in private 
transactions resulting in a net profit of $0.98 million in the year ended
December 31, 1997. At this date, Unimedia owns 1,067,916 shares of Common Stock.

         In September 1997, the Company borrowed $500,000 of short term working
capital in the form of a convertible debt from Unbeatable Investments Limited
("Unbeatable"). The debt was payable with interest of 10% per annum in April
1998 and was convertible into shares of Common Stock at the rate of $0.57 per
share. The Company's short term funding requirements were also met


                                       22
<PAGE>



during the fourth quarter of 1997 through private placements of an aggregate of
733,335 shares of the Company's authorized but unissued Common Stock (raising
$550,000 at $0.75 per share).

         On January 9, 1998, CM(UK) borrowed an aggregate of $1,250,000 from
Superstar Ventures Limited ("Superstar"). Such loan was evidenced by two 13%
Convertible Secured Promissory Notes in the original principal amounts of
$750,000 and $500,000, respectively (collectively, the "Notes"). Of the
aggregate proceeds, $500,000 was used to repay a loan previously made to CM(UK)
(see above) by Unbeatable. The Notes bear interest at the rate of 13% per annum
and are convertible into the Company's Common Stock on the basis of one share of
Common Stock for each $0.50 of outstanding principal and accrued interest on the
Notes, provided, however, that the Notes may not be converted until the Company
has held a shareholders meeting at which its Articles of Incorporation are
amended to increase the number of authorized shares of Common Stock of the
Company to at least the number required for conversion of the Company's Series A
Preferred Stock and the Notes. The Notes were due and payable on March 31, 1998
but, pursuant to the Notes and an agreement among the Company, CM(UK),
Superstar, Instar Holdings, Inc. ("Instar") and Universal Independent Holdings
Limited ("Universal"), payments on the Notes may only be made pari passu pro
rata as and when payments are made to Instar Holdings Inc. according to a stated
proportion. Instar and Universal are secured creditors of the Company and
CM(UK). To secure its obligations under the Note, CM(UK) granted to Superstar a
security interest on the same collateral upon which Instar has been granted a
security interest by CM(UK) and upon identical terms and conditions as are set
forth in the security documents entered into between Instar and CM(UK) pursuant
to the Facility Agreement dated October 31, 1996 between CM(UK) and Instar.
Instar has also granted to Superstar a right of first refusal to purchase the
Instar Loan for the full amount due before such loan is sold to a third party.
The Company also pledged its interest in 81.6% of Unimedia to Superstar to
further secure its obligations under this Note.

         Superstar and Unbeatable are parties controlled by David Ho, a Director
of the Company. Superstar received a fee of 200,000 shares of the Company's
Common Stock as a fee for arranging the original loan made by Unbeatable to the
Company and will receive a fee of 400,000 shares for arranging the January 1998
Superstar loan (which fee will be payable at such time as the Company has
authorized shares of Common Stock available to issue in order to pay this fee).
Additionally, Superstar has been granted a contingent option such that if such
loan is repaid (and not converted), Superstar shall have a one year option to
purchase up to 2.5 million shares of the Company's authorized and unissued
Common Stock at an exercise price of $.40 per share.

         On March 23, 1998, MMP, SA ("MMP"), a shareholder of the Company and a
subsidiary of Groupe AB, made available to the Company a line of credit (the
"MMP Line of Credit") pursuant to which the Company may borrow up to $2,000,000.
Outstanding amounts under the MMP Line of Credit bear interest at the rate of
13% per annum. The Company has fully borrowed the proceeds available from the
MMP Line of Credit.  Any outstanding principal amount and accrued interest is
payable not later than December 31, 1998, but becomes due and payable upon the
earlier of the consummation by the Company of any significant transaction or
when the Company's cash flow enables repayment. MMP may withdraw the MMP Line of
Credit at its sole discretion and without prior notice in the event that the
Company files for bankruptcy or is placed in bankruptcy by its creditors.


                                       23
<PAGE>



         As further consideration for granting the MMP Line of Credit, MMP was
granted the right, until March 31, 2000, to purchase shares of authorized but
unissued Common Stock of the Company at a price of $0.20 per share up to the
aggregate outstanding principal amount of and accrued interest on the line of
credit; provided, however, that the option may not be exercised until the
Company holds a shareholders meeting to authorize additional shares of
authorized but unissued Common Stock. Such purchase would not affect the
outstanding principal amount of and accrued interest on the MMP Line of Credit.

         On March 25, 1998, Superstar loaned the Company an additional $400,000,
payable on the same terms as the MMP Line of Credit. In connection with this new
loan, Superstar was granted an option to purchase shares of the Company's common
stock on the same terms as the option granted to MMP as described above.

         In the new agreements with Superstar and Groupe AB, Superstar has
agreed to make available $5.0 million and Groupe AB has agreed to provide cash
and services aggregating $6.64 million over a two year period. Such funding will
initially be in the form of debt, but will be automatically converted into
equity at the rate of $0.10 per share upon and after approval of an increase in
the Company's authorized common stock. If stockholder approval of the increase
in the authorized common stock is not obtained, then the debt incurred at that
date, together with interest and penalties, will be immediately due and payable.
Once these obligations are converted into Common Stock, Superstar and Groupe AB
will control a majority of the Company's outstanding common stock and will
control the Company. The Company believes that the Superstar and Groupe AB
agreements will fund the Company's capital requirements with respect to Onyx
Television for at least 12 months.

         In regard to its future capital raising efforts to fund the Company's
software and Internet related businesses, the Company is likely going to have to
fund these future capital requirements through additional sales of the Company's
equity securities. The Company may also seek funding for particular projects
through investments directly into those projects. The Company is also seeking
additional strategic alliances with respect to its other current and proposed
businesses and to reduce operating costs in all of its businesses whenever
possible. No definitive agreements have been entered into to date.

         The Company maintains its financial statements in dollars and holds the
majority of its funds in United States Dollars, Pound Sterling, German Deutsche
Marks and French Francs. 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, the Deutsche Mark and the Franc. 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 financial condition, results of operations and/or cash
flows. 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


                                       24
<PAGE>



Dollar, the Company cannot predict with any certainty the future effect, if any,
from period to period, of exchange rate fluctuations on its financial condition
or results of operations. However, such fluctuations have been materially
adverse in the past and may be materially adverse in the future.

         Although the Company is a Nevada corporation, its operations are
conducted outside of the United States through subsidiaries formed under the
laws of jurisdictions other than the United States. In addition, many of the
directors and officers of the Company are not residents of the United States. As
such, the Company, its shareholders and/or investors in the Common Stock, are
subject to the risks inherent in such an operational structure including,
without limitation, the following: (i) the Company's ability to receive
dividends or other distributions from its subsidiaries being subject to, among
other things, (a) restrictions on dividends under applicable local laws and
foreign currency exchange regulations of the jurisdictions in which its
subsidiaries operate and (b) board of directors or creditor approval; (ii) it
may be difficult, if not impossible, for investors to (a) enforce, outside the
United States, judgments against the Company obtained in the United States in
any civil actions, including actions predicated upon the civil liability
provisions of the United States federal securities laws and (b) effect service
of process within the United States upon directors and officers of the Company
who are non-residents of the United States or enforce against them judgments
obtained in the United States courts, including judgments predicated upon the
civil liability provisions of the United States federal securities laws; (iii)
changes in the political or economic climate in the countries in which the
Company does business; (iv) new or changed currency controls in foreign
jurisdictions that have or may in the future be implemented which may limit or
ban completely the Company's receipt of revenues from its foreign subsidiaries;
and (v) currency exchange risks (the Company does not currently hedge against
foreign currency exchange rate risks, and does not expect to do so in the
future). The Company is also exposed to the risk of changes in foreign and
domestic laws and policies that govern operations of overseas-based companies.

YEAR 2000 COMPLIANCE

         The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a
two-digit year is commonly referred to as the Year 2000 compliance issue. As the
year 2000 approaches, such systems may be unable to accurately process certain
date-based information.

         The Company believes that the software currently being used in its
operations is either year 2000 compliant or can be upgraded to bring it into
conformity with year 2000 requirements without a material cost to the Company.


                                       25
<PAGE>



ITEM 7.     FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                               PAGE
                                                                                               ----
<S>                                                                                               <C>
Years ended December 31, 1997 and 1996

         Independent Auditors' Report of Deloitte & Touche to the Board of
                  Directors and Shareholders of Capital Media Group Limited.....................F-2
         Independent Auditors' Report of Price Waterhouse Coopers to the
                  Board of Directors and Stockholders of Tinerama Investment AG.................F-3
         Consolidated Balance Sheet at December 31, 1997 and 1996...............................F-4
         Consolidated Statement of Operations For Years Ended December 31, 1997
                  and 1996......................................................................F-5
         Consolidated Statement of Stockholders' Equity For Years ended December 31,
                  1997 and 1996.................................................................F-6
         Consolidated Statement of Cash Flows For the Years Ended December 31, 1997
                  and 1996......................................................................F-7
         Notes to Consolidated Financial Statements.............................................F-8
</TABLE>

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

None


                                       26
<PAGE>


                                    PART III

ITEM 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; 
            COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

EXECUTIVE OFFICERS AND DIRECTORS

         The following persons presently serve as the directors and executive
officers of the Company:

<TABLE>
<CAPTION>
NAME                            Age     Position
----                            ---     --------
<S>                              <C>    <C>                                            
Gilles Assouline                 42     Chairman, President, Chief Executive Officer
Michel Assouline                 39     Director and Chief Operating Officer
David Ho                         50     Director
Jean-Pierre Souviron             60     Director
Stanley Hollander                60     Director
Jean-Francois Klein              33     Director
Stephen Kornfeld                 58     Director
Stephen Coleman                  51     Chief Financial Officer
</TABLE>

         Groupe AB has the right to designate two members to the Board of
Directors. Mr. Klein currently serves as Groupe AB's nominee to the Board.

CHANGES TO THE COMPANY'S MANAGEMENT

         The Company's Board consists of seven members. In August 1997, in
connection with the completion of the first closing of the share exchange with
Unimedia, Gilles Assouline, the Chief Executive Officer of Unimedia, Michel
Assouline, an executive officer of Unimedia, Jean-Pierre Souviron, a director of
Unimedia and David Ho were appointed to the Board. Shortly thereafter, three
persons who were on the Board at that date, Charles Koppel, Karl Hauptmann and
James Leitner, resigned from the Board. Additionally, two directors of the
Company, Marc Sillam and Barry Llewellyn, resigned from the Board in October
1997 and September 1998, respectively.

         At a Board meeting held on August 1, 1997, the newly constituted Board
of Directors elected Gilles Assouline as the Chairman, President and Chief
Executive Officer, and Michel Assouline as the Vice President and Chief
Operating Officer, of the Company.


                                       27
<PAGE>



BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS

         Gilles Assouline was, along with his brother, Michel Assouline, a
founder of Unimedia in July 1995. Prior thereto, for more than five years,
Gilles Assouline was managing director of several consulting, software and media
companies. See Item 12. "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."

         Michel Assouline together with his brother Gilles Assouline founded
Unimedia in July 1995. Prior thereto, for more than five years, Mr. M. Assouline
was employed by Thomson-CSF in various executive capacities, including having
responsibility for business development at the corporate level. Prior to joining
Thompson in 1990, Mr. M. Assouline was a management strategy consultant. See
Item 12. "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."

         David Ho is the founder of Caltex South China Investments Limited and
holds the position of Executive Vice Chairman of this petroleum firm, where he
has been employed for more than the last five years. Mr. Ho, through a private
venture capital fund, also has interests in other Asia Pacific companies with
extensive interests in manufacturing, leisure, construction, meat processing and
real estate. See Item 12. "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."

         Jean-Pierre Souviron has had an outstanding career both in French
industry and in various government positions. At various times, he held
positions as Technical Counsel to the Minister of Industry, Deputy Director for
the Minister of Foreign Affairs and Director of Industrial and International
Affairs at the Direction Generale des Telecommunications. He was, between 1978
and 1981, General Director of Industry for the French Ministry. Mr. Souviron has
previously held positions as Chairman of DB Morgan Grenfell France S.A. He is
presently the chairman and chief executive officer of a telephone company in
France that he founded. Mr. Souviron is also a member of the Board of Directors
of Cerus, Valeo and Olivetti, France.

         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. Mr. Hollander
serves as a director of Specialized Health Products, Inc. See Item 12. "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS."

         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. See Item 12. "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."

         Stephen Kornfeld is a director and was Co-Chairman of the Board of
Directors from September 20, 1996 to August 1, 1997. For the last five years,
Mr. Kornfeld has acted as an investor in and a consultant to several private
companies.


                                       28
<PAGE>



         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 is a Fellow of
the Association of Chartered Certified Accountants in the United Kingdom.

COMMITTEES OF THE BOARD

         The Board of Directors has established Committees to assist it in the
discharge of its responsibilities. These Committees, their principal
responsibilities, and the current members of each are described below. Prior to
August 1997, the Company did not have formal Audit, Compensation or Nominating
Committees. It was considered the continuing responsibility of the whole Board
to consider matters respecting the independent public accountants, to determine
employee benefits and to recommend nominees for the Board. On August 1, 1997,
the Board of Directors created an Audit Committee and Compensation Committee of
the Board. While the Compensation Committee has to date only met once, and the
Audit Committee has to date not met, the Board intends to organize and operate
these committees during future periods.

                  AUDIT COMMITTEE. The Audit Committee is comprised of Messrs.
Ho and Souviron. The Audit Committee recommends the firm to be appointed as
independent accountants to audit the Company's financial statements and to
perform services related to the audit, reviews the scope and results of the
audit with the independent accountants, reviews with management and the
independent accountants the Company's year-end operating results and considers
the adequacy of the Company's internal accounting procedures.

         COMPENSATION COMMITTEE. The Compensation Committee is comprised of
Messrs. Kornfeld, Ho and Souviron. The Compensation Committee reviews and
recommends the compensation arrangements for all directors and officers and
approves such arrangements for other senior level employees.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         To the Company's knowledge, no compensation committee interlocks
currently exist between the Company's management and its directors.

BOARD COMPENSATION

         Directors of the Company receive no compensation for their services as
a director. However, directors are reimbursed for travel expenses incurred in
attending meetings of the Board of Directors and its committees.


                                       29
<PAGE>



         On March 10, 1998, the Board of Directors granted certain options to
purchase an aggregate of 4,500,000 shares to purchase the Company's Common Stock
at an exercise price of $0.35 per share (the fair market value of the Common
Stock on the date of grant). Messrs. Gilles Assouline, Chairman and Chief
Executive Officer of the Company, Michel Assouline, Chief Operating Officer of
the Company, Stephen Coleman, Chief Financial Officer of the Company and Barry
Llewellyn, Vice President and a Director, of the Company, were each granted
options to purchase 1,000,000 shares of the Company's authorized but unissued
Common Stock. Of each 1,000,000 share option grant, options to purchase 200,000
shares vested immediately with the remaining options vesting in equal portions
over the next three years (in that regard, 800,000 of the options which were
issued to Mr. Llewellyn have lapsed due to his resignation from the Company in
September 1998).

         Additionally, on the same date, each non-employee director of the
Company was granted 100,000 options to purchase Common Stock of the Company at
an exercise price of $0.35 per share, for each year of service on the Board of
Directors of the Company, with each non-employee director receiving a minimum of
100,000 options. An aggregate of options to purchase 500,000 shares were granted
to non-employee directors of the Company. These options vested immediately.

         None of the options described in the two paragraphs above may be
exercised until the Company has held a shareholders meeting at which its
Articles of Incorporation are amended to increase the number of authorized
shares of Common Stock of the Company to at least the number required for the
issuance of shares upon exercise and/or conversion of the Company's other
derivative securities.

COMPLIANCE WITH SECTION 16(A)

         At the present time, the Company's directors and executive officers are
not in compliance with their reporting obligations under Section 16(a) of the
Securities Exchange Act of 1934 (the "Exchange Act"). The Company and its
directors and executive officers are currently working to bring the Company's
SEC filings into compliance with the Exchange Act and intend to make the
required filings under Section 16(a) in the near future.

OTHER KEY EMPLOYEES AND CONSULTANTS

         Ann-Marie Assouline, age 43, has served as an executive officer of
Unimedia since its formation. Mrs. Assouline is the wife of Gilles Assouline,
the Company's Chairman, President and Chief Executive Officer.

         Jacques Dubost, age 69, acts as consultant on behalf of his company,
Valfab S.C.B., for Unimedia, with respect to gaming and funding matters. Mr.
Dubost has over 40 years of experience in the gaming industry. Over that period,
Mr. Dubost owned and operated a hotel casino in Dieppe, France and managed
several other casinos, including the Monte-Carlo casino in Monaco and the Palm
Beach Casino in Cannes, France. Valfab S.C.B. has received certain commissions
for introducing the


                                       30
<PAGE>



Company to certain of its investors. See Item 6. "MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION."

ITEM 10.    EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

         The following table sets forth information about the compensation paid
or accrued during 1997 to the Company'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
                                               SALARY      BONUS    COMPENSATION(1)    OPTIONS    COMPENSATION
NAME                              YEAR           ($)        ($)           ($)            (#)           ($)
----                              ----           ---        ---           ---            ---           ---
 
<S>                               <C>           <C>          <C>           <C>        <C>           <C>  
Gilles Assouline                  1997          104,000      --            --         1,000,000        --

Michel Assouline                  1997           83,000      --            --         1,000,000        --

Stephen Coleman                   1997          160,000      --            --         1,000,000        --

Charles Koppel                    1997          110,000      --            --                --     100,000*
                                  1996          160,000      --            --                --        --

Barry Llewellyn                   1997          160,000      --            --         1,000,000        --
                                  1996          160,000      --            --                --        --
</TABLE>
----------
*Settlement of amount due under Services Agreement. See Item 3. "Legal
Proceedings, above.

EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS

         The Compensation Committee of the Board has recommended and the Board
of Directors has agreed that Gilles Assouline and Michel Assouline shall receive
a three-year employment agreement with the Company providing for them to receive
the following compensation for their services on the Company's behalf: (i)
annual base compensation of $250,000 and $200,000, respectively; (ii) such bonus
compensation as is determined by the Board in its discretion; (iii) a grant of
200,000 and 175,000 shares, respectively, of Common Stock; (iv) options to
purchase an additional 200,000 and 175,000 shares of Common Shares on the date
of grant; and (v) such benefits as are provided generally to the executive
management of the Company. The shares and options will vest 2/5 upon execution
of the agreement and 1/5 on each of the first, second and third anniversaries,
respectively, of the Agreement. The agreements are expected to provide that the
employees shall be paid one year's base compensation if they are terminated
without cause during the term of the Agreement. It is anticipated that the
agreements will be completed in the near future.


                                       31
<PAGE>



         Barry Llewellyn was a director of the Company from May 1995 until
September 1998, and was an executive officer of the Company from May 1995 until
June 1998. Mr. Llewellen had a service agreement with the Company under which he
was entitled to annual base salary of (pound)100,000 ($160,000). In connection
with his resignation as an executive officer of the Company, the Company and Mr.
Llewelyn entered into a settlement pursuant to which Mr. Llewellyn received a
payment of (pound)12,500 ($20,000) in full satisfaction of the Company's future
obligations under his service agreement and the service agreement was
canceled.

         Mr. Coleman has an arrangement with the Company to serve as its Chief
Financial Officer, under which he was entitled prior to January 1, 1998 to an
annual base salary of (pound)100,000 ($160,000) and under which he is entitled
to an annual base salary of (pound)125,000 ($200,000) after December 31, 1997.
The agreement provides for successive automatic one-year terms unless terminated
upon one year's prior notice in writing.

STOCK OPTIONS AND STOCK OPTION PLAN

         In March 1998, the Company granted certain stock options to its
executive officers. See Item 9. "DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT-BOARD
COMPENSATION" for information regarding the terms of such stock options.

         The Company intends to institute a stock option plan for its officers,
directors and key employees. The Plan will be administered by the Compensation
Committee of the Board.

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         As of August 31, 1998, the Company had issued 40,094,139 shares of its
Common Stock, 1,067,916 of which were owned by Unimedia. As such, at that date
there were 39,026,223 shares of Common Stock outstanding.

         Additionally, Superstar and Groupe AB will receive up to 50,000,000 and
66,400,000 additional shares, respectively, of Common Stock upon the automatic
conversion of their secured convertible debt, which cannot occur until the
Company's shareholders have voted to approve an increase in the Company's
authorized common stock, of which there can be no assurance. See Item 1.
"BUSINESS-GENERAL," Item 6. "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION-FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES" and Item 12.
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS." Assuming that the Company's
shareholders vote to increase the Company's authorized common stock and as a
result the above-described debt automatically converts into Common Stock,
Superstar and Groupe AB will collectively own approximately 80% of the
outstanding Common Stock. The Company is contractually obligated to hold a
stockholders' meeting to vote on an increase in the Company's authorized common
stock on or before November 30, 1998.


                                       32
<PAGE>



         The following table sets forth, as of August 31, 1998, the share
ownership of the Company's common stock (without the effect of the conversion of
any outstanding convertible debt, since such debt cannot be converted until the
Company's shareholders approve an increase in the Company's authorized common
stock), 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, is as
follows.

<TABLE>
<CAPTION>
                                                      SHARES                         PERCENT OF OUTSTANDING
   NAME OF BENEFICIAL OWNER                     BENEFICIALLY OWNED                        COMMON STOCK
   ------------------------                     ------------------                        ------------
<S>                                                  <C>                                       <C>  
Gilles Assouline(1)(2)(3)                            3,528,000                                  9.0%
Michel Assouline(1)(3)(4)                                    0                                   *
David Ho(5)(6)                                       4,585,965                                 11.8%
Charles Koppel(7)(8)                                 2,671,000                                  6.7%
Stephen Kornfeld(6)(9)                                 775,000                                  2.0%
Karl Hauptmann(10)                                   2,241,320                                  5.7%
James Leitner(11)                                    2,066,140                                  5.2%
Jean-Pierre Souviron(1)(6)(12)                         140,000                                   *
Jean-Francois Klein(1)(6)(13)(14)                    1,785,000                                  4.6%
Stanley Hollander(6)(15)                                90,000                                   *
Edgeport Nominees(16)                                2,332,656                                  6.6%
Groupe AB(17)                                        5,000,000                                 13.8%
Stephen Coleman(3)(18)                                 100,000                                   *
Kestrel, S.A.(19)                                    2,064,262                                  5.9%
Directors and Executive Officers as                  9,618,965                                 24.6%
a group (8 persons)(20)
</TABLE>
----------
*        Less than 1%.

(1)      In connection with the Unimedia Share Exchange, the Company became
         obligated to issue to the former shareholders of Unimedia certain
         warrants to purchase shares of the Company's common stock, as follows:
         (i) warrants to purchase an aggregate of 503,852 shares at an exercise
         price of $2.50 per share; (ii) warrants to purchase an aggregate of
         445,433 shares at an exercise price of $3.125 per share; and (iii)
         warrants to purchase an aggregate of 1,139,144 shares at an exercise
         price of $4.00 per share. The Company will issue these warrants to the
         former Unimedia shareholders who exchanged their shares in the Unimedia
         Share Exchange in the near future.

(2)      Includes shares owned of record by two entities, Diamond Productions
         and Multimedia Investments ("MMI"). Mr. Assouline, the Company's
         President and Chief Executive Officer, controls the power to vote and
         dispose of the shares of Common Stock owned by these entities, and may
         therefore be deemed to be the beneficial owner of these shares for U.S.
         securities law purposes. However, the actual number of shares of Common
         Stock owned by these entities and a third entity, Media Ventures (see
         footnote 13 below), from which Mr. Assouline and his wife, Anne-Marie
         Assouline, ultimately benefit is 2,118,281 shares (5.4%). Excludes
         shares and warrants which may be issued to Mr. Assouline in the future
         for his services. Additionally, the shares held by Mr. and Mrs.
         Assouline


                                       33
<PAGE>



         are subject to a put aggregating 110,800 of the shares from which they
         benefit. See footnotes (4) and (13) below. If the put were to be
         exercised, it would reduce the Assouline family's interest in the
         Company to 2,007,487 shares (5.1%).

(3)      Excludes options to purchase 1.0 million shares at $.35 per share. See
         Item 9. "DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT-BOARD COMPENSATION"
         for information regarding the terms of such stock options. Since these
         options cannot be exercised until the Company's stockholders approve an
         amendment to the Company's Certificate of Incorporation increasing the
         Company's authorized common stock, such options are not deemed to be
         beneficially owned at this date for reporting purposes.

(4)      Mr. Assouline, the Company's Chief Operating Officer, ultimately
         benefits from the 764,235 (2.0%) shares owned by several corporate
         entities controlled by Gilles Assouline and Marc Sillam. See footnotes
         (2) and (13). Mr. Assouline does not control the power to vote and
         dispose of the shares owned by those entities. Excludes shares and
         warrants which may be issued to Mr. Assouline in the future for his
         services. Additionally, the shares held by Mr. Assouline are subject to
         a put aggregating 55,413 of the shares from which he benefits. See
         footnotes (2) and (13). If the put were to be exercised, it would
         reduce Mr. Assouline's interest in the Company to 708,822 shares
         (1.8%).

(5)      Shares are owned of record by Unbeatable Investments Ltd. and
         Superstar, both of which entities are controlled by Mr. Ho.
         Additionally, Superstar owns certain convertible debt of the Company.
         See Item 6. "MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF
         OPERATION-FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES" and
         Item 12. "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."

(6)      Excludes options to purchase 100,000 shares at $.35 per share. See Item
         9. "DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT-BOARD COMPENSATION"
         for information regarding the terms of such stock options. Since these
         options cannot be exercised until the Company's stockholders approve an
         amendment to the Company's Certificate of Incorporation increasing the
         Company's authorized common stock, such options are not deemed to be
         beneficially owned at this date for reporting purposes.

(7)      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.

(8)      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 1,751,080 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.

(9)      Includes: (i) 400,000 Shares of Common Stock owned by 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, and (ii) 140,000 shares and 35,000 warrants to purchase
         shares at $4.00 per share owned by trusts of which Mr. Kornfeld is
         trustee.


                                       34
<PAGE>



(10)     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. Additionally, Mr. Hauptmann has an interest in the
         Instar Loan and would receive an indeterminate number of shares on the
         conversion of such debt if Instar were to receive the right to convert
         such debt and were to thereafter determine, at its option, to convert
         such debt into Common Stock in accordance with its terms. See Item 6.
         "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION-FINANCIAL
         CONDITION, LIQUIDITY AND CAPITAL RESOURCES" for information regarding
         the current status of the convertibility of the Instar Loan. See also
         footnote (8).

(11)     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) 132,500 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. Additionally, Mr.
         Leitner has an interest in the Instar Loan and would receive an
         indeterminate number of shares on the conversion of such debt if Instar
         were to receive the right to convert such debt and were to thereafter
         determine, at its option, to convert such debt into Common Stock in
         accordance with its terms. See Item 6. "MANAGEMENT'S DISCUSSION AND
         ANALYSIS OR PLAN OF OPERATION-FINANCIAL CONDITION, LIQUIDITY AND
         CAPITAL RESOURCES" for information regarding the current status of the
         convertibility of the Instar Loan. See also footnote (8).

(12)     Owned of record by Souviron Industrie Conseil Sarl., an entity
         controlled by Mr. Souviron.

(13)     Includes shares owned of record by two entities, BIMAP and Media
         Venture. Mr. Klein controls the power to vote and dispose of the shares
         of Common Stock owned by these entities, and may therefore be deemed to
         be the beneficial owner of these shares for U.S. securities law
         purposes. However, the ultimate benefit from 2,064,234 of the shares
         owned of record by these entities and an entity controlled by Mr.
         Assouline, MMI, is held by Claude Berda, who is also an officer,
         director and principal shareholder of Groupe AB. See Item 12. "CERTAIN
         RELATIONSHIPS AND RELATED TRANSACTIONS." Mr. Berda disclaims beneficial
         ownership over the shares owned by BIMAP, Media Ventures, MMI and
         Groupe AB. See footnote (17) below. The beneficiaries of these shares
         have a put to acquire the benefit of an additional 166,240 shares. See
         footnotes (2) and (4) above. If the put were to be exercised, it would
         increase Mr. Berda's ultimate interest in the Company to 2,230,474
         shares (5.7%).

(14)     While Mr. Klein serves as executive officers of Groupe AB, he disclaims
         beneficial ownership over the shares and warrants owned by Groupe AB.
         See footnote (17) below.

(15)     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 International Capital Growth, Inc. Mr. Hollander disclaims
         beneficial ownership of such securities.

(16)     Edgeport Nominees holds these securities for the benefit of customers
         of Townsley & Co. See Item 12. "CERTAIN RELATIONSHIPS AND RELATED
         TRANSACTIONS." Includes warrants to purchase 193,385 shares of Common
         Stock at an exercise price of $3.125 per share, warrants to purchase
         130,000 shares of Common Stock at $2.50 per share and warrants to
         purchase 572,606 shares of Common Stock at $4.00 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 and warrants to purchase 52,500 shares of the Company's Common
         stock at an exercise price of $4.00 per share. Additionally, Mr.
         Townsley has an interest in the Instar Loan and would receive an
         indeterminate number of shares on the conversion of such debt if Instar
         were to receive the right to convert such debt and were to thereafter
         determine, at its option, to convert such debt into Common Stock in
         accordance with its terms. See Item 6. "MANAGEMENT'S DISCUSSION AND
         ANALYSIS OR PLAN OF OPERATION-FINANCIAL CONDITION, LIQUIDITY AND
         CAPITAL RESOURCES" for information regarding the current status of the
         convertibility of the Instar Loan.


                                       35
<PAGE>



(17)     Shares are owned of record by MMP, S.A. on behalf of Groupe AB.
         Includes warrants to purchase 1,800,000 shares of Common Stock at an
         exercise price of $4.00 per share. Messrs. Klein and Berda disclaim
         beneficial ownership over the shares and warrants owned by Groupe AB.
         If aggregated with the shares beneficially owned by Mr. Berda, he would
         be deemed to benefit from an aggregate of 7,064,237 shares (19.4%), or
         7,230,477 (19.9%) if the put is exercised. See footnotes (13) and (14)
         above. Group AB also owns certain convertible debt of the Company. See
         Item 6. "MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF
         OPERATION-FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES" and
         Item 12. "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."

(18)     Includes options to purchase 100,000 shares at $2.50 per share.

(19)     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 in two nominee corporations,
         Latitude Investments and Transit Securities, for the benefit of
         multiple owners. Clients of Kestrel also control Universal, which has
         arranged for the transponder guarantee. See Item 6. "MANAGEMENT'S
         DISCUSSION AND ANALYSIS OR PLAN OF OPERATION" and Note 8 to Notes to
         Consolidated Financial Statements. 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. 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 (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.

(20)     Includes warrants to purchase an aggregate of 765,000 shares. Excludes
         options described in footnotes (3) and (6) above.


ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In October 1996, CM (UK) borrowed US $2.0 million from Instar Holdings,
Inc. (the "Instar Loan"). See Item 6. "MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION" for a description of the current status of the Instar Loan.
Karl Hauptmann, James Leitner and Barry Townsley, each of whom is a former
director of the Company, have interests of $200,000, $500,000 and $300,000
respectively in the Instar Loan. Additionally, Montegue Koppel, the father of
Charles Koppel, the former Chief Executive Officer of the Company, acts on
behalf of Instar in connection with the Instar Loan.

         Karl Hauptmann, a former director and a more than 5% shareholder of the
Company, is a principal of Telor International Limited, which owns 49% of
Tinerama Investment AG. Mr. Hauptmann is also a director of Tinerama Investment
AG. Telor had an amount of $411,600 owing from Tinerama at June 30, 1997. Mr.
Hauptmann was a Director of the Company until August 1997.

         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.


                                       36


<PAGE>



         Stanley Hollander, a director of the Company, is Senior Vice President
and a director of International Capital Growth, Ltd. ("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
commissions and warrants were paid to subdistributors who participated in the
placement, including Townsley & Co. In April 1997, ICG received 93,333 shares of
Common Stock for services. Additionally, in June 1998, Mr. Hollander on behalf
of ICG agreed to continue to assist the Company in an advisory role at no
additional charge.

         Groupe AB and Superstar, pursuant to their new agreements with the
Company, will become the majority shareholders of the Company. For the terms of
the Company's new agreements with Superstar and Groupe AB, see Item 1. BUSINESS
and Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. The
Company's believes that the terms of these new arrangements are more favorable
to the Company than the arrangements which might be available from unrelated
third parties.


                                       37
<PAGE>



ITEM 13.    EXHIBITS LIST 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 ("Agreement"), 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).

         2.3      Amendment No. 1 to the Agreement, dated as of June 25, 1997
                  (incorporated by reference from the Company's Current Report
                  on Form 8-K dated June 25, 1997).

         2.4      Amendment No. 2 to the Agreement, dated as of July 11, 1997
                  (incorporated by reference from the Company's Current Report
                  on Form 8-K dated July 11, 1997).

         2.5      Amendment No. 3 to the Agreement, dated as of July 25, 1997
                  (incorporated by reference from the Company's Current Report
                  on Form 8-K dated July 11, 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      Certificate of Designations, Preferences and Rights of Series
                  A Preferred Stock (incorporated by reference from the
                  Company's Quarterly Report on Form 10-QSB for the quarter
                  ended June 30, 1997).

         4.2      Form of warrant issued in connection with Registrant's winter
                  1995/96 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 Investment A.G. and the Registrant (1).

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


                                       38
<PAGE>



         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 and Studio Dortmund (1).

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

         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).


                                       39


<PAGE>



         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).

         10.21    Form of Indemnification Agreement dated July 31, 1997, by and
                  between the Company and Gilles Assouline and Michel
                  Assouline.*

         10.22    Reserved

         10.23    Letter Agreement, dated July 1998, between the CM (UK), the 
                  Company, Onyx, Superstar and Instar.*

         10.24    Services Agreement between Onyx Television and Groupe AB.*

         10.25    Superstar Note in the face amount of $5.0 million.*

         10.26    Groupe AB Note in the face amount of $6.64 million.*

         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 Annual Report on Form 10-KSB
         for the year ended December 31, 1996.

(b)      REPORTS ON FORM 8-K

         (i)      A Current Report on 8-K was filed on May 15, 1998 reporting
                  certain information under Item 5 of Form 8-K (Other Events).


                                       40
<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
14th day of October, 1998.

                                      CAPITAL MEDIA GROUP LIMITED

                                      By:   /s/ GILLES ASSOULINE
                                         ---------------------------------------
                                          Gilles Assouline, President and Chief
                                          Executive Officer

         Pursuant to the requirements of the Securities Act of 1933, this Annual
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/ GILLES ASSOULINE       
-------------------------------------------      Chairman, President and Chief                October 14, 1998
Gilles Assouline                                 Executive Officer (Principal
                                                 Executive Officer)

/s/ MICHEL ASSOULINE
-------------------------------------------      Director, Chief Operating Officer            October 14, 1998
Michel Assouline

 /S/ STEPHEN COLEMAN                       
-------------------------------------------      Chief Financial Officer (Principal           October 14, 1998
Stephen Coleman                                  Financial Officer)



 /S/ DAVID HO                              
-------------------------------------------                       Director                    October 14, 1998
David Ho

 /S/ JEAN-PIERRE SOUIRON                   
-------------------------------------------                       Director                    October 14, 1998
Jean-Pierre Souviron
</TABLE>


                                       S-1
<PAGE>



<TABLE>
<CAPTION>
                 SIGNATURE                                          TITLE                           DATE
                 ---------                                          -----                           ----
<S>                                                               <C>                         <C> 
/s/ STANLEY HOLLANDER
-------------------------------------------                       Director                    October 16, 1998
Stanley Hollander                          

 /S/ JEAN-FRANCOIS KLEIN                   
-------------------------------------------                       Director                    October 14, 1998
Jean-Francois Klein

/s/ STEPHEN KORNFELD                       
-------------------------------------------                       Director                    October 16, 1998
Stephen Kornfeld
</TABLE>


                                       S-2
<PAGE>



                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                              PAGE
                                                                                              ----
<S>                                                                                            <C>
Independent Auditors' Report of Deloitte & Touche to the Board of
     Directors and Shareholders of Capital Media Group Limited.................................F-2

Independent Auditors' Report of Price Waterhouse Coopers to the Board of
     Directors and Stockholders of Tinerama Investment AG......................................F-3

Consolidated Balance Sheet at December 31, 1997 and 1996.......................................F-4

Consolidated Statement of Operations For Years Ended December 31, 1997 and 1996................F-5

Consolidated Statement of Stockholders' Equity For Years ended December 31, 1997
           and 1996............................................................................F-6

Consolidated Statement of Cash Flows For the Years Ended December 31, 1997
           and 1996............................................................................F-7

Notes to Consolidated Financial Statements.....................................................F-8
</TABLE>


                                       F-1
<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,
1997 and 1996 and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended December 31, 1997 and
1996. 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 Investments AG (a consolidated subsidiary), which
statements reflect total assets constituting 17% of consolidated total assets at
December 31, 1997 (1996 - 37%) and 1% of consolidated operating loss for the
year then ended (year ended December 31, 1996-1%). 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, 1997 and 1996 and the results of their operations and their cash flows for
the years ended December 31, 1997 and 1996 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 15. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

         As discussed in note 11 to the financial statements, the outcome of
certain litigation against the company is unknown at this time.

DELOITTE & TOUCHE



Chartered Accountants
London, England
14 October 1998


                                       F-2
<PAGE>



INDEPENDENT AUDITORS' REPORT TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
TINERAMA INVESTMENT AG

         We have audited the financial statements of Tinerama Investment AG
Group of Companies as of December 31, 1997. The 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 conducted our audit in accordance with Generally Accepted Auditing
Standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
management, as well as evaluating the overall financial statements presentation.
We believe that our audit provides a reasonable basis for our opinion.

         As set out in note 15, the company has a claim for an additional 10% of
the share capital of the Romanian subsidiaries at zero consideration. Prior to
the final resolution of this matter, this potential additional ownership has not
been reflected in the financial statements of the company.

         In our opinion, subject to the matter mentioned in the preceding
paragraph, the financial statements referred to above present fairly, in all
material respects, the financial position of Tinerama Investment AG Group of
Companies as at December 31, 1997 and December 31, 1996 and the results of its
operations and its statement of changes in financial position for the year ended
31 December, 1997 in conformity with United States Generally Accepted Accounting
Principles.




COOPERS & LYBRAND
Bucharest September 18, 1998


                                       F-3
<PAGE>


                                                     CAPITAL MEDIA GROUP LIMITED

CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997

<TABLE>
<CAPTION>
                                                                             DECEMBER 31,      DECEMBER 31,
                                                                NOTE                 1997              1996
                                                                ----         ------------      ------------
<S>                                                               <C>           <C>               <C>    
                                                                                        $                 $
ASSETS
Cash and cash equivalents                                                         359,695           320,070
Accounts receivable within one year, net of allowances for
     doubtful accounts of $11,788 (December 31, 1996 -            3             1,207,398           754,103
     10,399)
Inventories                                                                        25,660            38,455
Amounts due from shareholder                                      4               313,691           313,691
Prepaid expenses and deposits                                                     510,828         1,168,145
                                                                           --------------   ---------------
TOTAL CURRENT ASSETS                                                            2,417,272         2,594,464


Investments                                                                     2,014,917           217,213
Intangible assets, net of accumulated amortization of
$2,203,973 (December 31, 1996 - $262,536)                         5             3,452,976           803,821
Property, plant and equipment, net                                6             1,020,818         1,475,284
                                                                            -------------    --------------

TOTAL ASSETS                                                                    8,905,983         5,090,782
                                                                            =============    ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable                                                                4,377,812         1,378,801
Accrued expenses                                                                2,710,780         2,310,261
Loans repayable within one year                                   7             4,229,008         2,016,568
Amounts due to minority shareholders                                              614,173           411,600
                                                                           --------------     -------------

TOTAL LIABILITIES                                                              11,931,773         6,117,230

COMMITMENTS AND CONTINGENCIES                                     8                     -                 -

MINORITY INTEREST IN SUBSIDIARIES                                                 901,980           615,795
                                                                           --------------   ---------------

                                                                               12,833,753         6,733,025

STOCKHOLDERS' EQUITY
Preferred stock - 5,000,000 shares authorized:
$0.001 par value: no shares issued and outstanding                                      -                 -
Common stock - 50,000,000 shares authorized:
$0.001 par value 35,094,139 (December 31, 1996 -
     12,663,328) issued and outstanding                                            40,090            12,663
Additional paid in capital                                                     31,155,909        17,117,651
Subscriptions receivable                                                           (5,000)           (5,000)
Cumulative translation adjustment                                               2,846,067           326,214
Accumulated deficit                                                           (37,964,836)      (19,093,771)
                                                                            -------------      ------------

TOTAL STOCKHOLDERS' EQUITY                                                     (3,927,770)       (1,642,243)
                                                                            -------------      ------------

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY                                                            8,905,983         5,090,782
                                                                            =============      ============
</TABLE>

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


                                       F-4
<PAGE>


                                                     CAPITAL MEDIA GROUP LIMITED

CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
                                                                           YEAR ENDED                       YEAR ENDED
                                                                         DECEMBER 31,                     DECEMBER 31,
                                          NOTE                                   1997                             1996
                                          ----                           ------------                     ------------
<S>                                         <C>        <C>               <C>               <C>            <C>         
                                                                $                   $               $                $

Operating revenues                                                          2,429,275                        2,075,407

Operating costs:

Staff costs                                             3,754,124                           3,705,972
Depreciation and amortization                             747,876                             521,069
Operating expenses - exceptional             9          4,202,737                             497,670
Operating expenses - other                             12,160,527        (20,865,264)      13,628,277     (18,352,988)
                                                   --------------     --------------      -----------   -------------

Operating loss                                                           (18,435,989)                     (16,277,581)

Other (expenses)/income                                                      (44,684)                          42,531
Equity in net loss of unconsolidated
     company                                                                (251,550)                        (211,414)
Interest (paid)/income, net                                                 (244,694)                         132,950
                                                                     ---------------                    ------------- 

Loss before income tax provision                                         (18,976,917)                     (16,313,514)

Income tax credit/(provision)               10                                 1,390                           (6,623)
                                                                     ---------------                    ------------- 

Loss after taxation                                                      (18,975,527)                     (16,320,137)

Minority interest                                                            104,462                           58,033
                                                                     ---------------                    ------------- 

Net loss                                                                 (18,871,065)                     (16,262,104)
                                                                     ===============                    ============= 

Net loss per share                                                            ($0.67)                          ($1.32)
                                                                     ===============                    ============= 

Weighted average shares outstanding                                       27,966,383                       12,359,029
                                                                     ===============                    =============
</TABLE>


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


                                       F-5
<PAGE>


                                                     CAPITAL MEDIA GROUP LIMITED

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
YEAR ENDED                                               ADDITIONAL                     CUMULATIVE
DECEMBER 31,                                                PAID-IN   SUBSCRIPTION     TRANSLATION    ACCUMULATED
1997                          COMMON STOCK                  CAPITAL     RECEIVABLE      ADJUSTMENT        DEFICIT         TOTAL
----                          ------------                  -------     ----------      ----------        -------         -----
<S>                      <C>                 <C>         <C>               <C>             <C>        <C>             <C>        
                             SHARES               $               $             $                $              $              $

Balance at               12,663,328          12,663      17,117,651         (5,000)        326,214     (19,093,771)    (1,642,243)
(January 1, 1997)

Issuance of              27,430,811          27,427      14,038,258              -               -               -     14,065,685
common stock

Translation                       -               -               -              -       2,519,853               -      2,519,853
adjustment

Net loss                          -               -               -              -               -     (18,871,065)   (18,871,065)
                         ----------          ------      ----------        -------       ---------    ------------  -------------

Balance at               40,094,139          40,090      31,155,909        (5,000)       2,846,067     (37,964,836)    (3,927,770)
December 31, 1997        ==========          ======      ==========        =======       =========    ============  =============



YEAR ENDED                                               ADDITIONAL                     CUMULATIVE
DECEMBER 31,                                                PAID-IN   SUBSCRIPTION     TRANSLATION    ACCUMULATED
1996                          COMMON STOCK                  CAPITAL     RECEIVABLE      ADJUSTMENT        DEFICIT         TOTAL
----                          ------------                  -------     ----------      ----------        -------         -----
<S>                      <C>                 <C>         <C>               <C>             <C>        <C>             <C>        
                             SHARES               $               $             $                $              $              $

Balance at                9,326,664           9,327      10,309,314         (5,000)        (59,963)     (2,831,667)     7,422,011
(January 1, 1996)

Issuance of               3,336,664           3,336       6,808,337              -               -               -      6,811,673
common stock

Translation                       -               -               -              -         386,177               -        386,177
adjustment

Net loss                          -               -               -              -               -     (16,262,104)   (16,262,104)
                         ----------          ------      ----------        -------       ---------    ------------  -------------
Balance at               12,663,328          12,663      17,117,651         (5,000)        326,214     (19,093,771)    (1,642,243)
December 31, 1996        ==========          ======      ==========        =======       =========    ============  =============
</TABLE>

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


                                       F-6
<PAGE>


                                                     CAPITAL MEDIA GROUP LIMITED

CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
                                                                                 YEAR ENDED       YEAR ENDED
                                                                               DECEMBER 31,     DECEMBER 31,
                                                                                       1997             1996
                                                                               ------------     ------------
                                                                                          $                $
<S>                                                                             <C>              <C>         
CASH FLOWS FROM OPERATING ACTIVITIES

Net loss                                                                        (18,871,065)     (16,262,104)
Adjustment to reconcile net loss to net cash used in
operating activities:
     Depreciation and amortization                                                2,438,829          521,069
     Equity in net losses of investment in joint venture                            251,550          211,414
     Minority interest                                                             (104,462)         (58,033)
     Changes in assets and liabilities:
     Decrease in inventories                                                         12,795           41,959
     Increase in accounts receivable                                               (453,295)        (232,991)
     Increase in amount due from shareholder                                              -         (313,691)
     Decrease/(increase)  in prepaid expenses and deposits                          657,317         (882,883)
     Increase in accrued expenses and accounts payable                            3,399,530        2,252,550
     Increase/(decrease) in amounts due to minority
     shareholders                                                                   202,573         (288,786)
                                                                             --------------     ------------

NET CASH USED IN OPERATIONS                                                     (12,466,228)     (15,011,496)
                                                                             --------------     ------------


CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment                                       (355,778)        (501,396)
Acquisition of intangible assets                                                 (4,277,740)        (180,444)
Proceeds on the sale of investments                                              (1,658,607)        (393,822)
                                                                             --------------     ------------

NET CASH USED IN INVESTING ACTIVITIES                                            (6,292,125)      (1,075,662)
                                                                             --------------     ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of shares                                                 14,924,892        7,181,673
Commission paid on issuance of shares                                              (859,207)        (370,000)
Loans                                                                             2,212,440        2,000,000
                                                                             --------------     ------------

NET CASH PROVIDED BY FINANCING ACTIVITIES                                        16,278,125        8,811,673
                                                                             --------------     ------------

NET (DECREASE) IN CASH                                                           (2,480,228)      (7,275,485)

Effect of exchange rate movements on cash                                         2,519,853           58,418
Cash and cash equivalents at start of year                                          320,070        7,537,137
                                                                             --------------     ------------

Cash and cash equivalents at end of year                                            359,695          320,070
                                                                             ==============     ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW ACTIVITY:

Cash payments for interest                                                          111,285           33,334
Cash paid for taxes                                                                   1,881                -
</TABLE>

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


                                       F-7
<PAGE>


                                                     CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997

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"), its 51% owned subsidiary Tinerama Investment AG
         ("Tinerama")"), together with the Company's 81.6% owned subsidiary
         Unimedia SA ("Unimedia") and Unimedia's 90% owned subsidiary TopCard SA
         ("TopCard"). CM(UK)'s 50% joint venture investment interest in Blink TV
         Limited ("Blink") has been accounted for using the equity method, after
         the elimination of all significant intercompany balances and
         transactions.

         The results of Unimedia and TopCard has been consolidated in the
         consolidated financial statements from September 1997 and November
         1997, respectively, being the dates of their acquisition.

         INVENTORIES

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

         INTANGIBLE ASSETS

         Intangible assets represent purchased broadcast licenses, and goodwill
         arising on acquisition of subsidiary undertakings. The amounts in the
         balance sheet are stated net of the related accumulated depreciation.
         Intangible assets and goodwill are amortized on a straight-line basis
         over a period of five years. The Company evaluates the possible
         impairment of long-lived assets, including intangible assets, whenever
         events or circumstances indicate that the carrying value of the assets
         may not be recoverable, by comparing the undiscounted future cash flows
         from such assets with the carrying value of the assets. An impairment
         loss would be computed based upon the amount by which the carrying
         amount of the asset exceeds its fair value at any evaluation date.

         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.
         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 recognized for deductible temporary differences
         and net operating losses, recognized by a valuation allowance if it is
         more likely than not that some portion of the benefit will not be
         recognized.

         LEASE

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

         INCOME PER SHARE

         In fiscal 1998, the Company adopted Statement of Financial Accounting
         Standards No. 128 ("SFAS No. 128"), EARNINGS PER SHARE, which requires
         presentation of basic and diluted income per share on the face of the
         Consolidated Statements of Operations. Basic income per share is
         calculated on the basis of weighted average outstanding shares, after
         giving effect


                                       F-8
<PAGE>


                                                     CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997

         to preferred stock dividends. Diluted income per share is computed on
         the basis of weighted average shares outstanding common shares, plus
         equivalent shares assuming exercised stock options and conversion of
         outstanding convertible securities where issued. All income per share
         disclosures have been restated in accordance with SFAS No. 128.

         FAIR VALUE OF FINANCIAL INSTRUMENTS

         The fair value of certain financial instruments, including cash,
         receivables, accounts payable, and other accrued liabilities,
         approximate the amount recorded in the balance sheet because of the
         relatively short-term maturities of these financial instruments. The
         fair value of bank, insurance company and other long-term financing at
         December 31, 1997 approximate the amounts recorded in the balance sheet
         based on information available to the Company with respect to current
         interest rates and terms for similar debt instruments.

         RECLASSIFICATIONS

         Certain reclassifications have been made to the 1996 year end balances
         to conform to the 1997 year end presentation.

         USE OF ESTIMATES

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

         APPROVED ACCOUNTING STANDARDS NOT YET ADOPTED

         In 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
         No. 130, "Reporting Comprehensive Income," and SFAS No. 131,
         "Disclosures about Segments of an Enterprise and Related Information."
         These statements are required to be adopted in fiscal 1999. In 1998,
         the FASB issued SFAS No. 132, "Employers' Disclosures about Pensions
         and Other Postretirement Benefits." This statement is also required to
         be adopted in fiscal 1999. In 1998, the FASB also issued SFAS No. 133,
         "Accounting for Derivative Instruments and Hedging Activities." This
         statement is required to be adopted in fiscal 2000. The Company is
         currently in the process of evaluating the impact of adopting these new
         statements.

 2.      GOING CONCERN

         The accompanying financial statements have been prepared on the going
         concern basis, which contemplates the realization of assets and the
         satisfaction of liabilities in the normal course of business. As shown
         in the financial statements, during the years ended December 31, 1997
         and 1996, the Company incurred net losses of $18,871,065 and
         $16,262,104, respectively. At December 31, 1997, the Company had net
         current liabilities of $9,514,501 and its total liabilities exceeded
         its total assets by $3,025,790. 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 the 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 14, 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 reported in July 1998 that it had entered into
         agreements to provide funding so that the Company can meet its
         obligations and sustain operations from sources described in note 15.


                                       F-9
<PAGE>


                                                     CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997

3.       ACCOUNTS RECEIVABLE

<TABLE>
<CAPTION>
                                                                         DECEMBER 31,     DECEMBER 31,
                                                                                 1997             1996
                                                                         ------------     ------------  
                                                                                    $                $
<S>                                                                         <C>                <C>    
         Accounts receivable within one year comprise:

         Trade receivables                                                    593,589          139,059
         Taxation receivables                                                 449,167          116,801
         Other debtors receivable                                             164,642          498,243
                                                                          -----------      -----------

         Total                                                              1,207,398          754,103
                                                                          ===========      ===========
</TABLE>


4.       AMOUNT DUE FROM SHAREHOLDER

         In December 1995, the Company issued shares to a shareholder in
         exchange for that shareholder guaranteeing the establishment of a
         contract with PTT Telecom. This resulted in the shareholder receiving
         shares for no payment. The directors believe this amount to be
         recoverable within one year.

5.       INTANGIBLE ASSETS

<TABLE>
<CAPTION>
                                                                         DECEMBER 31,     DECEMBER 31,
                                                                                 1997             1996
                                                                         ------------     ------------  
                                                                                    $                $
<S>                                                                         <C>                <C>    

Purchased broadcast licenses                                                  246,810           364,969
Computer Software                                                             195,016           113,371
Goodwill                                                                    5,215,123           588,017
                                                                          -----------       -----------
                                                                            5,656,949         1,066,357

Less accumulated amortization                                              (2,203,973)         (262,536)
                                                                          -----------       -----------
                                                                            3,452,976           803,821
                                                                          ===========       ===========
</TABLE>



                                      F-10
<PAGE>


                                                     CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997

6.       PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
                                                                         DECEMBER 31,     DECEMBER 31,
                                                                                 1997             1996
                                                                         ------------     ------------  
                                                                                    $                $
<S>                                                                         <C>                <C>    
Property, plant and equipment consists of:                  

Buildings                                                                     191,550           191,550
Fixtures, fittings and equipment                                            2,089,649         1,817,170
                                                                          -----------       -----------


Total property, plant and equipment                                         2,281,199         2,008,720

Less accumulated depreciation                                              (1,260,381)         (533,436)
                                                                          -----------       -----------

                                                                            1,020,818         1,475,284
                                                                          ===========       ===========
</TABLE>

7.       LOANS REPAYABLE WITHIN ONE YEAR

<TABLE>
<CAPTION>
                                                                         DECEMBER 31,     DECEMBER 31,
                                                                                 1997             1996
                                                                         ------------     ------------  
                                                                                    $                $
<S>                                                                         <C>                <C>    
Loans repayable within one year comprise:

Instar Holdings Ltd                                                         2,000,000          2,000,000
Unbeatable Investments Ltd                                                    500,000                  -
Fontal Ltd                                                                    200,000                  -
Oradea                                                                        500,000                  -
Roland Pardo                                                                  500,000                  -
Falcon Management                                                             335,000                  -
Interest Accrued                                                              194,008             16,568
                                                                          -----------       ------------
                                                                            4,229,008          2,016,568
                                                                          -----------       ------------
</TABLE>


      The terms of the loans are:

      The terms of the Instar loan are detailed in Note 14.

      The Unbeatable loan was received on October 10, 1997 and carried an
      interest rate of 10% per annum and was repaid on January 9, 1998, see Note
      15.

      The Fontal loan was received on December 30, 1997 and carries an interest
      rate of 10% per annum and was repayable on February 16, 1998, see Note 11.


                                      F-11
<PAGE>


                                                     CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997

      The Oradea loan was made to Unimedia in 1996 and carries an interest rate
      of 2% above 3 month Eurodollar Libor rate and repayable on April 17, 1998.

      The Roland Pardo loan was made to Unimedia in 1996 and carries an interest
      rate of 2% above 3 month Eurodollar Libor rate and was repayable on July
      29, 1998.

      The Falcon loan was made to Unimedia in 1995 and carried an interest rate
      of 0.5% per month and was repaid on May 25, 1998.

8.    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, 1997 stood at ECU
      1,250,000 ($1,350,000 at December 31, 1997 exchange rates).

      The Company was not in a position to support the guarantee. As a result
      the guarantee has been provided by Universal Holdings Limited, See Note 11
      to the Consolidated Financial Statements.

      The Company is committed under the terms of the agreement to paying ECU
      2,163,000 ($2,336,000 at December 31, 1997 exchange rates) over the
      remaining period of the contract which expires on September 25, 1998 for
      use of the transponder capacity under the terms of the agreement.

      COMMITMENTS

      In March 1998, the Company entered into a monthly agreement to lease
      offices, as well as the use of studio, post production and editing
      facilities in Dortmund, Germany, as required. Under the terms of the
      office agreement, the Company was committed to paying DM150,000 ($80,000
      at December 31, 1997 exchange rates) per annum.

      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 was committed to
      paying DM 2,940,000 ($1,635,000 at December 31, 1997 exchange rates) per
      annum for the use of the equipment and facilities until January 2001.
      Under the terms of the lease, the lease can be terminated effective
      October 1998. Notice of termination of the lease has been given to the
      lessor.

      In January 1996, the Company entered into an agreement to lease uplink
      capacity until January 2001, at a cost of approximately (pound)245,000
      ($403,000 at December 31, 1997 exchange rates) per annum. Under the terms
      of the agreement, the lease can be terminated effective October 1998.
      Notice of termination of the lease has been given to the lessor.

      The Company has also entered into leases for office space in France,
      expiring between 1999 and 2002 at an annualized cost of approximately
      $130,000 (at December 31, 1997 exchange rates). The total rental expense
      in 1997 and 1996 were $5,592,000 and $4,190,000, respectively.

      The Company is committed to pay to its directors and officers under
      employment agreements an aggregate of $650,000 during the year ended
      December 31, 1998.


                                      F-12
<PAGE>


                                                     CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997

9.    OPERATING EXPENSES - EXCEPTIONAL

<TABLE>
<CAPTION>
                                                                         DECEMBER 31,     DECEMBER 31,
                                                                                 1997             1996
                                                                         ------------     ------------  
                                                                                    $                $
<S>                                                                         <C>                <C>    
Currency translation difference on foreign
currency net investment                                                     2,511,784          497,670

Additional depreciation and amortization charges
relating to the Company's current evaluation of
the value of certain assets and goodwill                                    1,690,953                -
                                                                         ------------       ----------
                                                                            4,202,737          497,670
                                                                         ============       ==========
</TABLE>


10.   INCOME TAXES

      The income tax provisions consisted of the following:

<TABLE>
<CAPTION>
                                                                         DECEMBER 31,     DECEMBER 31,
                                                                                 1997             1996
                                                                         ------------     ------------  
                                                                                    $                $

<S>                                                                             <C>             <C>    
Current tax credit/(expense)                                                    1,390           (6,623)
                                                                                =====           =======
</TABLE>

      Net operating loss carry forwards which give rise to deferred tax assets
      at December 31, 1997 are as follows:

<TABLE>
<CAPTION>
                                                                         DECEMBER 31,     DECEMBER 31,
                                                                                 1997             1996
                                                                         ------------     ------------  
                                                                                    $                $
<S>                                                                         <C>              <C>      
Unutilized tax losses                                                       4,180,000        4,757,000
Valuation Allowances                                                       (4,180,000)      (4,757,000)
                                                                          -----------      -----------

Total deferred tax assets                                                           -                -
                                                                          ===========      ===========
</TABLE>


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

11.   LITIGATION

      The litigation against Com TV Production und Vertrieb GmbH ("Com") and Nen
      TV ("Nen") and Mr. John Garman, relates to an agreement in 1995, wherein
      the Company was purportedly to invest in and develop a satellite
      broadcasting project and was thereby to allot Nen 5% of the issued share
      capital of the project in consideration for various undertakings. The
      Company has always maintained that there had been a repudiatory breach of
      contract by Com and Nen and that the Company believed that the claims made
      were without merit and intended to vigorously contest the same.


                                      F-13
<PAGE>


                                                     CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997

      In December 1997, at the direction of the trial judge, the Company and Com
      and Nen and John Garman were directed to either come to an agreement or
      that the parties were instructed to prepare for the case to be immediately
      held for trial. An agreement to settle this suit was made with Garman on
      December 12, 1997 wherein the Company agreed to enter into reciprocal
      commercial agreements allowing Garman to access available down time for
      advertising purposes.

      In June 1997, a former managing director of Onyx Television whose
      employment was terminated brought suit in Germany for alleged wrongful
      early termination of his employment. The suit sought damages of DM750,000.
      Onyx maintained that the action which it took with respect to this
      employee was lawful and in July 1998, the court ruled in favor of Onyx
      Television. The plaintiff has the right to appeal and Onyx Television
      believes that it has valid defenses to this claim. However, there can be
      no assurance as to the outcome of this matter.

      In May 1998, TV Strategies, a Dallas based television services company,
      obtained a default judgment against Onyx Television for DM300,000, plus
      interest, relating to services which Television Concepts alleges that they
      provided to Onyx. Onyx intends to seek to have the default judgment set
      aside in Texas, and believes that it has the grounds to obtain relief from
      the default judgment. Onyx Television also believes that it has
      meritorious defenses to the suit. There can be no assurance as to the
      outcome of this matter.

      In July 1998, the Company was sued in the U.S. District Court for the
      District of Nevada by Fontal Limited ("Fontal") for breach of a promissory
      note. See Note 7 for a description of the Fontal Note. The Company had
      pledged the rights to international trademarks for the Onyx name and
      branding outside of Germany to Fontal to secure repayment of this note.
      The Company has filed a motion to dismiss this suit for FORUM NON
      CONVENIENS, believing that the proper forum for this suit is England. The
      Company also believes that it has meritorious defenses to this suit and
      intends to vigorously defend same. There can be no assurance as to the
      outcome of this matter.

      Unimedia has three minority shareholders (Oradea, Roland Pardo and Fontal
      (see note 7)) who have previously advised Unimedia that they do not
      believe that the reorganization of Unimedia with the Company was in the
      best interest of Unimedia and its stockholders. These stockholders have
      brought numerous legal actions against Unimedia and/or its management
      (which is also now, in part, the senior executive management of the
      Company) contending that the past and future activities of Unimedia are
      not in the best interest of Unimedia's shareholders and were not being
      engaged in for the benefit of Unimedia and its stockholders. To date, such
      suits have not been successful. In addition, the French Courts have to
      date rejected all requests to appoint experts in judgment to review
      Unimedia's management's actions.

      Charles Koppel, the former chairman and CEO of the Company, had a service
      agreement with the Company under which he was entitled to an annual base
      salary of (pound)100,000 ($160,000). The agreement provided for successive
      automatic one-year terms unless terminated upon one year's prior notice in
      writing. Mr. Koppel resigned his positions with the Company on August 6,
      1997. Mr. Koppel has advised the Company that he believes that the Board's
      selection of a new President and CEO of the Company in August 1997,
      constituted a constructive dismissal of Mr. Koppel under his service
      agreement.

      On March 12, 1998, the Company resolved its dispute with Mr. Koppel in
      regard to his claim for wrongful dismissal. Pursuant to the settlement,
      the Company agreed to pay Mr. Koppel (pound)60,000 over an agreed period
      of time to resolve outstanding claims under his services agreement with
      the Company.

      In August 1998, Onyx Television sued Mr. Koppel in Germany. The suit
      alleges that certain of Mr. Koppel's actions as the managing director of
      Onyx Television were improperly performed and that certain of his other
      actions were taken for his own direct or indirect benefit and not for the
      benefit of Onyx Television. The suit seeks damages in an unspecified
      amount. The Company intends to vigorously pursue this action against Mr.
      Koppel.

      The Company is a party to legal actions in the normal course of business.
      The Company does not believe that the resolution of any of these actions
      will be material to the financial statements.

12.   TINERAMA

      Tinerama has 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 ($145 at December 31, 1997) The option was valid for a
      period of six months from the date of finalization of the 1995 financial
      statements of the Romanian subsidiaries on June 7, 1996. TIAG has formally
      confirmed its intention to exercise its option to acquire the full 10%.


                                      F-14
<PAGE>


                                                     CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997

 13.  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, 1997:

      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                  2,300,000

      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; and

      In September 1996, 100,000 shares and warrants to purchase an additional
      100,000 shares at an exercise price of $2.50 per share were issued to a
      director for consulting services.

      On March 10, 1998, the Board of Directors granted certain options to
      executive officers of the Company to purchase an aggregate of 4,500,000
      shares to purchase the Company's Common stock at an exercise price of
      $0.35 per share (the fair market value of the Common Stock on the date of
      grant). On the same date the non-employee Directors were granted certain
      options to purchase an aggregate of 500,000 shares to purchase the
      Company's Common stock at the same price. The options vest for executive
      officers over 3 years and for non-employee Directors immediately.

14.   LIQUIDITY AND CAPITAL RESOURCES

      The Company has continued to use its cash reserves to fund its operations.
      The ownership, development and operation of media interests, including the
      Onyx television station requires substantial funding. Due to the poorer
      than expected advertising revenues at Onyx in its second year of
      operation, the funds raised by the Company since commencement were
      expended earlier than anticipated. To date the Company has historically
      financed itself through sales of equity securities and debt financing.

      On January 13, 1997, the Company issued a Private Placement Memorandum
      offering 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; $.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.

      On June 30, 1997, the Company received subscriptions for $4 million in a
      Private Placement offering of its securities to certain accredited
      investors. In the offering, the Company agreed to issue an aggregate of
      7,017,543 shares of common stock; $.001 par value per share, at a purchase
      price of $0.57 per share. On June 30, 1997, $1,500,000 of the proceeds of
      the subscription was received and the balance of $2,500,000 was received
      on August 1, 1997.

      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 and was until December 31,
      1997 at the rate of 2% above Lloyds Banks' base rate. Interest as from
      January 1, 1998 is at the rate of 13% per annum. The terms of the Instar
      Loan were amended in August 1997, January 1998 and July 1998.

      The terms of the Instar Loan were amended in July 1998 to provide that:

      (i) the repayment date is now extended such to accede to a repayment
      schedule plan commencing in September 1998 and terminating on receipt of a
      final installment payment in late 1999; and

      (ii) the loan ( or any part thereof) may be converted, at the option of
      the holder, into fully paid shares of common stock at a conversion rate
      that may be offered from time to time by the Company to any existing or
      potential investor.


                                      F-15
<PAGE>


                                                     CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997

      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 8 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.

15.   SUBSEQUENT EVENTS

      On January 9, 1998, CM (UK) borrowed an aggregate of $1,250,000 from
      Superstar Ventures Limited ("Superstar"). Such loan was evidenced by two
      13% Convertible Secured Promissory Notes (the "Notes") in the original
      amounts of $750,000 and $500,000, respectively. Of the aggregate proceeds,
      $500,000 was used to repay a loan previously made to CM (UK) by Unbeatable
      Investments Limited. The Notes bear interest at the rate of 13% per annum
      and are convertible into the Company's Common Stock on the basis of one
      share of Common Stock for each $0.50 of outstanding principal and accrued
      interest. The Notes however, may not be converted until the Company has
      held a shareholders meeting at which its Articles of Association are
      amended to increase sufficiently the number of authorized shares of Common
      Stock of the Company.

      On February 12, 1998, the Company, Unimedia, and Pixel Multimedia Ltd.
      ("PMM") consummated the transactions contemplated by an agreement executed
      on that date and effective as of January 1, 1998. PMM previously owed
      Unimedia $2,700,000 for loans made to PMM and for other expenses. As part
      of the transaction, Unimedia purchased the outstanding stock of Pixel
      Ltd., an Israeli company ("Pixel") from PMM. As part of the transaction,
      Pixel also purchased certain software previously developed for Unimedia by
      PMM. The purchase price paid to acquire Pixel consisted of: (i)
      forgiveness of $1.7 million of the debt owed by PMM to Unimedia and (ii)
      the assumption by Pixel (guaranteed by Unimedia and the Company) of
      certain PMM debt not exceeding $750,000 due to a financial institution.
      Additionally, PMM may receive up to 600,000 shares of the Company's Common
      Stock owned by Unimedia if certain performance objectives are achieved by
      Pixel. These shares have been pledged by Unimedia to the financial
      institution to secure Pixel's debt to the financial institution. Finally,
      the remaining $1,000,000 owed by PMM to Unimedia will be forgiven in the
      event that certain future performance objectives are achieved by Pixel.

      On February 28, 1998, the Mirror Group PLC ("Mirror") sold its 50%
      interest in the share capital of Blink to a director of Blink.

      On March 23, 1998, MMP, SA ("MMP"), a shareholder of the Company made
      available a $2,000,000 Line of Credit ("MMP Line of Credit"), which
      carried interest at 13% per annum. The principal and accrued interest is
      repayable on December 31, 1998, or earlier if the Company's cash flow
      enables repayment. The MMP Line of Credit is convertible at $0.20 per
      share.

      On March 25, 1998, Superstar loaned the Company an additional $400,000
      payable on the same terms as the MMP Line of Credit.

      On June 16, 1998, the Company entered into two Memorandum of Understanding
      Agreements ("MOU") with AB Groupe ("AB"), (which is the parent company of
      MMP) and Superstar to continue to fund the Company's operations. These new
      Agreements will provide up to $11.64 million, $5.4 million in the form of
      cash investment to be infused over a one year period and $6.24 million
      through providing operating services to the Company over a period of two
      years. The new funding will initially be in the form of debt to be
      automatically converted into shares of common stock at $0.10 cents per
      share upon and after approval of an increase in the Company's authorized
      capital at the next shareholders meeting, which the Company is obligated
      to hold no later than November 30, 1998.

16.   RELATED PARTY TRANSACTIONS

      In July 1997, the Company paid Unimedia a fee of $240,000 in connection
      with the $4.0 million private placement. See Note 14 above.

      There were no related party transactions other than in the normal course
      of business between the group companies.


                                      F-16
<PAGE>


                                 EXHIBIT INDEX


EXHIBIT                                DESCRIPTION
-------                                -----------

10.21         Form of Indemnification Agreement dated July 31, 1997, by and
              between the Company and Gilles Assouline and Michel Assouline

10.23         Letter Agreement dated July 1998 between the CM (UK), the Company,
              Onyx, Instar and Superstar

10.24         Services Agreement with Groupe AB

10.25         Superstar Note in the face amount of $5.0 million

10.26         Groupe AB Note in the face amount of $6.64 million

21.1          Subsidiaries

27.1          Financial Data Schedule