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, 1998

              [ ] 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)

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<S>                                                                       <C>
                       NEVADA                                                              87-0453100
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(State or other jurisdiction of incorporation or organization)            (I.R.S. Employer Identification No.)
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         2 RUE DU NOUVEAU BERCY
        94220, CHARENTON, FRANCE
-------------------------------------------                 ---------------
 (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:

         TITLE OF EACH CLASS                NAME OF EACH EXCHANGE ON WHICH
                                                      REGISTERED

           Not Applicable                                None

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

                          Common Stock, $.001 par value

Check whether the 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: $2,468,490

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Because there is only a limited market for the Company's Common Stock, the
aggregate market value of the voting stock held by non-affiliates of the Company
cannot be determined with accuracy. As of June 25, 1999, there were 38,426,223
shares of the Company's Common Stock issued and outstanding, of which 28,807,258
shares were owned by non-affiliates of the Company.

The following documents are incorporated by reference:        None.

Transitional Small Business Disclosure Format.  YES ____      NO __X__

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                                     PART I

ITEM 1.           DESCRIPTION OF BUSINESS

GENERAL

         THE STATISTICAL AND OTHER INFORMATION CONTAINED IN THIS SECTION HAS
BEEN DERIVED FROM KABEL & SATELLIT, A PUBLICATION IN GERMANY FOCUSING ON THE
CABLE AND SATELLITE INDUSTRY. THE COMPANY ALSO RECEIVES INFORMATION FROM
DEUTSCHE TELEKOM, PRIVATE CABLE OPERATORS, SATELLITE OPERATORS AND EUTELSAT
SUPPORTING ITS DISTRIBUTION AND MARKET INFORMATION.

         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 11.0 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 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 agreements provided 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. Groupe AB, in March 1999, also agreed to fund an additional
$6.0 million to allow the Company to repay indebtedness and for working capital.
All of this funding will be initially in the form of debt, but will be
automatically converted into common equity at the rate of $0.10 per share upon
approval of an increase in the Company's authorized but unissued common stock
(which will occur at a stockholders meeting to be held in the near future). See
Item 5. "Market for Common Equity and Related Stockholder Matters - Contemplated
Stockholders' Meeting." Once these obligations are converted into Common Stock,
and assuming no exercise of warrants and options, Superstar will control
approximately 45% and Groupe AB will control approximately 39% of the Company's
outstanding common stock (approximately 31% and 58% respectively after the
completion of all services and fundings) and will control the Company. The
diluted holdings, after warrants and options are exercised, will be 26% and 49%
respectively. See Item 11. "Security Ownership of Certain Beneficial Owners and
Management" and Item 12. "Certain Relationships and Related Transactions."

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         Since the Company's acquisition of Unimedia 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
requires substantial capital investment. To date, the Company has financed its
capital requirements through sales of equity securities and debt financing. 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 the agreement with Groupe AB provides 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 four other businesses: (i) Blink TV,
which is a specialist TV programming company which provides lifestyle
programming on large video screens at concert events, (ii) Pixel, which
specializes in computer graphics and 3D animation for TV packaging, digital
broadcasting and special effects, (iii) TopCard, a software development business
which is engaged in the development of applications based upon smart card
technology (including remote security Internet access and infra-red contactless
smart-card technology) and (iv) Unimedia, which intends to develop in the future
a software platform for Internet entertainment and gaming. The Company further
has an interest in Tinerama, which operates a Romanian print media group and
radio station, which is being held as an asset held for disposition.

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 (teleshopping) 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 December 31, 1998, Onyx's broadcast signal was distributed to 9.7
million cable homes in Germany, compared to 6.7 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 6.5
billion ($3.9 billion) in 1997. During this same period, television advertising
revenue as a percentage of total advertising revenue has increased from
approximately 10% in 1984 to approximately 24% in 1997. Industry sources
estimate that television advertising will nearly double to DM 12.0 billion ($7.2
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 members of the Target Audience watch more television than any other
demographic group in Germany and that the Target Audience has high purchasing
power. At present, the Company believes that there are an estimated 35 million
people comprising the Target Audience, equating to approximately 40% of the
population.

         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 (teleshopping). 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

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for a four year period, the sales agent will be paid commissions based upon the
revenues derived from 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

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broadcast. In that regard, the German National Convention of Broadcast, based
upon a recent 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 stockholders 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
designed to reach Onyx Televisions' Target Audience. 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

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to penetrate existing markets and enter new markets, and (v) if possible,
syndicate Onyx's internally produced programming to third-parties. There can be
no assurance that these strategies will be successfully implemented.

         STRATEGIC ALLIANCES AND RECENT DEVELOPMENTS

         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 in cash 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 $260,000 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
increase of the Company's common stock available for issuance thereby allowing
such shares to be converted into shares of the Common Stock (or will be
repayable in full, with interest and a penalty, in the event that the Company's
stockholders' do not approve such increase in shares.

         In that regard, effective October 1, 1998, Onyx Television's signal
began to be broadcast on EUTELSAT, a digital satellite transponder used 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 has 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."

         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

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programming opportunities for Onyx, including significantly increased
teleshopping programming, with the goal of increasing the revenues being derived
from the operation of Onyx Television.

         In March 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. 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.

OTHER BUSINESSES

         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
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% interest in Blink TV. The balance is owned by
RCL Communications, Ltd. 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 1996, Blink TV has already
transmitted approximately 200 hours of tailor-made programming at approximately
400 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 has not yet 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 TV 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. Management
is also considering whether the Company should continue its involvement with
Blink or withdraw in some fashion from this venture.

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         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. Stockholders of Unimedia who did not participate in
the first closing of 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 these share exchanges (the "Unimedia
Share Exchanges") were valued at their then fair value ($0.57 per share).

         At the time that the Company acquired an 81.6% interest in Unimedia, it
was a development-stage company. The main thrust of its operations was the
development of on-line applications for home shopping and gaming. Projects under
development at that time included (i) the creation of specific entertainment
sites and several multi-player games, (ii) the promotion of TV packaging
activity and (iii) distant interactive education.

         Unimedia also owned at that time minority equity positions in several
companies which Unimedia believed had progressive Internet, Smart Card and
advanced software technologies, with the objective to be involved in their
product development and subsequent distribution while securing enabling front
edge Internet technologies to acquire a competitive advantage on applications
under development. To that date, its acquisition activities had been comprised
principally of the acquisition of interest in companies like ActivCard, Pixel,
TopCard, Internet Way and Enanti, whose technologies include remote security and
authentication technology, sales automation, Internet access and intra-red
contactless Smart Card technology.

         Unimedia had revenues of $327,726 and $93,815, respectively, for 1996
and the first six months of 1997 and Unimedia had a net loss of $3,399,283 for
1996 and net income of $437,730 for the first six months of 1997 (much of which
was derived from the sale of investments). At June 30, 1997, Unimedia had total
assets of $11.0 million, including $6.2 million in investments, liabilities of
$7.5 million and stockholders' equity of $3.5 million.

         At July 31, 1997, Unimedia: (i) held a 10% minority interest in TopCard
and was seeking to acquire the remaining balance of TopCard's outstanding
shares, (ii) had made a $2.5 million loan to Pixel, (iii) held a minority
interest in ActivCard, S.A. ("ActivCard"), a French company that has developed
remote security and authentication token technology, and was acting as a
distributor of ActivCard's technology, and (iv) held a minority interest in
several other companies, including Enanti Corp., a Florida company with
technology for Internet sales automation and contact management, and Internet
Way, a French internet service provider. Unimedia had eight employees at July
31, 1997. At the time that the Company acquired its interest in Unimedia,
Unimedia was also in the beginning stages of seeking to develop a software
platform for internet gaming.

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         Subsequent to the Company's acquisition of an interest in Unimedia,
Unimedia has acquired an additional 80% interest in TopCard and acquired 100% of
Pixel Ltd., on the terms more particularly described below. Unimedia continues
to run both of those companies. Unimedia has also sold its interests in
ActivCard and Internet Way, and has discontinued its involvement in distributing
ActivCard's technology.

         In addition to operating TopCard and Pixel, Unimedia is continuing to
pursue the development of a software platform for Internet gaming and
entertainment. To date, in furtherance of this objective, the Company has
engaged the services of a consultant, Valfab, which provides the services of
Jacques Dubost, a consultant to the casino industry and the former manager of
two famous casinos in Cannes, France and in Monte Carlo. Such 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 consideration provided in connection with Unimedia's acquisition of
Pixel, in addition to the software described above, 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.

         Pixel is not affiliated, directly or indirectly, with Pixar, the
Richmond, California digital animation studio run by Stephen Jobs.

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         TOPCARD, S.A.

         On November 1, 1997, Unimedia acquired an additional 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 stockholders 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).

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 concept to other countries.

DISCONTINUED OPERATIONS

         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. TIAG is owned 51% by the Company and 49% by
Telor International Ltd., an entity controlled by Karl Hauptmann, a former
director and a more than 5% shareholder of the Company. See Item 12. "Certain
Relationships and Related Transactions."

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         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
try to stem the continuing losses from its operations (see Item 6. "Management's
Discussion and Analysis or Plan of Operation") and at December 31, 1998, the
Company had determined to dispose of its interest in TIAG.

PERSONNEL

         At December 31 1998, the Company employed 77 persons, 23 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.

ITEM 2.           PROPERTIES

         The Company's Chairman is located in France and the Company's
headquarters is temporarily located in France. The Company intends to organize a
French branch, CMG France, to operate as a party to the Company's activities in
France and to serve as a temporary administrative agent for the Company in
France until such time as the Company relocates its headquarters to another
jurisdiction. Prior to September 1998, the Company's principal executive office
was located in leased office space in London, England.

         CMG France, when organized, will share office space with Unimedia (at
the present time, the Company and Unimedia have entered into an agreement to
allocate office space and office costs among the Company and Unimedia). Unimedia
leases office space in Charenton, France.

         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 10 to Notes to Consolidated Financial Statements.

                                       13

<PAGE>

ITEM 3.           LEGAL PROCEEDINGS

         CM (UK) was sued in 1995 by COM TV Production Und Vertrieb GmbH and Nen
TV Limited ("NEN"). This suit, which the Company vigorously contested, sought an
interest in Onyx Television pursuant to an alleged agreement among the parties.
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 ($30,000).
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 ($24,000), 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
($133,000). In turn, NEN will receive 25% of all amounts paid to Onyx relating
to such client, up to a maximum of DM1,500,000 ($900,000). 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 ($450,000).
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 ($180,000),
plus interest, relating to services which TV Strategies alleges that they
provided to Onyx. In March 1999, the default judgment was set aside by the Texas
Appeals Court. The time for TV Strategies to appeal the decision of the
appellate court will expire in April 1999. Assuming the default judgment is not
reinstated, the Company intends to vigorously defend this claim and believes,
based upon discussions with its counsel, that it has meritorious defenses to the
suit. No opinion of counsel has been obtained with respect to this matter and
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.
The Company believes that Fontal is controlled by Marc Degarni, who is a
stockholder of the Company and who previously represented to the Company that he
is a stockholder in Unimedia (through an entity, Atlas Investments, although
that entity has advised Unimedia that it is now represented by another
individual, Roland Pardo). Mr. Degarni is also a former director of CM (UK).

         Pursuant to the note, the Company owed Fontal $200,000, plus accrued
but unpaid interest. The Company had pledged the rights to trademarks for the
International Onyx name and branding outside of Germany, Switzerland and Austria
to Fontal to secure repayment of this note.

                                       14

<PAGE>

         In June 1999, the Fontal litigation was fully settled for $327,500 and
the related promissory note was satisfied. This suit has now been dismissed with
prejudice.

         Unimedia has three minority stockholders (Oradea Inc., represented by
its chairman, Alfonso Lodolo D'Oria, Roland Pardo and Atlas Investments) who
have previously advised Unimedia that they do not believe that the summer 1997
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 stockholders
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.

         Oradea Lodolo, and Pardo have also taken action through the courts in
France and Israel to attempt to safeguard their potential rights over certain
assets of Unimedia in order to secure payment of their unsecured loans due from
Unimedia. See Note 8 of Notes to Consolidated Financial Statements. In
connection with such actions and based upon the fact that the notes do not by
their terms reflect a repayment date, the court has established a payment plan
for Unimedia to repay these loans in installments, and to date, Unimedia has met
its obligations under the payment plan. Unimedia is also preparing actions
against Oradea and against Messrs. Lodolo and Pardo for damages which it
believes have been caused by reason of Oradea, Lodolo and Pardo's inappropriate
actions against Unimedia.

         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 has
been funding Unimedia's cash flow requirements through a $500,000 line of
credit, and in that regard, Unimedia has pledged its stock interest and loan in
Pixel to the Company to secure repayment of that obligation. To the extent that
such minority holders disagree with the business decisions made by Unimedia's
management 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 (approximately $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

                                       15

<PAGE>

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 paid Mr. Koppel (pound)60,000 to resolve outstanding claims under his
service agreement with the Company, which amount was paid prior to the end of
1998.

         In August 1998, Onyx Television sued Charles Koppel in Germany. The
suit alleges that certain of Mr. Koppel's actions as the managing director of
Onyx Television were improperly performed and seeks damages in an unspecified
amount. The Company and Mr. Koppel will exchange mutual general releases in
connection with the Instar Settlement (as defined) and all of the suits between
the Company and Mr. Koppel will be dismissed with prejudice. See Item 6.
"Management's Discussion and Analysis or Plan of Operation - Liquidity and
Capital Resources" and Item 12. "Certain Relationships and Related Transactions"
for information regarding the Instar Settlement.

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 1998 or the first two quarters of 1999.

                                       16

<PAGE>
                                     PART II

ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

TRADING MARKET FOR THE COMPANY'S SECURITIES

         The Common Stock was quoted on the NASDAQ Small Cap Market under the
symbol "CPMG" from July 1996 until June 8, 1998, when the Common Stock was
delisted from the NASDAQ Small Cap Market. Subsequent to that date, until
November 17, 1998, the Common Stock was only listed in the pink sheets published
by the National Quotations Bureau. On November 17, 1998, the Common Stock began
to be quoted on the Bulletin Board maintained by the NASD. The Company does not
believe that there is an active trading market for the Common Stock at this
time.

         The following table sets forth, for the calendar quarters indicated,
the range of high and low bid prices per share of the Common Stock:

                                                             HIGH         LOW
                                                             ----         ---
         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
         Fourth Quarter (commencing November 17, 1998)      21/32         1/4

         1999

         First Quarter                                       3/16        5/32
         Second Quarter (to June 4, 1999)                   11/64        9/64

         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 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 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 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 may discourage broker-dealers from effecting
transactions in the Common Stock which could severely limit the market liquidity
of the Common Stock.

COMMON STOCK PURCHASE WARRANTS

         The Company has the following warrants to purchase common shares
outstanding at the date of this Form 10-KSB:

         DESCRIPTION                                                   NUMBER
         -----------                                                   ------
         Warrants to purchase common stock at $4.00 per share         5,200,000
         Warrants to purchase common stock at $3.125 per share          433,328
         Warrants to purchase common stock at $2.50 per share         1,100,000

                                       17

<PAGE>

         The Company is also obligated to issue warrants to the former Unimedia
stockholders, as follows:

         DESCRIPTION                                                   NUMBER
         -----------                                                   ------
         Warrants to purchase common stock at $4.00 per share         1,139,144
         Warrants to purchase common stock at $3.125 per share           77,871
         Warrants to purchase common stock at $2.50 per share           197,675

         All of the outstanding and to be outstanding warrants will expire 36
months after the Company registers the shares underlying such warrants for
resale. In that regard, the Company intends in the near future to file a
registration statement to register the resale of these shares by the warrant
holders.

         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 the warrant holders the
right, for a period of not less than 61 days, to exercise their warrants and
receive two shares of Common Stock at an exercise price of $0.30 per share. If
the holders of the outstanding warrants do not exercise this right, the warrants
will remain outstanding on their original terms until their expiration date.
This right will be given to the Company's warrantholders in order to allow the
Company's warrantholders, many of whom originally acquired their shares at $2.50
per share, to acquire additional company securities at a lower price and to
raise additional capital for the Company's operations.

         The Company has offered one of its warrant holders, Auric Investments
Limited ("Auric"), the right to subscribe to purchase 1,566,156 shares of Common
Stock on the basis of two shares for each of the 783,078 warrants which they
hold, but at an exercise of $0.20 per share. Auric was granted this lower price
due to the assistance which they provided to the Company in helping the Company
obtain the quotation on the Bulletin Board maintained by the NASD.

OTHER MATTERS

         The Company is also considering giving its existing stockholders the
right to participate in the future development of the Company at an attractive
price, although the terms of such participation have not been finally determined
and any such offer will be subject to satisfaction of applicable requirements
under U.S. securities laws.

CONTEMPLATED STOCKHOLDERS' MEETING

         The Company intends to hold a stockholders' meeting in the near future.
The Company intends to make the following proposals for consideration by its
stockholders at the meeting: (i) a proposal to ratify the terms of the
arrangements between the Company and Groupe AB and Superstar as more
particularly described in Item 6. "Management's Discussion and Analysis or Plan
of Operation;" (ii) a proposal to reverse split the Company's outstanding common
stock on a one-for-

                                       18

<PAGE>

ten basis, with the Company's authorized common stock remaining at 50 million
shares (thereby increasing the Company's available shares for issuance to
45,990,587 shares and allowing for the issuance of shares due to Groupe AB and
Superstar upon the exercise of outstanding convertible debt); (iii) to ratify
the grant of a two year warrant to purchase 16.0 million shares at $0.10 per
share to an entity controlled by the Company's Chairman; and (iv) to elect six
persons to serve as directors of the Company until the next annual stockholders'
meeting or until their successors are elected and qualified. The Company has
filed a Preliminary Proxy Statement with the SEC and expects to mail to its
stockholders in the near future a definitive proxy statement for use in
connection with the meeting in the near future. All share references in this
Form 10-KSB are before the purposed reverse stock split.

DIVIDEND POLICY

         The Company has never declared a cash dividend on its Common Stock. The
Board 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
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.

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 ANNUAL REPORT ON 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
UNCERTAINTIES, INCLUDING, WITHOUT LIMITATION, THE ABILITY OF THE COMPANY TO
MAINTAIN OR INCREASE THE DISTRIBUTION OF ONYX TELEVISION ON GERMAN CABLE
SYSTEMS, THE ABILITY TO INCREASE ONYX TELEVISION'S ADVERTISING REVENUES, CHANGES
IN COSTS OF PROGRAMMING, AND MATTERS RELATING TO ONYX TELEVISIONS' RELATIONSHIP
WITH THE GERMAN MEDIA AUTHORITIES HAVING JURISDICTION OVER ONYX TELEVISION, 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
CONTAINED HEREIN ARE REASONABLE, ANY OF THESE 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.

                                       19

<PAGE>

         GENERAL

         The 1997 and 1998 financial results include the consolidated accounts
of the Company, its wholly owned subsidiary CM(UK) and CM(UK)'s wholly owned
subsidiary, Onyx, and the Company's 81.6% owned subsidiary Unimedia, and
Unimedia's 90% owned subsidiary TopCard SA ("TopCard"). The Company's 50%
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. Both Unimedia and TopCard have revenues from the sales of goods and
services. Results for 1998 also include the activities of Pixel Ltd. and its
47.5% interest in Henry Communications, Ltd., which is accounted for using the
equity method. Pixel was effectively acquired as of January 1, 1998, has been
consolidated as of its date of acquisition. Pixel's revenues are generated from
the sale of animation and graphic design to Israel Cable Programming and from
services provided in its post-production editing facilities. The Company's
interest in TIAG has been accounted for as an asset held for disposition.

         The 1997 Consolidated Financial Statements have been restated to
conform to the 1998 Consolidated Financial Statements. The restatement is in
respect of the treatment of the Company's issued stock held by Unimedia. The
stock held was within investments in the original 1997 Financial Statement and
the cost were adjusted by a year end valuation provision. The 1997 Restated
Financial Statements were restated to show the holding at original cost and as
an element of Shareholders' Equity. In Fiscal 1998, the results of Tinerama are
treated as discontinued operations and the 1997 comparatives have been
reclassified accordingly.

         The Company has recently issued a significant amount of debt
convertible into Common Stock at $0.10 per share, the amount which the Board has
determined and believes to be the fair market value of the Common Stock at the
date of grant. While the Company's Common Stock is quoted on the Bulletin Board
maintained by the NASD, there is currently only a limited market for the Common
Stock, and no opinion on the valuation of the Common Stock has been obtained
from a third party. If it were to be later determined that the fair market value
of the Common Stock on the date of these transactions was greater than $0.10 per
share when such convertible debt were issued, the difference between the fair
market value of such shares and $0.10 per share would be charged to the
Company's operations.

                                       20

<PAGE>

SELECTED FINANCIAL DATA

         THE FOLLOWING INFORMATION HAS BEEN DERIVED FROM THE FINANCIAL
STATEMENTS OF THE COMPANY. THE FINANCIAL STATEMENTS AS OF AND FOR THE PERIODS
ENDED DECEMBER 31, 1997 AND 1998 INCLUDED ELSEWHERE HEREIN HAVE BEEN AUDITED BY
DELOITTE & TOUCHE AND PRICEWATERHOUSECOOPERS, RESPECTIVELY, INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS. THIS SECTION SHOULD BE READ IN CONJUNCTION WITH
THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO AND THIS
"MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION," WHICH ARE INCLUDED
ELSEWHERE IN THIS FORM 10-KSB.

<TABLE>
<CAPTION>
                                                       FISCAL YEAR ENDED DECEMBER 31,
                                                   --------------------------------------
                                                                              RESTATED
                                                        1998                    1997
                                                   ---------------         --------------
<S>                                                     <C>                    <C>
STATEMENT OF INCOME DATA:

Operating Revenues...........................           $2,468,490             $1,286,076
Operating Costs:
     Staff costs.............................            2,765,239              3,572,498
     Depreciation and amortization...........            1,410,697              1,564,452
     Other Operating expenses................            9,145,292             11,104,510
                                                   ---------------         --------------
             Total Operating Costs...........          (13,321,228)           (16,241,460)
Operating Loss...............................          (10,852,738)           (14,955,384)

Equity in net losses in investment in joint venture       (150,808)              (251,550)
Financial income (expense net)...............              970,407             (2,812,292)
Other income (expense).......................             (465,996)              (441,748)
                                                   ---------------         --------------
Loss from continuing operations before taxation        (10,498,835)           (17,577,478)
Tax provision (credit).......................               41,552                  1,658
                                                   ---------------         --------------
                                                       (10,457,283)           (17,575,820)
Discontinued operations loss.................             (308,532)              (797,770)
Minority interest............................               (1,732)                 1,834
                                                   ---------------         --------------
Net Loss.....................................          (10,767,547)           (18,371,756)
                                                   ===============         ==============
Net loss Per share for continuing operations.

                                                   ===============         ==============
         basic                                             ($0.26)                ($0.63)
                                                   ===============         ==============
         diluted                                           ($0.26)                ($0.63)
                                                   ===============         ==============
Net loss per share including discontinued operations

                                                   ===============         ==============
         basic                                             ($0.27)                ($0.66)
                                                   ===============         ==============
         diluted                                           ($0.27)                ($0.66)
                                                   ===============         ==============
Weighted Average Shares Outstanding - basic..           40,094,139             27,966,383
                                                   ===============         ==============
Weighted Average Shares Outstanding - diluted           40,094,139             27,966,383
                                                   ===============         ==============
</TABLE>

<TABLE>
<CAPTION>

                                                                   December 31,
                                                    -------------------------------------------
                                                           1998                     1997
                                                    ------------------       ------------------
<S>                                                       <C>                       <C>
BALANCE SHEET DATA:

Working Capital/(Deficit)...................              $(20,607,970)             $(9,373,049)
Total Assets................................                 6,608,642                6,302,328
Total Liabilities...........................                23,440,814               11,611,064
Minority Interest...........................                   404,209                  402,477
Stockholder's Equity/(Deficiency in Net Assets)            (17,236,381)              (5,711,213)
</TABLE>


                                       21

<PAGE>

         YEAR ENDED DECEMBER 31, 1998 AND 1997

         Operating revenues for the year ended December 31, 1998 were $2.47
million, an increase of $1.18 million compared to operating revenues of $1.29
million for 1997. This increase in operating revenue from period to period was
largely attributable to revenues for 1998 of an aggregate of $1.70 million of
operating revenues at TopCard and Pixel. The Company acquired Unimedia, TopCard
and Pixel under the purchase method of accounting and therefore accounted for
their operations from their respective date of purchase (August 1997, November
1997 and January 1998.)

         Advertising sales by Onyx Television during 1998 totaled $0.76 million,
compared to $0.46 million for 1997. The Company has recently signed an agreement
with a newly appointed media agency, whose agents are developing new marketing
and sales strategies for Onyx Television and, although there can be no
assurance, the Company believes that Onyx Television's advertising revenue will
increase in the future.

         In addition, Onyx has entered into a two year strategic alliance
agreement with a subsidiary of Groupe AB, a French television production
company, which became operational on October 1, 1998. Pursuant to that
agreement, Groupe AB, through its subsidiary, MMP S.A., provides certain
technical services to the Company, including the use of a transponder and uplink
facilities, transmission services and use of a master control room, as well as
providing the funding required to pay cable transmission costs. In return, the
Company pays MMP $260,000 per month (initially in debt, but automatically
convertible into Common Stock when the Company has sufficient authorized but
unissued shares to allow for such conversion).

         Operating costs, including staff costs, depreciation and amortization,
totaled $13.32 million for Fiscal 1998 (1997 - $16.24 million). Fiscal 1998
included $2.40 million of operating costs relating to the operations of Pixel,
Unimedia and TopCard. This compares to $0.72 million in 1997 relating to TopCard
and Unimedia.

         Total operating costs, excluding operating expenses associated with the
operations of Pixel, Unimedia and TopCard, decreased by $4.6 million for 1998
compared to 1997. During the latter part of 1997, and throughout 1998, the
Company took steps to substantially reduce costs across all the group operations
and these changes favorably impacted operating costs for 1998.

         Onyx's operating costs were reduced to $8.24 million in Fiscal 1998
from $12.0 million in Fiscal 1997 and are set to fall further in 1999 as a
result of the strategic agreement detailed above with Groupe AB. Operating
expenses of Onyx include programming costs, broadcast studio expenses and
transmission expenses.

         Depreciation and amortization for Fiscal 1998 was $1.41 million
compared to $1.56 million for Fiscal 1997.

         As a result of all of the above factors, the Company's operating loss
was $10.85 million for the year ended December 31, 1998, compared to an
operating loss of $14.96 million for the same period in 1997.

                                       22

<PAGE>

         The increase in other expenses relates to the loss incurred on the sale
of investments in 1998. Interest expense also increased substantially during the
1998 period compared to interest expense in 1997, due to the substantial
increase in borrowings from period to period. Financial income also included a
credit of $2.25 million in respect of foreign exchange gains arising from
currency exchange rates at December 31, 1998 compared to exchange rates at
December 31, 1997 (Fiscal 1997 - $2.51 million charge).

         Pixel reported a net profit of $112,000 in Fiscal 1998 compared to a
net profit of $376,000 in the year prior to acquisition. This result included a
share of the net loss of $74,000 for Henry, its 47.5% owned subsidiary, compared
to a share of net profit of $137,000 in the year prior to acquisition. Henry is
accounted for on an equity basis.

         During Fiscal year 1998, the Tinerama companies continued to operate in
difficult economic uncertainty resulting in a loss of $308,532, compared to a
loss of $797,770 as restated for Fiscal 1997. While Blink reduced substantially
its operating loss in Fiscal 1998, it has still not met its original target
objectives and management is reviewing ways of eliminating the continuing
losses. During 1998, the Board in its review of investments approved a decision
to dispose of Tinerama and it is anticipated that its sale will be concluded by
the end of 1999. Accordingly the operating loss of Tinerama has been
reclassified as a discontinued operation and the 1997 results have been
similarly restated.

         The Company has significant tax losses in the groups arising primarily
from the operating losses incurred in Germany. These tax losses are available to
be carried forward to be set off against future profits in Germany. However, at
the end of 1998, management forecast that the Company may not be profitable in
1999 and therefore no credit for income taxes was made. The Company will
continue to review its tax valuation allowance during future periods.

         Taking into account all of these factors, the net loss for 1998 was
$10.77 million ($0.27 per basic and $0.07 per diluted share), compared to a net
loss of $18.37 million ($0.66 per basic and diluted share) for 1997.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

         GENERAL

         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, 1998, the Company has incurred an accumulated deficit of
approximately $48.23 million, principally related to the Company's launch and
operation of Onyx Television. At December 31, 1998, the Company had a negative
working capital of approximately $20.61 million.

                                       23

<PAGE>

         INSTAR LOAN

         In October 1996, the Company's UK subsidiary, CM (UK), entered into an
agreement to borrow US $2.0 million (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 Instar Loan is
guaranteed by the Company and Onyx and is secured by a charge on all of CM
(UK)'s assets and a pledge of the stock of CM (UK). Interest was payable monthly
on the Instar Loan, at the rate of 2% above Lloyds Bank base rate until December
31, 1997 and 13% per annum thereafter.

         As part of the Instar Loan, CM (UK) granted a charge against all of its
assets and the Company has granted a charge against the shares of CM (UK) to
secure the obligation in connection with the guaranty of the transponder lease.
See Note 10 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 CM (UK) pledge all of its assets and that the
Company pledge its stock interest in CM (UK) to secure their obligations in
connection therewith. Instar and Universal have agreed that their liens on the
Company's assets shall have equal status and that they shall share equally in
the proceeds of the collateral.

         At the date of this Form 10-KSB, the Company and Instar have reached an
agreement in principal to settle their dispute. Under the Instar Settlement, the
Company has agreed to pay Instar $2.2 million, $1.4 million of which will be
paid at the closing of the Instar Settlement and the balance of which will be
paid (without interest) in installments of $100,000 over the next eight months.
The Company has also agreed to issue 2.0 million shares to Instar when the
Company's Stockholders approve an increase in the Company's authorized common
stock. Groupe AB has agreed to guaranty repayment of the settlement amounts, and
is obligated to deliver a guaranty agreement to Instar within 30 days after the
closing. As part of the settlement, Universal has agreed that the Company shall
no longer be liable to it regarding its guaranty of the transponder lease.
Additionally, as part of the settlement: (i) the liability of Latitude
Investments, Ltd. ("Latitude") to the Company will be extinguished; (ii) the
Company and Instar, Universal and Latitude will enter into mutual releases
regarding their respective obligations in connection with these matters, and
(iii) the Company and Charles Koppel, the former Chief Executive Officer of the
Company, will enter into a mutual general release. As part of the settlement,
Instar and Universal will release their charges against CM(UK)'s assets and the
stock of CM(UK). The Instar Settlement is expected to be completed in the near
future, although there can be no assurance that the settlement will be
completed.

         EQUITY OFFERINGS BY THE COMPANY

         In 1995, the founders of the Company organized Excalibur Communications
Limited (n/k/a (CM(UK)) to develop Onyx Television and to own the Company's
interest in TIAG. In December 1995, the founders of the Company exchanged their
shares in Excalibur for shares of the Company's

                                       24

<PAGE>

common stock. Simultaneously, in late 1995 and early 1996, the Company raised
net proceeds of $14.4 million in a private placement of its securities.

         On March 3, 1997, the Company closed a 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 4.0 million
shares of Common Stock subscribed by Unimedia. At the time of this private
placement, Unimedia was not an affiliate of the Company.

         On June 25, 1997, the Company accepted a subscription for $4.0 million
from Unimedia. In this 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, simultaneously with the closing of the share exchange between
certain of the stockholders of Unimedia and the Company, as described below. 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. At the time
of this private placement, Unimedia was not an affiliate of the Company.

         Simultaneously with and immediately after this placement, Unimedia
transferred 6,109,140 of the shares which it owed to eight investors at prices
ranging from $0.57 to $0.75 per share. One of these investors was an entity
controlled by David Ho, who at the time of this transaction was not an affiliate
of the Company. That entity, Unbeatable Investments Limited ("Unbeatable")
acquired 4,385,965 of these shares. None of the other investors who purchased
shares from Unimedia at this time were affiliates of the Company or Unimedia. In
connection with the transfer of these shares, Unimedia paid a fee to Valfab for
its services in connection with introducing Unimedia to certain of these
investors. The fee consisted of $195,000 in cash and 106,666 shares of the
Common Stock owned 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. Stockholders of Unimedia who did not participate in
the first closing of 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
on the Company's books at $0.57 per share. The Company acquired Unimedia based
on their belief that the merged entity would cross fertilize Internet
development activities and television distribution in order to poise the Company
at the convergence of thematic entertainment television and the internet.
Additionally, Unimedia and investors identified by Unimedia provided significant
financing for use in the Company business.

         As part of the completion of the first closing of the Unimedia share
exchange, four persons designated by Unimedia became directors of the Company
(Gilles Assouline, Michel Assouline, David Ho and Jean Pierre Souviron). At the
time, the Company's Board consisted of eight persons (Charles Koppel, James
Leitner, Karl Hauptmann, Barry Llewellyn, Stephen Kornfeld, Stanley Hollander,

                                       25

<PAGE>

Marc Sillam and Jean Francois Klein), and it was intended that the Board would
continue as a twelve person Board after completion of the Unimedia Share
Exchange. However, shortly after the closing, three of the Company's Board
members (Charles Koppel, James Leitner and Karl Hauptmann) unexpectedly resigned
from the Board.

         At the time of the closing of the Unimedia Share Exchange, Unimedia
held 4,908,403 shares of the Common Stock. Subsequent to the closing of the
Unimedia Share Exchange, Unimedia has transferred 3,240,487 of these shares to
investors in several private transactions, as follows:

TRANSFEREE                                                             SHARES
                                                                    TRANSFERRED

Transferees not affiliated with the Company and Unimedia........     1,244,487
Stockholders of TopCard(1)......................................       456,000
Gralec Establishment(2).........................................     1,540,000
                                                                     ---------
                                                                     3,240,487
                                                                     =========

         (1)      Shares were transferred to the stockholders of TopCard in
                  connection with Unimedia's acquisition of 80% of TopCard's
                  outstanding shares. See Item 1. "Description of Business-
                  Other Businesses-TopCard, S.A." for information regarding this
                  transaction. None of the TopCard stockholders were affiliates
                  of the Company or Unimedia at the time that these shares were
                  transferred to the stockholders of TopCard.

         (2)      During the first half of 1998, Unimedia transferred 1,540,000
                  shares of the Company's Common Stock to Gralec Establishment
                  ("Gralec") for an aggregate purchase price of $500,000. The
                  Company agreed to register the shares of Common Stock
                  transferred to Gralec, pursuant to a registration rights
                  agreement, on or before November 30, 1998, which has not
                  occurred. As part of the agreement, Unimedia agreed that
                  Gralec may put the shares back to Unimedia for the purchase
                  price if these shares were not registered by that date.

                  Since this registration has not taken place, the Company has
                  agreed with Gralec to extend the period during which the
                  registration may be completed until April 30, 1999. In return,
                  the Company has granted Gralec: (1) a subscription to purchase
                  2.2 million shares for a purchase price equal to the net
                  proceeds from the sale of 50,000 ActivCard shares, and (ii) an
                  option to purchase 6.0 million shares of its authorized but
                  unissued common stock at an exercise price of $0.10 per share,
                  which option will be exercisable until 30 days after the
                  shares of Common Stock originally issued to Gralec are
                  registered for resale.

         These transfers were effected to raise funds for the Company's and
Unimedia's operations and to complete the acquisitions of TopCard and Pixel.

         At the date of this Form 10-KSB, Unimedia continues to own 1,667,916
shares of the Company's Common Stock, including 600,000 shares which have been
pledged by Unimedia to Bank Hapoalin to secure Unimedia's guarantee to that bank
of certain indebtedness of Pixel, Ltd.

         The Company's short term funding requirements were also met during the
fourth quarter of 1997 through direct private placements by the Company to four
non-U.S. investors of an aggregate

                                       26

<PAGE>

of 793,335 shares of the Company's Common Stock (raising $586,000 at prices
between $0.60 and $0.75 per share).

         FUNDS BORROWED SUBSEQUENT TO THE UNIMEDIA SHARE EXCHANGE FROM
         SUPERSTAR AND GROUPE AB

         In September 1997, the Company borrowed $500,000 of short term working
capital in the form of a convertible loan from 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.

         On January 9, 1998, CM (UK) borrowed an aggregate of $1,250,000 from
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
replace a loan previously made to CM(UK) (see above) by Unbeatable. The Notes
bear interest at the rate of 13% per annum and were convertible into shares of
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 were not convertible until the Company has held a
stockholders meeting at which its Articles of Incorporation were amended to
increase the number of authorized shares of Common Stock of the Company to at
least the number required for conversion of 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 equally pro rata as and when payments are made to Instar according to a
stated proportion. Instar and Universal are secured creditors of the Company and
CM (UK). To secure its obligations under the Notes, CM (UK) and the Company have
granted to Superstar a security interest on the same collateral upon which
Instar has been granted a security interest by CM (UK) and the Company and upon
identical terms and conditions as are set forth in the security documents
entered into between Instar and CM (UK) (and Instar and the Company) pursuant to
the loan documents between CM (UK), the Company 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 the Notes. The conversion terms of the Superstar loan were
recently amended and are described below.

         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 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. See below for the amended
conversion terms of this loan.

         On March 23, 1998, MMP, SA ("MMP"), a stockholder 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

                                       27

<PAGE>

which the Company borrowed $2,000,000. Outstanding amounts under the MMP Line of
Credit bear interest at the rate of 13% per annum. Outstanding principal and
accrued interest was due and payable on December 31, 1998 and the Loan has
recently been amended (see below). 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 stockholders 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. See below for the amended conversion terms of this loan.

         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. See
below for the amended conversion terms of this loan.

         In August 1998, the Company entered into agreements with Superstar and
Groupe AB pursuant to which Superstar agreed to make available $5.0 million and
Groupe AB agreed to provide cash and services aggregating $6.64 million
($400,000 in cash which was payable to the Company in August 1998 and $6.24
million in services over a two year period). Such funding is initially in the
form of debt (bearing interest at the rate of 13% per annum), 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 available
for issuance. If stockholder approval of the increase in the authorized common
stock is not obtained, then the debt incurred to that date, together with
interest and penalties, will be immediately due and payable. Once these
obligations are converted into Common Stock and assuming no exercise of options
and warrants, Superstar and Groupe AB will control approximately 80% of the
Company's outstanding common stock and will control the Company.

         In December 1998, when the Company did not meet its obligation to hold
a stockholders' meeting by November 30, 1998, Superstar and Groupe AB demanded
that the Company: (i) reduce the conversion price on all of its outstanding
convertible debt to $0.10 per share; and (ii) that the Company pay a penalty of
2% of the outstanding principal amount of the loans (payable in shares at $0.10
per share) for each month during which the Company does not hold its special
stockholders meeting to seek approval of the amendment to the Company's articles
of incorporation. On December 18, 1998, the Board agreed to these changes.
Superstar and Groupe AB also agreed, as part of the amendment to the terms of
their loans, that all of the convertible debt which they hold will now
automatically convert into Common Stock upon the approval by the Company's
stockholders of the increase in the Company's authorized Common Stock.

         In March 1999, Groupe AB agreed to fund an additional $6.0 million to
the Company for working capital and to all the Company repay indebtedness,
including the funds required to complete the Instar Settlement. Such amount will
be funded over the next year and will automatically convert into Common Stock at
$0.10 per share.

                                       28

<PAGE>

         DEBT DUE FROM LATITUDE INVESTMENTS LIMITED

         The Company's balance sheet at December 31, 1998 includes a due from
stockholder of $313,691. This amount represents an amount due from Latitude, one
of the Company's founding stockholders. See Item 12. "Certain Relationships and
Related Transactions." This amount was initially presented to the Company as a
deposit paid by Latitude to PTT Telecom on behalf of CM (UK) and Latitude
received credit for the amount of such deposit in connection with its original
1995 subscription to purchase shares of CM (UK)'s stock (which shares were
exchanged for shares of the Company's Common Stock in December 1995). The
Company had determined that no deposit was ever paid by Latitude to PTT Telecom
and that therefore the shares of Common Stock owned by Latitude were not fully
paid as presented. This obligation will be deemed satisfied as part of the
Instar Settlement.

         The Company has been advised by KPN Telecom, formerly known as PTT
Telecom ("KPN"), that Onyx Television owes them approximately $1,060,000. The
Company believes that the amount due is significantly lower, due to failures in
the performance of services by KPN over the period of the agreement. At the
present time, the Company has accrued the entire amount allegedly owed to KPN
until this dispute is resolved. Additionally, the Company has been advised that
KPN has called upon the guaranty from Universal (see discussion above) and drawn
down upon the 500,000 ECU (approximately $587,000) being held to secure the
guaranty. As a result, the Company owed the amount paid by Universal back to
Universal. However, the Company's obligation to Universal will be deemed
satisfied as part of the Instar Settlement.

         LIQUIDITY AND CAPITAL RESOURCES

         The Company believes that the proceeds from the Superstar and Group AB
agreements will fund, along with anticipated revenues from operations, the
Company's operations for the next 12 months (assuming that the Company's
authorized Common Stock available for issuance is increased at the stockholders'
meeting anticipated to be held in the near future). However, if revenues do not
meet expectations, additional funding will be required. The Company will also
require additional funding to meet its non-operating indebtedness, and may issue
additional shares of its Common Stock to repay some of this indebtedness. There
can be no assurance that such funding will be available.

         In regard to its future capital raising efforts to fund the Company's
businesses, the Company is likely going to have to fund these future capital
requirements through additional sales of its 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

                                       29

<PAGE>

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 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 stockholders 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.

                                       30

<PAGE>

ITEM 7.           FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                                                                                                               PAGE
                                                                                                               ----
<S>                                                                                                             <C>
Years ended December 31, 1998 and 1997

         Independent Auditors' Report of PricewaterhouseCoopers to the Board of
                  Directors and Shareholders of Capital Media Group Limited.....................................F-2

         Independent Auditors' Report of Deloitte & Touche to the Board of
                  Directors and Shareholders of Capital Media Group Limited.....................................F-3

         Independent Auditors' Report of Coopers & Lybrand to the
                  Board of Directors and Stockholders of Tinerama Investment AG.................................F-4

         Consolidated Balance Sheet at December 31, 1998 and 1997 (restated)....................................F-5

         Consolidated Statement of Operations For Years Ended December 31, 1998
                  and 1997 (restated)...........................................................................F-6

         Consolidated Statement of Stockholders' Equity For Years ended December 31,
                  1998 and 1997 (restated)......................................................................F-7

         Consolidated Statement of Cash Flows For the Years Ended December 31, 1998
                  and 1997 (restated)...........................................................................F-8

         Notes to Consolidated Financial Statements.............................................................F-9
</TABLE>

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

         The Company has engaged the firm of PricewaterhouseCoopers to act as
the Company's independent auditors for the fiscal year ended December 31, 1998.

         Deloitte & Touche ("Deloitte & Touche"), which served as the Company's
independent auditors during the fiscal years ended December 31, 1995, 1996 and
1997, resigned as the Company's independent auditors effective on February 18,
1999. In connection with their audits of the Company's financial statements for
each of the two fiscal years ended December 31, 1997 and 1996, and in the
subsequent interim periods preceding their resignation, there were no
disagreements between the Company and Deloitte & Touche on any matters of
accounting principles or practices, financial statement disclosure or auditing
scope or procedures which, if not resolved to the satisfaction of Deloitte and
Touche would have caused them to make reference to the subject matter of the
disagreement(s) in connection with their report. Deloitte and Touche's audit
reports for 1997 and 1996 contained explanatory paragraphs as to the going
concern and as to the outcome of certain litigation against the Company.

                                       31

<PAGE>

                                    PART III

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

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

NAME                      Age     Position

Gilles Assouline           43     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

         Stephen Kornfeld and Jean-Pierre Souviron, who have served as directors
since September 1996 and August 1997, respectively, are expected to retire from
the Board at the close of the Company's next stockholders' meeting.

CHANGES TO THE COMPANY'S MANAGEMENT

         The Company's Board currently consists of seven members. In August
1997, in connection with the completion of the Company's acquisition of a
majority of the outstanding shares of Unimedia, S.A. ("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, unexpectedly resigned from the Board. Additionally, two directors of
the Company, for reasons unrelated to the Company's operations and the Company's
acquisition of Unimedia, 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
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.

                                       32

<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 the founder and managing director of several consulting,
software and media companies. See Item 12. "Certain Relationships and Related
Transactions."

         Prior to July 1995, for more than five years, Michel 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, Michel 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. Mr. Ho is also a director of Regency Worldwide Holdings Limited.
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 to
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 and Valeo.

         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 of the Company 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
companies, as well as pursuing other business interests.

         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

                                       33

<PAGE>

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 or Compensation Committees.
It was considered the continuing responsibility of the whole Board to consider
matters with respect to 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. The Compensation Committee met once during 1997 and once during 1998
and the Audit Committee did not meet during 1997 or 1998.

         AUDIT COMMITTEE

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

         COMPENSATION COMMITTEE

         The Compensation Committee is comprised of Messrs. Ho, Klein, Hollander
and Souviron. The Compensation Committee will review and recommend the
compensation arrangements for all directors and officers and approve 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 sometimes reimbursed for travel expenses
incurred in attending meetings of the Board of Directors and its committees.

         On March 10, 1998, the Board of Directors granted options to purchase
an aggregate of 4,000,000 of 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

                                       34

<PAGE>

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 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 options to purchase 100,000 shares of Common Stock 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 stockholders 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 the exercise and/or conversion of the Company's other
derivative securities.

CONSULTANTS

         Jacques Dubost, age 69, acts as consultant on behalf of his company,
Valfab S.C.B. ("Valfab"), for Unimedia and the Company, 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.

         In 1997, Valfab received the following fees relating to introducing
investors to Unimedia who purchased Company common stock from Unimedia (a)
$195,000 in cash (b) 106,666 shares of the Common Stock with a $64,000 value.
See Item 6. "Management's Discussion and Analysis or Plan of Operation --
Financial Condition, Liquidity and Capital Resources." Further, if Valfab
introduces investors to the Company in the future, Valfab will receive
commissions not to exceed 8% of the investment made.

         Valfab has also received (and will receive in the future) commissions
for services relating to the Company's and Unimedia's on-line gaming and
entertainment activities. It can be anticipated that a portion of any fees paid
to Valfab will be paid in shares of the Company's authorized but unissued common
stock.

BOARD MEETINGS

         The Board of Directors of the Company held a total of 10 meetings
during the fiscal year ended December 31, 1998. Each of the directors attended
at least 75% of the aggregate number of meetings of the Board of Directors.

                                       35

<PAGE>

FAMILY RELATIONSHIPS

         Gilles Assouline, the Company's Chairman of the Board, President and
Chief Executive Officer, and Michel Assouline, both members and nominees to the
Company's Board of Directors, are brothers.

COMPLIANCE WITH SECTION 16(A)

         The Company's officers, directors and more than 10% holders are
required to make filings with the SEC on Forms 3, 4 and, if required, 5 under
Section 16(a) of the Securities Exchange Act of 1934, to report their beneficial
ownership of the Company's securities at the time they became officers,
directors and more than 10% stockholders of the Company, and each month
thereafter that such ownership changes. All of the Company's current officers,
and all of the Company's current directors (except Jean-Francois Klein) have
made all of their required filings for 1998 and for periods prior thereto. Based
upon the information available to the Company, all of the holders who are
believed to own beneficially more than 10% of the Company's outstanding shares
have made their required filings under Section 16(a), except Groupe AB and
Claude Berda. All of the filings made by all of the Company's current officers,
directors and more than 10% stockholders were not filed on a timely basis as
required under Section 16(a). The delinquent filings required to be made by
Messrs. Klein and Berda and by Groupe AB will be filed in the near future.

                                       36

<PAGE>

ITEM 10.          EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

         The following table sets forth information about the compensation paid
or accrued during 1998 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.

                                           SUMMARY COMPENSATION TABLE
                                           --------------------------
<TABLE>
<CAPTION>

                                                                                       LONG-TERM
                                                ANNUAL COMPENSATION                    COMPENSATION
                                 --------------------------------------------------    ------------
                                                                       OTHER ANNUAL                  ALL OTHER
NAME                              YEAR          SALARY      BONUS     COMPENSATION     OPTIONS    COMPENSATION
                                                   ($)        ($)           ($)           (#)           ($)
                                                   ---        ---           ---           ---           ---
<S>                               <C>           <C>          <C>          <C>         <C>             <C>
Gilles Assouline                  1998          250,000                               1,000,000       --
                                  1997          104,000      --            --                (1)

Michel Assouline                  1998          200,000                               1,000,000       --
                                  1997           83,000      --            --                (1)

Stephen Coleman                   1998          200,000                               1,000,000       --
                                  1997          160,000      --            --

Charles Koppel                    1997          110,000      --            --                --    100,000(2)

Barry Llewellyn                   1998           75,000                                 200,000     20,000(3)
                                  1997          160,000      --            --                          --
</TABLE>

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

(1)  Gilles Assouline and Michel Assouline received in 1997 under their
     employment agreements (see "Employment Agreements with Executive Officers"
     below) a grant of 200,000 shares and 175,000 shares, respectively, and
     warrants to purchase 200,000 shares and 175,000 shares, respectively.

(2)  Settlement of amounts due under Service Agreement. See Item 3. "Legal
     Proceedings."

(3)  Settlement of amounts due under Service Agreement. No longer employed by
     the Company.

OPTION GRANTS DURING LAST FISCAL YEAR

         The following table sets forth information concerning options to
purchase shares of CMG's Common Stock granted during the fiscal year ended
December 31, 1998 to those persons named in the Summary Compensation Table.

<TABLE>
<CAPTION>
                                                    NUMBER OF          % OF TOTAL
                                                      SHARES         OPTIONS GRANTED
                                                    UNDERLYING       TO EMPLOYEES IN    EXERCISE PRICE   EXPIRATION
                    NAME                         OPTIONS GRANTED       FISCAL YEAR        ($/SHARE)         DATE
                    ----                        ------------------  -----------------  ---------------  ------------
<S>                                                      <C>                 <C>             <C>           <C>
Gilles Assouline............................             1,000,000           25%             $0.35         3/10/03
Michel Assouline............................             1,000,000           25%             $0.35         3/10/03
Stephen Coleman.............................             1,000,000           25%             $0.35         3/10/03
Barry Llewellyn(1)..........................             1,000,000           25%             $0.35         3/10/03
</TABLE>

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

(1)  No longer employed by the Company. Unvested portion of these options
     (800,000 shares) have been forfeited.

                                       37

<PAGE>

AGGREGATED OPTIONS EXERCISED, LAST FISCAL YEAR END OPTION VALUES

         The following table sets forth information concerning the exercise of
stock options to purchase shares of Common Stock during the 1998 fiscal year and
the value of unexercised stock options to purchase shares of Common Stock at the
end of the 1998 fiscal year for the persons named in the Summary Compensation
Table.

<TABLE>
<CAPTION>
                                                                              NUMBER OF                 VALUE OF UNEXERCISED
                                                                         UNEXERCISED OPTIONS          IN-THE-MONEY OPTIONS AT
          NAME                                                            AT FISCAL YEAR END            FISCAL YEAR END($)*
          ----                                                        --------------------------     --------------------------
                        NUMBER OF SHARES
                          ACQUIRED ON
                            EXERCISE           VALUE REALIZED ($)     EXERCISABLE/UNEXERCISABLE      EXERCISABLE/UNEXERCISABLE
                       ------------------      ------------------     --------------------------     --------------------------
<S>                            <C>                     <C>                 <C>                                  <C>
Gilles Assouline.....          --                      --                  320,000/880,000                      0/0
Michel Assouline.....          --                      --                  305,000/870,000                      0/0
Stephen Coleman......          --                      --                  500,000/800,000                      0/0
Barry Llewellyn(1)...          --                      --                     200,000/0                         0/0
</TABLE>
-----------------------------

*        Computed based upon the difference between the closing price of CMG
         Common Stock at December 31, 1998 and the exercise price. No value has
         been assigned to options which are not in-the-money.

(1)      No longer employed by the Company. Unvested options have been
         forfeited.

EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS

         The Company has entered into three-year employment agreements with
Gilles Assouline and Michel Assouline, effective August 1, 1997, 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,
(paid in french francs at the rate of six French francs to the dollar after
August 1998); (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 Stock at the fair market value of the Common Stock on the date of grant
($0.57); and (v) such benefits as are provided generally to the executive
management of the Company. The shares and options vested 2/5 upon the effective
date of the agreement and will vest 1/5 on each of the first, second and third
anniversaries, respectively, of the agreement. The agreements provide that
Messrs. Gilles Assouline and Michel Assouline shall be paid one year's base
compensation if they are terminated without cause during the term of the
agreements.

         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. Llewellyn 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.
Llewellyn 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.

                                       38

<PAGE>

         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

         In March 1998, the Company granted stock options to its executive
officers and directors. See Item 9. "Executive Officers and Directors-Board
Compensation" for information regarding the terms of these stock options.

         On December 18, 1998, the Board approved the grant of a two-year
warrant to purchase an aggregate of 16.0 million shares at an exercise price of
$0.10 per share to Diamond Productions, an entity controlled by Gilles Assouline
and Michel Assouline. This warrant is subject to stockholder approval at the
stockholders meeting which is anticipated to be held in the near future.

                                       39

<PAGE>

ITEM 11.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT

         As of the date of this Form 10-KSB, the Company had issued 40,094,139
shares of its Common Stock, 1,667,916 (including 600,000 pledged as security by
Unimedia to support its guaranty of certain debt of Pixel, Ltd. due to a
financial institution) of which are owned by Unimedia, a company which is an
81.6% owned subsidiary of the Company. As such, at this date there are
38,426,223 shares of Common Stock issued and outstanding.

         Additionally, the Company will issue (assuming a conversion of the
convertible debt at April 30, 1998) immediately upon the approval of an increase
in the authorized Common Stock an additional 66.6 million shares to Superstar
and an additional 60.6 million shares to Groupe AB (plus, in each such case,
additional shares (approximately 16.6 million shares) representing the
conversion into shares of interest and penalty due on this convertible debt to
the date of conversion). The Company will also be contractually obligated to
issue to Groupe AB for services to be rendered on behalf of Onyx Television and
fundings to be made to the Company by Groupe AB over the next two years an
additional 85.8 million shares. Upon conversion of all of the convertible debt
of the Company held by Groupe AB and Superstar into Common Stock (including
interest and penalties thereon and assuming no exercise of warrants and
options), Superstar and Groupe AB will collectively own approximately 80% of the
outstanding Common Stock.

         The Company was 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. Groupe AB and Superstar have agreed to extend the deadline
for the Meeting, but the Company is now obligated to pay a penalty of two
percent (2%) per month of the outstanding principal amount due to Groupe AB and
Superstar, payable in shares of Common Stock at $0.10 per share until such time
as the Company holds the Meeting.

         The following table sets forth, as of the date of this Form 10-KSB, the
share ownership of the Common Stock (without the effect of the conversion of any
outstanding convertible debt, since such debt is not by its terms convertible
until the Company's stockholders approve an increase in the Company's Common
Stock allowing for the automatic conversion of this debt into 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 executive officers; and (iii)
all directors and executive officers as a group, is as follows.

                              [CHART ON NEXT PAGE]

                                       40

<PAGE>

<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)                                       1,750,000                                  4.5%
Stephen Kornfeld(6)(9)                                       775,000                                  2.0%
Karl Hauptmann(10)                                         1,908,000                                  5.0%
James Leitner(11)                                          1,399,500                                  3.6%
Jean-Pierre Souviron(1)(6)(12)                               140,000                                  *
Jean-Francois Klein(1)(6)(13)(14)                          1,785,700                                  4.6%
Stanley Hollander(6)(15)                                      90,000                                  *
Edgeport Nominees(16)                                      2,332,656                                  6.6%
Groupe AB(17)                                              5,000,000                                 13.8%
Claude Berda(13)(17)                                       6,785,700                                 18.4%
Stephen Coleman(3)(18)                                       300,000                                  *
Kestrel, S.A.(19)                                          1,730,942                                  4.5%
Directors and Executive Officers as
a group (8 persons)(20)                                    9,618,965                                 24.6%
</TABLE>
------------------------------------

*        Less than 1%.

(1)      In connection with the Unimedia Share Exchange, (see Item 6.
         "Management's Discussion and Analysis or Plan of Operation - Liquidity
         and Capital Resources" for information) the Company became obligated to
         issue to the former stockholders of Unimedia certain warrants to
         purchase shares of the Company's common stock, as follows: (i) warrants
         to purchase an aggregate of 197,675 shares at an exercise price of
         $2.50 per share; (ii) warrants to purchase an aggregate of 77,871
         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 in the near future.

(2)      Includes shares owned of record by two entities, Diamond Productions
         and Multimedia Investments ("MMI"). Gilles 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, options and warrants to be issued to Mr. Assouline under his
         employment agreement or under the warrant granted to Diamond
         Productions. Additionally, Mr. and Mrs. Assouline's pecuniary interest
         is subject to a put (through ownership of shares in Media Ventures)
         aggregating 110,800 of the Company shares from which they benefit. See
         footnotes (4) and (13) below. If the put were to be exercised, it would
         reduce Anne-Marie and Gilles Assouline's collective interest in the
         Company to 2,007,630 shares (5.1%). Further, MMI intends to utilize up
         to 1.2 million of its shares to repay certain indebtedness owed by such
         company to third parties. In such event, Mr. and Mrs. Assouline will
         benefit from 1,714,493 shares (1,651,508 shares if the put is
         exercised).

(3)      Excludes options to purchase 1.0 million shares at $.35 per share.
         Since these options cannot be exercised until the Company's
         stockholders approve an amendment to the Company's Certificate of
         Incorporation increasing the

                                       41

<PAGE>

         Company's authorized Common Stock, such options are not deemed to be
         beneficially owned at this date for reporting purposes.

(4)      Michel Assouline, the Company's Chief Operating Officer, ultimately
         benefits from the 765,726 (2.0%) shares owned by several corporate
         entities controlled by Gilles Assouline and J. F. Klein. 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, options
         and warrants which may be issued to Michel Assouline under his
         employment agreement or under the warrant granted to Diamond
         Productions. Additionally, Michel Assouline's pecuniary interest is
         subject to a put (see footnote 2 for details) aggregating 55,413 of the
         Company shares from which he benefits. See footnotes (2) and (13). If
         the put were to be exercised, it would reduce Michel Assouline's
         interest in the Company to 708,822 shares (1.8%). Further, if MMI
         utilizes certain of its shares to repay indebtedness, Mr. Assouline
         would ultimately benefit from 621,712 shares (590,223 if the put is
         exercised).

(5)      Shares are owned of record by Unbeatable Investments Ltd. and
         Superstar, both of which entities are controlled by Mr. Ho.
         Additionally, Superstar holds $6.65 million in convertible debt of the
         Company. See Item 6. "Management's Discussion and Analysis or Plan of
         Operation" and Item 12. "Certain Relationships and Related
         Transactions."

(6)      Excludes options to purchase 100,000 shares at $.35 per share. 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.

(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 1,500,000 shares of Common Stock 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.

(10)     Owned of record by Telor International Limited ("Telor"), a corporation
         controlled by Mr. Hauptmann. Includes warrants to acquire 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 a $200,000 interest in the Instar Loan.
         See Item 6. "Management's Discussion and Analysis or Plan of
         Operation" for information regarding the current status of the Instar
         Loan. See also footnote (8).

(11)     Includes warrants to purchase 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 a
         $500,000 interest in the Instar Loan. See Item 6. "Management's
         Discussion and Analysis or Plan of Operation" for information
         regarding the current status 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 of which Gilles
         Assouline is the Chairman, MMI, is held by Claude Berda, who is also an
         officer, director and principal shareholder of Groupe AB. See "Certain
         Relationships and Related Transactions." Mr. Berda is also deemed to be
         the beneficial owner over the shares

                                       42

<PAGE>

         owned by BIMAP, Media Ventures, MMI and Groupe AB. See footnote (17)
         below. The beneficiaries of these shares have a put (see footnote 2 for
         details) to acquire the benefit of an additional 166,063 Company
         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 2,230,297 shares (5.7%) based upon his interest in BIMAP and
         Media Venture. Additionally, Mr. Berda has a pecuniary interest in his
         proportionate interest of the Company securities owned by Groupe AB.
         Further, if MMI uses a portion of its shares to repay debt, the shares
         from which Mr. Berda will ultimately benefit will be 1,413,036 shares
         (1,579,099 shares if the Put is exercised).

(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 a $300,000 interest in the Instar Loan. See Item 6.
         "Management's Discussion and Analysis or Plan of Operation" for
         information regarding the current status of the Instar Loan.

(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. Mr. Klein disclaims beneficial
         ownership over the shares and warrants owned by Groupe AB. Mr. Berda is
         deemed the beneficial owner of the shares and warrants owned by Groupe
         AB, by virtue of his being a principal stockholder, officer and
         director of that entity, although he only benefits from his
         proportionate share of such securities. If the securities owned by
         Groupe AB are aggregated with the shares beneficially owned by Mr.
         Berda through BIMAP and, Media Ventures, Mr. Berda would be deemed to
         ultimately benefit from an aggregate of 7,064,237 shares (19.4%), or
         7,230,300 (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 or Plan of
         Operation-Financial Condition, Liquidity and Capital Resources" and
         Item 12. "Certain Relationships and Related Transactions."

(18)     Includes options to purchase 300,000 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 67,500 shares of Common Stock at an
         exercise price of $4.00 per share. Montague Koppel, the father of
         Charles Koppel, the Company's former CEO, acts on behalf of Instar,
         Universal, Latitude and Transit with respect to the Company.

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

                                       43

<PAGE>

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In October 1996, CM (UK), a wholly owned subsidiary of this Company,
borrowed US $2.0 million from Instar Holdings, Inc. (the "Instar Loan") and the
Company currently owes Instar $2.61 million including interest to April 30,
1999. At the date of this Form 10-KSB, the Company and Instar have reached an
agreement in principal to settle their dispute. Under the settlement (the
"Instar Settlement"), the Company has agreed to pay Instar $2.2 million, $1.4
million of which will be paid at the closing of the Instar Settlement and the
balance of which will be paid (without interest) in installments of $100,000
over the next eight months. Groupe AB has agreed to guaranty repayment of this
amount to Instar, and will be obligated to deliver a guaranty agreement to
Instar within 30 days after the closing. Additionally, as part of the
settlement, Instar will receive 2.0 million shares when the Company's
Stockholders' approve an increase in the Company's authorized Common Stock. The
settlement is expected to be completed in the near future, although there can be
no assurance that the settlement will be completed.

         Further as part of the settlement: (i) Universal has agreed that the
Company shall no longer be liable to it for its guaranty of the transponder
lease, (ii) the liability of Latitude Investments, Ltd. ("Latitude") to the
Company will be extinguished; (iii) the Company and Instar, Universal and
Latitude will enter into mutual releases regarding their respective obligations
relating to the Instar, Universal and Latitude matters, and (iv) the Company and
Charles Koppel, the former Chief Executive Officer of the Company, will enter
into a mutual general release. Finally, as part of the Instar Settlement, Instar
and Universal will be releasing their charges against CM(UK)'s assets and the
stock of CM(UK). See Item 6. "Management's Discussion and Analysis or Plan of
Operation -- Financial Condition, Liquidity and Capital Resources."

         Karl Hauptmann, James Leitner and Barry Townsley, each of whom is a
former director of the Company, have interests of 10%, 25% and 15%,
respectively, in the Instar Loan and Montague 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 and controls the balance of the Instar
Loan. Mr. Koppel also acts on behalf of Latitude, Universal and Transit
Securities, Inc.

         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 ("TIAG"). The other 51% of TIAG is owned by the Company. Mr.
Hauptmann is also a director of TIAG. Telor had an amount of $411,600 owing from
Tinerama at June 30, 1997. See Item 1. "Discription of Business." 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.

         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

                                       44

<PAGE>

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.

         Superstar has loaned the Company an aggregate of $6,650,000 and Groupe
AB has loaned the Company $2.4 million in cash and is currently providing
services to the Company with a value of $6.24 million over a two year period.
Groupe AB has also recently agreed to lend the Company an additional $6.0
million, a portion of which will be used to fund the Company's settlement with
Instar. These loans (principal and interest) and the amounts due for such
services are automatically convertible into shares of Common Stock once the
Company holds its annual meeting of stockholders and its stockholders approve an
increase in the authorized Common Stock. The Company has agreed to pay a 2% per
month penalty on the outstanding principal of the loans, payable in shares of
Common Stock, for each month the Company fails to hold its special stockholders
meeting subsequent to November 30, 1998. The convertible debt becomes
automatically due to Superstar and Groupe AB and payable (with interest plus a
20% penalty) if the Company's stockholders do not approve an increase in the
Company's authorized Common Stock. Groupe AB and Superstar, pursuant to their
agreements with the Company, will own more than 80% of the outstanding Common
Stock of the Company when their debt is converted into Common Stock (more than
90% after all fundings and services are provided by Groupe AB to the Company).
For additional terms of these loans, see Item 6. "Management's Discussion and
Analysis or Plan of Operation -- Financial Condition, Liquidity and Capital
Resources." The Company believes that the terms of the Company's arrangements
with Groupe AB and Superstar are more favorable to the Company than the
arrangements which might have been available from unrelated third parties.

         In June 1997, prior to the Company's acquisition of an 81.6% interest
in Unimedia and prior to Gilles Assouline and Michel Assouline becoming
executive officers of the Company, the Company was assisted by Unimedia in
completing a private placement. In connection with such placement, the Company
paid Unimedia a fee of $240,000, which was netted against the proceeds of such
offering. A portion of that fee ($195,000) was paid by Unimedia to Valfab for
introducing Unimedia to certain of the investors acquired some of the Company's
shares from Unimedia simultaneously with and/or immediately after this private
placement. For information regarding the fees paid to Valfab, see Item 9.
"Executive Officers and Directors-Consultants." For additional information
regarding the Company's private placements, see Item 6. "Management's Discussion
and Analysis or Plan of Operation -- Financial Condition, Liquidity and Capital
Resources."

                                       45

<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).

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

                                                        46

<PAGE>

         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).

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

         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).

                                       47

<PAGE>

         10.21    Form of Indemnification Agreement dated July 31, 1997, by and
                  between the Company and Gilles Assouline and Michel Assouline
                  (3).

         10.22    Letter Agreement, dated July 1998, between CM (UK), the
                  Company, Onyx, Superstar and Instar (3).

         10.23    Services Agreement between Onyx Television and Groupe AB (3).

         10.24    Superstar Note in the face amount of $5.0 million (3).

         10.25    Groupe AB Note in the face amount of $6.64 million (3).

         21.1     Subsidiaries (3).

         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.

(3)      Incorporated by reference to the Company's Annual Report on Form 10-KSB
         for the year ended December 31, 1997.

(B)      REPORTS ON FORM 8-K

         1. Form 8-K reporting the resignation of Deloitte & Touche as the
Company's independent auditor, dated February 18, 1999.

         2. Form 8-K reporting the appointment of PricewaterhouseCoopers as the
Company's independent auditor, dated February 22, 1999.

                                       48

<PAGE>
<TABLE>
<CAPTION>
                           CAPITAL MEDIA GROUP LIMITED


                          INDEX TO FINANCIAL STATEMENTS

                                                                                          PAGE
                                                                                          ----
<S>                                                                                       <C>
YEAR END 1998 AND 1997

Independent Auditors' Report of PricewaterhouseCoopers to the Board of
     Directors and Stockholders of Capital Media Group Limited.............................F-2

Independent Auditors' Report of Deloitte & Touche to the Board of
     Directors and Shareholders of Capital Media Group Limited.............................F-3

Independent Auditors' Report of Coopers & Lybrand to the Board of
     Directors and Stockholders of Tinerama Investment AG..................................F-4

Consolidated Balance Sheet at December 31, 1998 and 1997 (restated)........................F-5

Consolidated Statement of Operations for the Years ended December 31, 1998 and
         1997 (restated)...................................................................F-6

Consolidated Statement of Stockholders' Equity for the Years ended December 31,
        1998 and 1997 (restated)...........................................................F-7

Consolidated Statement of Cash Flows for the Years ended December 31, 1998
        and 1997 (restated)................................................................F-8

Notes to the Consolidated Financial Statements.............................................F-9
</TABLE>

                                       F-1

<PAGE>

                          CAPITAL MEDIA GROUP LIMITED


           INDEPENDENT AUDITORS' REPORT TO THE BOARD OF DIRECTORS AND
              STOCKHOLDERS OF CAPITAL MEDIA GROUP LIMITED FOR 1998

To the Board of Directors and
the Stockholders of Capital Media Group Limited

        In our opinion, the consolidated balance sheet and the related
consolidated statements of income, of cash flows and of changes in stockholders'
equity presented on pages F-5 through F-30, present fairly, in all material
respects, the financial position of Capital Media Group Limited and its
subsidiaries (the "Company") at December 31, 1998 and the result of their
operations and their cash flows for the year in conformity with generally
accepted accounting principles in the United States of America. 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 conducted our audit in accordance with
generally accepted auditing standards in the United States of America which
require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.

        The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2 of 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 16. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

PricewaterhouseCoopers


Paris, June 4, 1999


                                       F-2

<PAGE>

                           CAPITAL MEDIA GROUP LIMITED

INDEPENDENT AUDITORS' REPORT TO THE BOARD OF DIRECTORS AND
SHAREHOLDERS OF CAPITAL MEDIA GROUP LIMITED FOR 1997

        We have audited the accompanying consolidated balance sheet of Capital
Media Group Limited and its subsidiaries ("the companies") as of December 31,
1997 and the related consolidated statements of operations, stockholders' equity
and cash flows for the year ended December 31, 1997. 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 and 1% of consolidated
operating loss for the year then ended. 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 the results of their operations and their cash flows for the year
ended December 31, 1997 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 16. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

        As discussed in Note 14 to the financial statements, the outcome of
certain litigation against the company is unknown at this time.

        As discussed in Note 18 to the financial statements, the accompanying
consolidated financial statements for the year ended December 31, 1997 have been
restated.

DELOITTE & TOUCHE

Chartered Accountants
London, England
14 October 1998  (13 April 1999 as to Note 18)

                                       F-3

<PAGE>

                           CAPITAL MEDIA GROUP LIMITED

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

        In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income and retained earnings and of cash
flows present fairly, in all material aspects the financial position of Tinerama
Investment AG and its subsidiaries as of December 31, 1997 and 1996 and the
results of its operations and its cash flows for each of the two years in the
period ended December 31, 1997 in conformity with Generally Accepted Accounting
Principles in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with Generally Accepted Auditing
Standards in the United States of America, which require that we plan and
perform the audit to obtain reasonable assurance whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinions expressed
above.


                                               Coopers & Lybrand


September 18, 1998
Bucharest, Roumania

                                       F-4

<PAGE>
<TABLE>
<CAPTION>
                           CAPITAL MEDIA GROUP LIMITED

CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998

                                                       NOTE       DECEMBER 31,    DECEMBER 31,
                                                                      1998            1997
                                                                                  AS RESTATED
                                                                                 (SEE NOTE 18)
                                                                       ($)            ($)
<S>                                                     <C>        <C>             <C>
ASSETS
Cash and cash equivalents                               3             583,320         332,795
Accounts receivable within one year, net of             4
    allowances for doubtful accounts of $77,579                     1,801,892       1,004,171
    (December 31, 1997 - $11,788)
Inventories                                                            93,938          80,364
Amounts due from stockholders                          5-17           313,691         313,691
Prepaid expenses and deposits                                          40,003         507,024
                                                                 ------------    ------------

TOTAL CURRENT ASSETS                                                2,832,844       2,238,045
Investments                                                             4,153         143,336
Equity in affiliate companies                                         117,000          87,454
Intangible assets, net of accumulated amortization of
    $3,076,882 (December 31, 1997 - $2,203,973)          6          2,858,412       3,452,976
Property, plant and equipment, net                       7            796,233         380,517
                                                                 ------------    ------------

TOTAL ASSETS                                                        6,608,642       6,302,328
                                                                 ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable                                                    3,786,764       4,245,888
Accrued expenses                                                    4,630,380       2,625,765
Related parties loans repayable within one year         8-17       14,337,442       4,229,008
Other loans repayable within one year                   8             190,000               -
Net liabilities for discontinued operations             9             496,228         338,433
Amounts due to minority stockholders                                        -         171,970
                                                                 ------------    ------------
TOTAL LIABILITIES                                                  23,440,814      11,611,064

COMMITMENTS AND CONTINGENCIES                          10-14                -               -

MINORITY INTEREST IN SUBSIDIARIES                                     404,209         402,477
                                                                 ------------    ------------
                                                                   23,845,023      12,013,541
                                                                 ------------    ------------
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 40,094,139 (December 31, 1997 -
40,094,139) issued and outstanding                                     40,090          40,090
Additional paid in capital                                         31,155,909      31,155,909
Shares held by subsidiary-1,667,916 (December 31,     18
1997 - 4,023,396), at cost                                           (950,712)     (2,282,752)
                                                                 ------------    ------------
                                                                   30,245,287      28,913,247
Cumulative translation adjustment                                     756,406       2,846,067
Accumulated deficit                                               (48,238,074)    (37,470,527)
                                                                 ------------    ------------
TOTAL STOCKHOLDERS' EQUITY                                        (17,236,381)     (5,711,213)
                                                                 ------------    ------------
TOTAL LIABILITIES AND
    STOCKHOLDERS' EQUIT                                             6,608,642       6,302,328
                                                                 ============    ============
</TABLE>

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

                                       F-5

<PAGE>
<TABLE>
<CAPTION>
                           CAPITAL MEDIA GROUP LIMITED

CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998

                                                                           YEAR ENDED
                                                                           DECEMBER 31,
                                                      YEAR ENDED              1997
                                                      DECEMBER 31,         AS RESTATED
                                                          1998            (SEE NOTE 18)
                                            NOTE           ($)                  ($)
<S>                                                   <C>                 <C>
Operating Revenue                                        2,468,490           1,286,076

Operating costs
    Staff costs                                          2,765,239           3,572,498
    Depreciation and amortization                        1,410,697           1,564,452
    Other operating expenses                 11          9,145,292          11,104,510
                                                      ------------        ------------
                                                       (13,321,228)        (16,241,460)

Operating loss                                         (10,852,738)        (14,955,384)

Other (expenses) / income                                 (465,696)            441,748
Financial income (expense) net               12            970,407          (2,812,292)
Equity in net losses of affiliates                        (150,808)           (251,550)
                                                      ------------        ------------
Loss from continuing operations                        (10,498,835)        (17,577,478)
   before taxation
Income tax benefit                           13             41,552               1,658
                                                      ------------        ------------
                                                       (10,457,283)        (17,575,820)
Discontinued operations                       9
Net loss from operation of discontinued
subsidiary including provision for our
share of $84,267 estimated operating
losses through date of disposal                           (308,532)           (797,770)

Minority interest                                           (1,732)              1,834
                                                      ------------        ------------

Net loss                                               (10,767,547)        (18,371,756)
                                                      ============        ============
Net loss per share for continuing            15
operations - basic                                    ($      0.26)       ($      0.63)
                                                      ============        ============

- diluted                                             ($      0.26)       ($      0.63)
                                                      ============        ============

Net loss per share including discontinued
operations                                   15
- basic                                               ($      0.27)       ($      0.66)
                                                      ============        ============

- diluted                                             ($      0.27)       ($      0.66)
                                                      ============        ============
Weighted average shares - basic                         40,094,139          27,966,383
                                                      ============        ============
Weighted average shares - diluted                       40,094,139          27,966,383
                                                      ============        ============
</TABLE>

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

                                       F-6

<PAGE>
<TABLE>
<CAPTION>
                           CAPITAL MEDIA GROUP LIMITED

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

YEAR ENDED DECEMBER 31, 1998

                                                                   ADDITIONAL
YEAR ENDED                                                          PAID-IN        SHARES HELD
DECEMBER 31, 1998                   COMMON STOCK                    CAPITAL        BY SUBSIDIARY

                                      SHARES             ($)          ($)              ($)
<S>                                 <C>            <C>            <C>              <C>
Balance at                          40,094,139         40,090      31,155,909       (2,282,752)
January 1, 1998
as restated

Translation adjustment                    --              --              --              --

Net loss
Comprehensive loss                        --              --              --              --

Issuance of common stock                  --              --              --              --

Shares held by subsidiary sold            --              --              --         1,332,040
                                   -----------     -----------     -----------     -----------
Balance at
    December 31, 1998               40,094,139          40,090      31,155,909        (950,712)
                                   ===========     ===========     ===========     ===========

<CAPTION>
                                     CUMULATIVE
                                       OTHER
                                     COMPREHEN-
                                     SIVE INCOME    ACCUMULATED
                                      (DEFICIT)       DEFICIT           TOTAL
                                        ($)             ($)                ($)
<S>                                <C>             <C>             <C>
Balance at                            2,846,067      (37,470,527)      (5,711,213)
January 1, 1998
as restated

Translation adjustment               (2,089,661)            --         (2,089,661)

Net loss                                             (10,767,547)     (10,767,547)
                                                                      -----------
Comprehensive loss                         --                         (12,857,208)

Issuance of common stock                   --               --               --

Shares held by subsidiary sold             --               --          1,332,040
                                    -----------      -----------      -----------
Balance at
    December 31, 1998                   756,406      (48,238,074)     (17,236,381)
                                    ===========      ===========      ===========

<CAPTION>
                                                                         ADDITIONAL
                                                                          PAID-IN       SHARES HELD
                                       COMMON STOCK                       CAPITAL      BY SUBSIDIARY
YEAR ENDED
SHARES DECEMBER 31, 1997                                     ($)            ($)             ($)
<S>                                     <C>                 <C>         <C>             <C>
Balance at
    January 1, 1997                     12,663,328          12,663      17,117,651            --

Translation adjustment                        --              --              --              --

Net loss
Comprehensive loss                            --              --              --              --

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

Shares held by subsidiary, at cost            --              --              --        (2,282,752)
                                       -----------     -----------     -----------     -----------
Balance at
    December 31, 1997 as
    restated (Note 18)                  40,094,139          40,090      31,155,909      (2,282,752)
                                       ===========     ===========     ===========     ===========
<PAGE>

<CAPTION>
                                        CUMULATIVE
                                          OTHER
                                        COMPREHEN-
                                        SIVE INCOME   ACCUMULATED
                                         (DEFICIT)      DEFICIT           TOTAL
                                            ($)           ($)               ($)
<S>                                       <C>         <C>               <C>
Balance at
    January 1, 1997                       326,214     (19,098,771)      (1,642,243)

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

Net loss                                              (18,371,756)     (18,371,756)
                                                                       -----------
Comprehensive loss                           --                        (15,851,903)

Issuance of common stock                     --              --         14,065,685

Shares held by subsidiary, at cost           --              --         (2,282,752)
                                      -----------     -----------      -----------
Balance at
    December 31, 1997 as
    restated (Note 18)                  2,846,067     (37,470,527)      (5,711,213)
                                      ===========     ===========      ===========
</TABLE>


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

                                       F-7

<PAGE>
<TABLE>
<CAPTION>
                           CAPITAL MEDIA GROUP LIMITED

CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
                                                                                      YEAR ENDED
                                                               YEAR ENDED            DECEMBER 31,
                                                             DECEMBER 31,                   1997
                                                                     1998            AS RESTATED.
                                                                                     (SEE NOTE 18)
                                                                 ($)                      ($)
<S>                                                          <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES

Net loss                                                      (10,767,547)           (18,371,756)
Adjustment to reconcile net loss to net cash used in
    operating activities:
      Depreciation and amortization                             1,410,697              2,438,829
      Equity in net losses of affiliates                          150,808                251,550
      Minority interest                                             1,732                 (1,834)
Changes in assets and liabilities:
      Decrease in other assets and inventories                     39,539                635,334
      Increase in accounts receivable                            (798,139)              (372,512)
      Increase in accrued expenses and other liabilities        2,704,749              3,994,657
                                                            -------------            -----------

NET CASH USED IN OPERATIONS                                    (7,258,161)           (11,425,732)
                                                            -------------            -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment                     (489,580)               (17,742)
Acquisition of intangible assets                                  (31,120)            (4,615,776)
Cash proceeds from sale of investments                            994,047                390,647
Acquisition of Investments                                              -             (2,939,210)
                                                            -------------            -----------

NET CASH RECEIVED/(USED) IN INVESTING ACTIVITIES                  473,347             (7,182,081)
                                                            -------------            -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of shares                                        -             14,924,892
Commission paid on issuance of shares                                   -               (859,207)
Increase in short term debt                                     9,460,000              2,035,000
Repayments of loans                                              (335,000)                     -
                                                            -------------            -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES                       9,125,000             16,100,685
                                                            -------------            -----------

Effect of exchange rate changes on cash                        (2,089,661)             2,519,853
                                                            -------------            -----------
Net increase in cash and cash equivalents                         250,525                 12,725
Cash and cash equivalents at beginning of period                  332,795                320,070
                                                            -------------            -----------
Cash and cash equivalent at end of period                         583,320                332,795
                                                            =============            ===========

Supplemental data:
Interest paid                                                     151,977                111,285
Income tax paid                                                     6,222                  1,881
</TABLE>

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

                                       F-8

<PAGE>

                           CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998

1.    SIGNIFICANT ACCOUNTING POLICIES

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

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Capital Media
Group Limited (the "Company") and its wholly-owned subsidiaries, Capital Media
(UK) Limited ("CM(UK)"), and Onyx Television GmbH ("Onyx"), together with the
Company's 81.6% owned subsidiary Unimedia S.A. ("Unimedia") and Unimedia's
wholly owned subsidiary Pixel Limited ("Pixel"), and its 90% owned subsidiary
TopCard S.A. ("TopCard"). All intercompany accounts and transactions have been
eliminated in consolidation. CM(UK)'s 50% investment interest in Blink TV
Limited ("Blink") and Pixel's 47.5% interest in Henry Communications Limited,
have been accounted for using the equity method, after the elimination of all
significant intercompany balances and transactions. Tinerama Investment AG
("Tinerama"), a 51% owned subsidiary, is treated as discontinued operations (See
Note 9).

The results of Unimedia, TopCard and Pixel have been consolidated in the
consolidated financial statements from September 1997, November 1997 and January
1998, being their respective dates of acquisition.

INVENTORIES

Inventories are stated at the lower of first-in, first-out cost or market value.
Inventories include both raw materials and finished goods.

INTANGIBLE ASSETS

Intangible assets represent purchased broadcast licenses, computer software and
goodwill arising on acquisition of subsidiary undertakings. The amounts in the
balance sheet are stated net of the related accumulated amortization. Computer
software are amortized in the year of their acquisition. Broadcast licenses and
goodwill are amortized on a straight-line basis over periods not exceeding six
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. Any impairment loss would be computed based upon the amount by which the
carrying amount of the assets 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:

Fixtures, fittings and equipment    5 to 20 years

                                       F-9

<PAGE>

                           CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 1998

FOREIGN CURRENCY

Assets and liabilities of the Company's foreign subsidiaries are translated at
year-end exchange rates. Income statement items are translated at the average
rate for the period. 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.

Due to the hyper-inflationary situation in Romania, assets and liabilities of
the Company's foreign subsidiary in Romania are translated at historical
exchange rates in accordance with Statement of Financial Accounting Standards
No. 52.

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, reduced by a valuation allowance if it is more likely than not that some
portion of the benefit will not be realized.

LEASE

Operating leases are charged to expense, on a straight-line basis, over the term
of the lease.

REVENUE RECOGNITION

Sales are recognized when products, services and fees are delivered and when
advertisements are broadcast and thereby invoiced to the customer. Intercompany
charges are eliminated on consolidation and not included in revenues.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are charged to expense as incurred.

EARNINGS PER SHARE

In Fiscal 1997, 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. Diluted income per share is computed on the basis of
weighted average outstanding common shares, plus potential common shares
assuming exercised stock options and conversion of outstanding convertible
securities where issued. All prior year earnings 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, 1998

                                      F-10

<PAGE>

                           CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998

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 AND RESTATEMENT

Certain reclassifications have been made to the 1997 year end balances to
conform to the 1998 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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

APPROVED ACCOUNTING STANDARDS

In 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about Pensions
and other Postretirement Benefits." This statement is required to be adopted in
1999. In 1998, the FASB also issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement, which establishes
accounting and reporting standards for derivative instruments and for hedging
activities, is required to be adopted in fiscal 2000. The Company is currently
in the process of evaluating the impact of adopting these 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, 1998 and 1997, the Company
incurred net losses of $10,767,547 and $18,371,756, respectively. At December
31, 1998, the Company had net current liabilities of $20,111,742 and its total
liabilities exceeded its total assets by $17,236,381. 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 assets 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 16, the Company's
continuation as a going concern is dependent upon its ability to obtain
additional financing as may be required, and ultimately to attain successful
operations. Management reported in March 1999 that it was to propose at the its
forthcoming Stockholders Meeting, a resolution to increase the authorized
capital of the Company and a further resolution to agree to allow the conversion
of certain of the loans received and interest accrued into equity of the
Company. Management reported in March 1999 that it had entered into a further
agreement to provide funding so that the Company can meet its obligations and
sustain operations from sources described in Note 17.

                                      F-11

<PAGE>

                           CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998

3.    CASH AND CASH EQUIVALENTS

      Cash and cash equivalents at December 31, 1998 includes a bank deposit
balance of $520,164 (1997-Nil).

4.    ACCOUNTS RECEIVABLE

                                              DECEMBER 31,    DECEMBER 31,
      Accounts receivable comprise:               1998            1997
                                                   ($)             ($)
      Trade receivables                           $899,352         503,605
      Taxation receivables                          19,761         449,167
      Other debtors receivable                     882,779          51,399

                                              ------------    ------------
                                                 1,801,892       1,004,171
                                              ============    ============

5.    AMOUNT DUE FROM STOCKHOLDER

      In December 1995, the Company issued 261,410 shares at $1.20 each to a
      stockholder (Latitude Investments, Ltd.) in exchange for that stockholder
      guaranteeing the establishment of a contract with PTT Telecom. This
      resulted in the stockholder receiving shares for no payment. As part of an
      overall agreement with Instar, Universal and Latitude (See Note 17)
      this amount will be forgiven.

6.    INTANGIBLE ASSETS
                                              DECEMBER 31,     DECEMBER 31,
                                                   1998             1997
                                                    ($)              ($)

      Purchase broadcast licenses                  249,570          246,810
      Computer Software                            591,560          419,978
      Goodwill                                   5,094,165        4,990,161
                                              ------------     ------------
                                                 5,935,295        5,656,949
      Less accumulated amortization             (3,076,883)      (2,203,973)
                                              ------------     ------------
                                                 2,858,412        3,452,976
                                              ============     ============

      Goodwill net of amortization is as follows:

                                              DECEMBER 31,     DECEMBER 31,
                                                   1998             1997
                                                    ($)              ($)

      Tinerama                                           0                0
      Unimedia                                   2,138,468        2,592,989
      Top Card                                     558,819          677,437
      Pixel                                         78,986              --
                                              ------------     ------------
                                                 2,776,273        3,270,426
                                              ============     ============

                                      F-12

<PAGE>

                           CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998

7.    PROPERTY, PLANT AND EQUIPMENT
                                                   DECEMBER 31,    DECEMBER 31,
      Property, plant and equipment consists of:       1998            1997
                                                       ($)              ($)

      Fixtures, fittings and equipment                3,211,962         936,382
      Less accumulated depreciation                  (2,415,729)       (555,865)
                                                   ------------    ------------
                                                        796,233         380,517
                                                   ============    ============


8.    LOANS REPAYABLE WITHIN ONE YEAR

                                                   DECEMBER 31,    DECEMBER 31,
                                                        1998            1997
                                                        ($)             ($)
      Instar Holdings Ltd.*                           2,000,000    $  2,000,000
      Unbeatable Investments Ltd.*                            -         500,000
      MMP, SA*                                        3,120,000               -
      Superstar Investments Ltd.*                     6,650,000               -
      Fontal Ltd.*                                      200,000         200,000
      Oradea*                                           500,000         500,000
      Roland Pardo*                                     500,000         500,000
      Falcon Management*                                      -         335,000
      Interest Accrued*                               1,367,442         194,008
                                                   ------------    ------------
      Related party loans                            14,337,442       4,229,008
      Sundry loans                                      190,000               -
                                                   ------------    ------------
                                                     14,527,442       4,229,008
                                                   ============    ============
------------------------
*     A related party.

The terms of the Instar, MMP (a fully owned subsidiary of Groupe AB) and
Superstar loans are detailed in Notes 15 and 16.

The Unbeatable loan was received on October 10, 1997 and carried an interest
rate of 10% per annum and was replaced on January 9, 1998 by a loan from
Superstar Ventures, Ltd., see Note 16.

                                      F-13

<PAGE>

                           CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998

      LOANS REPAYABLE WITHIN ONE YEAR (CONTINUED)

      The Fontal loan was received on December 30, 1997 and carries an interest
      rate of 15% per annum and was repayable on February 16, 1998, see Note 14.

      The Oradea loan was made to Unimedia in 1996 and carries an interest rate
      of 2% above 3 month Eurodollar Libor rate and was repayable on April 18,
      1998. See Note 14.

      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
      26, 1998. See Note 14.

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

      The sundry loans are in respect of two proposed subscriptions for
      1,900,000 shares of common stock at $0.10 per share.

9.    DISCONTINUED OPERATIONS

      On May 13, 1998, the Company decided to sell its interests in the
      Romania company, Tinerama. Discussions with the potential buyer are in
      progress and the transaction is expected to be concluded in the second
      quarter of 1999. The results of the Tinerama business have been
      reported separately as discontinued operations. Prior year consolidated
      financial statements have been restated to present the Tinerama
      businesses as discontinued. The components of the net liabilities of
      the discontinued operations included in the consolidated balance sheets
      are as follows:

                                               1998          1997
                                                ($)           ($)
       Current assets
       Receivables                             79,445        89,984
       Inventory                               38,930        26,079
       Other current assets                    34,369        63,848
                                            ---------     ---------
                                              152,744       179,911
                                            ---------     ---------

       Less current liabilities
       Accounts payables                     (138,076)     (131,924)
       Other current liabilities             (564,827)     (527,218)
                                            ---------     ---------
                                             (702,903)     (659,142)
                                            ---------     ---------

       Net current liabilities               (550,159)     (479,231)

       Minority interests                    (460,559)     (499,503)
       Net property, plant and equipment      514,490       640,301
                                            ---------     ---------
       Net liabilities                       (496,228)     (338,433)
                                            =========     =========

                                      F-14

<PAGE>

                           CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998

10.       COMMITMENTS AND CONTINGENCIES

          TRANSPONDER

          A bank guarantee was originally provided to KPN Telecom (formerly PTT
          Telecom) on November 30, 1995 in the amount of ECU 2,000,000 in
          relation to an Agreement entered into by CM(UK) on behalf of Onyx to
          lease transponder capacity in order to broadcast a television channel
          in Germany. The Agreement for use of the transponder expired on
          September 25, 1998 and the guarantee as at December 31, 1998 was ECU
          500,000 ($587,000 at December 31, 1998 exchange rates).

          The Company was originally not in a position to support the guarantee.
          As a result the guarantee was provided by Universal Independent
          Holdings Limited ("Universal") (see Note 16 to the Consolidated
          Financial Statements).

          LEASE 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
          agreement, the Company was committed to paying DM 150,000 ($90,000 at
          December 31, 1998 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 and was committed to paying DM 2,940,000 ($1,765,000 at
          December 31, 1998 exchange rates) per annum for the use of the
          equipment and facilities until January 2001. The terms of the original
          agreement were renegotiated and subsequently the lease was terminated
          on September 30, 1998.

          In January 1996, the Company entered into an agreement to lease uplink
          capacity at a cost of approximately (pound)245,000 ($408,000 at
          December 31, 1998 exchange rates) per annum. The lease was terminated
          effective October 1998.

          The Company has also entered into leases for office space in France,
          expiring between 1999 and 2002 at an annualized cost of $100,000 (at
          December 31, 1998 exchange rates).

          The total rental expense in 1998 and 1997, including transponders and
          lease commitments as above, were $4,423,113 and $5,592,000,
          respectively.

          Under the terms of a two year service agreement which commenced
          October 1, 1998, broadcasting facilities for Onyx comprising the
          uplink, master control, and satellite transponder broadcasting and
          cable transmission costs are provided by Groupe AB at an annual cost
          of $3,120,000 (see Notes 15 and 16).

          Minimum lease payments under operating lease as of December 31, 1998
          are as follows:

                                                       $
          Years ending December 31,                    -
          1999                                $2,648,500
          2000                                 2,044,000
          2001                                   170,000
          2002                                   170,000
          2003 and thereafter                 $  295,000
                                              ----------
                                              $5,327,500
                                              ==========

          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, 1999.

                                      F-15

<PAGE>

                           CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998

          RETIREMENT INDEMNITIES AND PENSION PLANS.

          Retired employees benefit from State or Government sponsored pension
          schemes. Contributions by employers to these sponsored schemes are
          expensed as incurred. There are no specific supplemental pension plans
          operated by the Company or any subsidiary. There is no liability
          arising from retirement indemnity.

11.       RESEARCH AND DEVELOPMENT COSTS

          TopCard is involved in the development of specific applications based
          upon smart card technology including remote security Internet access
          and infra-red contactless smart card technology. 1997 costs are from
          the date of acquisition.

                                                   1998            1997
                                                    ($)             ($)

Research and development costs                    268,641         45,330
                                                =========       ========


12.       FINANCIAL INCOME (EXPENSE) NET

                                                   1998              1997
                                                   ($)                ($)

Interest expense                               (1,284,417)         (244,694)
Foreign currency exchange gain/(losses)         2,254,824        (2,567,598)
                                              -----------       -----------

                                                  970,407        (2,812,292)
                                              ===========       ===========

          The foreign currency exchange gain in 1998 and the loss in 1997 arose
          primarily from the exchange differences arising in the intercompany
          loan between CM (UK) and Onyx recorded in pounds sterling and German
          Marks, respectively.

13.       INCOME TAXES

          The income tax benefit consisted of the following:

                                               YEAR ENDED         YEAR ENDED
                                               DECEMBER 31,       DECEMBER 31,
                                                  1998               1997
                                                   ($)                ($)

Income tax benefit                                (41,552)            (1,658)
                                              ===========        ===========

                                      F-16

<PAGE>
                           CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998

          The income tax benefit, net, includes $53,321 of research and
          development tax credit for TopCard.

          Net operating loss carry forwards which give rise to deferred tax
          assets at December 31, 1998 are as follows:

                                               YEAR ENDED       YEAR ENDED
                                             DECEMBER 31,     DECEMBER 31,
                                                  1998             1997
                                                   ($)              ($)

Deferred tax asset on unrealized tax losses    18,408,000        4,180,000
Timing differences                                292,000
                                             ------------     ------------
Valuation allowances                          (18,700,000)      (4,180,000)
                                             ------------     ------------
Total deferred tax assets                               -                -
                                             ============     ============

          The Company has significant deferred tax assets ($15,828,000)
          corresponding to tax losses arising primarily from the operating
          losses incurred by Onyx, in Germany. These tax losses are available to
          be carried forward indefinitely to be set off against future profits
          in Germany. However, at the end of 1998, the management forecast that
          the Company will not be profitable in 1999 and therefore no credit for
          income tax was recorded. The Company will continue to review its tax
          valuation allowance in future periods.

14.       LITIGATION

          The Company's litigation against Com TV Production und Vertrieb GmbH
          ("Com") and Nen TV ("Nen") and Mr. John Garman, related 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. In December 1997, at the direction of
          the trial judge, the Company and the other parties agreed to a form of
          settlement, wherein the Company agreed to enter into reciprocal
          commercial agreements allowing the other parties to introduce
          potential clients wishing to access available down time for
          advertising purposes. To date, no client has been introduced to Onyx
          by Nen.

          In June 1997, a former managing director of Onyx whose employment was
          terminated brought suit in Germany for alleged wrongful early
          termination of his employment. The suit sought damages of DM750,000
          ($450,000). Onyx maintained that the action taken was lawful and in
          July 1998, the court ruled in favor of Onyx. The plaintiff has
          appealed and Onyx believes that it has valid defenses to this claim.
          However, there can be no assurance as to the outcome of the matter.

          In May 1998, TV Strategies, a US Dallas based television services
          company, obtained a default judgment against Onyx for DM300,000
          ($180,000), plus interest, relating to services which TV Strategies
          alleges that they provided to Onyx. Onyx has taken action in the US to
          have the default judgment set aside, and in March 1999, the Texas
          appeal court overturned that default judgment. Onyx believes that it
          has meritorious

                                      F-17

<PAGE>

                           CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998

          defenses to the suit and intends to vigorously defend same. However,
          there can be no assurance as to the outcome of the 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
          promissory note. See Note 8 for a description of the Fontal Note. The
          Company had pledged the rights to trademarks for the International
          Onyx name outside of Germany, Switzerland and Austria 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. However, there can be no assurance as to the outcome of the
          matter.

          Unimedia has three minority stockholders (Oradea, Roland Pardo and
          Fontal (see Note 8) 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 stockholders 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.

          Oradea and Pardo have also taken action through the courts in France
          and Israel to safeguard their potential rights over certain assets of
          Unimedia in order to secure repayment of their unsecured loans due
          from Unimedia (see Note 8). In connection with such actions and based
          upon the fact that the notes do not by their terms reflect a repayment
          date, in February 1999, the French court ruled that repayment of the
          loans be made by a number of installments starting February 1999 until
          September 1999 and set a lower rate of interest to accrue. Unimedia is
          also preparing actions against the principal of Oradea and Pardo for
          damages which it believes have been inappropriately caused by reason
          of the actions taken by the principal of Oradea and Pardo against
          Unimedia and its management.

          Charles Koppel, the former chairman and CEO of the Company claimed
          constructive dismissal following the Board's selection of a new
          President and CEO for the Company in August 1997. In March 1998, the
          Company resolved its dispute with Mr. Koppel in regard to his claim
          for wrongful dismissal and paid Mr. Koppel (pound)60,000 ($100,000) to
          resolve outstanding claims under his service contract with the
          Company.

          In August 1998, Onyx sued Mr. C. Koppel in Germany. The suit alleges
          that certain of Mr. C. Koppel's actions as the managing director of
          Onyx were improperly performed and seeks damages in an unspecified
          amount. The Company and Mr. C. Koppel will exchange mutual
          general releases in connection with the Instar Settlement (see Note
          17) and all of the suits between the Company and Mr. C. Koppel will
          be dismissed with prejudice.

                                      F-18

<PAGE>

                           CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998

15.       CAPITAL STRUCTURE

COMMON STOCK PURCHASE WARRANTS

The company has the following issued and vested warrants to purchase common
stock outstanding at December 31, 1998 and 1997:
<TABLE>
<CAPTION>

                                           December 31,                    December                     December
                                               1998         Expired        31, 1997        Granted      31, 1996
<S>                                          <C>           <C>             <C>             <C>         <C>
DESCRIPTION
Warrants for common stock exercisable @
$4.00                                        5,200,000            --       5,200,000           --      5,200,000
Warrants for common stock exercisable @
$3.125                                         433,328     (1,600,000)     2,033,328           --      2,033,328
Warrants for common stock exercisable @
$2.50                                        1,100,000     (1,200,000)     2,300,000       100,000     2,200,000
                                          ------------  -------------   ------------       -------     ---------
                                             6,733,328     (2,800,000)     9,533,328       100,000     9,433,328
                                          ============  =============   ============       =======     =========
</TABLE>

          All outstanding warrants (except the warrants which expired on
          December 31, 1998), expire 36 months from the date of the effective
          registration of their underlying shares. 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 (which warrants expired at
          December 31, 1998). In September 1996, 100,000 shares and warrants to
          purchase an additional 100,000 shares at an exercise price of $2.50
          were issued to a director for consulting services.

          Additionally, the Company is obliged to issue warrants to former
          Unimedia shareholders under the terms of the share exchange agreement
          signed in 1997, as follows:
<TABLE>
<CAPTION>
                                                 December 31,                     December 31,
                                                     1998             Expired             1997

<S>                                                  <C>              <C>            <C>
Warrants for Common Stock exercisable @ $4.00        1,139,144              --       1,139,144
Warrants for Common Stock exercisable @ $3.125          77,871        (367,562)        445,433
Warrants for Common Stock exercisable @ $2.50          197,675        (306,177)        503,852
                                                --------------    ------------    ------------
                                                     1,414,690        (673,739)      2,088,429
                                                ==============    ============    ============
</TABLE>

          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 the
          warrant holders the right, for a period of not less than 61 days, to
          exercise their warrants and receive two shares of Common Stock at an
          exercise price of $0.30 per share. If the holders of the outstanding
          warrants do not exercise this right, the warrants will remain
          outstanding on their original terms until their expiration date. This
          right will be given to the Company's warrant holders in order to allow
          the Company's

                                      F-19

<PAGE>

                           CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998

          warrant holders to acquire additional Company securities at a lower
          price and to raise additional capital for the Company's operations.

          The Company has offered one of its warrant holders, Auric Investments
          Limited ("Auric"), the right to subscribe to purchase 1,566,156 shares
          of Common Stock on the basis of two shares for each of the 783,078
          warrants which they hold, but at an exercise of $0.20 per share. Auric
          was granted this lower price due to the assistance which they provided
          to the Company in helping the Company to re-obtain obtain the
          quotation on the Bulletin Board maintained by the NASD in 1998.

          COMMON STOCK PURCHASE OPTIONS
<TABLE>
<CAPTION>
                                                              Outstanding at             Outstanding at           Outstanding at
                                                               December 31,                December 31,            December 31,
                                                                   1998        Granted       1997       Granted       1996
          <S>                                                   <C>           <C>           <C>         <C>           <C>
          Executive officers options exercisable @ $0.57          375,000            --     375,000     375,000            --
                                         of which vested          225,000                   150,000

          Officers options exercisable @ $2.50                    300,000       100,000     200,000     100,000       100,000
                                         of which vested          200,000                   100,000

          Executive officers options exercisable @ $0.35        4,000,000     4,000,000          --          --            --
                                         of which vested          800,000

          Non-employee directors options exercisable @ $0.35      500,000       500,000          --          --            --
                                         of which vested          500,000

          Options to Diamond Production exercisable @ $0.10    16,000,000    16,000,000          --          --            --
                                                               --------------------------------------------------------------
                                                               21,175,000    20,600,000     575,000     475,000       100,000
                                                               ==============================================================
</TABLE>

          On August 1, 1997, the Company has entered into three-year employment
          agreements with the executive officers providing for them to receive,
          in addition to other compensations, options to purchase 200,000 and
          175,000 shares of common stock at an exercise price of $0.57 per
          share, the price at which transactions were effected at the time. The
          options vested 2/5 upon the effective date of the agreement and will
          vest 1/5 on each of the first, second and third anniversaries,
          respectively, of the agreement. These options expire 36 months from
          the date of their effective registration.

          The Chief Financial Officer as part of his service contract is
          entitled to receive an option to purchase 100,000 common shares of the
          Company at $2.50, the price at which transactions were effected at the
          time for each of the years 1996, 1997 and 1998. These options expire
          36 months from the date of their effective registration.

          On March 10, 1998, the Board of Directors granted options to four
          executive officers of the company to purchase an aggregate of
          4,000,000 shares of common stock at an exercise price of $0.35 per
          share (the price at which common stock was negotiated on the date of
          grant). On the same date, non-employee directors were granted options
          to purchase an aggregate of 500,000 shares at the same price. The
          option vested to executive officers 200,000 each in 1998, with the
          balance over 3 years, and to non-employee directors immediately.
          The options are valid for 5 years and expire on March 10, 2003.

          On December 18, 1998, the Board approved the grant of a two year
          warrant to purchase an aggregate of 16,000,000 shares at an exercise
          price of $0.10 per share to Diamond Production, a company owned by two
          executive directors. This grant has to be approved at the forthcoming
          stockholders' meeting.

          PRO FORMA NET LOSS AND NET LOSS PER SHARE

          The Company has adopted the disclosure requirements of SFAS No 123,
          "Accounting for Stock-Based Compensation" and, as permitted under SFAS
          No 123 applies Accounting Principles Board Opinion ("APB") No 25 and
          related interpretations in accounting for its stock options. Since the
          Company awarded the stock options with no discount as compared with
          the market price at the time of the grants, there was no related
          compensation costs for any of the years presented based on the
          estimated grant date fair value as defined by FAS 123. The Company
          pro-forma net loss and loss per share for the year ended December 31,
          1998 and 1997 are as follows:





                                             1998              1997
                                               $                 $
          Pro forma net loss
          Basic and diluted               (10,767,547)     (18,371,756)

          Pro forma net loss per share
          Basic and diluted                     (0.27)           (0.66)


          CONVERTIBLE DEBT AT DECEMBER 31, 1998

          The following derivative securities outstanding will become
          exercisable if the company's stockholders authorize an increase in
          additional shares (see Note 2). Interest and penalties accrued are
          also convertible into common stock.
<TABLE>
<CAPTION>
                                                          CONVERSION       SHARES ISSUABLE
                PAYEE                        $             PRICE($)         ON CONVERSION
                                       -------------     -------------     ---------------
<S>                                        <C>               <C>                <C>
Superstar Ventures Ltd.                    1,250,000         0.10               12,500,000
Superstar Ventures Ltd.                      400,000         0.10                4,000,000
MMP SA                                     2,000,000         0.10               20,000,000
Superstar Ventures Ltd.                    5,000,000         0.10               50,000,000
MMP SA (1)                                 1,120,000         0.10               11,200,000
Interest and Penalties Accrued               732,419         0.10                7,324,190
                                       -------------                       ---------------
                                          10,502,419                           105,024,190
                                       =============                       ===============
</TABLE>

-------------------------
          (FOOTNOTES ON NEXT PAGE)

                                      F-20

<PAGE>


                           CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998

          (FOOTNOTES FROM PRIOR PAGE)

          (1)     The debt is part of a convertible note under which MMP will
                  loan $6,640,000 over 2 years. See Note 10 - Lease Commitments.
                  It is convertible into common stock at $0.10 per share. The
                  total shares of common stock to be issued are 66,400,000.

          These loans (principal and interest) are automatically convertible
          into shares of common stock once the Company holds its meeting of
          stockholders and its stockholders approve the increase in the number
          of authorized shares. The Company has agreed to pay a 2% per monthly
          penalty on the outstanding principal of the loans, payable in shares
          of common stock, for each month the Company fails to hold its special
          stockholders meeting subsequent to November 30, 1998. The convertible
          debt becomes automatically due to Superstar and MMP SA and immediately
          payable (with interest plus a 20% penalty) if the Company's
          stockholders do not approve the above-mentioned share number increase.

                                      F-21

<PAGE>

                           CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998

     BASIC EPS COMPUTATION
<TABLE>
<CAPTION>
                                                                  1998                 1997
<S>                                                           <C>                  <C>
Net income of continuing operations                           ($10,459,015)        ($17,573,986)
                                                            --------------     ----------------

Net loss                                                      ($10,767,547)        ($18,371,756)
                                                            --------------     ----------------

Weighted Average Number of Shares                               40,094,139           27,966,383
                                                            --------------     ----------------

Basic EPS      Net loss of continuing operations                   ($0.26)              ($0.63)
                                                            --------------     ----------------

Basic EPS      Net loss including discontinued operations          ($0.27)              ($0.66)
                                                            -------------      ---------------

DILUTED EPS COMPUTATION

Weighted average shares                                        40,094,139           27,966,383
Warrants(1)                                                             -                    -
Convertible debt - 105,024,190 shares(1)                                -                    -
Board options - 1,300,000 vested in 1998(1)                             -                    -
                                                           --------------     ----------------
               Adjusted Weighted Average                       40,094,139           27,966,383
                                                           --------------     ----------------

Diluted EPS    Net Loss of Continuing Operations                  ($0.26)             ($0.63)
                                                           -------------      ---------------

Diluted EPS    Net Loss Including Discontinued                    ($0.27)             ($0.66)
               Operations
                                                           -------------      ---------------
<FN>

------------------------
(1)  The computation does not assume exercise of the warrants or options since
     it would have an antidilutive effect on earnings per share.
</FN>
</TABLE>

16.     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
        and third years 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.

                                      F-22

<PAGE>

                           CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998

        On January 13, 1997, the Company issued a Private Placement Memorandum
        offering its securities to accredited investors including to all
        existing stockholders. 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 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. See
        note 17.

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

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

               (b)    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.

        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 10) CM (UK)'s
        obligations under the Deed are guaranteed by the Company and Onyx, and
        are secured by substantially all of the Company's assets. Instar and
        Universal have agreed that their liens on the Company's assets shall
        rank pari-passu.

        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, the latter replacing 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
        stockholders' meeting at which its Articles of Association are amended
        to increase sufficiently the number of authorized shares of Common Stock
        of the Company.

                                      F-23

<PAGE>

                           CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998

        On March 23, 1998, MMP, SA ("MMP"), a stockholder of the Company made
        available a $2,000,000 Line of Credit ("MMP Line of Credit"), which
        carried interest at 13% per annum, and has been fully utilized. The
        principal and accrued interest was repayable on December 31, 1998, or
        earlier if the Company's cash flow enabled repayment.

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

        These two loans are still outstanding at December 31, 1998.

        On June 16, 1998, the Company entered into two Memorandum of
        Understanding Agreements ("MOU") with Groupe AB ("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, of which $400,000 were received in 1998, and $6.24 million over
        a 24-month period through providing operating services to the Company at
        a rate of $200,000 per month starting October 1, 1998 and cash advances
        of $60,000 per month starting November 1, 1998. 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
        stockholders' meeting, which the Company was obligated to hold no later
        than November 30, 1998. (See Note 15)

17.     SUBSEQUENT EVENTS

        The Company has reached an agreement in principal to settle the Instar
        Loan. Under the terms of the settlement, the Company will pay Instar
        $2.2 million in full settlement of this loan. As part of the
        settlement, the company's obligations to Instar and Universal will be
        extinguished. (See Notes 8 and 16). Additionally, the obligations of
        Latitude Investments, Ltd. to the Company will be deemed paid in full.
        (See Note 5). As part of the settlement, all of the securities given
        will be released. This transaction is expected to result in a net
        credit to income of some $400,000 representing the settlement of the
        litigation. There can be no assurance that the settlement will be
        completed.

        On March 10, 1999, the Company entered into a new $6.0 million
        Convertible Promissory Note agreement with AB to provide additional
        funding for the Company's operations including $800,000, which was paid
        for the purchase of certain technical equipment necessary to implement
        the Service Agreement dated July 27, 1998; $3 million is to be loaned in
        cash over the five months to July 31, 1999, of which $1,160,000 has been
        received by the Company and the balance of $2.2 million, of the Note is
        reserved for the Settlement of the proposed repayment of the Instar
        loan. (See Note 16). The Note bears interest at the rate of 10% per
        annum, and is automatically converted into the Company's Common Stock on
        the basis of one share of Common Stock for each $0.10 of principal and
        interest. As previous, the Note, may not be converted until the Company
        has held its stockholders' meetings at which its Articles of Association
        are amended to provide the sufficient number of authorized shares of
        Common Stock of the Company.

18.     RESTATEMENT

        Subsequent to the issuance of the Company's consolidated financial
        statements for the year ended December 31, 1997, the Company's
        management determined that the 4,023,396 shares of the Company's stock
        held at year end should be reflected as an element of stockholders
        equity.

        Prior to its acquisition by the Company, Unimedia S.A. held 4,556,320
        shares in Capital Media Group. Between the date of its acquisition and
        the year end, 76,924 shares were sold, and 456,000 formed part of the
        consideration given in exchange for the shares in TopCard S.A. The
        remaining 4,023,396 shares held at the

                                      F-24

<PAGE>

                           CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998

        year end were carried in the balance sheet within investments at the
        market value of $0.44 per share in the previously issued financial
        statements. This was after reducing the investment by approximately
        $0.13 per share from the cost of $0.57 per share. The 1997 financial
        statements have been restated to reflect this investment as an element
        of the Stockholders' Equity at their original cost of $0.57 per share.
        The consolidated financial statements have been restated from the
        amounts previously reported as follows:

        A summary of the significant effects of the restatement are as follows:
<TABLE>
<CAPTION>
                                                  As previously reported    As restated
                                                             ($)                 ($)
<S>                                                       <C>                  <C>
        At December 31, 1997:
          Investments                                     2,014,917            143,336
          Total Stockholders' Equity                     (3,927,770)        (5,711,213)

       For the Year ended December 31, 1997
          Other (expenses)/income                           (44,684)           441,748
          Loss from continuing operation before
          taxation                                      (18,976,917)       (17,577,478)
          Net Loss after taxation                       (18,975,527)       (18,371,756)
          Net loss per share - basic and diluted              (0.68)             (0.66)
</TABLE>

19.     PRO FORMA FINANCIAL INFORMATION

        The following unaudited pro forma consolidated financial statement give
        effect to the acquisition as of January 1, 1998 of Pixel Limited
        (Israel) ("Pixel") by Unimedia, SA, as if the acquisition were effected
        as of January 1, 1997. The acquisition was accounted for by the purchase
        method of accounting.

        The cost of investment by Unimedia was based upon the part
        extinguishment of a loan made by Unimedia to Pixel Multimedia, its
        parent company, in 1996. The loan including interest and costs
        outstanding at December 31, 1997 was $2,700,000. The loan was fully
        provided for in the accounts of Unimedia in the year ended December 31,
        1996. At December 31, 1997, Pixel Multimedia sold to Pixel certain
        software produced for Unimedia for $950,000. On closing of the purchase
        of Pixel, Unimedia set-off this debt against the loan and reduced the
        loan to $1,750,000. $750,000 was extinguished for the cost of investment
        in Pixel and the remaining $1,000,000 is contingently extinguishable if
        certain financial performance benchmarks are achieved.

        The software has been fully amortized.

        The excess of purchase price over the fair value of net assets acquired
        is allocated to goodwill and is amortized over six years.

                                      F-25

<PAGE>

                           CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 1998

        Pixel and its 47.5% owned subsidiary Henry Communications Ltd. are
        engaged in providing services in the area of television, computerized
        graphics packaging, animation and special effects for television
        commercials and other video graphics production.

19.     PRO FORMA FINANCIAL INFORMATION

                   UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
                             FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
                                                          AS REPORTED
                                                       AFTER RESTATEMENT
                                                       -----------------
                                                         CAPITAL MEDIA       PIXEL LIMITED      PRO FORMA AS
                                                             GROUP                                ADJUSTED
                                                              ($)                ($)                ($)
                                                        ---------------      -------------      ---------------
<S>                                                         <C>                  <C>              <C>
       Operating Revenue                                    1,286,076            720,176          2,006,252

       Operating costs
          Staff costs                                       3,572,498            257,000          3,829,498
          Depreciation and amortization                     1,564,452            238,080          1,802,532
          Other operating expenses                         11,104,510             43,477         11,147,987
                                                          -----------        -----------        -----------
                                                           16,241,460            538,557         16,780,017
                                                          -----------        -----------        -----------

       Operating profit / (loss)                          (14,955,384)           181,619        (14,773,765)

       Other (expenses)/income                                441,748               --              441,748
       Financial income (expense) net                      (2,812,292)           (11,749)        (2,824,041)
       Equity in net losses of affiliates                    (251,550)           136,999           (114,551)
                                                          -----------        -----------        -----------
       Loss before income tax provision                   (17,577,478)           306,869        (17,270,609)

       Income tax benefit                                       1,658               --                1,658
                                                          -----------        -----------        -----------
       Continued operations                               (17,575,820)           306,869        (17,268,951)

       Discontinued operations                               (797,770)              --             (797,770)

       Minority interests                                       1,834            (56,464)           (54,630)
                                                          -----------        -----------        -----------

       Net loss                                           (18,371,756)           250,405        (18,121,351)
                                                          ===========        ===========        ===========

       Net loss per share for continuing operations       ($     0.63)                          ($     0.65)
                                                          ===========                           ===========

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

                                      F-26

<PAGE>

                           CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998

20.        SEGMENT INFORMATION BY ACTIVITY AND GEOGRAPHIC AREA

           The following financial information is summarized by business segment
           and country.
             - The television media segment contains the operations of Onyx; and
             - The technology segment contains the operations of Unimedia, Pixel
               and Topcard.

          Capital Media Group's activities are concentrated in Germany, France
          and Israel (Revenues account for: 1998 - approximately 31%, 39%, and
          29% respectively, 1997 - approximately 35%, 65% and nil respectively).
          Revenues were primarily derived from their domestic markets. In 1998,
          in Israel all revenue was derived under contract from one Company,
          Israeli Cable Programming. In France 55% of revenue was derived from
          Societe Marseillaise de Transport.

<TABLE>
<CAPTION>
                                                  Television                      Elimination &
                                                    Media         Technology       Corporate           Total
                                                     ($)             ($)               ($)              ($)

YEAR ENDED DECEMBER 31, 1998
<S>                                                  <C>            <C>                 <C>           <C>
       Revenues                                      760,824        1,697,381           10,285        2,468,490
       Inte-segment revenues                            --               --               --               --
                                                 -----------      -----------      -----------      -----------
       Total revenues                                760,824        1,697,381           10,285        2,468,490
       (Losses) from operations                   (7,480,286)        (674,215)      (2,698,237)     (10,852,738)
       Other (expenses) income                       324,495         (348,240)        (441,951)        (465,696)
       Interest revenue                                    0           10,752                0           10,752
       Interest expenses                             (64,352)        (169,086)      (1,061,732)      (1,295,170)
       Other financial income, net                 1,795,444          261,318          198,063        2,254,825
       Equity in net losses of affiliates               --            (74,000)         (76,808)        (150,808)
       Loss in discontinued business                    --               --           (308,532)        (308,532)
       Income tax benefit                             (4,887)          47,774           (1,335)          41,552
       Minority interest                                --             (1,732)            --             (1,732)
                                                 -----------      -----------      -----------      -----------
       Net loss                                   (5,429,586)        (947,429)      (4,390,532)     (10,767,547)
                                                 ===========      ===========      ===========      ===========
       Total assets                                1,066,965        2,385,586        3,156,091        6,608,642
                                                 ===========      ===========      ===========      ===========
       Capital expenditure                           385,788          103,181              611          489,580
                                                 ===========      ===========      ===========      ===========
       Depreciation of fixed assets                  135,355          288,123           17,008          440,486
                                                 ===========      ===========      ===========      ===========
</TABLE>

                                      F-27

<PAGE>
<TABLE>
<CAPTION>
                           CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998

           SEGMENT INFORMATION BY ACTIVITY AND GEOGRAPHIC AREA (CONTINUED)

YEAR ENDED DECEMBER 31, 1998                     GERMANY          FRANCE           ISRAEL      OTHER CORPORATE       TOTAL
                                                   ($)              ($)             ($)              ($)              ($)
<S>                                               <C>              <C>              <C>               <C>           <C>
       Revenues                                   760,824          970,381          727,000           10,285        2,468,490
       Inter-segment revenues                        --               --               --               --               --
                                              -----------      -----------      -----------      -----------      -----------
       Total revenues                             760,824          970,381          727,000           10,285        2,468,490
       (Losses) income from operations         (7,480,286)        (932,215)         258,000       (2,698,237)     (10,852,738)
       Other (expense) income                     324,495         (343,240)          (5,000)        (441,951)        (465,696)
       Interest revenue                              --             10,752             --               --             10,752
       Interest expenses                          (64,352)        (102,086)         (67,000)      (1,061,732)      (1,295,170)
       Other financial income, net              1,795,444          261,318             --            198,063        2,254,825
       Equity in net losses of affiliates            --               --            (74,000)         (76,808)        (150,808)
       Loss in discontinued business                 --               --               --           (308,532)        (308,532)
       Income tax benefit                          (4,887)          47,774             --             (1,335)          41,552
       Minority interest                             --             (1,732)            --               --             (1,732)
                                              -----------      -----------      -----------      -----------      -----------
       Net (loss)/profit                       (5,429,586)      (1,059,429)         112,000       (4,390,532)     (10,767,547)
                                              ===========      ===========      ===========      ===========      ===========
       Total assets                             1,066,965        1,620,586          765,000        3,156,091        6,608,642
                                              ===========      ===========      ===========      ===========      ===========
       Capital expenditure                        385,788          103,181              611             --            489,580
                                              ===========      ===========      ===========      ===========      ===========
       Depreciation of fixed assets               135,355          288,123           17,008             --            440,486
                                              ===========      ===========      ===========      ===========      ===========
</TABLE>

                                      F-28

<PAGE>

                           CAPITAL MEDIA GROUP LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998

           SEGMENT INFORMATION BY ACTIVITY AND GEOGRAPHIC AREA (CONTINUED)
<TABLE>
<CAPTION>
                                                                         Elimination &
                                       Television Media   Technology      Corporate          Total
                                             ($)             ($)             ($)              ($)

YEAR ENDED DECEMBER 31, 1997

<S>                                        <C>              <C>          <C>                <C>
Revenues                                   455,646          830,430             --          1,286,076
Inte-segment revenues                         --               --               --               --
                                       -----------      -----------      -----------      -----------
Total revenues                             455,646          830,430             --          1,286,076
(Losses) income from operations        (11,424,492)         101,628       (3,632,520)     (14,955,384)
Other income                                21,204          420,544                           441,748
Interest revenue                              --               --              4,782            4,782
Interest expense                           (69,876)         (41,410)        (138,190)        (249,476)
Financial (expense) income, net         (2,055,525)         158,753         (670,826)      (2,567,598)
Equity in net losses of affiliates            --               --           (251,550)        (251,550)
Loss in discontinued business                 --               --           (797,770)        (797,770)
Income tax benefit                          (1,613)           3,271             --              1,658
Minority interest                             --              1,834             --              1,834
                                       -----------      -----------      -----------      -----------
Net (loss)/profit                      (13,530,302)         644,620       (5,486,074)     (18,371,756)
                                       ===========      ===========      ===========      ===========
Total assets/(liabilities)               1,163,414       (1,123,048)       6,261,962        6,302,328
                                       ===========      ===========      ===========      ===========
Capital expenditure                           --               --             17,742           17,742
                                       ===========      ===========      ===========      ===========
Depreciation of fixed assets               114,322           51,039           13,664          179,025
                                       ===========      ===========      ===========      ===========

                                                                           Other
                                        Germany             France       Corporate           Total
                                          ($)                 ($)           ($)                ($)

Revenues                                   455,646          830,430             --          1,286,076
Inter-segment revenues                        --               --               --               --
                                       -----------      -----------      -----------      -----------
Total revenues                             455,646          830,430             --          1,286,076
(Losses) income from operations        (11,424,492)         101,628       (3,632,520)     (14,955,384)
Other income                                21,204          420,544             --            441,748
Interest revenue                              --               --              4,782            4,782
Interest expense                           (69,876)         (41,410)        (138,190)        (249,476)
Financial (expenses) income, net        (2,055,525)         158,753         (670,826)      (2,567,598)
Equity in net losses of affiliates            --               --           (251,550)        (251,550)
Loss in discontinued business                 --               --           (797,770)        (797,770)
Income tax benefit                          (1,613)           3,271             --              1,658
Minority interest                             --              1,834             --              1,834
                                       -----------      -----------      -----------      -----------

Net (loss)/profit                      (13,530,302)         644,620       (5,486,074)     (18,371,756)
                                       ===========      ===========      ===========      ===========
Total assets/(liabilities)               1,163,414       (1,123,048)       6,261,962        6,302,328
                                       ===========      ===========      ===========      ===========
Capital expenditure                           --               --             17,742           17,742
                                       ===========      ===========      ===========      ===========
Depreciation of fixed assets               114,322           51,039           13,664          179,025
                                       ===========      ===========      ===========      ===========
</TABLE>

                                      F-29

<PAGE>

           21. RELATED PARTY TRANSACTIONS

           In addition to the transactions described in Notes 5, 8, 10, 14, 15,
           16 and 17, the related party transactions also include the following:

           Mr. Jacques Dubost acts as consultant on behalf of his company,
           Valfab, S.C.B. In 1997, the Company paid to Valfab fees relating to
           introducing investors to Unimedia who purchased Company common stock
           from Unimedia: a) $195,000 in cash b) 106,666 shares of the Common
           Stock with a $64,000 value. Further, if Valfab introduces investors
           to the Company in the future, Valfab will receive commissions not to
           exceed 8% of the investment made.

           Mr. 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 ("TIAG"). The other 51% of TIAG is
           owned by the Company . Mr. Hauptmann is also a director of TIAG.

           Townsley & Co., a UK brokerage firm, participated in the Company's
           winter 1995/96 private placement for which it received direct
           commissions of $210,000, 86,655 shares of Common Stock and warrants
           to purchase 86,665 shares and 218,750 shares, respectively, at an
           exercise price of $3,125 and $4.00, respectively. Mr. Barry Townsley,
           Managing Director of Townsley & Co., was a Director of the Company
           until January 1997.

           Mr. 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 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. 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.

           Mr. James Leitner, a former director and more than 5% shareholder of
           the Company is a principal of Falcon Management which loaned $335,000
           to Unimedia in 1995 and was repaid in 1998.

                                      F-30

<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
9th day of July, 1999.

                                    CAPITAL MEDIA GROUP LIMITED

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

         Pursuant to the requirements of the Securities Exchange Act of 1934,
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>
                                                 Chairman, President and Chief
/s/ GILLES ASSOULINE                             Executive Officer (Principal
-------------------------------------------      Executive Officer)                           July 9, 1999
Gilles Assouline


/S/ MICHEL ASSOULINE
-------------------------------------------
Michel Assouline                                 Director, Chief Operating Officer            July 9, 1999


                                                 Chief Financial and Accounting
/S/ STEPHEN COLEMAN                              Officer (Principal Financial
-------------------------------------------      Officer)                                     July 9, 1999
Stephen Coleman


/S/ DAVID HO
-------------------------------------------
David Ho                                                          Director                    July 9 1999


/S/ JEAN-PIERRE SOUVIRON
-------------------------------------------
Jean-Pierre Souviron                                              Director                    July 9, 1999
</TABLE>

                                       S-1

<PAGE>

<TABLE>
<CAPTION>
                 SIGNATURE                                          TITLE                         DATE
                 ---------                                          -----                         ----
<S>                                              <C>                                          <C>
/S/ STANLEY HOLLANDER
-------------------------------------------
Stanley Hollander                                                 Director                    July 9, 1999


/S/ JEAN-FRANCOIS KLEIN
-------------------------------------------
Jean-Francois Klein                                               Director                    July 9, 1999


-------------------------------------------                       Director
Stephen Kornfeld
</TABLE>

                                       S-2

<PAGE>

                                  EXHIBIT INDEX

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

 27               Financial Data Schedule