FORM 10-KSB
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

     [X]   Annual Report under Section 13 or 15(d) of the Securities Exchange
           Act of 1934 For the fiscal year ended October 31, 2000

                                       or

     [ ]   Transitional Report Under Section 13 or 15(d) of the Securities
           Exchange Act of 1934

                        Commission file number 000-29921

                                  MAGICINC.COM
                 (Name of small business issuer in its charter)

           DELAWARE                                          65-0494581
          -----------                                  ------------------
  (State or other Jurisdiction of                      (I.R.S. Employer
   Incorporation or Organization)                      Identification No.)

            530 North Federal Highway, Fort Lauderdale, Florida 33301
            ---------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number (954) 764-0579

        Securities registered pursuant to Section 12(b) of the Act: NONE

        Securities registered under to Section 12(g) of the Exchange Act:

                                  Common Stock
                                  ------------
                                (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not 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. [ ]

The aggregate market value of the voting stock held by non-affiliates, computed
by reference to the average bid and asked prices of such stock, as of January
31, 2001 was $1,791,000.

As of January 31, 2001, there were 14,482,505 shares of common stock of
Magicinc.com outstanding.

<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

A.       Corporate History

         Magicinc.com ("We or the "Company") is a Delaware corporation organized
in 1961 under the name Magic Fingers, Inc. Our original purpose was to design,
manufacture and distribute a patented vibrating massage device for installation
in hotel and motel beds. In 1979, we began attempts to diversify our operations
and we sought opportunities in other industries. Currently, we are a development
stage company with plans to engage in the distribution, promotion and production
of varied forms of entertainment via the Internet.

         In April 1994, we acquired, in a reverse merger, a 100% interest in
Flash Entertainment, Inc. ("Flash"), a Florida film production and distribution
corporation for 20,000,000 shares of our pre-reverse split common stock. As part
of this acquisition, we also acquired a Florida film distribution company, No
Bull Distribution, Inc., which was a wholly- owned subsidiary of Flash, and the
rights to three feature-length films, "No More Dirty Deals," "Shakma," and
"Shoot." Pursuant to the merger and reorganization, Flash acquired approximately
79% of our outstanding stock and assumed management of our company. Our current
management obtained controlling ownership, pursuant to this reorganization.

         In May 1995, certain company insiders attempted an unsuccessful hostile
takeover. Gordon Scott Venters, our president, and chief executive officer,
initiated legal action to prevent the hostile takeover, and a trustee was
subsequently assigned. The trustee appointed a new board of directors and was
eventually released from his position on August 2, 1995. As a result, our
company became dormant and conducted minimal business operations until December
9, 1996, when we reorganized and a new board of directors was elected. The
reorganization was carried out to bring change in our focus. Prior management
had allowed our company to become dormant and only minimal business was
conducted. We had substantial debt and no significant operations. As a result of
the reorganization, we began developing and implementing a plan of operations
designed to restructure and eliminate our substantial debt. The last of our "old
debt" was settled on December 5, 1999, leaving us free to pursue our present
plan of operations.

         At various times in our history, our charter under Delaware law has
become inoperative for failure to pay taxes. However, each time we responded and
corrected such delinquency by filing a Certificate for Renewal and Revival in
accordance with Section 312 of the General Corporate Law of Delaware.

         In an effort to revitalize our company, new management undertook an
aggressive program to restructure and eliminate our debt. The debt primarily
consisted of promissory notes payable to Dr. H. K. Terry (the "Terry Notes") in
the amount of $220,000; a judgment entered against us in favor of Ing. Adolph
Malinek Gesellschaft M.B.H., an Austrian corporation, in the amount of
$247,205.35 (the "Malinek Judgment"); and a secured convertible promissory note
payable to HDT Properties, Inc. in the sum of $100,000 (the "HDT Note").

         We satisfied the Malinek Judgment by payment of $50,000 cash and the
issuance of 100,000 shares of our common stock. The HDT Note was satisfied by
payment of $50,000 cash. The Terry Notes were first extended and then settled by
us by issuing to Dr. Terry a total of 84,125 shares of our common stock.

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         We entered into an agreement with Castle Hill Productions in March
1998, to grant and assign the rights in the motion picture "Shakma." We received
$7,220 pursuant to this agreement. This agreement was superseded by an agreement
dated February 12, 1999, in which we granted Castle Hill Productions the
exclusive worldwide rights to, three feature films owned by us, "Shakma,"
"Shoot," and "No More Dirty Deals." Castle Hill Productions paid us an
additional $46,240 for the distribution rights to these films in perpetuity.

B.       Corporate Organization

         Magicinc.com operates through four separate divisions.

Magicinternetwork.com is an independent network of exclusive entertainment
content owned or licensed to Magicinc.com for distribution to the world market
on the Internet.

CyBars.com is a nightclub portal using CyBarCam Internet cameras and monitors
which will broadcast, live on the Internet, nightclubs, bands and bars on its
own network, Magicinternetwork.com.

Magic Studios is an independent studio to produce independent films, music
videos, commercials and other core content for Magicinternetwork and for
licensing to other broadcast mediums.

Magic Music Label is an independent music label utilizing the CyBars.com portal
and the Magicinternetwork to distribute independent artists' music over the
Internet.

C.       Business of the Company

General

         We are development stage Internet entertainment company with plans to
engage in distribution, promotion and production of varied forms of
entertainment via the Internet.

         Our current major focus is the development of our Internet
entertainment business. We own two registered domain names on the Internet: (i)
magicinternetwork.com, which we propose to use as our own Internet Service
Provider (ISP) for our CyBars network, through club monitors and (ii) CyBars.com
within which we intend to create an Internet link of entertainment venues to
magicinternetwork.com for Internet broadcast of content owned by us.

         We intend to focus our efforts on creating an independent Internet
entertainment network, magicinternetwork.com (a registered domain name).
Contained within this network will be a diverse array of select entertainment
nightclub links using club monitors. Cybars.com (a registered domain name) is a
live Internet nightclub membership syndication utilizing CyBarCam Internet
cameras and club monitors.

         Our websites will contain graphically rich interactive "CyBar-Streets"
and "CyBarClubs" in a virtual entertainment network linking major cities
throughout the country. These "CyBar-Streets" will contain numerous
entertainment venues in the form of Internet "CyBarClubs." At these sites,
member patrons can literally go out "nightclubbing" from home computer terminals
linked to monitors and live camera feeds to local clubs. Future developments
will attempt to include CyBar Internet computer terminals in CyBarClubs in major
U.S. cities creating direct interaction between members and patrons.

         We intend to sell memberships in our CyBarClub network with three
membership levels. The silver or basic membership level offers access to the
website and the club membership network for a monthly fee of $4.95. Silver level
membership offers patrons menus of night club locations, events and access to
membership e-mail lists and photos of other CyBar members, live DJ mixes, and

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live bands (audio only). The gold membership for $9.95 per month offers all the
services of the silver membership, as well as allowing members to peek inside
the club via the cybercams (live camera feeds, live DJ mixes and live bands)
before ever leaving home. The platinum level membership for $19.95 per month
with a required three-month minimum offers all the services of the gold
membership, plus VIP access (no cover charge with $50 minimum purchase) at all
participating CyBarClubs contained within the network. We intend to distribute
CyBarCam and Internet monitors to bars and nightclubs for no charge.
Installation charge will be approximately $6,000. Once our CyBars nightclub
network is in operation, we also intend to sell advertising to be featured in
the clubs through Magicinterwork.com.

Description of Products and Services

         We are an Internet entertainment holding company. We currently have no
substantial operations or operating history. We are attempting to create an
independent Internet entertainment network, magicinternetwork.com. Within this
network we will attempt to create a diverse array of select entertainment
nightclub links through cybars.com, a live Internet nightclub membership
syndication utilizing CyBarCam Internet cameras.

         Our plan is to create and maintain websites containing graphically rich
interactive "CyBar-Streets" and "CyBarClubs" in a virtual entertainment network
linking major cities throughout the country. Under our plan, these CyBar-Streets
would contain numerous entertainment venues in the form of Internet
"CyBarClubs." Once these sites are developed and in operation, member patrons
can literally go out "nightclubbing" from home computer terminals linked to live
camera feeds to their local clubs. We will seek to develop CyBar Internet
computer terminals in CyBarClubs in major U.S. cities, thus creating direct
interaction between members and patrons.

         Additionally, we currently hold an option to purchase all of the
outstanding shares of Quantum Entertainment, Inc. ("Quantum"), a Florida
corporation, in exchange for certain rights and payment of $50,000 and 50,000
shares of our common stock. Quantum owns 100% of the exclusive worldwide
distribution rights to the feature film project "Liberty City." Also, Quantum
owns 70% of the gross proceeds after print, advertising and distribution costs
up to the first $5 million. Thereafter, Quantum will receive 60% of the gross
proceeds up to $7.5 million and then 50% in perpetuity. Gordon Scott Venters is
the President and CEO as well as a major shareholder of Quantum. (For more
information, see Related Party Transactions, page 15).

Distribution Methods

         We plan to develop our network by concentrating our efforts, at first,
on a region-by-region approach. Our first area of concentration is Fort
Lauderdale, Florida followed by the South Beach area of Miami Beach, Florida and
then other cities in Florida.

         We are using the term "Cypod", the CyBar Nightclub Pod group, to
describe our method of growth. Each pod or cluster will include seven to ten
clubs in a concentrated geographic area. We expect these pods to develop into
regional clusters such as several clusters of nightlife in South Florida and
then start another group of pods in the Orlando of Central Florida and then
Tampa and Jacksonville. After concentrating on the different regions of Florida,
we expect to develop around another major city known for its high profile
nightlife.

         We chose Fort Lauderdale for several reasons for the initial launch of
CyBars.com and the magicinternetwork. The first was because our corporate office
is located in Fort Lauderdale and our directors are very familiar with the area
and will be able to closely monitor all aspects of the test marketing with

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minimum travel time and expense. In addition, we believe that the Fort
Lauderdale area has the perfect demographics in which to launch the network.
Fort Lauderdale has a concentration of nightclubs and affluent patrons.

         We plan to embark on a media campaign in the Fort Lauderdale to promote
membership subscriptions for our interactive Internet nightclub network website.
Our media campaign will use local billboards, print media, bus banners and
benches, local entertainment papers, bumper stickers and other high visibility
advertising placements. A local press conference, to initiate the media
campaign, will be held at the first linked nightclub. We expect to use the
slogan "See Them Live, Meet Them Live" to describe our nightclub experience
concept. The current subscription plan calls for a base monthly membership rate
of $9.95 for unlimited access to the network.

         We installed our first CyBarCam in the Fort Lauderdale-based blues club
"The Poorhouse" which is owned by our former director, Robert P. Pignone. We
signed seven more clubs in the River Walk area of Fort Lauderdale to be part of
our first pod and we are currently negotiating agreements for additional
installations in clubs in the downtown Fort Lauderdale area. We are continuing
our efforts to negotiate links with other existing clubs in the area. We expect
that once our network is running, additional clubs will join our Fort Lauderdale
pod.

         In addition to the clubs that have agreed to be part of the Fort
Lauderdale cluster, approximately 125 clubs in Florida and in other states have
agreed to be part of the network.

         Although, we are concentrating our marketing efforts in South Florida,
we are continuing to sign clubs nationwide to join our planned future CyBars
club network when it reaches their city.

         We leased, with an agreement to purchase, a building where we plan to
locate a company-owned CyBar. Our plans for this location includes it serving as
a prototype CyBar location and as a live Internet corporate broadcast facility
for our planned CyBar Network. Each CyBar location will be linked to other CyBar
locations via magicinternetwork.com. Members will be able to interact with
patrons and other CyBar members while visiting the nightclub location of their
choice from the comfort of home. Members and patrons at a CyBar location will
also be able to interact with each other at other club locations or the same
club via the club's Internet computer terminals. Chat rooms, games, contests,
promotions, and if desired, a private one-on-one live video interaction via
CyBarCam would all contribute to the unique club experience. In addition,
CyBarCam plans to provide added security for both patrons and nightclub
establishments.

         Our magicinternetwork.com division intends to record, store and own all
of the content transmitted via the CyBar network for future broadcasts and
licensing, as well as providing for our own network content and programming.

New Products

         We are attempting to establish an Internet network utilizing live
CyBarCam Internet broadcasts via CyBarCams, which will be located in our
proposed CyBar franchise club locations. We will seek to generate income from
our CyBars Nightclub Network by charging monthly membership fees to cybars.com
members. Members of the CyBars Nightclub Network will be charged a monthly fee
between $4.95 and $19.95 depending on level of membership.

         We have an option to purchase, for $50,000, 100% of Quantum
Entertainment; Inc. Quantum has ownership rights to a motion picture project
entitled "Liberty City" and any subsequent music soundtrack album. Gordon Scott
Venters, our president, chief executive officer and director, owns a 50%
interest in Quantum Entertainment, Inc. If the option is exercised, our plan

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would be to integrate film and the Internet via our Web site. We plan to create
a unique "brand of entertainment" which strategically aligns certain areas of
the independent entertainment industry. (For more information, see Related Party
Transactions, page 15).

Competition

         The Internet industry is intensely competitive and there are many
well-established competitors such as Launch.com and MP3. These and other
competitors have substantially greater financial and other resources than we do.
The great majority of these companies are better established in the
entertainment marketplace than we are. Changes in consumer tastes, national,
regional or local economic conditions and demographic trends often affect the
entertainment business. We believe, however, that we are in a position to use
our business plan to develop intellectual properties with long- term residual
value. There can be no assurances, however, that we will be able to attain our
business strategy or to be profitable.

         The market for online entertainment and entertainment products is new,
rapidly evolving and intensely competitive, and we expect competition to
intensify even more in the future. Barriers to entry are relatively low, and
current and new competitors can launch new sites at relatively low cost using
commercially available software.

         The Internet and production/distribution of online entertainment are
highly competitive businesses. In the production phase, competition affects our
ability to obtain the services of preferred performers and other creative and/or
technical personnel. We compete with a number of Web sites and Internet service
providers who have substantially greater resources, larger and more experienced
production and distribution staffs and established histories of successful
production of Internet sites.

         We also potentially face competition from a number of large online
communities and services that have expertise in developing online commerce and
in facilitating online person-to-person interaction. Some of these potential
competitors are Amazon.com, AOL Time Warner and Microsoft Corporation. Other
large companies with strong brand recognition and experience in online commerce
also may seek to compete in the online entertainment delivery market.

D.       Regulatory Overview

         We are subject to the same federal, state and local laws as other
companies conducting business on the Internet. Today there are relatively few
laws specifically directed toward online services. However, due to the
increasing popularity and use of the Internet and online services, it is
possible that laws and regulations will be adopted with respect to the Internet
or online services. These laws and regulations could cover issues such as online
contracts, user privacy, freedom of expression, pricing, fraud, content and
quality of products and services, taxation, advertising, intellectual property
rights and information security. Applicability to the Internet of existing laws
governing issues such as property ownership, copyrights and other intellectual
property issues, taxation, libel, obscenity and personal privacy is uncertain.

         Changes to existing laws or the passage of new laws that address
Internet issues may directly affect the way we do business or may create
uncertainty in the marketplace. This could reduce demand for our services or
increase the cost of doing business as a result of litigation costs or increased
service delivery costs, or could otherwise harm our business. In addition,
because our services are accessible worldwide, and we expect to facilitate sales
of goods to users worldwide, foreign jurisdictions may claim that we are
required to comply with their laws. In some jurisdictions, we may be required to
collect value-added or other taxes on our fees. Our failure to comply with
foreign laws could subject us to penalties ranging from fines to bans on our
ability to offer our services.

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E.       Reports to Security Holders

         We are not required to deliver an annual report to security holders and
we do not plan to deliver a copy of the annual report to the security holders.
Our Form 10SB registration statement became effective on September 5. 2000.
Since that date, we have filed with the Securities and Exchange Commission
("SEC") our quarterly report, Form 10-QSB, for the period ended July 31, 2000.
We plan to file with the SEC all required forms that may be or become applicable
to us.

         The public may read and copy any materials that are filed by us with
the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington,
D.C. 20549. The Public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The statements and forms
filed by us with the SEC have also been filed electronically and are available
for viewing or copying on the SEC maintained Internet site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC. The Internet address for this
site can be found at http://www.sec.gov. Additional information can be found
concerning us on the Internet at http://www.magicinc.com.

F.       Employees

         We currently have three full- time employees in management and two
part-time employees. We typically enter into independent contractor agreements
or work-for-hire agreements with individuals to provide professional services on
an as- needed basis.

ITEM 2. DESCRIPTION OF PROPERTY

         Up until May 31, 2000, we rented approximately 2,100 square feet of
office space in Fort Lauderdale, Florida for our executive and administrative
offices. This property was leased by us on a month-to-month basis at $1,000 per
month. We then entered into a lease for an 8,500 square foot building at 530
North Federal Highway, Fort Lauderdale, Florida. We moved our existing offices
to the new location. Our executive and administrative offices and computer
operations are now situated at the new building. Plans are in place to build a
recording studio and video facility at this building.

         The lease is for a term of two years beginning June 1, 2000 and ending
May 31, 2002. The rent for the property was scheduled as follows:

          June 1, 2000 through July 31, 2000          Rent waived by Landlord
          August 1, 2000 through November 30, 2000         $4,000 / month
          December 1, 2000 through May 31, 2001            $4,500 / month
          June 1, 2001 through November 30, 2001           $5,000 / month
          December 1, 2001 through May 31, 2002            $5,300 / month

         Since the renovation of the building has not been completed and a
certificate of occupancy has not yet been obtained, the landlord has continued
to waive rent payments. Once the certificate of occupancy is received there may
be certain modifications to the lease terms.

         We have also entered into an agreement to purchase the building no
later than May 31, 2002 for $480,000 subject to standard conditions, including
obtaining the necessary licenses and permits. The landlord/seller has agreed to
pay up to $26,935 for repairs to the building. We believe these facilities are
adequate for us to operate our business as presently constituted.

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         During the construction period, we have allowed Black Music Television,
Inc. to occupy a part of our facility rent-free. Robert Ingria, an officer and
director of our company is also an officer, director and major shareholder of
Black Music Television, Inc.

ITEM 3.  LEGAL PROCEEDINGS

         We are not currently a party to any legal proceedings. We are not aware
of any legal, governmental or administrative proceedings contemplated either
against us or on our behalf.

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

         No matters were submitted to a vote of our security holders during the
fourth quarter of our fiscal year,

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

         The primary market for our common stock is now the OTC Bulletin Board,
where our stock trades under the symbol "MAGC."

         Our common stock was traded on the OTC Bulletin Board until December
19, 1999 under the symbol "MAGC" and then under the symbol "MAGCE" until January
19, 2000 when it was delisted. Beginning January 20, 2000, our stock was quoted
in the "Pink Sheets", which is a trademark of Pink Sheets LLC, under the symbol
"MAGC." On September 5, 2000 our registration statement, Form 10SB, was deemed
"effective" by the SEC and shortly thereafter, our stock recommenced trading on
the OTC Bulletin Board.

         The following table sets forth the high and low closing bid prices for
the shares of our common stock for the periods indicated as provided by the OTC
Bulletin Board. The quotations shown reflect inter-dealer prices, without retail
mark-up, markdown, or commission and may not represent actual transactions.

         Records provided by the Trading Market Service of NASD for OTC
Quarterly Trading Summaries indicate that, for the period January 1997 through
September 30, 1999, trading in our common stock was negligible and could not be
considered a true indication of market value. During 1997 only 500 shares of our
common stock traded in three transactions with a total market value of less than
$1,000. Likewise, during 1998, NASDAQ trading records indicate that for the
entire year there were nine transactions representing 6,650 shares. For the
first three quarters of the calendar year 1999, the market for shares of our
common stock was likewise negligible and sporadic

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                  Quarter Ended                 High                 Low
                  -------------                 ----                 ---
1998              September 30                  $0.02               $0.02
                  December 31                    0.02                0.02

1999              March 31                        n/a                 n/a
                  June 30                        0.87                0.43
                  September 30                   0.75                0.16
                  October 31                     0.49*               0.31

*To coincide with our new fiscal year, quarters following October 31, 1999 are
shown based on the new fiscal year, which ends October 31.

                  Quarter Ending                High                 Low
                  -------------                 ----                 ---
2000              January 31                   $0.50                 $0.06
                  April 30                      0.20                  0.05
                  July 31                       0.12                  0.04
                  October 31                    0.19                  0.04

 Shareholders

         As of January 31, 2001, we had 14,482,505 shares of common stock
outstanding and approximately 481 shareholders of record.

         The holders of our common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of shareholders. Holders of
our common stock have no preemptive rights and no right to convert their common
stock into any other securities. There are no redemption or sinking fund
provisions applicable to our common stock.

Dividends

         We have not declared any cash dividends since inception and do not
anticipate paying any cash dividends in the foreseeable future. The payment of
dividends is within the discretion of our board of directors and will depend on
our earnings, capital requirements, financial condition and other relevant
factors. There are no restrictions that currently limit our ability to pay
dividends on our common stock other than those imposed by applicable state law.

Changes in Securities and Use of Proceeds

         As of December 31, 1997, we had 1,463,158 shares of our common stock
outstanding.

         During calendar year 1998, we issued 225,500 shares of our common stock
for cash; 100,000, as part of a debt settlement agreement and 965,366 for
services and the exercise of stock options for a total of 1,290,866 shares.

         In the fiscal period ending October 31, 1999, we issued 580,000 shares
for cash and 610,000 shares for services for a total of 1,190,000 shares.

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         In the fiscal year ending October 31, 2000, we issued 4,747,500 shares
for cash; 75,000 as part of a debt settlement agreement; 1,635,600 for services
and other value and 3,230,381 for conversion of our convertible debentures for a
total of 9,688,481 shares.

         As of October 31, 2000, the total of our outstanding shares was
13,632,505.

         The details of our stock issuances through July 31, 2000 have been
reported in our Form 10-SB and our Form 10-QSB for the quarter ended July 31,
2000.

         During the period from August 1, 2000 through October 31, 2000, the
fourth quarter of our fiscal year, we issued 6,881,667 shares. Of these shares,
3,865,000 were issued for cash; 500,000 were issued for services and other
value; 2,316,667 were issued on conversion of our debentures and 200,00 were
issued as interest on the debentures. The details of the stock issuances during
our fourth fiscal quarter are listed below.

         From August 21, 2000 through August 30, 2000, we issued a total of
3,450,000 shares of our common stock pursuant to a private placement memorandum
to the accredited investors listed below. We issued the shares pursuant to Rule
504 under Regulation D of the Securities Act of 1933. We issued the shares to
investors who were given a private placement memorandum and offered the
opportunity to inspect our books and records. We relied on the following facts
in determining that Rule 504 of Regulation D was available: (a) we were not
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act; (b) we were engaged in the production and distribution of entertainment
products and were neither a development stage company with no specific business
plan or purpose, nor a company whose plan was to merge with an unidentified
company; (c) the aggregate offering price did not exceed one million dollars and
(d) we filed a Form D within 15 days of the first sale of shares subject to the
offering.

  Name                          Price                    Number of Shares
  ----                          -----                    ----------------
PMR & Associates  LLC           $ 0.04                        625,000
Paul Montle                       0.05                        100,000
Paul Montle                       0.05                        400,000
Michael  Herman                   0.05                        200,000
Kent Lovelace                     0.05                        400,000
Fountainview Capital Corp.        0.05                        500,000
Joseph   Lynde                    0.04                        625,000
Bering Capital                    0.05                        500,000
Jeremy Wessels                    0.05                        100,000


         On August 24, 2000, we issued 20,000 shares of our common stock to
Frederick W. Rapple, Jr.; 100,000 shares to Christopher Gilbert and 70,000
shares to Carlos A. Munoz at $0.10 per share. The issuances were made in
reliance on Section 4(2) of the Securities Act of 1933 and were made without
general solicitation or advertising. The recipients were sophisticated investors
with access to all relevant information necessary to evaluate the investment,
and who represented to us that the securities were being acquired for investment
purposes. We used the $19,000 proceeds of the sale for general working capital
requirements.

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         On August 24, 2000, we also issued 100,000 shares of our common stock
to Black Music Television, Inc. at $0.05 per share. Our director, Robert M.
Ingria is president, director and majority shareholder of Black Music
Television, Inc. The issuance was made in reliance on Section 4(2) of the
Securities Act of 1933 and was made without general solicitation or advertising.
The recipient was a sophisticated investor with access to all relevant
information necessary to evaluate the investment, and who represented to us that
the securities were being acquired for investment purposes. We used the $5,000
proceeds of the sale for general working capital requirements.

         On August 24, 2000, we also issued 50,000 shares of our common stock to
Academy Entertainment, Inc. in exchange for a license to acquire public domain
programming for our nightclub network.. The issuance was made in reliance on
Section 4(2) of the Securities Act of 1933 and was made without general
solicitation or advertising. The recipient was a sophisticated investor with
access to all relevant information necessary to evaluate the investment, and who
represented to us that the securities were being acquired for investment
purposes. We valued the stock at $0.05 per share, which approximated market
value and charged the $2,500 as a program license expense.

         On August 24, 2000, we also issued 350,000 shares of our common stock
for consulting services, as follows: 325,000 shares to Robert M. Ingria, a
director of our company and 25,000 shares to John J. Kearney, a former director
of our company. The stock was valued at $0.05 per share, which approximated
market value. The issuances were made in reliance on Section 4(2) of the
Securities Act of 1933 and were made without general solicitation or
advertising. The recipients were sophisticated investors with access to all
relevant information necessary to evaluate the investment, and who represented
to us that the securities were being acquired for investment purposes.

         On August 24, 2000, we also issued 100,000 shares of our common stock
at $0.0001 per share to Richard Surber for consulting services pursuant to a
written compensation plan. These shares were issued pursuant to a written
employee benefit plan under Rule 701 adopted pursuant to the Securities Act of
1933. Mr. Surber provided bona fide services to us, which services were not in
connection with the offer or sale of securities in a capital raising
transaction, or to directly or indirectly promote or maintain a market for our
securities. The stock was valued at $0.05 per share, which approximated market
value.

         On August 31, 2000, we issued 125,000 shares to Christopher Gilbert at
$0.08 per share. The issuance was made in reliance on Section 4(2) of the
Securities Act of 1933 and was made without general solicitation or advertising.
The recipient was a sophisticated investor with access to all relevant
information necessary to evaluate the investment, and who represented to us that
the securities were being acquired for investment purposes. We used the $10,000
proceeds of the sale for general working capital requirements.

         On October 24, 2000 and October 30, 2000 we issued 1,250,000 and
1,066,667 shares of our common stock to HLKT, LLC in conversion of $ 65,000
principal amount of our Series A convertible debentures which were issued in
November 1999 under Rule 504 of Regulation D pursuant to authorization in
October 1999. The shares were issued in accordance with a conversion formula
based on 75% of the average bid price prior to notice of conversion. Also on
October 30, 2000 we issued an additional 200,000 shares of our stock for payment
of interest on the debentures.

         In the first quarter of fiscal year 2001, we issued a total of 850,000
shares of our common stock, of which 200,000 shares were issued for cash and
650,000 shares were issued for services.

         In January 2001, we received $130,500 (net of expenses of $19,500) from
our offering of 5% Class A senior subordinated convertible redeemable
debentures. These debentures entitle the holder to convert incremental face
amounts of $10,000 into our common stock at 70% of the average closing bid price

                                       11
<PAGE>

of the three trading days prior to the election to convert. Accrued interest may
also be paid in the same fashion. At any time after 90 days, we have the option
to redeem the debentures, in whole or in increments of $10,000, for 125% of the
face amount. At the request of the debenture holders, we issued, in escrow,
3,250,000 shares of common stock to guarantee the stock issuance if the
debenture holders elect conversion. Due to provisions of the conversion formula,
the potential dilutive effect, if debentures are converted, cannot be determined
at this date.

         As of January 31, 2001 we had 14,482,505 shares of common stock
outstanding. We do not include in the total outstanding the shares held in
escrow referred to in the previous paragraph.

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

General

         We are a development stage Internet entertainment company with plans to
engage in the distribution, promotion and production of varied forms of
entertainment via the Internet.

         Our current major focus is the development of our Internet
entertainment business. We own two "registered domain names" on the Internet.
These are (i) Magicinternetwork.com, which we propose to use as our own Internet
Service Provider (ISP) for our CyBars network, and (ii) Cybars.com within which
we intend to create an Internet link of entertainment venues to
Magicinternetwork.com for Internet broadcast and for content owned by us.

Results of operations

         The following discussion and analysis provides information that our
management believes is relevant to an assessment and understanding of our
results of operations and financial condition. The discussion should be read in
conjunction with the financial statements and footnotes that appear elsewhere in
this report. In 1999, we changed our year end from a calendar year to a fiscal
year ending October 31. The analysis herein compares a full calendar year ending
October 31, 2000 ("Fiscal Year 2000") with the short fiscal year, 10 months,
ending October 31, 1999 ("Fiscal Year 1999").

Sales and Other Revenues

         In the fiscal year 2000, there were no sales or other revenues. This
compared to revenues in fiscal year 1999 of $46,240. This decline resulted from
our concentration of efforts in the latest fiscal year on the development of our
Internet entertainment business model. During the fiscal year 1999, we licensed
distribution rights in perpetuity to three feature films, which were owned by
us, for the net sum of $46,240. This was a one-time payment for distribution
rights to the films. We have no further rights to use or market these films.

Cost of Sales

         Since there were no sales or revenues in fiscal year 2000, there was no
cost of sales for that period. In the prior period, fiscal year 1999, the cost
of sales was likewise $0 because the sold films were carried on our books at a
zero basis.

                                       12
<PAGE>

Expenses

         Selling, general and administrative expenses for the fiscal year 2000
increased $219,655 or 136% to $381,294 from $161,639 in fiscal year 1999. During
this same period, interest expense increased to $83,592 for fiscal year 2000
from $0 in fiscal year 1999. The increase in selling, general and administrative
expenses were primarily the result of expenses associated with the relocation to
new facilities and the general expenses associated with the start-up of our new
Internet-related entertainment business. Included in the selling, general and
administrative expenses, for the fiscal year 2000 is the accrued but unpaid
salary of our president and chief executive officer, Mr. Gordon Scott Venters,
in the amount of 133,333. Also included in the expenses for the year are
professional consulting services paid for with the issuance of our common stock,
valued at $8,500.

         The substantial increase in interest expense resulted from the payment
of interest on $150,000 of our convertible debentures. The interest on the
debentures was a combination of the payment of the coupon rate on the debentures
in stock and the amortization of the original issue discount on the debentures.

         Depreciation expense for fiscal year 2000 increased, by 877%, to
$2,287, in fiscal year 2000 from $234 in fiscal year 1999.

Losses

         Our net loss before taxes and extraordinary gain for fiscal year 2000
increased 303% to $464,886 from $115,399 in fiscal year 1999. This increase in
the loss before extraordinary gains and taxes of $349,487 was the result of the
decrease in revenues of $46,240, the increase of selling, general and
administrative expenses of $219,655 and the increase in interest expense in the
amount of $83,592. There were no extraordinary gains in fiscal year 2000
compared to the $259,500 realized in the October 31, 1999 fiscal period. That
year's extraordinary gain resulted from debt restructuring. Since we had no
extraordinary gains in fiscal year 2000, our net loss after extraordinary gains
was the same as before extraordinary gains, $(464,886), which compares to net
income in the fiscal year ended October 31, 1999 of $144,101.

         We are projecting that our operations will break even or operate at a
slight profit for the coming fiscal year, which will end October 31, 2001 as a
result of the intended launch of our Magicinternetwork.com entertainment network
and the activation of our Cybars.com program. There can be no assurance that we
will achieve or maintain profitability or that revenues will be generated or
that growth can be sustained in the future.

Impact of Inflation

         We believe that inflation has had only a negligible effect on our
operations in the past several years.

Liquidity and capital resources

         We did not generate cash from operations in the period January 1,1999
through October 31, 2000. In fact, our operating activities consumed cash in the
amount of $250,062 in the fiscal year ended October 31, 2000 and $19,184 in the
fiscal period ended October 31, 1999. Without the extraordinary gain of $259,500
in fiscal 1999, cash consumed in that fiscal period would have been $278,684.

                                       13
<PAGE>

         We have been able to continue in business primarily from the receipt of
cash from financing activities. During fiscal year 2000, our financing
activities provided total funds of $269,536. Similarly, our financing activities
provided total funds of $37,638 for fiscal year 1999.

         We have funded our cash needs during the last two fiscal years through
the issuance of our common stock and convertible debentures, for cash. We also
used our common stock, in lieu of cash, to obtain professional and employment
services. We intend to cover our cash needs over the next twelve months through
the sale of additional shares of our common stock and/or convertible securities
pursuant to a registration statement or an appropriate exemption from
registration. In order to support existing and proposed operations, bank,
private and/or equity financing will be necessary. However, there is no
guarantee that we will be able to raise additional funds from borrowing or the
sale of our securities.

Debt Settlement

         During 1998 and 1999, we settled $547,205 of debt for total cash
payment of $100,000 and issuance of 175,000 shares of our common stock.

Capital Expenditures

         Up through the end of our fiscal year, October 31, 2000, our capital
expenditures on property and equipment had not been significant. We plan to
substantially increase our capital expenditures during fiscal year 2001 as we
proceed with the development and the launching of the magicinternetwork and
CyBar concepts. We plan to purchase and/or lease the video and computer
equipment needed to connect member nightclubs to our network. We have allocated
$150,000 for this development and intend to contract for the completion of this
work when funds are available.

         Our landlord has agreed to pay up to $26,935 for repairs and
renovations to our new facilities.

Income Tax Expense (Benefit)

         We have substantial net operating loss carry-forwards, which may be
used to offset operating profit. In the periods covered by this report there was
no income tax expense or benefit reported on our financial statements.

Quasi-reorganization

         As of October 1999, we reached settlement agreements with all of our
significant creditors. Also, by that date we changed our business focus to
become an Internet entertainment company. Our board of directors, therefore,
elected to state our October 31, 1999 balance sheet as a "quasi-reorganization."
In a quasi-reorganization, the deficit in retained earnings is eliminated by
charging paid-in-capital. In effect, this gave our balance sheet a
"fresh-start." Beginning November 1, 1999 and continuing forward, we are
crediting net income and charging net losses to retained earnings.

Ability to Continue as a Going Concern

         Our financial statements, which are a part of this Form 10-KSB, have
been prepared assuming that we will continue as a going concern. In the past two
years, while we have been restructuring our liabilities and developing a new
business plan, we have had no revenue in the ordinary course of business. Sales
for the period January 1998 through October 31, 2000 were from the disposition
of our interest in certain films. The lack of sales and recurring losses from
operations raises substantial doubt about our ability to continue as a going
concern. Our management estimates it will need approximately $250,000 to fund
our operations for the next twelve months. Our management's plan regarding these
matters is to seek further equity funding to allow us to meet our cash needs and

                                       14
<PAGE>

to build our Internet entertainment network, Magicinternetwork.com and our
nightclub connection, Cybars.com. In order to support ongoing operations for the
next twelve-month period, additional financing must be obtained.

ITEM 7. FINANCIAL STATEMENTS

         Our financial statements for the fiscal years ended October 31, 2000
and October 31, 1999 follow as pages F-1 through F-14.

                                       15
<PAGE>

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

         We have not changed our accountants or had disagreements with them on
accounting or financial disclosure.

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

         The following is a list of our directors, executive officers, control
persons, and significant employees, their respective ages and the positions they
hold with us.

    Name                    Age                   Positions
    ----                    ---                   ---------
Gordon Scott Venters        39             Director, chief executive officer,
                                           president and secretary
Todd Nugent                 43             Director
Robert M. Ingria            47             Director


         Pursuant to Article II of our bylaws, all directors are elected to a
term of one year, and hold such office until the next meeting of the
shareholders or until their successors are elected and qualified. The executive
officers serve at the pleasure of the board. The principal occupation and
business experience for each executive officer and director for at least the
past five years are as follows:

         Gordon Scott Venters, our president, chief executive officer and
secretary has specialized in the entertainment industry, including the
financing, management and production of films, videos and recordings, for over
16 years. Mr. Venters has served as our director from March 15, 1994 to May 19,
1995 and from December 9, 1996 to the present. From May 19, 1996 until December
9, 1996, he served as president and a director of Quantum Entertainment Company
in Los Angeles, California. From 1990 to 1993, Mr. Venters served as the
president and chief executive officer of Flash Entertainment, Inc., an
independent feature film company and predecessor of our company, during which
time he was the executive producer of the feature film "No More Dirty Deals" and
five music videos. From 1989 to 1990, Mr. Venters was the executive producer of
two full-length feature films, "Shakma" and "Shoot." Mr. Venters has also been a
financial advisor and a registered stockbroker with F.D. Roberts Securities from
1987-1989 and with Prudential- Bache Securities, Inc.

         Robert Michael Ingria, a director of our company since December 1999,
is a native of Miami, Florida and graduated with honors from the Fine Arts
Program in Motion Pictures and Art of Florida State University. Mr. Ingria's
professional background includes over 20 years experience in the entertainment
and motion picture industry. Since February 1995, he worked as a producer with
RMI Entertainment Company, a film production company located in Sunny Isles,
Florida. From October 1997 to August 1998, he served as President of Ocean Drive
Entertainment Company located in Miami, Florida. From December 1997 to December
1998, he served as president of Millennium Telemedia, Inc., a Miami Florida
company, which is in the entertainment business. He built, and operated for
approximately fifteen years, Quadradial Recording Studios that operates video
production and motion picture facilities in South Florida. Mr. Ingria's dossier
includes writing, producing and directing all forms of film and video projects
including three motion pictures, over thirty music videos, infomercials for
multi-million dollar grossing direct response programs, corporate videos and
television commercials. Mr. Ingria is a member of the Florida Motion Picture and
Television Association. Mr. Ingria has also, since June 2000, been president
director and controlling shareholder of Black Music Television, Inc., a company
developing a television concept.

                                       16
<PAGE>

         Todd Waddell Nugent, a director since 1996, served as our chief
executive officer from July 17, 1996 to December 9, 1996 and as the president of
our company's Entertainment Film Partners division from December 9, 1996 to
February 17, 1997, when this division was eliminated. From June 1995 to March
1996, Mr. Nugent served as chief executive officer of Stradigi, Inc., a
telecommunications group. Mr. Nugent was a co-founder of Multi-Channel Video
Programming, Inc., a DBS system, where he served as its chief executive officer
from February 1994 to March 1995. From 1986 to February 1993, Mr. Nugent was a
broker with Royal Alliance and Associates, Inc., a registered securities
broker/dealer.

Compliance with Section 16(a) of the Exchange Act

         Messrs. Venters, Ingria and Nugent have not filed all required Forms 3
and 4 in a timely manner.

ITEM 10: EXECUTIVE COMPENSATION

Compensation of Executives

         The following table provides summary information for the years 2000 and
1999 concerning cash and non-cash compensation paid or accrued by us to or on
behalf of Gordon Scott Venters, our president and chief executive officer.
Except as indicated below, no officer or employee of ours received a total
salary and bonus exceeding $100,000 during the periods reflected.
<TABLE>
<CAPTION>

                                             Summary Compensation Table

                                   Annual Compensation                   Awards         Payouts

                                                                                       Securities
 Name                                                  Other                             Under-
 and                                                   Annual         Restricted          lying        All Other
 Principal                                             Compen-          Stock           Options/LTIP    Compen-
 Position        Year        Salary        Bonus        sation          Awards          SARs Payouts     sation
-------------- --------- --------------  ----------  ---------------  --------------  --------------  -------------
<S>             <C>         <C>             <C>       <C>             <C>               <C>            <C>
Venters         1999        100,000                                   12.50 (1)
CEO             2000        133,333(2)         0          0               0                   0             0
</TABLE>

(1)      In 1997, the Company issued a stock option to Mr. Venters to purchase,
         over three years, up to 750,000 shares of stock at $0.0001. Mr. Venters
         exercised his option to purchase 125,000 shares in 1997, 500,000 shares
         in 1998 and the remaining 125,000 shares in 1999.

(2)      On October 1, 1997 Gordon Scott Venters entered into a three year
         employment agreement providing for a salary of $75,000 during the first
         year, $100,000 during the second year and $133,000 for the third year.
         Only $40,000 was paid in 1999 and $41,000 paid in 2000 in and the
         balance was accrued.

Employment Agreements

Gordon Scott Venters. Effective October 1, 1997, we entered into a three year
employment agreement with Gordon Scott Venters, our president and chief
executive officer, whereby Mr. Venters receives a salary of $75,000 for the
first year.

The agreement provided for increases in year two to $100,000 and year three to
$133,000. The agreement has not yet been extended. With the approval of our
board of directors, accruals of salary expense for Mr. Venters have continued
after the end of the term of the agreement at the same monthly rate as in the
final year of the agreement. The earned but unpaid portion of Mr. Venters'
compensation is carried as a current payable and reflects any payments made
through October 31, 1999 and October 31, 2000. The amounts owing on those dates
were $186,111 and $278,444, respectively.

                                       17
<PAGE>

Mr. Venters is also entitled to receive two weeks paid vacation for the first
year and four weeks paid vacation for the following two years. In the event of
Mr. Venters' disability for a period of more than two weeks, Mr. Venters will
receive 50% of his compensation for a period of up to three months.

Robert Michael Ingria. Effective December 15, 1999, the Company entered into a
one year employment agreement with Robert Michael Ingria. In December 1999, Mr.
Ingria received 75,000 shares of the our common stock pursuant to the employment
agreement. In addition, as a director Mr. Ingria receives 25,000 additional
shares annually for his services. On August 24, 2000, Mr. Ingria received an
additional 325,000 shares valued at $16,250 or $0.05 per share.

Compensation of Directors

All members of our board of directors will receive, on an annual basis, 25,000
shares of our common stock as payment for service on our board.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information concerning the ownership of
our common stock (par value $0.0001) as of January 31, 2000, with respect to:
(i) each person known to us to be the beneficial owner of more than 5 percent of
our common stock; (ii) all of our directors and executive officers; and (iii)
all of our directors and executive officers as a group. The notes accompanying
the information in the table are necessary for a complete understanding of the
information provided below. As of January 31, 2000, there were 14,482,505 (post
1 for 40 reverse split) shares of common stock outstanding.

                                                    Amount and
                               Relationship         Nature of          Percent
Name and Address of               to the            Beneficial           of
Beneficial Owner                 Company            Ownership           Class
----------------                 -------            ---------           -----
Gordon Scott Venters              Director           600,000             4.1%
530 North Federal Highway         Officer
Fort Lauderdale, FL 33301

Todd Nugent                       Director            90,000             0.6%
1291 Claret St.
Fort Myers, FL 33919

Robert M. Ingria                  Director           525,000(1)          3.4%
530 North Federal Highway
Fort Lauderdale, FL 33301

Directors and officers as a
group (3 individuals)                              1,215,000             8.4%


(1)      Includes 100,000 shares owned by Black Music Television, Inc.

                                       18
<PAGE>

        This table does not include the potential shares that may be issued if
the outstanding $150,000 Series A debentures are converted into common stock.
Three investors, each owning $50,000 principal amount, own the debentures. Due
to the nature of the conversion formula, the number of shares that may be issued
cannot be determined.

Changes in Control

There are currently no arrangements in place that will result in a change in
control of our company.

                                       19
<PAGE>

ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         On May 28, 1999, and amended on June 15, 1999, we were granted an
option to purchase all of the outstanding shares of Quantum., a Florida
corporation, in exchange for certain rights and payment of $50,000 and 50,000
shares of our common stock. Quantum owns 100% of the exclusive worldwide
distribution rights to the feature film project "Liberty City." It also owns 70%
of the gross proceeds after print, advertising and distribution costs up to the
first $5 million. Thereafter, Quantum Entertainment, Inc. will receive 60% of
the gross proceeds up to $7.5 million and then 50% in perpetuity. Gordon Scott
Venters is the president and chief executive officer as well as a major
shareholder of Quantum Entertainment, Inc.

         Mr. Robert Ingria, a director of our company is also president,
director and controlling shareholder of Black Music Television, Inc. We have
allowed Black Music Television, Inc. to occupy a part of our facility rent-free
while construction of the building proceeds. Upon issuance of a certificate of
occupancy of the premises we will make other arrangements with Black Music
Television, Inc.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits

         23.1     Consent of Cronin & Company

         (b)      Reports on Form 8-K.

         No reports on Form 8-K were filed during the quarter ended October 31,
         2000.

                                       20
<PAGE>

                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                   MAGICINC.COM


February 13, 2001                   By: /s/ Gordon Scott Venters
                                       ------------------------
                                       Gordon Scott Venters
                                       President and Chief Executive Officer

                                       /s/ Todd Nugent
                                       ------------------------
                                       Todd Nugent, Director

                                       /s/ Robert M. Ingria
                                       ------------------------
                                       Robert M. Ingria, Director

                                       21
<PAGE>

                                  MAGICINC.COM

                          INDEX TO FINANCIAL STATEMENTS

      Independent Auditors' Report..........................................F-2

      Financial Statements:

         Balance Sheet as of October 31, 2000 and October 31, 1999..........F-3

         Statement of Operations for the Years Ended October 31, 2000
           and October 31, 1999 ............................................F-4

         Statement of Cash Flows for the Years Ended October 31, 2000
           and October 31, 1999.............................................F-5

         Statement of Changes in Stockholders' Deficit for the Years
           Ended October 31, 2000 and October 31, 1999......................F-6

         Notes to Financial Statements......................................F-7



                                       F-1
<PAGE>

                                Cronin & Company
                          Certified Public Accountants
                             1574 Eagle Nest Circle
                          Winter Springs, Florida 32708



Board of Directors and Shareholders
Magicinc.com
Fort Lauderdale, Florida

         We have audited the  accompanying  balance sheet of  Magicinc.com as of
October 31, 2000 and October 31, 1999 and the related  statements of operations,
cash flows and  stockholders'  deficit for the years then ended.  The  financial
statements are the  responsibility  of the directors.  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  except as described in the last paragraph.  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,  the  financial  statements  referred to above  present
fairly, in all material  respects,  the financial position of Magicinc.com as of
October 31, 2000 and  October  31, 1999 and the results of its  operations,  its
cash flows and changes in stockholders' deficit for the year and ten months then
ended in conformity with generally accepted accounting principles.

         The accompanying  financial  statements have been prepared assuming the
Company will  continue as a going  concern.  The Company has incurred  operating
losses of  approximately  $5,800,000  through  October 31, 2000.  As a result of
these continued losses, the Company has been unable to generate  sufficient cash
flow from its operating activities to support current operations.  The Company's
ability to generate  sufficient future cash flows from its operating  activities
in order to sustain  future  operations  cannot be determined at this time.  Its
plan  is  included  in  Note 9 of the  financial  statements.  The  Company  has
primarily  funded  its  operations  through  the sale of its  common  stock  and
proceeds of debt borrowings.  There can be no assurance that the Company will be
able to do so in the future,  and, if so, provide it with sufficient capital and
on terms favorable to the Company.  These  uncertainties raise substantial doubt
about the  Company's  ability to  continue  as a going  concern.  The  financial
statements do not include any  adjustments  that might arise from the outcome of
these uncertainties.

February 8, 2001

/s/ Cronin & Company

Cronin & Company
Certified Public Accountants

                                       F-2
<PAGE>
<TABLE>
<CAPTION>
                                  MAGICINC.COM

                                  Balance Sheet
                      October 31, 2000 and October 31, 1999
     See Summary of Accounting Policies and Notes to Financial Statements.

                                     ASSETS

                                                            October 31,
                                                       2000            1999
                                                     --------        --------
<S>                                                  <C>             <C>
Current Assets:
  Cash and Cash Equivalents                          $ 17,129        $ 20,515

  Deposit Receivable                                   10,000               0

  Subscriptions Receivable on Convertible
     Debentures                                             0         150,000
                                                     --------        --------
   Total Current Assets                                27,129         170,515

Property and Equipment-Net                             10,926             351
                                                     --------        --------
Total Assets                                         $ 38,055        $170,866
                                                     ========        ========

                       LIABILITIES & STOCKHOLDERS' DEFICIT

Current Liabilities:
  Accounts Payable-Trade and
     Accrued Expenses Payable                        $ 12,794        $ 24,370

  Accrued Officer's Salary under
     Employment Agreement                             278,444         186,111

  Liability to Issue Common Stock                           0           5,250
                                                     --------        --------
   Total Current Liabilities                          291,238         215,731

Long-term Debt:
              -Other                                        0         250,804
              -Related Parties                              0          21,908
                                                     --------        --------
Total Liabilities                                     291,238         488,443
                                                     --------        --------
Stockholders' Deficit:
  Common Stock 13,632,505 and 3,944,024
     Shares Issued                                    231,703        (317,577)

  Subscription Receivable                             (20,000)              0

  Deficit Accumulated During Development Stage
     since Quasi-Reorganization October 31, 1999     (464,886)              0
                                                     --------        --------

   Total Stockholders' Deficit                       (253,183)       (317,577)
                                                     --------        --------

Total Liabilities & Stockholders' Deficit            $ 38,055        $170,866
                                                     ========        ========

</TABLE>
                                       F-3
<PAGE>
<TABLE>
<CAPTION>
                                  MAGICINC.COM

                             Statement of Operations
                      October 31, 2000 and October 31, 1999
      See Summary of Accounting Policies and Notes to Financial Statements.


                                              Fiscal Year Ended    Ten Months Ended
                                               October 31, 2000     October 31, 1999
                                               ----------------     ----------------
<S>                                                <C>                <C>
Net Sales                                          $        0         $   46,240

Costs Applicable to Sales and Revenue                       0                  0
                                                   ----------         ----------

Gross Profit                                                0             46,240

Selling, General and Administrative Expenses          381,294            161,639
Interest                                               83,592                  0
                                                   ----------         ----------
(Loss) before Income Taxes and Extraordinary
  Item                                               (464,886)          (115,399)

Extraordinary Item-Gain Realized upon
   Debt Restructuring                                       0            259,500
                                                   ----------         ----------
Net Income (Loss) before Income Taxes                (464,886)           144,101

Income Tax Expense                                          0                  0
                                                   ----------         ----------
Net Income (Loss)                                  $ (464,886)        $  144,101
                                                   ==========         ==========
Basic Net Income (Loss) Per Share                  $    (0.09)        $     0.05
                                                   ==========         ==========
Weighted Average Common Shares Outstanding          5,338,173          3,096,906
                                                   ==========         ==========

</TABLE>

                                       F-4
<PAGE>
<TABLE>
<CAPTION>
                                  MAGICINC.COM

                             Statement of Cash Flows
                      October 31, 2000 and October 31, 1999
      See Summary of Accounting Policies and Notes to Financial Statements.


                                                     Fiscal Year      Ten Months
                                                        Ended            Ended
                                                  October 31, 2000   October 31, 1999
                                                  ----------------   ----------------
<S>                                                <C>                <C>
Operating Activities:

Net Income (Loss)                                  $ (464,886)        $  144,101

Non-cash Expenses Included in Net Income (Loss)
  Depreciation                                          2,287                234
  Amortization of Original Issue Discount              50,000                  0
  Stock Issued for Services                            81,780                  0
  Extraordinary Item                                        0           (259,500)

Adjustments to Reconcile Net Loss to Cash

Provided (Consumed) by Operating Activities:

  Increase in Accounts Payable and Accruals            80,757             95,981
                                                   ----------         ----------
Cash Consumed by Operating Activities                (250,062)           (19,184)


Financing Activities:

Proceeds from the Issuance of Common Stock            242,250             57,104
Proceeds of Long-term Borrowings                      143,500
(Payment) of Long-term Debt                          (122,714)            (7,270)
(Payment) of Long-term Debt-Related Parties                 0            (12,196)
Advances from Related Parties                           6,500                  0
                                                   ----------         ----------
Cash Generated by Financing Activities                269,536             37,638

Investing Activities:

Acquisition of Fixed Assets                           (12,862)                 0
Refundable Advances                                   (10,000)                 0
                                                   ----------         ----------
Cash Consumed by Investing Activities                 (22,862)                 0


Change in Cash                                         (3,388)            18,454
Cash and Cash Equivalents-Beginning                    20,515              2,061
                                                   ----------         ----------
Cash and Cash Equivalents-Ending                   $   17,127         $   20,515
                                                   ==========         ==========

</TABLE>

                                       F-5
<PAGE>
<TABLE>
<CAPTION>
                                  MAGICINC.COM

                  Statement of Changes in Stockholders' Deficit
                      October 31, 2000 and October 31, 1999
      See Summary of Accounting Policies and Notes to Financial Statements.


                                           Common           Common                                   Total
                                           Stock             Stock              Accumulated      Stockholders'
                                           Shares         Paid-in-Capital         Deficit            Deficit
                                           ------         ---------------         -------            -------
<S>                                       <C>              <C>                  <C>                 <C>
Balance December 31, 1998                 2,754,024        $ 4,926,256          $(5,485,039)        $(558,783)

Shares Issued in Exchange for Cash          580,000             97,104

Shares Issued in Payment for Services       610,000                  0

Reclassification of Paid In Capital
  to Accumulated Deficit as a
  Quasi-Reorganization                                      (5,340,937)           5,340,937

Net Income for Year Ended
  October 31, 1999                                                                  144,102
                                         ----------        -----------          -----------         ---------
Balance October 31, 1999                  3,944,024        $  (317,577)         $         0         $(317,577)


Shares Issued in Exchange for Cash        4,747,500            262,250

Shares Issued as Part of
  Debt Settlement Agreement                  75,000              5,250

Shares Issued in Payment for
  Services and Other                      1,635,600             81,780

Shares Issued upon Conversion
  of Debt                                 3,230,381            150,000

Original Issue Discount on
   Convertible Debt                               0             50,000

Subscription Receivable                                        (20,000)

Net Loss for Year Ended
  October 31, 2000                                                                 (464,886)
                                         ----------        -----------          -----------         ---------
Balance October 31, 2000                 13,632,505        $   211,703          $  (464,886)        $(253,183)
                                         ==========        ===========          ===========         =========

</TABLE>
                                       F-6
<PAGE>

                                  MAGICINC.COM

                   Summary of Significant Accounting Policies
            Fiscal Years Ended October 31, 2000 and October 31, 1999

Change in Accounting Year

         Beginning January 1, 1999, the Company changed its accounting reporting
         period from a calendar year ending  December 31 to a fiscal year ending
         October 31. The financial statements,  accordingly, present the results
         of operations,  changes in stockholders' deficit and cash flows for the
         twelve  month  period  ended  October 31, 2000 and the ten months ended
         October 31, 1999.

Quasi-Reorganization

         As  of  October  31,  1999,   the  Company   concluded  its  period  of
         reorganization  by  reaching  a  settlement   agreement  with  all  its
         significant  creditors.  The  Company,  as  approved  by its  Board  of
         Directors,  has elected to state its October 31, 1999, balance sheet as
         a  "quasi-reorganization",  pursuant to ARB 43. These rules require the
         revaluation  of all  assets and  liabilities  to their  current  values
         through a current charge to earnings and the elimination of any deficit
         in  retained  earnings by charging  paid-in-capital.  The Company  will
         report  future  earnings as  retained  earnings  from  November 1, 1999
         forward.

Use of Estimates

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

Cash and Cash Equivalents

         For financial statement  presentation  purposes,  the Company considers
         those short-term, highly liquid investments with original maturities of
         three months or less to be cash or cash equivalents.

Property and Equipment

         Property and equipment are recorded at cost.  Depreciation  is computed
         using the  straight-line  method over the estimated useful lives of the
         assets,  generally 5 years.  Expenditures  for renewals and betterments
         are capitalized.  Expenditures for minor items, repairs and maintenance
         are  charged  to  operations  as  incurred.  Gain or loss  upon sale or
         retirement due to obsolescence is reflected in the operating results in
         the period the event takes place.

                                       F-7
<PAGE>

     Summary of Accounting Principles (Cont'd)

Revenue Recognition

         Sales are  recognized  when a product  is  delivered  or shipped to the
         customer  and all  material  conditions  relating to the sale have been
         substantially performed.  Film production costs are capitalized as film
         cost  inventory and are amortized  using the  individual-film-forecast-
         computation method over the licensing period.

Stock Based Compensation

         Stock based  compensation is accounted for by using the intrinsic value
         based method in accordance with Accounting Principles Board Opinion No.
         25,  "Accounting for Stock Issued to Employees" ("APB 25"). The Company
         has adopted  Statements  of  Financial  Accounting  Standards  No. 123,
         "Accounting  for Stock Based  Compensation",  ("SFAS 123") which allows
         companies to either continue to account for stock based compensation to
         employees  under  APB  25,  or  adopt  a fair  value  based  method  of
         accounting.  The  Company  has elected to continue to account for stock
         based  compensation to employees under APB 25 but has made the required
         SFAS 123 pro forma disclosures in accordance with SFAS 123.

Fair Value of Financial Instruments

         Statements  of Financial  Accounting  Standards  No. 107,  "Disclosures
         About Fair Value of Financial Instruments," requires disclosure of fair
         value  information  about financial  instruments.  Fair value estimates
         discussed  herein  are  based  upon  certain  market   assumptions  and
         pertinent  information  available to management as of October 31, 2000.
         The respective  carrying value of certain  on-balance  sheet  financial
         instruments approximated their fair values. These financial instruments
         include  cash  and  cash  equivalents,   marketable  securities,  trade
         receivables,  accounts payable and accrued  expenses.  Fair values were
         assumed to approximate carrying values for these financial  instruments
         since  they  are  short-term  in  nature  and  their  carrying  amounts
         approximate  fair values or they are  receivable  or payable on demand.
         The fair value of the Company's  notes payable is estimated  based upon
         the  quoted  market  prices  for the same or  similar  issues or on the
         current  rates  offered to the Company  for debt of the same  remaining
         maturities. The carrying value approximates the fair value of the notes
         payable.

 Earnings Per Common Share

         The Company  has  adopted the  provisions  of  Statement  of  Financial
         Accounting  Standards No. 128  "Earnings Per Share" ("SFAS 128").  SFAS
         128 replaces the previous  "primary" and "fully  diluted"  earnings per
         share with "basic" and "diluted"  earnings per share.  Unlike "primary"
         earnings  per share that  included  the  dilutive  effects of  options,
         warrants  and  convertible  securities,   "basic"  earnings  per  share
         reflects the actual  weighted  average of shares issued and outstanding
         during the period.  "Diluted" earnings per share are computed similarly
         to "fully diluted"  earnings per share. In a loss year, the calculation
         for "basic" and  "diluted"  earnings per share is  considered to be the
         same as the impact of potential common shares is anti-dilutive.

                                       F-8
<PAGE>

     Summary of Accounting Principles (Cont'd)

Income Taxes

         The Company  accounts for income taxes in accordance  with Statement of
         Financial  Accounting Standards No. 109, "Accounting for Income Taxes,"
         ("SFAS  109") which  requires  recognition  of  estimated  income taxes
         payable or  refundable  on income tax returns for the current  year and
         for  the  estimated   future  tax  effect   attributable  to  temporary
         differences and  carry-forwards.  Measurement of deferred income tax is
         based on enacted tax laws including tax rates,  with the measurement of
         deferred  income tax assets being reduced by available tax benefits not
         expected to be realized.

Impairment of Long-lived Assets

         The Company  adopted  Statement of Financial  Accounting  Standards No.
         121,  "Accounting  for the  Impairment  of  Long-lived  Assets  and for
         Long-lived  Assets to be Disposed of," ("SFAS 121").  SFAS 121 requires
         impairment   losses  to  be  recorded  on  Long-lived  assets  used  in
         operations and goodwill when  indications of impairment are present and
         the  undiscounted  cash flows estimated to be generated by those assets
         are less than the carrying amount of the asset.

Recent Accounting Pronouncements

         Effective for periods  beginning after December 15, 1997, the Financial
         Accounting  Standards  Board issued  Statement of Financial  Accounting
         Standards No. 131,  "Disclosure  about  Segments of an  Enterprise  and
         Related  Information," ("SFAS 131"). SFAS 131 establishes standards for
         the way  that  public  companies  report  information  about  operating
         segments in annual  financial  statements  and  requires  reporting  of
         selected  information  about operating  statements in interim financial
         statements  issued to the public.  The Company has not  determined  the
         impact the adoption of this new  accounting  standard  will have on its
         future financial statements and disclosures.

                                       F-9
<PAGE>

                                  MAGICINC.COM

                          NOTES TO FINANCIAL STATEMENTS
            Fiscal Years Ended October 31, 2000 and October 31, 1999

1. The Company:

Magicinc.com (the "Company") is a Delaware  corporation formed in 1961 under the
name Magic Fingers,  Inc. It changed its name in 1999.  Through the period ended
October  31,  1999,  the  Company  devoted  substantially  all  its  efforts  to
reorganizing its financial affairs and settling its debt obligations. During the
fiscal year ended  October 31,  2000,  the Company was engaged  primarily in the
planning and development of an interactive network to provide  entertainment via
the Internet.

2. Notes Payable and Long-term Debt:

In  January  1998  the  Company   settled  the  first  of  three  troubled  debt
obligations. Significant concessions were granted by the creditors that resulted
in the recognition of  Extraordinary  Gain on the settlement of these debts. The
Company's  common stock has been valued at fair market value,  if recent trading
data existed, where it was included as part of the settlement. The shares issued
as part of the  Settlement  of  Obligation  A were valued at $5,250 or $0.07 per
share which approximated  market value at the date of issuance in November 1999.
A summary of these obligations and their respective settlements is as follows:
<TABLE>
<CAPTION>
                                    Carrying Value         Total              Extraordinary
Note or        Settlement          on Restructuring       Amount of          Gain Recognized
Obligation        Date                   Date            Settlement         Year ended 10/31/99
----------        ----                   ----            ----------         -------------------
<S>        <C>                        <C>                 <C>                    <C>
 A           August 23, 1999          $   220,000          *10,500                  209,500
 B          November 19, 1999             100,000           50,000                   50,000
                                      -----------         --------               ----------
                Totals                $   320,000         $ 60,500               $  259,500
                                      ===========         ========               ==========
---------------------------------------------------------------------------------------------
*Includes  75,000 shares of common stock
</TABLE>
                                      F-10
<PAGE>

     (Notes to Financial Statements Cont'd)

3. Income Taxes:

The  Corporation has  approximately  $5,800,000 in net operating loss carryovers
available  to reduce  future  income  taxes.  These  carryovers  may be utilized
through the year 2015.  The Company has adopted SFAS 109 which  provides for the
recognition of a deferred tax asset based upon the value the loss carry-forwards
will  have to  reduce  future  income  taxes and  management's  estimate  of the
probability of the realization of these tax benefits.  A summary of the deferred
tax asset presented on the accompanying balance sheet is as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
                                                            Oct. 31, 2000   Oct. 31, 1999
                                                            -------------   -------------
<S>                                                           <C>            <C>
Federal Deferred Tax Asset Relating to Net Operating Losses   $ 2,072,679    $ 1,906,715
State Deferred Tax Asset Relating to Net Operating Losses         290,291        267,047
Less: Valuation Allowance                                      (2,362,970)    (2,173,762)
                                                              -----------    -----------
Total Deferred Tax Asset                                      $         0    $         0
                                                              ===========    ===========
-------------------------------------------------------------------------------------------
</TABLE>

4. Commitments:

Facilities

The  Company  is leasing  an 8,500  square  foot  building  in Fort  Lauderdale,
Florida,  which serves as its  administrative  offices and  computer  operations
center.

The lease is for a term of two years  beginning  June 1, 2000 and ending May 31,
2002. The rent for the property was initially scheduled as follows:

         June 1, 2000 through July 31, 2000           Rent waived by Landlord
         August 1, 2000 through November 30, 2000         $4,000 / month
         December 1, 2000 through May 31, 2001            $4,500 / month
         June 1, 2001 through November 30, 2001           $5,000 / month
         December 1, 2001 through May 31, 2002            $5,300 / month

Building  renovations have not been completed and a certificate of occupancy has
not been issued. The landlord has waived additional rent payments. Upon issuance
of a certificate of occupancy,  the lease terms may be modified. The Company has
entered  into an  agreement  to purchase the building no later than May 31, 2002
for $480,000 subject to standard  conditions.  The landlord/seller has agreed to
pay up to $26,935 for repairs to the building.

Future rental commitments are as follows:

         Year ending October 31, 2001        $ 43,000
         Year ending October 31, 2002          36,800


Employment Agreements

The Company was obligated  under  several  employment  agreements,  the terms of
which have expired without being renewed.  The contracts  provided  minimum cash
compensation to the contracted employees.  In addition to the cash compensation,
the employees  were also  entitled to receive  approximately  800,000  shares of
common stock through  stock grants and options to acquire the  Company's  common
stock at $0.0001 per share. The following table summarizes these arrangements:
<TABLE>
<CAPTION>
                                                                                                   Termination
                                                                       Initial                        Clause
                                                                       Annual           Stock         Salary        Change in
                                    Commencement                        Cash            Options    Continuation      Control
    Name            Position            Date             Term         Compensation      Granted       Period       Arrangement
------------------------------------------------------------------------------------------------------------------------------
<S>               <C>                <C>                <C>             <C>             <C>            <C>             <C>
G. Scott Venters  President/Chief    Oct. 1, 1997       3 Yrs.          $ 75,000        750,000         None            No
                  Executive Officer
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      F-11
<PAGE>

     (Notes to Financial Statements Cont'd)

Mr. G. Scott Venters'  agreement  provided for increases in year two to $100,000
and year three to $133,000. Accruals of Mr. Venters' salary have continued after
the end of the term of the  agreement  at the same  monthly rate as in the final
year  of  the  agreement.   The  earned  but  unpaid  portion  of  Mr.  Venters'
compensation  is carried as a current  payable and reflects  any  payments  made
through  October 31, 1999 and October 31, 2000. The amounts owing on those dates
were $186,111 and $278,444, respectively.

5. Stockholders' Equity:

Stock Issued for Services:

During the year 1998 and the fiscal  year ended  October 31,  1999,  the Company
issued an aggregate of 1,575,366 common shares,  or about 40% of the outstanding
common stock at October 31, 1999,  for  professional  services,  consulting  and
employment. There was no valuation reflected due to the fact that only a limited
and sporadic  trading market existed at the time of issuance and the shares were
restricted as to transfers  and the Company had a negative  tangible book value.
During fiscal year 2000,  the Company  issued  1,635,600  additional  shares for
services at a valuation of $81,780, which approximated market value.

Stock Issued in Payment of Long-term Debt:

During  1998-1999 the Company also issued or promised to issue 175,000 shares of
its  common  stock  as part of the  settlement  agreements  in  satisfaction  of
$467,000 of its long-term debt. This  transaction has been recorded at the value
of the  stock  at the  date of  agreement  where a fair  market  value  could be
determined.  In fiscal  year  2000,  75,000  shares  were  issued as part of the
promised  settlement.  These  shares were valued at $5,250,  which  approximated
market value.

Stock Issued upon Conversion of Debentures:

During fiscal year 2000, the Company issued 3,230,381 shares of its common stock
upon  conversion  of  $150,000  of  principal  amount  of  Series A  convertible
debentures.

Stock Based Compensation:

Stock based  compensation  is accounted for by using the  intrinsic  value based
method  in  accordance  with  Accounting   Principles   Board  Opinion  No.  25,
"Accounting  for Stock Issued to Employees"  ("APB 25"). The Company has adopted
Statements  of Financial  Accounting  Standards No. 123,  "Accounting  for Stock
Based  Compensation,  ("SFAS 123") which allows  companies to either continue to
account for stock based  compensation to employees under APB 25, or adopt a fair
value based method of accounting. The Company has elected to continue to account
for stock  based  compensation  to  employees  under APB 25.  APB 25  recognizes
compensation expense for options granted to employees only when the market price
of the stock  exceeds  the grant  exercise  price at the date of the grant.  The
amount reflected as compensation  expense is measured as the difference  between
the exercise price and the market value at the date of the grant.

                                      F-12
<PAGE>

     (Notes to Financial Statements Cont'd)

SFAS 123 requires pro forma  disclosures  regarding  net income and earnings per
share as if the compensation  expense had been determined in accordance with the
fair value based method  described in SFAS 123. The Company  estimates  the fair
value of each stock option at the date of grant using the  Black-Scholes  option
pricing model with the following weighted average assumptions for grants issued.

                  Dividend Yield                              None
                  Expected Life                              2 Years
                  Expected Volatility                         68%
                  Risk-free Interest Rate                      6%

A summary of employee and non-employee options and warrants granted and
exercised for each of the fiscal years ended October 31, 1999 and October 31,
2000 is presented below:
<TABLE>
<CAPTION>
                                               1999                       2000
                                              ------                      ----
                                                    Weighted                  Weighted
                                                     Average                   Average
                                         Shares     Exercise         Shares    Exercise
                                                       Price                     Price
----------------------------------------------------------------------------------------
<S>                                     <C>          <C>           <C>          <C>
Balance at Beginning of Year            125,000      $ 0.0001             0         -
  Grants Made During Year:
    Employment Agreements                     0             -             0         -
    Other                                     0             -             0         -
  Less: Options Exercised During Year   125,000        0.0001             0         -
  Less: Options that Expired During Year      0             -             0         -
                                        -------      --------       -------     -----
Amount of Options Outstanding
 at End of Fiscal Year                        0             -             0
                                        =======      ========       =======     =====

----------------------------------------------------------------------------------------
Options Exercisable at Year End           None       $   N/A          None      $ N/A
----------------------------------------------------------------------------------------
Weighted Average Fair Value of Options
Granted During Year                                  $   N/A                    $ N/A
----------------------------------------------------------------------------------------
</TABLE>

                                      F-13
<PAGE>

     (Notes to Financial Statements Cont'd)

6. Related Party Transactions:

Mr.  Gordon  Scott  Venters is employed  as the  Company's  President  and Chief
Executive  Officer,  pursuant to a  three-year  employment  agreement  beginning
October 1, 1997. The agreement  provides for a base salary of $75,000,  $100,000
and $133,000 for years one,  two and three,  respectively.  Since the end of the
term of the  employment  agreement,  Mr.  Venters has,  with the approval of the
Board of Directors,  continued in his positions  with the Company and his salary
has continued to accrue at the same level as in the last year of the  agreement.
The accrued but unpaid portion of Mr. Venters' cash compensation is carried as a
current  payable and  reflects any  payments  made through  October 31, 1999 and
October 31, 2000.  The amounts  owing on those dates were $186,111 and $278,444,
respectively.

In addition to cash  compensation,  the Company  granted Mr. Venters  options to
purchase  750,000 shares of the Company's  common stock at $0.0001 per share. As
of October 31, 2000, Mr. Venters had exercised all of these options.

Mr.  Venters  also has an option to  acquire  an  additional  500,000  shares at
$0.0001 per share upon the  successful  procurement  of financing for the motion
picture "Liberty City".

7. Supplemental Cash Flow Information:

Selected non-cash investing and financing activities are summarized as follows:

                                                            2000          1999
--------------------------------------------------------------------------------
Non-cash Equity Transactions:

Issuance of Common Stock to Retire Debt                    $   5,250        $ 0
Issuance of Common Stock upon Conversion of Debentures       150,000          0
--------------------------------------------------------------------------------

                                      F-14
<PAGE>

     (Notes to Financial Statements Cont'd)

8. Subsequent Events:

In the first quarter of fiscal year 2001,  the Company issued a total of 850,000
shares of its common  stock,  of which  200,000  shares were issued for cash and
650,000 shares were issued for services.

In January 2001, the Company received $130,500 (net of expenses of $19,500) from
its offering of 5% Senior Subordinated Convertible Redeemable Debentures.  These
Debentures  entitle the holder to convert  incremental  face  amounts of $10,000
into the Company's  common stock at 70% of the average  closing bid price of the
three trading days prior to the election to convert.  Accrued  interest may also
be paid in the same  fashion.  At any time after 90 days,  the  Company  has the
option to redeem the debentures,  in whole or in increments of $10,000, for 125%
of the face amount. At the request of the debenture holders, the Company issued,
in escrow,  3,250,000  shares of common stock to guarantee the stock issuance if
the debenture  holders  elect  conversion.  Due to provisions of the  conversion
formula,  the potential dilutive effect, if debentures are converted,  cannot be
determined at this date.

9. Ability to Continue as a Going Concern and Management Plan

The  financial  statements  have been  prepared  assuming  that the Company will
continue as a going  concern.  The  Company has not had revenue in the  ordinary
course of its  business.  Its only sales for the  period  January  1998  through
October 31, 2000 were from the disposition of its interest in certain films. The
lack of sales and recurring  losses from  operations  raises  substantial  doubt
about the Company's ability to continue as a going concern. Management's plan in
regards to these matters is to seek further  equity funding to allow it to build
its Internet  entertainment network,  MagicInternetwork.com  and to proceed with
the development of its interactive nightclub concept, Cybars.com. To support its
ongoing  operations,  additional  financing must be obtained  either through the
sale of equity or debt.

                                      F-15