<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

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

                                   FORM 10-QSB

                   Quarterly Report Under Section 13 or 15 (d)
                     of the Securities Exchange Act of 1934.

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

       For Quarter Ended September 30, 1998 Commission file number 0-18410
                         ------------------                        -------

                     THE PRODUCERS ENTERTAINMENT GROUP LTD.
                     --------------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                   95-4233050
-------------------------------                   --------------------
(State or other jurisdiction of                     (I.R.S. Employer
incorporation or organization)                    Identification No.)

     5757 Wilshire Blvd., PH1, Los Angeles, CA                90036
    -------------------------------------------            ----------
       (Address of principal executive offices)            (Zip Code)

       Registrant's telephone number, including area code (323) 634-8634
                                                          --------------

 ___________________________________________________________________________

(Former name, former address and former fiscal year, if changed since last 
report)

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DURING THE PRECEDING 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
                             ---      ---

INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.

COMMON STOCK, $.001 PAR VALUE--8,081,647 SHARES AS OF NOVEMBER 18, 1998
-----------------------------------------------------------------------

<PAGE>

Part 1. Financial Information
Item 1. Financial Statements

             THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                              SEPTEMBER 30, 1998         JUNE 30, 1998
                                                                  (UNAUDITED)              (AUDITED)

<S>                                                           <C>                       <C>
ASSETS

Cash and cash equivalents                                               ($27,398)          $   73,751
Short term investments                                                         0                    0
Accounts receivable, net trade                                         2,770,441              938,130
Note Receivable                                                          200,000                    0
Receivable from related parties                                           59,855               47,778
Prepaid expenses                                                          40,428                    0
Film costs, net                                                        1,363,171            1,189,392
Fixed assets, net                                                        178,898              182,473
Covenant not to compete                                                   46,750              115,000
Acquisition Costs                                                        115,340                    0
Goodwill                                                                 790,785                    0
Other assets                                                              10,035              179,167
                                                                     -----------          -----------
TOTAL ASSETS                                                         $ 5,548,305          $ 2,725,691
                                                                     -----------          -----------

LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts payable and accrued expenses                                 $2,037,820        $     335,712
Obligations under capital leases                                          56,842               70,905
Dividends payable                                                        106,250              106,250
Deferred income                                                          131,543                    0
Notes payable                                                            384,889               84,346
                                                                     -----------         ------------
TOTAL LIABILITIES                                                     $2,717,344         $    597,213
Shareholders' equity:

Preferred Stock, $.001 par value, authorized 20,000,000 shares 
  Series A Preferred Stock, $.001 par value, authorized 
  1,000,000 shares; issued and outstanding 1,000,000 shares                1,000                1,000
  Series B Preferred Stock, $.001 par value, authorized 1,375,662
  shares; none issued and outstanding                                          0                    0
  Series D Preferred Stock, $.001 par value, authorized 50,000
  shares; issued and outstanding 50,000 shares                                50                    0
  Series E Preferred Stock, $.001 par value, authorized 500,000
  shares; issued and outstanding 25,000 shares                                25                    0
  Series F Preferred Stock, $.001 par value, authorized 500,000
  shares; issued and outstanding 75,000 shares                                75                    0
Common Stock, $.001 par value, authorized 50,000,000 shares;
  issued and outstanding 7,876,647 and 6,672,943 shares                    7,877                6,673
Additional paid-in capital                                            24,987,781           23,411,349
Accumulated deficit and dividends                                    (21,155,654)         (20,280,352)
Treasury stock, 93,536 shares at cost                                 (1,010,192)          (1,010,192)
                                                                    ------------         ------------
Net shareholders' equity                                              $2,830,962         $  2,128,478
                                                                    ------------         ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                            $5,548,305         $  2,725,691
                                                                    ------------         ------------

</TABLE>
            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.


                                       2
<PAGE>

             THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                    THREE MONTHS ENDED SEPTEMBER 30,
                                                                    --------------------------------
                                                                       1998                   1997

<S>                                                         <C>                       <C>
Revenues                                                    $       304,100           $     4,388,592

Costs related to revenues:

  Amortization of film costs                                              0                 2,775,101
  Costs of projects sold                                              1,347                    71,418
                                                            ---------------           ---------------

  Net Revenues                                                      302,753                 1,542,073

General and administrative expenses                               1,173,934                 1,063,660
                                                            ---------------           ---------------

  Operating income (loss)                                          (871,181)                  479,413

Other income (expenses):

Acquisition expense                                                   6,695                         0

Interest income                                                           0                    10,430

Amortization of Goodwill                                             34,000                         0

Amortization of Acquisition Costs                                     5,320                         0

Settlements expense                                                  69,000                    69,000
                                                            ---------------           ---------------


  Net other income (expense)                                       (115,015)                  (58,570)
                                                            ---------------           ---------------


  Net income (loss)                                                (986,196)                  419,843

Provision for income taxes                                            5,304                         0
                                                            ---------------           ---------------

  Net income (loss)                                                (991,500)                  419,843


Dividend requirement on Series A Preferred Stock                   (106,250)                 (106,250)
                                                            ---------------           ---------------


Net income (loss) applicable to common
  shareholders                                                  ($1,097,750)               $  313,593
                                                            ---------------           ---------------


Net income (loss) per share (basic and diluted)                       ($.15)                     $.02

Average common shares
   outstanding (basic and diluted)                                7,228,027                18,773,818
                                                            ---------------           ---------------

</TABLE>

            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.


                                       3
<PAGE>


             THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

                      THREE MONTHS ENDED SEPTEMBER 30, 1998
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                      SERIES  SERIES   SERIES   SERIES                        ADDITIONAL
                           PREFERRED    D        D        E        E      COMMON     STOCK     PAID-IN    ACCUMULATED
                             STOCK    SHARES    AMT    SHARES     AMT     SHARES     AMOUNT    CAPITAL      DEFICIT

                           ---------- ------- -------- -------- -------- ---------- --------- ----------- ------------ ----------
<S>                        <C>        <C>     <C>      <C>      <C>      <C>        <C>       <C>         <C>          <C>       
Balance,
June 30, 1998                 $1,000                                     6,672,943    $6,672  $23,513,101 ($20,057,905)$3,462,869

Issuance of common
shares in payment of
dividends on Series A
Preferred Stock                                                                            0                                    0

Issuance of common
shares in connection
with the acquisition of                                                  1,203,704  $824,785                             $824,785
MWI

Issuance of Series D                  50,000  220,000                                                                     220,000
Preferred Stock

Issuance of Series E
Preferred Stock                                         25,000  431,250                                                   431,250

Net loss                                                                                                      (991,500)  (991,500)

Dividends on Series
A Preferred Stock                                                                                (106,250)               (106,250)

-------------------------- ---------- ------- -------- -------- -------- ---------- --------- ----------- ------------ ----------
Balance,
September 30, 1998            $1,000  50,000  220,000   25,000  431,250  7,876,647  $831,457  $23,406,851 ($21,049,405)$3,841,154

Less:
Treasury Stock                                                             (93,536)                                    (1,010,192)



NET SHAREHOLDERS' EQUITY                                                 7,783,111                                     $2,830,962

</TABLE>



                 SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.


                                       4
<PAGE>




             THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>


                                                                     THREE MONTHS ENDED SEPTEMBER 30,
                                                                     --------------------------------
                                                                          1998                1997

<S>                                                                 <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

  Net income (loss)                                                 $   (991,500)         $   419,843

ADJUSTMENTS TO RECONCILE NET (LOSS) TO
NET CASH (USED IN) OPERATING ACTIVITIES:

    Depreciation of fixed assets                                          24,298               18,673
    Amortization of film costs                                                 0            2,775,101
    Write off of projects in development                                       0                    0
    Amortization of Goodwill                                              34,000                    0
    Amortization of Acquisition Costs                                      5,320                    0
    Amortization of non-competition agreement                             69,000               69,000
    Decrease deferred tax asset                                           51,300                    0
    Issuance of Common Stock in Settlement                                     0                    0

CHANGES IN OPERATING ASSETS AND LIABILITIES:

    (Increase) decrease in accounts receivable                         1,576,644             (671,569)
    (Increase) decrease in other assets                                  169,837              (91,191)
    (Increase) decrease in notes receivable                             (200,000)                   0
    Increase (decrease) in accounts payable
        and accrued expenses                                           1,163,514              152,771
    Increase in prepaid expenses                                          40,428                    0
    Decrease (increase) in deferred revenues                          (4,974,759)            (163,567)
                                                                      ----------          -----------
    Net cash (used in) operating activities                           (3,031,918)           2,509,061
                                                                      -----------         -----------

CASH FLOWS FROM INVESTING ACTIVITIES:

    (Additions) to film costs, net                                     4,848,411           (4,573,448)
    Capital (expenditures) on equipment                                  (84,081)             (55,294)
    (Increase) in short term investments                                       0            2,698,568
    (Decrease) in Right to Receive Revenue                              (196,105)                   0
    (Increase) decrease in receivables from related parties               (9,224)              35,000
    Increase in Acquisition Costs                                       (120,660)                   0
                                                                      ----------          -----------
Net cash (used in) investing activities                                4,438,341           (1,895,174)
                                                                      ----------          -----------

CASH FLOWS FROM FINANCING ACTIVITIES:

    Obligations Under Capital Leases                                      56,842                    0
    Proceeds from preferred stock issues                                 651,250                    0
    Proceeds from borrowings                                                   0              416,000
    (Repayment) of borrowings                                            (31,111)                   0
    Increase in dividends payable                                            ---                    0
    (Payment) of cash dividends on Preferred Stock                       212,500             (106,250)
                                                                      ----------          -----------
Net cash provided by financing activities                                889,481              309,750
                                                                      ----------          -----------

Net increase (decrease) in cash                                        2,295,904              923,637
Cash and cash equivalents at beginning of period                       2,268,506            1,344,870
                                                                      ----------          -----------
Cash and cash equivalents at end of period.                           $  (27,398)          $2,268,507
                                                                      ----------          -----------

</TABLE>

                SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.


                                       5
<PAGE>


             THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

                               September 30, 1998

(1)       BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of The 
Producers Entertainment Group Ltd. ("TPEG" or the "Company") have been 
prepared in accordance with generally accepted accounting principles for 
interim financial information and in accordance with the instructions to Form 
10-QSB. Accordingly, they do not include all of the information and footnotes 
required by generally accepted accounting principles for complete financial 
statements. In the opinion of management, all material adjustments 
(consisting of normal recurring accruals) considered necessary for a fair 
presentation have been included. Operating results for the three month period 
ended September 30, 1998 are not necessarily indicative of the results that 
may be expected for the year ended June 30, 1999. The information contained 
in this Form 10-QSB should be read in conjunction with the audited financial 
statements filed as part of the Company's Form 10-KSB for the fiscal year 
ended June 30, 1998.

         On October 20, 1997, the Company acquired 100% of the outstanding 
capital stock of three entities comprising the "Grosso Jacobson Companies" 
(including Grosso Jacobson Productions, Inc., Grosso Jacobson Entertainment 
Corporation, and Grosso Jacobson Music Company, Inc) through the merger of 
three wholly-owned subsidiaries of the Company into the Grosso Jacobson 
Companies. The Grosso Jacobson Companies are engaged in the business of 
developing and producing entertainment products including television movies 
and series. The consideration paid by the Company to the sole shareholders of 
the Grosso Jacobson Companies pursuant to the merger was paid through the 
issuance of 2,222,222 shares of the Company's Common Stock valued at an issue 
price of $3.60 per share.

         The mergers of the Company's wholly-owned subsidiaries into the 
Grosso Jacobson Companies for Common Stock of the Company has been recorded, 
for financial statement reporting purposes, as a pooling of interests, and 
accordingly, the accompanying financial statements reflect the combined 
results of the pooled businesses for the respective periods presented.

         On July 15, 1998, the Company acquired 100% of the outstanding 
capital stock of MWI Distribution, Inc., a California corporation ("MWI"), 
which is engaged in the international co-production and licensing of 
television and video programming, as well as merchandising. The acquisition 
was accomplished by merger. The consideration paid by the Company to the sole 
shareholders of MWI pursuant to the merger was paid through the issuance of 
763,889 shares of the Company's Common Stock valued at an issue price of 
$1.75 per share. In addition, the Company may have to pay additional 
consideration, in the form of Common Stock, to the stockholders of MWI, which 
payments are contingent upon the performance of MWI over a period of time. 
The stockholders of MWI also shall receive up to an additional 109,428 shares 
of Common Stock if the Common Stock Average Price, as defined in the Merger 
Agreement, does not equal or exceed $3.80 per share between July 15, 1998 and 
June 30, 1999. 

     Certain figures for the three months ended September 30, 1997 have been 
restated to conform with current presentation.

(2)       GOODWILL

         Goodwill related to the acquisition of MWI is being amortized over a
period of five years.

(3)      DIVIDEND ON SERIES A PREFERRED STOCK

         For the three months ended September 30, 1998, the Company will 
issue shares of its Common Stock at a market value equivalent to $106,250, 
representing the $106,250 quarterly dividend required to be paid on the 
Series A Preferred Stock for the quarter ended September 30, 1998.

(4)      LOSS PER SHARE

         Loss per share for the three month period ended September 30, 1998 
has been computed after deducting the dividend requirements of the Series A 
Preferred Stock. It is based on the weighted average number of common and 
common equivalent shares reported outstanding during the entire period ending 
on September 30, 1998.


                                       6
<PAGE>

(5)      STOCK OPTIONS AND WARRANTS

         The Company uses APB Opinion No. 25 "Accounting for Stock Issued to 
Employees" to calculate the compensation expense related to the grant of 
options to purchase Common Stock under the intrinsic value method. 
Accordingly, the Company makes no adjustments to its compensation expense or 
equity accounts for the grant of options. The Company has made no grant of 
options for the period ended September 30, 1998. At September 30, 1998 there 
were options to acquire 287,028 shares outstanding at exercise prices ranging 
from $3.36 per share to $39.00 per share of Common Stock.

         In addition to the Redeemable Warrants to purchase an aggregate of 
1,700,000 shares of Common Stock at $5.25 per share issued in connection with 
the September 1996 public offering, the Company has other existing warrants 
outstanding to purchase an aggregate of 142,518 shares of Common Stock at 
prices ranging from $23.10 to $43.20 per share. There were a total of 
approximately 1,842,518 warrants outstanding as of September 30, 1998.

(6)      RELATED PARTY TRANSACTIONS

         As of the period ended September 30, 1998, the Company issued a 
promissory note to Mountaingate Productions, LLC, an affiliate of Irwin 
Meyer, Chief Executive Officer and Co-Chairman of the Board of Directors of 
the Company, for the sum of $79,760, which represents amounts owed to 
Mountaingate Productions, LLC under its production agreement with the 
Company. The promissory note bears interest at the rate of ten percent (10%) 
per annum.

         As of the period ended September 30, 1998, the Company issued a 
promissory note to S.A.G. Productions, Inc., an affiliate of Salvatore 
Grosso, Chief Operating Officer and Co-Chairman of the Board of Directors of 
the Company, for the sum of $145,923, which represents amounts owed to S.A.G. 
Productions, Inc. under its production agreement with the Company. The 
Promissory note bears interest at the rate of ten percent (10%) per annum.

         As of the period ended September 30, 1998, the Company issued a 
promissory note to Lawrence Jacobson Associates, Inc., an affiliate of 
Lawrence Jacobson, President and Co-Chairman of the Board of Directors of the 
Company, for the sum of $145,923, which represents amounts owed to Lawrence 
Jacobson Associates, Inc. under its production agreement with the Company. 
The Promissory note bears interest at the rate of ten percent (10%) per 
annum. 
Item 2.


                                       7
<PAGE>


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

         FORWARD LOOKING STATEMENTS. This report contains statements that 
constitute "forward-looking statements" within the meaning of Section 21E of 
the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 
1933 with respect to the Company and its operations that are subject to 
certain risks and factors which could cause the Company's future actual 
results of operations and future financial condition to differ materially 
from those described herein. The words "expect," "estimate," "anticipate," 
"predict, "believe" and similar expressions and variations thereof are 
intended to identify forward-looking statements. These statements appear in a 
number of places in this filing and include statements regarding the intent, 
belief or current expectations of the Company with respect to, among other 
things, the integration of the acquisition of MWI, trends affecting the 
Company's financial condition and the Company's business and strategies. The 
stockholders of TPEG are cautioned not to put undue reliance on such 
forward-looking statements. Such forward-looking statements involve risks and 
uncertainties, including the number of the Company's projects in development 
that result in completed productions that yield revenues during specific 
fiscal periods, the lapse in time between the expenditures made by the 
Company and the receipt of cash and the timing of such production 
expenditures and related revenues. Other risk factors include the intensity 
of competition from other television and motion picture producers and 
distributors, the status of the Company's liquidity in future fiscal periods, 
the Company's ability to integrate the acquisition of MWI and factors that 
generally affect the entertainment industry such as changes in management at 
the major studios, broadcast and distribution companies, as well as economic, 
political, regulatory, technological and public taste environments. The 
readers of this filing are cautioned that any such forward-looking statement 
are not guarantees of future performance and involve risks and uncertainties, 
and that actual results may differ materially from those projected in this 
filing, including, without limitation, those risks and uncertainties 
discussed under the headings "Factors That Could Impact Future Results" and 
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations" in the Company's Annual Report on Form 10-K for the fiscal year 
ended June 30, 1998 as well as the information set forth below. The Company 
does not ordinarily make projections of its future operating results and 
undertakes no obligation to publicly update or revise any forward looking 
statements, whether as a result of new information, future events or 
otherwise.

         The Company's revenues in connection with its television activities 
are primarily derived from the production and distribution of television 
projects, and producer fees. In June 1998, the Company ceased providing 
personal management services. The amount of revenues derived by the Company 
from its television production activities in any one period is dependent 
upon, among other factors, projects completed during any such period and the 
distribution of completed projects. Accordingly, the amount of revenues 
recognized in any period are not necessarily indicative of revenues to be 
recognized by the Company in future periods.

         Revenues received from license fees for distribution rights to 
projects-in-process constitute deferred income until the project becomes 
available for broadcast in accordance with the terms of its licensing 
agreements and are recognized as revenue at such time. The portion of the 
license fees which equals the amount allowed within the project's budget for 
the Company's producer fees is recognized as revenue during the production 
phase. Revenues from completed projects where distribution rights are owned 
by the Company are recognized when the project becomes contractually 
available for broadcasting or exhibition in certain media and geographical 
territories by the licensee. Revenues from the sale of projects completed 
under straight producer arrangements are recognized during the production 
phase. Additional licensing, distribution fees or profit participation are 
recognized as earned in accordance with the terms of the related agreements. 

         Revenues received by MWI are primarily derived from the licensing of 
rights of family television programming, as well as the sale of home video 
programming.

         Amortization of film costs is charged to operations on a project by 
project basis. The cost charged per period is determined by multiplying the 
remaining unamortized costs of the project by a fraction, whose numerator is 
the income generated by the project during the period and whose denominator 
is management's estimate of the total gross revenue to be derived by the 
project over its useful life from all sources. This is commonly referred to 
as the Individual Film Forecast Method under FASB 53. The effects on the 
amortization of completed projects resulting from revision of management's 
estimates of total gross revenue on certain projects are reflected in the 
year in which such revisions are made.

                                       8
<PAGE>


RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 1998, COMPARED TO THREE MONTHS ENDED 
SEPTEMBER 30, 1997

         Revenues for the three months ended September 30, 1998 were 
$304,100, a 93% decrease from $4,388,592 for the three months ended September 
30, 1997. Revenues for the three months ended September 30, 1998 consisted of 
income from the continuing international distribution of completed projects. 
Revenues of $4,388,592 for the three months ended September 30, 1997 
consisted of revenues from the delivery of completed programming to the 
Family Channel and $60,748 from personal management fees. The decrease in 
revenues was due primarily to decreased production and the termination of the 
Company's personal management business.

         Amortization of film costs for the three months ended September 30, 
1998 and September 30, 1997 was $0 and $2,775,101, respectively, and was 
computed using the Individual Film Forecast Method. The difference in 
amortization as a percentage of total revenues related to the amortization of 
projects and reflects the mix of projects in which TPEG has no expectation of 
additional revenues that are amortized at 100% of cost and projects in which 
TPEG has retained distribution rights held for future sale that are amortized 
according to the Individual Film Forecast Method.

         Cost of sales for the three months ended September 30, 1998 and 
September 30, 1997, was $1,347 and $71,418, respectively. Cost of sales as a 
percentage of total revenues decreased from 16% for the three months ended 
September 30, 1997 to .4% for the three months ended September 30, 1998.

         General and administrative expenses for the three months ended 
September 30, 1998 were $1,173,934 compared to $996,541 for the three months 
ended September 30, 1997. The $177,393, or 15% increase in general and 
administrative expenses was due to the completion of the Grosso Jacobson 
merger, and therefore adjustments to staffing levels and the addition of the 
New York office, the expansion of staff in the television departments, 
salaries and related benefits for personnel of MWI, and the addition of 
professional consultants.

         During the three months ended September 30, 1998, the Company 
recorded ($69,000) of amortization related to a November 4, 1996 
non-competition agreement with a former officer and director, which cost is 
being amortized over the life of the non-competition agreement at ($23,000) 
per month.

         During the three months ended September 30, 1998, TPEG recorded $0 
interest income on temporary cash investments. During the three months ended 
September 30, 1997, interest income of $40,963 consisted of $24,000 imputed 
interest discount on related party notes, $7,864 of imputed interest related 
to a trade note receivable and $9,099 earned on temporary cash investments.

         TPEG reported a loss of $1,097,500 or $.15 per share in the three 
months ended September 30, 1998 compared to a profit of $313,593 or $.02 per 
share in the three months ended September 30, 1997. The income (loss) for 
both compared periods included required dividend payments of $106,250 to 
holders of the Company's outstanding Series A Preferred Stock. The number of 
weighted average common shares outstanding increased to 7,228,027 as of the 
three months ended September 30, 1998 from 6,257,939 as of the three months 
ended September 30, 1997 due primarily to the issuance of new shares and the 
payment of dividends with respect to the Series A Preferred Stock. The 
calculation of weighted average common shares for both periods reflects the 
effect of the one-for-three stock split completed during the fourth quarter 
1998.

LIQUIDITY AND CAPITAL RESOURCES

         As of September 30, 1998, TPEG had decreased liquidity from the 
comparable period ended September 30, 1997 primarily as a result of a 
decrease in revenue. Cash and cash equivalents as of September 30, 1998 were 
($27,398) and trade accounts receivable increased to $2,770,441. As of 
September 30, 1998, the Company had recorded accounts payable and accrued 
expenses of $2,144,070. In the comparable period ending September 30, 1997, 
the Company had $2,268,506 in cash and cash equivalents and $1,193,797 in 
trade accounts receivable to cover $980,556 of current liabilities.

         Management estimates that, as of September 30, 1998, the Company's 
cash commitments for the next twelve months will aggregate approximately 
$3,000,000. The figure includes (a) base compensation to its key officers, 
key independent contractors and key consultants of approximately $2,087,000 
and (b) office rent of approximately $372,000.


                                       9
<PAGE>


         The Company also incurs other general and administrative costs such 
as staff salaries, employee benefits, employer taxes, premiums on insurance 
policies, marketing costs, office expenses, professional fees, consulting 
fees and other expenses. For the three months ended September 30, 1998, total 
cash general and administrative expenses, for all categories except legal 
expenses, aggregated approximately $1,300,000. In addition to general and 
administrative expenses, the required dividends on the shares of Series A 
Preferred Stock are $425,000 annually. The dividends on the Series A 
Preferred Stock may be paid either in shares of the Company's Common Stock or 
in cash.

         The Company's projected costs of operation will require funding of 
overhead costs in order to continue its operations and to establish other 
activities related to its core business. The Company anticipates that funds 
raised in the course of the year will be used to obtain options on literary 
properties for new projects, to develop properties into finished scripts, to 
finance timing differences between production costs and collection of license 
fees, to acquire the copyrights and distribution rights to third party 
product and to finance accounts receivable. The actual utilization of excess 
working capital is subject to change based on the then present circumstances 
and management's evaluation of alternative projects. An inability to raise 
additional capital could prevent the Company from achieving its objectives 
and have a material adverse effect on the Company's business, results of 
operations and financial condition.

         The timing differences among the Company's financings of certain 
projects may require the Company to obtain additional external financing or 
capital. The Company's ability to rely on external sources of funds, rather 
than its own liquid resources, will be significant in determining the extent 
to which the Company will expand and diversify its production and 
distribution activities. There is no assurance that such external sources of 
funds will be available to the Company or that, if available, the terms 
thereof will be at reasonable cost to the Company. No agreements have been 
entered into for any such external financing as of the date of this Report. 
In July 1998, the Company secured access to a $5,500,000 equity-based line of 
credit with an institutional investor. The Company's ability to draw on this 
equity-based line of credit is subject to certain trading requirements. To 
date, the Company has received $750,000 from the investor in exchange for the 
sale by the Company of Series D and Series E convertible preferred stock to 
the investor. The Company is committed to use $2,000,000 of the equity-based 
line of credit, which is available to the Company, subject to certain 
restrictions, through August 2000. The holders of the Series D Preferred 
Stock are entitled to annual dividends of 6% (aggregating $30,000 annually 
assuming no conversion) and holders of the Company's Series E Preferred Stock 
are entitled to annual dividends of 6% (aggregating $15,000 annually assuming 
no conversion), all of which are payable quarterly in cash, or at the 
Company's option, in shares of Common Stock.

         The Company's ability to satisfy selling, general and administrative 
costs with cash flow from operations depends on the product mix, number of 
projects and timing of delivery of projects in each quarter. Projects made 
under producer arrangements provide a lower contribution margin to the 
Company's costs of operations than projects in which the Company holds 
distribution rights.

IMPACT OF YEAR 2000

         The Year 2000 issue is the result of computer programs being written 
using two digits instead of four to define the applicable year. Any of the 
Company's computer programs that have time-sensitive software or facilities 
or equipment containing embedded micro-controllers may recognize a date using 
"00" as the year 1900 rather than the Year 2000. This could cause a system 
failure or miscalculations resulting in potential disruptions of operations, 
including, among other things, a temporary inability to process transactions, 
send invoices or engage in similar normal business activities.

         The Company has assessed its hardware and software systems, which 
are comprised solely of an internal personal computer network and 
commercially available software products. Based on this assessment, the 
Company believes that its hardware and software systems are Year 2000 
compliant. The Company has begun to assess the embedded system contained in 
its leased equipment and expects to finish this assessment by the end of 
March 1999. At this time, the Company is uncertain whether the embedded 
systems contained in its leased equipment are ready for the Year 2000.

         In addition, the Company is contacting its key vendors and customers 
to determine if there are any significant Year 2000 exposures which would 
have a material effect on the Company. The Company is not yet aware of any 
Year 2000 issues relating to third parties with which the Company has a 
material relationship. There can be no assurance, however, that the systems 
of third parties on which the Company or its systems rely will not present 
Year 2000 problems that could have a material adverse effect on the Company. 
The Year 2000 issue presents a number of other risks and uncertainties that 
could impact the Company, such as 


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<PAGE>


disruptions of service from third parties providing electricity, water or 
telephone service. If such critical third party providers experience 
difficulties resulting in disruption of service to the Company, a shutdown of 
the Company's operations at individual facilities could occur for the 
duration of the disruption.

         The Year 2000 project cost has not been material to date and, based 
on preliminary information, is not currently anticipated to have a material 
adverse effect on the Company's financial condition, results of operations or 
cash flow in future periods. However, if the Company, its customers or 
vendors are unable to resolve any Year 2000 compliance problems in a timely 
manner, there could result a material financial impact on the Company. 
Accordingly, management plans to devote the resources it considers 
appropriate to resolve all significant Year 2000 problems in a timely manner.

         The project is estimated to be completed not later than mid-1999. 
After completion of its Year 2000 assessment, the Company will develop 
contingency plans to reduce its Year 2000 exposure and expects to have such 
contingency plans in place by January 1999.

         Readers are cautioned that forward-looking statements contained in 
this Year 2000 disclosure should be read in conjunction with the Company's 
disclosures under the heading, "Forward-looking Statements," beginning on 
page 8 above. Readers should understand that the dates on which the Company 
believes the Year 2000 project will be completed are based upon Management's 
best estimates, which were derived utilizing numerous assumptions of future 
events, including the availability of certain resources, third-party 
modification plans and other factors. However, there can be no guarantee that 
these estimates will be achieved, or that there will not be a delay in, or 
increased costs associated with, the implementation of the Company's Year 
2000 compliance project. A delay in specific factors that might cause 
differences between estimates and actual results include, but are not limited 
to, the availability and costs of personnel trained in these areas, the 
ability of locating and correcting all relevant computer code, timely 
responses to and corrections by third parties and suppliers, the ability 
implement interfaces between the new systems and the systems not being 
replaced, and similar uncertainties. Due to the general uncertainty inherent 
in the Year 2000 problem, resulting in part from the uncertainty of the Year 
2000 readiness of third parties and the interconnection of national and 
international businesses, the Company cannot ensure that its ability to 
timely and cost effectively resolve problems associated with the Year 2000 
issue will not affect its operations and business, or expose it to third 
party liability.


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<PAGE>


                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         None

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         None

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None

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

         None

ITEM 5.  OTHER INFORMATION

         The Company has received a letter from NASDAQ stating that if the 
trading value of the Company's Common Stock does not reach $1.00, and 
maintain at least a closing bid price of $1.00 for at least ten consecutive 
trading days, by January 11, 1999, the Company's shares of Common Stock may 
be delisted from the NASDAQ Small Cap Market.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K AND FORM 8-K/A

         (a)  EXHIBITS

              27.1  -   Financial Data Schedule

         (b)  Reports on Form 8-K 
              
              The Company filed a Current Report on Form 8-K/A on September 
         29, 1998. Item 7 was reported.

              The Company filed a Current Report on Form 8-K on July 31, 
         1998. Item 2 was reported.
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<PAGE>



                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
         the registrant has duly caused this Report to be signed on its behalf
         by the undersigned thereunto duly authorized.


                     THE PRODUCERS ENTERTAINMENT GROUP LTD.
                     --------------------------------------
                                  (Registrant)



Dated:        November 19, 1998        /S/ IRWIN MEYER
         ----------------------        ---------------------------
                                       Irwin Meyer,
                                       Chief Executive Officer


Dated:        November 19, 1998        /S/ ARTHUR H. BERNSTEIN
         ----------------------        ---------------------------
                                       Arthur H. Bernstein,
                                       Executive Vice President, 
                                       Principal Financial Officer


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