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


(Mark One)
[X]     Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended June 30, 2002 or

[ ]     Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________ to__________

                         Commission file number: 0-27063

                      Family Room Entertainment Corporation
                      -------------------------------------
                 (Name of small business issuer in its charter)

          New Mexico                                  85-0206160
          ----------                                  ----------
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
 incorporation or organization)


1041 N. Formosa Ave. Mary Pickford Bldg., Ste. 101, Los Angeles, CA.    90046
           (Address of principal executive offices)                   (Zip code)

Registrant's telephone number, including area code:   (323) 850-2800

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

Securities registered pursuant to Section 12(g) of the Act:    Common Stock

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 by check mark if disclosure of delinquent filers pursuant to Item 405
Regulation S-B is not contained herein, and will not 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 issuer had revenues of $816,142  for the fiscal year ended June 30, 2002.

The aggregate market value of the voting stock held by non-affiliates on June
30, 2002 was approximately $ 7,837,405 based on the average of the bid and asked
prices of the issuer's common stock in the over-the-counter market on such date
as reported by the OTC Bulletin Board. As of June 30, 2002, 18,660,487 shares of
the issuer's common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

Transitional Small Business Disclosure Format     Yes     No  X
                                                      --     --


<PAGE>
PART I

ITEM 1.  DESCRIPTION OF BUSINESS

General Business Development
----------------------------

     Family Room Entertainment Corporation (the "Company"(FMLY)), is a New
Mexico corporation originally organized and incorporated in 1969 as Cobb
Resources Corporation.   We are located in Los Angeles, California, and are
engaged in key aspects of motion picture entertainment, including production,
production services, finance and distribution.

Restructuring Transaction

     Prior to February 3, 2000, we were engaged in copper mining and oil and gas
exploration and marketable equity securities trading.  Effective February 3,
2000, three individuals and certain entities under their control (collectively
referred to as the "Investors") acquired 88% of our common stock through a
series of transactions as follows:

     The three individuals each acquired 666,666 shares (approximately 7.8%
individually and 23.4% in the aggregate of our common stock from our most
significant stockholder (the "Stockholder").

     We sold substantially all of our existing assets, including mineral
interests, cash, marketable equity securities and other assets, to the
Stockholder in exchange for 2,000,000 shares of our common stock (that were
placed in treasury) and the Stockholder's assumption of all of our known and
unknown liabilities, fixed and contingent, that had accrued up to February 3,
2000.  The aggregate purchase price paid by the Stockholder in connection with
this transaction was approximately $338,000.  As a result of this transaction,
we discontinued all current operations in which the FMLY was engaged.

     We enacted a ten for one reverse stock split that was effective for
stockholders of record on February 17, 2000.

Asset Purchase

     Concurrent with the Restructuring Transaction described above, we acquired
interests in certain film projects (the "Asset Purchase") in exchange for
12,407,000 post-split shares of our common stock.  The interests in the film
projects acquired during the Asset Purchase were collectively valued at $
1,912,000 based upon independent appraisal.

Name and Symbol Change

     Effective May 22, 2000, COBB Resources Corporation's name was changed to
Family Room Entertainment Corporation, and its corresponding OTC:BB trading
symbol "COBB" was changed to "FMLY".

Entertainment Motion Picture Industry Overview

     FMLY discontinued all activities in Mining, Oil and Gas as a result of the
restructure and is now in the entertainment industry.  FMLY develops, produces
and performs production related services for the entertainment industry mainly
through the following three wholly-owned subsidiaries: (1) Emmett/Furla Films
Productions Corporation. (hereafter, "EFFP"), a California Corporation, is a
Motion Picture Development, Production, and Production Related Service entity
that primarily develops, produces and provides production related services for
motion pictures intended for worldwide theatrical release (EFFP's subsidiary,
Good Entertainment Service, Inc. ( formally Good Advice, Inc.) (hereafter,
"GESI), is the signature company to the guilds and has  produced a  film "Good


<PAGE>
Advice"; (2) Emmett Furla Films Distribution LLC, is a Delaware Limited
Liability Company set up to oversee and arrange world wide distribution of FMLYs
entertainment projects and properties, and (3) E F F Entertainment, Inc.
(formally Family Room Productions Corporation) (hereafter, "EFFI") , a
California Corporation, is setup primarily to develop and produce action
adventure and family oriented motion pictures for television and home video
distribution as well as episodic television and internet programming. EFFI has
two wholly owned subsidiaries, Family Room Entertainment Music Publishing
Corporation (a/k/a FMLYMusic) and Emmett/Furla Films Music Publishing
Company(a/k/a EmmettFurlaMusic), both California corporations, whose function is
to oversee EFFI's EFFP's and their subsidiaries' music publishing (ancillary
rights associated with the creation of original music for motion pictures). In
addition FMLY has other subsidiaries, which are inactive including Family Room
Entertainment Live, LLC and its subsidiary Spotlight, LLC which were formed to
develop and produce Live Broadway type projects.

     The motion picture industry may be broadly divided into two major segments:
production, which involves the development, financing and other activities
associated with making of motion pictures; and distribution, which involves the
promotion and exploitation of completed motion pictures in a variety of media.

     Historically, the largest companies, the so-called "Majors" and
"Mini-Majors," have dominated the motion picture industry by both producing and
distributing a majority of the motion pictures which generate significant
theatrical box office receipts.  Over the past 15 years "Independents" or
smaller film production and/or distribution companies, such as FMLY, have played
an increasingly significant and sizable role in the production and distribution
of motion pictures needed to fill ever the increasing worldwide demand for
filmed entertainment product.

     The Majors (and Mini-Majors) include: Vivendi-Universal Pictures (a
division of Vivendi-Universal , Warner Bros. Pictures (a division of AOL-Time
Warner), Metro-Goldwyn-Mayer Inc., Twentieth Century Fox Film Corporation (a
division of News Corporation), Paramount Pictures Corporation (a division of
Viacom), Sony Pictures Entertainment (including Columbia Pictures, Tri Star
Pictures and Triumph Releasing; altogether divisions of Sony) and The Walt
Disney Company (Buena Vista Pictures, Touchstone Pictures and Hollywood
Pictures).  Generally, the Majors own and operate private production studios
(including lots, sound stages, production equipment and post-production
facilities), have nationwide and/or worldwide distribution organizations,
release pictures with direct production costs generally ranging from $25,000,000
to $100,000,000, and collectively provide a near continual source of motion
pictures to film exhibitors.

     The Majors also have divisions that are promoted as "independent"
distributors of motion pictures, often referred to as the "Mini-Majors."  These
"independent" divisions of the Majors include Miramax Films (a division of The
Walt Disney Company), Sony Classics (a division of Sony Pictures), Fox
Searchlight (a division of News Corporation), and New Line (a division of
AOL-Time Warner) and its Fine Line distribution label. Most of these divisions
were formerly private production and/or distribution companies.

     In addition to the Mini-Majors, there are private or publicly held
production and/or distribution companies, such as FMLY, (hereafter, collectively
the "Independents") which engage primarily in the production and/or distribution
of motion pictures produced by companies other than those held by the Majors and
Mini-Majors. Such Independents include, among others, Trimark Holdings and
Artisan Entertainment.  The Independents typically do not own production studios
nor do they employ as large a development and/or production staff as the Majors.


<PAGE>
Motion Picture Production and Financing

     The production of a motion picture requires the financing of the direct
costs and indirect overhead costs of development, production and production
related services. Direct production and production related service costs include
film studio rental, cinematography, post-production costs and the compensation
of creative, services and other production personnel.  Distribution costs
(including costs of advertising and release prints) are not included in direct
production costs.

     Majors generally have sufficient cash flow from their motion picture and
related activities, or in some cases, from unrelated businesses  (e.g., theme
parks, publishing, electronics, and merchandising) to acquire new creative
properties (e.g., screenplay and novels) and pay for the direct production costs
of their motion pictures.  Overhead costs are, in substantial part, the salaries
and related costs of the production staff and physical facilities, which Majors
maintain on a full-time basis.  Majors often enter into contracts with writers,
producers and other creative personnel for multiple projects or for fixed
periods of time.

     Independents generally avoid incurring substantial overhead costs by hiring
creative, services and other production personnel, retaining only any essential
elements, which will be required for pre-production, principal photography and
post- production activities, on a project-by-project basis.  Independents also
typically finance their production activities from various sources, including
bank loans, "pre-sales," equity offerings and joint ventures.  Independents
generally attempt to complete the financing of their motion picture production
prior to commencement of principal photography, at which point substantial
production costs begin to be incurred and require payment.

     "Pre-sales" are often used by Independents to finance all or a portion of
the direct production costs of a motion picture. Pre-sales consist of fees or
advances paid or guaranteed to the producer by third parties in return for the
right to exhibit the completed motion picture in theaters and/or to distribute
it in home video, television, international and/or other ancillary markets.
Payment commitments for a pre-sale are typically subject to the approval of a
number of pre-negotiated factors, including script, production budget, cast and
director and to the delivery of the completed motion picture in the agreed upon
format(s).

     Both Majors and Mini-Majors often acquire motion pictures for distribution
through an arrangement known as a "negative pickup" under which the Major or
Mini-Major agrees to acquire from another production company, often an
Independent, some or all of the rights to a film upon its completion. The
Independent often finances the production of a motion picture pursuant to
financing arrangements it has made with banks or other lenders wherein the
lender obtains a security interest in the film and in the Independent's rights
under its distribution arrangement.  When the Major or Mini-Major "picks up" the
completed motion picture, it may assume some or all of the production financing
indebtedness incurred by the production company in connection with the film.  In
addition, the Independent is often paid a production fee and is granted a
participation in the profits from the distribution of the motion picture.

     Majors, Mini-Majors and Independents often grant third-party participations
in connection with the distribution and production of a motion picture.
Participations are the contractual rights of actors, directors, screenwriters,
producers, owners of rights and/or other creative and/or financial contributors
entitling them to share in revenues or profits (as defined in their individual
respective agreements) from a particular motion picture.  Except for the most


<PAGE>
sought-after talent, participations are generally payable only after all
distribution and marketing fees and costs; direct production costs (including
overhead) and financing costs are recouped by the producer in full.

Financing the Major Motion Picture

     Majors often produce motion pictures whose direct costs exceed $20,000,000.
In order for an Independent, such as FMLY, to produce projects that exceed their
equity capabilities, they turn to various outside sources for funding. Some of
those sources, which may be used in any combination, include: (1) foreign equity
contributions, where a foreign company will exchange equity or the guarantee
thereof for the rights to distribute a motion picture in its respective
territory(s) and participation in the picture; (2) a guarantee or advance by a
distributor or exhibitor for a particular right(s) in a particular territory(s);
(3) a sales agent to garner contracts with actual exhibitors which state minimum
guarantee(s) for particular or aggregate media; (4) a bank or lending
institution will lend monies based on actual sales contract(s) which license
exhibition rights; (5)  a bank or lending institution which will lend monies
based on its calculations of potential earnings revenue for the motion picture
in question; (6) by having a third party investor fund a portion, usually from
10% to 50% of the production costs with a participation in the net profit of the
motion picture, (6) and/or arrange for or with another Independent production
facility to finance and produce the motion pictures. By combining (as necessary)
the afore mentioned outside funding sources, the Independent can create motion
pictures which meet and/or exceed the quality and scope of those created by the
Major and Mini-Major at costs which would normally exceed the Independent's
possible equity contribution.

Motion Picture Distribution

     Distribution of a motion picture involves the domestic and international
licensing of the picture for (i) theatrical exhibition, (ii) home video, (iii)
presentation on television, including pay-per-view, video-on-demand, satellites,
pay cable, network, basic cable and syndication, (iv) non-theatrical exhibition,
which includes airlines, hotels, armed forces facilities and schools and (v)
marketing of the other rights in the picture, which may include books, CD-ROMs,
merchandising and soundtrack recordings.

Theatrical Distribution and Exhibition.

     Motion pictures are often exhibited first in theaters open to the public
where an admission fee is charged. Theatrical distribution involves the
manufacture of release prints, licensing of motion pictures to theatrical
exhibitors, and promotion of the motion picture through advertising and
promotional campaigns. The size and success of the promotional and advertising
campaign may materially affect the revenues realized from its theatrical
release, generally referred to as "box office gross."

     Box Office Gross represents the total amounts paid by patrons at motion
picture theaters for a particular film, as determined from reports furnished by
exhibitors. The ability to exhibit films during summer and holiday periods,
which are generally considered peak exhibition seasons, may affect the
theatrical success of a film. Competition among distributors to obtain
exhibition dates in theaters during these seasons is significant. In addition,
the costs incurred in connection with the distribution of a motion picture can
vary significantly depending on the number of screens on which the motion
picture is to be exhibited and whether the motion picture is exhibited during
peak exhibition season(s). Similarly, the ability to exhibit motion pictures in
the most popular theaters in each area can affect theatrical revenues.


<PAGE>
     Exhibition arrangements with theater operators for the first run of a film
generally provide for the exhibitor to pay the greater of 90% of ticket sales in
excess of fixed amounts relating to the theater's costs of operation and
overhead, or a minimum percentage of ticket sales which varies from 40% to 70%
for the first week of an engagement at a particular theater, decreasing each
subsequent week to 25% to 30% for the final weeks of the engagement. The length
of an engagement depends principally on exhibitors' evaluation of the audience's
response to the film with respect to the current marketplace (e.g., the success
of other films) as weighed against the opportunity cost of exhibiting a "new"
release.

     Films with theatrical releases (which generally may continue for several
months domestically) typically are made available for release in other media as
follows:

<TABLE>
<CAPTION>
Market                           Months After Theatrical Release  Approximate Release Period
-------------------------------  -------------------------------  --------------------------
<S>                              <C>                              <C>
Domestic pay-per-view                               4 - 6 months                    3 months
Domestic pay cable                                 6 - 12 months              12 - 21 months
Domestic home video                               10 - 12 months              12 - 24 months
Domestic network or basic cable                   30 - 36 months              18 - 36 months
Domestic syndication                              30 - 36 months                3 - 15 years
International theatrical                                     ---                4 - 6 months
International home video                           6 - 12 months                    6 months
International television                          18 - 24 months        18 months - 10 years
</TABLE>

Home Video.

     The home video distribution business involves the promotion and sale of
videocassettes, DVDs and videodiscs to video retailers (including video
specialty stores, convenience stores, record stores "on-line" stores (i.e.,
Amazon.com) and other outlets), which then rent or sell the videocassettes and
videodiscs to consumers for private viewing. The home video marketplace now
generates total revenues greater than the domestic theatrical exhibition market.

     Videocassettes of feature films are generally sold to domestic wholesalers
on a unit basis.  Unit-based sales typically involve the sales of individual
videocassettes to wholesalers or actual retailers (e.g., Blockbuster) at  $15.00
to $50.00 per unit and generally are rented by consumers for fees ranging from
$1.00 to $5.00 per day (with all rental fees retained  by the retailer).
Wholesalers who meet certain sales and performance objectives may earn rebates,
return credits and cooperative advertising allowances. Selected titles including
certain made-for-video programs, are priced significantly lower to encourage
direct purchase by consumers.  The market for direct sale to consumers is
referred to as the "priced-for-sale" or "sell-through" market.

     Technological developments, including video server and compression
technologies which regional telephone companies and others are developing, and
expanding markets for DVD , could make competing delivery systems economically
viable and could significantly impact the home video market generally and, as a
consequence, FMLY's home video revenues.


<PAGE>
Pay-Per-View.

     Pay-per-view television allows cable and satellite television subscribers
to purchase individual programs, primarily recently released theatrical motion
pictures, sporting events and music concerts, on a "per use" basis.  The fee a
subscriber is charged is typically split among the program distributor, the pay-
per-view operator and the cable operator.

Pay Cable.

     The domestic pay cable industry (as it pertains to motion pictures)
currently consists primarily of HBO/Cinemax, Showtime/The Movie Channel,
Encore/Starz and a number of regional pay services.  Pay cable services are sold
to cable system operators for a monthly license fee based on the number of
subscribers receiving the service.  These pay programming services are in turn
offered by cable system operators to subscribers for a monthly subscription fee.
The pay television networks generally acquire their film programming by
purchasing the distribution rights from motion picture distributors for a
particular period of time, often called a "window".

Broadcast and Basic Cable Television .

     Broadcast television allows viewers to receive, without charge, programming
broadcast over the air by affiliates of the major networks (ABC, CBS, NBC, and
Fox), recently formed networks (UPN and WB Network), independent television
stations and cable and satellite networks and stations. In certain areas,
viewers may receive the same programming via cable transmission for which
subscribers pay a basic cable television fee. Broadcasters or cable systems
operators pay fees to distributors for the right to air programming a specified
number of times.

Foreign Markets

     In addition to their domestic distribution activities, some motion picture
distributors generate revenue from the distribution of motion pictures in
foreign theaters, home video, television and other foreign markets. There has
been a dramatic increase in recent years in the world-wide demand for U.S.
motion pictures, accented by the increase in the number of foreign television
stations, the introduction of global direct broadcast satellite services, and
increased home video and cable penetration world-wide.

Other Markets

     Revenues also may be derived from the distribution of motion pictures to
airlines, schools, libraries, hospitals and the military; the licensing of
rights to perform musical works and sound recordings embodied in a motion
picture, and the licensing of rights to manufacture and distribute merchandise,
clothing and similar commercial articles derived from characters or other
elements of a particular motion picture.

New Technologies

     New means of delivery of entertainment product are constantly being
developed and offered to the consumer, including the internet. The impact of
emerging technologies such as direct broadcast satellites and the internet, on
FMLY's operations cannot be determined at this time. However, as a holder of
entertainment copyrights, the FMLY monitors these new media possibilities.
Non-Theatrical Exhibition.


<PAGE>
     In addition to the distribution media described above, a number of sources
of revenue exist for motion picture distribution through the exploitation of
other rights, including the right to distribute films to airlines, schools,
libraries, hotels, armed forces facilities and hospitals.

International Markets.

     The worldwide demand for motion pictures has expanded significantly as
evidenced by the development of new international markets and media.  This
growth is primarily driven by the overseas privatization of television stations,
introduction of direct broadcast satellite services, growth of home video and
increased cable penetration.

FMLY Motion Picture Acquisitions

     In addition to its own production and production service activities, FMLY
continually seeks to acquire rights to films and other programming from
Independent film producers, distribution companies and others in order to
increase the number of films it can distribute and provide related services in
connection with in existing and emerging delivery systems.  To be successful,
FMLY must locate and track the development and production of numerous
independent feature films.

Types of Motion Pictures Acquired.

     FMLY generally seeks to produce, provide production services in connection
with, or acquire motion pictures across a broad range of genres, including
drama, thriller, comedy, science fiction, family, action and  fantasy/adventure,
which will individually appeal to a targeted  audience.  The FMLY has been very
selective in acquiring higher budgeted films (over $3,000,000) because of the
interest that the Majors have shown in acquiring such films, and the associated
competition and higher production advances, minimum guarantees and other costs.
FMLY acquires projects when it believes it can limit its financial risk on such
projects through, for example, significant presales, and when it believes that a
project has significant marketability.  In most cases, FMLY attempts to acquire
rights to motion pictures with a recognizable marquis "name" personalities with
public recognition, thereby enhancing promotion of the motion pictures in the
home video and/or international markets.  FMLY believes that this approach
increases the likelihood of producing a product capable of generating positive
cash flow, ancillary rights income and the possibility of a theatrical release.

Methods of Acquisition.

     FMLY typically acquires films on either a "pick-up" basis or a "pre-buy"
basis.  The "pick-up" basis refers to those films in which the FMLY acquires
distribution rights following completion of most or all of the production and
post-production process.  These films are generally acquired after management of
the FMLY has viewed the film to evaluate its commercial viability.

     The "pre-buy" basis refers to films in which FMLY acquires distribution
rights prior to completion of a substantial portion of production and
post-production.  Management's willingness to acquire films on a pre-buy basis
is based upon factors generally including the track record and reputation of the
picture's producer(s), the quality and commercial value of the screenplay, the


<PAGE>
"package" elements of the picture, including the director and principal cast
members, the budget of the picture and the genre of the picture.  Before making
an offer to acquire rights in a film on a pre-buy basis, FMLY may work with the
producer to modify certain of these elements.  Once the modifications are
considered acceptable, FMLY's obligation to accept delivery and make payment is
conditioned upon receipt of a finished film conforming to the script reviewed by
FMLY and other specifications considered important by the FMLY.

Acquisition Process.

     If FMLY locates a motion picture project which it believes satisfies its
criteria, FMLY may pay an advance against a share or participation in the
revenue actually received by FMLY from the exploitation of a film in each
licensed media (hereafter an, "Advance") or a guarantee a minimum payment based
on projected revenues actually to be received by FMLY from the exploitation of a
film in each licensed media (hereafter, a "Minimum Guarantee"), all of which are
conditioned upon delivery of a completed film which meets or exceeds certain
technical standards which are pre-determined in the distribution agreement with
FMLY. The minimum guarantee is generally paid prior to the film's release.
Typically, FMLY will have the right to recoup the Advance or Minimum Guarantee
and certain other amounts from the distribution revenues realized by the FMLY
prior to paying any additional revenue participation to the production company.

FMLY Feature Film Production

     FMLY's feature film division, Emmett/Furla Films Productions Corporation,
develops and produces low to medium budget films. FMLY's low to medium budget
films to date have had production budgets ranging from less than $1 million to
$10 million, although FMLY, from time to time, may produce and release films
having higher or much higher budgets.  FMLY's low-budget films are primarily
targeted for direct distribution to the television and home video markets and
its medium-budget films are generally targeted for initial theatrical release.

     FMLY generally retains distribution rights through  Emmett/Furla Films
Distribution, LLC.  FMLY's films generally are distributed by third party
licensees domestically and by third party sales agents for internationally.  In
unique circumstances, FMLY undertakes limited domestic distribution or
co-distribution activities.


     FMLY's feature film strategy generally is to develop, perform production
services, and/or produce feature films when the production budgets for the films
are expected to be entirely or substantially covered through a combination of
pre-sales, output arrangements, equity arrangements and production loans with
"gap" financing. To further limit FMLY's financing risk or to obtain production
loans, FMLY often purchases completion bonds to guarantee the completion of
production and delivery of pre-determined, technically acceptable film and/or
video elements.



The  following  films  were  either in production, completed, and/or released or
delivered  by  FMLY  to  certain  distributors  in  2000,  2001, and 2002 and/or
scheduled  for  release  in  FMLY's  fiscal  2002  or  2003


<PAGE>
<TABLE>
<CAPTION>
PICTURE                     INITIAL MEDIA   DELIVERY/RELEASE     PRINCIPAL TALENT
                                                  DATE
==========================  =============  ==================  ==================
<S>                         <C>            <C>                 <C>
Speedway Junky              Theatrical     September 2001      Jesse Bradford,
                                                               Jordan Brower,
                                                               Jonathan Taylor
                                                               Thomas, Tiffani
                                                               Amber Theissen,
                                                               Warren G, Daryl
                                                               Hannah
--------------------------  -------------  ------------------  ------------------
Held For Ransom             Video/Cable    August 2000         Dennis Hopper,
                                           (foreign and        Zachery Ty Bryan,
                                           domestic)           Kam Heskin, Jordan
                                                               Brower Randy
                                                               Spelling, Tsianina
                                                               Joelson, Morgan
                                                               Fairchild
--------------------------  -------------  ------------------  ------------------
After Sex                   Video/Cable    August 2000         Brooke Shields,
                                           (foreign and        Virginia Madsen,
                                           domestic)           D.B. Sweeney, Dan
                                                               Cortese, Maria
                                                               Pitillo, Johnathon
                                                               Schaech
--------------------------  -------------  ------------------  ------------------
I'm Over Here Now           Pay-per-View/  March 2000          Andrew "Dice" Clay
(produced                   Video
in conjunction with
an Independent Production
company)
--------------------------  -------------  ------------------  ------------------



Good Advice                 Video/Cable    March 2001          Charlie Sheen,
                                           delivery date.      Angie Harmon,
                                           December 2001       Denise Richards,
                                           release date.       Rosanna Arquette,
                                           (Domestic)          & Jon Lovitz
--------------------------  -------------  ------------------  ------------------
Ticker                      Video/Cable    March 2001          Tom Sizemore,
(produced                                  delivery date.      Steven Seagal,
in conjunction with                        December 2001       Jamie Pressly, &
an Independent Production                  (Domestic release)  Dennis Hopper
company)
--------------------------  -------------  ------------------  ------------------
The Badge                   Video/Cable    December 2001       Billy Bob Thornton,
(f/k/a Behind the                          Delivery date.      Patricia Arquette, &
Sun)                                       September 2002      Seal Ward
(produced                                  (Domestic release)
in conjunction with
an Independent Production
company)
--------------------------  -------------  ------------------  ------------------
Run for the Money           Video/Cable    December 2001       Christian Slater, Val
(a/k/a In God We                           (Delivery date)     Kilmer, Daryl


<PAGE>
Trust)                                     February 2002       Hannah, Bokeem
(produced                                  (Domestic Release)  Woodbine, & Vern
in conjunction with                                            Troyer
an Independent Production
company)
--------------------------  -------------  ------------------  ------------------
Half Past Dead              Theatrical     June 2002           Steven Seagal, Morris
(produced                                  (Delivery date)     Chestnut, Ja Rule
in conjunction with                        Scheduled for
an Independent Production                  release November
company)                                   2002
--------------------------  -------------  ------------------  ------------------
Narc                        Theatrical     October 2001        Ray Liotta, Jason
(produced                                  (Delivery date)     Patric, Busta
in conjunction with                        Scheduled for       Rhymes
an Independent Production                  release December
company)                                   2002
--------------------------  -------------  ------------------  ------------------
The Devil and               Theatrical     November 2002       Alec Baldwin, Anthony
Daniel Webster                             (Delivery date.)    Hopkins, Jennifer
(produced                                                      Love Hewitt
in conjunction with
an Independent Production
company)
--------------------------  -------------  ------------------  ------------------
Try Seventeen               Theatrical     September 2002      Elijah Wood, Franka
(produced                                  (Delivery date)     Potente, Mandy
in conjunction with                                            Moore
an Independent Production
company)
--------------------------  -------------  ------------------  ------------------
Shottas                     Theatrical     March 2003          Ky-Mani Marley,
                                           (Delivery date)     Spragga Benz, Wyclef
                                                               Jean, Paul Campbell,
                                                               Louie Rankin
--------------------------  -------------  ------------------  ------------------
Out for a Kill              Theatrical     March 2003          Steven Seagal
(produced                                  (Delivery date)
in conjunction with
an Independent Production
company
==========================  =============  ==================  ==================
</TABLE>

     There is no assurance that any motion picture, which has not yet been
released, will be released, that a change in the scheduled release dates of any
such films will not occur or, if such motion picture is released, it will be
successful.  FMLY has various additional potential feature films under
development.  There is no assurance that any project under development will be
produced or that if produced, that it will be released or successful.

Employees

     As of June 30, 2002, FMLY had 6 full-time employees,  of whom 4  were
engaged in development, production and distribution of theatrical based motion
pictures.   None of FMLY's employees are covered by a collective bargaining
agreement, although some of FMLY's subsidiaries are subject to guild agreements.
Management believes that its employee relations are good.


<PAGE>
Company Outlook

On September 6, 2002,  FMLY's  Emmett Furla Films Productions Corp. sold its
equity position in the motion picture project "The Devil and Daniel Webster to
Miracle Entertainment for a net profit of approximately  $92,000.

On October 3, 2002, FMLY"s E F F Independent Inc. in conjunction with a third
party independent production company commenced  photography on "Out for a Kill"
starring Steven Seagal.


ITEM 2.     PROPERTIES

     FMLY leases approximately 1785 square feet of office space at The Lot, 1041
North Formosa Avenue, Mary Pickford Building, Suite 101, Los Angeles,
California. The lease is month to month with approximate monthly payment of $
5,180.

ITEM 3.     LEGAL PROCEEDINGS

     FMLY is not a party to any material pending legal proceedings and, to the
best of our knowledge, no such action by or against the FMLY has been threatened

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

     The Shareholders at the annual meeting voted and approved the following
items on December 5, 2001:

-    The election of three directors.
-    To approve and adopt an amendment to the Company's Certificate of
     Incorporation to increase the authorized number of shares of common stock.
-    To approve an amendment to the Certificate of Incorporation in order to
     provide for a stock combination (reverse split) of the Common Stock in an
     exchange ratio to be approved by the Board, ranging from one newly issued
     share for each two outstanding shares of Common Stock to one newly issued
     share for each five outstanding shares of Common Stock
-    To approve the appointment of Ham, Langston & Brezina, L.L.P. as auditors
     for Family Room Entertainment Corporation.

ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our common stock trades on the Over-the Counter Bulletin Board, also called
the OTCBB, under the trading symbol "FMLY".  The following table set forth the
quarterly high and low bid prices per share for our common stock.  The bid
prices reflect inter-dealer prices, without retail markup, markdown, or
commission and may not represent actual transactions.


<PAGE>
                           HIGH   LOW
                           BID    BID
                          -----  -----
Fiscal 2000
-----------
September 30, 1999        $0.17  $0.10
December 31, 1999         $0.12  $0.10
March 31, 2000            $0.12  $0.18
June 30, 2000             $1.50  $1.50 (reflects ten to one reverse split)

Fiscal 2001
-----------
September 30, 2000        $2.25  $1.12
December 31, 2000         $3.12  $1.37
March 31, 2001            $1.87  $0.43
June 30, 2001             $1.57  $0.60

Fiscal 2002
-----------
September 30, 2001        $1.05  $0.45
December 31, 2001         $0.75  $0.30
March 31, 2002            $0.56  $0.25
June 30, 2002             $0.51  $0.25

To date, the FMLY has not declared or paid dividends on its common stock.

     As of June 30, 2002, there were approximately 1115 shareholders of record
of the FMLY's Common Stock.

Recent Sales of Unregistered Securities
---------------------------------------

None

Transfer Agent and Registrar
----------------------------

     FMLY's transfer agent is Securities Transfer Corporation, 2591 Dallas
Parkway, Suite 102, Frisco, Texas, 75034.

ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Plan of Operation
-----------------

The short-term objectives of the FMLY are the following:

     1.   To provide production related services in connection with and to
          produce genre specific moderate cost movies in the $5 to $25+ million
          range

The Company's long-term objectives are as follows

     1.   To build a library of film rights and assets from which FMLY can earn
          revenue from.
     2.   To continue to produce films and provide production services in
          connection with motion pictures containing high profile talent.


<PAGE>
     3.   To produce films with Major and/or Mini-major studios.

     Additionally, through Emmett Furla Films Productions Corp., Family Room
Entertainment Corporation's business plan emphasized the expansion of film
project development along with acquisitions and the commencement of new
productions for the fiscal year 2002.   Recent developments include the
following:

-    Wednesday, May 29th, 2002, Los Angeles, CA: Emmett/Furla Films Productions
     Corporation, a wholly owned subsidiary of Family Room Entertainment
     Corporation (NASDAQ OTC: BB Symbol: FMLY) is announced that it will be
     producing two pictures with action-star Steven Seagal. The announcement of
     Emmett/Furla Films latest two pictures came in conjunction with an
     announcement by Steven Seagal regarding his new production/distribution
     entity. On May 20, 2002, "Daily Variety" reported, "Actor-producer Steven
     Segal has launched a production and sales company, Luminosity Media. He
     will produce and star in its first two projects in conjunction with
     Millennium/Nu Image. The pictures are "Belly of the Beast" and "Out for a
     Kill." Budgeted at $20 Million each, they will be produced with
     Emmett/Furla Films." "Belly of the Beast" and "Out for a Kill" will be
     produced by Steven Seagal as well as Emmett/Furla Films' Randall Emmett and
     George Furla. Phillip Goldfine will serve as Co-executive producer on both
     pictures. Danny Lerner will also serve as a producer on "Out for a Kill."
     Millennium's Danny Dimbort, Avi Lerner and Trevor Short will serve as
     executive producers on both pictures as well. "Out for a Kill," an action
     picture set within the backdrop of the drug wars, is written by Sam Hayes
     and Dennis Dimster. Michael Oblowitz is set to direct this picture.
     Principal photography is set to begin on "Out for a Kill" in Eastern Europe
     in the fall of 2002.
-    April 23rd, 2002, Los Angeles, CA: Emmett/Furla Films Productions Corp., a
     wholly owned subsidiary of Family Room Entertainment Corporation (NASDAQ
     OTC: BB Symbol: FMLY) is announced that Viacom Inc.'s (NYSE: VIA) Paramount
     Pictures, in conjunction with Lions Gate Entertainment Corp. (AMEX: LGF),
     has acquired domestic distribution rights to the critically acclaimed
     motion picture, "NARC". "NARC" stars Ray Liotta and Jason Patric as well as
     Busta Rhymes. Paramount Pictures also announced that Tom Cruise (star of
     Steve Spielberg's "Minority Report") and Paula Wagner (producer of the
     "Mission Impossible" films), under their Cruise/Wagner banner, will now
     serve as Executive Producers on the Picture. In a release from Paramount
     Pictures yesterday, Paul Wagner is quoted as saying, "Tom and I are proud
     to be associated with a film of this caliber and look forward to supporting
     and helping "Narc" receive the attention and recognition it deserves." In
     addition to Cruise and Wagner, Emmett/Furla Films' Randall Emmett and
     George Furla as well as David Glasser of Splendid Picture's and Adam Stone
     executive produced the Picture. The police thriller was written and
     directed by Joe Carnahan ("Blood, Guts, Bullets and Octane") and produced
     by Diane Nabitoff (producer of "Very Bad Things" and "Operation Dumbo
     Drop"), Ray Liotta, Michelle Grace and Jules Nasso. Emmett/Furla Films
     Productions Corporation provided financing services on the Picture.
     Paramount Pictures, who according to Daily Variety (April 18, 2002), will
     handle the domestic marketing and distribution of "NARC", has slated the
     Picture for a fourth quarter 2002 release. Paramount Pictures, in a deal
     with financier and international distributor Splendid Pictures, has also
     picked up distribution rights to three international territories.
-    April 03, 2002, Los Angeles, CA: Emmett/Furla Films Productions Corp., a
     wholly owned subsidiary of Family Room Entertainment Corporation (NASDAQ
     OTC: BB Symbol: FMLY) announced they have recently acquired a fifty percent


<PAGE>
     ownership in the motion picture "Speedway Junky". "Speedway Junky", which
     was given a limited theatrical release this past fall by Regent
     Entertainment, starred Jesse Bradford ("Clockstoppers") Jordan Brower
     ("Texas Rangers"), Jonathan Taylor Thomas (TV's "Home Improvement"),
     Tiffani Amber Theissen (Woody Allen's "Hollywood Ending"), Warren G and
     Daryl Hannah (TV's "Run for the Money"). Nickolas Perry wrote and directed
     the picture. Emmett/Furla Films' Randall Emmett and George Furla produced
     the Picture along side Rodney Omanoff and Jeff Rice. Gus Van Sant (director
     of "Finding Forrester") Executive Produced the Picture. Rafi Stephan
     co-produced the picture.
-    April 2, 2002, Los Angeles, CA: Emmett/Furla Films Productions Corp., a
     wholly owned subsidiary of Family Room Entertainment Corporation (NASDAQ
     OTC: BB Symbol: FMLY) is announced they have acquired the exclusive option
     to acquire all rights a new high concept action screenplay, "Exchange of
     Power" by Kim Delgado. Randall Emmett and George Furla of Emmett/Furla
     Films will produce with Larry Abramson of Incognito Entertainment. Barry
     Perelman will executive produce. The screenplay, which is based on actual
     events, is a fasted paced smart thriller in the vein of "Traffic".
     "Exchange of Power" is the story of a renegade DEA agent who must avoid
     being double-crossed while trying to bring down the latest in a string of
     well-connected and violent cartels. The screenplay is currently out to
     actors.


     FMLY has financed operations through the sale of common stock and through
financing from financial institutions. In the near term, it is anticipated that
FMLY film financing will be entirely through outside sources to sustain our
operations.  For the fiscal year 2001, FMLY obtained approximating $600,000 in
the aggregate in debt financing from outside funding. Of this, $250,000 of debt
has been retired.

     FMLY'S capital requirements will depend on numerous factors, including the
profitability of our film projects and our ability to control costs.  We believe
that our current assets will be sufficient to meet our operating expenses and
capital expenditures to the successful commercialization of our existing film
projects.  However, we cannot predict when and if any additional capital
contributions may be needed and we may need to seek one or more substantial new
investors.  New investors could cause substantial dilution to existing
stockholders.

RESULTS OF OPERATIONS
---------------------

Year Ended June 30, 2002 Compared to Year Ended June 30, 2001
-------------------------------------------------------------

      During the year ended June 30, 2002 FMLY generated revenue of $816,142 as
compared to $6,440,748 for the year ended June 30, 2001. The significant
decrease in our fiscal year 2002 revenues was mainly a direct result of not
having the single major film project (Good Advice)with the revenues of
$4,500,000 that was received in fiscal 2001. FMLY did not engage in any large
film project during fiscal 2002 as it mainly engaged in development of multiple
projects that would , in the long-term, give FMLY a steady flow  film or
production fee revenues. $500,000 of FMLY's film revenue in 2002 was derived
from producer film projects in motion pictures produced by other companies for
domestic theatrical, home video, cable and foreign markets.The remaining fiscal
2002 revenue was generated from producer fees of $289,350 and production and
rechargeable overhead fees of $26,792.


<PAGE>
     FMLYs operating costs for the year ended June 30, 2002 were $2,742,877 as
compared to $5,516,565 for the year ended June 30, 2001.  FMLY's operating costs
consist solely of film cost amortization and write offs. Film cost amortization
and write-offs in fiscal 2002 were mostly from amortized film costs of released
films of $ 1,881,508 and the write off of certain in-production, development or
pre-production projects that we believed were of no future value of $861,369 as
compared to amortized films costs of released films of $ 5,148,187 and write off
of certain development or pre-production projects we believed had no furthur
value of $ 717,737 for fiscal 2001.

     FMLY'S gross profit (loss) for fiscal year 2002 was ($1,926,735) as
compared to gross profit of $924,183 for fiscal year 2001. The decrease in our
gross profit was a direct result of reduction in film revenues and fees and
write off of certain development and pre-production projects.

     FMLY's selling, general administrative expenses for fiscal year 2002 was $
1,809,538 as compared to $646,535 for fiscal 2001. Our costs for fiscal 2002
consisted primarily of salaries and benefits of $302,681, rent and occupancy
costs of $81,024, general advertising and promotion costs of $97,283, a one time
charge (cost) for stock option expense of $ 376,695, entertainment and travel of
$26,641, loss on sale of marketable securities of $ 679,136 communications costs
of $68,819, messenger and fright costs of $13,294, and other general and
administrative costs of $ 131,188, as compared to costs for fiscal 2001
consisting of salaries and benefits of $266,84, rent and occupancy cost of
$77,041, general advertising and promotion of $144,887, entertainment and travel
of $35,407, communications costs of $75,358, messenger and fright costs of
$13,082, a reversal of the provision for doubtful accounts of $180,000, and
other general and administrative costs of $ 213,876.

     LIQUIDITY AND CAPITAL RESOURCES:
     -------------------------------

     Net cash used in operating activities in fiscal 2002 amounted to
$1,955,080 as compared to $50,752 for fiscal 2001. The use of cash for fiscal
year 2002 is mainly attributable to a net loss of $4,218,018 plus film costs of
$1,682,797 offset by stock options of $ 535,160, film amortization write offs of
$2,742,877, loss on marketable equity securities of $679,136 plus miscellaneous
amounting to $ 11,438.

     Net cash provided in investing activities for fiscal year 2002 amounted to
$932,925 as compared to net cash used in investing of $473,155 in fiscal year
2001 for a net change of $1,406,080. This difference is attributable to proceeds
of sale of marketable equity securities of $275,039 and collections of notes
receivable of $675,000, and our investment in notes receivable was $450,000 in
2001.

     Financing activities provided net cash of $717,384 in fiscal 2002 compared
with $34,237 in fiscal year 2001. The increase in fiscal 2002 was attributable
mainly to process from notes and revolving lines of credit and sale of common
stock.

     There is no expected or planned sale of significant equipment by the
company.  FMLY's work force is expected to remain at the same level over the
next twelve months.


<PAGE>
ITEM 7.     FINANCIAL STATEMENTS
                                                           Page
                                                           ----
INDEX TO AUDITED FINANCIAL STATEMENTS

Report of Independent Accountants                           F-3

Audited Financial Statements

  Consolidated Balance Sheet as of June 30, 2002
    and 2001                                                F-4

  Consolidated Statement of Operations for the
    years ended June 30, 2002 and 2001                      F-5

  Consolidated Statement of Stockholders' Equity
    for the years ended June 30, 2002 and 2001              F-6

  Consolidated Statement of Cash Flows for the
    years ended June 30, 2002 and 2001                      F-7

Notes to Consolidated Financial Statements                  F-8


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

Not Applicable


<PAGE>
                                    PART III

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

     The following table sets forth the names, ages and all positions with FMLY
currently held by each person who may be deemed an executive officer of FMLY.
Executive officers serve at the discretion of the Board of directors. Unless
otherwise noted, all references to FMLY include Family Room Entertainment
Corporation and all its wholly owned subsidiaries:

     The following table sets forth the directors and executive officers of the
FMLY

Name            Age    Executive Position Held
--------------  ---  ----------------------------

George Furla     42  Co-Chairman, Chief Executive
                     Officer and President
Randall Emmett   31  Co-Chairman, Chief Operating
                     Officer and Secretary

Peter Benz *     42  Treasurer

*Mr. Benz resigned as a Director and Officer of FMLY as of September 16, 2002


Randall Emmett - Co-Chairman Mr. Emmett has extensive experience in the
----------------------------
entertainment and film industry.  He began his career with Simpson/Bruckheimer
Films as an Assistant to the Producer after graduating from the New York School
of Visual Arts in 1994.  While at Simpson/Bruckheimer, Randall worked on film
projects such as "Bad Boys" and "Crimson Tide".  Randall later worked for
International Creative Management ("ICM") as an Assistant within the Motion
Picture Talent Division.  Mr. Emmett jointly formed the current production
company in 1998 and is principally responsible for talent, agency relationships
and has joint responsibility for concept development.

George Furla - Co-Chairman Mr. Furla has over 18 years of business experience in
--------------------------
entertainment and financial services.  He began his business career with Cantor
Fitzgerald where he was a trader in the equity securities area.  After spending
several years with Cantor Fitzgerald, George then worked for Jones and
Associates for 3 years in a similar capacity.  In 1988, Mr. Furla left Jones and
Associates to run a hedge fund, which he established.  Mr. Furla entered the
film business in 1995, financing several productions.  George jointly formed the
current production company in 1998 and is principally responsible for financing
arrangements, distribution and has joint responsibility for concept development.
Mr. Furla is a 1982 graduate of the University of Southern California with a
degree in business administration.

Peter T. Benz - Treasurer     Mr. Benz has over 15 years experience in the areas
-------------------------
of investment banking and advisory services.   Mr. Benz is the founding
principal and President of Bi Coastal Consulting, a company founded in 1986 to
work with small growth companies in the areas of financing, mergers/acquisition,
funding strategy and general corporate development.  Prior to founding Bi
Coastal Consulting, Mr. Benz worked at Gilford Securities where he was
responsible for Private Placements and Investment Banking activities.  Mr. Benz
has also founded three public companies and has served as a Director of four
other public companies.  Mr. Benz is a graduate of Notre Dame University.  Mr.
Benz resigned as a Director and Officer of FMLY as of September 16, 2002


<PAGE>
Compliance with Section 16(a) of the Securities Exchange Act of 1934

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the FMLY's equity securities to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of FMLY.  Officers,
directors and greater than 10% shareholders are required by SEC regulations to
furnish FMLY with copies of all Section 16(a) forms they file.

     To the best of FMLY's knowledge, based solely on its review of the copies
of such reports furnished to the company and written representations that no
other reports were required during the fiscal year ended June 30, 2002, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with.

<TABLE>
<CAPTION>
                                                                                 Long Term Compensation
                                    Annual Compensation                          Awards
Payouts
                       ---------------------------------------  ------------------------------------------------
(a)                     (b)        (c)       (d)       (e)          (f)        (g) (3)       (h)         (I)
Name                                                Other(2)                 Securities                  All
And                                                 Annual      Restricted   Underlying                 Other
Principal                                           Compen         Stock      Options/       LTIP       Compen
Position                Year   Salary (1)   Bonus   sation($)    Award($)      Sar (#)    Payouts($)  sation ($)
<S>                    <C>     <C>          <C>     <C>         <C>          <C>          <C>         <C>
President/CEO            2002  $         0       0           0            0           0            0           0
Secretary, Treasurer     2002            0       0           0            0           0            0           0
Director                 2002            0       0           0            0           0            0           0
Key Personnel:           2002            0       0           0            0           0            0           0
Total:                         $         0       0           0            0           0            0           0
Directors as a
Group                          $         0       0           0            0           0            0           0

<FN>
     (1)  There are no existing employment agreements between the officers and FMLY.
     (2)  Executive Officers are not collecting any salary at this time. However, during the year their options
          were repriced resulting in compensation expense of $168,000.
</TABLE>



<PAGE>
<TABLE>
<CAPTION>
Options/Share  Grants  in  Last  Fiscal  Year
---------------------------------------------

                                  Number of     % of Total
                                  Securities   Options/SARS
                                  Underlying    Granted to
                                 Options/SARS  Employees in    Exercise or Base
Name                               Granted      Fiscal Year      Price ($/Sh)     Expiration Date
-------------------------------  ------------  -------------  ------------------  ---------------
<S>                              <C>           <C>            <C>                 <C>
George Furla, Co -CEO                 300,000          18.4%  $             0.50         12/15/10
Randall Emmett, Co-CEO                300,000          18.4%                0.50         12/15/10
Peter Benz, Secretary, Treasurer      300,000          18.4%                0.50         12/15/10
</TABLE>


Aggregated  Option/Sar  Exercises
---------------------------------

None exercised

ITEM 11.     SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information regarding the beneficial
ownership of FMLY's Common Stock as of June 30, 2002 based on information
available to FMLY by (I) each person who is known by FMLY to own more than 5% of
the outstanding Common Stock based upon reports filed by such persons within the
Securities and Exchange Commission; (ii) each of FMLY's directors; (iii) each of
the Named Executive Officers; and (iv) all officers and directors of FMLY as a
group.

<TABLE>
<CAPTION>
Name and Address of                         Number of Shares
Beneficial Owner                         Beneficially Owned (1)  Percentage
---------------------------------------  ----------------------  -----------
<S>                                      <C>                     <C>
George Furla
The Lot, Mary Pickford Bldg., Suite 101
1041 North Formosa Ave.
Hollywood, CA.   90046                                5,169,334       27.71%

Randall Emmett
The Lot, Mary Pickford Bldg., Suite 101
1041 North Formosa Ave.
Hollywood, CA.   90046                                3,868,999      20.73 %

Peter Benz
543 Virginia Avenue
San Mateo, CA.  94402                                 2,318,999      12.42 %

     Total                                           11,357,332      60.86 %
---------------------------------------  ----------------------  -----------
</TABLE>

ITEM 12.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

     As at June 30, 2000, George Furla has loaned FMLY under a Convertible Note
Payable amounting to $350,000 (see Note 8 of Notes to Financial Statements).
Subsequently to June 30, 2000George Furla has loaned the FMLY approximately an
additional $ 850,000 under a Convertible Notes Payable.

     As of June 30, 2001, George Furla's loan to FMLY had an outstanding balance
of $98,263. This note was amended to be non convertible. (see Note 8 of Notes to
Financial Statements)

     As of June 30, 2002, George Furla's loan to FMLY under a Note Payable had a
outstanding balance of $357,168. Subsequently to June 30, 2002, George Furla has
loaned FMLY approximately an additional $ 28,600. Additionally, subsequent to
June 30, 2002, FMLY made a repayment of $33,000.


<PAGE>
     As of June 30, 2002, Peter Benz loaned FMLY $17,000 under a Note Payable.
Subsequent to June 30, 2002, this loan was repaid in full.

     As of June 30, 2002, Randall Emmett Loaned FMLY $50,000 under a Note
Payable. Additionally, Randall Emmett, subsequent to June 30, 2002, has loaned
FMLY approximately $2,000. As of June 30, 2002, approximately $ 12,000 has been
repaid.

     During the fiscal year ending June 30, 2002, FMLY received under certain
contractual agreements, in relation to producer fees, for certain of FMLY's
affiliation with third party film producers that began during fiscal 2002. FMLY
paid George Furla $15,500 and Randall Emmett $17,250.

ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K


Form 8-K filed September 18, 2002

     Item  6.  Resignations  of  Registrant's  Directors

     Peter Benz has resigned as Director of the Family Room Entertainment
     Corporation Board of Directors effective September 16, 2002 for personal
     reasons. Mr. Benz has also resigned as Secretary and Treasurer of the
     Registrant effective September 16, 2002.


<PAGE>
SIGNATURES

In  accordance  with  Section  13  or  15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                    Family  Room  Entertainment  Inc.
                    By:  /s/ George Furla
                         ---------------
                         George Furla
                         Director, Chief Executive Officer,
                         President  and  Chief Accounting Officer

                              Date  October 15, 2002


In  accordance  with  the Exchange Act, this report has been signed below by the
following  persons  on behalf of the registrant and in the capacities and on the
dates  indicated.

/s/  George Furla      Director, Chief Executive Officer,       October 15, 2002
     -------------     President and Chief Accounting Officer
     George Furla

/s/  Randall Emmett     Director, Chief Operating Officer       October 15, 2002
  ------------------    Assistant Secretary
     Randall Emmett


<PAGE>
                      FAMILY ROOM ENTERTAINMENT CORPORATION

                                   ----------


                        CONSOLIDATED FINANCIAL STATEMENTS
                     WITH REPORT OF INDEPENDENT ACCOUNTANTS
                   FOR THE YEARS ENDED JUNE 30, 2002 AND 2001




                                      F-1
<PAGE>
<TABLE>
<CAPTION>
                      FAMILY ROOM ENTERTAINMENT CORPORATION
                                TABLE OF CONTENTS

                                   ----------

                                                                      PAGE(S)
                                                                      -------
<S>                                                                   <C>
Report of Independent Accountants                                       F-3

Audited Financial Statements

  Consolidated Balance Sheet as of June 30, 2002
    and 2001                                                            F-4

  Consolidated Statement of Operations for the
    years ended June 30, 2002 and 2001                                  F-5

  Consolidated Statement of Stockholders' Equity
    for the years ended June 30, 2002 and 2001                          F-6

  Consolidated Statement of Cash Flows for the
    years ended June 30, 2002 and 2001                                  F-7

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


                                      F-2
<PAGE>
                        REPORT OF INDEPENDENT ACCOUNTANTS
                        ---------------------------------



To the Stockholders and Board of Directors
Family Room Entertainment Corporation:


We  have  audited  the  accompanying balance sheets of Family Room Entertainment
Corporation  (the  "Company")  as  of  June  30,  2002 and 2001, and the related
statements of operations, stockholders' equity and cash flows for the years then
ended.  These  financial  statements  are  the  responsibility  of the Company's
management.  Our  responsibility  is  to  express  an opinion on these financial
statements  based  on  our  audits.

We conducted our audits in accordance with auditing standards generally accepted
in  the  United  States  of  America.  Those  standards require that we plan and
perform  the  audits  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  audits  provide  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 Family Room Entertainment
Corporation  as of June 30, 2002 and 2001, and the results of its operations and
its cash flows for the years then ended in conformity with accounting principles
generally  accepted  in  the  United  States  of  America.


                                       /s/ Ham, Langston & Brezina, L.L.P.


Houston, Texas
September 10, 2002


                                      F-3
<PAGE>
<TABLE>
<CAPTION>
                      FAMILY ROOM ENTERTAINMENT CORPORATION
                            CONSOLIDATED BALANCE SHEETS
                              JUNE 30, 2002 AND 2001

                                    -----------

     ASSETS                                                2002           2001
     ------                                            -------------  ------------
<S>                                                    <C>            <C>
Cash and cash equivalents                              $     27,822   $   332,593
Marketable equity securities                                      -       954,175
Accounts receivable, net                                    131,239       152,552
Notes receivable                                                  -       478,500
Film costs, net                                           1,801,918     2,861,998
Property and equipment, net                                  51,476        58,938
Prepaid expenses and other                                    8,836        51,881
                                                       -------------  ------------

      Total assets                                     $  2,021,291   $ 4,890,637
                                                       =============  ============


LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Notes payable                                          $  1,075,647   $   423,263
Accounts payable and accrued liabilities                    160,253       117,625
Income tax payable                                                -         6,500
                                                       -------------  ------------

    Total liabilities                                     1,235,900       547,388
                                                       -------------  ------------

Commitments and contingencies

Stockholders' equity:
  Preferred stock; $.01 par value;
    5,000,000 shares authorized; no shares issued
    and outstanding                                               -             -
  Common stock; $.01 par value; 25,000,000 shares
    authorized; 18,660,487 and 18,245,487 shares
    issued and outstanding at June 30, 2002 and 2001,
    respectively                                          1,866,049     1,824,549
  Additional paid in capital                              9,777,165     9,157,172
  Deferred compensation                                     (37,333)      (52,000)
  Subscription receivable                                   (16,000)            -
  Accumulated deficit                                   (10,804,490)   (6,586,472)
                                                       -------------  ------------

    Total stockholders' equity                              785,391     4,343,249
                                                       -------------  ------------

      Total liabilities and stockholders' equity       $  2,021,291   $ 4,890,637
                                                       =============  ============
</TABLE>



                   The accompanying notes are an integral part
                   of these consolidated financial statements.
                                       F-4


<PAGE>
<TABLE>
<CAPTION>
                      FAMILY ROOM ENTERTAINMENT CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   FOR THE YEARS ENDED JUNE 30, 2002 AND 2001

                                    -----------


                                                       2002          2001
                                                   ------------  ------------
<S>                                                <C>           <C>
Revenue:
  Film revenue                                     $   816,142   $ 6,203,539
  Overhead fees                                              -       237,209
                                                   ------------  ------------

    Total revenue                                      816,142     6,440,748

Operating cost - amortization of film costs          2,742,877     5,516,565
                                                   ------------  ------------

      Gross margin                                  (1,926,735)      924,183

Selling, general and administrative                  1,776,771       646,535
                                                   ------------  ------------

      Income (loss) from operations                 (3,703,506)      277,648
                                                   ------------  ------------

Other income (expenses):
  Interest income                                      218,124        58,768
  Interest expense                                     (60,000)     (265,568)
  Loss on marketable equity securities                (679,136)            -
                                                   ------------  ------------

    Total other income (expenses), net                (521,012)     (206,800)
                                                   ------------  ------------

    Income (loss) before benefit (provision) for
      income taxes                                  (4,224,518)       70,848

Benefit (provision) for income taxes                     6,500        (6,500)
                                                   ------------  ------------

      Net income (loss)                            $(4,218,018)  $    64,348
                                                   ============  ============

Weighted average number of common shares
  outstanding:
  Basic                                             18,638,884    18,245,487
                                                   ============  ============

  Fully diluted                                     18,638,884    18,741,112
                                                   ============  ============

Net income (loss) per common share-basic and
  fully diluted                                    $     (0.23)  $      0.00
                                                   ============  ============
</TABLE>



                   The accompanying notes are an integral part
                   of these consolidated financial statements.
                                      F-5


<PAGE>
<TABLE>
<CAPTION>
                                             FAMILY  ROOM  ENTERTAINMENT  CORPORATION
                                          CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                            FOR THE YEARS ENDED JUNE 30, 2002 AND 2001

                                                            -----------


                                      COMMON STOCK        ADDITIONAL
                                 ----------------------    PAID-IN        DEFERRED      SUBSCRIPTION    ACCUMULATED
                                   SHARES      AMOUNT      CAPITAL      COMPENSATION     RECEIVABLE       DEFICIT        TOTAL
                                 ----------  ----------  ------------  --------------  --------------  -------------  ------------
<S>                              <C>         <C>         <C>           <C>             <C>             <C>            <C>
Balance at June 30, 2000         18,245,487  $1,824,549  $ 9,197,770   $           -   $           -   $ (6,650,820)  $ 4,371,499

Cancellation of conversion
  feature attached to conver-
  tible debt                              -           -     (126,848)              -               -              -      (126,848)

Issuance of compensatory stock
  options                                 -           -       86,250         (52,000)              -              -        34,250

Net income                                -           -            -               -               -         64,348        64,348
                                 ----------  ----------  ------------  --------------  --------------  -------------  ------------

Balance at June 30, 2001         18,245,487   1,824,549    9,157,172         (52,000)              -     (6,586,472)    4,343,249

Common stock issued for cash        157,080      15,708       57,792               -         (16,000)             -        57,500

Exercise of stock options            15,000       1,500        6,000               -               -              -         7,500

Repricing of compensatory stock
  options                                 -           -      406,828          14,667               -              -       421,495

Common stock issued for legal
  Services                          242,920      24,292       89,373               -               -              -       113,665

Value of conversion feature
  associated with convertible
  debt                                    -           -       60,000               -               -              -        60,000

Net loss                                  -           -            -               -               -     (4,218,018)   (4,218,018)
                                 ----------  ----------  ------------  --------------  --------------  -------------  ------------

Balance at June 30, 2002         18,660,487  $1,866,049  $ 9,777,165   $     (37,333)  $     (16,000)  $(10,804,490)  $   785,391
                                 ==========  ==========  ============  ==============  ==============  =============  ============
</TABLE>


                   The accompanying notes are an integral part
                   of these consolidated financial statements.
                                      F-6


<PAGE>
<TABLE>
<CAPTION>
                        FAMILY  ROOM  ENTERTAINMENT  CORPORATION
                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                       FOR THE YEARS ENDED JUNE 30, 2002 AND 2001

                                      -----------


                                                                 2002          2001
                                                             ------------  ------------
<S>                                                          <C>           <C>
Cash flows from operating activities:
  Net income (loss)                                          $(4,218,018)  $    64,348
  Adjustment to reconcile net loss to net cash used
    by operating activities:
    Compensatory stock options and stock issuances               535,160        34,250
    Film cost amortization and write-offs                      2,742,877     5,516,565
    Depreciation                                                   7,563         6,374
    Software amortization                                         17,013        12,229
    Provision for doubtful accounts                                    -      (180,000)
    Amortization of debt costs                                    60,000       107,500
    Accretion of discount                                       (196,500)      (28,500)
    Loss on marketable equity securities                         679,136             -
    Change in operating assets and liabilities:
      Decrease (increase) in accounts receivable                  21,313      (434,955)
      Decrease (increase) in prepaid expenses and other
        assets                                                    43,045       (51,881)
      Additions to film costs                                 (1,682,797)   (3,391,175)
      Increase (decrease) in accounts payable and
        accrued liabilities                                       42,628    (2,192,007)
      Increase (decrease) in income taxes payable                 (6,500)        6,500
                                                             ------------  ------------

          Net cash used by operating activities               (1,955,080)     (530,752)
                                                             ------------  ------------

Cash flows from investing activities:
  Proceeds from sale of marketable equity securities             275,039             -
  Collection of notes receivable                                 675,000             -
  Investment in notes receivable                                       -      (450,000)
  Purchase of property and equipment                             (17,114)      (23,155)
                                                             ------------  ------------

          Net cash provided (used) by investing activities       932,925      (473,155)
                                                             ------------  ------------

Cash flows from financing activities:
  Proceeds from notes payable and revolving line of
    credit                                                     1,092,362     3,567,000
  Proceeds from sale of common stock                              65,000             -
  Payments on note payable and revolving line of credit         (439,978)   (3,601,737)
                                                             ------------  ------------

          Net cash provided (used) by financing
            activities                                           717,384       (34,237)
                                                             ------------  ------------

Decrease in cash and cash equivalents                           (304,771)   (1,038,144)

Cash and cash equivalents at beginning of period                 332,593     1,370,737
                                                             ------------  ------------

Cash and cash equivalents at end of period                   $    27,822   $   332,593
                                                             ============  ============
</TABLE>


                   The accompanying notes are an integral part
                   of these consolidated financial statements
                                      F-7


<PAGE>
                      FAMILY ROOM ENTERTAINMENT CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


1.   THE  COMPANY
     ------------

     Family  Room  Entertainment  Corporation  (the  "Company"),  a  New  Mexico
     corporation,  is  a  motion  picture  company  involved  in  the  creative
     development,  production,  distribution,  licensing and financing of motion
     pictures  and the internet content that supports those motion pictures. The
     Company's  distribution  markets  include  primarily  the United States and
     Canadian  markets,  but  extend to other markets worldwide. The significant
     business  activities of the Company constitute one business segment, filmed
     entertainment.


2.   SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES
     ----------------------------------------------

     PRINCIPLES  OF  CONSOLIDATION
     -----------------------------

     The  consolidated  financial statements include the accounts of the Company
     and  its  wholly-owned  subsidiaries. All significant intercompany balances
     and  transactions  have  been  eliminated.

     UNCLASSIFIED  CONSOLIDATED  BALANCE  SHEET
     ------------------------------------------

     In  accordance  with  the  provisions  of  Statement of Position 00-2 ("SOP
     00-2"),  the  Company  presents  an unclassified consolidated balance sheet
     because  the  Company  has an operating cycle of approximately three years.

     ACCOUNTING  ESTIMATES
     ---------------------

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

     REVENUE  RECOGNITION
     --------------------

     Revenue  from  the  distribution of motion pictures is recognized as earned
     under  the criteria established by SOP 00-2. The Company's revenue cycle is
     generally  one  to three years, with the expectation that substantially all
     revenue  will  be  recognized  in  the first two years of individual motion
     pictures. In accordance with SOP 00-2, the Company considers revenue earned
     when  all  of  the  following  have  occurred:

     -    The Company has a valid sale or licensing agreement in place.
     -    The motion picture is complete and in accordance with the agreement
          with the customer.
     -    The motion picture has been delivered or is deliverable.
     -    The license period has begun.
     -    The revenue is fixed or determinable and collection is reasonably
          assured.


                                      F-8
<PAGE>
                      FAMILY ROOM ENTERTAINMENT CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

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


2.   SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES,  CONTINUED
     ----------------------------------------------------------

     FILM  COSTS
     -----------

     Film  costs include costs to acquire, develop and/or produce feature motion
     pictures:  mainly  salaries,  equipment,  overhead, participation costs and
     exploitation  costs. Production costs in excess of reimbursable amounts are
     capitalized. Once a film is released, any film production costs capitalized
     is  amortized  in  the proportion that the revenue during the year for each
     film  bears  to the estimated revenue to be received from all sources under
     the  individual  film forecast method. Estimates of anticipated total gross
     revenues  are reviewed periodically and revised when necessary. Unamortized
     film production costs are compared with net realizable value each reporting
     period  on  a  film-by-film  basis.  If  estimated  gross  revenues are not
     sufficient  to  recover  the  unamortized  film  production  costs,  the
     unamortized  film  production costs are written down to their estimated net
     realizable  value.

     CASH  EQUIVALENTS
     -----------------

     The  Company  considers  all  highly  liquid  investments  purchased with a
     maturity  of  three  months  or  less  to  be  cash  equivalents.

     MARKETABLE  EQUITY  SECURITIES
     ------------------------------

     The Company has classified all marketable equity securities for which there
     is  a  determinable  fair market value and there are no restrictions on the
     Company's  ability  to  sell  the security within the next twelve months as
     available-for-sale.  In  accordance  with  the  provisions  of  Financial
     Accounting  Standards  Board  ("FASB")  Statement  No. 115, "Accounting for
     Certain  Investments  in  Debt  and  Equity Securities", available-for-sale
     securities  are  carried  at  fair  value, with unrealized gains and losses
     reported  as a separate component of stockholders' equity net of applicable
     income  taxes. Realized gains and losses and declines in value deemed to be
     other-than-temporary on available-for-sale securities are included in other
     income.  The cost basis for realized gains and losses on available-for-sale
     securities is determined on a specific identification basis. As of June 30,
     2001,  the Company's investment in available-for-sale securities had a fair
     market  value  that  approximated  cost.

     PROPERTY  AND  EQUIPMENT
     ------------------------

     Property  and  equipment  are  stated at cost. Depreciation of property and
     equipment  is  calculated  using  the  straight-line  method over estimated
     useful  lives  ranging  from  three  to  five  years.  These  assets  are
     periodically  reviewed  for  impairment  whenever  changes in circumstances
     indicate  that  the  carrying  amount  of the asset may not be recoverable.
     Impaired  assets  and assets to be disposed of are reported at the lower of
     carrying  values  or  fair  values,  less  costs  of  disposal.

     INCOME  TAXES
     -------------

     The Company uses the liability method of accounting for income taxes. Under
     this  method,  deferred  income  taxes  are  recorded  to  reflect  the tax
     consequences on future years of temporary differences between the tax basis
     of  assets  and  liabilities  and  their financial amounts at year-end. The
     Company  provides  a  valuation  allowance to reduce deferred tax assets to
     their  net  realizable  value.


                                       F-9
<PAGE>
                      FAMILY ROOM ENTERTAINMENT CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

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


2.   SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES,  CONTINUED
     ----------------------------------------------------------

     INTEREST
     --------

     Costs  associated  with  the  maintenance of debt are charged to expense or
     capitalized to the extent debt is used for productions.

     NET  LOSS  PER  COMMON  SHARE
     -----------------------------

     Basic loss per common share amounts is based on the weighted average number
     of  common  shares outstanding during the respective periods. Dilutive loss
     per  common  share  amounts  is based on the weighted average common shares
     outstanding  during the period and shares assumed issued upon conversion of
     stock  options when the effect of such conversions would have been dilutive
     to  net  loss.  There is no assumed conversion of stock options for 2002 or
     2001  because  the  effect  would  be  anti-dilutive.

     STOCK-BASED  COMPENSATION
     -------------------------

     Stock-based  compensation is accounted for using the intrinsic value method
     prescribed  in  Accounting  Principles  Board  Opinion  ("APB")  No.  25,
     "Accounting  for  Stock Issued to Employees", rather than applying the fair
     value  method  prescribed  in  Statement  of Financial Accounting Standards
     ("SFAS")  No.  123,  "Accounting for Stock-Based Compensation". The Company
     applies  the  disclosure  only  provisions  of  SFAS  No.  123.

     COMPREHENSIVE  INCOME
     ---------------------

     In  June  1997,  the FASB issued SFAS 130, "Reporting Comprehensive Income"
     ("SFAS 130") which establishes standards for the reporting of comprehensive
     income  and  its  components  in financial statements. Comprehensive income
     consists  of  net income and other gains and losses affecting stockholder's
     equity  that,  under generally accepted accounting principles, are excluded
     from  net  income,  such  as  unrealized  gains  and  losses on investments
     available  for  sale,  foreign  currency  translation  gains and losses and
     minimum  pension liability. For the years ended June 30, 2002 and 2001, the
     Company's financial statements include none of the additional elements that
     affect  comprehensive  income.  Accordingly,  net  income and comprehensive
     income  are  identical.

     RECLASSIFICATIONS
     -----------------

     Certain  amounts  included  in  the financial statements for 2001 have been
     reclassified  to  conform  to  2002  financial  statement  presentation.

     FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS
     ---------------------------------------

     The  Company  includes fair value information in the notes to the financial
     statements  when  the  fair value of its financial instruments is different
     from  the  book  value.  When  the  book  value approximates fair value, no
     additional  disclosure  is  made.


                                      F-10

<PAGE>
                      FAMILY ROOM ENTERTAINMENT CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

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


2.   SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES,  CONTINUED
     ----------------------------------------------------------

     CONCENTRATION  OF  CREDIT  RISK
     -------------------------------

     Cash,  accounts  receivable  and notes receivable are the primary financial
     instruments  that subject the Company to concentrations of credit risk. The
     Company  maintains  its  cash  in  banks  selected  based upon management's
     assessment  of  the  bank's  financial stability. Balances often exceed the
     $100,000  federal  depository  insurance  limit;  however,  the Company has
     experienced  no  losses  on  deposits.

     Accounts  receivable  arise  primarily  from transactions with customers in
     California.  The  Company  performs  credit  reviews  of  its customers and
     provides  a  reserve  for  accounts  where  collectibility  is  uncertain.
     Collateral is not required for credit granted. Notes receivable at June 30,
     2001  arose  from transactions with a single customer. The Company required
     collateral, in the form of security interests in various film projects, for
     credit  granted.

     RECENTLY  ISSUED  PRONOUNCEMENTS
     --------------------------------

     In June 2001, the Financial Accounting Standards Board issued SFAS No. 142,
     "Goodwill  and  Other  Intangible  Assets".  SFAS  No.  142  eliminates the
     amortization  of  goodwill  and requires that goodwill be reviewed annually
     for  impairment.  SFAS  No.  142  also  requires  that  the useful lives of
     previously  recognized  intangible  assets  be reassessed and the remaining
     amortization periods be adjusted accordingly. SFAS No. 142 is effective for
     fiscal years beginning after December 15, 2001 and affects all goodwill and
     other  intangible  assets  recorded  on the Company's balance sheet at that
     date,  regardless  of  when  the  assets  were  initially  recorded.  The
     implementation of SFAS No. 142 is not expected to have a material impact on
     the  Company's  results  of  operations  or  financial  position.

     In  June  2001,  the  FASB  issued  SFAS  No.  143,  "Accounting  for Asset
     Retirement  Obligations".  SFAS  No. 143 addresses accounting and reporting
     for  obligations  associated  with  the  retirement  of tangible long-lived
     assets  and  the  associated  asset  retirement  costs.  This  statement is
     effective  for fiscal years beginning after June 15, 2002. The Company does
     not  expect the implementation of SFAS No. 143 to have a material impact on
     the  Company's  results  of  operation  or  financial  position.

     In  July  2001,  the  FASB  issued SFAS No. 144, "Impairment or Disposal of
     Long-Lived  Assets",  which  is  effective for fiscal years beginning after
     December  15,  2001.  The  provisions  of  this  statement provide a single
     accounting  model for impairment of long-lived assets. The Company does not
     expect  the implementation of SFAS No. 144 to have a material impact on the
     Company's  results  of  operation  or  financial  position.


                                      F-11
<PAGE>
                      FAMILY ROOM ENTERTAINMENT CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

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


3.   MARKETABLE  EQUITY  SECURITIES
     ------------------------------

     Marketable equity securities at June 30, 2001 consisted of the common stock
     of Miracle Entertainment, Inc. ("Miracle"), a Canadian company. The Company
     received  these  shares in payment of accounts receivable for overhead fees
     and  reimbursement  of  operating  development costs. Miracle trades on the
     over-the-counter  market  and  is  an  extremely  volatile  security  that
     generally  responds  negatively when large positions are sold. Accordingly,
     during  2001  Miracle  issued  the Company additional shares when its stock
     price  declined  and  the  decline  was  not  expected to be temporary. The
     Company's marketable equity securities are considered available-for-sale at
     June 30, 2001. During the year ended June 30, 2002, Miracle and the Company
     continued to engage in various business transactions although the financial
     position  of  Miracle  declined.  During 2002 management changes at Miracle
     caused  the  Company's  business  relationship  with  Miracle  to  change
     dramatically.  Miracle no longer offered the Company additional shares when
     the  share  value  declined  and  market  value  changes in Miracle's stock
     resulted in the Company recognizing losses of $679,136 on marketable equity
     securities  in  2002.


4.   ACCOUNTS  RECEIVABLE
     --------------------

     Accounts  receivable  at June 30, 2002 and 2001 consisted of the following:


                                                       2002      2001
                                                     --------  --------
     Accounts receivable for overhead fees and
       reimbursement of operating development costs  $      -  $ 52,552
     Accrued receivables from film distribution       131,239   100,000
                                                     --------  --------

                                                     $131,239  $152,552
                                                     ========  ========

     Two  customers  account  for all receivables at both June 30, 2002 and 2001
     (See  Note  15).  The  receivable  for  overhead  fees and reimbursement of
     operating  development  costs  is  due  from a single participant in a film
     participation  agreement  at  June  30,  2001.


5.   NOTES  RECEIVABLE
     -----------------

     Notes  receivable  at  June 30, 2001 consisted of amounts due from a single
     film production company for film completion loans. The notes were issued at
     a  discount  and,  in addition to interest to maturity, provide the Company
     with  a  participation in the profits of certain film projects owned by the
     debtor. These notes matured at various dates through December 2001 and bore
     interest  at  a weighted average effective rate that exceeds 100% per year.
     Following is an analysis of notes receivable at June 30, 2001:

     Contractual balance of notes        $ 675,000

     Less discount at issuance            (225,000)

     Plus discount amortization in 2001     28,500
                                         ----------

                                         $ 478,500
                                         ==========


                                      F-12
<PAGE>
                      FAMILY ROOM ENTERTAINMENT CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

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


6.   FILM  COSTS
     -----------

Film  costs  and  related  amounts  capitalized  at  June 30, 2002 and 2001, and
related activity during the years then ended were as follows:

<TABLE>
<CAPTION>
                                                               DEVELOPMENT
                                                                   IN         AND PRE-
                                              RELEASED         PRODUCTION    PRODUCTION      TOTAL
                                        --------------------  ------------  ------------  ------------
<S>                                     <C>                   <C>           <C>           <C>
     Net film cost balance at June 30,
       2000                             $            40,861   $ 3,389,589   $ 1,556,938   $ 4,987,388
                                        --------------------  ------------  ------------  ------------

     Cost of acquiring film rights
       in 2001                                            -             -       835,448     1,007,260
     Production costs incurred during
       2001                                               -     2,308,915             -     2,308,915
     Interest cost capitalized during
       2001                                               -        75,000             -        75,000
     Transfers of film costs between
       categories in 2001                         5,792,497    (5,773,504)      (18,993)         -
                                        --------------------  ------------  ------------  ------------

       Total film costs incurred and
         paid by the Company during
         2001                                     5,792,497    (3,389,589)    1,988,267     3,391,175
                                        --------------------  ------------  ------------  ------------

         Net film cost balance before
           2001 amortization and write
           offs                                   5,833,358             -     2,545,205     8,378,563

     Less film cost amortization and
       write offs during 2001                    (4,799,538)            -      (717,027)   (5,516,565)
                                        --------------------  ------------  ------------  ------------

     Net film cost balance at June 30,
       2001                                       1,033,820             -     1,828,178     2,861,998
                                        --------------------  ------------  ------------  ------------

     Cost of acquiring film rights
       in 2002                                      624,444             -             -       624,444
     Production costs incurred during
       2002                                               -       221,967       821,326     1,043,293
     Interest cost capitalized during
       2002                                               -        13,814         1,246        15,060
     Transfers of film costs between
       categories in 2002                         1,190,168        (8,235)   (1,181,933)            -
                                        --------------------  ------------  ------------  ------------

       Total film costs incurred and
         paid by the Company during
         2002                                     1,814,612       227,546      (359,361)    1,682,797
                                        --------------------  ------------  ------------  ------------

         Net film cost balance before
           2002 amortization and write
           offs                                   2,848,432       227,546     1,468,817     4,544,795

     Less film cost amortization and
       write offs during 2002                    (1,881,508)      (75,546)     (785,823)   (2,742,877)
                                        --------------------  ------------  ------------  ------------

     Net film cost balance at June 30,
           2002                         $           966,924   $   152,000   $   682,994   $ 1,801,918
                                        ====================  ============  ============  ============
</TABLE>


                                      F-13
<PAGE>
                      FAMILY ROOM ENTERTAINMENT CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

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


6.   FILM  COSTS,  CONTINUED
     -----------------------

     Following  is  an  analysis  of  film  cost  amortization,  write-downs and
     write-offs,  by project and project type, for the years ended June 30, 2002
     an  2001:

<TABLE>
<CAPTION>
                                                          2002        2001
                                                       ----------  ----------
<S>                                                    <C>         <C>
     RELEASED PROJECTS - AMORTIZATION

       Held for Ransom                                 $    2,698  $  193,162
       Good Advice                                      1,177,959   3,918,564
       Speedway Junkie                                    163,427           -
       Badge                                                3,656     312,269
       Narc                                                84,075     314,852
       Ticker                                             317,750           -
       Hard Money (a/k/a In God We Trust)                 131,943           -
       Total of other individual projects with costs
         less than $100,000                                     -      60,691
                                                       ----------  ----------

         Totals                                         1,881,508   4,799,538
                                                       ----------  ----------
</TABLE>


     PROJECTS IN DEVELOPMENT OR PRE-PRODUCTION - WRITE-DOWNS AND WRITE-OFFS

<TABLE>
<CAPTION>
<S>                                                   <C>         <C>
       Imagining Argentina                                     -     208,850
       Unholy Alliance                                         -     303,583
       Going After Caciatto                                    -     153,252
       Street Pirates                                    100,644           -
       Grizzly Wilderness Project                        352,602           -
       Total of other individual projects with costs
         less than $100,000                              408,123      43,842
                                                      ----------  ----------

        Totals                                           861,369     717,027
                                                      ----------  ----------

     Total all projects                               $2,742,877  $5,516,565
                                                      ==========  ==========

</TABLE>

     Following is the percentage make-up of net film costs at June 30, 2002 and
     2001:

<TABLE>
<CAPTION>
                                                        2002   2001
                                                        -----  -----
<S>                                                     <C>    <C>
       Good Advice                                        33%    53%
       Ticker                                              -     11
       Grizzly Wilderness Project                          -     12
       Speedway Junkie                                     6      -
       Devil and Daniel Webster                           15      -
       After Sex                                           6      -
       Held for Ransom                                     9      -
       Shottas                                             8      -
       Total of other individual projects less than 5%    23     25
                                                        -----  -----

                                                         100%   100%
                                                        =====  =====
</TABLE>


                                      F-14
<PAGE>
                      FAMILY ROOM ENTERTAINMENT CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

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


6.   FILM  COSTS,  CONTINUED
     -----------------------

     All  write-offs  during  the  years  ended  June 30, 2002 and 2001 were the
     result  of  management's  decisions  to  abandon the projects. Management's
     decisions  were based on their analysis of the anticipated economic benefit
     from  each  project.  Management  believes  that  on  the average, projects
     currently  in  release  will  be  amortized  within  three  years.

     Following  is an analysis of revenues, by project, for the years ended June
     30,  2002  and  2001:

<TABLE>
<CAPTION>
                                                   2002       2001
                                                 --------  ----------
<S>                                              <C>       <C>

     FILM PRODUCTION

       Good Advice                               $      -  $4,500,000
       Speedway Junkie                            250,000           -
       Badge                                            -     363,077
       Devil and Daniel Webster                   250,000           -
       Narc                                             -     572,767
                                                 --------  ----------

         Total film production                    500,000   5,435,844
                                                 --------  ----------

     PRODUCER FEES

       Held for Ranson                             55,000           -
       Good Advice                                      -      50,000
       Speedway Junkie/Devil and Daniel Webster    60,000     475,534
       Badge                                            -     113,077
       Narc                                        16,000      99,084
       Try Seventeen                               60,000           -
       In God We Trust                             28,350           -
       Cutaway                                     70,000           -
                                                 --------  ----------

         Total producer fees                      289,350     737,695
                                                 --------  ----------

           Total film revenue                     789,350   6,173,539

     Overhead fees                                 26,792     267,209
                                                 --------  ----------

         Total revenue                           $816,142  $6,440,748
                                                 ========  ==========
</TABLE>


7.   PROPERTY  AND  EQUIPMENT
     ------------------------

     Property  and  equipment  at  June  30,  2002  and  2001  consisted  of the
     following:

<TABLE>
<CAPTION>
                                      LIFE      2002      2001
                                    -------  ---------  ---------
<S>                                <C>      <C>        <C>
     Office furniture               7 years  $  4,436   $      -
     Computer equipment             5 years    36,482     34,706
     Software                       3 years    56,490     45,588
                                             ---------  ---------

                                               97,408     80,294
     Less accumulated depreciation
       and amortization                       (45,932)   (21,356)
                                             ---------  ---------
                                             $ 51,476   $ 58,938
                                             =========  =========
</TABLE>


                                      F-15
<PAGE>
                      FAMILY ROOM ENTERTAINMENT CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

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


7.   PROPERTY  AND  EQUIPMENT,  CONTINUED
     ------------------------------------

     During  the  years  ended  June  30,  2002  and  2001,  depreciation  and
     amortization  expense  was  $24,576  and  $18,603,  respectively.


8.   NOTES  PAYABLE
     --------------

     Notes payable at June 30, 2002 and 2001 consisted of the following:

8.   NOTES  PAYABLE
     --------------

     Notes payable at June 30, 2002 and 2001 consisted of the following:

<TABLE>
<CAPTION>
                                                               2002       2001
                                                            ----------  --------
<S>                                                         <C>         <C>
     Note payable to a bank under a $500,000 revolving
       line of credit, bearing interest at the bank's
       prime rate (4.75% at June 30, 2002) plus 1.5% per
       year and due December 31, 2002.  This note is
       collateralized by the guarantees of two major
       stockholders/directors/officers of the Company.      $  460,436  $      -

     Notes payable (the "Stockholder Notes") to three
       major stockholders/directors/officers of the
       Company.  These notes, bearing interest at 10.0%
       per year, are due on demand and are collateralized
       by substantially all assets of the Company.             415,211    98,263

     Convertible note payable to certain investors (the
       "Investor Note") that currently bears interest
       at 5% per year and is repayable on demand. This
       note is convertible into shares of FMLYs common
       stock at a discount of 30% to the market price.         200,000   325,000
                                                            ----------  --------

                                                            $1,075,647  $423,263
                                                            ==========  ========
</TABLE>

<TABLE>
<CAPTION>
                                                            2002      2001
                                                          --------  --------
<S>                                                       <C>       <C>
       Interest charged to expense                        $ 60,000  $265,568

       Interest capitalized in film costs                   15,060    75,000
                                                          --------  --------

         Total interest incurred                          $ 75,060  $340,568
                                                          ========  ========

       Interest expense paid in cash                      $ 15,060  $265,568
                                                          ========  ========
</TABLE>


                                      F-16
<PAGE>
                      FAMILY ROOM ENTERTAINMENT CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

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


8.   NOTES  PAYABLE,  CONTINUED
     --------------------------

     The  Company  periodically  raises  capital to participate in film projects
     that  management feels will provide good current returns to the Company and
     the  potential  for participation in future profits. In its capital raising
     activities  the  Company  is  sometimes  dependent  on  certain  members of
     management  and  stockholders  to  provide  or  locate  sources of capital.
     Accordingly, included in total interest charges for the year ended June 30,
     2001  is  $115,815  of  interest  expense  paid  or  payable  to  a  major
     stockholder/officer  of  the  Company.  Also  included  in interest expense
     during  the  years  ended  June  30,  2002 and 2001 is $60,000 and $32,500,
     respectively,  of  interest  expense  related  to  the amortization of loan
     origination costs and discounts on the Investor Notes. Such loan costs were
     paid  to  a  major  stockholder/officer  of  the  Company  during  2001.


9.   ACCOUNTS  PAYABLE  AND  ACCRUED  LIABILITIES
     --------------------------------------------

     Accounts  payable  and  accrued  liabilities  at  June  30,  2002  and 2001
     consisted  of  the  following:

<TABLE>
<CAPTION>
                                                 2002      2001
                                               --------  --------
<S>                                            <C>       <C>
     Accounts payable                          $ 45,570  $  6,225
     Accrued film costs                          81,400   106,400
     Accrued professional fees and other         33,283     5,000
                                               --------  --------

                                               $160,253  $117,625
                                               ========  ========
</TABLE>

10.  INCOME  TAXES
     -------------

     The  Company  has incurred significant operating losses since its inception
     and,  therefore, has not generally been subject to federal income taxes. As
     of  June 30, 2002, the Company had net operating loss ("NOL") carryforwards
     for  income  tax purposes of approximately $5,208,000, which expire in 2002
     through  2022.  Under the provisions of Section 382 of the Internal Revenue
     Code the greater than 50% ownership changes that occurred in the Company in
     connection  with  the  Sales  Transaction,  subsequent  Asset  Purchase and
     private  placement  of  the  Company's  common  stock  severely limited the
     Company's  ability to utilize its NOL carryforward to reduce future taxable
     income and related tax liabilities. Additionally, because United States tax
     laws  limit  the time during which NOL carryforwards may be applied against
     future  taxable  income, the Company will be able to use only approximately
     $3,330,000  of  its  NOL for federal income tax purposes should the Company
     generate  sufficient  taxable  income.

     The  composition of deferred tax assets and the related tax effects at June
     30,  2002  and  2001  are  as  follows:

<TABLE>
<CAPTION>
                                            2002         2001
                                        ------------  ----------
<S>                                     <C>           <C>
     Deferred tax assets:
       Net operating losses             $ 1,762,998   $ 954,800
       Valuation allowance               (1,757,998)   (953,200)
                                        ------------  ----------
           Total deferred tax assets          5,000       1,600
     Deferred tax liabilities:
       Basis of property and equipment       (5,000)     (1,600)
                                        ------------  ----------

           Net deferred tax asset       $         -   $       -
                                        ============  ==========
</TABLE>


                                      F-17
<PAGE>
                      FAMILY ROOM ENTERTAINMENT CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

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


10.  INCOME  TAXES,  CONTINUED
     -------------------------

     The  difference  between  the  income  tax  benefit  (provision)  in  the
     accompanying  statement  of  operations and the amount that would result if
     the  U.S.  Federal  statutory  rate  of  34% were applied to pre-tax income
     (loss)  for  the  years  ended  June  30,  2002  and  2001  is  as follows:

<TABLE>
<CAPTION>
                                               2002              2001
                                      ------------------  -----------------
                                         AMOUNT      %      AMOUNT      %
                                      ------------  ----  ----------  -----
<S>                                   <C>           <C>   <C>         <C>
     Benefit (provision) for income
       tax at federal statutory rate  $ 1,334,126    34%  $ (21,878)  (34)%
     Effect of graduated rates                  -     -      11,087     17
     Non-deductible compensation
            and interest                 (595,160)  (14)          -      -
     Use of net operating losses and
       other                               (5,546)    -         152      -
     Loss of net operating losses         (22,122)    -    (143,461)  (223)
     Change in valuation allowance       (804,798)  (20)    147,600    230
                                      ------------  ----  ----------  -----

                                      $     6,500     -%  $  (6,500)  (10)%
                                      ============  ====  ==========  =====
</TABLE>

     The  (provision) benefit for income taxes for the years ended June 30, 2002
     and  2001  consists  of  the  following:

<TABLE>
<CAPTION>
                                                   2002      2001
                                                 --------  --------
<S>                                              <C>       <C>
     Current portion:
       State                                     $(1,500)  $  1,500
       Federal                                    (5,000)     5,000
                                                 --------  --------

                                                  (6,500)     6,500
                                                 --------  --------

     Deferred benefit:
       State                                           -          -
       Federal                                         -         -
                                                 --------  --------

     Total (provision) benefit for income taxes  $(6,500)  $  6,500
                                                 ========  ========
</TABLE>


     The Company made no cash payments for income taxes in 2002 or 2001.


11.  COMMITMENTS
     -----------

     LEASE  AGREEMENT
     ----------------

     The Company operates in leased facilities under a month to month lease with
     a  current  base  rental rate of approximately $6,000 per month. Management
     expects  to  continue operating under the present month to month lease, but
     believes  that  the leased premises can be replaced under no less favorable
     terms  without  disruption  to the Company's operations. Total rent expense
     under  operating  leases  for  the  years  ended June 30, 2002 and 2001 was
     $81,024  and  $77,812,  respectively.


                                      F-18
<PAGE>
                      FAMILY ROOM ENTERTAINMENT CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


12.  STOCKHOLDERS'  EQUITY
     ---------------------

     COMMON  STOCK
     -------------

     During  the  year ended June 30, 2002, the Company issued 400,000 shares of
     common  stock  to  its  legal  counsel for $57,500 of cash plus $113,665 of
     services  and a receivable of $16,000 that was collected subsequent to year
     end.  Also  during 2002, the Company's stockholders approved an increase in
     the  number  of authorized shares of common stock from 25,000,000 shares to
     200,000,000  shares.  However, the Company has not yet filed a request with
     the  state of New Mexico for approval and the increase in authorized shares
     is  not  reflected  in  the  financial  statements.

     STOCK  OPTIONS
     --------------

     The  Company  periodically issues incentive stock options to key employees,
     officers,  and  directors  to  provide additional incentives to promote the
     success of the Company's business and to enhance the ability to attract and
     retain  the services of qualified persons. The issuance of such options are
     approved by the Board of Directors. The exercise price of an option granted
     is  generally  determined by the fair market value of the stock on the date
     of  grant;  however, certain options granted during the year ended June 30,
     2002  and  2001  included  below  market  exercise  prices  and the Company
     recognized  $461,762  and $34,250, respectively, of compensation related to
     those  grants  and  repricing  of  existing  options.

     The  Company  has elected to follow Accounting Principles Board Opinion No.
     25,  "Accounting  for  Stock  Issued  to  Employees"  (APB  25) and related
     Interpretations  in  accounting  for its employee stock options because, as
     discussed  below,  the alternative fair value accounting provided for under
     FASB Statement No. 123, "Accounting for Stock-Based Compensation", requires
     use  of  option valuation models that were not developed for use in valuing
     employee  stock  options.  Under  APB  25,  when  the exercise price of the
     Company's employee stock options is greater than or equals the market price
     of  the  underlying  stock on the date of grant, no compensation expense is
     recognized.  However,  when  the exercise price is less than the underlying
     stock on the date of grant, compensation is recognized to the extent of the
     difference.

     Proforma  information  regarding  net  income  and  earnings  per  share is
     required  by  Statement  123, and has been determined as if the Company had
     accounted  for  its  employee  stock options under the fair value method of
     that  Statement. The fair value for these options was estimated at the date
     of  grant  using  a  Black-Scholes  option pricing model with the following
     weighted-average  assumptions for 2002 and 2001: risk-free interest rate of
     4.0% and 4.5%; no dividend yield; weighted average volatility factor of the
     expected  market  price of the Company's common stock of 70% and 60%; and a
     weighted-average  expected  life  of  the  options  of  3  years.

     The  Black-Scholes  option  valuation  model  was  developed  for  use  in
     estimating  fair value of traded options which have no vesting restrictions
     and  are  fully  transferable. In addition, option valuation models require
     the  input  of  highly  subjective assumptions including the expected stock
     price  volatility.  Because  the  Company's  employee  stock  options  have
     characteristics  significantly  different from those of traded options, and
     because  changes  in the subjective input assumptions can materially affect
     the  fair  value  estimate, in management's opinion, the existing models do
     not  necessarily provide a reliable single measure of the fair value of its
     employee  stock  options.


                                      F-19
<PAGE>
                      FAMILY ROOM ENTERTAINMENT CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


12.  STOCKHOLDERS'  EQUITY,  CONTINUED
     ---------------------------------

     STOCK  OPTIONS,  CONTINUED

     For  purposes  of  proforma  disclosures,  the  estimated fair value of the
     options is included in expense over the option's vesting period or expected
     life.  The  Company's  proforma  information  follows:

<TABLE>
<CAPTION>
                                                    2002       2001
                                                -----------  ---------
<S>                                             <C>           <C>
       Net income (loss) as reported            $(4,218,018)  $ 64,348
       Proforma net income (loss)               $(4,375,650)  $ 60,693
       Actual and Proforma basic and dilutive
         net income (loss) per common share     $     (0.23)  $   0.00
</TABLE>

<TABLE>
<CAPTION>
                                         SHARES
                                          UNDER    WEIGHTED-AVERAGE
                                         OPTIONS    EXERCISE PRICE
                                        ---------  -----------------
<S>                                     <C>        <C>
     Outstanding at June 30, 2000         460,000  $            0.50

     Granted                            1,480,000  $            0.50
                                        ---------

     Outstanding at June 30, 2001       1,940,000  $            0.50

     Granted                              160,000  $            0.25
     Exercised                           (15,000)  $            0.50
                                        ---------

     Outstanding at June 30, 2002       2,085,000  $            0.25
                                        =========
</TABLE>

     The  weighted-average  fair value of options granted during the years ended
     June  30,  2002  and  2001 was approximately $0.28 and $0.26, respectively.
     During  the  year ended June 30, 2002, all options were repriced to bear an
     exercise  price  of $0.25 per share. The repricing of options resulted in a
     change  to compensation expense of $376,695. A summary of outstanding stock
     options  at  June  30,  2002,  follows:

<TABLE>
<CAPTION>
                                                          REMAINING
                                                         CONTRACTUAL
     NUMBER OF SHARES                   EXPIRATION DATE  LIFE (YEARS)  EXERCISE PRICE
     ---------------------------------  ---------------  ------------  ---------------
<S>                                     <C>              <C>           <C>
     Exercisable at June 30, 2002:
       460,000                          February 2004             2.6  $          0.25
     1,346,666                          December 2010             8.5             0.25
        45,000                          December 2006             4.5             0.25
       100,000                          June 2007                 4.9             0.25

     Not Exercisable at June 30, 2002:
       133,334                          December 2010             8.5             0.25
     ---------

     2,085,000
     =========
</TABLE>


                                      F-20
<PAGE>
                      FAMILY ROOM ENTERTAINMENT CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

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


13.  MAJOR  CUSTOMERS  AND  CONCENTRATIONS
     -------------------------------------

     The  Company's  revenues were derived from a limited number of customers in
     the motion picture industry in both 2002 and 2001. Following is an analysis
     of  major  customers  for  the  years  ended  June  30,  2002  and  2001:

<TABLE>
<CAPTION>
                                                        2002   2001
                                                        -----  -----
<S>                                                     <C>    <C>
     Total number of customers                             2      5
     Number of customers accounting for more than 10%
       of total revenue                                    2      2
     Percentage of total revenue derived from largest
       customer                                           75%    47%
     Percentage of total revenue derived from second
       largest customer                                   25%    23%
</TABLE>


14.  NON-CASH  INVESTING  AND  FINANCING  ACTIVITIES
     -----------------------------------------------

     During  the  years ended June 30, 2002 and 2001, the Company engaged in the
     following  non-cash  investing  and  financing  activities:

                                                             2002        2001
                                                          ----------  ----------

     Notes payable repaid by surrender of certificate
       of  deposit                                        $       -   $1,200,000


                                      F-21
<PAGE>
CEO  CERTIFICATION

I,  George  Furla,  certify  that:

     1.   I have reviewed this annual report on Form 10-K of Family Room
Entertainment  Corporation,

     2.   Based on my knowledge, this annual report does not contain any
          untrue statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this annual report;

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this annual report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the registrant as of, and for, the periods presented in
          this annual report;

     4.   The registrant's other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
          and we have:

               a)   designed such disclosure controls and procedures to ensure
                    that material information relating to the registrant,
                    including its consolidated subsidiaries, is made known to us
                    by others within those entities, particularly during the
                    period in which this annual report is being prepared;

               b)   evaluated the effectiveness of the registrant's disclosure
                    controls and procedures as of a date within 90 days prior to
                    the filing date of this annual report (the "Evaluation
                    Date"); and

               c)   presented in this annual report our conclusions about the
                    effectiveness of the disclosure controls and procedures
                    based on our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent evaluation, to the registrant's auditors and the
          audit committee of registrant's board of directors (or persons
          performing the equivalent function):

               a)   all significant deficiencies in the design or operation of
                    internal controls which could adversely affect the


<PAGE>
                    registrant's ability to record, process, summarize and
                    report financial data and have identified for the
                    registrant's auditors any material weaknesses in internal
                    controls; and

               b)   any fraud, whether or not material, that involves management
                    or other employees who have a significant role in the
                    registrant's internal controls; and

     6.   The registrant's other certifying officers and I have indicated in
          this annual report whether or not there were significant changes in
          internal controls or in other factors that could significantly affect
          internal controls subsequent to the date of our most recent
          evaluation, including any corrective actions with regard to
          significant deficiencies and material weaknesses.

Date:  October 15, 2002

                                    /s/        George Furla
                                    --------------------------------------
                                    George Furla
                                    Chief Executive Officer


<PAGE>
CFO  CERTIFICATION


I,  Stanley  Tepper,  certify  that:

     1.  I  have  reviewed  this  annual  report  on Form 10-K of Family Room
Entertainment  Corporation,

     2.   Based on my knowledge, this annual report does not contain any
          untrue statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this annual report;

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this annual report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the registrant as of, and for, the periods presented in
          this annual report;

     4.   The registrant's other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
          and we have:

               a)   designed such disclosure controls and procedures to ensure
                    that material information relating to the registrant,
                    including its consolidated subsidiaries, is made known to us
                    by others within those entities, particularly during the
                    period in which this annual report is being prepared;

               b)   evaluated the effectiveness of the registrant's disclosure
                    controls and procedures as of a date within 90 days prior to
                    the filing date of this annual report (the "Evaluation
                    Date"); and

               c)   presented in this annual report our conclusions about the
                    effectiveness of the disclosure controls and procedures
                    based on our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent evaluation, to the registrant's auditors and the
          audit committee of registrant's board of directors (or persons
          performing the equivalent function):

               a)   all significant deficiencies in the design or operation of
                    internal controls which could adversely affect the
                    registrant's ability to record, process, summarize and
                    report financial data and have identified for the
                    registrant's auditors any material weaknesses in internal
                    controls; and

               b)   any fraud, whether or not material, that involves management
                    or other employees who have a significant role in the
                    registrant's internal controls; and

     6.   The registrant's other certifying officers and I have indicated in
          this annual report whether or not there were significant changes in
          internal controls or in other factors that could significantly affect
          internal controls subsequent to the date of our most recent
          evaluation, including any corrective actions with regard to
          significant deficiencies and material weaknesses.

Date:  October 15, 2002

                                    /s/  Stanley Tepper
                                    ------------------------------
                                    Stanley Tepper
                                    Chief Financial Officer


<PAGE>