<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB

[x]  Annual report pursuant to section 13 or 15(d) of the Securities Exchange
     Act of 1934 for the fiscal year ended December 31, 1999, 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 No. 0-23015

                             J-BIRD MUSIC GROUP LTD.
           (Name of Small Business Issuer as specified in its charter)

           Pennsylvania                                    06-1411727
(State or Other Jurisdiction of                          (IRS Employer
Incorporation or Organization)                         Identification No.)

                   396 Danbury Road, Wilton, Connecticut 06897
              (Address of Principal Executive Offices and Zip Code)

Issuer's Telephone Number: (203) 761-9393

Securities registered under Section 12(b) of the Act: None

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

                         Common Stock, Par Value $0.001

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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B in this form, and no disclosure will be contained, to the best of
registrants 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's revenues for its most recent fiscal year: $498,190.

The aggregate market value of voting stock held by non-affiliates computed on
the basis of the last sale price on March 19, 2000 was $4,216,123.

As of December 31, 1999, the Registrant had outstanding 21,598,395 shares of
Common Stock, par value $0.001.

Documents incorporated by reference: None.

                                        1
<PAGE>

                                TABLE OF CONTENTS

ITEM NUMBER AND CAPTION                                                    Page

Part I

1.       Description of Business                                              3

2.       Description of Properties                                            6

3.       Legal Proceedings                                                    6

4.       Submission of Matters to a Vote of Security Holders                  7

Part II

5.       Market for Common Equity and Related Stockholder Matters             7

6.       Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                            7

7.       Financial Statements                                                 8

8.       Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosure                                             8

Part III

9.       Directors, Executive Officers, Promoters and Control

         Persons; Compliance with Section 16(a) of the Exchange Act           8

10.      Executive Compensation                                               9

11.      Security Ownership of Certain Beneficial Owners and Management      10

12.      Certain Relationships and Related Transactions                      12

13.      Exhibits and Reports on Form 8-K                                    12








                                        2


<PAGE>


                        FORWARD-LOOKING STATEMENT NOTICE

         When used in this report, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "intend," and similar
expressions are intended to identify forward-looking statements within the
meaning of Section 27a of the Securities Act of 1933 and Section 2le of the
Securities Exchange Act of 1934 regarding events, conditions, and financial
trends that may affect the Company's future plans of operations, business
strategy, operating results, and financial position. Persons reviewing this
report are cautioned that any forward-looking statements are not guarantees of
future performance and are subject to risks and uncertainties and that actual
results may differ materially from those included within the forward-looking
statements as a result of various factors. Such factors are discussed under the
headings "Item 1. Description of Business," and "Item 6. Management's Discussion
and Analysis of Financial Condition and Results of Operations," and also include
general economic factors and conditions that may directly or indirectly impact
the Company's financial condition or results of operations.

                                     PART I

                         ITEM 1. DESCRIPTION OF BUSINESS

General

         J-Bird Records, Inc. ("J-Bird") is the first World Wide Web Recording
Label (TM). The Company was officially launched on November 1, 1996 to market,
distribute and sell music via a new medium - the Internet. At its Website,
located at http://wwwj-birdrecords.com, the Company attracts and signs recording
artists through its on-line office and promotes, markets and sells their
recordings through its on-line record store.


         The Company's Website provides a comprehensive entertainment and
information resource enabling users to search and sample music and artist
information interactively through sound and graphics, including on-line "sound
stations" for each artist and the J-Bird on-line "radio station". When an artist
signs a recording contract with the Company, such artist's music is posted on
the Company's Website in digital form for streaming either Real Audio TM or
Windows Media Player. The Website contains a webpage for each of the Company's
artists. Users who are interested in the music they sample may purchase it
immediately on-line. Users can also obtain information on specific artists and
related concert tours, music events and other promotions and read recent
articles on the favorite J-Bird artists. J-Bird designs, produces and
distributes CD's on-line and in the traditional retail chains around the
country. Artists, either new or established, Who want more control over the
production and distribution of their music, select and contract with J-Bird.
J-Bird and the artists then share in the proceeds of the CD sales. By giving
tens of millions of Internet users worldwide access to the music of these
artists, J-Bird fills a niche not addressed by radio, music videos, and
traditional music retailers.







                                        3
<PAGE>

         Each new artist who executes a Recording Contract with J-Bird is
required to produce one compilation of music for J-Bird during the three-year
term of the contract. Pursuant to the Recording Contract J-Bird has the
exclusive rights, in perpetuity, to manufacture, advertise, sell and distribute
such compilation. In return, the artist receives a 12% royalty on the sales of
all CDs produced. If the artist enters into a recording contract with another
record label during the three-year term, J-Bird will receive a royalty of 2% of
all sales for the first album produced by the artist with the new record label.
The contract further requires the artist to purchase either 250 CDs for $ 1,000
or 1,000 CDs for $2,250, which the artist is entitled to sell for $10 each.
J-Bird currently has 230 artists in its catalogue.

         J-Bird has chosen the Internet as its primary marketing vehicle because
the Internet provides a low-cost method of providing, displaying and selling
different styles and genres of music to a worldwide audience. The Internet also
allows J-Bird to target sales to the largest music-buying population, the 15 to
24 age group, which also represents the highest concentration of Internet users.
J-Bird's Website offers content-rich music genre sites for rock, pop,
alternative, country, urban, rap, jazz, gospel, classical and world music,
through the combination of audio, graphics, and text. J-Bird's genre and artist
web pages allow users to target music and information based on personal
interests. J-Bird believes that this approach provides a stimulating and
entertaining on-line environment, which establishes a community atmosphere and
promotes consumer-driven product sales. J-Bird believes that the Company's
business will greatly benefit from the growth of the Internet.

         The Company believes that on-line sales of recorded music will
compliment the traditional retail channel and will expand overall music sales
because of the on-line medium's ability to capitalize on the ongoing shift in
demographics of music buyers; to reach a growing international consumer market
and to offer the consumer easier access to a broad range of titles. J-Bird also
believes that the ability to gather and process data resulting from customer
purchases and usage will facilitate targeted promotional efforts in the highly
segmented recorded music market. The Internet also provides access to
international markets for recorded music, which are growing faster than the U.S.
market.

         In addition, the Company gathers important information about
demographics and consumer preferences from users of its Website. This
information permits the Company to target subsequent promotions to a particular
customer group or geographic area. The Company believes that this practice will
enable the Company to market its artists in an efficient, cost-effective manner
by targeting the most Rely buyers for such artist's music. In the future, the
Company expects to promote its artists through the use of its radio station and
on-line "chat-rooms" intended to spark interest in a particular music genre or
artist. The Company believes that its strategy of interactive sales on the
Internet combined with targeted promotions will enable it to build a loyal
customer base.


         Traditional record companies typically incur high promotional and other
costs in the distribution of their music, providing a strong disincentive to
sign unproven bands. J-Bird's low-cost approach of relying upon listeners'
interests will allow the Company to compete on a cost-effective basis with other
record companies. The Company feels that the use of its interactive Website, its
on-line radio station, and its targeted advertising, promotion and distribution,
creates a new medium for the music industry that permits it to reach music
buyers throughout the world and that has the potential to shift the way music is
marketed to consumers.


                                        4

<PAGE>

         In May 1998, the Company entered into a Download Agreement with AT&T
Corp. Under the agreement the Company granted AT&T a license to use tracks of
music produced by artists under contract with the Company, encode the tracks for
delivery over the internet using AT&T's "a2b" media player, and promote the
music tracks on AT&T's a2b music website. AT&T also made available through the
Company's website the a2b media player for consumers to download so that they
could retrieve and play encoded tracks. Consumers are charged an average price
of $1.99 for each track retrieved, which is paid by credit card to AT&T. Under
the Agreement, AT&T is entitled to retain the first $2,000 from music track
purchases, and all subsequent purchases are divided equally between the Company
and AT&T.

         In February 1999, the Company entered into a Web Events and Windows
Media Technology Promotion Agreement with Microsoft Corporation. Under this
Agreement, the Company is entitled to promote and make available the Windows
Media Player through its website and distribute music tracks formatted for the
Windows Media Player. Microsoft will make available through its "webevents"
website a site link to the Company's website and a content summary of the music
products available at the Company.

         In November 1997, J-Bird was approached by Navarre Corporation
("Navarre") with respect to, a distribution arrangement. J-Bird entered into a
three-year exclusive retail distribution Agreement with Navarre. Navarre, one of
the leading independent distributors of music and interactive software,
distributes to retail accounts throughout the nation, including, Tower Records,
The Musicland Group (which includes Media Play, Sam Goody, Musicland and
On-Cue), Blockbuster, Best Buy, Wherehouse, Camelot, HMV, Borders and Circuit
City as well as all the leading One Stops. Under the Agreement, Navarre
distributes J-Bird products nationally through its retail distribution
relationships, and the Company receives a percentage of each product sold.

Catalog Evaluation

         The J-Bird catalog of 300 artist is evaluated using common music
industry standards. The formula is as follows:

         3 years gross sales less returns x ten (10) = Catalog Evaluation

         J-Bird combined three years average sales = $388,100
         $388,100 x 10 = J-Bird Catalog Evaluation of $3,881,000

Jbirdmusic.com

         Jbirdmusic.com, the newly formed subsidiary for JBMG, has been designed
to function as a complete promotional Internet site. This site will be the
entryway into the already existing e-commerce site and store at J-Bird Records
as well as a promotional vehicle for other independent labels seeking effective
internet promotion and other A & R requirements.







                                        5
<PAGE>

         Jbirdmusic.com, through its relationship with MediaX, is developing a
promotional web site that will become an entryway into the J-Bird e-commerce
store, J-Bird artist tour dates, J-Bird downloan station, J-Bird artist
relations, J-Bird contests, J-Bird newsletters and J-Bird Investors relations.
These are all currently existing tools that are functional at the web site. The
mission for Jbirdmusic.com will be to desegregate these tools into a cohesive
site dedicated to marketing and promotion. Additional promotional sites will be
developed as alliances are formed with other independent labels.

History

         On October 7, 1997, the Company entered into a Stock Purchase Agreement
with the shareholders of J- Bird Records, Inc., to acquire their shares of
J-Bird Records, Inc., for the equivalent number of shares of the

         Company. The total number of shares exchanged in this transaction was
4,480,000. On October 8, 1997, the Company changed its name to J-Bird Music
Group LTD.

         On April 22, 1997, the Company entered into an Option Agreement with
Feild Technologies, LLC ("FTL"), a company based in Bangor, Maine. Under this
agreement, the Company assigned seven domestic and foreign in valve patents held
by the Company to FTL for a 5% equity position in FTL. In the event the Company
does not receive distributions of at least $100,000 on or before December 31,
2000, it shall be entitled to increase its interest in FTL from 5% to 10%, and
the other members' interests in FTL shall be reduced on a basis proportionate to
their relative interests.

         On May 3, 1996, the Company entered into an agreement with Rhode Island
Renal Institute ("RIRI") and Brooks Porter ("Porter"). RIRI and Porter entered
into a Development and Investment A-reement ("D&I Agreement") and pursuant to
the D&I Agreement, RIRI agreed to provide financial support, clinical testing
facilities and supplies to Porter to assist his development of the Renal Ozone
Sterilization System ("ROSS"). Under the agreement with the Company, RIRI and
Porter assigned to the Company the right to manufacture and distribute ROSS, and
any other interests or rights created by the D&I Agreement between or among
Porter and RIRI. In accordance with the agreement between the Company and RIRI,
RIRI received 125,000 shares of restricted common stock of the Company. In
December 1997, the ROSS Corporation agreed to buy the Company's interest in the
ROSS project for $500,000 represented by a promissory note due December 10,
1998. In connection with this transaction the Company recognized a loss of
$1,810,000. In November 1998, the Company settled the $500,000 payment
obligation from ROSS Corporation in exchange for the return to the Company for
cancellation of 125,000 shares of the Company's common stock.










                                        6
<PAGE>

         On June 14, 1996, the Company entered into an agreement with a company
called Applied Advanced Technologies, Inc. ("AAT") and an individual named Tovi
Avnery ("Avnery"), owners of an electron beam technology. Under this agreement,
the Company advanced to AAT a total of $350,000. In return, the Company received
114,546 shares of common stock of AAT, representing 45% ownership in the
company. Avnery also received I'@0,000 shares of restricted common stock of the
Company. On July 15, 1997, the Company and AAT entered into a Memorandum of
Understanding. In accordance with this Memorandum of Understanding, AAT was to
pay to the Company $350,000 plus interest, not to exceed $500,000, by July 31,
1999. In September, 1997, the Company executed a Release and Assignment of
Interest in AAT, to be held in escrow until the amount owed to the Company was
paid in full. In May 1998, the Company and AAT settled the outstanding balance
due the Company for $205,000 in cash and the return of 130,000 shares of the
Company's common stock by Avnery, and the Company transferred all of its equity
interest in AAT to Avnery.

Governmental Regulation

         There is no material government regulation of the Company's business.

Competition

         The Company competes for artists and recordings to distribute with
national and regional recording and distributing companies, which have a
competitive edge over the Company by virtue of their stronger management,
promotional, and financial resources. The Company's strategy is to sign artists
who are unable to obtain recording contracts with larger recording companies and
acquire distributing rights to recordings that management believes will appeal
to consumers interested in particular music genres. The recording products
offered by the Company compete for consumers who have a wide selection of music
choices within the same music genres offered by the Company. The Company also
competes with other businesses that offer and sell recordings through the
Internet. The Company will compete for consumer dollars on the basis of the
types of music it selects for distribution and the marketing of its music
selections through the Internet.

Employees

         The Company has 5 employees, consisting of 3 management employees and 2
marketing and office employees.

                        ITEM 2. DESCRIPTION OF PROPERTIES

         The Company's principal place of business is an office located at 396
Danbury Road, Wilton, Connecticut 06897. The office facility consists of
approximately 1800 square feet and is being leased pursuant to a thirty-six
month lease expiring in July, 2000 for a monthly lease payment of $2,638.








                                        7
<PAGE>

                            ITEM 3. LEGAL PROCEEDINGS

         The Company is not a party to any legal proceedings, and to the best of
its knowledge, no such proceedings by or against the Company have been
threatened.


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

         No matter was submitted to a vote of security holders in the fourth
quarter of 1999.

                                    PART III

        ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The following table sets forth for the respective periods indicated the
prices of the Company's Common Stock in the over-the-counter market, as reported
and summarized by the OTC Bulletin Board. Such prices are based on inter-dealer
bid and asked prices, without markup, markdown, commissions, or adjustments and
may not represent actual transactions.

Calendar Quarter Fnded                      High Bid             Low Bid

March 31, 1997                                $7.75              $1.25
June 30, 1997                                 $3.25              $0.5313
September 30, 1997                            $2.00              $0.5313
December 31, 1997                             $1.875             $0.4063

March 31, 1998                                $0.75              $0.3125
June 30, 1998                                 $1.75              $0.28125
September 30, 1998                            $1.59375           $0.5625
December 31, 1998                             $1.25              $0.5313

March 31, 1999                                $0.562             $0.531
June 30, 1999                                 $0.74              $0.625
September 30, 1999                            $0.467             $0.41
December 31, 1999                             $0.32              $0.32

         There are approximately 153 shareholders of record, which figure does
not take into consideration those shareholders whose certificates are held in
the name of broker-dealers.

         As of the date hereof, the Company has not paid or declared any cash
dividends. The Company can give no assurance that it will generate future
earnings from which cash dividends can be paid. Management has followed the
policy of retaining any and all earnings to finance the development of the
business. Such a policy is likely to be maintained as long as necessary to
provide working capital for the Company's operations.




                                        8
<PAGE>

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

Overview

         The following discussion and analysis provides information that
management believes is relevant to an assessment and understanding the Company's
consolidated results of operations and financial condition for the years ended
December 31, 1999 and 1998. The discussion should be read in conjunction with
tbe Company's consolidated financial statements and accompanying notes.

         The Company derives its revenues from three principle sources: (i)
sales of compact disks ("CDs") directly to the artists for resale to consumers;
(ii) CD sales on the Company's website; and (iii) retail CD sales.

         The Company's strategy to develop products and services for the music
entertainment business was primarily responsible for its net loss for the years
ended December 31, 1999 and 1998. The Company has only a limited operating
history in its operations upon which an evaluation of J-Bird and its prospects
can be based. Accordingly, J-Bird believes that the results of its operations in
the past, during which time the Company had minimal revenues, are not meaningful
indications of future performance. The Company incurred losses from continuing
operations of, $2,147,064 and $3,756,724 for the years ended December 31, 1999
and 1998.

         In 1997 the Company signed a distribution agreement with Navarre
Corporation which provides the Company with a national presence in approximately
52,000 traditional retail establishments. This agreement also provides the
Company with a national sales force that has existing relationships with the
major retail outlets in the country. As a start-up entity in 1997 the Company
sold directly to retail markets with minimal results. In the second half of 1997
the Company was able to obtain two distribution agreements with regional
distributors. This enabled the Company to establish a regional presence and
provided credentials that assisted in signing the distribution agreement with
Navarre Corporation.

         The Company currently intends to increase substantially its operating
expenses to (a) fund increased sales and marketing, enhance its existing
website, and to complete strategic relationships important to the success of the
Company. To the extent that such expenses precede or are not subsequently
followed by increased revenues, the Company's business, results of operations,
and financial condition will be materially adversely affected. There can be no
assurance that the Company will be able to generate sufficient revenues from the
sale of music recordings, related merchandise, advertising, and sponsorship
programs to achieve or maintain profitability on a quarterly or annual basis in
the future. The Company expects negative cash flow from operations to continue
for the foreseeable future as it continues to develop and market its business.









                                        9
<PAGE>

Liquidity and Capital Resources

         The Company has financed its operations and capital expenditures
primarily from equity- financing and loans from shareholders. At December 1999,
the Company had a cash overdraft of $8,801. In 1999 the Company received
$775,000 in cash from the sale of stock through subscription agreements and
collected $119,750 of the stock subscriptions outstanding at December 31,1997.
The amount due under stock subscriptions at December 31, 1999 is $250,000. The
Company expects negative cash flow from operations to continue for the
foreseeable future, as it continues to develop and market its operations.
Inflation has not had any material impact on the Company's operations. The
Company is presently funding its operating deficit through a credit agreement
with IMM International Inc. a shareholder of the company.

         The Company is currently pursuing long term financing for its operating
activities. No source of financing has occurred to date and there can be no
assurance that financing will be available, or if available, that it will be on
acceptable terms. The ability to finance existing and future operations will be
dependent upon external sources.

         In January 1999 the Company obtained a $100,000 line of credit with a
commercial bank. The line of credit bears interest at 2% above the bank's prime
rate. Certain officers and shareholders have personally guaranteed the debt. The
Company has borrowed $81,251 as of December 3l, 1999 under the line of credit.

Results of Operations- year ended December 31, 1999 compared to year ended
December 31, 1998

A comparison of the 1999 results to the 1998 results is as follows

                                               1999             1998
                                           -----------      -----------
Net Sales                                  $498,190            $432,713
---------------
Cost of Sales                              $207,370            $238,658

         Sales increased in 1999 over 1998 primarily as a result of the
distribution agreement with Navarre. Sales also increased due to the increased
number of artists and bands signed by the Company in 1999, including a
nationally recognized performer. This artist accounted for approximately 59% of
sales in 1999.

         The Company has 278 artists under agreements at December 31, 1999,
compared to 230 at December 31, 1998.












                                       10
<PAGE>
<TABLE>
<CAPTION>


                                                            1999              1998
                                                       ------------     -----------

<S>                                                      <C>               <C>
Advertising and Promotion Expenses                       $  83,804         $440,864
---------------------------------------------

The decrease in advertising and promotion is due to the termination of an
agreement with an advertising agency.

Professional Fees                                         $370,134        $  92,371
---------------------

The increase in professional fees is due to the higher level of legal fees
incurred in 1999.


Salaries                                                  $156,958         $362,829
----------

The decrease in salary expense is due to the decrease in the number of
employees, offset with more labor out sourced.

Financing Fee-Sale of Discounted Stock                    $671,400       $1,277,500
-------------------------------------------------

Financing fees related to the non-cash change for the purchase of restricted
common stock at a discount to the market value of the stock.

Administrative Expenses                                 $1,000,096         $472,466
------------------------------

Increase is due to the increased operations of the company.

Interest Expenses                                        $  18,632       $    4,620
---------------------

Interest expense is on the company line of credit.

</TABLE>

                          ITEM 7. FINANCIAL STATEMENTS

         The financial statements of the Company appear at the end of this
report beginning with the Index to Financial Statements on page F-1.









                                       11
<PAGE>

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

         There have been no changes in or disagreements with accountants in the
past three years.

                                    PART III

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

Directors and Officers

The following table sets forth the names, aces, and positions with the Company
for each of the directors and officers of the Company.

Name                    Age      Positions                              Since
----                    ---      ---------                              -----

John J. Barbieri        35       President, CEO and Director            1997

Douglas G. McCaskey     45       Chairman and Director                  1997

Hope D. Trowbridge      38       Secretary, Treasurer and Director      1991

Asa L. Fish             33       Director                               1997

All executive officers are elected by the Board and hold office until the next
Annual Meeting of stockholders and until their successors are elected and
qualify.

The following is information on the business experience of each director and
officer.

JOHN J. BARBIERI, CEO, President and Director of the Company, earned a B.F.A.
Degree from Paier College of Art in 1986. After graduating, Mr. Barbieri joined
Polygram Records as a Senior Graphics Manager responsible for the print
production and graphic production budgets as well as implementing domestic
product. In May 1993, Mr. Barbieri joined Angel Records, a division of EMI
Records Group, as Vice President of Creative and Production Services. Until June
1996, he was responsible for creative services production, operations and new
technologies departments. Involved in creative direction, marketing and label
management, Mr. Barbieri has help pioneer the new multi-media technology for CD
PLUS and Enhanced CDs. He founded J-Bird Records, Inc. in July 1996, and serves
as its CEO, President and Director as well as serving the same positions for
J-Bird Music Group LTD as of October 7, 1997.

DOUGLAS G. McCASKEY, Chairman and Director of the Company. Mr. McCaskey is a
graduate and MBA candidate of Babson College, where he earned a B.S./B.A. degree
in Accounting/Finance in 1975. In November, 1975 he joined Readers Digest
Association as a Field Manager. In January, 1982 he joined Shearson American
Express as a Vice President of Investments. He went on to work as Vice President
of Investments for Oppenheimer & Company and Drexel Burnham Lambert. Mr.
McCaskey has over fifteen



                                       12

<PAGE>

years of experience in the field of investments, as a retail and institutional
broker as well as a Registered Investment Advisor. Mr. McCaskey left the
securities industry in 1992, and since leaving has been a principal owner of
several real estate projects and provided independent consulting services to
businesses in the areas of business development and financing. From December
1996, to the present Mr. McCaskey has served as the President and a Director of
Marcorp, Inc., an inactive publicly- held corporation with no assets.

HOPE D. TROWBRIDGE: Secretary, Treasurer and Director of J-Bird Music Group LTD
since June 7, 1991, earned a B.S. Degree in Business, concentration marketing,
from Skidmore College in 1983. Ms. Trowbridge was employed as an account
executive from March, 1986 to November, 1992 at Drexel Burnham Lambert, Access
Securities, Minotaur Securities and Harbor Financial, Inc. Registered Agent
(Series 7 and 63) August, 1983. She left the securities industry in November
1992. From December 1992, to the present Ms Trowbridge has served as the
Corporate Secretary and a Director of Marcorp, Inc., an inactive publicly-held
corporation with no assets. She served as President of the Company from December
1996 to October 1997, and is currently the Secretary/Treasurer and a director
and Secretary/Treasurer of the Company's subsidiary.

ASA L. FISH, has been a director of the Company since April 1997. He served as
the Secretary from April 1997 until October 1997, and is presently Vice
President and head of Investor Relations for the Company. For five years prior
to his joining the Company, he was a Nutrition Expert and Fitness Consultant for
Gold's Gym.

Section 16(a) Filing Compliance

         Section 16(a) of the Securities Exchange Act of 1934 requires officers
and Directors of the Company and persons who own more than ten percent of a
registered class of the Company's equity securities to file reports of ownership
and changes in their ownership on Forms 3, 4, and 5 with the Securities and
Exchange Commission, and forward copies of such filings to the Company. The
Company believes none of its directors, officers, and beneficial owners of more
than ten percent of the equity securities of the Company have filed any of the
required reports since the Company became a reporting company in 1998.

                         ITEM 10. EXECUTIVE COMPENSATION

         For the year ending December 31, 1998, Mr. Barbieri was compensated at
the rate of $120,000 per year for his services as President, which was deferred
and has not been paid as of December 31, 1999. For the year ended December 31,
1999 Mr. Barbieri received $120,000 in compensation which is reflected as a
consulting fee. There is no employment agreement with Mr. Barbieri or any other
executive officer of the Company.

         There were no stock options granted or exercised to the executive
officers in 1996, 1997 or 1998. On February 1, 1999 Mr. Barbieri was granted an
option to purchase 1,000,000 shares of common stock at $.25 per share pursuant
to S.E.C. Rule 144. The option was exerciseable at any time.




                                       13

<PAGE>

    ITEM II. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth as of March 19, 2000, the number and
percentage of the outstanding shares of common stock which, according to the
information supplied to the Company, were beneficially owned by (i) each person
who is currently a director of the Company, (ii) each executive officer, (iii).
all current directors and executive officers of the Company as a group and (iv)
each person who, to the knowledge of the Company, is the beneficial owner of
more than 5% of the outstanding common stock. Except as otherwise indicated, the
persons named in the table have sole voting and dispositive power with respect
to all shares beneficially owned, subject to community property laws where
applicable.

                                              Common            Percent of
                                              Shares             Class (2)
                                              ------             ---------

John J. Barbieri (1)                          1,900,000             8.8
396 Danbury Road
Wilton, CT  06897

IMM International, Inc. (2)                   3,555,000            16.4
#2 Springhill Road, Suite 17
Norwalk, CT  06851

Douglas G. McCaskey (1)(3)                    1,556,000             7.2

Hope D. Trowbridge (1)(2)                       180,000              .8

Asa L. Fish (1)                                 220,000             1.0

All Executive officers and
  Dirctors as a Group (4)                     7,411,000            34.2



(1)  These persons are all of the executive officers and directors of the
     Company.

(2)  Hope D. Trowbridge is the sole officer, director, and shareholder of IMM
     International, Inc. Accordingly, Miss Trowbridge has voting and investment
     control over these shares.

(3)  Includes 430,000 shares held by Mr. McCaskey through a general partnership
     in which he is the general partner and principal owner. Accordingly, Mr.
     McCaskey has voting and investment control over these shares.

             ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In October 1998 the Company entered into a credit agreement with IMM
International, Inc., ("IMM") a principal stockholder of the Company, whereby IMM
will provide up to $500,000 in financing to the Company for working capital
purposes. Hope Trowbridge an officer and director of the company is the sole
officer, director and shareholder of IMM.


                                       14


<PAGE>

The funding commitment under the agreement expired on March 31,1999. Amounts
outstanding under this agreement bear interest at 8% and are due on June 30,
2000. At December 31,1998 the Company had borrowed $113,560 under this
agreement. Subsequent to December 3l, 1998 the company borrowed an additional
$191,000.

         In 1998 IMM purchased 2,000,000 shares of the Company's common stock
for $525,000. Other non- affiliate shareholders purchased 750,000 shares of
stock at prices ranging from $.25 to $.40 per share. The difference between the
subscription price and the fair market value of the stock of $1,277,500 was
recorded as a non-cash charge to operations. In 1998, IMM repaid $119,750 of
amounts outstanding under stock subscriptions at December 31,1997. At December
31, 1998, $250,000 in stock subscriptions receivable were outstanding from IMM
for 1,000,000 shares purchased at a discount to market in 1997.

         In 1999 IMM purchased 2,700,000 shares of the company's common stock
for $540,000.


                    ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

         The following documents are included as exhibits to this report
pursuant to Item 601 of Regulation S-B.

Exhibits.
<TABLE>
<CAPTION>

  Exhibit         SEC Ref.                  Tile of Document                            Location
     No.             No.

<S>               <C>              <C>                                                 <C>
     1            (3)(i)            Articles of Incorporation, as amended (1)           Fm 10-SB
                                                                                        Page E-1

     2            (3)(ii)           By-Laws (1)                                         Fm 10-SB
                                                                                        Page E-8

     3            (10)              Navarre Corporation Distribution
                                    Agreement (1)                                       Fm 10-SB
                                                                                        Page E-35

     4            (10)              AT&T Download Agreement dated
                                    May 14, 1998                                        This Filing
                                                                                        Page E-1

     5            (10)              Assignment Agreement with ROSS
                                    Corporation dated December 10, 1997This Filing
                                                                                        Page E-9

     6            (10)              Agreement to Discharge Promissory
                                    Note with ROSS Corporation dated
                                    November 12, 1998                                   This Filing
                                                                                        Page E-11
</TABLE>


                                       15
<PAGE>
<TABLE>
<CAPTION>

  Exhibit         SEC Ref.                  Tile of Document                            Location
     No.             No.

<S>               <C>              <C>                                                 <C>

     7            (10)              Credit Agreement with IMM
                                    International, Inc. dated October 1, 1998           This Filing
                                                                                        Page E-13

     8            (21)              Subsidiaries of the Registrant                      This Filing
                                                                                        Page E-31

     9            (27)              Financial Data Schedules (2)                           Not
                                                                                        Applicable
</TABLE>

(1)  Exhibit No.'s I and 2 are incorporated herein by this reference to the
     Company's Registration Statement on Form 1O-SB filed with the Securities
     and Exchange Commission on December 21, 1998.


(2)  The Financial Data Schedule for the year ended December 31, 1998 is
     presented only in the electronic filing with the Securities and Exchange
     Commission.

FORM 8-K FILINGS

1 report on Form 8-K was filed in the last calendar quarter of 1999. This report
established the accountant of record as Caracansi Ramey & Associates, LLC.































                                       16

<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.

                                               J-BIRD MUSIC GROUP LTD.

Date:  March 27, 2000                          By: John J. Barbieri, President

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

Dated:  March 27, 2000                         John J. Barbieri, Director

Dated:  March 27, 2000                         Douglas G. McCaskey, Director

Dated:  March 27, 2000                         Hope D. Trowbridge, Director

Dated:  March 27, 2000                         Asa L. Fish, Director



























                                       17
<PAGE>


                             J-BIRD MUSIC GROUP LTD.
                              Financial Statements

                           December 31, 1999 and 1998

                                    CONTENTS


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

Balance Sheet........................................................F-3

Statements of Operations.............................................F-4

Statements of Stockholders' Equity...................................F-5

Statements of Cash Flows.............................................F-8

Notes to the Financial Statements...................................F-11




























                                       F-1


<PAGE>








INDEPENDENT AUDITORS'REPORT

Board of Directors
J-Bird Music Group LTD.

We have audited the accompanying balance sheet of J-Bird Music Group LTD. as of
December 31, 1999 and the related statements of operations, changes in
stockholders' equity and cash flows for each of the years in the two year period
ended December 31, 1999. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Company's 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 J-Bird Music Group LTD. as of
December 31, 1999 and the results of its operations and cash flows for each of
the years in the two year period ended December 31, 1999 in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1. to the financial
statements the Company has suffered recurring losses from operations that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.









                                       F-2
<PAGE>


                             J-BIRD MUSIC GROUP LTD.
                          COMPARATIVE BALANCE SHEET AT
                           DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>

                                     ASSETS

                                                                   1999           1998

<S>                                                         <C>            <C>
Cash                                                        $         0    $     2,005
Accounts Receivable                                             551,279              0
Inventory                                                        72,280        198,474
Loans receivable, shareholder                                    55,314        173,500
Recording advances                                               89,764         16,589
                                                            -----------    -----------
Total Current Assets                                            768,637        390,568

Fixed assets, net                                               116,347        128,502
Other assets                                                        981          7,279
                                                            -----------    -----------
Total Assets                                                $   885,965    $   526,349
                                                            ===========    ===========





                      LIABILITIES AND STOCKHOLDERS' EQUITY

Account payable and accrued expenses                        $   197,016    $   412,708
Note payable                                                     81,251         15,000
Accrued royalties                                               102,575         75,806
                                                            -----------    -----------
Total Current Liabilities                                       380,842        503,514

Due to IMM International, Inc.                                   42,148        113,560
Due to shareholders and officers                                 20,000         30,330
                                                            -----------    -----------
Total Liabilities                                               434,189        647,404

Stockholders' Equity(Deficiency)
Common stock $.001 par value 25,000,000 shares
  authorized, 21,598,395 issued and outstanding                  21,698         14,325
Stock subscriptions receivable                                 (250,000)      (250,000)
Paid in capital                                               8,864,907      6,161,186
Deficit                                                      (8,193,630)    (6,046,566)
                                                            -----------    -----------
                                                                442,975       (121,055)
                                                            -----------    -----------
Total Liabilities and Deficit                               $   885,965    $   526,349
                                                            ===========    ===========
</TABLE>

                 See accompanying notes to financial statements

                                       F-3
<PAGE>

                             J-BIRD MUSIC GROUP LTD.
                            STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>

                                                           1999            1998
                                                      ------------    ------------

<S>                                                   <C>             <C>
Net sales                                             $    498,190    $    423,713

Cost of sales                                              290,820         238,658
                                                      ------------    ------------
Operating expenses:
  Advertising and promotion                                 83,804         440,864
  Professional fees                                        370,134          92,371
  Amortization and depreciation                             53,412          40,489
  Salaries                                                 156,958         362,829
  Interest                                                  18,632           4,260
  Selling, general and administrative expenses           1,000,096         472,466
                                                      ------------    ------------
                                                         1,683,036       1,413,279

Net (loss) before other (expenses)                       ( 671,400)     (1,219,224)

Other income (expense):
  Loss from disposition of assets                                0        (673,000)
  Financing fee-sale of discounted common stock           (671,400)     (1,277,500)
                                                      ------------    ------------
                                                          (671,400)     (2,545,500)
                                                      ------------    ------------
Net loss                                              $ (2,147,065)   $ (3,764,724)
                                                      ============    ============

Net loss per common share (basic and diluted)         $      (0.10)   $      (0.29)
                                                      ------------    ------------
Weighted average common shares outstanding             17,534,2700      13,002,670


</TABLE>

                 See accompanying notes to financial statements













                                       F-4
<PAGE>


                             J-BIRD MUSIC GROUP LTD.
                            STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 1999 AND 1998

Cash flows from (used in) operating activities
Adjustments to reconcile net (loss) to net cash
  from (used in) operating activities:

                                                    1999               1998
                                                 -----------       -----------
Net (loss)                                       $(2,147,065)      $(3,764,724)
Loss on sale of assets                                     0           673,000
Amortization and depreciation                         53,412            40,000
Financing fee-sale of common stock at discount       671,400         1,277,500
Decrease (Increase) in accounts receivable          (551,279)           10,095
Decrease (Increase) in inventory                     126,194          (144,708)
Stock issued for services                            103,010           718,945
Decrease (increase) in recording advances            (73,175)            5,076
Decrease (increase) other assets                       6,298            (5,120)
Compensation expense (non cash)                            0           120,000
Interest expense (non cash)                                0                 0
Collection of note receivable                              0           205,000
Notes payable                                         81,251                 0
Increase/(Decrease) in accrued royalties              26,769            58,406
Increase/(Decrease) in accounts payable             (233,294)           51,292
                                                 -----------       -----------
Net cash (used in) operating activities           (1,008,479)         (754,749)



Cash flows from (used in) investing activities
Purchase of fixed assets                             (14,590)          (37,506)
                                                 -----------       -----------
Net cash (used in) investing activities              (14,590)          (37,506)

Cash flows from (used in) financing activities
Stock issued for cash                                886,000           775,000
Payment of stock subscription                              0           119,750
Due from officer and shareholder                      55,314          (138,500)
Due to shareholders and officers                      20,000              (500)
Payments of notes payable                                  0           (75,000)
Proceeds from notes payable                                0                 0
Due to IMM International Inc.                         42,148           113,560
                                                 -----------       -----------
Net cash from financing activities                 1,003,462           794,260
                                                 -----------       -----------

Net increase (decrease) in cash                      (10,806)            2,005

Cash, beginning of year                                2,005                 0
                                                 -----------       -----------
Cash, end of year                                $         0       $     2,005
                                                 ===========       ===========

Supplemental cash flow information:
  Cash paid for interest                         $    18,632       $     4,600

          See accompanying notes to financial statements

                                       F-5
<PAGE>

                             J-BIRD MUSIC GROUP LTD.
                  STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
                     YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>

                                                          Common                        Retained
                                           Common         Stock         Paid In         Earnings       Subscription
                                           Shares         Amount        Capital        (Deficit)        Receivable     Total
                                           ------         ------        -------        ---------        ----------     -----

<S>                                        <C>              <C>          <C>             <C>             <C>              <C>
Balance at January 1, 1998                 10,985,895       10,985       3,273,201       (2,281,842)     (369,750)        632,594

Net Loss                                            0            0               0       (3,764,724)            0      (3,764,724)
Payment of Stock                                    0            0               0                0       119,750         119,750
  Subscription
Financing Fee - Sale of                             0            0       1,277,500                0             0       1,277,500
  Discounted Common
  Stock
Shares Cancelled                             (125,000)        (125)              0                0             0            (125)

Fair Value of Employment                            0            0         120,000                0             0         120,000
  Services - Non
  Compensated
Merger Shares                                   5,000            5               0                0             0               5
Stock Issued for Cash                       2,750,000        2,750         772,250                0             0         775,000
Stock Issued for Services                     709,500          710         718,235                0             0         718,945
                                           ----------       ------       ---------       ----------      --------       ---------
Balance at December 31,                    14,325,395       14,325       6,161,186       (6,046,566)     (250,000)       (121,055)
  1998

Net Loss                                            0            0               0       (2,147,064)            0      (2,147,064)
Payment of Stock                                    0            0               0                0             0               0
  Subscription
Financing Fee - Sale of                             0            0               0                0             0               0
  Discounted Common
  Stock
Shares Cancelled                                    0            0               0                0             0               0

Fair Value of Employment                            0            0               0                0             0               0
  Services - Non
  Compensated
Merger Shares                                       0            0               0                0             0               0
Stock Issued for Options                      200,000          200         197,400                0             0         197,600
Stock Issued for Cash                       2,644,000        2,644         886,000                0             0         888,644
Stock Issued for Services                   4,429,000        4,429       1,620,321                0             0       1,624,750
                                           ----------       ------       ---------       ----------      --------       ---------
Balance at December 31, 1999               21,598,395       21,598       8,864,907       (8,193,630)     (250,000)        442,875
                                           ==========       ======       =========       ==========      ========       =========


</TABLE>
                 See accompanying notes to financial statements


                                       F-6
<PAGE>

                             J-Bird Music Group LTD.
                   Notes to Consolidated Financial Statements
                     Years Ended December 31, 1999 and 1998

Note 1. Organization and Significant Accounting Policies

On October 7, 1997, Caltron, Inc. entered into a stock purchase agreement with
the shareholders of J-Bird Records, Inc. to purchase their shares of J-Bird
Records, Inc. for the equivalent number of shares of the Company. The total
number of Caltron common shares issued to J-Bird Records, Inc. shareholders in
this transaction was 4,480,000 and was valued at $827,466, the net assets of
Caltron at date of acquisition. The number of shares issued represents
approximately 107% of the outstanding Caltron shares at October 7, 1997. The
4,000,000 shares received by the founding shareholders of J-Bird Records, Inc.
in connection with the transaction have been shown as outstanding since the
inception of J-Bird Records, Inc. This transaction is in substance a capital
transaction, accompanied by a recapitalization and has been accounted for as a
reverse merger with J-Bird Records, Inc. being the acquiring company for
accounting purposes. Caltron, Inc. is the acquiring company for legal purposes.
The financial statements include the operations of Caltron, Inc. since October
7, 1997, date of acquisition. No goodwill was recorded in this transaction. On
October 8, 1997 Caltron changed its name to J-Bird Music Group LTD (the
"Company"). J-Bird Records, Inc. is a wholly owned subsidiary of J-Bird Music
Group LTD.

J-Bird Records, Inc. is the first World Wide Web Recording Label (TM). The
Company was officially launched on November 1, 1996 to market, distribute and
sell music via a new medium - the Internet. At its Website, located at
http://www.j-birdrecords.com, the Company attracts and signs recording artists
through its on-line office and promotes, markets and sells their recordings
through its on-line record store.

The Company has experienced operating losses since its inception and has
experienced significant cash flow problems. The Company is in the process of
raising capital through various sources to fund its operations and has
implemented certain operating strategies to obtain profitably.

The previously issued financial statements included gross goodwill of
approximately $2,206,000. Goodwill has not been recognized in the restated
financial statements.

Investments in affiliates

The Company accounts for its investments in affiliates by using the equity
method of accounting under which the Company's share of earnings of these
affiliates is reflected in the statement of operations. Investments acquired
through the issuance of the Company's stock are recorded at an average of the
most recent sales price of the stock at the date of acquisition







                                       F-7

<PAGE>


Fixed Assets

Fixed assets are recorded at cost and are being depreciated over their estimated
useful lives (5 to 15 years).

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, J-Bird Records Inc. Material intercompany balances
and transactions have been eliminated in consolidation.

Cash

For purposes of the statement of cash flows, the Company considers cash as cash
held in operating accounts and all highly liquid investments with a maturity of
three months or less to be cash equivalents.

Inventory

Inventory of $72,280 and $194,474, in 1999 and 1998 stated at the lower of cost
or market (first in, first out), consists of musical CDs.

Revenue Recognition

Revenue is recorded when CDs are shipped from its fulfillment center. The
Company maintains its inventory at a fulfillment center, which provides the
shipping to customers. Most sales are made with the right of return of unsold
units. Estimated reserves for returns are established by management based upon
historical and industry experience and the Company's product mix and are subject
to the ongoing review and adjustment by the Company.

Recording Advances

Recording advances represent advances against future royalties of certain
recording artists. When anticipated sales appear to be insufficient to fully
recover the advances, a provision against current operations is made for
anticipated losses.

Royalties

Royalties are accrued at an average 12% of an artist's sales. Mechanical
royalties are estimated at approximately 50 cents per musical CD sold.

Officers' Compensation

In 1999 and 1998 the chief executive officer received compensation of $120,000
each year respectively. The December 31, 1998 financial statements have been
adjusted to include annual compensation of $120,000, to reflect the fair value
of the services provided, as a charge to operations. Paid in capital has been
increased, accordingly. In 1999 Mr. Barbieri received $120,000 in compensation
which is reflected as a consulting fee.


                                       F-8

<PAGE>

Income Taxes

The Company accounts for income taxes under Statement of Financial Accounting
Standard No. 109, "Accounting for Income Taxes." The Company has a net loss
carry forward of approximately $6,000,000, which expires through 2013.

Earnings Per Share

In 1997 the Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share". Earnings per share are based on the weighted average
number of shares outstanding. Common stock equivalents have not been considered,
as their effect would be anti-dilutive.

Use of Estimates

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

Reclassifications and Restatements

In the previously issued financial statements the Company had accounted for the
acquisition of J-Bird Records, Inc. using the purchase method of accounting with
Caltron Inc. being the acquiring company. The accompanying financial statements
have been restated to reflect J-Bird Records, Inc. acquiring Caltron. In
addition certain sales of stock to shareholders at a price below the market have
been adjusted to reflect the difference between the subscription price and fair
market value of the stock as a financing fee. The financial statements have also
been adjusted to reflect the estimated fair value of services performed by the
chief executive office at no cost to the Company.

Note 2. J-Bird Records Inc.

On October 7, 1997, Caltron, Inc. entered into a stock purchase agreement with
the shareholders of J-Bird Records, Inc. to purchase their shares of J-Bird
Records, Inc. for the equivalent number of shares of the Company. The total
number of Caltron common shares issued to J-Bird Records, Inc. shareholders in
this transaction was 4,480,000 and was valued at $827,466, the net assets of
Caltron at date of acquisition. In 1997, 4,475,000 shares were issued and 5,000
shares were issued in 1998. The number of shares issued represents approximately
107% of the outstanding Caltron shares at October 7, 1997. The 4,000,000 shares
received by the founding shareholders of J-Bird Records, Inc. in connection with
this transaction has been shown as outstanding since the inception of J-Bird
Records, Inc. This transaction is in substance a capital transaction,
accompanied by a recapitalization and has been accounted for as a reverse merger
with. J-Bird Records, Inc being the acquiring company for accounting purposes.
Caltron, Inc. is the acquiring company for legal purposes.





                                       F-9

<PAGE>


Note 3. Disposition of Long Term Assets and Investments

Laminar Fluid Controls

On April 22, 1997, the Caltron entered into an option agreement with Field
Technologies, LLC ("FTL"), a company based in Bangor, Maine. Under this
Agreement, the Caltron merged its patents into FTL for a five percent (5%)
equity position in FTL. FTL is an operating company run by the original
inventory of the patented valve technology.

In accordance with Statement of Financial Accounting Standard 121, "Accounting
for the Impairment of Long Lived Assets and for Long Lived Assets to be Disposed
Of" no value was assigned to the patents at the date of acquisition.

Rhode Island Renal Institute

In November 1998 the Company and the ROSS Corporation agreed to exchange 125,000
shares of the Company's stock owned by ROSS for the $500,000 note receivable in
the accompanying financial statements. The Company has recorded this transaction
as a $500,000 loss on disposition of assets in 1998. The shares have been
recorded as treasury stock.

Applied Advanced Technology

In May of 1998 $205,000 was received for full settlement of the $350,000 note
due from AAT. The difference of $145,000 was recorded as a loss on disposal of
assets in the 1998. All shares issued in this transaction have been returned to
the original issuing parties. The Company's shares have been recorded as
treasury stock.

Note 4. Related Party Transactions

In October 1998 the Company entered into a credit agreement with IMM
International, Inc., ("IMM") a company that owns approximately 50% of the
outstanding shares of the Company, whereby IMM will provide up to $500,000 in
financing to the Company for working capital purposes. The agreement expired on
March 31,1999. Amounts outstanding under this agreement bear interest at 8% and
are due on June 30,2000. At December 31,1998 the Company had borrowed $113,560
under this agreement. Subsequent to December 31,1998 the Company borrowed an
additional $191,000 under the credit agreement.

In 1998, certain shareholders of the Company entered into stock subscription
agreements with the Company, to purchase 2,750,000 shares of stock at prices
ranging from $.25 to $.40 per share. The difference between the subscription
price and the fair market value of the stock, $1,277,500 was recorded as a
non-cash charge to operations, "financing fee-sale of discounted stock". IMM
purchased 2,000,000 shares for $525,000 in 1998 and repaid $119,750 of amounts
outstanding under stock subscriptions at December 31, 1997. At December 31,
1998, $250,000 in stock subscriptions receivable were outstanding from IMM who
had purchased the stock at a discount to market in 1997.



                                      F-10
<PAGE>

Note 5. Downloading Agreement

In 1998 the Company and a2b Music, a subsidiary of AT&T, entered into an
agreement whereby certain J-Bird artists would have single musical productions
available to be downloaded from a J-Bird and a2B Music co - branded web site
(that is hosted and promoted as part of the a2b Music web site). The agreement
allows for approximately 15 musical titles from the J-Bird catalog to be added
to the web site each calendar quarter The charge to consumers for downloading
the music is $1.99 per song track. A2b is responsible for collecting the fees
and maintaining the web site. Revenues will be shared equally after a2b recovers
its cost for developing the web site not to exceed $2,000. J-Bird is responsible
to pay its artists 12% of its revenue share as a royalty fee and $.071 on each
download as part of the mechanical license. Certain artists such as Billy Squier
share equally the J-Bird revenue as a royalty fee. There was no revenue or costs
associated with this agreement in 1998.

Note 6. Fixed Assets

Fixed assets consist of:

Computer equipment and software
Leasehold improvement
Furniture and fixtures

Accumulated depreciation

Note 7. Note Payable

The amount due at December 31, 1999 consist of a $81,251 line of credit bearing
interest at the prime rate to provide the Company working capital.

Note 8. Common Stock

In 1998, the Company entered into investment advisory agreements with two firms
to assist the Company in raising capital. The firms were issued 600,000 shares
for their services. The Company recorded a charge to operations for $595,000 in
connection with these agreements. The value of the stock issued was based upon
the current market price of the stock at the date the agreements ere entered
into.

At December 31, 1998, warrants to purchase 87,140 shares of common stock
exercisable through March 2002 at $.25 per share were outstanding. See note











                                      F-11

<PAGE>


At December 31, 1998, options to purchase $260,000 shares of stock at $1 per
share exercisable through 2002 were outstanding. No expense was recorded as the
option price exceeded the market price of the Company's stock at date of grant.

An original J-Bird records Inc. stockholder was granted an option to purchase
shares, under the same terms of future subscription agreements for stock to be
issued under fair market value, to maintain a 2.3% ownership percentage of the
Company. No options have been exercised under this agreement. Approximately
30,000 shares may be issued upon exercise of the option.

Note 9. Commitments and Contingencies

(a)      Leases

The Company has an operating lease agreements for an office condominium
Aggregate annual minimum future rental payments under the leases are $31,650, in
1999 and $18,466 in 2000. The Company has an option to purchase the office
condominium for $379,800 at the end of the lease. Fifty percent of the aggregate
lease payments would be applied to the purchase price. Rent expense was
approximately $31,000 and $8,000 in 1998 and 1997, respectively.

(b) Operating Agreements

The Company has a one year agreement with a public relations firm that requires
monthly payments of $4,500 in 1999.

(c) Common Stock

During the years ended December 31, 1999 and 1998, the Company issued shares of
its common stock. These shares were not registered under the Securities Act of
1933 based on the exemption from registration thereunder provided by section 4
(2), thereof for offerings not involving a public offering.

Note 9. Subsequent Events

In January 1999 the Company obtained a $100,000 line of credit with a commercial
bank. The line of bears interest at 2% above the bank's prime rate. Certain
officers and shareholders have personally guaranteed the debt. The Company has
borrowed $100,000 as of March 31,1999 under the line of credit.












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