ODYSSEY PICTURES CORPORATION
          
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                     Page

Report of Independent Accountants                                     F-2

Financial Statements:
    Consolidated Balance Sheets
     as of June 30, 1998 and 1997                                     F-3

    Consolidated Statements of Operations for the
     Years Ended June 30, 1998, 1997 and 1996                         F-4

    Consolidated Statements of Changes in Shareholders'
     Equity (Deficit) for the Years Ended June 30,
     1998, 1997 and 1996                                              F-5


    Consolidated Statements of Cash Flows for the
     Years Ended June 30, 1998, 1997 and 1996                         F-6 - F-7

    Notes to Consolidated Financial Statements                        F-8 - F-22



All  schedules  have been  omitted  because  the  requested  information  is not
required,  or,  because the  information  required is included in the  financial
statements or notes thereto.





                                      F-1
<PAGE>

                             WANT & ENDER, CPA, P.C.
                        386 PARK AVENUE SOUTH, SUITE 1618
                               NEW YORK, NY 10016

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Odyssey Pictures Corporation

In our  opinion,  the  accompanying  consolidated  balance  sheets  and  related
consolidated  statement of  operations,  shareholders'  equity and of cash flows
present  fairly,  in all material  respects,  the financial  position of Odyssey
Pictures  Corporation  and its  subsidiaries  at June 30,  1998 and 1997 and the
results of their  operations  and their cash flows for the period ended June 30,
1998 and 1997 in conformity with generally accepted accounting principles. 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  audit.  We  conducted  our audit of these  statements  in  accordance  with
generally accepted auditing standards which 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 test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe  that our audit  provides a reasonable  basis for the opinion  expressed
above.

As  discussed in Note 7 to the  financial  statement,  the Company  defaulted on
payments  due August and October  1996  relating to notes  payable.  The Company
proposed to the noteholders to defer maturity of the notes and exchange existing
warrants for shares, or cancel the notes and existing warrants in their entirety
in exchange for shares.  The Company  offered to register  any shares  issued in
exchange for the notes as of August 12, 1997 the date the  registration  becomes
effective, and all but one of the noteholders agreed to exchange their notes for
registered  stock.  The remaining notes for $50,000 (held by a single  investor)
have not been  paid  and are in  default.  Additionally,  an  unsecured  note of
$179,000 is also in default.  At this time, the ultimate  outcome of this matter
cannot be determined.

As  discussed  in Note 8, the Company is a defendant  in various  lawsuits.  The
Company  has  filed   counteractions  and  preliminary  hearings  and  discovery
proceedings  on several  actions are in progress.  The  ultimate  outcome of the
litigation cannot be determined at present.  Not all liabilities that may result
upon adjudication have been accrued in the accompanying financial statements.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 3 to the
financial statements, the Company has suffered recurring losses from operations,
has a net capital  deficiency and has  insufficient  working capital to meet its
current  obligations and liquidity needs.  These factors raise substantial doubt
about the Company's ability to continue as a going concern.  Management's  plans
in  regard  to  these  matters  are  also  described  in Note 3.  The  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.

/s/Want & Ender, CPA, P.C.
--------------------------
Want & Ender, CPA, P.C.
New York City, New York
December 22, 1998


                                      F-2
<PAGE>

                              Price Waterhouse LLP
                             1880 Century Park East
                                  Century City
                           West Los Angeles, CA 90067
                                 (310) 553-6030

To the Board of Directors and
Shareholders of
Communication and Entertainment Corp.

In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated  statements of operations,  shareholders'  equity and of cash flows
present   fairly,   in  all  material   respects,   the  financial  position  of
Communications and Entertainment Corp. and its subsidiaries at June 30, 1996 and
1995,  and the results of their  operations and their cash flows for each of the
three  years in the period  ended June 30,  1996 in  conformity  with  generally
accepted   accounting   procedures.   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 audit.  We  conducted  our
audits  of these  statements  in  accordance  with  generally  accepted auditing
standards which require that we plan and preform 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,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.

As discussed in Note 10 to the financial  statements,  the Company has defaulted
on  payments  due in August and October  1996  relating  to notes  payable.  The
Company has proposed to the  noteholders  to defer the maturity of the notes and
exchange  existing warrants for shares, or to cancel the notes in their entirety
in exchange for shares.  Both proposals are subject to  registration  statements
becoming  effective.  As of October 6, 1996 several noteholders had accepted the
first proposal and one noteholder had accepted the second  proposal;  however as
some noteholders have not accepted either of the proposals, the ultimate outcome
of this matter cannot be determined at present.

As  discussed in Note 11, the Company is a defendant  in various  lawsuits.  The
Company has filed several  counteractions and preliminary hearings and discovery
proceedings  on several  actions are in progress.  The  ultimate  outcome of the
litigation cannot be determined at present.  Not all liabilities that may result
upon adjudication have been accrued in the accompanying financial statements.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 3 to the
financial statements, the Company has suffered recurring losses from operations,
has a net capital  deficiency and has  insufficient  working capital to meet its
current  obligations and liquidity needs.  These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management's plan is
regard to these matters are also  described in Note 3. The financial  statements
do not  include  any  adjustments  that might  result  from the  outcome of this
uncertainty.

/S/  Price Waterhouse LLP
-------------------------
Los Angeles, CA
October 14, 1996

<PAGE>


<TABLE>
<CAPTION>



                                              ODYSSEY PICTURES CORPORATION
                                               Consolidated Balance Sheets
                                              ------------------------------------


<S>                                                                   <C>                      <C>
                                                                             JUNE 30,                JUNE 30,
                                                                               1998                    1997
                                                                         ------------------      ------------------

ASSETS:
     Cash                                                                           $4,331                  $8,790
     Accounts receivable, net of allowances
         of $0 and $0                                                                9,500                 292,251
     Note receivable                                                               100,000                 300,000
     Film costs, net                                                               110,422                 120,472
     Other assets                                                                  451,200                  17,998
                                                                         ------------------      ------------------

                                                                                  $675,453                $739,511
                                                                         ==================      ==================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT):
     Liabilities:
         Accounts payable and accrued expenses                                    $865,923                $874,020
         Accrued wages                                                             457,794                 335,996
         Accrued interest                                                           77,168                  64,601
         Accrued rent                                                                    0                 149,000
         Due to producers and participants                                         250,000                 560,499
         Deferred revenues                                                          29,000                  19,800
         Notes and loans payable                                                 1,079,000                 961,500
                                                                         ------------------      ------------------
                                                                                 2,758,885               2,965,416
                                                                         ------------------      ------------------
     Commitments and contingencies

     Shareholders' Equity (Deficit):
         Preferred stock, par value $.10;
             Authorized - 10,000,000 shares
             Issued - 500,000 shares                                                50,000
         Class A stock, par value $.01;
             Authorized - 10,000,000 shares
             Issued - none
         Common stock, par value $.01;
             Authorized - 40,000,000 shares
             Issued and outstanding -
                5,029,285 and 3,279,515 shares                                      50,293                  32,796
         Capital in excess of par value                                         27,552,973              26,358,583
         Accumulated deficit                                                   (29,736,698)            (28,617,284)
                                                                         ------------------      ------------------
         Total shareholders' deficit                                            (2,083,432)             (2,225,905)
                                                                         ------------------      ------------------

                                                                                  $675,453                $739,511
                                                                         ==================      ==================






                                   The accompanying notes are an integral part of these statements.
</TABLE>

                                                            F-3
<PAGE>
<TABLE>
<CAPTION>
                                                       ODYSSEY PICTURES CORPORATION
                                                 Consolidated Statements Of Operations

                                                                                  For the Years
                                                                                  Ended June 30,
                                                              ----------------------------------------------------
<S>                                                         <C>                 <C>              <C>

                                                                   1998              1997              1996

REVENUES:                                                            $42,630           $141,202        $1,010,826
                                                              ---------------   ----------------  ----------------

EXPENSES:
     Costs related to revenues                                        20,019            565,610         1,046,299
     Selling, general and
       administrative expenses                                     1,073,134          1,678,450         1,565,307
                                                              ---------------   ----------------  ----------------
                                                                   1,093,153          2,244,060         2,611,606
                                                              ---------------   ----------------  ----------------

     Operating income (loss)                                      (1,050,523)        (2,102,858)       (1,600,780)

OTHER INCOME (EXPENSES):
     Other income
     Interest income                                                                                        1,243
     Interest expense                                                (68,891)           (91,435)          (97,701)
     Loss on sale of joint venture interests                                                           (3,262,478)
     Other Income                                                                     2,263,101

                                                              ---------------   ----------------  ----------------
     Income (loss) from continuing operations
        before provision for income taxes                         (1,119,414)            68,808        (4,959,716)
     Benefit for income taxes
                                                              ---------------   ----------------  ----------------

     Income (loss) from continuing operations                     (1,119,414)            68,808        (4,959,716)
     Loss from discontinued
        operations
                                                              ---------------   ----------------  ----------------

     Net income (loss)                                           ($1,119,414)           $68,808       ($4,959,716)
                                                              ===============   ================  ================

Income (loss) per share:
     Income (loss) from continuing operations                         ($0.25)             $0.02            ($2.17)
     Loss from discontinued
       operations

                                                              ---------------   ----------------  ----------------
        Net income (loss)                                             ($0.25)             $0.02            ($2.17)
                                                              ===============   ================  ================
     Weighted average common
        shares outstanding*                                        4,403,435          2,993,809         2,283,611
                                                              ===============   ================  ================
Fully diluted income (loss) per share:
     Income (loss) from continuing operations                         ($0.25)             $0.02            ($2.17)
     Loss from discontinued
       operations
                                                              ---------------   ----------------  ----------------
        Net income (loss)                                             ($0.25)             $0.02            ($2.17)
                                                              ===============   ================  ================
     Weighted average common
        shares outstanding*                                        4,403,435          2,993,809         2,283,611
                                                              ===============   ================  ================


                                          The accompanying notes are an integral part of these statements.

                                                                    F-4
</TABLE>
<PAGE>
<TABLE>
                                                                ODYSSEY PICTURES CORPORATION
                                             Consolidated Statements Of Changes in Shareholders' Equity (Deficit)



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

                                               Preferred Stock           Common Stock                                      Total
                                                       Amount                   Amount    Capital in                   Shareholders'
                                                     ($.10 Par                ($.01 Par    Excess of       Accumulated     Equity
                                          Shares       Value)     Shares        Value)     Par Value       Deficit        (Deficit)

Balances - June 30, 1995                                         2,284,189      $22,842   $25,682,817    ($23,726,376)    $1,979,283
     Issuance of shares to officers
       in payment of notes                                         307,053        3,071       228,949                        232,020
     Cash payments in lieu of
        fractional shares on
        conversion of Class A stock                                                              (400)                         (400)
     Net loss                                                                                              (4,959,716)   (4,959,716)
                                        ------------  --------- ------------  ----------- -------------  -------------  ------------

Balances - June 30, 1996                     -           -       2,591,242       25,913    25,911,366    (28,686,092)    (2,748,813)
     Issuance of shares to officers
        in payment of notes                                         78,948          789        44,211                        45,000
     Re-issue of unexchanged shares
       shares previously cancelled                                  65,825          659          (659)                            0
     Issuance of shares in consideration
        for services rendered                                       43,500          435        33,665                        34,100
     Sale of shares to equity
        investors                                                  500,000        5,000       370,000                       375,000
     Net income                                                                                                68,808        68,808
                                       ------------  --------- ------------  -----------  ------------  -------------   ------------

Balances - June 30, 1997                      -           -      3,279,515      $32,796   $26,358,583    ($28,617,284)  ($2,225,905)

     Issuance of shares of preferred 
        stock to equity investors          500,000     50,000                                 450,000                       500,000
     Issuance of shares of common stock
        in exchange for cancellation                                                         
        notes payable and other 
        liabilities                                              1,010,455       10,104       529,235                       539,339
     Issuance of shares of common stock
        to equity investors                                         66,667          667        49,333                        50,000
     Issuance of shares of stock in 
        exchange for cancellation of
        deferred compensation notes                                667,648        6,676       165,823                       172,499 
     Issuance of shares of common stock
        in consideration for service
        rendered                                                     5,000           50                                          50
     Net loss                                                                                             (1,119,414)    (1,119,414)
                                       ------------  --------- ------------  -----------  ------------  -------------   ------------

Balances - June 30, 1998                   500,000    $50,000    5,029,285      $50,293   $27,552,973   ($29,736,698)   ($2,083,432)
                                       ============  ========= ============  ===========  ============  =============   ============
 

                              The accompanying notes are an integral part of these statements.

                                                            F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                            ODYSSEY PICTURES CORPORATION
                                                       Consolidated Statements Of Cash Flows

                                                                                       For the Years
                                                                                       Ended June 30,
                                                                ---------------------------------------------------------
<S>                                                                 <C>                  <C>                <C>>

                                                                          1998                1997                1996
Cash Flows from Operating Activities:
    Net loss from continuing operations                               ($1,119,414)           $68,808         ($4,959,716)
      Adjustments to reconcile net income
       to net cash provided by (used in)
       operating activities:
          Loss on sale of joint venture interest                                                               3,262,478
          Amortization of film costs                                       36,976          1,660,440             634,179
          Additions to film costs                                         (26,926)          (779,944)           (185,401)
          Other depreciation and amortization                              10,961             18,963              44,307
          Issuance of shares of preferred stock to
             equity investors                                             500,000
          Issuance of shares of common stock in exchange for
             cancellation notes payable and other liabilities             539,338
          Issuance of shares of common stock to                            50,000
             equity investors
          Issuance of shares of stock in exchange for
             cancellation of deferred compensation notes                  172,499
          Issuance of shares of common stock in consideration
             for services rendered                                             50             34,100
          Issuance of shares of common stock in consideration
          Issuance of shares of common stock to officers
             in payment of deferred compensation                                              45,000             232,020
          Cash payments in lieu of fractional shares                                                                (400)
             Funds held in joint venture accounts                                                                352,723
             Accounts receivable, net                                     282,751            704,323            (406,331)
             Note receivable                                              200,000           (300,000)
             Other                                                          5,837               (536)             (5,500)
          (Decrease) increase in liabilities net of
             Accounts payable and accrued expenses                        (22,732)           510,988            (199,628)
             Due to producers and participants                           (310,499)        (3,199,643)           (115,701)
             Deferred revenues                                              9,200             16,800               3,000
                                                                ------------------  -----------------   -----------------

    Net cash used in continuing operations                                328,041         (1,220,701)         (1,343,970)
                                                                ------------------  -----------------   -----------------

Cash Flows from Investing Activities:
    Purchase of stock in E-3 Sports New Mexico, Inc.                     (135,000)
    Purchase of stock in Media Trust S.A.                                (315,000)
    Acquisition of fixed assets                                                               (8,480)             (6,550)
    Proceeds on sale of joint venture interest                                                                 1,500,000
    Net cash provided by (used in)
                                                                ------------------  -----------------   -----------------
          investing activities                                           (450,000)            (8,480)          1,493,450
                                                                ------------------  -----------------   -----------------

                                            The accompanying notes are an integral part of these statements.

</TABLE>
                                                              F-6
<PAGE>
<TABLE>
<CAPTION>
                                                                    ODYSSEY PICTURES CORPORATION
                                                          Consolidated Statements Of Cash Flows (Continued)
                                                          -------------------------------------------------

                                                                                     For the Years
                                                                                     Ended June 30,
                                                                ---------------------------------------------------------
<S>                                                                   <C>                 <C>                 <C>

                                                                            1998               1997               1996
Cash Flows from Financing Activities:
    Note payable in settlement of Generale Bank
      complaint                                                           (25,000)           275,000
    Net proceeds from the sale of
      Senior Notes                                                                                               270,000
    Net proceeds from private placement
      sale of common stock                                                                   375,000
    Net proceeds from interim financing                                    26,173            125,000
    Repayment on interim financing notes                                  (51,173)
    Notes payable exchanged for common stock                             (282,500)
    Note payable-investment in E-3 Sports New Mexico, Inc.                135,000
    Note payable-investment in Media Trust S.A.                           315,000
                                                                ------------------  -----------------   -----------------
    Net cash provided by (used in) financing activities                   117,500            775,000             270,000
                                                                ------------------  -----------------   -----------------

Net increase (decrease) in cash                                            (4,459)          (454,181)            419,480
Cash at beginning of period                                                 8,790            462,971              43,491
                                                                ------------------  -----------------   -----------------

Cash at end of period                                                      $4,331             $8,790            $462,971
                                                                ==================  =================   =================



Supplemental Disclosure of Cash Flow Information:
    Cash paid during the year for-
      Interest                                                            $18,476            $48,240             $10,778
                                                                ==================  =================   =================
      Income taxes                                                             $0                 $0                  $0
                                                                ==================  =================   =================





                                            The accompanying notes are an integral part of these statements.

                                                                   F-7

</TABLE>
<PAGE>
                          ODYSSEY PICTURES CORPORATION
                               (FORMERLY KNOWN AS)
                     COMMUNICATIONS AND ENTERTAINMENT CORP.
                   Notes to Consolidated Financial Statements

1.  Summary of Significant Accounting Policies:

a)   Principles of Consolidation:

     The consolidated  financial statements include the accounts of the Company,
its  wholly-owned  subsidiaries and majority owned or controlled joint ventures.
All significant intercompany accounts have been eliminated.

     In March 1989, the Company  entered into a joint venture  pursuant to which
the Company and a non-affiliated entity co-financed and co-produced a theatrical
motion  picture  entitled  "Q&A",  in which the Company  had a 50.01%  ownership
interest.  In March 1990,  the Company  entered into two 50% joint  ventures (in
which the Company exercised contractual control) with the same entity to acquire
the foreign distribution rights of and distribute two motion pictures,  "Switch"
and "Guilty By  Suspicion".  In December  1991,  the Company  entered into a 50%
joint venture (in which the Company  exercised  control) with the same entity to
acquire the foreign  distribution rights of and to distribute the motion picture
"This Boy's Life". The assets,  liabilities,  revenues and expenses of the joint
ventures  have been  included in the  consolidated  financial  statements of the
Company.  Minority  interests  in  operations  and in net assets in these  joint
ventures have been included in film costs and due to producers and  participants
in  the  consolidated  statements  of  operations  and of  financial  condition,
respectively.  In January  1996,  the Company  sold its  interests  in the joint
ventures (See Note 4).

     Certain  reclassifications  have been made to prior year amounts to conform
to the current year presentation.

b)   Revenue Recognition:

     Revenues from foreign theatrical, home video, television and pay television
licensing  contracts are recognized when the film is available for exhibition by
the licensee and when certain other  conditions are met.  Revenues from domestic
theatrical distribution of films are recognized as the films are exhibited.

     Virtually all of the Company's  revenues for the fiscal year ended June 30,
1997 and 1996 and  approximately  62% of the  revenues for the fiscal year ended
June  30,  1995,  were  from  foreign  distribution  rights.  For  fiscal  1996,
approximately  50.2% of revenues  were  derived  from one  picture.  One picture
accounted for approximately 28.3 % of revenues for the year ended June 30, 1995.

c)   Film Costs:

     Film costs include (1) cost of production,  (2) investment in  distribution
rights, (3) marketing and distribution expenses, and (4) development costs. Film
costs are amortized, and estimated residual and participation costs are accrued,
on an  individual  film basis in the ratio that the  current  year's  gross film
revenues bear to  management's  estimate of total  ultimate  gross film revenues
from all sources.

     Film  costs are  stated at the lower of cost or  estimated  net  realizable
value on an individual film basis. Ultimate revenue and cost forecasts for films
are  periodically  reviewed by management and revised when warranted by changing
conditions. When estimates of total revenues and costs indicate that a film will
result  in an  ultimate  loss,  additional  amortization  is  provided  to fully
recognize such loss.

e)   Property and Equipment:

     Depreciation  of property and  equipment  is provided by the  straight-line
method over their estimated useful lives of up to eight years.

                                      F-8
<PAGE>

     Maintenance and repairs are expensed as incurred.  The cost of renewals and
betterments are capitalized.  When assets are sold or otherwise disposed of, the
cost and related accumulated depreciation are removed from the accounts, and any
resultant gain or loss is included in current year operations.

f)   Earnings (Loss) Per Share:

     Earnings (loss) per share are computed using the weighted average number of
common  shares  outstanding  during the  respective  periods,  adjusted  for the
dilutive effect, if any, of outstanding stock options and warrants.  On March 6,
1996,  the Board of Directors  announced a one-for-six  reverse stock split (the
"Reverse Stock Split") which became effective on March 18, 1996. For comparative
purposes,  the number of weighted average common shares outstanding and loss per
share reported in the accompanying  consolidated  statements of operations,  and
share data included in the notes to the consolidated financial statements,  have
been  adjusted to reflect the effect of the Reverse  Stock Split for all periods
presented.

g)   Use of Estimates:

     The  preparation  of financial  statements  in  accordance  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the  reported  amounts  and  disclosures  in  financial
statements. Actual results could differ from those estimates.

h)   Fair Value of Financial Instruments:

     The carrying  value of cash,  notes  receivable and notes and loans payable
approximates fair value because of the short-term maturity of these instruments.

i)   Impact of Recently Issued Accounting Standards:

     In March 1995, the Financial  Accounting Standards Board released Statement
of Financial  Accounting  Standards No. 121  "Accounting  for the  Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("FAS 121"). This
Statement  establishes  accounting  standards  for the  impairment of long-lived
assets, certain identifiable  intangibles to be disposed of and goodwill related
to  those  assets  to be held and used and for  long-lived  assets  and  certain
identifiable  intangibles  to be disposed of. FAS 121 is effective for financial
statements for fiscal years  beginning after December 15, 1995. The Company will
apply this  Statement  beginning in fiscal 1997.  The adoption of FAS 121 is not
expected to have a material effect on the financial statements of the Company.

     In  October  1995,  the  Financial   Accounting  Standards  Board  released
Statement of Financial  Accounting Standards No. 123 "Accounting for Stock Based
Compensation ("FAS 123"). This statement  establishes  methods of accounting for
stock-based  compensation plans. FAS 123 is effective for fiscal years beginning
after  December 15, 1995.  The Company  expects to continue to apply  Accounting
Principles  Board  Opinion 25 for  measurement  of stock  compensation  and will
provide  the  disclosure  required  by FAS 123  beginning  in fiscal  1997.  The
adoption of FAS 123 is not expected to have a material  effect on the  financial
statements of the Company.

2.  Change in Management Control:

     In  January  1995,  a group  of  shareholders  of the  Company  (the  "CECO
Shareholders  Committee") launched an effort to change the senior management and
Board of Directors of the Company.

     Pursuant to a settlement agreement (the "Settlement Agreement") dated as of
March 31,  1995,  among the  members  of the CECO  Shareholders  Committee,  the
Company,  the Company's  subsidiary,  Odyssey  Entertainment  Ltd.  ("Odyssey"),
Global Intellicom,  Inc. and each of the directors of the Company at the time of
signing, a change in the entire Board of Directors occurred on April 12, 1995.

                                      F-9
<PAGE>

     In March, 1998, the Board of Directors appointed Mr. Johan Schotte as Chief
Executive  Officer and  Chairman  of the Board of the  Company,  and Mr.  Pierre
Koshakji as President and Director of the Company.  Former  management agreed to
terminate their existing employment agreement in exchange for revised employment
and consulting  agreements.  An affiliate of Mr. Schotte  purchased  convertible
deferred  compensation  notes from former  management and converted a portion of
those notes into 667,648 shares of the Company's common stock in April 1998.

     In connection  with the change in management,  the Company  acquired an 18%
equity interest in two corporations affiliated with Mr. Schotte, one of which is
the owner of a professional soccer team in New Mexico, and the other of which is
a media production  company in Luxembourg.  The Company issued one-year notes in
the aggregate  amount of $450,000 in consideration of the purchase of the equity
interests in these companies.

3.   Results of Operations and Management's Plans:

     The Company's  continued existence is dependent upon its ability to resolve
its liquidity problems.  The Company must achieve and sustain a profitable level
of operations  with  positive  cash flows and must continue to obtain  financing
adequate to meet its ongoing operation requirements.

     Net income for the year ended June 30, 1997 was due primarily  from various
transactions  which are explained in the category of "Other Income"  below.  Net
loss  for  the  year  ended  June  30,  1996  is  primarily  due  to a  loss  of
approximately  $3.3  million  on the  sale of the  Company's  interest  in joint
ventures  relating to four theatrical  motion pictures,  and due to insufficient
revenues to offset normal expenses.

     Revenues for the twelve  months  ended June 30, 1997  decreased to $141,202
compared to  $1,010,826  for the twelve months ended June 30, 1996. No new films
became available for delivery during either period.

     Costs related to revenues decreased to $565,610 for the twelve months ended
June 30, 1997 as compared to  $1,046,299  for the twelve  months  ended June 30,
1996.  The decrease is  primarily  related to the fact that there was lower film
revenues in the current year.  Additionally,  development  and festival costs in
the amount of  $249,544  were  written  off,  litigation  and  settlement  costs
relating to the Film Bridge  settlement  in the amount of $148,174 were expensed
and $435,102 in inventory  costs related to the picture  Downrange  were written
off.  This was  partially  offset by a write-off  of  $449,163 in  participation
liabilities related to the Kinnevik Library which were settled subsequent to the
Kinnevik sale.

     Selling, general and administrative expense increased by $113,143 (7.2%) to
$1,678,450  for the twelve month period ended June 30, 1997 from  $1,565,307 for
the comparable period ending June 30, 1996. The increase is primarily related to
higher salaries and professional fees.

     Other  income for the twelve  months  ended June 30,  1997  consisted  of a
$818,776 gain from the sale of certain  distribution and subdistribution  rights
in certain  films to a third party,  recognition  of a $1,245,758  gain from the
cancellation of a contractual  obligation related to the Company's  distribution
rights  in  "Wuthering  Heights"  and  recognition  of a gain in the  amount  of
$198,567 from the  settlement of an  outstanding  litigation  with Generale Bank
(formerly   known  as  Credit   Lyonnais  Bank   Nederland   N.V.)  and  Conecom
Entertainment  Group Inc. There was no other income recognized in the respective
twelve months ended June 30, 1996.

     Since the change in management  control in April 1995,  new  management has
embarked  on a program  to reverse  the  unfavorable  results  by  significantly
reducing  overhead,  taking steps to  recapitalize  the Company,  and  acquiring
rights  to  existing  film   libraries  and  new  pictures  in   development  or
pre-production.

     In August and October 1995,  the Company  received net proceeds of $219,250
and  $50,750,  respectively,  from the  private  placement  of an  aggregate  of
$312,500  principal  amount of 12% Senior  Unsecured  Promissory Notes (See Note
10).

                                      F-10
<PAGE>

     In January 1996, the Company entered into an agreement to sell its interest
in joint ventures  relating to four theatrical motion pictures pursuant to which
it received net proceeds of $1,500,000 (See Note 4).

     In August 1996,  the Company  entered into an agreement,  pursuant to which
the  Company  agreed  to grant  subdistribution  rights  in,  and to sell  other
distribution rights to, certain films in the Company's film library. In exchange
for these  rights,  the  Company  will  receive a total  cash  consideration  of
$1,075,000,  payable $500,000 on closing, $275,000 six months after closing, and
$300,000 eighteen months after the closing. In addition, the Company will retain
a continuing  right to receive  revenues  from  certain of the films,  valued by
management at a minimum of approximately $150,000.  Additionally,  the purchaser
will provide the Company with a $500,000  revolving line of credit to be secured
by accounts  receivable and other contractual rights acquired by the Company. As
part  of  the  transaction,  the  Company  will  grant  100,000  stock  options,
exercisable  over a three year period at the bid price of the  Company's  common
stock in effect on August 5, 1996 ($.625).  The transaction closed on October 7,
1996

     In  September   1996,  the  Company  entered  into  an  agreement  with  an
unaffiliated  third party for the purchase of 1 million  shares of the Company's
common stock in consideration for $750,000 cash and warrants to purchase up to 2
million  shares  of  common  stock.  Following  a dispute  between  the  parties
concerning the satisfaction of certain  conditions to closing and the investor's
indication  of an  unwillingness  to  consummate  the  transaction,  the parties
reached a settlement in June 1997, pursuant to which the investor would purchase
66,667  shares of Common Stock of the Company for  $50,000,  or $ .75 per share.
The proceeds will be used the pay legal costs related to the transaction.

     In  September,  1996,  the Company  reached an  agreement  with  Paramount,
pursuant to which Paramount would cancel the Company's  contractual guarantee of
$2.7 million in full, in exchange for which the Company agreed to (i) relinquish
all further distribution rights to "Wuthering Heights"; (ii) assign to Paramount
all of its rights in any outstanding  distribution  agreements for the film, and
any  receivables to be generated  therefrom;  and (iii) guarantee that Paramount
will  collect a total of $500,000 in sales  revenue from  existing  distribution
agreements no later than January 15, 1997.  Existing license  agreements yielded
approximately  $420,000 in net revenues  prior to January 15, 1997 (of which the
Company  would  have  been  entitled  to retain  approximately  20%  thereof  in
commissions).  The  Company  has  paid  over  $250,000  in net  revenues  and is
currently in negotiations  with Paramount  regarding the timing of the remaining
$250,000 payment.

     In December,  1996, the Company  settled the  outstanding  litigation  with
Generale Bank  ("Generale")  (formerly  known as Credit  Lyonnais Bank Nederland
N.V.) and Cinecom  Entertainment Group Inc. Pursuant to the settlement agreement
with  Generale,  the Company  agreed to pay to  Generale  the sum of $275,000 in
complete  satisfaction  of the claim,  payable  $25,000  upon  execution  of the
settlement  agreement,  $25,000 on each of June 30, and December 31 in the years
1997, 1998 and 1999, and $100,000 on June 30, 2000. Interest on the installments
(at the rate of LIBOR plus 1% per annum)  will be waived  provided  the  Company
remains in  compliance  with the agreed upon payment  schedule.  The Company has
only made one  payment to Generale  Bank in the amount of  $25,000.  In October,
1997, the Company  entered into a revised  payment  schedule with Generale Bank.
The  Company  is in  receipt of a demand  letter  dated May 4, 1998.  The letter
demands that the Company cure the non-payment of a $30,000 installment due April
15, 1998.  According to the agreement between the Company and Generale Bank, the
Company had ten business days after receipt of this letter to cure this default.
The  consequences  of not clearing  this default is the entry of a confession of
judgement  already  executed  by the  Company  for an amount of  $275,000.  This
confession of judgement is against Odyssey Distributors  Limited, a wholly owned
subsidiary of the Company. (see litigation)

     In February, 1997, the Company completed a sale of 500,000 shares of Common
Stock and 500,000 Common Stock Warrants to four (4) offshore European  investors
for an aggregate  consideration of $375,000. The warrants are exercisable over a

                                      F-11
<PAGE>

three year period (expiring February 25, 2000) at an exercise price of $1.06 per
share.  One of the investors,  Johan  Schotte,  was retained by the Company as a
financial  consultant  for a period of one year from the date of  closing at the
rate of $2,500 per month.  The investors  were also given the right to designate
one of the investors (or another third party), to serve as a member of the Board
of Directors of the Company.

     In April, 1997, Stephen Greenwald, Lawrence I. Schneider and Robert Miller,
Jr., all  directors of the Company,  made loans to the Company in the amounts of
$50,000, $25,000 and $25,000,  respectively.  Each loan is payable on demand and
bears interest at the rate of 2 points over prime per annum. The note is secured
by a collateral  assignment  of the  Company's  $300,000  note  receivable  from
Kinnevik.  In consideration of making the loans, the lenders received  five-year
warrants to purchase shares of Common Stock of the Company, exercisable at $1.00
per share.  Messrs.  Schneider and Miller each received  25,000 warrants and Mr.
Greenwald  received 50,000 warrants as additional  consideration  for making the
loans to the Company. In addition, an independent  unaffiliated third party made
a $25,000 loan to the Company in June,  1997 on the same terms and conditions as
the loans made by Mr. Greenwald, Schneider and Miller.

     In  September,  1997,  the  Company and  Kinnevik  Media  Properties,  Ltd.
executed  a letter  agreement  pursuant  to which  Kinnevik  agreed,  subject to
completion of due diligence  and the approval of Kinnevik's  Board,  to purchase
500,000 shares of convertible,  redeemable  preferred stock of the Company,  par
value $1.00 per share,  for an aggregate  purchase  price of $500,000.  Kinnevik
would  purchase  the  first  $250,000  of  preferred  stock at the  closing,  an
additional  $125,000 of  preferred  stock 90 days after  closing,  and the final
$125,000 of preferred  stock 270 days after closing.  The preferred  stock would
bear  interest  at the  rate  of 10%  per  annum  which  would  be  paid in kind
semi-annually  by the issuance of additional  shares of preferred stock at a par
value of $1.00 per share.  Kinnevik  would have the right for a five year period
to  convert  the  preferred  stock  into  common  stock  of  the  Company  on  a
share-for-share  basis. The Company would have the right to redeem the preferred
stock for $1.25 per share in the event the  Company's  common  stock trades at a
price of $2.00 per share or more for a period of 20  consecutive  trading  days.
The Company agreed to help secure  television  distribution  rights for Kinnevik
from third parties, and introduce various projects to Kinnevik from time to time
which may be of interest to Kinnevik.  In the event Kinnevik acquires any rights
as a result of any  introductions  made by the  Company,  the  parties  agree to
mutually  determine  the  value of such  services  and to  redeem  shares of the
preferred  stock at $1.00 per share based on the aggregate value of the services
so determined.

     In  January,  1997,  prior  counsel  to the  Company  agreed to  exchange a
promissory  note in the face amount of $70,000 in exchange for 120,000 Shares of
the Company's Common Stock.

4.   Sale of Joint Venture Assets:

     As of  January  2,  1996,  the  Company  entered  into  an  agreement  (the
"Agreement")  with  Regency  International  Pictures,  B.V.,  its joint  venture
partner,  to sell its interest in the related  joint  ventures  through which it
held  approximately 50% ownership  interests in four theatrical motion pictures,
entitled "Q&A,"  "Switch,"Guilty  By Suspicion" and "This Boy's Life." The joint
venture is defined as the distribution  agreements related to the aforementioned
four motion pictures. Individual agreements were created to finance, produce and
distribute each picture and to share in revenues generated from the exploitation
of them.  Joint venture  pictures  were  accounted for in the same manner as any
other  picture  that the Company  distributed.  Pursuant to the  Agreement,  the
Company  received  $1,500,000  in  exchange  for all of its  interest in the net
assets and obligations of the joint ventures. In addition,  the Company retained
a contingent  interest in certain  receivables,  not to exceed  $212,500,  and a
contingent interest in future revenues from the pictures.


                                      F-12
<PAGE>

5.   Investment in Global Intellicom, Inc.:

     On  December  8, 1994,  the  Company  acquired  3,300,000  shares of Global
Intellicom,  Inc.  ("Global")  and  subsidiaries,   a  Nevada  corporation,  for
$1,000,000,  representing 66% of Global's 5,000,000 outstanding shares of common
stock.  Simultaneously  and  pursuant to a contract of sale entered into by Tech
Acquisition Corp. ("Tech") (a wholly-owned  subsidiary of Global) on October 28,
1994,   Global   purchased   certain  net  assets  of  AMCOM  Business   Centers
Corp.("AMCOM") (a Pennsylvania  corporation)  subject to certain liabilities and
obligations. On December 8, 1994 Tech changed its name to AMCOM Business Centers
Corp.

     AMCOM is a wholesale  distributor of computer hardware and related products
and serves customers throughout the United States.

     The  total  purchase  price  of the net  assets  of AMCOM  was  $5,280,000,
$2,224,000  of which was paid to the  sellers  at  closing.  The  balance of the
purchase price of $3,056,000 is payable by Global in installments equal to 1% of
gross sales  effective  January 1, 1994 (as defined by  agreement)  in quarterly
installments  through December 1995 and monthly  thereafter until the obligation
is satisfied. In addition, Global agreed to reimburse AMCOM stockholders for all
income  taxes  incurred  by them with  respect  to their  distributive  share of
AMCOM's taxable income for the period January 1, 1994 through the closing date.

     During the quarter ended March 31, 1995, the then Board of Directors of the
Company declared a dividend to its  shareholders  consisting of 1,700,000 shares
of the  common  stock of Global,  and also  delivered  522,641  shares of Global
common stock to its former outside counsel in payment of outstanding legal fees.
Further,  as of March 31,  1995 the then  Board of  Directors  entered  into the
Settlement  Agreement with the CECO  Shareholder  Committee  which,  among other
things,  provided for the sale of the Company's remaining interests in Global to
persons affiliated with the prior Board. The sale closed on April 12, 1995.

6.   Film costs:
     
     Film costs are comprised of the following:

                                                   June 30,
                                        ----------------------------
Component                                 1998                    1997

Films released, at cost                $      0                 $      0
Less accumulated amortization                 0                        0
                                       --------                 --------
Projects in development                 110,422                  120,472
                                       --------                 --------
Total film costs                       $110,422                 $120,472
  

7.   Income Taxes:

     At June 30,  1997,  the  Company  had a federal  net  operating  loss carry
forward, for tax purposes, of approximately $27,000,000,  expiring through 2011.
The utilization of approximately $4,900,000 of these losses in future periods is
estimated by the Company to be limited to  approximately  $350,000 per year (the
"annual earnout limitation").

     Statement of Financial  Accounting Standards No. 109, Accounting for Income
Taxes, which establishes  accounting and reporting  standards for the effects of
income taxes that result from an enterprise's  activities during the current and
preceding years became  effective for the Company for its fiscal year ended June
30, 1994.  The  cumulative  effect of adopting SFAS 109 was  immaterial  and was
recorded in the first quarter of fiscal 1994.

8.   Notes and Loans Payable:

     Notes and  loans  payable  as of June 30,  1997 and 1996  include  $179,000
principal amount of 6% Convertible Subordinated Debentures, due July, 1997.

                                      F-13
<PAGE>

     In April 1995, the Company issued a note in the principal amount of $70,000
to its  outside  legal  counsel  for  legal  services  performed.  The  note was
repayable in October 1995, together with interest at the rate of 7%. In February
1996 the note holder  agreed to extend the due date to  December  31,  1996.  In
connection with the extension,  the Company granted  warrants to purchase 16,667
shares of the  Company's  common stock at an exercise  price of $1.88 per share,
exercisable over a three year period. The amount of the note will be reduced, as
of December  31,  1996,  by one-half of the amount by which the average  closing
price of the stock,  for the ten most recent trading days,  exceeds the exercise
price of the  warrants.  In January,  1997,  the Company  agreed to exchange the
promissory  note in the face amount of $70,000 in exchange for 120,000 shares of
the Company's Common Stock.

     In August and October 1995,  the Company  received net proceeds of $219,250
and  $50,750,  respectively,  from the  private  placement  of an  aggregate  of
$312,500  principal  amount  of  12%  Senior  Unsecured  Promissory  Notes  (the
"Notes").  The Notes are  repayable  with  interest  on the  earlier  of (a) the
closing of a public offering of the Company's  equity  securities from which the
Company  receives gross proceeds of at least  $10,000,000,  or (b) one year from
the issuance  date.  The Company also granted to the  purchasers of the Notes an
aggregate of 26,042 warrants (the  "Warrants"),  20,833 of which are exercisable
at $2.83 per share and 5,209 of which are  exercisable at $2.37 per share.  Each
of the Warrants is  exercisable at any time beginning one year after the date of
issuance and expiring four years after the date of issuance.

     The Notes and interest were not repaid as scheduled.  The Company  proposed
that  Noteholders  either defer  maturity of their notes and  exchange  existing
warrants  for  shares,  or cancel the notes and  warrants  in their  entirety in
exchange  for a greater  number of shares.  The Company  offered to register any
shares  issued in exchange for the notes.  As of August 12,  1997,  the date the
registration  became effective,  a total of $262,500 of notes were exchanged for
595,455 shares of registered  stock.  The remaining notes for $50,000 (held by a
single investor) have not been paid and are in default.

     On July 17, 1997, unsecured long term notes of the Company in the aggregate
amount of $179,000  matured.  Such notes were not paid on the maturity date. The
Company  entered  into an  installment  payment plan  extending  over a 15 month
period through March, 1999, and made the first installment payment of $17,900 in
January 1998.  The company did not make the March 1998 payment of $17,900 and is
presently in default of the payment schedule.

     In April, 1997, Stephen Greenwald, Lawrence I. Schneider and Robert Miller,
Jr., all  directors of the Company,  made loans to the Company in the amounts of
$50,000, $25,000 and $25,000,  respectively.  Each loan is payable on demand and
bears interest at the rate of 2 points over prime per annum. The note is secured
by a collateral  assignment  of the  Company's  $300,000  note  receivable  from
Kinnevik.  In consideration of making the loans, the lenders received  five-year
warrants to purchase shares of Common Stock of the Company, exercisable at $1.00
per share.  Messrs.  Schneider and Miller each received  25,000 warrants and Mr.
Greenwald  received 50,000 warrants as additional  consideration  for making the
loans to the Company.  In addition,  two independent  unaffiliated third parties
made  additional  $25,000  loans to the Company in June and August,  1997 on the
same terms and  conditions  as the loans made by Mr.  Greenwald,  Schneider  and
Miller.  In May,  1998, the loans of Mr.  Schneider and one of the  unaffiliated
parties were paid from the proceeds of the Kinnevik  receivable.  The  remaining
lenders  agreed to a rollover of their loans  (aggregating  $100,000)  against a
second Kinnevik receivable and, in consideration,  received an additional 50,000
warrants in the aggregate, exercisable for the extension at $1.00 per share over
a three year period.

9.   Commitments and Contingencies:

     Lease Commitments:

     The Company  leased  office  space in Los Angeles  pursuant to an operating
lease  which  expired in May 1998,  providing  for  monthly  rental  payments of
$5,301.  Minimum payments under the lease aggregated $63,612 and $58,311 for the
fiscal years ending June 30, 1997 and 1998, respectively.

                                      F-14
<PAGE>

     The Company was party to a lease at 800 Third  Avenue,  New York,  New York
10022,  which  terminated in 1997. The Company  vacated such office space during
the year ended June 30,  1995.  In September  1995 the landlord  filed an action
against the Company.  The Company reached a settlement  with the landlord.  (see
Litigation).  Rent expense for the years ended June 30, 1997,  1996 and 1995 was
$0, $38,772 and $297,287, respectively.

     Litigation:

     On December  20,  1990,  a suit was filed  against the Company  seeking the
payment of $300,000 for certain investment banking services allegedly  provided.
In October  1991,  the Court granted a judgment in favor of the  plaintiff.  The
judgment is stayed pending the determination of an action brought by the Company
against   the   plaintiff   described   below.   The   Company   has   posted  a
non-collateralized  bond pending the results of an appeal. In a separate action,
the Company  filed a complaint  against the  plaintiff  claiming  that  services
alleged to have been performed were never  performed and demanding the return of
funds and securities paid by the Company. In October 1994, the plaintiff filed a
voluntary  bankruptcy  petition  under  Chapter  11 of the United  States  Code.
Consequently,  the Company's action has been  automatically  stayed. The Company
has filed a proof of claim.

     On December 30, 1994,  Krisna Shah,  who  allegedly  served as President of
Double  Helix Films from about July 1991 until about  March 1993,  filed  action
against the Company,  Norman Muller,  a former  Chairman and CEO of the Company,
and others in which he alleged among other things breach of an oral agreement to
pay him $152,000  (which he allegedly  advanced for the benefit of Double Helix)
and to give him  19.5%  ownership  interest  in its  corporate  successors.  The
Company reached a settlement with Mr. Shah in which the Company has paid $15,000
and  quitclaimed  any and all  rights,  title,  and  interest it has to the film
library known as the "Double Helix Film Library.

     On or about May 15, 1995,  Credit  Lyonnais Bank Nederland N.V. and Cinecom
Entertainment  Group, Inc. filed a complaint  against the Company's  subsidiary,
Odyssey  Distributors,  Ltd.  They allege that Odyssey  collected  but failed to
remit to them assigned  distribution  proceeds in the amount of $566,283.33 from
the foreign  distribution  of two  pictures.  The complaint  alleges  claims for
breach of contract and breach of fiduciary  duty and seeks  damages in excess of
$566,283,  attorney's fees, an accounting,  a temporary  restraining order and a
preliminary injunction.  In June 1995, the Court denied plaintiffs an attachment
and stayed the action pending  arbitration  in New York. In September,  1996 the
Court  dismissed  the  Complaint.  In December,  1996,  the Company  settled the
outstanding litigation with Generale Bank ("Generale") (formerly known as Credit
Lyonnais Bank Nederland N.V.) and Cinecom  Entertainment  Group Inc. Pursuant to
the settlement  agreement  with Generale,  the Company agreed to pay to Generale
the sum of $275,000 in complete  satisfaction of the claim, payable $25,000 upon
execution of the settlement agreement,  $25,000 on each of June 30, and December
31 in the years 1997, 1998 and 1999, and $100,000 on June 30, 2000.  Interest on
the  installments  (at the  rate of  LIBOR  plus 1% per  annum)  will be  waived
provided  the  Company  remains  in  compliance  with the  agreed  upon  payment
schedule.  The Company and General Bank later agreed upon a new payment schedule
as follows: $25,000 on or before October 15, 1997 (payment was made); $30,000 on
each of April 15,  1998,  June 30, 1998,  December  31, 1998,  June 30, 1999 and
December 31, 1999; and $100,000 on June 30, 2000. The Company is in receipt of a
demand  letter dated May 4, 1998.  The letter  demands that the Company cure the
non-payment  of a  $30,000  installment  due April 15,  1998.  According  to the
agreement  between the Company and Generale  Bank,  the Company had ten business
days after receipt of this letter to cure this default.  The consequences of not
clearing this default is the entry of a confession of judgement already executed
by the  Company for an amount of  $275,000.  This  confession  of  judgement  is
against Odyssey Distributors Limited, a wholly owned subsidiary of the Company.

     In August 1995, G.P. Productions,  Inc. ("GP") and Greenwich Subject Films,
Inc.  ("Greenwich")  commenced an action  entitled G.P.  Productions,  Inc., and
Greenwich  Studios,  Inc.  v.  Double  Helix  Films,  Inc.,  Communications  and
Entertainment, Inc., Krishna Shaw, Gerald Muller and Norman Muller in the United
States  District Court,  Southern  District of Florida (Case No.  95-1188).  Mr.


                                      F-15
<PAGE>

Muller has  demanded  that the  Company  indemnify  him  against  any  expenses,
judgements  and amounts paid in settlement of the action.  The Company  contends
that, by virtue of Mr. Muller's  breaches of fiduciary duty and violation of his
obligations to the Company, it is not required to provide indemnification.

     GP and  Greenwich  allege that they are the  exclusive  owners of the films
"The Gallery" and "South Beach". They assert claims for copyright  infringement,
unfair competition,  breach of contract,  accounting,  conversion,  civil theft,
conspiracy  and  fraudulent  conveyance.  The Complaint  demands a recall of the
films,  an  attachment,   preliminary  and  permanent   injunctive   relief,  an
accounting,  and  unspecified  compensatory,  punitive and treble  damages.  The
Company's motion to transfer venue of the action was granted in November,  1995,
and the case was transferred to the United States District Court of the Southern
District  of New  York.  There has been no  activity  in this  matter  since the
transfer of venue in 1995.

     In September  1995, the agent for the landlord for the premises in New York
City previously  occupied by the Company filed a Summons and Verified  Complaint
against the  Company.  The  plaintiff  alleged  that it was due $66,694 from the
Company  (plus  interest) for rent  allegedly  owed during the period from April
through  September,  1995.  The Company  vacated the premises on April 12, 1995.
Summary  judgment  was awarded to the  plaintiff  and a judgment was entered for
$74,142 in May, 1996. In July, 1996, the landlord  commenced a second action for
$121,000  for rent  allegedly  owed during the period from  October 1995 through
July 1996.  The Company  reached a settlement in this case,  pursuant  which the
Company  delivered  177,500  registered  shares of the Company's Common Stock to
each of the landlord and its agent in full settlement of the actions.

     In October 1995 Canon  Financial  Services  filed a complaint,  in which it
claims that it is due $47,499.83,  plus damages,  pursuant to a lease agreement.
The  Company  has filed an Answer in this  action  and  plaintiff's  motion  for
summary  judgement has been denied by the Court.  No trial date has yet been set
in this matter.

     In January 1996, a former director brought an action against the Company on
a promissory  note in the amount of $25,000.  The  plaintiff  obtained a summary
judgment.  The  Company  is  considering  whether  or  not it  has a  claim  for
indemnification against former management in connection with the issuance of the
note.

     In January  1996,  an action  was filed  against  the  Company in which the
plaintiff sought damages in the amount of $33,849.98 for legal services rendered
to the Company  and its  subsidiaries.  In June,  1997,  the  parties  reached a
settlement in the matter,  pursuant to which the Company agreed to pay $7,000 to
plaintiff,  deliver 40,000 freely tradeable shares of the Company's Common Stock
to  plaintiff,  and  deliver an  additional  cash  amount to the extent that the
aggregate  market  value of the  shares  on the date of  delivery  was less than
$40,000.  Payment of the  additional  cash  amount of $13,000 was  completed  in
December, 1997.

     In March  1996,  an  action  was filed  against  the  Company  in which the
plaintiff  claims  that she is due  $17,920.49  pursuant  to a  promissory  note
previously  issued to her. The Company has filed a cross-claim  seeking  offsets
against the amount due and other damages.  On May 21, 1998, a default  judgement
was entered on behalf of  plaintiff in the amount of  $22,261.23.  Subsequently,
plaintiff  filed a motion to  include  attorney  fees and costs in the amount of
$39,121.95. The Company is attempting to reach a settlement with plaintiff.

     On or about March 25, 1996, a class action  complaint was filed against the
Company  entitled  "Dennis  Blewitt  v.  Norman  Muller,  Jerry  Minsky,  Dorian
Industries, Inc. and Communications and Entertainment Corp." The complaint seeks
damages in connection with the Company's  treatment in its financial  statements
of the  disposition of its subsidiary,  Double Helix Films,  Inc., in June 1991.
The complaint seeks  unspecified  damages on behalf of all persons who purchased
shares of the Company's  common stock from and after June 1992. A second action,
alleging  substantially  similar grounds,  was filed in December 1996 in Federal


                                      F-16
<PAGE>

court  in the  United  States  District  Court  for  the  Southern  District  of
California  under  the  caption  heading  "Diana   Pfannebecker  v.  N.  Muller,
Communications  and Entertainment  Corp., Jay Behling,  Jeffrey S. Konvitz,  Tom
Smith,  Jerry Silva,  David Mortman,  Price  Waterhouse & Co., Todman & Co., and
Tenato  Tomacruz."  Following the filing of the second action,  the first action
was dismissed by  stipulation in May 1997. The Company filed a motion to dismiss
the  complaint  in the second  action and after a hearing on the motion in July,
1997, the Court dismissed the federal securities law claims as being time-barred
by the applicable statute of limitations, and dismissed the state securities law
claims for lack of subject matter  jurisdiction.  The lower court's dismissal of
this action was upheld on appeal by the Ninth Circuit. Messrs. Muller, Smith and
Mortman,   former   directors  of  the  Company,   have   asserted   claims  for
indemnification  against the Company. The Company has advised the claimants that
it will not provide such  indemnification,  based on their wrongful  actions and
failure to comply with various obligations to the Company.

     On September 18, 1996,  Film Bridge  International,  Inc.  ("Film  Bridge")
filed a complaint in Los Angeles County  Superior  Court,  entitled "Film Bridge
International v. Communications and Entertainment  Corp., and Does 1 through 50,
Inclusive,"  contending  that the Company had  breached  the terms of an alleged
joint venture agreement between the parties regarding the distribution rights to
certain films. On December 19, 1996, the Company filed a cross-complaint against
Film Bridge alleging that,  since the end of June,  1996, Film Bridge had failed
to furnish the Company with a proper  accounting of its revenues and expenses in
connection  with the sale of foreign  licensees  of  various  films in which the
Company had an interest and had failed to make  payment of at least  $450,000 to
the Company for monies due and owing to the  Company  from the foreign  sales of
such films.  An agreement  was reached  between the parties in May,  1997,  as a
result of which the Company  received  $336,000 of the monies being held by Film
Bridge,  with the balance being retained by Film Bridge as sales commissions and
in full settlement of the litigation.

     On December 2, 1997,  the Directors  Guild of America  ("DGA")  obtained an
arbitration  award  against  Down  Range  Productions,   Inc.,  a  wholly  owned
subsidiary of Odyssey Pictures Corporation,  on behalf of Kahn Brothers Pictures
fso Michael Kahn, Charles Skouras,  and Scott C. Harris.  Down Range was ordered
to pay: Kahn Brothers  Pictures the total sum of $155,041;  Charles  Skouras the
total sum of $32,360; and Scott C. Harris the total sum of $8,868; plus interest
at 18% per annum on each of these  amounts  from April 1,  1997.  Down Range was
also ordered to pay the DGA $2,500. Down Range was also ordered to assign to the
DGA all of Down Range's  right,  title and interest in the motion  picture "Down
Range",  including the  screenplay  for the motion  picture,  and Down Range was
enjoined from  licensing the motion picture or the screenplay to any third party
other than the DGA. Down Range was also ordered to pay the arbitrator $2,250.

     Kahn  Brothers  Pictures fso Michael  Kahn also filed a claim  against Down
Range  Productions,  Inc. and the Company with the Writers Guild of America West
(WGA) for unpaid  writing  services on "Down  Range".  That claim was settled by
current management for the amount of $15,000 in July 1998.

     The Screen  Actors  Guild  (SAG) has also  asserted  that there are amounts
owing to four actors (Dale Dye, John Philbin, Tegan West, and Kiljoy Productions
fso Kathleen  Wilhoite),  arising out of "Down Range". The Company believes that
SAG has never  instigated any arbitration or other  proceeding to try to collect
on these claims.  Additionally,  there were two actors,  Corbin Bernsen and Jeff
Fehey who had  pay-or-play  contracts.  The outcome of these  contracts  and the
actors claims have not been resolved.

     In April,  1998, the Company  reached a settlement with Mr. Silva regarding
his action  against the  Company in the Supreme  Court of the State of New York.
Mr. Silva will discontinue the matter and the Company will authorize the sale of
Mr.  Silva's  shares in the  Company  under Rule 144,  up to a maximum of 25,000
shares per month.

     In April,  1998,  an action was  commenced  against the Company by Siegel &
Gale, a provider of brochure material for the Company. The lawsuit seeks payment
of $48,695,  plus costs,  related to work done by Siegel & Gale for the Company.
The  Company has not yet filed an Answer in this action and is in the process of
consulting with its counsel on the best course of resolving this matter.

                                      F-17
<PAGE>

     On November 21, 1996, the law form of Halperin,  Klein & Halperin  (counsel
to Mr. Silva)  commenced an action against the Company in the Civil Court of the
State of New York on a returned check in the amount of $5,000 for legal services
allegedly rendered to the Company.  The check was originally issued to plaintiff
in April,  1995 in connection  with the change of control of the Company at that
time.  The  Company  has filed an Answer in the action and intends to defend the
matter on the basis of a failure of consideration.

10.  Shareholders' Equity:

     On March  6,  1996  the  Board  of  Directors  of the  Company  approved  a
one-for-six  reverse  stock  split of the  outstanding  shares of the  Company's
Common Stock (the "Common  Stock").  The Reverse Stock Split was effective as of
March 18, 1996 (the "Record  Date").  On the Record Date, each six shares of the
Company's  then   outstanding   Common  Stock  (the  "Old  Common  Stock")  were
automatically  converted into one share of the new Common Stock,  par value $.01
per share (the "New Common Stock").

     No fractional  shares of New Common Stock were issued.  Rather,  holders of
Old Common  Stock who are  entitled to receive  fractional  shares of New Common
Stock will be rounded up to the nearest whole share of New Common Stock.

     The Reverse  Stock Split  resulted in a net  reduction of 11,408,973 in the
number on Common Shares outstanding,  including 1,995 shares issuable due to the
rounding up of fractional shares.

     Except  for the  number of shares of  Common  Stock  outstanding  after the
Reverse  Stock  Split,  the  Old  Common  Stock  and the New  Common  Stock  are
identical.

     On February 14, 1995, the then Board of Directors of the Company declared a
dividend payable to holders of record on February 24, 1995 ("the Dividend Record
Date") of the Company's common stock and Class A stock.  The dividend  consisted
of  1,700,000  shares of common  stock,  $.01 par  value  per  share,  of Global
Intellicom, Inc. that were owned by the Company. Holders of the Company's common
stock and Class A stock received .1233 and .0786 shares, respectively, of Global
common stock for each share of the Company's stock. The dividend was recorded as
a reduction of capital in excess of par value.

     The shares of Global  common stock were  distributed  to an escrow agent on
the Dividend Record Date pending  registration of the shares. The Securities and
Exchange  Commission  declared Global's  registration  statement effective as of
September  1,  1995  and,  accordingly,  the  escrow  agent  was  authorized  to
distribute the dividend shares.

     Communications and Entertainment  Corp. was originally formed to consummate
the  mergers  of  Double  Helix  Films,   Inc.   ("Double  Helix")  and  Odyssey
Entertainment  Ltd. pursuant to the Agreement and Plan of Merger dated September
22, 1989 ("the Merger  Agreement").  On September  6, 1990 the  shareholders  of
Double Helix and Odyssey approved the Merger Agreement. Pursuant to the terms of
the Merger Agreement, each share of common stock of Odyssey was convertible into
one share of Class A stock of the Company and each share of Double  Helix common
stock  was  convertible  into one share of the  Company's  common  stock.  Prior
management's  instructions  to the transfer  agent  required  that any shares of
Odyssey or Double  Helix  outstanding  at the time of the Merger not tendered to
the Company's  transfer agent for exchange by March 31, 1995 should be canceled.
Accordingly,  86,790 shares of the Class A stock and 10,496 shares of the common
stock reserved for exchange were canceled. The par value of the shares canceled,
of $5,837, was transferred to capital in excess of par. Upon further research by
counsel to the Company, the instructions of prior management were reversed,  and
all  cancelled  shares  were  reinstated,   with  the  result  that  $5,837  was
transferred back to stated capital.


                                      F-18
<PAGE>

     Additionally,  in accordance  with the Company's  charter,  all outstanding
shares of the Company's  Class A stock,  automatically  converted,  on March 31,
1995,  into shares of the  Company's  common  stock at a rate of .6375 shares of
common stock for each share of Class A stock.

11.  Stock Options and Warrants:

     The number of options and  warrants,  and exercise  prices in the following
paragraphs have been restated to give effect to a 1 for 6 Reverse Stock Split in
March 1996.

     The Company has an Incentive  Stock Option Plan (The "Option Plan") for its
key employees providing for the granting of options to acquire common stock. The
maximum  number of shares of common stock  subject to the Option Plan is 75,000,
plus 5% of any increase in the number of issued shares after the effective  date
of the Merger, excluding any increase due to stock awards to key employees or as
result of the  conversion of Class A stock.  The price for the shares covered by
each option  will not be less than 100% of the fair market  value at the date of
grant (110% for holders of more than 10% of the company's common stock). Options
granted  expire ten years from the date of grant (five years for holders of more
than 10% of the Company's common stock).


          A summary of options under the plan is as follows:

                                                Shares           Exercise Price

         Outstanding, June 30, 1993             63,250           $5.04 - $15.54
         Granted                                19,167           $9.00 - $13.86
         Canceled                              (22,917)          $9.00 - $15.36
                                               --------

         Outstanding, June 30, 1994             59,500           $5.04 - $15.54

         Canceled                              (59,500)          $5.04 - $15.54
                                               --------

         Outstanding, June 30, 1995               -0-   

         Outstanding, June 30, 1996               -0-   

         Outstanding, June 30, 1997               -0-   


     The Company  issued an aggregate of 134,854  warrants to the  purchasers of
common stock of the Company sold in private  placements  during fiscal 1992. The
exercise  prices range from $18.00 to $25.50 per share.  21,024 of such warrants
were exercised during 1992 at $18.00 per share.  During the years ended June 30,
1995,  1994 and 1993,  58,652,  53,500 and 608 warrants,  exercisable at $25.50,
$18.00 and 18.00 per share, respectively,  expired,  unexercised. The balance of
the warrants, exercisable at $18.00 per share, expired unexercised in July 1996.

     An  additional  70,833  warrants and options  were granted  during the year
ended June 30,  1992 to outside  consultants  for  services in  connection  with
private  placements.  The exercise prices range from $12.00 to $25.50 per share.
8,333 of such options were exercised in 1992 at $12.00 per share. 4,167 options,
exercisable at $16.50 per share, expired,  unexercised,  during fiscal 1993. The
balance expired, unexercised, during fiscal 1995.

     In fiscal 1992,  the Board of Directors  approved the grant of options,  to
purchase  6,000  shares  to the  outside  directors  of the  Company,  for their
services as directors,  at an exercise price of $18.96 per share.  An additional
6,000 options were granted  during fiscal 1993 to the outside  directors,  at an
exercise price of $10.08. The options to the directors have not yet been issued.



                                      F-19
<PAGE>

     During the year ended June 30, 1993,  8,333 options were granted outside of
the plan, at an exercise  price of $9.00,  to an officer in  connection  with an
employment  agreement.  Such options  expired during fiscal 1995.  Additionally,
1,667 options were granted,  at an exercise price of $9.00, to a director of the
Company for services rendered. Such options expired, unexercised,  during fiscal
1997.

     During fiscal 1993, warrants to purchase 12,500 shares were also granted to
outside consultants,  for services rendered,  at an exercise price of $13.14 per
share.  Such options  expired,  unexercised,  during  fiscal  1998.  Warrants to
purchase 70,833 shares were granted to outside consultants for services rendered
during fiscal 1994, at exercise  prices ranging from $7.50 to $21.00.  66,667 of
such  warrants,  exercisable at $9.00 to $21.00 per share,  expired  unexercised
during fiscal 1996.  The balance of the warrants  expired,  unexercised,  during
fiscal 1997.

     In April 1995,  following  the change in management  control,  the Board of
Directors authorized the issuance of 8,333 options to each of five new Directors
and 16,667  options to the president of the Company.  The Board also  authorized
the  issuance  of a total of  10,000  options  to two  outside  consultants  for
services in connection with the proxy contest. All such warrants are exercisable
for a four year period commencing October 13, 1995 at $3.92 per share.

     In August and October  1995,  the  Company  issued an  aggregate  of 26,041
warrants to purchasers of 12% Senior Unsecured Notes sold in private  placement.
The exercises prices ranged from $2.37 to $2.83 per share. With the exception of
4,167 warrants,  which are  exercisable  through August 1999 at $2.83 per share,
all of the  warrants  issued  in  connection  with the  private  placement  were
exchanged by the warrant  holders for  registered  shares of common stock of the
Company.  In  connection  with the private  placement,  the Company  also issued
33,333  warrants  to its outside  counsel in  consideration  for legal  services
performed, exercisable during the three year period commencing one year from the
date of issuance, at a price per share of $2.83.

     During the year ended June 30, 1996,  769,167 warrants were granted outside
of the Plan to officers and directors,  at exercise prices ranging from $1.50 to
$2.83. All such warrants were exercisable as of June 30, 1998.

     During  fiscal  1996,  the Company  also  granted  16,667  warrants,  at an
exercise price of $1.88 per share, to its outside counsel in connection with the
extension  of a note.  Additionally,  warrants to purchase  167,500  shares were
granted to  consultants  for services  rendered  during fiscal 1996, at exercise
prices ranging from $.76 to $1.88 per share.  All such warrants were exercisable
as of June 30, 1998.

     During the fiscal year ended June 30, 1997,  a total of 1,153,333  warrants
were issued to officers,  directors,  employees,  consultants and third parties,
exercisable  at prices  ranging  from $ .625 per share to $1.06 per  share.  The
warrants are exercisable  for periods ranging from three to five years.  None of
such warrants was exercised during fiscal 1997 or fiscal 1998.

     During the fiscal  year ended June 30,  1998,  a total of 254,260  warrants
were issued to third parties, exercisable at prices ranging from $1.00 per share
to $1.65 per share. The warrants are exercisable for periods ranging from two to
five years. None of such warrants was exercised during fiscal 1997 and 1998.

     On July 1, 1998,  a third  party  investor  in the  Company was granted the
right to acquire up to 150,000 transferable warrants having an exercise price of
$1.60 per share.

12.  Related Party Transactions:

     The firm of  Goodkind,  Labaton,  Rudoff  &  Sucharow,  of  which  David A.
Mortman, a former Director of the Company was a member, received legal fees from
the Company of $195,000 for the fiscal year ended June 30,  1995.  Additionally,
it received an aggregate of 522,641 shares of common stock of Global Intellicom,
Inc., a subsidiary of the Company,  valued at $155,905,  in consideration of the
cancellation of outstanding legal fees.

                                      F-20
<PAGE>

     The firm of David A. Mortman, P.C. and its predecessor firm, of which David
A. Mortman, a Director of the Company was a member, received legal fees from the
Company of $16,585 and $387,987  during the fiscal years ended June 30, 1995 and
1994, respectively.

     Lawrence I.  Schneider,  a former  member of the Board of  Directors of the
Company and one of three former Co-Chairman in the Office of the Chairman of the
Company  during the fiscal year ended June 30,  1996,  was also a  principal  of
Global Capital  Resources,  Inc. during that period,  a New York based financial
consulting  services  firm ("Global  Capital").  During the 11 month period from
May, 1995 through March,  1996,  Global Capital  rendered  financial  consulting
services to the Company in connection  with the change of management  control of
the Company.  Such services were rendered to the Company at the agreed upon rate
of $15,000 per month.  However,  in order to conserve the cash  resources of the
Company,  Global Capital agreed to accept stock options from the Company in lieu
of a cash payment. On March 6, 1996, the Board of Directors of the Company (with
Mr.  Schneider  abstaining  from the voting)  authorized  the issuance to Global
Capital  of stock  options  to  purchase  83,333  shares of Common  Stock of the
Company, exercisable over a five-year period at the exercise price of $1.875 per
share (after adjustment for the Reverse Split).

     During  the fiscal  years  ended  June 30,  1997 and 1996,  the law firm of
Herbst & Greenwald,  of which Mr.  Greenwald,  a director of the  Company,  is a
member,  received fees for legal services  rendered to the Company in the amount
of $21,564 and $9,075.

     On August 1,  1996,  the  Board of  Directors  of the  Company  offered  to
reimburse  the  members  of the  CECO  Shareholders  Committee  in kind  for all
expenses  incurred by such members in  connection  with the change of management
control of the Company  effected in April,  1995. The Board offered to reimburse
such expenses by issuing  stock  options to the  committee  members in an amount
equal to one and one-third times the amount of such expenses.  Robert Miller,  a
director of the Company,  agreed to accept options to purchase  40,000 shares of
the Company's  Common Stock,  exercisable over a five-year period at an exercise
price of $ .75 per share,  representing  the then  current  market  price of the
Company's  Common Stock on the date of grant.  In exchange,  Mr. Miller released
his claim for reimbursement of approximately $30,000 of expenses incurred by Mr.
Miller in connection with the change of control. Lawrence I. Schneider, a former
director of the Company  and also a member of the CECO  Shareholders  Committee,
has not  agreed to accept  options  in lieu of his  claim for  reimbursement  of
expenses in connection with the change in control.

     The  Company  has  entered  into  a  "first  look"  agreement  with  Presto
Productions,  a production company in which Stephen R. Greenwald,  a Director of
the Company,  has an interest.  Mr.  Greenwald's  interest in Presto varies on a
film-by-film  basis. The Company believes that the terms of its arrangement with
Presto are no less favorable than could be arranged with other independent third
party producers.

     In April, 1997,  Stephen R. Greenwald,  Lawrence I. Schneider and Robert E.
Miller,  Jr. made loans to the  Company in the  amounts of $50,000,  $25,000 and
$25,000  respectively.  Each loan was payable on demand bearing  interest at the
rate of 9.25%  per annum  and was  secured  by a  collateral  assignment  of the
Company's $300,000 receivable due from Kinnevik. In consideration of making such
loans,  the lenders  received  five-year  warrants to purchase  shares of Common
Stock of the Company,  exercisable  at $1.00 per share.  Messrs.  Schneider  and
Miller each  received  25,000  warrants  in  consideration  of their  respective
$25,000  loans to the Company,  and Mr.  Greenwald  (or his  designee)  received
50,000 warrants in consideration  of his $50,000 loan to the Company.  In March,
1998,  the loan of Mr.  Schneider  was repaid in full from the  proceeds  of the
Kinnevik receivable. However, Messrs. Greenwald and Miller agreed to a roll-over
of their loans against a second Kinnevik  receivable due in September,  1998. In
consideration  of the  roll-over,  Messrs.  Greenwald and Miller will receive an
additional  25,000 warrants and 12,500  warrants,  respectively,  exercisable at
$1.00 per share over a three year period.


                                      F-21
<PAGE>

13.  Subsequent Events:

     The Company signed an agreement with Kimon  Mediaright KB ("Kimon") on July
14, 1998 to purchase the assets of Kimon, valued at $4,500,000,  in exchange for
4,500,000 Odyssey shares of subordinated  convertible preferred stock, Series B,
having a value of $1.00 per share for conversion  purposes.  Kimon shall be able
to convert to Odyssey  common stock  between June 30, 2000 and December 31, 2000
on a dollar-for-dollar basis based on the price of the Company's common stock at
the time of conversion.  Kimon assets  purchased  consist of a film library with
worldwide  and/or  Scandinavian   distribution  rights  and  Scandinavian  video
distribution rights to Hallmark Entertainment products.

     In June,  1998, the Company  applied for, and was accepted for,  trading on
the Berlin Stock  Exchange under the symbol "ODY".  The German company  Berliner
Freiverkehr  (Aktien)  assisted  the  Company in the  application  and signed an
agreement  with the Company to serve as a market  maker/coordinator  in exchange
for 200,000  warrants  having an exercise price of $1.55 per share,  exercisable
during the two-year period commencing June 23, 1998.

     The Company  received  $150,000 in funding from the Augustine  Fund L.P. in
July,  1998.  In exchange  for the  financing,  the  Augustine  Fund  received a
$150,000  convertible  note  as well as up to  150,000  transferrable  warrants,
exercisable  at $1.60 per share for a three year period.  Augustine  can convert
into restricted shares of the Company's common stock at a discount to the market
price of the common stock at the time of the conversion  (i.e.,  at the lower of
the  market  price on the  closing  date,  or 80% of the market  price  prior to
conversion). Augustine and certain Augustine associated parties were also issued
a total of 45,000  shares of  restricted  common  stock in  connection  with the
transaction.

     Mr. Ira Smith,  one of  Odyssey's  Directors  on the Board,  resigned  as a
Director on July 2, 1998 to pursue other business interests.






                                      F-22
<PAGE>