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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-KSB

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

    For the fiscal year ended December 31, 2000
                              ------------------

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

    For the transition period from ____________ to _______________

    Commission File Number: 000-24706
                            ---------

                        SELECT MEDIA COMMUNICATIONS, INC.
       -------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

           New York                                  13-3415331
-------------------------------          ---------------------------------
(State or other jurisdiction of          (IRS Employer Identification No.)
 incorporation or organization)

              475 Park Avenue South, 10th Floor, New York, NY 10016
             ------------------------------------------------------
                    (Address of principal executive offices)

                                 (212) 545-1785
                           ---------------------------
                           (Issuer's telephone number)

                     44 East 32nd Street, New York, NY 10016
              ----------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

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

     Title of Class                    Name of each exchange on which registered

          None
--------------------------            ------------------------------------------

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

                         Common Stock ($0.01 par value)
--------------------------------------------------------------------------------
                                (Title of Class)

--------------------------------------------------------------------------------
                                (Title of Class)

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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [__]

State issuer's revenues for its most recent fiscal year. $477,899

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by references to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.)

Aggregate Market Value of Common Stock held by Non-Affiliates on March 30,
2001: $16,735,946

Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate market
value of the common equity held by non-affiliates on the basis of reasonable
assumptions, if the assumptions are stated.

                   ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
                           DURING THE PAST FIVE YEARS

Check whether Select Media filed all documents and reports required to be filed
by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [X]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 15,222,506 Shares of Common Stock on
March 30, 2001

Transitional Small Business Disclosure Format (Check One): Yes[ ]   No [X]

                       DOCUMENTS INCORPORATED BY REFERENCE

Not applicable.

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                                     PART I

Item 1. Description of Business.

This report on Form 10-KSB may be deemed to include forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, that involve
risk and uncertainty, including financial, regulatory environment and trend
projections, estimated costs to complete or possible future revenues from the
Company's expansion plans, the likelihood of successful completion of such
plans, as well as any statements preceded by, followed by, or that include the
words "intends," "estimates," "believes," "expects," "anticipates," "should,"
"could," or similar expressions; and other statements contained herein regarding
matters that are not historical facts. Although the Company believes that its
expectations are based on reasonable assumptions, it can give no assurance that
its expectations will be achieved. The important factors that could cause actual
results to differ materially from those in the forward-looking statements below
include, without limitation, the risks referenced from time to time in the
Company's filings with the Securities and Exchange Commission, including this
Form 10-KSB for the year ended December 31, 2000 under the heading "Risk
Factors" on page 4, below. Except for its reporting responsibilities, the
Company does not undertake any obligation to release publicly any revisions to
such forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.

Select Media Communications, Inc. (the "Company" or "Select Media"), a New York
media company, was organized in September 1981. The Company's common stock is
traded in the non-Nasdaq over-the-counter market (the "pink sheets") under the
symbol "SMTV.OB." Select Media began operations as a producer and distributor of
"vignettes," which are short-form (thirty-second) informational programs
distributed by particular sponsors for viewing during regular programming. In
1998, Select Media hired personnel to provide services to worldwide news
broadcasters and act as a television news agency under the name "Select
International Television Network" ("SITN") to produce and distribute news
segments for sale to local and foreign news broadcasters. During 1999, the
Company's principal sources of revenue were the SITN operations and the
production and distribution of video press releases. Because of its landlord
dispute and its subsequent move to a new facility, Select Media closed its SITN
business permanently on October 30, 2000. See Item 3, "Legal Proceedings."
During 2000, the Company's principal source of revenue was its Sigma Sound
Studio, Inc. subsidiary.

On October 13, 1995, the Company filed a voluntary petition for reorganization
pursuant to Chapter 11 of Title 11 of the United States Bankruptcy Code. The
petition was filed in the United States Bankruptcy Court for the Southern
District of New York and its plan of reorganization was confirmed on August 28,
1997. In the period from the Company's bankruptcy filing in October 1995 until
September 1998, the Company was essentially dormant. In September 1998, the
Company reactivated its marketing efforts, began marketing its vignette products
to advertisers, began production and distribution of video press releases for
General Motors Corporation and began repositioning the Company and its business.
In 1999, the Company was dependent upon one major customer (General Motors
Corporation) for over 35% of its revenues. Beginning in the fall of 1999, the
Company began its restructuring and moved its office. In 2000, the

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Company closed its International News Division operated under the name SITN,
which accounted for 45% of 1999 revenues and focused on restructuring and
acquiring Sigma and AHP. Thus, in 2000, the Company has not been dependent on
any major customers, and does not reasonably foresee any such dependence for the
balance of the current year. The Company's sources of revenues during the period
covered by this report consisted of revenues from the distribution of video news
releases, its international news division and revenue from its Sigma Sound
Studio, Inc. subsidiary ("Sigma"). Resale of advertising airtime has never
constituted a major source of the Company's revenues.

         In January 2000, Select Media repositioned its business as the owner of
entertainment content providers whose product is marketed through traditional
media and over the Internet. In January 2000, Select Media purchased all the
outstanding stock of Sigma for $1,000,000, of which $400,000 was paid in 1999,
with the balance due in payments of $200,000 on June 30, 2000 and January 30,
2001. The Company paid $100,000 of the $200,000 payment due June 30, 2000 and
the Company received a 180-day extension for payment of the balance. On December
21, 2000, the Company received a further extension on the balance of the June
30, 2000 payment. On April 11, 2001, the Company signed a Forbearance and
Settlement Agreement extending the time to pay the balance and certain monies
advanced by Joseph Tarsia to May 31, 2001. Approximately $715,000 will be due.
The Company's obligation to pay the balance on the Sigma acquisition is secured
by a pledge of all of Sigma Sound's assets, including accounts receivable,
general intangibles, equipment, goods, instruments and inventory. The Company
also assumed $105,000 of Sigma accounts payable and other current liabilities
(the "Sigma Liabilities"). None of the Sigma Liabilities is secured by any
security interest in any of the Sigma Assets. Sigma is a full service recording
studio that provides services to record companies, independent artists and
record producers. Founded in 1968 by Joseph Tarsia, Sigma's president, Sigma is
a state of the art recording facility, including both analog and digital
capabilities. Sigma and its staff of engineers assist record producers in
recording, mixing and editing music and video tracks for sale as recorded music
or videos. In March 2000, Select Media purchased the assets of After Hours
Productions, Inc. ("AHP"), consisting of certain contracts for recording
projects, for $125,000, which was paid in cash at closing. AHP creates custom
music and video products. AHP was partly owned by Joseph Tarsia. These
acquisitions were accounted for as purchases. See Financial Statements and notes
to Financial Statements.

On September 11, 2000, the Company entered into a letter of intent to purchase
all the assets and liabilities of Betelgeuse Productions, LLC ("Betelgeuse"), a
full service television and video production and post-production business in New
York, for a total of $10,000,000 in cash, subject to adjustment. On December 6,
2000, Select Media and Betelgeuse signed a definitive Asset Purchase Agreement
(the "Definitive Agreement"); the Company made a down payment of $200,000 to
Betelgeuse, with three additional $100,000 payments due in the following three
months for a total down payment of $500,000. Of the three additional amounts due
toward the down payments, $98,102 has been paid. The balance of the purchase
price will be due at a closing to be held within six (6) months of the signing
of the Definitive Agreement and the completion of certain due diligence. The
Company has received a firm commitment from Lloyds Bahamas Securities, Ltd.
("Lloyds") for the $500,000 down payment. Lloyd will provide the $500,000 down
payment in exchange for 500,000 shares of restricted Common Stock of the
Company. $298,102 has been provided toward the down payment. The Company does
not yet have a commitment from a funding source for the balance of the purchase
price.

When and if the Betelgeuse transaction is consummated, the Company will enter
into agreements with John Servidio and Sam Domenico (the principals of
Betelgeuse), which include certain stock options. The options to be granted to
Servidio and Domenico are for 1,000,000 shares of Select Media Common Stock at
an exercise price of $1.00 per share, which vest 33 1/3% on the first, second
and third anniversaries of the signing of the definitive agreement.


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Market Strategies

During the year ended December 31, 2000, the Company restructured to market its
video and audio production business into three distinct markets: (1) short and
long form television production and distribution; (2) international news
production and distribution (the "SITN Business"); and (3) entertainment content
production and distribution. On October 30, 2000, the Company voluntarily
vacated its offices at 666 Third Avenue and closed the SITN Business.

Short and Long Form Television Production and Distribution

The Company's legacy vignette and video press release business comprise this
market area, along with proposed future television projects. The Company retains
its ability to produce and distribute both short-form and long-form video
productions. These include vignette products, video press releases and
traditional television programming. The Company did not produce any traditional
television programming during the year ended December 31, 2000, although the
Company has produced such programming in the past. Because of the Company's
repositioning of its business in 2000, the Company has focused on products other
than vignettes and video press releases.

Select Media continues to market its remaining vignette products to large
advertisers directly to the marketing departments of these companies. Select
Media uses its own internal staff for such marketing. Generally, Select Media
purchases "distressed" or unwanted airtime at a discount for use by its
customers. Select Media resells the airtime with a slight mark-up to cover its
costs. Given the shift in the Company's business to that of an entertainment
content provider, the Company no longer markets its video press release service
to major manufactures of consumer products.

International News Production and Distribution--SITN

During 1998 and 1999, the SITN Business was active and the Company produced and
distributed news segments on behalf of a number of international news operations
with small U.S. presences. During the year ended December 31, 1999, the SITN
Business segment accounted for approximately 45% of the Company's revenues. The
Company marketed the services of its SITN Business to foreign journalists
stationed in New York. In 2000, the SITN Business was inactive due to a landlord
dispute (see Item 3, "Legal Proceedings") and a subsequent move to other office
space, and on October 30, 2000, Select Media closed the SITN business
permanently.

Entertainment Content Production and Distribution.

The Company's entrance into this business segment began in January and March
2000 with the acquisition of Sigma and AHP by Select Media. Sigma owns a state
of the art recording facility staffed by experienced professional sound
engineers. AHP produces custom audio and video content for sale through direct
marketers, television shopping channels and traditional record distributors.

On December 6, 2000, Select Media signed a Definitive Agreement to acquire
Betelgeuse for this business segment. Betelgeuse is a full-service production
and post-production facility located at 44 E. 32nd Street in New York.
Betelgeuse owns several state of the art editing suites containing digital

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computer editing equipment, as well as, a number of studios for producing video
programming, voice-overs, dubbing for foreign language productions and the like.

Sigma markets its recording services to independent record producers and
recording artists. Sigma markets its services directly through its principals.
Sigma and AHP have also produced compilation albums sold direct to consumers
through home shopping channels, direct response television and direct mail.

Betelgeuse markets its services to local television channels, cable and
broadcast networks directly through its marketing department. Betelgeuse does
not produce product for sale directly to consumers.

The Company distributes its products mainly electronically either by tape or via
satellite. The Company's Sigma subsidiary provides its services to independent
record producers and recording artists from throughout the United States.

During the year ended December 31, 2000, the Company has not been dependent on
any major customer. For the year ended December 31, 1999, the Company sold a
substantial portion of its services to one customer. Sales to this customer
totaled $800,000 (or 35% of revenue for the period).

The Company has not and does not in the future expect to have significant
research and development expenses.

                                  RISK FACTORS

Select Media's business is subject to numerous risk factors, including, but not
limited to, the following:

RISKS RELATED TO THE COMPANY'S BUSINESS

Conflicts of Interest.

None of the Company's officers or directors has any conflicts of interest. Mr.
Mongiardo and Mr. Simmons, the Company's non-employee directors, may in the
future participate in business ventures that could be deemed to compete with the
Company. Conflicts of interest and non-arms length transactions may also arise
in the future in the event the Company's officers or directors become involved
in the management of any firm with which the Company transacts business. The
Company has adopted a policy that the Company will not seek a merger with, or
acquisition of, any entity in which members of the Company's management serve as
officers, directors or partners, or in which they or their family members own or
hold any material ownership interest.

Mr. Mongiardo is associated with Homewood Capital Group, a business consulting
and investment banking firm, as disclosed in Item 9, below. Consequently, there
are potential conflicts of interest in his acting as a director of the Company.

                                       6
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Insofar as Mr. Mongiardo is engaged in other business activities, management
anticipates he will devote only a minor amount of time to the Company's affairs.

The officers and directors of the Company may in the future become stockholders,
officers or directors of other companies that may be engaged in business
activities similar to those conducted by the Company. Accordingly, conflicts of
interest may arise in the future with respect to such individuals acting on
behalf of the Company or other entities. Moreover, additional conflicts of
interest may arise with respect to opportunities which come to the attention of
such individuals in the performance of their duties or otherwise. The Company
does not currently have a right of first refusal pertaining to opportunities
that come to management's attention insofar as such opportunities may relate to
the Company's business operations. The Company has adopted a policy that the
Company will not seek a merger with, or acquisition of, any entity in which
members of the Company's management serve as officers, directors or partners, or
in which they or their family members own or hold any material ownership
interest. With the exception of the policy regarding mergers and acquisitions
described in the preceding sentence, the Company does not have any policies
regarding resolving conflicts of interest.

Select Media Anticipates Future Losses and Negative Cash Flow; Substantial
Accumulated Deficit.

Select Media expects operating losses and negative cash flow to continue for the
foreseeable future. Select Media anticipates the Company's losses will increase
significantly from current levels because the Company expects to incur
additional costs and expenses related to:

-    Termination of the SITN International News business, which provided 45% of
     revenues in the year ended December 31, 1999;
-    Brand development, marketing and other promotional activities;
-    Development of new products and services;
-    Expansion of the Company's operations;
-    Integration of the Sigma, AHP and Betelgeuse acquisitions;
-    Potential other acquisitions in the Company's areas of focus;
-    Development of relationships with strategic business partners; and
-    Possible costs of litigation.

As of December 31, 2000, Select Media had an accumulated deficit of $15,800,799.
Select Media incurred net losses of $6,053,253 on gross sales of $477,899 for
the fiscal year ended December 31, 2000. These losses were due to an increase in
expenses related to the relocation of the Company's offices, the start of new
projects to develop new sources of revenue coupled with the lack of revenue due
to the closing of the SITN business. The Company's ability to become profitable
depends on the Company's ability to generate and sustain substantially higher
net sales while maintaining reasonable expense levels. If Select Media does
achieve profitability, the Company cannot be certain that the Company would be
able to sustain or increase profitability on a quarterly or annual basis in the
future. See Item 6-"Managements Discussion and Analysis or Plan of Operations."

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Qualified Report Of Independent Certified Public Accountants Regarding the
Company's Ability to Continue as a Going Concern.

Our independent certified public accountants' report on our financial statements
for the year ended December 31, 2000 states that the Company's working capital
deficiency of $8,636,217, stockholders' deficiency of $6,797,929 and losses from
operations of $5,961,485 raise substantial doubt about Select Media's ability to
continue as a going concern. See Note 1 to the Company's Financial Statements.

Securities Law Violations, Rescission Expenses and Costs of Registration.

In October 1999, the Company engaged in the sale of 4,500,000 shares of its
Common Stock in a private placement under the Securities Act of 1933 (the
"Securities Act"). Although the Company offered and sold the securities in good
faith, the Company did not have the exemption for such sales that the Company
assumed it had. The Company made rescission offers to these investors; if these
investors accepted such rescission offers, the Company would have been obligated
to pay $1,000,000 plus interest to these investors. Lloyds, as agent for the
investors, indicated to the Company that the investors were not interested in
accepting the proposed rescission offer.

The Company undertook at its own expense to register these shares for resale by
these investors under the Securities Act. A Form SB 2 filed January 31, 2001
registering these shares became effective March 26, 2001.

If the Company Loses the Pending Lawsuit with Contractors Concerning Leasehold
Improvements, Such a Loss Will Have a Material Adverse Effect on the Company's
Financial Statements.

The Company is in a dispute with several contractors relating to the Company's
leasehold improvements at its prior offices at 666 Third Avenue, New York. See
Item 3, "Legal Proceedings." If the Company loses this dispute, it could result
in substantial liability to the Company of approximately $500,000 plus
interest, which will have a material adverse effect on the Company's business
and financial statements.

The Company has moved its Offices to a New Facility.

On October 30, 2000, the Company vacated the facility at 666 Third Avenue due to
the dispute with its Landlord. The Company is now subletting space from
Betelgeuse at 475 Park Avenue South, 10th Floor, New York, New York 10016. The
Company incurred substantial costs in the move, and the move has caused some
disruption in its activities. The Company also determined at the time of the
move to cease SITN operations. The move itself, the disruption caused by the
move and the decision to cease SITN operations had a material adverse effect on
the Company's financial status for the current year.

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The Company Has A Substantial Payroll Tax Liability That is Currently being
Negotiated with the Internal Revenue Service.

Included in the liabilities on the balance sheet found in the Company's audited
financial statements is an accrued expense of approximately $1,186,000 that
represents past due federal payroll taxes and estimated penalties and interest.
The Company is attempting to negotiate with the Internal Revenue Service (the
"IRS") for a reasonable payment plan. If the Company is unable to negotiate a
payment plan with the IRS, the IRS could file a tax lien on the Company's
assets, which would have a material adverse effect on the Company's business.

The Company Has A Substantial Tax Liability to the City of New York And is Late
in Making Payments.

The Company owes the City of New York approximately $230,000 (including
interest) in pre-bankruptcy commercial rent tax. Under the Plan of
Reorganization, the Company was required to make semi-annual payments of
principal and interest to the New York City Department of Finance beginning in
February 1998. To date, the Company has been unable to make any payments and has
accrued this liability on its financial statements. If the Company continues to
fail to pay this liability as payments are due, the Department of Finance could
declare Select Media in default of its obligations under the Plan of
Reorganization and could file an action to attach the Company's assets, which
would have a material adverse effect on the Company's business.

The Company's Operating Results are Volatile and Difficult to Predict. If Select
Media Fails to Meet the Expectations of Public Market Analysts and Investors,
the Market Price of the Company's Common Stock May Decrease Significantly.

The Company's annual and quarterly operating results may fluctuate significantly
in the future due to a variety of factors, many of which are outside of the
Company's control, including, among other things, the unpredictability of
consumer trends. Because the Company's operating results are volatile and
difficult to predict, Select Media believes that quarter-to-quarter comparisons
of the Company's operating results are not a good indication of the Company's
future performance. It is likely that in some future quarter the Company's
operating results may fall below the expectations of securities analysts and
investors. In this event, the trading price of the Company's Common Stock may
fall significantly. Factors that may harm the Company's business or cause the
Company's operating results to fluctuate include the following:

 -   The Company's decision to close the SITN Business (its International News
     division), which accounted for 45% of the Company's revenues in 1999;
 -   The Company's inability to obtain new customers at reasonable cost and
     retain existing customers;
 -   Decreases in the funds available for marketing and promoting the Company's
     services;
 -   The Company's inability to manage integration of acquisitions;
 -   The Company's inability to adequately maintain, upgrade and develop the
     Company's technical systems;
 -   The ability of the Company's competitors to offer competitive services or
     products;

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 -   Price competition;
 -   The termination of existing, or failure to develop new, strategic marketing
     relationships;
 -   Increases in the cost of marketing; and
 -   The amount and timing of operating costs and capital expenditures relating
     to expansion of the Company's operations.

A number of factors will cause the Company's gross margins to fluctuate in
future periods, including the mix of services provided by the Company and its
subsidiaries, the market for the Company's products, the Company's ability to
keep up with technical innovations and efficiencies and the like. Any change in
one or more of these factors could harm the Company's gross margins and
operating results in future periods.

To Manage the Company's Growth and Expansion, Select Media Needs to Integrate
its Acquisitions. If Select Media Is Unable To Do So Successfully, the Company's
Business Would Be Seriously Harmed.

The Company's growth in operations and possible acquisitions will place a
significant strain on the Company's management, information systems and
resources. In order to manage this growth effectively, Select Media needs to
continue to improve the Company's financial and managerial controls and
reporting systems and procedures. The Company's failure to successfully
implement, improve and integrate these systems and procedures would harm the
Company's results of operations.

If Select Media Is Unable To Obtain Financing, The Company Will Be Unable To
Complete The Acquisition Of Betelgeuse, Which Would Seriously Affect The
Company's Business Plan.

Although the Company has secured a commitment from Lloyds for the down payment
on its acquisition of Betelgeuse, the Company does not yet have financing
committed for the balance of the purchase price of $9,500,000. If the Company is
unable to complete the acquisition of Betelgeuse because it is unable to get
sufficient financing, the Company may lose any monies given to Betelgeuse as a
down payment on this transaction. The Company expects to raise the balance of
the purchase price through a public or private offering of its securities. The
Company has not yet obtained any commitment or letter of intent for this
proposed offering.

Select Media May Not Be Able To Compete Successfully Against Current and Future
Competitors.

Select Media faces competition from some of the largest entertainment companies
in the United States.

Select Media expects competition to intensify in the future, as additional
distribution channels for entertainment product are opened.

In its International News business (SITN Business) segment, because of the delay
in obtaining its necessary studio space and its subsequent move to a new
facility, Select Media closed its SITN Business permanently on October 30, 2000.

In its Entertainment Content business, Sigma competes with numerous recording
studios located throughout the United States. Sigma can successfully compete
with these competitors because of its central location on the eastern seaboard,
its state of the art equipment and its facility and its staff of experienced
professional engineers.

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AHP competes with a large number of independent record and video producers on
the basis of expertise and creativity.

Betelgeuse competes with a large number of independent video and film
production, post-production and editing facilities throughout the United States.
Betelgeuse competes with these competitors based on its state of the art
equipment and its staff of experienced editors, producers and technicians.

Many of the Company's competitors have longer operating histories, larger
customer bases, greater brand recognition and significantly greater financial,
marketing and other resources than does Select Media. Many of these competitors
can devote substantially more resources to marketing and promotion than can
Select Media. In addition, larger, well-established and well-financed
entertainment companies may try to offer competing products. The Company's
competitors may be able to adopt more aggressive pricing policies than can
Select Media.

If Select Media Does Not Successfully Expand the Company's Product Offerings,
the Company's Business Could be Seriously Harmed.

If Select Media does not successfully expand the Company's product offerings,
including services of its subsidiaries, Select Media will not be able to
increase the Company's net sales in accordance with the expectations of
securities analysts and investors. In such an event, the Company's business will
be harmed. The Company's success depends on the Company's ability to expand the
Company's product and service offerings rapidly in order to accommodate a
significant increase in customer orders. The Company's planned expansion may
cause disruptions that could harm the Company's business, results of operations
and financial condition.

If Select Media Does Not Respond To Rapid Technological Changes, the Company's
Services Could Become Obsolete and the Company's Business Would Be Seriously
Harmed.

If Select Media faces material delays in introducing new services, products and
enhancements, the Company's customers may forego the use of the Company's
services and use those of the Company's competitors. To remain competitive,
Select Media must continue to improve and expand its product choices and
value-added services. The entertainment industry is rapidly changing as a result
of technology improvements, new distribution channels and new customer demands.
If competitors introduce new products and services embodying new technologies,
or if new industry standards and practices emerge, the Company's existing
products and services may become obsolete. Developing, enhancing and upgrading
the Company's technology entails significant technical and business risks.
Select Media may use new technologies ineffectively or Select Media may fail to
adapt the Company's existing technology and the Company's computer network to
customer requirements or emerging industry standards.

If the Protection of the Company's Proprietary Rights Is Inadequate, the
Company's Business Will Be Seriously Harmed.

Select Media, Sigma and Betelgeuse produce different types of products with
differing intellectual property rights and concerns. As of the date of this

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filing, the Company and its subsidiaries have not filed for copyrights or
patents. Select Media has filed for and been granted the trademark on its
"Horror Hall of Fame" television program and recently renewed this trademark for
an additional five (5) years. Select Media also has filed for and been granted
the trademark on its "Blade Warrior" series, which it produced in 1993-94, which
was a long-form weekly series. Select Media's trademark rights to the "Blade
Warrior " name expire in five (5) years. In the future, to the extent the
Company or its subsidiaries produce unique entertainment products, such as
vignettes, original musical works or television programs, except as described in
the following two sentences, the Company will file for the copyrights in the
individual product and be responsible for protecting those rights. Each product
and project will have different contractual arrangements, which will determine
which party owns the intellectual property rights in the product or project.
Where Select Media, Sigma or Betelgeuse provide production, post-production,
editing or sound engineering services to customers in producing the customers'
entertainment products, the customers are responsible for protecting their
copyrights.

The Company will depend on copyright protection to protect the content of its
own products, such as original television programming. This need will increase
in the future because the Company is now dedicated to creating new product. With
the addition of Sigma, the Company will face significant challenges in the
changing distribution systems under development for prerecorded music product
over the Internet. These challenges may include inadequate copy protection
software, which may deprive the Company of royalties for downloaded product that
is subsequently copied and redistributed without authorization. Sigma does not
now distribute prerecorded music over the Internet. Betelgeuse does not
currently create original programming. To the extent it creates original
programming to which it will own the intellectual property rights, Betelgeuse
will also need to file for copyright protection to protect its entertainment
products.

In addition, the Company intends to seek trademark protection for its logos,
trademarks and trade names for itself and its subsidiaries. Select Media has not
yet begun this process.

If the steps Select Media takes to protect the Company's proprietary rights are
inadequate, Select Media may be unable to enforce those rights in case of
infringement and may be harmed financially.

The Loss of the Services of One Or More of the Company's Key Personnel, or the
Company's Failure To Attract, Assimilate and Retain Other Highly Qualified
Personnel in the Future Would Seriously Harm the Company's Business.

The loss of the services of one or more of the Company's key personnel could
seriously harm the Company's business. Select Media depends on the continued
services and performance of the Company's senior management and other key
personnel, particularly Mitch Gutkowski. Mr. Gutkowski and all of the Company's
key employees are bound by employment agreements. Select Media does not have
"key person" life insurance policies covering any of the Company's employees.

Risks Associated With Potential Acquisitions.

If Select Media is presented with appropriate opportunities, Select Media
intends to make investments in complementary companies, products or

                                       12
<PAGE>

technologies. Select Media may not realize the anticipated benefits of any
acquisition or investment. If Select Media buys a company, Select Media could
have difficulty in assimilating that company's personnel and operations. In
addition, the essential personnel of the acquired company may decide not to work
for the Company. If Select Media makes other types of acquisitions, Select Media
could have difficulty in assimilating the acquired technology or products into
the Company's operations. These difficulties could disrupt the Company's ongoing
business, distract the Company's management and employees and increase the
Company's expenses. Furthermore, Select Media may have to incur debt or issue
equity securities to pay for any future acquisitions or investments, the
issuance of which could be dilutive to the Company or the Company's existing
stockholders.

Existing Stockholders Will Be Able to Exercise Significant Control Over Select
Media.

Mr. Gutkowski, Chairman and Chief Executive Officer of Select Media, and Mr.
Sartorio, an employee of the Company, each own approximately 13% of the
Company's common stock and, along with the Company's other executive officers,
directors, employees and entities affiliated with them, if acting together,
would be able to significantly influence all matters requiring approval by the
Company's stockholders, including the election of directors and the approval of
mergers or other business combination transactions. These stockholders, taken
together, beneficially own approximately 48.7% of the Company's outstanding
common stock and can effectively elect all directors and pass any action
requiring stockholder approval at a meeting. Mr. Sartorio is an employee of the
Company responsible for mergers and acquisitions and corporate structure issues.
He is not an officer of Select Media. See Item 11, "Security Ownership of
Certain Beneficial Owners and Management" and Item 9 "Directors, Executive
Officers, Promoters and Control Persons."

RISKS RELATED TO SECURITIES MARKETS

Select Media May Be Unable to Meet the Company's Future Capital Requirements.

Select Media cannot be certain that additional financing will be available to
the Company on favorable terms when required, or at all. The Company does not
have a firm commitment for financing the balance of the Betelgeuse Acquisition
costs. If Select Media raises additional funds through the issuance of equity,
equity-related or debt securities, such securities may have rights, preferences
or privileges senior to those of the rights of the Company's Common Stock and
the Company's stockholders may experience additional dilution. Select Media
requires substantial working capital to fund the Company's business. Since the
Company's emergence from Chapter 11 bankruptcy proceedings, Select Media has
experienced negative cash flow from operations and expects to experience
significant negative cash flow from operations for the foreseeable future. The
Company does not yet have a commitment for the $9,500,000 balance of the
purchase price for Betelgeuse. The Company's anticipated sources of funds in
2001 include an additional $3.0 million best efforts letter of intent from
Lloyds contingent upon the Company's relisting on the OTC Bulletin Board, and
expected revenues. The Company is not assured of receiving any additional
financing from Lloyds in 2001 under the best efforts letters of intent. Select
Media will need to raise additional funds before the expiration of such period
to cover the Betelgeuse acquisition and any unexpected expenses.

                                       13
<PAGE>

In these best efforts financings, Lloyds is acting to obtain financing for the
Company from Lloyds' customers or Lloyds' own funds. Lloyds has a consulting
agreement with Select Media under which it provides a variety of services to
Select Media and receives compensation for such services, including finder's
fees for introducing investors to the Company. Lloyds is an investment banking
and securities brokerage firm located in Nassau, the Bahamas and is subject to
the financial laws and regulations of the government of the Bahamas in its
activities as a broker-dealer for Select Media.

In addition, although the Company has a firm commitment from Lloyds to cover the
$500,000 down payment on the Betelgeuse acquisition of which $298,102 has been
paid, the Company does not have a commitment for the balance of $9,500,000 of
the purchase price. If the Company is unable to secure financing, the Company
could forfeit any monies paid to Betelgeuse as a down payment.

Broker-Dealer Sales of Shares.

The Company's Common Stock is quoted in the "pink sheets." The Nasdaq Stock
Market, Inc. has recently revised the entry and maintenance criteria for listing
eligibility on The Nasdaq SmallCap Market(TM) to require at least $4 million in
net tangible assets or $750,000 net income in two of the last five years, a
public float of at least 1 million shares, $5 million market value of public
float, a minimum bid price of $4.00 per share, at least three market makers, and
at least 300 stockholders. The maintenance standards (as opposed to entry
standards) require at least $2 million in net tangible assets or $500,000 in net
income in two of the last three years, a public float of at least 500,000
shares, a $1 million market value of public float, a minimum bid price of $1.00
per share, at least two market makers, and at least 300 stockholders.

The Company can give no assurances that the Common Stock will ever qualify for
inclusion on the Nasdaq System. Until the Company's shares qualify for inclusion
in the Nasdaq system, the Common Stock will continue to be traded in the
over-the-counter markets through the "pink sheets", as the common stock is
currently traded, or on the OTC Bulletin Board.

If the Company's stock price falls below $5.00 per share, the Company's Common
Stock would be covered by SEC Rule 15g-9 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), that imposes additional
sales practice requirements on broker-dealers who sell such securities to
persons other than established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with net worth
in excess of $2,500,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse). For transactions covered by Rule 15g-9, the broker-dealer
must make a special suitability determination for the purchaser and receive the
purchaser's written agreement to the transaction before the sale. The
broker-dealer must also provide the purchaser with specific disclosures
regarding the risks of investing in "penny stocks," customer rights and broker
responsibilities. Consequently, Rule 15g-9 may affect the ability of
broker-dealers to sell the Company's securities and may affect the ability of
the stockholders to sell their shares in the secondary market. Before the sale
or purchase of a penny stock, the broker-dealer must provide the customer with
the current bid and offer quotations for the penny stock, must disclose the

                                       14
<PAGE>

brokerage firm's compensation for the trade, including markups and markdowns,
and must disclose the salesperson's compensation for the trade, including cash
or other compensation. In addition, the brokerage firm must sent to the
investor:

         (a) monthly account statements giving an estimate of the value of each
             penny stock in the customer's portfolio, if there is enough
             information to make such an estimate; and

         (b) a written statement of the investor's financial situation and
             investment goals, which must be signed and returned to the
             brokerage firm.

The effect of Rule 15g-9 can be to decrease liquidity by making it more
difficult for investors to purchase or sell shares of the Company's Common Stock
in the market. If the Company's common stock became subject to this rule, the
difficulties involved in buying or sell the common stock could force down the
price of the common stock.

The Company has cooperated with Brockington Securities, Inc. in its application
to act as a market maker in the Company's Common Stock. The Company has not
furnished any compensation to Brockington to act as a market maker.

The Company's Common Stock Price May Be Volatile, Which Could Result in
Substantial Losses For Individual Stockholders.

The market price for the Company's common stock is likely to be highly volatile
and subject to wide fluctuations in response to factors including the following,
some of which are beyond the Company's control:

-   Actual or anticipated variations in the Company's quarterly operating
    results;
-   Announcements of new products or services by the Company or the Company's
    competitors;
-   Changes in financial estimates by securities analysts;
-   Conditions or trends in the entertainment industry;
-   Changes in the economic performance and/or market valuations of other
    independent entertainment companies;
-   Announcements by the Company or the Company's competitors of significant
    acquisitions, strategic partnerships, joint ventures or capital commitments;
-   Additions or departures of key personnel;
-   Release of lock-up or other transfer restrictions on the Company's
    outstanding shares of common stock or sales of additional shares of common
    stock; and
-   Potential litigation.

                                       15
<PAGE>

If the Company's Stock Price Is Volatile, Select Media Could Face a Securities
Class Action Lawsuit.

In the past, following periods of volatility in the market price of their stock,
many companies have been the subjects of securities class action litigation. If
disgruntled stockholders sued Select Media in a securities class action, it
could result in substantial costs and a diversion of management's attention and
resources and would harm the Company's stock price.

Substantial Sales of the Company's Common Stock Could Cause the Company's Stock
Price To Fall.

If the Company's stockholders sell substantial amounts of the Company's Common
Stock in the public market, the market price of the Company's Common Stock could
fall. Such sales also might make it more difficult for the Company to sell
equity or equity-related securities in the future at a time and price that
Select Media deems appropriate. The Company's stock is thinly traded and small
volume fluctuations can have major impacts on price.

Reporting Requirements May Delay or Preclude Acquisition.

Sections 13 and 15(d) of the Exchange Act require companies subject thereto to
provide certain information about significant acquisitions, including certified
financial statements for the company acquired, covering one, two, or three
years, depending on the relative size of the acquisition. The time and
additional costs that may be incurred by some target entities to prepare such
statements may significantly delay or essentially preclude consummation of an
otherwise desirable acquisition by the Company. Acquisition prospects that do
not have or are unable to obtain the required audited statements may not be
appropriate for acquisition so long as the reporting requirements of the
Exchange Act are applicable.

Item 2. Description of Property.

During the year ended December 31, 1999 and until October 30, 2000, the Company
leased a facility as its headquarters located at 666 Third Avenue, New York, NY.
This facility contained studio space, editing equipment and offices. The
facility contained approximately 16,700 square feet total, of which 11,000
square feet were used for office space; 4,000 square feet were to be used for
studios and 1,200 square feet were used to house equipment. The lease on this
facility was to expires on February 15, 2015 and the annual lease payments in
2000 were $522,951 for the entire facility. However, because of its dispute with
its landlord, the Company vacated this facility on October 30, 2000. Litigation
concerning this dispute was resolved in February 2001. See Item 3, "Legal
Proceedings." Select Media is now using excess space leased by Betelgeuse at 475
park Avenue South, 10th Floor, New York, New York 10016 at a monthly rental of
$6,200. The Company anticipates finding permanent space for its headquarters in
New York the second half of 2001.

As part of the Sigma transaction, the Company leases a facility located at North
12th Street, Philadelphia, Pennsylvania as the recording studio and offices of

                                       16
<PAGE>

Sigma. This facility contains recording studio space, editing equipment and
offices. The facility contains approximately 3,000 square feet total, of which
1,000 square feet are used for office space and 2,000 square feet are used for
studios. The lease on this facility expires January 31, 2005 and the annual
lease payments are $76,000 for the entire facility. This facility is owned by an
affiliate of Joseph Tarsia.

Item 3. Legal Proceedings.

In November, 1999, 405 Lexington, L.L.C. (the "Landlord") began an action in New
York City Landlord-Tenant Court alleging that Select Media had breached its
lease and seeking the payment of use and occupancy. The Landlord sought up to
$600,000 in additional payments based on an alleged breach of the lease. The
Company defended this action. On a motion by the Company, this action was
consolidated with the Supreme Court Action discussed in the following paragraph.

In May 2000, Select Media began an action in New York Supreme Court against the
Landlord seeking an injunction to permit completion of the build-out of the
studios to be used for SITN and surrounding space in its leased premises, the
release of $706,880 of Landlord's contributions toward build-out already
completed and for damages in excess of $10 million for loss of the SITN
business. In February 2001, the parties resolved the matter and both actions
were dismissed with prejudice. The Landlord, after exercising on a $ 1 million
security deposit made by the Company, agreed to pay the contractors involved in
the build-out of the Company's space $700,000. The Company is responsible for
any additional amounts claimed by the contractors as described in the following
paragraph.

In September, 2000, Micron General Contractors began an action in New York
Supreme Court for services rendered in the build-out of the Company's leased
space at 666 Third Avenue. A subsequent action was filed by Rober B. Samuels,
Inc., also in New York Supreme Court, relating to its services with respect to
this build-out. Upon motion by the Company, the Samuels action was consolidated
with the Micron action. Approximately $1,200,000 is claimed in the consolidated
actions. The landlord has paid $700,000 of this amount with the Company
responsible for any additional amounts. The Company is defending this action.

In November, 2000, Commonwealth Partners instituted an action in the Supreme
Court of New York seeking damages in excess of $600,000 for alleged financial
advisory services and for assisting in raising capital for the Company. The
Company believes this action is without merit and has filed its answer in
opposition.

As part of the Bankruptcy Proceeding, the New York City Department of Finance
has filed alleged unsecured priority tax claims for unpaid commercial rent tax
in the amount of $229,899, including interest to December 31, 2000. Under the
Plan of Reorganization, the Company was required to make semi-annual payments of
principal and interest to the New York City Department of Finance beginning in
February 1998. To date, the Company has been unable to make any payments and has
accrued this liability on its financial statements. If the Company continues to
fail to pay this liability as payments are due, the Department of Finance could
declare Select Media in default of its obligations under the Plan of
Reorganization and could file an action to attach the Company's assets. The
Company has been uable to make any payments on this liability, but intends to
pay this liability once the Company becomes profitable.

                                       17
<PAGE>

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

No matters were submitted for a stockholder vote during the period covered by
this report.

                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

Price quotations for the Company's Common Stock are posted presently on the
"pink sheets" and have been since April 2000. From August 1997 to March 2000,
the Company's common stock was quoted on the OTC Bulletin Board. The symbol for
the Company's stock was originally "SMTV." When the Company's stock was no
longer eligible for inclusion on the OTC Bulletin Board on April 5, 2000, the
stock became traded on the "pink sheets." In the period from March 10, 2000 to
April 14, 2000, the OTC Compliance Unit of the NASD affixed the letter "E" to
the symbol. When the Company's shares were no longer eligible for OTC Bulletin
Board inclusion, the shares became quoted on the "pink sheets" and the symbol
reverted to "SMTV." The suffix ".OB" is now affixed to all non-NASDAQ
over-the-counter stocks.

As soon as the Company becomes eligible, the Company intends to request a
listing for the common stock on the Nasdaq SmallCap Market(TM). This listing
requires certain asset, earnings and per share price standards that the Company
does not now meet. The Company can give no assurance that it will meet these
standards in the foreseeable future, it at all.

(a) Market Price.

The historical prices, both actual prices and as adjusted for a 1 for 300
reverse stock split effective November 15, 1999, for the Company's Common Stock
on the OTC Bulletin Board and the "pink sheets" are as follows:

                                       18
<PAGE>
<TABLE>
<CAPTION>
     ------------------------------------------------------------------------------------

     Period                          Adjusted     Adjusted        Actual        Actual
     ------                             High        Low            High          Low
     ------------------------------------------------------------------------------------
<S>                                    <C>         <C>            <C>           <C>
     1997
     ------------------------------------------------------------------------------------
     First Quarter                     $52.50      $33.00          $.175         $.111
     ------------------------------------------------------------------------------------
     Second Quarter                    $46.50      $30.00          $.155         $.100
     ------------------------------------------------------------------------------------
     Third Quarter                    $204.00      $30.00          $.680         $.100
     ------------------------------------------------------------------------------------
     Fourth Quarter                   $144.00      $36.00          $.480         $.120
     ------------------------------------------------------------------------------------
     1998
     ------------------------------------------------------------------------------------
     First Quarter                     $51.00      $15.00          $.170         $.050
     ------------------------------------------------------------------------------------
     Second Quarter                   $300.00      $16.50          $1.00         $.055
     ------------------------------------------------------------------------------------
     Third Quarter                    $267.00      $45.00          $.890         $.150
     ------------------------------------------------------------------------------------
     Fourth Quarter                   $108.00      $30.00          $.360         $.100
     ------------------------------------------------------------------------------------
     1999
     ------------------------------------------------------------------------------------
     First Quarter                     $84.00      $42.00          $.290         $.180
     ------------------------------------------------------------------------------------
     Second Quarter                   $183.00      $52.50          $.610         $.175
     ------------------------------------------------------------------------------------
     Third Quarter                     $60.00      $27.00          $.200         $.090
     ------------------------------------------------------------------------------------
     Fourth Quarter                                               $30.00         $2.00
     ------------------------------------------------------------------------------------
     2000
     ------------------------------------------------------------------------------------
     First Quarter                                                 $6.50         $5.00
     ------------------------------------------------------------------------------------
     Second Quarter                                                $6.25         $4.75
     ------------------------------------------------------------------------------------
     Third Quarter                                                 $6.00         $5.50
     ------------------------------------------------------------------------------------
     Fourth Quarter                                                $6.25         $3.00
     ------------------------------------------------------------------------------------
     2001
     ------------------------------------------------------------------------------------
     First Quarter                                                 $5.032        $2.25
</TABLE>
The foregoing information was obtained from the National Quotation Bureau and
reflects inter-dealer prices, without retail markup, markdown or commission, and
may not represent actual transactions.

The main cause of the most extreme of these fluctuation is the effect of
recasting historical stock prices to account for the Company's 1 for 300 reverse
stock split. Small changes in the prior periods are magnified when the stock
prices are adjusted. In addition, the Company's stock is very thinly traded,
with few shares traded on any given day. This lack of volume tends to make price
fluctuations more volatile. For example, in the fourth quarter of 2000, the

                                       19
<PAGE>

daily volume fluctuated from a high on November 22, 2000 of 119,600 shares
traded to a low on October 19, 2000 when only 100 shares traded. During this
period, the average daily volume was less than 12,300 shares traded per day.

For the initial listing in the Nasdaq SmallCap Market(TM), a company must have
net tangible assets of $4 million or market capitalization of $50 million or a
net income (in the latest fiscal year or two of the last fiscal years) of
$750,000, a public float of 1,000,000 shares with a market value of $5 million.
The minimum bid price must be $4.00 and there must be three market makers. In
addition, there must be 300 stockholders holding 100 shares or more, and the
company must have an operating history of at least one year or a market
capitalization of $50 million. For continued listing in the Nasdaq SmallCap
Market(TM), a company must have net tangible assets of $2 million or market
capitalization of $35 million or a net income (in the latest fiscal year or two
of the last fiscal years) of $500,000, a public float of 500,000 shares with a
market value of $1 million. The minimum bid price must be $1.00 and there must
be two market makers. In addition, there must be 300 stockholders holding 100
shares or more. The Company can give no assurances that it will qualify its
securities for listing on Nasdaq or some other national securities exchange, or
be able to maintain the maintenance criteria necessary to insure continued
listing. The failure of the Company to qualify its securities or to meet the
relevant maintenance criteria after such qualification in the future may result
in the discontinuance of the inclusion of the Company's securities on a national
exchange. In such events, trading, if any, in the Company's securities may then
continue in the non-Nasdaq over-the-counter market. Consequently, a stockholder
may find it more difficult to dispose of, or to obtain accurate quotations as to
the market value of, the Company's securities.

(b) Holders. There are approximately 1,166 holders of the Company's Common
Stock. During 1999, the Company issued 9,520,666 shares to investors for cash,
in exchange for services, or to extinguish debt.

In 1999, the Company issued shares of Common Stock as follows:
<TABLE>
<CAPTION>
        Date            Number of Shares        Consideration
        ----            ----------------        --------------
<S>                           <C>                    <C>
      1/02/99                 6,666             Stock-based Compensation to Mr. Sartorio
      1/02/99                 5,000             Shares issued to bankruptcy creditor
      3/03/99                   333             Services
      3/03/99                 5,000             Equity bonus for loan
      4/29/99                   333             Services
      4/29/99                 1,667             Services
      6/11/99                 1,667             Services
     10/22/99             2,000,000             Stock-based Compensation to Mr. Gutkowski
     10/22/99             2,000,000             Stock-based Compensation to Mr. Sartorio
     10/22/99             1,000,000             Finders Fee to Lloyds
     10/22/99             4,500,000             Cash ($1,000,000)
</TABLE>
On January 2, 1999, the Company issued 6,667 shares of Common Stock to Mr.
Sartorio as compensation for his services as a consultant to the Company in
1998.

                                       20
<PAGE>

On January 2, 1999, the Company issued 5,000 shares of Common Stock to an
unrelated third party creditor to settle bankruptcy claims in the amount of
$420,718.

On March 3, 1999, the Company issued 333 shares of Common Stock to a third party
who provided services to the Company in lieu of a cash payment of $20,979.

On March 3, 1999, the Company issued a creditor of the Company an equity bonus
of 5,000 shares of Common Stock in connection with a $225,000 loan.

On April 29, 1999, the Company issued 333 shares of Common Stock to a third
party who provided services to the Company in lieu of a cash payment of $20,979.

On April 29, 1999, the Company issued 1,667 shares of Common Stock to a third
party who provided services to the Company in lieu of a cash payment of $367.

On June 11, 1999, the Company issued 1,666 shares of Common Stock to a third
party who provided services to the Company in lieu of a cash payment of $367.

On October 22, 1999, the Company issued 2,000,000 shares of Common Stock to
Mitch Gutkowski, its President and C.E.O. (described below) and 2,000,000 shares
to Dominick Sartorio, an employee. Mr. Gutkowski provided substantial services
to the Company from the period beginning before the Company filed for bankruptcy
court protection in October 1995 to up to and including October 22, 1999. For
much of that period, Mr. Gutkowski did not take a salary, or took a reduced
salary. Mr. Gutkowski was responsible for bringing in the consultants and new
employees who brought the Company back into business after the bankruptcy. Mr.
Gutkowski brought in Mr. Sartorio initially as a consultant and then as an
employee to assist in restructuring the Company.

On October 29, 1999, the Company sold 4,500,000 shares of Common Stock for a
total of $1,000,000 in cash to a small number of accredited investors introduced
to the Company by Lloyds. Lloyds received a finders fee of 1,000,000 shares of
Common Stock for arranging this transaction.

No persons were granted or exercised any stock options or warrants in 1999 or in
2000.

During 2000, the Company entered into an agreement with an individual to convert
$1,125,000 due into 350,000 shares of common stock, expected to be consummated
in 2001. The individual had loaned the Company $125,000 and signed a letter of
credit on behalf of the Company for $1,000,000 as a security deposit on the
lease for the Company's facility at 666 Third Avenue which was drawn down by the
Landlord (see Item 3,"Legal Proceedings"). During 2000, the Company also
borrowed from International Electronic Securities Trading, Ltd. a total of
$1,522,200 pursuant to a Loan Agreement and Securities Pledge Agreement dated
October 29, 2000. International Electronic Securities Trading, Ltd. elected to
convert this debt into 1,522,200 shares of common stock on January 15, 2001. An
additional $259,300 was raised by Lloyds Bahamas Securities, Ltd. for which
259,300 shares of common stock are due.

On June 15, 2000, the Company issued 450,000 shares of Common Stock to
consultants for services provided to the Company. The Company valued these
services at $225,000. During the year ended December 31, 2000, the Company
issued 180,000 shares of Common Stock to an employee for services valued at
$48,000.

                                       21
<PAGE>

There were no underwriters or broker-dealers involved in the sale of these
shares in 1999 or for the agreements reached in 2000. The Company sold these
shares in transactions intended to be exempt from registration under the
Securities Act by virtue of the exemption for registration under Section 4(2),
as transactions not involving any public offering. The shares sold on October
29, 1999 to accredited investors for $1,000,000 were sold pursuant to the
exemption granted under Rule 506 of Regulation D. The shares sold pursuant to
Rule 506 were sold without general solicitation, to accredited investors for
investment purposes. The shares issued for services were issued to third parties
that were not affiliates of the Company. The shares issued in conversion of debt
were issued to third parties that were not affiliates of the Company. The
certificates representing the shares sold in 1999 contain restrictive legends
restricting the transfer of the shares in the absence of a registration or an
exemption from such registration. The shares issued to International Electronic
Securities Trading, Ltd. were registered pursuant to an SB 2 filed on January
31, 2001 which became effective on March 26, 2001.

In connection with the Company's refinancing in October 1999, a number of
stockholders agreed to execute written lock-up agreements for periods of six
months to one year. These lock-up agreements require that the stockholder not
sell or otherwise dispose of any common stock until the lock-up period expires.
The Company has no other restrictions of stock held by stockholders, except as
required by Regulation D, Section 4(2) of the Securities Act or Rule 144.

As of the date of this report, 5,364,085 shares of the Company's Common Stock
held by non-affiliates are eligible for sale, including 71,358 shares eligible
under Rule 144 promulgated under the Securities Act of 1933, as amended, subject
to certain limitations included in such Rule. In general, under Rule 144, a
person (or persons whose shares are aggregated), who has satisfied a one year
holding period, under certain circumstances, may sell within any three-month
period a number of shares which does not exceed the greater of one percent of
the then outstanding Common Stock or the average weekly trading volume during
the four calendar weeks prior to such sale. Rule 144 also permits, under certain
circumstances, the sale of shares without any quantity limitation by a person
who has satisfied a two-year holding period and who is not, and has not been for
the preceding three months, an affiliate of the Company.

(c) Dividends. The Company has not paid any dividends to date, and has no plans
to do so in the immediate future.

Item 6. Management's Discussion and Analysis or Plan of Operation.

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

Overview

Select Media is a New York corporation whose common stock is currently traded in
the "pink sheets" under the symbol "SMTV.OB." Select Media began in the business
of producing and distributing "vignettes," which are short-form (thirty-second)
informational programs distributed by particular sponsors for viewing during

                                       22
<PAGE>

regular programming. In 1998, Select Media hired personnel to provide services
to worldwide news broadcasters and act as a television news agency under the
name "Select International Television Network" ("SITN") to produce and
distribute news segments for sale to local and foreign news broadcasters.
Revenues from SITN dramatically fell in 2000 due to a lack of planned studio
space at the Company's former 666 Third Avenue, New York, New York location. The
Company ceased operations of SITN as of October 30, 2000. In general, in the
year ended December 31, 2000, the Company's sources of revenues consisted of
revenues from Sigma. Resale of advertising airtime has never constituted a major
source of the Company's revenues.

In the period from the Company's bankruptcy filing in October 1995 until
September 1998, the Company was essentially dormant. In 1999, the Company was
dependent upon one major customer (General Motors Corporation) for over 35% of
its revenues, most of which were received in the first six months of the year.
The SITN Business accounted for approximately 45% of the Company's revenue in
1999. Beginning in the fall of 1999, the Company began its restructuring and
moved its offices. In 2000, the Company has had minimal revenues as it has
focused on restructuring its business and acquiring Sigma and AHP. The Company
closed the SITN Business permanently as of October 30, 2000. Thus, in 2000, the
Company has not been dependent on any major customers.

In January 2000, Select Media repositioned itself as the owner of entertainment
content providers whose product can be marketed through traditional media and
over the Internet. In January 2000, Select Media purchased all the outstanding
stock of Sigma for $1,000,000 payable in cash in several payments, with the
final payments due May 31, 2001. Sigma is a full service recording studio that
provides services to record companies, independent artists and record producers.
The Company believes that the price paid for the Sigma acquisition was fair. We
believe the Sigma Sound name and reputation is well known and well respected in
the sound recording industry and has significant value, as does the relationship
with Sigma's management and professional staff. Further, we expect the revenue
generated by Sigma in the future to justify the acquisition cost premium over
the value of the assets acquired.

In March 2000, Select Media purchased the assets of AHP, consisting of a number
of contracts for recording projects, for $125,000 in cash. AHP creates custom
music and video products. AHP has produced one new album of musical works for
sale by select Media through shopping channels and direct response television
ads since the acquisition.

These acquisitions were accounted for as purchases. The principals of Sigma and
AHP were not affiliated with Select Media or Lloyds before their acquisition by
Select Media. Lloyds' financing was not contingent upon these particular
acquisitions. See Financial Statements and notes to Financial Statements.

We believe that, given the changes in the structure of television broadcasting,
including, but not limited to, the creation of a number of alternative
television networks and the resulting scarcity of advertising airtime available
to local television stations, the Company can better serve its stockholders by
becoming the owner of entertainment content providers. By owning content
providers, the Company can take advantage of the changing distribution systems
offered by broadcast, cable and Internet distribution of its product.

                                       23
<PAGE>

Competition

Select Media faces competition from some of the largest entertainment companies
in the United States. It is difficult to estimate the size of the vignette
market. The Company is not aware of any other reporting companies involved in
the vignette business. The Company believes that competition in its business
comes not from other producers of vignettes, but from other users of scarce
airtime. One of the most significant developments in the broadcast television
industry in the 1990's has been the growth of alternative broadcast networks,
such as Fox, WB and UPN. Before this development, television stations that were
not affiliates of the three major television networks (CBS, NBC and ABC) were
independent local stations, each of which had substantial amounts of airtime to
sell to the Company and its customers. Today, most formerly independent stations
are affiliated with one of the new networks. As a result, the network, in
exchange for providing programming, gets to sell a significant portion of the
affiliate's broadcast airtime. Therefore, the affiliate has less airtime to sell
itself. Scarcity of a commodity tends to increase the price. As a result, the
cost of airtime has dramatically increased.

The entertainment market is rapidly evolving and intensely competitive.
Increased competition is likely to result in price reductions, reduced gross
margins and loss of market share, any of which could seriously harm Select
Media's net sales and results of operations. Select Media expects competition to
intensify in the future as additional distribution channels for entertainment
product are opened. In particular, Select Media believes that the use of the
Internet for distribution of entertainment product is both an opportunity and a
challenge. With so many entertainment choices, Select Media faces the challenge
of adapting its core business to Internet entertainment. Select Media expects
that its acquisition of content providers will enable it to adapt to the
Internet entertainment challenge, because Select Media believes that Internet
technology is developing faster than content can be produced. Although the
technology exists to provide a rich entertainment experience via the Internet,
Select Media believes that there is not sufficient high quality content
available for users. Select media intends to provide that content.

In line with this strategy, in 2000 Select Media acquired Sigma and AHP. On
December 6, 2000, Select Media signed a definitive agreement to purchase all the
assets and liabilities of Betelgeuse. Betelgeuse has the ability to create
entertainment content for broadcast, cable and Internet and to adapt existing
product for use as Internet content. The Company can give no assurances that we
will complete the Betelgeuse acquisition.

Market Strategy

Select Media markets its remaining vignette products to large advertisers
directly to the marketing departments of these companies. Select Media uses its
own internal staff for such marketing. The cost of advertising airtime has the
greatest impact on whether the Company can sell its vignette product. For each
airing of a vignette, the customer has to purchase sufficient airtime to
broadcast both the vignette and the customer's own advertisement. The greater
the cost of airtime, the higher the cost to the customer. The Company only
resells airtime to its vignette customers to air vignettes. The Company is not
in the business of reselling airtime to third parties.

Sigma markets its services directly through its principals. Sigma and AHP have
also produced compilation albums sold through home shopping channels, direct
response television and direct mail.

Select Media has 11 full time and 2 part time employees and during the period
covered by this report, until October 30, 2000, operated a facility at 666 Third
Avenue, New York, New York, which was used as the principal corporate office and
the site of its studio facilities. As a result of the Sigma acquisition, Select
Media also leases a sound recording studio facility at North 12th Street in
Philadelphia, Pennsylvania. The Company's current offices are located at 475
Park Avenue South, New York, NY.

RESULTS OF OPERATIONS

Revenues

The following table sets forth certain items from Select Media's consolidated
statements of operations as a percentage of net revenues for the periods
indicated:

                                       24
<PAGE>

                                                    For the Year ended
                                                        December 31,
                                                  -----------------------
                                                   2000            1999
                                                  -----------------------

     Net revenues                                  100.0%          100.0%

     Cost of revenues                               95.5%           56.1%
                                                  ------           ------
     Gross profit                                    4.5%           43.9%
                                                  ------           ------
     Operating expenses:
       Marketing and selling                           0%              0%
       General and administrative                1,251.9%          201.2%
       Amortization of acquisition-related
         intangible assets                             0%              0%

         Total operating expenses                1,270.8%          239.3%

     Operating income (loss)                    (1,247.4)%        (195.4)%
     Other income and expense, net                 (18.8)%         (38.2)%

     Income (loss) before income taxes          (1,266.3)%        (233.4)%
     Provision for  (benefit from)
       income taxes                                   .3%              0%

     Net income (loss)                          (1,266.6)%        (233.4)%
                                                  ------          -------

     Net Revenues                               (1,266.6)%        (233.4)%

Before the Sigma acquisition, Select Media's net revenues were derived mainly
from the sales of vignettes, video press releases and SITN. In the year ended
December 31, 1999, net revenues increased by $1,861,879, or 415%, to $2,310,002
from $448,123 in the year ended December 31, 1998. The increase in net revenues
during 1999 was primarily attributable to revenues from its international news
operations and video press releases for General Motors Corporation. Revenues
decreased in 2000 to $477,899 or (79)%, from $2,310,002 in the year ended
December 31, 1999. The decrease in 2000 was due to a loss of SITN revenues due
to the inability to use studio space at Select Media's facility caused by a
dispute with its landlord and the subsequent decision to cease SITN operations
on October 30, 2000.

Gross Profit

Gross margins during 2000 decreased to 4.5%

Cost of revenues consists primarily of costs associated with audio studio
personnel. The resulting gross profit fluctuates based on factors such as salary
expense, editing and marketing. Re-use of vignettes and portions thereof
increases profits. Gross margin decreased to 44% in 1999, compared to 51% in
1998. The decrease during 1999 was primarily due to for expenses of starting the
international news bureau operation.

Expenses

Selling, general and administrative expenses were $5,983,012 in 2000 and
$5,528,274 in 1999. for an increase of $454,738, or 8%. This increase was

                                       25
<PAGE>

attributable to the expenses of the Sigma and AHP acquisitions and the
redirection of the Company to acquire content providers and production and
post-production houses as a vertically integrated provider and distributor of
programming and high-quality recorded music through traditional media and the
new medium of the Internet.

Losses

The Company incurred losses from operations of $(5,961,485) in 2000 compared to
$(4,513,161) in 1999, for an increase of $(1,448,324) or 32%. The increase in
losses was due primarily to to the decision to close the SITN business, which
accounted for approximately 45% of the Company's revenues in 1999, the expenses
of the Sigma and AHP acquisitions and the redirection of the Company to acquire
content providers and production and post production houses.

LIQUIDITY AND CAPITAL RESOURCES

Select Media has significant capital needs and cannot be certain that additional
financing will be available to the Company on favorable terms when required, or
at all. The Company does not have a firm commitment for financing the balance of
the Betelgeuse acquisition costs, namely $9,500,000. If Select Media raises
additional funds through the issuance of equity, equity-related or debt
securities, such securities may have rights, preferences or privileges senior to
those of the rights of the Company's common stock and the Company's stockholders
may experience additional dilution. Select Media requires substantial working
capital to fund the Company's business. Since the Company's emergence from
Chapter 11 bankruptcy proceedings, Select Media has experienced negative cash
flow from operations and expects to experience significant negative cash flow
from operations for the foreseeable future. Select Media received on October 22,
1999 a best efforts letter of intent from Lloyds Bahamas Securities, Ltd.
("Lloyds") for $1 million in additional financing which was funded for 4,500,000
shares of common stock. During 2000 the Company raised an additional $259,300
through Lloyds for which 259,300 shares of common stock are due. Also in 2000
the Company raised $1,522,200 in convertible debt from International Electronic
Trading Securities, Ltd. which was converted into 1,522,200 common shares on
January 15, 2001. Lloyds is an investment banking and securities brokerage
business located in Nassau, the Bahamas. In raising equity capital for the
Company in 2000, Lloyds assigned part of its interest to International
Electronic Trading Securities, Ltd. The Company has received a separate best
efforts letter of intent from Lloyds for an additional $3 million in financing
once the Company's common stock is relisted on the OTC Bulletin Board. Between
January 1 and April 7, 2001, the Company has received $279,935.75 from Lloyds in
advance of relisting on the OTC Bulletin Board for which 559,872 shares of
common stock are due. The Company also has received a separate commitment from
Lloyds for the $500,000 down payment on the Betelgeuse transaction of which
$298,102 has been received and paid to Betelgeuse. The Company estimates that if
Lloyds completes its best effort $3 million financing in 2001 once it is
relisted on the OTC Bulletin Board together with anticipated revenues, this will
be sufficient to fund the Company's business plan for 2001. There can be no
assurance that such a financing will be completed or, if completed, be on
favorable terms.

The Company has also received a non-binding letter of intent from Bryn Mawr
Investment Group, Inc. to provide up to $10 million in financing to the Company
through private or public offerings of securities, to be used for working
capital and acquisitions.


                                       26
<PAGE>


Select Media owes its counsel in its bankruptcy proceeding professional fees of
$798,000. However, under the agreement between select Media and its counsel,
this amount is payable only from the Company's profits. When the Company's
operations become profitable, the Company will begin making payments on this
obligation.


As shown in the accompanying financial statements, the Company incurred a net
loss of $6,053,253 during the year ended December 31, 2000, and, as of that
date, the Company's current liabilities exceeded its current assets by
$8,636,217 and its total liabilities exceeded its total assets by $6,797,929.
Management of the Company is developing a plan to reduce its liabilities through
the issuance of additional common stock through private or public offerings
conforming to the requirements of the Securities Act. As of the date of this
report, the Company has not received a commitment to raise the funds necessary
to fund operations through December 31, 2001. Under this plan, the Company
intends to use any funds raised to fund operations and to make strategic
acquisitions through cash and stock transactions. Management hopes that these
acquisitions will enable the Company to generate positive cash flows from
operations. If the Company is unable to raise the appropriate funds, we will not
be able to make any acquisitions nor will the Company be able to fund operations
through December 31, 2001.

There can be no assurances that the Company will be successful in its attempts
to raise sufficient capital essential to its survival. To the extent that the
Company is unable to generate or raise the necessary operating capital, it will
become necessary to curtail or cease operations. These matters raise substantial
doubt about the Company's ability to continue as a going concern. However, the
accompanying financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and satisfactions of liabilities in
the normal course of business. The financial statements do not include any
adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should the Company be
unable to continue as a going concern.


Item 7. Financial Statements.

                                       27



<PAGE>

                                                SELECT MEDIA COMMUNICATIONS INC.
                                                                  AND SUBSIDIARY

                                                                        CONTENTS
--------------------------------------------------------------------------------


                                                                            Page

INDEPENDENT AUDITORS' REPORT                                                 F-1


CONSOLIDATED FINANCIAL STATEMENTS

  Consolidated Balance Sheet                                           F-2 - F-3
  Consolidated Statements of Operations                                F-4 - F-5
  Consolidated Statement of Stockholders' Deficit                            F-6
  Consolidated Statements of Cash Flows                                F-7 - F-8


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            F-9 - F-25



<PAGE>





                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors of
Select Media Communications Inc.

We have audited the accompanying consolidated balance sheet of Select Media
Communications Inc. and Subsidiary as of December 31, 2000 and the related
consolidated statements of operations, stockholders' deficit and cash flows for
the years ended December 31, 2000 and 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Select Media
Communications Inc. and Subsidiary as of December 31, 2000, and the consolidated
results of its operations and cash flows for the years ended December 31, 2000
and 1999 in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company incurred a net loss of $6,053,253
during the year ended December 31, 2000, and, as of that date, the Company's
current liabilities exceeded its current assets by $8,636,217 and there is
uncertainty with respect to its ability to pay its debt as they become due.
These matters raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans regarding those matters are also described
in Note 1. The financial statements do no include any adjustments relating to
the recovery of the recorded assets or the classification of the liabilities
that might be necessary should the Company be unable to continue as a going
concern.

                                                       /s/ Marcum & Kliegman LLP

April 11, 2001
Woodbury, New York

                                                                             F-1
<PAGE>





                                                SELECT MEDIA COMMUNICATIONS INC.
                                                                  AND SUBSIDIARY

                                                      CONSOLIDATED BALANCE SHEET

                                                               December 31, 2000
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                     ASSETS
                                     ------

CURRENT ASSETS
--------------
<S>                                                                      <C>                <C>
  Cash                                                                   $       2,335
  Accounts receivable, less allowance for doubtful accounts
   of $14,009                                                                  165,460
  Inventories                                                                   38,073
  Prepaid expenses and other current assets                                     40,621
                                                                          ------------


       Total Current Assets                                                                  $   246,489


PROPERTY AND EQUIPMENT, Net                                                                      861,149
---------------------------


OTHER ASSETS
------------
  Reorganization value, net of accumulated
    amortization of $814,720                                                 1,629,438
  Deposit on pending acquisition                                               225,000
  Goodwill and other intangible assets                                         733,281
                                                                           -----------

           Total Other Assets                                                                  2,587,719
                                                                                              ----------


       TOTAL ASSETS                                                                           $3,695,357
                                                                                              ==========


</TABLE>



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




                                                                             F-2
<PAGE>


                                                SELECT MEDIA COMMUNICATIONS INC.
                                                                  AND SUBSIDIARY

                                                      CONSOLIDATED BALANCE SHEET

                                                               December 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                      LIABILITIES AND STOCKHOLDERS' DEFICIT


CURRENT LIABILITIES
<S>                                                                              <C>                <C>
 Accounts payable and accrued expenses                                           $  4,506,334
 Notes payable                                                                      1,882,837
 Notes payable - stockholders                                                       1,576,917
 Due to stockholder                                                                   259,300
 Due to officer                                                                       239,463
 Current portion of capital lease obligation                                           87,956
 Reorganization liabilities, current portion                                          329,899
                                                                                -------------

      Total Current Liabilities                                                                     $  8,882,706

OTHER LIABILITIES
 Capital lease obligation, net of current portion                                     440,969
 Reorganization liabilities, net of current portion                                 1,169,611
                                                                                 ------------

       Total Other Liabilities                                                                         1,610,580
                                                                                                    ------------

       TOTAL LIABILITIES                                                                              10,493,286

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT
 Common stock - $.001 par value; 35,000,000 shares
  authorized, and 13,051,592 shares issued and outstanding                             13,052
 Additional paid-in capital                                                         8,989,818
 Accumulated deficit                                                              (15,800,799)
                                                                                 ------------

      TOTAL STOCKHOLDERS' DEFICIT                                                                     (6,797,929)
                                                                                                    ------------

      TOTAL LIABILITIES AND
        STOCKHOLDERS' DEFICIT                                                                       $  3,695,357
                                                                                                    ============

</TABLE>

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




                                                                             F-3

<PAGE>


                                                SELECT MEDIA COMMUNICATIONS INC.
                                                                  AND SUBSIDIARY

                                           CONSOLIDATED STATEMENTS OF OPERATIONS

                                  For the Years Ended December 31, 2000 and 1999
--------------------------------------------------------------------------------

                                                       2000            1999
                                                   ------------    ------------

SALES                                              $    477,899    $  2,310,002
-----

COST OF SALES                                           456,372       1,294,889
-------------                                      ------------    ------------

      GROSS PROFIT                                       21,527       1,015,113

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES          5,983,012       5,528,274
--------------------------------------------       ------------    ------------

      OPERATING LOSS                                 (5,961,485)     (4,513,161)
                                                   ------------    ------------

OTHER INCOME (EXPENSE)
----------------------
  Loss on abandonment of lease                         (205,924)       (557,303)
  Gain on sale of fixed assets                          230,000            --
  Other income                                          118,376          32,476
  Interest expense                                     (232,720)       (357,793)
                                                   ------------    ------------

      TOTAL OTHER INCOME (EXPENSE)                      (90,268)       (882,620)
                                                   ------------    ------------

       LOSS BEFORE INCOME TAXES                      (6,051,753)     (5,395,781)

INCOME TAXES                                              1,500            --
------------                                       ------------    ------------


      NET LOSS                                     $ (6,053,253)   $ (5,395,781)
                                                   ============    ============

Net Loss Per Share:

Weighted Average Shares Outstanding                  12,015,614       1,915,582
                                                   ============    ============

Net Loss Per Share - basic and diluted             $      (0.50)   $      (2.82)
                                                   ============    ============



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




                                                                             F-4
<PAGE>


                                                SELECT MEDIA COMMUNICATIONS INC.
                                                                  AND SUBSIDIARY

                                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

                                  For the Years Ended December 31, 2000 and 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                      Par         Additional
                                                     Value         Paid-in       Accumulated
                                        Shares      $ 0.001        Capital        Deficit          Total
                                     ----------   ------------   ------------   ------------    ------------

<S>                                  <C>          <C>            <C>            <C>             <C>
BALANCE - January 1, 1999 ......         86,926   $         88   $  4,201,312   $ (4,351,765)   $   (150,365)

Sale of common stock ...........      4,500,000          4,500        995,500           --         1,000,000

Issuance of stock as finance
 costs .........................          5,000              5           --             --                 5

Stock compensation .............      4,006,666          4,006        877,460           --           881,466

Issuance of stock for services .      1,004,000          1,004        258,273           --           259,277

Issuance of stock as payment of
 reorganization liabilities ....          5,000              5        420,718           --           420,723

Extinguishment of note payable -
 stockholder ....................          --             --          559,999                        559,999

Net loss .......................           --             --             --       (5,395,781)     (5,395,781)
                                     ----------   ------------   ------------   ------------    ------------

BALANCE - December 31, 1999 ....      9,607,592          9,608      7,313,262     (9,747,546)     (2,424,676)


Stock compensation .............        180,000            180         47,820           --            48,000

Issuance of stock for services .        450,000            450        224,550           --           225,000

Conversion of Due to
 Stockholder ...................      2,814,000          2,814      1,404,186           --         1,407,000


Net Loss .......................           --             --             --       (6,053,253)     (6,053,253)
                                     ----------   ------------   ------------   ------------    ------------
BALANCE - December 31, 2000 ....     13,051,592   $     13,052   $  8,989,818   $(15,800,799)   $ (6,797,929)
                                     ==========   ============   ============   ============    ============


</TABLE>


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




                                                                             F-5


<PAGE>


                                                SELECT MEDIA COMMUNICATIONS INC.
                                                                  AND SUBSIDIARY

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  For the Years Ended December 31, 2000 and 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                             2000           1999
                                                        -----------    -----------
<S>                                                     <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 Net loss                                               $(6,053,253)   $(5,395,781)
                                                        -----------    -----------
  Adjustments to reconcile net loss to net cash
   used in operating activities:
    Stock-based compensation                                 48,000        881,466
    Stock issued for services                               225,000        259,277
    Accrued interest                                         77,554           --
    Gain on sale of fixed asset                            (230,000)          --
    Loss on abandonment of lease                            205,924           --
    Depreciation and amortization                           819,452        368,035
    Provision for doubtful accounts                        (229,105)       243,114
  Changes in assets and liabilities:
    Accounts receivable                                     463,362       (313,648)
    Inventories                                             (38,073)          --
    Note receivable                                            --          194,800
    Capital improvements receivable                            --           53,982
    Prepaid expenses and other current assets                23,886        244,525
    Accounts payable and accrued expenses                 1,945,537      3,381,448
    Due to officer                                          239,463           --
    Reorganization liabilities                              (80,459)      (183,061)
                                                        -----------    -----------

    TOTAL ADJUSTMENTS                                     3,470,541      5,129,938
                                                        -----------    -----------

    NET CASH USED IN OPERATING ACTIVITIES                (2,582,712)      (265,843)
                                                        -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of property and equipment                      (200,142)      (415,576)
  Payment for purchase of Sigma Sound Services, Inc.,
   net of $1,400 cash acquired                             (198,600)      (400,000)
  Purchase of intangible assets                            (125,000)          --
  Proceeds from sale of fixed asset                         230,000           --
  Deposit on pending acquisition                           (225,000)          --
                                                        -----------    -----------

    NET CASH USED IN INVESTING ACTIVITIES               $  (518,742)   $  (815,576)
                                                        -----------    -----------
</TABLE>

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




                                                                             F-6

<PAGE>


                                                SELECT MEDIA COMMUNICATIONS INC.
                                                                  AND SUBSIDIARY

                                CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued

                                  For the Years Ended December 31, 2000 and 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>


                                                               2000            1999
                                                           -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
<S>                                                        <C>            <C>
  Repayments of capital lease obligation                   $  (106,055)   $    (8,408)
  Advances from stockholder                                  3,188,500           --
  Proceeds from notes payable                                     --          138,000
  Repayments of notes payable                                 (145,000)          --
  Proceeds from issuance of common stock                       166,000        834,005
  Repayments from stockholder                                     --             --
                                                           -----------    -----------

    NET CASH PROVIDED BY FINANCING
     ACTIVITIES                                              3,103,445        963,597
                                                           -----------    -----------

       NET INCREASE (DECREASE) IN CASH                           1,991       (117,822)

CASH - Beginning                                                   344        118,166
                                                           -----------    -----------

CASH - Ending                                              $     2,335    $       344
                                                           ===========    ===========


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid during the years for:

  Interest                                                 $   111,613    $    37,865

Noncash investing and financing activities:

  Acquisition of equipment through capital leases          $   561,750    $   126,831
  Conversion of stockholder advances to common shares      $ 1,407,000
  Promissory note issued for the purchase of Sigma Sound
    Services, Inc.                                         $   400,000
  Purchase of equipment with long-term debt                               $    83,840
  Conversion of debentures and debt to common shares                      $   559,000
  Subscription receivable                                                 $   166,000


</TABLE>

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




                                                                             F-7

<PAGE>


                                                SELECT MEDIA COMMUNICATIONS INC.
                                                                  AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 1 - Organization, Basis of Presentation and Management Plans

       The Company and Nature of Business
       Select Media Communications Inc. ("Select Media") a New York integrated
       media company was organized in September 1981. On October 13, 1995, the
       Company filed a voluntary petition for reorganization pursuant to Chapter
       11 of Title 11 of the United States Bankruptcy Code. The petition was
       filed in the United States Bankruptcy Court for Southern District of New
       York and its plan or reorganization was confirmed on August 28, 1997. In
       the period from the Company's bankruptcy filing in October 1995 until
       September 1998, the Company was essentially dormant. In September 1998,
       the Company reactivated its marketing efforts, began marketing its
       vignette products to advertisers.

       On January 18, 2000 the Company purchased all of the issued and
       outstanding common stock of Sigma Sound Services, Inc. ("Sigma") pursuant
       to the terms of a stock purchase agreement (see Note 5).

       Select Media is engaged in producing and distributing records,
       programming, and broadcasting services. Select Media provides through its
       wholly owned subsidiary Sigma, studio space and technology for the
       recording of audio media for the music recording, motion picture, and
       commercial advertising industries.

       Going Concern Uncertainty
       As shown in the accompanying financial statements, the Company incurred a
       net loss of $6,053,253 during the year ended December 31, 2000, and, as
       of that date, the Company's current liabilities exceeded its current
       assets by $8,636,217 and its total liabilities exceeded its total assets
       by $6,797,929. Management of the Company is developing a plan to reduce
       its liabilities through the issuance of additional common stock through
       private or public offerings conforming to the requirements of Securities
       Acts. As of the date of this report the Company has not received a
       commitment to raise the funds necessary to fund operations through
       December 31, 2001. Under this plan the Company intends to use any funds
       raised to fund operations and to make strategic acquisitions through cash
       and stock transactions. Management hopes that these acquisitions will
       enable the Company to generate positive cash flows from operations. If
       the Company is unable to raise the appropriate funds they will not be
       able to make any acquisitions nor will the Company be able to fund
       operations through December 31, 2001.

                                                                             F-8

<PAGE>



                                                SELECT MEDIA COMMUNICATIONS INC.
                                                                  AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 1 - Organization, Basis of Presentation and Management Plans, continued

       Going Concern Uncertainty, continued
       There can be no assurances that the Company will be successful in its
       attempts to raise sufficient capital essential to its survival. To the
       extent that the Company is unable to generate or raise the necessary
       operating capital it will become necessary to curtail or cease
       operations. These matters raise substantial doubt about the Company's
       ability to continue as a going concern. However, the accompanying
       financial statements have been prepared on a going concern basis, which
       contemplates the realization of assets and satisfactions of liabilities
       in the normal course of business. The financial statements do no include
       any adjustments relating to the recovery of the recorded assets or the
       classification of the liabilities that might be necessary should the
       Company be unable to continue as a going concern.


NOTE 2 - Summary of Significant Accounting Policies

       Basis of Consolidation
       The consolidated financial statements include the accounts of Select
       Media, and it wholly-owned subsidiary Sigma collectively referred to as
       the ("Company"). All significant inter-company transactions and balances
       have been eliminated in consolidation.

       Reverse Stock Split
       On November 2, 1999, the Board of Directors authorized a one for three
       hundred reverse stock split, with the number of authorized shares of
       Common Stock and the par value per share remaining unchanged. The split
       was effective November 30, 1999 and all per share amounts and shares
       issued have been adjusted retroactively to reflect this reverse stock
       split.

       Revenue Recognition
       The Company recognizes revenues when services the Company performs are
       complete. Services are considered complete as follows:

       Studio Space Rental and Engineering Services
       Revenues from Studio space rental and engineering services are recognized
       when the Studio is rented for a recording session and associated
       engineering services are provided. These services are provided by Sigma
       which was acquired on January 18, 2000. During the year ended December
       31, 2000, approximately 79% of the Company's revenue was from Studio
       space rental and engineering services.

                                                                             F-9

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                                                                  AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------



NOTE 2 - Summary of Significant Accounting Policies, continued

       Revenue Recognition, continued
       Record Production and Distribution
       The Company produces records consisting of compact discs and
       audiocassettes. The Company markets the records via consignment. Revenues
       are recognized when the Consignee sells the records. During the year
       ended December 31, 2000 approximately 12% of the Company's revenue was
       from the sale of compact discs and audiocassettes.

       Programming Services
       Revenues derived from programming (including the sale of non-cancelable
       license agreements for television programming and vignettes) are
       recognized when the programs and vignettes have been produced, are
       available for airing and all station clearances or acquisitions of media
       time have been obtained. Revenues from other license agreements are
       recorded when the program or vignette airs. During the year ended
       December 31, 2000 approximately 9% of revenues have been earned from
       programming services and none during the first quarter of 2001.

       Broadcast Services
       Revenues derived from broadcast services, (including the sale of news
       segments, transmission, studio facilities and crewing) are recorded when
       the service has been rendered and the project has been completed. These
       services were provided under the name Select International Television
       Network ("SITN").

       Capitalized Record Master Costs
       Cost incurred for creation of the record master are capitalized and
       amortized over the estimated life of the recorded performance using a
       forecasted revenue percentage. At December 31, 2000 $29,739 of
       capitalized record master costs are included in other current assets.

       Property and Equipment and Depreciation
       Property and equipment is stated at cost and is depreciated using a
       straight-line method over the estimated useful lives of the respective
       assets. Routine maintenance and repairs are expensed as incurred and
       improvements that extend the useful lives of the assets are capitalized.
       When property and equipment is sold or otherwise disposed of, the cost
       and related accumulated depreciation are eliminated from the accounts and
       any resulting gain or loss is recognized in operations.


                                                                            F-10
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                                                                  AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 2 - Summary of Significant Accounting Policies, continued

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

       Net Loss Per Share
       The Company computes per share amounts in accordance with Statement of
       Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share".
       SFAS No. 128 eliminates the presentation of the primary and fully
       dilutive earnings per share ("EPS") and requires presentation of the
       basic and diluted EPS. Basic EPS is computed by dividing the income
       (loss) available to Common Stockholders by the weighted-average number of
       common shares outstanding for the period. Diluted EPS is based on the
       weighted-average number of shares of Common Stock and Common Stock
       equivalents outstanding during the periods. All prior periods' EPS have
       been restated giving effect to the Company's 1 for 300 reverse stock
       split. Convertible debt and warrants have not been included in the
       computation of diluted EPS as their effect would be antidilutive.

       Stock-Based Compensation
       SFAS No. 123, "Accounting for Stock-Based Compensation" prescribes
       accounting and reporting standards for all stock-based compensation
       plans, including employee stock options, restricted stock, employee stock
       purchase plans and stock appreciation rights. SFAS No. 123 requires
       employee compensation expense to be recorded (i) using the new fair value
       method or (ii) using the existing accounting rules prescribed by
       Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
       to Employees" ("APB 25") and related interpretations with pro forma
       disclosure of what net income and earnings per share would have been had
       the Company adopted the new fair value method. The Company accounts for
       employee stock based compensation in accordance with the provisions of
       APB 25. For non-employees options and warrants the Company uses the fair
       value method as prescribed in SFAS 123.

       Fair Value of Financial Instruments
       SFAS No. 107, "Disclosures about Fair Value of Financial Instruments"
       requires that the Company disclose estimated fair values of financial
       instruments. The carrying amounts reported in the statement of financial
       position for current assets and current liabilities qualifying as
       financial instruments are a reasonable estimate of fair value. The fair
       value of long-term debt is estimated to approximate fair value based on
       the current rates offered to the Company for debt of the same remaining
       maturities.

                                                                            F-11

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                                                                  AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 2 - Summary of Significant Accounting Policies, continued

       Reclassifications
       Certain accounts in the prior year financial statements have been
       reclassified for comparative purposes to conform with the presentation in
       the current year financial statements. These reclassifications have no
       effect on previously reported operations.

       Advertising Costs
       Advertising costs were $78,543 and $-0- for the years ended December 31,
       2000 and 1999, respectively.

       Impairment of Long-Lived Assets
       Long-lived assets are reviewed for impairment whenever events or changes
       in circumstances indicate that the carrying amount may not be
       recoverable. If the sum of the expected undiscounted cash flows is less
       than the carrying value of the related asset or group of assets, a loss
       is recognized for the difference between the fair value and carrying
       value of the asset or group of assets.

       Business Segment
       SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
       Information", establishes standards for the way that public enterprises
       report information about operating segments in annual financial
       statements and requires reporting of selected information about operating
       segments in interim financial statements regarding products and services,
       geographic areas and major customers. SFAS No. 131 defines operating
       segments as components of an enterprise about which separate financial
       information is available that is evaluated regularly by the chief
       operating decision maker in deciding how to allocate resources and in
       assessing performance. The Company has determined that under SFAS No.
       131, it operates in one segment. In addition Management believes that
       although they market their services differently, all the services are
       provided to the entertainment industry


NOTE 3 - Inventories

       Inventories, which consist of compact discs and audiocassettes valued at
       $38,073 at December 31, 2000, are stated at the lower of cost (first-in,
       first-out basis) or market value. At December 31, 2000, no inventory was
       held on consignment.



                                                                            F-12
<PAGE>



                                                SELECT MEDIA COMMUNICATIONS INC.
                                                                  AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 4 - Property and Equipment

       Property and equipment at December 31, 2000 consist of the following:

                                                                     Estimated
                                                   Amount           Useful Lives
                                                  -------------- ---------------
       Video, Audio and Computer Equipment         $  952,262            5 years
       Leasehold Improvements                         104,434      Life of Lease
       Furniture and Fixtures                           9,569            7 years
                                                  -----------
                                                    1,066,265
       Less:  accumulated depreciation               (205,116)
                                                  -----------

            Property and Equipment, net           $   861,149
                                                  ===========

       Depreciation expense for the years ended December 31, 2000 and 1999 was
       $218,813 and $123,619, respectively.


NOTE 5 - Acquisition

       On January 18, 2000, the company purchased all of the issued and
       outstanding common stock of Sigma pursuant to the terms of a stock
       purchase agreement (the "Agreement") Select Media paid $600,000 cash and
       issued a $400,000 10% secured promissory note (see Note 10). The note is
       secured by all of the Company's existing and future customer accounts,
       general intangibles, equipment, goods, instruments and inventory (see
       Note 21). The transaction was accounted for under the purchase method of
       accounting and, accordingly, assets acquired and liabilities assumed were
       recorded at their fair values at January 1, 2000, and the operations of
       Sigma were included in the Company's consolidated statements of
       operations since that date. The excess of the purchase price over the
       fair value of assets acquired was $964,504 and has been attributed to
       Goodwill, which is being amortized over three years.

       A summary of the allocation of aggregate consideration for the
       aforementioned acquisition to the fair market value of the assets
       acquired and liabilities assumed is as follows:

       Current assets:
         Cash                                      $    1,400
         Accounts receivable                           34,517
                                                   ----------

                                                                    $   35,917

       Property and equipment                                          104,600
         Goodwill                                                      964,504
                                                                    ----------

            Total Assets  (Forward)                                 $1,105,021
                                                                    ----------


                                                                           F-13
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                                                SELECT MEDIA COMMUNICATIONS INC.
                                                                  AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------



NOTE 5 - Acquisition, continued

            Total Assets  (Forward)                                  $1,105,021

     Current Liabilities:
       Accounts payable and accrued expenses                            105,021
                                                                     ----------

            Aggregate Consideration Paid                             $1,000,000
                                                                     ==========

       The pro forma unaudited condensed results of operations data for the year
       ended December 31, 1999, as if the purchases had occurred on January 1,
       1999, are as follows:

     Revenues                                                       $ 2,812,793

     Expenses                                                         8,353,201
                                                                    -----------

            Net Loss                                                $(5,540,408)
                                                                    ===========

     Proforma net loss per share:
       Basic and diluted                                                 $(2.89)
                                                                         ======

     Weighted average shares outstanding                              1,915,582
                                                                      =========

       This Pro forma information does not purport to be indicative of what
       would have occurred had the acquisition been complete as of January 1,
       1999 or results which may occur in the future.


NOTE 6 - Goodwill and Intangible Assets

       Goodwill and intangible assets at December 31, 2000 consist of the
       following:


                                                                     Estimated
                                                   Amount           Useful Lives
                                              ------------------ ---------------




       Goodwill, acquisition of Sigma              $  964,504           3 years
       AHP Contract acquisition (1)                   125,000           3 years
                                                   ----------
                                                    1,089,504
            Less:  accumulated amortization          (356,223)
                                                   ----------

       Intangible Assets, Net                      $  733,281
                                                   ==========

                                                                            F-14
<PAGE>


                                                SELECT MEDIA COMMUNICATIONS INC.
                                                                  AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 6 - Goodwill and Intangible Assets, continued

       Amortization expense for the year ended December 31, 2000 was $356,223.

       (1) On March 8, 2000 the Company purchased certain contracts of After
       Hours Productions, Inc ("AHP") for $125,000 pursuant to the terms of an
       asset purchase agreement (the "AHP Agreement"). AHP is owned by the
       former owner of Sigma. Accordingly, the Company recorded an intangible
       asset, which is being amortized using the greater of the income forecast
       method or the straight line method over a useful life of three years.


NOTE 7 - Private Placement and Funding Agreement

       The Company entered into an agreement on October 22, 1999 and amended
       November 1, 1999 with Lloyds Bahamas Securities, Ltd. ("Lloyds") to sell
       shares of the Company's Common Stock with Lloyds as their agent through
       an offering exempt under Rule 504 of Regulation D by the Securities and
       Exchange Commission under the Securities Act of 1933. In exchange for
       $1,000,000, Lloyds' investors received 4,500,000 new shares of the
       Company's Common Stock. As a condition of the funding the Company agreed
       to acquire Nationsmusic.com, Inc. ("Nationsmusic") in exchange for
       3,000,000 shares of the Company's Common Stock. The Company has not
       consummated its transaction with Nationsmusic. On November 14, 2000,
       Lloyds, by letter agreement, waived the requirement to acquire
       Nationsmusic as a condition to the funding.

       During 1999, Lloyds received 1,000,000 shares of Common Stock for
       financial advisory services.

       During the year ended December 31, 2000, Lloyds made advances of
       $3,188,500 to the Company. On April 13, 2000 the Company issued 2,814,000
       shares of Common Stock to Lloyds in settlement of $1,407,000 of these
       advances. On October 29, 2000, Lloyds assigned $1,522,200 of these
       advances to a third party, which is included in Notes Payable (see Note
       10). At December 31, 2000, the remaining amount due to Lloyds is
       $259,300, which is included in Due to stockholder.



                                                                            F-15
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                                                SELECT MEDIA COMMUNICATIONS INC.
                                                                  AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 8 - Accounts Payable and Accrued Expenses

       At December 31, 2000, accounts payable and accrued expenses consist of
the following:

     Trade accounts payable                                         $1,602,223
     Payroll taxes payable                                           1,185,760
     Accrued expenses                                                  710,851
     Accrued liabilities - contractor                                  500,000
     Accrued payroll                                                   507,500
                                                                    ----------

            Total                                                   $4,506,334
                                                                    ==========


NOTE 9 - Notes Payable - Stockholders

       Notes payable - Stockholders at December 31, 2000 consists of the
       following:

       Note payable stockholder in the amount $375,000 plus
       accrued interest at December 31, 2000 of $76,917. The
       note bears interest at 10% per annum and was due
       December 1999. The note was extended and is currently
       due upon demand.                                              $ 451,917

       Notes payable stockholder in the amount of
       $1,125,000. $125,000 of these notes relates to cash
       advances and $1,000,000 relates to a letter of credit
       (see Note 12). The Company has agreed to convert
       these notes into 350,000 shares of Common Stock in
       2001.                                                         1,125,000
                                                                    ----------

                          Total                                     $1,576,917
                                                                    ==========


NOTE 10 - Notes Payable

       Notes payable at December 31, 2000 consisted of the following:

       On October 29, 2000 the Company issued a convertible
       non -interest bearing promissory note in connection
       with Lloyds assignment of advances made to the
       Company (see Note 7). The note was due March 31,
       2001. The note was issued in place of amounts due to
       stockholder. Each $1.00 of debt converts into one (1)
       share of the Company's Common Stock. During January
       2001 the note was converted into 1,522,200 shares of
       Common Stock (Forward)                                       $1,522,200
                                                                    ----------


                                                                            F-16

<PAGE>


NOTE 10 - Notes Payable, continued

                              (Forward)                             $1,522,200

       As discussed in Note 5, Select Media issued a
       $400,000 10% secured promissory note in connection
       with the acquisition of Sigma. Payment was originally
       due in two installments on June 30, 2000 and January
       3, 2001. Select Media paid $100,000 on October 2000
       and subsequently extended the due date to May 31,
       2001 (see Note 21). The note is secured by all of
       Sigma's existing and future customer accounts,
       general intangibles, equipment, goods, instruments
       and inventory                                                   338,137

       Note payable non-interest bearing, payable upon demand           22,500
                                                                    ----------

             Total                                                  $1,882,837
                                                                    ==========


NOTE 11 - Due to Officer

       The balance of $239,463 represents advances made by an officer of Sigma
       to fund Sigma's operations, which are noninterest-bearing and due on
       demand. On April 11, 2001, the Company entered into an agreement whereby
       agreeing to pay all amounts due by May 31, 2001.


NOTE 12 - Related Party Transaction

       Reimbursement of Officer/Stockholder
       In January 2000, the Company reimbursed one of its officers/stockholders
       $100,000 for amounts previously contributed by him pursuant to the
       Company's Plan of Reorganization.

       Letter of Credit
       A stockholder signed a letter of credit on behalf of the Company for
       $1,000,000 acting as a security deposit on the office space occupied by
       the Company. When the Company abandoned the lease (Note 13), the Bank
       drew down the $1,000,000 letter of credit to the benefit of the previous
       landlord and the Company vacated the premises. During 2000, the Company
       issued a $1,000,000 note payable to this stockholder (see Note 9).


                                                                          F-17
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                                                                  AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 12 - Related Party Transaction, continued

       Sales
       During the year ended December 31, 2000 the Company had sales to a
       related party in the amount of $34,938. The amount due from this customer
       included in accounts receivable was $84,268.

       Leasing Agreements
       Sigma leases office space under an operating lease agreement with its
       former owner and current President, which expires on January 31, 2005.

       Minimum future rental commitments under this lease as of December 31,
       2000 are as follows:

                          For the Year Ending
                             December 31,                      Amount
                          -----------------------------------------------
                                 2001                           $  76,000
                                 2002                              76,000
                                 2003                              76,000
                                 2004                              76,000
                          2005 and Thereafter                      82,333
                                                                ---------

                                    Total                        $386,333
                                                                 ========

       In addition the Company leases offices month to month, located at 475
       Park Avenue New York, NY from a related party. Monthly expense under this
       agreement is $6,200 per month.

       Total rental expense was $636,245 and $560,241 for the years ended
       December 31, 2000 and 1999, respectively. On October 30, 2000, the
       Company vacated their offices located at 666 3rd Avenue, New York, NY
       (see Note 13).


NOTE 13 - Litigation

       In addition to the following, the Company is involved in litigation
       through the normal course of business. The Company believes that the
       resolution of these matters will not have a material adverse effect on
       the financial position of the Company.

                                                                            F-18

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                                                                  AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 13 - Litigation, continued

       Former Landlord
       In November, 1999, 405 Lexington, L.L.C. (the " Former Landlord") began
       an action in New York City Landlord-Tenant Court alleging that Select
       Media had breached its lease and seeking the payment of use and occupancy
       of offices located at 666 Third Avenue, New York NY ("Offices"). In May
       2000, The Company began an action in New York Supreme Court against the
       Landlord seeking an injunction to permit completion of the build-out of
       the office space and damages for loss of its SITN business. On October
       30, 2000, Select Media vacated the offices.

       In February 2001 the Company entered into a mutual release with the
       Former Landlord and both actions were dismissed with prejudice. The
       Former Landlord, after drawing down on a $1,000,000 Letter of Credit (See
       Note 9), paid $700,000 of the amount due to the contractors involved in
       the build-out of the Company's space. The Company is responsible for any
       additional amounts claimed by the contractors as described in the
       following paragraph.

       Former Contractors
       In September 2000, a contractor began an action in New York Supreme Court
       for services rendered in the build-out of the Company's leased space at
       666 Third Avenue. Another contractor filed a subsequent action, also in
       New York Supreme Court, relating to its services with respect to this
       build-out. Upon motion by the Company, the two actions were consolidated.
       Approximately $ 1,200,000 is claimed in the consolidated actions. As
       discussed above, the landlord has paid $700,000 of this amount with the
       Company responsible for any additional amounts determined to be owed to
       the contractors. The Company is defending this action, however, the
       judgment is measurable and the ultimate payment is probable, therefore,
       the Company has recorded the remaining $500,000 which is included in
       accrued expenses at December 31, 2000.

       Former Consultant
       In November 2000, Commonwealth Partners LP instituted an action in the
       Supreme Court of New York seeking damages in excess of $600,000 for
       alleged financial advisory services rendered to the Company. The Company
       believes this action is without merit and has filed its answer in
       opposition. However, the Company is unable to predict the outcome of this
       claim and, accordingly, no adjustment has been recorded in the
       consolidated financial statements in response to this claim.


                                                                            F-19

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                                                                  AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 14 - Stockholders Deficit

       On June 15, 2000 the Company issued 450,000 shares of Common Stock to
       consultants for services provided to the Company. The fair value of these
       services, which is $225,000, has been recorded.

       During the year ended December 31, 2000, the Company issued 180,000
       shares of Common Stock to an employee for past services performed. As a
       result of the issuance, the Company recorded $48,000 of stock based
       compensation expense.


NOTE 15 - Capital Leases

       The Company is the lessee of equipment under a capital lease expiring in
       2005. The asset with a net book value of $505,575 at December 31, 2000,
       is being depreciated over the life of the lease. Depreciation for the
       year ended December 31, 2000 was $56,175.

       Minimum future lease payments under capital leases as of December 31,
       2000 for each of the next five years, and in the aggregate, are as
       follows:

                               For the Year Ending
                                   December 31,                    Amount
                   -------------------------------------------------------
                                       2001                       $173,355
                                       2002                        160,020
                                       2003                        160,020
                                       2004                        160,020
                                       2005                        106,680
                                                                  --------

                   Total minimum lease payments                    760,095

                   Less: amount representing interest              231,170
                                                                  --------

                   Present value of minimum lease
                    Payments                                      $528,925
                                                                  ========

                   Current Portion                                $ 87,956

                   Long-term Portion                               440,969
                                                                  --------

                                      Total                       $528,925
                                                                  ========

                                                                            F-20

<PAGE>


                                                SELECT MEDIA COMMUNICATIONS INC.
                                                                  AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 15 - Capital Leases, continued

       Interest rate on capitalized lease is 16.1% and is imputed based on the
       lessor's implicit rate of return.

       In November 2000 when the Company vacated its offices at 666 Third Avenue
       (see Note 13) certain equipment under three capital leases was returned
       to the lessor and the Company was released from any future obligations
       under the capital leases. The Company recognized a gain in the amount of
       $37,615 in connection with this transaction, which is included in loss on
       abandonment of lease.


NOTE 16 - Income Taxes

     The components of deferred tax assets and liabilities at December 31, 2000
     consist of the following:

     Deferred tax assets:
       Net operating loss carryforwards                          $ 4,976,000
       Accumulated amortization                                       97,000
       Allowance for doubtful accounts                                 6,000
                                                                 -----------

              Total Deferred Tax Assets                            5,079,000
                                                                 -----------

     Less: Valuation allowance                                   $(5,079,000)
                                                                 ===========

              Net deferred tax assets                            $        --
                                                                 ===========

     Deferred income taxes reflect the net tax effects of temporary differences
     between the carrying amounts of assets and liabilities for financial
     reporting purposes and the amounts used for income tax purposes. A
     valuation allowance is required if, based on the weight of available
     evidence, it is more likely than not that some portion or all of the
     deferred tax assets will not be realized. Management concluded a valuation
     allowance was appropriate at December 31, 2000 due to operating losses
     incurred.

     At December 31, 2000, the Company has net operating loss carryforwards of
     approximately $12,000,000 for income tax purposes, which expire through
     2020

     In accordance with the provisions of the Internal Revenue Code ("IRC")
     Section 382, utilization of the Company's net operating loss carryforward
     is severely limited. Additionally, the Company has not filed Federal or
     State corporate income tax returns for the past several years. Accordingly,
     the Company may be subject to penalties and the net operating losses may be
     severely limited beyond IRC Section 382 limitations.

                                                                            F-21
<PAGE>

                                                SELECT MEDIA COMMUNICATIONS INC.
                                                                  AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 17 - Extinguishment of Note Payable, Stockholder

       In October 1999, a note payable to a stockholder in the amount of
       $560,000 was extinguished for $1. Since the exchange occurred with a
       stockholder of the Company, the transaction has been recorded as a
       $599,999 contribution to additional paid in capital.


NOTE 18 - Commitments and Contingencies

       Pending Acquisition
       On December 6, 2000, the Company and Betelgeuse Productions, LLC
       ("Betelgeuse"), a full service television and video production and
       post-production business in New York signed a definitive Asset Purchase
       Agreement (the "Definitive Agreement"); whereby the Company will purchase
       all of the assets of Betelgeuse for $10,000,000 in cash. As per the
       Definitive Agreement the Company made a down payment of $200,000 to
       Betelgeuse, with three additional $100,000 payments due monthly for a
       total non-refundable down payment of $500,000. As of the date of this
       report the Company has only paid $298,102 of the down payment ($225,000
       at December 31, 2000). The balance of the purchase price will be due at a
       closing to be held within six (6) months of the signing of the Definitive
       Agreement and the completion of certain due diligence. The Company has
       received a firm commitment from Lloyds for the $500,000 down payment.
       Lloyds will provide the $500,000 down payment in exchange for 500,000
       shares of restricted Common Stock of the Company. As of the date of this
       report no shares of Common Stock have been issued to Lloyds in connection
       with the down payment. The Company does not yet have a commitment from a
       funding source for the balance of the purchase price. There is no
       assurance that the acquisition will be completed by the Company and
       Betelgeuse.

       Payroll Taxes Select Media has not filed payroll tax returns from October
       1, 1998 through March 31, 2000. As of December 31, 2000, the past due
       amounts have been included in accrued expenses totaling approximately
       $1,186,000 and consist of payroll taxes owed and estimated penalties and
       interest. Beginning April 2000, Select Media began using a payroll
       service to process their payroll and file and pay all payroll tax returns
       and applicable taxes. At any time the Internal Revenue Service could
       declare Select Media in default of their fiduciary responsibility and
       could file a tax lien on the Company's assets or take other action
       against the Company and its responsible officers, which would have a
       material adverse effect on the Company's business.

                                                                            F-22

<PAGE>

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                                                                  AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 18 - Commitments and Contingencies, continued

       Employment Agreements
       The Company has entered into employment agreements with the chief
       executive officer and two employees, two on October 25, 1999 and one on
       January 1, 2000 (See below). Two of these agreements expire in 2002 and
       two which expire in 2004. Two of these agreements provide for bonuses
       based on percentages of net profits, as specified in their respective
       employment agreements.

       Future minimum payments related to these agreements for the next five (5)
years are approximately:

                                  For the Year Ending
                                     December 31,                  Amount
                          -------------------------------------------------
                                         2001                   $   717,000
                                         2002                       817,000
                                         2003                       833,000
                                         2004                       833,000
                                                                -----------

                                            Total                $3,200,000
                                                                 ==========

       For past services performed, the chief executive officer and one of the
       employees that entered into the above employment agreements received
       4,006,666 shares of the Company's Common Stock during 1999. As a result
       of this issuance, the Company recognized $881,466 of compensation
       expense.


NOTE 19 - Major Customer

       During the year ended December 31, 1999 the Company sold a substantial
       portion of its services to one customer. Sales to this customer totaled
       $800,000 (35%). The amount due from this customer included in accounts
       receivable at December 31, 1999 was $200,000. There were no customers
       that accounted for more than 10% of the Company's revenue in 2000.


NOTE 20 - Bankruptcy Proceedings

       On August 28, 1997 the United States Bankruptcy Court of the Southern
       District of New York confirmed the Company's Plan of Reorganization. The
       plan stipulated payments totaling $2,444,158 to be paid to certain
       secured, administrative and unsecured creditors. It was

                                                                            F-23
<PAGE>

                                                SELECT MEDIA COMMUNICATIONS INC.
                                                                  AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 20 - Bankruptcy Proceedings, continued

       determined that the Company's reorganization value computed immediately
       before August 28, 1997, the date of plan confirmation, was $2,444,158,
       which is being amortized over a period of 10 years and recorded
       amortization expense of $244,415 for the years ended December 31, 2000
       and 1999. The Company adopted fresh start reporting because holders of
       existing voting shares immediately before filing and confirmation of the
       plan received less than 50% of the voting shares of the emerging entity
       and its reorganization value is less than its post petition liabilities
       and allowed claims.

       The remaining bankruptcy liabilities at December 31, 1999 consists of the
       following:


                    Class of Creditors
       ----------------------------------------------------------
       Class 1 - Secured
       Class 2 - Priority and Administrative           $1,049,510
       Class 3 - Unsecured                                450,000
                                                      -----------

              Total                                    $1,499,510
                                                       ==========

       Short-Term                                      $  329,899
       Long Term                                        1,169,611
                                                       ----------
                                                       $1,499,510
                                                       ==========

       The Company owes approximately $798,000 in professional fees rendered in
       accordance with the Order entered into by the United States Bankruptcy
       Court in the Southern District of New York. Company has agreed with the
       Claimant to pay this amount in quarterly installments equal to 3% of the
       Company's corresponding quarterly gross receipts less ordinary expenses
       before any cash compensation to officers until paid in full. No part of
       the stated amount has been paid and is included in the accrued amounts
       for class 2 creditors at December 31, 2000.

       The New York City Department of Finance has filed alleged unsecured
       priority tax claims in the amount of $229,899. Included in this amount is
       $37,623 of interest accruing at an annual interest rate of 8.5%. The
       entire amount is included in the accrued amounts for class 2 creditors at
       December 31, 2000.

       Under the Plan of Reorganization, the Company was required to make
       semi-annual payments of principal and interest to the New York City
       Department of Finance beginning in February 1998. The Company has not
       made any payments on this liability. At any time the Department of
       Finance could declare Select Media in default of its obligations under
       the Plan of Reorganization and could file an action to attach the
       Company's assets.

                                                                            F-24
<PAGE>

                                                SELECT MEDIA COMMUNICATIONS INC.
                                                                  AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 20 - Bankruptcy Proceedings, continued

       All remaining allowed claims will be paid in accordance with the
       Company's confirmed Plan of Reorganization in cash.


NOTE 21 - Subsequent Events

       In January 2001, a note payable for $1,522,200 was converted into
       1,522,200 shares of Common Stock as discussed in Note 10.

       In February 2001, the Company entered into a mutual release agreement
       with its Former Landlord, as discussed in Note 13.

       On April 11, 2001 the Company entered into an agreement with the former
       owner of Sigma whereby, extending the due dates of the note payable
       issued in connection with the acquisition of Sigma and amounts due to
       officer to May 31, 2001, as discussed in Notes 10 and 11.




                                                                            F-25







<PAGE>

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

On October 13, 1995, Select Media filed a voluntary petition for reorganization
pursuant to Chapter 11 of Title 11 of the United States Bankruptcy Code. Ernst &
Young LLP did not provide any services, including services as auditor, to Select
Media after October 13, 1995. Select Media did not formally notify Ernst & Young
LLP that the client-auditor relationship had ceased until October 30, 2000.
Before Select Media's formal notice to Ernst & Young LLP, on February 1, 2000,
we engaged Marcum & Kliegman, LLP as our new independent auditors to audit the
Company's financial statements. The decision to change accountants was
recommended by the Company's Board of Directors.

On November 7, 2000, the Company filed a Form 8-K, amended December 22, 2000,
noting the change in accountants. The Company's former accountants, Ernst &
Young LLP, ceased acting as the Company's auditors at the time that the Company
filed for bankruptcy in October 1995. There were no disagreements with the
former accountants.

The last report issued by Ernst & Young LLP on Select Media's consolidated
financial statements related to Select Media's fiscal year ended December 31,
1994. Such report was issued on March 22, 1995 and Ernst & Young LLP's opinion
was modified as to the uncertainty of Select Media to continue as a going
concern. Ernst & Young LLP has not issued any reports on Select Media's
consolidated financial statements since the March 22, 1995 report. In connection
with the audit of the Company's consolidated financial statements for the year
ended December 31, 1994 and during any subsequent interim periods up to October
30, 2000, there have been no disagreements with Ernst & Young LLP on any matters
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures, which if not resolved to the satisfaction of Ernst
& Young LLP would have caused Ernst & Young LLP to make reference to the subject
matter of the disagreements in connection with their report.

On February 1, 2000, the Company's Board of Directors formally engaged Marcum &
Kliegman LLP, 130 Crossways Park Drive, Woodbury, New York as its new
independent auditors ("M&K") to audit the Company's financial statements.
Neither the Company, nor any person on the Company's behalf during the two most
recent fiscal years and the subsequent interim periods prior to the engagement
of M&K, consulted with M&K with regard to any of the matters listed in
Regulation S-B Items 304(a)(2)(i) or (ii).

The Company has requested that Ernst & Young LLP furnish it with a letter
addressed to the Securities and Exchange Commission stating whether it agrees
with the above statements. A copy of the Ernst & Young LLP letter to the
Securities and Exchange Commission, dated December 21, 2000, was filed as
Exhibit 16 to the Company's amended Form 8-K filed December 22, 2000.

                                       28
<PAGE>

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        with Section 16(a) of the Exchange Act.

The directors and officers of the Company are as follows:
<TABLE>
<CAPTION>
                                                                             Position with
Name                  Age      Position                                   Select Media Since
----                  ---      --------                                   ------------------
<S>                   <C>      <C>                                              <C>
Mitch Gutkowski       46       Chairman of the Board, Chief Executive           1981
                               Officer and Director
James Mongiardo       55       Vice Chairman and Director                       1999
Chet Simmons          72       Director                                         1999
Joseph Tarsia         66       President of Sigma                               2000
</TABLE>
Mitch Gutkowski, Chairman of the Board, Chief Executive Officer and Director
since 1981, founded Select Media in 1981 and as Chairman coordinates the efforts
of the Company's divisions and oversees operations. With the Board of Directors
as a group, Mr. Gutkowski oversees strategic planning for the Company. Before
founding Select Media, Mr. Gutkowski was Vice President for Advertising Sales
for Pro-Sport Entertainment, Inc. Mr. Gutkowski was Chairman of the Board and
Chief Executive Officer of the Company in 1995, when the Company filed for
bankruptcy protection under Chapter 11. See "Description of Business."

James Mongiardo, Vice Chairman of the Board since 1999, has extensive experience
in building companies and in the banking and securities business. He has served
as Chief Executive Officer for public biotechnology and healthcare services
companies and as head of United States marketing for Schering-Plough
Corporation. Since November 2000, Mr. Mongiardo has been Managing Director of
Homewood Capital Group, LLC, a corporate finance consulting and investment
banking firm. For the five year period ending November 2000, he was Managing
Director of LBC Capital, an investment banking firm specializing in
institutional private placements for emerging companies.

Chet Simmons, Director since 1999, has a distinguished career in helping to
shape modern sports television. In 1957, he joined the group responsible for the
American Broadcasting Company's sports programming, including "ABC's Wide World
of Sports," "The American Sportsman," and ABC's Olympic Games coverage. In 1964,
he moved to NBC, where rose to the position of the first President of NBC
Sports. During his tenure at NBC, that network acquired the rights to televise
Major League Baseball, the National Hockey League, various Olympic Games and
NCAA football. Mr. Simmons left NBC Sports to become the first President and
Chief Executive Officer of ESPN. Mr. Simmons became commissioner of the United
States Football League in 1982 and then went on to serve as a consultant to a
variety of sports/television businesses.

Joseph Tarsia, President of Sigma, started his recording career in 1958,
building and maintaining local Philadelphia recording studios. In 1961, he
joined Cameo Parkway Records, where he quickly rose to the position of Chief
Engineer for such artists as Bobby Rydell, Chubby Checker, the Dovells and the
Orlons. In 1968, Mr. Tarsia founded Sigma Sound Studios as an independent
recording studio, which became the home of major record producers Kenny Gamble,
Leon Huff and Thom

                                       29
<PAGE>

Bell, and the birthplace of the Sound of Philadelphia. Two producers, Ken Gamble
and Thom Huff of Philadelphia International Records, and other independent
producers, working with Joe Tarsia and the staff of Sigma, shared ideas on what
constituted good and innovative music that became extremely popular and
influential in the 1970's and became known as the Sound of Philadelphia. This
particular style influenced the development of Disco, R&B and Soul, as well as
mainstream pop music.

Sigma earned Gold and Platinum record awards for recordings by Jerry Butler, The
Intruders, Harold Melvin and The Blue Notes, The Ojays, Teddy Pendergrass, The
Stylistics, The Delfonics, Lou Rawls and The Jacksons. Artists and producers who
recorded at Sigma included Stevie Wonder, B. B. King, Grace Jones, Gladys Knight
and The Pips, David Bowie, Robert Palmer and The Four Tops.

In 1976, Mr. Tarsia expanded Sigma to include three studios in Manhattan's music
district. Sigma New York attracted the likes of Whitney Houston, Madonna, Steely
Dan, The Village People, Talking Heads, Paul Simon, Ashford and Simpson and
Billy Joel.

Mr. Tarsia has won many industry awards for his engineering accomplishments,
including over 150 Gold and Platinum records from the Recording Industry
Association of America.

Mr. Tarsia is President of Sigma and began his association with Select Media in
2000.

The above listed directors will serve until the next annual meeting of the
stockholders or until their death, resignation, retirement, removal, or
disqualification, and until their successors have been duly elected and
qualified. Our executive officers serve at the discretion of the Board of
Directors. Vacancies in the existing Board of Directors are filled by majority
vote of the remaining Directors. Officers of the Company serve at the will of
the Board of Directors. There are no agreements or understandings for any
officer or director to resign at the request of another person and no officer or
director is acting on behalf of or will act at the direction of any other
person. There is no family relationship between any executive officer or
director of the Company.

Board Committees. The Board of Directors has not yet established any committees.
The Board intends to establish a Compensation Committee and an Audit Committee
at the next meeting of the Board of Directors.

Compensation Committee Interlocks and Insider Participation. The Board has not
yet established a Compensation Committee. The Board of Directors as a whole
performs this function.

Director Compensation. Select Media's directors do not receive any cash
compensation for their service as members of the Board of Directors, although
they are reimbursed for travel and lodging expenses in connection with
attendance at Board meetings.

Section 16(a) Beneficial Ownership Reporting Changes

In the period covered by this report, Mr. Gutkowski is late in filing one (1)
Form 4 and Mr. Sartorio and Mr. Mongiardo are each late in filing one (1) Form

                                       30
<PAGE>

3. Mr. Gutkowski had one (1) transaction in 1999. Mr. Sartorio and Mr. Mongiardo
each became subject to reporting requirements in October 1999 and failed to file
timely Form 3's.

Item 10.  Executive Compensation.

Executive Compensation.

The following table sets forth the compensation received for services rendered
to the Company during the fiscal year ended December 31, 2000 by our Chief
Executive Officer. Except for the CEO, the Company had no officers who earned
more than $100,000 during the fiscal year ended December 31, 2000.
<TABLE>
<CAPTION>
                                               SUMMARY COMPENSATION TABLE

                                                                                      Long-Term Compensation
                                                                              -------------------------------------
Name And Principal             Annual Compensation       Other Annual         Awards                   All Other
Position                   Year     Salary($)    Bonus($)     Compensation    Restricted Stock   Options     Awards
------------------         ----     ----------   --------     ------------    ----------------   ---------   ------
<S>                        <C>      <C>            <C>             <C>             <C>              <C>        <C>
Mitch Gutkowski            2000     $              $0             None            None             None       None
Chief Executive Officer    1999     $252,000       $0             None            $440,000         None       None
                           1998     $200,000       $0             None            None             None       None
Joseph Tarsia
President of Sigma         2000     $ 97,790       $0            $9,625           None             None       None
</TABLE>
The Company did not pay to our Chief Executive Officer or any executive officer
any compensation intended to serve as incentive for performance to occur over a
period longer than one year pursuant to a long-term incentive plan in the fiscal
year ended December 31, 2000. The Company does not have any defined benefit or
actuarial plan with respect to our Chief Executive Officer or any executive
officer under which benefits are determined primarily by final compensation and
years of service. On October 25, 1999, Mr. Gutkowski was issued 2,000,000 shares
of restricted common stock for prior services to the Company. Mr. Gutkowski
provided substantial services to the Company from the period beginning before
the Company filed for bankruptcy court protection in November, 1995 to up to and
including October 24, 1999. For much of that period, Mr. Gutkowski did not take
a salary, or took a reduced salary. The $440,000 value placed on the stock
issued to Mr. Gutkowski is based on sales made by the Company that took place
just before the issuance to Mr. Gutkowski. Mr. Gutkowski was responsible for
bringing in the consultants and independent contractors who brought the Company
back into business after the bankruptcy. On October 25, 1999, the Company
reduced Mr. Gutkowski's salary from $300,000 per year to $200,000 per year in
order to conserve the Company's cash resources.

Option Grants

The Company granted no stock options in the fiscal year ended December 31, 2000.

Employment Contracts

The Company has an employment contract with Mr. Gutkowski to act as the
Company's president and chief executive officer, which provides for a yearly

                                       31
<PAGE>

salary of $200,000 in 2000, $300,000 in 2001, $350,000 in 2002, $400,000 in 2003
and $450,000 in 2004, with a bonus of 2% of the Company's net profits,
determined and paid quarterly. This agreement has a term of 5 years and expires
October 2004.

Conflicts of Interest

Mr. Mongiardo and Mr. Simmons, the Company's non-employee directors, are
associated with other firms involved in a range of business activities, as noted
in Item 9, above. Consequently, there are potential conflicts of interest in
their acting as directors of the Company. Insofar as these directors are engaged
in other business activities, management anticipates they will devote only a
minor amount of time to the Company's affairs. However, as of the date of this
filing, no actual conflicts of interest exist between the Company and either Mr.
Mongiardo or Mr. Simmons.

The officers and directors of the Company may in the future become stockholders,
officers or directors of other companies that may be engaged in business
activities similar to those conducted by the Company. Accordingly, conflicts of
interest may arise in the future with respect to such individuals acting on
behalf of the Company or other entities. Moreover, additional conflicts of
interest may arise with respect to opportunities which come to the attention of
such individuals in the performance of their duties or otherwise. The Company
does not currently have a right of first refusal pertaining to opportunities
that come to management's attention insofar as such opportunities may relate to
the Company's business operations. The Company has adopted a policy that the
Company will not seek a merger with, or acquisition of, any entity in which
members of the Company's management serve as officers, directors or partners, or
in which they or their family members own or hold any material ownership
interest. With the exception of the policy regarding mergers and acquisitions
described in the preceding sentence, the Company does not have any policies
regarding resolving conflicts of interest.

None of the Company's directors receives any compensation for their respective
services rendered to the Company as directors, nor have they received such
compensation in the past. They all have agreed to act without compensation until
authorized by the Board of Directors. Further, none of the directors accrued any
compensation during the period covered by this report under any agreement with
the Company.

Item 11. Security Ownership of Certain Beneficial Owners and Management.

(a) Security Ownership of Certain Beneficial Owners.

The following table sets forth the beneficial ownership for the Company's sole
class of Common Stock of the Company beneficially owned by all directors,
officers and 5% or more holders.

                                       32
<PAGE>

Name and
Address of                       Nature of
Beneficial                       Beneficial            Number of
Owner                            Ownership             Shares            Percent
-----                            ---------             ------            -------
Mitch Gutkowski(1)               Record                2,000,000         13.1%

James Mongiardo(1)(2)            Record                  350,000          2.3%

Chet Simmons(1)                  Record                   11,600          (3)

Dominick Sartorio                Record                2,006,667         13.2%
215 Route 110
Huntington, NY 11746

All officers, directors and
    key employees as a group
    (4 persons)                                        4,368,267         28.7%

(1) Address c/o the Company at 475 Park Avenue South, 10th Floor, New York, New
    York.
(2) Includes 250,000 shares owned by a joint venture in which he holds a
    beneficial interest.
(3) Less than 1%.

Item 12. Certain Relationships and Related Transactions.

In the period form the Company's bankruptcy filing in October 1995 until October
1999, Mr. Gutkowski provided substantial services to the Company. For much of
that period, Mr. Gutkowski did not take a salary or took a reduced salary. In
October 1999, the Company issued Mr. Gutkowski 2,000,000 shares as compensation
for these prior services, valued for reporting purposes at $440,000.

In 1996, Mr. Gutkowski contributed $100,000 in cash to the Company's
reorganization plan as part of the Company's emergence from bankruptcy. The
Company repaid this contribution to Mr. Gutkowski in January 2000.

In October 1999, a note payable to a stockholder, Robert Johnson, for $560,000
was extinguished for $1. As additional consideration, Mr. Johnson exchanged
3,334 unrestricted shares (valued at $.022 per share) of the Company's common
stock for 200,000 restricted shares (valued at $0.22 per share) of the Company's
common stock held by Lloyds. Mr. Johnson was not an officer, director or 5% or
greater stockholder of the Company at the time of this transaction.

An individual has signed a letter of credit on behalf of the Company for
$1,000,000 as a security deposit on the lease for the Company's facility at 666
Third Avenue. Because of the dispute with the Landlord noted in Item 3, "Legal
Proceedings," above, during November 2000, the bank has drawn down the entire
amount of the $1,000,000 letter of credit to the benefit of the previous
landlord and the Company has vacated the premises. The Company intends to issue
this individual 350,000 shares of Common Stock. This individual is not an

                                       33
<PAGE>

officer, director or 5% or greater stockholder of the Company. The Company has
notes payable to a stockholder, Richard Pizzitta, for $375,000. The notes bear
interest at 10% and had original maturity dates in November and December 1999.
Mr. Pizzitta extended the maturity dates on these notes and the notes are
currently due upon demand. Mr. Pizzitta received 6,667 shares of common stock as
compensation for the extensions. Mr. Pizzitta is not an officer, director or 5%
or greater stockholder of the Company.


Item 13. Exhibits and Reports on Form 8-K.

         Item 1.  Exhibit Index

Exhibit No
----------
(3)      Articles of Incorporation and Bylaws

3.1      Articles of Incorporation *
3.2      Bylaws    *

(10)     Material Contracts

10.1     Employment Agreement with Mitch Gutkowski ***

10.2     Stock Purchase Agreement for the Purchase of all the outstanding Common
         Stock of Sigma Sound Studio, Inc. **

10.3     Letter of Intent for the purchase of all the assets and liabilities of
         Betelgeuse Productions, LLC. ***

10.4     Agreements with Lloyds regarding Financing ***

10.5     Non-Binding Letter of Intent with Bryn Mawr Investment Group regarding
         Financing ***

10.6     Agreement with Lloyds to fund the Betelgeuse Down Payment ****

10.7     Agreement with Lloyds regarding Interim Financing ****

10.8     Definitive Agreement to Purchase the Assets and Liabilities of
         Betelgeuse Productions, LLC ****

10.9     Registration Rights Agreement ****

(16)     Letter on Change in Certifying Accountant

                                       34
<PAGE>

16.1     Letter of Ernst & Young LLP dated December 21, 2000 regarding the
         matters required by Item 304 (a) of Regulation S-B*****

(21)     Subsidiaries of the Registrant

21.1     Subsidiaries of the Registrant****

(27)     Financial Data Schedule

27.1     Financial Data Schedule ****

* Incorporated by reference to Exhibits to Registrant's original Registration
Statement Number 33- 80412 filed under the Securities Act of 1933 on August 19,
1994.

** Incorporated by reference to Exhibits to Registrant's Form 10KSB filed under
the Securities Exchange Act of 1934 on July 27, 2000.

*** Incorporated by reference to Exhibits to Registrant's Form 10KSB/A1 filed
under the Securities Exchange Act of 1934 on November 15, 2000.

**** Incorporated by reference to Exhibits to Registrant's Form 10KSB/A2 filed
under the Securities Exchange Act of 1934 on December 12, 2000.

***** Incorporated by reference to Exhibit 16 to Registrant's Form 8K/A1 filed
under the Securities Exchange Act of 1934 on December 22, 2000.


Item 2 Reports on Form 8-K.

       During the year ended December 31, 1999, the period covered by this
report, the Company did not file any reports on Form 8-K. In 2000, the Company
filed two Forms 8-K, as follows:

       (a) On November 6, 2000, the Company filed a Form 8-K to report a change
           in certifying accountant in response to Item 4 of Form 8-K. The
           Company filed an amendment to this Form 8-K on December 22, 2000.

       (b) On November 27, 2000, the Company filed a Form 8-K to report the
           acquisition of all of the outstanding stock of Sigma Sound Studio,
           Inc.

                                       35
<PAGE>

                                   SIGNATURES

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

                        SELECT MEDIA COMMUNICATIONS, INC.

                                 By: /s/ MITCH GUTKOWSKI.
                                     --------------------
                                     Mitch Gutkowski, Chief Executive Officer

Date: 4/13/2000

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

By /s/ MITCH GUTKOWSKI
   -----------------------------------------------------------------
       Mitch Gutkowski, Chief Executive Officer, Director

Date: 4/13/2000

By: /s/ ANTHONY URBANO
    ----------------------------------------------------------------
        Anthony Urbano, Controller

Date: 4/13/2000

By: /s/ JAMES MONGIARDO
    ----------------------------------------------------------------
        James Mongiardo, Director

Date: 4/13/2000

By: /s/ CHET SIMMONS
    ----------------------------------------------------------------
        Chet Simmons, Director

Date: 4/13/2000