U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-KSB

(Mark One)

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

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

For the transition period from ______________________ to ______________________

                         Commission File number 0-17591
                         KALEIDOSCOPE MEDIA GROUP, INC.
               --------------------------------------------------
              (Exact name of small business issuer in its charter)

                      Delaware                            93-0957030
           ------------------------------              -----------------
          (State or other jurisdiction of             (I.R.S. Employer
           incorporation or organization)             Identification No.)

(Address of principal executive offices (Zip Code)

Insurer's telephone number (212) 582-1116

Securities registered pursuant to Section 12(b) of the Act:

     Title of each class               Name of each exchange on which registered
------------------------------         -----------------------------------------
Securities registered pursuant
 to Section 12(g) of the Act.

                         Common Stock, $.0001 par value

(Title of Class)

      Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No. ___.

      Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained herein, and no disclosure will be contained, to
the best of issuer's knowledge, in definitive proxy of information statements
incorporated by reference in Part III of this Form 10-KSB or any amendments to
this Form 10-KSB, [ ]

      Issuer's revenues for the year ended December 31, 2000 are $852,163.

      The aggregate market value of the voting and non-voting common stock held
by non-affiliates of the issuer is $7,028,043 (as of April 13, 2000).

      The number of shares outstanding of the issuer's common stock is
$55,376,820 (as of March 31, 2001).


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Item 1. Description of Business

Corporate History

      Kaleidoscope Media Group, Inc. (the "KMG"), then called BNN Corporation
("BNN") and a publicly traded corporation without operations, acquired all of
the outstanding shares of Kaleidoscope Media Group, a private corporation (now
called HSPSMM, Inc. and referred to herein as "HSPS"), on October 22, 1996. The
transaction was effected by issuing shares of common stock of KMG in an amount
that resulted in the original HSPS shareholders receiving approximately 40.3% of
the then outstanding shares of KMG. For financial reporting purposes, the
transaction was recorded as a recapitalization of HSPS. HSPS is the continuing,
surviving entity for accounting purposes, but KMG is the continuing entity for
legal purposes. On December 3, 1997, KMG, a Nevada corporation, was
reincorporated in the State of Delaware under its present name.

      HSPS was formed on May 3, 1996 when it acquired substantially all the
shares of SeaGull Entertainment, Inc., ("SeaGull") and all of the outstanding
share of two corporations constituting the Kaleidoscope Sports Group ("KSG").

Introduction

      During the first nine months of 2000 we experienced increasing sales
activity while continuing to reduce costs. During the last quarter of 2000 we
experienced a severe cash shortage as a result of the refusal of a prime
distributor to honor its contractual commitments regarding delivery of the
mini-series "Shaka-Zulu The Citadel", and pay us substantial sums due as an
guarantee for distribution of the mini-series "Magnificent Ambersons". This
caused us to curtail substantially all operations. If we did not receive
$300,000 in short term loans in November and December 2000 we would have had to
cease operations. Presently our chief executive is our only employee. We do not
anticipate any substantial revenue unless we have additional capital. Therefore,
the comparison presented below may not be indicative of future operations.

      During 2000 revenues increased as a result of new contracts established
during the first and second quarter of the year. However, a portion of the
revenues was generated from a client that we are currently in arbitration with.
The company may increase its revenues through the settlement of this suit. Even
though revenues were increased and expenses were decreased, the company still
incurred a loss for the year. This loss was primarily a result in the write-off
of all non-performing assets, the interest incurred on the outstanding notes,
and the finance cost incurred from these notes.

      From January 2000 through November 2000 we received $1,006,032 gross
proceeds in consideration of the sale of convertible notes.

      In January 2000 the principal executive offices of the Company were
relocated to 1370 Avenue of The Americas, Suite 2602, New York, NY 10019.

Business Strategy

Once we are able to resume activity we will focus primarily on distribution of
programming for television; home video, the Internet and exploiting related
licensing and merchandising opportunities. We will also provide consulting
services in the development of specialty television and Internet programming and
reactivate the distribution of specialty television programming and properties
from its entertainment library. We will attempt to use strategic partnerships,
pre-sales of distribution rights, and advertising time to help third party
producers finance production budgets. We believe that our expertise in domestic
and foreign syndication, home video, and Internet broadcasting is an important
factor in our ability to successfully compete in these areas.

Our long range distribution strategy is to become a leader in the domestic and
international distribution of television properties in four categories:

- one hour dramas and mini series;
- children's programming;


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- documentaries and,
- music programming.

In furtherance of achieving its strategic goals, we are seeking to expand our
television operations through the acquisition of distribution and other
representation rights to additional entertainment properties.

Programming Distributed by the Company

      We also had secured distribution rights to two new mini-series, which are
presently the subject of an arbitration proceeding. The first of which is the
remake of the "The Magnificent Ambersons". This new mini-series is based on the
original script developed by Orson Wells. This is a 4-hour TV mini-series. Our
distribution agreement had guaranteed us a minimum distribution fee of $500,000
for the year ending December 31, 2000. This sum remains unpaid. The second
mini-series is "Shaka-Zulu. The Citadel". The distributor has failed to deliver
this program. Both of these min-series are subject of arbitration procedures in
the United Kingdom. We have terminated our distribution agreement with
Information Television Network to distribute worldwide, award winning programs
which focus on Medicine, Women and Children's health, Technology and the
Environment because our cash position prevented us from effectively distributing
these programs.

The Television Market

      The entertainment industry is an approximately $30 billion per year
industry which is presently undergoing strategic changes as new technologies
proliferate in both the development and production of projects and in the
electronic distribution of entertainment programming. The development and growth
of the 500 channel cable system, DBS (Direct Broadcasting Satellite), Pay Cable,
home video, DVD's, CD-ROMs and other interactive multimedia are creating many
more opportunities for the distribution of entertainment programming to the
consumer, while at the same time reducing the overall market share for any one
program. Even with these changes, management believes that the creative content
of programming will continue to drive the market share. Consequently, management
believes there is, and is likely to continue to be, a growing demand for quality
content-based entertainment products that can be produced more efficiently.

      Network-affiliated stations, independent stations and cable TV operators
serve the United States television market. During prime time hours (primarily 8
pm to 11pm in Eastern and Pacific time zones and 7 pm to 10 pm in the Central
and Mountain time zones), network affiliates primarily broadcast programming
produced for the network. In non-prime time, network affiliates telecast network
programming, off-network programming (reruns), first run programming
(programming produced for distribution on a syndicated basis) and local
programming produced by the local stations themselves. Independent television
stations, during both prime and non-prime time, produce their own programs,
telecast off-network programs or acquire first-run programs form independent
producers or "syndicators." A syndicator is generally a company that sells
programming to independent stations and network affiliates. Programming acquired
by stations on a syndicated basis is generally acquired either for cash license
fees or an exchange commercial advertising time within the program which is
retained by the syndicator for sale ("barter") or for a combination of cash and
barter.

      The international television market continues to grow as the continued
growth and development of international television distribution channels
increases the demand for quality programming. International sales of programming
are made to television distributors on a cash basis. Initial cash down payment
is made upon the agreement of the international channel to display the
programming. The balance of the cash for the licensing fee is generally paid
upon delivery of the programming. The international television networks retain
sales of advertising time.

Television Distribution/Barter

In addition to receiving cash for distribution, we have from time to time
distributed through barter syndication. Barter syndication is the process


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whereby a syndicator or distributor obtains commitments from television stations
to broadcast a program at a cash-licensing fee and sells such retained
advertising time for its own account to national advertisers at rates based on
projected ratings and viewer demographics. From time to time, certain stations
may require cash consideration from us, in addition to programming, in exchange
for advertising time.

By placing the program with televisions stations throughout the United States,
the syndicator creates an "ad hoc" network that has agreed to carry the program.

Fees paid by national advertisers for barter advertising are established on the
basis of a household audience ratings or, more frequently, on the basis for
delivery of a certain demographic category of the viewing audience, but may vary
depending on the conditions in the general market for television advertising.
The desired household rating or demographic delivery, as the case may be, is
negotiated in advance with the advertiser or its representative. In general, if
the television program does not deliver at least the agreed-upon audience, the
distributor is obligated to make available additional advertising time on the
same program or other programs at no additional cost or to refund that portion
of the advertising fee attributed to the failure to deliver the agreed-upon
audience.

Cable Network Licenses

Television programming can be licensed for telecast by cable network such as the
ESPN, Lifetime, USA and Arts & Entertainment basic cable networks and the Disney
and HBO pay cable networks. The production and distribution of the programming
for the initial exhibition on cable networks is similar to that for broadcast
networks, although the license fees paid by cable networks are typically
considerably lower than those paid by the broadcast networks.

International Television Production and Distribution

Based on industry sources, we believe revenues from the distribution of U.S.
television programs industry wide to foreign markets have increased
significantly in recent years. Development in the European television industry,
such as the present trend towards increasing the number of privately owned
channels and greater channel capacity might cause foreign sales to become a more
important component of the distribution of programs produced by the United
States television industry. There is no assurance that the programs distributed
by us will reflect such increase.

New Programming

In general, we earn a fee for distributing programs for others based on a
percentage of the license fees paid by television stations for the right to
broadcast particular programs. In certain domestic cases, all or a portion of
such license fee may be payable in television advertising time or then sell the
advertising time to national advertisers.

In additional to United States television broadcast rights, we have in the past
acquired, where available on acceptable terms, worldwide broadcast television
and non-standard television distribution rights (such as cable and videocassette
rights) to the program it distributes. These acquisitions are typically on a
long-term exclusive basis, often between three and twelve years, in some cases
with various renewal options, and may provide that we have the right to
undertake production of the program in the event the producer fails to deliver
the contracted programming.

Entering into arrangements for distribution of new material or properties for
television and new multimedia productions is essential to our future growth. We
may obtain new properties from several sources: (i) distribution agreement with
the owner of a property; (ii) acquisition of existing properties; (iii)
co-development of new properties; and (iv) development of new properties
internally. As long as we experiences capital shortages, it will concentrate on
acquiring distribution rights as opposed to being responsible for financing of a


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project.

Revenue Sources

Our television programming business has in the past generated two significant
sources of revenue, distribution fees and the sale of advertising time derived
from barter.

Distribution Fees

In most cases, our distribution revenues are based on a percentage of the net
revenues derived from the sale of advertiser sponsorships or on cash license
fees. Generally, we advance all distribution costs of items such as advertising,
promotion, tape shipping and tape duplication and recover such expenses from the
program revenues. In some instances, these expenses are assumed by us as part of
its distribution fee. Our fee for distribution is generally between 20% to 30%
and the fee for advertiser sales representation is generally between 5% to 10%
of net revenues. However, each fee arrangement is separately negotiated and may
be subject to variation. The sums in excess of our fees and expenses and profit
positions (where applicable) are remitted to the producers of the programs,
which in certain cases may also be us.

Sales of Advertising

Fees for advertising time are established on the basis of a certain assumed
level of audience ratings and, in some cases, an assumed demographic make-up of
the viewing audience. While it is in our interest to establish as high an
assumed rating and as favorable demographic make up as possible, there can be no
assurance in advance that the actual rating or demographic make-up of a
particular program will support the fee initially charged for the advertising
time on such program. If the television programs does not achieve the assumed
rating or demographic make-up (as determined by A.C. Nielsen or similar rating
services), we may be obligated to offer the advertiser additional time ("make
goods") on the same program or other programs to fulfill any short fall in the
actual rating or demographic assumptions. Alternatively, we may be obligated to
refund a portion of the advertising fee. "Make goods" are the predominant means
whereby we satisfy such obligations to advertisers.

Among the sponsors that have in the past purchased participation in our programs
are General Motors, Proctor & Gamble, Kraft/General Foods, Hershey and Bristol
Meyers. Sales are made through our sales force and through advertising agencies
representing the sponsors. We have bartered syndication licenses provide that we
retain a negotiated amount of commercial time per program (usually 7 minutes per
hour or 50% of the total commercial time) for sale to national advertisers, with
the remaining commercial time retained by the station for local sale. Generally,
our fee for sales of advertising time is between 5% and 10% of net revenues.

Competition

      Competition in the production and distribution of television programming
is intense. We are a minor participant in the television distribution business.
KMG's programming competes with other first run programming, network reruns and
programs produced by local television stations. We compete with many other
companies that have been acquiring, producing and distributing programs for a
longer period to time than us, and most of theses companies have greater
financial resources than ours. These competitors include large television and
film studios such as Paramount Communications Inc., Columbia Pictures
Television; 20th Century Fox Film Corp., MCA Inc., and Warner Bros. Inc., as
well as other television distribution companies such as King World Productions,
Inc., Pearson Television and Viacom International, Inc. We compete with other
companies for the sale of television advertising time, including Tribune
Broadcasting Co./Entertainment Co., Viacom International, Inc., Pearson
Television and King World.

      Our success is highly dependent upon such various unpredictable factors as
the viewing preferences of television audiences. Public taste is unpredictable
and a shift in demand could cause our programming to lose its appeal. Television


<PAGE>

programming also competes for audiences with many other forms of entertainment
and leisure time activities, some of which include new areas of technology (e.g.
video games and home video). The impact of these on our operations cannot be
predicted.

Principal Customers

      No customer accounted for more than 10% of our revenue for the period
ended December 31, 1999. Although for the nine months ended September 30, 20000
we did receive more than 10% of our revenue from our relationship with Global
Entertainment, however there currently is litigation regarding this
relationship.

Employees

At January 15, 2001, we employed only one (1) person, our chief executive
officer, who devotes a majority of his time to our affairs. We have no
collective bargaining agreement with our employee and we believe that our
relationship with our employee is good.

Property

Our principal executive offices are located at 1370 Avenue of the Americas, New
York, New York 10019 and consist of approximately 1,000 square feet at a rental
of $2,000 per month.

Item 2. Description of Property

Our principal executive offices are located at 1370 Avenue of the Americas, New
York, New York 10019 and consist of approximately 1,000 square feet at a rental
of $2,000.

Item 3. Legal Proceedings

      On June 21, 1996, an action, entitled International Sports Marketing, Inc.
v. Saatchi & Saatchi, et al. was filed in the Wayne County Circuit Court against
two of our inactive subsidiaries and other unrelated parties seeking to enforce
a default judgment of $21,000,000 entered in 1995 for prior action in 1998. The
subsidiaries have vigorously defended themselves in this litigation.
Furthermore, management believes that if any subsidiary were found liable for a
judgment, its subsidiaries would be able to obtain indemnification from prior
owner of the former affiliate's business, a major advertising agency.

      A default judgment has also been obtained by Darrell N. Griffin against
Paul Siegel, an officer and director for us, in the amount of approximately
$166,000 in an action pending in the Supreme Court of the State of California.
The claim arises out of action for salary allegedly payable to a plaintiff
purportedly an employee of our former subsidiary Celebrity Showcase Network.
Judgment was taken after Mr. Siegel's counsel failed to respond to discovery
requests. The court of appeals rejected Mr. Siegel's appeal of the lower court's
decision. Mr. Siegel has commenced an action against his former attorney for
malpractice. We are obligated to indemnify Mr. Siegel in accordance with
Delaware law.

      On October 28, 1998 Paul Cioffari commenced an action against us and its
subsidiary claiming failure of us to perform its agreement to pay Mr. Cioffari
agreed consideration for entertainment property allegedly delivered by Mr.
Cioffari to us. Cioffari vs. BNN Company (Supreme Court New York County).
Defendants seek damages up to $700,000 on a variety of claims. We had settled
this claim and have agreed to pay Mr. Cioffari 300,000 shares of KMG common
stock as well as $6,500 in legal fees. Because of delays in obtaining
registration of the shares to be issued to Mr. Cioffari, he terminated the
settlement.

      ACC Entertainment GMBH Co. v. Kaleidoscope Media Group, Inc. commenced
October 27, 1998 United States District Court for the District of California by
ACC Entertainment GMBH Co. ("ACC") for alleged breach of contract seeking
damages of $250,000. The contract provided for certain rights to our Merlin film
to be produced by us in return for an investment of $375,000. This case has been
settled in consideration of $100,000.


<PAGE>

      On August 5, 1998 Mr. Barry Synter commenced an action against us in the
Supreme Court of the State of New York County of New York. (Synter vs. BNN
Corporation) Mr. Synter seeks damages of up to $1,500,000 for our alleged
failure to permit transfer by Mr. Synter of stock certificates allegedly owned
by him. We agreed to settle this action in consideration of the issuance of
900,000 shares of its common stock. Because of the delays in obtaining
registration of the shares to be issued in settlement. This settlement may not
be finalized.

      An action has also been commenced by Eric Ashenberg a former officer of
Celebrity Showcase Network, its prior subsidiary for damages arising from our
failure to approve the transfer of a certificate allegedly owned by Mr.
Ashenberg. Mr. Ashenberg has also named Henry Siegel and Paul Siegel as
defendants. Mr. Ashenberg sought damages in the amount of $450,000. We have
settled this action in consideration of 300,000 shares to Mr. Ashenberg. Because
we failed to perform part of our obligations under the agreement Mr. Ashenberg
obtained default judgment against us and certain directors. We have verbally
agreed to settle with Mr. Ashenberg pursuant to which we (a) recognized Mr.
Ashenberg's entitlement to his original shares and (b) have agreed to register
up to 1,800,000 additional shares to cover the balance of Mr. Ashenberg's agreed
upon damages in the amount of $70,000 under the proposal. If the aggregate
market value of the common stock at the time is greater than Mr. Ashenberg's
damages upon effective date a portion of the shares will be returned to the
Company.

      In November 2000 Paul Siegel commenced a lawsuit against us, Myron Hyman,
our chief executive officer, former outside directors Richard Kostyra, Kevin
Eastman and Ann Collins, a former employee and now consultant. Former outside
directors Siegel vs. Kaleidoscope Media Group, Inc. et al (Los Angeles County
Superior Court, State of California). Mr. Siegel seeks unpaid salary and fees
indemnity for damages he sustained for being named as a defendant in an action
and breach of the settlement agreement. We have also commenced an action against
Henry Siegel and Paul Siegel Kaleidoscope Media Group, Inc. vs Henry Siegel (NY
County Supreme Court State of New York). We seek damages against both defendants
for interference with settlement discussions with Global Entertainment, which we
are now engaged in an arbitration proceeding. We have sued Mr. Siegel for breach
of his settlement agreement. Mr. Siegel has filed a counterclaim alleging
various breaches of his separation agreement.

      We have commenced an arbitration proceeding in the United Kingdom against
Global Entertainment Products B.V. We have made claims arising out of a joint
distribution agreement and separate sub-distribution agreements relating to the
television production of Shaka-Zulu - The Citadel and the Magnificent Ambersons.
As a result of Global Entertainments' breach we believe we are owed in excess of
$1,000,000, which we are seeking to recover in the arbitration proceeding.

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

      No matter was submitted.

                                     Part II

Item 5. Market for Common Equity and Related Stockholder Matters

      KMG's common stock (the "Common Stock") is quoted on the OTC Bulletin
Board under the symbol "KMGG".

      Set forth are the approximate high and low bids for the Common Stock on
the OTC Bulletin Board as published by the National Quotation Bureau, Inc. Such
quotations reflect interdealer prices without retail mark-up, mark-down or
commissions, and may not reflect actual transactions.

                                                     Common Stock
                                                     High     Low

         2000

         First Quarter                             $ .52    $ .13
         Second Quarter                              .36      .14
         Third Quarter                               .24      .13
         Fourth Quarter                              .16      .03


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                                                     Common Stock
                                                     High     Low

         1999

         Fourth Quarter                              .18      .09
         Third Quarter                               .30      .145
         Second Quarter                              .31      .160
         First Quarter                               .65      .22

      As of January 26, 2001, there were approximately 247 recordholders of the
common stock, although we believe that there are more than 400 beneficial owners
of the common stock.

Sales of Securities

      During the nine-month period the Company issued eight (8%) percent
convertible promissory notes aggregating two hundred and fifty thousand dollars
($250,000) to foreign private investors. These notes mature March 9, 2001
together with interest, unless the parties agree to extend the maturity date.
The Notes are convertible into an indeterminate number of shares at a conversion
price of the lower of ten ($0.10) cents per share or 70% of the lowest closing
price within sixty (60) days of conversion. In conjunction with the financing,
the Company issued a total of 27,625,000 warrants at an exercise price of $0.11.
The Company incurred financing costs of $32,000, which is being amortized over
the life of the note.

      The Company also issued an additional ten (10%) percent convertible
promissory note in the amount of two hundred and fifty thousand dollars
($250,000) to a foreign investor. This is a demand note. The Note is convertible
into 1,250,000 shares at the conversion price of twenty ($0.20) cents per share.
There were no costs incurred during the financing of this note. This note is
secured with proceeds from several contracts.

      During the third quarter the company issued two additional notes in the
amounts of one hundred and fifty thousand dollars ($150,000) and fifty two
thousand five hundred dollars ($52,500) to a foreign private investor and a
domestic private investor, respectively. The notes are due upon completion of
the sale of shares of KMG stock. The interest on the notes is calculated at ten
percent (10%) per annum. There were no finance costs incurred during the
financing of these notes. These notes are secured with proceeds from several
contracts.

      The Company believes each of these transactions is exempt from the
registration requirement of the Securities Act of 1933 pursuant to Section 4(2)
thereof.

Dividends

      KMG plans to retain any future earnings for use in its business and,
accordingly, we do not anticipate paying dividends in the foreseeable future to
the holders of the Common Stock. Payment of dividends is within the discretion
of KMG's Board of Directors ("Board of Directors") and will depend, among other
factors, upon our earnings financial condition and capital requirements.

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

      Reference is made to Note 2 of KMG's Consolidated Financial Statements for
a discussion of significant accounting policies, including revenue recognition.

Forward Looking Statements

      The following statements and certain other statements contained in this
annual report on Form 10-K are based on current expectations. Such statements
are forward looking statements that involve a number of risks and uncertainties.
Factors that could cause actual results to differ materially include the
following (i) general economic conditions, (ii) competitive market influences,
(iii) audience appeal and critical reviews of its television programs and (iv)
the ability to identify, acquire the distribution rights to, and to develop
quality properties (v) the failure of third parties to complete or timely
delivery product.


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Results of Operations

      Year ended December 31, 2000 as Compared with Year Ended December 31, 1999

      Net revenues consist of total billings (less any agency fees and media
costs) and accruals for earned fees.

      Net revenues for the twelve months of 2000 were $852,163 compared with net
revenue of $(53,668) for the twelve months of 1999. The year 2000 revenues are
derived from Shaka-Zulu as a recoupable but non-refundable advance towards sales
of the series. The growth in revenue is attributed to increased sales of our
existing products during the first nine months of 2000.

      Amortization of program costs (costs to produce, market and distribute a
broadcast or film property) and other direct project costs was $ 953,246 in the
twelve months of 2000 compared to $1,361,614 in 1999. The relative decrease in
the amortization of program costs in 2000 primarily results from significant
amortization of several non-performing asset in the prior year. In the year 2000
we amortized the balance of these assets.

      Gross profit increased by $1,314,198, to $(101,084)for the twelve months
in 2000 from $(1,415,282) for the twelve months of 1999.

      Salaries and benefits decreased by $573,994, to $499,742 in the twelve
months of 2000 compared to $1,073,736 in the twelve months of 1999. The decrease
in salaries and benefits is a result of the closing of the Los Angeles office,
the downsizing of staff to its current staffing level and the benefits of the
separations agreements between former executives and directors, which resulted
in, lower salaries.

      General and administrative expenses increased by $ 67,470, to $1,185,364
in the twelve months of 2000 from $1,104,482 in the twelve months of 1999. The
increase in cost in attributable to the cost of approximately $350,000 incurred
during our attempts to acquire other entities that were compatible with ours.
These efforts were suspended during the fourth quarter of 2000 when our cash
flow was hampered by the non payment of our distributors.

      Amortization, depreciation, and interest increased by $239,289, to
$491,402 in the twelve months of 2000 from $252,113 in the twelve months of
1999. The increase is largely due to the amortization of finance costs. During
the year 2000 we amortized $334,959 of these costs and $154,303 for the twelve
months of 1999, this was an increase of $180,656 for the year 2000. These costs
were incurred during end of the second, third and forth quarters 1999 and second
quarter of 2000 and are being amortized over the life of the loan.

      Interest increased by $62,220 for the twelve months of 2000, from $82,585
in the twelve months of 1999 to $144,805 in the twelve months of 2000. This
increase reflects interest on the notes for the full period plus interest on
additional notes issued in 2000.

      Losses from operations (before equity income of joint venture) decreased
by $1,568,022 to a loss of $2,277,592 in the twelve months from a loss of
$3,845,614 in the twelve months of 1999. The results for the twelve months of
2000, reflects our continued efforts to turn our operations around before we
were compelled to curtail operations.

      We did not receive any equity income of its joint ventures in either the
third quarter of 1999 and 2000 or in the six months of 1999 and 2000. The Joint
Venture's only revenue producing project to date has been "Tarzan: The Epic
Adventures" which earned most of its revenues in 1996 and 1997. Management
believes that the joint venture will continue to have minimal activity and has
decided to fully amortize all deferred costs of the joint venture during the
current year.

      Our net loss amounted $2,281,232, or $(0.05) per share, for the twelve
months of 2000, as compared to net losses of $4,289,090, or $(0.10) per share,
for the twelve months of 1999.


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Net Operating Loss Carryforwards

      Because of our losses we have written off deferred income benefit.
Nevertheless, at December 31, 1998, NOLs of the Company amounted to
approximately $8,537,500 for federal income tax purposes. The NOLs are not
available for state income tax purposes. The NOLs begin to expire starting in
2011. The Company's subsidiaries file separate income tax returns in various
states and localities. The losses of one subsidiary cannot be used to offset the
losses of another subsidiary for state purposes. Certain of the Company's
subsidiaries have substantial NOLs available for state and local income tax
purposes. In addition, certain of the Company's subsidiaries have approximately
$175,000 of NOLs that can only be used to offset future taxable income (for
federal and certain state purposes) of the specific subsidiaries to which they
pertain. These NOLs are further limited by the operation of Section 382 of the
Internal Revenue Service Code. The subsidiaries are only allowed to use a
maximum of approximately $27,000 of these Carryforwards each year.

Liquidity and Capital Resources

      We have experienced chronic cash shortfalls and through March 31, 2001
have relied upon equity and debt financing. We have continued our effort to
substantially reduce operating costs. We are presently pursuing arbitration in
the United Kingdom to obtain sufficient funds to operate. Within the constraints
of our financial condition we are exploring the possibility to acquire
programming for distribution and to joint venture with companies that have a
need for a distribution facility. We only have cash resources to conduct
extremely limited operations. Our noteholders have the right to call their notes
at any time. If they do so the Company may have to cease operation. We have
verbal assurance from the noteholders that they presently will not to seek
collection of these notes.

      During 2000 we received $1,006,032 from the sale of convertible notes. A
portion of present loans are in default because we failed to timely file a
registration statement. These notes are, therefore, demands notes. If demand
were to be made for payment of the loans the Company would not be able to pay
the loans and may not be able to continue in business.

      As of December 31, 2000 the Company had a working capital deficit of
$5,011,696 compared to a working capital deficit of $4,087,940 as of December
31, 1999. The increase in working capital deficit was primarily due to the
increase in loans required to maintain operations over the last three months
over the year. As of December 31, 2000, the Company had cash of $19,478 compared
with $45,650 as of December 31, 1999. Operating activities generated a net cash
outflow of $887,178. The principle source of cash during 2000 was from the notes
issued in the amount of $1,006,032.

      Net cash used in operating activities was $887,178 in 2000 compared with
$1,502,940 in 1999. A decrease in the write down of program costs, an increase
in the issuance of stock to settle outstanding expenses and a reduction in
operating costs has attributed to the reduction in net cash used in operations.

      Net cash used by investing activities in 2000 was $20,026 compared to the
net cash used by investing activities in 1999 was $84,081. The reduction is due
to the decrease is expenditures for program costs.

      Net cash provided by financing activities amounted to $881,032 for the
year ended December 31, 2000 as compared to $1,627,767 net cash provided by
financing activities for the year ended December 31, 1999. The decrease in cash
provided by financing activities was primarily the result the reduction in the
our cash need to operate on a ongoing basis.

Inflation

      We believe that the relatively moderate rates of inflation in recent years
have not had a significant impact on its net revenue or its profitability.


<PAGE>

Year 2000 Compliance

      The Company's accounting programs have been upgrade to be Y-2K compliant.
The Company has plans to upgrade all other programs by the end of 2000.

Item 7. Financial Statements

      Reference is made to index to financial statements comprising a portion of
this Annual Report on Form 10-KSB.

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

Financial Disclosure

      There have been no changes in accountants due to disagreements on
accounting and financial disclosure during the 24 months prior to December 31,
2000.

                                    Part III

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

      As March 31, 2001 the directors and executive officers of the Company were
as set forth below.

Name                       Age              Position
----                       ---              --------
Myron A. Hyman             61               President, Chief Operating Officer

Ann F. Collins             35               Secretary

      Myron A. Hyman has been President and Chief Operating Officer of the
Company since December 1999. Mr. Hyman was formerly General Counsel to CBS
Records Group and Associate General Counsel for CBS, Inc. from 1977 to 1979. He
was President of MGM/UA Home Video from 1980 to 1983 and the President of
Tomorrow Entertainment from 1984 to 1986 before going into his own law practice
specializing in the entertainment industry. His firm represented clients in
film, music, television, home video, and product licensing.

      Ann F. Collins has been Secretary since December 1999. Ms. Collins
started her career in Accounting with Dancer Fitzgerald and Sample ("DFS) after
her gradation from Mercy College with a degree in Accounting. After the merger
of DFS with Saatchi & Saatchi Advertising she continued her position to Senior
Accountant. When Lifestyle Marketing Group (a division of S&S) left and merged
with People & Properties, Inc. she became Director of Finance until its merger
with SeaGull Entertainment and the formation of Kaleidoscope Media Group, Inc.
when she then became Controller.

      Executive officers serve at the discretion of the Board of Directors.

Compliance with Section 16(a) of the Exchange Act.

      Forms 3, 4 and 5 have not yet been filed by any officer, director or
beneficial owner of more than ten (10%) percent of our common stock. In reports
for officers and directors will be filed shortly. The Company will encourage
beneficial owners of more than ten (10%) percent of the Company's common stock
to file their reports by the same date.

Item 10. Executive Compensation

      The following table sets forth information concerning compensation paid or
accrued by us or our subsidiaries for services rendered during the fiscal years


<PAGE>

ended December 31, 1998, 1999, and 2000 to our then chief executive officer and
to each executive officer whose compensation exceeded $100,000 during its fiscal
year ended then December 31, 2000. Henry Siegel was an officer only during part
of 2000.

                           Summary Compensation Table

                                                                     Long Term
                                           Annual Compensation      Compensation
                                           -------------------      ------------

Name and Principal Position                Year         Salary        Shares

Myron A. Hyman                             2000        $154,167       894,792

Henry Siegel - Chief Executive Officer     2000        $ 50,000*
                                           1999        $350,000*
                                           1998         350,000*

The number of shares ultimately subject to Mr. Hyman's options, are dependent on
the amount of outstanding shares on December 31, 2001 and 2002.

Partial 1998, 1999, and 2000 salary amounts were not paid but accrued. The above
individual is not presently an employee. All accrued amounts were released on
May 12, 2000 pursuant to separation agreements described in "Certain
Transactions." The options to Mr. Henry Siegel have been cancelled.

The following table sets forth all grants of stock options to each of the named
executive officers of KMG during the fiscal year ended December 31, 2000.
Pursuant to the separation agreements described in "Certain Transactions," the
options granted to Messrs. Henry Siegel set forth below have been cancelled.

                        Option Grants in Last Fiscal Year

                 Number of Shares  Percent of Total
                 Of Common Stock   Options Granted to
                 Underlying        Employees in Fiscal  Exercise  Expiration
Name             Options Granted   Year                 Price     Date

Myron A. Hyman   894,792           100%                 $22,370   April 15, 2009

The number of shares ultimately subject to Mr. Hyman's options, are dependent on
the amount of outstanding shares on December 31, 2001 and 2002.

The following table sets forth information as to options exercised by each of
the named executives during the fiscal year ended December 31, 2000 and the
value of in-the-money options held by such executives at December 31, 2000.
Pursuant to the separation agreements described in "Certain Transactions," the
options granted to Messrs. Henry Siegel set forth below have been cancelled.

     Options Exercised in Last Fiscal Year and Fiscal Year End Option Values

<TABLE>
<CAPTION>
                 Number of
                 Shares of
                 Common
                 Stock                    Number of Shares of Common
                 Acquired on   Value      Stock Underlying Unexercised   Value of In-the-Money
Name             Exercise      Realized   Options at 12/31/99            Options at 12/31/00
--------------------------------------------------------------------------------------------------
                                          Exercisable/Unexercisable      Exercisable/Unexercisable
--------------------------------------------------------------------------------------------------
<S>              <C>           <C>        <C>                            <C>
Myron A. Hyman   0             --         894,792/1,789,585              22,370/44,740
</TABLE>

Represents difference between exercise price and market value of $0.05 on such
date.


<PAGE>

Employment Agreements

      In December 1999 Myron Hyman, as our president and chief operating
officer, entered into a thirty-seven (37) month employment agreement with us at
a salary of $150,000 increasing to $200,000 for months 13 through 25 and
$250,000 for the balance of the term. Effective January 3, 2000 the agreement
provides for payments of bonus at the sole discretion of the board additional
life insurance and an automobile allowance. The agreement provides for severance
in certain circumstances including a change of control.

Mr. Hyman's employment agreement provides that he is to receive as of January 3,
2000 options to purchase a number of shares equal to five (5%) percent of the
outstanding shares on December 31, 2000. The options vest as to one-third (1/3)
of the shares on each December 31, 2000, 2001 and 2002. The number of shares
shall be based on the number of outstanding shares on the vesting date less the
number of shares, if any, previously issued. The exercise price shall be 50% of
market price at the time of vesting and the exercise period is to be five (5)
years after vesting.

We have amended Mr. Hyman's employment agreement. For the period December 15,
2000 through November 15, 2001 Mr. Hyman's salary payments of $200,000 have been
reduced to $75,000. The balance of $125,000 and his car allowance are being
deferred. The deferred amount is only payable if we have net income in two
successive quarters of $125,000. If that occurs Mr. Hyman's deferred salary and
expenses are paid over a period of twelve months. Mr. Hyman will continue to
devote substantial time to our affairs but may devote time to other matters. The
amendment also provides that the exercise price for his options will be based on
the market price on December 1, 2000.

Stock Option Plan

      KMG has adopted a 1996 Stock Option Plan (the "1996 Plan") for officers,
employees and consultants of KMG or any of its subsidiaries and other entities
in which KMG has an interest. The 1996 Plan provides for the granting of options
which are intended to qualify either as incentive stock options (the "incentive
Stock Options") within the meaning of Section 422 of the Internal Revenue Code
of 1986 or as options which are not intended to meet requirements of such
section (the "Nonstatutory Stock Options"). As of December 31, 1997, Options to
purchase 835,000 shares of Common Stock had been granted.

      The 1996 is administered by the Board if Directors or a committee of the
Board of Directors (the "Administrator"). The Administrator has discretionary
authority (subject to certain restrictions) to determine, among other things the
individuals to whom and the times at which the Options will be granted; the
number of shares co Common Stock underlying the Options; and the exercise price
and the vesting periods of the Options.

      The Options are evidenced by a written agreement containing the above
terms and such other terms and conditions consistent with the 1996 Plan as the
Administrator may impose. The exercise price in Incentive Stock Options may not
be less than 100% of fair market value of the Common Stock at the date of grant
(110% in the case of the Incentive Stock Options granted to holders of 10% of
the voting power of the Company's capital stock). The aggregate fair market
VALUE OF common Stock (determined at the time of option grant) with respect to
which Incentive Stock Options become exercisable for the first time any year
cannot exceed $100,000. Each Option, unless sooner terminated, shall expire no
later than 10 years from the date of the grant (five years in the case of
Incentive Stock Options granted to holders of 10% of the voting power of the
Company's capital stock), as the Administrator my determine.

      The 1996 Plan (but not Options previously granted hereunder) shall
terminate on December 2001. Subject to certain limitations, the 1996 Plan may be
amended or terminated at an earlier date by the Board of Directors or by a
majority of the outstanding shares entitled to vote thereon.


<PAGE>

      Recently, we have issued options outside of the Plan.

      In connection with their employment agreements we granted Mr. Siegel and
Mr. Hyman options to purchase shares of the Company's common stock.

      Mr. Siegel's terminated employment agreement required that Mr. Siegel be
awarded an option to purchase at least 4,125,340 shares of common stock at ten
($.10) cents per share with the right to receive additional options. All these
options were surrendered in connection with his Separation Agreement.

      Mr. Hyman's employment agreement provides that he is to receive as of
January 3, 2000 options to purchase a number of shares equal to five (5%)
percent of the outstanding shares on December 31, 2000. The options vest as to
one-third (1/3) of the shares on each December 31, 2000, 2001 and 2002. The
number of shares shall be based on the number of outstanding shares on the
vesting date less the number of shares, if any, previously invested. The
exercise price shall be market price at the time of vesting and the exercise
period is to be five (5) years after vesting.

Compensation of Directors

      Directors who are not employed by KMG will be paid a fee of $100 for each
Board of Directors meeting attended and $100 for each committee meeting
attended. All directors are reimbursed for expenses incurred on behalf of KMG.

Item 11. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information regarding beneficial
ownership of our common stock as of March 31, 2001 by (i) each stockholder known
by us to be the beneficial owner of more than 5% of the outstanding common
stock, (ii) each director of KMG, (iii) each executive officer named in the
Summary Compensation Table above and (iv) all directors and executive officers
as a group. Except as otherwise indicted, the based information furnished by
such owners, have sole investment and voting power with respect to such shares,
subject to community property laws where applicable.

Name and address of                   Number of Shares
Beneficial Owner                      Beneficially Owned     Percentage of Class
-------------------                   ------------------     -------------------

Myron Hyman (3)                           1,194,792                2.2%
244 West 54th Street
New York, New York

Byron Lerner                              4,900,000                8.4%

Libra Finance, S.A.(2)                   32,116,000               37.4%
P.O. Box 4603
Zurich, Switzerland

Esquire Trade Finance Inc.(2)            10,254,000               16.0%

Austinvest AnStalt Balzers(2)            10,264,000               16.5%

Amro International(2)                     6,525,100               10.8%

Nesher Inc.(2)                            3,680,000                6.4%

Moshe Manoah(2)                           3,500,000                6.1%

Robert Lancellotti                        2,962,000                5.5%

All directors and executive
officers as a group (1 person)            1,194,792                2.2%

----------


<PAGE>

(1) The above table does not reflect 5,689,280, which we are obligated to issue.
We claim there is a breach of the contract and we may not be obligated to issue
these shares.

(2) Includes presently exercisable options or warrants to purchase shares of
common stock and/or presently convertible notes as follows: Libra Finance, S.A.
32,116,000, Esquire Trade Finance Inc. 10,254,000, Austinvest AnStalt Balzers
10,264,000, Amro International 6,525,100, Nesher Inc. 3,680,000, Ellis
Enterprises Ltd. 3,361,300,Moshe Manoah 3,500,000.

(3) Exclusive of options not presently exercisable.

Item 12. Certain Relationships and Related Transactions

      On May 12, 2000 we entered into separation agreements with each of Henry
Siegel and Paul Siegel. Henry Siegel was our chief executive officer and a
director. Mr. Siegel was a director. Each of Henry and Paul Siegel resigned all
positions held by them with us and all agreements between us and each of the
Siegel's and their entities was terminated. Mr. Siegel's employment agreement
called for salary and fee payments to related entities of $250,000 increasing to
$350,000 in 2002. All rights to receive accrued salary (or consulting fees) for
both Henry Siegel and Paul Siegel were terminated. Options to purchase 2,057,420
and 350,000 shares of our common stock respectively owned by Henry Siegel and
Paul Siegel were cancelled. The cancelled options included options to acquire an
indeterminate number of shares equal to one (1%) percent of the outstanding
shares as of December 31, 2002. We had agreed to issue an additional 6,650,000
shares of common stock to Mr. Henry Siegel of which 5,000,0000 shares to be
issued in November 2000. If the market price of our shares falls below $1.00
prior to May 2001 we may have to issue additional shares to Mr. Siegel. We have
also agreed to pay Mr. Siegel twenty-five (25%) percent of revenues received
from projects he participated in while an officer and assign to him the benefits
of consulting arrangement which depended on the services of Mr. Henry Siegel. We
issued an additional 525,000 shares to Paul Siegel. We had agreed to arrange for
the sale of 500,000 shares of common stock per month for each of Messrs. Henry
and Paul Siegel through November 2000. If the proceeds did not equal $300,000
then we would have to pay the difference to them. Pursuant to our understanding
with Mr. Henry Siegel any amounts in excess at the foregoing amount will be
contributed to us. The parties had exchanged general releases although we are
still liable to indemnify them and Paul Siegel in accordance with law.

During 1998 the pension trust for the benefit of Henry Siegel advanced us
$150,000. Mr. Henry Siegel and Mr. Paul Siegel advanced us $50,000 in 1999 as
non-interest bearing loans. These loans were repaid in January 2000. At the same
time we entered into a separate agreement with Henry Siegel we entered into an
agreement with Mr. Siegel's pension fund pursuant to which we agreed to repay on
May 12, 2000 the full amount of the fund with shares of common stock at the
market price on the same date. Options to the pension fund have been terminated.

Both Paul and Henry Siegel claim that we have breached the separation agreements
with them with regards to our obligation to issue stock to them. We believe that
they both have breached their respective separation agreements have with respect
to the return of stock and options of the Company and have commenced an action
against each of them for this and other reasons. Mr. Paul Siegel has commenced
an action against us in California and Mr. Henry Siegel has asserted
counterclaim against us in the action commenced by us against Mr. Seigel.

We believe the terms of the transaction with our affiliates described above are
as favorable to us as would have been obtained from independent third parties.


<PAGE>

                         KALEIDOSCOPE MEDIA GROUP, INC.
                                AND SUBSIDIARIES

                 For the years ended December 31, 2000 and 1999

                                    CONTENTS

                                                                    PAGE #

Independent Auditors' Report                                          F-1

Financial Statements:

     Consolidated Balance Sheets                                    F-2 - F-3

     Consolidated Statements of Operations                            F-4

     Consolidated Statements of Stockholders' Deficit                 F-5

     Consolidated Statements of Cash Flows                            F-6

     Notes to Consolidated Financial Statements                     F-7 - F-16


<PAGE>

                                    DON FUCHS
                           CERTIFIED PUBLIC ACCOUNTANT
                                370 BROOK AVENUE
                           PASSAIC , NEW JERSEY 07055

                          INDEPENDENT AUDITORS' REPORT

Board of Directors
Kaleidoscope Media Group Inc.

I have audited the accompanying consolidated balance sheet of Kaleidoscope Media
Group, Inc. (formerly BNN Corporation) and Subsidiaries as of December 31, 2000,
and the related consolidated statements of operations, stockholders' equity and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit. The consolidated
financial statements of Kaleidoscope Media Group Inc. (formerly BNN Corporation)
at December 31, 1999 was audited by Liebman, Goldberg & Drogin, LLP whose report
dated March 7, 2000, expressed an unqualified opinion on those statements.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I 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.
I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the consolidated financial statements referred to above represent
fairly, in all material respects, the financial position of Kaleidoscope Media
Group, Inc. (formerly BNN Corporation) and Subsidiaries as of December 31, 2000,
and the results of their operations and their cash flows for the year then ended
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 15 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 15. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Passaic, New Jersey
May 3, 2001


                                      F-1
<PAGE>

                          Kaleidoscope Media Group, Inc
                           (Formerly Bnn Corporation)
                                 and Subsidaries

                           CONSOLIDATED BALANCE SHEETS

                                     AUDITED

                                     ASSETS

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

CURRENT ASSETS
      Cash                                                            $ 19,478
      Accounts receivable, less allowance for doubtful
           accounts of  $461,428 in 2000 and $411,428 in1999           454,262
      Other current assets                                              87,385
                                                                      --------

                       Total Current Assets                           $561,125

      Property and equipment at cost less:
           accumulated depreciation                                     30,041

      Investment in joint venture                                       10,450

      Other Assets                                                          --
                                                                      --------

                               Total Assets                           $601,617
                                                                      ========


                                      F-2
<PAGE>

                          Kaleidoscope Media Group, Inc
                           (Formerly Bnn Corporation)
                                 and Subsidaries

                           CONSOLIDATED BALANCE SHEETS

                                     AUDITED

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

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

CURRENT LIABILITIES
      Notes payable                                                   2,105,040
      Accounts  payable and accrues liabilities                       2,510,440
      Income tax payable                                                906,301
      Deferred income and client advances                                51,040
                                                                   ------------

           Total Current Liabilities                                  5,572,821

Security deposit payable                                                     --
                                                                   ------------

           Total liabilities                                          5,572,821

STOCKHOLDERS' DEFICIT
      Preferred stock, $0.001 par value 15,000,000
      shares authorized and none issued in 2000
      or 1999                                                                --
      Common stock,  $0.001 par value, 100,000,000
           shares authorized and 53,541,540 issued in
           2000, and $0.01 par value 100,000,000 shares
           authorized and 41,355,960 issued in 1999                      53,542
      Additional paid-in-capital                                     10,503,941
      Accumulated deficit                                           (15,528,688)
                                                                   ------------
                Total Stockholders' Deficit                          (4,971,205)
                                                                   ------------
                Total Liability and Stockholders' Deficit          $    601,617
                                                                   ============


                                      F-3
<PAGE>

                          Kaleidoscope Media Group, Inc
                           (Formerly Bnn Corporation)
                                and Subsidiaries

                      CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                                                              Twelve months ended
                                                                                  December 31
                                                                                  -----------
                                                                               2000           1999
                                                                               ----           ----
<S>                                                                       <C>            <C>
NET REVENUE                                                               $    852,163   $    (53,668)

DIRECT PROJECT COSTS
              Amortization of program costs                                    946,421      1,328,560
              Other direct project costs                                         6,825         33,054
                                                                          ------------   ------------

              Total direct project costs                                  $    953,246   $  1,361,614
                                                                          ------------   ------------

GROSS PROFIT                                                              $   (101,084)  $ (1,415,282)
                                                                          ------------   ------------

EXPENSE
              Salaries and benefits                                       $    499,742   $  1,073,736
              General and administrative                                     1,185,364      1,104,482
                                                                          ------------   ------------

                          Total expenses                                  $  1,685,106   $  2,178,218
                                                                          ------------   ------------

Operating loss                                                              (1,786,190)    (3,593,500)

Amortization of finance costs                                                  334,959        154,303
Depreciation expense                                                            11,639         15,225
Interest expense                                                               144,805         82,585
                                                                          ------------   ------------

Total amortization, depreciation and interest                             $    491,402   $    252,113
                                                                          ------------   ------------

LOSS BEFORE EQUITY IN LOSS OF JOINT VENTURE
              AND INCOME TAXES                                            $ (2,277,592)  $ (3,845,614)

Loss Income of Joint Venture                                                        --       (443,476)
                                                                          ------------   ------------

Loss before Income Taxes                                                    (2,277,592)    (4,289,090)

INCOME TAX (BENEFIT) EXPENSE                                                     3,640             --
                                                                          ------------   ------------

NET LOSS                                                                  $ (2,281,232)  $ (4,289,090)
                                                                          ============   ============

NET EARNINGS PER COMMON SHARE
              Basic                                                              (0.05)         (0.10)

              Diluted                                                            (0.05)         (0.10)
</TABLE>


                                      F-4
<PAGE>

                          Kaleidoscope Media Group, Inc
                           (Formerly Bnn Corporation)
                                 and Subsidaries

            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                    (AUDITED)

<TABLE>
<CAPTION>
                                                                                        Additional
                                                             Shares          Common       Paid-in       Accumulated
                                                             Issued          Stock        Capital         Deficit          Total
                                                             ------          -----        -------         -------          -----

Twelve Months Ended December 31, 1999

<S>                                                        <C>            <C>          <C>             <C>             <C>
Balance -- January 1, 1999                                 38,660,960     $   38,662   $  9,386,258    $ (8,957,030)   $    467,890

        Issuance of shares for
        cash consideration                                  2,695,000          2,695        216,805              --         219,500

Net Loss                                                           --             --             --      (4,289,090)     (4,289,090)
                                                         ------------     ----------   ------------    ------------    ------------
                                                           41,355,960     $   41,357   $  9,603,063    $(13,246,120)   $ (3,601,700)
                                                         ============     ==========   ============    ============    ============

Twelve Months Ended December 31, 2000

Balance -- January 1, 2000                                 41,355,960     $   41,357   $  9,603,063    $(13,246,120)   $ (3,601,700)

        Issuance of stock to settle outstanding
        notes                                               3,009,520     $    3,009   $    296,079              --         299,088

        Issuance of shares to settle
        accounts payable                                    1,238,500     $    1,238   $    140,002              --         141,240

        Issuance of shares in settlement
        of claim                                            1,635,000     $    1,635   $     19,200          (1,335)         19,500

        Issuance of stock to purchase
        rights to distribute library                        1,640,625     $    1,641   $    155,859              --         157,500

        Additional paid-in capital by shareholder                  --     $       --   $    156,000              --         156,000

        Issuance of stock in connection
        with financing                                      4,662,000     $    4,662   $    133,738              --         138,400

Net Loss                                                           --             --             --      (2,281,233)     (2,281,233)
                                                         ------------     ----------   ------------    ------------    ------------
                                                           53,541,605     $   53,542   $ 10,503,941    $(15,528,688)   $ (4,971,205)
                                                         ============     ==========   ============    ============    ============
</TABLE>


                                      F-5
<PAGE>

                         Kaleidoscope Media Group, Inc.
                           (formerly BNN Corporation)
                                 And Subsidaries

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (AUDITED)

<TABLE>
<CAPTION>
                                                                                   Twelve Months Ended
                                                                                       December 31
                                                                                    2000          1999
                                                                                    ----          ----
<S>                                                                             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
      Net loss                                                                  $(2,281,232)   $(4,289,090)
      Adjustment to reconcile net (loss) to net cash
           used in operating activities:
           Amortization and depreciation                                             63,652        169,529
           Equity in income of joint venture                                              0        443,476
           Expenses paid through the issuance of stock                              279,640         56,250
           Change in assets and liabilities:
                       Accounts receivable                                         (241,040)       110,103
                       Expenditures billable to clients                               6,333         (6,333)
                       Deferred financing costs                                     144,545             --
                       Other assets                                                  (5,845)      (241,361)
                       Cash overdraft                                               (19,308)         6,257
                       Accounts payable and accrued liabilities                     677,961        615,385
                       Write-down of program costs inventory                        788,921      1,328,560
                       Income taxes payable                                            --                0
                       Deferred income and client advances                         (253,242)       304,282
                                                                                -----------    -----------

                       Net Cash Used in Operating Activities                       (839,614)    (1,502,942)
                                                                                -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
      Distribution from joint venture                                                    --        102,500
      Investment in joint venture                                                      (100)       (10,350)
      Expenditures for program costs                                                (54,926)      (156,744)
      Acquisition of property and equipment                                              --        (28,447)
      Loans receivable - officers and shareholders - net change                      35,000          9,000
                                                                                -----------    -----------

                       Net Cash Used In Investing Activities                        (20,026)       (84,041)
                                                                                -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
      Loans payable to officers and shareholder                                     (50,000)            --
      Loans payable to officer                                                           --         99,800
      Proceeds from notes payable                                                 1,006,032      1,308,468
      Repayments of notes payable                                                   (75,000)            --
      Issuance of common stock and related warrants                                       0        219,500
                                                                                -----------    -----------

                       Net Cash Provided by Financing Activities                    881,032      1,627,768
                                                                                -----------    -----------

INCREASE (DECREASE) IN CASH                                                          21,392         40,785

CASH
      Beginning of period                                                            45,650          4,865
                                                                                -----------    -----------

      End of period                                                             $    19,478    $    45,650
                                                                                ===========    ===========
</TABLE>


                                      F-6
<PAGE>

                         KALEIDOSCOPE MEDIA GROUP, INC.
                           (Formerly BNN Corporation)
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2000

Note 1 - Organization and Description of Business:

On October 22, 1996, Kaleidoscope Media Group, Inc. ("KMG"), which changed its
name from BNN Corporation in December 1997 (upon reincorporating as a Delaware
corporation - it had been a Nevada corporation) and was a publicly traded
corporation without significant operations, acquired all of the outstanding
shares of HSPSMM, Inc. ("HSPS") which changed it name from Kaleidoscope Media
Group, Inc. in November 1997. The transaction was effected by issuing additional
KMG shares in an amount that resulted in the original HSPS shareholders
receiving approximately 40.3% of the outstanding shares of BNN. The original
HSPS shareholders owned additional shares of KMG from before the October 22,
1996 transaction. After the consummation of the transaction, they owned
approximately 47% of the outstanding shares, and with the other 53% scattered,
had effective control.

For financial reporting purposes, the transaction was recorded as a
recapitalization of HSPS. HSPS is the continuing, surviving, entity for
accounting purposes, but adopted the capital structure of KMG, which is the
continuing entity for legal purposes. All references to shares of common stock
have been restated to reflect the equivalent number of KMG shares.

To clarify the corporate names discussed above, the parent company, formerly
called BNN Corporation, has adopted the name of the former subsidiary,
Kaleidoscope Media Group, Inc. which in turn changed its name to HSPSMM, Inc.
All references in these financial statements to KMG refer to the "new" KMG; all
references to HSPS refer to the "old" KMG.

HSPS was formed in May of 1996, at which time it issued 5,685,688 common shares
to acquire approximately 91% of the outstanding shares of SeaGull Entertainment,
Inc. ("SeaGull") and 3,814,312 common shares to acquire 100% of the outstanding
stock of the Kaleidoscope Group ("KG"), a marketing and consulting company
engaged primarily in sports and event marketing. Since, as a result of the
transaction, stockholders of SeaGull owned a majority of the common stock of
HSPS, the acquisition of SeaGull by HSPS was accounted for as a recapitalization
of SeaGull. Accordingly, the historical financial statements are those of
SeaGull. The acquisition of KG was accounted for as a purchase of KG by SeaGull.
The shares issued to acquire KG were assigned a value of $2,900,000, based upon
the fair value of KG's net assets. At the date of acquisition, KG had
Stockholders' Deficit of approximately $539,670, resulting in the recording of
goodwill of $3,439,670. The goodwill was amortized using the straight line
method over a period of twenty years. During 1998, KG discontinued operations of
this division. Any remaining unamortized goodwill related to the acquisition was
written off.

Kaleidoscope Media Group, Inc.:

Kaleidoscope Media Group, Inc is primarily engaged in the business of domestic
and international distribution of entertainment properties as well as exploiting
related licensing and merchandising opportunities, home video distribution and
distribution of programming for Internet broadcasting. It also provides
consulting services in the development of specialty television programming and
is involved in the acquisition and distribution of entertainment library
properties.


                                      F-7
<PAGE>

                         KALEIDOSCOPE MEDIA GROUP, INC.
                           (Formerly BNN Corporation)
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2000

Note 2 - Summary of Significant Accounting Policies:

Principles and Consolidation:

The consolidated financial statements include the accounts and transactions of
KMG and its wholly owned subsidiaries. All material intercompany accounts and
transactions have been eliminated. KMG's investment included a 50% owned joint
venture in Keller Siegel Entertainment. During the year 2000, the Company wrote
off the remaining balance of the asset 'Investment in Keller Siegel
Entertainment'. KMG also has an investment of 40% in a joint venture, The
Kirkwood Group.

Program Cost Inventory:

Program cost inventory is stated at the lower of amortized cost or estimated
realizable value. Television productions and participation costs are amortized
based on the ratio of the current period's gross revenues to estimated total
gross revenues from all sources (the "ultimate" revenue) on an individual
production basis. Estimates of total gross revenues can, and usually do, change
significantly due to the level of market acceptance of television products. In
addition, because of uncertainties inherent in the process of estimating costs,
estimates of the ultimate costs of episodic television programming can change
significantly in the near term. Accordingly, the estimates of ultimate revenue
and costs are reviewed periodically and are adjusted upward or downward as
additional information is learned. Amortization expense is consequently
adjusted. Such adjustments could have a material effect on results of operations
in future period.

In the case of episodic television programming, the Company considers each
season to be a single product for the estimation of ultimate revenues and costs.

During 2000 and 1999 $ 946,421 and $1,328,560 respectively, of program cost
inventory were written off because of lowered estimates of revenues or
discontinued projects. As of December 31, 2000 there was no remaining balance in
the asset 'Program Media Costs'.

Revenue Recognition:

Revenue from the licensing or distribution of a television program is recognized
when the licensee of the program has the legal right to exhibit or broadcast the
program and the program is deliverable to the licensee.

Revenue from the barter syndications of television programming (the sale of
television programming in exchange for advertising time) is recognized when the
program has been licensed, the licensee has the legal right to broadcast the
program, the program is deliverable to the licensee, noncancelable contracts
have been signed with both the station and the purchaser of the advertising time
and appropriate allowances can be estimated for rating shortfalls (" make
goods"). The estimation process has inherent uncertainties. Accordingly,
management's estimate of the allowance for rating shortfalls may change in the
near term. Such changes could have a material effect on results of operations in
future periods.

Expenditures Billable to Clients:

Expenditures billable to clients represent direct costs incurred by the Company
in connection with its various contracts, that are either specifically billable
to the clients under the contracts or related to contracts for which the fees
have not yet been filled or earned. Payroll and related costs, including those
relating to specific client work, are expensed as incurred.


                                      F-8
<PAGE>

                         KALEIDOSCOPE MEDIA GROUP, INC.
                           (Formerly BNN Corporation)
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2000

Note 2 - Summary of Significant Accounting Policies (Continued):

Deferred Revenue:

Deferred revenue presents amounts received from or billed to clients prior to
the Company's completion of the earning process in accordance with its revenue
recognition policy. Upon completion of the earning process, the amounts are
included in revenue.

Depreciation:

Property and equipment are stated at cost and are depreciated on straight-line
and accelerated methods over the estimated useful lives indicated in Note 9.
Leasehold improvements are amortized over the term of the lease.

Cash Overdrafts:

KMG and the various subsidiaries maintain most of their cash balances in the
same bank but in separate accounts owned by the different corporations. The
Company's practice has generally been to view the group of accounts at the same
bank as one balance and to move funds from one account to another, with the
bank's cooperation, as funds are needed to pay checks as presented. Because
there is no legal right of offset of one subsidiary's positive balance with
another's overdraft balance, generally accepted accounting principles require
that the overdraft balances be shown separately as a liability.

Incentive Stock Option Plan:

Stock based compensation is recognized using the intrinsic value method under
which compensation cost for stock options is measured as the excess, if any, of
the quoted market price of the Company's stock at the measurement date over the
exercise price. For disclosure purposes, pro-forma net income and earnings per
share are provided as if the fair value method had been applied.

Use of Estimates:

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the balance sheet dates and the reported
amounts of revenues and expenses during the years then ended. Actual results
could differ from those estimates

Fair Value of Financial Statements

SFAS No. 107, "Disclosure About Fair Value of Financial Instruments", require
disclosure of the fair value information, whether or not recognized in the
balance sheet, where it is practical to estimate that value. The carrying value
of cash, cash equivalents and accounts receivable approximate fair value.

Impairment of Long Lived Assets

The Company has adopted SFAS 121, "Accounting for the Impairment of Long Lived
Assets and for Long Lived Assets to be disposed of". The effect of this SFAS is
immaterial on the financial statements.


                                      F-9
<PAGE>

                         KALEIDOSCOPE MEDIA GROUP, INC.
                           (Formerly BNN Corporation)
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2000

Note 2 - Summary of Significant Accounting Policies (Continued):

Derivative Financial Statements

For years beginning after December 31, 1999 the FASB adopted SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". The SFAS
requires recognition of all derivative financial instruments as either assets or
liabilities on the balance sheet at fair value. The accounting for changes to
fair value will depend upon the intended use of the derivatives. The Company
does not believe that the adoption of this standard had a material effect on its
financial statements.

Loss Per Common Share:

Basic loss per common share is based upon the weighted average number of common
shares outstanding during the year. Diluted earnings (loss) per common share
include the effects of potential dilution that would occur if securities (such
as warrants) or other contracts (such as options) to issue common stock were
exercised or converted into common stock. Such instruments that are convertible
into common stock are excluded from the computation in periods in which they
have an anti-dilutive effect. Inclusion of the contingent shares potentially
issuable as a result of the KMG transaction would have an anti-dilutive effect
on earnings (loss) per share. As a result, it was not used in the earnings per
share calculation. The weighted average number of common shares used to
calculate loss per common share during 2000 and 1999 was 47,481,524 and
40,860,878 respectively.

The Company adopted Financial Accounting Standards Board (FASB) Statement No.
128, "Earnings per Share". The Statement establishes standards for computing and
presenting earnings per share (EPS). It replaced the presentation of primary EPS
with a presentation of basic EPS and also requires dual presentation of basic
and diluted EPS on the face of the income statement.

Comprehensive Income

The FASB issued SFAS No. 130 " Reporting Comprehensive Income" which is
effective for years beginning after December 15, 1997. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its components
in a full set of general purpose financial statements. The adoption of the SFAS
did not have a material effect on the Company's financial position or results of
operations.

Income Taxes:

Income tax expense (benefit) consists of income taxes currently due or
refundable arising from the period's operations as adjusted by the deferred tax
expense (benefit). The deferred tax expense (benefit) arises from those changes
in the Company's deferred tax assets and liabilities relating to operations.
Deferred tax assets and liabilities result from temporary differences between
the amounts of assets and liabilities recorded on the financial statements and
the amounts recorded for income tax purposes. Deferred tax assets also result
from certain income attributes existing at the balance sheet date that can
provide future income tax benefits including net operating loss carryforwards
which can be used to offset future taxable income. The deferred tax assets and
liabilities are calculated based on the currently enacted tax rates that apply
to the periods that the temporary differences are expected to reverse or the tax
attributes are expected to be utilized. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is likely that some
portion or all of the deferred tax assets will not be realized. For the current
period ,the Company has set up a valuation allowance of 100%.


                                      F-10
<PAGE>

                         KALEIDOSCOPE MEDIA GROUP, INC.
                           (Formerly BNN Corporation)
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2000

Note 2 - Summary of Significant Accounting Policies (Continued):

Income Taxes (Continued):

The Company files consolidated federal income tax returns, including all the
subsidiaries (i.e., they are taxed as if they were one company). KMG and each of
the subsidiaries file separate state and local income tax returns in the
jurisdictions where they are subject to tax.

Note 3 - Account Receivable

Included in total Accounts Receivable is an open invoice to Global Entertainment
Productions B.V. for $325,0000. This represents a portion of the Company's
contractual distribution fee of $500,000, all of which was guaranteed to be paid
by December 31, 2000. The agreement states that the Company is to receive a fee
of 10% of Globals sales of a certain products in specified markets with minimum
guaranteed earning of $500,000. As of december31, 2000 Global had recorded sales
of $3,250,000. The Company recorded fee income of $325,000 and is currently
being litigated.

Major Customers:

There were no major customers in 2000 or 1999.

Note 4 - Program Cost Inventory:

      Program cost inventory consisted of the following:

                                                             December 31,
                                                             ------------
                                                          2000            1999
                                                          ----            ----

      Released, less accumulated amortization          $       0      $       0

      In-process                                               0        280,119
                                                       ---------      ---------

                                                                        280,119

      Less: Current portion                                    0       (280,119)
                                                       ---------      ---------

            Noncurrent portion                         $       0      $       0
                                                       =========      =========


As of December 31, 2000 all program cost inventory have been written off.


                                      F-11
<PAGE>

                         KALEIDOSCOPE MEDIA GROUP, INC.
                           (Formerly BNN Corporation)
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2000

Note 5 - Property and Equipment:

           Property and equipment is comprised as follows::

                                                                December 31,
                                                                ------------
                                                             2000        1999
                                                             ----        ----

      Furniture and fixtures                               $ 14,855    $ 14,855
      Computers and office equipment                         74,873      74,873
                                                           --------    --------
                                                             89,728      89,728
      Less: accumulated depreciation                        (59,687)    (48,048)
                                                           --------    --------

                                                           $ 30,041    $ 41,680
                                                           ========    ========

Depreciation expense was $11,639 and $15,255 for the years ended December 31,
2000 and 1999 respectively.

Note 6 - Investment in Joint Ventures:

      The Company has a 50% ownership interest in Keller-Siegel Entertainment
      LLC ("KSE"). KSE produced a television series. Summarized financial
      information of KSE as of December 31, 1999 and the year then ended are as
      follows:

                                                               December 31, 1999
                                                               -----------------

      Assets                                                       $ 281,671

      Liabilities                                                   (281,671)
                                                                   ---------
      Members capital                                              $      --
                                                                   =========

      Revenue                                                      $  14,575
                                                                   =========

      Net income                                                   $  23,890
                                                                   =========

      Company's equity in net (loss) income                        $ 188,658
                                                                   =========

Note 7 - Investment in Joint Ventures:

During the period ended December 31, 2000 the entire remaining investment
balance in KSE was written off.. Additionally, the Company owns 40% of The
Kirkwood Group. There was no activity in 2000 .As of December 31, 2000 the
Company net investment was $10,450 in this entity.


                                      F-12
<PAGE>

                         KALEIDOSCOPE MEDIA GROUP, INC.
                           (Formerly BNN Corporation)
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2000

Note 8 - Notes Payable:

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

      8% Converted Notes Payable Dated April &
      August 1999, 8% per annum
      Principal and Interest due January 2, 2001                      $  682,000

      8% Converted Notes Payable Dated December 1999
      & January 2000, 8% per annum
      Principal and Interest due January 2, 2001                         545,740

      8% Converted Notes Payable Dated March 2000
      Principal and Interest due January 2, 2001                         225,000

      15% Notes Payable Dated November and
      December 2000
      Principal and Interest due January 9, 2001                         150,000

      10% Notes Payable Dated November 2000
      Principal and interest due January 9, 2001                          25,000

      10% Note due to shareholders- no maturity date                     202,500

      15% Note due to H. Siegel Pension Plan                             150,000

      Various non interest bearing notes                                 124,800

      Total Notes Payable                                             $2,105,040
                                                                      ==========

      During the year 2000 -$284,260 of Notes Payable were converted into common
      shares by the noteholders.


                                      F-13
<PAGE>

                         KALEIDOSCOPE MEDIA GROUP, INC.
                           (Formerly BNN Corporation)
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2000

Note 9 - Commitments and Contingies

The Company rents space for its principal office in New York, City under a month
to month basis. Currently the Company pays $2,000 a month which covers its rent,
utilities and secretarial costs.

Rent expense was $ 84,980 and $115,697 for the years ended December 31, 2000 and
1999 respectively.

On June 21, 1996, a suit was filed against two of the Company's subsidiaries and
other unrelated parties in the amount of $21,000,000 alleging that they are
successors to the alleged liability for a default judgment entered against a
former affiliate of the subsidiaries in April, 1995 for an alleged action taking
place in 1988. The subsidiaries have vigorously defended themselves in this
litigation. Management believes that the claim against the former affiliate
lacks merit and that, in any case, its subsidiaries have no responsibility for
the debts of the former affiliate. Furthermore, management believes that if any
judgment were to be entered against the subsidiaries, it would be able to obtain
indemnification from the prior owner of the former affiliate's business, a major
advertising agency. In a recent decision, the court dismissed plaintiff's claim
against the subsidiaries and at the same time found that the advertising agency
may be liable to the plaintiff pursuant to aforesaid indemnity agreement. The
plaintiff and the advertising agency have submitted arguments to reargue and the
Company believes they intend to appeal in any event. While management believes,
based on the foregoing, that the litigation will not have a material effect on
the Company's financial position, it is as least reasonably possible that a
material liability could result, although the amount cannot be estimated.

At the time of the May, 1996 acquisition of KG (see Note 1), KG had a note
payable (jointly and severally with a former affiliate that is now insolvent) to
a former parent company in the amount of $225,000. KG was contesting its
liability under this note because of various claims against the former parent.
In accounting for the acquisition, the Company valued the liability at $40,000
based on a signed settlement agreement with the former parent's bankruptcy
trustee. Subsequent to the issuance of the 1996 financial statement, the
settlement was rejected by the creditors of the former parent. No efforts have
been made by the former parent's bankruptcy estate to collect this debt, the
Company still intends to assert its counterclaims if the matter is litigated. No
adjustment has been made to the original $40,000 valuation assigned to the debt.
It is, however, at least reasonably possible that the Company would be required
to pay the full $225,000, resulting in a loss of $185,000.

As shown in the accompanying financial statements, the Company incurred a net
loss of $2,281,232 during the year ended December 31, 2000, and as of that date,
the Company's current liabilities exceeded its current assets by approximately
$5,000,000 Those factors, create an uncertainty about the Company's ability to
continue as a going concern. The ability of the Company to continue as a going
concern is dependent upon the Company obtaining financing or equity investments.
The financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern.


                                      F-14
<PAGE>

                         KALEIDOSCOPE MEDIA GROUP, INC.
                           (Formerly BNN Corporation)
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2000

Note 10 - Income Taxes (Continued):

      Deferred income taxes as reported on the balance sheet consists of:

                                                        December 31,
                                                        ------------
                                                    2000            1999
                                                    ----            ----

      Deferred tax assets                       $ 6,942,327     $ 6,178,347
      Deferred tax liabilities                            0               0
      Valuation allowance                        (6,942,327)     (6,178,347)
                                                -----------     -----------

                                                $         0     $         0
                                                ===========     ===========

As of December 31, 2000, the Company had net operating loss ("NOL")
carryforwards of approximately $14,000,000 available to offset future federal
taxable income; the carryforwards are not available for state income tax
purposes. These carryforwards begin to expire in 2011. The Company has provided
a full 100% valuation allowance on the deferred tax assets as at December 31,
2000 to reduce such deferred income tax assets to zero as it is managements
belief that realization of such amounts do not meet the criteria required by
generally accepted accounting principles. Management will review the valuation
allowance requirement periodically and make adjustments was warranted.

Note 11 - Capital Structure:

During the current period a shareholder advanced monies to the Corporation as a
loan, subsequently the shareholder forgave the debt in return for the
Corporation paying a personal debt of the shareholder in the amount of $94,000.
As of December 31, 2000 the Company remained liable in the amount of $84,000 on
this loan. Additional paid in capital was credited for the net effect of this
transaction.

During the current period two individuals submitted proof to the Company that
they had been shareholders since inception. These individuals never received
shares in the new entity. The Company issued shares to them in the current
period. Common stock has been credited for the shares issued and retained
earnings has been charged for the prior period adjustment.

The Company purchased certain exclusive distribution rights to certain
television programming.. Payment was made in the form of restricted shares in
the Company's stock. The financial statements reflect these shares at fair
market value less a discount due to their restrictive nature. An expense account
- Distribution rights has been charged and additional capital has been credited
for this value.

The Company is obligated to certain noteholders.. During the current year these
noteholders converted approximately $284,000 of the debt into common shares of
the Company. Stockholders equity has been credited for the value of these notes
and any accrued interest payable.

Note 12 - Stock Options:

There was no Stock option activity was for 2000 or 1999 The balance of options
as of December 31, 2000 as follows:were 828,333 As described in Note 2, the
Company accounted for the granting of stock options under the intrinsic value
method and, accordingly, no compensation cost has been recognized for stock
options in the financial statements.


                                      F-15
<PAGE>

                         KALEIDOSCOPE MEDIA GROUP, INC.
                           (Formerly BNN Corporation)
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2000

Note 13 - Fair Value of Financial Instruments:

Statement of Financial Accounting Standards No. 107, Disclosures about Fair
Value of Financial Instruments ("SFAS 107") requires entities to disclose the
fair values of financial instruments except when it is not practicable to do so.
Under SFAS 107, it is not practicable to make this disclosure when the costs of
formulating the estimated values exceed the benefit when considering how
meaningful the information would be to financial statement users.

As a result of the difficulties presented in the valuation of the loans
receivable and payable from the officers and shareholders because of their
related party nature, estimating the fair value of these financial instruments
is not considered practicable. The fair value of the cash, notes receivable,
cash overdraft and notes payable do not differ materially from their carrying
amounts.

None of the above are derivative financial instruments and none are held for
trading purposes.

Note 14 - Subsequent Events:

The Company is in the default on its notes Payable which were due January and
March 2001.


                                      F-16
<PAGE>

Item 13. Exhibits and Reports on Form 8-K

(a)           Exhibits

20.1        Plan and Agreement of Reorganization, dated as of October 22, 1996,
            among the Company and the shareholders of HSPS (1)

3.01(5)     Certificate of Incorporation of the Company

3.02(5)     By-laws of the Company

4.01(5)     Specimen Certificate

10.01*      1996 Stock Option Plan. (2)

10.02*(5)   Employment Agreement entered into between the Company and Henry
            Siegel

10.03*(5)   Employment Agreement entered into between the Company and Paul
            Siegel.

10.06(5)    Joint Venture Agreement, dated as of October 1, 1995, between
            SeaGull Entertainment, Inc. and Keller Entertainment Group, Inc.

10.07       Amended and Restated Limited Liability Company Agreement, dated as
            of April 30, 1997, among the Company, Interpublic Group of
            Companies, Inc., 345 Park Avenue PAS Sports, Inc. and People and
            Properties, Inc. (3).

10.08       Agreement dated as of August 20, 1997, among, Interpublic Group of
            Companies, Inc., 345 PAS Sports, Inc., and People and Properties,
            Inc. (4)

10.9(5)     Vendor Agreement, dated December 18, 1996, between the Company and
            HSN Direct Int. LTD and addendum thereto, dated March 31, 1997.

10.10(5)    Joint Venture Agreement dated as of June 1995, between the Company
            and BV Sports Marketing, Inc.

10.11       Distribution Agreement between Global Entertainment Productions and
            Kaleidoscope Media Group Incorporated, dated November 19, 1998.

21.01       Subsidiaries of the Company

----------

* Management contract or compensatory plan or arrangement.


<PAGE>

(1)   Such Exhibit was filed with the Company's Current Report, dated October
      22, 1996, and is incorporated herein by reference.

(2)   Such Exhibit was filed with the Company's Proxy Statement for the Annual
      Meeting held on December 2, 1997 and is incorporated herein by reference.

(3)   Such Exhibit was filed with the Company Current Report, dated May 5, 1997,
      and is incorporated herein by reference.

(4)   Such Exhibit was filed with the Company's Current Report, dated August 20,
      1997, and is incorporated herein by reference.

(5)   Such Exhibits were filed with Company's Annual Report on 10K, for 1997 and
      are incorporated herein by reference.

Reports on Form 8-K.

                                   SIGNATURES

      In accordance with the requirements of the Securities Act of 1933, the
Company certifies that it has reasonable grounds to believe that it meets all of
therequirements of filing on Form 10KSB and has duly caused this Form 10KSB to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York, on May 18, 2001.

                                  KALEIDOSCOPE MEDIA GROUP INC.

                                  By: /s/ Myron Hyman
                                      ---------------------------------
                                      Myron Hyman, Chief Executive Officer

      KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Henry Siegel and Paul Siegel, and each of them,
with full power to act without the other, his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
file the same, with all exhibits thereto, and the documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

      In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.


<PAGE>

    Signatures              Capacity                                  Date
    ----------              --------                                  ----

/s/ Myron Hyman
-----------------      Chief Executive Officer,                    May 18, 2001
Myron Hyman            Director

/s/ Ann Collins
----------------       Chief Financial Officer (Principal          May 18, 2001
Ann Collins            Financial Officer and Principal
                       Accounting Officer)