UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 FORM 10-KSB
 
 [X] ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES ACT OF 1934
 
 For the fiscal year ended December 31, 2003
 
 Commission File Number 0-27219
 
 Warning Model Management, INC.
 
 (Exact name as specified in its charter)
 
 New York13-3865655
(State or other jurisdiction of                (IRS Employer
incorporation or organization)                Identification No.)

9440 Santa Monica Boulevard, Suite 400, Beverly Hills, CA            90210
Address of principal executive office)               (Zip Code)

Registrant's telephone number: (310) 860-9969 
 Securities registered under section 12 (b) of the Exchange Act: None
 
 Securities registered under section 12 (g) of the Exchange Act:  Common Stock
 
 
 Check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the last 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (x) No ( )
 
 Check here if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of the registrants' knowledge, in definitive proxy or information statements incorporated by reference in Part III of this 10-KSB or any amendment to this Form 10-KSB. [ ]
 
 Aggregate market value of Registrants' voting and non-voting common equity held by non-affiliates as of April 5, 2004 - approximately $7,762,030
 
 Outstanding common stock, $.001 par value as of April 5, 2004 was 388,101,535 shares
 
 
 
 1 WARNING MODEL MANAGEMENT , INC.
 
 TABLE OF CONTENTS

PART I

Item 1. Description of Business

Item 2. Description of Property

Item 3. Legal Proceedings

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

PART II

Item 5. Market for Company's Common Equity and Related Stockholder Matters

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

Item 7. Financial Statements

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

Item 8A. Controls and Procedures

PART III

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

Item 10. Executive Compensation

Item 11. Security Ownership of Certain Beneficial Owners and Management

Item 12. Certain Relationships and Related Transactions

Item 13. Exhibits and Reports on Form 8-K

Item 14. Principal Accountant Fees and Services

SIGNATURES

EXHIBITS 2 PART I.
 
 Item 1. Description of Business
 
 On May 28, 1998, we acquired Famous Fixins, Inc., a privately-held New York corporation formed on November 29, 1995 ("FFNY"), in a transaction viewed as a reverse acquisition. FFNY was a promoter and marketer of celebrity endorsed consumer products. It commenced business activities in 1995 and began sales operations in March 25, 1997. Pursuant to a Plan and Agreement of Reorganization, we issued 5,494,662 shares of common stock to Jason Bauer, as trustee for certain shareholders of FFNY, in exchange for 97% of the outstanding common stock of FFNY. Pursuant to the reorganization, the controlling shareholders became our controlling shareholders and officers and directors. FFNY became a majority-owned subsidiary of our company.
 
 On June 8, 1998, we changed our name to Famous Fixins, Inc. under the laws of the State of Nevada.
 
 On November 16, 1998, we reincorporated under the laws of the State of New York by merging into our wholly-owned subsidiary, Famous Fixins Holding Company, Inc., a corporation formed for the purpose of reincorporation. On November 20, 1998, we merged with our New York subsidiary, FFNY. On November 20, 1998, we changed our name to Famous Fixins, Inc. under the laws of the State of New York. We operate as a single entity under the laws of the State of New York.
 
 On December 27, 2002 we consummated an Agreement and Plan of Merger ("Agreement") whereby Famous Fixins, Inc. was combined with Warning Model Management, LLC, a California Limited Liability Company, ("Warning") which was organized in September 1998. The transaction has been accounted for, as a reverse acquisition for accounting purposes and the continuing business is that of Warning Model Management, LLC. Pursuant to the Agreement, we issued 24,313,655 shares of common stock and a three convertible notes in the aggregate principal amount of $2,900,000 to the Members of Warning Model Management, LLC.
 
 On July 13, 2003 we changed our name to Warning Model Management, Inc under the laws of the State of New York.
 
 The accounting treatment is that of a business combination using the reverse acquisition method, with Warning being the accounting acquirer under accounting principles generally accepted in the United States. The assets and liabilities of the Company consist primarily of petty cash, receivables, convertible debentures and accrued expenses and are combined with those of Warning at historical cost. The statements of operations subsequent to the combination will be those of the Warning. At the time the Agreement was executed, the Company had no operations.
 
 Warning Model Management, LLC (WAMM) was established in September 1998 and is a large modeling management company operating in the United States WAMM is the one of the largest model management companies in Los Angeles having quality fashion oriented models and talent for both the fashion industry and TV/Radio commercials, as well as the retailing and advertising sectors.
 
 WAMM differs from other Los Angeles (LA) model management companies by providing the fashion/retailing industry in California and other Western States the level of modeling talent previously only found in New York and Paris. We have achieved this by focusing on those clients that use LA and San Francisco as a primary location rather than as a base, and making available the talent they require locally, saving them (in many cases) the expense of having to bring those models from New York or Paris. We can do this by the advancement and application of an interactive web site that has made the old ways of transporting bulky portfolios by messenger obsolete. What took days before can be done in seconds from anywhere in the world. WAMMs stable of talent includes many of the worlds top models. WAMM operates as an independent model management company, which means they have no one corresponding agent in New York or elsewhere. This places WAMM in an enviable position to be able to work with any agency we desire. This is important in that we have a greater selection of talent to offer the entire market as a whole.
 
 3
  Current clients include all the major fashion lines as well as local clientele such as Macys, Nordstroms, Mervyns, Robinsons-May, Gap, Banana Republic, Bon Marche, Eddie Bauer, J. Crew and Talbots. Warning also represents many of the Victoria Secret Models. WAMMs models are prominently featured in print media, including the worlds top fashion magazines, TV commercials and other retailing media campaigns.
 
 Principal products or services and their markets ;
 
 Our principal service is providing models for commercial and high-end fashion purposes. We provide both male and female models to a wide range of advertising media using print, still photography, video and television commercials. We also supply models for high-end fashion engagements, such as fashion shows and runway walks.
 
 While our market is world wide, we have a strong presence in the United States and our Los Angeles, California base of operations. The Los Angeles area is renowned for a relatively rain-free climate allowing for almost year round production of outdoor oriented filming and print oriented photography. Los Angeles also has a diversity of landscape with oceans, mountains and desert that makes it an ideal location for shooting commercials and advertising.
 
 Distribution methods of the products or service;
 
 We function as an independent agency, having no branch offices in other cities. As an independent, we can work with any number of other model agencies in cities all around the world to maximize our talents exposure.
 
 The modeling business is driven by personal relationships that are developed over time. We have numerous contacts with various booking agencies, retail fashion advertising departments, fashion magazines, high-end designer contacts and other sources that represent a source of bookings and revenue.
 
 Each model has a portfolio that is developed by the company that serves as a critical business development component. The portfolio contains a pictorial representation of past assignments, various poses and technical information such as height, weight, shoe size, etc. The customer can then request representative portfolio samples or can go directly to the companys web site to view individual models and their portfolios. We believe that our web site provides a competitive advantage that allows customers and prospects to see all of our potential modeling talent. The online element dramatically changes the existing dynamics of sending a portfolio by courier to the customer to immediate online access. Our web site ( www.warningmodels.com ) allows for the expansion of customer choice in viewing many model portfolios for their contemplated project. In addition to inbound requests by customers for talent, there are also many outbound calls made to solicit business.
 
 In addition to individual assignments, models may be requested for longer term activities such as representing a customers product line (for example, cosmetics or lingerie) wherein an entire advertising campaign is developed around the product and the model. A more recent phenomenon has been the model transitioning to a film/acting or entertainment role. The company can benefit at each stage, collecting a fee as part of the models print or commercial shoot.
 
 Status of any publicly announced new product or service;
 
 On March 23, 2004, Warning Model Management Inc. announced the exclusive model representation of Paris Hilton. Warning will be representing Miss Hilton for all print work, advertising campaigns and endorsements, personal appearances and runway work.
 
 On March 25, 2004, WNMI announced that Rhea Rachevsky, an agent for over 14 years, opened and heads up Warning Photography Division within the Beverly Hills office. Annual revenue of over one million dollars is anticipated form this business. .
  
 On March 29, 2004, WNMI announced the exclusive representation of one of the world's best-known and most beautiful woman surfer MALIA JONES ( www.maliajones.com ). We are also extremely excited to announce that we have signed a deal for development of Malia's own range of hair care and sun care products to be launched later this year.
 
 4
  Competitive business conditions and the small business issuers competitive position in the industry and methods of competition ;
 
 We operate in a highly competitive industry. While there are certain brand name competitors such as LA Models and Ford, the industry is characterized as somewhat fragmented and with no clear dominant competitor. Some key drivers and competitive differentiation include the overall talent pool that is maintained by each competitor, a new face or talent that can become a hot property, historic ties to customers and advertising relationships as well as the ability to match modeling product with customer need. We also believe that our web site provides a competitive distinction when compared to other competitor capabilities.
 
 Our competitive position is largely influenced by our ability to maintain responsiveness to the  developing market in which we are engaged and to ensure continuing development of our models in order to keep pace with the competition and developing market trends and needs.
 
 Sources and availability of models and the names of principal suppliers ;
 
 There are a variety of sources for model talent development, including portfolio submission by the prospective model, interaction with other modeling agencies, and through fashion shows and industry functions. A classic source is that of simple discovery by the companys representatives while in the course of everyday activities.
 
 As part of the process, if the model agrees to have the company represent them, an agreement is executed between the company and the model that delineates responsibilities, payment and other terms. The Company engages models as independent  contractors and not as employees. While there is a large pool of available talent, the longer-term success of any model is much narrower and uncertain.
 
 Dependence on one or a few major customers;
 
 Our customer base and revenue sources are diverse. While we are based in Los Angeles, we supply talent for assignments throughout the world. Consequently we believe that we have geographic diversity to help balance economic cycles. Continual contact with worldwide customers and prospects is important to continue business growth and new customer acquisition.
 
 Patents, trademarks, licenses, franchises, concessions, royalty agreements or labor contracts, including duration ;
 
 Outside of our logo and service mark, we do not hold title to patents, trademarks, licenses, franchises, concessions. We do maintain royalty agreements between the models and talent and our company that are part of the standard model agreement.
 
 Need for any government approval of principal products or services. If government approval is necessary and the small business issuer has not yet received that approval, discuss the status of the approval within the government approval process ;
 
 The Company is required to have a Talent Agency License and be bonded within the State of California.  To the best of our knowledge, additional government approval for our products and services is not required in the normal course of business operation.
 
 Effect of existing or probable governmental regulations on the business ;
 
 Government regulations at both the State and Federal level are encountered. Regulations and laws related to labor principally affect our company. Indirectly, we are also impacted by changes at the Federal and State level that may affect advertising or related business.
 
 5
  Costs and effects of compliance with environmental laws (federal, state and local);
 
 Compliance costs with environmental laws have a minimal impact on our company.
 
 Number of total employees and number of full time employees
 
 We employed a total of 12 people at December 31, 2003, of which 10 were classified as full time employees. Currently we have 12 employees. We have successfully expanded the quantity and quality of our sales, marketing and support staff. Although, we compete for such personnel with other companies and organizations that in many cases can offer superior facilities and resources, our ability to offer prospective employees the opportunity to make a large contribution in an exciting, growing and dynamic environment has made the recruitment of highly qualified individuals a relatively easy task.
 
 ITEM 2. Description of Property
 
 As of December 31, 2003 the Company leases its facility under a 60-month agreement, which terminates on April 30, 2005, with the option to renew for an additional six months. The aggregate rental rate for the entire facility for the year ending December 31, 2003, and the year ending December 31, 2002 were $125,516  and $100,859, respectively. All operations were performed at this facility.
 
 ITEM 3. Legal Proceedings
 
 None
 
 ITEM 4. Submission of Matters to a Vote of Security Holders
 
 The following actions were taken pursuant to the written consent of a majority of our shareholders, dated March 10, 2003, in lieu of a special meeting of the shareholders. The following actions became effective on or about April 10, 2003:
 
 1.  Amendment of our certificate of incorporation to change the Company
 name from Famous Fixins, Inc. to Warning Model Management, Inc., and concurrently to change the Companys OTCBB trading symbol.
 
 2.  Amendment of our Certificate of Incorporation to increase the authorized number of shares of our common stock from 200,000,000 to 800,000,000.
 
 3.  The ratification of the appointment of Pohl, McNabola, Berg, & Co., LLP, as our independent accountants for the current fiscal year.
 
 6
 PART II
 
 ITEM 5. Market for Company's Common Equity and Related Stockholder Matters
 
 Our common stock is quoted on the Over-the Counter Bulletin Board, also called the OTCBB, under the trading symbol WNMI. The following table set forth the quarterly high and low bid prices per share for our common stock. The bid prices reflect inter-dealer prices, without retail markup, markdown, or commission and may not represent actual transactions.
 
 Fiscal Year
Quarter Ended
High
Low2000
March 31, 2000
$0.69
$0.19June 30, 2000
$0.51
$0.17September 30, 2000
$0.20
$0.05December 31, 2000
$0.09
$0.022001
March 31, 2001
$0.47
$0.02June 30, 2001
$0.06
$0.02September 30, 2001
$0.03
$0.01December 31, 2001
$0.02
$0.012002
March 31, 2002
$0.01
$0.01June 30, 2002
$0.01
$0.01September 30, 2002
$0.01
$0.01December 31, 2002
$0.02
$0.012003
March 31, 2003
$0.03
$0.01June 30, 2003
$0.02
$0.01September 30, 2003
$0.01
$0.00December 31, 2003
$0.0
$0.002004
March 31, 2004
$0.03
$0.00 
 The Company has not declared or paid any cash dividends on the common stock and does not anticipate that any cash dividends will be paid in the foreseeable future.
 
 As of March 31, 2004, the Company's common stock was held by approximately 125  shareholders of record.
 
 Recent Sales of Unregistered Securities
 
 On January 7, 2003, we issued a $50,000 of 10% convertible debenture due in 2004 to Alpha Capital Aktiengesellschaft, in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering. The debenture accrues interest at 10% per annum. The holder has the right to convert the debentures in to common shares at any time through maturity at a conversion price of 85% of the average of the lowest three trading prices during the 20 trading days preceding the conversion date.
 
 On February 6, 2003, Mercator Momentum Fund L.P., the holder of an assigned portion of the 4% convertible debenture issued by Famous Fixins Inc. to Roseworth Group Limited on October 27, 2000, elected to convert, $25,500 of the outstanding principal amount of the debenture, into 5,000,000 shares of our restricted common stock in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering.
 
 On March 5, 2003, we issued a $48,000 promissory note to Filter International, LTD. For cash loaned to us in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering. On December 9, 2003, the maturity date of this note was extended to June 5, 2004
  On April 4 th and on April 15, 2003 we issued one year promissory notes for $25,000 respectively to Jeff Rice for cash loaned to WNMI in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering.
 
 On May 15, 2003 we issued a promissory note for $100,000 to the Mercator Momentum Fund L.P. for cash loaned to WNMI in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering. On November 12, 2003, the due date was extended to May 15, 2004.
 
 7
  On June 16, 2003 we issued a promissory note for $40,000 to George Furla for cash loaned to WNMI in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering. On December 9, 2003, the maturity date of this note was extended to June 16, 2004
 
 On June 17, 2003 we issued a promissory note for $28,788 to George Furla for cash loaned to WNMI in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering. On December 9, 2003, the maturity date of this note was extended to June 17, 2004
 
 On July 9, 2003 we issued a promissory note for $300,000 to the Michael T. Covell and Arline Covell Revocable Trust for cash loaned to WNMI in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering.
 
 On July 22, 2003 we issued 5,446,623 shares of common stock to Mercator Momentum Fund L.P. for the partial conversion ($25,000) of a convertible note. The conversion price was $.00459 per share in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering. On December 9, 2003, the maturity date of this note was extended to June 17, 2004.
 
 On August 5, 2003 we issued a promissory note for $50,000 to Howard Schraub for cash loaned to WNMI in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering.
 
 On September 26, 2003, the company issued a short-term note for $15,000 with interest of interest at 10% per annum to Betty Reider in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering.
 
 On October 30, 2003 we issued 5,882,353 shares of common stock to Mercator Momentum Fund L.P. for the partial conversion ($10,000) of a convertible note. The conversion price was $.0017 per share in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering. On December 9, 2003, the maturity date of this note was extended to June 17, 2004
 
 On December 17, 2003 we issued a promissory note for $50,000 to Howard Schraub for cash loaned to WNMI in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering.
 
 On March 5, 2004, we issued a $20,000 promissory note to Peter Benz for cash loaned to us in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering...
 
 On March 22, 2004 we issued 4,577,536 shares of common stock to Balmore S.A. for the partial conversion ($10,000) of a convertible note that was held for over two years. The conversion price was $.0255 per share in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering.
 
 On March 23, 2004 we issued 11,445,164 shares of common stock to Balmore S.A. for the partial conversion ($25,000) of a convertible note that was held over two years. The conversion price was $.0255 per share in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering.
 
 On March 24, 2004 we issued 57,252,308 shares of common stock to Balmore S.A. for the partial conversion ($35,000) of a convertible note that was held over two years. The conversion price was $.0255 per share in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering.
  On March 24, 2004 we issued 57,252,308 shares of common stock to Balmore S.A. for the partial conversion ($35,000) of a convertible note that was held over two years. The conversion price was $.0255 per share in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering.
 8
 On March 25, 2004 we issued 16,032,500 shares of common stock to Austost Anstalt Schaan for the partial conversion ($125,000) of a convertible note that was held over two years. The conversion price was $.0255 per share in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering.
 
 On March 25, 2004 we issued 8,758,169 shares of common stock to Alpha Capital for the partial conversion ($20,000) of a convertible note that was held over two years. The conversion price was $.0255 per share in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering.
 
 On March 30, 2004 we issued 22,908,871 shares of common stock to Balmore S.A. for the partial conversion ($50,000) of a convertible note that was held over two years. The conversion price was $.0255 per share in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering.
 
 On April 5, 2004 we issued 34,051,747 shares of common stock to Balmore S.A. for the partial conversion ($75,000) of a convertible note that was held over two years. The conversion price was $.0255 per share in a transaction deemed to be exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities not involving a public offering.
 
 ITEM 6. Management's Discussion and Analysis of Financial Condition and Results of Operations.
 
 
 General
 
 Plan of Operation
 
 Short-term Objectives:
 
 Continue to expand revenue through organic growth of existing business lines;Source and develop new talent in both male and female models.Seek additional financing so as to provide capital to rapidly growing components of the organization, such as the Talent Division. 
 Long-term Objectives:
 
 Continue business expansion through acquisition, merger or joint venture with modeling agencies located in other geographic areas to provide economy of scale, incremental revenue and a larger talent pool;Acquire complementary product lines to provide a broader service offering for customers, expand modeling careers and revenue sources. 
 We have no expected or planned sale of significant property or equipment.
 
 In our opinion sufficient working capital will be available from internal operations and from outside sources during the next twelve months thereby enabling us to meet our obligations and commitments as they become payable for the following reasons: 1) We have signed a letter of intent for a credit facility, and we will be doing a registration statement for the underlying shares shortly, 2) We are in process of negotiating with a financial institution a credit line, and 3) $2,900,000 of our debt is with management. Additionally, historically, our operations have provided sufficient funds to met our obligations and commitments as they became payable.
 
 9
  Results of Operations
 
 Year Ended December 31, 2003 versus Year Ended December 31, 2002
 
 Revenue for the year ended December 31, 2003 was $1,746,075 as compared to $2,208,535 for the same period in 2002, or a decrease of $462,460. The decrease is the result of a fall off of business in general throughout the year. WNMI has seen a pickup in its business towards the end of the fourth quarter.
 
 Gross profit for the year ended December 31, 2003 was $659,682 as compared to $ 920,221 for the same period in 2002, or a decrease of $260,539.  This decrease is a direct result of the decrease in revenue. Our gross profit percentage has remained stable.
 
 Operating expenses for the period ending December 31, 2003 were $1,735,620 as compared to $1,365,297 for the same period in 2002, or an increase of $370,323. The increase in operating expenses were mainly attributable to: 1) an increase in salaries and wages of $72,861 due to an increase in head count from 11 to 13; 2) rent of $31,645 due to move to larger office space; 3) general and administrative of $ 368,406; which was mainly due to an increase in bad debts of $ 26,733, Consulting Fees of $221,628, accounting related expenses of $78,765 and other general and administrative expenses of $41,280, offset by decreases in 1) business development cost of $18,020; 5) non-recurring expenses of $ 86,375 attributable to the closing of the reverse merger with the remaining difference of $1,806 consisting of other miscellaneous items. Management engaged the services of consultants to assist us in developing strategies to increase revenues and other business related matters.
 
 Interest expense was $562,655 for the year ended December 31, 2003 as compared to $122,426 for the same period in 2002, or an increase of $440,239. The increase in interest expense in 2003 was primarily an increase in the use of our secured line of credit and an increase in interest on convertible debt.
 
 Other income of $39,233 increased $7,313 over the same period the prior , which was primarily due to miscellaneous items.
 
 Our net (loss) for the current year ended December 31, 2003 was $1,601,006 as compared to a net loss of $535,937 for the year ended December 31, 2002, which is an increase of $1,065,069 or 198%. This increase in loss is mainly attributable to the increase in interest expense and the decrease in business experienced as a result of the Iraq war and the overall softness of the advertising marketplace during 2003.
 Net change in cash used in operating activities in 2003 versus 2002 was $566,904. This change in cash from operating activities was principally due to an increase in net loss of $1,065,069, plus a decrease in payable and accrued expenses of $549,806 and model fees payable of $254,155, offset by increases in 1) bad debt expense of $41,123, 2) bond and warrant discount amortization of $241,919, 3) stock based compensation of $307,500, 4) accounts receivable of $291,112, 5) advances to models of $307,366, 6) accrued interest on convertible debt and secured line of $100,426 plus miscellaneous items of $12,680.
 
 Net cash provided by (used in) investing activities was $3,762 and $ 15,743 for the years ended December 31, 2003 and 2002, respectively, reflecting a change of $11,981. This change is due to a decrease in purchases of property and equipment.
 
 Net cash provided by financing activities was $361,814 and $807,914 for the years ended December 31, 2003 and 2002, respectively, reflecting a decrease of $446,100. This decrease was principally due to a decrease in proceeds from convertible notes of $450,000, net decrease of borrowings from a secured line of credit of $357,999, a decrease in payment on notes payable of $118,000, offset by an increase in advances from shareholders of $56,788, an increase in proceeds of notes payable $427,000 plus miscellaneous items of $3,889.
 
 Liquidity and Capital Resources
 
 The Companys revenues in 2003 have not been sufficient to cover the cost of revenues and operating expenses. WNMI has relied on debt and equity financial to meet its cash needs. For future requirements we will continue to seek funding through debt issuances and equity financing.
 
 Therefore over the next twelve months management is of the opinion that sufficient working capital will be available from operations and financing activities to meet the Company's liabilities and commitments as they become payable.
 
 10
  Inflation
 
 We believe our operations and financial condition have suffered no adverse material effect due to inflation.
 Subsequent event:
 
 On February 4, 2004, Mr. Michael Rudolph resigned as Chief Executive Officer and as a member of the Board of Directors of WNMI.
 
 Also on February 4, 2004, the Board of directors of Warning Model Management appointed Brian Bonar as a Director . Brian Bonar is currently serving as a director of Imaging Technologies Corporation (IMTO) since August 1995 and became IMTO's Chairman of the Board in December 1999. From August 1992 through April 1994, Mr. Bonar served as the IMTOs Director of Technology Sales and from April 1994 through September 1994 as the IMTOs Vice President, Sales and Marketing. In September 1994, Mr. Bonar became the IMTOs Executive Vice President and, in July 1997, was appointed as the IMTOs President and Chief Operating Officer. In April 1998 Mr. Bonar assumed the post of CEO. From 1991 to 1992, Mr. Bonar was Vice President of Worldwide Sales and Marketing for Bezier Systems, Inc., a San Jose, California-based manufacturer and marketer of laser printers. From 1990 to 1991, he was Worldwide Sales Manager for Adaptec, Inc., a San Jose-based laser printer controller developer. From 1988 to 1990, Mr. Bonar was Vice President of Sales and Marketing for Rastek Corporation, a laser printer controller developed located in Huntsville, Alabama. From 1984 to 1988, Mr. Bonar was employed as Executive Director of Engineering at QMS, Inc., an Alabama-based developer and manufacturer of high-performance color and monochrome printing solutions. Prior to these positions, Mr. Bonar was employed by IBM, U.K. Ltd. for approximately 17 years.
 
 ITEM 7. Financial Statements
 
 The report of independent auditors and financial statements are set forth in this report beginning on Page F-1.
 
 ITEM 8. Changes in and Disagreements with Accountants on Auditing and Financial Disclosures
 
 On January 31, 2003, the Registrant changed its principal independent accountants from Freeman & Davis LLP, 225 West 34 th Street, Suite 320, New York, NY 10122 to Pohl, McNabola, Berg & Co., LLP, 50 Francisco Street, Suite 120, San Francisco, CA, 94133. Freeman & Davis LLP was dismissed and the decision to change accountants was approved by the Board of Directors and audit committee.
 
 The reports of Freeman & Davis LLP on the financial statements of Famous Fixins, Inc., for the two years ended December 31, 2001 and 2000 and through the third quarter ended September 30, 2002, and through the date of dismissal of January 31, 2003, contained no adverse opinions or disclaimers or were qualified as to audit review scope, or accounting principles, except that a going concern uncertainty was included in such reports.
 
 During the Registrant's two years ended December 31, 2001 and 2000 and through the third quarter ended September 30, 2002, and through the date of dismissal of January 31, 2002, there were no disagreements with Freeman & Davis LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing review scope or procedures, which disagreements, if not resolved to the satisfaction of the former accountant, would have caused it to make a reference to the subject matter of the disagreements in connection with its report.
 
 During the Registrants two fiscal years ended December 31, 2001 and 2000 and through the third quarter ended September 30, 2002, and through the date of dismissal of January 31, 2003, the Registrant did not consult with Pohl, McNabola, Berg & Co., LLP regarding any of the matters or events set forth in Item 304 (a)(2) of Regulations S-B.
 
 11
  ITEM 8A.  Controls and Procedures.
 
 (a)        Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this quarterly report (the Evaluation Date). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to our Company (including our consolidated subsidiaries) required to be included in our reports filed or submitted under the Exchange Act.
 
 (b)        Changes in Internal Controls over Financial Reporting. During the most recent fiscal quarter, there have not been any significant changes in our internal controls over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
 
 
 
 12 
 Part III
 
 Item 9. Directors, Executive Officers, Promoters And Control Persons: Compliance With Section 16(A) Of The Exchange Act
 
 Name
Age
Position with Company
SinceMichael Rudolph *
53
Director and past Chief Executive Officer
June 13, 2002Steven Chamberlin
41
Director and Managing Partner of Warning Model Management, LLC.
January 29, 2003Stanley Tepper
59
Chief Financial Officer, and Principal Accounting Officer
January 29, 2003Brian Bonar
56
Director and New Chief executive Officer
February 4, 2004 
 Michael Rudolph: Michael Rudolph was appointed Director and Chief Executive Officer of Famous Fixins, Inc. on June 13, 2002. In 1995 Mr. Rudolph founded The Edgehill Group, Inc., a financial advisory and consulting practice, which specializes in business strategy development and merger/acquisition evaluation. In addition, in 2001 Mr. Rudolph founded and is the Managing Member of Viking Asset Management, LLC, an investment advisor registered under the California Corporate Securities Laws. Mr. Rudolph was within Charles Schwabs Institutional Trading Division from 1989 through 1995 where he was responsible for all non-trading activities. Prior to this, Mr. Rudolph held senior management positions at Bank of America, Wells Fargo Bank, and Crocker National Bank. Mr. Rudolph has qualified for registration with the National Association of Securities Dealers as an Investment Advisor. He received his BS degree in Biochemistry from Purdue University and has an MBA from Washington University, St. Louis.
 * Mr. Rudolph resigned on February 4, 2004.
 
 Steven Chamberlin: Stephen Chamberlin was appointed Director of Famous Fixins on January 29, 2003. Mr. Chamberlin founded and has been the Managing Partner of Warning Model Management, LLC, (WMM) since 1998. Mr. Chamberlin co founded and ran NY Models from 1996 through 1998 and prior to that he was involved in the development and administration of LA Models. Mr. Chamberlin was involved as a founder or senior manager in various modeling agencies since 1979. In 1984, Mr. Chamberlin earned a Bachelor of Law from the University of New South Wales in Sidney Australia.
 
 Stanley Tepper: Mr. Tepper was appointed the Chief Financial Officer in January 2003. At present, Mr. Tepper is also the Chief Financial Officer of Family Room Entertainment Corporation since March 2000. Mr. Tepper has held senior management positions with such entities since February, 1998 through March 2000 Mr. Tepper was Controller of Operations for Time/Warner/Village Roadshow Pictures joint venture , Prior to that Mr. Tepper has over 30 years of experience as senior management in accounting and finance , principally in the entertainment industry such entities as Time/Warner/Orion Pictures joint venture, Satori Film, ALMI Distribution/RKO Warner Theaters, and the Cannon Group, Inc. Mr. Tepper began his career with Price Waterhouse, New York. He earned a BS degree from Southeastern University of Washington, DC with a major in accounting and minor in computer methodology.
 
 Brian Bonar: Mr. Bonar was appointed Director and Chief Executive Officer on February 4, 2004. Brian Bonar is currently serving as a director of Imaging Technologies Corporation (IMTO) since August 1995 and became IMTO's Chairman of the Board in December 1999. From August 1992 through April 1994, Mr. Bonar served as the IMTOs Director of Technology Sales and from April 1994 through September 1994 as the IMTOs Vice President, Sales and Marketing. In September 1994, Mr. Bonar became the IMTOs Executive Vice President and, in July 1997, was appointed as the IMTOs President and Chief Operating Officer. In April 1998 Mr. Bonar assumed the post of CEO. From 1991 to 1992, Mr. Bonar was Vice President of Worldwide Sales and Marketing for Bezier Systems, Inc., a San Jose, California-based manufacturer and marketer of laser printers. From 1990 to 1991, he was Worldwide Sales Manager for Adaptec, Inc., a San Jose-based laser printer controller developer. From 1988 to 1990, Mr. Bonar was Vice President of Sales and Marketing for Rastek Corporation, a laser printer controller developed located in Huntsville, Alabama. From 1984 to 1988, Mr. Bonar was employed as Executive Director of Engineering at QMS, Inc., an Alabama-based developer and manufacturer of high-performance color and monochrome printing solutions. Prior to these positions, Mr. Bonar was employed by IBM, U.K. Ltd. for approximately 17 years.
 
 13
  Each director holds office for a one-year term or until his successor has been elected and qualified at the annual meeting of the Company's shareholders. The members of the Board of Directors serve without remuneration for service on the board. Corporate officers are appointed by the Board of Directors and serve at the discretion of the Board.
 
 The Company has no standing audit, nominating or compensation committee. During the period from January 1, 2003 (end of last fiscal year of Warning Model Management, Inc.) to December 31, 2003, there was no Board meeting that was held.
 
 Compliance with Section 16(a) of the Securities Exchange Act of 1934
 
 Section 16(a) of the Securities Exchange Act of 1934 requires the Companys directors and executive officers, and persons who own more than 10% of a registered class of the Companys equity securities to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than 10% shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.
 
 To the Companys knowledge, based solely on its review of the copies of such reports furnished to the company and written representations that no other reports were required during the fiscal year ended December 31, 2003, all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with.
 
 January 1, 2003 to December 31, 2003 all filing requirements applicable to Reporting Persons were complied with.
 
 ITEM 10. Executive Compensation
 
 The following table discloses the compensation paid to Famous Fixins, Inc.'s executive officers during the period November 13, 2002 to December 31, 2003:
 
 SUMMARY COMPENSATION TABLE
 
  
 LONG TERM COMPENSATIONANNUAL COMPENSATION
AWARDSPAYOUTS 
 
 NAME AND PRINCIPAL POSITION
YEAR
SALARY
BONUS
OTHER ANNUAL COMPENSATION(1)
Restricted Stock Award(s)
SECURITIES UNDERLYING OPTIONS(#)
LTIP
PAYOUTS
ALL OTHER COMPENSATIONMichael Rudolph
2003
$0
$0
$0
0
0
0
02002
$0
0
$15,000
0
0
0
0Steven Chamberlin
2003
$58,000
0
0
0
0
0
02002
$50,000
0
0
0
0
0
02001
$25,750
0
0
0
0
0
0Stanley Tepper
2003
$0
0
0
0
0
0
02002
$0
0
0
0
0
0
0 
  14
  OPTIONS GRANTED IN LAST FISCAL YEAR
 
 No options to purchase Common Stock of the Company have been granted to the Company's executive officers.
 
 FISCAL YEAR-END OPTION EXERCISES AND OPTION VALUES
 
 No options to purchase Common Stock of the Company have been granted to the Company's executive officers.
 
 EMPLOYEE COMPENSATION
 
 We do not yet have a compensation committee that approves or offers recommendations on compensation for our employees.
 
 ITEM 11. Security Ownership of Certain Beneficial Owners and Management
 
 The following table sets forth certain information known to the Company with respect to the beneficial ownership of the Companys common stock as of March 31,, 2004 by (i) each person who is known by the Company to own beneficially more than 5% of the Company's common stock, (ii) each of the Company's directors and executive officers, and (iii) all officers and directors of the Company as a group. Except as otherwise listed below, the address of each person is c/o Warning Model Management, INC. 9440 Santa Monica Blvd. $400 Beverly Hills, CA 90210.
 
 Name and Address of Beneficial OwnerClass

Number ofShares

PercentOwned (1)Steve Chamberlin
Director and Managing Member of WAMM

1,725,462

0% 
 (1) Except as pursuant to applicable community property laws, the persons named in the table have sole
 voting and investment power with respect to all shares of common stock beneficially owned. The total
 number of issued and outstanding shares of 388,101,535 and the total number of shares owned by
 each person is calculated as of April 5, 2004.
 
 ITEM 12. Certain Relationships and Related Transactions
 
 Mr. Chamberlin has been advanced money for costs and expenses relating to model expenses and travel of $28,040. The advances are due on demand and non-interesting bearing.
 
 ITEM 13. Exhibits and Reports on Form 8-K.
 
  (a)
Exhibits31.1
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)( Section 302 of the Sarbanes-Oxley Act of 2002)31.2
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) ( Section 302 of the Sarbanes-Oxley Act of 2002)32.1
Certification of the Chief Executive Officer pursuant to 18 U.S.C.ss.1350 (Section 906 of the Sarbanes-Oxley Act of 2002)32.2
Certification of the Chief Financial Officer pursuant to 18 U.S.C.ss.1350 (Section 906 of the Sarbanes-Oxley Act of 2002) 15
 (b)  Reports on Form 8-K:
 
 Form 8-K:  filed under date of January 7, 2003 with respect to Items 2 and 7.
 Form 8-K:  filed under date of February 11, 2003 with respect to Items 4 and 7.
 Form 8-K/A:  amendment to Form 8-K filed March 3, 2003 with respect to Items 4 and 7.
 Form 8-K:  filed under date of May 23, 2003 with respect to Items 5 and 7.
 Form 8-K;  filed under date of February 19, 2004 with respect to Items 5, 6, and 7.
 
 
 ITEM 14.  Principal Accountant Fees and Services
 
 The Company paid or accrued the following fees in each of the prior two fiscal years to its current independent certified public accountants, Pohl, McNabola, Berg & Co., LLP:
 
 
 For the Year Ended December 31,2003
2002Audit Fees
$ 27,500
$ 31.414Audit-Related Fees
$ 33,227
-Tax Fees
$ 5,350
$ 500All Other Fees
$ 6,228
-Total Fees
$ 72,305
$ 31,914 
 "Audit Fees" consisted of fees billed for services rendered for the audit of the Companys annual financial statements and Audit-related fees are for review of the financial statements included in the Companys quarterly reports on Form 10-QSB.
 
 The Company paid fees of $28,400 for performing the three quarterly reviews of interim financial statements in 2002 to its former independent certified public accountants, Freeman Davis & Co., LLP:
 16 
 
 SIGNATURES
 
 Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 Warning Model Management, Inc.
 
 
 Signature

Title
DateBy:
/s/Steve Chamberlin
Director, Managing Member
April 13, 2004Steve Chamberlin
Warning Model Management, LLC 
 
 In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities on the dates indicated:
 
  Signature

Title
DateBy:
/s/Steve Chamberlin
Steve Chamberlin
Director, Managing Member
Warning Model Management, LLC
April 13, 2004By:
/s/Stanley Tepper
Stanley Tepper
Chief Financial Officer
April 13, 2004 
 17
 
  
 
 
 
 
 
  
 
 
 Warning Model Management, Inc.
 (f/k/a Famous Fixins, Inc.)
 
 Consolidated Financial Statements
 
 December 31, 2003 and 2002
 
 Warning Model Management, Inc.
 (f/k/a Famous Fixins, Inc.)
 
 Consolidated Financial Statements
 
 December 31, 2003 and 2002
 
 
 
 
 C O N T E N T S
 
 
 
 Page
 
 
 Independent Auditors' Report............................................................................................................................................. F- 1
 
 Consolidated Balance Sheets................................................................................................................................................F-2-3
 
 Consolidated Statements of Operations..............................................................................................................................F- 4
 
 Consolidated Statements of Shareholders' Equity.............................................................................................................F- 5
 
 Consolidated Statements of Cash Flows............................................................................................................................F- 6 - 8
 
 Notes to the Consolidated Financial Statements..............................................................................................................F- 9 - 34
 
 
 
 
 
 
 
 
 
 
 INDEPENDENT AUDITORS' REPORT
 
 
 
 
 
 To the Board of Directors and Shareholders Warning Model Management, Inc.
 
 
 We have audited the accompanying consolidated balance sheets of Warning Model Management, Inc., (the Company) as of December 31, 2003 and 2002, and the related consolidated statements of operations, changes in shareholders' equity, and cash flows for the years ended December 31, 2003 and 2002. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
 We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
 In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Warning Model Management, Inc., as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles in the United States of America.
 
 The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency, which raises doubts about its ability to continue as a going concern. Managements plans regarding those matters also are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 
 
 /s/ Pohl, McNabola, Berg & Company, LLP
 
 Pohl, McNabola, Berg & Company, LLP
 San Francisco, California
 April 1, 2004
 
 
 F-1
  
    
 
 
 
  
 December 31, 2003

December 31, 2002ASSETSCurrent AssetsCash and cash equivalents
$
-

$
503,422Accounts receivable, net of reserve for doubtfulaccounts of $61,332 and $63,422, respectively

292,746


332,823Advances to models, net of reserve of$166,180 and $41,180, respectively

356,937


419,233Advances to officer

28,040


28,040Advances to employees

3,650


-Prepaid expenses

11,628


2,734Total Current Assets

693,001


1,286,252Property and EquipmentFurniture and fixtures

8,168


8,168Computers and equipment

73,793


90,80581,961


98,973Accumulated depreciation

(42,703)


(40,443)Total Property and Equipment

39,258


58,530Total Assets
$
732,259

$
1,344,782
 
 
 
 
 
 
 (continued)
 
 
 The accompanying notes are an integral part of these financial statements.

F- 2 -Warning Model Management, Inc.(f/k/a Famous Fixins, Inc.)Consolidated Balance SheetsAs Of December 31, 2003 and 2002
 
  
 
 December 31, 2003

December 31, 2002LIABILITIES AND EQUITYCurrent LiabilitiesAccounts payable and accrued expenses
$
315,267

$
445,266Model fees payable

318,343


319,946Model reserves

39,696


26,955Line of credit

50,979


51,036Notes payable

588,672


166,783Advances from shareholders

113,788


52,000Accrued interest

220,454


17,517Taxes payable

7,060


5,160Current portion - capital leases

9,797


17,219Secured line of credit

149,384


367,400Convertible debentures

1,178,675


1,175,739Total Current Liabilities

2,992,115


2,645,021Long Term LiabilitiesConvertible debentures

434,329


403,087Convertible notes payable to shareholders

2,560,225


2,390,105Capital leases

17,653


27,450Total Long Term Liabilities

3,012,207


2,820,642EquityCommon stock - 800,000,000 authorized, par value $0.001,92,252,810 and 44,673,834 issued andoutstanding for 2003 and 2002, respectively

92,253


44,674Additional paid-in capital

499,480


97,235Accumulated deficit

(5,863,796)


(4,262,790)Total Equity

(5,272,063)


(4,120,881)Total Liabilities and Equity
$
732,259

$
1,344,782
 
 The accompanying notes are an integral part of these financial statements.

F- 3 -
  
 
  
 2003

2002RevenuesRevenues
$
1,746,075

$
2,208,535Costs of revenues

(1,086,393)


(1,288,314)659,682


920,221Operating ExpensesSalaries and wages

608,839


535,978Rent


161,005


129,360General and administrative

873,153


504,167Business development

73,184


91,204Non-recurring expenses

-


86,375Depreciation and amortization

19,439


17,633Total Operating Expenses

1,735,620


1,364,717Other Income (Expense)Interest income

843


445Other income

39,233


31,920Interest expense

(562,665)


(122,426)Other expense

(499)


-Total Other Income (Expense)

(523,088)


(90,061)Net Loss Before Income Taxes

(1,599,026)


(534,557)Provision for Income Taxes

(1,980)


(1,380)Net Loss
$
(1,601,006)

$
(535,937)Net loss per share  basic
$
(0.02)

$
(0.02)Net loss per share - diluted
$
(0.02)

$
(0.02)Number of share used in calculation - basic

75,860,170


24,569,666Number of share used in calculation - diluted

75,860,170


24,569,666
 
 
 The accompanying notes are an integral part of these financial statements.
 
  
 F-4
  
 
 
 
 AdditionalCommon Stock

Paid-In

AccumulatedShares

Amount

Capital

Deficit

TotalBalance, December 31, 2001
24,313,655

$
24,314

$
420,670

$
(506,687)

$
(61,703)Additional capital contribution
-


-


7,000


-


7,000Reverse merger:Share issuance
20,360,179


20,360


(20,360)


-


-Net effect of assumption of FIXN assets and liabilities
-


-


-


(3,627,476)


(3,627,476)Reclassification of paid-in capital due to merger
-


-


(407,310)


407,310


-Note payable conversion option
-


-


88,235


-


88,235Warrants issuance
-


-


9,000


-


9,000Net loss
-


-


-


(535,937)


(535,937)Balance, December 31, 2002
44,673,834

$
44,674

$
97,235

$
(4,262,790)

$
(4,120,881)Common stock issued for services
25,250,000


25,250


282,250


-


307,500Conversion of notes payable
16,328,976


16,329


44,171


-


60,500Warrant issuance
-


-


33,824


-


33,824Conversion of warrants
6,000,000


6,000


42,000


-


48,000Net loss
-


-


-


(1,601,006)


(1,601,006)Balance, December 31, 2003
92,252,810

$
92,253

$
499,480

$
(5,863,796)

$
(5,272,063)
 
 The accompanying notes are an integral part of these financial statements.

F- 5 -
  
 
  2003

2002Operating Activities:Net Loss

$
(1,601,006)

$
(535,937)Adjustments to reconcile loss to net cashprovided by (used in) operating activities:Depreciation and amortization


19,439


17,633Bad debt expense


122,910


81,787Bond and warrant discount amortization


244,060


2,141Stock-based compensation


307,500


-Loss on disposal of asset


3,579


-Other


(902)


1,074Changes in operating assets and liabilities:Accounts receivable - trade


42,167


(248,945)Advances to models


(62,704)


(370,070)Prepaid expenses


(8,894)


(2,734)Advances to officer


-


(28,040)Advances to employees


(3,650)


-Accounts payable and accrued expenses


(139,948)


409,858Model fees payable


(1,603)


252,552Model reserves


12,741


21,640Taxes payable


1,900


1,960Accrued interest on convertible debt and secured line


202,937


102,511Net cash used in operating activities

(861,474)


(294,570)Investing activities:Purchases of property and equipment


(3,762)


(15,743)Net cash used in investing activities

(3,762)


(15,743)
 
 
 (continued)
 
 
 The accompanying notes are an integral part of these financial statements.

F- 6 -
  
 2003

2002Financing activities:Capital contributions - cash


-


7,000Proceeds from convertible notes payables


50,000


500,000Borrowings from secured line of credit


789,947


1,914,900Payments on secured line of credit


(1,007,963)


(1,774,917)Exercise of warrants


48,000


-Payments on capital lease obligation


(7,015)


(7,866)Borrowings under bank line of credit


10,134


11,111Payments under bank line of credit


(10,077)


(8,991)Proceeds from notes payable


545,000


118,000Payments on notes payable


(118,000)


-Advances from shareholders


108,788


52,000Payments on advances from shareholders


(47,000)


(3,323)Net cash provided by (used in) financing activities


361,814


807,914Increase (Decrease) in cash and cash equivalents

(503,422)


497,601Cash and cash equivalents, beginning of period

503,422


5,821Cash and cash equivalents, end of period
$
-

$
503,422
 
 
 (continued)
 
 
 
 
 
 The accompanying notes are an integral part of these financial statements.

F- 7 -
 
  
 
 2003

2002Supplemental disclosures of cash flow information:Cash paid during the period forInterest

$
29,895

$
9,401Taxes

$
7,542

$
-Supplemental schedule of non-cash financing activitiesValue of convertible benefit feature on convertible debt

$
8,824

$
88,235Conversion of debt to common stock
$
60,500

$
-Fair value of warrants issued with notes payable
$
25,000

$
9,000Common stock issued for services
$
307,500

$
-Net liabilities assumed in merger with Famous Fixins
$
-

$
3,627,476Disposal of equipment
$
20,775

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

F- 8 -
 
  Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 
 
 
 1.  Summary of Significant Accounting Policies
 
 A.  General Description of Business
 
 Warning Model Management, Inc., (the Company or WNMI), formerly known as Famous Fixins, Inc. ("FIXN"), was incorporated on February 9, 1984, in the State of Utah. Through May 15, 2002, the date of its operating asset sale, FIXN was a promoter and marketer of celebrity endorsed consumer products for sale in supermarkets, other retailers and over the Internet. FIXN developed, marketed and sold licensed consumer products based on the diverse professional, cultural and ethnic backgrounds of various celebrities. FIXN entered into licensing agreements with high profile celebrities and created consumer products, which included various product lines consisting of salad dressings, candy products, cosmetic products, adhesive bandages and other novelty products endorsed by the licensors. FIXN sold directly to consumers and utilized a network of consumer products brokers to distribute its products throughout the United States and Canada. Third party manufacturers produced FIXN's various consumer products. Effective May 15, 2002, FIXN became a shell company that had discontinued its operations and had no operating revenues subsequent to that date.
 
 On December 27, 2002, FIXN merged with Warning Model Management, LLC, a California limited liability company.
 
 In March 2003, the Company has filed a Proxy Statement with the Securities Exchange Commission (SEC) and changed its name to Warning Model Management, Inc., and increased the authorized shares from 200 million to 800 million.
 
 Warning Model Management, LLC, was established in September 1998 to provide high-quality fashion models to the Southern California market. Los Angeles is one of the premier locations for the creation of fashion advertisements and television commercials, with WNMI being one of Los Angeles's premier model management companies.
 
 The Company's current clients include major fashion companies, major department stores and major fashion magazines.
 
 
 B.  Basis of Presentation and Organization
 
 Effective December 27, 2002, the Warning Model Management, LLC acquired FIXN (trading symbol: FIXN) through a reverse merger.
 
 The application of reverse takeover accounting, resulted in the consolidated financial statements being issued under the name of the legal parent (f/k/a Famous Fixins, Inc.), but are a continuation of the financial statements of the legal subsidiary, (Warning Model Management, LLC), and not of the legal parent. The control of the assets and business of Famous Fixins, Inc., is deemed acquired in consideration for the issue of additional capital by Warning Model Management, LLC.
 -F-9Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 1.  Summary of Significant Accounting Policies (continued)
 
 B.  Basis of Presentation and Organization (continued)
 
 These consolidated financial statements represent the financial activity of Warning Model Management, LLC and its subsidiaries. The financial statements for the years ended December 31, 2003 and 2002 have been prepared in accordance with generally accepted accounting principles in the US. The financial statements and notes are representations of the management and the Board of Directors who are responsible for their integrity and objectivity.
 
 
 Consolidation Policy
 
 The accompanying consolidated financial statements include the accounts of the Company and its majority-owned subsidiary corporations, after elimination of all material inter-company accounts, transactions and profits. These financial statements consolidate the accounts of the Warning Model Management, LLC and FIXN subsequent to the merger date. FIXN's operating activity, which is limited to the resolution of its existing convertible debentures, is included as discontinued operations.
 
 
 C.  Cash and Cash Equivalents
 
 For purposes of cash flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Those with original maturities greater than three months and current maturities less than twelve months from the balance sheet date are considered short-term investments, and those with maturities greater than twelve months from the balance sheet date are considered long-term investments.
 
 The Company invests excess cash in high quality short-term liquid money market instruments with maturities of three months or less when purchased. Investments are made only in instruments issued by or enhanced by high quality financial institutions. The Company has not incurred losses related to these investments.
 
 
 Concentration of cash
 
 The Company at times maintains cash balances in excess of the federally insured limit of $100,000 per institution. There were no uninsured balances as of December 31, 2003, and there were uninsured balances totaling $403,000 as of December 31, 2002.
 
 F-10Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 
 1.  Summary of Significant Accounting Policies (continued)
 
 D.  Property and Equipment
 
 Property and equipment are recorded at cost less accumulated depreciation and amortization. Maintenance and minor replacements are charged to expense as incurred. Renewals and improvements that extend the useful lives of the assets are capitalized and added to the property and equipment. Gains and losses on disposals are included in the results of operations.
 
 Depreciation and amortization are provided using the straight-line method over estimated useful lives of the respective assets as follows:
 
 Office furniture and fixtures
5-7 yearsComputer and office equipment and software
3 yearsLeasehold improvements
4 years
 
 
 Amortization of leasehold improvements is computed using the straight-line method over the lesser of the asset life or the life of the respective lease.
 
 The cost and related accumulated depreciation of all property and equipment retired or otherwise disposed of are removed from the accounts. Any gain or loss is recognized in the current period. Various accelerated methods are used for tax purposes.
 
 
 Assets Held under Capital Leases
 
 Assets held under capital leases are recorded at the lower of the net present value of the minimum lease payments or the fair value of the leased asset at the inception of the lease. Amortization expense is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the period of the related lease.
 
 
 E.  Income Taxes
 
 The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.
 --F-11Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 1.  Summary of Significant Accounting Policies (continued)
 
 E.  Income Taxes (continued)
 
 Until December 27, 2002, the Company operated as a privately held limited liability company. Therefore, the Company's taxable income or loss was allocated to members in accordance with their respective percentage ownership. Accordingly, provision or liability for income taxes included in these financial statements is attributable to California minimum franchise tax of $800 for 2001 and for the period starting January 1, 2002, to December 27, 2002. The Company is subject to the California limited liability company fee, which is based on the Company's revenues. FIXN is subject to New York State and City franchise taxes.
 
 
 F.  Revenue Recognition
 
 The Company's revenues are derived from two sources.
 
 The Company's primary source of revenue is from model services provided to print media. Revenue for print media is recorded when the models have completed the fashion shoot. The revenue is recorded at gross billings, which includes all agency fees. Costs of revenues consist of payments due to the models for services rendered and expenses and costs incurred for models in performance of those services.
 
 The second source of revenue is from commissions on payments received by models and actors for appearing in television and cable commercials. The Company records a commission of 10% to 15% when cash is received.
 
 
 G.  Advertising Costs
 
 All advertising costs are expensed as incurred. Advertising expense totaled $550 for the year ended December 31, 2003 and none for the year ended December 31, 2002.
 
 
 H.  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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
 Management makes estimates that affect reserves for doubtful accounts, depreciation and reserves for any other commitments or contingencies. Any adjustments applied to estimates are recognized in the year in which such adjustments are determined.
 
 F-12Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 1.  Summary of Significant Accounting Policies (continued)
 
 I.  Segments of an Enterprise and Related Information
 
 The Company follows SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information. SFAS No. 131 requires that a public business enterprise (optional for a private enterprise) report financial and descriptive information about its reportable operating segments on the basis that is used internally for evaluating segment performance and deciding how to allocate resources to segments. Currently, the Company operates in only one segment.
 
 
 J.  Business Risks and Credit Concentrations
 
 The Company operates in the high-end fashion modeling industry segment, which is rapidly evolving and highly competitive. The Company relies on the clients engaging its models. There can be no assurance that the Company will be able to continue to provide models to support its operations.
 
 Accounts receivable are typically unsecured. The Company performs ongoing credit evaluations of its customers' financial condition. It generally requires no collateral and maintains reserves for potential credit losses on customer accounts, when necessary.
 
 The Company advances funds to its models for preparing model portfolios and travel costs.
 
 
 K.  Fair Value of Financial Instruments
 
 The carrying value of certain of the financial instruments, including accounts receivable, other current assets, accounts payable, notes payable and accrued expenses approximate fair value due to their short maturities. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of notes payable approximates fair value.
 
 The value attributable to a beneficial conversion feature and/or to stock purchase warrants issued in conjunction with convertible notes payable is amortized to interest expense over the term of the notes.
 
 
 L.  Recent Accounting Pronouncements
 
 In October 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement also extends the reporting requirements to report separately, as discontinued operations, components of an entity that either have been disposed of or are classified as held-for-sale. The Company adopted the provisions of SFAS No. 144 effective July 1, 2002. The adoption of this statement did not have any impact on the Company's financial condition or results from operations.
 
 F-13Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 1.  Summary of Significant Accounting Policies (continued)
 
 L.  Recent Accounting Pronouncements (continued)
 
 In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145 ("SFAS 145"), "Rescission of FASB Statements Nos. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS 145 eliminates the requirement that gains and losses from the extinguishment of debt be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. SFAS 145 was adopted by the Company in the first quarter of fiscal 2002. The adoption of SFAS 145 did not have a material impact on the Company's results of operations or financial position.
 
 In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or Disposal Activities. SFAS No. 146 addresses significant issues regarding the recognition, measurement, and reporting of costs that are associated with exit and disposal activities, including restructuring activities that are currently accounted for under EITF No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). The scope of SFAS No. 146 also includes costs related to terminating a contract that is not a capital lease and termination benefits that employees who are involuntarily terminated receive under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred-compensation contract. SFAS No. 146 will be effective for exit or disposal activities that are initiated after December 31, 2002 and early application is encouraged. The provisions of EITF No. 94-3 shall continue to apply for an exit activity initiated under an exit plan that met the criteria of EITF No. 94-3 prior to the adoption of SFAS No. 146. The Company has adopted FSAS 146 for exit or disposal activities that are initiated after December 31, 2002. The effect on adoption of SFAS No. 146 will change on a prospective basis the timing of when restructuring charges are recorded from a commitment date approach to when the liability is incurred.
 
 In December 2002, the FASB issued SFAS No.148, "Accounting for Stock-Based Compensation  Transition and Disclosure." This statement amends SFAS No.123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation. Pursuant to SFAS No.123, the Company will continue to show pro forma disclosure related to the expense attributable to the fair market value of stock options granted to employees.
 
 In November 2002, the FASB issued Interpretation No. 45 (FIN 45), Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34. FIN 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. FIN 45 also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken. The initial recognition and measurement provisions of FIN 45 are applicable to guarantees issued or modified after December 31, 2002 and are not expected to have a material effect on our Financial Statements.
 
 In January 2003, the FASB issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities, an interpretation of ARB No. 51. FIN 46 addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003 the provisions of FIN 46 must be applied for the first interim period beginning after June 15, 2003. The application of FIN 46 is not expected to have a material effect on the Company's consolidated financial statements. The Company does not have any variable interest entities; therefore, this Interpretation is not expected to have an impact on its consolidated financial statements.
 
 F-14
  1.  Summary of Significant Accounting Policies (continued)
 
 L.  Recent Accounting Pronouncements (continued)
 
 In April 2003, the FASB issued SFAS 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, which amends SFAS 133 for certain decisions made by the FASB Derivatives Implementation Group.  In particular, SFAS 149: (1) clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative, (2) clarifies when a derivative contains a financing component, (3) amends the definition of an underlying instrument to conform it to language used in FASB Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, and (4) amends certain other existing pronouncements.  This Statement is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. In addition, most provisions of SFAS 149 are to be applied prospectively.  The Company does not expect the adoption of SFAS 149 will have a material impact on its financial position, cash flows or results of operations.
 
 In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity (SFAS 150).  SFAS 150 changes the accounting for certain financial instruments that under previous guidance issuers could account for as equity.  It requires that those instruments be classified as liabilities in balance sheets.  The guidance in SFAS 150 is generally effective for all financial instruments entered into or modified after May 31, 2003, and otherwise is effective on July 1, 2003.  The Company does not expect the adoption of SFAS 150 will have a material impact on its financial position, cash flows or results of operations .
 
 
 M.  Advances to Models
 
 The Company pays bills on behalf of models for the preparation of their professional modeling portfolios and for travel costs. These amounts have no specific repayment terms, but management generally expects repayment within one year.
 
 Advances to models have been reviewed by management, and the Company has recorded an allowance for doubtful collections of $166,180 and $41,180 in 2003 and 2002, respectively.
 
 
 N.  Trade Accounts Receivable
 
 Accounts receivable are typically unsecured. The Company performs ongoing credit evaluations of its customers' financial condition. It generally requires no collateral and maintains reserves for potential credit losses on customer accounts when necessary.
 
 The Company establishes an allowance for uncollectible trade accounts receivable based on historical collection experience and management evaluation of collectibility of outstanding accounts receivable.
 
 F-15Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 1.  Summary of Significant Accounting Policies (continued)
 
 O.  Basic and Diluted Net Earnings per Share
 
 Basic net earnings (loss) per common share is computed by dividing net earnings (loss) applicable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of common stock options. In periods where losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.
 
 
 P.  Accounting for Derivative Instruments and Hedging Activities
 
 The Company has adopted Financial Accounting Standards Board Statement No. 133 "Accounting for Derivative Instruments and Hedging Activities," which requires that all derivative instruments be recorded on the balance sheet at fair value. The Company is currently not engaged in hedging activities nor does it have any derivative instruments, thus there is no impact on the current periods financial statements
 
 
 Q.  Comprehensive Income (Loss)
 
 Comprehensive income consists of net income and other gains and losses affecting shareholders' equity that, under generally accepted accounting principles are excluded from net income in accordance with Statement on Financial Accounting Standards No. 130, "Reporting Comprehensive Income. The Company, however, does not have any components of comprehensive income (loss) as defined by SFAS No. 130 and therefore, for the years ended December 31, 2003 and 2002, comprehensive income (loss) is equivalent to the Company's reported net income (loss).
 
 
 R.  Long-Lived assets
 
 The Company accounts for the impairment and disposition of long-lived assets in accordance with SFAS No. 121, "Accounting for the impairment of long-lived Assets and Long-Lived Assets to Be Disposed Of". In accordance with SFAS No. 121, long-lived assets to be held are reviewed for events or changes in circumstances, which indicate that their carrying value may not be recoverable. During the years ended December 31, 2003 and 2002, no impairment has been recorded.
 
 
 S.  Reclassifications
 
 Certain reclassifications have been made to the 2002 financial statements to conform to the 2003 presentation. The reclassifications did not have any impact on previously reported results from operations or shareholders deficit.
 F-16Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 1.  Summary of Significant Accounting Policies (continued)
 
 T.  Stock-Based Compensation  Warrants
 
 The Company accounts for stock-based compensation using the fair-value based method prescribed in Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation". Compensation cost for all stock warrants issued by the Company is (a) measured at the grant date based on the fair value of the warrants and (b) recognized over the service period. See Note 11.
 
 
 
 2.  Going Concern
 
 The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, the Company has experienced net losses of $1,601,006 and $535,937 for the years ended December 31, 2003 and 2002, respectively. The Company also had a net working deficit of $2,299,114 and $1,358,769 for the years ended December 31, 2003 and 2002 respectively. Additionally, the Company must raise additional capital to meet its working capital needs. These factors raise substantial doubt about the Companys ability to continue as a going concern. In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon the Companys ability to generate sufficient sales volume to cover its operating expenses and to raise sufficient capital to meet its payment obligations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
 
 Management has previously relied on equity financing sources and debt offerings to fund operations. The Company's reliance on equity and debt financing will continue, and the Company will continue to seek to enter into strategic acquisitions. Management has obtained additional capital through debt offerings subsequent to December 31, 2003.
 
 
 
 3.  Income Taxes
 
 Until December 27, 2002, the Company had chosen to be treated as a partnership for federal and state income tax purposes. A partnership is not a tax paying entity for federal or state income tax purposes. Accordingly, no federal income tax expense has been recorded in the statements. All income or losses will be reported on the individual members' income tax returns. The Company is subject to a minimum franchise tax in California.
 F-17Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 3.  Income Taxes (continued)
 
 Significant components of the provision for taxes based on income for the year ended December 31, 2003 and 2002 are as follows:
 
 2003

2002CurrentFederal
$
-

$
-State

(1,980)


(1,380)(1,980)


(1,380)DeferredFederal

-


-State

-


-Total
$
(1,980)

$
(1,380)
 
 
 Significant components of the Company's deferred tax assets and liabilities for income taxes consist of the following:
 
 Federal

State

LocalDeferred tax assetNet operating loss carryforwards
$
829,403

$
213,456

$
17,324Bad debts

43,019


11,062


1,569Total deferred tax asset
$
872,422

$
224,518

$
18,893Less valuation allowance
$
(872,422)

$
(224,518)

$
(18,893)Net deferred tax asset
$
-

$
-

$
-
 
 
 At December 31, 2003, The Company has available approximately $2,220,000 in net operating loss carryforwards available to offset future federal and New York state income taxes, respectively, which expire through 2022. Realization is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. This and other components of deferred tax asset accounts are described above. As at December 31, 2003, the Company has provided a valuation allowance to reduce its net deferred tax asset to zero. The amount of the deferred tax asset considered realizable, however, can be revised in the near term based upon future operating conditions during the carryforward period.
 
 The provision for income taxes consists of state franchise taxes. The expected combined federal and state income tax benefit of approximately 45% is reduced predominately by the valuation allowance applied to such benefits. The use of loss carryforwards from FIXN of approximately $1,000,000 is limited because of the change of greater than 50% in the ownership of its stock resulting from the merger.
 
 F-18Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 3.  Income Taxes (continued)
 
 A reconciliation of the provision for income tax expense with the expected income tax computed by applying the federal statutory income tax rate to income before provision for (benefit from) income taxes for the year ended December 31, 2002, is as follows:
 
 2003

2002Income tax provision (benefit) computedat federal statutory rate
(35.00%)

(35.00%)State and local
(9.84%)

(9.84%)Other
1.00%

(8.74%)Valuation allowance
43.96%

53.60%Effective tax rate
0.12%

0.02%
 
 
 The Company incurred minimum franchise taxes in New York and California.
 
 
 
 4.  Financing Agreement
 
 Until September 30, 2003, the Company had a secured asset-borrowing program with a financial institution to collateralize, with recourse, certain eligible trade receivables up to a maximum percentage of 80% of the net amounts of each receivable. As receivables collateralized to the financial institution are collected, the Company may transfer additional receivables up to the discretion of the lending institution. Gross receivables transferred to the financial institution amounted to $856,671 and $2,129,025 in 2003 and 2002, respectively. The Company retains the right to recall collateralized receivables under the program, and the receivables are subject to recourse. Therefore, the transaction did not qualify as a sale under the terms of Financial Accounting Standards Board Statement No. 125 (Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities). Included in the Balance Sheets as receivables at December 31, 2003 and 2002, are account balances totaling $0 and $352,458 of uncollected receivables collateralized to the financial institution.
 
 Effective October 15, 2003, the Company has obtained a new secured lending facility from a new financial institution. The Companys borrowings are secured by the underlying trade receivables. The borrowings are collateralized, with recourse, by certain eligible trade receivables up to a maximum percentage of 70% of the net amounts of each receivable. As receivables collateralized to the financial institution are collected, the Company may transfer additional receivables up to the discretion of the lending institution. Gross receivables transferred to the financial institution amounted to $408,202 in 2003. The Company retains the right to recall any of the collateralized receivables under the program, and the receivables are subject to recourse. Therefore, the transaction does not qualify as a sale under the terms of Financial Accounting Standards Board Statement No. 125 (Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities). Included in the Balance Sheets as receivable at December 31, 2003, are account balances totaling $213,406 of uncollected receivables collateralized to the financial institution under this agreement.
 F-19Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 5.  Line of Credit
 
 The Company has an unsecured line of credit agreement with a bank, which provides that it may borrow up to $50,000 at the interest rate of 12% per annum. At December 31, 2003 and 2002, $50,000 and $50,000 were borrowed against the line of credit. The line of credit is renewable annually by mutual agreement of the parties.
 
 
 
 6.  Equity
 
 In January 2003, the Company issued 11,000,000 shares of its registered common stock, having a market value of $165,000, to three individuals in lieu of cash compensation for services rendered.
 
 In January 2003, the holder of a 4% convertible debenture converted $25,500 of principal into 5,000,000 shares of the Companys common stock.
 
 In April 2003, the Company issued 4,250,000 shares of its registered common stock, having a market value of $42,500 to three individuals in lieu of cash compensation for legal and management consulting services rendered.
 
 In April 2003, the Company issued to a consultant warrants to purchase 6,000,000 shares of its common stock at an exercise price of $0.008 per share under the terms of a consulting agreement. In April 2003, this warrant holder exercised the warrant to purchase 6,000,000 shares of common stock for $48,000.
 
 In May 2003, the Company issued 5,000,000 shares of its registered common stock, having a market value of $50,000, to various consultants in lieu of cash compensation for services rendered.
 
 In June 2003, the Company issued 5,000,000 shares of its registered common stock, having a market value of $50,000, to various consultants in lieu of cash compensation for services rendered.
 
 In July 2003, the holder of a 4% convertible debenture converted $25,000 of principal into 5,446,623 shares of the Companys common stock.
 
 In November 2003, the holder of a 4% convertible debenture converted $10,000 of principal into 5,882,353 shares of the Companys common stock.
 
 
 
 7.  Related Party Transactions
 
 Mr. Steve Chamberlin
 
 Mr. Steve Chamberlin, President and Member of the Board of Directors of the Company, has advanced monies to the Company. The Company repaid to Mr. Chamberlin $3,323 in 2002 for these advances.
 
 During 2002, the Company advanced to Mr. Chamberlin $28,040. These advances are due on demand and are non-interest-bearing.
 F-20Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 7.  Related Party Transactions (continued)
 
 Transactions with shareholders
 
 Two shareholders made to the Company non-interest bearing advances that totaled $52,000 during 2002. The Company repaid these advances in January 2003.
 
 In 2003, shareholders have advanced to the Company $93,788, and these advances bear interest at 10% per annum. The Company has repaid $5,000 of these advances.
 
 In 2003, an employee advanced to the Company $15,000, which has been repaid during the year.
 
 
 
 8.  Commitments and Contingencies
 
 A.  Legal
 
 The Company is periodically involved in legal actions and claims that arise as a result of events that occur in the normal course of operations. The Company is not currently aware of any legal proceedings or claims that the Company believes will have, individually or in the aggregate, a material adverse effect on the Company's financial position or results of operations.
 
 
 B.  Operating Leases
 
 On May 17, 2001, the Company's principal executive offices relocated to a 3,479 square foot facility at 9440 Santa Monica Boulevard, Suite 400, Beverly Hills, CA 90210. The Company leases the facility under a 60-month agreement that terminates on April 30, 2005, with the option to renew for an additional six months. The aggregate rental rate for the entire facility for the year ending December 31, 2003 and 2002 were $125,516 and $71,667, respectively. All operations were performed at this facility.
 
 The Company also leases office equipment under several open-ended operating leases. The aggregate monthly rental (exclusive of sales tax) is $585 per month.
 
 In March 2000, the Company leased an automobile under a 36-month non-cancelable operating lease agreement. The Company was obligated to pay $376 per month.
 
 In September 2002, the Company leased an automobile under a 36-month non-cancelable operating lease agreement. The Company is obligated to pay $1,392 per month.
 
 In November 2002, the Company leased an automobile under an operating lease agreement. The lease was terminated in July 2003. The Company was obligated to pay $422 per month.
 F-21Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 8.  Commitments and Contingencies (continued)
 
 The aggregate future rental rates through December 31, 2008, are as follows:
 
 Year Ending December 31,2004
$
140,0582005

57,3172006

7,0232007

7,0232008

7,023$
218,444
 
 
 C.  Capital Leases
 
 The Company maintains a capital lease for some of its office equipment. The following is a schedule by year of the approximate future minimum lease payments required under this lease:
 
 2004
$
12,1012005

12,1012006

7,059Future Minimum lease payments
$
31,261Less amount representing interest

(3,811)Present value of minimum lease payments

27,450Less current portion

(9,797)Long-term capital lease obligation
$
17,653
 
 
 The leased property under capital leases as of December 31, 2003 has a cost of $39,761, accumulated amortization of $15,739 and a net book value of $24,022. Amortization of the leased property is included in depreciation expense and amounts to $9,940 and $5,799 for the years ended December 31, 2003 and 2002, respectively.
 
 
 F-22Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 8.  Commitments and Contingencies (continued)
 
 D.  Contingent Liability
 
 On May 15, 2002, FIXN completed a transaction pursuant to a Settlement of Debts and Asset Purchase Agreement, dated March 29, 2002, with Starbrand, LLC, pursuant to which FIXN divested all of its operations and sold substantially all of its assets and certain specified liabilities to Starbrand, LLC, in exchange for cancellation of $450,000 of outstanding 4%, $1,500,000 convertible debentures. FIXN is contingently liable for the payment of the liabilities transferred aggregating approximately $200,000. No claim has been made regarding these liabilities as of December 31, 2003 and 2002, and management believes that no reserve is necessary.
 
 
 
 9.  Merger of Famous Fixins and Warning Model Management, LLC
 
 On December 27, 2002, the Company completed the merger with Famous Fixins, Inc., ("FIXN"), a public shell company traded on the NASDAQ Over-the-Counter Bulletin Board, by acquiring 54% of the outstanding capital stock of FIXN.
 
 The merger of WNMI LLC, an operating company, with FIXN, a non-operating public shell company with nominal assets, is treated as a capital transaction in substance rather than a business combination. Therefore, no goodwill or intangible assets are recorded.
 
 The following table presents the allocation the assets acquired and liabilities assumed as:
 
 Accounts receivable
$
64,500Total assets
$
64,500Convertible debt and long-term debt due within one year
$
(1,232,691)Other current liabilities

(81,380)Convertible notes payable-shareholders

(2,900,000)Unamortized bond discount

522,095Total liabilities assumed

(3,691,976)Total adjustment to equity
$
(3,627,476)
 
 
 F-23Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 9.  Merger of Famous Fixins and Warning Model Management, LLC
 
 The following (unaudited) pro forma consolidated results of operations have been prepared as if the merger with FIXN, Inc. had occurred at January 1, 2002:
 
 December 31, 2002Sales
$
2,323,849Operating expenses

(1,133,292)Discontinued operations-loss

(248,922)Net loss

(5,118,194)Discontinued loss per share-basic
$
(0.01)Discontinued loss per share-diluted
$
(0.01)Net loss per share-basic
$
(0.12)Net loss per share-diluted
$
(0.12)
 
 The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the merger been consummated as of that time, nor is it intended to be a projection of future results.
 F-24Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 10.  Notes Payable
 
 Notes payable at December 31, 2003 and 2002, consist of the following:
 
 2003

200210% note payable  private party. Interest payable or accruing monthly, due on demand
$
48,783

$
48,783Note payable  private party, $6,000 fixed interest, due January 2003, unsecured

-


30,000Non-interest-bearing note payable  private party, due December 2002, unsecured

-


88,000Note payable  private party, due June 2004, unsecured

48,000


-10% note payable  private party. Interest payable or accruing monthly, due December 2004, unsecured

100,000


-10% note payable  private party. Interest payable or accruing monthly, due May 2004, unsecured

105,000


-18% note payable  private party. Interest payable or accruing at 1.5% per month, due on demand

300,000


-Total notes payable at December 31,

601,783


166,783Less bond discount

(13,111)


-$
588,672

$
166,783
 
 
 In September 2002, the Company borrowed $88,000 from a private party. The loan was paid in January 2003.
 
 In October 2002, the Company borrowed $30,000 from a private party. The loan, including the premium, was paid in January 2003.
 
 In March 2003, the Company obtained short-term debt financing of $48,000 from an unrelated party.
 
 In May 2003, the Company obtained short-term debt financing of $105,000 from an unrelated party. The lender is a holder of its 10% convertible debentures.
 
 In July 2003, the Company obtained $300,000 in debt financing in the form of short-term notes bearing 18% interest per annum. The Company issued warrants convertible into 5,000,000 shares of common stock at an exercise price of $0.01 per share. Management determined the fair value for the warrants issued to be $25,000, which is being amortized over the term of the note.
 F-25Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 10.  Notes Payable (continued)
 
 In August 2003, the Company obtained short-term debt financing of $50,000 from an unrelated party. In December 2003, the Company obtained additional short-term debt financing of $50,000 from the same party. These short-term notes bear 10% interest per annum.
 
 
 10% Demand Notes Payable
 
 In January 2002, FIXN issued promissory notes of $27,500 with interest at a rate of 10% per year. Beginning June 15, 2002, these notes became payable on demand.
 
 In May 2002, FIXN borrowed an aggregate of $21,283 from two lenders and issued notes payable at an interest rate of 10% per annum. Beginning June 15, 2002, these notes became payable on demand. The lenders include a party related to the holders of its 4% convertible debentures and another unrelated party.
 
 
 
 11.  Convertible Debentures & Promissory Notes
 
 Short term convertible notes consisted of the following at December 31:
 
 2003

20025% convertible note payable, due on demand
$
33,975

$
33,9754% convertible note payable, due on demand

989,700


1,050,0004% convertible note payable, due on demand

105,000


105,00010% convertible note payable, due on January 3, 2004

50,000


-Total current notes

1,178,675


1,188,975Less discount

-


(13,236)Total current convertible notes payable
$
1,178,675

$
1,175,739
 
 
 -F-26Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 11.  Convertible Debentures & Promissory Notes (continued)
 
 Long term convertible notes consisted of the following at December 31:
 
 2003

200210% convertible note payable, due on December 30, 2005
$
500,000

$
500,0004% convertible note payable, due on December 27, 2005

2,900,000


2,900,000Total long term notes

3,400,000


3,400,000Less discount

(405,446)


(606,808)Total long term convertible notes payable
$
2,994,554

$
2,793,192
 
 
 4% Convertible Debentures Payable
 
 On October 27, 2000, FIXN entered into an agreement with the three investors for the issuance of $1,500,000 4% Convertible Debentures and 250,000 warrants for shares of FIXN's common stock. Under the terms of the agreement, the $1,500,000 principal amount of the 4% debentures was issued for cash of $500,000 and the surrender of the outstanding $1,000,000 of 0% Convertible Debentures described above. The entire issue of the $1,500,000 4% Convertible Debentures was due on August 7, 2001, with a 5% premium on principal, plus accrued interest. Effective May 15, 2002, FIXN was relieved of $450,000 of the outstanding principal and the premium of $75,000 as a result of the asset sale to Starbrand, LLC. The debentures are convertible into common stock commencing on the maturity date at a conversion price of the lesser of $.054 per share or an amount computed under a formula, based on the discounted average of the lowest bid prices during a period preceding the conversion date.
 
 The conversion of the 4% debentures into common shares is subject to the condition that, no debenture holder may own an aggregate number of shares, including conversion shares, which is greater than 9.9% of the then outstanding common stock. Other provisions of the agreement include default, merger and common stock sale restrictions on FIXN. The debenture holders may cause FIXN to redeem debentures, with interest and a 30% payment premium, from up to 50% of the net proceeds received under an equity line of credit type of agreement or other permitted financing. The equity line of credit agreement was a condition to the October 27, 2000, 4% Convertible Debenture and Warrants Purchase Agreement.
 
 Interest on the 4% convertible debentures is payable semi-annually and is convertible into common stock at the investors' option. Due to the non-payment of interest in fiscal year 2000, the debenture holders had the right to consider the debentures as immediately due and payable.
 
 In July 2002, FIXN issued an additional $100,000 of 4% convertible debentures. These debentures are due in July 2003 and are classified as current. The notes have a $5,000 premium due at maturity. The value of the convertible feature was $17,647, which is amortized over the term of the note.
 F-27Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 11.  Convertible Debentures & Promissory Notes (continued)
 
 4% Convertible Debentures Payable (continued)
 
 The debenture conversion price was 85% of the average of the five (5) lowest closing bid prices of the Common Stock during the twenty-two (22) Trading Days preceding the applicable Conversion Date. The beneficial conversion feature of these debentures issued was $17,674. The amount attributable to the beneficial conversion feature is amortized over the term of the loan and is included as a component of interest expense. Interest on the indebtedness is accrued through December 31, 2003.
 
 The financial statements as of December 31, 2003, reflect the remaining principal amount of the 4% debentures, less the unamortized bond discount. Interest on the indebtedness is accrued through December 31, 2003.
 
 
 5% Convertible Debentures Payable
 
 The 5% Debenture holders are entitled to convert, at any time, any portion of the principal of the 5% Debentures to common stock at a conversion price for each share at the lower of (a) 80% of the market price at the conversion date or (b) $0.55. The 5% Debentures include an option by the Company to exchange the Debentures for Convertible Preferred Stock.
 
 The following summarizes the outstanding balance of the 5% Debentures at December 31, 2003 and 2002:
 
 
 2003

2002Outstanding principal amount of 5% debentures
$
33,975

$
33,975Less unamortized discount for warrants issued

-


(9)Carrying amount
$
33,975

$
33,966
 
 
 10% Convertible Debentures Payable
 
 On December 30, 2002, the Company issued $500,000 in new three-year convertible debentures with an interest rate of 10%, payable quarterly. These debentures are convertible in the Company's common stock at 85% of the average of the three lowest closing prices during the 20 days prior to the conversion. All these debentures are redeemable in cash due one year from the date of issuance. The notes mature in December 2005, and are classified as long-term.
 
 F-28Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 11.  Convertible Debentures & Promissory Notes (continued)
 
 10% Convertible Debentures Payable (continued)
 
 The debenture conversion price was 85% of the average of the five (5) lowest closing bid prices of the Common Stock during the twenty-two (22) Trading Days preceding the applicable Conversion Date. The beneficial conversion feature of these debentures issued was $88,235, and the amount was credited in the accounts as additional paid in capital. The amount attributable to the beneficial conversion feature is amortized over the term of the loan and is included as a component of interest expense. In conjunction with the issuance of the convertible debentures, the Company issued Common Stock Purchase Warrants (collectively the Note Warrants) to purchase 1,000,000 shares of the Company's common stock, par value $0.001 per share (the Common Stock), at an exercise price of $0.01 per share, and are immediately exercisable. Total funds received of $500,000 were allocated $9,000 to the Note Warrants and $491,000 to the Notes. The total value allocated to the Note Warrants is being amortized to interest expense over the term of the Notes. At December 31, 2003 and 2002, the unamortized discount on the Notes is approximately $65,333 and $96,913, respectively.
 
 In January 2003, the Company received aggregate proceeds of $50,000 in connection with the issuance of a 10% $50,000 convertible debenture, due in 2004. The lender, an unrelated party, is a current holder of a note payable issued by the Company. The convertible benefit feature value was $8,824, and it is amortized over the term of the note.
 
 The financial statements as of December 31, 2003, reflect the remaining principal amount of the 10% debentures, less the unamortized bond discount attributable to the beneficial conversion feature and the warrants. Interest on the indebtedness is accrued through December 31, 2003.
 
 
 Convertible Notes Payable Due to Members of Warning Model Management, LLC
 
 The merger of Warning Model Management, LLC, and FIXN resulted in FIXN issuing to the members of Warning Model Management, LLC an aggregate of $2,900,000 principal amount of 4% convertible debentures due December 27, 2004.
 
 The terms of the debentures require that interest be paid on the principal sum outstanding semi-annually in arrears at the rate of 4% per annum accruing from the date of initial issuance. Accrual of interest shall commence on the first business day to occur after the date of initial issuance and continue until payment in full of the principal sum has been made or duly provided for. Semi-annual interest payments shall be due and payable on December 1 and June 1 of each year, commencing with June 1, 2003. The Company will pay the principal of and any accrued but unpaid interest due upon this Debenture on the Maturity Date.
 
 The Holders of these Convertible Debentures are entitled, at their option, to convert at any time, the principal amount of this Debenture or any portion thereof, plus, at the Holder's election, any accrued and unpaid interest, into shares of Common Stock of the Company (the common stock of the Company, the "Common Stock" and shares of Common Stock so converted, the "Conversion Shares") at a conversion price for each share of Common Stock ("Conversion Price") equal to the lesser of (i) $0.05 (the "Set Price") (subject to adjustment for stock splits and the like), and (ii) 85% of the average of the five (5) lowest closing bid prices of the Common Stock during the twenty-two (22) Trading Days preceding the applicable Conversion Date.
 F-29Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 11.  Convertible Debentures & Promissory Notes (continued)
 
 Convertible Notes Payable Due to Members of Warning Model Management, LLC (continued)
 
 The debenture conversion price is either the lesser of 0.05 per share or 85% of the average of the five (5) lowest closing bid prices of the Common Stock during the twenty-two (22) Trading Days preceding the applicable Conversion Date. The beneficial conversion feature of the $2,900,000 debentures issued was $511,765, and the amount was credited in the accounts of the Company as additional paid in capital. The amount attributable to the beneficial conversion feature is amortized over the term of the loan and is included as a component of interest expense. Interest on the indebtedness is accrued through December 31, 2003.
 
 The financial statements as of December 31, 2003 and 2002, reflect the remaining principal amount of the 4% debentures to shareholders, less the unamortized bond discount.
 
 
 12.  Equity Drawdown Facility
 
 On October 31, 2000, FIXN entered into a type of equity line of credit agreement for the future sale of shares of its common stock and warrants. Under the agreement, which is subject to various conditions, an investor has committed to provide up to $5 million, at FIXN's request, over a 24-month period, to be applied to the purchase price of FIXN's common stock. FIXN may request at specified intervals, $100,000 minimum equity drawdowns, with maximum drawdown amounts at each request based on 4.5% of (i) the weighted average price of FIXN's common stock for a prescribed period prior to the request multiplied by (ii) the total trading volume during such period. As at December 31, 2002 and 2001 the minimum drawdown requirement has not been met. Drawdowns may be further limited due to a provision in the agreement that prevents FIXN from issuing shares to the extent that the investor would beneficially own more than 9.9% of FIXN's then outstanding common stock. Under the agreement, FIXN is required to file a Registration Statement with the Securities and Exchange Commission before the investor is obligated to accept a drawdown request by FIXN. Consequently, until such Registration Statement is effective, FIXN will not receive any funds under the agreement.
 
 The per share amount to be received by FIXN for the sale of its common stock on each equity drawdown shall be reduced by a 17.5% discount on the market price of the shares (as defined in the agreement). Escrow agent fees and a 10% placement fee will also reduce the proceeds of sale. At the October 31, 2000 closing, FIXN issued a stock purchase warrant for up to 500,000 shares of common stock to the investor at an exercise price of $.0636 per share, such warrant to expire on October 31, 2003. The value of the 500,000 stock warrants ($35,730) is charged to interest expense in 2000. FIXN has also agreed to issue additional warrants for shares equal to 50% of the shares purchased by the investor on each drawdown. There are various other conditions to the agreement, including the investor's right to terminate the agreement under specified events. At the closing, FIXN paid $10,000 for the investor's legal and other expenses.
 
 See Note 11 in connection with an election by the holders of the 4% Convertible Debentures to apply a portion of the proceeds of the equity drawdowns to redeem their debentures.
 F-30Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 12.  Equity Drawdown Facility (continued)
 
 FIXN did not utilize this equity drawdown facility as of December 27, 2002. The Company did not utilize this facility as of December 31, 2002. Subsequent to the merger, the Company has elected to pursue a different financing vehicle.
 
 In December 2002, the Company signed a letter of intent with a different unrelated third party, who has provided debt financing to the Company, to provide an equity drawdown facility of up to $2,000,000. As of December 31, 2003, the Company had decided not to utilize this new equity drawdown facility.
 
 
 
 13.  Outstanding Warrants to Purchase Common Stock
 
 FIXN had issued warrants to purchase shares of its common stock to certain officers, employees and non-employees. The objectives of the issuance of the warrants include attracting and retaining the best talent, providing for additional performance incentives and promoting the success of FIXN by providing the opportunity to employees and non-employees to acquire common stock. FIXN had also issued warrants to certain investors in connection with the issuance of debentures and the sale of common stock. Outstanding warrants have been granted at exercise prices ranging from $.001 to $2.25 and expire as much as five years from the date of grant. On December 27, 2002, date of merger, FIXN had warrants outstanding to purchase 8,867,480 common shares.
 
 The status of the Companys warrants is summarized below as of December 31, 2002 and 2003:
 
 Number of
Warrants

Weighted Range of Exercise Prices

Average Exercise
PriceOutstanding at December 31, 2002
9,867,480

$
0.001  1.00

$
0.35Granted in 2003
5,000,000


0.01


0.01Expired in 2003
(1,946,828)


0.06  1.00


0.29Outstanding at December 31, 2003
12,920,652

$
0.001  1.00

$
0.21
 
 
 Weighted average remaining contractual terms
1.73 yearsNumber of warrants exercisable at December 31, 2003
12,920,652Weighted average exercise price of warrants
0.13
 
 F-31Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 13.  Outstanding Warrants to Purchase Common Stock (continued)
 
 Number of
Warrants

Weighted Range of Exercise Prices

Average Exercise
PriceOutstanding at December 27, 2002
8,867,480

$
0.001 - 1.00

$
0.48Granted in 2002
1,000,000


0.01


0.01Cancelled in 2002
-


0.00


0.00Outstanding at December 31, 2002
9,867,480

$
0.001 - 1.00

$
0.35
 
 
 Weighted average remaining contractual terms
1.85 yearsNumber of warrants exercisable at December 31, 2002
9,867,480Weighted average exercise price of warrants
0.43
 
 
 As stated in Note 1, the Company accounts for stock-based compensation using the fair value method prescribed in SFAS No. 123 "Accounting for Stock-Based Compensation", under which compensation cost for all stock warrants issued (both vested and non-vested) is measured at the grant date based on the fair value of the warrants. Such cost is recognized over the service period (the contract period).
 
 The fair value of each warrant issued was estimated on the date of grant using the Black-Scholes option-pricing model.
 
 The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options and warrants, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's warrants have characteristics significantly different from those of traded options and warrants, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options.
 
 Warrants are granted at prices equal to the current fair value of the Company's common stock at the date of grant. The vesting period is usually related to the term of the underlying convertible debenture.
 
 The fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: 2003  dividend yield of 0%; expected volatility of 200%; risk-free interest rate of 5.5%, and expected life of 3 years. The fair value of the options granted in 2003 was $0.005 per share. 2002  dividend yield of 0%; expected volatility of 200%; risk-free interest rate of 5.84%, and expected life of 3 years. The fair value of the options granted in 2002 was $0.009 per share.
 F-32Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 14.  Subsequent Events
 
 Stock Compensation Plan
 
 In January 2004, Company adopted a Consulting and Legal Services Plan. This Plan provides the granting of common stock or warrants convertible into common stock to key consultants and legal service providers as a means of compensating them for their services. The Plan reserves 60,000,000 shares of common stock. Stocks under the Plan are to be granted at no less than par value of the shares. Company filed a Registration statement on Form S-8 on January 30, 2004 relating to 60,000,000 shares of the Companys common stock, $0.001 par value, issuable pursuant to the Companys Advisory and Consultancy Agreements.
 
 In March 2004, Company amended the above Consulting and Legal Services Plan. The 2004 Amended Consulting and Legal Services Plan provides for the granting of stocks or warrants convertible into common stock to key consultants and legal service providers as a means of compensating them for their services. For the purposes of the Amended Plan, the Board of Directors is authorized to increase the number of shares by 50,000,000 for an aggregate up to 110,000,000 shares and/or options of the Companys Common Stock. Stocks under the Plan are to be granted at no less than par value of the shares. Company filed a Registration statement on Form S-8 on March 26, 2004 relating to 50,000,000 shares of the Companys common stock, $0.001 par value, issuable pursuant to the Companys 2004 Amended Advisory and Consultants Agreements.
 
 The Company granted warrants that were immediately converted into 106,700,000 shares of its common stock to various consultants. The warrants were convertible into the Companys common stock at an exercise price of $0.01 per share. As of April 5, 2004, warrant holders have converted all of the shares underlying these warrants.
 
 
 Conversion of Notes Payable into Common Stock
 
 On March 01, 2004, a holder of the Companys 10% Convertible Notes has elected to convert an aggregate of $10,000 interest amount of the note into 3,921,569 shares.
 
 On March 22, 2004, a holder of the Companys 10% Convertible Notes has elected to convert an aggregate of $10,000 interest amount of the note into 4,065,041 shares.
 
 On March 22, 2004, a holder of the Companys 4% Convertible Notes has elected to convert an aggregate of $10,000 principal amount of the note and $1,673 interest into 4,577,536 shares.
 
 On March 23, 2004, a holder of the Companys 4% Convertible Notes has elected to convert an aggregate of $25,000 principal amount of the note and $4,185 interest into 11,445,164 shares.
 
 On March 24, 2004, a holder of the Companys 4% Convertible Notes has elected to convert an aggregate of $125,000 principal amount of the note and $20,993 interest into 57,252,308 shares.
 
 On March 24, 2004, a holder of the Companys 10% Convertible Notes has elected to convert an aggregate of $25,000 interest amount of the note into 10,162,602 shares.
 
 On March 25, 2004, a holder of the Companys 10% Convertible Notes has elected to convert an aggregate of $20,007 principal amount of the note and $2,333 interest into 8,758,169 shares.
 
 F-33Warning Model Management, Inc.
(f/k/a Famous Fixins, Inc.)
Notes to Consolidated Financial Statements
 14.  Subsequent Events (continued)
 
 Conversion of Notes Payable into Common Stock (continued)
 
 On March 25, 2004, a holder of the Companys 4% Convertible Notes has elected to convert an aggregate of $35,000 principal amount of the note and $5,883 interest into 16,032,500 shares.
 
 On March 26, 2004, a holder of the Companys 10% Convertible Notes has elected to convert an aggregate of $2,778 principal and $17,222 interest amount of the note into 8,130,081 shares.
 
 On March 30, 2004, a holder of the Companys 4% Convertible Notes has elected to convert an aggregate of $50,000 principal amount of the note and $8,418 interest into 22,908,871 shares.
 
 On April 1, 2004, a holder of the Companys 10% Convertible Notes has elected to convert an aggregate of $19,309 principal and $691 interest amount of the note into 7,843,137 shares.
 
 On April 5, 2004, a holder of the Companys 4% Convertible Notes has elected to convert an aggregate of $75,000 principal amount of the note and $11,832 interest into 34,051,747 shares.
 
 
 Promissory Notes/Borrowings
 
 In January, February ,and March, 2004 the Company has borrowed $15,000 from an employee and $249,000 from various private investors and shareholders. These borrowings bear an interest rate of 10% and mature in 2004.
 
 
 F-34