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

                                   FORM 10KSB
(Mark One)
    |X|     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934 [FEE REQUIRED] for the fiscal year ended
            March 31, 2000
                                       OR
    [__]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE             ACT OF 1934 [NO FEE REQUIRED] for the transition period
from                       _______to_______.

                         Commission File Number: 0-21322

                                  OUT-TAKES, INC.

                 (Name of small business issuer in its charter)

              Delaware                                 95-4363944

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

3811 Turtle Creek Blvd., Suite 350                              75219
Dallas, Texas                                                (Zip Code)

(Address of principal executive offices)

                     Issuer's telephone number: (214) 528-8200

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

                                      None

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

                          Common Stock, $.01 par value
                                (Title of Class)



Check  whether  the issuer  (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for
such shorter period that the issuer was required to file such  reports),  and

(2) has been subject to such filing requirements for the past 90 days. Yes X No

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,
to the best of issuer's  knowledge,  in definitive proxy or information
statements incorporated  by  reference in Part III of this Form 10-K,  or
any
amendment to this Form 10-K. ___

The issuer's revenues for the most recent fiscal year were $637,450.

The aggregate market value of the voting stock held by non-affiliates as of
March 31, 2000 was $456,429.

The number of shares outstanding of the issuer's Common Stock as of March
31, 2000 was 20,788,122.

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

______________________________________________________________________________
                               OUT-TAKES, INC.

         FORM 10_K ANNUAL REPORT FOR FISCAL YEAR ENDING MARCH 31, 2000

                               TABLE OF CONTENTS
                                                                         Page
PART I                                                                    1

  ITEM 1.   DESCRIPTION OF BUSINESS                                       1

  ITEM 2.   DESCRIPTION OF PROPERTY                                       4

  ITEM 3.   LEGAL PROCEEDINGS                                             11

  ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS           12

PART II                                                                   12

  ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
            MATTERS                                                       12

  ITEM 6.   SELECTED FINANCIAL DATA                                       13
  ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
            OPERATION                                                     13

  ITEM 8.   FINANCIAL STATEMENTS                                          29

PART IV                                                                   39

  ITEM 14.  EXHIBITS AND REPORTS ON FORM 8-K                              39


                                    PART I

ITEM 1.  DESCRIPTION OF BUSINESS

Except for historical financial information contained herein, the matters
discussed in this annual report may be considered forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and
Section 21E of the Securities Exchange Act of 1934, as amended and subject to
the safe harbor created by the Securities Litigation Reform Act of 1995. Such
statements include declarations regarding the intent, belief or current
expectations of the Company and its management. Prospective investors are

cautioned that any such forward-looking statements are not guarantees of future
performance and involve a number of risks and uncertainties; actual results
could differ materially from those indicated by such forward-looking
statements.
Among the important factors that could cause actual results to differ
materially
from those indicated by such forward-looking statements are: that the
information is of a preliminary nature and may be subject to further
adjustment,
the possible unavailability of financing, risks related to the development,
acquisition and operation of power plants, the impact of avoided cost pricing,
energy price fluctuations and gas price increases, the impact of curtailment,

start-up risks, general operating risks, the dependence on third parties, risks

associated with the power marketing business, changes in government regulation,
the availability of natural gas, the effects of competition, the dependence on

senior management, (xvii) volatility in the Company's stock price, fluctuations
in quarterly results and seasonality, and other risks identified from time to
time in the Company's reports and registration statements filed with the
Securities and Exchange Commission.

GENERAL


Out-Takes, Inc., a corporation incorporated in Delaware on March 18, 1992 ("the
Company"), up until October 26, 1998, was engaged in the sale of
photographic  portraits of children, adults and family groups. Until October
26, 1998, the Company operated a retail photo studio, called Out- Takes(R),
which  opened on May 24, 1993 and is located in MCA/ Universal's CityWalkSM
project in Los Angeles, California ("the CityWalk Studio"). The Company had
a second studio, which commenced operations on December 1, 1995, at the
Entertainment Center in the Bazaar at the Irvine Spectrum located in Irvine,
Orange County, California ("the Irvine Studio"). As a result of management's
continuing review of the poor performance of the Irvine Studio, management
decided to close the Irvine Studio. The Irvine Studio ceased operations on
April 22, 1998. The CityWalk studio employs proprietary hardware and
software developed by, or specifically for, the Company which includes
digital imaging technology and automated motion control equipment to
position the studio camera and set subject lighting to the proper levels for
each scene (collectively, the "Proprietary System"). Using the Proprietary
System, the Company is able to place pictures it takes of its clients "into"
still photographs prepared in advance from popular movie scenes and other
backgrounds licensed by the Company. On or about August 31, 1998, the
Company acquired all of the issued and outstanding units of equity of Los
Alamos Energy, LLC, which operates a 1 megawatt power plant in Los Alamos,
California, which produces electricity from "waste gas," and shifted its
business emphasis to that of electrical energy provider. On or about October
26, 1998, the Company leased its photo studio assets to Colorvision
International, Inc., completing the shift of its business focus to the
providing of electrical energy.

LOS ALAMOS ENERGY

Los Alamos Energy was formed in June, 1996, for the purpose of becoming a

principal electricity provider in the state of California. With the acquisition
of Los Alamos Energy, the Company is engaged in a "niche" area of electricity
production from "waste gas," natural gas which is produced in conjunction with
oil production, but for which there is no market. Normally, waste gas is
flared, or burned. The procurement of waste gas provides an inexpensive source

of fuel for the Company's generators. The Company currently provides all of the

electrical energy to the unincorporated town of Los Alamos, California, through
Pacific Gas and Electric Company (PG&E), which is mandated by current law to
purchase all the electrical energy that the Company can produce.

On August 31, 1998, the Company entered into a Share Purchase Agreement (the
"Acquisition Agreement") whereby the Company acquired (the "Acquisition")
all of the issued and outstanding equity interests in Los Alamos Energy,
LLC, a California limited liability company ("LAE"). The purchase price to be
paid for the equity interests of LAE is Four Million Dollars ($4,000,000),
which was paid by Promissory Notes (the "Notes") to the holders of LAE
equity (the "Equity Holders") calling for interest on all outstanding
amounts to accrue at the rate of ten percent (10%) per annum. Payments of

principal and accrued interest under the Notes shall be made monthly in arrears

up to the maturity date, which is the fifth anniversary of the Notes. The Notes
may be prepaid at any time without premium or penalty.

The Acquisition Agreement provides that, in the event the Equity Holders shall
desire to do so, they may convert their indebtedness to common stock of the
Company representing in the aggregate ninety percent (90%) of the issued and

outstanding shares of such common stock as of the date of such conversion.  The
Acquisition Agreement provides that it is a condition of the conversion that
the
Company effect a reverse stock split of one (1) share for every one hundred
(100) shares issued and outstanding as of such date. LAE contemplates that a

significant number of persons currently holding promissory notes and/or working

interests in its electricity production (collectively, "Interest Holders") will
exercise their rights to convert such interests into the equity of LAE, and
subsequently to join in the conversion of the Notes into common stock of the

Company. Presently, management of LAE anticipates that, prior to the conversion
of the Notes and after giving effect to the contemplated reverse stock split,
the Company will issue approximately three million (3,000,000) additional
shares
of common stock,  and that subsequent to completing the conversion, the Equity
Holders and  Interest Holders will own, in the aggregate, approximately two
million eight hundred eighty thousand (2,880,000) shares of the Company's
common
stock,  representing ninety percent (90%) of the total amount of common stock
estimated to be issued and outstanding as of the date such conversion rights
are
exercised.  As of March 31, 2000, the holders have not yet exercised their
right to convert the note to common stock.

The indebtedness represented by the Notes is secured by (a) a Security
Agreement, granting a first lien and security interest upon all of the
assets of
the Company; and (b) a pledge of the common stock of the Company held by Photo
Corporation Group Pty Limited, an Australian corporation, which  is the
controlling stockholder of the Company. The stock pledge grants the Holders
specific rights under certain circumstances, including the right to receive
distributions made by the Company in respect of its common stock and the right
to vote the pledged shares, for so long as the  Notes are in force.

The purchase  price  to be paid by the Company for all of the issued and

outstanding equity of LAE was negotiated based upon several factors, including,
without limitation, the asset value of LAE and its projected income from
operations based, in part, upon management's estimates of its natural gas
reserves and its current contracts.

The Company is engaged in the sale of photographic portraits of children,
adults
and family groups.  Prior to the acquisition, Out Takes derived substantially
all of its revenue from a retail photographic studio, called OUT-TAKES , which
opened on May 24, 1993 and is located in MCA/Universal's City Walk project in
Los Angeles, California. LAE is engaged in the collection and distribution of
natural gas from properties owned or leased by it in the State of California,
and management of LAE intends  to position LAE to become an important
independent power producer, and to benefit as a principal provider of
electricity to consumers in California  and elsewhere as deregulation is
implemented. LAE will be operated as a wholly-owned subsidiary of the Company.

THE MARKET

The power industry represents the third largest industry in the United States,
with an estimated end-user market of over $250 billion of electricity sales in
1998 produced by an aggregate base of power generation facilities with a

capacity of approximately 750,000 megawatts. In response to increasing customer

demand for access to low-cost electricity and enhanced services, new regulatory
initiatives have been and are continuing to be adopted at both the state and
federal level to increase competition in the domestic power generation
industry.
Management believes that this increase in competition will benefit rather than
harm the Company, because the Company will be free to sell its power to any
customer, rather than to just PG&E, who is now obligated to buy all the power
the Company can produce. Management expects that with the advent of
dergulation,

prices for power will increase over and above what it the Company is being paid
by PG&E.   The power generation industry historically has been largely
characterized by electric utility monopolies producing electricity from old,
inefficient, high-cost generating facilities selling to a captive customer
base.

Industry trends and regulatory initiatives have transformed the existing market
into a more competitive market where end users purchase electricity from a

variety of suppliers, including non-utility generators, power marketers, public
utilities and others.   There is a significant need for additional power
generating capacity throughout the United States, both to satisfy increasing

demand, as well as to replace old and inefficient generating facilities. Due to

environmental and economic considerations, managment believes this new capacity
will be provided predominantly by gas-fired facilities. Management believes
that
these market trends will create substantial opportunities for efficient,
low-cost power producers that can produce and sell energy to customers at
competitive rates.

In addition, as a result of a variety of factors, including deregulation of the
power generation market, utilities, independent power producers and industrial
companies are disposing of power generation facilities. To date, numerous
utilities have sold or announced their intentions to sell their power
generation
facilities and have focused their resources on the transmission and
distribution

segments. Many independent producers operating a limited number of power plants
are also seeking to dispose of their plants in response to competitive
pressures, and industrial companies are selling their power plants to redeploy
capital in their core businesses.

STRATEGY

The Company's strategy is to expand its existing power plant to 4 mW, and to
further expand its power producing capacity by exploring acquisition
opportunities in the power market, by exploring opportunities that exist to

merge with other similarly situated small electrical power production companies
which produce electrical energy from waste gas, in order to expand its current
power production capacity, and to capture more of a market share of this
growing
industry, which the Company predicts will increase with the advent of
deregulation of the power industry.

DESCRIPTION OF FACILITIES

The Company has purchased all of the natural gas reserves on the Blair Oil and
Gas Field ("the field"), which is located adjacent to the unincorporated
town of
Los Alamos, California, on Rancho El Roblar, approximately 60 miles north of
Santa Barbara along US 101, and which is operated by Texaco.  The field has 15
oil wells producing approximately 500 barrels of oil per day, and from which
approximately one million cubic feet (1073 BTU) of natural gas was being
flared.

The gas recoverable reserve is estimated to be sufficient to provide electrical
production for the next several years.

During 1986, the Blairs entered into an agreement with American Cogenics of
California ("ACI") to convert the waste gas into electricity, and two gas
driven, CAT G398T generator sets ("Gensets"), each respectively 550 kilowatts
and 600 kilowatts, were installed, from which electricity was generated and
sold to PG&E, pursuant to a power purchase agreement, dated November 28, 1988
(the "PG&E contract"). In early 1995, the Santa Barbara County Air Pollution
Control District ("APCD") shut down the operation due to emissions violations.

During October, 1996, Los Alamos Energy consummated the purchase and sale
agreement with American Cogenics of California ("ACI"), dated August 28, 1996,
and acquired the rights to the gas, the two Gensets, the PG&E contract, the
FERC certification, and power purchase agreement with Texaco, and brought the
equipment into APCD compliance.

When the Gensets were initially installed, there were only a few wells
producing oil and gas on the field.  Since that time, production has increased
from about 150 MCFD to about 1,000 MCFD currently, providing the potential of
adding more generators to increase the Company's current capacity from 1 mega
watt (1 mW) to 4mW, at an estimated cost of $1.2 million to $1.5 million.

GOVERNMENT REGULATION


The Company is subject to complex and stringent energy, environmental and other
governmental laws and regulations at the federal, state and local levels in
connection with the development, ownership and operation of its energy
generation facilities. Federal laws and regulations govern transactions by
electrical and gas utility companies, the types of fuel which may be utilized
by an electric generating plant, the type of energy which may be produced by

such a plant and the ownership of a plant. State utility regulatory commissions

must approve the rates and, in some instances, other terms and conditions under
which public utilities purchase electric power from independent producers and
sell retail electric power. Under certain circumstances where specific
exemptions are otherwise unavailable, state utility regulatory commissions may
have broad jurisdiction over non-utility electric power plants. Energy
producing projects also are subject to federal, state and local laws and
administrative regulations which govern the emissions and other substances
produced, discharged or disposed of by a plant and the geographical location,
zoning, land use and operation of a plant. Applicable federal environmental
laws typically have both state and local enforcement and implementation
provisions. These environmental laws and regulations generally require that a

wide variety of permits and other approvals be obtained before the commencement
of construction or operation of an energy-producing facility and that the
facility then operate in compliance with such permits and approvals.

FEDERAL ENERGY REGULATION

As described below, the exemptions from extensive federal and state regulation

afforded by PURPA to Qualifying Facilities are important to the Company and its
competitors. The project that the Company currently owns meet the requirements

under PURPA to be a Qualifying Facilities and will be maintained on that basis.
Additionally, managment expects regulatory impositions on power marketing
operations to be minimal under existing regulatory standards.

PURPA


The enactment of the Public Utility Regulatory Policies Act of 1978, as amended
("PURPA") and the adoption of regulations thereunder by the Federal Energy

Regulatory Commission ("FERC") provided incentives for the development of small
power facilities (those having a capacity of less than 80 megawatts.)  A
domestic electtricity generating project must be a Qualifying Facility ("QF")
under FERC regulations in order to take advantage of certain rate and
regulatory incentives provided by PURPA>   PURPA exempts QF's from most
provisions of the Federal Power Act ("FPA") and, except under certain limited
cicrcumstances, state laws concerning rate or financial regulation.  In order
to be a Qualifying Facility, a cogeneration facility must (i) produce not only

electricity but also a certain quantity of thermal energy (such as steam) which
is used for a purpose other than power generation, (ii) meet certain energy
operating and efficiency standards when oil or natural gas is used as a fuel
source and (iii) not be controlled or more than 50% owned by an electric
utility or electric utility holding company, or any combination thereof.


PURPA provides two primary benefits to Qualifying Facilities owned and operated
by non-utility generators. First, Qualifying Facilities under PURPA are exempt

from certain provisions of PUHCA, the Federal Power Act (the "FPA") and, except
under certain limited circumstances, state laws respecting rate and financial

regulation. Second, PURPA requires that electric utilities purchase electricity

generated by Qualifying Facilities at a price equal to the purchasing utility's
full "avoided cost" and that the utility sell back-up power to the Qualifying
Facility on a non-discriminatory basis. Avoided costs are defined by PURPA as
the "incremental costs to the electric utility of electric energy or capacity
or both which, but for the purchase from the Qualifying Facility or Qualifying
Facilities, such utility would generate itself or purchase from another
source." The FERC regulations also permit Qualifying Facilities and utilities
to negotiate agreements for utility purchases of power at rates other than the
purchasing utility's avoided cost. Although public utilities are not required

by PURPA to enter into long-term contracts, PURPA helped to create a regulatory
environment in which it has become more common for such contracts to be

negotiated or executed through selective procurement or competitive bidding. If
Congress amends PURPA, the statutory requirement that an electric utility
purchase electricity from a Qualifying Facility at full avoided costs could be
eliminated. Although current legislative proposals specify the honoring of
existing contracts, repeal of the statutory purchase requirements of PURPA
going forward could increase pressure to renegotiate existing contracts. Any
changes which result in lower contract prices could have an adverse effect on
the Company's operations and financial position. See Competition.

PUHCA

Under the Public Utility Holding Company Regulation ("PUHCA"), any person
(defined by PUHCA to include corporations and partnerships and other legal
entities) which owns or controls ten percent or more of the outstanding voting
securities of a "public utility company" or a company which is a "holding
company" of a "public utility company" is subject to registration with the
Securities and Exchange Commission (the "Commission") and regulation under

PUHCA, unless such person is eligible for an exemption, such as is available to
Qualifying Facilities under PURPA, or as established elsewhere under PUHCA. A
registered holding company is required by PUHCA to limit its operation to a
single integrated utility system and to divest any other operations not
functionally related to the operation of that utility system.

THE ENERGY ACT

Congress passed the Energy Act to promote further competition in the
development of new wholesale power generation sources. Through amendments to
PUHCA, the Energy Act encourages the development of independent power projects
which will be certified by the FERC as exempt wholesale generators ("EWGs").
The owners or operators of these facilities are exempt from the provisions of
PUHCA. The Energy Act also provides the FERC with extensive new authority to
order electric utilities to provide other electric utilities, Qualifying
Facilities and independent power projects with access to their transmission
systems. However, the Energy Act does preclude the FERC from ordering
transmission services to retail customers and prohibits sham wholesale energy
transactions which appear to provide wholesale service, but actually are
providing service to retail customers.

A company engaged in the ownership or operation of electric power generation
and transmission facilities faces certain types of regulation for its
international activities. The principal regulatory consideration for
international projects is PUHCA, since it is broadly applicable to the
ownership and operation of power facilities (including generation and
transmission facilities) both inside and outside of the United States. For
international projects, the principal basis for exemption from PUHCA is by
obtaining EWG status from the FERC. EWG status is even more beneficial for
international projects because, although EWGs are not permitted to make retail
sales in the United States, retail sales by EWGs are generally allowed in
international markets. Another way to obtain an exemption from PUHCA for
foreign ownership and operation activities is by filing a foreign utility
company determination ("FUCO") with the Commission. However, FUCO filings are

less frequently used, because unlike EWGs, no formal regulatory order is issued

confirming the status of a FUCO, and more rigorous state commission scrutiny is
entailed.

Structuring the Company's activities to ensure that it is not a "holding
company" of a "public utility company" under PUHCA is also important in
providing financing and financial reporting flexibility to the Company. The
cogeneration facilities owned by the Company, or in which the Company has
investments, are Qualifying Facilities under PURPA.  The Company has also
pursued
the development of independent power projects which will not qualify for the
benefits provided by PURPA, which could subject these projects to PUHCA
jurisdiction. To avoid such a consequence, the Company will structure its
participation in independent power projects in a manner to qualify for
exemptions under PUHCA provided by the Energy Act. Such structures will permit
the Company to take ownership positions in a number of independent power
project projects.

FPA

The Federal Power Act ("FPA") grants the FERC exclusive rate-making
jurisdiction over wholesale sales of electricity in interstate commerce. The
FPA provides the FERC with ongoing as well as initial jurisdiction, enabling

the FERC to revoke or modify previously approved rates. Such rates may be based
on a cost-of-service approach or on rates that are determined through
competitive bidding or negotiation on a market basis.

Although Qualifying Facilities under PURPA are exempt from rate-making and
certain other provisions of the FPA, independent power projects and certain

power marketing activities are subject to the FPA and to the FERC's rate-making
jurisdiction.

Utilities are not obligated to purchase power from projects subject to
regulation by the FERC under the FPA because they do not meet the requirements
of PURPA. However, because such projects would not be bound by PURPA's thermal
energy use requirement, they may have greater latitude in site selection and
facility size. The project currently owned or operated by the Company as a
Qualifying Facility under PURPA is exempt from the FPA. FERC has significantly
relaxed the rules under which power marketers and independent power producers
can sell or market power. With approval from FERC, such entities, with certain
exceptions, are exempted from cost-based rates and can make all sales at
market-based rates set through negotiations. The independent power project in
which the Company currently participates have been granted market based rate
authority and comply with the FPA requirements governing approval of wholesale
rates and subsequent transfers of ownership interest in such projects.
CHANGES IN FEDERAL REGULATIONS

Historically in the United States, regulated and government-owned utilities
have been the only significant producers of electric power for sale to third
parties. The energy crisis of the 1970s led to the enactment of the federal
Public Utility Regulatory Policies Act of 1978 ("PURPA"), which encouraged

companies other than utilities to enter the electric power business by reducing
regulatory constraints. In addition, PURPA and its implementing regulations
created unique opportunities for the development of cogeneration facilities by

requiring utilities to purchase electric power generated in cogeneration plants
meeting certain requirements (referred to as "Qualifying Facilities"). See
"Regulatory Matters -- Energy Regulation."

As a result of PURPA, a significant market for electric power produced by

independent power producers such as the Company developed in the United States.
In 1992, Congress enacted the Energy Policy Act of 1992 ("Energy Act"), which
amended the Public Utility Holding Company Act of 1935 ("PUHCA") to create new
exemptions from PUHCA for independent power producers selling electric energy

at wholesale, to increase electricity transmission access for independent power
producers and to reduce the burdens of complying with PUHCA's restrictions on
corporate structures for owning or operating generating or transmission
facilities in the United States or abroad. The Energy Act has enhanced the
development of independent power projects and has further accelerated the
changes in the electric utility industry that were initiated by PURPA.
Implementation of federal and state policies resulting in increased

availability of transmission access for wholesale and retail transactions could
create additional markets and competition for electricity power sales.

The Company believes it is possible that changes in PURPA, PUHCA and other
related federal statutes may occur in the next several years. The nature and
impact of such changes on the Company's projects operations and contracts is
unknown at this time. The Company is actively monitoring these developments

directly and through industry trade groups to determine such impacts as well as

to evaluate new business opportunities created by restructuring of the electric
power industry. Depending on the outcome of these legislative matters, changes
in legislation could have an adverse effect on current contract prices.

STATE REGULATION


State public utility commissions, pursuant to state legislative authority, have
jurisdiction over how any new federal initiatives are implemented in each
state and have broad jurisdiction over regulated independent power projects
which are not Qualifying Facilities under PURPA, and which are considered
public utilities in many states. Such jurisdiction would include the
issuance of certificates of public convenience and necessity to construct a
facility as well as regulation of organizational, accounting, financial and
other corporate matters on an ongoing basis. Although the FERC generally has
exclusive jurisdiction over the rates charged by an independent power
project to its wholesale customers, state public utility commissions have
the practical ability to influence the establishment of such rates by
asserting jurisdiction over the purchasing utility's ability to pass through
the resulting cost of purchased power to its retail customers. In addition,
states may assert jurisdiction over the siting and construction of
independent power projects and, among other things, issuance of securities,
related party transactions and sale and transfer of assets. The actual scope
of jurisdiction over independent power projects by state public utility
regulatory commissions varies from state to state.

In the State of California, restructuring legislation was enacted in
September 1996 and was implemented in 1998. This legislation established an
Independent Systems Operator ("ISO") responsible for centralized control and
efficient and reliable operation of the state-wide electric transmission
grid, and a Power Exchange responsible for an efficient competitive electric
energy auction open on a non-discriminatory basis to all electric services
providers. Other provisions include the quantification and qualification of
utility stranded costs to be eligible for recovery through competitive
transition charges ("CTC"), market power mitigation through utility
divestiture of fossil generation plants, the unbundling and establishment of
rate structure for historical utility functions, the continuation of public
purpose programs and issues related to issuance of rate reduction bonds.

The California Energy Commission ("CEC") and Legislature have responsibility
for development of a competitive market mechanism for allocation and
distribution of funds made available by the legislation for enhancement of
in- state renewable resource technologies and public interest research and
development programs. Funds are to be available through the four-year
transition period to a fully competitive electric services industry.


In addition to the significant opportunity provided for power producers such as
the Company through implementation of customer choice (direct access), the
California restructuring legislation both recognizes the sanctity of existing
contracts, provides for mitigation of utility horizontal market power through
divestiture of fossil generation and provides funds for continuation of public
services programs including fuel diversity through enhancement for in-state
renewable technologies (includes geothermal) for the four-year transition
period to a fully competitive electric services industry.

TRANSMISSION AND WHEELING

Energy-producing projects that sell power to customers which are not
geographically located near the project require that the project have the
capability of transmitting its power over utility power transmission grids to
the purchaser ("wheeling"). The FERC and state utility regulatory commissions
have jurisdiction over the wheeling of power to remote users; the prices and
related terms and conditions of wheeling in interstate commerce are regulated
by the FERC.  At the moment, the Company's customers being serviced by Los
Alamos Energy are in the same geographical area as the Company's power plant.

The PUCT has promulgated rules that require affected utilities to provide
wheeling service. These rules are in effect in the Electrical Reliability
Counsel of Texas system and the new transmission access provisions of the
Energy Act do not alter that federal and state jurisdictional balance.

Rules adopted at the FERC and a number of state utility regulatory commissions

require utilities to grant power producers increased access to transmission and

wheeling. The provisions of the Energy Act increase such access. The Energy Act
supports increased transmission access, and in April 1996 the FERC adopted
rules (Order 888) to expand significantly transmission service and access and
provide alternative methods of pricing for transmission services. Upon
promulgation of the final rule by the FERC (and the PUCT for ERCOT), the

interstate transmission grid in the continental United States was opened to all
qualified persons that seek transmission services to wheel wholesale power.
Utilities are required to provide transmission customers non-discriminatory
open access to their transmission grids with rates, terms, and conditions
comparable to that which the utility imposes on itself. This provides the
Company with increased opportunities to sell and market the power produced by
its independent power projects. It also increases competition on a nationwide
basis between traditional and non-traditional power generators, such as the
Company.

ENVIRONMENTAL REGULATION

The construction and operation of domestic and international energy and fuel
producing projects and the exploitation of natural resource properties are
subject to extensive federal, state and local laws and regulations adopted for
the protection of the environment and to regulate land use. The laws and
regulations applicable to the Company and projects in which it participates
primarily involve the discharge of emissions into the water and air, but can
also include wetlands preservation, noise regulation and a comprehensive
Environmental Impact Assessment which includes evaluation of the facility's
impact on air, water, ecology, human health and socioeconomic factors. These
laws and regulations in many cases require a lengthy and complex process of
obtaining licenses, permits and approvals from federal, state and local
agencies. Obtaining necessary approvals regarding the discharge of emissions
into the air is critical to the development of a project and can be time-
consuming and difficult. Each energy-producing project requires technology and
facilities which comply with federal, state and local requirements and
sometimes extensive negotiations with administrative agencies. Meeting the
requirements of each jurisdiction with authority over a project can delay or
sometimes prevent the completion of a proposed project, as well as require
extensive modifications to existing projects.

The Company monitors environmental standards and evaluates its selection of
technology to ensure that applicable standards are being met. Based on current
trends, the Company expects that environmental and land use regulation will
become more stringent. Accordingly, the Company plans to continue to place a
strong emphasis on the development and use of state-of-the-art technology to
minimize potential impacts on the environment. In addition, the Company has

developed expertise and experience in obtaining necessary licenses, permits and
approvals.

In November 1990, comprehensive amendments to the Clean Air Act were enacted
(the "1990 Amendments"). The first major revisions to the Clean Air Act since
1977, the 1990 Amendments vastly expand the scope of federal regulations and

enforcement in several significant respects. In particular, provisions relating
to non-attainment, air toxics, permitting, enforcement and acid deposition may
affect the Company's domestic projects. The Clean Air Act and the 1990
Amendments contain provisions that regulate the amount of sulfur dioxide and
nitrogen oxides that may be emitted by a project. These emissions may be a
cause of "acid rain." The project the Company owns, operates or plan's to
investment in are, or will be fueled by natural gas and are not expected to be
significantly affected by the acid rain provisions of the 1990 Amendments.


One of the key elements of the 1990 Amendments is the inclusion of an operating
permit program in Title V. This program is intended to establish a central
point in tracking all applicable air quality requirements for every source
required to obtain a permit under the Clean Air Act. Final regulations

implementing these provisions were issued by the EPA in 1992. These regulations
created minimum requirements for the operating permit program. Each state was
required to submit a program for its implementation of the regulations for
approval to the EPA. The Company is required to submit complete operating
permit applications to those states in which it has operating projects which
meet the applicability standards under the 1990 Amendments.

PHOTO STUDIO BUSINESS


Prior to the acquisition of Los Alamos Energy, the Company's principal business
was running a digital portrait photo studio in Universal City Walk, Universal
City, California.

Effective as of October 26, 1998, Out-Takes, Inc., a Delaware corporation
(the "Company") has entered into an Asset Lease Agreement (the "Lease")
with Colorvision International, Inc., a Florida corporation ("CVI"),
pursuant to which CVI will lease certain assets of the Company described in
the Lease and held at the Company's photographic studio located on Universal
City Walk, Universal City, California and certain other locations (the
"Leased Assets"). The Leased Assets constitute substantially all of the
photographic business assets owned by the Company. Along with the lease of
the Leased Assets, the Company assigned to CVI its interests in  the
Business Lease (the "Studio Lease"), dated as of November 13, 1992, between
the Company and MCA Development Company, a division of MCA, Inc. (the
"Landlord"), in which most of the Leased Assets are used. Although CVI  has
agreed to be responsible for all of the Company's liabilities under the
Lease, and has indemnified the Company against any liabilities arising under
the Lease from the date of its assignment to CVI, the Company remains
contingently liable for its obligations to the Landlord under the Studio
Lease notwithstanding CVI's express assumption of those liabilities.  The
Studio Lease expires on May 30, 2005.

Under the Lease, CVI paid a deposit to the Company in the amount of Fifty
Thousand Dollars ($50,000), and shall pay a monthly rental amount equal to
seven percent of the gross revenues generated from the use of the Leased
Assets, or the conduct of any other business, at the photographic studio
covered by the Studio Lease. CVI has agreed to use its best efforts to
operate its business at the photographic studio profitably, although there
can be no assurance that profitable operations will result from CVI's use of
the Leased Assets, and if none occur, then no monthly rental may be paid
under the Lease. The Lease also included a license for CVI to use the trade
name of the Company at such photographic studio.

In addition to the assumption of the Company's obligations under the Studio
Lease, the Lease provides for CVI to assume the Company's obligations under
a number of license agreements between the Company and third-party
licensees, primarily motion picture studios for the use of certain film
images in its photographic business. These licenses contain certain use-
based royalties, as well as minimum annual payment guarantees, which CVI has
expressly assumed responsibility for, including in respect of certain past
due payments owed by the Company to some of these third-party  licensees.

The entry by the Company into the Lease with CVI is intended by management
of  the Company to provide for the productive use of its photographic studio
assets, while permitting management to focus on its plans for the Company,
through its wholly-owned subsidiary Los Alamos Energy, LLC ("LAE"), to
become an important independent power producer, and to benefit as a
principal provider of electricity to consumers in California and elsewhere
as deregulation of the electric utility markets is implemented.

Products and Services-Photo Studio

The technological capabilities of the Proprietary System and the variety of
backgrounds that the Company has developed pursuant to various merchandise
licenses in effect (see "- License Agreements") represent a distinction in
the consumer portraiture business. Most of the portraits taken in the
CityWalk Studio are presented to the customer as framed 8" x 10", 5" x 7"
and wallet-sized photographs within about thirty minutes after the portrait
session is completed. The remainder (primarily enlargements and greeting
cards based on these photographic images) are produced and delivered to
clients within several weeks using the Company's order fulfillment
capabilities as well as processing arranged through independent service
bureaus.

Licensing Agreements-Photo Studio

The Company has merchandise licensing agreements with Paramount Pictures
Corporation ("Para mount"); MCA/Universal Merchandising, Inc. ("Universal");
Warner Bros. Consumer Products ("Warner") with respect to several properties
from the Hanna-Barbera and MGM libraries; Twentieth Century Fox Licensing &
Merchandising ("Fox"); Jay P. Morgan Photography ("Morgan"); Tony Stone
Worldwide Stock Agency ("TSW"), Queen Bee Productions ("Queen Bee"), Curtis
Archives ("Curtis A"), Curtis Management ("Curtis M"), King Features
("King"), MTV Networks ("MTV"), Saban Merchandising Inc. ("Saban"),
Innerspace Visions ("Visions"), The Baywatch Production Company ("Baywatch")
and others, individually and collectively referred to as the "License
Agreements" (Paramount, Universal, Turner, Fox, Morgan, TSW, Queen Bee,
Curtis A, Curtis M, King, MTV, Saban, Visions and Baywatch are individually
and collectively referred to herein as "Licensors").

The License Agreements generally grant the Company the right to manufacture,
sell and distribute in a defined geographic area, computer generated
photographs incorporating a customer's image into a still photograph
("Licensed Products") with the characters, designs and/or visual
representations ("Licensed Articles") as they appear in television
productions and motion pictures. The Licensed Products may be sold
separately or affixed to items approved by the Licensor, including
photographic enlargements, greeting cards, posters, books, t-shirts, mugs,
buttons and other novelty items, in consideration of payment to the Licensor
of a specified royalty based on a percentage of gross retail sales revenue
from each of the Licensed Products. Many of the License Agreements require a
non-refundable advance payment against future royalties and stipulate a
guaranteed minimum level of royalties that must be paid during each year of
their term. The License Agreements also provide that the Licensor retains
approval rights over the use of the Licensed Articles.

A summary of the License  Agreements and the  Titles/Properties available
thereunder is presented in the table as follows:

Licensor                 Selected Titles /Properties  Territory and Usage
Paramount  Pictures
Corporation             Current titles in use:        Territory:  Worldwide.
                        Star Trek (Original Series)
                        Trek Wrath of Khan
                        Deep Space Nine
                        Cool World
                        Friday the 13th
MCA/Universal           Current titles in use:        Territory: United States

Merchandising, Inc.      Back to the Future, Part I   United Kingdom,
Holland,

                         Jaws                         New Zealand and Australia
                         Jurassic Park
                         Harry & Hendersons


Warner Bros. Consumer    Current titles in use:       Territory:  United States
Products - (For MGM and  Gone with the Wind           and its territories
and
Hanna-Barbera film       Tom & Jerry Movie            possessions.
libraries)               Wizard of Oz
                         The Flintstones
                         Cave Kids

Twentieth Century Fox      Current titles in use:      Territory:  "The entire
Licensing & Merchandising  Miracle on 34th St.         world".
                           The Simpsons
                           The Pagemaster

Jay P. Morgan Photography  Multi-property agreement    Territory:  Worldwide.
                           covering 25 original Jay P.
                           Morgan images.  Out-Takes
                           has the right of substitution
                           from time-to-time.

Tony Stone World-wide      International stock and     Territory:  Worldwide.
Stock Agency               assignment photography,
                           including access to a
                           library of photographs
                           contributed by over 1,000
                           photographers worldwide.


Queen B Productions       Current titles in use:       Territory: United States
                                                       and Canada.
                           Elvira in bathtub
                           Elvira at movie theater

Curtis Archives (on       All Norman Rockwell          Territory:  United
States
behalf of Norman          illustrations including
Rockwell's Estate)        artwork and logo art associated
                          with his extensive collection
                          of Saturday Evening Post
                          magazine covers.


Curtis Management         Approved photographs         Territory: United States
                          supplied by licensor.
                          Current property in use:
                          Hollywood  Sign

King Features             Current titles in use:       Territory: United
States,
                           Betty Boop                  Canada and Mexico
                           Popeye

Innerspace Visions        Approved photographs         Territory: Worldwide
                          supplied by photographer.


MTV Networks              Current property in use:     Territory:  United
States
                           Beavis & Butt-head          and its territories and
                                                       possessions, Canada

Saban Merchandising Inc.  Current property in use:     Territory:  United
States
                          Mighty Morphin Power         and its territories
and
                          Rangers                      possessions.

The Baywatch Production   Current property in use:      Territory:  United
States

Company                   Baywatch                      and its territories and
                                                        possessions.


As of March 31, 1999, the Company has not received any notice that any Licensor
intends, by virtue of this matter, to exercise any of the remedies provided
for in its respective License Agreements. The Company is current with respect
to all payments and required reports to all Licensors and believes that its
relationship with all Licensors is satisfactory.

On March 1, 1995, the Company entered into a sublicense agreement with
Photo Corporation of Australia Pty Limited ("PCA"), a subsidiary of Photo
Corporation Group Pty. Ltd. ("PCG"), that, subject to the prior approval of
the Licensors, grants PCA a non-exclusive license to utilize the Licensed
Articles on substantially the same terms as provided in the License
Agreements. The sublicense also provides that PCA will pay the Company an
amount equal to 120% of the royalties the Company pays to Licensors for such
images. The Company has received consent from Morgan, Fox and Paramount  and
other Licensors have indicated their willingness to support utilization of
the licensed Articles in countries where PCA operates. The PCA sublicense
agreement has not yet generated any royalties.

COMPETITION

Los Alamos Energy

The power generation industry is characterized by intense competition, and
the Company encounters competition from utilities, industrial companies and
other power producers. The independent power industry has grown rapidly over
the past twenty years. The demand for power may be met by generation
capacity based on several competing technologies, such as gas-fired or
coal-fired cogeneration and power generating facilities fueled by
alternative energy sources including hydro power, synthetic fuels, solar,
wind, wood, geothermal, waste heat, solid waste and nuclear sources. The
Company competes with other non-utility generators, regulated utilities,
unregulated subsidiaries of regulated utilities and other energy service
companies in the development and operation of energy-producing projects and
the marketing of electric power. In recent years, there has been increasing
competition in an effort to obtain power sales agreements, and this
competition has contributed to a reduction in electricity prices. In
addition, many states are implementing or considering regulatory initiatives
designed to increase competition in the domestic power industry. In
California, the CPUC issued decisions which provide for direct access for
all customers as of April 1, 1998.  This competition has put pressure on
electric utilities to lower their costs, including the cost of purchased
electricity, and increasing competition in the future will increase this
pressure.  However, management believes that the deregulation of the
electrical power industry in California will enable it to achieve higher
revenues from the sale of power.  Power sales are currently limited to PG&E,
who must purchase all of the power the Company can produce at regulated rates.

At the Federal level, the Energy Act reduces certain restrictions currently
applicable to certain projects which are not Qualifying Facilities (as
further defined below) under PURPA and provides for the removal of certain
impediments to competition in the power generation industry. Although the
provisions of the Energy Act apply only to wholesale transactions, actions
by many state authorities are also increasing competition for industrial,
commercial and other larger scale customers in the provision of services by
Qualifying Facilities ("QF's"), and independent power projects, as well as
power marketers and other unregulated suppliers. The development rights of
Qualifying Facilities, which were facilitated by certain provisions of
PURPA, have not been affected, nor amended, by the Energy Act. However,
proposed legislation has been introduced in Congress to repeal all or part
of PURPA. These federal legislative proposals would not abrogate or amend
existing contracts with electric utilities and would only be effective
prospectively for new contracts.

Legislation to repeal PUHCA is also currently pending in Congress. Although
passage of stand alone legislation repealing PUHCA is not expected during
the current session, eventual repeal or modification of PUHCA is being
considered. Congressional repeal or modification of PUHCA will loosen the
strictures currently placed on utilities and others from acquiring
generation and transmission assets outside of their service territories.
This will significantly increase the competition the Company faces.

The industry is presently characterized by rapid change in the regulatory
and commercial aspects of competition. Although the timing and ultimate
effect of these changes cannot be predicted, management of the Company
believes that the overall effect of the current changes will be to increase
competition in the generation, transmission and sale of electric power.

Photo Studios-Competition and Seasonality

Competition in the traditional portrait photography industry, the
merchandise licensing business and with respect to the development of new
technology is intense. The Company has enjoyed limited protection  from
competition at its CityWalk Studio because of a restriction contained in its
lease which states that during the initial lease term, which expired on May
31, 1998, the landlord would not lease to third parties nor operate for its
own account a retail store engaged in selling computer-generated photographs
similar to those produced and sold by the Company. The new lease does not
contain the same restrictive covenant. This restriction did not  apply to
photographic products offered within the theme park adjacent to the CityWalk
Studio. The opening of additional digital photographic  concessions within
the theme park in the spring of 1997 increased the number of photographic
opportunities available to visitors to the area and has diluted  the
CityWalk Studio's share of the market. As a result of the expiration of the
lease restriction, the Company may face new competition at the CityWalk
Studio. The Company has identified three potential kinds of competition -
traditional photographers who are likely to compete for retail customers as
well as future locations; photographers who employ digital technologies  who
are likely to compete for retail customers, future locations and merchandise
licensing agreements; and new technologies which may render the Proprietary
System obsolete or require the Company to incur a substantial  expense in
order to remain competitive in terms of product quality,  selection, pricing
and customer service. The Company has renewed the lease for a further seven
years.

Many of the firms with which the Company competes, or can reasonably be
anticipated to compete in the future, have far greater financial resources,
experience and industry relationships than the Company. In  addition, such
organizations have proven operating histories, which may afford these firms
significant advantages in negotiating and obtaining future merchandise
licenses and retail leases, arranging financing, attracting skilled
personnel and developing technology and products. Many of these firms offer
their products at substantially lower prices than the Company  sells its
products. The Company believes that its portrait photography  products are
competitive in terms of product quality, service quality and the selection
and attractiveness of the Licensed Products.

The professional photography business is seasonal, with the largest volume of
sales generally occurring in the Company's third fiscal quarter during the
period preceding the Christmas season. The CityWalk location is one of the
major tourist attractions in Southern California and therefore is also
highly seasonal, with its largest number of visits occurring in the
Company's  second and third fiscal quarters, particularly between July 4th
and Labor Day.

EMPLOYEES

As of March 31, 1999, the Company employed 2 people. None of the Company's
employees are covered by collective bargaining agreements, and the Company
has never experienced a work stoppage, strike or labor dispute. The Company
considers relations with the Company's employees to be good.

ITEM 2. PROPERTIES

Photo Studio

The Company leases 1,699 square feet of retail space (plus approximately 200
square feet of mezzanine space) from MCA Recreation Services, a division of
MCA Inc., for the CityWalk Studio. (see "Description of Business - General")
This lease provides for a minimum annual rental obligation of  approximately
$123,250 plus a percentage rental payment equal to ten percent (10%) of
annual store revenues over $881,177. During the year to March 31, 1998 the
Company paid additional rent of $13,351 as a result of revenues being in
excess of the $881,177 threshold. The CityWalk Studio lease expired on May
31, 1998 and the Company has exercised its option to renew the lease for a
period of seven (7) years. The lease may be terminated by the lessor if the
Company does not meet a minimum annual sales requirement of $587,000. This
lease has been assigned to Colorvision.

The Company maintains computer graphics and image production facilities at
the CityWalk Studio and has its administrative offices at 1419 Peerless
Place, Suite 116 in Los Angeles, California ("the Peerless Premises").
Certain of the Company's equipment, furniture and materials are temporarily
stored at 101 E. Alameda Ave., Burbank, California ("the Storage Facility").
The Company has a month to month rental obligation for both the Peerless
Premises and the Storage Facility.

All of the Company's leasehold premises are covered by casualty, liability
and business interruption insurance with limits and conditions that
management deems customary for the industry.

Los Alamos Energy

The Company rents offices from its President, James C. Harvey, at the rate
of $850 per month, on a month to month basis, and also rents offices from a
former member of LAE at a nominal rental on a month to month basis at 466
Bell Street, Los Alamos, California.  The Company owns two internal
combustion engine/generator sets located on the Blair Ranch.  The Company
owns all right, title and interest in and to the power purchase agreement
between ACI and PG&E, dated November 28, 1988, and the power purchase
agreement with Texaco, consisting of correspondence between Texaco and ACI.


PATENTS, SERVICE MARKS, COPYRIGHTS AND OTHER PROPRIETARY TECHNOLOGY

Photo Studio

The Company has registered the marks Out-Takes(R), So You Want to be in
Pictures(R), Photomation(R) and Create the Moment(R) with the U.S. Patent
and Trademark Office and has registered the Out-Takes(R) service mark in
Japan, in both Japanese and English. The Company actively manages the
protection of its trademarks, know-how, trade secrets and other intellectual
property by requiring all its employees and those contractors where
applicable, to execute confidentiality agreements in relation to the
Company's intellectual property. The Company is not aware of any instance
where there has been a breach of such confidentiality obligations.

Los Alamos Energy

The Company has no patents, copyrights or trademarks with respect to its power
plant operations.

ITEM 3.  LEGAL PROCEEDINGS

         None.

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

         None.
                                   PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock began trading on the Nasdaq Small Cap MarketSM
("NASDAQ") on March 9, 1993 under the symbol OUTT (also OUTTC during the
period from October 28, 1994 through December 30, 1994). On January 3,
1995, the Company's securities were delisted from NASDAQ as a consequence of
the Company's not fulfilling the minimum bid price requirements set forth in
Paragraph 1(c)(4) of Schedule D of the NASDAQ By-Laws. On January 4, 1995,
the Company's Common Stock began to be quoted on the OTC-Bulletin BoardSM
under the symbol OUTT.

The NASD has recently added an "E" to the symbol, making it "OUTTE," which
indicates that it has been placed on the NASD OTC Bulletin Board's eligibility
list. In order to remain quoted on the NASD Bulletin Board, the Company must
comply with all of the reporting requirements of the Securities and Exchange
Act of 1933 by the ninth day of March, 2000. If the Company fails to do this,
it will no longer be quoted on the NASD OTC Bulletin Board. There can be no
assurance that the Company will continue to be quoted on the NASD OTC Bulletin
Board.

The following table sets forth, for the periods indicated, the high and low
closing prices for the Common Stock as reported by Nasdaq Trading, Market
Services Inc., and Freerealtime.com.


                  Fiscal 1997          Fiscal 1998               Fiscal 1999
                 High      Low          High      Low            High     Low

First Quarter   27/100   22/100       10/100     7/100           5/64    1/32
Second Quarter  25/100   10/100      7.5/100     7/100           1/16    1/32
Third Quarter   6.5/100   6/100        7/100     4/100           3/32    1/32
Fourth Quarter   9/100    4/100    3.125/100   1.5/100           9/64
7/100

There were approximately 83 holders of record of the Company's Common Stock
as of March 31, 1999 and as of February 23, 2000.

The Company has not paid any dividends on its Common Stock since
incorporation in March 1992 and does not anticipate paying dividends in the
foreseeable future. There are no restrictions on the Company's present
ability to pay dividends on its Common Stock, other than those prescribed by
Delaware law.

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth certain data for the years ended March 31,
1995
through March 31, 1999. Refer to "Item 7. Management's Discussion and
Analysis or Plan of Operation" for discussion of operations.

                             1999          1998          1997       1996
       1995
Income Statement Data

Revenue from operations    637,450     $1,187,638   $2,014,788   $1,580,712
   $1,274,836

Gross Income (Loss)       (541,246)        88,858     (635,416)     (44,276)

Net Loss                  (403,774)    (1,082,306)    (753,346)  (1,576,484)
  (1,309,459)
Net loss per share       (0.019)      ($0.05)        (0.05)     ($0.16)
 ($0.24)

Balance Sheet Data

Total Assets                312,503      $285,840   $1,011,463   $1,409,752
  $1,862,279

Total Liabilities         1,667,725     1,020,943      698,710    1,383,653
     769,696

Stockholders' Equity
 (Deficit)               (1,355,672)     (735,103)     312,753       26,099
   1,092,583


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION


The following discussion should be read in conjunction with the historical
financial statements of Out-Takes, Inc. ("the Company") and notes
thereto included elsewhere in this Form 10-K.

Overview

The Company currently leases to a third party, Colorvision, an operating
photographic portrait studio, which was opened on May 24, 1993 at
MCA/Universal's CityWalkSM project in Los Angeles, California ("the CityWalk
Studio"). The Company opened a second studio on December 1, 1995 at the
Entertainment Center in the Bazaar at the Irvine Spectrum located in Irvine,
Orange County, California ("the Irvine Studio"). The Irvine Studio closed on
April 22, 1998.

The Company currently operates a 1 mW waste gas electricity plant in Los
Alamos,
California, which was acquired from Los Alamos Energy, LLC on August 31, 1998.

The following table summarizes the Company's fiscal quarter results:

On or about August 31, 1998, the Company acquired all of the issued and
outstanding units of equity of Los Alamos Energy, LLC, which operates a 1 mega
watt power plant in Los Alamos, California, which produces electricity from
"waste gas," and shifted its business emphasis to that of electrical energy
provider.

On or about October 26, 1998, the Company leased its photo studio assets to
Colorvision International, Inc., completing the shift of its business focus to
the providing of electrical energy.

Results of Operations

Year Ended March 31, 1999 Compared to Year Ended March 31, 1998

The net loss for the year ended March 31, 1998 was $1,082,306 compared with
$403,774 for the year ended March 31, 1999. The primary reasons for the
decrease in the net loss were the elimination of expenses of the photo studio,

and the increase in gross income from the operation of the power plant. Studio.

The Company overall generated $1,187,638 in revenues in the fiscal year ended
March 31, 1998, compared to revenues of $637,450 in the fiscal year ended
March 31, 1999. Management attributes this decline to the change in
business focus from a photography studio with negative cash flow to power
production, with positive cash flow.

Year Ended March 31, 1998 Compared to Year Ended March 31, 1997

The net loss for the year ended March 31, 1998 was $1,082,306 compared with
$753,346 for the year ended March 31, 1997. The primary reasons for the
increase in the net loss were a decrease in the gross income generated by
the CityWalk Studio, an increase in the gross loss incurred by the Irvine
Studio and the costs associated with the closure of the Irvine Studio,
partly offset by a reduction in general and administrative expenses.

The following table shows Revenues, Cost of Revenues and Gross Income/
(Loss) during the fiscal years ended March 31, 1998 and March 31, 1997,
by studio.
             Fiscal Year Ended March 31, 1998     Fiscal Year Ended March
31, 1997
             --------------------------------
--------------------------------
                 CityWalk    Irvine    Traveling   CityWalk    Irvine
Traveling

                  Studio     Studio    Studio      Studio      Studio    Studio
                  ------     ------    ------      ------      ------
-------

Revenues         $909,683  $ 277,558  $    397   $1,492,024   $508,192  $
14,572
                 --------  ---------  --------   ----------   --------
--------

Cost of Revenues:
  Compensation &
    Related
    Benefits      333,947     188,558    1,771      429,764   277,501    5,674
  Depreciation &
    Amortization  170,155     250,010      152      137,855   220,975      293
  Rent            133,094     101,098    2,000      192,432   100,500    7,925
  Loss on closure
   of studio            -     164,745        -            -         -        -
  Other           243,498     139,053      803      318,536   227,188    7,287
                 --------- ----------  -------    ---------  --------  -------

  Total            880,694    843,464    4,726    1,078,587   826,164   21,179
                 --------- ----------  -------   ----------  --------  -------

Gross Income /

 (Loss)          $  28,989 $ (565,906) $(4,329)  $  413,437  $(317,972)$(6,607)
                 ========= ==========  =======   ==========  ========== ======

The Company overall generated $1,187,638 in revenues in the fiscal year ended
March 31, 1998, compared to revenues of $2,014,788 in the fiscal year ended
March 31, 1997. CityWalk Studio revenues decreased by $582,341 to $909,683,
a decrease of 39.0%. Management attributes this decline to a number of
factors including the opening of additional digital photographic
concessions within the theme park adjacent to the CityWalk Studio in the
spring of 1997. The Company's lease contains a restriction that prevents
the sale of computer generated photographs by any other store within
CityWalk during the Company's initial lease term (the initial lease term
expired May 31, 1998). The Company renewed the lease for a further seven
years however the new lease did not contain the same restrictive covenant.
This restriction has afforded the Company limited protection from
competition,  however the restriction does not apply to photographic
products offered within the theme park. The opening of additional digital
photographic  concessions within the theme park has increased the number of
photographic  opportunities available to visitors to the area and has
diluted the CityWalk  Studio's share of the market. Management also believes
that the Studio's  performance was directly affected by the level of foot
traffic through the theme park, resulting in a flow on effect into the
Studio. In May 1996, a new "ride" opened in the theme park, that management
believes attracted  an increased number of both new and repeat visitors to
the area.  Management perceives that the absence of a significant new
attraction during the year to March 31, 1998, has resulted in a decline in
the level of foot traffic through the Studio. Also, in the first part of
calendar 1996, a travel show broadcast on national television in Japan,
included an episode on "Hollywood" featuring the CityWalk Studio. Throughout
the nine months  ended December 31, 1996, an unusually high number of
Japanese  tourists, who had seen the segment on television in Japan, visited
the CityWalk Studio. There was no similar national television broadcast in
1997.

Irvine Studio revenues decreased by $230,634 to $277,558, a decrease of
45.4%. The demographics of the area in which the Irvine Studio was located,
indicated that many of the customers to the Irvine Spectrum Entertainment
Center were local or repeat customers. While such persons utilize
entertainment facilities on a regular basis, they viewed photography as a
service to be used only occasionally or infrequently, hence the Studio did
not benefit from the repeat business experienced by other vendors in the
center. In August 1997, Stage II of The Irvine Company's development plan
for the Irvine Spectrum commenced. A consequence of this was to dramatically
 limit parking facilities in and around the center, which in turn led to a
substantial reduction in foot traffic through the Studio. Despite
management's substantial efforts to increase the Studio's revenues,
management concluded that the only way to stop the negative cash flow effect
 generated by the Irvine Studio, was to close the Studio. Following lengthy
negotiations with the Studio's landlord, the landlord agreed to allow the
Company to terminate its lease at the Irvine Entertainment Center and the
Company closed the Irvine Studio on April 22, 1998. The costs  associated
with the closure of the studio totaled $164,745 and included  approximately
$135,000 non-cash loss on disposal of leasehold improvements  and write off
of equipment identified as only being of use for spare parts for the
CityWalk Studio; $3,000 in termination payments to staff; $5,000 to remove
equipment from the studio and vacate the premises; $7,000 in property tax
obligations; and $14,000 in operating losses for the period that the store
remained open from March 31, 1998 to the date of closure. It is management's
 opinion that as of March 31, 1998, all costs associated with the closure of
the Irvine Studio have been provided for in full.

Revenues from the Traveling Studio were $397 in the fiscal year ended March
31, 1998 compared with $14,572 in the preceding year. In December 1997, for
a one month trial period, the Company tested an event photography system at
a central meeting venue for inbound Japanese tourists. The trial  proved to
be unsuccessful, generating only $397 in revenues and as a result, the trial
was discontinued. Cost of revenues in the year to March 31, 1998 were
$1,728,884 or approximately 145.6% of revenues. Excluding the $164,745 of
costs  associated with the closure of the Irvine Studio, cost of revenues in
the year to March 31, 1998 were $1,564,139 or approximately 131.7% of
revenues. Cost of revenues in the year to March 31, 1997 were $1,925,930 or
approximately 95.6% of revenues.

Cost of revenues for the CityWalk Studio decreased by $197,893 to $880,694.
Compensation and related benefits were $95,817 lower than the previous year
as a result of tighter controls over the number of staff hours worked at the
studio and as a consequence of the reduction in revenues. Depreciation was
higher than the previous year by $32,300. Rent was lower by $59,338 as a
result of the Company paying rent based on a percentage of revenues, such
revenues being lower than in the previous period by $582,341. Other cost of
revenues decreased by 23.6%. The percentage decrease in other cost of
revenues was less than the decrease in revenues as there are certain costs
that are not incurred in direct proportion to the level of revenue,
including  insurance, taxes, repairs and maintenance, utilities and
cleaning. The CityWalk Studio earned gross income of $28,989 during the
fiscal year ended March 31, 1998 compared to gross income of $413,437 for
the same period last year, a decrease in gross income of $384,448.

Cost of revenues for the Irvine Studio increased by $17,300 to $843,464
compared with $826,164 for the year to March 31, 1997. Excluding the
$164,745 of costs associated with the closure of the Irvine Studio, cost of
revenues decreased by $147,445 to $678,719. The percentage decrease in cost
of revenues was less than the decrease in revenues as there are certain
costs that are not incurred in direct proportion to the level of revenue,
including insurance, taxes, repairs and maintenance, utilities and cleaning.
Compensation and related benefits were $88,943 lower than the previous  year
as a result of tighter controls over the number of staff hours worked at the
studio. Management reduced staffing levels in the studio to the extent
possible within the constraints of the number of hours the studio was
required to be open, in order to minimize the impact of the reduction in
revenue.  Depreciation was higher by $29,035 than the previous year. Rent
increased by $598 from $100,500 in the year to March 31, 1997 to $101,098
for the year to March 31, 1998. Other cost of revenues decreased by 38.8%,
in line with the decrease in revenues. The Irvine Studio incurred a gross
loss of  $565,906 during the fiscal year ended March 31, 1998 compared to a
gross loss of $317,972 for the same period last year, an increase in gross
loss of $247,934. Excluding the $164,745 of costs related to the closure of
the Irvine Studio, there was an $83,189 increase in the gross loss. Cost of
revenues for the Traveling Studio were $4,726, resulting in a gross loss of
$4,329. In the year ended March 31, 1997, the Traveling Studio incurred a
gross loss of $6,607.

The Company overall incurred a gross loss of $541,246 during the fiscal year
ended March 31, 1998, compared with gross income for the same period last
year of $88,858. The incremental gross loss for the year to March 31,  1998
of $630,104 consists of a $384,448 reduction in gross income  generated by
the CityWalk Studio, an increase of $247,934 in the gross loss incurred by
the Irvine Studio, such increase including $164,745 of costs associated with
the closure of the studio, partly offset by a decrease in the gross loss
incurred by the Traveling Studio of $2,278. Excluding the $164,745 of costs
related to the closure of the Irvine Studio, the Company  overall incurred a
gross loss of $376,501 in the year to March 31, 1998, a  $465,359 increase
in gross loss compared with the previous year.

General and administrative expenses for the fiscal year ended March 31, 1997
includes termination payments totaling $51,250 paid to former officers of
the Company. After adjusting for this non-recurring item, the Company's
general and administrative expenses decreased from $736,836 in the fiscal
year ended March 31, 1997 to $488,875 in the fiscal year ended March 31,
1998, a decrease of $247,961 or approximately 33.7%. This decrease is
consistent with management's plan to reduce overhead costs. Compensation and
related benefits decreased by approximately 51.4% to $125,571 (excluding the
$51,250 termination payments) from $258,380 for the same period last year.
This decrease was the result of the cessation of employment of the Vice
President Operations and the Vice President Development on September 1,
1996,  together with the cessation of employment of the Operations Manager
during  the quarter ended December 31, 1997 and a reduction in the level of
administrative and technical support staff during the year to March 31, 1998
 compared with the year to March 31, 1997. Professional fees decreased by
9.5% to $91,218, compared to $100,777 for the same period last year.
Management  fees of $31,200 have been expensed in recognition of the
services  provided during the year by PCG. The expense for the year to March
31, 1997 was $131,000. The reduction of $99,800 in management fees is a
consequence of a greater number of responsibilities being managed by the
Company internally and therefore a reduction in the level of services
provided by PCG. Management believes that $31,200 (1997: $131,000)
represents the reasonable cost of services provided by PCG during the year.
As PCG agreed not to charge management fees for a period of two years from
December 1, 1996, the Company has recorded a capital contribution of
$31,200. Office and storage rent expenses decreased from $39,558 in the year
to March 31, 1997 to $33,300.  Depreciation and amortization costs were
higher by $1,297. Other general and administrative expenses decreased by
$832 to $114,626 for the fiscal year ended March 31, 1998, compared to
$115,458 for the same period last year.

The Company earned interest income of $224 in the fiscal year ended March
31, 1998 as compared to $484 earned during the prior year. Interest charges
totaling $52,409 were incurred on the loan from PCG and on the loan payable
to former executives of the Company, compared with interest expense of
$54,602 in the year ended March 31, 1997.

As of March 31, 1998, the Company has net operating loss carry forwards of
approximately $10,700,000. The ability to utilize $8,275,000 of these losses
to be offset against future taxable income is restricted as a result of the
change in control arising from the PCG transaction. The losses will expire
in March, 2011.

Year Ended March 31, 1997 Compared to Year Ended March 31, 1996

The net loss for the year ended March 31, 1997 was $753,346 compared with
$1,576,484 for the year ended March 31, 1996. The primary reason for the
reduction in the net loss between the two years is that in the year ended
March 31, 1996 there was a loss on impairment of long-lived assets of
$762,129.  There was no such loss in the year ended March 31, 1997.

The following table shows Revenues, Cost of Revenues and Gross Income / (Loss)
during the fiscal years ended March 31, 1997 and March 31, 1996, by studio.


                    Fiscal Year Ended March 31, 1997 Fiscal Year Ended March
31, 1996
                    --------------------------------
--------------------------------
                    CityWalk   Irvine    Traveling   CityWalk   Irvine
Traveling
                    Studio    Studio     Studio      Studio     Studio
Studio

                                                               (Opened     (Not
                                                                12/9/95)
Operational)

Revenues         $1,492,024  $  508,192   $14,572   $1,422,845  $157,867
$    -
                 ----------  ----------   -------   ----------  --------
------

Cost of Revenues:
  Compensation  &
    Related
    Benefits        429,764    277,501     5,674        439,350  108,787
    -
  Depreciation &
    Amortization    137,855    220,975       293        189,781   59,468
    -
  Loss on
   impairment of
   Long-Lived
   Assets               -          -           -        722,000        -
40,129
  Pre-opening
   Costs                -          -           -           -       67,007
    -
  Rent              192,432    100,500     7,925        183,421    27,218
    -
  Other             318,536    227,188     7,287        309,175    69,792
    -
                  ----------  ---------    ------       --------   -------
------

  Total           1,078,587    826,164    21,179      1,843,727   332,272
40,129
                   ---------  ---------    ------      ---------   -------
------

Gross Income /
 (Loss)          $  413,437  ($317,972)  ($6,607)     ($420,882 ($174,405)
$40,129
                  ==========  =========   ======    =========   ========
=======

The Company overall generated $2,014,788 in revenues in the fiscal year
ended March 31, 1997, compared to revenues of $1,580,712 in the fiscal year
ended March 31, 1996. The increase in revenues of approximately  $434,076 is
primarily a result of the Irvine Studio trading for a full twelve months in
the year to March 31, 1997 compared with only four months in the year to
March 31, 1996 (the Irvine Studio commenced trading on December 9, 1995).
CityWalk Studio revenues increased by $69,179 to $1,492,024, an increase of
4.9%. Revenues from the Irvine Studio and the Traveling  Studio were
$508,192 and $14,572 respectively.

Cost of revenues in the year to March 31, 1997 were $1,925,930 or
approximately 95.6% of revenues. Cost of revenues in the year to March 31,
1996 were $2,216,128 or approximately 140.0% of revenues. 34.4% of the cost
of revenues in the year to March 31, 1996 represents a loss on  impairment
of long-lived assets. Excluding this amount, cost of revenues in the year to
March 31, 1996 were $1,453,999 or approximately 92.0% of revenues.

Cost of revenues for the CityWalk Studio decreased by $765,140 to $1,078,587
despite the $69,179 increase in revenues. Compensation and related benefits
were $9,586 lower than the previous year as a result of  tighter controls
over the number of staff hours worked at the studio.  Depreciation was lower
by $51,926 as a result of the adoption in June 1995 of Statement of
Financial Accounting Standard ("SFAS") No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived  Assets to be Disposed
Of, and the recognition of a $722,000 loss on  impairment of CityWalk Studio
assets in the quarter ended June 30, 1995, together with the fact that
certain assets have now been fully depreciated.  As a result of the
Company's continuing operating losses, the information  obtained during
research and the development of the Irvine Studio and the revised total
projected future cash flows of the CityWalk Studio, in June  1995 management
determined that an impairment loss of approximately  $722,000 should be
recognized. This loss was calculated as the excess of the net carrying value
of the CityWalk Studio long lived assets over the total  projected future
cash flows over the remaining useful life of the assets.  Rent was higher as
a result of the Company paying rent based on a percentage of revenues, such
revenues being higher than in the previous  period by $69,179. Other cost of
revenues increased by 3.0%, in line with the 4.9% increase in revenue. The
CityWalk Studio earned gross income of $413,437 during the fiscal year ended
March 31, 1997 compared to a gross loss of $420,882 for the same period last
year, an improvement of $834,319.  Excluding the effect of the impairment
loss recognized in the year ended March 31, 1996, this represents an
improvement of $112,319.

Costs of revenues for the Irvine Studio were $826,164, resulting in a gross
loss of $317,972. Included in cost of revenues was $220,975 of depreciation,
 a non-cash expense. Cost of revenues for the prior year of $322,272
represented the four month period from opening to March 31, 1996, and
included $67,007 of non-recurring pre-opening costs. The Irvine Studio is
still performing below expectation and the Company is continuing to develop
the portfolio of products available at the Irvine Studio in an endeavor to
improve the revenues from the Irvine Studio.

Cost of revenues for the Traveling Studio were $21,179, resulting in a gross
loss of $6,607. In the year ended March 31, 1996 as a consequence of the
adoption of SFAS No. 121, the Traveling Studio incurred a gross loss of
$40,129.

Despite the gross loss of $317,972 which was incurred in the Irvine Studio,
and the gross loss of $6,607 incurred by the Traveling Studio, the Company
overall earned a gross income of $88,858 during the fiscal year ended March
31, 1997. The gross loss for the same period last year was $635,416. The
increase in gross income for the year to March 31, 1997 is mainly due to the
loss on impairment of long-lived assets of $762,129 recorded in the year
ended March 31, 1996 (there was no similar charge in the year to March 31,
1997), offset by the gross loss incurred in the Irvine Studio which traded
for a full twelve months in the year to March 31, 1997 compared with only
four months trading in the prior year. Also contributing to the increase in
gross income is the $112,319 (excluding the $722,00 loss on impairment of
long-lived assets recorded in the year to March 31, 1996) improvement in the
gross income generated by the CityWalk Studio.

General and administrative expenses for the fiscal year ended March 31, 1997
includes termination payments totaling $51,250 paid to former officers of
the Company. The corresponding year ended March 31, 1996  includes a
non-recurring charge of $110,000 for professional fees  relating to the PCG
transaction. After adjusting for these non-recurring  items, the Company's
general and administrative expenses decreased from $805,824 in the fiscal
year ended March 31, 1996 to $736,836 in the fiscal  year ended March 31,
1997, a decrease of approximately 9%. This decrease is consistent with
Management's plan to reduce overhead costs. Compensation  and related
benefits decreased by approximately 18% to $258,380 (excluding the $51,250
termination payments) from $313,432 for the same period last year,  as a
consequence of the cessation of employment on September 1, 1996 of the Vice
President Operations and the Vice President Development. Professional  fees,
excluding the $110,000 in kind consideration on the PCG transaction in the
year ended March 31, 1996, increased by 4% to $100,777, compared to $96,979
for the same period last year. Management fees of $131,000 payable to PCG
were accrued, relating to the period April 1, 1996 to November 29, 1996,
pursuant to the Personnel Consulting Agreement dated June 28, 1995. The
expense for the year to March 31, 1997 of $131,000 is comparable with the
$130,000 accrued in the previous year for the period July 1, 1995 to March
31, 1996. Management believes that $131,000 (1996: $130,000) represents the
reasonable cost of services provided by PCG during the year. Office and
storage rent expenses increased from $29,524 in the year to March 31, 1996
to $39,558. Depreciation and amortization costs were lower by $37,244 as a
result of previously non-producing assets being put into production and the
consequential charges reported in cost of revenues. Other general  and
administrative expenses increased by $8,476, or 8% to $115,458 for the
fiscal year ended March 31, 1997, compared to $106,982 for the same period
last year.

The Company earned interest income of $484 in the fiscal year ended March
31, 1997 as compared to $3,035 earned during the prior year. Interest
charges totaling $54,602 were incurred on the loan from PCG and on the loan
payable to former executives of the Company compared with interest expense
of $28,279 in the year ended March 31, 1996.

As of March 31, 1997, the Company had net operating loss carry forwards of
approximately $9,650,000. The ability to utilize $8,275,000 of these losses
to be offset against future taxable income is restricted as a result of the
change in control arising from the PCG transaction. The losses will expire
in March, 2011.

Liquidity and Capital

At March 31, 1998, the Company had a working capital deficit of $1,505,743
as compared to a working capital deficit on March 31, 1999 of $719,567. The
increase of $482,207**** is primarily attributable to operating losses
incurred during the year to March 31, 1999. Funds have been provided by PCG
during the year to enable the Company to meet the costs associated with its
day to day operations and to fund the payments due to former officers of the
Company.

Net cash used in operating activities was $482,207 for the fiscal year ended
on March 31, 1998, compared to the utilization of $346,687 of cash for the
same period March 31, 1999.

The Company does not anticipate that it will have any problems in meeting
its  obligations for continuing fixed expenses, materials procurement or
operating labor.

Other Matters

The Company's  securities  are quoted on the  OTC-Bulletin  Board under the
trading symbol OUTTE. The NASD has recently added an "E" to the symbol,
making it "OUTTE," which indicates that it has been placed on the NASD OTC
Bulletin Board's eligibility list.  In order to remain quoted on the NASD
Bulletin Board, the Company must comply with all of the reporting
requirements of the Securities and Exchange Act of 1933 by the first day of
March, 2000.  If the Company fails to do this, it will no longer be quoted
on the NASD OTC Bulletin Board.  There can be no assurance that the Company
will continue to be quoted on the NASD OTC Bulletin Board.

ITEM 8.  FINANCIAL STATEMENTS

[CAPTION]
                         Report of Independent Auditor

Board of Directors
Out-Takes, Inc.
Dallas, Texas

    We have audited the accompanying consolidated balance sheets of
Out-Takes, Inc., and subsidiary as of March 31, 1999, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.  We did not audit the
financial statements of Out-Takes, Inc. which reflected total assets of
$285,840 as of March 31, 1998 and total revenues of $1,187,638 and
$2,014,788 for the years ended March 31, 1998 and 1997 respectively.  Other
auditors whose report dated May 20, 1998, expressed an unqualified opinion
on those statements.

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

    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Out-Takes, Inc. and its subsidiary as of March 31, 1999 and the
consolidated results of its operations and their cash flows for the year
then ended in conformity with generally accepted accounting principles.

    The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern.  As discussed in Note 7 to the
financial statements, the Company has suffered recurring losses from
operations and has a net working capital deficiency that raise substantial
doubt about its ability to continue as a going concern.  Management's plans
in regard to these matters are also described in Note 7. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.

Rogelio G. Castro
Certified Public Accountant
Oxnard, California
March 2, 2000

[CAPTION]

                                   OUT-TAKES INC.
                             Consolidated Balance Sheets

                                       ASSETS                    March 31,
                                                             1999        1998
Current Assets:

  Cash and Cash Equivalents                             $     1,356 $    26,878

  Inventory                                                       -      10,082

  Prepaid Expenses                                                -      11,954

  Advances   Related party                                  217,414      96,560

  Other Current Assets                                            -       9,564

                                                        ----------- -----------

  Total Current Assets                                  $   218,770 $   155,038


Plant & Equipment - Net                                     248,965     472,848

Other Non-Current Assets:

  Deposits                                                   24,692      50,196
  Goodwill                                                4,279,455

                                                        ----------- -----------

     Total Assets                                       $ 4,771,882 $   678,082

                                                        =========== ===========


                        LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:

  Accounts Payable                                      $     4,600 $    31,173

  Accrued Expenses                                                -     135,466

  Provision for Studio closure                                           31,878

  Compensation payable - Related Parties                    202,341     122,801

  Due to Related Party                                      357,506   1,032,733
  Convertible Interests                                     250,278
250,278
  Interest payable                                          93,008      56,452
  Prepaid asset lease                                        30,604
 -

                                                        ----------- -----------

  Total Current Liabilities                                 938,337   1,660,781


Long-term Debt                                              951,400     103,556

Commitments (Note 4)


Stockholders' Equity (Deficit):
  Preferred Stock, par value $.01 per share;
   5,000,000 shares authorized, none issued                       -
 -

  Common  Stock,  par  value  $.01  per  share;
   35,000,000  shares  authorized; 20,788,122
   shares  issued  of which  292,396  shares

   are in  Treasury                                         207,882     207,882

  Capital in excess of par value                         14,256,014   9,906,430
  Accumulated deficit
(11,473,345)(11,092,161)
  Less treasury shares, at cost                         (   108,406)(
108,406)

                                                        ----------- -----------
Total Stockholders' Equity (Deficit)                    ($2,882,145)
(1,086,255)

                                                         ---------- -----------

     Total Liabilities and Stockholders' Equity         $ 4,771,882 $   678.082


                                                        =========== ===========


     The Accompanying Notes are an Integral Part of These Financial Statements.


[CAPTION]
                                  OUT-TAKES INC.
                      Consolidated Statements Operations

                                                 Years ended March 31,

                                             1 9 9 9       1 9 9 8     1 9 9 7
                                             -------       -------     -------


Revenues                                $     637,450   $ 1,204,238 $ 2,014,788


Cost of Sales                                 192,374     1,728,884   1,929,273

                                        -------------   ----------- -----------
Gross Income (Loss)                           445,076      (524,646)
85,515)

                                        -------------   ----------- -----------


General and Administrative                    734,802       661,955     896,349

                                        -------------   ----------- -----------

     Loss from Operations                  (  289,726)   (1,186,601) (
810,834)

Other Income (Expense)

  Interest income                                  35           224         484
  Interest expense                            (36,559)      (52,409)
(54,602)
  Discontinued operation                      (55,934)
  Startup cost                                              (37,214)
(46,852)
                                        --------------  ------------
----------
     Total Other Income (Expense)             (92,458)      (89,399)
(100,970)
                                        --------------  ------------
----------

Net Loss                                ($    382,184)  ($1,276,000)($
911,804)

                                         ============   =========== ===========

Net Loss Per Share (Basic and
 Diluted)                               ($       0.02)  ($     0.05)($
0.05)

                                        =============   =========== ===========

Weighted Average Common Shares

 Outstanding                               20,495,726    20,495,726  14,824,881

                                          ===========    ==========  ==========



     The Accompanying Notes are an Integral Part of These Financial Statements.

[CAPTION]
<TABLE>


                                                    OUT-TAKES INC.
                                    Consolidated Statement of Stockholders'
Equity

                             Common Stock        Capital
                             Number of           in Excess of Accumulated
Treasury  Deferred
                             Shares     Amount   Par Value     Deficit Stock
Compensation    Total
                             ------     ------   ---------     -------
----- ------------    -----
<S>                           <C>         <C>      <C>           <C>
<C>      <C>         <C>

Balance - March 31, 1996  11,168,122  $111,682  $ 9,071,180  ($ 8,904,357)
($108,406) ($144,000)  $  26,099

Cash Proceeds from
 Issuance of Stock           650,000     6,500      123,500             -
      -          -     130,000

Stock Issued upon
 Conversion of Debt        8,970,000    89,700     820,300              -
      -          -     910,000

Capital Contribution                                 1,000
1,000
Net Loss for the year
  ended March 31, 1997             -         -          -       (911,804)
      -          -    (911,804)
                           ----------  --------  -----------  ------------
--------   --------  ----------

Balance - March 31, 1997  20,788,122   207,882  10,015,980  (  9,816,161)
(108,406)   ( 144,000)    155,295

Management fee -
  Related Party                    -         -      31,200               -
      -         -       31,200

Adjustment for
 cancellation of escrow
 shares(See note [6A])             -         -    (144,000)              -
      -    144,000           -

Options issuance cost              -         -       3,250               -
      -          -       3,250

Net Loss for the year
  ended March 31,1998              -         -           -      (1,276,000)
      -          -  (1,276,000)
                          ----------  -------- -----------      ------------
--------  --------   ----------
Balance  March 31, 1998   20,788,122   207,882   9,905,430     (11,092,161)
(108,406)         -  (1,086,255)

Acquisition of
  Subsidiary                          4,342,784                      4,342,784
Capital adjustment                       7,800                         7,800

Net loss for the year
  Ended March 31, 1999               (   382,184)               (  382,184)
                         -----------  --------  ----------   ------------
--------  --------   ----------
Balance, March 31, 1999   20,788,122  $207,882 $14,256,014
$(11,473,345)$(108,406) $      -  $ 2,882,145
                         ===========  ======== ===========  ============
=========  ========   ==========


</TABLE>

[CAPTION]


                                OUT-TAKES INC.
                      Consolidated Statements of Cash Flows



                                                      Years ended March 31,

                                                  1999        1998         1997
Operating Activities:


  Net Loss                                      $(382,184)
$(1,276,000)$(911,804)

  Adjustments to Reconcile Net Loss to
   Net Cash Used in Operating Activities:
     Depreciation and Amortization                116,585      540,185
466,369
     Loss on closure of Irvine Studio                          154,157
     Loss on Disposal of Plant and Equipment            -            -
504
     Compensation fee   related party              80,887      110,062
  -
     Options issuance cost                                       3,250
  -
  Changes in Assets and Liabilities:
   (Increase) Decrease in:
     Due from Related Party                      (120,854)       3,847
     Deposits                                     (25,504)      11,330
(22,814)
     Inventory                                     10,082       12,797
13,719
     Due from Officers                                  -            -
8,565
     Prepaid Expenses                              11,954        6,671
(7,757)
     Other Current Assets                           9,564            -
 -
   Increase (Decrease) in:
     Accounts Payable                            (162,039)    (127,413)
(248,769)
     Notes payable                                      -            -
(15,036)
     Interest payable                              36,556       48,581
(22,104)
     Provision for Studio Closure                 (31,878)      31,878
  -
     Prepaid asset lease                           30,604            -
  -
     Compensation payable-Related Party            79,540     (119,990)
252,337
                                               ----------   ----------
--------
  Net Cash Used in Operating Activities        (  346,687)  (  604,492)
(448,916)
                                               ----------   ----------
--------
Investing Activities:
  Purchases of Property, Plant and
    Equipment                                  (   33,522)  (  218,893)
(165,362)
  Proceeds on Disposal of Plant and Equipment                      100
2,242
                                               ----------   ----------
--------
Net Cash Used in Investing Activities          (   33,522)  (  218,883)
(163,120)
                                               ----------   ----------
---------
Financing Activities:
  Proceeds from the Issuance of Stock                   -
130,000
  Advances from Related Party                     272,887      703,783
260,000
  Capital                                           7,800
1,000


  Convertible notes                                74,000       65,834
240,000
                                                 --------   ----------
--------

  Net Cash Provided by Financing Activities       354,687      769,617
631,000
                                                ---------   ----------
--------
Net Increase (Decrease)in Cash and Cash
 Equivalents                                     ( 25,522)    ( 53,758)
18,964
Cash and Cash Equivalents - Beginning of
  Years                                            26,878       80,636
61,672
                                                ---------    ---------
---------
Cash and Cash Equivalents - End of Years        $   1,356    $  26,878  $
80,636
                                                =========    =========
=========
Supplemental Disclosure of Cash Flow Information
  Cash paid for:
   Interest                                                  $   7,650  $
66,501

Non cash activities:
  Acquisition of subsidiary                    $4,000,000


<F/N>  The Accompanying Notes are an Integral Part of These Financial
Statements.


[CAPTION]
OUT-TAKES INC.
Consolidated Notes to Financial Statements

Note 1 - Summary of Significant Accounting Policies

Basis of Presentation - The accompanying consolidated financial statements are
presented on an accrual basis.  Revenues are recognized when merchandise is
sold
and expenses are recognized when incurred.

Principals of Consolidation   On August 31, 1998, Out-Takes, Inc. acquired all
of the issued and outstanding equity interests of Los Alamos Energy, LLC, a

California limited liability company (LAE). This acquisition has been accounted
for as an exchange between companies under common control.  The investment has
been recorded at historical cost in a manner similar to a pooling of interest,
and the face value of the note given has been adjusted down to the net equity
value of LAE at the date of the exchange.

The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, Los Alamos Energy, LLC.  All
significant inter-company transactions and balances have been eliminated in
consolidation.


Plant and Equipment and Depreciation - Plant and equipment as of March 31, 1999
consists primarily of generators, computers, furniture and fixtures, and they
are stated at cost. Depreciation is provided over the estimated useful asset
lives using the straight-line method over 5-7 years for all equipment and
furniture.

Stock Options - The difference between the fair market value and the exercise
price, if below fair market value, of a stock option granted under the
Company's
Employee Stock Option Plan is charged to expense in the period in which the
option is granted.  All transactions in which goods or services are the

consideration received for the issuance of equity instruments are accounted for
based on the fair value of the consideration received or the fair market value
of the equity instruments issued, whichever is more reliably measurable

Inventories - Inventories consisting principally of frames, bags, mattes,
chemicals, paper products and other supplies are priced at cost determined
using
the FIFO method.

Cash and cash equivalents - The Company classifies all highly liquid debt

instruments, readily convertible to cash and purchased with a maturity of three
months or less at date of purchase, as cash equivalents. The Company had no
cash
equivalents at March 31, 1999.

Risk concentrations - Financial instruments, which potentially subject the

Company to concentrations of credit risk, consist principally of cash. At March
31, 1999, the Company had no deposits in financial institutions which exceeded
the $100,000 federally insured limit. The excess of the institution's deposit
liability to the Company over the federally insured limit was therefore zero.

Company's primary customer is Pacific, Gas and Electric Company.

Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts. Accordingly, actual
amounts could differ from those estimates.

Advertising - Advertising costs are expensed as incurred. Advertising
expenditures for the year ended March 31, 1999 were $4,500.

Amortization of Goodwill

Cost of investments in purchased companies in excess of the underlying fair
value of net assets at dates of acquisition are recorded as goodwill and
amortized over 40 years on a straight-line basis.

Loss per share - The Financial Accounting Standards Board ("FASB") has issued
Statement of Financial Accounting Standard  ("SFAS") No. 128, "Earnings Per
Share" which is effective for financial statements issued for periods ending

after December 15, 1997.  Accordingly, earnings per share data in the financial
statements for the year ended March 31, 1998 has been calculated in accordance

with SFAS No. 128. Prior periods earnings per share data have been recalculated
as necessary to conform prior years data to SFAS No. 128. SFAS No. 128

supersedes Accounting Principles Board Opinion No. 15, "Earnings per Share" and
replaces its primary earnings per share with a new basic earnings per share
representing the amount of earnings for the period available to each share of
common stock outstanding during the reporting period. SFAS No. 128 also
requires
a dual presentation of basic and diluted earnings per share in the face of the
statement of operations for all companies with complex capital structures.
Diluted earnings per share reflects the amount of earnings for the period
available to each share of common stock outstanding during the reporting

period,  while giving effect to all dilutive  potential common shares that were

outstanding during the period, such as common shares that could result from the
potential exercise or conversion of securities into common stock.

The computation of diluted earnings per share does not assume conversion,
exercise or contingent issuance of securities that would have an antidilutive
effect on earnings per share (i.e. increasing earnings per share or reducing
loss per share).  The dilutive effect of outstanding options and warrants and
their equivalents are  reflected in dilutive earnings per share by the
application of the treasury  stock method which recognizes the use of proceeds
that could be  obtained  upon  exercise of options and warrants in computing
diluted earnings  per share.  It assumes that any proceeds would be used to
purchase common stock at the average market price during the period. Options
and
warrants will have a dilutive effect only when the average market price of the
common stock during the period exceeds the exercise price of the options or
warrants.

Potential common shares of 125,000 are not currently dilutive, but may be in
the
future.

Deferred  Taxes - There  are no  material  differences  between  the
accounting
methods used for financial and tax purposes. The Company has sustained
losses in
recent years and has a large net operating loss carryforward.  No deferred
taxes
are reflected in these financial statements.

Note 2 - Plant and Equipment

                                                March 31, 1999   March 31, 1998
The components of plant and equipment are:


Photographic Equipment                         $           -      $     620,750

Computers and Software                                 1,300            660,348

Equipment and Furniture                              337,912            605,707

Leasehold Improvements                                     -            609,494

Motor Vehicle                                          5,500             26,933

                                               -------------      -------------


Total - At Cost                                      344,712          2,523,232

Less: Accumulated Depreciation                        95,747          2,050,384

                                               -------------      -------------

Net                                            $     248,965      $     472,848

                                               =============      =============

Depreciation is provided over the estimated useful asset lives using the
straight-line method over five to seven years for all equipment and
furniture.
Leasehold improvements are amortized on a straight-line basis over the shorter
of the useful life of the improvement or the term of the lease.  Expenditures

for major renewals and betterments that extend the useful lives of property and

equipment are capitalized. Expenditures for maintenance and repairs are charged
to expense as incurred.

Note 3 - Related Party Transactions


The amount due to related party is unsecured and payable upon demand.  Interest
expense is charge at a rate of 10% per annum.  As of March 31, 1999,
interest of
$93,008 was accrued.

Note 4   Commitments

The Company has an extended 12 month operating lease agreement for an office
facility.

Future minimum lease obligations as of March 31, 1999 are:

         Year ended March 31
         -------------------
              2000                                 $  10,200
                                                    --------
              Total                                $  10,200
                                                   =========

In the year to March 31, 1999, total rent expense was $116,884.

Note 5 - Income Taxes

As of March 31, 1999, the Company has a net operating loss carry forward of
approximately  $11,411,016.

Note 6 - New Authoritative Pronouncements

The FASB has issued SFAS No. 130, "Reporting Comprehensive Income". SFAS No.
130 is effective for fiscal years beginning after December 15, 1997. Earlier
application is permitted. Reclassification of financial statements for earlier
periods provided for comparative purposes is required. SFAS No. 130 is not
expected to have a material impact on the Company.

The FASB has issued SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information". SFAS No. 131 changes how operating segments are
reported in annual financial statements and requires the reporting of selected
information about operating segments in interim financial reports issued to
shareholders. SFAS No. 131 is effective for periods beginning after December
15,
1997 and comparative information for earlier years is to be restated. SFAS No.
131 need not be applied to interim financial statements in the initial year of
its application. SFAS No. 131 is not expected to have a material impact on the
Company.

Note 7 - Going Concern

The Company has been unsuccessful in generating net cash from operations. The
net cash used by the Company in operating activities in the year ended March
31,
1998 was $346,687. The Company incurred a net loss of $318,555 for the year
ended March 31, 1999 and has a working capital deficit as of March 31, 1999 of
$719,567.

The accompanying financial statements have been prepared on a going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities and commitments in the normal course of business. The continuation

of the Company as a going concern is dependent upon its ability to generate net
cash from operations. The Company's recurring operating losses and net working
capital deficiency raises substantial doubt about the entity's ability to
continue as a going concern. Management's plans include the continuing
reduction

of expenses and expanding the activities of Los Alamos Energy to include direct
service of consumer electricity

The Company has, subsequent to March 31, 1999, during June, 1999, executed a

letter of intent with Coastal Resources Corporation, which, among other things,
provides for a merger to be effected pursuant to the provisions of a Share

Exchange Agreement to be entered into, and also providing for $300,000 in loans
to be made to Los Alamos Energy, LLC, a subsidiary of the Company.


The Company has also executed a letter of intent with Atlas Engineering, LLC to
the effect that the Company shall acquire Atlas Engineering, LLC pursuant to
the
provisions of a Purchase Agreement to be entered into.


Management plans to expand its existing power plant to 4 or 5 Mega Watt, and to
actively pursue other power plant development and acquisitions.

Note 8 - Impairment of Long-Lived Assets


The Company had adopted Statement of Financial Accounting Standard ("SFAS") No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of.

Long term assets of the Company are reviewed at least annually as to whether
their carrying value has become impaired, pursuant to guidance established in
Statement of Financial Standards ("SFAS") No. 121. Management considers assets
to be impaired if the carrying value exceeds the future projected cash flows
from related operations (undiscounted and without interest charges). If

impairment is deemed to exist, the assets will be written down to fair value or
projected discounted cash flows from related operations. Management also re-
evaluates the periods of amortization to determine whether subsequent events
and
circumstances warrant revised estimates of useful lives. As of March 31, 1999,
management expects these assets to be fully recoverable.

                                   PART IV

ITEM 14.   EXHIBITS AND REPORTS ON FORM 8-K


(a)  The  following  exhibits  are filed as part of this  report as required by
     Item 601 of Regulation S-B:

     3.1   Certificate of Incorporation of the Company. (ii)

     3.2   Certificate of Amendment of Certificate of Incorporation. (ix)

     3.3   Bylaws of the Company. (I)

     4.1   Form of Unit Purchase Option. (I)

     4.2   Form of Warrant Agreement. (I)

     4.3   Form of Escrow Agreement. (iv)

     4.4   Section 203 of the Delaware General Corporation Law. (ix)

     10.1  Form of Registration Rights Agreement. (I)


     10.5  Form of Standard Employment Agreement for hourly wage employee. (vi)

     10.6  Form of  Standard  Employment Agreement for hourly wage employee
           eligible to earn commissions. (vi)

     10.7  Form of Standard Employment Agreement for salaried employee. (vi)


     10.8  Form of Standard Employment Agreement for salaried employee eligible
           to earn commissions. (vi)


     10.9  Form of Standard Employment Agreement for salaried employee eligible
           for bonus in the form of incentive compensation. (vi)

     10.10 Agreement dated March 16, 1992 between the Placement Agent and
                Shelton on behalf of "Founders" specified therein, as
amended. (I)

     10.11 Founders Agreement dated March 25, 1992 among Robert H. Shelton
           ("Shelton"), Ellen Korval ("Korval"), Robert A. Small ("Small"),
Leah
           R.  Shelton  ("Shelton")and John L. Sigalos ("Sigalos"), as
           supplemented by letter agreement dated as of March 25, 1992 among
           Shelton, Shelton, Sigalos, Korval and Small. (I) +

     10.12 Merchandising License Agreement dated February 25, 1992 between
           MCA/Universal Merchandising, Inc. and the Company. (I)

     10.13 Merchandising License Agreement dated April 24, 1992 between Turner
           Home Entertainment, Inc. and the Company. (I)

     10.14 Merchandising License Agreement dated as of April 16, 1992 between
           Paramount Pictures Corporation and the Company. (I)

     10.15 Letter Agreement between the Image Bank West and the Company dated
           as of August 5, 1992. (I)

     10.16 Letter Agreement between the Company and Tony Stone Worldwide dated
           as of August 31, 1992. (I)

     10.17 1992 Employee Stock Option Plan. (iii) +

     10.18 1992 Non-Employee Directors Stock Option Plan. (iii)

     10.19 Metrum Imaging Products VAR Agreement dated September  11, 1992
           between Metrum Information Storage and the Company. (I)

     10.20 Lease dated  November  13, 1992 between the Company and  MCA
           Development Company. (ii)

     10.21 Lease dated  October 13, 1992 between the Company and  Midis
           Properties, Ltd. (ii)


     10.22 Lease dated March 28, 1993 between the Company and Midis Properties,
           Ltd. (vi)


     10.23 Letter Agreement  between the Company and Jay P. Morgan  Photography
           dated September 28, 1992. (iii)

     10.24 Settlement Agreement and Mutual Release dated as of August 11, 1994
           between the Company,  on the one hand, and Richard T. Eckhouse, B&E
           Financial Express,  Business & Executives Financial Group,
Innovative

           Business  Management Inc., and R. T. Eckhouse & Assoc., on the other
           hand. (vii)

     10.25 Promissory Note in favor of Photo Corporation of  Australia Pty
           Limited, dated March 23, 1995. (viii)

     10.26 Security Agreement between the Company and Photo Corporation  of
           Australia Pty Limited, dated as of March 23, 1995. (viii)

     10.27 Subscription Agreement between the Company and Oakrusk Pty Limited,
           dated May 26, 1995. (viii)

     10.28 Stock Option Agreement between the Company and Oakrusk Pty Limited,
           dated May 26, 1995. (viii)

     10.29 Form of Subscription Agreement. (ix)

     10.30 Settlement and Mutual Release  Agreement between the Company,
           Shelton, Shelton and Photo Corporation Group Pty Limited,  dated
           August 31, 1996. (x)

    10.31  Purchase and Sale Agreement between the Company and Los Alamos
           Energy, LLC, Dated August 31, 1998

    10.32 Asset Lease Agreement dated October 26, 1998

    14(a)2 Report of Former Independent Accountant
           Financial Statements as of March 31, 1997 and 1996
           Statements of Operations
           Statements of Stockholder's Equity
           Statements of Cash Flows

    16    Letter of Former Independent Accountant

(b)  Reports on Form 8-K

     Current Report on Form 8-K dated April 27, 1998.

     Current Report on Form 8-K dated May 13, 1998

     Current Report on Form 8-K dated October 28, 1998

     (I)  Incorporated by reference to the Company's Registration Statement
on Form S-1  (Registration  No. 33- 52904) filed on October 5, 1992
(the "Registration Statement").

     (ii)  Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement filed on December 21, 1992.

     (iii)  Incorporated by reference to Pre-Effective Amendment No. 2 to the
Registration Statement filed on January 15, 1993.

     (iv)  Incorporated by reference to Pre-Effective Amendment No. 3 to the
Registration Statement filed on February 3, 1993.

     (v)  Incorporated by reference to the Company's Registration Statement on
Form 8-A (No. 0-21322) filed on March 5, 1993 and effective on March 19, 1993.

     (vi)  Incorporated by reference to the Company's Annual Report on Form
10-KSB for the fiscal year ended March 31, 1993.


     (vii)  Incorporated by reference to the Company's Quarterly Report on Form
10-QSB for the quarterly period ended June 30, 1994.

     (viii)  Incorporated by reference to the Company's Annual Report on Form
10-KSB for the fiscal year ended March 31, 1995.

     (ix)  Incorporated by reference to the Company's Annual Report on Form
10-KSB for the fiscal year ended March 31, 1995.

     (x) Incorporated by reference to the Company's Report on Form 10-QA for
the
period ended September 30, 1996.

Management contract or compensatory plan.


                                   SIGNATURES

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

                                 Out-Takes, Inc.


Dated: March 1, 2000             By:  James Harvey, President
                                      ________________________
                                      James Harvey, President


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

         Signature                       Title                     Date


       James Harvey         Chairman of the Board, President,   March 1, 2000
   -----------------        Chief Executive Officer, Chief
       James Harvey         Financial Officer and Secretary,
       And Sole Director


[TYPE]EX-27
          2
[DESCRIPTION]FDS --
[ARTICLE]                     5
[LEGEND]
This schedule contains summary financial information extracted from the
consolidated balance sheet and the consolidated statement of operations and is
qualified in its entirety by reference to such information.



[PERIOD-TYPE]                   Year
[FISCAL-YEAR-END]                              Mar-31-1999
[PERIOD-END]                                   Mar-31-1999
[CASH]                                         23,044
[SECURITIES]                                   0
[RECEIVABLES]                                  0
[ALLOWANCES]                                   0
[INVENTORY]                                    0
[CURRENT-ASSETS]                               506
[PP&E]                                         291,456
[DEPRECIATION]                                 0
[TOTAL-ASSETS]                                 312,053
[CURRENT-LIABILITIES]                          716,323
[BONDS]                                        0
[PREFERRED-MANDATORY]                          0
[PREFERRED]                                    0
[COMMON]                                       20,788
[OTHER-SE]                                     0
[TOTAL-LIABILITY-AND-EQUITY]                   312,053
[SALES]                                        ****
[TOTAL-REVENUES]                               ****
[CGS]                                          ****
[TOTAL-COSTS]                                  ****
[OTHER-EXPENSES]                               ****
[LOSS-PROVISION]                               0
[INTEREST-EXPENSE]                             ****
[INCOME-PRETAX]                                ****
[INCOME-TAX]                                   0
[INCOME-CONTINUING]                            ****
[DISCONTINUED]                                 0
[EXTRAORDINARY]                                0
[CHANGES]                                      0
[NET-INCOME]                                   ****
[EPS-BASIC]                                    ****
[EPS-DILUTED]                                  ****


EXHIBIT 10.31 PURCHASE AND SALE AGREEMENT BETWEEN COMPANY AND LOS ALAMOS
ENERGY, LLC, DATED AUGUST 31, 1998 PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made and entered into
as
of the 31st day of August, 1998, by and between OUT-TAKES, INC., a
corporation duly organized and validly existing under the laws of the state
of Delaware (the "Purchaser") and the several individuals named on the
signature page of this Agreement (collectively, the "Seller").

WHEREAS, the Purchaser is a publicly-traded corporation on the OTC-Bulletin
Board under the symbol OUTT; and

WHEREAS, the Seller collectively owns all of the issued and outstanding
units of equity interest (the "Equity") in LOS ALAMOS ENERGY, LLC, a limited
liability company organized and existing under the laws of the State of
California (the "Company"); and

WHEREAS, the Purchaser desires to purchase from the Seller, and the Seller
desires to sell and convey to the Purchaser, all of the Equity in the
Company, subject to and in accordance with the terms and conditions set
forth in this Agreement;

NOW, THEREFORE, in consideration of the foregoing premises and the covenants
and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound, hereby agree as follows:

PURCHASE AND SALE OF THE EQUITY.  Upon execution of this Agreement by both

parties, and subject to the fulfillment of all Closing Conditions (as such term
is defined below) contained in Section 7 below, the Purchaser hereby
irrevocably
agrees to purchase, and the Seller agrees to sell, transfer and convey to the
Purchaser, all of the Equity in the Company outstanding as of the Closing (as
defined below).  Such units of Equity, once delivered to the Purchaser as set
forth herein, shall be validly issued, fully paid and non-assessable. The
Seller
may elect, in its sole discretion at any time prior to the Closing, to
convert its form of organization from a limited  liability company to a
corporation, in which case each reference to the Company shall be deemed to
refer to the new corporation, and each reference to units of Equity in this

Agreement shall be deemed to refer to shares of capital of the new corporation.

CONSIDERATION TO BE PAID FOR THE EQUITY. As consideration for the Equity to
be purchased hereunder, the Purchaser shall deliver to the Seller promissory
notes, substantially in the form of Exhibit A attached hereto, totaling four
million dollars ($4,000,000) in the aggregate (collectively, the "Promissory
Note"). The Promissory Note shall have a maturity of five (5) years, and
shall bear interest at the rate of ten percent (10%) per annum until paid in
full. As security for the Note, at the Closing, the Purchaser shall deliver
to the Seller a security agreement (the "Security Agreement") substantially
in the form of Exhibit B attached hereto, and a stock pledge agreement (the
"Stock Pledge") substantially in the form of Exhibit C attached hereto. The
security interests granted in the Security Agreement and the Stock Pledge
shall remain in full force and effect until the Note has been repaid in its
entirety, or converted as set forth in Section 3 below.

3.    CONVERSION OPTION IN THE NOTE.  The Note shall contain an option (the
"Conversion Option") to convert the indebtedness represented thereby into
such number of shares of voting common stock of the Purchaser as shall
represent ninety percent (90%) of the shares of such voting stock issued and
outstanding as of the date of conversion, on a fully-diluted  basis (the
"Conversion Shares").  In the event that the Seller desires to exercise the
Conversion Option, it shall notify the Purchaser of such fact, and commence
such actions not later than ninety days from the date of the Note. Within
thirty (30) days after the Purchaser determines that the Conversion may be
lawfully completed (or such other time as is mutually agreed between the
parties), there shall be a closing of the Conversion Option (the "Conversion
Closing"). At such Conversion Closing, the Seller shall deliver to the
Purchaser the Note marked Paid in Full, and the Purchaser shall deliver to
the Seller, or its nominees, a certificate or certificates  evidencing the
issuance to the Seller of the Conversion Shares, which  Conversion Shares
when so delivered shall be validly issued, fully paid, and  non-assessable.
The Conversion Closing shall be subject to the condition that the Purchaser
shall have effected a reverse stock split of one (1) share for every one
hundred (100) shares of the Purchaser outstanding as of such date. The
Conversion Closing shall only occur if the foregoing condition has been
fully satisfied or waived prior to or simultaneously with such Conversion
Closing as set forth herein.

4.     REPRESENTATIONS AND WARRANTIES OF THE SELLER. Each Seller hereby
represents and warrants to the Purchaser, as to himself only and not
jointly, as of the date hereof, the following:

(a)    each Seller is an adult individual, and has full power and capacity
to enter into, execute, deliver and perform this Agreement in accordance
with its terms, which Agreement, once so executed and delivered by such
Seller, shall be the valid and binding obligation of such Seller,
enforceable against him by any court of competent jurisdiction in accordance
with its  terms;

(b)     no Seller, is bound by or subject to any contract, agreement, court
order, judgment, administrative ruling, law, regulation or any other item
which prohibits or restricts such party from entering into and performing
this Agreement, or which requires the consent of any third party prior to

the entry into or performance of this Agreement, in accordance  with its terms.

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.  The Purchaser hereby
represents and warrants to the Seller, as of the date hereof, the following:

the Purchaser is a corporation duly organized and validly existing under the
laws of the State of Delaware, and has full power and authority to enter
into and perform this Agreement in accordance with its terms;

the individuals signing this Agreement on behalf the Purchaser are the duly
elected executive officers of the Purchaser so indicated, and have full
power and authority to execute and deliver this Agreement for and on behalf
of the Purchaser, which Agreement, once so executed and delivered, shall be
the valid and binding obligation of the Purchaser, enforceable against it by
any court of competent jurisdiction in accordance with its terms;

the Purchaser is not bound by or subject to any contract, agreement, court
order, judgment, administrative ruling, law, regulation or any other item
which prohibits or restricts such party from entering into and performing
this Agreement, or which requires the consent of any third party prior to

the entry into or performance of this Agreement, in accordance  with its terms;

(d)     a majority of the Purchaser's voting stock is owned by PCG, which
controls, beneficially and of record, fourteen million four hundred ten
thousand (14,410,000) shares of the Company's common stock and a beneficial
interest in another approximately eight hundred eighty five thousand
(885,000) shares of the Company's common stock (common stock being the only
voting securities of the Company outstanding as of the date hereof), on  a
fully-diluted basis, representing approximately seventy-five percent  (75%)
of the total number of shares of common stock issued and  outstanding as of
the date hereof;

(e)   the Purchaser has been given every opportunity to review all
documents, and ask all questions of the Seller and the executive officers of
the Company, as it shall have requested prior to executing and delivering
this Agreement to the Seller; and the Purchaser has been advised to consult
with its attorney and tax advisor regarding the consequences of  purchasing
the Equity.

INDEMNIFICATION.  The parties each hereby agree that they shall be
responsible for, and shall hold harmless and indemnify the other party from
and against, any and all obligations, liabilities, losses, costs, charges,
damages or expenses (including, but not limited to, reasonable attorneys
fees and court costs incurred in defense thereof) of whatever type or nature
to the extent that any such Claim shall result from or arise out of the
breach by such party of any agreement, undertaking, representation or
warranty contained in this Agreement (including, without limitation, all
exhibits and other documents entered into pursuant hereto).

7.     CLOSING.  The transactions contemplated by this Agreement shall be
consummated at such location, at such time and on such date as the parties
shall mutually agree (the "Closing"). At the Closing, each Seller shall
deliver to the Purchaser a certificate evidencing his respective portion of
the Equity being acquired hereunder, and the Purchaser shall deliver to each
such Seller an originally-signed Note, evidencing such Seller's pro rata
portion of the Purchase Price, together with originally-signed copies of the
Security Agreement and the Stock Pledge, and each party shall further
deliver such documents and instruments as the other party may reasonably
request to further the transactions to be consummated at the Closing (all of
such delivery items being referred to herein as the "Closing
Conditions").

8.     MISCELLANEOUS PROVISIONS.

(A)   NOTICES. All notices, requests, demands and other communications to be
given hereunder shall be in writing and shall be deemed to have been duly
given on the date of personal service or transmission by fax if such
transmission is received during the normal business hours of the addressee,
or on the first business day after sending the same by overnight courier
service or by telegram, or on the third business day after mailing the same
by first class mail, or on the day of receipt if sent by certified or
registered mail, addressed as set forth below, or at such other address as
any party may hereafter indicate by notice delivered as set forth in  this
Section 8(a):

      If to the Seller:   Sellers of Equity in the Company
                          c/o Los Alamos Energy, LLC
                          466 Bell Street
                          Los Alamos, CA  93440
                          Attn: Mr. Hannes Faul
                          Managing Member

      (with a copy) to:   Feldhake, August & Roquemore
                          600 Anton Boulevard, Suite 1730
                          Costa Mesa, CA  92626
                          Attn: Kenneth S. August, Esquire
                          Partner

      If to the Purchaser: Out-Takes, Inc.
                          1419 Peerless Place
                          Suite 116
                          Los Angeles, California  90035
                          Attn: Mr. Peter C. Watt
                          President

      (with a copy) to:   Photo Corporation Group Pty. Limited
                          P.O. Box 415
                          Chester Hill, N.S.W. Australia 2162
                          Attn: Mr. Michael C. Roubicek
                          Group Commercial Manager

(B)     BINDING AGREEMENT; ASSIGNMENT. This Agreement shall constitute the
binding agreement of the parties hereto, enforceable against each of them in
accordance with its terms. This Agreement shall inure to the benefit of each
of the parties hereto, and their respective successors and permitted
assigns; provided, however, that this Agreement may not be assigned (whether
by contract or by operation of law) by either party without the prior
written consent of the other party.

(C)     ENTIRE AGREEMENT. This Agreement constitutes the entire and final
agreement and understanding between the parties with respect to the subject
matter hereof and the transactions contemplated hereby, and supersedes any
and all prior oral or written agreements, statements, representations,
warranties or understandings between the parties, all of  which are merged
herein and superseded hereby.

(D)     WAIVER. No waiver of any provision of this Agreement shall be deemed
to be or shall constitute a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing by the party making the waiver.

(E)     HEADINGS. The headings provided herein are for convenience only and
shall have no force or effect upon the construction or interpretation of any
provision hereof.

(F)     COUNTERPARTS.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

FURTHER DOCUMENTS AND ACTS. Each party agrees to execute such other and
further documents and to perform such other and further acts as may be
reasonably necessary to carry out the purposes and provisions of this
Agreement.

GOVERNING LAW; VENUE.  This Agreement shall be governed by and construed in
accordance with the internal laws of the State of California, without giving
effect to the principles of conflicts of laws applied thereby.

(I)    INJUNCTIVE RELIEF. Each party hereby agrees that should either party
materially breach any of its respective obligations under this Agreement,
including without limitation any exhibit or other document entered into
between the parties pursuant hereto, the non-breaching party would have no
adequate remedy at law, since the harm caused by such a breach may not be
easily measured and compensated for in damages. Accordingly, the parties
agree that in addition to such other remedies as may be available to the
non-breaching party at law, such party may also obtain injunctive or other
equitable relief including, but not limited to, specific performance, to
compel the breaching party to meet its obligations under this Agreement. All
of such remedies available to any party hereunder shall be cumulative and
non-exclusive.

(J)     CONFIDENTIALITY.  By their execution hereof, each party hereby
acknowledges to the other that certain information furnished to it by the
other party is proprietary to such disclosing party, and neither the
receiving party, nor any affiliate, employee, officer, director,
shareholder, agent or representative of such receiving party shall have any
rights to distribute or divulge any of such Confidential Information to any
third party without the disclosing party's prior, written consent,  or to
use any such Confidential Information in any way detrimental to the
disclosing party or its affiliates, or which would otherwise destroy, injure
or impair any of the disclosing party's rights in or in respect of any such
Confidential Information including, without limitation, by using of such
Confidential Information to establish or assist any person or entity which
is, or will be, directly or indirectly in competition with the disclosing
party.  For purposes of this Agreement, the term "Confidential  Information"
shall mean any and all proprietary information belonging to  the disclosing
party, whether tangible or intangible, written or oral,  including, without
limitation, any non-public intellectual property rights, trade secrets,
designs, books and records, computer software and files, and lists of
(and/or information concerning) such disclosing party's financial condition,
customers, suppliers, vendors, sources, methods, techniques and other
business relationships or information.

(K)   SEVERABLE PROVISIONS. The provisions of this Agreement are severable,
and if any one or more provisions is determined to be illegal, indefinite,
invalid or otherwise unenforceable, in whole or in part, by any court of
competent jurisdiction, then the remaining provisions of this Agreement and
any partially unenforceable provisions to the extent enforceable in the
pertinent jurisdiction, shall continue in full force and effect and shall be
binding and enforceable on the parties.

(L)     EXHIBITS.  All Schedules and Exhibits attached hereto are hereby
incorporated by reference herein as an integral part of this Agreement, with
the same force and effect as if the same had been written herein in their
entirety.   SURVIVAL.  The provisions of Sections 4, 5, 6 and 8(j) shall
expressly survive any expiration, termination or revocation of this
Agreement by either party.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the
date and year first above written.

 THE PURCHASER:

 OUT-TAKES, INC.                    ATTEST:


 By: _____________________        By: ____________________
   Peter C. Watt                    Michael C. Roubicek
   President                        Secretary


 THE SELLER:

 HANNES FAUL                         WITNESS:





 LANCE HALL                          WITNESS:






 THE INWOOD 1991 TRUST               WITNESS:


 By:
    James C. Harvey
    Trustee

[CAPTION] EXHIBIT A TO PURCHASE AND SALE AGREEMENT

THIS CONVERTIBLE PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), NOR UNDER THE LAWS OF ANY STATE, AND MAY
NOT BE RESOLD, ASSIGNED, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
THE MAKER THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.

OUT-TAKES, INC.
CONVERTIBLE PROMISSORY NOTE
 --------------------------

  $---------                      August ____, 1998



FOR VALUE RECEIVED, OUT-TAKES, INC., a corporation organized and existing under
the laws of the State of Delaware (hereinafter referred to as the "Maker"),
hereby promises to pay to the order of -------------------------------, an
adult

individual residing in the County of --------, State of California (hereinafter
referred to as the "Payee"), at Payee's principal address located at
------------------------, ------- California, 9----, or such other place or
places as the Payee may hereafter direct from time to time, in lawful money of
the United States and in immediately available funds, the principal sum of
--------------------- DOLLARS ($---------).  This Convertible Promissory Note
(hereinafter referred to as the "Note") shall accrue simple interest at the
rate
of ten percent (10%) per annum. Amounts of principal and accrued interest due
and payable in respect of this Promissory Note shall be paid out of gross
operating revenues, as available, with payments to be made monthly in
arrears up
to ninety-nine percent (99%) of gross revenues from operations, being applied

first to accrued interest and then to principal, with the balance due on August
--, 2003 (the "Maturity Date"), unless this Note is earlier converted in
accordance with the provisions set forth below (the "Conversion Date"). The
principal amount of this Promissory Note shall be due and payable on the
Maturity Date, unless earlier converted in accordance with the provisions set
forth herein.


This Promissory Note may be converted into shares of common stock of the Maker,

having a par value of One Cent ($0.01) per share, (the "Common Stock") in whole
or in part, in the manner set forth below. Each Promissory Note shall be
convertible into such number of shares of Common Stock of the Maker as are
obtained by (a) calculating the total outstanding amount of principal and
accrued interest owed by Maker to all sellers of Los Alamos Energy, LLC
(pursuant to that certain Purchase and Sale Agreement dated as of August 31,

1998, by and between Maker and the several sellers named therein (the "Purchase
Agreement") as of the effective date of such conversion (the "Conversion
Date");
(b) determining what percentage of such total amount is represented by the

indebtedness evidenced by this Note; and (c) multiplying such percentage by the
total number of Conversion Shares available (as such term is defined in the
Purchase Agreement).


The indebtedness represented by this Promissory Note constitutes senior secured

indebtedness of the Maker, and shall be senior in right of payment to all other
indebtedness of the Maker. By its execution of this Note, the Maker represents
and warrants that it is not subject to any indebtedness which would be senior
to, or pari passu with, the indebtedness to the Payee evidenced by this Note,
other than in accordance with the Purchase Agreement.

The Maker hereby agrees and covenants with the Payee that, in the event that
the
Maker shall hereafter become in default under this Promissory Note, the Maker
shall not make or authorize any dividend or other distribution to shareholders
of the Maker prior to the repayment in full of any amounts outstanding
hereunder.

Upon the occurrence of either of the following specified Events of Default
(each
herein called an "Event of Default"):

(i)   Breach of Agreements. The Maker shall be in breach or violation, for a
period of three (3) days, of any material agreement, undertaking, obligation,
representation, warranty or statement contained in this Promissory Note, the
Purchase Agreement, or any other Exhibit or document entered into by the Maker
pursuant thereto; or

(ii)    Insolvency. The Maker shall suspend or discontinue its business, or
make
an assignment for the benefit of creditors or a composition with creditors,
shall file a petition in bankruptcy, shall be adjudicated insolvent or
bankrupt,
shall petition or apply to any tribunal for the appointment of any custodian,
receiver, liquidator or trustee of or for it or any substantial part of its
property or assets, shall commence any proceedings relating to it under any
applicable bankruptcy, reorganization, arrangement, readjustment of debt,
receivership, dissolution or liquidation law or statute of any jurisdiction,
whether now or hereafter in effect; or there shall be commenced against the
Maker any such proceeding which shall remain undismissed or unstayed for a
period of forty-five (45) days or more, or any such order, judgment or decree
shall be entered, or the Maker shall by any act or failure to act indicate its
consent to, approval of or acquiescence in any such proceeding or in the
appointment of any such custodian, receiver, liquidator or trustee; or the
Maker
shall take any action for the purpose of effecting any of the foregoing;


then, and in any such event, and at any time thereafter if any Event of Default

shall be continuing, the Payee may, by written notice to the Maker, declare the
entire principal of this Promissory Note, and any accrued but unpaid
interest in
respect thereof, to be forthwith due and payable. The Maker hereby expressly
waives presentment, demand, protest or other notice of any kind.


This Promissory Note shall inure to the benefit of the Payee, his or her heirs,
executors, successors and permitted assigns. The obligations of the Maker
arising hereunder shall become the obligations of any successor in interest or
permitted assignee thereof, whether by contract or by operation of law.

This Promissory Note shall be governed by and construed in accordance with
the
internal laws of the State of California applicable to the enforcement and
operation of such instruments in the State, and without giving effect to the
principles of conflicts of laws which may be applied thereby. Any action
brought

under or in respect of this Promissory Note shall be brought only in a court of
competent jurisdiction sitting in the County of Los Angeles, State of

California. If any suit or other proceeding shall be instituted with respect to
this Promissory Note, the prevailing party shall, in addition to such other
relief as the court may award, be entitled to recover reasonable attorneys'
fees, expenses and costs of investigation.

IN WITNESS WHEREOF, the Maker hereby sets its hand and seal in the County of
Los Angeles, State of California, as of the date and year first above written.

THE MAKER:


OUT-TAKES, INC.                    ATTEST:

                                   [SEAL]
By: -------------------------             By:
-----------------------------
   Peter C. Watt                                   Michael C.Roubicek
   President                                       Secretary


                      EXHIBIT B TO PURCHASE AND SALE AGREEMENT

                               SECURITY AGREEMENT

THIS SECURITY AGREEMENT (the "Agreement") is made and entered into as of this
---th day of August, 1998 by and between OUT-TAKES, INC., a corporation
organized and existing under the laws of the State of California (the
"Grantor")
and the several individuals named on the signature page of this Agreement
(collectively, the "Secured Party").

WHEREAS, the Grantor and the Secured Party have entered into that certain
Purchase and Sale Agreement, dated as of August ---, 1998 (the "Purchase

Agreement"), pursuant to which Grantor has purchased (the "Acquisition") all of
the equity securities issued and outstanding of LOS ALAMOS ENERGY, LLC, a
California limited liability company (the "Subsidiary"); and

WHEREAS, the Grantor has delivered to the Secured Party, as the Purchase Price
for the Acquisition, a Secured Promissory Note in the amount of Four Million
Dollars ($4,000,000) dated as of even date herewith (the "Note"); and

WHEREAS, in order to induce the Secured Party to accept the Note as
consideration for the Acquisition, the Grantor has agreed to provide the
Secured

Party with a security interest in and first lien upon all of its assets and the
assets of the Subsidiary, and the parties now desire to enter into this
Agreement to evidence the same;

NOW, THEREFORE, in consideration of the foregoing premises and the promises
and
covenants herein contained, and for other good and valuable consideration,
the
receipt and sufficiency of which are hereby acknowledged, the parties,
intending
to be legally bound, hereby agree as follows:

1.    Grant of Security Interest. Grantor hereby assigns, conveys and grants
to Secured Party a continuing security interest in and first lien upon all
of Grantor's right, title and interest in and to all of the assets and
properties owned or used by the Grantor in the conduct of its business, or
the business of the -Subsidiary, now owned or hereafter acquired at any time
during the term-hereof, whether tangible or intangible, fixed, movable or
fixtures, of whatever-kind or nature and wherever located, including,
without limitation, all cash and-cash equivalents, securities, accounts
receivable, plant and equipment,-inventory, rolling stock, materials,
supplies, intellectual property rights,-contract rights, choses in action,
and any proceeds from the sale, lease,-transfer or other disposition of any
of such assets, whether for cash or-property (all of the foregoing being
herein referred to collectively as the-"Collateral").  The security interest
granted herein is intended to secure the-prompt payment, when due, of all
amounts due and payable to Secured Party under-the Note including, without
limitation, all principal amounts due thereunder,-all interest accrued
thereon, and all applicable late charges or other fees due-under the Note,
as well as the performance in full of all of Grantor's-obligations under the
Purchase Agreement (collectively, the "Secured-Obligations").

2.    Transfers and Other Liens. Grantor hereby acknowledges to, and agrees
with, Secured Party that for so long as this Agreement shall be in effect,
Grantor, without the prior written consent of the Secured Party, shall not:

(a)     sell, assign or otherwise dispose of, any or all of the Collateral
(except in the ordinary course of business); or

(b)     create or permit to exist or be created any lien, mortgage, security
interest, or other charge or encumbrance upon or with respect to the
Collateral,
other than the Secured Obligations; or

(c)     move the Collateral from any location other than the Grantor's
principal
place of business located at the address set forth in Section 6(b) below.

Remedies Upon an Event of Default.
---------------------------------------
In the event that the Grantor shall fail to perform fully any Secured
Obligation
on the date such performance is due, or if the Grantor should breach or be in
default of any other provision of the Note, the Purchase Agreement or this
Agreement (any of such occurrences being hereinafter referred to as an
"Event of
Default"), to the extent that such Event of Default is not cured or waived
within ten (10) days after the occurrence of such Event of Default, then the
Secured Party shall be entitled to foreclose upon and take possession of the
Collateral, in satisfaction (full or partial as the case may be) of the
indebtedness owed by Grantor.  Promptly after retaking possession of the
Collateral upon any such foreclosure, the Secured Party shall, after deducting
therefrom any amounts expended by the Secured Party in enforcing the Note, the
Purchase Agreement or this Agreement and/or repossessing the Collateral
(including, without limitation, the cost of reasonable attorneys' fees), remit
to the Grantor the difference between the liquidation value of the
Collateral on

the date of repossession thereof and the sum of any amounts paid to the Secured
Party to purchase the Collateral in a liquidating sale. The parties hereby
agree that any such payment to Grantor upon such foreclosure may be made in

stock of the Grantor or a five (5)-year promissory note bearing interest at the

rate of ten percent (10%) per annum, or some combination thereof, as determined
in the sole discretion of the Secured Party.

The Secured Party hereby agrees with the Grantor that, in the event it shall
exercise any or all of its remedies upon an event of default set forth in
Clause
3(a) above, it shall look first to satisfy all of the Secured Obligations
out of
the assets of the Subsidiary, which it shall exhaust as fully as reasonably

possible prior to looking to the assets of the Grantor to satisfy any remaining
Secured Obligations.

4.     Continuing Security Interest; Termination of Same.
      --------------------------------------------------

(a)     This Agreement shall create a continuing security interest in the
Collateral, and shall (i) remain in full force and effect until all of the
Secured Obligations of Grantor shall have been paid or performed in full; (ii)
be binding upon the Grantor, its successors and permitted assigns; and (iii)
inure to the benefit of the Secured Party and their respective successors,
heirs, executors, administrators, transferees and assigns.

(b)   Upon the payment or performance in full of all Secured Obligations, and
any fees, costs and penalties owing thereon, the security interest granted
hereby shall automatically terminate. Upon any such termination, the Secured
Party shall execute and deliver to the Grantor such documents as the Grantor

shall reasonably request to evidence such termination and to effect the release
of the Collateral.

5.   Amendments and Waivers. No amendment or waiver of any provision of this
Agreement, the Purchase Agreement or the Note, and no consent to any departure
by the Grantor herefrom or therefrom, shall in any event be effective unless
the
same shall be in writing and signed by the Secured Party, and then such waiver

or consent shall be effective only in the specific instance and for the express
written purpose for which given.

6.    Notices. In the event that any notice or other communication is to be

sent pursuant to this Agreement, such notice shall be in writing, sent by telex

or by certified mail, return receipt requested, or by delivery in person, or by
overnight courier, addressed as follows, or to such other address as either
party may notify the other of in accordance with the provisions hereof:

      if to Secured Party, to: c/o Mr. Hannes Faul
                                   466 Bell Street
                                   Los Alamos, CA  93440

      (with a copy) to:    Feldhake, August & Roquemore
                           600 Anton Boulevard, Suite 1730
                           Costa Mesa, CA  92626
                           Attn: Kenneth S. August, Esquire
                           Partner


      if to Grantor, to:     OUT-TAKES, INC.
                             1419 Peerless Place, Suite 116
                             Los Angeles, CA  90035
                             Attn: Mr. Peter C. Watt
                             President

      (with a copy) to:     Photo Corporation Group
                            Pty. Limited
                            P.O. Box 415
                            Chester Hill, N.S.W.
                            Australia 2162
                            Attn: Mr. Michael C. Roubicek
                            Group Commercial Manager

All notices and other communications hereunder shall be deemed given when
telexed or delivered, or upon receipt if mailed, in accordance with this
paragraph.

7.    Further Assurances. Grantor agrees to execute and deliver immediately
upon request, financing statements on Form UCC-1 for recordation with the

California Secretary of State; and (b) such other documents as may be necessary
to perfect the Secured Parties' security interests in the Collateral.

8.    Entire Agreement. This Agreement, together with the Note, constitutes
the entire agreement between Grantor and Secured Party, with respect to the
subjects contained herein, and supersedes any prior agreements or
understandings, whether written or oral, express or implied.

9.   Governing Law; Venue. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, without reference to
principles of conflicts of law. Any action brought by any party to enforce any
of the terms or provisions of this Agreement or the note, or otherwise in
connection with or relating to this Agreement, shall be brought only in the

courts of the State of California in the county of Los Angeles, and the parties
hereby accept the exclusive jurisdiction of such courts for all disputes
arising
under this Agreement, the Purchase Agreement or the Note.

10.     Miscellaneous. All other provisions of the Purchase Agreement,

including, without limitation, the specific clauses setting forth the governing

law and venue of this Agreement, the right of further assurances, severability,

specific performance and other injunctive relief, and every other aspect of the
performance, interpretation relationship between the parties and other
miscellaneous provisions, are hereby incorporated herein by reference from the
Purchase Agreement, and are of force and effect as fully as if the same had
been
repeated herein in their entirety.

IN WITNESS WHEREOF, Grantor has caused this Agreement to be duly executed
and
delivered as of the date first above written.

 THE GRANTOR:

 OUT-TAKES, INC.               ATTEST:


 By: ---------------------           By: ---------------------
    Peter C. Watt                         Michael Roubicek
    President                             Secretary



THE SECURED PARTY:

 LOS ALAMOS ENERGY, LLC           WITNESS:


    By:  ----------------------------   By: ------------------------
          Hannes Faul
          Managing Member


 THE INDIVIDUALS:                WITNESS:


 ---------------------              -------------------

 ---------------------              -------------------

[CAPTION]
EXHIBIT 10.33 ASSET LEASE AGREEMENT BETWEEN COMPANY AND COLORVISION, INC.
DATED OCTOBER 26, 1998

               ASSET LEASE AGREEMENT

This is an Asset Lease Agreement ("Agreement"), effective as of October ___,
1998, by and between Colorvision International, Inc., a Florida
corporation, located at 8250 Exchange Drive, Suite 132, Orlando, Florida 32809
(hereinafter referred to as "Lessee") and Out-Takes, Inc., a Delaware
corporation located at 1419 Peerless Place, Suite 116, Los Angeles, California
90035 (hereinafter referred to as "Lessor").

                  BACKGROUND

Lessor owns and operates the Out Takes photo store (the "Business") located
at
Universal Studios California City Walk (the "Location"). Lessee seeks to

lease from Lessor, and Lessor seeks to lease to Lessee certain of the assets of

the Business for use at the Location as set forth in this Agreement, subject to
the terms and conditions set forth below. Accordingly, in consideration of the

mutual covenants and agree-ments set forth below, the parties agree as follows:

                   TERMS

1.    LEASE OF ASSETS. The parties hereby agree that, at Closing (as defined
below), Lessor shall lease the assets of the Business set forth on Schedule
1 to
this Agreement (collectively the "Assets") provided, however, that within
thirty

(30) days from the date of this Agreement they shall jointly prepare an item by
item list of the Assets being leased hereunder, and the agreed-upon value
thereof, which list will then be attached to this Agreement as a revised
Schedule 1.  Lessor further agrees that the Assets shall be used only at the
Location during the Lease Term, as hereafter defined. Upon the expiration of

the Lease Term, or its earlier termination, all of the Assets shall be returned

to Lessor hereunder in the same condition as they are being delivered to Lessee
at the Closing, normal wear and tear excepted, and free and clear of any lien,
charge, security interest, claim or other encumbrance. The Assets are being
leased to Lessee on an "as is-where is" basis, and Lessor makes no
representation or warranty to Lessee, express or implied, as to the
condition of
any Asset or suitability to the Business or the contemplated use thereof by
Lessee.

Throughout the entire Lease Term, Lessee hereby agrees with and covenants to
Lessor that it shall not do any of the following, nor suffer or permit any of

the following to occur to the extent the same shall be within its discretion or
control, without having obtained the prior written consent of Lessor:

   (a)    sell, lease, sublease, exchange, transfer or otherwise dispose of
any of the Assets;

   (b)    subject any of the Assets to any lien, security interest or
encumbrance;

   (c)    take any action which would materially destroy, injure, alter or
modify any Asset, or the right of Lessor to use any Asset, or which would
render

defective or otherwise encumber good and marketable title to any such Asset, to
the extent such title exists in respect of such Asset at the Closing.

2.   ASSIGNMENT OF LEASE. At Closing (as defined below), Lessor shall assign
and transfer to Lessee all of its right, title and interest in and to that
certain Business Lease executed as of November 13, 1992 ("Lease") between
Lessor

and MCA Development Company, a division of MCA Inc. ("Landlord") pursuant to an
Assignment of Lease substantially in the form attached to this Agreement as
Exhibit "A" ("Assignment"), which Assignment requires the written consent of
the
Landlord.

3.    LEASE PRICE. The rental price for the Assets (the "Lease Price") shall
be a monthly amount equal to seven percent (7%) of the gross revenues (less
applicable sales taxes due on goods sold at the Location) ("Gross Revenues")

derived by Lessee from the Business, or any other business conducted or engaged

in by Lessee at the Location during each month, or portion thereof, that Lessee
shall be in possession of the Assets, for the duration of the Lease, as

currently extended through May 30, 2005 (the "Lease Term"). In the event Lessee
ceases to conduct any business at the Location: (i) for reasons of
bankruptcy or
insolvency, (ii) acts of God, emergencies, strikes or other causes out of
Lessee's control; (iii) any loss of the right of Lessor to lease the Assets to
Lessee prior to the conclusion of the Lease Term; or (iv) any termination of
Lease by Landlord if through no fault of the Lessee, then no further payments
shall be due Lessor hereunder from the date Lessee ceases to operate at the

Location until Lessee resumes business at the Location, if such a resumption of
business occurs.  Lessee acknowledges to Lessor by its execution of this
Agreement that it intends in good faith to operate at the Location
profitably in
accordance with the Lease, and shall use its best efforts throughout the Lease
term to do so, and Lessor acknowledges to Lessee that it understands such
profitable operation cannot be guaranteed.

4.    PAYMENT OF LEASE PRICE. Subject to the terms of this Agreement and in
reliance on the representations and warranties of Lessor set forth below,
Lessee

shall lease, at Closing, the Assets and, in full consideration therefor, shall:

   (a)     pay $50,000.00 as a deposit ("Deposit") to Lessor at Closing.
Lessee shall have the option of making the payment by cashier's check or bank
wire.  Lessor shall provide bank wire instructions to Lessee if requested by
Lessee; and

   (b)   pay the entire amount of the Lease Price due and payable to Lessor
(together with the applicable amount of any taxes as may be required in
connection with payments of the Lease Price) on or before the fifteenth day of
the month following each month of the Lease Term; provided, however, that
Lessee
may deduct up to $4,166.67 each month from any sum otherwise payable to Lessee
pursuant to this subsection 4(b) until the entire amount of the Deposit has
been
repaid to Lessee; further provided that the amount of any security deposits
shown on Schedule 2 to this Agreement which are transferred to, or credited to
the account of, Lessee by the holders of such deposits shall be deemed
repayments of the Deposit to Lessee and shall thereby reduce, by a
corresponding
amount, any deductions from the Gross Revenues otherwise payable to Lessor
which
Lessee may make pursuant to this Subsection 4(b).

5.    LICENSE TO USE TRADE NAME. In further consideration of the payment
of the Lease Price to Lessor as set forth above, the Lessor hereby grants to
Lessee a license (the "License") to use the trade name "Out-Takes" (the "Trade
Name") only in connection with the Business at the Location and for so long as
Lessee operates the Business at the Location. Lessee shall have no right to

use the Trade Name in connection with any other present or future operations of
Lessee. Lessee recognizes and acknowledges Lessor's ownership of and prior
rights in the Trade Name and shall not take any action inconsistent with
Lessor's ownership of and prior rights in the Trade Name or which would
otherwise destroy or impair Lessor's interest in such rights.

Notwithstanding any other provisions contained in this Agreement concerning
the
rights of Lessor to indemnification hereunder, and without limiting or
excluding any of such rights, Lessee hereby expressly agrees with Lessor
that in
the event Lessor shall be named in any lawsuit or other proceeding solely by
virtue of Lessee's use of the Trade Name hereunder (and not in connection with
any actual liability or specific claim against Lessor in such lawsuit or
proceeding), then Lessee shall provide to the Lessor directly, and promptly
upon
its request therefor, the full amount of any fees or expenses (including,

without limitation, reasonable attorneys' fees and expenses) incurred by Lessor
in having itself dismissed from any such action.

The license to use the Trade Name granted hereunder shall be co- terminous

with the Lease Term or such shorter period as Lessee shall actually operate the
Business at the Location. Lessor agrees that, for so long as this Agreement
shall be in effect, it shall not take any action, or omit to take any action
which would have the effect of impairing any of Lessor's rights in the Trade
Name, or the value thereof to Lessor. Lessor covenants that it shall not enter

into any agreement, arrangement or undertaking, the effect of which would be to
result in the transfer, assignment, mortgage, hypothecation, dilution or
extinguishment of the Trade Name or any rights of Lessor therein.

6.    CLOSING. The closing of the transaction contemplated by this Agreement
(the "Closing") shall take place in Los Angeles, California on October ---,
1998, or such other date and/or place as the parties mutually agree in writing
(the "Closing Date").

7.     DELIVERIES BY LESSOR. At Closing, Lessor shall deliver to Lessee:

   (a)     an originally executed copy of this Agreement;

   (b)     the Assignment, duly executed by Lessor;

   (c)     a certificate of actions by Board of Directors of Lessor
authorizing the transaction contemplated by this Agreement to be undertaken by
Lessor.

8.   DELIVERIES BY LESSEE. At Closing, Lessee shall deliver to Lessor (1) an
originally executed copy of this Agreement; (2) the Deposit in accordance with
subsection 4(a) hereof; (3) the Assignment, duly executed by Lessee; and (4) a
certificate of action by the Board of Directors of Lessee authorizing the
transactions contemplated by the Agreement to be undertaken by Lessee.

9.   LIABILITIES OF LESSOR. Except with respect to the Assignment and except
as provided in Schedule 3 to this Agreement, Lessee will not assume any trade

and accounts payable that are, or have become due for payment as of the Closing
date or any other liabilities not incurred by Lessor in the ordinary course of
business through the Closing Date.  Without limiting the generality of the
foregoing, Lessee will not assume intercompany liabilities, payables or
obligations of Lessor, nor will it assume any of Lessor's liabilities or
obligations arising out of employment agreements between Lessor and any of
Lessor's employees or Lessor's liabilities or obligations relating to the
negotiation and/or closing of the transaction contemplated herein including,
but
not limited to, any broker commission payable in connection with the
transaction.  Lessee shall be solely and exclusively liable for, and Lessor
expressly does not agree to assume any of the obligations created or
liabilities
imposed upon Lessee by virtue of its use of the Assets after the Closing.
Lessee further covenants to and agrees with Lessor that in the use of the
Assets

as contemplated herein, it shall not disturb any agreement to which such Assets

are subject nor by which they are bound, nor create, nor suffer or permitted to
be created or imposed, any lien, charge or other liability to, upon or for the
account of, Lessor.

10.     INDEMNIFICATION.

   (a)   Except as otherwise contemplated herein, Lessor shall indemnify and
hold Lessee harmless from, against, and in respect of the following:

     (i)     any and all liabilities, obligations, debts, contracts or
other commitments of Lessor of any kind, known or unknown, whether fixed or
contingent, and whether arising in contract, in tort, or otherwise from the
operation of the Business at the Location prior to Closing including, but not
limited to, any liability of Lessor for sales and use taxes;

     (ii)   any damage or deficiency resulting from any misrepresentation
in or omission from any certificate or other instrument furnished or to be
furnished to Lessee by Lessor pursuant to this Agreement;

     (iii)     any and all losses, liabilities, claims, damages and
expenses, including court costs and reasonable attorney's fees, arising out of
any claim for brokerage or other commissions relative to this Agreement or the
transactions contemplated hereby insofar as any such claim arises by reason of
services alleged to have been rendered to or at the instance of Lessor;

     (iv)     any material breach by Lessor of this Agreement; and
     (v)      all actions, suits, proceedings, claims, demands, assessments,
judgments, legal fees, costs and expenses incident to any of the foregoing or
arising out of any act or omission of Lessor in the conduct of the Business
before the Closing.
     (b)   Lessee shall indemnify and hold Lessor harmless from, against, and
in respect of the following:
     (i)     any and all liabilities, obligations, debts, contracts or other
commitments of Lessee of any kind, known or unknown, whether fixed or
contingent, and whether arising in contract, in tort, or otherwise from the
operation of the Business (or any other business or activity conducted) at the
Location after the Closing including, but not limited to, any liability of

Lessee for sales and use taxes and any use of the Trade Name at any location by
Lessee in breach of Section 5 hereof; and

     (ii)     any material breach by Lessee of this Agreement.

     (iii)   any liability or obligation arising out of the inclusion in the
list of Assets of the license agreements set forth on Schedule 1 hereto,

including without limitation for the failure of Lessor to obtain the consent of
any licensor thereunder prior to leasing such licenses to Lessee, or any

liability or obligation which may be agreed upon between Lessee and any of such
licensors subsequent to the date of the Closing.


   (c)     Each party agrees to give notice to the other party of the assertion

of any claim or demand or the institution of any action, suit, or proceeding in
respect of which indemnification may be claimed hereunder and the party
receiving such notice shall have the right to undertake the defense or
settlement of such action, suit or proceeding ("Litigation") at it's own
expense.  If the party receiving such notice does not undertake (or, within
ten (10) days thereafter, express its intention to so undertake) the defense
or settlement of the Litigation, the party giving such notice may control
the defense or settlement of the Litigation, provided, that if at any time
during the pendency of such Litigation it shall be deemed in good faith by
either party, or its respective counsel, that the interests of the
respective parties in respect of such Litigation are or may become adverse,
or otherwise conflict in any material way, then each party shall be entitled
to separate counsel thereafter, and, provided, further, that in no event
shall either party be entitled to make any offer or agreement of settlement
in respect of any  such Litigation which is or will or could become binding
upon the other party hereto, without having obtained such other party's
prior written consent to be bound thereby. In the event Lessee is
controlling the defense or settlement of Litigation pursuant to this
Subsection 10(c), and provided that Lessor is not entitled to
indemnification in respect of such Litigation pursuant to Section 10(b)
above, Lessor hereby authorizes Lessee to deduct the costs of such defense
or settlement from any sums due Lessor pursuant to subsection 4(b) hereof.
In the event such costs exceed any sums due Lessor pursuant to subsection
4(b) hereof, Lessor shall remit the amount of such costs directly to Lessee.

(d)   Notwithstanding anything else contained in this Section 10, Lessee
shall promptly notify Lessor in the manner set forth in Section 16(d) below
in the event it becomes aware of any threatened or pending litigation
involving or relating to the Business, any other business or activity
conducted at the Location, the Assets (or any part thereof) or the Lease.

11.     REPRESENTATIONS AND WARRANTIES OF LESSOR. Lessor represents and
warrants
to Lessee as follows:

   (a)   Organization and Standing. Lessor is a corporation organized under
the laws of the State of Delaware and its status is active.

   (b)   Power and Authority. Lessor has the requisite corporate authority to
enter into this Agreement and to incur and perform its obligations under
this Agreement.  Lessor has all necessary corporate power to own, lease,
hold, and operate all of its properties and assets and to carry on the
Business as it is now being conducted. The execution, delivery and
performance by Lessor of this Agreement has been authorized by all necessary
corporate action. Upon the execution and delivery of this Agreement, this
Agreement shall constitute a valid and binding agreement of Lessor,
enforceable against Lessor in accordance with its terms, subject only to
applicable bankruptcy, moratorium and similar laws.

   (c)     Title to Assets. Except for any licenses listed on Schedule 7
hereto with respect to which Lessor makes no representation or warranty as
to title, quality or validity thereof, Lessor has good and marketable title
to all of the Assets, free and clear from all liens, encumbrances, security
interests or claims of any kind or nature, other than liens incurred in the
ordinary course of the Business for trade or in connection with the purchase
of assets, or for services rendered to Lessor by materialmen or other
similar persons, or for taxes not yet due and payable, or which otherwise do
not have a material adverse impact upon the financial condition of the
Business. With respect to any security interests by a third party in the
Assets, Lessor shall deliver to Lessee at closing (or as soon thereafter as
Lessor may become aware thereof) a copy of a duly filed UCC Form 3
terminating the security interest of any third party in the Assets.

   (d)   Approvals and Consents. The execution, delivery and performance of
this

Agreement (and the transactions contemplated by this Agreement) do not and will
not:  (i) contravene any provision of the articles of incorporation or
bylaws of
Lessor; (ii) result in a material breach of, constitute a material default

under, result in the modification or cancellation of, or give rise to any right
of termination, modification or acceleration in respect of any indenture, loan
agreement, mortgage, lease or any other contract, or agreement to which Lessor
or any of the Assets are bound (other than in respect of the Lease); (iii)
other
than as may apply to Lessee, result in the creation of any security interest,

pledge, lien, charge, claim, option, right to acquire, encumbrance, restriction
on transfer, or adverse claim of any nature whatsoever upon any of the Assets;

(iv) violate any writ, order, injunction or decree of any court or any federal,
state, municipal or other domestic or foreign governmental department,
commission, board, bureau, agency or instrumentality, which violation or
default
in any such case would have a material adverse effect on the Business; (v)
require approval of the shareholders of Lessor; or (vi) require any
authorization, consent or approval of, or filing with or notice to, any
governmental or judicial body or agency, or any other entity or person,
including, without limitation, any filing with the Securities and Exchange
Commission ("SEC") other than any obligation Lessor may have to file a Form
8- K
as contemplated by Section 15 of this Agreement.

   (d)   Litigation. There are no actions or suits at law or in equity now

---------- pending or, to the actual knowledge of Lessor, threatened which
could
have a material adverse effect on the Business or any of the Assets, or the
ability of Lessor to consummate the transactions contemplated by this
Agreement.

   (e)     Collective Bargaining Agreements. There are no collective
---------------------------------- bargaining agreements to  which Lessor is a
party or by which Lessor is bound, and there is no pending or threatened labor
dispute, labor union organizing attempt, strike, or work  stoppage affecting
either Lessor or the Business.

   (f)   Benefit Plans. There are no benefit plans applicable to any of the
         -------------
employees of the Business that are currently in effect or which, with
respect to

the Business, Lessor has committed to implement prior to the Closing, except as
shown on Schedule 4 to this Agreement.

   (g)     Contracts.  Schedule 5 to this Agreement lists all material
contracts
(including contracts with consultants), leases (where Lessor is lessor or
lessee) except the Lease, licenses, agreements, and undertakings of Lessor to
which it is or at the Closing Date will be a party and bound, or to which
any of
its properties or Assets are or will be subject, and, if written, Lessor shall

have supplied Lessee with copies of such documents. Except as shown on Schedule

6 to this Agreement, each such contract, undertaking or other commitment listed
in Schedule 5 is, and upon the Closing will be (except as completed or expired
by its terms), valid and enforce-able in accordance with its terms, and no
party
is in default under any material provision thereof.

   (h)     Trade Name.  Lessor has adopted and uses the Trade Name in
connection
with the Business. Lessor has not been notified that Lessor's use of the trade

name or logo infringes the rights of a third party. No proceedings have been or
will at the Closing Date have been instituted or threatened which assert

infringement of rights of any third party against Lessor pursuant to its use of
the Trade Name.

   (i)     Compliance with Laws. As of the date of this Agreement, to the
actual
knowledge of Lessor, (i) there is no violation of any applicable laws,
regulations or orders relating to the conduct of the Business, and (ii)
there is
no use of the Assets by Lessor in the Business which violates any applicable
laws, codes, ordinances and regulations, whether federal, state or local,
which,
in either case, would have a material adverse effect on  the Business.


   (j)     Conditions Affecting the Business. Other than as applicable to Gerry
Wersh, who is deemed to be essential to the technical aspects of the
Business as
currently being conducted, Lessor is not aware of any extraordinary or unusual
conditions in existence on the date hereof with respect to the markets,
services, facilities, personnel, or supplies of Lessor that is not public
information or known generally in Lessor's industry or which has not been
disclosed in writing to Lessee and which Lessor believes will result in a
material and adverse effect on the Business not experienced by others in
similar businesses.

   (k)   No Misrepresentations. None of the representations and warranties of
Lessor set forth in this Agreement or in the attached exhibits and schedules
nor
any information or statements contained in the lists or documents provided
or to
be provided by Lessor to Lessee, notwithstanding any investigation thereof by
Lessee, contains or will contain any untrue statement of a material fact, or
omits or will omit the statement of any material fact necessary to render the
same not misleading.

   (l)    Conveyance Not Fraudulent. Lessor is not making the transactions
contemplated by this Agreement with the intent to hinder, delay, or defraud
either its present or future creditors.

   (m)   Discontinuance of Business. Upon consummation of the transactions

contemplated hereby, Lessor will discontinue its operation of the Business, but
not of any other business owned or operated by Lessor.

12.     REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee represents and
warrants
to Lessor as follows:

   (a)    Organization and Standing. Lessee is a corporation organized and
existing under the laws of the State of Florida and its status is active.

   (b)   Power and Authority. Lessee has the requisite corporate authority to
enter into this Agreement and to incur and perform its obligations under this
Agreement.  Lessee has all necessary corporate power to own, lease, hold, and
operate the Assets and carry on the Business as it is now being conducted. The
execution, delivery, and performance by Lessee of this Agreement has been
authorized by all necessary corporate action. Upon the execution and
delivery of
this Agreement, this Agreement shall constitute a valid and binding
agreement of
Lessee, enforceable against Lessee in accordance with its terms, subject
only to
applicable bankruptcy, moratorium, and similar laws.

   (c)   Approvals and Consents. The execution, delivery and performance of
this

Agreement (and the transactions contemplated by this Agreement) do not and will

not: (i) contravene any provision of the articles of incorporation or bylaws of
Lessee; (ii) result in a breach of, constitute a default under, result in the
modification or cancellation of, or give  rise to any right of termination,
modification, or acceleration in respect of any indenture, loan agreement,
mortgage, lease or any other contract, or agreement to which Lessee is bound;
(iii) require any authorization, consent or approval of, or filing with or
notice to, any governmental or judicial body or agency, or any other entity or
person.

   (d)   No Misrepresentations. None of the representations and warranties of
Lessee set forth in this Agreement or in the attached exhibits and schedules,
nor any information or statements included in the lists or documents to be
provided by Lessee to Lessor, notwithstanding any investigation thereof by
Lessor, contains or will contain any untrue statement of a material fact, or
omits or will omit the statement of any material fact necessary to render the
same not misleading.

(e)   Brokers' Fees. Lessee has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.

13. SURVIVAL OF PROVISIONS. All representations, warranties, agreements,

covenants, assignments and licenses made or granted herein by Lessor or  Lessee
in connection with the transactions contemplated by or set forth in this

Agreement or contained in any certificate, schedule, exhibit, or other document
delivered pursuant to this Agreement shall survive the Closing.

14.     DISCLOSURE AND NON-INTERFERENCE. The parties agree not to make any

independent press releases or to disclose the terms of this Agreement except to
their attorneys and other necessary parties.  The parties further agree to
prepare and issue a mutually agreeable press release upon Closing of this
transac-tion, provided that Lessee understands that Lessor may be obligated to
file with the SEC on Form 8-K within five days following the Closing. Further,
the parties agree not to interfere in each other's businesses, nor to make any
statements which would adversely impact the other's business interests.
15.     RELATIONSHIP CREATED; INDEPENDENT CONTRACTOR. No provision of this
Agreement is intended to make Lessee an employee or agent of Lessor for any
purpose whatsoever, nor shall the execution of this Agreement be deemed to
create any partnership, joint venture or other form of business association
between the parties other than that of independent contractors.  Lessor
acknowledges that it shall not have the right to require Lessee to make any

specific amount or number of sales, to attend sales meetings, to conform to any
fixed or minimum number of hours devoted to selling effort, to follow
prescribed
itineraries, or do anything else which would jeopardize the relationship being
created between the parties. Notwithstanding the foregoing, Lessor shall have
the right to request Lessee to, and Lessee shall, provide Lessor with such
reports or information regarding the Assets as Lessor may reasonably request
from time to time during the Lease Term.

16.     GENERAL PROVISIONS.

   (a)     Further Assurances. The parties agree that, from time to time
hereafter and upon request, each of them will execute, acknowledge and deliver

such other instruments as may be reasonably required to carry out the terms and
conditions of this Agreement.

   (b)    Benefit and Assignment. This Agreement shall be binding upon and
inure
to the benefit of the parties hereto and their respective successors and
assigns.  The rights of Lessee hereunder may not be assigned without the prior
written consent of Lessor which shall not unreasonably be withheld. The rights

of Lessor hereunder may be assigned, provided that any such assignment shall in
no way relieve Lessor of its obligations and responsibilities to Lessee under
this Agreement.

   (c)     Governing Law; Venue. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, excluding
those laws of California relating to conflicts of laws of different
jurisdictions.  The parties hereby expressly submit to the jurisdiction of any
court of competent jurisdiction sitting in and for the County of Los Angeles,
State of California.

(d)     Notices.  All notices, requests, demands and other communications
hereunder shall be in writing, and shall be deemed to have been duly given if
delivered by overnight delivery service or hand delivered, addressed as
follows:

     If to Lessor:

        Out-Takes, Inc.
        1419 Peerless Place, Suite 116
        Los Angeles, California  90035

     With a copy (which shall not constitute notice) to:

        Feldhake, August & Roquemore
        600 Anton Boulevard, Suite 1730
        Costa Mesa, California 92626
        Attention:  Kenneth S. August, Esquire

     If to Lessee:

        Colorvision International, Inc.
        8250 Exchange Drive, Suite 132
        Orlando, Florida 32809

     With a copy (which shall not constitute notice) to:

        Holland & Knight LLP
        Post Office Box 1526
        Orlando, Florida  32802
        Attention:  John R. Dierking, Esquire

   (e)    Expenses. Any expenses in connection with this Agreement or the
transactions contemplated herein shall be paid for by the party incurring such
expenses following the Closing.  Lessee shall not assume any obligations of
Lessor, nor Lessor assume any obligations of Lessee, in connection with any
such
expenses.

   (f)    Sales and Other Taxes. Any sales and other applicable taxes with
respect to the lease of the Assets hereunder shall be borne by Lessee, and
shall
be paid by Lessee as and when such taxes become due consistent with the
lease of
the Assets set forth on Schedule 1 attached hereto.

   (g)     Headings.  All paragraph headings herein are inserted for
convenience
only and shall not modify or affect the construction or interpretation of any
provision of this Agreement.

   (h)    Counterparts; Faxes. This Agreement may be signed in one or more
counterparts, each of which shall be considered an original copy but all of

which together shall be deemed to be but one and the same instrument.  Wherever
in this Agreement an original signature shall be required, a facsimile of an
original signature shall be deemed an original signature for all purposes.

   (i)     Schedules and Exhibits. The schedules and exhibits attached to this

Agreement are hereby incorporated herein as an integral part hereof as fully as
if they had been written into the body of this Agreement in their entirety.


   (j)     Amendment, Modification and Waiver.  This Agreement may be modified,
amended and supplemented only by the mutual written agreement of both of the
parties hereto. Each party may waive in writing any condition intended to be
for
its benefit.

   (k)    Validity. The invalidity or unenforceability of any provision or

provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement which shall remain in full force and
effect, nor shall the invalidity or unenforceability of a portion of any
provision of this Agreement affect the validity or enforceability of the
balance
of such provision.

   (l)    Entire Agreement. This Agreement and the Schedules and Exhibits
delivered herewith represent the entire Agreement of the parties and supersede
all prior negotiations and discussions by and among the parties hereto with
respect to the subject matter hereof. No provision or document of any kind
shall

be included in or form a part of this Agreement unless in writing and delivered
to the other party by the party to be charged. This agreement supersedes and
replaces the Letter which shall terminate upon the execution of this Agreement
by the parties.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year set forth above.

LESSOR:

OUT-TAKES, INC.                         ATTEST:

By:
   -----------------------------
   James C. Harvey, President, Secretary

LESSEE:

COLORVISION INTERNATIONAL, INC.          ATTEST:



By:
--------------------------
--------------------------
    President, Secretary

   EXHIBIT "A"

   ASSIGNMENT, ASSUMPTION OF LEASE AND LANDLORD CONSENT AGREEMENT

THIS AGREEMENT is made and entered into as of this _____  day of October,
1998 by
and between Out-Takes, Inc. ("Assignor"), Colorvision International, Inc.
("Assignee") and Universal CityWalk Hollywood, a Unit of Universal Studios,
Inc., as successor in interest to MCA Development, a division of MCA Inc.
("Landlord").
                              R E C I T A L S

A. Landlord and Assignor, as Tenant, entered into that certain written Lease

dated as of November 12, 1992 (" 1992 Lease") pursuant to which Landlord leased

to Assignor certain premises located in Universal City, California as described
in such 1992 Lease (the "Premises"), which was subsequently amended by that
certain First Amendment to Lease dated March, 1993. The 1992 Lease and the
First
Amendment to Lease are collectively referred to herein as the "Lease".

   B. Simultaneously as of November 13, 1992 Guarantor executed and
delivered a
Guarantee of Lease (the "Guarantee") with respect to Assignor's obligations
under the 1992 Lease, which Guarantee remains in full force and effect.

   C. Effective as of the date first written above, Assignor wishes to assign
and Assignee wishes to accept such assignment and assume all of Assignor's
rights and obligations under the Lease.

   NOW, THEREFORE, in consideration of the above and other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:

1.  Assignor hereby assigns, conveys and transfers all of its right, title and
interest in the Lease, a copy of which is attached and incorporated herein
by
reference.


   2.  Assignee hereby assumes, agrees to be bound by and undertakes to perform
each and every one of the terms, covenants and conditions contained in the
Lease. The Assignee further assumes all obligations and liabilities of the

Assignor under the Lease in all respects as if Assignee were the original party
to the Lease.

3.   Assignee shall be liable for all amounts due under the Lease on or after
the date hereof. In the event of a default under the Lease, Lessor shall have
the right to proceed directly and immediately against the Assignee without
first
proceeding against the property and such proceeding is not deemed to be an
irrevocable election of remedies.

4.     Subject to the terms and conditions herein, Lessor consents to the
assignment of the Lease from Assignor to Assignee. Assignor acknowledges that

this consent by Lessor is given without releasing Assignor from its obligations
under the Lease. This consent by Lessor shall not be deemed to be or construed
as a consent to any subsequent assignment of the Lease.

5.  Assignee and Lessor agree that Assignee shall replace Robert Shelton as
Guarantor under said Lease, and shall assume all obligations of Guarantor
consistent with the terms of the Lease.

6.   Assignee shall deposit with Lessor a Security Deposit of two months
Minimum Rent (as defined in the Lease) in the amount of Twenty Thousand Seven
Hundred Forty Five Dollars and Seventy Cents ($20,745.70). Landlord hereby
agrees that, notwithstanding the foregoing, Assignor shall transfer its
Security
Deposit currently held by Landlord in the amount of Eighteen Thousand Seven
Hundred Twenty Two Thousand Dollars Sixty Six Cents ($18,722.66), less any
amounts owed to Landlord prior to the Effective Date, to Assignee's Security
Deposit account, and Assignee shall remit to Landlord on or before the
Effective

Date any balance remaining in order to satisfy the Security Deposit requirement
of Assignee.

7.   Assignor represents, warrants and agrees that all furniture, fixtures and
equipment which are the property of Assignor (including but not limited to
property which Assignor leases to Assignee as part of the assignment

transaction) and used in the Premises will be owned by Assignor, free and clear
of any lien or encumbrance, and further that in the event of a default by
Assignee which results in the loss of the right of Assignee to occupy the
Premises and the re-entry by Assignor, all of Assignor's furniture, fixtures
and
equipment located in the Premises will be left in the Premises for Assignor's
use without compensation until the obligations of Assignor to Landlord under
the
Lease have been satisfied.

8.    Except as modified hereby, all terms and conditions of the Lease shall
remain in full force and effect.

9. All of the terms and provisions of this Agreement shall be binding and
shall insure to the benefit of the parties, their respective successors and
assigns.

      IN WITNESS WHEREOF, the parties have caused this instrument to be
executed
as of the date first written above.

ASSIGNOR:     OUT-TAKES, INC.


By     --------------------------------
Name:  --------------------------------
Title: --------------------------------


ASSIGNEE:  Colorvision International, Inc.


By:  ---------------------------------
Name: --------------------------------
Title: -------------------------------

LANDLORD: Universal CityWalk Hollywood,
a Unit of Universal Studios, Inc.


By:-----------------------------------
   Larry Kurzweil
   Senior Vice President & General Manager


[CAPTION]
    SCHEDULE 1

 ASSETS OF BUSINESS

1.     All items remaining in the Out Takes store at Universal City Walk as of
October ___ , 1998, excluding the Sticker Machine belonging to paradise
Creations.

2.     All items remaining in the Panorama City storage facility including
equipment previously used by Lessor in operating its Irvine, CA location.

3.     The licenses listed on Schedule 7 hereof.

[The parties shall prepare a definitive list of the above-referenced Assets
being leased hereunder within thirty (30) days from the date of this Agreement
in accordance with the provisions of Section 1 hereof.]

     SCHEDULE 2

SECURITY DEPOSITS

     City Walk premises deposit        $18,722.66     Board
of Equalization deposit                $ 1,000.00
     City Walk electricity deposit     $   700.00
   SCHEDULE 3

   LIABILITIES OF LESSOR TO BE ASSUMED BY LESSEE

Lessee assumes all liabilities in connection with royalties on the below
named contracts, as of October ---, 1998. Lessee will assume financial
responsibility and liability for any and all existing or future guarantees or
other commitments in respect of the below named contracts:

 1.     MTV Networks
 2.     King Features
 3.     Stan Gorman
 4.     Young Kwon
 5.     Simon Kornblit
 6.     Gerry Wersh/Watkins
 7.     20th Century Fox
 8.     Curtis Archives
 9.     CMC
10.     Universal Studios
11.     Tony Stone Images
12.     Paramount
13.     JP Morgan
14.     Queen B
15.     Saban
16.     Baywatch
17.     Warner Brothers

   SCHEDULE 4

   BENEFIT PLANS OF LESSOR

1.   Group health insurance plan in effect as of September 30, 1998

   SCHEDULE 5

   SCHEDULE OF CONTRACTS

1.     License Agreements listed on Schedule 3

   SCHEDULE 6

   CONTRACT DEFAULTS

License agreements with:

1.     JP Morgan
2.     20th Century Fox
3.     Curtis Archives
4.     CMC
4.     Universal Studios
6.     Warner Brothers



   SCHEDULE 7

   LICENSE AGREEMENTS

 1.     MTV Networks
 2.     King Features
 3.     Stan Gorman
 4.     Young Kwon
 5.     Simon Kornblit
 6.     Gerry Wersh/Watkins
 7.     20th Century Fox
 8.     Curtis Archives
 9.     CMC
10.     Universal Studios
11.     Tony Stone Images
12.     Paramount
13.     JP Morgan
14.     Queen B
15.     Saban
16.     Baywatch
17.     Warner Brothers


                              OUT TAKES, INC.
                             WRITTEN CONSENT
                                 of the
                              SOLE DIRECTOR


                             October 26, 1998

This Written Consent of the Sole Director of Out Takes, Inc., a Delaware
Corporation (the "Corporation") is made as of the date set forth above in
accordance with the Bylaws of the Corporation. The Sole Director hereby
consents, pursuant to the provisions of Section 141(f) of the Delaware
Corporations Code, to the adoption of the following Resolutions, effective
as of 5:00 p.m. on October 26, 1998, which are to be filed with the Minutes
of the Board of Directors:

WHEREAS, it is in the best interests of the Corporation to lease to others
certain of its assets; and

WHEREAS, it is in the best interests of the Corporation to divest itself of
certain of its liabilities:

RESOLVED, that the Corporation enter into an Asset Lease Agreement with
Colorvision International, Inc.

FURTHER RESOLVED, that all of the actions taken by the executive officers of
 the Corporation since the last meeting of the Board of Directors are hereby
specifically authorized, ratified and approved by the Sole Director.

APPROVED:



--------------------
James C. Harvey
Sole Director

[CAPTION]
EXHIBIT 14(a)FORMER INDEPENDENT AUDITOR'S REPORT

             INDEPENDENT AUDITOR'S REPORT

The Stockholders and Board of Directors of
Out-Takes, Inc.
Los Angeles, California

We have audited the accompanying balance sheets of Out-Takes, Inc. as of March
31, 1998 and 1997, and the related statements of operations, stockholders'
equity, and cash flows for each of the three fiscal years in the period ended
March 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting

the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by

management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Out-Takes, Inc. as of March
31,
1998 and 1997 and the results of its operations and its cash flows for each of
the three fiscal years in the period ended March 31, 1998, in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 14 to the

financial statements, the Company has suffered recurring losses from operations

and has a net working capital deficiency that raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 14. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

Moore Stephens, P.C.
Certified Public Accountants
Cranford, New Jersey
May 20, 1998







                                 OUT-TAKES INC.

                                 BALANCE SHEETS

                    ASSETS                   March 31,
                                             1998        1997
Current Assets:
 Cash and Cash Equivalents               $  23,044      $ 70,908
 Inventory                                  10,082        22,879
 Due from Related Party                     -              7,343
 Prepaid Insurance                           8,949        10,796
 Prepaid Taxes                               3,005         7,829
 Other Current Assets                        9,564         8,132
                                          -----------    ---------
 Total Current Assets                    $  54,644      $127,887

Plant & Equipment - Net                     204,148      845,198

Other Non-Current Assets:
 Deposits                                    27,048       38,378
                                         -----------    ----------

   Total Assets                          $ 285,840     1,011,463
                                         ===========   ===========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
 Accounts Payable                   $   31,173          $113,803
 Accrued Payroll                        22,047            42,868
 Accrued Expenses                      108,819           104,331
 Accrued Interest - Related Party       56,452             7,871
 Provision for Studio closure           31,878                -
 Compensation payable - Related Parties  1,347           115,375
 Due to Related Party                  721,227           260,500
                                      -----------     -----------
 Total Current Liabilities          $  972,943        $  644,748

Non-Current Liabilities:
 Notes Payable                      $   48,000        $   48,000
 Compensation payable - Related Parties     -              5,962
                                      -----------     -----------
 Total Non-Current Liabilities      $   48,000        $  53,962

 Commitments (Note 8)                      -                 -

Stockholders' Equity (Deficit):
 Preferred Stock, par value $.01 per share;
  5,000,000 shares authorized, none issued     $  -   $       -

 Common Stock, par value $.01 per share;
  35,000,000 shares authorized; 20,788,122
  shares issued of which 292,396 shares
  are in Treasury                     207,882           207,882

 Capital in excess of par value     9,905,430        10,014,980

 Accumulated deficit              (10,740,009)       (9,657,703)
                                   -----------       -----------

 Total                             ($ 626,697)       $  565,159

 Less: Treasury Stock, at cost       (108,406)         (108,406)
   Deferred Compensation          -  (144,000)
                                   -----------       -----------

Total Stockholders' Equity (Deficit ($ 735,103)      $  312,753
                                   -----------       -----------

   Total Liabilities and
   Stockholders' Equity             $  285,840       $1,011,463
                                   ===========       ===========

                                 OUT-TAKES INC.

                           STATEMENTS OF OPERATIONS

                           Years ended March 31,

                       1 9 9 8    1 9 9 7   1 9 9 6
                       -------    -------   -------

Revenues            $  1,187,638  $ 2,014,788 $ 1,580,712
                    -------------  ----------- -----------

Cost of Revenues:

 Compensation and Related Benefits      524,276    712,939   548,137
 Depreciation and Amortization          420,317    359,123   249,249
 Loss on Impairment of Long-Lived
  Assets                                     -          -      762,129
 Pre-Opening Costs - Irvine Studio           -          -       67,007
 Rent                                   236,192    300,857     210,639
 Loss on closure of Irvine Studio       164,745         -        -
 Other Cost of Revenues                 383,354    553,011     378,967
                                     ------------ ----------- -----------

 Total Cost of Revenues               1,728,884  1,925,930   2,216,128
                                     ---------------------- -----------

   Gross Income (Loss)                 (541,246)    88,858    (635,416)
                                     ------------ ----------- ----------

General and Administrative Expenses:

 Compensation and Related Benefits      125,571    309,630     313,432
 Professional Fees                       91,218    100,777     206,979
 Management Fee - Related Party          31,200    131,000     130,000
 Rent of Offices                         33,300    39,558      29,524
 Depreciation and Amortization           92,960    91,663     128,907
 Other G & A Expenses                   114,626   115,458     106,982
                                    -----------  ---------   ---------

 Total Expenses               488,875    788,086   915,824
                    -------------  ----------- -----------

   Loss from Operations         (1,030,121)   (699,228) (1,551,240)

Other Income (Expense)
 Interest income                       224          484      3,035
 Interest expense                     (210)      (3,423)        (7)
 Interest expense - Related Parties(52,199)     (51,179)   (28,272)
                                   --------     --------   ---------

   Total Other Income (Expense)    (52,185)     (54,118)   (25,244)
                                   --------    ---------   ---------

Net Loss                      ($ 1,082,306)  ($ 753,346)($1,576,484)
                               ============  =========== ===========

Net Loss Per Share (Basic and
 Diluted)                       ($    0.05) ($     0.05)($     0.16)
                                ===========  =========== ===========

Weighted Average Common Shares
 Outstanding                     20,495,726  14,824,881   9,567,748
                                 ==========  =========== ===========


[CAPTION]
                   Consolidated Statement of Stockholders' Equity
<TABLE>

                               Common Stock        Capital
                               ------------
                            Number of           in Excess of Accumulated
Treasury  Deferred
                             Shares     Amount   Par Value     Deficit
Stock Compensation    Total
                             ------     ------   ---------     -------
----- ------------    -----

<S>                           <C>        <C>         <C>        <C>      <C>
     <C>           <C>
Balance - March 31, 1996   11,168,122  $111,682  $9,071,180  ($ 8,904,357)
($108,406)($144,000)  $   26,099

Cash Proceeds from
 Issuance of Stock           650,000      6,500     123,500            -
     -         -       130,000

Stock Issued upon
 Conversion of Debt        8,970,000     89,700     820,300            -
     -         -       910,000

Capital Contribution                                 1,000
     1,000
Net Loss for the year
  ended March 31, 1997            -          -          -        (911,804)
     -         -     (911,804)
                          ----------  -------- -----------   ------------
--------  --------   ----------

Balance - March 31, 1997  20,788,122   207,882  10,015,980  (  9,816,161)
(108,406)( 144,000)      155,295

Management fee -
  Related Party                    -         -      31,200             -
     -         -       31,200

Adjustment for
 cancellation of escrow
 shares(See note [6A])             -         -    (144,000)            -
     -   144,000           -

Options issuance cost              -         -       3,250             -
     -         -        3,250

Net Loss for the year
  ended March 31,1998              -         -           -    (1,276,000)
     -         -   (1,276,000)
                          ----------  -------- -----------  ------------
--------  --------   ----------
Balance -  March 31, 1998 20,788,122   207,882   9,905,430   (11,092,161)
(108,406)        -   (1,086,255)

Acquisition of
  Subsidiary                                    4,342,784
   4,342,784
Capital adjustment                                  7,800
              7,800

Net loss for the year
  Ended March 31, 1999                                       (   382,184)
             (  382,184)
                         -----------  --------  ----------   ------------
--------  --------   ----------
Balance, March 31, 1999   20,788,122  $207,882 $14,256,014
$(11,473,345)$(108,406) $      -  $ 2,882,145
                         ===========  ======== ===========  ============
=========  ========   ==========
</TABLE>

[CAPTION]
<TABLE>
                                  OUT-TAKES INC.
                        Consolidated Statements of Cash Flows


                                                       Years ended March 31,

                                                      1999     1998        1997
Operating Activities:                           _________ ____________
_________
<S>                                               <C>         <C>
<C>


  Net Loss                                      $(382,184) $(1,276,000)
$(911,804)

  Adjustments to Reconcile Net Loss to
   Net Cash Used in Operating Activities:
     Depreciation and Amortization                116,585      540,185
$66,369
     Loss on closure of Irvine Studio                          154,157
    -
     Loss on Disposal of Plant and Equipment            -            -
  504
     Compensation fee   related party              80,887      110,062
    -
     Options issuance cost                                       3,250
    -
  Changes in Assets and Liabilities:
   (Increase) Decrease in:
     Due from Related Party                      (120,854)      3,847
     Deposits                                     (25,504)      11,330    (
22,814)
     Inventory                                     10,082       12,797
13,719
     Due from Officers                                  -            -
8,565
     Prepaid Expenses                              11,954        6,671
(7,757)
     Other Current Assets                           9,564             -
    -
   Increase (Decrease) in:
     Accounts Payable                            (162,039)    (127,413)
(248,769)
     Notes payable                                      -            -
(15,036)
     Interest payable                              36,556       48,581
(22,104)
     Provision for Studio Closure                 (31,878)      31,878
    -
     Prepaid asset lease                           30,604            -
    -
     Compensation payable-Related Party            79,540     (119,990)
252,337
                                               ----------   ----------
-----------
  Net Cash Used in Operating Activities        (  346,687)  (  604,492)  (
448,916)
                                               ----------   ----------
------------
Investing Activities:
  Purchases of Property, Plant and
    Equipment                                  (   33,522)  (  218,893)  (
165,362)
  Proceeds on Disposal of Plant and Equipment                      100
2,242
                                               ----------   ----------
-----------
Net Cash Used in Investing Activities          (   33,522)  (  218,883) (
163,120)
                                               ----------   ----------
------------

Financing Activities:
  Proceeds from the Issuance of Stock                   -      130,000
  Advances from Related Party                     272,887      703,783
260,000
  Capital                                           7,800
1,000

  Convertible notes                                74,000       65,834
240,000
                                                 --------   ----------
-----------
  Net Cash Provided by Financing Activities       354,687      769,617
631,000
                                                ---------   ----------
-----------
Net Increase (Decrease)in Cash and Cash
 Equivalents                                     ( 25,522)    ( 53,758)
18,964
Cash and Cash Equivalents - Beginning of
  Years                                            26,878       80,636
61,672
                                                ---------    ---------
---------
Cash and Cash Equivalents - End of Years        $   1,356    $  26,878  $
80,636
                                                =========    =========
=========
Supplemental Disclosure of Cash Flow Information
  Cash paid for:
   Interest                                     $    7,650   $  66,501
Non cash activities:
  Acquisition of subsidiary                     $4,000,000

<F/N>         The Accompanying Notes are an Integral Part of These Financial
Statements.

<CAPTION>
OUT-TAKES INC.
NOTES TO FINANCIAL STATEMENTS

[1] Summary of Significant Accounting Policies

Basis of Presentation - The accompanying financial statements are presented on

an accrual basis. Revenues are recognized when merchandise is sold and expenses

are recognized when incurred. Where applicable, the figures for the years ended
March 31, 1997 and 1996 have been reclassified in order to facilitate
comparison
with the figures for the current year.

Plant and Equipment and Depreciation - Plant and equipment consists
primarily of
computers, photography equipment and leasehold improvements, and are stated at
cost. Depreciation is provided over the estimated useful asset lives using the
straight-line method over 5 years for all equipment and furniture. Leasehold
improvements are amortized on a straight-line basis over the shorter of the
useful life of the improvement or the term of the lease. Maintenance, repairs
and minor purchases are expensed as incurred.

Royalties - Royalties are calculated as a percentage of sales as specified in
each License Agreement and are expensed over the life of the agreement except

where this amount is less than the minimum guarantee provided by the agreement.
In the latter situation, royalty expense is equal to the minimum guarantee,
amortized on a straight-line basis over the period of the guarantee. Where
royalties have been paid in advance, such amounts are disclosed on the
Company's
balance sheet as prepaid royalties, net of amounts expensed.

Stock Options - The difference between the fair market value and the exercise
price, if below fair market value, of a stock option granted under the
Company's
Employee Stock Option Plan is charged to expense in the period in which the
option is granted. All transactions in which goods or services are the

consideration received for the issuance of equity instruments are accounted for
based on the fair value of the consideration received or the fair market value
of the equity instruments issued, whichever is more reliably measurable
Inventories - Inventories consisting principally of frames, bags, mattes,
chemicals, paper products and other supplies are priced at cost determined
using
the FIFO method.

Cash and Cash Equivalents - The Company classifies all highly liquid debt

instruments, readily convertible to cash and purchased with a maturity of three
months or less at date of purchase, as cash equivalents. The Company had no
cash
equivalents at March 31, 1998.

Risk Concentrations - Financial instruments, which potentially subject the

Company to concentrations of credit risk, consist principally of cash. At March
31, 1998, the Company had no deposits in financial institutions which exceeded
the $100,000 federally insured limit. The excess of the institution's deposit
liability to the Company over the federally insured limit was therefore zero.

A significant part of the Company's ability to generate revenues is
dependent on

the continuation of the License Agreements with the various Licensors. Three of
the License Agreements provide a portfolio of images that each result in

approximately 15% of the revenues of the Company. While the Company has License

Agreements relating to the use of the images there can be no assurance that the
License Agreements will be renewed or renewed on commercially acceptable terms
after their current expiry dates. In such event, unless alternative License
Agreements can be obtained, the loss of the License Agreements would have a
material adverse affect on the Company (see note 3[A]).

Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts. Accordingly, actual
amounts could differ from those estimates.

Advertising  - Advertising  costs are expensed as incurred. Advertising
expenditure for the years ended March 31, 1998, 1997 and 1996 was $21,069,
$28,552 and $13,140 respectively.

Loss per share - The Financial Accounting Standards Board ("FASB") has issued
Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings Per
Share" which is effective for financial statements issued for periods ending
after December 15, 1997. Accordingly, earnings per share data in the financial
statements for the year ended March 31, 1998 has been calculated in accordance

with SFAS No. 128. Prior periods earnings per share data have been recalculated
as necessary to conform prior years data to SFAS No. 128.

SFAS No. 128 supersedes Accounting Principles Board Opinion No. 15, "Earnings
per Share" and replaces its primary earnings per share with a new basic
earnings
per share representing the amount of earnings for the period available to each
share of common stock outstanding during the reporting period. SFAS No. 128
also
requires a dual presentation of basic and diluted earnings per share in the
face
of the statement of operations for all companies with complex capital
structures. Diluted earnings per share reflects the amount of earnings for the
period available to each share of common stock outstanding during the
reporting period, while giving effect to all dilutive potential common shares
that were outstanding during the period, such as common shares that could
result
from the potential exercise or conversion of securities into common stock.

The computation of diluted earnings per share does not assume conversion,
exercise or contingent issuance of securities that would have an antidilutive
effect on earnings per share (i.e. increasing earnings per share or reducing
loss per share). The dilutive effect of outstanding options and warrants and
their  equivalents are reflected in dilutive earnings per share by the
application of the treasury stock method which recognizes the use of proceeds
that could be obtained upon exercise of options and warrants in computing
diluted earnings per share. It assumes that any proceeds would be used to
purchase common stock at the average market price during the period. Options
and
warrants will have a dilutive effect only when the average market price of the
common stock during the period exceeds the exercise price of the options or
warrants.

Potential common shares of 125,000 are not currently dilutive, but may be in
the
future.

Deferred Taxes - There are no material differences between the accounting
methods used for financial and tax purposes. The Company has sustained
losses in

recent years and has a large net operating loss carryforward. No deferred taxes
are reflected in these financial statements.

[2] Organization and Business

The Company was incorporated on March 18, 1992, under the laws of the State of
Delaware. The Company is engaged in the production and sale of photographic
portraits of children, adults and family groups using proprietary hardware and
digital imaging  software.  The Company  currently  operates and derives
substantially all of its revenues from a retail studio, called Out-
Takes(R), which opened on May 24, 1993 and is located at MCA/Universal's
CityWalkSM project in Los Angeles, California ("the CityWalk Studio"). During
the period December 1, 1995 to April 22, 1998, the Company operated a second
Studio, at the Entertainment Center in the Bazaar at the Irvine Spectrum,
located in Irvine, Orange County, California ("the Irvine Studio").

[3] [A] License Agreements and Royalties

The Company has merchandise licensing agreements ("License Agreements") with

Paramount Pictures Corporation ("Paramount"), MCA/Universal Merchandising, Inc.

("Universal"), Warner Bros. Consumer Products ("Warner"), Twentieth Century Fox
Licensing & Merchandising ("Fox"), Jay P. Morgan Photography ("Morgan"), MTV
Networks ("MTV"), Saban Merchandising Inc. ("Saban"), The Baywatch Production
Company ("Baywatch") and various other agencies and photographers that grant
the
Company the right to manufacture, sell and distribute in a defined geographic
area, still photographs which combine a digital photograph taken of the
customer

in the studio with a licensed background from one of the Licensors which may be
sold separately or affixed to items approved by these licensors, including
photographic enlargements, greeting cards, posters, books, t-shirts, mugs,
buttons and other novelty items. Royalties expense for the year ending March
31,
1998, 1997 and 1996 was $39,365, $66,816 and $35,622 respectively.

Although the Company has not commenced to market all Licensed Articles on a
timely basis, as of March 31, 1998, the Company has not received any notice
that

any Licensor intends, by virtue of this matter, to exercise any of the remedies
provided for in its respective License Agreements. The Company is current with
respect to all payments and required reports to all Licensors.

[B] Sublicense Agreement - Related Party

On March 1, 1995, the Company entered into a sublicense agreement with Photo

Corporation of Australia Pty Limited ("PCA"), a subsidiary of Photo Corporation
Group Pty. Ltd. ("PCG") (see note 5), that, subject to the prior approval of
the
Licensors, grants PCA a non-exclusive license to utilize the Licensed Articles
on substantially the same terms as provided in the License Agreements. The
sublicense also provides that PCA will pay the Company an amount equal to 120%
of the royalties the Company pays to Licensors for such images. The Company
has received consent from Morgan, Fox and Paramount and other Licensors
indicating their willingness to support utilization of the Licensed Articles
in countries where PCA operates. As of March 31, 1998, the PCA
sublicense agreement has not yet generated any royalties.

[4] Plant and Equipment
                                    March 31, 1998        March 31, 1997

The components of plant and equipment are:

Photographic Equipment             $   620,750      $  622,192
Computers and Software                 659,048         679,427
Equipment and Furniture                301,316         308,987
Leasehold Improvements                 609,494       1,011,292
Motor Vehicle                           21,433            -
                                 -------------      -------------

Total - At Cost                      2,212,041       2,621,898
Less: Accumulated Depreciation       2,007,893       1,776,700
                                  -------------   -------------

Net                                $   204,148     $   845,198
                                  =============   =============

Depreciation is provided over the estimated useful asset lives using the

straight-line method over five years for all equipment and furniture. Leasehold
improvements are amortized on a straight-line basis over the shorter of the
useful life of the improvement or the term of the lease. Maintenance, repairs
and minor purchases are expensed as incurred.

[5] Related Party Transactions

Mr Robert Shelton, Vice President Development and Mrs Leah Peterson- Shelton,
Vice President Operations, ceased employment with the Company from and
effective

September 1, 1996. Mr Shelton also ceased as a Director of the Company from and
effective September 1, 1996.

Deferred salaries owing to Mr Shelton and Mrs Peterson-Shelton, accrued
interest
on deferred salaries, accrued vacation pay and amounts payable on termination
totaling $274,373 were consolidated on September 1, 1996, and were repaid over
the period to April 17, 1998. This liability is presented on the balance sheet
as "Compensation payable - Related Party". The liability is secured by the
assets of the Company pursuant to the Settlement and Mutual Release
Agreement as

of September 1, 1996, between the Company, Mr Shelton, Mrs Peterson-Shelton and

Photo Corporation Group Pty Limited ("PCG"), the majority stockholder. Interest
expense is incurred at the prime rate of interest (approximately 8.5%) and in
the period to March 31, 1998 interest expense totaled $3,618. As of March 31,
1998, interest of $67 was accrued and unpaid.

The Settlement and Mutual Release Agreement inter alia provides for Mr Shelton
and Mrs Peterson-Shelton to act as consultants to the Company as requested by
the Company and as agreed to by them. No consulting fees were incurred or paid
during the year ended March 31, 1998.

During the year to March 31, 1997, PCG charged the Company $131,000 in

management fees pursuant to the Personnel Consulting Agreement with the Company
dated June 28, 1995. Effective December 1, 1996, PCG agreed not to charge

management fees for services provided by it or its related parties for a period
of two years. The Company has recorded a capital contribution of $31,200 for
management fees for the year to March 31, 1998. Management believes that this
represents the reasonable cost of doing business, for services provided by PCG
personnel in the year to March 31, 1998.


At March 31, 1998 the $721,227 "Due to Related Party" ($260,500 as of March 31,
1997) was advanced by PCG. This balance consists of $715,500 advanced to the
Company and $5,727 of expenses paid by PCA on behalf of the Company (1997:
$7,343 "Due from Related Party" representing monies advanced by the Company
during fiscal 1997 on behalf of PCA). The funds advanced to the Company have

been used predominantly to fund the day to day operation of the business and to
fund the payments due to former officers of the Company. The amount Due to
Related Party is unsecured and is payable on demand. Interest expense is
incurred at a rate of 10% per annum on the funds advanced to the Company and
for
the year ended March 31, 1998 was $48,581. As of March 31, 1998, interest of
$56,452 was accrued.

The weighted average interest rate on short term borrowings as of March 31,
1998
was approximately 10.0%.

[6] Capital Stock Transactions

[A] Escrow Shares

In March, 1992, 1,900,000 shares were issued to the Company's founders
("Founders") and deferred compensation of $364,800 was recorded for the

1,900,000 shares. Included in the 1,900,000 shares were 1,150,000 shares issued
to the Founders for services in connection with the incorporation of the
Company. Accordingly, $220,800 was amortized as compensation expense in 1992.
The remaining 750,000 shares of the Company's Common Stock were placed into
escrow for the benefit of the Founders. As the Company's pre-tax earnings did
not equal or exceed the required threshold level, in May of 1998 the Company
requested that the shares be returned to the Company to be placed in Treasury.
The financial statements reflect the reversal of the deferred compensation

attributable to these shares, however the share data will be adjusted as of the
date the shares are returned.

[B] Stock Option Plan

Under the Company's Amended and Restated 1992 Stock Option Plan, incentive
stock

options may be granted to purchase shares of the Company's stock at a price not
less than the fair market value of the Common Stock at the date of the grant.
Non-qualified stock options may be granted at a price not less than 85% of the
fair market value. No option may be exercised after ten years from the date of
the grant. In September of 1997, options for 175,000 shares were issued to
employees and consultants of the Company.

Information is summarized as follows:

                                Shares Under Options and Warrants
                                ---------------------------------
                              Amended                         Weighted
                              And Restated     Price          Average
                              1992 Stock       per            Exercise
                              Option Plan      Share          Price
                              -----------      -----          -----

Outstanding at March 31, 1995   249,245    $0.65 to $4.40      $3.44

  Forfeited during the year
   ended March 31, 1996         (94,527)
                                --------
Outstanding at March 31, 1996   154,898    $0.65 to $4.40      $4.00

  Forfeited during the year
   ended March 31, 1997        (154,898)
                               --------

Outstanding at March 31, 1997      -           -                  -

  Granted during the year
   ended March 31, 1998         175,000     $0.06              $0.06

  Forfeited during the year
   ended March 31, 1998         (50,000)
                                 -------

Outstanding at March 31, 1998   125,000        -               $0.06
                               =========

The exercise price for the options outstanding at March 31, 1998 is $0.06
with a
vesting period of three years and a contractual life of ten years. The company
estimates that approximately 100% of such options will eventually vest.

On September 15, 1997, the Board of Directors granted to four individuals,  a
total of 175,000 stock options to purchase company stock at an exercise
price of
$0.06 per share for past services performed. The options are to vest over a

three year period, 50% the first year and 25% the remaining two years,  with an
expiration date of September 15, 2007. The company applies APB Opinion 25 in
accounting for its fixed and performance based stock option  compensation
plans.
Compensation cost of $3,250, $0 and $0 was charged to operations for the three
years ended March 31, 1998, 1997 and 1996  respectively. Had compensation cost
been determined on the basis of fair value pursuant to FASB Statement No. 123,
net income and earnings per share would have been recorded as follows:

                       1998            1997            1996
                    $                 $               $
Net Income (Loss)
As reported         (1,082,306)      (753,346)      (1,576,484)
Pro forma           (1,089,056)      (753,346)      (1,576,484)

Earnings per Share
As reported            (0.05)     (0.05)     (0.16)
Pro forma              (0.05)     (0.05)     (0.16)


The fair value of each option grant is estimated on the date of grant using the
Black-Scholes  option  pricing model with the following  weighted- average
assumptions used for grants in 1998: dividend yields of $0 for each year,
expected volatility of approximately 106% for each year, risk free interest
rates of 5.83% and an expected life of five years. The  weighted-average fair
value of options granted was $0.06 for the year ended March 31, 1998.

[7] Closure of Irvine Studio

In the third quarter of the Company's fiscal year, management determined that
despite its substantial efforts to increase the revenues of the Irvine Studio,
it would be in the best interests of the Company to contain the negative cash
flow incurred by the Company, by determining an exit plan for the Irvine
Studio.
In the fourth quarter of the fiscal year, the Company finalized its exit plan.
Following lengthy  negotiations with the landlord of the Irvine Studio,
management reached an agreement with the landlord to close the Studio. The
closure was effected without the payment of any additional amounts to the
landlord. The Studio closed on April 22, 1998. Costs associated with the
closure
of the studio totaled $164,745 and included approximately $135,000 non-cash
loss
on disposal of leasehold improvements and write off of equipment identified as
only being of use for spare parts for the CityWalk Studio; $3,000 in
termination
payments to staff; $5,000 to remove equipment from the studio and vacate the
premises; $7,000 in property tax obligations; and estimated additional
operating
costs of approximately  $14,000 through to the date of closure. It is
management's opinion that as of March 31, 1998, all costs associated with the
closure of the Irvine Studio have been accrued.

[8] Commitments


Lease Agreements - The Company leases its CityWalk Studio premises under a five

year lease, with an option to extend the lease for a period of seven years. The
initial lease term expired on May 31, 1998 and the Company has exercised its
option to renew the lease for a further seven years. The lease provides for an
annual rental payment of $123,250 and the payment of 10% of annual store
revenues in excess of $881,177. In addition, pursuant to the lease agreement,
the Company pays annual allocated property taxes for the CityWalk Studio of
approximately $600. Both the base rental amount and the percentage rental cut-
in point are adjusted annually for changes in the consumer price index. The
lease may be terminated by the lessor if the Company does not meet a minimum
annual sales requirement of $587,000.

Future minimum lease payments under non-cancelable operating leases as of
March
31, 1998 are shown in the table below.

     Year ended March 31
     -------------------
       1999                $ 123,250
       2000                  123,250
       2001                  123,250
       2002                  123,250
       2003                  123,250
       Thereafter            267,041
                            ---------

       Total               $ 883,291
                           =========


In the year to March 31, 1998 the Company paid $101,098 in rent for the Irvine

Studio. Following closure of the Irvine Studio on April 22, 1998, the lease was
terminated. There is no further obligation on the Company with respect to the
lease.

The Company has a month to month commitment of $2,450 per month for corporate
office space and a month to month commitment of $650 per month for storage
facilities.

Total rental charged to operations for the fiscal years ended March 31, 1998,
1997 and 1996 is broken down as follows:

                               1998        1997     1996

                           $             $          $
       Base rental         256,141      278,128    183,301
       Additional rent      13,351       62,287     56,862
                          --------      -------   --------
                          $269,492     $340,415   $240,163
                          ========     ========   ========

The additional rent is a result of sales being in excess of the $881,177 sales
threshold.

Consulting  Agreement - the Company has a consulting agreement with an

unaffiliated entity for the maintenance of the image technology at the CityWalk
Studio. Effective October 1, 1997 the agreement provides for the payment of
$50,000 per annum of consulting fees and a discretionary performance bonus
of up
to 10% of the fees paid. The agreement may be terminated by either party
with a
minimum of one month's notice. For the year ended March 31, 1998 the Company
expensed $49,000 in payments to this unaffiliated entity.

[9] Net Loss Per Share

Net loss per share was calculated based on the weighted average shares
outstanding during the year. Potential common shares have not been included as
their inclusion would be antidilutive.

[10] Trademark Registrations and Patent Applications

The Company has registered the marks Out-Takes(R), So You Want to be in
Pictures(R) , Photomation(R) and Create the Moment(R) with the U.S. Patent and
Trademark Office and has registered the Out-Takes(R) service mark in Japan, in
both Japanese and English.

[11] Income Taxes

As of March 31, 1998, the Company has a net operating loss carry forward of
approximately $10,700,000. The ability to offset $8,275,000 of these losses
against future taxable income has been restricted as a result of the change in
control which occurred on June 28, 1995 when a majority shareholding in the

Company was acquired by PCG. As of March 31, 1998, the Company has deferred tax
assets of approximately $729,000 arising from these operating loss carry
forwards which will expire in March, 2011. However, due to uncertainty as to
whether the Company will generate income in the future sufficient to fully or
partially utilize these loss carry forwards, an allowance of $729,000 has been
established to offset this asset. The Company recorded an increase in its
valuation allowance of $66,000 over the allowance at March 31, 1997.

[12] Notes Payable

The Note Payable of $48,000 is unsecured and is due to a former financial
consultant to the Company pursuant to a settlement agreement dated August
17,1994. The note is non-interest bearing and payment is subject to
availability
of future cash flows from the Company's operations.

The note holder has threatened to commence litigation, however management has
advised the note holder that no amount is due at the present time as the
Company
has not generated positive cashflow. Counsel has advised the Company that no
litigation has commenced and counsel is unable to assess a possible outcome.

[13] New Authoritative Pronouncements

The FASB has issued SFAS No. 130, "Reporting Comprehensive Income". SFAS No.
130
is effective for fiscal years beginning after December 15, 1997. Earlier
application is permitted. Reclassification of financial statements for earlier
periods provided for comparative purposes is required. SFAS No. 130 is not
expected to have a material impact on the Company.

The FASB has issued SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information". SFAS No. 131 changes how operating segments are
reported in annual financial statements and requires the reporting of selected
information about operating segments in interim financial reports issued to
shareholders. SFAS No. 131 is effective for periods beginning after December
15,
1997 and comparative information for earlier years is to be restated. SFAS No.
131 need not be applied to interim financial statements in the initial year of
its application. SFAS No. 131 is not expected to have a material impact on the
Company.

[14] Going Concern

The Company commenced commercial operations on May 24, 1993 and as of May 29,

1998, the Company has been unsuccessful in generating net cash from operations.
The net cash used by the Company in operating activities in the year ended
March
31, 1998 was $482,207. The Company incurred a net loss of $1,082,306 for the
year ended March 31, 1998 and has a working capital deficit as of March 31,
1998
of $918,299.

The accompanying financial statements have been prepared on a going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities and commitments in the normal course of business. The continuation

of the Company as a going concern is dependent upon its ability to generate net
cash from operations. The Company's recurring operating losses and net working
capital deficiency raises substantial doubt about the entity's ability to
continue as a going concern.

Management's plans include improving the revenues from the CityWalk Studio,
continuing the reduction of expenses throughout the Company and continuing in
its efforts to find suitable locations in which to open additional studios.

There can be no assurance that management will be successful in these endeavors
and if it is not, the Company will be dependent on the willingness and the
ability of the major stockholder, PCG, to continue to provide additional
financing and no assurance can be given that such additional financing will be
provided.

[15] Impairment of Long-Lived Assets


The Company had adopted Statement of Financial Accounting Standard ("SFAS") No.
121, Accounting for the Impairment of Long-Lived Assets and for Long- Lived
Assets to be Disposed of.

As a result of the Company's continuing operating losses and the information
obtained during research and the development of the Irvine Studio, the Company

reviewed the carrying value of the assets at its CityWalk studio for impairment
in the June 1995 quarter. Management determined that an impairment loss of
approximately $722,000 should be recognized. This loss was determined as the
excess of carrying value over fair value. Fair value was determined by
reference
to costs for similar assets for the Irvine Studio. As a result of the
significant operating difficulties associated with the Traveling Studio,  the
Company reviewed the carrying value of the asset for impairment in the March
1996 quarter. Management determined that an impairment loss of $40,129
should be

recognized to reduce the carrying value of the asset to its fair value of zero.
Fair value was determined to be zero as the asset was not able to be placed
into

production in its present form. Long term assets of the Company are reviewed at
least annually as to whether their carrying value has become  impaired,
pursuant
to guidance established in Statement of Financial Standards ("SFAS") No. 121.
Management considers assets to be impaired if the carrying  value exceeds the
future projected cash flows from related operations  (undiscounted and without

interest charges). If impairment is deemed to exist, the assets will be written

down to fair value or projected discounted  cash flows from related operations.
Management also re-evaluates the periods of amortization to determine whether

subsequent events and  circumstances warrant revised estimates of useful lives.
As of March 31, 1998, management expects these assets to be fully recoverable.

[16] Financial Instruments

The carrying amount of cash and notes payable approximates fair value. [17]
Subsequent Events

During the period April 1, 1998 to May 29, 1998 PCG provided an additional
$15,000 of cash to assist the Company in funding its day to day operations, to
enable the Company to make the required payments due to the former officers of
the Company and to meet the expenses associated with the closure of the Irvine
Studio. Certain subsidiaries of PCG have purchased, for a total of $20,000
cash,
certain equipment with no book value.

<CAPTION>
 EXHIBIT 16. LETTER OF FORMER INDEPENDENT ACCOUNTANT

U.S. Securities and Exchange Commission Washington, D.C. 10549

The undersigned certifying accountants hereby acknowledge that they have
reviewed the "Changes in and Disagreements on Accounting and Financial
Disclosures" as contained in the form 10-K being filed by Out Takes, Inc., and

that the undersigned concurs with the statements made therein by the Registrant
concerning the change in the Registrant's independent accountant.

MOORE STEPHENS, P.C.
____________________________
Moore Stephens, P.C.
Certified Public Accountants
Cranford, New Jersey
March 1, 2000



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