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

                                   FORM 10-K
(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, 1999
                                       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, 1999 and as of March 1, 2000 was $456,429.

The number of shares outstanding of the issuer's Common Stock as of March 31,
1999 and as of March 1, 2000 was 20,788,122.

                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  Registrant's  definitive  Proxy Statement  relating to the
1999 Annual Meeting of Stockholders are incorporated herein by reference into
Part II and Part III.

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



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                               OUT-TAKES, INC.

         FORM 10-K ANNUAL REPORT FOR FISCAL YEAR ENDING MARCH 31, 1999

                               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                                          21

  ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
            ACCOUNTING AND FINANCIAL DISCLOSURE                           ****

PART III                                                                  ****

  ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
            CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE
            EXCHANGE ACT                                                  ****

  ITEM 11.  EXECUTIVE COMPENSATION                                        ****

  ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
            OWNERS AND MANAGEMENT                                         ****

  ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                ****

PART IV                                                                   ****

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


                                    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 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.

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.

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 PURPAthe 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 the 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     7/1005/641/32
Second Quarter  25/100   10/100      7.5/100     7/1001/161/32
Third Quarter   6.5/100   6/100        7/100     4/1003/321/32
Fourth Quarter   9/100    4/100    3.125/100   1.5/1009/647/100

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       1,667,7251,020,943      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 Resources

At March 31, 1998, the Company had a working capital deficit of $918,299 as
compared  to a working  capital  deficit  on March  31,  1999 of ****.  The
increase of $**** 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 $**** of cash for the
same period  last year.

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


                               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]
CONSOLIDATED BALANCE SHEETS FOR
THE PERIOD MARCH 31, 1998 AND
MARCH 31, 1999

                                       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
                                                        ----------- -----------
     Total Assets                                       $   492,427 $   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 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                          9,914,230   9,906,430
  Accumulated deficit                                   (11,411,016)(11,092,161)
  Less treasury shares, at cost                             108,406     108,406
                                                        ----------- -----------
Total Stockholders' Equity (Deficit)                    ($1,397,310) (1,086,255)
                                                         ---------- -----------
     Total Liabilities and Stockholders' Equity         $   492,427 $   678.082
                                                        =========== ===========


[CAPTION]
CONSOLIDATED STATEMENTS
OF OPERATIONS OF OUT-TAKES, INC.

                                                     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                    671,473       661,955     869,349
                                        -------------   ----------- -----------

     Loss from Operations                  (  226,397)   (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                                ($    318,855)  ($1,276,000)($  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
                                          ===========    ==========  ==========


[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   (10,740,009)
(108,406)        -  (1,086,255)

Capital adjustment                                  7,800
                  7,800

Net loss for the year
  Ended March 31, 1999                                       (   318,855)
               (318,855)
                         -----------  --------  ----------   ------------
--------  --------
----------
Balance, March 31, 1999   20,788,122   $207,882 $9,914,230  $(11,411,016)
$(108,406) $      - $(1,397,310)
                         ===========  ======== ===========  ============
=========  ========  ==========
</TABLE>


[CAPTION]
CONSOLIDATED STATEMENT OF
CASH FLOWS
<TABLE>


                                                         Years ended March 31,
                                                      1999       1998
1997
<S>                                                  <C>         <C>
<C>
Operating Activities:


  Net Loss                                      $(318,855) $(1,276,000)
$(911,804)

  Adjustments to Reconcile Net Loss to
   Net Cash Used in Operating Activities:
     Depreciation and Amortization                 53,256      540,185
466,369
     Loss on Impairment of Long-Lived Assets            -            -
762,129
     Loss on closure of Irvine Studio                          154,157        -
     Loss on Disposal of Plant and Equipment            -          504
997
     Compensation fee   related party              80887       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                              35,556       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       354,727      769,617
631,000
                                                ---------   ----------
-----------
Net Increase (Decrease)in Cash and Cash
 Equivalents                                     ( 25,522)    ( 57,758)
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
 </TABLE>

[CAPTION]
NOTES TO CONSOLIDATED
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.

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.  Maintenance,
repairs and minor purchases are expensed 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 the Company paid  $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.

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: /s/ 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


   /s/ 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
<SEQUENCE>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.
<TABLE>
[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: /s/                                                By: /s/
      Peter  C.  Watt                                        Michael C.
Roubicek
      President                                              Secretary


  THE  SELLER:

  HANNES  FAUL                                                 WITNESS:


  /s/                                                           /s/


  LANCE  HALL                                                  WITNESS:


  /s/                                                          /s/



  THE  INWOOD  1991  TRUST                                    WITNESS:


  By:   /s/                                                   /s/
       James  C.  Harvey
       Trustee






                                    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:


  _____________________                           ___________________

  _____________________                           ___________________


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,  facili-ties,  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:                                           By:
__________________________
     James  C.  Harvey                                           James C.
Harvey
     President
Secretary

LESSEE:

COLORVISION  INTERNATIONAL,  INC.                    ATTEST:



By:          _____________________________                    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



     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,  California
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

EXHIBIT 14(a)2FORMER 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
<S>                                                            <C>        <C>
                                       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
                                                        =========== ===========
</TABLE>

<TABLE>
                                   OUT-TAKES INC.

                              STATEMENTS OF OPERATIONS
<S>                                           <C>            <C>         <C>

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

</TABLE>
                                      OUT-TAKES INC.

                             STATEMENT OF STOCKHOLDERS' EQUITY


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




Balance - March 31, 1995   5,728,122  $ 57,282  $ 8,615,580 ($ 7,327,873)
($108,406)($144,000)  $1,092,583

Proceeds from Issuance of
  Stock                    5,440,000    54,400      455,600            -
-         -      510,000

Net Loss for the year
  ended March 31,1996              -         -           -    (1,576,484)
-         -   (1,576,484)
                          ----------  -------- -----------  ------------
-------  --------   ----------

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

Net Loss for the year
  ended March 31, 1997              -        -          -       (753,346)
-         -     (753,346)
                          ----------  -------- -----------  ------------
--------  --------   ----------

Balance - March 31, 1997  20,788,122  $207,882 $10,014,980  ($ 9,657,703)
($108,406)($144,000)  $  312,753

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              -         -           -    (1,082,306)
-         -   (1,082,306)
                          ----------  -------- -----------  ------------
--------  --------   ----------

Balance -  March 31, 1998 20,788,122  $207,882 $ 9,905,430  ($10,740,009)
($108,406) $      -   ($ 735,103)
                         ===========  ======== ===========  ============
=========  ========   ==========


                                   OUT-TAKES INC.
                               STATEMENT OF CASH FLOWS

<TABLE>
                                                   Years ended March 31,
                                                      1998       1997
1996
<S>                                                 <C>          <C>         <C>
Operating Activities:


  Net Loss                                     ($1,082,306) ($ 753,346)
$(1,576,484)
                                               -----------  ----------
------------
  Adjustments to Reconcile Net Loss to
   Net Cash Used in Operating Activities:
     Depreciation and Amortization              $ 513,277    $ 450,786  $
378,156
     Loss on Impairment of Long-Lived Assets            -            -
762,129
     Loss on closure of Irvine Studio             154,157            -      -
     Loss on Disposal of Plant and Equipment            -          504    997
     Management fee - Related Party                31,200            -    -
     Options issuance cost                          3,250            -
Changes in Assets and Liabilities:
   (Increase) Decrease in:
     Prepaid Royalties                                  -            -    840
     Due from Related Party                         7,343       (7,343)    -
     Deposits                                      11,330          334  (18,290)
     Inventory                                     12,797       13,719
(10,090)
     Due from Officers                                  -            -    8,565
     Prepaid Insurance                              1,847       (2,003)    -
     Prepaid Taxes                                  4,824       (5,754)    -
     Other Current Assets                          (1,432)       1,670
(10,314)
   Increase (Decrease) in:
     Accounts Payable                             (82,630)      24,880
(196,867)
     Accrued Payroll and Other Expenses           (16,333)    (275,020)  56,453
     Notes Payable                                      -      (15,036)  15,036
     Accrued Interest - Related Party              48,581      (22,104)  20,835
     Provision for Studio closure                  31,878            -   -
     Accrued Management Fee - Related Party             -      131,000   130,000
     Compensation Payable - Related Parties      (119,990)     121,337   -
                                               -----------  ----------
-----------

   Total Adjustments                            $ 600,099    $ 416,970
$1,137,450
                                               ----------   ----------
-----------

  Net Cash Used in Operating Activities        ($ 482,207)  ($ 336,376) ($
439,034)
                                               ----------   ----------
------------

Investing Activities:
  Acquisition of Equipment and Leasehold
   Improvements                                ($  26,484)  ($  46,630) ($
652,814)
  Proceeds on Disposal of Plant and Equipment         100        2,242     1,050
                                               ----------   ----------
-----------

  Net Cash Used in Investing Activities        ($  26,384)  ($  44,388) ($
651,764)
                                               ----------   ----------
------------

Financing Activities:
  Proceeds from the Issuance of Stock           $       -    $ 130,000  $
510,000
  Advances from Related Party                     460,727      260,000
649,500
  Proceeds from Interim Loan Financing  -
   Related Party                                        -            -
39,000
  Payment of Interim Loan Financing -
   Related Party                                        -            -
(100,000)
                                                -- ------   ----------
------------

  Net Cash Provided by Financing Activities     $ 460,727    $ 390,000
$1,098,500
                                                ---------   ----------
-----------

Net (Decrease) Increase in Cash and Cash
 Equivalents                                   ($  47,864)   $   9,236  $
7,702

  Cash and Cash Equivalents - Beginning of
  Years                                            70,908       61,672
53,970
                                                ---------   ----------
-----------

  Cash and Cash Equivalents - End of Years      $  23,044    $  70,908   $
61,672
                                               ==========   ==========
===========

Supplemental Disclosure of Cash Flow Information
  Cash paid for:
   Interest                                    $    7,650   $   66,501  $
4,401
   Income Tax                                  $        -   $        -  $    -
</TABLE>


Non-Cash Investing and Financing Activities On May 7, 1996,  the majority
stockholder,  Photo  Corporation  Group Pty. Ltd.  ("PCG"),  converted  $130,000
of its then  $649,500  loan  payable  into 650,000 shares of the  Company's
Common Stock.  On November 29, 1996,  PCG converted an additional  $780,000 into
8,320,000 shares of the Company's  Common Stock.  This represented  loan
principal of $519,000 and accrued  management fees of $261,000 payable to Photo
Corporation  of Australia  Pty Limited  ("PCA") which debt was assumed by Photo
Corporation Group Pty Limited ("PCG").

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


                                 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.


EXHIBIT 16.  LETTER OF FORMER INDEPENDENT ACCOUNTANT

U.S.  Securities and Excahnge 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 contianed 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.

/s/MOORE STEPHENS, P.C.
Moore Stephens, P.C.
Certified Public Accountants
Cranford, New Jersey
March 1, 2000