U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                  Form 10-KSB/A

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

                    For the fiscal year ended May 29, 1999

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

        For the transition period from            to


                         Commission file number 0-21634

                            Metro Global Media, Inc.
                            ------------------------
                 (Name of small business issuer in its charter)

            Delaware                                        65-0025871
            --------                                        ----------
  (State or other jurisdiction of                        (IRS Employer
   incorporation or organization)                       Identification No.)

                 1060 Park Avenue, Cranston, Rhode Island 02910
                 ----------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (401) 942-7876
                                 --------------
                           (Issuer's telephone number)

Securities registered under Section 12(b) of the Exchange Act: NONE


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

                                  Common Stock
                                  ------------
                                (Title of class)

                                ---------------
                                (Title of class)

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

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

     State issuer's revenue for its most recent fiscal year: $23,389,171

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

                        $7,252,618 at September 30, 1999
                        --------------------------------

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


<PAGE>


                   (ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
                           DURING THE PAST FIVE YEARS)

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


                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

     State the number of shares  outstanding of each of the issuer's  classes of
common equity,  as of the latest  practicable  date:  6,894,529 at September 30,
1999



                       DOCUMENTS INCORPORATED BY REFERENCE

     If the followings documents are incorporated by reference, briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated:  (1) any annual report to security  holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
the Rule 424(b) or (c) of the Securities  Act of 1993  ("Securities  Act").  The
listed documents should be clearly described for identification  purposes (e.g.,
annual report to security holders for fiscal year ended December 24, 1990).

Transitional Small Business Disclosure Format (Check one):

Yes      No   X


                                        2
<PAGE>




                                TABLE OF CONTENTS

                                     PART I
                                     ------

ITEM 1.  BUSINESS.............................................................4

ITEM 2.  PROPERTIES..........................................................13

ITEM 3.  LEGAL PROCEEDINGS...................................................13

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................13

                                     PART II
                                     -------

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS.............................................................14

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS...............................................15

ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA..........................19

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURES...........................................19

                                    PART III
                                    --------

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
         PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
         ACT.................................................................21

ITEM 10. EXECUTIVE COMPENSATION..............................................22

ITEM 11. SECURTITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.....24

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................25

                                     PART IV
                                     -------

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K....................................29

INDEX TO FINANCIAL STATEMENTS...............................................F-0


                                        3
<PAGE>


PART I
------

ITEM 1. BUSINESS
----------------

     Metro Global Media,  Inc. ("Metro Global") is engaged in the production and
distribution of erotic prerecorded videocassettes,  magazines,  CD-ROMs, digital
versatile discs ("DVD"),  and other products.  Metro Global operates through the
following  subsidiaries:  Metro, Inc ("Metro"),  Metro-West Studios, Inc., Metro
International  Distributors ("Metro  International"),  Amazing Direct, Inc., and
Airborne for Men, Ltd. ("Airborne"). Additionally, Metro, through its subsidiary
Rocket  Media  Group LLC,  is a 50%  partner in  Maxstone  Media  Group,  LLC, a
producer  and  distributor  of  newsstand  magazines.   Metro  Global  generated
approximately  $23,389,000  in revenues from  continuing  operations  during the
fiscal year ended May 29,  1999,  approximately  40% of which is  attributed  to
sales made to Capital Video Corporation ("CVC") owned by a principal shareholder
and the Acting Chief Executive Officer of Metro Global, see "Distribution; Major
Customer" below.

     On August 3, 1998,  Metro  Global  purchased  Fanzine  International,  Inc.
("Fanzine"),  which through the balance of fiscal 1999  operated the  Publishing
Segment, generating revenues of approximately $11,734,000 during the fiscal year
ended May 29, 1999. In September 1999, Metro Global's Board of Directors adopted
a plan to discontinue  the operations of Fanzine and the Publishing  Segment and
instructed  management to divest  Fanzine by the end of fiscal 2000. As a result
of the Board's action,  Fanzine is reported as a discontinued  operation for the
fiscal  years  ended May 29, 1999 and May 30,  1998,  and Metro  Global's  adult
entertainment business is correspondingly  reported as the continuing operations
of Metro Global for such years. On September 29, 1999, Metro Global sold Fanzine
back to its  former  shareholders  and a  corporation  controlled  by them.  See
"Discontinued Operations".

     Metro  Global was  incorporated  under the name South  Pointe  Enterprises,
Inc., in Florida in November  1987. In February  1996,  Metro Global changed its
name from South Pointe Enterprises, Inc. to Metro Global Media, Inc. In November
1996,  Metro Global merged into an inactive  subsidiary  of Metro Global,  Metro
Sub, Inc., which merged entity changed its name to Metro Global Media, Inc.

CONTINUING OPERATIONS
---------------------

Film and Video

     Metro  produces  and  distributes  erotic  motion  picture   entertainment,
commonly referred to in the industry as "adult entertainment". This includes the
production and financing of feature films (full length motion pictures  produced
on film),  feature videos (full length motion  pictures  produced on videotape),
and video  compilations,  distributed  primarily on videocassettes  and DVD; the
distribution  of pay  television  and cable  programming;  and the ownership and
administration  of film  copyrights.  Metro  produces  films and  videos  either
independently or under  arrangements with other producers,  and is generally the
principal  source of financing  for these motion  pictures.  In addition,  Metro
purchases  outright,  or licenses for  distribution,  completed films and videos
produced by others.  Acquired  distribution  rights may be limited to  specified
territories, specified media and/or particular periods of time.

     Metro  owns or has  distribution  rights  to a  library  in excess of 3,000
titles primarily  available on videocassette.  Management believes Metro's 3,000
plus film and video library and extensive still photo archive is one of the most
diverse and  extensive  libraries  in adult  entertainment  and includes the Cal
Vista line,  the  Amazing  Collection,  and  eighteen  volumes of Taboo,  one of
Metro's  most  popular  adult  video  series.  Metro has  manufactured  and sold
approximately  2,300,000  videocassettes  during the  fiscal  year ended May 29,
1999,  primarily to  distributors,  wholesalers  and store chains located in the
United  States.  Many of Metro's  original  motion  picture  programs  have been
re-edited and licensed to cable television  operators.  Approximately 25% of the
titles in Metro's motion  picture  library have been obtained from third parties
under  distribution  agreements  pursuant to which Metro has acquired  perpetual
U.S. distribution rights, and in some cases limited foreign distribution rights,
to the

                                        4
<PAGE>


motion  picture.  Metro  continues its efforts to expand its video  distribution
into  international  markets  and  has  entered  into  license  agreements  with
international distributors granting distribution rights to several of its motion
picture titles in several countries  outside the United States.  Metro is in the
process of converting its top selling films and videos into the DVD format.

     During fiscal 1999,  Metro released  seven new feature  films,  one hundred
seven feature videos, and one hundred  seventy-eight video  compilations.  Metro
plans to continue to actively seek to acquire  distribution rights to additional
titles  produced by third  parties,  and increase its efforts to distribute  its
library and new titles into domestic cable and satellite  television  markets as
well as new international markets.

     Motion  pictures shot on film generally  offer better  production  quality,
utilize more elaborate  production  techniques and incur higher production costs
than  motion  pictures  shot on  videotape.  Many of Metro's  new  feature  film
releases are edited into several  versions  depending on the media through which
they are  distributed.  Metro  has  entered  into a  variety  of  exclusive  and
non-exclusive  licensing  arrangements  with  several  cable and pay  television
operators for recent feature releases. These relationships include various types
of fee arrangements,  including arrangements which permit unlimited showings for
a  defined  duration  in  exchange  for a  one-time  lump sum  royalty  payment,
arrangements for which Metro is paid a fee based on the number of subscribers to
the cable station and the number of times Metro's motion  picture is shown,  and
arrangements  pursuant  to which  Metro  receives  a  commission  based upon the
revenues  received by the pay  television  operators as a result of a showing of
Metro's motion  picture.  In general,  versions of the films edited for cable or
pay-per-view  television are less sexually explicit than the versions edited for
home video distribution.

     In  July  1998,   Metro  signed  an  agreement  with  Cable   Entertainment
Distributors  ("CED") to represent  Metro for adult  programming  through cable,
television,  satellite and stand-alone  systems throughout the United States. As
part  of  the  agreement,   Metro  signed  an  output   agreement  with  Playboy
Entertainment Group, ("Playboy"). Under the agreement, Metro will supply Playboy
with up to three features per month for two years.  During the fiscal year ended
May 29, 1999, Metro contracted to supply Playboy with nineteen features. Playboy
has rights to these  features  for five years,  with an option for another  five
years at a fee of 25% of the  original  licensing  fee.  CED  receives  a graded
commission on all placements.

     In July 1999, Metro entered into a seven-year licensing and production deal
with New  Frontier  Media,  Inc.  ("New  Frontier"),  a  publicly  traded  adult
satellite  network company.  New Frontier  operates "TeN:The Erotic Network" and
the Extasy  Network,  which  consists of three  twenty-four  hour direct to home
satellite channels, and the recently launched "Pleasure" channels. The licensing
arrangement  allows New Frontier the right to utilize  Metro's entire adult film
and video  library for all formats of  electronic  delivery,  including  but not
limited to dial-up Internet, Broadband Internet,  Video-On-Demand,  subscription
and pay television, and other video delivery mechanisms.

     The  production  deal calls for Metro to  generate  more than four  hundred
features  including a series of high-visibility  special  programming events for
New  Frontier's  five  adult  networks,  and  Internet  sites that are part of a
pending acquisition by New Frontier of Interactive Gallery,  Inc. ("I Gallery"),
a leader in Internet-delivered adult entertainment.  In addition, Metro plans to
create an original, high-end video line branded by New Frontier for distribution
by Metro to the home video/DVD market.

     Metro creates and designs all artwork for  promotional  items and packaging
and contracts for printing services. Approximately 30% of Metro's videocassettes
are  duplicated  at Metro's  own  duplicating  facility  located in Metro's  Los
Angeles,  California location,  with the balance being contracted to independent
laboratories.

                                        5
<PAGE>


     Metro also is in the business of manufacturing and distributing  Video View
Centers  where a user can review  videos  and DVDs  before  purchase  for a fee.
Usually this fee is split 50/50 with the owner of the location.  Metro maintains
ownership of all equipment and is responsible for its maintenance. The expansion
of this  business is limited as these units can only be  installed  in locations
where space permits and proper zoning so allows.

     In January of 1999,  Metro retained STV  Communications,  Inc.  ("STV"),  a
privately  held  company  out of Santa  Monica,  California,  to  produce  a new
Interactive  Media Center for Metro's top selling lines of videos and DVDs. STV,
a leader in providing  products and services for  electronic  merchandising  and
marketing  for major  chains,  such as Tower  Records  and  Virgin  Superstores,
produced the Media  Centers  that display up to thirty  titles with a one to two
minute previews, clips from upcoming titles,  advertisements of Metro's Internet
sites and promotions for Metro's other  vendors.  Management  believes that with
the  use of such a  customer-friendly,  captivating,  interactive  merchandising
display that  advertise  Metro's  Internet  sites and  products,  revenues  will
increase over existing traditional marketing techniques.

     In June of 1999, Metro rolled out the first one hundred of its Media Center
interactive  display  units to the adult retail  market.  Each unit houses a 20"
color monitor and holds up to two hundred forty pieces of video and DVD packaged
for  sell-through.  Consumers  can be assured  that the  quality of the movie is
consistent  with the quality of the  packaging by viewing the titles that are on
display.  This Media Center is  exclusive  to Metro and  separates us from other
companies marketing adult video and DVD product.

DVD

     During 1998, Metro entered the world of Digital  Versatile Discs,  ("DVD"),
which has grown  dramatically  since a unified  single  standard was  finalized.
Management  believes that this unified DVD format will make serious inroads into
the  market  shares  of the  video  cassette  recorder.  DVD has  several  major
advantages over competing home video delivery  technologies:  1) A single 5 1/4"
DVD can hold up to 135 minutes per side of high resolution  digital  full-motion
video and audio;  2) Instant  access is  available to a favorite  scene;  3) DVD
contains  significantly  higher image and audio quality than laserdisc and video
tape; 4) Multiple  language tracks can be incorporated on one disc; 5) Since DVD
is 100% digital,  the cost of  replication  is comparable to CD-ROM or audio CD;
and 6) A relatively  low  replication  cost will translate to a retail price for
motion  picture of under  $20.00,  giving  this  medium  tremendous  mass-market
potential.  Experts at Toshiba  estimate that the market for DVD software  could
exceed $20 billion by the year 2005. The next evolution of the CD-ROM drive, now
standard  equipment for all multimedia  computer  systems,  will be the DVD-ROM.
Similar to a CD-ROM in most  respects,  the  DVD-ROM  will be capable of holding
more then ten times more information than a CD-ROM.

     Metro utilizes third-party designers,  artists and programmers to introduce
creative  and  technically   superior   products.   Metro  does  not  anticipate
experiencing  any  material  difficulties  and  delays  in the  manufacture  and
packaging of its products.  Distribution of DVD products is accomplished through
the same  distribution  network  of  wholesalers  and  retailers  to whom  Metro
distributes  its adult  video  products  both in the United  States,  Canada and
Europe. Order fulfillment is coordinated through Metro's California distribution
facility.

     Many DVD titles  features an automated  photo gallery,  full motion chapter
index,  star  biographies and behind the scenes footage.  Metro was the first to
produce DVDs with True Perspectivetm  multiple angle technology which allows the
viewer to watch the same moment in time from two distinctive  angles.  Metro has
released 9 DVD titles as of May 30, 1998 and 29 titles as of May 29, 1999.

                                        6
<PAGE>


Magazines

     Metro  publishes and distributes a variety of adult magazines under various
tradenames,  which it distributes  through  wholesalers  located  throughout the
United States, Canada and Europe. For example, Metro publishes several magazines
featuring  pictures  of men and women  engaged in erotic and  sexually  explicit
situations,  magazines oriented to readers with specific sexual preferences, and
magazines  featuring  photographs and short stories contributed by photographers
and writers.  Metro currently publishes twelve magazines,  which are distributed
on a bi-monthly or quarterly basis.

     During fiscal 1999,  Maxstone Media Group published seven magazines titles,
including a newly formatted  magazine entitled AMAZING.  This new format will be
printed in seven languages and Maxstone has entered into distribution agreements
in five European countries, as well as South Africa,  Australia and New Zealand.
The North American  distribution will be handled by Metro. Maxstone expects that
each of the planned new publications  will contain exclusive photos from Metro's
extensive film and video library in an effort to cross-promote  the product line
in countries where Metro's video products are currently distributed.

     Production  for  magazines  are created by in-house  artists while some are
contracted with independent  contractors.  Production contracts are entered into
on a series rather than a single title basis and are fixed-price with provisions
for cost of labor,  material and  specification  adjustments.  These  contracts,
subject to certain  limitations,  may be terminated  by Metro or the  production
company.

     All of Metro's publications are printed by independent third parties. Metro
uses  three  different  printers  for  all of its  magazine  publication.  Metro
believes  that  generally  there is an  adequate  supply  of  printing  services
available to Metro at competitive prices,  should the need arise. All of Metro's
magazine production and printing activities are coordinated through its facility
located in Cranston, Rhode Island.

Franchise Sales

     Airborne  engages  in the  sale of  franchises  to  operate  upscale  adult
orientated  retail  stores.  In  fiscal  1999,  Airborne  retained  a  franchise
development  consultant to assist in the preparation of a retail store franchise
package,  and has completed  registration of its Franchise  Offering Circular in
the  States of Rhode  Island,  New York,  California  and  Connecticut,  and has
received  an  exemption  from  the  registration  requirements  in the  State of
Florida. In addition, as a result of its franchise registration in Rhode Island,
Airborne is permitted to offer franchises in approximately  twenty-eight states,
including  Massachusetts,  Pennsylvania and New Jersey, in which registration of
franchise offerings is not required.

     Under  Airborne's  franchising  program,  Metro  Global plans to grant to a
franchise owner the right to develop one or a specified  number of retail stores
at an approved location. Prior to the opening of franchise, franchisees would be
required to execute Airborne's standard franchise agreement.  Metro Global plans
to begin offering  Airborne  franchises for sale in the fourth quarter of fiscal
2000. Of course, there can be no assurance that any such franchises will be sold
or that Airborne's franchise program and retail formats will prove successful.

     Airborne  will assist  franchisees  by  locating,  approving  and  securing
prospective locations. In addition, Airborne would typically provide franchisees
with specifications and layouts for each approved location,  an initial training
program, a start-up-marketing  program, and on-site consultation and guidance as
requested. Airborne typically provides extensive product and support services to
its franchise  owners,  and derives  income from  providing  these  products and
services.  With the possible  exception of offering net 30-day terms on sales of
inventory  to credit  worthy  franchisees,  Airborne  does not intend to provide
financing to prospective franchisees. Airborne has not set specific requirements

                                        7
<PAGE>


as to who may become a  franchisee;  rather,  franchisees  will be  approved  by
Airborne based upon management's assessment of the prospective  franchisee's net
worth,  available  working  capital,  business  acumen and financial  ability to
successfully operate a franchise.

     CVC owns and operates five Airborne for Men  franchises.  Because the Board
of Directors  believes  that CVC's  expertise in the  operation of retail stores
will  significantly  augment the value of the Airborne for Men franchise,  Metro
Global did not require CVC to pay the standard franchise fee of $20,000.  During
fiscal 1999,  Metro Global  recorded from CVC $90,569 in royalty income pursuant
to a franchise  agreement  for the operation of the five Airborne for Men stores
owned and operated by CVC. CVC owns the initial  Amazing  Superstores  opened in
May, 1999 in Providence, Rhode Island.

     Airborne  is in the process of  attempting  to  franchise a newly  designed
franchise format for Airborne's adult entertainment  retail stores, the "Amazing
Superstores".  The Amazing  Superstores  differ markedly from traditional  adult
retail stores both in product line and presentation. This new concept Superstore
is intended  to be more  attractive  to women and  couples.  The stores  feature
custom fixtures,  captivating colors and an integrated  lighting and floor plan.
CVC owns the initial Amazing  SuperStore which opened in May 1999 in Providence,
Rhode Island.

     Airborne plans to offer CVC and the other  franchise  owner the opportunity
to convert their existing stores into this new unique retailing format. Airborne
plans to aggressively  expand the number of franchise  locations  available on a
national level through  acquisition and franchise sales. Metro Global expects to
convert its five existing franchises into Amazing Superstores.  Besides creating
franchise fees, management estimates,  based on past experience,  each franchise
sold to  generate  approximately  $500,000 to  $750,000  annually in  additional
revenue through its exclusive distribution program.

Internet

     Since its inception in early 1998, Metro's amazingonline.com  Internet mall
has  continued  to grow.  Due to the  growth of the online  adult  entertainment
consumer population,  particularly the female demographic,  Metro redesigned and
added  more and  varied  product  lines to the  site.  Amazingonline.com  allows
customers to directly purchase thousands of products, including many produced by
Metro. Management believes amazingonline.com's product database of adult videos,
CD-ROMs,  DVDs,  magazines,  adult  toys,  and  lingerie to be one of the worlds
largest available online.  The site will offer the user discounted prices on all
products,  quick and efficient  delivery,  with low shipping and handling costs.
Additional  discounts  will be offered to repeat  buyers and  members  who enter
through the membership site. The mall is free of charge to enter and new product
is updated daily. Additionally, a revenue share program was implemented allowing
webmasters to resell product from amazingonline.com and receive a share of every
sale.  A complete  online  signup form will allow  webmasters  to offer  Metro's
products.

     Due to an  increase  in traffic and  business  to Metro's  e-commerce  site
(amazingonline.com) and membership site (amazingsex.com), along with an analysis
of   the   benefits,    increased    opportunities   and   revenue   growth   of
direct-to-consumer  sales, Metro is investing  resources in upgrading and adding
to its  existing  sites.  The average  number of hits per day on Metro sites has
increased  over  300% in the last  eight  months.  A  redesign  to the  back-end
management  functionality  and an upgrade to Sun Station Unix web servers should
allow Metro easy scalability while increasing speed, reliability and security to
our sites.

     During the year, Metro retained Adult  Entertainment  Group ("AEG"), of Los
Angeles,  California,  to  redesign  and upgrade  all of its  approximately  one
hundred domain sites.  AEG was the 1998 winner of the Adult Video News award for
Best Graphic  Design.  By  incorporating  the latest design and site  management
technology,  Metro  expects to provide a site that is eye  catching  with easily
navigated interfaces.

                                        8
<PAGE>

     The  marketing  concept of  offering  full  screen,  full  motion  video in
conjunction  with  amazingsex.com  was  implemented  by Metro this year with the
production  of the Project X 2000 CD-ROM.  By combining  the  interactivity  and
accessibility of the Internet with the speed of the CD-ROM, users can now watch,
by linking to  projectx2000.com,  full  screen,  full  motion  video clips while
online at the site.  This  promotional  CD-ROM allows the user to see behind the
scenes  footage,  view scenes from  upcoming  releases,  pre-order  any of these
movies online, and take a virtual tour of the site before joining the membership
site, amazingsex.com.

     Metro  expects  that the first  volume  of  Project X 2000 will be given to
thousands  of  users  free of  charge  to  promote  this  exciting  new  format.
Approximately  6,000 users have already  requested to be  registered  to receive
their complimentary CD-ROM, which is scheduled for release in late October 1999.
Metro  expects to release a new  volume of the CD-ROM  bi-monthly  to users that
have subscribed to the membership site. Metro plans to offer  subscriptions at a
price lower than many competitive sites. With the addition of the Project X 2000
format, management believes this site will stand out above our competitors while
promoting new products for direct sale.  Metro has retained patent attorneys who
are  reviewing the process Metro is using with the Project X 2000 format for the
possibility  of applying for patent  protection  in the United  States and other
countries.

     In July 1999,  Metro entered into an Internet  support and  traffic-sharing
agreement with Interactive Telecom Network ("ITN") and Interactive Gallery, Inc.
("IGallery").  Under the terms of the agreement,  ITN will provide all technical
support   necessary   to  operate   our  sites,   including   hosting,   systems
administration and management, network security solutions, customer service, and
fully automated  credit card clearing  services.  ITN offers Internet access and
Service  Bureau for  automation  and systems  integration,  and  specializes  in
mass-call  processing  using  state-of-the-art  switching,  voice  response  and
computer technology.

     The  traffic-sharing   program  of  the  agreement  directs  a  portion  of
IGallery's  fifteen million visitors per month to Metro's web sites,  along with
exit traffic and qualified  traffic to be routed to IGallery  sites.  As part of
the  traffic-sharing  program,  IGallery  will also  place  banners on its sites
promoting Metro and provide links to its sites from its webmaster portal and its
weekly Tips & Tricks  newsletter.  In  addition,  IGallery  will send  marketing
emails to its database of webmasters  promoting  Metro's  online  presence.  The
agreement  also calls for the  creation  of a new  pay-per-view  live feed site,
amazinglive.com,  in which both Metro and IGallery will participate in revenues.
This new live feed will also be offered  to the  thousands  of adult  webmasters
already contracted with IGallery.

     In the coming year,  Metro  expects to add four to five new "teaser"  sites
every month to the hub  network.  Management  believes  the increase in Internet
sites will enable  Metro to increase  its traffic and market  share and generate
increasing revenues.

Distribution; Major Customer

     Wholesale   distribution   of  Metro's  home  video  and  DVD  products  is
accomplished  through a distribution  network of wholesalers  located throughout
the United  States,  Canada and Europe.  In addition,  Metro operates a regional
distributorship  for its own  motion  picture  titles  as well as the  video/DVD
titles  of other  companies  to  retail  outlets  located  throughout  the upper
Northeast  region  of the  United  States.  Wholesale  distribution  of  Metro's
publications  is  accomplished  through a  distribution  network of  wholesalers
located  throughout  the United  States and Canada.  Metro's New England  region
fulfillment  activities  are  conducted  from a  centralized  64,000 square foot
facility in Cranston,  Rhode Island. National distribution is conducted from the
California facility.

     Metro Global's wholly owned subsidiary,  Metro  International,  operates an
international  sales office in  Flensburg,  Germany to handle the sales of video
rights in Europe, South America and Australia.  In addition to the sale of video
rights, this office sells Metro's videos and DVDs in Europe, South America and

                                        9
<PAGE>

Australia.  In  February  1999,  Metro  International  opened  a newly  expanded
facility  in  Flensburg,  Germany.  Metro  International  generated  revenues of
approximately  $765,000  or 3%  of  the  consolidated  revenue  from  continuing
operations of Metro Global, during the fiscal year ended May 29, 1999.

     In March 1998,  Metro  acquired an 80% interest in Amazing  Direct,  a mail
order company.  Metro acquired the remaining 20% interest in April,  1999. Metro
expects to build a customer database through advertisement in adult magazines as
well as  purchasing  or  renting  customer  lists.  Brochures  are  mailed  on a
quarterly  basis  to  approximately   one  hundred  and  fifty  thousand  active
customers.

     All  orders  are  taken  via  phone or mail and  sent to the  Cranston,  RI
warehouse for  fulfillment.  Metro  anticipates  continued  growth during fiscal
2000, as the customer database continues to expand.

     CVC, which is wholly-owned by Kenneth Guarino, a principal  shareholder and
the Acting Chief Executive  Officer of Metro Global and for which Daniel Geribo,
Metro  Global's  Director,  serves  as  President  and sole  Director,  operates
approximately  thirty  video and magazine  retail  stores in the New England and
upstate New York areas and accounted for  approximately 40% of Metro's net sales
for the  fiscal  year ended May 29,  1999 and 47% of  Metro's  net sales for the
fiscal year ended May 30, 1998. See "Item 12. Certain  Relationships and Related
Transactions".  No other  customer  accounted  for more than 10% of Metro's  net
sales for the fiscal years ended May 30, 1999 and 1998.

Competition

     The  production  and  distribution  markets  of home  video,  DVD and cable
television products are highly  competitive,  as each competes with the other as
well as with  other  forms of  entertainment.  Furthermore,  there is  increased
competition in the television  industry,  evidenced by the increasing number and
variety of basic cable and pay television  services now available.  Revenues for
motion  picture  entertainment  products  depends in part upon general  economic
conditions,  but the competitive  position of a producer or distributor is still
greatly  affected by the quality of, and public  response to, the  entertainment
product  it makes  available  to the  marketplace.  There is strong  competition
throughout the home video industry, both from home video subsidiaries of several
major motion picture studios and from independent  companies.  There are several
competitors  of Metro that have  already  released  adult DVD titles.  Moreover,
management  believes that new competitors are increasing their focus on this new
format,  which will  result in  greater  competition  for  Metro.  Nearly all of
Metro's  products  compete with other products and services that utilize leisure
time or disposable income.

     Metro  meets  with  direct  competition  from  other  publishers  of  adult
magazines  as well as all  other  forms  of  print  media  adult  entertainment,
including several better known national  publications with substantially  larger
circulation than those of Metro.

     Competition  in the mail order  business is high.  Metro competes with such
businesses  as Adam and Eve,  Leisure  Time and Video  Age.  It is  management's
belief that it can continue to penetrate  this line of business by continuing to
increase its database.

Government Regulation

     The right to distribute adult videocassettes, magazines and CD-ROM products
is  protected  by the First  and  Fourteenth  Amendments  to the  United  States
Constitution, which prohibit Congress or the various states from passing any law
abridging the freedom of speech.

     The  First  and  Fourteenth   Amendments,   however,  do  not  protect  the
dissemination of obscene  material,  and several states and communities in which
Metro's  products are distributed  have enacted laws regulating the distribution
of

                                       10
<PAGE>


obscene  material  with some  offenses  designed as  misdemeanors  and others as
felonies, depending on numerous factors. The consequence for violating the state
statutes  varies by state.  Similarly,  18 U.S.C.  Sections  '1460 through '1469
contain the federal  prohibitions  with respect to the  dissemination of obscene
material,  and the potential  penalties  for  individuals  (including  corporate
directors,  officers and employees) violating the federal obscenity laws include
fines, community service, probation, forfeiture of assets and incarceration. The
range of possible  sentences require  calculations  under the Federal Sentencing
Guidelines,  and the  amount  of the fine and the  length  of the  period of the
incarceration  under those guidelines are calculated based upon the retail value
of the unprotected materials.  Also taken into account in determining the amount
of the fine,  length of  incarceration or other possible penalty are whether the
person accepts  responsibility for his or her actions,  whether the person was a
minimal or minor participant in the criminal activity, whether the person was an
organizer, leader, manager or supervisor, whether multiple counts were involved,
whether  the person  provided  substantial  assistance  to the  government,  and
whether  the person has a prior  criminal  history.  In  addition,  federal  law
provides for the forfeiture of: (1) any obscene material produced,  transported,
mailed,  shipped  or  received  in  violation  of the  obscenity  laws;  (2) any
property, real or personal,  constituting or traceable to gross profits or other
proceeds  obtained  from such offense;  and (3) any property,  real or personal,
used or  intended  to be used to commit or to  promote  the  commission  of such
offense, if the court in its discretion so determines, taking into consideration
the nature, scope and proportionality of the use of the property in the offense.
Because Metro is engaged primarily in the wholesale distribution of its products
to other  wholesalers  and/or  retailers,  Metro can regulate the communities to
which it  distributes  its  products.  Management  has  taken  steps  to  ensure
compliance with all federal,  state and local regulations regulating the content
of its motion  pictures  and print  products,  by  staying  abreast of all legal
developments  in the areas in which its motion  pictures and print  products are
distributed and by specifically avoiding distribution of its motion pictures and
print  products  in areas  where  the local  standards  clearly  or  potentially
prohibit these  products.  In light of Metro's  efforts to review,  regulate and
restrict  the  distribution  of its  materials,  management  believes  that  the
distribution of Metro's products does not violate any statutes or regulations.

     Many of the  communities  in the areas in which  Airborne  intends to offer
Airborne For Men  franchises  have enacted  zoning  ordinances  restricting  the
retail sale of adult entertainment  products.  Airborne intends to open Airborne
For Men stores and to permit the opening of Airborne For Men franchises  only in
locations where the retail sale of adult entertainment products is permitted.

     Distribution  rights to video cassettes,  magazines and CD-ROM products are
also granted legal  protection under the copyright laws of the United States and
most foreign countries,  which provide  substantial civil and criminal sanctions
for unauthorized duplication and exhibition. Metro plans to take all appropriate
and reasonable  measures to secure and maintain copyright  protection for all of
its products under the laws of all applicable jurisdictions.

Trademarks and Trade Names

     Metro owns or licenses  numerous  trademarks and copyrights that it uses in
its video and magazine  businesses.  Its most important  trademarks are METROtm,
INTROPICStm,   CAL  VISTAtm,  MAGMAtm,  ULTRACOLOR  PUBLICATIONStm,   AMAZINGtm,
TOXXXICtm,  METRO PRIME CUTStm,  TABOOtm, ONLY THE BESTtm, CASTING CALLtm, BABES
ILLUSTRATEDtm, SOHOtm, ARCUStm, SUPERSHOTStm, RAGEtm and PULSEtm. Metro believes
it has  trademark  rights in these names and relies on trademark  law to protect
such  rights.   Airborne  For  Men,  Ltd.  has  filed   trademark   registration
applications  with respect to its AIRBORNE FOR MENtm  tradename and logo.  Metro
believes  that the name  recognition  and image that it has developed in each of
its markets  significantly  enhance customer  response to its sales  promotions.
Accordingly,  trademarks and  copyrights  are important to Metro's  business and
Metro intends to aggressively defend them.

                                       11
<PAGE>

DISCONTINUED OPERATIONS
-----------------------

     Metro  Global   purchased   Fanzine  on  August  3,  1998.   See  "Business
Acquisitions  and  Other  Activities"  below.  Fanzine  publishes  approximately
eighteen teen oriented and special interest magazines on a semi-monthly, monthly
and bi-monthly  basis.  The teen oriented  magazines  include Teen Celebrity,  a
seventy-six page monthly  magazine that deals with young adult  interests,  life
style,  fashion and clothing.  The special  interest  magazines  include Gym and
Burn,  which are devoted to men's health,  fitness and  exercise,  and Celebrity
Style - 101 Hair  Styles,  a one hundred two page all color  oversized  magazine
containing  photographs,  information and assistance devoted to various types of
contemporary women's hairstyles and beauty tips. Fanzine also publishes "how to"
digest guides, Farmers Almanacs, Academic Calendars and Diary magazines.

     In September  1999,  Metro  Global's  Board of Directors  adopted a plan to
discontinue  the  operations  of Fanzine  and  instructed  management  to divest
Fanzine  and the  Publishing  Segment  by the end of fiscal  2000.  Accordingly,
Fanzine is reported  herein as a  discontinued  operation for the year ended May
29, 1999 (see note 17 to financial  statements).  On September  29, 1999,  Metro
Global sold  Fanzine  back to the former  shareholders  of Fanzine and a company
controlled  by them,  for  $4,500,000  and the  return  to Metro  Global  of the
1,000,000 shares of its Common Stock held by Fanzine's former shareholders.  The
cash portion is scheduled to be paid as follows: $1,000,000 by October 31, 1999;
$1,000,000 by November 30, 1999;  $1,000,000 by May 31, 2000;  and $1,500,000 by
August 31, 2000.  The first two  scheduled  payments are secured by the personal
guarantees  of  Fanzine's  shareholders  and all such  payments  are  secured by
Fanzine's assets.

BUSINESS ACQUISITIONS AND OTHER ACTIVITIES
------------------------------------------

     In August 1997, Rocket Media Group, LLC, a wholly owned subsidiary of Metro
entered into a joint venture with Salmill  Enterprises,  Inc. for the purpose of
magazine  publishing.  Under the terms of the  agreement,  Rocket  contributed a
sub-license  agreement for the rights to certain titles, names and materials and
Salmill contributed its publishing and circulation expertise into a newly formed
entity Maxstone  Media,  LLC; each joint venture  partner  contributed  $30,000.
Metro Global has  included  Maxstone  Media's  results  from  operations  in the
consolidated financial statements.  Minority interest amounted to $53,567 at May
29, 1999.

     In March 1998,  Metro Global acquired an 80% interest in Amazing Direct,  a
Nevada Corporation by purchasing four hundred shares of its outstanding stock at
$2.00 per share.  Amazing Direct is a mail order company.  In April 1999,  Metro
acquired the remaining shares of outstanding stock.

     On August 3, 1998, Metro Global acquired 100% of the stock of Fanzine for a
cash  purchase  price  of  $4,000,000,   plus  contingent   consideration  in  a
transaction  approved  by Metro  Global's  Board of  Directors.  The  contingent
consideration  consisted  of one  million  restricted  shares of Metro  Global's
Common  Stock with put option  rights at $8.00 per share to be  exercised by the
selling  shareholder's  during the second year on a quarterly  basis, if certain
minimum  earnings,   as  defined,  are  met.  During  Fanzine's  first  year  of
operations,  Metro  Global  had the right to call the  shares at the  greater of
$6.00  per  share or 75% of the  market  price.  Metro  Global  did not call the
shares.

     The Fanzine acquisition was accounted for as a purchase.  The excess of the
purchase  price  over the fair  market  values  of net  assets  acquired,  which
included,  among others,  licenses,  trademarks,  and distribution  rights,  was
allocated to goodwill and is being amortized over ten years. The cash portion of
$4,000,000  was  financed  by  a  long-term   convertible  debenture  and  other
short-term borrowing.

     On  September  29,  1999,  Metro  Global  sold  Fanzine  back to the former
shareholders and a company controlled by the former  shareholders  pursuant to a
Rescission and Purchase Agreement.  In consideration for this sale, Metro Global
is scheduled to receive total payments of $4,500,000 and has received back the

                                       12
<PAGE>


1,000,000  shares of its  Common  Stock  held by the  former  shareholders.  The
$4,500,000  will be paid  in four  installments  ending  August  31,  2000.  The
promissory  notes are  collateralized  by the assets of Fanzine and, in part, by
the personal  guarantees of the former  shareholders.  The operations of Fanzine
have been classified as discontinued  operations for fiscal 1999 (see note 17 to
financial statements).

EMPLOYEES

     As of  September  30,  1999,  Metro  Global and its  subsidiaries  employed
approximately 145 persons, of which 142 are full-time employees.

ITEM 2. PROPERTIES
------------------

     Metro's  principal  administrative  office is an approximate  64,000 square
foot office,  warehouse and shipping  complex located in Cranston,  Rhode Island
leased from an entity principally owned by the spouse of Kenneth Guarino,  Metro
Global's principal shareholder and Acting Chief Executive Officer. See "Item 12.
Certain  Relationships and Related  Transactions".  This facility houses Metro's
administrative,  editorial and operational  offices;  the data center,  customer
service,  and warehouse and fulfillment  facilities.  As of July 15, 1999, Metro
relocated  it's  California  offices to an  approximate  35,500  square  feet of
office, warehouse,  distribution and duplicating laboratory space located in Los
Angeles  County,  California.  This site has a four year,  eleven and half month
lease term expiring on June 30, 2004, with a renewable  option of one additional
period of sixty months,  subject to terms and  conditions.  Metro  International
Distributors  has warehouse  and office space  located in Flensburg,  Germany of
approximately 1,700 square feet with a five-year lease term.

     Maxstone  and  Fanzine  are  located  in New York  City,  New York  with an
approximate  3,045 square feet of office space with a five year, two month lease
term expiring on May 30, 2003.

ITEM 3. LEGAL PROCEEDINGS
-------------------------

     There are no material legal proceedings pending against Metro Global or its
subsidiaries other than routine litigation that is incidental to the business.

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

     None

                                       13
<PAGE>


PART II
-------

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
-----------------------------------------------------------------------------

     Metro Global's  Common Stock is traded in the  over-the-counter  market and
quoted on the  NASDAQ  Small Cap  Market  under the  symbol  "MGMA".  There is a
limited  market for Metro  Global's  Common Stock and no assurances can be given
that any trading  market will be sustained.  On September  14, 1999,  upon Metro
Global's issuance of a press release that it did not timely file its 1999 Annual
Report on Form  10-KSB,  the NASDAQ  Stock  Market  halted the  trading of Metro
Global's  Common  Stock.  The  following  table  sets forth the high and low bid
prices per share of Metro Global's Common Stock for each quarter within the last
two fiscal years.

<TABLE>
<CAPTION>

                                                              COMMON STOCK*
                                                           High Bid     Low Bid
<S>                                                        <C>          <C>
Fiscal Year Ended May 29,1999
-----------------------------
First Quarter                                              $ 4.6250     $2.2810
Second Quarter                                             $ 4.0005     $1.8750
Third Quarter                                              $ 3.7500     $2.3750
Fourth Quarter                                             $ 4.1250     $1.6250

Fiscal Year Ended May 30, 1998
------------------------------
First Quarter                                              $ 2.0000     $1.2500
Second Quarter                                             $ 1.5625     $1.1250
Third Quarter                                              $ 6.9690     $1.1250
Fourth Quarter                                             $ 5.0000     $1.8750
</TABLE>


* Such  market  quotations  reflect  the high and low prices for Metro  Global's
securities as quoted by dealers  without retail mark-ups and may not necessarily
represent actual transactions.

     At  September  30, 1999 there were 420 holders of record of Metro  Global's
Common Stock.

     Metro  Global  did not pay any cash  dividends  during  its last two fiscal
years  and  the  Board  of  Directors  does  not  contemplate  doing  so in  the
foreseeable  future.  Any decision as to future payment of dividends will depend
on the earnings and  financial  condition of Metro Global and such other factors
as the Board of Directors deems relevant.

Sales of Unregistered Securities

     On July 31, 1998,  Metro Global  entered into an 8%  convertible  debenture
with an unrelated third party. In connection with this transaction, Metro Global
issued  warrants to purchase  75,000 and 25,000 shares of Common Stock at prices
of $4.11 and $3.29, respectively, expiring on July 31, 2000.

     On October 28,  1998,  Metro  Global  entered  into a note  payable with an
unrelated third party.  In  consideration  of the loan,  Metro Global issued the
lender 150,000 restricted shares of Metro Global's Common Stock.

     On  December  9,  1998,  Metro  Global  entered  into a term  note  with an
unrelated  third party.  As part of the  transaction,  Metro  Global  issued the
lender warrants to purchase  350,000 shares of Common Stock at a price of $3.00,
expiring on December 31, 2001 and 100,000 share of Common Stock.

                                       14
<PAGE>


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
-----------------------------------------------------------------

Results of Continuing Operations - Fiscal 1999 Compared to Fiscal 1998

     Metro Global had revenues of  $23,389,171  from  continuing  operations for
fiscal 1999 as compared to revenues  of  $20,391,134  for fiscal  1998,  a 14.7%
increase.  Increased  revenues are primarily due to (1) increased  video and DVD
sales of $1,700,000 as a result of the increased investment made by Metro Global
in new  productions;  (2)  inclusion  of revenues  from Metro  International  of
approximately  $765,000,  compared  to none in  fiscal  1998;  (3)  increase  in
revenues of approximately $509,000 to $739,000 in fiscal 1999 for Maxstone Media
due to the increased number of publications.

     Metro Global's gross profit from continuing  operations for fiscal 1999 was
$7,314,720 as compared to $7,222,920 in fiscal 1998. Metro Global's gross margin
decreased to 31.3% in fiscal 1999 from 35.4% in fiscal 1998.  The primary reason
for the decrease in gross profit is due to the increase in amortization  expense
of the  film  library  of  approximately  $430,000  due to the  increase  in the
investment in film, increase in duplicating payroll,  increased costs associated
with the production of DVDs and increased  costs  associated with the production
of additional magazines.

     Selling  general  and  administrative  costs  increased  by  $2,887,763  to
$9,493,943 in fiscal 1999 as compared to  $6,606,180 in 1998, a 43.7%  increase.
The increase in selling, general and administrative expenses is primarily due to
(1) increase in payroll and related payroll  expenses for Metro of approximately
$550,000 due to the expansion of the west coast  operations,  (2)  approximately
$100,000  in expenses  associated  with the  upgrade  and  expansion  of Metro's
internet sites (3)  approximately  $271,000 of expenses for Amazing Direct,  (4)
approximately $313,600 in expenses for Metro International,  for which there was
none  in  fiscal  1998  (5)  additional  consulting  fees  of  $350,000  and (6)
amortization of goodwill and acquisition  costs  associated with the purchase of
Fanzine  of  $364,071.  As  a  percentage  of  revenues,  selling,  general  and
administrative expenses were 40.6% in fiscal 1999 as compared to 32.4% in fiscal
1998 due to the foregoing reasons.

     Other income (expense) increased $1,245,966 to $2,114,768 in fiscal 1999 as
compared to $868,802 in 1998.  This  increase is primarily due to an increase in
interest  expense from  $973,918 at May 30, 1998 to  $2,240,488  at May 29, 1999
attributable  to the  increase  in  borrowings  to finance  the  acquisition  of
Fanzine.

     Metro Global recorded a net loss of $4,127,141  from continuing  operations
in fiscal 1999 as compared to a net loss from continuing  operations of $721,746
in fiscal 1998. This loss is primarily due to the decrease in gross margin,  the
increase in selling,  general and  administrative  expenses  and the increase in
interest expense, all as discussed above

Liquidity and Capital Resources

     Cash amounted to $144,288 at May 29, 1999.  Metro Global's  primary sources
of cash in fiscal 1999  consisted of:  (1)$506,256 in cash provided by operating
activities  in fiscal 1999,  (2)  approximately  $1,317,000 in net proceeds from
issuance of preferred stock, (3) proceeds from notes payable of $5,100,000,  (4)
proceeds from issuance of convertible  debentures of $1,200,000,  (5) borrowings
under an accounts  receivable line of credit,  with a maximum borrowing limit of
$1,000,000 and (6) proceeds from the exercise of warrants of $600,000.

     The primary  uses of cash for the fiscal year ended May 29, 1999  consisted
of: (1)  investments  in motion  pictures  and other  films of  $2,869,558,  (2)
payments on the acquisition of Fanzine of $4,168,860,  (3) purchases of property
and  equipment of $477,322,  (4) purchase of treasury  stock of $507,500 and (5)
payments

                                       15
<PAGE>


on  notes  payable  of  $875,000.  Metro  Global  had  non-cash  adjustments  of
$5,074,080 at May 29, 1999  primarily from  depreciation  and  amortization  and
valuation of issued warrants.

     The net increase in accounts  receivable of $2,906,281 was primarily due to
the  increase  of  sales  for the  period  and the  inclusion  of  approximately
$1,894,724  of  receivables  of Fanzine,  as  compared to zero at May 31,  1998.
Prepaid expenses  increased  $960,857  predominately  due to prepayments made by
Fanzine  on paper and  printing  services  for  magazines  not yet  shipped  and
prepayment of interest expense.  Accounts payable and accrued expenses increased
$3,781,550 due to increased purchasing,  increased spending for film production,
the inclusion of payables of Fanzine  totaling  $2,543,103 and accrued  interest
and penalties on various borrowings.

     On July 1, 1998,  Metro  Global  entered into a 12%  convertible  debenture
totaling $200,000 with a related party. See "Item 12" below. The note was due on
July 1, 1999, in either cash or Common Stock,  at a conversion rate of $2.25 per
share.  Metro  Global  recorded  $60,248 of  interest  expense  relating  to the
embedded beneficial  conversion  feature.  Proceeds from the debenture were used
for working  capital.  On July 1, 1999, the debenture was extended until July 1,
2001. In conjunction with the extension warrants were granted to purchase 50,000
shares of Metro Global's Common Stock for $2.58 per share.

     On August 1,  1998,  Metro  Global  entered  into  notes  payable  totaling
$1,000,000  with related  parties.  See "Item 12" below.  The notes,  which bear
interest  at 8%, were due August 1, 1999.  Proceeds  from the notes were used in
the acquisition of Fanzine.  In October 1998, the notes were reduced by $600,000
for the exercise of warrants.  On August 1, 1999,  the balance of the notes were
extended for one year.  In  consideration  of the  extension,  the interest rate
increased  from 8% to 10% and  warrants  were  issued to  purchase up to 115,000
shares  of  Common  Stock at a price of  $2.58,  exercisable  for a term of five
years.

     On July 31, 1998,  Metro Global  entered into an 8%  convertible  debenture
with an unrelated party for $1,000,000, which is due July 31, 2000 with interest
payable quarterly, which was used in the purchase of Fanzine. In connection with
this  transaction,  Metro  Global  issued a warrant for 75,000  shares of Common
Stock at a price of $4.11 and a warrant for 25,000  shares of Common  Stock at a
price of $3.29,  both  exercisable  over two  years.  Metro  Global  recorded  a
discount on the debenture of $157,700 for the  valuation of the warrants.  Metro
Global amortized  $65,708 of the discount to interest expense for the year ended
May 29, 1999.

     The debenture  was to mature on July 31, 2000.  The holder of the debenture
is entitled to convert,  after 120 days of the  agreement,  the principal  value
into Metro Global's  Common Stock at a discounted  market price as is defined in
the agreement.  Metro Global has recorded  $141,844 of interest expense relating
to the  embedded  beneficial  conversion  feature  in 1999.  Metro  Global is in
technical  default  under the terms of the  debenture  due to the  suspension of
trading of its Common Stock on September 14, 1999.

     Beginning in April 1998,  Metro  offered 5%  convertible  Preferred  Shares
pursuant  to  Regulation  S of the U.S.  Securities  Act of 1933.  Metro  Global
received approximately $846,500 and $1,317,000 in net proceeds from the offering
in fiscal 1998 and 1999, respectively. Proceeds from such agreement were used to
fund working capital. Metro Global recognized dividends of $309,248 and $234,502
at May 29, 1999 and May 30,  1998,  respectively,  for the  embedded  beneficial
conversion  feature.  During fiscal 1999, all of the Series A shares and accrued
dividends were converted into 982,120 shares of Metro Global's Common Stock.

     In addition to the Series A Shares, Metro Global issued 400,000 warrants to
purchase Metro Global Common Stock at $1.50 per share  commencing April 20, 1998
exercisable over 5 years.  Metro Global  recognized a dividend of $1,212,000 for
the year ended May 30, 1998 for the beneficial  conversion  feature.  In October
1998, all 400,000 warrants were transferred to a related party and exercised.
See "Item 12" below.

                                       16
<PAGE>


     On October 28,  1998,  Metro  Global  entered  into a note  payable with an
unrelated third party for $1,100,000. The note, which bears no interest, was due
in  quarterly   installments  of  $275,000  commencing  December  31,  1998.  In
consideration  of  the  loan  and  part  of  an  investment  banking  consultant
agreement,  Metro Global issued the lender  150,000  restricted  shares of Metro
Global's Common Stock.  Metro Global used $507,500 of the proceeds to repurchase
198,242  shares of its  outstanding  Common  Stock  from Metro  Plus,  a company
partially  owned by  Kenneth  Guarino.  For the year ended May 29,  1999,  Metro
Global made one payment of $275,000.  In September 1999, Metro Global and lender
agreed to an extension of the note.  Under the terms of the extension,  payments
totaling  $550,000  are due by  September  30,  1999 and the  final  payment  of
$275,000 is due on December  31,  1999.  The  September  30, 1999  payments  are
currently in default.  If all  payments  are not made by January 1, 2000,  Metro
Global must issue the lender 100,000 shares of restricted stock as a penalty.

     On December  9, 1998,  Metro  Global  entered  into a  six-month  term loan
agreement with an unrelated third party,  under which it borrowed  $3,000,000 at
an interest rate of 10% per year. The proceeds were used toward the  acquisition
of Fanzine and to fund working  capital.  In connection  with this  transaction,
Metro Global issued warrants to purchase up to 350,000 shares of Common Stock at
a price of $3.00,  expiring on December 31, 2001. Metro Global recorded interest
expense of $577,000  for the  valuation  of the  warrants.  Additionally,  Metro
Global issued 100,000  shares of Common Stock and recorded  $187,500 of interest
expense.  In September 1999, Metro Global and the lender agreed to an extension,
under  which Metro  Global  must pay $1.3  million  upon  closing a  prospective
financing with another lender.  The other $1,800,000,  which includes a $100,000
penalty,  will be exchanged for 8%  convertible  debentures.  The debentures are
convertible at a rate of not more than 10% of the total debenture per week, at a
price  of 80% of the  average  closing  bids  for the five  days  preceding  the
conversion. In consideration of the extension,  Metro Global will issue warrants
to purchase up to 100,000  shares of Common  Stock at a price of $1.75 per share
with a two-year  expiration.  In the event that  funding is not  received on the
prospective  financing  with  Reservoir  Capital,  Metro  Global  will remain in
default under the debt obligation.

     In June 1997,  Metro  entered into a line of credit  agreement  with Finova
Capital  Company,  under which  Metro may borrow up to 75% of assigned  accounts
receivable less than 90 days old, up to a maximum of $1,000,000. The balance due
under the line of credit bears interest at the prime rate plus 5% per annum plus
a collateral  management fee. The outstanding  balance under the line is secured
by  accounts  receivable  of Metro and  guaranties  of Metro  Global and certain
officers/shareholders.  The line of credit  expired  during June 1999. As of May
29,  1999,  the balance on the line of credit was  $942,298.  On June 30,  1999,
Finova  did not  renew  the  agreement  and is  waiting  to be  repaid  from the
Reservoir Capital financing.

     In August 1999,  Metro Global  signed a $4,000,000  commitment  letter with
Reservoir Capital Corporation. Pursuant to the terms, Metro may borrow up to 70%
of accounts  receivable less than ninety day old, up to a maximum of $3,000,000.
The  accounts  receivable   borrowing  base  excludes  foreign  receivables  and
receivables  where more than 50% of the balance is over ninety days old. Metro's
borrowings on the receivables due from CVC, a related party,  are limited to the
lesser of 30% of total accounts  receivable or $1,600,000.  Additionally,  Metro
can borrow 40% of inventory, up to a maximum of $1,000,000.

     Borrowings under this loan bear interest at prime rate plus 3.5% per annum.
Additionally,  Metro  must pay a service  fee of .35% per  month on the  average
daily  loan  balance.  Metro must pay an unused fee of .25% on the amount of the
borrowings  under  $2,000,000.  The loan will be secured by the assets of Metro.
The CVC accounts  receivables will be guaranteed by the sole shareholder of CVC.
Additionally,  CVC  will  execute  a put on the  inventory  of  Metro in case of
default

     Of Metro's total accounts  receivable at May 29, 1999,  $2,419,990 (40%) as
compared to  $2,477,041  (49%) at May 30, 1998 is owed by CVC, a chain of retail
stores,  which is wholly-owned by Kenneth Guarino,  a principal  shareholder and
the

                                       17
<PAGE>


Acting Chief  Executive  Officer of Metro  Global and for which  Daniel  Geribo,
Metro Global's Director,  serves as President and sole Director.  Because of the
amount of this  receivable,  the  concentration  of business with CVC and as CVC
continues  to open new retail  locations,  this  receivable  is  monitored  very
closely and personally guaranteed by the wife of CVC's sole shareholder, Kenneth
Guarino.  All amounts due from CVC are predominantly  maintained within 60 to 90
day terms.  Accordingly,  no  allowance  for related  party  receivables  and no
related  party bad debt expense has been  recorded in Metro  Global's  financial
statements.

     In fiscal 1999,  Metro invested  $2,869,558 in new feature films and video.
Metro estimates it will invest approximately $2,500,000 to $3,000,000 in feature
films and video during fiscal 2000.  Financing for these activities has been and
will  continue to be  generated  through  operating  cash flows as well as funds
received from its line of credit.

Capital Expenditures

     Capital  expenditures  for fiscal 1999  amounted to $477,322 as compared to
$105,590 for fiscal 1998. Metro Global anticipates that its capital expenditures
for fiscal 2000 will be approximately  $500,000 to $750,000,  primarily used for
computer  equipment,  interactive  media  center  units  and other  editing  and
duplicating  equipment.  Metro Global has negotiated a $1,000,000  capital lease
line for its use which management believes will be sufficient.

     Management  believes that funds  provided by  operations,  existing and new
line of credit,  are adequate to meet the  anticipated  short-term and long-term
capital needs.  Management believes that inflation has not had a material effect
on its operations.

Forward Looking Statements

     This Form 10-KSB Report contains  "forward-looking  statements,"  including
statements in "Management's Discussion and Analysis or Plan of Operation," as to
expectations,  beliefs, plans, objectives and future financial performance,  and
assumptions  underlying  or  concerning  the  foregoing.   Such  forward-looking
statements involve risks and uncertainties,  which could cause actual results or
outcomes  to differ  materially  from  those  expressed  in the  forward-looking
statements including, without limitation government actions or initiatives, such
as attempts to limit or otherwise regulate the sale of adult-oriented materials,
including print, video and online materials.

Year 2000 Compliance

     As the year 2000  approaches,  an issue has emerged  regarding how existing
application  software  programs and operating  systems can accommodate this date
value.  Failure to adequately address this issue could have potentially  serious
repercussions.  Metro  Global  has begun to  identify,  evaluate  and  implement
changes to its existing computerized business systems. In addition, Metro Global
is  communicating  with its vendors and other  service  providers to ensure that
their  products  and  business   systems  will  be  Year  2000   compliant.   If
modifications  and  conversions  by Metro Global and those it conducts  business
with  were not made in a timely  manner,  the Year  2000  problem  could  have a
material  adverse affect on Metro  Global's  business,  financial  condition and
results of  operations.  Most of the systems of Metro  Global have  already been
identified  as Year  2000  compliant,  including  most  financial  applications.
Although  Metro Global is still  quantifying  the impact,  Metro Global does not
expect to expend more than $50,000 to $100,000.  These costs are being  expensed
as incurred.

     As a contingency  plan for the most reasonably  likely worst case scenario,
Metro  Global has  addressed  all major  elements  related to this issue.  Metro
Global  believes its  technology  systems  will be ready for the Year 2000,  but
Metro Global may experience isolated incidences of non-compliance.  Metro Global
plans  to  allocate  internal   resources  and  retain  consultants  and  vendor
representatives to be

                                       18
<PAGE>


ready to take action if these events  occur.  Although  Metro Global  values its
established  relationships  with key vendors  and other  service  providers,  if
certain  vendors  are unable to perform on a timely  basis due to their own Year
2000 issues,  Metro Global  believes  that  substitute  products or services are
obtainable  from other vendors.  Metro Global also recognizes the risks if other
key  suppliers  in  utilities,  communications,   transportation,   banking  and
government are not ready for the Year 2000, and is approaching this issue in the
same manner.

Unaudited Restatements of Quarterly Information

     In the  fourth  quarter  of fiscal  1999,  Metro  Global  made  significant
adjustments  to  the  financial  statements  which  impact  previously  reported
quarterly  results of operations.  The  adjustments  were made for such items as
embedded  interest and dividends,  valuations of warrants and options and change
in estimates.  The following table presents the quarterly  results of operations
considering the above mentioned adjustments:

<TABLE>
<CAPTION>

                                         For the Quarters Ended               Nine Months
                             Aug. 28, 1998   Nov. 28, 1998   Feb. 27, 1999   Feb. 27, 1999
                             -------------   -------------   -------------   -------------
<S>                          <C>             <C>             <C>             <C>
Revenue                      $  6,520,569    $  8,503,284    $  9,567,751    $ 24,591,604
Cost of Revenues                4,374,558       6,445,803       7,063,744      17,884,105
                             ------------    ------------    ------------    ------------
                                2,146,011       2,057,481       2,504,007       6,707,499

SG&A                            2,169,895       2,377,230       2,724,787       7,271,912


Other Income (expense) net       (160,011)       (231,138)       (777,569)     (1,168,718)
                             ------------    ------------    ------------    ------------

Income before taxes              (183,895)       (550,887)       (998,349)     (1,733,131)

Tax Benefit                         6,436          19,280          34,923          60,639
                             ------------    ------------    ------------    ------------

Net Loss                     $   (177,459)   $   (531,607)   $   (963,426)   $ (1,672,492)
                             ============    ============    ============    ============
</TABLE>


ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
--------------------------------------------------

     The consolidated financial statements and supplemental data of Metro Global
and the report of  independent  auditors  thereon set forth at pages F-1 through
F-27 herein are incorporated herein by reference.

ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
--------------------------------------------------------------------------------
FINANCIAL DISCLOSURES
---------------------

     On May 10,  1999,  Metro  Global  appointed  the  accounting  firm of Grant
Thornton,  LLP as  independent  accountants  for fiscal  1999 to  replace  Trien
Rosenberg, Rosenberg, Weinberg, Ciullo & Fazzari, LLP, ("Trien"), who were Metro
Global's  certifying  accountants  since 1993,  effective with such appointment.
Metro Global's Board of Directors approved the selection of Grant Thornton,  LLP
as new independent accountants. Management had not consulted with Grant Thornton
on any  accounting,  auditing or reporting  matter  prior to their  appointment.
During the two most recent fiscal years and interim period subsequent to May 30,
1998,  there had been no  disagreements  with Trien on any matter of  accounting
principles or practices,  financial  statement  disclosure or auditing  scope or
procedure.  Trien's  report on the financial  statements  for the past two years
contained no adverse  opinion or  disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope or accounting principles. However, Metro
Global's May 30, 1998, May 31, 1997 and May 31, 1996 financial  statements  have
been restated (see Item 7 in the accompanying financial statements, note 14).

                                       19
<PAGE>


     On  June  22,  1999,  Grant  Thornton  resigned.   Since  Grant  Thornton's
appointment,  there were no disagreements on any matter of accounting principles
or practices,  financial  statement  disclosure or auditing  scope or procedure.
Grant  Thornton did not audit Metro  Global's May 29, 1999 records nor have they
issued a report on Metro  Global's  financial  statements.  In its letter to the
SEC, which is part of the Form 8-K/A filed with the Commission on July 13, 1999,
Grant Thornton stated that it was unwilling to be associated with Metro Global's
financial  statements.  Grant Thornton stated in its July 8, 1999 letter that it
resigned as Metro  Global's  auditors  because Grant Thornton was of the opinion
that  Kenneth  F.  Guarino  had the  operating  and  financial  decision  making
authority  at  Metro  Global.  Mr.  Guarino,  who  is a  principal  shareholder,
subsequently became Acting Chief Executive Officer in September, 1999 (see "Item
9" below).  Mr. Guarino was also the founder and is a former  president of Metro
Global, but until September 1999, had not served in such a capacity for 3 years.
The ultimate operating and financial decision making authority rests solely with
Metro  Global's  Board of  Directors.  Mr.  Guarino is not currently a member of
Metro  Global's  Board of Directors and does not have the ultimate  authority to
make operational or financial decisions on behalf of Metro Global.

     On July 16, 1999,  Metro Global  appointed the  accounting  firm of Imowitz
Koenig & Co., LLP as  independent  accountants  for fiscal 1999.  Metro Global's
Board of Directors  approved the  selection of Imowitz  Koenig & Co., LLP as new
independent  accountants.  Management did not consult with Imowitz Koenig & Co.,
LLP on any accounting, auditing or reporting matter prior to their appointment.

                                       20
<PAGE>


PART III
--------

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
--------------------------------------------------------------------------------
WITH SECTION 16(a) OF THE EXCHANGE ACT
--------------------------------------

     The following  table sets forth all of the current  directors and executive
officers of Metro Global, their ages and the offices they hold with Metro Global
as of October 4, 1999.  Executive officers and employees serve at the discretion
of the Board of  Directors.  All  directors  hold  office  until the next annual
meeting of  stockholders  of Metro Global and until their  successors  have been
duly elected and qualified.

<TABLE>
<CAPTION>

Name                 Age  Position
----                 ---  --------
<S>                  <C>  <C>

Kenneth F. Guarino   50   Acting Chief Executive Officer

Gregory N. Alves     32   Acting President and Director

A. Daniel Geribo     55   Director

Alan S. Casale       50   Director

Janet M. Hoey        36   Treasurer, Secretary and Director
</TABLE>

     Kenneth F. Guarino was named Acting  Chief  Executive  Officer in September
1999. Mr. Guarino,  Metro Global's  founder and former Chief Executive  Officer,
was retained by Metro  Global in March 1999 as a consultant  to advise the Board
of Directors on various  matters.  When Dan H. Eberly resigned as Metro Global's
President in June 1999,  Mr.  Guarino was asked to assist the Board in finding a
new Chief  Executive  Officer.  Since Metro  Global has, as yet,  been unable to
recruit a new Chief Executive Officer,  Mr. Guarino assumed the duties of Acting
Chief Executive  Officer in September 1999,  while Gregory Alves has assumed the
duties of Acting  President.  Metro Global is continuing its effort to recruit a
permanent  Chief  Executive  Officer.  Mr.  Guarino  previously  served as Metro
Global's  Chief  Executive  Officer from October 1995 until  October  1996.  Mr.
Guarino has served since 1994 as an Executive  Consultant  to CVC. In 1997,  Mr.
Guarino  pled  guilty  in U.S.  District  Court  for the  District  of Nevada to
participating  in a  conspiracy  to impede the Internal  Revenue  Service in the
assessment and collection of taxes owned by another individual.

     Gregory N. Alves was named Acting  President in June 1999. Mr. Alves joined
Metro Global in March 1998 as  Vice-President  and General Manager of West Coast
operations.  From 1996 until joining  Metro Global,  Mr. Alves served as general
manager of Elegant Angel, a competitor of Metro.  Prior to this, Mr. Alves owned
VG Video,  located in San  Diego.  Mr.  Alves has  extensive  experience  in the
production, promotion and marketing aspects of the industry. Mr. Alves possesses
an ownership  interest in a production  company employed by Metro Global,  which
received  payments of $75,500 from Metro Global  during  fiscal 1999.  Mr. Alves
received  his  Bachelor's  degree  in  Business   Administration  from  National
University. Mr. Alves was appointed to the Board of Directors in September 1999.

     A. Daniel Geribo has served as Metro  Global's  Secretary from 1997 to 1999
and as a  Director  since  1995.  Mr.  Geribo  has  also  served  as  President,
Treasurer,  Secretary and sole Director of Capital Video, which operates a chain
of retail  video  stores in the New  England  and  upstate  New York areas since
November  1994,  and from  September  1993 to  November  1994  served as General
Manager of Capital Video, which is wholly-owned by Kenneth Guarino. From January
1983 to May 1993, Mr. Geribo served as President of Unfinished  Furniture House,
Inc., a chain of retail furniture stores. Mr. Geribo was President of Metro from
November 1996 through October 1998.

                                       21
<PAGE>


     Alan S.  Casale  has been a  principal  in the  accounting  firm of Casale,
Caliri,  and Jeroma since its inception in 1996. Prior to 1996, Mr. Casale was a
principal  in the  accounting  firm of Cardello,  Riccitelli & Casale,  which he
joined in 1987.  Cardello,  Riccitelli  & Casale were the  auditors of record of
Metro Global from  December  1992 to February  1993,  and audited the  financial
statements  of Metro global for the years ended May 31, 1992,  and May 31, 1991.
Mr. Casale, who specializes in taxation,  valuation and litigation services, has
over 25 years of experience in both the private and public sectors.  Mr. Casale,
a certified public accountant,  received both his Bachelor of Science and Master
of Taxation  degrees  from Bryant  College.  Mr.  Casale is a member of both the
American Institute and Rhode Island Society of Certified Public Accountants. Mr.
Casale was appointed a Director of Metro Global in 1995.

     Janet M. Hoey was elected  Treasurer of Metro Global in December  1997. Ms.
Hoey was  employed  by the  accounting  firm of Ernst & Young from 1985  through
1990.  From 1990 through 1996, Ms. Hoey was employed as controller and financial
consultant by Quantum Resources,  a forensic  accounting and consulting company.
Prior to joining Metro Global, Ms. Hoey was employed by Barnstable County Supply
as its controller.  Ms. Hoey, a certified  public  accountant,  is a graduate of
Providence College. Ms. Hoey was appointed to the Board of Directors and elected
Secretary of Metro Global in September 1999.

     In addition to the Directors and Executive  Officers  listed above,  Dennis
Nichols is expected to make a significant  contribution to the business of Metro
Global and its  subsidiaries.  Dennis  Nichols,  50, has served as President and
sole Director of Metro since its inception in 1990.  From March 1992 to November
1994,  Mr.  Nichols  served as President,  Treasurer,  Secretary and Director of
Capital Video Corporation,  which operates a chain of retail video stores in the
New England and upstate New York area and is wholly-owned by Kenneth Guarino.

     No director or executive  officer  serves  pursuant to any  arrangement  or
understanding between him or her and any other person(s), other than arrangement
or understandings with directors and officers acting solely in their capacity as
such. There are no family  relationships  among directors and executive officers
of Metro Global.

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

     Section  16(a)  of the  Securities  Exchange  Act of  1934  requires  Metro
Global's  Officers  and  Director,  and  persons  who  own  more  than  10% of a
registered  class  of Metro  Global's  equity  securities,  to file  reports  of
ownership and changes in ownership with the Securities and Exchange  Commission.
Officers,  Directors  and  greater  then 10%  stockholders  are  required by the
Securities  and Exchange  Commission  regulations  to furnish  Metro Global with
copies of all Section 16(a) forms they file.

     Based  solely on a review of the  copies of such forms  furnished  to Metro
Global, or written  representations that no Forms 5 were required,  Metro Global
believes that,  during fiscal 1999, all Section 16(a) filing  requirements  were
complied  with in  regards  to its  officers,  directors  and  greater  then 10%
beneficial owners except that Briana Investment Group, LLP, Kenneth Guarino,  A.
Daniel Geribo and Alan Casale are late in filing Form 5 statements  with respect
to the fiscal year ended May 29, 1999. In addition, Gregory Alves and Janet Hoey
are late in filing their initial statements of beneficial ownership on Form 3.

ITEM 10. EXECUTIVE COMPENSATION
-------------------------------

     The following table summarizes all  compensation  paid to the three persons
who served as  President  of Metro  Global  during the fiscal year ended May 29,
1999  (the  "Named  Executive  Officers").  No other  executive  officer  earned
compensation  and bonus exceeding  $100,000 during the fiscal year ended May 29,
1999.

                                       22
<PAGE>


<TABLE>
<CAPTION>

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

Name and Principal                                 Other               Securities               All
Position              Fiscal                       Annual              Underlying               Other
                      Year       Salary    Bonus   Comp.     Awards    Options       Payouts    Comp.
<S>                   <C>       <C>        <C>     <C>       <C>       <C>           <C>        <C>
---------------------------------------------------------------------------------------------------------
Dan Eberly            1999      $50,000      -        -         -         -             -         -
President (1)
---------------------------------------------------------------------------------------------------------
Gregory N. Alves      1999      $75,000      -        -         -         -             -         -
President (2)         1998      $18,750      -        -         -         -             -         -

---------------------------------------------------------------------------------------------------------
A. Daniel             1998      $30,000      -        -         -         -             -         -
Geribo                1997      $15,000      -        -         -         -             -         -
President (3)
---------------------------------------------------------------------------------------------------------
</TABLE>


(1) Mr. Eberly was President of Metro Global from October 1998 to May 1999.

(2) Mr. Alves was elected  Acting  President  of Metro Global in June 1999.  Mr.
Alves possesses an ownership  interest in a production company employed by Metro
Global, which received payments of $75,500 from Metro Global during fiscal 1999.
See "Item 12. Certain Relationships and Related Transactions."

(3) Mr. Geribo was elected President of Metro Global in November 1996 and served
as President until October 1998.

Options Granted in Last Fiscal Year

     Metro  Global did not grant  stock  options  to any of the Named  Executive
Officers during the fiscal year ended May 29, 1999.

Option  Exercises in Last Fiscal Year and Fiscal  Year-End  Value of Unexercised
Options

     None of the Named  Executive  Officers  exercised  any options for stock of
Metro Global during the fiscal year ended May 29, 1999. The following table sets
forth  information with respect to the Named Executive  Officers with respect to
the unexercised  options held by them as of the end of the fiscal year ended May
29, 1999.

<TABLE>
<CAPTION>

Aggregated Options/SAR Exercises in Last Fiscal Year and fiscal year-end Option
-------------------------------------------------------------------------------
/SAR Values
-----------

                                                         Number of       Value of Unexercised
                                                        Securities           In-the-Money
                                                        Underlying          Options/SARs at
                                                        Unexercised             FY-end
                                                      Options/SARs at
                                                          FY-End

                         Shares          Value
                       Acquired on    Realized ($)     Exercisable /         Exercisable /
Name                  exercise (#)                     Unexercisable         Unexercisable
<S>                  <C>              <C>           <C>                  <C>
-------------------- ---------------- ------------- -------------------- ----------------------
A. Daniel Geribo            0              -           20,600/30,000         22,947/33,750
-------------------- ---------------- ------------- -------------------- ----------------------
</TABLE>

(1) Based upon the difference between the closing price of Metro Global's Common
Stock on May 29, 1999 of $3.125 and the option exercise price.

     In  September  1993,  a  disinterested  majority of the Board of  Directors
authorized  the  execution of an Employment  Agreement  with Kenneth F. Guarino,
effective as of January 1, 1993. By mutual agreement,  the employment  agreement
was  terminated  on December 31, 1996.  In  addition,  Metro Global  granted Mr.
Guarino

                                       23
<PAGE>


stock  options to  purchase up to 200,000  shares of Common  Stock at a purchase
price of $1.50 per share,  exercisable  in four  annual  installments  of 50,000
shares  commencing  January 1, 1994. In January 1997 the term of the options was
extended to December 31,  2006.  The  requirement  that the options be exercised
within 30 days after termination of employment was deleted.

     In March 1999,  the Board of Directors  entered into a one year  consulting
agreement with Mr. Guarino. In consideration of his services,  Metro Global will
pay Mr. Guarino $10,000 per month. In addition, Metro Global granted Mr. Guarino
options to purchase up to 100,000 shares of Common Stock at a price of $2.00 per
share, exercisable for a period of 5 years.

Compensation of Directors

     Metro Global does not currently pay or intend to pay cash  compensation  to
its directors for their  services in that capacity;  however,  directors who are
not employees are reimbursed for  out-of-pocket  expenses incurred in connection
with their attendance at Board of Directors or committee meetings.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------

     The following table sets forth certain information regarding Metro Global's
Common Stock  beneficially owned as of September 30, 1999 (i) by each person who
is known by Metro  Global to own  beneficially  more  than 5% of Metro  Global's
Common  Stock  and (ii) by each of Metro  Global's  directors,  Named  Executive
Officers and by all executive officers and directors as a group.

<TABLE>
<CAPTION>


                                          No. of Shares of                  Percentage of
                                            Common Stock                Beneficial Ownership
Name and Address                         Beneficially Owned                      (1)
-------------------------------------- ------------------------ ------ ------------------------

Named Executive Officers and
Directors
<S>                                    <C>                      <C>    <C>
-------------------------------------- ------------------------ ------ ------------------------
Janet Hoey                                                   0
268 Wilson Road
Fall River, MA  02720
-------------------------------------- ------------------------ ------ ------------------------
A. Daniel Geribo
788 Reservoir Avenue, Suite 300                         50,600    (2)                        *
Cranston, RI 02910
-------------------------------------- ------------------------ ------ ------------------------
Alan S. Casale
1140 Reservoir Avenue                                    1,220    (3)                        *
Cranston, RI  02920
-------------------------------------- ------------------------ ------ ------------------------
Gregory N. Alves                                        78,955    (4)                        *
5150 Avenida Hacienda
Tarzana, CA  91356
-------------------------------------- ------------------------ ------ ------------------------
All executive officers and directors
as a group (5 people)                                2,750,176                           39.89
-------------------------------------- ------------------------ ------ ------------------------
5% Beneficial Owners
-------------------------------------- ------------------------ ------ ------------------------
Briana Investment Group, LP
c/o Helen Adderley, Esquire                          1,745,318                           25.31
Corner House
20 Parliament Street
Hamilton HM DX, Bermuda
-------------------------------------- ------------------------ ------ ------------------------
Kenneth F. Guarino                                   2,619,401  (5)                      37.99
50 Fort Avenue
Cranston, RI  02905
-------------------------------------- ------------------------ ------ ------------------------
Metro Plus
1060 Park Avenue                                       186,758                            2.71
Cranston, RI 02910
-------------------------------------- ------------------------ ------ ------------------------
</TABLE>

                                       24
<PAGE>


* Beneficial  ownership  represents  less than 1% of Metro Global's  outstanding
Common Stock.

(1)  Beneficial  ownership  is  determined  in  accordance  with  rules  of  the
     Securities and Exchange  Commission,  and includes  generally  voting power
     and/or investment power with respect to securities.  Shares of Common Stock
     which may be acquired  upon exercise or conversion of warrants or Preferred
     Stock which are  currently  exercisable  or  exercisable  within 60 days of
     September 30, 1999,  are deemed  outstanding  for computing the  beneficial
     ownership  percentage  of the person  holding such  securities  but are not
     deemed outstanding for computing the beneficial ownership percentage of any
     other  person.  Except as indicated by footnote,  to the knowledge of Metro
     Global,  the  persons  named in the table  above  have the sole  voting and
     investment  power  with  respect  to all  shares of Common  Stock  shown as
     beneficially owned by them.

(2)  Represents unexercised stock options.

(3)  Includes 600 unexercised stock options.

(4)  Includes 76,555 shares held by Mr. Alves' mother,  with respect to which he
     disclaims beneficial ownership.

(5)  Includes 300,000 unexercised stock options, 1,745,318 shares held by Briana
     Investment  Group, LP, a trust established for the benefit of Mr. Guarino's
     spouse and children, and he has investment and voting power with respect to
     these shares,  and 186,758  shares held by Metro Plus, a company  partially
     owned by Kenneth Guarino.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------

     A.  Daniel  Geribo  serves as the sole  officer  and  director  of, and Mr.
Guarino also serves as the  operations  manager and is 100% owner of, CVC, which
operates a chain of retail  video stores in the New England and upstate New York
area. CVC accounted for $9,358,002 (40%) and $9,952,316 (47%) of the revenues of
Metro for the fiscal years ended May 29, 1999 and May 30, 1998. At May 29, 1999,
$2,419,990 (40%) of Metro's  outstanding  accounts receivable were due from CVC.
At May 30, 1998,  $2,477,041 (49%) of Metro's  outstanding  accounts  receivable
were  due.  Payment  of  CVC's  accounts  receivable  (a) is  secured  by  CVC's
inventory,  which  security  interest  is  evidenced  by that  certain  security
agreement  dated  September  1993 and (b) is guaranteed by a personal  guarantee
executed by Mr. Guarino's spouse. The aging of the accounts  receivable from CVC
is as follows:

<TABLE>
<CAPTION>

    ------------------- --------------- --------------- -------------- ---------------
                             Current        30-60 days     60-90 days    Over 90 days
    <S>                 <C>             <C>             <C>            <C>
    ------------------- --------------- --------------- -------------- ---------------

    May 29, 1999        $      684,339  $      599,408  $     561,475  $      574,768
    ------------------- --------------- --------------- -------------- ---------------

    May 30, 1998        $      998,408  $    1,328,941  $     149,692  $            0
    ------------------- --------------- --------------- -------------- ---------------
</TABLE>

     While in the past, Metro Global did not allow CVC receivables to age beyond
90 days,  Metro Global's  management has determined that extending CVC's payment
terms is  reasonable  and in the best  interests of Metro Global  because of the
volume of business CVC has historically  provided to Metro Global,  the value of
the inventory securing the payment of the accounts receivable, and the guarantee
executed  by Mrs.  Guarino.  During the year ended May 29,  1999,  Metro  Global
billed CVC $187,498 for services  rendered for  distribution  and sales analysis
cost incurred by Metro Global.

     CVC owns and operates five Airborne for Men  franchises.  Because the Board
of Directors  believes  that CVC's  expertise in the  operation of retail stores
will  significantly  augment the value of the Airborne for Men franchise,  Metro
Global did not require CVC to pay the standard franchise fee of $20,000.  During
fiscal 1999,

                                       25
<PAGE>


Metro Global recorded from CVC $90,569 in royalty income pursuant to a franchise
agreement  for the  operation  of the five  Airborne  for Men  stores  owned and
operated by CVC. CVC owns the initial Amazing Superstores opened in May, 1999 in
Providence, Rhode Island.

     Effective May 1, 1993,  Metro entered into a lease with Castle  Properties,
L.L.C.,  an  entity   principally   owned  by  Mr.  Guarino's  spouse,   for  an
approximately 50,000 square foot office,  warehouse and shipping complex located
in  Cranston,   Rhode  Island.   This   facility   houses   Metro's   executive,
administrative,  editorial and operational offices, the data center and customer
service,  warehouse and fulfillment  facilities.  The lease is for a term of ten
years with two five-year  renewal options,  and provides for a fixed annual rent
of  $245,200  for the first five years,  triple  net.  The annual rent for lease
years  six  through  ten and the rent for the  renewal  terms,  if the  lease is
extended,  shall be increased  based on consumer  price  index.  In fiscal 1998,
Metro was granted a rent reduction of $81,733, which is being amortized over the
remaining term of the lease.  Approximately 7,500 square feet of the facility is
sublet to CVC under an oral,  month-to-month  lease  agreement  for  $4,000  per
month.

     Metro  Global pays  property  taxes on real  property  located at 1060 Park
Avenue,  Cranston,  RI.  This  property  is being  leased by CVC from  Centurion
Financial Group,  L.L.C., a company  principally owned by a trust, the principal
beneficiaries of which, are Mr. Guarino's  children.  For the year ended May 29,
1999, Metro Global incurred approximately $6,000 of expense.

     On December 3, 1997,  Metro  Global's  Board of Directors  awarded  Kenneth
Guarino  100,000  shares  restricted and 100,000  shares  unrestricted  of Metro
Global's Common Stock in consideration of certain consulting  services.  On that
date,  Metro Global's Common Stock was trading at $1.50 per share.  Metro Global
recorded $278,000 of consulting expense related to this transaction.

     On March 23,  1998,  Metro Global  entered into a one year 12%  convertible
debenture  with  Centurion  Investment  Group,  Inc.  for  $250,000.   Centurion
Investment  Group,  Inc. is a Rhode Island company owned by a trust, the primary
beneficiaries of which are Mr. Guarino's children.  The debenture is convertible
into Metro  Global's  Common  Stock at a rate of $2.25 per  share.  On March 23,
1999, the debenture was extended for one year. In consideration  therefore,  the
face  value  of  the  debenture   was   increased   from  $250,000  to  $280,000
(representing  accrued interest).  Interest expense attributable to a beneficial
conversion  feature of the  debenture  of $62,556 was  recorded by Metro  Global
during 1998.

     On March 23,  1998,  Metro Global  entered into a one year 12%  convertible
debenture with Cal Vista,  Inc. for $250,000.  Cal Vista is a trust  established
for  the  benefit  of Mr.  Guarino's  spouse  and  children.  The  debenture  is
convertible  at a rate of $2.25 per share.  On March 23, 1999, the debenture was
extended  for one  year.  In  consideration  therefore,  the  face  value of the
debenture  was  increased  from  $250,000  to  $280,000   (representing  accrued
interest).  Interest expense attributable to a beneficial  conversion feature of
the debenture of $62,556 was recorded by Metro Global during 1998.

     On May 27, 1998, notes payable and accrued interest  totaling  $136,536 due
to  Kenneth  Guarino  were  converted  into  91,025  restricted  shares of Metro
Global's Common Stock. On that date,  Metro Global's Common Stock was trading at
$2.50 per share. On May 27, 1998,  notes payable and accrued  interest  totaling
$577,501 due to Metro Plus, a company  partially owned by Kenneth Guarino,  were
converted into 385,000  restricted shares of Metro Global's Common Stock.  Metro
Global recorded  additional  interest expense of $499,826 for the year ended May
30, 1998.

     On July 1,  1998,  Metro  Global  entered  into a one year 12%  convertible
debenture with Cal Vista,  Inc. Cal Vista is a trust established for the benefit
of Mr. Guarino's spouse and children. The debenture has a face value of $200,000
and is convertible at a rate of $2.25 per share.  On July 1, 1999, the debenture
was extended for one year.  In  consideration  therefore,  the face value of the
debenture  was  increased  from  $250,000  to  $280,000   (representing  accrued
interest) and

                                       26
<PAGE>


Centurion  Investment  Group was granted  warrants to purchase  50,000 shares of
Metro Global's common stock for $2.58 per share.  Interest expense  attributable
to a beneficial  conversion  feature of the debenture of $60,248 was recorded by
Metro Global during 1999.

     On August 1, 1998, Metro Global issued its one-year  promissory note in the
principal amount of $250,000 bearing interest at 8% to Dennis Nichols, President
of Metro.  On August 1, 1999, the term of the note was extended for one year. In
consideration for the extension,  the interest rate was adjusted from 8% to 10%,
the principal  amount of the note was increased to $270,000 and Mr.  Nichols was
granted  warrants to purchase  75,000 shares of Metro Global's  Common Stock for
$2.58 per share.

     On August 1, 1998, Metro Global entered into a one-year promissory note for
$750,000 at 8% interest with Briana  Investment  Group  ("Briana").  Briana is a
trust established for the benefit of Mr. Guarino's wife and children.  On August
1, 1999,  the note was extended for one year and the interest rate was increased
to from 8% to 10% and Briana was granted  warrants to purchase  40,000 shares of
Metro Global's  Common Stock for $2.58 per share.  In October 1998, an unrelated
party holding 400,000 warrants issued in conjunction with the Series A Preferred
stock  transferred the warrants to Briana. In October 1999, Briana exercised the
warrant, and the note payable was reduced from $750,000 to $150,000.

     On June 2,  1998,  Messrs.  Guarino  and  Nichols  acquired  from  Priority
Trading, Ltd. options to purchase an aggregate of 250,000 shares of Common Stock
at an  exercise  price of $1.25  per  share.  Priority  Trading  had  originally
purchased the options from Metro Global on February 12, 1998 and had transferred
them to Messrs. Guarino and Nichols on May 30, 1998. Messrs. Guarino and Nichols
exercised  the  options  on June  2,  1998  and  both  executed  indemnification
agreements  with Metro Global in connection with their exercise of the warrants.
On the date of  exercise,  Metro  Global's  Common Stock was being traded at the
price of $2.65 per share. As a result of this transaction, Metro Global recorded
$364,062 of consulting expense in fiscal 1998.

     In October 1998, Metro Global repurchased 198,242 shares of its outstanding
Common Stock from Metro Plus, a company  partially owned by Mr.  Guarino.  Metro
Global  paid  $2.56 per  share,  which was the  market  price on the date of the
transaction.

     On  March  19,  1999,  Metro  Global  entered  into a one  year  consulting
agreement effective April 1, 1999 with Kenneth Guarino,  pursuant to which Metro
Global  will pay Mr.  Guarino a fee of $10,000  per month.  In  addition,  Metro
Global  granted Mr.  Guarino  options to purchase up to 100,000 shares of Common
Stock at a price of $2.00 per  share,  exercisable  for a period of 5 years.  On
that Date,  Metro Global's  Common Stock was trading at $2.063 per share.  Since
the date of the consulting  agreement,  Metro Global recorded consulting expense
of $21,333 in connection  with the issuance of the warrants and  reimbursed  Mr.
Guarino for approximately $70,000 in expenses he has incurred in connection with
his activities for Metro Global.

     Greg Alves, a director and Acting  President of Metro Global,  possesses an
ownership  interest in a production  company that is employed by Metro Global or
its subsidiaries. The production company received payments of $75,500 from Metro
during fiscal 1999 and approximately $50,000 during fiscal 1998.

Conflicts of Interest

     Of  necessity,  some  inherent  conflict of  interest is involved  whenever
Officers,  Directors and others acting on behalf of Metro Global supply services
or goods to Metro Global for compensation. Additional conflicts may arise in the
future when Company Officers, Directors or significant shareholders are involved
in the  management  of any other  company  with  which  Metro  Global  transacts
business. Conflicts may also arise with respect to opportunities,  which come to
the  attention  of such  persons.  Conflicts  may also arise with respect to the
amount of time and effort devoted to respective businesses and opportunities.


                                       27
<PAGE>

     Many of the persons who perform services as Officers and Directors to Metro
Global are  actively,  and in the future will be,  involved in  businesses  from
which they derive income,  other than Metro Global. Their activities may include
information and management of business ventures, the legal profession,  purchase
and sale of real estate and pursuit of other opportunities.  It is expected that
these persons will continue  their separate  business  activities in conjunction
with their activities at Metro Global.

     Although the Board of Directors believes that members of management will be
of great assistance to Metro Global in the fulfillment of its corporate mission,
some  transactions  may and will  occur  where  Metro  Global  and a  member  of
management will have conflicts in particular respects. Prospective investors are
specifically cautioned that such conflicts will occur as a routine matter in the
operation of Metro Global.  However,  it is intended  that,  in accordance  with
legal  principals  applicable to  corporations,  Metro  Global's  action will be
determined  whenever  possible  by a  disinterested  majority  of the  Board  of
Directors.

     It is Metro  Global's  policy  that all  transactions  in which an Officer,
Director or 5% shareholder has a direct or indirect interest be on terms no less
favorable  to Metro  Global  than Metro  Global  would grant to or obtain from a
independent third-party in an arms-length transaction. Because a majority of the
Board of Directors are not affiliated with CVC, all  transactions  between Metro
Global or Metro and CVC have been, and all future transactions will be, approved
and/or ratified by a disinterested majority of the Board of Directors.

                                       28
<PAGE>


PART IV
-------

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------

     Exhibits marked with an asterisk are filed  herewith.  The remainder of the
exhibits have  heretofore  been filed with the Commission  and are  incorporated
herein by reference.

(A) EXHIBITS:

  2.1    Stock  Purchase  Agreement  dated  July 31,  1998 by and  among  Robert
         Maiello,  Michael Levine,  Philip P.  Salvatore,  Bart Senior and Metro
         Global Media,  Inc. as filed with the  Commission on August 15, 1998 as
         Exhibit (1) on Form 8-K and incorporated herein by reference.

  2.2    Rescission and Purchase Agreement dated September 29, 1999 by and among
         Metro Global Media,  Inc., Metro, Inc.,  Fanzine  International,  Inc.,
         Goldtree Publishing,  Inc., Robert Maiello,  Philip P. Salvatore,  Bart
         Senior  and  Michael  Levine as filed  with the  Commission  on October
         4,1999 as exhibit 2.1 on Form 8-K and incorporated herein by reference.

  2.3    Security   Agreement   dated  September  29,  1999   between    Fanzine
         International, Inc. and  Metro Global  Media,  Inc. as  filed  with the
         Commission  on  October  4,  1999  as  exhibit  2.2  on  Form  8-K  and
         incorporated herein by reference.

  2.4    Security   Agreement   dated   September  29,  1999   between   Fanzine
         International, Inc.  and  Metro Global  Media,  Inc. as filed  with the
         Commission  on October  4,  1999  as  exhibit  2.3  on  Form  8-K  and
         incorporated herein by reference.

  2.5    Promissory Note dated  September 29, 1999 from Robert Maiello,  Michael
         Levine, Bart Senior and Philip P. Salvatore to Metro Global Media, Inc.
         as filed with the  Commission on October 4, 1999 as exhibit 2.4 on Form
         8-K and incorporated herein by reference.

  2.6    Promissory Note dated September 29, 1999 from Goldtree Publishing, Inc.
         to Metro Global Media, Inc. as filed with the Commission  on October 4,
         1999 as exhibit 2.5 on Form 8-K and incorporated herein by reference.

  2.7    Personal Guarantee of Michael Levine  dated September 29, 1999 as filed
         with  the  Commission  on  October  4,  1999  as  exhibit  2.6 on  Form
         8-K  and incorporated herein by reference.

  2.8    Personal Guarantee of Robert Maiello  dated September 29, 1999 as filed
         with  the  Commission  on  October  4,  1999  as  exhibit  2.7 on  Form
         8-K  and  incorporated herein by reference.

  2.9    Personal  Guarantee of Philip P. Salvatore  dated September 29, 1999 as
         filed with the Commission on October 4, 1999 as exhibit 2.8 on Form 8-K
         and incorporated herein by reference.

  2.10   Personal Guarantee of  Bart Senior dated  September  29, 1999 as filed
         with  the  Commission  on  October  4,  1999  as  exhibit  2.9 on  Form
         8-K and incorporated herein by reference.

  3.1    Articles of  Incorporation,  as filed with the Commission on August 23,
         1988 as  Exhibit  3.1 to the  Registration  Statement  on Form S-18 and
         incorporated herein by reference.

  3.2    Bylaws,  as filed with the Commission on August 23, 1988 as Exhibit 3.2
         to the Registration  Statement on Form S-18 and incorporated  herein by
         reference.

                                       29
<PAGE>


  3.3    Articles of Amendment of Articles of  Incorporation  of the Registrant,
         as filed with the  Commission on January 17, 1995 as Exhibit 3.3 to the
         Quarterly  Report on Form 10-QSB for the fiscal  quarter ended November
         30, 1994 and incorporated herein by reference.

  3.4    Amendment to Bylaws of the Registrant,  as filed with the Commission on
         January 17, 1995 as Exhibit 3.4 to the Quarterly  Report on Form 10-QSB
         for the fiscal quarter ended November 30, 1994 and incorporated  herein
         by reference.

  3.5    Articles of Amendment of Articles of  Incorporation  of the Registrant,
         as filed with the  Commission  on August 28, 1996 as Exhibit 3.5 to the
         Form  10-KSB for the fiscal  year ended May 30,  1996 and  incorporated
         herein by reference.

  10.1   Stock Option  Agreement  dated September 9, 1993 between the Registrant
         and Kenneth F.  Guarino,  as filed with the  Commission  on February 3,
         1994 as Exhibit 10.2 to the Annual Report on Form 10-KSB for the fiscal
         year ended May 30, 1993 and incorporated herein by reference.

  10.2   Lease  Agreement  dated  September 9, 1993 between  Castle  Properties,
         L.L.C.  and Metro,  Inc.,  as filed with the  Commission on February 3,
         1994 as Exhibit 10.4 to the Annual Report on form 10-KSB for the fiscal
         year ended May 30, 1993 and incorporated herein by reference.

  10.3   Security  Agreement  dated  September 24, 1993 between Metro,  Inc. and
         Capital Video Corporation,  as filed with the Commission on February 3,
         1994 as Exhibit 10.5 to the Annual Report on Form 10-KSB for the fiscal
         year ended May 30, 1993 and incorporated herein by reference.

  10.4   Form of Airborne  For  Men, Ltd. Franchise Agreement,  filed as Exhibit
         10.15  to  the   Post-Effective  Amendment  No. 14 to the  Registration
         Statement on Form SB- 2 and incorporated herein by reference.

  10.5   Promissory  note of Metro,  Inc.  payable  to the order of  Kenneth  F.
         Guarino dated as of May 24, 1995 in the principal  amount of $63,393 as
         filed with the  Commission  as Exhibit 10.13 to the Form 10-KSB for the
         fiscal year ended May 30, 1995 and incorporated herein by reference.

  10.6   Capital Stock Purchase  Agreement  dated as of November 30, 1995 by and
         between Airborne for Men, Ltd. and Capital Video Corporation,  as filed
         with the  Commission  on December  10, 1995 as Exhibit 10.1 to Form 8-K
         and incorporated herein by reference.

  10.7   Debt Conversion  Agreement  between  Capital Video  Corporation and the
         Registrant,  as filed  with the  Commission  on  December  11,  1995 as
         Exhibit 10.2 to the Form 8-K and incorporated herein by reference.

  10.8   Capital Stock  Purchase  Agreement  dated as of January 31, 1996 by and
         between  Airborne for Men, Ltd. and Capital Video  Corporation as filed
         with the  Commission  on May 9, 1996 as Exhibit  10.1 to the  Quarterly
         Report on Form 10-QSB for the fiscal  quarter  ended  February 28, 1996
         and incorporated herein by reference.

  10.9   Amendment to Capital Stock Purchase  Agreement dated as of November 30,
         1996  by  and  between   Airborne  For  Men,  Ltd.  and  Capital  Video
         Corporation, as filed with the Commission on August 28, 1996 as Exhibit
         10.16 to the Form  10-KSB  for the fiscal  year ended May 30,  1996 and
         incorporated herein by reference.

  10.10  Amendment  Agreement  dated as of  December  31, 1995  between  Kenneth
         Guarino and the Registrant,  as filed with the Commission on August 28,
         1996 as Exhibit  10.17 to the Form 10-KSB for the fiscal year ended May
         30, 1996 and incorporated herein by reference.

                                       30
<PAGE>


  10.11  Amendment  to Stock  Option  Agreement  dated  January  16, 1997 by and
         between  Kenneth  F.  Guarino  and the  Registrant,  as filed  with the
         Commission on April 15, 1997 as Exhibit 10.1 to the Quarterly Report on
         Form 10-QSB for the quarter ended March 1, 1997 and incorporated herein
         by reference.

  10.12  Indemnification  Agreement dated December 3, 1996 by Kenneth F. Guarino
         in favor of Registrant  as filed with the  Commission on April 15, 1997
         as Exhibit 10.2 to the Quarterly  Report on Form 10-QSB for the quarter
         ended March 1, 1997 and incorporated herein by reference.

  10.13  Termination  Agreement  dated  April 10,  1997  between  Capital  Video
         Corporation,  Elvira  Famiglietti  and  Metro,  Inc.  as filed with the
         Commission on April 15, 1997 as Exhibit 10.3 to the Quarterly Report on
         Form 10-QSB for the quarter ended March 1, 1997 and incorporated herein
         by reference.

  10.14  Description of Directors  Compensation  Arrangement,  as filed with the
         Commission on April 15, 1997 as Exhibit 10.4 to the Quarterly Report on
         Form 10-QSB for the quarter ended March 1, 1997 and incorporated herein
         by reference.

  10.15  Registration   Rights  Agreement  dated  May  8,  1997  between  Briana
         Investment Group, Ltd. and the Registrant, as filed with the Commission
         on May 8, 1997 as Exhibit 10.1 to Form 8-K and  incorporated  herein by
         reference.

  10.16  Employment  Agreement  dated July 31, 1998 between  Robert  Maiello and
         Metro Global  Media,  Inc. as filed with the  Commission  on August 15,
         1998 as Exhibit (2) on Form 8-K and incorporated herein by reference.

  10.17  Employment  Agreement  dated July 31, 1998 between  Michael  Levine and
         Metro Global  Media,  Inc. as filed with the  Commission  on August 15,
         1998 as Exhibit (3) on Form 8-K and incorporated herein by reference.

  10.18  Employment  Agreement  dated July 31, 1998 between  Philip P. Salvatore
         and Metro Global Media, Inc. as filed with the Commission on August 15,
         1998 as Exhibit (4) on Form 8-K and incorporated herein by reference.

  10.19  Employment  Agreement dated July 31, 1998 between Bart Senior and Metro
         Global Media,  Inc. as filed with the  Commission on August 15, 1998 as
         Exhibit (5) on Form 8-K and incorporated herein by reference.

* 10.20  Consulting Agreement dated March 19, 1999 between  Metro Global  Media,
         Inc. and Kenneth F. Guarino.

* 10.21  License  Agreement dated  July  21,  1999  between  Colorado  Satellite
         Broadcasting, Inc. and Metro Global Media, Inc. on behalf of itself and
         its wholly owned subsidiary, Metro, Inc.

* 10.22  Amendment to  No. 1 Business Consulting  Agreement  dated September 10,
         1999 between Metro Global Media, Inc. and Kenneth F. Guarino.

* 10.23  Loan  and  Security  Agreement dated September 30, 1999 by and  between
         Metro Global Media, Inc.,Metro, Inc. and Reservoir Capital Corporation.

  21     Subsidiaries of the Registrant:

                      Metro, Inc.
                      Metro West Studios, Inc.
                      Rocket Media Group, LLC
                      Airborne for Men, Ltd.
                      Metro International Distributors
                      Amazing Direct, Inc.
                      Fanzine International, Inc.

                                       31
<PAGE>


  99.1  Letter from Ellis L. Levin, Director of Ten Eyck Associates, Inc., dated
        March 5, 1998 as filed with the  Commission on April 13, 1998 as Exhibit
        (1) on Form 8-KA and incorporated herein by reference.

  99.2  Letter from Trien Rosenberg,  Rosenberg, Weinberg, Ciullo & Fazzari LLP,
        dated March 18, 1998 as filed with the  Commission  on April 13, 1998 as
        Exhibit (2) on Form 8-KA and incorporated herein by reference.

* 27.1  Financial Data Schedule for 1999

* 27.2  Restated Financial Data Schedule for 1998


(B) REPORTS ON FORM 8-K

1.   Report on Form 8-K, filed May 14, 1999, as amended by Report on Form 8-K/A,
     filed May 19, 1999 and Report on Form 8-K/A, filed May 28, 1999, reporting,
     under Item 4: Changes in Registrant's  Certifying  Accountant,  that on May
     10, 1999, Metro Global appointed the accounting firm of Grant Thornton, LLP
     as  independent  accountants  for fiscal 1999 to replace  Trien  Rosenberg,
     Rosenberg, Weingerg, Ciullo & Fazzari, LLP.

                                       32
<PAGE>



                               S I G N A T U R E S

     Pursuant  to the  requirement  of  Section  13 or 15(d)  of the  Securities
Exchange Act of 1934, the registrant has duly caused the amendement to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                       Metro Global Media, Inc.

                                       By: /s/ Gregory N. Alves
                                       ------------------------
                                               Gregory N. Alves,
                                               Acting President

                                       Date:   October 5, 1999


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, 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/ Kenneth F. Guarino    Acting Chief Executive Officer         October 5, 1999
----------------------    (principal executive officer)
    Kenneth F. Guarino

/s/ Gregory N. Alves      Acting President and Director          October 5, 1999
--------------------
    Gregory N. Alves

/s/ A. Daniel Geribo      Director                               October 5, 1999
--------------------
    A. Daniel Geribo

/s/ Janet M. Hoey         Treasurer (principal                   October 5, 1999
-----------------         financial and accounting Officer)
    Janet M. Hoey         , Secretary and Director

/s/ Alan S. Casale        Director                               October 5, 1999
------------------
    Alan S. Casale

                                       33
<PAGE>



                          INDEX TO FINANCIAL STATEMENTS


Independent Auditors' Report...........................................F-1

Consolidated Balance Sheet.............................................F-2

Consolidated Statements of Operations..................................F-4

Consolidated Statements of Shareholders' Equity........................F-5

Consolidated Statements of Cash Flows..................................F-6

Notes to Consolidated Financial Statements.............................F-9 - F27



                                       F-0
<PAGE>


INDEPENDENT AUDITORS' REPORT



To the Board of Directors and Shareholders of
Metro Global Media, Inc. and Subsidiaries
Cranston, Rhode Island


We have  audited the  accompanying  consolidated  balance  sheet of Metro Global
Media, Inc. and Subsidiaries (the "Company") as of May 29, 1999, and the related
consolidated statements of operations,  shareholders' equity, and cash flows for
each of the years in the two-year  period ended May 29,  1999.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of Metro Global Media,
Inc. and Subsidiaries as of May 29, 1999 and the results of their operations and
their  cash  flows for each of the years in the  two-year  period  ended May 29,
1999, in conformity with generally accepted accounting principles.



                                            Imowitz Koenig & Co., LLP

New York, New York

September 17, 1999, except for note
17, as to which the date is October 5, 1999


                                       F-1

<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MAY 29, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>


                                     Assets
                                     ------

<S>                                                                 <C>
Current Assets
--------------

  Cash                                                              $   144,288
  Accounts receivable, less allowance for doubtful accounts
    of $237,100                                                       5,504,476
  Accounts receivable, related party                                  2,419,990
  Inventory                                                           4,104,080
  Recoverable income tax                                                339,000
  Prepaid expenses and other current assets                             995,426
                                                                    -----------

Total Current Assets                                                 13,507,260
---------------------                                               -----------



  Motion pictures and other films at cost, less accumulated
    amortization of $8,734,633                                        4,853,527

  Property and equipment at cost, less accumulated
    Depreciation of $2,194,911                                        2,027,274

  Goodwill, net of accumulated
    amortization of $364,071                                          3,804,789

  Other assets                                                          267,556
                                                                    -----------


Total Assets                                                        $24,460,406
------------                                                        ===========
</TABLE>


                 See Notes to Consolidated Financial Statements
                                       F2

<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MAY 29, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                      Liabilities and Shareholders' Equity
                      ------------------------------------

<S>                                                                <C>
Current liabilities
-------------------

  Current portion of capital lease obligations                     $    273,521
  Short-term borrowings                                               4,767,298
  Related party convertible debentures                                  560,000
  Convertible debentures                                                908,008
  Accounts payable and accrued expenses                               7,700,217
  Income taxes payable                                                  458,769
                                                                    -----------

Total current liabilities                                            14,667,813
-------------------------


  Notes payable to related parties                                      600,000
  Capital lease obligations, less current portion                       315,851
                                                                    -----------

Total liabilities                                                    15,583,664
-----------------                                                   -----------


  Minority interest                                                      53,467
  Commitments and Contingencies


Shareholders' equity
--------------------


  Preferred Stock, no par value; authorized 2,000,000 shares;
    issued and outstanding, none
  Common stock, $.0001 par value; authorized 10,000,000
    shares; issued 6,542,198 shares and outstanding,
    6,343,956 shares                                                        654
  Additional paid in capital                                         15,456,612
  Accumulated deficit                                                (5,759,509)
  Accumulated other comprehensive loss - foreign exchange                (6,765)
                                                                    -----------
                                                                      9,690,992

  Unearned compensation                                                (360,217)
  Less cost of Treasury Stock (198,242 common shares)                  (507,500)
                                                                    -----------

Total shareholders' equity                                            8,823,275
--------------------------                                          -----------


Total liabilities and shareholders' equity                          $24,460,406
------------------------------------------                          ===========
</TABLE>



                 See Notes to Consolidated Financial Statements
                                       F-3


<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                         1998
                                                          1999        as restated
                                                          ----        -----------

<S>                                                   <C>             <C>
  Revenues                                            $ 23,389,171    $ 20,391,134
  Cost of revenues, including amortization of
    motion pictures and other films of
    $1,757,722 and $1,327,856, respectively             16,074,451      13,168,214
                                                      ------------    ------------
                                                         7,314,720       7,222,920

  Selling, general and administrative expenses
    (including $108,333 and $278,000 to related
    parties in 1999 and 1998, respectively)              9,493,943       6,606,180
                                                      ------------    ------------
                                                        (2,179,223)        616,740
                                                      ------------    ------------
Other income and (expenses)
---------------------------

  Interest expense (including $175,575 and $562,133
    to related parties in 1999 and 1998, respectively)  (2,240,488)       (973,918)
  Royalty income                                           130,145         127,206
  Miscellaneous income(expense)                                822          (3,870)
  Minority interest                                         (5,247)        (18,220)
                                                      ------------    ------------
                                                        (2,114,768)       (868,802)
                                                      ------------    ------------

Loss from continuing operations                         (4,293,991)       (252,062)

  Provision (benefit) for income taxes                    (166,850)        469,684
                                                      ------------    ------------

Loss from continuing operations                         (4,127,141)       (721,746)

Income from discontinued operations (net of tax)           150,201
                                                      ------------    ------------

Net loss                                              $ (3,976,940)   $   (721,746)
                                                      ============    ============

Loss Per Share:

  Loss from continuing operations:
    Basic and Diluted                                 $      (0.80)   $      (0.60)
  Income from discontinued operations:
    Basic and Diluted                                 $       0.03    $       0.00
  Net loss:
    Basic and Diluted                                 $      (0.77)   $      (0.60)
  Weighted average number of shares:
    Basic and Diluted                                    5,511,084       3,662,719

</TABLE>


                 See Notes to Consolidated Financial Statements
                                      F-4


<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                   Retained
                                             Series A                                Additional    Earnings
                                         Preferred Stock   Common Stock   Treasury    Paid-in     (accumulated  Unearned
                                         Shares    Amt     Shares     Amt  Stock      Capital       deficit)  Compensation  Total
 <S>                                     <C>    <C>        <C>        <C>  <C>       <C>         <C>          <C>        <C>
 Balance at May 31, 1997 (as restated)                     3,558,168  $356  -0-       $5,714,557  $1,202,777    $ -0-    $6,917,690
 Adjustments (see note 14)                                                                           137,500   (496,371)   (358,871)
                                                           ---------  ----  ---       ----------  ----------   --------- ----------
 Balance at May 31, 1997 (as restated)                     3,558,168  $356  -0-       $5,852,057  $  706,406    $ -0-    $6,558,819

 Shares issued:
   as compensation                                           211,000    21               678,576                (64,375)    614,222
   in connection with conversion
     of related party notes payable,
     accrued interest and extinguishment                                               1,213,816                          1,213,863
     of debt                                                 476,025    47
   upon issuance of Series A
     Preferred stock (less offering
     costs of $11,500)                    2,175  2,163,500                                                                2,163,500
  Embedded interest on
     convertible debentures                                                              125,112                            125,112
 Subscription receivable on Series
     A Preferred Stock                   (1,320)(1,317,000)                                                              (1,317,000)
 Dividends on Series A Preferred Stock              11,479                             1,446,502  (1,457,981)
 Net Loss                                                                                           (721,746)              (721,746)
                                            --- ---------- ---------  ----  ---       ---------- -----------   --------- ----------
 Balance at May 30, 1998 (as restated)      855 $  857,979 4,245,193  $424  -0-       $9,316,063 $(1,473,321)  $(64,375) $8,636,770

 Shares issued:
   as compensation                                           414,885    42             1,037,550               (415,380)    622,212
   in connection with conversion of
     Series A Preferred Stock              (855)(857,979)    982,120    98             2,174,902                          1,317,021
   as interest cost on borrowings                            250,000    25               569,975                            570,000
   upon exercise of warrants                                 400,000    40               599,960                            600,000
   upon exercise of option                                   250,000    25               299,975                            300,000
 Embedded interest on
   convertible debentures                                                                202,092                            202,092
 Dividends on Series A Preferred Stock                                                   309,248    (309,248)
 Purchase of Treasury Stock                                                 (507,500)                                      (507,500)
 Issuance of unexercised warrants                                                        818,847                            818,847
 Issuance of unexercised options                                                         128,000               (128,000)
 Amortization of unearned compensation
   -stock                                                                                                       247,538     247,538
 Net Loss                                                                                         (3,976,940)            (3,976,940)
                                             ---    ---    ---------  ---- --------------------- ------------ ---------  ----------
 Balance, May 29, 1999                       -0-    -0-    6,542,198  $654 $(507,500)$15,456,612 $(5,759,509) $(360,217) $8,830,040
                                             ===    ===    =========  ==== ===================== ============ =========  ==========


</TABLE>

                 See Notes to Consolidated Financial Statements
                                       F-5

<PAGE>




METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                           1998
                                                            1999       as restated
                                                            ----       -----------

Cash flows from operating activities:
<S>                                                     <C>            <C>
  Net loss                                              $(3,976,940)   $  (721,746)
                                                        -----------    -----------

Adjustments to reconcile net loss to net
 cash provided by operating activities:
  Depreciation Expense                                      513,773        385,226
  Amortization of motion pictures and other films         1,757,722      1,327,856
  Amortization of deferred rent                             (14,011)       (14,011)
  Amortization of unearned compensation                     247,538           --
  Amortization of goodwill                                  364,071           --
  Amortization of discount on debenture                      65,708           --
  Accrued interest added to note payable principal           60,000           --
  Discount on issuance of convertible debenture            (157,700)          --
  Interest expense on extinguishment of related party
    debt                                                       --          499,826
  Allowance for doubtful accounts                            74,070        140,948
  Embedded interest on convertible debentures               202,092        125,112
  Common Stock issued for consulting services               573,478        607,372
  Common Stock issued for compensation                         --            6,850
  Common Stock issued for interest expense                  570,000           --
  Issuance of warrants                                      818,847           --
  Minority interest                                           5,247         18,220
  Foreign exchange                                           (6,765)          --
(Increase) decrease in assets:
  Accounts receivable                                    (2,906,281)    (1,152,172)
  Inventory                                                (377,117)       (42,462)
  Prepaid expenses and other current assets                (960,857)       (37,291)
  Other assets                                              (93,819)        37,395
  Recoverable income tax                                   (134,000)       287,000
  Deferred income taxes                                        --          165,650
 Increase (decrease) in liabilities:
  Accounts payable and accrued expenses                   3,781,550        220,511
  Income taxes payable                                       99,650         (4,018)
  Deferred income taxes                                        --          (35,700)
                                                        -----------    -----------

Total adjustments                                         4,483,196      2,536,312
                                                        -----------    -----------

Net cash provided by operating activities               $   506,256    $ 1,814,566
                                                        -----------    -----------
</TABLE>



                 See Notes to Consolidated Financial Statements
                                       F-6


<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                           1998
                                                       1999            as restated
                                                       ----            -----------
Cash flows from investing activities:

<S>                                                 <C>                 <C>
  Acquisition of Fanzine                            (4,000,000)               --
  Acquisition costs                                   (168,860)               --
  Investments in motion pictures and other films    (2,869,558)         (2,279,676)
  Purchase of property and equipment                  (477,322)           (105,590)
                                                    ----------          ----------

Net cash used in investing activities               (7,515,740)         (2,385,266)
-------------------------------------               ----------          ----------

Cash flows from financing activities:

  Proceeds from the issuance of Series A
    convertible Preferred Stock                      1,317,021             846,500
  Purchase of Treasury Stock                          (507,500)               --
  Proceeds from issuance of common stock                48,734                --
  Proceeds from exercise of warrants                   600,000                --
  Proceeds from issuance of convertible debentures   1,200,000             500,000
  Net proceeds from (payments on) line of credit       412,026            (366,975)
  Proceeds on notes payable                          5,100,000                --
  Principal payments on notes payable                 (875,000)               --
  Principal payments on capital lease obligations     (356,504)           (281,554)
  Contribution from joint venture partner               30,000                --
                                                     ---------          ----------

Net cash provided by financing activities            6,968,777             697,971
-----------------------------------------            ---------          ----------


Net increase (decrease) in cash                        (40,707)            127,271

Cash, beginning of year                                184,995              57,724
                                                     ---------          ----------

Cash, end of year                                    $ 144,288          $  184,995
                                                     =========          ==========


Supplemental disclosures of cash flow information:

    Cash paid during the year for:

        Interest                                     $ 236,728          $  278,248
                                                     =========          ==========

        Income taxes                                 $    -             $   29,637
                                                     =========          ==========

</TABLE>




                 See Notes to Consolidated Financial Statements
                                       F-7



<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED MAY 29, 1999 and MAY 30, 1998
--------------------------------------------------------------------------------

Supplemental schedule of non-cash investing and financing activities:

     During the year ended May 29,  1999,  a payable of $300,000  was  converted
into 250,000 restricted shares of Metro Global's Common Stock by a related party
(see note 11).

     During  the year ended May 29,  1999,  2,175  shares of Series A  preferred
stock plus accrued  dividends of $35,247 were  converted  into 982,120 shares of
Metro Global's Common Stock. Metro Global recognized total dividends of $543,750
relating to the beneficial  conversion feature of this stock. As of May 29, 1999
all shares have now been converted.

     During the year ended May 30,  1998,  notes  payable and  accrued  interest
totaling  $714,037  were  converted  into  476,025  restricted  shares  of Metro
Global's Common Stock.

     Capital lease obligations of $230,382 and $412,495 were incurred during the
years 1999 and 1998,  respectively,  when Metro Global entered into  capitalized
leases for office equipment and machinery and equipment.


                 See Notes to Consolidated Financial Statements
                                       F-8


<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------


1. Nature of Business and Summary of Significant Accounting Policies

Nature of Business

     Metro Global  Media,  Inc.  ("Metro  Global"),  which was  incorporated  in
November 1987,  produces and  distributes,  predominantly  in the United States,
motion pictures and other entertainment  products (including  magazines,  videos
and  novelties)  and related  ancillary  products to  wholesalers  and retailers
oriented to the adult entertainment market.

     On August 3, 1998, Metro Global purchased 100% of the outstanding  stock of
Fanzine International,  Inc. ("Fanzine"). Fanzine publishes a series of monthly,
bi-monthly  and  event-driven  magazines,  as well  as  calendars  and  "how-to"
digests.  On September  29,  1999,  Metro Global sold Fanzine back to the former
shareholders and a company controlled by the former  shareholders.  Accordingly,
Metro Global has accounted for the Fanzine  segment as  discontinued  operations
(see notes 17 and 18) in the accompanying financial statements.

Plan of Operation

     As described in the following  footnotes,  Metro Global is in default under
certain debt  agreements.  Metro Global has arranged for alternative  financing,
however, funding has not yet occurred.  Proceeds of the loan will be utilized to
cure the  defaulted  debt. In the event that proceeds are not received from this
loan, Metro Global will remain in default under its debt obligations.

     As  described in Note 17, Metro  Global has sold  Fanzine,  its  publishing
segment,  and expects to utilize a substantial portion of the proceeds to retire
debt.

     In addition,  on September  14,  1999,  the NASDAQ Stock Market  halted the
trading of Metro Global's  common stock due to Metro Global's late filing of its
fiscal 1999 Annual Report on Form 10-KSB.

Year-end

     Beginning May 31, 1997, Metro Global changed its fiscal year end to a 4-4-5
week format, which results in Metro Global's year-end to be on the last Saturday
in May of each year.

Principles of Consolidation

     The consolidated  financial statements include the accounts of Metro Global
and its majority-owned and controlled  subsidiaries.  All intercompany  balances
and transactions have been eliminated in consolidation.

Recognition of Revenues

     Revenue is recognized  at the time Metro,  Inc.  ("Metro"),  a wholly owned
subsidiary  of Metro  Global,  sells  motion  pictures  and  other  products  to
customers.  Fees collected from motion pictures  licensed as television  program
material  are  recognized  as revenue  when the  license  period  begins and the
licensee is able to exercise rights under the agreement.

     Sales of magazines and estimated sales returns are recorded when each issue
is shipped to the distributor.

                                       F-9
<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------


1. Nature of Business and Summary of Significant Accounting Policies (Continued)

Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted   accounting   principles  requires  the  use  of  estimates  based  on
management's  knowledge and experience.  Due to their prospective  nature, it is
reasonable to expect actual results to differ from those estimates.

Accounts Receivable

     Accounts  receivable  for Fanzine are recorded net of estimated  returns of
magazines, credits and allowances.  Retail sellers of magazines retain the right
to  return  magazines  for a number of months  after  the date the  magazine  is
"off-sale," accordingly, the allowance for returns is normally a high percentage
of the gross  receivables  in the  magazine  publishing  industry.  When  actual
returns are received or documented,  the corresponding  receivable and allowance
are reduced. The allowance for returns at May 29, 1999 totals $10,505,195.

Inventory

     Inventory is valued at the lower of cost  (first-in,  first-out  method) or
market and consists  principally of motion picture films,  magazines and novelty
items held for resale.

Foreign Currency Translation

     The  financial  statements of the  subsidiary  outside the United States is
measured  using the local  currency as the  functional  currency.  Metro  Global
translates the assets and liabilities of its foreign  subsidiary at the exchange
rate in effect at year-end.  Net revenues  and  expenses  are  translated  using
average  exchange rates in effect during the year. Gains and losses from foreign
currency  translation (which constitute other comprehensive  income or loss) are
credited or charged to  stockholders'  equity in the  accompanying  consolidated
balance sheet.  Transaction gains or losses are recorded in selling, general and
administrative expense and are not material.

Property and Equipment

     The cost of property and equipment,  including leasehold  improvements,  is
charged to operations over the estimated  useful lives of the respective  assets
using depreciation computed by the straight-line method ranging from five to ten
years.  Amortization  of  assets  held  under  capital  leases  is  included  in
depreciation expense. Maintenance and minor repairs and replacements are charged
directly to operations.  Major renewals and improvements are capitalized.  Costs
and  accumulated  depreciation  applicable  to assets sold are removed  from the
accounts and any gain or loss on disposal is charged or credited to income.

Motion Picture and Other Films

     Motion picture films,  including  videocassettes,  video  libraries,  video
rights,  CD-ROMs and DVDs are  reflected at the lower of  amortized  cost or net
realizable  value.  The cost of motion picture films is charged to operations in
accordance  with Statement of Financial  Accounting  Standards  ("SFAS") No. 53,
Financial  Reporting by Producers  and  Distributors  of Motion  Picture  Films.
Estimated future revenues are periodically  reviewed and,  revisions may be made
to amortization  rates or write-downs made to the film's net realizable value as
a result of  significant  changes in future  revenue  estimates.  Net realizable
value is

                                      F-10
<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------


1. Nature of Business and Summary of Significant Accounting Policies (Continued)

     the  estimated  selling  price in the  ordinary  course of  business,  less
estimated costs to complete and exploit in a manner  consistent with realization
of that income.  More than 70% of film costs are expected to be amortized in the
first three years  commencing upon the release of the respective  motion picture
films.

Earnings per Share

     During the year ended May 30,  1998,  Metro  Global  adopted  Statement  of
Financial  Accounting  Standards No. 128,  "Earnings per Share",  which replaces
primary and fully diluted earnings per share with basic and diluted earnings per
share.  Under the new requirements,  the dilutive effect of certain Common Stock
equivalents  is  excluded  from the  computation  of basic  earnings  per share.
Diluted earnings per share is calculated similarly to fully diluted earnings per
share as  required  under  APB 15.  All prior  period  earnings  per share  data
presented have been restated to conform to the provisions of this statement.

     Basic  earnings   (loss)  per  share  is  computed  by  dividing  net  loss
attributable to common  stockholders  (net income (loss) reduced  (increased) by
preferred  stock  dividends)  divided by the weighted  average  number of shares
outstanding during the year. Diluted earnings per share is consistent with basic
earnings per share while giving effect to all dilutive  potential  common shares
that would have been  outstanding  if the dilutive  potential  common shares had
been  issued,  while  adding back to income any  preferred  dividend or interest
expense on convertible  securities;  however,  such  calculations are ignored if
they are antidilutive.

Reclassification

     Certain items in the financial  statements  for the year ended May 30, 1998
have been reclassified to conform with the current year presentation.

Deferred Income Taxes

     Metro Global follows Statements of Financial  Accounting Standards No. 109,
"Accounting for Income Taxes".  This statement requires a liability approach for
measuring  deferred taxes based on temporary  differences  between the financial
statement and tax bases of assets and liabilities existing at each balance sheet
date using  enacted tax rates for years  which taxes are  expected to be paid or
recovered.

Goodwill and Acquisition Costs

     Goodwill and acquisition costs are being amortized on a straight-line basis
over ten years.  Amortization  expense  amounted to $333,333  for  goodwill  and
$30,738 for acquisition costs for the year ended May 29, 1999.

Comprehensive Income (loss)

     In 1999, Metro Global adopted Statement of Financial  Accounting  Standards
No. 130,  "Reporting  Comprehensive  Income"  ("SFAS  130") which  requires  the
display of  comprehensive  income  (loss) and its  components  in the  financial
statements.  Comprehensive  income (loss)  includes net earnings and  unrealized
gains and  losses  from  currency  translation,  available  for sale  marketable
securities and minimum  pension  liability  adjustments.  Metro Global's  single
component of comprehensive  loss as of May 29, 1999 consists of a current period
charge of $(6,765) in foreign currency translation.


                                      F-11
<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------


1. Nature of Business and Summary of Significant Accounting Policies (Continued)

New Accounting Pronouncement

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). The
Statement  establishes  accounting and reporting  standards requiring that every
derivative  instrument  (including  certain derivative  instruments  embedded in
other  contracts)  be  recorded  in the  balance  sheet  as  either  an asset or
liability  measured at its fair value.  SFAS 133  requires  that  changes in the
derivative's  fair value be  recognized  currently in earnings  unless  specific
hedge  accounting  criteria are met.  Special  accounting for qualifying  hedges
allows a derivative's  gains and losses to offset related  results on the hedged
item  in the  income  statement,  and  requires  that a  company  must  formally
document,  designate and assess the  effectiveness of transactions  that receive
hedge accounting.

     SFAS 133 is  effective  for fiscal years  beginning  after June 15, 1999. A
company may also  implement  the  Statement  as of the  beginning  of any fiscal
quarter after  issuance  (that is, fiscal  quarters  beginning June 16, 1998 and
thereafter). SFAS 133 cannot be applied retroactively.  SFAS 133 must be applied
to (a) derivative,  instruments and (b) certain derivative  instruments embedded
in hybrid contracts that were issued,  acquired, or substantively modified after
December 31, 1997. The adoption of SFAS 133 will have no effect on the financial
statements of Metro Global, as Metro Global has no derivative activity.

2. Acquisitions

Amazing Direct

     In March 1998,  Metro Global acquired an 80% interest in Amazing Direct,  a
Nevada Corporation by purchasing four hundred shares of its outstanding stock at
$2.00 per share.  Amazing Direct is a mail order company.  In March 1999,  Metro
Global acquired the remaining 100 shares outstanding.

Maxstone Media

     In August 1997, Rocket Media Group, LLC, a wholly owned subsidiary of Metro
entered into a joint venture with Salmill  Enterprises,  Inc. for the purpose of
magazine  publishing.  Under the terms of the  agreement,  Rocket  contributed a
sub-license  agreement for the rights to certain titles, names and materials and
Salmill contributed its publishing and circulation expertise into a newly formed
entity Maxstone  Media,  LLC. Each joint venture  partner  contributed  $30,000.
Metro Global,  which effectively  controls Maxstone Media, has included Maxstone
Media's results from operations in the consolidated financial statements.
Minority interest amounted to $53,467 at May 29, 1999.

Fanzine International, Inc.

     On August 3,  1998,  Metro  Global  acquired  100% of the stock of  Fanzine
International,  Inc.  ("Fanzine") for a cash purchase price of $4,000,000,  plus
contingent  consideration.  Fanzine,  which began  operations on August 1, 1997,
publishes event driven, mainstream magazines translated into seven languages and
distributed  worldwide.  The  contingent  consideration  consisted  of 1,000,000
restricted shares of Metro Global's Common Stock with put option rights at $8.00
per share to be exercised by the selling shareholder's during the second year on
a quarterly  basis, if certain  minimum  earnings,  as defined,  are met. During
Fanzine's  first  year of  operations,  Metro  Global  had the right to call the
shares


                                      F-12
<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------


2. Acquisitions (Continued)

at the greater of $6.00 per share or 75% of the market  price.  Metro Global did
not call the shares. The acquisition  agreement also provided for a reduction in
purchase price if Fanzine's  results of operations did not meet certain  minimum
earnings.

     The acquisition was accounted for as a purchase. The excess of the purchase
price over the fair market values of net assets acquired,  which included, among
others, licences, trademarks, and distribution rights, was allocated to goodwill
and amortized  over ten years.  The cash portion of $4,000,000 was financed by a
long-term  convertible debenture and other short-term  borrowings.  On September
29, 1999,  Metro Global sold  Fanzine's  stock back to the selling  shareholders
(see note 17).

3. Property and Equipment

<TABLE>
<CAPTION>

   Property and equipment consists of the following at May 29, 1999,

           <S>                                                       <C>
           Machinery and equipment                                   $2,328,984
           Furniture and fixtures                                       603,505
           Office equipment                                             928,429
           Automobiles                                                   73,125
           Leasehold improvements                                       288,142
                                                                     ----------
                                                                      4,222,185
           Less: Accumulated depreciation                             2,194,911
                                                                     ----------

           Total                                                     $2,027,274
                                                                     ==========
</TABLE>



4. Motion Pictures and Other Films

<TABLE>
<CAPTION>

   Motion pictures and other films consists of the following at May 29, 1999,


           <S>                                                      <C>
           Motion picture films produced and released               $ 9,217,850
           Rights acquired to release motion pictures
             and other films                                          2,161,854
           CD-ROM/DVD                                                   500,878
           Motion picture films in process                            1,707,578
                                                                    -----------
                                                                     13,588,160
           Less: Accumulated amortization                             8,734,633
                                                                    -----------

           TOTAL                                                    $ 4,853,527
                                                                    ===========
</TABLE>

                                      F-13

<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------


5.  Debt

     During the year ended May 30,  1998  certain  notes  payable due to related
parties  (see note 11) with  principal  and accrued  interest  of $714,037  were
converted  into 476,025  shares of Metro  Global's  Common  Stock.  Metro Global
recognized additional interest expense of $499,826 on this transaction.

     On August 1,  1998,  Metro  Global  entered  into  notes  payable  totaling
$1,000,000 with related parties.  The notes, which bear interest at 8%, were due
August 1, 1999. Proceeds from the notes were used in the acquisition of Fanzine.
In October  1998,  $600,000 of debt was converted  into 400,000  shares of Metro
Global's Common Stock (see note 11). On August 1, 1999, the balance of the notes
were extended for one year. In consideration of the extension, the interest rate
increased  from 8% to 10% and  warrants  were  issued to  purchase up to 115,000
shares  of  Common  Stock at a price of  $2.58,  exercisable  for a term of five
years.

     On October 28,  1998,  Metro  Global  entered  into a note  payable with an
unrelated third party for $1,100,000. The note, which bears no interest, was due
in  quarterly   installments  of  $275,000  commencing  December  31,  1998.  In
consideration  of  the  loan  and  part  of  an  investment  banking  consultant
agreement,  Metro Global issued the lender  150,000  restricted  shares of Metro
Global's  Common Stock.  Metro Global recorded  interest  expense of $243,412 in
1999 in connection with the issuance of the restricted stock.  Metro Global used
$507,500 of the proceeds to repurchase  198,242 shares of its outstanding Common
Stock from Metro Plus,  a company  partially  owned by Kenneth  Guarino,  Acting
Chief Executive Officer of Metro Global and a significant  shareholder (see note
11). For the year ended May 29, 1999, Metro Global made one payment of $275,000.
As a result, default interest at 11% per annum has been accrued on this note. In
September 1999,  Metro Global and the lender agreed to an extension of the note.
Under  the  terms  of the  extension,  payments  totaling  $550,000  were due by
September  30, 1999 and the final  payment of  $275,000  is due on December  31,
1999. The September 30, 1999 payments are currently in default.  If all payments
are not made by January  1, 2000,  Metro  Global  must issue the lender  100,000
shares of restricted stock as a penalty.

     On December  9, 1998,  Metro  Global  entered  into a  six-month  term loan
agreement with an unrelated third party. Under the terms of the agreement, Metro
Global  borrowed  $3,000,000 at an interest  rate of 10% per year.  The proceeds
were used toward the  acquisition  of Fanzine and to fund  working  capital.  In
connection with this transaction, Metro Global issued warrants to purchase up to
350,000  shares of Common  Stock at a price of $3.00,  expiring on December  31,
2001. Metro Global recorded  interest expense of $577,000 in connection with the
issuance of the warrants during 1999. Additionally,  Metro Global issued 100,000
shares of Common Stock and recorded $187,500 of interest expense relating to the
issuance of these shares during 1999.

     In  September  1999,  Metro Global and the lender  agreed to an  extension.
Under the terms of the  extension,  Metro  Global must pay $1.3 million upon the
closing of the  prospective  financing  with  Reservoir  Capital a new unrelated
third party lender (see notes 7 and 17). The balance of the note of  $1,800,000,
which  includes a $100,000  penalty,  will be  exchanged  for an 8%  convertible
debenture.  The debenture is  convertible  at a rate of not more than 10% of the
total  debenture per week, at a price of 80% of the average closing bids for the
five days preceding the conversion.  In  consideration  of the extension,  Metro
Global will issue warrants to purchase up to 100,000 shares of Common Stock at a
price of $1.75 per share with a two-year  expiration.  In the event that funding
is not received on the  prospective  financing  with  Reservoir  Capital,  Metro
Global will remain in default under the debt obligation.

                                      F-14
<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------


Capital Lease Obligations

     Metro Global leases office equipment, machinery and equipment and furniture
and fixtures under  noncancellable  capital leases. The leases expire at various
times through 2004 and bear interest at annual rates ranging from  approximately
10% to 21%. All leases are secured by the respective assets acquired.

    Annual Payments under capital lease obligations are due as follows:

<TABLE>
<CAPTION>

                Years ended                                Amount
                ------------                               ------
                   <S>                                    <C>
                   2000                                   $273,521
                   2001                                    181,185
                   2002                                     84,379
                   2003                                     43,641
                   2004                                      6,646
                   ----                                   --------

                   Total                                  $589,372
                                                          ========
</TABLE>

6. Convertible Debentures

     On July 31, 1998,  Metro Global  entered into an 8%  convertible  debenture
with an  unrelated  party in the  amount  of  $1,000,000,  which was used in the
purchase of Fanzine. In connection with this transaction,  Metro Global issued a
warrant for 75,000 shares at a price of $4.11 and a warrant for 25,000 shares at
a price of $3.29,  both  exercisable  over two years.  Metro  Global  recorded a
discount on the  debenture  of  $157,700  for the value of the  warrants.  Metro
Global  amortized  $65,708 of the discount to interest  expense  during the year
ended May 29, 1999.

     The  $1,000,000  debenture  was to mature  on July 31,  2000.  Interest  is
payable  on a  quarterly  basis.  The holder of the  debenture  is  entitled  to
convert,  after  120 days of the  agreement,  the  principal  value  into  Metro
Global's  Common  Stock  at a  discounted  market  price  as is  defined  in the
agreement.  Metro Global has recorded  $141,844 of interest  expense relating to
the embedded beneficial conversion feature in 1999. Metro Global is in technical
default under the terms of the debenture due to the suspension of trading of its
Common Stock on September 14, 1999.

     On March 23, 1998, Metro Global entered into two 12% convertible debentures
totaling  $500,000 with related parties.  Both notes were due on March 23, 1999,
in either cash or Common Stock, at a conversion  rate of $2.25 per share.  Metro
Global recorded $125,112 of interest expense relating to the embedded beneficial
conversion feature.  Proceeds from the debentures were used for working capital.
In March 1999, the debentures,  including accrued interest of $60,000 (which was
added to the note principal), were extended until March 23, 2000. In conjunction
with the  extension,  warrants  were granted to purchase  50,000 shares of Metro
Global's Common Stock for $2.58 per share.

     On July 1, 1998,  Metro  Global  entered into a 12%  convertible  debenture
totaling  $200,000  with a related  party.  The note was due on July 1, 1999, in
either cash or Common  Stock,  at a  conversion  rate of $2.25 per share.  Metro
Global recorded $60,248 of interest expense relating to the embedded  beneficial
conversion  feature.  Proceeds from the debenture were used for working capital.
On July 1, 1999,  the debenture was extended  until July 1, 2001. In conjunction
with the  extension,  warrants  were granted to purchase  50,000 shares of Metro
Global's Common Stock for $2.58 per share.

                                      F-15
<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------


7. Short-Term Borrowings

     Pursuant to a line of credit agreement with Finova Capital,  Metro Global's
subsidiary,  Metro,  may borrow up to 75% of assigned  accounts  receivable less
than 90 days old, up to a maximum of $1,000,000.  The balance due under the line
of credit bears interest at the prime rate plus 5% per annum. In addition, Metro
pays the finance  company a management fee equal to 3/4 of 1% of sales submitted
for inclusion in the net security value of the accounts receivable, but not more
than $7,500 per month. The outstanding  balance under the line is secured by the
accounts  receivable of Metro, and the guarantee of Metro Global.  As of May 29,
1999,  short-term  borrowings under the line of credit totaled $942,298. On June
30, 1999,  Finova did not renew the  agreement  and is waiting to be repaid from
the Reservoir Capital financing.

     In August 1999,  Metro Global  signed a $4,000,000  commitment  letter with
Reservoir Capital Corporation. Pursuant to the terms, Metro may borrow up to 70%
of accounts  receivable less than ninety day old, up to a maximum of $3,000,000.
The  accounts  receivable   borrowing  base  excludes  foreign  receivables  and
receivables  where more than 50% of the  balance is over  ninety  days old.  The
borrowings on accounts  receivable  from Capital Video  Corporation  ("CVC"),  a
related party (see note 11), are limited to the lesser of 30% of total  accounts
receivable or $1,600,000. Additionally, Metro can borrow 40% of inventory, up to
a maximum of $1,000,000.

     Borrowings under this loan bear interest at prime rate plus 3.5% per annum.
Additionally,  Metro  must pay a service  fee of .35% per  month on the  average
daily  loan  balance.  Metro must pay an unused fee of .25% on the amount of the
borrowings  under  $2,000,000.  The loan will be secured by the assets of Metro.
The CVC  accounts  receivables  will be  guaranteed  to the  lender  by the sole
shareholder  of CVC.  Additionally,  CVC will execute a put on the  inventory of
Metro in case of default (see note 17).

8. Income Taxes

   The provision (benefit) for income taxes consists of the following:

<TABLE>
<CAPTION>

                                                      1999            1998
                                                      ----            ----
     <S>                                           <C>              <C>
     Current provision (benefit)
         Federal                                   $(140,622)       $304,000
         State and local                             (26,228)         35,734
                                                   ---------        --------
                                                    (166,850)        339,734
                                                   =========        ========
     Deferred provision (benefit)
         Federal                                        -             85,600
         State and local                                -             44,350
                                                   ---------        --------
                                                        -            129,950
                                                   ---------        --------
     Total                                         $(166,850)       $469,684
                                                   =========        ========
</TABLE>

The  following  table  is  a  reconciliation  of  the  income  tax  /  provision
(benefit)at the U.S. statutory rate to that in the financial statements:

<TABLE>
<CAPTION>

                                                     1999              1998
                                                     ----              ----
     <S>                                         <C>                <C>
     Taxes (benefit) computed at 34%             $(1,459,957)       $(85,701)
     Valuation allowance                             582,485         343,312
     Permanent differences                           500,023          63,882
     Other                                           210,599         148,191
                                                 -----------        --------

                                                 $  (166,850)       $469,684
                                                 ===========        ========
</TABLE>


                                      F-16

<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------


8. Income Taxes (Continued)

     Deferred  income taxes result from  temporary  differences in the financial
bases and tax bases of assets and  liabilities.  The  significant  components of
Metro Global's deferred income tax assets and liabilities as follow:

<TABLE>
<CAPTION>

                                                     1999              1998
                                                     Asset             Asset
                                                  (Liability)       (Liability)
                                                  -----------       -----------

     <S>                                          <C>               <C>
     Excess depreciation                          $(200,000)        $(197,490)
     Unearned management compensation               122,000           122,000
     Allowance for doubtful accounts                 96,000            72,042
     Inventory capitalization                       175,000           164,158
     State net operating loss carry forward         200,000            12,300
     Other Net deferred assets                      (21,000)           16,190
                                                   --------          --------
     Less valuation allowance                       372,000           189,200
     Net deferred tax asset                        (372,000)         (189,200)
                                                   --------          --------
                                                      -0-               -0-
                                                   ========          ========
</TABLE>

     A valuation allowance equal to 100% of the net deferred tax assets has been
established due to the uncertainty of taxable income in future years.

     Metro  Global's  state net operating  loss carry  forward of  approximately
$2,000,000 expires at various times through year 2014.

9. Shareholders' Equity

Series A Convertible Preferred Stock

     During  April  1998,  Metro  Global  entered  into an  Offshore  Securities
Subscription Agreement for convertible Preferred Shares pursuant to Regulation S
of the U.S.  Securities  Act of 1933.  Under the terms of the  agreement,  Metro
Global issued 2,175 shares of 1998 Series A Convertible Preferred Stock ('Series
A Shares') at a price of $1,000 per share with a 5% cumulative  dividend payable
in Common Stock at conversion.  At May 30, 1998, Metro Global received  proceeds
of $846,500, net of offering costs representing 855 shares. Substantially all of
the proceeds for the remaining 1320 shares were received in fiscal 1999.

     The Series A Shares were  convertible  at a rate of 100 shares plus accrued
dividends per week at 80% of the 15 day average closing bid price.  These Shares
were subject to a twenty-four month mandatory  conversion feature.  Metro Global
recognized  dividends of $309,248 and $234,502 at May 29, 1999 and May 30, 1998,
respectively,  for the embedded beneficial conversion feature.  During 1999, all
of the Series A shares and accrued  dividends were converted into 982,120 shares
of Metro Global's Common Stock.

     In addition to the Series A Shares,  Metro Global issued 400,000 detachable
warrants to purchase Metro Global's  Common Stock at $1.50 per share  commencing
April 20, 1998 exercisable over 5 years.  Metro Global  recognized a dividend of
$1,212,000  for the  year  ended  May 30,  1998  for the  beneficial  conversion
feature.  In October 1998,  all 400,000  warrants were  transferred to a related
party of Metro Global and exercised (see note 11).

                                      F-17
<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------


9. Shareholders' Equity (Continued)

Consultant Stock Compensation Plan

     Metro Global's  Consultant Stock  Compensation  Plan allows Metro Global to
compensate  consultants  and certain other persons who have provided  service to
Metro Global through the award of 500,000 shares of Metro Global's Common Stock.
In June 1998, Metro Global added 500,000 shares of Common Stock to the plan.

     During the year ended May 30, 1998,  Metro Global issued  206,000 shares of
Common  Stock  valued at  $307,685 of which  $62,500 was  unearned as of May 30,
1998. In addition,  Metro Global issued  250,000  shares of Common Stock in 1999
relating to 1998 for $300,000.  During the year ended May 29, 1999, Metro Global
issued  390,092  shares of Common Stock valued at $988,858.  As of May 29, 1999,
151,908 shares are available under this plan.

Equity Incentive Plan

     During  the year  ended  May 31,  1997,  Metro  Global  adopted  an  Equity
Incentive  Plan  (the  'Plan')  which  allows  Metro  Global to  compensate  key
employees and directors  who have provided  service to Metro Global  through the
award of 500,000 shares of Metro Global's Common Stock,  including qualified and
non-qualified stock options.

     During the year ended May 31, 1997, options to purchase 200,000 shares were
awarded to Officers and key employees  under the Plan. The grants under the Plan
provide for the options to vest 1/5  annually,  on the  anniversary  date of the
grant. The vested options are exercisable through March 2007 at $2.00 per share.
Due to the  termination  of employment  100,000 shares have been returned to the
plan.

     During the year ended May 30, 1998,  5,000 shares of Common Stock valued at
$6,850 were awarded under the Plan. During the year ended May 29, 1999,  options
to purchase  20,000  shares of Common  Stock were  exercised.  There are 390,800
shares available under this Plan as of May 29, 1999 (see note 12).

Employee Stock Purchase Plan

     During the year ended May 31, 1997,  Metro Global adopted an Employee Stock
Purchase  Plan.  This Plan allows  employees  of Metro  Global to purchase up to
600,000  shares of Metro  Global's  Common Stock at a 15% discount to the market
price of the stock on the  commencement  date or closing  date of the plan year,
whichever is lower.

     During the year ended May 29, 1999,  4,793  shares were awarded  under this
plan. Compensation cost of $8,721 was charged to compensation. There are 595,207
shares available under this plan as of May 29, 1999.

Debt Conversion

     During the year ended May 30, 1998,  Metro Global  converted a note payable
to Metro Plus Company,  a company  partially  owned by Kenneth  Guarino,  with a
principal balance plus accrued interest totaling $577,501 into 385,000 shares of
Common  Stock.  Additionally,  Metro Global  converted a note payable to Kenneth
Guarino with a principal  balance and accrued  interest  totaling  $136,536 into
91,025  shares of Common  Stock.  Metro Global  recognized  additional  interest
expense to related parties of $499,546 on the transaction.

                                      F-18

<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------


9. Shareholders' Equity (Continued)

Exercise of Options

     On June 2, 1998 related  parties  exercised  options for 250,000  shares of
common stock at $1.25 per share,  that they had acquired from an unrelated third
party who had  purchased  the options on February 12, 1998.  As a result of this
transaction, Metro Global recorded consulting expense of $364,062 in fiscal 1998
(see note 11).

Stock Options

     Pursuant to an employment agreement, Kenneth Guarino was granted options to
purchase  200,000  shares of Metro  Global's  Common Stock at $1.50 per share on
January 1, 1993. Compensation of $300,000 was charged to operations from January
1, 1993 to  January 1, 1997.  As of  January  1, 1997 the term to  exercise  the
options was extended to December 31, 2006. Metro Global  recognized  $137,500 of
additional expense in fiscal 1997 for the extension (see notes 11 and 14).

     Effective  April 1, 1999,  Metro Global entered into a one year  consulting
agreement with Kenneth  Guarino.  Under the agreement,  the former executive was
given options to purchase up to 100,000 shares of Metro Global's Common Stock at
a price of $2.00 per share,  exercisable over five years.  Metro Global recorded
unearned  compensation  of  $128,000  for the value of the option and  amortized
$21,333 to consulting expense for the year ended May 29, 1999.

     All options remain  outstanding.  The Black-Scholes  Method was utilized to
value the options.

10. Commitments and Contingencies

Operating Leases

     Metro Global is obligated under long-term  operating leases,  which require
minimum annual rentals as follows:

<TABLE>
<CAPTION>

                                   Office                           Machinery
                                   Warehouse                           and
 Year           Total              Premises        Vehicles         Equipment
 ----           -----              ---------       --------         ---------

<S>          <C>                 <C>                <C>              <C>
 2000        $  865,987          $  608,172         $23,791          $234,024
 2001           624,607             591,126           7,615            25,866
 2002           611,024             591,126           2,538            17,360
 2003           578,847             570,407                             8,440
 2004           283,909             276,264                             7,645
             ----------          ----------         -------          --------

Total        $2,964,374          $2,637,095         $33,944          $293,335
             ==========          ==========         =======          ========
</TABLE>

     The lease on the Rhode Island warehouse and office facilities (see note 11)
has a renewal option for two successive  additional terms of five years (through
April,  2008 and April,  2013,  respectively),  each based on the current annual
rent plus an amount  based on the  consumer  price  index one month prior to the
date of renewal. The lease requires monthly rentals of $20,719. On June 1, 1997,
Metro Global was granted a rent reduction of $81,733,  which is being  amortized
over the remaining term of the lease.

     Metro Global had three leases on California buildings which expired on July
1,  1999.  On July  15,  1999,  Metro  Global  signed a lease  for new  space in
California.  The lease has a term of four years and  eleven and one half  months
expiring on June 30, 2004, with a renewable option for sixty months.


                                      F-19
<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------


10. Commitments and Contingencies

     The lease on the New York City space,  which houses  Fanzine and  Maxstone,
expires on May 30, 2003.

     Rent expense under office and warehouse  operating  leases totaled $458,897
and $412,122 during the years 1999 and 1998, respectively

Uninsured Cash

     Metro Global  maintains  its cash and cash  equivalents  in various  banks.
Accounts  at  each  bank  are  guaranteed  by  the  Federal  Deposit   Insurance
Corporation (FDIC) up to $100,000.

Other Matters/Major Customer

     Metro  Global is a defendant  in suits  relating to matters  arising in the
ordinary  course of business.  The amount of liability,  if any, from the claims
cannot be estimated,  but management and outside  counsel is of the opinion that
the  outcome of the claims  will not have a  material  impact on Metro  Global's
financial position.

     Metro  Global used one vendor in 1998 and three  vendors in 1999 to provide
all  substantial  printing  services  (magazines,  video  boxes and  promotional
material).  Management  of Metro  Global  believes  that other  suppliers  could
provide similar services at comparable terms.

     CVC accounted for  approximately  40% and 47% of Metro Global's sales (from
continuing  operations)  during the years ended May 29,  1999 and May 30,  1998,
respectively.

     During  the  year  ended  May  29,  1999,  one  distributor  accounted  for
approximately 87% of Fanzine's revenues.

11. Related Party Transactions

     Metro Global has significant  tenant,  borrower and customer  relationships
with companies owned and managed by  Officers/shareholders  of Metro Global (see
Notes 5 and 9).  Significant  related party  transactions for the years 1999 and
1998 are summarized below:

     Capital  Video  Corporation  ("CVC"),  which is owned by  Kenneth  Guarino,
acting chief  executive  officer of Metro Global and a significant  shareholder,
operates  approximately  thirty  video  and  magazine  retail  stores in the New
England and New York areas and accounted for  approximately 40% and 47% of Metro
Global  sales for the years May 29, 1999 and May 30, 1998,  respectively.  Metro
Global accounts  receivables include $2,419,990 due from CVC at May 30, 1999. No
allowance for doubtful  related party  receivables and no related party bad debt
expense  has been  recorded  in the  accompanying  1999  and  1998  consolidated
financial statements.  During the year ended May 29, 1999 and 1998, Metro Global
billed CVC  $187,498  and  $120,000  ,respectively,  for  services  rendered for
distribution  and sales analysis  costs incurred by Metro Global.  During fiscal
1999 and 1998, Metro Global recorded from CVC $90,569 in royalty income pursuant
to a franchise  agreement for the operation of the Airborne for Men stores owned
by CVC.  Daniel Geribo,  a Director of Metro Global,  serves as the sole Officer
and Director of CVC.

                                      F-20
<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------


11. Related Party Transactions (Continued)

     Metro leases its Rhode Island  warehouse and office  facilities from Castle
Properties,  L.L.C.,  an  affiliate,  for its Rhode  Island  operations.  Castle
Properties is principally owned by Mr. Guarino's wife. A portion of the facility
rented  from  Castle  Properties,  L.L.C.  is sublet to CVC on a  month-to-month
basis. Sublease income during the years 1999 and 1998 totaled $48,000 each year.
During the year ended May 30, 1998,  Castle  Properties  granted  Metro Global a
four-month  moratorium  amounting to $81,733 which is being  amortized  over the
remaining lease term. The net rent expense to Castle Properties,  L.L.C. for the
years ended May 29, 1999 and 1998 was $200,061 and $177,478,  respectively.  The
corporate offices of Metro Global are located with the corporate offices of CVC.
Although  Metro Global does not pay rent,  Metro Global pays  property  taxes on
certain  assets.  For  the  year  ended  May 29,  1999,  Metro  Global  incurred
approximately $6,000 of expense.

     On December 3, 1997,  Metro  Global's  Board of Directors  awarded  Kenneth
Guarino  100,000  restricted  shares and 100,000  shares  unrestricted  of Metro
Global's Common Stock in consideration  of certain  consulting  services.  Metro
Global recorded $278,000 of consulting expense related to this transaction.

     On March 23,  1998,  Metro Global  entered into a one year 12%  convertible
debenture  with  Centurion   Investment  Group,  Inc  for  $250,000.   Centurion
Investment  Group,  Inc. is a Rhode Island company  principally owned by a trust
for the benefit of Mr.  Guarino's  children.  The debenture is  convertible at a
rate of $2.25 per share.  On March 23, 1999,  the debenture was extended for one
year and its face  value was  increased  by  $30,000  of  accrued  interest,  to
$280,000.  Interest expense  attributable to a beneficial  conversion feature of
the debenture of $62,556 was recorded by Metro Global during 1998 (see note 14).

     On March 23,  1998,  Metro Global  entered into a one year 12%  convertible
debenture with Cal Vista, Inc for $250,000. Cal Vista is a trust established for
the benefit of Mr. Guarino's  spouse and children.  The debenture is convertible
at a rate of $2.25 per share.  On March 23, 1999, the debenture was extended for
one year and its face value was  increased  by $30,000 of accrued  interest,  to
$280,000.  Interest expense  attributable to a beneficial  conversion feature of
the debenture of $62,556 was recorded by Metro Global during 1998 (see note 14).

     On May 27, 1998, notes payable and accrued interest  totaling  $136,536 due
to  Kenneth  Guarino  were  converted  into  91,025  restricted  shares of Metro
Global's  Common  Stock.  On May 27, 1998,  notes  payable and accrued  interest
totaling  $577,501 due to Metro Plus, a related  company  partially owned by Mr.
Guarino,  were converted into 385,000 restricted shares of Metro Global's Common
Stock.  Metro Global recorded  additional  interest  expense of $499,826 for the
year ended May 30, 1998 (see Notes 9 and 14).

     On July 1,  1998,  Metro  Global  entered  into a one  year  12%,  $200,000
convertible  debenture with Cal Vista, Inc. Cal Vista is a trust established for
the benefit of Mr. Guarino's  spouse and children.  The debenture is convertible
at a rate of $2.25 per share.  On July 1, 1999,  the  debenture was extended for
one year. In conjunction  with the extension,  CalVista was granted  warrants to
purchase  50,000  shares of Metro  Global's  Common  Stock for $2.58 per  share.
Interest  expense  attributable  to  a  beneficial  conversion  feature  of  the
debenture of $60,248 was recorded by Metro Global during 1999.

                                      F-21

<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------


11. Related Party Transactions (Continued)

     On August 1, 1998,  Metro Global issued a one-year  promissory  note in the
principal  amount  of  $250,000,  bearing  interest  at  8% to  Dennis  Nichols,
President of Metro. On August 1, 1999, the term of the note was extended for one
year. In consideration for the extension, the interest rate was adjusted from 8%
to 10%, the principal amount of the note was increased to $270,000 (representing
the accrued  interest) and Mr. Nichols was granted  warrants to purchase  75,000
shares of Metro Global's common Stock for $2.58 per share.

     On August 1, 1998, Metro Global entered into a one-year promissory note for
$750,000 at 8% interest with Briana  Investment  Group  ("Briana").  Briana is a
trust established for the benefit of Mr. Guarino's wife and children. In October
1998, the holder of the 400,000 warrants issued in conjunction with the Series A
Preferred  stock  transferred  the  warrants  to  Briana  (see  note 9).  Briana
exercised  the  warrants,  and the note  payable  was reduced  from  $750,000 to
$150,000.   On  August  1,  1999,  the  note  was  extended  for  one  year.  In
consideration for the extension,  the interest rate was adjusted from 8% to 10%,
the principal amount was increased to $174,000  (representing  accrued interest)
and Briana was  granted  warrants to purchase  40,000  shares of Metro  Global's
Common Stock for $2.58 per share.

     On June 2,  1998,  Messrs.  Guarino  and  Nichols  acquired  from  Priority
Trading, Ltd. options to purchase an aggregate of 250,000 shares of common Stock
at an  exercise  price of $1.25  per  share.  Priority  Trading  had  originally
purchased the options from Metro Global on February 12, 1998 and had transferred
them to Messrs. Guarino and Nichols on May 30, 1998. Messrs. Guarino and Nichols
exercised  the  options  on June  2,  1998  and  both  executed  indemnification
agreements  with Metro Global in connection with their exercise of the warrants.
As a result of this  transaction,  Metro Global recorded  $364,062 of consulting
expense in fiscal 1998.

     On  March  19,  1999,  Metro  Global  entered  into a one  year  consulting
agreement  effective April 1, 1999 with Kenneth Guarino. In consideration of the
services,  Metro  Global will pay Mr.  Guarino  $10,000 per month.  In addition,
Metro Global  granted Mr.  Guarino  options to purchase up to 100,000  shares of
Metro  Global's  Common Stock at a price of $2.00 per share,  exercisable  for a
period of 5 years.  Metro  Global  recorded  consulting  expense  of  $21,333 in
connection  with the  issuance  of the  warrants  and  reimbursed  approximately
$70,000 of expenses to Mr. Guarino during the year ended May 29, 1999.

     In October 1998, Metro Global repurchased 198,242 shares of its outstanding
Common Stock from Metro Plus, a company  partially owned by Mr.  Guarino.  Metro
Global  paid  $2.56 per  share,  which was the  market  price on the date of the
transaction.

     A film production  owned by Mr. Alves, The Acting President of Metro Global
was paid approximately $75,500 during fiscal 1999.


                                      F-22

<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------


12. Accounting for Stock Based Compensation

     Metro  Global  applies  APB  Opinion  25  and  related  interpretations  in
accounting  for its stock options  issued to employees.  Accordingly,  under the
intrinsic value method,  no  compensation  cost for options issued to employees,
has been recognized for the years May 29, 1999 and May 30, 1998 (see note 9).

     In October 1995, the Financial  Accounting Standards Board issued Statement
(SFAS) No. 123, Accounting for Stock Based Compensation,  which became effective
for transactions entered into in fiscal years beginning after December 15, 1995.
This  statement  permits an entity to apply the fair value based method to stock
options awarded during 1995 and thereafter in order to measure the  compensation
cost at the grant date and recognize it over its vesting period.  This statement
also allows an entity to continue to measure  compensation costs for these plans
pursuant  to APB  Opinion 25.  Entities  electing to remain with the  accounting
treatment under APB Opinion 25 must make proforma  disclosures in net income and
earnings per share to include the effects of all awards granted to employees, as
if the fair value based method of  accounting  pursuant to SFAS No. 123 had been
applied.

     Metro Global has stock option plans which  reserves  shares of Common Stock
for issuance to executives,  employees, and directors.  Metro Global has adopted
the  disclosure  only  provisions of Statement of Financial  Accounting No. 123,
"Accounting for Stock Based  Compensation".  Accordingly,  compensation  expense
continues to be recognized under APB Opinion 25 for such plans. Had compensation
cost for Metro  Global's  stock option plans been  determined  based on the fair
value at the grant date for awards  during the years  ended May 29, 1999 and May
30, 1998  consistent  with the  provisions of SFAS No. 123,  Metro  Global's net
income  (loss) and earning  (loss) per share would have been  reduced to the pro
forma amounts indicated below:

<TABLE>
<CAPTION>
                                                       1999              1998
                                                       ----              ----
        <S>                                        <C>                <C>
        Net loss - as reported                     $(3,976,940)       $(721,746)
        Net loss - pro forma                       $(4,003,940)       $(778,746)
        Basic loss per share - as reported                (.77)            (.60)
        Basic loss per share - pro forma                  (.78)            (.61)
        Diluted loss per share - as reported              (.77)            (.60)
        Diluted loss per share - as pro forma             (.78)            (.61)
</TABLE>

     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 during the year ended May 30, 1998:  dividend yield
0.00%,  expected  volatility  58.08%,  risk free  interest  rate of  7.50%,  and
expected  lives of ten years.  No options were granted during the year ended May
29, 1999.

     The pro forma effect of applying SFAS 123 may not be  representative of the
effects on reported  net income and  earnings  per share for future  years since
options vest over varying periods.


                                      F-23
<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------


13. Fair Values of Financial Instruments

     Statement of Financial  Accounting  Standards (SFAS) No. 107, as amended by
SFAS No. 119, "Disclosures about Fair Value of Financial Instruments",  requires
that Metro Global disclose estimated fair values for its financial  instruments.
Fair value  estimates  are made at a specific  point in time,  based on relevant
market  information and information about the financial  instrument.  Because no
market exists for a significant  portion of Metro Global financial  instruments,
fair values are based on judgments  regarding  future expected loss  experience,
current  economic   conditions,   risk   characteristics  of  various  financial
instruments  and other  factors.  These  estimates are  subjective in nature and
involve  uncertainties and matters of significant  judgment and therefore cannot
be determined with precision.

     Management  of Metro Global  estimates  that all financial  instruments  of
Metro Global,  except long-term  liabilities (notes payable) and a certain trade
accounts  receivable  included in other  assets,  have a fair value equal to the
carrying  value.  Regarding  the fair  value of the  long-term  liabilities  and
certain trade account receivables, it has been determined that fair value cannot
be reasonably  estimated  since the unique  nature,  interest  rates,  repayment
terms,  restrictions and all related conditions  pertaining to these instruments
do not  provide  information  that would yield a basis for a sound fair value in
accordance with guidelines in SFAS 107 and 119.

14. Restatements

     Metro Global has restated the financial  statements  for fiscal 1996,  1997
and 1998.

     In fiscal  1996,  Metro  Global  recorded a gain on the disposal of certain
assets to an  affiliated  company in the amount of  $171,795.  Metro  Global has
reclassified  the gain from retained  earnings into additional  paid-in capital.
The effect of the  reclassification  was a reduction of net income from $525,675
to $353,880 and a reduction in basic  earnings per share from $.17 to $.12,  and
diluted earnings per share from $.17 to $.11.

     For fiscal 1997,  Metro Global  adjusted  for an error in  calculating  the
amortization of the film library by increasing amortization expense by $563,872.
Additionally,  Metro  Global  recorded  $137,500 of  consulting  expense for the
extension of stock options to Kenneth Guarino (see Note 11). The effect of these
adjustments resulted in an increase in net loss from $207,158 to $705,536 and an
increase in basic and diluted loss per share from $(.06) to $(.20).

     In addition,  Metro Global  changed its  estimates  in  accounting  for the
amortization  of film costs during 1997.  Film costs had  previously  been fully
amortized  after  three  years.  Approximately  73% of film costs are  currently
amortized after three years. The effect of the change in estimated  amortization
for 1997 was a decrease in net loss of approximately $200,000 or $.06 per share.

     In Fiscal 1998,  Metro Global  restated its financial  statements to record
dividends of $1,446,502 relating to the embedded beneficial  conversion features
of the Series A Preferred  Stock and the value of  detachable  warrants  issued.
Metro Global recognized $125,112 of interest expense for the embedded beneficial
conversion feature on convertible  debentures (see notes 6 and 11). Metro Global
recorded  $499,826 of interest  expense on the  conversion of debt to stock (see
notes 9 and 11).  Additionally,  Metro Global recorded an expense of $364,062 on
the  issuance  of stock  options  and  $22,811  on the  issuance  of  stock  for
consulting  services  (see note 11).  Partially  offsetting  these  amounts is a
$162,584 decrease

                                      F-24

<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------


14. Restatements (Continued)

in amortization expense, which results from correction of the error in 1997. The
effect of this  restatement was a decrease in 1998 income from $349,681 to a net
loss of $721,746 and a per share  decrease  from earnings of $.09 per share to a
loss of $(.60) per share.

15. Earnings Per Share

     The  computation  of basic and diluted  earnings per share from  continuing
operations is as follows:

<TABLE>
<CAPTION>
                                                May 29, 1999       May 30, 1998
                                                ------------       ------------

   <S>                                          <C>                <C>
   Loss from continuing operations              $(4,127,141)       $  (721,746)
   Preferred Stock dividends                       (309,248)        (1,457,981)
                                                -----------        -----------
   Loss from continuing operations
   attributable to common shareholders          $(4,436,389)       $(2,179,727)
                                                ===========        ===========

   Basic and Diluted EPS:
     Basic and Diluted common shares              5,511,084          3,662,719
     Basic and Diluted EPS from continuing
       operations                                   $ (0.80)           $ (0.60)
</TABLE>

     The weighted average shares attributable to the dilutive instruments listed
below were not included in the computation of diluted earnings per share because
to do so would have been antidilutive for the periods presented:

<TABLE>
<CAPTION>
                                                 May 29, 1999       May 30, 1998
                                                 ------------       ------------
<S>                                                 <C>                 <C>
   Stock Options                                    106,187             83,449
   Warrants                                            -                24,761
   Series A Preferred Stock                            -                80,951
   12% convertible debentures                       338,736             42,009
   8% convertible debentures                        317,460                -

</TABLE>

     At May 29, 1999,  warrants to purchase  550,000  shares of Common Stock are
not listed in the above  analysis  since the exercise  price is greater than the
average market price of the common shares.

16. Operating Segment Information

     Effective in 1999,  Metro  Global  adopted  SFAS 131, "  Disclosures  About
Segments of an Enterprise and Related  Information." This statement introduced a
new  model  for  segment  recording,   called  the  "management  approach".  The
management  approach  is based  on the way the  chief  operating  decision-maker
organizes segments within a company for making operating decisions and assessing
performance.

     The accounting  policies of the segments are the same as those described in
note 1, Summary of  Significant  Accounting  Policies.  Metro  Global  evaluates
segment  performance based on operating earnings before allocations of corporate
overhead costs. Intersegement net sales and eliminations are not material.


                                      F-25
<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------


16. Operating Segment Information (Continued)

     Metro Global was comprised of two segments: the Adult Entertainment Segment
and the Publishing  Segment  (Fanzine).  However,  on September 29, 1999,  Metro
Global  sold  the  Publishing  Segment  and is  accounting  for the  segment  as
discontinued operations (see note 18) in the accompanying financial statements.

     Foreign sales totaled  $764,931 at May 29, 1999. There was no concentration
of sales to any one country. Foreign assets are immaterial at May 29, 1999.

17. Subsequent Events

     On September  29,  1999,  Metro  Global  signed a  Rescission  and Purchase
Agreement with the selling  shareholders of Fanzine and a company  controlled by
them.  In  consideration  of this sale of  Fanzine's  stock,  Metro  Global will
receive  payments  totaling  $4,500,000 and the 1,000,000  contingent  shares of
Common  Stock  originally  given to the  selling  shareholders.  Payment  of the
$4,500,000  is  secured  by the  assets of  Fanzine  and  partly  secured by the
personal  guarantees  of the former  Fanzine  shareholders.  Metro  Global  will
receive  payments of $1,000,000 by October 31, 1999,  $1,000,000 by November 30,
1999,  $1,000,000  by May 31,  2000 and  $1,500,000  by  August  31,  2000.  The
operations  of Fanzine have been  classified as  discontinued  operations in the
accompanying financial statements (see note 18).

     On October 5, 1999,  Metro Global  signed a working  capital line of credit
agreement with Reservoir  Capital under  essentially the same terms as is in the
commitment  letter described in note 7. Actual funding is expected to take place
shortly.  Proceeds of the loan will be  utilized  for a partial pay down of debt
currently in default (as  described  in note 5). In the event that  proceeds are
not received from this loan,  Metro Global will remain in default under its debt
obligations.

18. Discontinued Operations

     In September 1999,  Metro Global adopted a plan of disposition for Fanzine,
which was sold on  September  29,  1999 for  approximately  $4,500,000  in notes
payable and the return of 1,000,000  shares of Metro Global's Common Stock.  The
following table is a summary of the results of  discontinued  operations for the
year ended May 29, 1999:

<TABLE>
<CAPTION>

                                                         May 29, 1999
                                                         ------------
        <S>                                               <C>
        Revenues                                          $11,733,545
        Cost of revenues                                   10,127,236
                                                          -----------
                                                            1,606,309

        Other expenses                                      1,321,608
                                                          -----------

        Income before income taxes                            284,701

        Income taxes                                         (134,500)
                                                          -----------

        Income from discontinued operations               $   150,201
                                                          ===========

</TABLE>

     Income from discontinued operations before income taxes does not include an
allocation of corporate interest expense or amortization of goodwill. At May 29,
1999,  Fanzine has current  assets of  $2,638,932,  other assets of $167,760 and
current liabilities of $2,656,491.


                                      F-26
<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MAY 29, 1999 AND MAY 30, 1998
--------------------------------------------------------------------------------


19. Unaudited Restatements of Quarterly Information

     In the  fourth  quarter  of fiscal  1999,  Metro  Global  made  significant
adjustments  to  its  financial  statements  which  impact  previously  reported
quarterly  results of operations.  The  adjustments  were made for such items as
embedded  interest and dividends,  valuations of warrants and options and change
in estimates.  The following table presents the quarterly  results of operations
considering the above mentioned adjustments:

<TABLE>
<CAPTION>

                                            For the Quarters Ended            Nine Months
                             Aug. 28, 1998   Nov. 28, 1998   Feb. 27, 1999   Feb. 27, 1999
                             -------------   --------------  -------------   -------------

<S>                          <C>             <C>             <C>             <C>
Revenue ..................   $  6,520,569    $  8,503,284    $  9,567,751    $ 24,591,604
Cost of Revenues .........      4,374,558       6,445,803       7,063,744      17,884,105
                             ------------    ------------    ------------    ------------
                                2,146,011       2,057,481       2,504,007       6,707,499

SG&A .....................      2,169,895       2,377,230       2,724,787       7,271,912


Other Income (expense) net       (160,011)       (231,138)       (777,569)     (1,168,718)
                             ------------     -----------     -----------    ------------

Income before taxes ......       (183,895)       (550,887)       (998,349)     (1,733,131)

Tax Benefit ..............          6,436          19,280          34,923          60,639
                             ------------    ------------    ------------    ------------

Net Loss .................   $   (177,459)   $   (531,607)   $   (963,426)   $ (1,672,492)
                             ============    ============    ============    ============
</TABLE>



                                      F-27