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

                                 Form 10-KSB/A-2

(Mark One)

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

          For the fiscal year ended June 30, 2000

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

          For the transition period from ________ to __________


                         Commission File Number: 0-30027


                             TOTAL FILM GROUP, INC.
               (Exact name of Registrant as specified in charter)


         DELAWARE                                             13-3851302
State or other jurisdiction of                          I.R.S. Employer I.D. No.
incorporation or organization


9107 WILSHIRE BOULEVARD, SUITE 475, BEVERLY HILLS, CA                   90210
(Address of principal executive offices)                              (Zip Code)

Issuer's telephone number, including area code: (310) 275-8404

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001
par value

Check whether the Issuer (1) has 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. (1) Yes [X]
No [ ] (2) Yes [X] No [ ]

Check if 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 or any amendment to
this Form 10-KSB. [ ]

State issuer's revenues for its most recent fiscal year: $3,205,892

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State the aggregate market value of the voting stock held by non-affiliates of
the Registrant computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days: The aggregate market value of the voting stock held by
non-affiliates of the Registrant computed by using the average bid and asked
prices at September 26, 2000, was $11,664,706.

State the number of shares outstanding of each of the Issuer's classes of common
equity as of the latest practicable date: At February 15, 2001, there were
14,853,899 shares of the Registrant's Common Stock outstanding.

Documents Incorporated by Reference: Exhibits from the Registrant's registration
statement, as amended, on Form 10-SB are incorporated by reference into Part III
hereof.

                                     PART I

                         ITEM 1. DESCRIPTION OF BUSINESS

HISTORY AND ORGANIZATION

     Total Film Group, Inc. (the "Company") was incorporated under the laws of
the State of Delaware on August 1, 1995. The Company was originally incorporated
under the name "Executive Marketing, Inc." On February 5, 1997, the Company
changed its name to "Total Film Group, Inc." The Company is also qualified to do
business in the State of California.

     Set forth below is a chart showing the Company and its subsidiaries and the
percentage interest in each:

<TABLE>
<CAPTION>
                                                                           Percent
Parent Company                     Subsidiary                               Owned
--------------                     ----------                              -----
<S>                                <C>                                     <C>
Total Film Group, Inc.             Alien Sky UK Ltd.                         100%
                                   Alma Productions UK Ltd                   100%
                                   Sundowning, Inc.                          100%
                                   Total China, Inc.                         50.004%
                                   Total China II, Inc.                      100%
                                   Total Creative, Inc.                      100%
                                   Total Films UK Ltd                        100%
                                   Total Media, Inc.                         100%
                                   Total Pictures, Inc.                      100%
                                   1st Mr., Inc.                             100%
</TABLE>

     None of our subsidiaries own any subsidiaries.

     In January 1997 the Company entered into an agreement with Total Media
Corporation, a Nevada corporation, to exchange all of the issued and outstanding
shares of such entity for

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3,000,000 shares of common stock of the Company. The Agreement and Plan of
Reorganization was closed by the parties on or about February 4, 1997. As a
result of the closing the Company issued 3,000,000 shares, representing
approximately 67% of the outstanding stock at closing, to the shareholders of
the Nevada corporation. Mr. Green and his affiliates received 1,250,000 of such
shares. Also as a result of the closing new directors of the Company were
appointed. Messrs. Green, Boyer, and Pacheco were appointed as new directors.
Prior to closing, on January 27, 1997, the Company declared a stock dividend of
one share of common stock of the Company for each two shares of common stock of
the Company outstanding to the shareholders of record as of the close of
business on January 27, 1997. The payment and delivery date for such dividend
was January 31, 1997.

     In February 1998, the Company incorporated a wholly owned subsidiary, Total
Design, Inc., a California corporation engaged in providing marketing and
advertising services. Total Design, Inc. changed its name to "Dyer
Communications, Inc." on May 26, 1998. Effective January 1999 the Company
acquired all of the outstanding stock of Michel/Russo, Inc., a California
corporation engaged in marketing and advertising for 100,000 shares of common
stock of the Company issued to the two shareholders of Michael/Russo. On March
5, 1999, Dyer Communications, Inc. changed its name to "Total Creative, Inc."
Also effective January 1999 Total Creative, Inc. and the Company acquired all of
the interest in Skyrocket, LLC, a California limited liability company engaged
in web development, e-commerce, and digital advertising for a total of 225,000
shares and $25,000. All of the assets, liabilities, and operations of Skyrocket
were transferred to Total Creative, Inc. immediately subsequent to the
acquisition effective January 1999. All of the operations of Michel/Russo, Inc.
were transferred to Total Creative, Inc. subsequent to the acquisition effective
January 1999 and the ownership of Michel/Russo, Inc. was assigned to Total
Creative, Inc. in March 2000.

     In February 1999 the Company borrowed $2,000,000 from The Orbiter Fund, an
entity managed by one of the principal shareholders of the Company. (See
"Certain Relationships and Related Transactions.") As additional consideration
for the loan, the Company issued 250,000 three-year warrants to the fund,
exercisable at $2.00 per share. In August 1999 the Company negotiated an
extension of the initial payment of principal in return for which the Company
issued 250,000 shares to the lender. On February 28, 2000, The Orbiter Fund
assigned the note to Lancer Offshore, Inc. and Lancer Partners, L.P. In
September 1999 the Company borrowed an additional $1,800,000 from Lancer
Offshore, Inc., an entity managed by the same principal shareholder of the
Company, and $200,000 from others. (See "Certain Relationships and Related
Transactions.") As additional consideration for the loan, the Company issued a
total of 250,000 shares pro rata to the lenders. The Company also paid a
consulting fee of $140,000 and issued warrants to purchase 100,000 shares of
common stock to Capital Research Ltd. In February 2000 the parties to the loans
agreed to amend the conversion price to $1.50 per share and to convert the
principal amount of the loans into 2,666,667 shares of common stock and to
convert the $376,100 in past due interest into 270,000 shares at the rate of
$1.39 per share. The Company also agreed to pay a consulting fee of $40,000 and
26,667 shares of common stock to Capital

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Research Ltd. The consulting fees paid to Capital Research Ltd. were done so
pursuant to a consulting agreement between the Company and such entity.

     In September 1999 the Company entered into a consulting agreement with
Capital Research Ltd. The consulting agreement provides that Capital Research
will assist the Company in the following areas:

     -    reviewing the financial condition of the Company;

     -    developing a capital formation plan;

     -    locating market makers for the Company's stock;

     -    building the Company's visibility and credibility with investors and
          the media; and

     -    locating equity and/or debt funding for the Company and Total
          Creative.

In part, the agreement provides that the Company shall issue as of the date
of the agreement, five year warrants initially to purchase 100,000 shares.
Thereafter the Company shall issue five year warrants to purchase 25,000
shares of common stock starting December 1, 1999, and each quarter
thereafter, so long as the agreement is in effect. The exercise price of the
warrants is to be set at the closing price of the common stock on the date of
the grant. The agreement has no initial term but can be terminated by either
party upon ninety days prior notice. The Company is also obligated to pay a
monthly fee of $3,000, plus a 7% fee and a grant of warrants to purchase
50,000 shares of common stock for each $1 million raised by such entity for
the Company. As of December 1, 2000, the Company had issued a total of
325,000 warrants and 51,657 shares, and had paid $131,500 to Capital Research
as compensation pursuant to the agreement.

     On October 20, 1999, the Company incorporated Total China, Inc., a Delaware
corporation, as a subsidiary. This entity was formed to act as a holding company
to acquire 20% of the capital stock of MeetChina.com, Inc., formerly known as US
Business Network, Inc., a Delaware corporation, which has intellectual property
rights to the business-to-business e- commerce portal, Meet China.com, and is
engaged directly through a subsidiary in promoting imports and exports to and
from China through the Internet and providing ancillary services related
thereto. In November 1999, Total China, Inc. and the Company conducted a joint
private offering to raise funds for the transaction with MeetChina.com, Inc.
Total China, Inc. sold 30 units in the private offering. Each unit consisted of
1.6666 shares of common stock of Total China, Inc. and was sold for $66,667 per
unit. As a part of the same private offering, the Company sold 30 units, with
each unit consisting of three-year warrants to purchase 6,667 shares of the
Company's common stock at an exercise price of $3.75 per share. The units were
sold by the Company for approximately $6,666.67 each, or $1.00 per warrant. Each
warrant holder was granted registration rights, and a right of first refusal to
purchase a pro rata amount of the assets of Total China, Inc. Investors were
required to purchase both the Total China, Inc. and the Company units in the
offering. Total China, Inc. realized gross proceeds of $2,000,000 and the
Company realized gross proceeds of $200,000. Also in connection with this
private offering, the Company issued warrants to purchase 200,000 shares of
common stock to JBRG Consultants as a commission for introducing potential
investors to the Company. The proceeds to the Company

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were allocated to pay the costs of the offering, and the proceeds to Total
China, Inc. were used to purchase shares of common stock of MeetChina.com, Inc.,
which shares ultimately represented 17.58% of the issued and outstanding capital
stock of such corporation at closing. This reduction in percentage ownership was
a result of an increased valuation of MeetChina.com, Inc. As a result of this
offering, the Company now owns slightly in excess of 50% of the outstanding
stock of Total China, Inc.

     On or about December 16, 1999, the Company and Total China, Inc. jointly
entered into a stock purchase agreement with MeetChina.com, Inc. On December 17,
1999, the Company and Total China, Inc. finalized the agreement with
MeetChina.com, Inc., and the stock of MeetChina.com, Inc. was issued to Total
China, Inc. Because of subsequent financings by MeetChina.com, Inc., at May 31,
2000, Total China, Inc. owned approximately 11.9% of the outstanding stock of
such entity. MeetChina.com, Inc. has the option under the agreement to acquire
approximately 5% of the shares purchased by Total China, Inc. at a cash price of
two- thirds of the market value of such shares. Such right is only exercisable
on the 120th day after an initial public offering of capital stock by
MeetChina.com, Inc. on a designated exchange. Until the stock of MeetChina.com,
Inc. is listed on a designated exchange, the Company and Total China, Inc. have
the right, jointly, to designate one representative to attend meetings of the
board of directors of MeetChina.com, Inc. Total China, Inc. has the right of
first refusal to purchase any shares to be sold or issued by MeetChina.com, Inc.
at less than the price paid by Total China, Inc. Total China, Inc. also has
piggy-back registration rights to register its shares in any appropriate
registration statement filed by U.S. Business Network, Inc. with the U.S.
Securities and Exchange Commission after the initial public offering and which
includes shares of the founders of MeetChina.com, Inc.

     On November 2, 1999, the Company incorporated Total Group, Inc., a Delaware
corporation, as a wholly-owned subsidiary. Originally formed as a shell
corporation, this entity was used to acquire an equity interest in
MeetChina.com, Inc. On November 15, 1999 Total Group, Inc. changed its name to
Total China II, Inc. The Company owns all of the outstanding common stock of
Total China II, Inc. and 5% of the outstanding preferred stock.

     On May 23, 2000, Total China II, Inc. and the Company conducted a joint
private offering to raise funds for the transaction with MeetChina.com, Inc. The
offering was terminated in July 2000. Total China II, Inc. sold 73.86 units in
the private offering. Each unit consisted of 10,000 shares of preferred stock of
China II and 10,000 shares of the Company's common stock. The units sold for
$50,000 per unit. The total gross proceeds of the joint private offering were
$3,693,000. Total China II, Inc. realized gross proceeds of $2,215,800 and the
Company realized gross proceeds of $1,477,200. The Company's proceeds of the
offering will be used for general working capital and the proceeds to Total
China II, Inc. were used to purchase shares of preferred stock in MeetChina.com,
Inc. An investment of $2,000,000 (106,689 shares) was made in MeetChina.com. In
connection with this private offering, a cash fee of $369,300 was paid to JL
Devore & Associates as a commission to structure and administer the private
offering. Of the total fee, Total China II, Inc. paid $221,580 and the Company
paid $147,720. In addition to the

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cash fee, JL Devore & Associates was issued 50,000 shares of the Company's
common stock as compensation for services.

     In August 2000 the Company borrowed $1,000,000 for working capital from
Michael Lauer, and from Lancer Partners and Viator Fund, entities controlled by
Michael Lauer, one of our principal shareholders. We have executed a term sheet
outlining the terms of the loan . The term sheet provides that the loan will
bear interest at 12% per annum, payable quarterly, and that the loan will be due
May 15, 2001. The Company will be obligated to repay the loan out of proceeds of
any financing greater than $3,000,000. The loan will be convertible at $3.00 per
share, provided that the conversion price will be reduced to $1.50 for the
ninety day period following the due date, and to $1.00 per share thereafter, if
the loan remains unpaid. The shares will have one demand and piggyback
registration rights. The Company also transferred 30,000 shares of MeetChina.com
pro rata to the lenders as additional consideration for the loan. The Company
has also paid a consulting fee of $70,000, and have issued five-year warrants to
purchase 100,000 shares at $3.50 per share, to Capital Research Ltd. in
connection with the loan.

     In November 2000 the Company borrowed $525,000 for working capital from
Lancer Offshore and The Viator Fund, entities controlled by Michael Lauer, one
of our principal shareholders. The Company has executed a term sheet outlining
the terms of the loan. The term sheet provides that the loan will bear interest
at 12% per annum, payable quarterly, and that the loan will be due August 14,
2001. The Company will be obligated to repay the loan out of proceeds of any
financing greater than $3,000,000. The loan will be convertible at $2.00 per
share, provided that the conversion price will be reduced to $1.50 after nine
months from the issuance of the note, and $1.00 per share ninety days
thereafter, if the loan remains unpaid. The shares will have one demand and
piggyback registration rights. The Company has also paid a consulting fee of
$36,750, and have issued five-year warrants to purchase 50,000 shares at $3.00
per share, to Capital Research Ltd. in connection with the loan.

     The Company's business is divided into three segments: the film production
business, the advertising and marketing business, and as a holding company. The
film production segment is engaged in the production, marketing, and
distribution of commercial feature films. The advertising and marketing segment
is engaged in the development of advertising and marketing campaigns to provide
Internet services for a variety of clients and the Company. The Company

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also holds the stock of two subsidiaries as a holding company, Total China, Inc.
and Total China II, Inc., which in turn own stock of MeetChina.com, Inc., an
Internet related business.

THE FILM BUSINESS

     The Company's independent film production business is conducted primarily
through the parent, Total Film Group, Inc., and other wholly owned entities
created for specific pictures. Because most of the films are financed by
different entities, and in keeping with industry practice, the Company creates a
new subsidiary for each film it produces. Since January 1997 the Company has
produced three films: THE NEW SWISS FAMILY ROBINSON, which aired on January 10,
1999, on ABC's Wonderful World of Disney and was released theatrically abroad;
DIAMONDS, which was released domestically in a limited number of movie theaters
in December 1999 in order to qualify for Academy Award consideration, and had
general domestic release in February 2000 by Miramax Films; and CHICK FLICK,
which was completed in 1998 and is scheduled for release in 2001.

     In November 1999 the Company entered into an oral arrangement with
Paramount Classics, a division of Paramount Picture Corporation, for the
marketing and distribution of four feature films. The Company has produced two
of the films under this arrangement, MY FIRST MISTER and BRIDE OF THE WIND. The
Company anticipates that similar arrangements will be made with Paramount
Classics on the next two films, but there is no binding agreement to enforce
such arrangement.

     The following is a list of the Company's wholly owned subsidiaries used in
the film business, the jurisdiction of incorporation, and the film associated
with such subsidiary:

<TABLE>
<CAPTION>
     Subsidiary                    Jurisdiction             Film
     ----------                    ------------             ----
<S>                                <C>                      <C>
     Total Films UK Ltd.           United Kingdom           THE NEW SWISS FAMILY ROBINSON
     Alma Production UK Ltd.       United Kingdom           BRIDE OF THE WIND (a.k.a. ALMA)
     Sundowning, Inc.              Nevada                   DIAMONDS
     1st Mister, Inc.              California               MY FIRST MISTER
</TABLE>

     The Company has also incorporated Total Pictures, Inc., a California
corporation, to act as signatory for transactions with the Writers' Guild. All
future screen plays developed by the Company will be assigned to this entity.
The Company has acquired an option to purchase a film library which, if
purchased, will become part of this entity.

     THE UNITED STATES MOTION PICTURE INDUSTRY

     The current motion picture industry in the United States includes the
production and theatrical or television screening of feature-length motion
pictures and the subsequent distribution of such pictures in home video and
ancillary markets. The industry is dominated by the major studios -- some of
which have divisions which are promoted as "independent"

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distributors of motion pictures -- including Universal Pictures, Warner Brothers
(including Turner Pictures, New Line Cinema and Castle Rock Entertainment),
Twentieth Century Fox, Sony Pictures Entertainment (including Columbia Pictures
and Tristar Pictures), Paramount Pictures, The Walt Disney Company (including
Buena Vista, Touchstone and Miramax) and MGM (including Metro Goldwyn Mayer
Pictures, United Artists Pictures, Orion Pictures and Goldwyn Entertainment
Company). These "majors" have traditionally produced and distributed the
majority of theatrical motion pictures, and made-for-TV movies, released
annually in the United States. In recent years, however, independent motion
picture production companies have played an important role in the production of
motion pictures for the worldwide feature film and made-for-TV markets. There
are also a large number of smaller production companies, such as the Company,
and other entities that produce theatrical motion pictures and made-for-TV
movies.

     The "majors" generally own their production studios and have national or
worldwide distribution organizations. Major studios typically release films with
direct production costs generally ranging from approximately $40 million to $100
million or more, and provide a continual source of motion pictures to the
nation's theatrical exhibitors. The independents, including the Company, do not
own production studios and, with certain exceptions, have more limited
distribution capabilities than the major studios. Independents typically produce
fewer motion pictures at substantially lower average production costs than major
studios. A low budget independent film (generally one more suitable for
television) may cost as little as $3 million. A few independent production
companies specialize in producing mid-range feature films, those costing between
$10 million to $40 million. Production costs consist of acquiring or developing
the screenplay, film studio rental, cinematography, post-production costs and
the compensation of creative and other production personnel. Distribution
expenses, which consist primarily of the costs of advertising and release
prints, are not included in direct production costs and generally financed by
the distribution company.

     MOTION PICTURE PRODUCTION AND FINANCING.

     The production of a motion picture begins with the screenplay adaptation of
a popular novel or other literary work acquired by the producer or the
development of an original screenplay having its genesis in a story line or
scenario conceived of or acquired by the production company. In the development
phase, the producer typically seeks production financing and tentative
commitments from a director, the principal cast members, and other creative
personnel. A proposed production schedule and budget also are prepared during
this phase.

     Upon completing the screenplay and arranging financing commitments,
pre-production of the motion picture begins. In this phase, the producer engages
creative personnel to the extent not previously committed; finalizes the filming
schedule and production budget; obtains insurance and secures completion
guarantees, if necessary or available; establishes filming

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locations and secures any necessary studio facilities and stages; and prepares
for the start of principal photography.

     Principal photography, the actual filming of the screenplay, may extend
from four to sixteen weeks or longer, depending upon such factors as budget,
location, weather and complications inherent in the screenplay. Following
completion of principal photography, the motion picture is edited. Also,
opticals, dialogue, music and any special effects are added, and voice, effects
and music sound tracks and picture are synchronized during post-production. This
results in the production of the negative from which the release prints of the
motion picture are made.

     The major studios generally fund production costs from cash flow from their
motion picture and related activities, licensing fees generated from film
library holdings, and, in some cases, from unrelated businesses. Substantial
overhead costs, consisting largely of salaries and related costs of the
development, production, distribution and marketing staff and physical
facilities maintained by the major studios, also must be funded.

     Independent production companies generally avoid incurring substantial
overhead costs by hiring creative and other production personnel and retaining
the other elements required for pre-production, principal photography and
post-production activities on a project-by-project basis. Unlike the major
studios, the independents also typically finance their production activities
from bank loans, "pre-sales" agreements, equity offerings and joint ventures.
Independents generally attempt to complete their financing of a motion picture
production prior to commencement of principal photography, at which point
substantial production costs begin to be incurred and require payment.

     "Pre-sales" are often used by independent film companies to finance all or
a portion of the direct production costs of a motion picture. Pre-sales consist
of license fees paid to the producer by third parties in return for the right to
exhibit the completed motion picture in theaters or to distribute it in home
video, television, international or other ancillary markets. Producers with
distribution capabilities may retain the right to distribute the completed
motion picture either domestically or in one or more foreign markets. Producers
may separately license theatrical, home video, television, foreign and all other
distribution rights among several licensees. The producer may also at times be
able to acquire additional production funds through "gap financing," whereby a
lender loans a portion of the production funds based on a distributor's estimate
of the value of distribution rights. Although "gap financing" is currently
available through a variety of lenders, there can be no assurance such lenders
will continue to make funds available on this basis in the future. The Company
obtained financing through the Lewis W. Horwitz Organization, which is a
division of Southern Pacific Bank, for MY FIRST MISTER. The Organization
committed $2,050,000 as gap financing for the film. At September 30, 2000, the
Company had borrowed $1,804,387 from that arrangement. The funds will be repaid
from the international distribution rights to the motion picture. The funds were
borrowed at the prime rate plus one and a quarter percent. The due date of the
loan is April 30, 2001.

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     Both major studios and independent film companies often acquire motion
pictures for distribution through a customary industry arrangement known as a
"negative pickup," under which the studio or independent film company agrees to
acquire from an independent production company all rights to a film upon
completion of production. The independent production company normally finances
production of the motion picture pursuant to financing arrangements with banks
or other lenders in which the lender is granted a security interest in the film
and the independent production company's rights under its arrangement with the
studio or independent. When the studio or independent "picks up" the completed
motion picture, it assumes or pays the production financing indebtedness
incurred by the production company in connection with the film. In addition, the
independent production company is paid a production fee and generally is granted
a participation in the net profits of the motion picture.

     Both major studios and independent film companies generally incur various
third-party participations or deferrals in connection with the production and
distribution of a motion picture. These participations or deferrals are
contractual rights of actors, directors, screen writers, owners of rights and
other creative and financial contributors entitling them to share in revenues or
net profits (as defined in the respective agreements) from a particular motion
picture. Except for the most sought-after talent, participation or deferral
costs are generally payable after all distribution and marketing fees and
expenses, direct production costs and financing costs are paid in full.

     MOTION PICTURE DISTRIBUTION.

     Motion picture distribution encompasses the distribution of motion pictures
in theaters and in ancillary markets such as home video, pay-per-view, pay
television, broadcast television, foreign and other markets. The distributor
typically acquires rights from the producer to distribute a motion picture in
one or more markets. For its distribution rights, the distributor typically
agrees to advance the producer a certain minimum royalty or guarantee, which is
to be recouped by the distributor out of revenues generated from the
distribution of the motion picture and is generally nonrefundable. The producer
also is entitled to receive a royalty equal to an agreed-upon percentage of all
revenues received from distribution of the motion picture over and above the
royalty advance.

     THEATRICAL DISTRIBUTION. The theatrical distribution of a motion picture
involves the manufacture and transportation of release prints, the promotion of
the picture through advertising and publicity campaigns and the licensing of the
motion picture to theatrical exhibitors. The size and success of the promotional
advertising campaign can materially affect the revenues realized from the
theatrical release of a motion picture. The major studios can spend in excess of
$50 million to promote motion pictures, and have average combined print and
advertising costs in excess of $19 million. The costs incurred in connection
with the distribution of a motion picture can vary significantly, depending on
the number of screens on which the motion picture is to be exhibited and the
competition among distributors for theaters during certain seasons. Similarly,
the ability to exhibit motion pictures in the most popular theaters can affect
theatrical revenues.

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     The distributor and theatrical exhibitor generally enter into an
arrangement providing for the exhibitor's payment to the distributor of a
percentage of the box office receipts for the exhibition period, in some cases
after deduction of the theater's overhead, or a flat negotiated weekly amount.
The distributor's percentage of box office receipts varies widely, depending
upon the success of the motion picture at the box office and other factors.
Distributors carefully monitor the theaters which have licensed the picture for
exhibition to ensure that the exhibitor promptly pays all amounts due the
distributor. Substantial delays in collection are not unusual.

     Successful motion pictures may continue to play in theaters for up to four
(4) months or longer following their initial release. Concurrently with their
release in the United States, motion pictures generally are released in Canada
and may also be released in one or more other foreign markets.

     HOME VIDEO. The home video distribution business involves the promotion and
sale of videocassettes and DVDs to local, regional and national video retailers
(e.g., video specialty stores, convenience stores, record stores and other
outlets), which then rent or sell such videocassettes and DVDs to consumers
primarily for private viewing.

     Major feature films are usually scheduled for release in the home video
market within four to six months after theatrical release to capitalize on the
theatrical advertising and publicity for the film. Promotion of new releases is
generally undertaken during the nine to twelve weeks before the release date.
Videocassettes or DVDs of feature films are generally sold to domestic
wholesalers at approximately $50 to $60 per unit and generally are rented by
consumers for fees ranging from $1 to $5 per day. Wholesalers who meet certain
sales and performance objectives may earn rebates, return credits and
cooperative advertising allowances. Selected titles, including certain
made-for-video programs, are priced significantly lower to encourage direct
purchase by consumers. Direct sale to consumers is referred to as the
"priced-for-sale" or "sell-thru" market. Typically, owners of films do not share
in video rental income; however, video distributors are beginning to enter into
revenue sharing arrangements with certain retail stores in some circumstances.
Under such arrangements, videocassettes and DVDs are sold at a reduced price to
video rental stores and a percentage of the video rental revenue is then shared
with the owners (or licensors) of the films. Home video arrangements in
international territories are similar to those in domestic territories except
that the wholesale prices may differ.

     Overall growth in the domestic home video market has slowed as growth in
the number of new outlets and new VCR homes has moderated. The growth in outlets
designed to specifically serve the rental market has remained essentially flat
for the past several years, while the number of outlets which offer
videocassettes and videodiscs for sale has increased. The sell-thru market
continues to grow with strong sales in the traditional family entertainment
market and a growing number of hit feature films initially released at prices
generally below $30. Furthermore, technological developments which regional
telephone companies and others are developing could make competing delivery
systems economically viable and could affect the home video marketplace.

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     PAY-PER-VIEW. Pay-per-view television allows cable and satellite television
subscribers to purchase individual programs, including recently released motion
pictures and live sporting, music or other events, on a "per use" basis. The
subscriber fees are typically divided among the program distributor, the
pay-per-view operator and the cable system operator.

     PAY TELEVISION. Pay television allows subscribers to view premium channels
such as HBO/Cinemax, Showtime/The Movie Channel and other pay television
networks offered by cable and satellite system operators for a monthly
subscription fee. The pay television networks acquire a substantial portion of
their programming from motion picture distributors. New markets may develop with
the maturation of newly emerging direct broadcast satellite (DBS) systems and
other digital television systems.

     BROADCAST AND BASIC CABLE TELEVISION. Broadcast television allows viewers
to receive, without charge, programming broadcast over the air by affiliates of
the major networks (ABC, CBS, NBC and Fox), recently formed networks (UPN and WB
Network), independent television stations and cable and satellite networks and
stations. In certain areas, viewers may receive the same programming via cable
transmission for which subscribers pay a basic cable television fee.
Broadcasters or cable systems operators pay fees to distributors for the right
to air programming a specified number of times.

     FOREIGN MARKETS. In addition to their domestic distribution activities,
some motion picture distributors generate revenues from distribution of motion
pictures in foreign theaters, home video, television and other foreign markets.
There has been a dramatic increase in recent years in the worldwide demand for
filmed entertainment. This growth is largely due to the privatization of
television stations, introduction of direct broadcast satellite services, and
increased home video and cable penetration.

     OTHER MARKETS. Revenues also may be derived from the distribution of motion
pictures to airlines, schools, libraries, hospitals and the military, licensing
of rights to perform musical works and sound recordings embodied in a motion
picture, and licensing rights to manufacture and distribute merchandise,
clothing and similar commercial articles derived from characters or other
elements of a motion picture.

     NEW TECHNOLOGIES. New means of delivery of entertainment product are
constantly being developed and offered to the consumer. The impact of emerging
technologies such as direct broadcast satellites and the Internet, on the
Company's operations cannot be determined at this time.

     CURRENT COMPANY OPERATIONS

     Management has attempted to focus the film production operations of the
Company on filling the niche for the production of mid-range independent feature
films. Within this niche the Company has been successful in attracting
recognized movie actors, obtaining distribution

                                       12

<PAGE>

agreements with recognized distribution companies, such as Miramax Films for
DIAMONDS, and using production values similar to the ones used by the "majors"
to create feature films comparable to those produced by the "majors" at
substantially less cost.

     THE NEW SWISS FAMILY ROBINSON, staring Jane Seymour, was the first feature
film produced by the Company through its wholly owned subsidiary, Total Films UK
Limited, which was created solely for this project. Total Film UK Limited was
incorporated in England on February 11, 1997, under the name Daneslide Limited.

     The film was financed by CLT-UFA in exchange for distribution rights in
certain foreign territories, by the Company, and through a gap loan from Lewis
Horwitz Organization. This loan has since been repaid and its security interest
released.

     The film's executive producer was Gerald Green, the president/CEO, a
director, and a principal shareholder of the Company, pursuant to a producer's
agreement between the Company, Total Films UK Limited, and Mr. Green. (See
"Certain Relationships and Related Transactions.") The film aired on January 10,
1999, on ABC's Wonderful World of Disney and received one of the highest ratings
of any of Disney's shows during the season in that time slot. Pursuant to the
agreement between the American Broadcasting Companies, Inc. and Total Film UK
Limited, ABC has the exclusive rights to one additional broadcast of the film by
January 31, 2002, in the United States, its territories and possessions, Saipan,
and Bermuda, but excluding Spanish language broadcasts in Puerto Rico. ABC aired
the film a second time on July 23, 2000, thereby extinguishing its exclusive
domestic television rights to the film. The domestic television rights have
reverted to the Company. The film is scheduled to be released on video during
2001.

     During 1998 the Company completed production of CHICK FLICK. The film was a
very low budget picture that was financed entirely by the Company. CHICK FLICK
is scheduled for release in 2001.

     The third film is DIAMONDS, staring Kirk Douglas, Dan Aykroyd, and Lauren
Bacall. This film was produced by Sundowning, Inc., a wholly owned subsidiary of
the Company created for this project. Sundowning, Inc. was incorporated in the
State of Nevada on July 16, 1998, and is qualified to do business in the State
of California under the name "Sundowning Entertainment." The film was financed
through a co-production with a German company, Cinerenta/Cinesun, and Total Film
Group, Inc. The executive producers for the film were Gerald Green and Rainer
Bienger, and the producer of the film was Patricia Green, the wife of Gerald
Green. (See "Certain Relationships and Related Transactions.) "J&M
Entertainment" is handling the foreign sales for the film. The film has
completed its domestic run and is currently available on video.

     MY FIRST MISTER was filmed on location in Los Angeles in early 2000. The
film is now complete and stars an ensemble cast led by Albert Brooks, Lee Lee
Sobieski,

                                       13

<PAGE>

John Goodman, Carol Kane and Mary Kay Place. The film was directed by Christine
Lahti, who won an Academy Award for her short film LIEBERMAN IN LOVE. The
screenplay is by Jill Franklyn. The film was produced by Carol Baum and Jane
Goldenring. The executive producer was Gerald Green through the Company's
subsidiary, 1st Mr. Inc. The film is scheduled to be released by late 2000 or
early 2001. Domestic distribution will be handled by Paramount Classics, while
foreign territories are being sold by Mario Kassar and his C-2 Productions.

     BRIDE OF THE WIND is being produced through the Company's wholly owned
subsidiary, Alma Productions UK Ltd, in the Great Britain and is a UK/German
co-production. Directed by Bruce Beresford, the screenplay is by Marilyn Levy.
The film, produced by Lawrence Levy & Evzen Kolar, and executive produced by
Gerald Green, was filmed on location in Vienna and is now being edited in
London. The film is anticipated to be ready for release in 2001. Domestic
distribution will be handled by Paramount Classics and foreign territories are
being sold by Mario Kassar and his C-2 Productions.

     The Company has developed a strategy that capitalizes on market
opportunities emerging from the growing entertainment economy and was created to
realize this opportunity. Mr. Green oversees the development and production of
all feature films produced by the Company. The Company intends to tightly
control production expenditures while maintaining the artistic integrity
required to develop and produce successful feature films. The Company's approach
to the creative development and production of films is to focus selectively on
script driven productions that can be made with recognizable casts and at
mid-sized budgets ($5 million to $25 million). Before a motion picture receives
approval to begin pre-production, it must meet certain requirements. The Company
will only produce a film based on the following criteria:

     -    The script must be original and of the highest quality.

     -    The project must be mainstream and have mass appeal. Art films are not
          considered.

     -    Directors must have a proven track record with qualifications
          acceptable to the foreign buyers and domestic studios. The Company is
          not prepared to hire unproven directors.

     -    Available actors must be identified and their fee structures must fit
          into the budget requirements of the picture.

     -    The film must fall into the funding capabilities and parameters
          established. The Company will not generally participate in films with
          budgets in excess of approximately $25 million.

     -    The film must be acceptable to the completion bond company. The
          completion bond company underwrites any and all risk that the picture
          will not be completed

                                       14

<PAGE>

          and delivered to its distributors on schedule and within budget
          according to the delivery requirements specified in the distribution
          agreements.

     -    Before approving a picture, conservative sales estimates for the
          proposed film must indicate that the film project is viable.

     -    The Company must be able to secure a favorable distribution deal with
          a major U.S. domestic distributor prior to approving the film for
          pre-production.

     -    The Company's production executives work in tandem with the production
          personnel to ensure tight fiscal and logistical controls on the film.
          The Company hires line producers whose sole responsibility is to keep
          the film within its established logistics and budget.

     The Company has entered into a foreign sales agreement with C-2 Pictures,
LLC, a California limited partnership composed of equal interests owned by
Cinergi Pictures Entertainment, Inc., a Delaware corporation, and Mario Kassar
Productions LP, a California limited partnership. The agreement was entered into
on August 2, 1999, with Cinergi and was assigned to C-2 Pictures on January 25,
2000. The agreement appoints C-2 Pictures as the exclusive international sales
agent on three pictures, the first being MY FIRST MISTER, to be sold by C-2
Pictures throughout the world, except in the United States, its dominions,
including Puerto Rico, and English speaking Canada. The term of the agreement
shall be for a period of 30 months from the delivery of each picture. The rights
to the pictures shall include all forms of the theatrical, non-theatrical, home
video, public video, commercial video, pay-television, pay-per- view,
video-on-demand, DVD, free television, airline, hotel and ship-at-sea rights
throughout the allotted territory. The Company is obligated to advance between
$75,000 and $150,000 to C-2 Pictures for the costs and expenses in connection
with the distribution, advertising, and exploitation of the film. In addition,
C-2 Pictures will receive 10% of the gross receipts derived from sales in the
applicable territory until the Company recoups its investment in the picture and
the distribution expenses advanced to C-2 Pictures. Thereafter, C-2 Pictures
will receive 15% of the gross proceeds.

     The Company intends to secure domestic distribution from major distributors
on a film by film basis. The Company intends to utilize the availability of
print and advertising funds to negotiate favorable studio "Rent-a-System"
arrangements from major distributors on a film by

                                       15

<PAGE>

film basis. Such agreements require the user to be responsible for all prints
and advertising expenses. The value of a studio Rent-a-System distribution deal
can be characterized in the following way. Under a standard studio distribution
agreement, the studio would advance print and advertising costs. Such costs
would be recouped through the studio's first position to receive funds from the
film. In addition, a 10% overhead fee on the prints and advertising expenses
would be charged, as well as a 25% distribution fee applied to gross sales.
Additionally, home video participations for the Company would be computed on a
20% royalty basis rather than on a low-fee distribution basis. Conversely,
should the Company have sufficient capital to fund its own prints and
advertising expenses requirements, it could enter into a "Rent-a-System"
arrangement with the studio. Such an arrangement would provide the Company
access to a major studio's distribution apparatus on a preferred basis,
providing that the entire cost of production and distribution would be covered
by the Company. In return, a very favorable 17.5% distribution fee could be
negotiated with the studio, allowing the Company to capture a larger and more
profitable piece of a film's economic value. The Company would assume all
distribution risk but at the same time maintain control of all of the film's
profits. In this case, the Studio would take its 17.5% fee and nothing more.

     The Company has come to an oral arrangement with Paramount Classics'
co-presidents Ruth Vitale and David Dinerstein for Paramount to market and
distribute of up to four of the Company's feature films. Under the arrangement,
Paramount will receive North American rights to the films. Letter agreements
have been signed for the first two projects under this arrangement, which are
BRIDE OF THE WIND and MY FIRST MISTER.

     The Company has also borrowed $2,500,000 to launch the proposed film
project featuring the 'N Sync singing group. The funds were borrowed in April
2000 and were evidenced by promissory notes to the investors. The notes were
without interest, but carried a premium equal to 30% of the principal. In
addition, the investors will receive 6% of the adjusted gross proceeds from the
picture in any and all media, including ancillary rights. The notes are secured
by the producer's interest in the picture. The notes were originally due August
15, 2000, but were extended until November 13, 2000. For such extension, the
Company agreed to issue 166,667 shares to the investors on August 15, 2000,
September 15, 2000, and October 15, 2000. The notes were further extended until
December 31, 2000. For such extension, the Company issued 350,000 shares to the
lenders. The Company also paid a fee to Capital Research of 25,000 shares.

     By adding Total Creative, Inc., the Company now has two operational
divisions focusing on two business activities in multimedia: entertainment
production, and advertising/marketing/Internet services. Both divisions provide
great opportunity to capitalize on shared resources and existing synergies. Not
unlike major studios with strong content divisions that drive other business
units forward, the Company proposes to create similar advantages between its
entertainment and advertising divisions. The Company hopes to develop sources of
competitive advantage, additional revenue streams, and higher levels of
profitability.

                                       16

<PAGE>

THE ADVERTISING AND MARKETING BUSINESS

     Total Creative, Inc. ("TCI") is engaged in web design and development,
digital advertising and other traditional advertising and marketing related
services in the marketing business. In order to maximize its competitive
potential, TCI operates three business units, each focusing on different segment
of the industry: 1) a graphic design studio, directed at the entertainment
industry; 2) a general advertising agency that creates print and broadcast
advertising for consumer and business-to-business marketers; and 3) an Internet
services company, which develops and creates web sites and e-commerce solutions.
TCI has offices in Los Angeles.

     TCI helps clients plan and implement their Internet strategy with a
particular emphasis on brand and creative content. Services include marketing
and brand consulting, information architecture, graphical user interface design,
content development, programming and integration management. TCI's major clients
include Tourism Authority of Thailand, KPMG, Eastman Kodak, and MGM Home
Entertainment. Since the formation of TCI in March 1999, the Company's strategy
has been to enhance TCI's brand awareness and market position including
aggressive new business development efforts and negotiation of guaranteed
production contracts with key film clients. TCI also supplies the Company with
the marketing and creative advertising campaign work required for its films
produced "in house," including MY FIRST MISTER and BRIDE OF THE WIND (aka ALMA).

     Revenues from three customers of this segment represented approximately
$1,069,852 or 33.3% of the Company's consolidated revenues for the year ended
June 30, 2000.

EMPLOYEES

     At December 1, 2000, the Company and its subsidiaries employed 29 persons
on a full-time basis. In the film production segment, two are in executive
positions, two are administrative, and one is clerical. In addition, the Company
has several free-lance production personnel working on various film productions.
In the advertising and marketing business, three are in executive positions,
sixteen are employed in operations, and two are clerical. The holding company
segment does not have any employees. The Company provides to its employees,
optionally, medical, dental, and life insurance. In some of its segments, the
Company also provides to its employees a 401K plan .

                         ITEM 2. DESCRIPTION OF PROPERTY

     The Company leases approximately 4,962 square feet of office space in
Beverly Hills, California. This space is used for the Company's corporate
headquarters and the film business. The lease expires on May 31, 2005. Monthly
lease payments are $9,468.

                                       17
<PAGE>

     Total Creative, Inc. occupies approximately 5,000 square feet of office
space in Los Angeles, California, which is used for the advertising and
marketing business. The arrangement to occupy this space is for month to month
pursuant to an oral arrangement with the landlord. Monthly rental payments are
$12,000.

     Total Creative, Inc. also holds a lease for an unoccupied office space of
approximately 6,850 square feet of office space in the San Francisco,
California, area. The Company is currently attempting to sublease this space.
The lease expires December 31, 2002. Monthly lease payments are $22,833.

     Total Creative, Inc. has two major computer equipment leases used in its
advertising business. The principal amount of the first lease is $90,000, with
monthly payments of $2,062. The sixty month lease was entered into in June 1998.
Total Creative, Inc. has the option to purchase the equipment at the end of the
lease period at its then fair market value. The second lease was a thirty-six
month lease entered into in September 1999. The principal amount of this lease
is approximately $110,000. The monthly payments are $3,734. There is an option
to purchase the equipment for fair market value at the end of the lease.


                            ITEM 3. LEGAL PROCEEDINGS

     No legal proceedings are reportable pursuant to this item.


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

     No matters were submitted to a vote of the shareholders during the quarter
ended June 30, 2000.


                                     PART II

        ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET FOR STOCK

     The Common Stock of the Company is quoted on the Pink Sheets ("TFGP"). The
table below sets forth for the periods indicated the high and low bid quotations
as reported by Nasdaq Trading & Market Services. These quotations reflect
inter-dealer prices, without retail mark-up, mark-down, or commission and may
not necessarily represent actual transactions.

<TABLE>
<CAPTION>
                                   Quarter       High         Low
                                   -------       ----         ---
<S>                                <C>         <C>          <C>
FISCAL YEAR ENDED
JUNE 30, 1998                      First       $ 4.50       $ 2.75
                                   Second      $ 3.875      $ 1.125
                                   Third       $ 4.00       $ 2.00
</TABLE>

                                       18

<PAGE>

<TABLE>
<S>                                <C>         <C>          <C>
                                   Fourth      $ 4.25       $ 2.00

FISCAL YEAR ENDED
JUNE 30, 1999                      First       $ 3.1875     $ 1.3125
                                   Second      $ 3.75       $ 1.75
                                   Third       $ 5.25       $ 2.625
                                   Fourth      $ 5.875      $ 3.1875

FISCAL YEAR ENDED
JUNE 30, 2000                      First       $ 3.5625     $ 1.3125
                                   Second      $ 4.625      $ 2.6875
                                   Third       $ 8.75       $ 3.8125
                                   Fourth      $ 6.00       $ 1.50

FISCAL YEAR ENDING
JUNE 30, 2001                      First       $ 4.812      $ 2.75

</TABLE>

OUTSTANDING OPTIONS, WARRANTS, AND CONVERTIBLE INSTRUMENTS

     At December 5, 2000, the Company had outstanding options exercisable into
1,579,000 shares of common stock. Such options were issued pursuant to the
Company's Stock Option Plan and in individual option agreements.

     At December 5, 2000, the Company had outstanding warrants to purchase
1,150,000 shares of common stock. Of the outstanding warrants, 200,000 were
issued to investors and 200,000 were issued to JBRG Consultants as a consulting
fee in connection with the private offering by the Company in October 1999;
100,000 were issued to Capital Research Ltd. in connection with the $2,000,000
loan from entities controlled by Michael Lauer and others in September 1999;
100,000 were issued to Capital Research Ltd. in connection with the $1,000,000
loan from Michael Lauer and entities controlled by him in August 2000; 50,000
were issued to Capital Research Ltd. in connection with the $525,000 loan from
entities controlled by Michael Lauer in November 2000;175,000 were issued to
Capital Research Ltd. in connection with its consulting agreement; 250,000 were
issued to The Orbiter Fund in connection with the $2,000,000 loan to the Company
in February 1999; and 25,000 were issued to Richard Davimos, Jr. in connection
with a production loan for the film MY FIRST MISTER.

     In December 1998 the Company borrowed $50,000 from Merchants T&F and issued
5,000 shares in partial consideration for loaning such funds. The shares were
issued to Murray Wilson, the president of such entity. The Company agreed to
repurchase such shares at $3.00 per share if they could not be sold under Rule
144 after one year from December 1998.

     The Company has borrowed $1,000,000 from entities controlled by Michael
Lauer, one of our principal shareholders. This loan is convertible into shares
of common stock of the

                                       19
<PAGE>

Company. The loan will be convertible at $3.00 per share, provided that the
conversion price will be reduced to $1.50 for the ninety day period following
the due date, and to $1.00 per share thereafter, if the loan remains unpaid. We
have also agreed to issue five-year warrants to purchase 100,000 shares at $3.50
per share, to Capital Research Ltd. in connection with the loan.

     The Company has borrowed $525,000 from Lancer Offshore and The Viator Fund,
entities controlled by Michael Lauer, one of the principal shareholders of the
Company. This loan is convertible into shares of common stock of the Company.
The loan will be convertible at $2.00 per share, provided that the conversion
price will be reduced to $1.50 following six months from the date of issuance of
the promissory note, and $1.00 per share thereafter. We have also agreed to
issue five-year warrants to purchase 50,000 shares at $3.00 per share, to
Capital Research Ltd. in connection with the loan.

SHARES ELIGIBLE FOR FUTURE SALE UNDER RULE 144

     The Company had 14,073,899 shares of its common stock outstanding at
December 8, 2000. Of these shares, 9,027,049 are believed to be restricted
securities and 1,350,000 are believed to be control shares (non-restricted
shares held by affiliates of the Company) pursuant to Rule 144 promulgated by
the Securities and Exchange Commission. The control shares are not subject to
any holding requirement under Rule 144 and would be available for resale subject
to all other conditions of the rule. Management believes that 3,882,150 of the
restricted shares may have met the one year holding requirement of Rule 144.
Restricted shares held by affiliates, restricted shares held by non-affiliates
for less than two years, and control shares are not available for resale under
Rule 144 for a period of ninety days following the effective date of this
registration statement.

REGISTRATION RIGHTS

     In October 1999 the Company commenced an offering of warrants to purchase
200,000 shares of common stock in connection with the combined private offering
with Total China, Inc. The offering closed on November 30, 1999, and the Company
issued 200,000 warrants. In connection with this issuance, the Company granted
to the holders of the warrants the right to include the shares underlying the
warrants on a one-time basis in the next registration statement filed by the
Company under the Securities Act in which the Company proposes to offer shares
for cash or securities. The piggy-back registration rights expire thirty-six
months following the closing of the offering.

     The Company has agreed to register warrants to purchase 200,000 shares of
the Company's common stock, exercisable at $4.125 per share, to be issued to
JBRG Consultants in connection with the private offering by the Company and
Total China, Inc. in October 1999. The agreement provides for priority
registration rights and/or piggyback registration rights as normally attached as
compensation warrants.

                                       20

<PAGE>

     The Company has agreed to register the 738,600 shares of common stock of
the Company issued in connection with the combined private offering with Total
China II, Inc. The agreement to register the shares provides that the Company
shall cause the registration statement for such shares to be filed as soon as
commercially reasonable immediately after the closing of the offering. The
offering closed in August 2000. The Company has not identified the specific time
at which it intends to file such registration statement. The Company has agreed
to maintain the effectiveness of the registration statement for a period of at
least 270 days. The provision for registration rights contains mutual
indemnification provisions. The stockholders have agreed not to offer, sell,
contract to sell, grant any option for sale, or otherwise dispose of the shares
for a period of six months from the effective date of the registration period,
or the initial public offering of the equity securities of MeetChina.com,
whichever is the lesser period.

     In connection with the $1,000,000 loan from Michael Lauer and entities
controlled by him, the Company has agreed to make the loan convertible into
333,333 shares of common stock of the Company. If the loan is converted after
May 15, 2001, the principal amount of the loan will be convertible into 666,667
shares, and if the loan is converted after August 14, 2001, the principal amount
of the loan will be convertible into 1,000,000 shares. The shares will have one
demand and piggyback registration rights.

     In connection with the $525,000 loan from Lancer Offshore and The Viator
Fund, the Company has agreed to make the loan convertible into 262,500 shares of
common stock of the Company. If the loan is converted after May 14, 2001, the
principal amount of the loan will be convertible into 350,000 shares, and if the
loan is converted after August 13, 2001, the principal amount of the loan will
be convertible into 525,000 shares. The shares will have one demand and
piggyback registration rights.

RECORD HOLDERS OF STOCK; TRANSFER AGENT

     At December 5, 2000, the Company had 117 shareholders of record as reported
by the Company's transfer agent. The transfer agent for the Company is Interwest
Transfer Company, Inc., 1981 East 4800 South, Suite 100, Salt Lake City, UT
84117.

DIVIDENDS

     Since its inception, the Company has not paid any cash dividends on its
common stock and the Company does not anticipate that it will pay dividends in
the foreseeable future.

RECENT SALES OF UNREGISTERED SECURITIES

     During the fourth quarter ended June 30, 2000, the following securities
which were not registered under the Securities Act were sold by the Company:

                                       21
<PAGE>

     In September 1999 the Company entered into a consulting agreement with
Capital Research Ltd. and issued warrants to purchase 100,000 shares. Pursuant
to the terms of the consulting agreement, the Company also issued warrants to
Capital to purchase 25,000 shares of common stock on December 1, 1999, on March
1, 2000, on June 1, 2000, September 1, 2000, and December 1, 2000. Such
securities were issued without registration under the Act by reason of the
exemption from registration afforded by the provisions of Section 4(2) thereof
as transactions by an issuer not involving any public offering. Each investor
was believed to be sophisticated. Such investors delivered appropriate
investment representations with respect to such transaction and consented to the
imposition of restrictive legends upon the certificates evidencing such
securities. No general solicitations were made in connection with the
transaction.

     In May 2000 the Company issued 8,000 shares of common stock to John Daly as
compensation for production consulting services to the Company. Such securities
were issued without registration under the Securities Act by reason of the
exemption from registration afforded by the provisions of Section 4(2) thereof,
as transactions by an issuer not involving any public offering. No general
solicitations were used in connection with the transaction. Mr. Daly delivered
appropriate investment representations to the Company with respect to such
transaction and consented to the imposition of restrictive legends upon the
certificates evidencing such securities. He was believed to be a sophisticated
investor. No underwriting discounts or commissions were paid in connection with
such issuance.

     In February 2000 the Company borrowed $100,000 for working capital from
Trinity American Corporation in connection with the purchase of an option to
acquire a film library. The Company issued a three month promissory note dated
February 17, 2000, to such entity evidencing the loan. On May 17, 2000, the loan
was extended to September 30, 2000. The note was issued in reliance upon the
exemption provided in Section 3(a)(3) of the Securities Act. No underwriting
discounts or commissions were paid in connection with such issuance.

     In April 2000 the Company borrowed $2,500,000 from four accredited
investors and issued a promissory note to such investors representing such loan.
In August 2000 the loan was extended until November 13, 2000. In October 2000
the company issued 500,000 shares to such lenders for the granting of the
extension. In addition, the Company issued 25,000 shares to Capital Research,
Ltd. for consulting services in connection with the extension of the loan. The
notes were further extended until December 31, 2000. For such extension, the
Company issued 350,000 shares to the lenders. The Company also paid a fee to
Capital Research Ltd. of 25,000 shares. Such securities were issued without
registration under the Securities Act by reason of the exemption from
registration afforded by the provisions of Section 4(2) thereof, as transactions
by an issuer not involving any public offering. No general solicitations were
used in connection with the transaction. No underwriting discounts or
commissions were paid in connection with such issuance, except for the 50,000
fee paid to Capital Research, Ltd.

                                       22
<PAGE>

     From May until July 2000 the Company sold 738,600 common shares to 53
accredited investors in a private placement of the shares. The shares were sold
for an aggregate of $3,693,000. The Company also issued 50,000 common shares to
JL Devore & Associates as a consulting fee in connection with the private
offering. Such securities were issued without registration under the Act by
reason of the exemption from registration afforded by the provisions of Section
4(2) thereof, and Rule 506 promulgated thereunder, as transactions by an issuer
not involving any public offering. Such investors delivered appropriate
investment representations with respect to such transaction and consented to the
imposition of restrictive legends upon the certificates evidencing such
securities. No general solicitations were made in connection with the
transaction.

     The Company granted options during the fourth quarter ended June 30, 2000
to the following employees of the Company:

<TABLE>
<CAPTION>
                               Number of Shares               Date
     Optionee                 Underlying Options            Granted
     --------                 ------------------            -------
<S>                           <C>                           <C>
     Scott Taylor                    37,500                 6/22/00
     David Katz                      20,000                 6/22/00
     Stacey Abrams                  150,000                 6/22/00
</TABLE>

In each instance the options were granted without cash consideration but were
granted to maintain the continued employment or affiliation with the Company.
The options were granted to these persons without registration under the Act by
reason of the exemption from registration afforded by the provisions of Rule 701
promulgated by the Securities and Exchange Commission. No underwriting discounts
or commissions were paid in connection with the granting of such options.

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

GENERAL

     The Company's business is divided into three segments: (i) the film
production business; (ii) the advertising and marketing business; and (iii) as a
holding company of the stock of an internet related business. The Company
generates revenues from the film production business through movie release
income. This income is defined as the revenues collected from the exploitation
of motion picture releases in the following domestic and international markets:
domestic theatrical, domestic home video, domestic television and sales to
foreign distributors. The Company generates revenues from the advertising and
marketing business from the sale of media design, advertising, and Internet
business consulting services. The holding company is engaged to hold the stock
of MeetChina.com, an internet related business.

     The consolidated financial statements at June 30, 2000, include the
accounts of Total Film Group, Inc. and its subsidiaries: Total Creative, Inc.
("TCI"), Total China,

                                       23
<PAGE>

Inc., Total China II, Inc., Total Films UK Limited, Alien Sky UK Ltd.,
Sundowning, Inc., 1st Mister, Inc., and Alma Productions UK Ltd. (collectively,
the "Company"). All significant intercompany balances and transactions have been
eliminated upon consolidation.

     The Company's revenues and results of operations are significantly affected
by accounting policies required for the industries in which it operates. Among
the more significant policies are the following:

     REVENUE RECOGNITION: Revenues from distribution or releasing agreements are
recognized when the film is released and certain other conditions are met in
accordance with Statement of Position 00-2 ("SOP 00-2"), "Accounting by
Producers and Distributors of Films." Amounts received in advance of the film
being available for release are recorded on the balance sheet as deferred
revenue. This revenue recognition method may result in significant fluctuations
in revenues and net earnings (losses) from period to period. Revenues from Total
Creative, Inc. (TCI) are generally recognized at the completion of job
production. Revenue for long-term contracts is recognized on the
percentage-of-completion method.

     MOTION PICTURE DEVELOPMENT COSTS AND AMORTIZATION: Motion picture
development costs represent those costs incurred in the production, acquisition
and distribution of motion pictures, which include production costs, legal
expenses, interest and overhead costs. These costs have been capitalized in
accordance with SOP 00-2. The Company is amortizing the film costs for completed
films using the individual-film-forecast-computation method, whereby expense is
recognized in the proportion that current year revenues bear to management's
estimate of ultimate revenue from all markets. Motion picture development costs
are valued at lower of unamortized cost or estimated net realizable value.
Revenue and cost forecasts for films are regularly reviewed by management and
revised when warranted by changing conditions. When estimates of total revenues
and costs indicate that a film will result in an ultimate loss, additional
amortization is provided to fully recognize such loss.

SEASONALITY

     The Company's businesses are subject to the effects of seasonality.
Consequently, the operating results for the year ended June 30, 2000, for each
business segment, and for the Company as a whole, are not necessarily indicative
of results to be expected for future years.

     Movie release revenues fluctuate based upon the timing of theatrical motion
picture and home video releases and seasonal consumer purchasing behavior.
Release dates for theatrical and home video products are determined by several
factors, including timing of vacation and holiday periods and competition in the
market.

     Design fees are influenced by vendor demand and the seasonal nature of the
marketing and advertising services provided by the Company and generally peak in
the spring and summer.

                                       24
<PAGE>

RESULTS OF OPERATIONS

     COMPARISON OF FISCAL YEARS ENDED JUNE 30, 2000 AND 1999

     The Company's operating revenues for the fiscal year ended June 30, 2000,
were $3,205,892, a decrease of $2,914,202 or 47.6% from operating revenues of
$6,120,094 in the prior fiscal year ended June 30, 1999. This decrease resulted
primarily from a reduction in movie release income, which was $131,656 at June
30, 2000, as compared with $4,429,388 at June 30, 1999. Movie release income for
the fiscal year ended June 30, 1999, reflects the revenue from the Company's
film, THE NEW SWISS FAMILY ROBINSON. This movie was filmed during the 1997/1998
fiscal year and broadcast on ABC Television Network in January 1999.

     The Company's operating revenues generated by TCI for the fiscal year ended
June 30, 2000, were $3,074,236, an increase of $1,383,530 or 81.8% from
operating revenues of $1,690,706 in the prior fiscal year ended June 30, 1999.
The year ended June 30, 2000, reflects the first complete fiscal year of
operations for TCI after the company reorganized its management and professional
staffing structure and refocused its business strategy from that of a graphic
design boutique to its current strategy as an Internet services agency.

     Operating expenses include amortization of motion picture development
costs. Operating expenses exclusive of amortization of motion picture
development costs were $3,822,169 during the fiscal year ended June 30, 2000, as
compared to $3,487,878 during the fiscal year ended June 30, 1999. This increase
of $334,291 in operating expenses is due principally to an increase in TCI's
administrative expenses as a fully operational division of the Company.

     Interest expense for the fiscal year ended June 30, 2000, was $1,169,115 as
compared to $143,353 during the fiscal year ended June 30, 1999. The increase
was due to increased borrowings carried for longer terms. Total indebtedness for
borrowed money increased to $5,817,849 for the fiscal year ended June 30, 2000,
from $2,179,577 during the fiscal year ended June 30, 1999.

     Amortization of placement fee during the fiscal year ended June 30, 2000
was $1,054,021 as compared to $257,813 during the fiscal year ended June 30,
1999. This expense is directly related to the Company's borrowings with The
Orbiter Fund and The Lancer Group.

     For the fiscal year ended June 30, 2000, the Company's balance sheet
reflected goodwill (net of amortization) equal to $282,186 as compared to
$986,926 during the fiscal year ended June 30, 1999. The goodwill arises from
the net deficit assumed by the Company in the Michel/Russo Inc. acquisition as
well as the value of stock options granted in connection therewith. At June 30,
2000, the goodwill associated with the purchase of Skyrocket, LLC was determined
to be impaired as operations ceased immediately following the balance sheet
date. The unamortized balance of $637,063 was expensed for the year ending June
30, 2000.

                                       25
<PAGE>

     The Company reported a net loss of $(5,550,286) for the fiscal year
ended June 30, 2000, as compared to a net loss of $(1,044,483) for the fiscal
year ended June 30, 1999.  The weighted average number of common shares
outstanding for the compared periods were 9,061,332 in fiscal year 1999/2000
and 8,414,597 in fiscal year 1998/1999.

     During the fiscal year ended June 30, 2000 the Company entered into an
agreement to convert $4,000,000 of debt to equity by exchanging the
principal amount of the loans plus $376,100 of unpaid interest into common
stock of the Company. The conversion ratio stipulated that for each $1.50 of
principal and $1.39 of past due interest one share of Company common stock
would be issued. Pursuant to the agreement the Company issued 2,936,667
shares to the entities controlled by the majority shareholder. As a result
of this transaction the Company recorded a charge to additional paid in capital
of $4,253,018. The amount reported as additional paid in capital was
the difference between the fair value of the stock received by the principle
shareholder and the total obligations retired. The Company believes that it
may convert additional debt to equity where our principle shareholder is also
the lender when those obligations mature.

LIQUIDITY AND CAPITAL RESOURCES

     Cash and cash equivalents at June 30, 2000, decreased to $448,102 from
$1,130,179 at June 30, 1999. $782,740 of the cash balance at June 30, 1999,
represents unspent production funding for the film DIAMONDS. The Company expects
to collect revenues from this film during the 2000/2001 fiscal year from home
video, television, and foreign sales markets.

     The Company has funded its working capital requirements through operating
revenues and proceeds from debt and equity financings. At times, the Company has
relied upon its transactional production loans to provide bridge production
financing prior to receipt of distribution advances.

     In February 1999 the Company obtained a $2,000,000 bridge loan from The
Orbiter Fund, an entity managed by one of the principal shareholders of the
Company, with interest at 13.5% and maturing May 2000. In September 1999, the
Company obtained a $2,000,000 convertible note from the Lancer Group, with
interest at 12%, payable quarterly, and maturing March 2000. As of February 28,
2000 these loans were converted into common stock of the Company. (See Item 1
Description of Business--History and Organization.) As of June 30, 2000,
$2,500,000 of the Company's short-term debt obligations represent monies
borrowed in connection with the funding of the untitled N'SYNC production. (See
Part I, Item 7. Certain Relationships and Related Transactions and Part II, Item
4. Recent Sales of Unregistered Securities.)

     The Company conducted a joint private offering of Total China II, a
wholly owned subsidiary. The proceeds from the offering were used to acquire
an equity interest in MeetChina.com. The Company offered 738,600 shares of
preferred stock of Total China at $3 per share. By the completion of the
offering in July 2000, Total China II realized gross proceeds of $2,215,800.
After the offering the Company owned all of the outstanding common stock and
5% of the outstanding preferred stock of Total China II. The Company believes
that it will raise capital using similar transactions to the one described
above order to add to its equity position in MeetChina.com or other equity
securities in future years.

SUMMARY

     Management believes that existing resources and cash generated from
operating activities, together with the possible conversion of certain
outstanding debt, will be sufficient to meet the Company's working capital
requirements through the end of the fiscal year 2000/2001. The Company may seek
other sources of financing to meet its working capital requirements, including
separate equity or debt financing for TCI. The Company from time to time seeks
additional financing through the issuance of new debt or equity securities,
additional bank financings, or other means available to the Company to increase
its working capital.

                                       26
<PAGE>

                          ITEM 7. FINANCIAL STATEMENTS

     The financial statements of the Company are set forth immediately following
the signature page of this annual report.


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

     On July 10, 2000, the Company engaged Hollander, Lumer & Co. LLP, Certified
Public Accountants, as independent auditors of the Company for the year ending
June 30, 2000. The decision to retain Hollander, Lumer & Co. LLP, and not to
re-engage Miller, Kaplan, Arase & Co., LLP, the former independent auditor, was
made by the Board of Directors on such date. The decision not to re-engage
Miller, Kaplan, Arase & Co., LLP did not involve a dispute with the Company over
accounting policies or practices. The report of Miller, Kaplan, Arase & Co., LLP
on the financial statements of the Company and subsidiaries for the years ended
June 30, 1999 and 1998, did not contain an adverse opinion or disclaimer of
opinion, nor was it modified as to uncertainty, audit scope, or accounting
principals. In connection with the audit of the financial statements of the
Company and subsidiaries for such years ended June 30, 1999 and 1998, there were
no disagreements with Miller, Kaplan, Arase & Co., LLP for the annual periods,
and for the period up to the date of the change, on any matters of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure which, if not resolved to the satisfaction of Miller, Kaplan, Arase &
Co., LLP, would have caused such firm to make reference to the matter in its
report.

     Neither the Company, nor anyone on its behalf, has consulted Hollander,
Lumer & Co. LLP regarding the application of accounting principles to a specific
completed or contemplated transaction, or the type of audit opinion that might
be rendered on the financial statements of the Company and subsidiaries, and
neither written nor oral advice was provided by Hollander, Lumer & Co. LLP that
was an important factor considered by the Company in reaching a decision as to
any accounting, auditing, or financial reporting issue.


                                    PART III

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

     The following table sets forth as of December 15, 2000, the name, age, and
position of each executive officer and director of the Company and the term of
office of such director:

<TABLE>
<CAPTION>
     Name                     Age       Position(s)                      Director Since
     ----                     ---       -----------                      --------------
<S>                           <C>       <C>                              <C>
     Gerald Green              68       President, CEO, & Chairman             1997
     Manuel Pacheco            43       Director                               1997
</TABLE>

                                       27

<PAGE>

<TABLE>
<S>                           <C>       <C>                              <C>
     Eli Boyer                 80       Secretary, Treasurer, & Director       1997
     Peter Dattilo             28       Chief Financial Officer                 --
</TABLE>

     Directors are elected for a term of one year and until their successors are
elected and qualified. Annual meetings of the stockholders, for the selection of
directors to succeed those whose terms expire, are to be held at such time each
year as designated by the Board of Directors. The Board of Directors has not
selected a date for the next annual meeting of shareholders. Officers of the
Company are chosen by the Board of Directors. Each officer holds his office for
one year and until his successor is chosen and qualified. Officers may also be
removed by the Board of Directors whenever in its judgment the best interests of
the Company will be served by removing the officer.

     Set forth below is certain biographical information regarding the Company's
executive officers and directors:

     GERALD GREEN has been the president of the Company since January 1997. From
1977 to 1997 he was self employed as a producer of feature length motion
pictures.

     MANUEL PACHECO has been a practicing attorney in Mexico since 1982. He
received his bachelor of law degree from the Universidad Panamericana in Mexico
City in 1979, and received a master of law degree from Southern Methodist
University, Dallas, Texas, in 1982.

     ELI BOYER is a certified public accountant and was a senior partner in the
national accounting firm of Laventhol and Horwath from 1966 to 1986. He has been
self-employed as a certified public accountant since 1986. He served as chief
financial officer of the Company from January 1997 until November 1999. He is
also a director of Bright Star Holding and Safety Harbor Spa, Inc. Mr. Boyer
received his bachelor of science degree in accounting in 1940 from UCLA. He
became a certified public accountant in 1943.

     PETER DATTILO has been chief financial officer of the Company since
November 2000. From January 1997 until November 2000 he was employed by Miller,
Kaplan, Arase & Co., LLP, an accounting firm, as a supervisor and senior
accountant. From January 1995 until December 1996 he was employed by The Casden
Company, a real estate investment trust, as a

                                       28

<PAGE>

senior accountant. He received his bachelor of science degree in accounting in
1994 from San Diego State University.

     The following table sets forth as of June 30, 2000, the name, age, and
position of each executive officer and director, and each significant employee,
of Total Creative, Inc.:

<TABLE>
<CAPTION>
     Name                     Age       Position(s)                             Director Since
     ----                     ---       -----------                             --------------
<S>                           <C>       <C>                                     <C>
     Gerald Green              68       Director, President, and Secretary          1998
     Rod Dyer                  64       Co-creative director                        --
     Howard Russo              62       Co-creative director                        --
     Mark Armstrong            41       CEO
</TABLE>

     Set forth below is certain biographical information regarding the executive
officers and directors of Total Creative, Inc.:

     ROD DYER has been employed as the co-creative director of Total Creative,
Inc. since June 1998. From 1967 until June 1998 Mr. Dyer was president of Dyer
Mutchnick, a design and advertising firm.

     HOWARD RUSSO has been employed as co-creative director of Total Creative,
Inc. since January 1999. From February 1989 until December 1998, he was the
executive vice- president and chief financial officer of Michel/Russo, Inc., a
creative advertising agency. From January 1988 until January 1989, Mr. Russo was
senior vice-president and head of creative advertising for Columbia Pictures,
where he oversaw creative advertising for domestic releases of motion pictures.

     MARK ARMSTRONG has been employed as chief executive officer of Total
Creative, Inc. since September 2000. From 1992 until 1996 he was vice-president
of Metafor Imaging, a digital graphics imaging company, and from 1996 until 2000
he was president of such company.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

     Management believes that during the year ended June 30, 2000, one or more
filings required by Section 16(a) of the Exchange Act were not filed by Michael
Lauer, one of the 10% shareholders of the Company.

                         ITEM 10. EXECUTIVE COMPENSATION

COMPENSATION

     The following table sets forth the aggregate executive compensation awarded
to, earned by, or paid to the sole named executive officer by any person for all
services rendered in all capacities to the Company and its subsidiaries for the
fiscal years ended June 30, 2000, 1999, and

                                       29
<PAGE>

1998. No other executive officer's total annual salary and bonus exceeded
$100,000 during each of the last three fiscal years.

<TABLE>
<CAPTION>
                                           Annual Compensation                     Long-Term Compensation

                                                                                       Awards            Payouts

                                                               Other            Restricted                               All
Name and Principal                                             Annual             Stock        Options/   LTIP          Other
Positions                Year        Salary       Bonus     Compensation         Award(s)        SARs    Payouts     Compensation
<S>                      <C>       <C>            <C>       <C>                 <C>            <C>       <C>         <C>
Gerald Green, CEO        2000      $246,945         --      $  34,739               --            --       --             --
                         1999      $ 95,000(1)      --      $ 250,000(2)            --         500,000     --             --
                         1998      $ 80,000(1)      --      $ 350,000(3)            --            --       --             --

</TABLE>

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

     (1)  Of this amount, $20,000 was paid as salary to Patricia M. Green, wife
of Mr. Green.

     (2)  Of this amount, $100,000 is deferred compensation to Mr. Green for his
producer's fee for the film DIAMONDS. Of the remaining amount $100,000 was paid
as producer's fees to a company owned by Mrs. Green and $50,000 was deferred.

     (3)  Of this amount, $300,000 is deferred compensation to Mr. Green for his
producer's fee for the film THE NEW SWISS FAMILY ROBINSON. The remaining amount
is deferred compensation to a company owned by Mr. Green's wife, Patricia M.
Green.

1998 STOCK OPTION PLAN

     On June 19, 1998, the Board of Directors adopted a 1998 Non-Qualified Stock
Option Plan (the "Plan"), pursuant to which it was authorized to grant options
to purchase up to 800,000 shares of common stock to the Company's key employees,
officers, directors, consultants, and other agents and advisors. Awards under
the Plan consisted of non-qualified stock options. The Plan will terminate on
June 19, 2008. At June 30, 2000, all of the options under the plan had been
granted, except for 70,000. Of the outstanding options, 45,000 had been
exercised as of March 31, 2000.

     The Plan is administered by the Board of Directors which determined the
persons to whom awards were granted, the number of awards granted, and the
specific terms of each grant, including the vesting thereof, subject to the
provisions of the Plan.

     The exercise price of each option granted under the Plan was determined by
the Board of Directors. The exercise price is (i) payable in cash; (ii) payable
in whole or in part in shares of stock of the Company, which shares shall be
valued at its then fair market value as determined by the Board of Directors; or
(iii) by the surrender or cancellation of other rights to stock of the Company.

                                       30

<PAGE>

     No option granted under the Plan is transferable other than by will or the
laws of descent and distribution, or pursuant to a qualified domestic relations
order. The options are subject to certain adjustments in the case of stock
splits, stock dividends, combination or consolidation of shares, and in certain
asset transfers. In the event that any holder of an option, except a consultant,
is terminated or resigns from his or her position with the Company or a
subsidiary within six months of the grant of an award, any unexercised portion
of such option immediately becomes null and void. In the case of gross
negligence, criminal misconduct, or willful or gross misconduct by an employee,
the Board of Directors may cancel any options held by such person.

STOCK OPTION GRANTS

     During the year ended June 30, 1999, the Company granted a total of 960,000
options to employees. Of the options granted, 730,000 were granted under the
1998 Stock Option Plan and 230,000 were granted pursuant to individual stock
option agreements. The following table sets forth information concerning grant
of stock options made during the fiscal year to the named executive officer and
the percent the grant represents of total options granted to employees during
the fiscal year:

<TABLE>
<CAPTION>
                           Number of
                           Securities        Percent of
                           Underlying        Total             Exercise         Expiration
Name                       Options           Options           Price            Date
----                       -------           -------           -----            ----
<S>                        <C>               <C>               <C>              <C>
Gerald Green               500,000           52.08%            $2.00            7/27/01
Manuel Pacheco             55,000             5.73%            $2.00            6/19/01
Eli Boyer                  50,000             5.21%            $2.00            6/19/01
</TABLE>

     During the year ended June 30, 2000, the Company granted a total of 752,500
options to employees of the Company and its subsidiaries pursuant to individual
stock option agreements. The following table sets forth information concerning
these grants of stock options made during this fiscal year to the named
executive officers and the percent the grants represent of total options granted
to employees during the fiscal year:

<TABLE>
<CAPTION>
                         Number of
                         Securities     Percent of
                         Underlying     Total            Exercise     Expiration
Name                     Options        Options          Price        Date
----                     ----------     -------          -----        ----
<S>                      <C>            <C>              <C>          <C>
Gerald Green               500,000       66.45%          $2.00        5/15/03

</TABLE>

                                       31
<PAGE>

2000 RESTRICTED STOCK BONUS PLAN

     In January 2000 the Company adopted a Stock Bonus Plan (the "Stock Bonus
Plan") which allows the Company to issue up to 50,000 restricted shares of the
Company's common stock to directors, officers, employees, and others who have
performed bona fide services for the Company. The purpose of the Stock Bonus
Plan is to assist the Company in maintaining and developing a management team,
attracting qualified directors, officers, and employees capable of assisting in
the future success of the Company, and rewarding those individuals who have
contributed to the success of the Company. It is designed to aid the Company in
retaining the services of executives and employees and in attracting new
personnel when needed for future operations and growth and to provide such
personnel with an incentive to remain employees of the Company, to use their
best efforts to promote the success of the Company's business, and to provide
them with an opportunity to obtain or increase a proprietary interest in the
Company. It is also designed to permit the Company to reward those individuals
who are not employees of the Company but who are perceived by management as
having contributed to the success of the Company or who are important to the
continued business and operations of the Company. The Stock Bonus Plan is
administered by the Board of Directors. It will terminate not later than ten
years from its adoption by the Board of Directors. Pursuant to the terms of the
Stock Bonus Plan, the Company issued 7,500 shares to an employee of the Company
in January 2000.

COMPENSATION OF DIRECTORS

     The bylaws provide that directors, as such, are not entitled to receive any
stated salary for their services. However, they may receive a fixed sum and
expenses for attendance at meetings of the Board. The Company has not adopted a
policy with regard to establishing any fixed sum for attendance at special or
regular meetings of the board, but it does intend to reimburse directors for
out-of-pocket expenses related to such meetings.

EMPLOYMENT AGREEMENTS

     The Company has a full-time employment contract dated September 15, 1999,
with Gerald Green to serve as the chief executive officer of the Company. The
agreement terminates on August 31, 2004. Under the contract Mr. Green receives
an annual base salary of $300,000 and a fixed annual bonus of $29,167. He is
also entitled to a contingent annual bonus equal to 10% of the net profits of
the Company before income taxes. Mr. Green will also receive an executive
producer's fee to be negotiated for each film project of the Company. The
agreement provides for an annual review and permits the Board of Directors to
increase or decrease the compensation based upon the services performed by Mr.
Green and the financial condition of the Company. Mr. Green has the right to
defer any part of the compensation upon prior written notice. He is entitled to
a car allowance of $1,500 per month. He is also entitled to medical

                                       32
<PAGE>

insurance for himself, his spouse, and children up to age twenty-five, and the
amount of medical and hospital expenses paid or payable for such persons not
covered by insurance. He is to receive three weeks paid vacation each year. If
Mr. Green is unable to perform his duties because of illness or incapacity for
more than twelve months, the Company may suspend its payment obligation or
terminate the agreement. Mr. Green is also to receive screen and advertising
credit in films in which he provides creditable services.

     The Company entered into an employment agreement dated November 6,2000,
with Peter Dattilo to act as chief financial officer for the Company and its
affiliates. The agreement may be terminated at any time by either party. Mr.
Dattilo receives an annual salary of $85,000. He is entitled to the same
medical, dental, retirement, and other benefits afforded other similar employees
of the Company. Mr. Dattilo was also granted options to purchase 150,000 shares
of common stock of the Company. These options vest at the rate of 50,000 per
year commencing November 6, 2001, and are exercisable at $2.00 for the first
50,000, $3.00 for the second 50,000, and $4.00 for the final 50,000.

     Mr. Boyer, the Company's treasurer and secretary, has no employment
agreement or other compensatory plan or arrangement with the Company.


                     ITEM 11. SECURITY OWNERSHIP OF CERTAIN
                        BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information furnished by the named
shareholders and others concerning the ownership of common stock of the Company
as of December 5, 2000, of (i) each person who is known to the Company to be the
beneficial owner of more than 5 percent of the Common Stock; (ii) all directors
and executive officers; and (iii) directors and executive officers of the
Company as a group:

<TABLE>
<CAPTION>
                                   Amount and Nature
Name and Address                     of Beneficial
of Beneficial Owner                  Ownership (1)          Percent of Class
-------------------                -----------------        ----------------
<S>                                <C>                      <C>
Michael Lauer                         8,181,847(2)               54.84%
475 Steamboat Road
Greenwich, CT 06830

</TABLE>

                                       33
<PAGE>

<TABLE>
<S>                                <C>                      <C>
Lancer Offshore, Inc.                 4,376,002(3)               30.66%
Kaya Flamboyan 9
Curacao, Netherland Antilles

Lancer Partners LP                    2,108,774(4)               14.81%
475 Steamboat Road
Greenwich, CT 06830

Gerald Green                          2,220,000(5)               14.73%
9019 Lloyd Place
West Hollywood, CA 90069

Manuel Pacheco                           55,000(6)                    *

Eli Boyer                                50,000(7)                    *

Peter Dattilo                               -0-

Executive Officers and                2,325,000                  15.42%
Directors as a Group
(4 Persons)
</TABLE>

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

     *    Represents less than 1%.

     (1)  Unless otherwise indicated, this column reflects amounts as to which
the beneficial owner has sole voting power and sole investment power.

     (2)  Mr. Lauer owns 956,000 of these shares directly in his name. Of the
remaining shares, 4,176,002 are held directly in the name of Lancer Offshore;
1,942,107 are held directly in the name of Lancer Partners; and 261,905 are held
directly in the name of The Orbiter Fund. Mr. Lauer is the general partner of
Lancer Partners. Mr. Lauer is the investment manager of Lancer Offshore and The
Orbiter Fund. Mr. Lauer controls the voting and disposition of these shares by
virtue of being the investment manager for these entities. The Orbiter Fund has
been granted warrants to purchase 250,000 shares and holds a promissory note in
the amount of $125,000 convertible at $2.00 per share into 62,500 shares. Mr.
Lauer holds a promissory note in the amount of $250,000 convertible at $3.00 per
share into 83,333 shares. Lancer Offshore holds a promissory note in the amount
of $400,000 convertible at $2.00 per share into 200,000 shares. Lancer Partners
holds a promissory note in the amount of $500,000 convertible at $3.00 per share
into 166,667 shares. Viator Fund, an entity controlled by Mr. Lauer, holds a
promissory note in the amount of $250,000 convertible at $3.00 per share into
83,333 shares. The warrants are exercisable, and the notes are convertible,
within sixty days. The shares underlying the warrants and the convertible notes
are included in the table and are

                                       34
<PAGE>

considered to be outstanding for purposes of computing the percentage interest
held by Mr. Lauer.

     (3)  These shares are included in the total shares beneficially owned by
Mr. Lauer, who is deemed to share beneficial ownership of these shares with this
entity.

     (4)  These shares are included in the total shares beneficially owned by
Mr. Lauer, who is deemed to share beneficial ownership of these shares with this
entity.

     (5)  Of these shares 407,500 are held directly in the name of Mr. Green;
437,500 are held directly in the name of Mr. Green's wife, Patricia M. Green;
375,000 are held in trust for the children of Mr. and Mrs. Green. Mr. and Mrs.
Green control the voting of the shares held in trust. Mr. Green also holds
options to purchase 1,000,000 shares which are exercisable within sixty days.
The shares underlying these options are included in the table and are considered
to be outstanding for purposes of computing the percentage interest held by Mr.
Green.

     (6)  Mr. Pacheco holds options to purchase 55,000 which are exercisable
within sixty days. The shares underlying these options are included in the table
and are considered to be outstanding for purposes of computing the percentage
interest held by Mr. Pacheco.

     (7)  Mr. Boyer holds options to purchase 50,000 which are exercisable
within sixty days. The shares underlying these options are included in the table
and are considered to be outstanding for purposes of computing the percentage
interest held by Mr. Boyer.

             ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Gerald Green, the president, a director and principal shareholder of the
Company, may be deemed a promoter in relation to the organization of the
business of the Company and was the founder of Total Media Corporation. In
connection with the original acquisition of Total Media Corporation by the
Company, Mr. Green exchanged all of his shares of Total Media Corporation for
shares of the Company.

     Mr. Green was employed by Total Films UK Limited, a wholly owned subsidiary
of the Company, as the executive producer of THE NEW SWISS FAMILY ROBINSON. For
his services, Mr. Green earned $300,000 and screen credit as producer of the
film. Payment of the cash consideration has been deferred, without interest,
until the film recoups its negative costs. Mr. Green is also an officer and a
director of Total Films UK Limited.

     Mr. Green and his wife, Patricia M. Green, were also employed by
Sundowning, Inc. as the executive producer and the producer, respectively, of
the film DIAMONDS. For his services as producer of DIAMONDS, Mr. Green earned a
fee of $100,000, which is deferred, without interest, until the film recoups its
negative costs. Mr. and Mrs. Green are also officers and directors of
Sundowning, Inc. Mrs. Green, through her company, Saso Entertainment, Inc.,
earned $150,000 as producer's fees in connection with the film, $50,000 of which
has been deferred, without interest, until the film recoups its negative costs.
Of the total amount earned, $100,000 was paid during the fiscal year ended June
30, 1999. A bonus of $40,000 was paid to Mrs. Green during the fiscal year ended
June 30, 2000.

                                       35
<PAGE>

     Mrs. Green, through her company, Saso Entertainment, Inc., was paid $75,000
as an in- house production executive in connection with the film MY FIRST MISTER
and $100,000 as a producer's fee for the film BRIDE OF THE WIND (a.k.a. Alma).
These fees were paid during the current year.

     Mr. Andrew Somper, a former director of the Company, was a partner in the
law firm of Berwin Leighton which performed legal services for the Company. He
is also a director and officer of Total Film UK Limited. Legal fees paid to
Berwin Leighton total approximately $80,000. In addition, Mr. Somper received
stock options for the purchase of 75,000 shares at $2.00 per share. Mr. Somper
exercised this option in February 2000, by canceling 30,000 options. He received
45,000 shares through such exercise.

     In February 1999 the Company assumed the repayment of two loans and one
line of credit with a total principal amount of $150,000, the balance of which
at June 30, 2000, was $12,274, between Red Sky Films, LLC and Skyrocket, LLC as
the borrowers and Westamerica Bank as the lender. Assumption of the loans and
the line of credit were required pursuant to the acquisition agreement between
the Company and Skyrocket, LLC.

     In February 1999 the Company entered into a loan agreement with The Orbiter
Fund, an entity managed by Michael Lauer, a principal shareholder of the
Company. The principal amount of the loan was $2,000,000. The Company also
granted 250,000 warrants to The Orbiter Fund in connection with the loan. In
August 1999 the Company negotiated an extension of the initial payment of
principal in return for which the Company issued 250,000 shares to the fund.

     In September 1999 the Company issued convertible notes in the amount of
$2,000,000, which was used for working capital. The notes were convertible at
any time prior to maturity at the rate of one share for each $2.00 of principal
or interest converted. Of such funds, $1,800,000 were loaned by entities
controlled by Michael Lauer, a principal shareholder of the Company. All of the
lenders were granted pro rata 250,000 shares of restricted common stock. A cash
fee of 7% of the gross amount was paid to Capital Research Ltd., plus 100,000
five-year warrants with an exercise price of $2.25 per share. Capital Research
Ltd. and Bruce Cowen also each loaned $50,000 to the Company in this
transaction. The lenders were introduced to the Company by Mr. Cowen and the
fees were paid to his company pursuant to the terms of the consulting agreement
between Capital Research, Ltd. and the Company. Mr. Cowen, through Capital
Research Ltd., is a consultant to the Company and is a shareholder in the
Company.

     On February 28, 2000 the Company entered into an agreement with the lenders
in the two $2,000,000 loans made in February and September 1999 to convert the
principal amount of such loans into common stock of the Company and to forgive
the unpaid interest. Pursuant to the agreement the Company issued 2,790,014
shares to entities controlled by Mr. Lauer. These shares include the pro rata
amount of shares which were to be issued to such entities in connection with the
September 1999 loan. As of the date of the agreement, the Company owed $376,100
in interest to the entities controlled by Mr. Lauer. The agreement does not
affect the

                                       36
<PAGE>

250,000 warrants granted to The Orbiter Fund in connection with the February
1999 loan, or the 250,000 shares granted for extension of the payments under
such loan. Also in connection with this transaction, the Company issued 26,667
shares and paid $40,000 to Capital Research Ltd. as a transaction fee for
assisting the Company in the negotiation of the conversion of the loans. In
addition, Capital Research Ltd. and an additional lender received 310,079 shares
for loans made by them in connection with the September 1999 loan.

     At June 30, 2000, the Company had loaned approximately $78,895 to Rod Dyer,
a significant employee of Total Creative, Inc., the Company's wholly owned
subsidiary. The loan accrues interest at the rate of 8% per annum and repayment
is due in the full on or before June 30, 2002. Mr. Dyer has agreed to pledge his
interest in the 50,000 shares of common stock issued to him by the Company as
security for repayment of the loan. The funds were used by Mr. Dyer to satisfy
debts of the business operated by Mr. Dyer and which became Total Creative, Inc.

     In October 1999 the Board of Directors authorized the Company to make loans
to Mr. Green up to $50,000 at an annual interest rate of 8%, payable interest
only monthly with the balance due and payable September 15, 2003, or sooner, at
the option of Mr. Green. During the fiscal year ended June 30, 2000, the Company
loaned $37,500 pursuant to this arrangement. In addition, the Company loaned
$58,065, without interest, to Mr. Green during the fiscal year ended June 30,
1999, and $52,107, without interest, during the fiscal year ended June 30, 2000.
As of June 30, 2000, Mr. Green had made repayments totaling $20,000.

     In April 2000 the Company borrowed $1,900,000 from Michael Lauer, a
shareholder of the Company, as a part of a $2,500,000 loan to the Company by Mr.
Lauer and others for a new film project. The note issued to Mr. Lauer was
without interest, but carried a premium equal to 30% of the principal loaned by
Mr. Lauer to the Company. In addition, Mr. Lauer will receive a pro rata portion
of 6% of the adjusted gross proceeds from the picture in any and all media,
including ancillary rights. The note is secured by the producer's interest in
the picture. The note was originally due August 15, 2000, but was extended until
November 13, 2000. For such extension, the Company issued 380,000 shares to Mr.
Lauer. As a part of the extension of the loan, the Company paid a fee to Capital
Research Ltd. of 25,000. Mr. Cowen also loaned $100,000 to the Company as a part
of the foregoing $2,500,000 loan with the same terms as with Mr. Lauer and
received 20,000 shares for the extension. The notes were further extended until
December 31, 2000. For such extension, the Company issued 350,000 shares to the
lenders, including 266,000 shares to Mr. Lauer and 14,000 shares to Mr. Cowen.
The Company also paid a fee to Capital Research Ltd. of 25,000 shares.

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

     (a)(1) Financial Statements. The following financial statements are
included in this report:

<TABLE>
<CAPTION>
                                                                                Page
<S>                                                                             <C>
            Report of Auditor                                                   F-1

</TABLE>

                                       37
<PAGE>

<TABLE>
<S>                                                                             <C>

            Consolidated Balance Sheets as of June 30, 2000 and 1999            F-2
            Consolidated Statements of Operations for the fiscal years
               ended June 30, 2000 and 1999                                     F-3
            Consolidated Statements of Stockholders' Equity for the fiscal
               years ended June 30, 2000 and 1999                               F-4
            Consolidated Statements of Cash Flows for the fiscal years
               ended June 30, 2000 and 1999                                     F-5
            Notes to Financial Statements                                       F-7
</TABLE>

     (a)(2) Exhibits. The following exhibits are included as part of this
report:

<TABLE>
<CAPTION>
Exhibit No.    Description of Exhibit                                                Location
<S>            <C>                                                                   <C>
   2.1         Articles of Incorporation, as amended                                       *
   2.2         Current Bylaws                                                              *
   3.1         Form of Common Stock Certificate                                            *
   6.1         Reorganization Agreement dated January 29, 1997                             *
   6.2         Promissory Note to Merchants T&F dated December 15, 1998                    *
   6.3         Loan Agreement with the Orbiter Fund dated February 9, 1999, as
               amended August 11, 1999                                                     *
   6.4         Promissory Note to The Orbiter Fund dated February 10, 1999                 *
   6.5         A-Warrant Certificate Form, with schedule, to the Orbiter Fund             **
   6.6         Capital Research, Ltd Agreement                                             *
   6.7         B-Warrant Certificate Form, with schedule, to Capital
               Research Ltd.                                                            ****
   6.8         $2 Million Convertible Note Term Sheet dated September 21, 1999             *
   6.9         Form of Convertible Promissory Note with schedule of note holders           *
   6.10        Promissory Note Conversion Agreement dated February 28, 2000                *
   6.11        Form of Warrant Certificate in October 1999 Private Offering                *
   6.12        Form of Registration Rights Agreement in October 1999 Private
               Offering                                                                    *
   6.13        Form of Right of First Refusal Agreement in October 1999 Private
               Offering                                                                    *
   6.14        Promissory Note to Trinity American Corporation dated February
               17, 2000                                                                    *
   6.15        Agreement Re Sale of Interest in Skyrocket, LLC                             *
   6.16        Michel/Russo, Inc. Stock Purchase Agreement, as amended                     *
   6.17        Employment Agreement of Gerald Green                                        *
   6.18        Employment Agreement of Rod Dyer                                            *
   6.21        Employment Agreement of Howard Russo, as amended                            *
   6.22        Stock Option Certificate to Howard Russo                                    *

</TABLE>

                                       38

<PAGE>

<TABLE>
<S>            <C>                                                                   <C>
   6.25        1998 Non-Qualified Stock Option Plan                                        *
   6.26        Form of Non-Qualified Stock Option Certificate                              *
   6.27        Stock Option Certificate for Madeleine Ali, as amended                      *
   6.28        Stock Bonus Plan                                                            *
   6.29        Stock Purchase Agreement with U.S. Business Network, Inc.                   *
   6.30        Executive Producer Agreement for DIAMONDS                                   *
   6.31        Producer's Agreement for NEW SWISS FAMILY ROBINSON                          *
   6.32        Producer Agreement for CHICK FLICK                                          *
   6.33        Office Lease Agreement                                                   ****
   6.34        Paramount Pictures Corporation/Alma U.K. Production, Limited letter
               agreement for BRIDE OF THE WIND                                             *
   6.35        Paramount Pictures Corporation/First Mr. Inc. letter agreement for
               MY FIRST MISTER                                                             *
   6.36        JBRG Consultants consulting agreement                                       *
   6.37        C-Warrant Certificate for JBRG Consultants                                 **
   6.38        D-Warrant Certificate for Davimos                                          **
   6.39        Option Agreement for Gerald Green                                          **
   6.40        Foreign Sales Agreement, with assignment                                   **
   6.41        Dyer Loan Agreement dated August 18, 2000                                 ***
   6.42        Memorandum of Agreement dated April 20, 2000, with Lauer,
               Garvey,   Hauser,  and  Cowen  for  $2,500,000  loan;
               promissory  note dated April 20, 2000, and extensions
               dated August 1, 2000, and November 10, 2000 ****
   6.43        Employment Agreement of Peter Dattilo                                    ****
   6.44        Stock Option Certificate to Peter Dattilo                                ****
   6.45        Term Sheet for $525,000 senior convertible promissory notes              ****
   6.46        Form of senior convertible note for $525,000 and schedule
               of note holders                                                          ****
   6.47        Registration rights agreements for $525,000 loan                         ****
   6.48        Term Sheet for $1 Million senior convertible promissory notes            ****
   6.49        Form of senior convertible note for $1 Million and schedule
               of note holders                                                          ****
   6.50        Form of Registration rights agreement for $1 Million loan
               with schedule                                                            ****

</TABLE>

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

     *Filed with the original Form 10-SB registration statement of the Company
filed with the Securities and Exchange Commission on April 5, 2000 (SEC File no.
0-30227).

     ** Filed with the first post-effective amended Form 10-SB registration
statement of the Company filed with the Securities and Exchange Commission on
July 25, 2000 (SEC File no. 0- 30227).

                                       39
<PAGE>

     ***Filed with the second post-effective amended Form 10-SB registration
statement of the Company filed with the Securities and Exchange Commission on
October 13, 2000 (SEC File no. 0-30227).

     ****Filed with the third post-effective amended Form 10-SB registration
statement of the Company filed with the Securities and Exchange Commission on
December 20, 2000 (SEC File no. 0-30227).

     (b)  Reports on Form 8-K: No reports on Form 8-K were filed during the
fourth quarter of the fiscal year ended June 30, 2000.


                                   SIGNATURES

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

                                       Total Film Group, Inc.

Date: March 8, 2001                    By: /s/ Gerald Green
                                          --------------------------------------
                                          Gerald Green, President

Date: March 8, 2001                    By: /s/ Peter Dattilo
                                          --------------------------------------
                                          Peter Dattilo, Chief Financial &
                                          Principal Accounting Officer

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

Date: March 8, 2001                    /s/ Gerald Green
                                       -----------------------------------------
                                       Gerald Green, Director

Date: March 8, 2001                    /s/ Eli Boyer
                                       -----------------------------------------
                                       Eli Boyer, Director

Date: December ____, 2000
                                       -----------------------------------------
                                       Manuel Pacheco, Director

                                       40



<PAGE>

                     TOTAL FILM GROUP, INC. AND SUBSIDIARIES

                   FOR THE YEARS ENDED JUNE 30, 2000 AND 1999

<PAGE>

                     TOTAL FILM GROUP, INC. AND SUBSIDIARIES


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                      PAGE
<S>                                                                   <C>
Independent Auditors' Report                                            1

Independent Auditors' Report                                            2

Financial Statements

    Consolidated Balance Sheets                                        3-4

    Consolidated Statements of Operations                               5

    Consolidated Statements of Stockholders' Equity                    6-7

    Consolidated Statements of Cash Flows                              8-9


Notes to Financial Statements                                         10-28
</TABLE>

<PAGE>

                          INDEPENDENT AUDITORS' REPORT


Total Film Group, Inc. and Subsidiaries
Beverly Hills, California


We have audited the accompanying consolidated balance sheet of Total Film Group,
Inc. and Subsidiaries (the "Company"), as of June 30, 2000, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated 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 audit provides 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 Total Film Group,
Inc. and Subsidiaries as of June 30, 2000, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.


                                                      HOLLANDER, LUMER & CO. LLP

Los Angeles, California
September 21, 2000

<PAGE>

                          INDEPENDENT AUDITORS' REPORT


Total Film Group, Inc. and Subsidiaries
Beverly Hills, California


We have audited the accompanying consolidated balance sheet of Total Film Group,
Inc. and Subsidiaries (the "Company"), as of June 30, 1999, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated 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 audit provides 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 Total Film Group,
Inc. and Subsidiaries as of June 30, 1999, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.


                                 MILLER, KAPLAN, ARASE & CO., LLP

                                 North Hollywood, California
                                 September 29, 1999, except for Note 8,
                                 which is as of January 14, 2000.

<PAGE>

                     TOTAL FILM GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2000 AND 1999

<TABLE>
<CAPTION>
                                     ASSETS
                                                                                                           (Restated)
                                                                                 2000                         1999
                                                                        -----------------------       ----------------------
<S>                                                                     <C>                           <C>
CURRENT ASSETS
     Cash and Cash Equivalents                                          $            448,102          $         1,130,179
     Time Certificate of Deposit                                                      20,692                       27,678
     Accounts Receivable                                                           1,181,579                      453,413
     Related Party Receivable                                                        218,954                       90,165
     Deferred Costs                                                                  103,221                            -
     Prepaid Expenses                                                                281,347                       50,557
     Unamortized Loan Discount                                                             -                      275,686
                                                                        ---------------------         --------------------

                TOTAL CURRENT ASSETS                                               2,253,895                    2,027,678

OTHER ASSETS

     Film Costs, Net of Amortization                                               9,495,808                    3,091,298
     Property and Equipment, Net of Amortization                                     200,714                      114,948
     Investment in US Business Network, Inc                                        3,745,090                            -
     Recoverable Production Costs                                                  1,000,000                            -
     Deposits                                                                        538,483                      116,186
     Organization Costs, Net of Amortization                                               -                      126,784
     Goodwill, Net of Amortization                                                   282,186                      986,926
     Capitalized Financing Fees                                                      196,053                      226,491
     Other Assets                                                                          -                       39,597
                                                                        ---------------------         --------------------
                                                                                  15,458,334                    4,702,230
                                                                        ---------------------         --------------------

                TOTAL ASSETS                                            $         17,712,229          $         6,729,908
                                                                        =====================         ====================

                                   LIABILITIES


CURRENT LIABILITIES

     Debt Maturing within One Year                                      $          4,776,918          $         2,126,925
     Current Portion of Capital Lease                                                 45,464                        1,121
     Accounts Payable and Accrued Expenses                                         1,815,534                      623,830
     Deferred Revenue                                                                227,163                            -
     Producer's Fee Payable, Related Party                                           600,000                      300,000
                                                                        ---------------------         --------------------

            TOTAL CURRENT LIABILITIES                                              7,465,079                    3,051,876
                                                                        ---------------------         --------------------

LONG-TERM LIABILITIES

     Long-Term Debt, Net of Current Portion                                        1,040,931                        52,652
     Capital Lease, Net of Current Portion                                            57,905                            -
                                                                        ---------------------         --------------------

            TOTAL LONG-TERM LIABILITIES                                            1,098,836                      52,652
                                                                        ---------------------         --------------------

            TOTAL LIABILITIES                                                      8,563,915                    3,104,528
                                                                        ---------------------         --------------------


MINORITY INTEREST IN EQUITY OF CONSOLIDATED SUBSIDIARY                               829,550                            -
                                                                        ---------------------         --------------------
</TABLE>

                See notes to consolidated financial statements.

<PAGE>

<TABLE>
<CAPTION>
                              STOCKHOLDERS' EQUITY
                                                                                                                     (Restated)
                                                                        ADJ BAL          June 30, 2000            June 30, 1999
                                                                       ---------    --------------------       -------------------
<S>                                                                     <C>         <C>                        <C>
     Preferred Stock - $3 Par Value; Authorized 1,080,000 Shares;
         Issued and Outstanding 738,600 and 0 Shares Respectively                            2,215,800                         -
     Common Stock, $0.001 Par Value; Authorized 50,000,000 Shares;
         Issued and Outstanding 12,335,299 and 8,630,000 Shares
         Respectively
                                                                                                12,336                     8,630
     Additional Paid-in Capital                                                             13,422,193                 5,398,029
     Accumulated Deficit                                                                    (7,331,565)               (1,781,279)
                                                                                   ---------------------      --------------------

            TOTAL STOCKHOLDERS' EQUITY                                                       8,318,764                 3,625,380
                                                                                   ---------------------      --------------------

            TOTAL LIABILITIES AND STOCKHOLDERS'
                EQUITY                                                             $         17,712,229       $         6,729,908
                                                                                   =====================      ====================
</TABLE>

                See notes to consolidated financial statements.

<PAGE>

<TABLE>
<CAPTION>
                                                                                                                   (Restated)
                                                                                         2000                         1999
                                                                                ---------------------        ----------------------
<S>                                                                             <C>                         <C>
REVENUE
     Movie Release Income                                                       $            131,656        $            4,429,388
     Design Fees                                                                           3,074,236                     1,690,706
                                                                                ---------------------        ----------------------
                                                                                           3,205,892                     6,120,094
                                                                                ---------------------        ----------------------
COSTS AND OPERATING EXPENSES
     Production and Design Costs                                                           2,122,396                     1,366,786
     Selling, General & Administrative Expenses                                            3,560,741                     1,981,343
     Depreciation and Amortization                                                           750,754                     3,633,458
                                                                                ---------------------        ----------------------
            TOTAL COSTS AND OPERATING EXPENSES                                             6,433,891                     6,981,587
                                                                                ---------------------        ----------------------
            LOSS BEFORE OTHER INCOME (EXPENSES)                                           (3,227,999)                     (861,493)
                                                                                ---------------------        ----------------------
OTHER INCOME (EXPENSE)
     Interest Income                                                                         15,559                        20,107
     Interest Expense                                                                    (1,169,115)                     (143,353)
     Amortization of Placement Fee                                                       (1,054,021)                     (257,813)
     Miscellaneous Income                                                                    12,074                       226,397
                                                                                ---------------------        ----------------------

            TOTAL OTHER INCOME (EXPENSES)                                                (2,195,503)                     (154,662)
                                                                                ---------------------        ----------------------

            LOSS BEFORE INCOME TAXES                                                     (5,423,502)                   (1,016,155)

     Income Tax Provision                                                                        -                      (28,328)
                                                                                ---------------------        ----------------------

            LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN
                ACCOUNTING PRINCIPLE                                                     (5,423,502)                   (1,044,483)
                                                                                ---------------------        ----------------------

     Cumulative Effect for Adopting New Pronounceent on the Amortization
         of Organization Costs                                                             (126,784)                             -
                                                                                ---------------------        ----------------------

            NET LOSS                                                            $         (5,550,286)                   (1,044,483)
                                                                                =====================        ======================

PER SHARE AMOUNTS - BASIC
     Loss Before Cumulative Effect of Change in Accounting Principle            $             (0.60)         $              (0.12)
                                                                                ---------------------        ----------------------

     Cumulative Effect on Prior Years of Changing Organization Costs
         Amortization Method                                                                  (0.01)                             -
                                                                                ---------------------        ----------------------

     Net Loss                                                                   $              (.61)         $              (0.12)
                                                                                =====================        ======================

PROFORMA AMOUNTS ASSUMING THE NEW AMORTIZATION
  METHOD IS APPLIED RETROACTIVELY - LOSS PER SHARE
     Net Loss                                                                   $              (.61)         $              (0.12)
                                                                                =====================        ======================

WEIGHTED AVERAGE NUMBER OF COMMON
     SHARES OUTSTANDING                                                                   9,061,332                     8,414,597
                                                                                =====================        ======================
</TABLE>

                See notes to consolidated financial statements.

<PAGE>

<TABLE>
<CAPTION>

                                                            Common Stock                            Additional
                                                    ---------------------------      Preffered         Paid-In         Accumulated
                                                       Shares         Amount          Stock           Capital           Deficit
                                                    -------------   -----------    -------------  ----------------  ----------------
<S>                                                 <C>             <C>            <C>             <C>               <C>
Balance, June 30, 1998                                 8,300,000         8,300                -         4,098,593         (736,796)

Issuance of Common Stock for Acquisitions                325,000           325                -           718,391                 -

Issuance of Common Stock as Additional
     Consideration for Debt                                5,000             5                -            11,645                 -

Warrants Exercisable for 250,000 Shares of
     Common Stock at $2.00 per Share,
     Issued as Additional Consideration of
     Debt                                                      -             -                -           450,000                 -

Stock Options Exercisable for 210,000
     Shares of Common Stock at $2.00
     per Share for Services Rendered                           -             -                -           119,400                 -

Net Loss for the Year Ended June 30, 1999                      -             -                -                 -       (1,044,483)
                                                    -------------   -----------    -------------  ----------------  ----------------

Balance, June 30, 1999                                 8,630,000         8,630                -         5,398,029       (1,781,279)


Issuance of Common Stock as Additional
     Consideration for Debt,                             250,000           250                -           291,417                 -

Issuance of Common Stock as Compensation
     for Executive Officers, Directors and
     Employees                                           233,965           234                -           502,832                 -

Conversion of $4,000,000 of Debt plus
     $376,100 of Accrued Interest from the
     Company's Principle Shareholder for
     2,936,667 Shares of Common Stock                  2,936,667         2,937                -         4,253,081                 -

Issuance of Common Stock as Transaction Fee
     on the Conversion of Debt                            26,667            27                -            66,640                 -

Issuance of Common Stock as Additional
     Consideration for Debt                              250,000           250                -           546,500                 -

Issuance of Common Stock for the Consulting
     Services                                              8,000             8                -            33,367                 -

Proceeds from the Sale of 50% Interest
     in China I, Nov 1999                                      -             -                -           736,549                 -

Issuance of 738,600 Shares of Preferred
     Stock in China II                                         -             -        2,215,800         (324,341)                 -

738,600 Shares of Common Stock to be Granted
     in Private Placement                                      -             -                -         1,281,469                 -

Warrants Exercisable for 200,000 Shares of
     Common Stock at $3.75 per Share, Issued
     to Investors as Part of the China I Offering              -             -                -           200,000                 -

Warrants Exercisable for 200,000 Shares of
     Common Stock at $2.00 per Share,
     Issued as Placement Fees for the China I
     Offering                                                  -             -                -           140,000                 -

                See notes to consolidated financial statements.

<PAGE>

Warrants Exercisable for 275,000 Shares of
     Common Stock at $2.25 to $5.44 per Share,
     for Professional Services Rendered                        -             -                -           268,400                 -

Warrants Exercisable for 25,000 Shares of
     Common Stock at $3.75 per Share,
     Issued as Additional Consideration of
     Debt                                                      -             -                -            28,250                 -

Net Loss for the Year Ended June 30, 2000                      -             -                -                 -       (5,550,286)
                                                    -------------   -----------  ---------------  ----------------  ----------------

Balance, June 30, 2000                              $  12,335,299   $    12,336  $     2,215,800  $     13,422,193  $   (7,331,565)
                                                    =============   ===========  ===============  ================  ================
</TABLE>

                See notes to consolidated financial statements.

<PAGE>

                    TOTAL FILM GROUP, INC. AND SUBSIDIARIES

                   CONSOLIDATED STATEMENTS OF CASH FLOWS

                       FOR THE YEARS ENDED JUNE 30,

<TABLE>
<CAPTION>
                                                                                                               (Restated)
                                                                                      2000                        1999
                                                                             ------------------------   -------------------------
<S>                                                                          <C>                        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net Loss                                                                $            (5,550,286)    $            (1,044,483)
                                                                             ------------------------   -------------------------

           Cumlative Effect of Accounting Change                                             126,784                          -
                                                                             ------------------------   -------------------------

     Loss from Continuing Operations                                                     (5,423,502)                 (1,044,483)

     Adjustments to Reconcile Net Loss to Net Cash
        Provided By (Used in) Operating Activities:
           Prodeeds from Production Funding Arrangement                                    5,179,195                   7,219,391
           Cash Used in Motion Picture Development                                       (11,539,201)                 (7,993,987)
           Fair Value of Equity Granted                                                      773,390                     106,362
           Depreciation and Amortization                                                     750,754                   3,633,458
           Amortization of Placement Fees                                                  1,054,021                     284,956
           Decrease (Increase) in Assets:
                 Accounts Receivable                                                       (728,166)                   (135,922)
                 Related Party Receivable                                                  (128,789)                    (90,165)
                 Deferred Costs                                                            (103,221)                           -
                 Prepaid Expenses                                                          (230,790)                    (47,335)
                 Deposits                                                                  (422,297)                   (100,110)
           Increase (Decrease) in Liabilities:
                 Accounts Payable and Accrued Expenses                                     1,649,331                     67,744
                 Deferred Revenue                                                            227,163                 (2,593,816)
                                                                             ------------------------   -------------------------

                     TOTAL ADJUSTMENTS                                                   (3,518,610)                     350,576
                                                                             ------------------------   -------------------------

                     NET CASH (USED) BY OPERATING
                        ACTIVITIES                                                       (8,942,112)                   (693,907)
                                                                             ------------------------   -------------------------

CASH FLOWS FROM INVESTING ACTIVITIES

        Cash Proceeds from the Redemption of Certificate of Deposit                            6,986                    (27,678)
        Cash Used to Purchase Investment in MeetChina.com                                (3,745,090)                           -
        Other Assets                                                                       (156,456)                           -
        Purchase of Property and Equipment                                                  (23,432)                    (19,083)
        Purchase of Subsidiaries                                                             (5,000)                    (20,000)
                                                                             ------------------------   -------------------------

                     NET CASH (USED) BY  INVESTING
                        ACTIVITIES                                                       (3,922,992)                    (66,761)
                                                                             ------------------------   -------------------------

CASH FLOWS FROM FINANCING ACTIVITIES

        Proceeds from Loans                                                                7,307,017                   3,203,428
        Proceeds from the Issuance of Stock                                                1,333,000                           -
        Proceeds from the Issuance of Stock in Subidiary                                   3,707,750                           -
        Principal Payments Made on Loans                                                   (126,372)                 (1,940,421)
        Principal Payments on Capital Lease Obligations                                     (38,368)                     (1,496)
                                                                             ------------------------   -------------------------

                     NET CASH PROVIDED BY FINANCING
                        ACTIVITIES                                                        12,183,027                   1,261,511
                                                                             ------------------------   -------------------------

                     NET INCREASE (DECREASE) IN CASH AND
                        CASH EQUIVALENTS                                                   (682,077)                     500,843

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR                                         1,130,179                     629,336
                                                                             ------------------------   -------------------------

CASH AND CASH EQUIVALENTS AT END OF THE YEAR                                 $               448,102    $              1,130,179
                                                                             ========================   =========================
</TABLE>

                See notes to consolidated financial statements.

<PAGE>

<TABLE>
<CAPTION>

                                                                                                                (Restated)
                                                                                       2000                        1999
                                                                             ------------------------   -------------------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<S>                                                                          <C>                        <C>
     Interest Paid                                                           $               308,700    $                 62,768
                                                                             ========================   =========================

     Income Taxes Paid                                                       $                18,879    $                  2,821
                                                                             ========================   =========================
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

DURING THE YEAR ENDED JUNE 30, 2000

        The Company issued 500,000 shares of common stock with a value of
        $839,250 as additional consideration for debt issued.

        The Company issued 2,936,667 shares of common stock with a value of
        $4,256,018 as consideration for the conversion of $4,000,000 plus
        accrued interest of debt.

        The Company issued 26,667 shares of common stock with a value of $66,667
        as additional consideration for services rendered in connection with the
        conversion of debt.

        The Company granted stock warrants for 500,000 shares of common stock
        with exercise prices ranging from $2.00 to $5.54 per share for past
        services rendered.

        The Company issued 157,500 shares of common stock with a value of
        $405,409 to employees of the Company.

        The Company issued 8,000 shares of common stock with a value of $33,375
        for consulting services.


                See notes to consolidated financial statements.

<PAGE>

NOTE 1 - GENERAL:

             BUSINESS AND BACKGROUND:

             Total Film Group, Inc. (the "Company") was incorporated under the
             laws of the State of Delaware on August 1, 1995. The Company was
             originally incorporated under the name Executive Marketing, Inc.
             ("Executive"). On January 29, 1997 the Company entered into an
             agreement with Total Media Corporation ("Media"), a Nevada
             corporation, to exchange all of the issued and outstanding shares
             of Media for 3,000,000 shares of common stock of the Company. For
             accounting purposes, the share exchange was treated as a reverse
             acquisition of Executive Inc. by Media. The Agreement and Plan of
             Reorganization was closed by the parties in February 1997. As a
             result of the closing the Company issued 3,000,000 shares,
             representing approximately 67% of the outstanding stock at closing
             to Media. The purchase method of accounting was used with Media
             being treated as the acquirer for accounting purposes The results
             of operations reported in these consolidated financial statements
             reflect the operations of Media prior to January 29, 1997 and the
             combined operations of Executive and Media subsequent to January
             29, 1997. As a result of the share exchange, Media became a wholly
             owned subsidiary of Executive. On February 5, 1997, the Company
             changed its name to "Total Film Group, Inc." The Company is also
             qualified to do business in the State of California.

             Set forth below is a chart showing the Company and its subsidiaries
             and the percentage interest in each:

<TABLE>
<CAPTION>

                                                                       Percent
                  Parent Company            Subsidiary                  Owned
                  --------------            ----------                  -----
<S>                                         <C>                         <C>
                  Total Film Group, Inc.    Alien Sky UK Ltd.           100%
                                            Alma Productions UK Ltd.    100%
                                            Sundowning, Inc.            100%
                                            Total China, Inc.           50.004%
                                            Total China II, Inc.        100%
                                            Total Creative, Inc.        100%
                                            Total Films UK Ltd.         100%
                                            Total Media, Inc.           100%
                                            Total Pictures, Inc.        100%
                                            1st Mr., Inc.               100%
</TABLE>

             None of our subsidiaries own any subsidiaries.
             In February 1998, the Company incorporated a wholly owned
             subsidiary, Total Design, Inc., a California corporation engaged in
             providing marketing and advertising services. Total Design, Inc.
             changed its name to "Dyer Communications, Inc." on May 26, 1998.
             Effective January 1999 the Company acquired all of the outstanding
             stock of Michel/Russo, Inc., a California corporation engaged in
             marketing and advertising for 100,000 shares of common stock of the
             Company issued to the two shareholders of Michel/Russo. On March 5,
             1999, Dyer Communications, Inc. changed its
<PAGE>

             name to "Total Creative, Inc." Also effective January 1999
             Total Creative, Inc. and the Company acquired all of the
             interest in Skyrocket, LLC, a California limited liability
             company engaged in web development, e-commerce, and digital
             advertising for a total of 225,000 shares and $25,000. All of
             the operations of Michel/Russo, Inc. were transferred to Total
             Creative, Inc. subsequent to the acquisition effective January
             1999 and the ownership of Michel/Russo, Inc. was assigned to
             Total Creative, Inc. in March 2000.

             On October 20, 1999, the Company incorporated Total China, Inc., a
             Delaware corporation, as a subsidiary. This entity was formed to
             act as a holding company to acquire 20% of the capital stock of
             MeetChina.com, Inc., formerly known as US Business Network, Inc., a
             Delaware corporation, which has intellectual property rights to the
             business-to-business e-commerce portal, Meet China.com, and is
             engaged directly through a subsidiary in promoting imports and
             exports to and from China through the Internet and providing
             ancillary services related thereto. In November 1999, Total China,
             Inc. and the Company conducted a joint private offering to raise
             funds for the transaction with MeetChina.com, Inc. Total China,
             Inc. sold 30 units in the private offering. Each unit consisted of
             1.6666 shares of common stock of Total China, Inc. and was sold for
             $66,667 per unit. As a part of the same private offering, the
             Company sold 30 units, with each unit consisting of three-year
             warrants to purchase 6,667 shares of the Company's common stock at
             an exercise price of $3.75 per share. The units were sold by the
             Company for approximately $6,666.67 each, or $1.00 per warrant.
             Each warrant holder was granted registration rights, and a right of
             first refusal to purchase a pro rata amount of the assets of Total
             China, Inc. Investors were required to purchase both the Total
             China, Inc. and the Company units in the offering. Total China,
             Inc. realized gross proceeds of $2,000,000 and the Company realized
             gross proceeds of $200,000. Also in connection with this private
             offering, the Company issued warrants to purchase 200,000 shares of
             common stock to JBRG Consultants as a commission for introducing
             potential investors to the Company. The proceeds to the Company
             were allocated to pay the costs of the offering, and the proceeds
             to Total China, Inc. were used to purchase shares of common stock
             of MeetChina.com, Inc., which shares ultimately represented 17.58%
             of the issued and outstanding capital stock of such corporation at
             closing. This reduction in percentage ownership was a result of an
             increased valuation of MeetChina.com, Inc. As a result of this
             offering, the Company now owns slightly in excess of 50% of the
             outstanding stock of Total China, Inc.

             On or about December 16, 1999, the Company and Total China, Inc.
             jointly entered into a stock purchase agreement with MeetChina.com,
             Inc. On December 17, 1999, the Company and Total China, Inc.
             finalized the agreement with MeetChina.com, Inc., and the stock of
             MeetChina.com, Inc. was issued to Total China, Inc. Because of
             subsequent financing by MeetChina.com, Inc., at May 31, 2000, Total
             China, Inc. owned approximately 11.9% of the outstanding stock of
             such entity. MeetChina.com, Inc. has the option under the agreement
             to acquire approximately 5% of the shares purchased by Total China,
             Inc. at a cash price of two-thirds of the market value of such
             shares. Such right is only exercisable on the 120th day after an
             initial public offering of capital stock by MeetChina.com, Inc. on
             a designated exchange. Until the stock of MeetChina.com, Inc. is
             listed on a designated exchange, the Company and Total China, Inc.
             have the right, jointly, to designate one representative to attend
             meetings of the board of directors of MeetChina.com, Inc. Total
             China, Inc. has the right of first refusal to purchase any shares
             to be sold or issued by MeetChina.com, Inc. at less than the price
             paid by Total China, Inc. Total China, Inc. also has piggy-back
             registration rights to register its shares in any appropriate
             registration statement filed by MeetChina.com, Inc. with the U.S.
             Securities and Exchange Commission after the initial public
             offering and which includes shares of the founders of
             MeetChina.com, Inc.

             On November 2, 1999, the Company incorporated Total Group, Inc., a
             Delaware corporation, as a wholly-owned subsidiary. Originally
             formed as a shell corporation, this entity was used to acquire an
             equity interest in MeetChina.com, Inc. In August 2000 Total Group,
             Inc. changed its name to Total China II, Inc. The Company owns all
             of the outstanding common stock of Total China II, Inc. and 5% of
             the outstanding preferred stock.
<PAGE>

             On May 23, 2000, Total China II, Inc. and the Company conducted a
             joint private offering to raise funds for the transaction with
             MeetChina.com, Inc. The offering was closed in July 2000. Total
             China II, Inc. sold 73.86 units in the private offering. Each unit
             consisted of 10,000 shares of preferred stock of China II and
             10,000 shares of the Company's common stock. The units sold for
             $50,000 per unit. The total gross proceeds of the joint private
             offering were $3,693,000. Total China II, Inc. realized gross
             proceeds of $2,215,800 and the Company realized gross proceeds of
             $1,477,200. The Company's proceeds of the offering will be used for
             general working capital and the proceeds to Total China II, Inc.
             were used to purchase shares of preferred stock in MeetChina.com,
             Inc. An investment of $2,000,000 (106,689 shares) was made in
             MeetChina.com. In connection with this private offering, a cash fee
             of $369,300 was paid to JL Devore & Associates as a commission to
             structure and administer the private offering. Of the total fee,
             Total China II, Inc. paid $221,580 and the Company paid $147,720.
             In addition to the cash fee, JL Devore & Associates was issued
             50,000 shares of the Company's common stock as compensation for
             services.

             The Company's business is divided into three segments: the film
             production business, the advertising and marketing business, and as
             a holding company. The film production segment is engaged in the
             production, marketing, and distribution of commercial feature
             films. The advertising and marketing segment is engaged in the
             development of advertising and marketing campaigns to provide
             Internet services for a variety of clients and the Company. The
             Company also holds the stock of two subsidiaries, Total China, Inc.
             and Total China II, Inc., which in turn own stock of MeetChina.com,
             Inc., an Internet related business.

             ACQUISITIONS

             The following table presents information about acquisitions made by
             the Company for the fiscal years ended June 30, 2000, and 1999. All
             of the acquisitions were accounted for under the purchase method of
             accounting. All charges were recorded in the quarter in which the
             transaction was completed.

<TABLE>
<CAPTION>
                                                                                                            Amortization
                                               Acquisition          Purchase                               Period Goodwill
                                                  Date                Price              Goodwill            (in Years)
                                              --------------   -------------------- -------------------- --------------------
<S>                                           <C>              <C>                  <C>                  <C>
                  Skyrocket, LLC                  1/99                 $   531,250          $   701,598          15

                  Michel Russo, Inc.              1/99                     212,467              313,540          15
</TABLE>

             The purchase price was allocated to tangible and intangible assets,
             including goodwill less liabilities assumed.

             Management is primarily responsible for estimating the fair value
             of the assets and liabilities acquired, and has conducted due
             diligence in determining the fair value. Management has made
             estimates and assumptions that effect the reported amounts of
             assets, liabilities and expenses resulting from such acquisitions.
             Actual results could differ from those amounts.

             Pursuant to the purchase method of accounting, the accompanying
             consolidated statements of operations reflect the results of the
             aforementioned entities only subsequent to the date of acquisition.
             The following unaudited supplemental pro forma information has been
             prepared to give effect to the acquisitions as of the beginning of
             the fiscal year preceding the fiscal year in which the acquisition
             occurred.

<PAGE>

<TABLE>
<CAPTION>
                                                              June 30, 1999
                                                      --------------------------
<S>                                                   <C>
Total Revenue                                                   $     6,586,061

Total Operating Expenses                                              8,111,214
                                                      --------------------------

          Loss From Operations                                      (1,525,153)

Other Income (Expense)                                                (197,900)

          Loss Before Income Tax Expense                            (1,723,053)

Income Tax (Expense)                                                   (28,328)
                                                      --------------------------

Net Loss                                                        $   (1,751,381)
                                                      ==========================

Basic and Diluted Loss Per Share                                $        (0.20)
                                                      ==========================
</TABLE>

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

             BASIS OF CONSOLIDATION:

             The consolidated financial statements include all majority-owned
             subsidiaries in which Total Film Group, Inc. exercises control. All
             material intercompany balances and transactions have been
             eliminated upon consolidation.

             USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS:

             The preparation of financial statements in accordance with
             generally accepted accounting principles requires that management
             use estimates and assumptions in preparing financial statements.
             Those estimates and assumptions affect the reported amounts of
             assets and liabilities, the disclosure of contingent assets and
             liabilities, and the reported revenues and expenses. Actual results
             could differ from those estimates.

             REVENUE RECOGNITION:

             Revenues from distribution or releasing agreements are recognized
             when the film becomes available for release and certain other
             conditions are met in accordance with Statement of Position 00-2
             ("SOP 00-2"), "Accounting by Producers and Distributors of Films".

             Revenues from advertising and marketing are generally recognized at
             the completion of production.

             FOREIGN CURRENCY TRANSLATION

             For operations outside the United States that prepare financial
             statements in currencies other than the U.S. dollar, results of
             operations and cash flows are translated at average exchange rates
             during the period, and assets and liabilities are translated at
             end-of-period exchange rates. Translation adjustments are included
             as a separate component of accumulated other comprehensive income
             (loss) in shareholders' equity.

             CASH EQUIVALENTS:

             The Company considers all short-term investments with an original
             maturity of three months or less to be cash equivalents. There were
             no short-term investments included in cash and cash equivalents for
             the years ended June 30, 2000 and 1999.

<PAGE>


             ALLOWANCE FOR DOUBTFUL ACCOUNTS:

             Accounts receivable are stated net of allowance for doubtful
             accounts. The allowance is based upon management's estimate of the
             collectibility of accounts receivable at the end of the fiscal
             year. Management estimated the total allowance to be $12,154 and
             $12,155 for the years ended June 30, 2000 and 1999, respectively.
             During fiscal year end 2000 and 1999, the Company has written off
             $26,301 and $50,600 of accounts receivable, respectively.

             FOREIGN CURRENCY TRANSLATION

             For operations outside the United States that prepare financial
             statements in currencies other than the U.S. dollar, results of
             operations and cash flows are translated at average exchange rates
             during the period, and assets and liabilities are translated at
             end-of-period exchange rates. Translation adjustments are included
             as a separate component of accumulated other comprehensive income
             (loss) in shareholders' equity.

             MOTION PICTURE DEVELOPMENT COSTS AND AMORTIZATION:

             Motion picture development costs represent those costs incurred in
             the production, acquisition and distribution of motion pictures,
             which include production costs, legal expenses, interest and
             overhead costs. The Company is amortizing the film costs for
             completed films using the individual-film-forecast-computation
             method, whereby expense is recognized in the proportion that
             current year revenues bear to management's estimate of ultimate
             revenue from all markets.

             Motion picture development costs are valued at lower of unamortized
             cost or estimated net realizable value. Revenue and cost forecasts
             for films are regularly reviewed by management and revised when
             warranted by changing conditions. When estimates of total revenues
             and costs indicate that a film will result in an ultimate loss
             additional amortization is provided to fully recognize such loss.

             PROPERTY AND EQUIPMENT:

             Property and equipment are stated at cost. Depreciation of the cost
             of property and equipment is computed using the straight-line
             method over the estimated useful lives of the related assets
             ranging from three to seven years.

             Expenditures for maintenance and repairs are charged to expense as
             incurred. Additions and betterments are capitalized. The cost and
             related accumulated depreciation of property and equipment sold or
             otherwise disposed are removed from the accounts and any gain or
             loss is reflected in the current year's earnings.

             DEPOSITS:

             Deposits consist of refundable payments made in conjunction with
             the Company's motion pictures projects and office rental space.

             ORGANIZATION COSTS:
             Effective July 1, 1999, the Company adopted Statement of Position
             98-5 ("SOP 98-5) "Reporting on the Costs of Start-Up Activities".
             SOP 98-5 provides guidance on the financial reporting of start-up
             and organization costs and required such costs to be expensed as
             incurred. The total amount of deferred start-up costs reported as a
             cumulative effect of a change in accounting principle is $126,784
             or $.01 per share

<PAGE>

             GOODWILL:

             Goodwill is the excess of the purchase price over the fair value of
             identifiable net assets acquired in business combinations accounted
             for as purchases. Goodwill is amortized on a straight-line basis
             over the periods benefited, fifteen years. Goodwill is reviewed for
             impairment whenever events or changes in circumstances indicate
             that the carrying amount may not be recoverable the amount is
             expensed.

             At June 30, 2000 the goodwill associated with the purchase of
             Skyrocket LLC was determined to be impaired as operations ceased
             immediately following the balance sheet date. The unamortized
             balance of $637,063 was expensed for the year ending June 30, 2000.

             CAPITALIZED FINANCING FEES:

             The Company is in the process of acquiring additional financing for
             feature length motion pictures. When funding has been secured the
             capitalized costs will be allocated to the films.

             OTHER ASSETS:

             The Company was in the process of acquiring an advertising and
             marketing business in Europe as of June 30, 1999. The costs
             associated with this acquisition were expensed by the Company for
             the year ending June 30, 2000, when negotiations for the business
             ceased.

             AMORTIZATION OF PLACEMENT FEE:

             The Company granted additional consideration, both common stock and
             stock warrants for various debt instruments. The consideration was
             amortized over the term of the loans, anywhere from six months to
             one year. The stock was priced at the fair value at the date of
             grant. The warrants were priced using the Black-Scholes valuation
             method.

             INCOME TAXES:

             Income taxes are provided for the tax effects of transactions
             reported in the financial statements and consist of taxes currently
             due plus deferred taxes. Deferred taxes are recognized for
             differences between the basis of assets and liabilities for
             financial statement and income tax purposes. The differences relate
             primarily to different depreciation methods, net operating loss
             carryforwards and state franchise tax. The deferred taxes represent
             the future tax return consequences of those differences, which will
             either be taxable or deductible when the assets and liabilities are
             recovered or settled. A valuation allowance is recognized, if based
             on weight of available evidence, it is more likely than not that
             some portion or all of the deferred tax asset will not be realized

             ISSUANCE OF SUBSIDIARY STOCK

             The Company's policy is to treat issuances of subsidiary stock
             where the proceeds exceeds the carrying value as capital
             transactions, recorded in stockholders' equity as additional paid
             in capital.

             ACCOUNTING FOR STOCK BASED COMPENSATION

             The Company has elected to follow the accounting provisions of
             Accounting Principles Board Opinion No. 25 "Accounting for Stock
             Issued to Employees" to account for compensation expense for its
             stock-based employee compensation plan and to furnish the pro forma
             disclosure required under Statement of Financial Accounting
             Standards No. 123 "Accounting for Stock-Based Compensation").

             EARNINGS (LOSS) PER SHARE:

             Net income (loss) per share is computed using the weighted average
             number of shares of common stock outstanding. Common equivalent
             shares from stock options and warrants have been included in the
             computation when dilutive.

             Basic EPS is calculated by dividing earnings available to common
             stockholders (the "numerator") by the weighted-average number of
             common shares outstanding (the "denominator") during the period.

<PAGE>

             The computation of diluted EPS is similar to the computation of
             basic EPS except that the denominator is increased to include the
             number of additional common shares that would have been outstanding
             if the dilutive potential common shares (that is, securities such
             as options, warrants, convertible securities, or contingent stock
             agreements) had been issued. In addition, in computing the dilutive
             effect of convertible securities, the numerator is adjusted to add
             back (a) any convertible preferred dividends and (b) the after-tax
             amount of interest recognized in the period associated with any
             convertible debt.

             Options and warrants representing common shares were excluded from
             the average number of common equivalent shares outstanding in the
             diluted EPS calculation for the years ended June 30, 2000 and 1999
             since that would have an antidiluted effect on EPS.

             NON-DIRECT RESPONSE ADVERTISING:

             Non-direct response advertising costs are expensed the first time
             the advertising takes place. Advertising expense for the year ended
             June 30, 2000 and 1999 were $175,705 and $160,789 respectively.

             RECLASSIFICATIONS:

             Certain reclassifications have been made to amounts reported in
             prior periods to conform with current year presentation.


NOTE 3 - SIGNIFICANT RISKS AND UNCERTANTIES

             NEED FOR ADDITIONAL FINANCING

             The Company has a need for additional capital in order to provide
             working capital for its current business plans. Management believes
             it will be able to secure sufficient financing to carry out its
             business plan, supported, in part, by written assurance from the
             major lender and majority stockholder, that the current debt will
             be extended if needed to June 30, 2001 and beyond and has given
             verbal assurance to management that it will enable or provide
             additional funding to carry out the business plan.

             The Company's continued expansion of its business will depend
             substantially upon the availability of cash flow from operations or
             its ability to raise additional funds. As a result, Total Film
             Group may be required to seek additional financing sooner than
             anticipated. There is no assurance that the Company will be able to
             obtain additional financing when needed, or on terms acceptable to
             it. In the event the Company cannot obtain additional funds when
             needed on acceptable terms, it may be forced to limit its future
             operations, which could have a materially adverse impact on its
             business.

             RELIANCE ON OFFICERS, DIRECTORS AND KEY EMPLOYEES

             The ability of the Company to conduct its business affairs
             successfully will be subject to the capabilities, business acumen
             and continuing services of the Chairman of the Board of Directors
             and its President, Gerald Green, and other current officers and
             directors, and any key employees to be hired in the future. The
             Company has no employment agreements with any of its officers or
             key employees except for Gerald Green and Howard Russo. While the
             Company expects to retain the services both individuals, there can
             be no assurance of such result. The loss of either or any other key
             employees could have a material adverse impact on the continued
             operation of the Company.

             CONCENTRATION OF CREDIT RISK:

             The Company maintains bank account balances in institutions located
             in California, Puerto Rico and Europe. The balances in California
             are insured by the Federal Deposit Insurance Corporation up to
             $100,000. The Company's cash balances exceeded the level of
             insurance coverage for the years ended

<PAGE>

             June 30, 2000 and 1999 by $318,830 and $946,146, respectively.


NOTE 4 - RECENT PRONOUNCEMENTS

             In July 2000, the Accounting Standards Executive Committee of the
             AICPA issued Statement of Position 00-2 (SOP 00-02), "Accounting by
             Producers or Distributors of Films". SOP 00-2 supercedes Financial
             Accounting Standards Board (FASB) Statement of Financial Accounting
             Standards No. 53 "Financial Reporting by Producers and Distributors
             of Motion Picture Films". SOP 00-2 establishes new accounting and
             reporting standards for the Motion Picture Industry. SOP 00-2
             requires the Company to review its film capitalization costs and
             write off any production which three years from its first
             capitalized transaction has not been set for production. The
             Company will fully implement SOP 00-2 by the first quarter of
             fiscal year 2001. SOP 00-2 is not expected to have a material
             impact on the Company's consolidated balance sheet, statements of
             operations or cash flows.

             In December 1999, the Securities and Exchange Commission ("SEC")
             issued Staff Accounting Bulletin ("SAB") No. 101, Revenue
             Recognition. SAB 101 provides guidance on revenue recognition. SAB
             101 requires the following to occur before the Company can
             recognize income: 1) Persuasive evidence of an arrangement exists.
             2) Delivery has occurred or services have been rendered. 3) The
             price is fixed or determinable. 4) Collectibility is reasonably
             assured. The Company will adopt SAB 101 no later than the first
             quarter of fiscal year 2001. SAB 101 is not expected to have a
             material impact on the Company's consolidated balance sheet,
             statements of operations or cash flows.

<PAGE>

NOTE 5 - INVESTMENT IN MEETCHINA.COM

             The Company holds equity securities in MeetChina.com, a
             non-publicly traded entity at a cost and fair value of $3,745,090.
             The investment is classified as available for sale within the other
             asset section of the Consolidated Balance Sheet. The Company
             investments are reviewed for impairment by senior management. If
             the decline in fair value is judged to be other than temporary, the
             cost basis will be written down to the fair value and the
             write-down will be included in the current period's earnings.

NOTE 6 - PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
                                                                         2000                     1999
                                                                ---------------------    ---------------------
<S>                                                             <C>                      <C>
             Furniture and Fixtures                             $             46,785     $             37,589

             Office Equipment
                                                                             479,935                  325,083

             Leasehold Improvements
                                                                               9,029                    9,029

                                                                ---------------------    ---------------------
                           Total Cost
                                                                             535,749                  371,701
             Less: Accumulated Depreciation
                                                                             335,035                  256,753

                                                                ---------------------    ---------------------
                                                                $            200,714       $          114,948
                                                                ---------------------    ---------------------
</TABLE>

              Depreciation expense for 2000 and 1999 was $78,282 and $38,184,
respectively.

<PAGE>

NOTE 7 - REPORTABLE OPERATING SEGMENTS:

             SEGMENT PROFIT OR LOSS:

      FOR THE YEAR ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
                                                                                                     Segments
                                                                               ----------------------------------------------------
                                                             Totals            Motion Pictures       Marketing          Holding Co.
                                                       -----------------       ----------------    ------------        -------------
<S>                                                    <C>                     <C>                 <C>                 <C>
      Revenues from external customers                  $  3,205,892           $    131,656        $ 3,074,236           $     -

      Intersegment revenues
                                                               1,367                      -              1,367                 -

      Interest income
                                                              15,559                 11,524                  -             4,035

      Interest expense
                                                           1,169,115              1,138,251             30,864                 -

      Depreciation and amortization
                                                           1,750,754                973,991            776,763                 -

      Operating profit (loss)
                                                         (5,452,502)            (4,523,165)          (933,372)             4,035

      Segment assets
                                                          20,987,165             15,787,691          1,405,154         3,794,320

      FOR THE YEAR ENDED JUNE 30, 1999
</TABLE>

<TABLE>
<CAPTION>
                                                            Totals            Motion Pictures       Marketing         Holding Co.
                                                       -----------------       ----------------    ------------        -------------
<S>                                                     <C>                   <C>                  <C>                   <C>
      Revenues from external customers                  $  6,120,094          $   4,429,388        $ 1,690,706           $     -

      Intersegment revenues
                                                              88,761                      -             88,761                 -

      Interest income
                                                              20,107                 20,086                 21                 -

      Interest expense
                                                             143,353                129,194             14,159                 -

      Depreciation and amortization
                                                           3,633,458              3,584,700             48,758                 -

      Operating profit (loss)
                                                           (987,155)              (355,469)          (631,686)                 -

      Segment assets
                                                           9,663,148              8,209,827          1,453,321                 -
</TABLE>


      The accounting policies of the segments are the same as those described in
      the summary of significant accounting policies. Management evaluates
      segment performance based on profit or loss from operations before income
      taxes and nonrecurring gains and losses. Transfers between segments are
      accounted for at market value.

<PAGE>

             RECONCILIATION OF SEGMENT INFORMATION TO CONSOLIDATED AMOUNTS:

             Information for the Company's reportable segments relates to its
consolidated totals as follows:

<TABLE>
<CAPTION>
                                                                                 For the Years Ended June 30,
                                                                          -------------------------------------------
                                                                                2000                      1999
                                                                          -----------------         -----------------
<S>                                                                            <C>                       <C>
                 REVENUES

                     Total revenues for reportable segments                    $ 3,207,259               $ 6,208,855

                     Elimination of intersegment revenues
                                                                                   (1,367)                  (88,761)
                                                                          -----------------         -----------------

                     Total consolidated revenues                               $ 3,205,892               $ 6,120,094
                                                                          =================         =================

                 INCOME OR LOSS

                     Total loss for reportable segments                       $(5,452,502)               $ (987,155)

                     Elimination of intersegment income
                                                                                    29,000                  (29,000)
                                                                          -----------------         -----------------

                     Loss before income tax                                   $(5,423,502)              $(1,016,155)
                                                                          =================         =================

                 ASSETS

                     Total assets for reportable segments                     $ 20,987,165               $ 9,663,148

                     Eliminations of intersegment transactions                 (3,274,936)               (2,933,240)
                                                                          -----------------         -----------------

                     Consolidated total                                       $ 17,712,229               $ 6,729,908
                                                                          =================         =================
</TABLE>

             MAJOR CUSTOMER INFORMATION:

             Revenues from three customers of the Company's marketing and
             advertising segment represent approximately $1,069,852 or 33.3%
             (13.6%, 12.9%, 6.8%) of the Company's consolidated revenues, for
             the year ended June 30, 2000.

<PAGE>

NOTE 8 - DEBT OBLIGATIONS

<TABLE>
<CAPTION>
                                                                                            June 30,
                                                                                              2000                 1999
<S>                                                                                      <C>                 <C>
            Mercantile National Bank credit line, entered
               into March 1999 with monthly principal
               payments of $8,333, plus interest at 8.75%
               per annum.  The credit line matures
               March 2000.                                                               $           -       $       75,000

            WestAmerica Bank note assumed February
               1999 with monthly principal payments of $2,500
               plus a variable rate of interest currently 12.00%
               per annum.  The debt matures September 2000.                                      5,000               35,000

            WestAmerica Bank note assumed February
               1999 with monthly principal payments of $1,637
               plus a variable rate of interest currently 12.00%
               per annum.  The debt matures September 2000.                                      3,274               22,917

            WestAmerica Bank credit line, assumed January 1999.
               The interest rate is 12.50% per annum.                                           44,931               46,660

            Note entered into February 11, 1999 with
               principal payable quarterly at $375,000 beginning
               three months following the date of the first
               advance plus interest at 13.50% per annum.
               the note matures February 2000.                                                       -            2,000,000

            Note entered into January 2000, with interest payable
               quarterly at a variable rate of interest currently
               10.50%.  The note matures December 2001.                                      1,000,000                    -

            Note entered into February 2000, with interest payable
               quarterly at a 8% rate of interest.  The note matures
               September 2000.                                                                 100,000                    -

            Note entered into March 2000, with interest payable
               quarterly at a 9% rate of interest.  The note matures
               December 2000.                                                                  100,000                    -

            Note entered into March 2000, with interest accuring
               at a rate of 7.5%.  The note is secured by the foreign
               rights to My First Mister.  The note matures April 2001.                      1,607,017                    -

            Note entered into April 20, 2000 with a 30% premium
               which is being accrued as interest due on maturity.  The
               principal balance is $2,500,000 with $457,627 of interest.  The
               note matures August 2000 (from a majority shareholder)                        2,957,627                    -
                                                                                         -------------       ---------------
                                                                                         $   5,817,849       $    2,179,577
                                                   Less:  Current Portion                    4,776,918            2,126,925

                                                                                         -------------       ---------------
                                                                                         $   1,040,931       $       52,652
                                                                                         =============       ===============
</TABLE>

            Future aggregate debt maturities are as follows:
<TABLE>
<CAPTION>
               Year Ending
                 June 30                                                       Amount
            ------------------                                           ----------------
            <S>                                                          <C>
                  2001                                                   $   4,776,918
                  2002                                                       1,002,210
                  2003                                                           2,675
                  2004                                                           2,993
                  2005 and Thereafter                                           33,053
                                                                         ----------------
                                                                         $   5,817,849
                                                                         ================
</TABLE>
<PAGE>

             The holder of the February 1999, $2,000,000 note received as
             additional consideration, 250,000 warrants to purchase the
             Company's common stock. The fair value of the warrants was
             determined using the Black-Scholes valuation model to be $450,000
             and has been recorded as an unamortized debt discount to be
             amortized as interest over one year, the term of the debt. The
             unamortized loan discount at June 30, 2000 and 1999 was $0 and
             $275,686 respectively.

             Total interest expense for these obligations for the years ended
             June 30, 2000 and 1999 was $1,116,915 and $143,353 respectively.


NOTE 9 - RELATED PARTY TRANSACTIONS:

             The Company has receivables totaling $210,734 from its officers.
             The receivables are due between July 2002 to September 2003. The
             receivables at June 30, 2000 carry a stated rate of interest of 8%.
             Prior to January 2000 the Company loaned funds to its officers
             without interest.

             The Company's chief executive and his wife are employed by
             Sundowning, Inc. as the executive producer and the producer of the
             motion picture "Diamonds". For their services, they are to receive
             fees totaling $250,000, of which $150,000 is deferred, without
             interest. The agreement becomes effective as of the release date of
             the film. Producer fees of $100,000 were paid by June 30, 1999. A
             bonus of $40,000 was paid to the Company's chief executive's wife
             during the fiscal year ended June 30, 2000.

             The Company's chief executive and his wife are employed by My First
             Mister and Bride of the Wind as the executive producer and producer
             of those respective motion pictures. For their services they were
             paid $375,000 during the fiscal year ended June 30, 2000.

             The Company entered into several loan agreements with its principal
             shareholder. The total amount financed for the years ended June 30,
             2000 and 1999 were $4,500,000 and $2,000,000 respectively.
             Additionally, the Company granted 250,000 warrants and 250,000
             shares of restricted common stock as additional consideration for
             those loans. The Company later negotiated extensions of the initial
             payment of principal in return for which the Company issued 250,000
             shares of Company common stock to the fund. On February 28, 2000
             the Company entered into an agreement to convert $4,000,000 of
             principal and $376,100 of unpaid interest into common stock of the
             Company. The conversion ratio stipulated that for each $1.50 of
             principal and $1.39 of past due interest one share of Company
             common stock would be issued. Pursuant to the agreement the Company
             issued 2,936,667 shares to the entities controlled by the majority
             shareholder. As a result of this transaction the Company recorded
             a charge to additional paid in capital of $4,253,081. The amount
             reported to additional paid in capital was the difference between
             the fair value of the stock received by the principal shareholder
             and the total obligations retired. The agreement does not effect
             any of the previous additional consideration granted by the
             Company.

             Mr. Green was employed by Total Films UK Limited, a wholly owned
             subsidiary of the Company, as the executive producer of THE NEW
             SWISS FAMILY ROBINSON. For his services, Mr. Green earned $300,000
             and screen credit as producer of the film. Payment of the cash
             consideration has been deferred, without interest, until the film
             recoups its negative costs. Mr. Green is also an officer and a
             director of Total Films UK Limited.

             A director received stock options for the purchase of 75,000 shares
             at $2.00 per share in August 1998. He exercised this option in
             February 2000, by canceling 30,000 options. He received 45,000
             shares through such exercise.

             In February 1999 the Company assumed the repayment of two loans and
             one line of credit with a total principal amount of $150,000, the
             balance of which at June 30, 2000, was $12,274, between

<PAGE>

             Red Sky Films, LLC and Skyrocket, LLC as the borrowers and
             Westamerica Bank as the lender. Assumption of the loans and the
             line of credit were required pursuant to the acquisition agreement
             between the Company and Skyrocket, LLC.

NOTE 10 - COMMITMENTS AND CONTINGENCIES:

             LEGAL MATTERS

             The Company was named in a dispute with the Screen Actors Guild
             Pension Plan (the "Plan"). The Plan was awarded a judgement of
             $56,525 for back pension contributions owed pertaining to the
             motion picture New Swiss Family Robinson. The amount rendered in
             the judgement has been accrued by the Company as of June 30, 2000.

             LINE OF CREDIT

             The Company has a line of credit from Mercantile National Bank for
             $140,000. This irrevocable letter of credit is secured by TCI's
             accounts receivable. This line of credit was granted in April 2000
             and expires February 2001. The Company uses this letter of credit
             to secure office space in San Francisco.

             EMPLOYMENT AGREEMENTS

             The Company has an employment contract with key executive officers
             that expire from December 31, 2000 to August 31, 2004. In addition
             to a base salary, the agreements provide for a cash bonus and a
             supplemental bonus based on pre-tax earnings. The Company is
             obligated for $1,662,501 under the terms of the various employment
             agreements.

             CAPITAL LEASE

             The Company currently leases certain office equipment with lease
             terms expiring February 2002 through May 2003. These capital lease
             obligations have been recorded in the accompanying financial
             statements at the present value of future minimum lease payments.
             The capitalized cost of $104,116 is included in office equipment in
             the accompanying balance sheet. Accumulated depreciation at June
             30, 2000 and 1999 includes $18,621 and $2,673, respectively,
             related to the capitalized cost of the office equipment. Future
             minimum lease payments are as follows:
<TABLE>
<CAPTION>
                  Year Ending
                     June 30,                                 Lease Payments
                  -------------                               -----------------
                  <S>                                         <C>
                      2001                                          $60,546
                      2002                                           57,327
                      2003                                            9,248
                                                                  ---------
                    Total future minimum
                     lease payments                                $127,121
                                                                   ========
</TABLE>
             OPERATING LEASE

             The Company has entered into lease agreements for its office
             facilities and other office equipment under noncapitalized leases
             with terms ranging from two to five years and monthly payments from
             $222 to $22,838. Future minimum lease payments are as follows:
<TABLE>
<CAPTION>
                     Year Ending
                     June 30,                              Lease Payments
                  -------------                          -----------------
                  <S>                                    <C>
                      2001                                    $518,728
                      2002                                     518,728
                      2003                                     381,698
                      2004                                     240,534
                      2005                                     196,883
                                                            ----------
                    Total future minimum
<PAGE>

                     lease payments                         $1,856,573
                                                            ==========
</TABLE>

             Total rental expense included in the financial statements for the
             years ending June 30, 2000 and 1999 was $311,025 and $243,011,
             respectively.


NOTE 11 - INCOME TAXES:

               The Company has available at June 30, 2000 and 1999, unused
               operating loss carryforwards of approximately $7,300,000 and
               $1,700,000, respectively, which may be applied against future
               taxable income and which expire in various years through 2019.
               The amount of and ultimate realization of the benefits from
               operating loss carryforwards for income tax purposes is
               dependent, in part, upon the tax laws in effect, the future
               earnings of the Company, and other future events, the effects of
               which cannot be determined. Because of the uncertainty
               surrounding the realization of the loss carryforwards the Company
               has established a valuation allowance equal to the amount of the
               tax effect of loss carryforwards and, therefore, no deferred tax
               asset has been recognized for the loss carryforwards.

               The Company's net deferred tax assets (using a federal rate of
               34%) consisted of the following at:

<TABLE>
<CAPTION>
                                                       June 30, 2000        June 30, 1999
                                                       -------------        -------------
                    <S>                                <C>                  <C>
                    Deferred Tax Assets                 $2,482,000            $578,000
                    Deferred Tax Asset Valuation        (2,482,000)           (578,000)
                                                       -----------           ---------

                    Net Deferred Tax Assets            $        -            $      -
                                                       ===========           =========
</TABLE>

NOTE 12 - STOCKHOLDERS' EQUITY:

               STOCK OPTION PLAN:

               In July 1998, the Company adopted a Non-Qualified Stock Option
               Plan (the "Plan"). As of June 2000, approximately 800,000 shares
               of Common Stock are reserved for future issuance under this plan.
               The Plan allows for the Company to grant stock options to
               purchase shares of the Company's authorized but unissued Common
               Stock to officers, key employees, non-employee directors and
               consultants. Options are generally priced at the fair market
               value of the stock on the date of grant. Options are generally
               exercisable immediately but unvested shares are held in escrow.
               Options currently expire no later than five years from the date
               of grant. The Plan will terminate on June 19, 2008. As of June
               30, 2000 and 1999, approximately 730,000 shares of Common Stock
               were issued by the Plan.

               INDIVIDUAL STOCK OPTION AGREEMENTS:

               The Company grants stock pursuant to individual stock option
               agreements. The Company granted 752,500 and 230,000 options to
               employees under such agreements for the years ended 2000 and
               1999, respectively.



               Information relative to stock option activity is as follows (in
thousands):

<PAGE>

               The following table summarizes information concerning currently
               outstanding and exercisable options:


<TABLE>
<CAPTION>
                                                                              Weighted
                                                              Options         Average
                                                             Available        Exercise
                                                               Shares          Price
                                                          -------------    -------------
             <S>                                          <C>              <C>
             Options Outstanding at July 1, 1998                     -             $  -
             Granted                                               960             2.00
             Exercised                                               -                -
             Cancelled                                               -                -
                                                          -------------    -------------

             Options Outstanding at June 30, 1999                  960           $ 2.00

             Granted                                               752           $ 2.44
             Exercised                                            (45)             1.63
             Cancelled
                                                                     -                -
                                                          -------------    -------------

             Options Outstanding at June 30, 2000                1,667           $ 2.28
</TABLE>


               Using Black-Scholes option valuation model, the weighted average
               estimated fair value of employee stock options granted in the
               year ended June 30, 2000 was $1.10.

<TABLE>
<CAPTION>
                                           Option Outstanding                     Option Exercisable
                                -----------------------------------------   -----------------------------
                                                 Weighted
                                                  Average      Weighted                       Weighted
                                                 Remaining     Average                        Average
                  Range of         Number       Contractual    Exercise        Number         Exercise
               Exercise Prices  Outstanding        Life         Price       Exercisable        Price
               ---------------- -------------   ------------  -----------   -------------   -------------
<S>            <C>              <C>             <C>           <C>           <C>             <C>
                $2.00 - $5.00      1,667,500         2.04         $2.23          1,432,500           $2.05
</TABLE>

               STOCK BONUS PLAN:

               In January 2000 the Company adopted a Stock Bonus Plan ("Stock
               Bonus Plan") which allows the Company to issue up to 50,000
               restricted shares of the Company's common stock to directors,
               officers, employees, and others who have performed bona fide
               services for the Company. Pursuant to the terms of the Stock
               Bonus Plan, the Company issued 7,500 shares with a fair value of
               $31,875 to an employee of the Company during the year ended June
               2000.

               STOCK - BASED COMPENSATION:

               The Company applies Accounting Principles Board Opinion No. 25,
               "Accounting for Stock Issued to Employees", and related
               interpretations in accounting for its plan. Accordingly, no
               compensation expense has been recognized for its stock-based
               compensation plan other than for the stock options granted to
               non-employee directors and consultants. Had compensation cost for
               the Company's other options granted been determined based upon
               the fair value at the grant date for awards under this plan been
               consistent with the methodology prescribed under Statement of
               Financial Accounting Standards No. 123, "Accounting for
               Stock-Based Compensation", the Company's net loss and net loss
               per share would have been increased to the pro forma amounts
               indicated below:

<PAGE>

<TABLE>
<S>                                                       <C>
                          Net Loss as Reported            $      (5,550,286)

                          Proforma Net Loss                      (5,646,021)


                          Basic Net Loss per
                              Share as Reported                        (.60)


                          Proforma Basic Net
                              Loss per Share                           (.62)
</TABLE>

               For purposes of pro forma disclosures, the estimated fair value
               of the options is amortized to expense over the options' vesting
               period.

               The Black-Scholes option valuation model was developed for use in
               estimating the fair value of traded options that have no vesting
               restrictions and are fully transferable. In addition, option
               valuation models require the input of highly subjective
               assumptions, including the expected stock price volatility.
               Because the Company's options have characteristics significantly
               different from those of traded options, and because changes in
               the subjective input assumptions can materially affect the fair
               value estimate, in the opinion of management, the existing models
               do not necessarily provide a reliable single measure of the fair
               value of its options.

               The fair value of each option grant is estimated on the date of
               grant using the Black-Scholes option-pricing model using a
               dividend yield of 0% and the following additional weighted
               average assumptions used for grants.


<TABLE>
<S>                                                                <C>
                          Expected Stock Price Volatility          0.672%

                          Risk-Free Interest Rate                      6%

                          Expected Lives (In Years)                     3
</TABLE>





               NON-CASH EQUITY TRANSACTIONS:

               The Company issued shares of its common stock and stock warrants
               in non-cash transactions. The issued shares of common stock were
               reported at its fair value on the date of grant. The fair value
               of stock warrants were determined using the Black-Scholes
               valuation model.

<PAGE>

INCLUDED IN THE CURRENT STATEMENT OF STOCKHOLDERS' EQUITY ARE THE FOLLOWING
NON-CASH TRANSACTIONS:


<TABLE>
<CAPTION>
                                Number
             Date             of Shares                   Transaction or Service Provided                   Fair Value
          ------------  ---------------------- -------------------------------------------------------  -------------------
          <S>           <C>                    <C>                                                      <C>
            Jan-99            150,000          Purchase of Skyrocket, LLC                                      $   337,500

            Jan-99            100,000          Purchase of Michel Russo, Inc.
                                                                                                                   212,466
            Jan-99              5,000          Arranged financing for Company
                                                                                                                    11,650
            Jun-99             75,000          Purchase of Skyrocket, LLC
                                                                                                                   168,750
            Jul-99             50,000          Compensation for TCI Director
                                                                                                                   168,464
            Aug-99            250,000          Extension of $2,000,000 loan and accrued interest
                                                                                                                   291,667
            Sep-99            250,000          Granted to lender for $2,000,000 loan
                                                                                                                   546,750
            Jan-00              7,500          Bonus to Company employee
                                                                                                                    32,066
            Mar-00          2,666,667          Conversion of $4,000,000 debt to equity - Note 15
                                                                                                                 8,000,000
            Mar-00            270,000          Extinguishment of $376,100 of interest on debt
                                                                                                                   810,000
            Mar-00             26,667          Consulting fee for brokering debt conversion
                                                                                                                    66,667
            May-00              2,000          Motion picture consulting fee
                                                                                                                     7,500
            May-00              6,000          Motion picture consulting fee
                                                                                                                    25,875
            Jun-00             50,000          Compensation for TCI Director
                                                                                                                   139,500
            Jun-00             50,000          Compensation for TCI Director
                                                                                                                   159,000
                                                                                                        -------------------

                                                                                                              $ 10,977,855
</TABLE>

<TABLE>
<CAPTION>
                                Number
             Date            of Warrants                  Transaction or Service Provided                   Fair Value
          ------------  ---------------------- -------------------------------------------------------  -------------------
          <S>           <C>                    <C>                                                      <C>

            Feb-99            250,000          Additional consideration on $2,000,000 loan                     $   450,000

            Sep-99            100,000          Financial consultants placement fees
                                                                                                                    87,000
            Sep-99             60,000          Financial consultants placement fees
                                                                                                                    32,400
            Sep-99             40,000          Financial consultants placement fees
                                                                                                                    34,000
            Nov-99            200,000          Placement fees for MeetChina.com
                                                                                                                   140,000
            Dec-99             25,000          Financial consultants placement fees
                                                                                                                    25,500
            Jan-00             25,000          Additional consideration on $1,000,000 loan
                                                                                                                    28,250
            Mar-00             25,000          Financial consultants placement fees
                                                                                                                    48,250
            Jun-00             25,000          Financial consultants placement fees
                                                                                                                    41,250
                                                                                                         -------------------

                                                                                                               $   886,650
</TABLE>





NOTE 13 - MOTION PICTURE COSTS

               The Company's film production business has completed three motion
               pictures since its inception: The New Swiss Family Robinson,
               Diamonds and Chick Flick. The Company currently has two other
               films that are in production: My First Mister and Bride of the
               Wind. The Company is also developing other full length feature
               films. As of June 30, 2000 the components of motion picture costs
               net of production funding arrangement (See Note 14) are as
               follow:

<PAGE>
<TABLE>
                              <S>                                 <C>
                              Released                            $   5,624,823
                              Completed But Not Released                364,051
                              In Production                           5,817,317
                              Preproduction                           1,301,339
                                                                  -------------
                               Total Motion Picture Costs         $  13,107,530
                              Less: Accumulated Amortization         (3,611,722)
                                                                  -------------
                              Net Motion Picture Costs            $   9,495,808
                                                                  =============
</TABLE>


               The Company capitalizes all film costs which include all direct
               negative costs incurred in the physical production of a film, as
               well as allocations of production overhead and capitalized
               interest. Participation costs are accrued based on the
               individual-film-forecast-computation method. Exploitation costs
               are expensed as incurred.

               The Company recorded amortization costs for the years ended June
               30, 2000 and 1999, of $118,013 and $3,493,709, respectively. The
               Company expects to amortize approximately 22% of its completed
               films cost for the fiscal year ending June 30, 2001. The Company
               does not have any accrued participation costs that will be paid
               in the upcoming fiscal year.

               In addition the Company determined that one of its completed
               films Diamonds had been impaired as a result of the films actual
               performance subsequent to release failing to generate sufficient
               exploitation proceeds to substantiate its capitalized costs. The
               capitalized cost associated with that picture was written-off
               during the current fiscal year and no longer reported in the
               Released Film. For the years ended June 30, 2000 and 1999, the
               Company expensed $1,091,047 and $51,959 of previously capitalized
               motion picture costs.

               The Company procured an insurance policy for $1,00,000 that
               insured the recoupment of its production costs in the motion
               picture Diamonds. The policy specified that the Company will
               receive $1,000,000 less all net revenues generated by the film
               over the 36 month period commencing November 1998. The Company
               believes that the film will not produce any net revenues and as
               such recorded this policy as a non-current asset titled
               Recoverable Production Costs.

NOTE 14 - PRODUCTION FUNDING ARRANGEMENTS:

               The Company has entered into various production funding
               arrangements for the motion pictures which it produces. These
               contracts specify that the Company and a third party will
               co-produce and exploit the feature films. In exchange for the
               co-production rights the third party will make a financial
               contribution for the costs incurred in the exploitation of the
               film. All incoming exploitation proceeds are allocated between
               the Company and the third parties as specified by the production
               funding arrangements. Generally the third parties insure their
               production funding contributions, with the Company assuming no
               liability for the third parties recoupement of their investment.
               As of June 30, 2000 and 1999 third parties had contributed
               $5,179,195 and $7,219,391, respectively under these agreements.
               These contributions have been netted against the total cost of
               the motion pictures.

<PAGE>

NOTE 15 - CAPITAL TRANSACTION

               During the fiscal year ended June 30, 2000 the Company entered
               into an agreement to convert $4,000,000 of debt to equity by
               converting the principal amount of the loans and $376,100 of
               unpaid interest into common stock of the Company. The conversion
               ratio stipulated that for each $1.50 of principal and $1.39 of
               past due interest one share of Company common stock would be
               issued. Pursuant to the agreement the Company issued 2,936,667
               shares to the entities controlled by the majority shareholder
               (see Note 9). As a result of this transaction the Company
               recorded a charge of $4,253,081 to additional paid in capital.
               The amount reported as additional paid in capital was the
               difference between the fair value of the stock received by the
               principal shareholder and the total obligations retired.

NOTE 16 - ISSUANCE OF SHARES IN TOTAL CHINA II

               On May 23, 2000 the Company conducted a joint private offering
               its own common stock and preferred stock of Total China II, a
               wholly owned subsidiary. Originally formed as a shell
               organization, this entity was used to acquire an equity interest
               in MeetChina.com. The Company offered 738,600 shares of
               preferred stock of Total China II at $3 per share. By the
               completion of the offering in July 2000, Total China II realized
               gross proceeds of $2,216,800. After the offering the Company
               owned all of the outstanding common stock and 5% of the
               outstanding preferred stock of Total China II. The Company's
               operating loss carryforward will offset the realized gain arising
               from this transaction.

NOTE 17 - RESTATEMENTS OF FINANCIAL STATEMENTS

               The accompanying financial statements for the period ended June
               30, 1999 have been restated to correct an error in the
               calculation of the value of options granted to directors. The
               effect of the restatement is a decrease of the net loss for the
               year ended June 30, 1999 by $534,950.

NOTE 18 - SUBSEQUENT EVENTS:

               In July 2000, the Company received an extension on the $2,500,000
               loan entered into April 2000 due August 2000, with its majority
               shareholder. In exchange for the extension the Company issued
               500,000 shares of common stock payable 166,667 shares per month
               that the obligation was extended.

               In August 2000, the Company completed its offering in China II.
               The Company received the balance owed from the joint private
               offering made by the Company and China II. The common stock of
               the Company has not been issued to its investors or as a
               placement fee as of the date of the auditors' report. Also in
               August, the Company received a $1,000,000 working capital loan
               from its principal shareholder. The loan bears interest at 12%
               per annum payable quarterly. The loan will be convertible at
               $3.00 per share, provided that the conversion price will be
               reduced to $1.50 for the ninety day period following the due
               date, and to $1.00 per share thereafter, if the loan remains
               unpaid. The Company also paid a consulting fee of $70,000 and has
               agreed to issue five year warrants to purchase 100,000 shares at
               $3.50 per share to Capital Research Ltd. in connection with the
               loan.
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