UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K

                                   (Mark One)

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

                 For the fiscal year ended December 31, 2002, or

              [ ] 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: 000-26585


                               MM COMPANIES, INC.
             (Exact Name of Registrant as Specified in Its Charter)


                    DELAWARE                               54-1811721
         (State or Other Jurisdiction                    (I.R.S. Employer
               of Incorporation)                        Identification No.)

         888 SEVENTH AVENUE, 17TH FLOOR,
                  NEW YORK, NY                               10019
     (Address of Principal Executive Office)               (Zip Code)

        Registrant's telephone number, including area code (212) 974-5730

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

Securities registered pursuant to Section 12(g) of the Securities Act: Common
stock, par value $.01 per value.

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference to Part III of this Form 10-K or any
amendment to this Form 10-K [X].

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchanged Act Rule 12b-2): Yes [ ] No [X].

The aggregate market value of voting stock held by non-affiliates of the
registrant was approximately $2,933,356 as of March 25, 2003, based upon the
closing price of such equity as of such date.

As of March 25, 2003, 3,280,614 shares of the issuer's common stock were
outstanding.


<PAGE>



                               MM COMPANIES, INC.


                           ANNUAL REPORT ON FORM 10-K
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

PART I                                                                                                         Page

<S>         <C>                                                                                                <C>
ITEM 1.     Business.............................................................................................3

ITEM 2.     Properties...........................................................................................5

ITEM 3.     Legal Proceedings....................................................................................5

ITEM 4.     Submission of Matters to a Vote of Security Holders..................................................6

PART II

ITEM 5.     Market For Registrant's Common Equity and Related Stockholder Matters................................7

ITEM 6.     Selected Financial Data..............................................................................7

ITEM 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations................8

ITEM 7A.    Quantitative And Qualitative Disclosures About Market Risk..........................................14

ITEM 8.     Financial Statements and Supplementary Data.........................................................15

ITEM 9.     Changes In and Disagreements With Accountants On Accounting and Financial Disclosure................33

PART III

Item 10.    Directors and Executive Officers of the Registrant..................................................33

Item 11.    Executive Compensation..............................................................................35

Item 12.    Security Ownership of Certain Beneficial Owners and Management
            and Related Stockholder Matters.....................................................................38

Item 13     Certain Relationships and Related Transactions......................................................40

Item 14     Controls and Procedures.............................................................................40

Item 15     Principal Accountant Fees and Services..............................................................40

PART IV

Item 16.    Exhibits, Financial Statement Schedules and Reports on Form 8-K.....................................41

Signatures  ....................................................................................................44
</TABLE>




                                       2
<PAGE>




                                     PART I

Note Regarding Forward-Looking Information

         The statements contained in this Annual Report that are not historical
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, including statements regarding the expectations,
beliefs, intentions or strategies regarding the future. Without limiting the
foregoing, the words "anticipates," "believes," "expects," "intends," "may" and
"plans" and similar expressions are intended to identify forward-looking
statements. The Company intends that all forward-looking statements be subject
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements reflect the Company's views as of the
date they are made with respect to future events, but are subject to many risks
and uncertainties, which could cause the actual results of the Company to differ
materially from any future results expressed or implied by such forward-looking
statements. These statements speak only as of the date hereof. We are under no
duty to update, and do not undertake to update, any of the forward-looking
statements contained in this Annual Report to conform them to actual results or
to changes in our expectations.

ITEM 1.  Business.

         The Company was formed in Delaware on April 23, 1996. On January 3,
2001, the Board of Directors of MM Companies, Inc., formerly musicmaker.com,
Inc. (as used herein, the "Company" or "we") as then constituted voted
unanimously to cease its operations as a provider of customized music CD
compilations and music digital downloads. The Company had sold its products
primarily over the Internet through its website and through marketing partners,
strategic alliances and direct mail-order promotions. The then-Board concluded
at that time that this business no longer represented a viable alternative to
provide maximum value to the Company's stockholders. In connection with the
Company's cessation of its Internet-based custom CD-marketing business, the
Company sold all of the Company's remaining furniture and equipment.

         Thereafter, the Board determined to seek to pursue one or more
potential acquisitions of other publicly traded or privately held companies or
significant interests in such companies, with a view to refocusing the Company's
strategic direction. While the Company continues to actively examine certain
potential acquisition transactions and believes that attractive opportunities
exist, there can be no assurance whether, when, or on what terms the Company
will complete any such acquisition.

         On February 25, 2002 the Board of Directors authorized a stock
repurchase program for up to 500,000 shares of the Company's common stock.
Shares of common stock are expected to be purchased from time to time in open
market transactions and privately negotiated transactions, subject to
availability and price, prevailing market and business conditions and regulatory
compliance.

         On June 11, 2002, we changed our name from musicmaker.com, Inc. to MM
Companies, Inc.

         The Company's financial statements as of December 31, 2002, have been
prepared on a going concern basis, which contemplates the realization of assets
and the settlement of liabilities and commitments in the normal course of
business. At December 31, 2002, the Company had $575,454 in cash and cash
equivalents and $4,028,115 in precious metals (see below) compared to $7,596,588
of cash and cash equivalents at December 31, 2001. Substantially all of the
Company's remaining cash was provided by our initial public offering of common
stock in 1999. The Company expects to experience negative cash flows for the
foreseeable future. Based on our current level of operations, the Company
believes that it has sufficient cash and cash equivalents to satisfy its
obligations, although it can give no assurance in that regard. The Company
believes these obligations will primarily relate to costs associated with our
operation as a public company (legal, accounting, insurance, etc.), the
satisfaction of any legal judgments or settlements, and expenses related to any
new business activities which may be undertaken by the Company. As noted above,
the Company continues to pursue the potential acquisition of other businesses.
However, the Company has not consummated any significant transactions to date
and the Company's business prospects remain uncertain. To the extent that
management of the Company moves forward on any alternative strategy, such
strategy may have an impact on the Company's liquidity.

                                       3
<PAGE>

         On August 9, 2002, in connection with the review of the Company's
contested solicitation of proxies for the annual shareholders meeting of another
public company, the Company received a letter from the SEC's Division of
Investment Management inquiring as to the possible status of the Company as an
unregistered "investment company" within the meaning of the Investment Company
Act of 1940. The Company believes that, consistent with the discussion of
Investment Company Act matters in its Annual Report on Form 10-K for the year
ended December 31, 2001, the Company may have become an inadvertent investment
company during 2001. The Company has relied on the "transient investment
company" exemption from the applicable provisions of the Investment Company Act
contained in Rule 3a-2 thereunder, which provides for a one year "safe harbor".

         Accordingly, prior to the expiration of such one-year safe harbor
period, on August 29, 2002, the Company acquired ownership of gold bullion for a
purchase price of $4,028,115. As of December 31, 2002, the Company borrowed
approximately $1.9 million secured by that gold bullion, which is included in
other current liabilities on the Company's balance sheet. As a result of such
acquisition, "investment securities" held by the Company no longer exceed 40% of
its total assets (excluding cash and government securities), and the Company
believes that it is no longer within the relevant definition of "investment
company" for purposes of the Investment Company Act. Notwithstanding the fact
that the Company purchased such gold bullion and therefore "investment
securities" held by the Company no longer exceed 40% of its total assets
(excluding cash and government securities), the Company could be deemed an
investment company under Section 3(a)(1)(A) of the Investment Company Act, which
covers companies that are engaged primarily in the business of investing,
reinvesting or trading in securities.

         The Company believes that, at all relevant times prior to the date of
filing of this annual report, either it has not been an investment company as
defined by the Investment Company Act, or it has been a "transient investment
company" exempt from the Investment Company Act. The Company believes that
because of the character of its assets it does not currently fall within the
definition of an investment company.

         The Company is seeking to acquire one or more operating businesses in
the near term which the Company believes would, among other thing, eliminate any
concern that it may be deemed to be primarily engaged in the business of
investing, reinvesting or trading in securities. A determination by the SEC that
the Company is in fact an unregistered investment company could have a material
adverse effect on the Company's business. An unregistered investment company can
be prohibited from, among other things, engaging in interstate commerce.

         As of December 31, 2002, the Company had no employees other than its
President and Chief Executive Officer, and its Chief Financial Officer.

         During the period August 2001 to March 2002, the Company, along with
certain other entities (the "Reporting Entities"), purchased 1,448,535 shares of
Liquid Audio, Inc. ("Liquid Audio") at a cost of approximately $2.20 per share,
representing an approximately 6.9% ownership of Liquid Audio. On February 22,
2002, the Reporting Entities offered to acquire Liquid Audio for $2.50 per share
in cash, which was ultimately rejected by Liquid Audio's management. On May 3,
2002, the Company, on behalf of the "Reporting Entities," filed a lawsuit
against Liquid Audio in Delaware Chancery Court. The suit alleged that Liquid
Audio had failed to hold a timely annual meeting. On May 14, 2002, Liquid Audio
announced that it had scheduled its 2002 annual meeting for July 1, 2002. The
Company notified Liquid Audio of its intention to nominate Seymour Holtzman and
James Mitarotonda as Class III directors.

         Liquid Audio thereafter announced that it agreed to enter into a
reverse merger with Alliance Entertainment Corp. and in addition it would
conduct a self tender offer for up to 10 million shares of its common stock for
$3.00 per share. On July 16, 2002, the Company wrote to Liquid Audio expressing
its opposition to the proposed transactions. As an alternative the Company
proposed that Liquid Audio distribute $3.00 per share to all Liquid Audio
shareholders.

         At the September 26, 2002, Annual Shareholders Meeting of Liquid Audio,
the Company's nominees were elected to the Board. Subsequently, the CEO resigned
and Liquid Audio terminated its merger agreement with Alliance Entertainment and
suspended its self tender offer. On January 24, 2003, Liquid Audio announced
that it had sold its digital music fulfillment business to Anderson
Merchandisers for $3.2 million. On January 29, 2003, Liquid Audio distributed
$2.50 per share, in cash, to all of its shareholders.



                                       4
<PAGE>

ITEM 2.  PROPERTIES.

         Our headquarters are located in New York City, in an office maintained
by Barington Capital Group, L.P., an entity which along with certain affiliates
owns approximately 38% of the Company's common stock.

ITEM 3.  LEGAL PROCEEDINGS.

         On February 25, 2000, a purported securities class action complaint,
PAUL A. ROSENFELD, ET AL. V. MUSICMAKER.COM, INC., ET AL., No. 00-02018 CAS
(MANx), was filed in the United States District Court for the Central District
of California. At least four nearly identical complaints were filed shortly
after the original action was filed. On June 30, 2000, Plaintiffs filed a
consolidated and amended complaint (the "Class Action Complaint"), IN RE
MUSICMAKER.COM SEC. LITIG., No. 00-02018 CAS (MANx). Named as defendants are the
Company, EMI Group, PLC, EMI Recorded Music, EMI Recorded Music North America,
Virgin Holdings, Inc., Robert P. Bernardi, Devarajan S. Puthukarai, Irwin H.
Steinberg, Jay A. Samit, Jonathan A.B. Smith, and John A. Skolas. The Class
Action Complaint alleges that the Company violated Sections 11 and 12(a)(2) of
the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5 promulgated thereunder ("Rule 10b-5"), by making false and
misleading statements in the Company's filings with the SEC and in press
releases concerning the Company's access to recordings pursuant to certain
licensing agreements during the period from July 7, 1999, through November 15,
1999. The claims are purportedly brought on behalf of all persons who purchased
Company stock during that period, including investors who purchased stock during
the Company's initial public offering as well as those who purchased stock
thereafter. Plaintiffs sought unspecified compensatory damages and/or
rescission, as well as attorneys' fees and costs. On September 27, 2000, the
defendants filed a motion to dismiss the Class Action Complaint. In June 2001,
the court denied the motion to dismiss in part, granted it in part, and, in
August 2001, denied a subsequent motion for reconsideration with respect to the
motion to dismiss. In September 2001 plaintiffs filed a Third Consolidated
Amended and Supplemental Class Action Complaint, asserting the same causes of
action against the Company as were alleged in the Class Action Complaint (the
"Third Amended Complaint"). In October 2001, the Company answered the Third
Amended Complaint, denying liability to the plaintiffs on any cause of action.
In April 2001, several plaintiffs filed a purported non-class action complaint
against the same defendants named in the Class Action Complaint (including the
Company). The plaintiffs in this action subsequently filed an amended complaint
(this complaint as amended, the "Butler Complaint") in September 2001. The
Butler Complaint alleges claims under Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934, and Rule 10b-5, as well as common law fraud and negligent
misrepresentation claims relating to the same general types of purported
misrepresentations set forth in the Class Action Complaint. However, the alleged
misrepresentations set forth in the Butler Complaint allegedly occurred during
the period from November 15, 1999 through at least April of 2000. On January 21,
2002 and May 14, 2002, the parties participated in mediation sessions in an
attempt to settle matters set forth in the Class Action Complaint, the Third
Amended Complaint and the Butler Complaint. The latter mediation session led to
all of the parties to this litigation entering into a Memorandum of
Understanding (the "MOU") setting forth the material terms of a settlement of
all plaintiffs' claims. Under the terms of the MOU, the Company's directors and
officers insurance carriers will contribute to a settlement fund and the Company
will not be obligated to contribute to the settlement. The MOU was conditioned
upon, inter alia, the execution of a comprehensive Stipulation of Settlement and
the approval of that Stipulation by the District Court and the acceptance of the
terms of the settlement by plaintiffs-shareholders comprising a material part of
the class of the Company's shareholders. On October 9, 2002, the court
preliminarily approved the Stipulation of Settlement and scheduled a Settlement
Hearing for November 25, 2002. On or before November 5, 2002, class members who
object to the terms of the Stipulation of Settlement are required to file their
objections, which the court will consider in determining whether to grant final
approval of the Stipulation of Settlement. In addition any plaintiff who does
not wish to participate as a member of the class in the settlement must submit a
request for exclusion postmarked as of November 8, 2002. On November 25, 2002,
District Court Judge Christian A. Snyder signed a Final Judgement and Order of
Dismissal with Prejudice and the Judgement and Order, which was entered by the
Clerk of the Court on November 27, 2002, inter alia, granting final approval to
the terms of the settlement set forth in the Stipulation of Settlement.

         The Company has also been named as a defendant in three separate
lawsuits arising out of licensing agreements it had previously entered into with
Classicberry Limited and the Black Crowes partnership in the case of the first
lawsuit (the "Classicberry Lawsuit"), with Profile Publishing and Management
Corporation ApS in the case of the second lawsuit (the



                                       5
<PAGE>

"Profile Lawsuit"), and with Koch Entertainment LLC in the case of the third
lawsuit (the "Koch Lawsuit"). The lawsuits each seek an aggregate of
approximately $250,000, representing what the respective plaintiffs allege is
the balance owed by the Company under the agreements. With respect to the
Classicberry Lawsuit, the Company filed an answer denying liability and
asserting affirmative defenses and counterclaims. After the completion of
discovery, plaintiffs moved for summary judgment and the Company cross-moved for
leave to amend its pleadings. On December 20, 2001 the District Court granted
plaintiffs' motion for summary judgement, awarding plaintiffs judgment in the
amount of $270,096, and denied the Company's cross motion. The Company filed a
notice of appeal and secured a bond staying enforcement of the judgment. On
October 15, 2002, the United States Court of Appeals for the Second Circuit
affirmed the District Court's judgment. Plaintiffs subsequently agreed to give
the Company a satisfaction of judgment and general release in exchange for the
Company's payment to plaintiff of $280,000, all of which was performed on
December 23, 2002. With respect to the Profile Lawsuit, the Company filed an
answer denying liability and asserting affirmative defenses and counterclaims.
Plaintiff moved for summary judgment and the Company cross-moved to amend its
pleadings. The Court granted plaintiffs' motion and denied the Company's cross
motion. No judgment has yet been entered against the Company. However, based on
information available to us, we believe that the judgment, when entered, will be
for approximately $330,000. The Company and its attorneys were both sanctioned
by the court. A notice of appeal will be filed. With respect to the Koch
Entertainment Lawsuit, the Company filed an answer denying liability and
asserting affirmative defenses and counterclaims. Plaintiff filed an answer to
counterclaims denying liability and asserting affirmative defenses. Plaintiff
has agreed to discontinue this action in exchange for the Company's payment of
$190,000 to plaintiff. This was paid on February 18, 2003.

         In 1998, we received notice from Magix Entertainment Products GmbH, a
German company ("Magix"), claiming ownership of the trademark MUSICMAKER and
seeking to obtain from us the domain name MUSICMAKER.COM. We reached what we
view as a definitive settlement of Magix's claim in a written settlement
agreement in 1998. In late 1999, however, Magix renewed its demand for the
domain name MUSICMAKER.COM, which we believe to be in violation of our
settlement agreement. In December 1999, we filed suit against Magix in federal
court in New York. The case is captioned musicmaker.com, Inc., v. Magix
Entertainment Products GmbH, No. 99 Civ. 11577 (BSJ) (S.D.N.Y.). The Company has
asked the court, among other things, to declare that we own the trademark
MUSICMAKER and the domain name MUSICMAKER.COM and that we are entitled to use
them in connection with our business. In October 2001, Magix withdrew its
complaint.

         The Company had leased space on Parkridge Boulevard in Reston, Virginia
(the "Parkridge Property"), which served as the Company's administrative offices
and production center. The term of this lease expired on December 31, 2009, with
a monthly rent ranging from approximately $71,000 during the first year of the
lease to approximately $92,000 in the final year of the term. On February 22,
2002, Parkridge Five Associates (the "Parkridge Five") filed a lawsuit against
the Company captioned Parkridge Five Associates Limited Partnership v.
Musicmaker, Inc., Fairfax County Circuit Court (Chancery No. 177001). The Bill
of Complaint alleged claims for breach of contract and declaratory judgment. The
Company filed an Answer to the Complaint. At the conclusion of discovery, the
parties entered into settlement discussions, which resulted in the settlement of
the matter. The parties executed a settlement agreement providing for lease
termination and a cash payment from the Company to Parkridge of $2.1 million,
and the case was dismissed with prejudice by a consent order on September 25,
2002.

         On June 30, 2001, the Company closed its office located on Wiehle
Avenue in Reston, Virginia (the "Wiehle Property") and relocated its principal
offices to New York City. The Company sublet the Wiehle Property on July 1,
2001. The sub-lessee subsequently vacated the premises and, the Company
believes, is in default under the sublease. The Company retained legal counsel
to recover amounts due and owing under the sublease agreement. A summons was
filed in the Fairfax County General District Court on May 21, 2002. On July 10,
2002, counsel for the sub lessee advised the Company that it could apply the
security deposit to the unpaid rent. On the same date, our counsel withdrew the
action and the full security deposit was applied to the past due rent. On June
27, 2002, we executed a Lease Termination Agreement with Wiehle Limited
Partnership, the landlord, ending the Company's obligation for the Wiehle
Property.

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

         None.

                                       6
<PAGE>


                                     PART II

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

                        Market Price of our common stock.

         The Company was delisted from the NASDAQ National Market as of August
27, 2001. The Company's common stock subsequently became eligible for quotation
and is currently traded on the over-the-counter bulletin board ("OTC-BB") under
the symbol "MMCO."

         At March 13, 2003 the Company had 3,280,614 shares of common stock
outstanding, held by 58 shareholders of record. This does not reflect persons or
entities that held their stock in nominee or "street" name. The following table
sets forth the high and low bid quotations per share as reported by NASDAQ and
the OTC-BB for the periods stated. The quotations set forth below, to the extent
reflective of quotations on the OTC-BB, reflect inter-dealer prices, without
retail mark-up, mark-down or commission, and may not necessarily represent
actual transactions.

2001 Quarterly Period                 High Quoted                 Low Quoted
---------------------                 -----------                 ----------
First Quarter                         $5.7188                     $2.50
Second Quarter                        $2.906                      $1.93
Third Quarter                         $2.39                       $ 1.05
Fourth Quarter                        $ 2.25                      $ 1.20

2002 Quarterly Period                 High Quoted                 Low Quoted
---------------------                 -----------                 ----------
First Quarter                         $ 2.03                      $ 1.40
Second Quarter                        $ 2.03                      $ 1.30
Third Quarter                         $ 1.65                      $ 1.18
Fourth Quarter                        $ 1.60                      $ 1.31

         On March 13, 2003, the last sale price of our common stock on OTC-BB
was $1.45 per share.

                                Cash Distribution

         On February 15, 2001, the Company announced that the Board of Directors
had approved a cash distribution in the amount of $3.00 per share to the holders
of record of common stock as of March 1, 2001, the record date, pursuant to
which the Company distributed $9,941,998 to its stockholders.

                      Recent Sales of Unregistered Shares.

         None.

ITEM 6.  SELECTED FINANCIAL DATA.

         The following selected financial data should be read in conjunction
with the financial statements and the related notes thereto and the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Annual Report on Form 10-K. The
statement of operations data for the years ended December 31, 2002, 2001, and
2000 and the balance sheet data at December 31, 2002 and 2001 are derived from
the financial statements of the Company that are included elsewhere in this
Annual Report. The statement of operations data for the year ended December 31,
1998 and 1997 and the balance sheet data at December 31, 1999, 1998 and 1997 are
derived from the Company's 2000 Annual Report on Form 10-K. The results of
operations of prior periods are not necessarily indicative of results that may
be expected for any other period.



                                       7
<PAGE>

                                               Statement of Operations Data
<TABLE>
<CAPTION>

                                                                      Year ended December 31,
                                        ------------------------------------------------------------------------------------
                                             2002             2001              2000            1999             1998
                                        --------------- ------------------ --------------- ---------------- ----------------
<S>                                             <C>        <C>               <C>            <C>              <C>
Net sales                               $             -      $3,201,412         $5,583,505    $1,043,841         $74,028
Cost of sales                                         -       1,925,333         11,045,929     2,314,210         677,700
                                        --------------- ------------------ --------------- ---------------- ----------------
Gross margin                                          -       1,276,079         (5,462,424)   (1,270,369)       (603,672)
Operating expenses:
    Sales and marketing                               -        (647,685)        16,093,084     7,682,436         929,661
    Operating and development                         -          85,444          2,595,802     1,596,505         804,811
    General and administrative                  (74,521)      8,005,124         10,658,425     5,213,998       2,131,316
    Depreciation and amortization                     -       2,976,630        102,038,806    12,081,971         203,122
    Reorganization                                    -       2,087,746            774,573             -               -
    Loss on investment                                -               -          1,200,000             -               -
                                        --------------- ------------------ --------------- ---------------- ----------------
Total operating expenses                        (74,521)     12,507,259        133,360,690    26,574,910       4,068,910
                                        --------------- ------------------ --------------- ---------------- ----------------
Profit (loss) from operations                    74,521     (11,231,180)      (138,823,114)  (27,845,279)     (4,672,582)
Net interest income (expense)                   105,907         528,116          2,313,009     1,150,550          17,851
Other income                                     42,691          27,898                  -             -               -
                                        --------------- ------------------ --------------- ---------------- ----------------
Net profit (loss) before extraordinary
item                                    $       223,119     (10,675,166)      (136,510,105)  (26,694,729)     (4,654,767)
Gain on extinguishment of debt                                  151,429                  -             -               -
                                        --------------- ------------------ --------------- ---------------- ----------------
Net profit (loss)                               223,119    $(10,523,737)     $(136,510,105) $(26,694,729)    $(4,654,767)
                                        =============== ================== =============== ================ ================
Net profit (loss) before
extraordinary item per share                     $ 0.07         $ (3.22)           $(41.22)      $(13.45)         $(9.37)
Gain on extinguishment of debt
 per share                                            -            0.04                -              -              -
                                        =============== ================== =============== ================ ================
Basic and diluted net profit (loss)
per share                                        $ 0.07        $ (3.18)            $(41.22)      $(13.45)         $(9.37)
                                        =============== ================== =============== ================ ================

Weighted average shares outstanding           3,305,073       3,314,042          3,311,719     2,038,989         509,451
                                        =============== ================== =============== ================ ================
</TABLE>


<TABLE>
<CAPTION>

                                                      Balance Sheet Data
                                                                           At December 31,
                                        ---------------------------------------------------------------------------------------
                                              2002              2001               2000              1999            1998
                                        ----------------- ------------------ ------------------ --------------- ---------------
<S>                                             <C>              <C>               <C>             <C>                <C>
Cash and cash equivalents                       $575,454         $7,596,588        $26,451,805     $58,290,808        $972,954
Precious metals                                4,028,115                 --                 --              --              --
Working capital                                2,723,518          4,350,455         20,790,395      56,295,669       (369,286)
Total assets                                   8,032,220          9,460,059         33,541,049     165,400,220       3,233,963
Debt, long-term portion                                -                  -            128,572         171,429         726,786
Convertible preferred stock                            -                  -                  -               -       2,776,782
Total stockholders' equity (deficit)           4,931,413          4,695,044         24,959,608     161,244,771     (1,654,750)
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

         The following discussion should be read in conjunction with the
financial statements contained in Item 8 of this Form 10-K.

                              Results of Operations

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

         NET SALES. Net sales include the selling price of products sold by the
Company, net of returns, as well as sales promotions and discounts. The
Company's net sales were zero for the year ended December 31, 2002,



                                       8
<PAGE>

compared to $3,201,412 for the year ended December 31, 2001. This decrease is
attributable to the Company's cessation of its Internet-based custom CD
marketing business while the Board continues to pursue the potential acquisition
of other businesses.

         The positive net sales in the year ended December 31, 2001 were due to
the recognition of $3,100,779 in previously deferred revenue in connection with
the Company fulfilling its obligations with a contract with the Pepsi-Cola
Company.

         COST OF SALES. Cost of sales principally consists of content
acquisition costs, production and shipping costs, and credit card receipt
processing costs. Content acquisition costs include royalty advances that were
paid upon signing of royalty agreements with independent music labels and
royalty charges that were assessed on a per music track usage basis. Products
costs include CDs, jewel cases, CD trays and CD inserts. Cost of sales was zero
for the year ended December 31, 2002, compared to $1,925,333 for the year ended
December 31, 2001.

         SALES AND MARKETING EXPENSES. Sales and marketing expenses primarily
include advertising and promotional expenditures, consulting costs, payroll and
related expenses. Sales and marketing expenses were zero for the year ended
December 31, 2002, as compared to $(647,865) for the year ended December 31,
2001. The absence of sales and marketing expenses for the year ended December
31, 2002 is attributable to the Company's cessation of its Internet-based custom
CD marketing business while the Board continues to pursue the potential
acquisition of other businesses. The negative sales and marketing expenses
included in the year ended December 31, 2001 are due to the reversal of sales
and marketing expenses which had been previously accrued as an expense by the
Company.

         OPERATING AND DEVELOPMENT EXPENSES. Operating and developments expenses
consisted largely of payroll costs and maintenance costs. Operating and
development expenses for the year ended December 31, 2002 were zero, compared to
$85,444 for the year ended December 31, 2001. The decrease is attributable to
the Company's cessation of its Internet-based custom CD marketing business while
the Board continues to pursue the potential acquisition of other businesses. As
result of such cessation, the Company terminated its operating and development
personnel, suspended operations of the Company website and ceased fulfillment of
customer's orders.

         GENERAL AND ADMINISTRATIVE EXPENSES. During the twelve month period
ended December 31, 2002, general and administration expenses, primarily
consisted of legal and professional fees and related expenses for accounting and
administrative personnel, as well as other general corporate expenses. General
and administrative expenses were $(74,521) for the year ended December 31, 2002,
compared to $8,005,124 for the year ended December 31, 2001. Expenses were
reduced to $(74,521) by the reversal of accruals made in previous accounting
periods in the amount of $1,639,472. Of this amount, $289,469 is attributable to
the lease termination for the Company's Wiehle Avenue location and $294,804 is
attributable to the lease termination for the Company's office and production
facility at Parkridge Boulevard in Reston, Virginia. The remaining $1,055,199 is
due to the reversal of previously accrued accounts payable and general
liabilities.

         DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense decreased to zero for the year ended December 31, 2002, compared to
$2,976,630 for the year ended December 31, 2001. Depreciation decreased as a
result of the sale of all of the Company's remaining equipment and furniture
during the second quarter of 2001. The Company received gross proceeds of
$435,927, less applicable expenses of $55,389. This represented a gain of
$27,898 on the written down book value of equipment, furniture and fixtures.
Depreciation also decreased due to the write-off of significantly all remaining
leasehold improvements for the Company's office and production facility at
Parkridge Boulevard in Reston, Virginia in 2001.

         REORGANIZATION COSTS. Reorganization costs were zero for the year ended
December 31, 2002, compared to $2,087,745 for the year ended December 31, 2001.
The reorganization costs incurred in 2001 were a result of the Company
suspending its website and terminating its workforce with the exception of
president and chief executive officer, and chief financial officer. The Company
paid severance payments to its terminated employees in varying amount based on
the length of service to the Company. The Company does not expect to incur any
significant additional reorganization costs.



                                       9
<PAGE>

         INTEREST INCOME AND EXPENSE. Interest income was $105,907 for the year
ended December 31, 2002, compared to $528,116 for the year ended December 31,
2001. The decline in interest income reflects the decline in cash balances
available for investments. This decrease is also partially attributable to the
distribution by the Company on March 9, 2001, of $9,941,988, representing $3.00
per share to holders of record as of March 1, 2001.

         OTHER INCOME. Other income was $42,691, for the year ended December 31,
2002, compared to $27,898 for the year ended December 31, 2001. Other income in
2002 consisted of realized gains on sale of investments; other income in 2001
was derived from the sale of the Company's remaining furniture and equipment.

         EXTRAORDINARY GAIN. In May 2001, the Company settled its obligation of
$171,429 to the Music Maker Relief Fund for $20,000 and recorded an
extraordinary gain on the early extinguishment of debt of $151,429.

         STOCK SPLIT. On June 11, 2002, the Company's Board of Directors and a
majority of the stockholders authorized a one for one hundred reverse stock
split followed by a hundred for one forward stock split. On July 12, 2002, the
Company commenced effecting the approved reverse/forward split. Fractional
shares are being purchased by the Company at $1.35 per share, as of December 31,
2002, we have purchased 69,438 shares.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

         NET SALES. Net sales include the selling price of products sold by the
Company, net of returns, as well as sales promotions and discounts. The
Company's net sales were $3,201,412 for the year ended December 31, 2001,
compared to $5,583,505 for the year ended December 31, 2000. During the year
ended December 31, 2000, the Company recorded revenue from the fulfillment of
mass promotional sales of $2,921,548 or 52% of total revenue.

         At December 31, 2000, the Company had $3,100,779 of deferred revenue
associated with corporate sales promotions agreements entered into with the
Pepsi-Cola Company which were to be realized, under the guidance of SAB 101,
upon completion of the terms of the respective contracts. In February 2001, the
Company fulfilled its obligation to the Pepsi-Cola Company under such contracts.
As a result, in the first quarter of 2001, the Company recognized the remaining
$3,100,779 of contracted revenue provided under such contracts, offset by
$1,871,760 of cost of sales.

         COST OF SALES. Cost of sales principally consists of content
acquisition costs, production and shipping costs, and credit card receipt
processing costs. Content acquisition costs include royalty advances that were
paid upon signing of royalty agreements with independent music labels and
royalty charges that were assessed on a per music track usage basis. Production
costs include jewel cases, CD trays and CD inserts. Cost of sales was $1,925,333
for year ended December 31, 2001, compared to $11,045,929 for year ended
December 31, 2000.

         SALES AND MARKETING EXPENSES. Sales and marketing expenses primarily
include advertising and promotional expenditures, consulting costs, payroll and
related expenses. Sales and marketing expenses were $(647,685) for the year
ended December 31, 2001, compared to $16,093,084 for the year ended December 31,
2000.

         In May 2000, the Company and America Online, Inc. mutually agreed to
end the interactive agreement entered into in September 1999. The Company
recorded a non-cash charge of $1,472,000 to sales and marketing expenses for the
quarter ended June 30, 2000. As a result of the termination, the Company was
released from its future obligation to pay AOL the remaining $13,500,000
obligation, which was to have been repaid in $1,500,000 quarterly payments
through September 2002.

         OPERATING AND DEVELOPMENT EXPENSES. Operating and development expenses
were $85,444 for the year ended December 31, 2001, as compared to $2,595,802 for
the year ended December 31, 2000.

         GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses primarily consist of legal and professional fees, payroll costs and
related expenses for accounting and administrative personnel, and other expenses
associated with general and corporate functions. Also included in general and
administrative expenses are expenses associated with the issuance of warrants to
various consultants. For the year



                                       10
<PAGE>

ended December 31, 2001, general and administrative expenses were $8,005,124,
compared to $10,658,425 for the year ended December 31, 2000. General and
administrative expenses for the year ended December 31, 2001 included $3,237,302
in rent accruals, a $104,000 accrual for future payments under certain licensing
agreements, legal and other professional fees of $907,253, and $600,000 in
insurance premiums.

         DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expenses were $2,976,630 for the year ended December 31, 2001, as compared to
$102,038,806 for the year ended December 31, 2000. Depreciation decreased as a
result of the sale of all of the Company's remaining equipment and furniture
during the second quarter of 2001.

         REORGANIZATION COSTS, Reorganization costs were $2,087,745 for the year
ending December 31, 2001, compared to zero for the year ending December 31,
2000. The reorganization costs incurred in 2001 were a result of the Company
suspending its website and terminating its workforce with the exception of the
president and chief executive officer, and chief financial officer. The Company
paid severance payments to its terminated employees in varying amounts based on
the length of service to the Company. The Company does not expect to incur any
significant additional reorganization costs.

         INTEREST INCOME AND EXPENSE. Interest income was $528,116 for the year
ended December 31, 2001, compared to $2,314,219 for the year ended December 31,
2000. The decline in interest income reflects the decline in cash balances
available for investment.

         OTHER INCOME. Other income was $27,898 for the year ending December 31,
2001, compared to zero for the year ending December 31, 2000. Other income was
derived from the sale of the Company's remaining furniture and equipment.

         EXTRAORDINARY GAIN. In May 2001, the Company settled its obligation of
$171,429 to the Music Maker Relief Fund for $20,000 and recorded an
extraordinary gain on the early extinguishments of debt of $151,429.
Extraordinary gain in 2000 was zero.

                          Critical Accounting Policies

         The SEC has recently issued Financial Reporting Release No. 60,
"Cautionary Advice Regarding Disclosure About Critical Accounting Policies"
("FRR 60"), suggesting companies provide additional disclosure and commentary on
those accounting policies considered most critical. FRR 60 considers an
accounting policy to be critical if it is important to the Company's financial
condition and results, and requires significant judgment and estimates on the
part of management in its application. The Company believes the following
represent the critical accounting policies of the Company as contemplated by FRR
60 based on our current state of operations. For a summary of all of the
Company's significant accounting policies, including the critical accounting
policies discussed below, see Note 2 to the accompanying consolidated financial
statements based on the Company's current activities.

                  Investments in Available-for-Sale Securities

         The Company purchased marketable equity securities, which it has
classified, for accounting purposes, as available-for-sale securities.
Available-for-sale securities are stated at fair value with unrealized holding
gains and losses reported as a separate component of stockholders' equity as
accumulated other comprehensive income. The fair market value of
available-for-sale securities is based on quoted market prices from nationally
recognized exchanges. The Company also assesses whether any impairment of the
fair value of an available-for-sale security below its cost basis is other than
temporary and might require a write down through earnings.

                            Operating Lease Accruals

         The Company has vacated possession of its premises subject to operating
leases. This should be read in conjunction with the statements contained in Item
2, Part 1, of this Form 10-K.



                                       11
<PAGE>

                               Legal Contingencies

         We have been involved in several legal proceedings resulting from our
former operations. A significant judgment we make, in consultation with legal
counsel, is the determination as to the likelihood that any of the legal claims
filed against us will result in a liability for the Company. We record accruals
related to the potential loss that we believe provides for the probable and
estimable losses related to legal claims. We also disclose any legal claims
filed against us that we believe to be significant. It is possible that future
results of operations for quarterly or annual periods could be materially
affected by changes in our assumptions, or the effectiveness of our settlement
or litigation strategies, related to these proceedings.

                         Liquidity and Capital Resources

         Net cash used in operating activities was $6,485,672 for the year ended
December 31, 2002. The cash used in operating activities resulted from the
Company's purchase of precious metals (gold bullion) of $4,028,115 and prepaid
expenses, primarily related to Liquid Audio, in the amount of $1,028,277, the
net settlement of lease obligations of $1,326,403 and other liabilities, chiefly
the borrowing of $1.9 million to complete the lease termination of the Parkridge
Boulevard facility, offset by the Company's net income of $223,119.

         Cash used in activities characterized as investment activities for
accounting purposes was $443,928. The cash used in investing activities resulted
from the purchase of an investment in a partnership (JHC Investment Partners
LLC) created to purchase shares in Fairmarket Inc. in the amount of $596,021,
offset by proceeds from available for sale securities of $152,092.

         Cash used in financing activities was $91,533, used for the purchase of
our stock.

         On February 25, 2002, the Board of Directors authorized a stock
repurchase program for up to 500,000 shares of the Company's common stock.
Shares of common stock are expected to be purchased from time to time in open
market transactions and privately negotiated transactions, subject to
availability and price, prevailing market and business conditions, and
regulatory compliance.

         On February 27, 2002, the Company, along with certain other entities
(together with the Company, the "Reporting Entities"), was party to a joint
filing on Schedule 13D reporting the purchase of 3,485,500 shares of common
stock of Fairmarket Inc. ("Fairmarket") (NASDAQ: FAIM) (such amount representing
approximately 12.0% of Fairmarket's outstanding common stock). Of the total
amount of outstanding common stock reported as beneficially owned by the
Reporting Entities, the Company may deemed to account for 627,390 shares of such
common stock (such amount representing approximately 3.0% of Fairmarket's
outstanding common stock). The Reporting Entities include, in addition to the
Company, Barington Companies Equity Partners, L.P., an affiliate of Barington
Capital Group, L.P., a major shareholder of the Company, and Jewelcor
Management, Inc., an entity whose Chairman and Chief Executive Officer is
Seymour Holtzman, the Chairman of the Company's Board of Directors. On May 8,
2002, Fairmarket appointed Joseph Wright, Jr., to Fairmarket's Board of
Directors. Mr. Wright is also a director of the Company. Mr. Wright was
appointed to the Board of Fairmarket pursuant to an agreement that Fairmarket
entered into with the Reporting Entities. The agreement provides that the
Reporting Entities will not proceed with their proposed proxy contest and limits
actions that the group may take prior to January 22, 2005 with respect to their
ownership of Fairmarket common stock. In addition, James Mitarotonda, President
and Chief Executive Officer of MM Companies, Inc., was granted observer status
to Fairmarket's Board.

         At December 31, 2002, the Company had $575,454 in cash and cash
equivalents compared to $7,596,588 at December 31, 2001. Substantially all of
the Company's remaining cash was provided by our initial public offering of
common stock in 1999. The Company expects to experience negative cash flows for
the foreseeable future. Based on our current level of operations, we believe
that we have sufficient cash and cash equivalents to satisfy our obligations for
the next two years, although we can give no assurances in that regard. The
Company believes these obligations will primarily relate to costs associated
with the operation as a public company (legal, accounting, insurance, etc.), the
satisfaction of any potential legal judgments or settlements, as well as the
expenses associated with any new business activities which may be undertaken by
the Company.



                                       12
<PAGE>

         To the extent that management of the Company moves forward on its
alternative strategies, such strategies may have a significant impact on our
liquidity.

         On August 9, 2002, in connection with the review of the Company's
contested solicitation of proxies for the annual shareholders meeting of another
public company, the Company received a letter from the SEC's Division of
Investment Management inquiring as to the possible status of the Company as an
unregistered "investment company" within the meaning of the Investment Company
Act of 1940. The Company believes that, consistent with the discussion of
Investment Company Act matters in its Annual Report on Form 10-K for the year
ended December 31, 2001, the Company may have become an inadvertent investment
company during 2001. The Company has relied on the "transient investment
company" exemption from the applicable provisions of the Investment Company Act
contained in Rule 3a-2 thereunder, which provides for a one-year "safe harbor."

         Accordingly, prior to the expiration of such one-year safe harbor
period, on August 29, 2002, the Company acquired ownership of gold bullion for a
purchase price of $4,028,115. As of December 31, 2002, the Company borrowed
approximately $1.9 million secured by that gold bullion, which is included in
other current liabilities on the Company's balance sheet. As a result of such
acquisition, "investment securities" held by the Company no longer exceed 40% of
its total assets (excluding cash and government securities), and the Company
believes that it is no longer within the relevant definition of "investment
company" for purposes of the Investment Company Act. Notwithstanding the fact
that the Company purchased gold bullion, and "investment securities" held by the
Company no longer exceed 40% of its total assets (excluding cash and government
securities), the Company could be deemed to be an investment company under
Section 3(a)(1)(A) of the Investment Company Act, which covers companies that
are engaged primarily in the business of investing, reinvesting or trading in
securities.

         The Company believes that, at all relevant times prior to the date of
filing of this Report, either it has not been an investment company as defined
in the Investment Company Act or it has been a "transient investment company"
exempt from the Investment Company Act. The Company believes that because of the
character of its assets it does not currently fall within the definition of an
investment company.

         The Company is seeking to acquire one or more operating businesses in
the near term, which the Company believes would, among other things, eliminate
any concern that it may be deemed to be primarily engaged in the business of
investing, reinvesting or trading in securities. A determination by the SEC that
the Company is in fact an unregistered investment company could have a material
adverse effect on the Company's business. An unregistered investment company can
be prohibited from, among other things, engaging in interstate commerce.

                      Factors That May Affect Our Business,
                  Financial Condition and Results of Operations

Our common stock has been delisted from the Nasdaq and is currently subject to
"penny stock" rules.

         Since our common stock is not listed on a national securities exchange
or listed on a qualified automated quotation system, and does not qualify for
any available exceptions, it is subject to Rule 15g-9 under the Exchange Act,
which imposes additional sales practice requirements on broker-dealers that sell
such securities to persons other than established customers and "accredited
investors." (Accredited investors are, generally, individuals with a net worth
in excess of $1,000,000 or annual incomes exceeding $200,000 or $300,000
together with their spouses.)

         For transactions covered by Rule 15g-9, a broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. For any
transaction involving a penny stock, unless exempt, the rules require delivery,
prior to any transaction in a penny stock, of a disclosure schedule prepared by
the SEC relating to the penny stock market. Disclosure is also required to be
made about sales commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities. Finally,
monthly statements are required to be sent disclosing recent price information
for the penny stock held in the account and information on the limited market in
penny stock. Consequently, such Rule may affect the ability of broker-dealers to
sell the Company's securities and may affect the ability of purchasers to sell
any of the Company's securities in the secondary market.

Concentration of stock ownership may delay or prevent a change of control.



                                       13
<PAGE>

         Our directors, executive officers and principal stockholders and their
affiliates own a significant percentage of our outstanding common stock. As a
result, these stockholders may have the ability to influence the outcome of
corporate actions requiring stockholder approval. This concentration of
ownership may have the effect of delaying or preventing a change in control of
the Company.

Certain alternatives being considered by the Board, if they occur, could have a
substantially dilutive effect on your investment.

         The Company's Board of Directors has determined to seek to pursue one
or more potential acquisitions. See Item 1, "Business." Such acquisitions could
involve the issuance of additional equity in the Company or a future business
combination involving the Company. Depending on the terms of any such event, you
could experience a substantially dilutive effect on your investment.

Our stockholders may have difficulty in recovering monetary damages from
directors.

         Our certificate of incorporation contains a provision, which eliminates
personal liability of our directors for monetary damages to be paid to us and
our stockholders for some breaches of fiduciary duties. As a result of this
provision, our stockholders may be unable to recover monetary damages against
our directors for their actions that constitute breaches of fiduciary duties,
negligence or gross negligence. Inclusion of this provision in our certificate
of incorporation may also reduce the likelihood of derivative litigation against
our directors and may discourage lawsuits against our directors for breach of
their duty of care even though some stockholder claims might have been
successful and benefited stockholders.

We may be deemed to be an investment company and subjected to related
restrictions

         The regulatory scope of the federal Investment Company Act, which was
enacted principally for the purpose of regulating vehicles for pooled
investments in securities, extends generally to companies engaged primarily in
the business of investing, reinvesting, owning, holding or trading in
securities. The Investment Company Act may, however, also be deemed to be
applicable to companies which do not intend to be characterized as an investment
company but which, nevertheless, may be deemed to be within the definitional
scope of certain provisions of the Investment Company Act. We do not intend and
do not consider the Company to be an investment company and our anticipated
activities going forward are expected to involve acquiring one or more related
or other businesses. If we were deemed to be an investment company, our
activities would be restricted, including restrictions on the nature of our
investments and the issuance or repurchase of securities. We might also be
required to register under the Investment Company Act and file reports, or adopt
corporate governance rules including significant reporting, record keeping,
voting, proxy, disclosure and other rules and regulations. In the event we were
deemed to be an investment company, our failure to satisfy such regulatory
requirements have a material adverse effect on us.

Item 7A.          Quantitative and Qualitative Disclosures About Market Risk.

         The majority of our sales and expenses are denominated in U.S. dollars
and as a result, foreign exchange gains and losses to date have been
insignificant. While the Company may effect some transactions in foreign
currencies, it does not expect that any related gains or losses will be
significant. The Company has not engaged in foreign currency hedging to date.


                                       14
<PAGE>



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Index to Financial Statements                                          Page

Reports of Independent Auditors...........................................16

Balance Sheets
         As of December 31, 2002 and 2001................................18

Statements of Operations
         For the years ended December 31, 2002, 2001 and 2000............19

Statements of Stockholders' Equity
         For the years ended December 31, 2002, 2001 and 2000............20

Statements of Cash Flows
         For the years ended December 31, 2002, 2001 and 2000............21

Notes to Financial Statements............................................22




                                       15
<PAGE>


                         Report of Independent Auditors

Board of Directors and Stockholders of MM Companies, Inc.

         We have audited the accompanying balance sheet of MM Companies, Inc.
(formerly musicmaker.com, Inc.) (the "Company"), as of December 31, 2002, and
the related statements of operations, stockholders' equity and cash flows for
the year then ended. Our audit also included the financial statement schedule
listed in the Index at Item 16(a). These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audit.

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

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of MM Companies, Inc.
(formerly musicmaker.com, Inc.) as of December 31, 2002, and the results of its
operations and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.

         The accompanying financial statements and schedule have been prepared
assuming that the Company will continue as a going concern. As described more
fully in Note 1, on January 3, 2001, the Company ceased operation of its
Internet-based custom compact disc marketing business and has no current
substantive business operations. The Board of Directors continues to review
alternatives for the Company, but has not consummated any significant
transactions to date. As a result, the Company's business prospects remain
uncertain. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. The financial statements and financial statement
schedule do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and
classifications of liabilities that may result from the outcome of this
uncertainty.

                                             /s/ Rothstein, Kass & Company, P.C.
Roseland, New Jersey
March 6, 2003



                                       16
<PAGE>


                         Report of Independent Auditors

Board of Directors and Stockholders
Musicmaker.com, Inc.

         We have audited the accompanying balance sheet of Musicmaker.com, Inc.
as of December 31, 2001, and the related statements of operations, stockholders'
(deficit) equity, and cash flows for each of the two years in the period ended
December 31, 2001. Our audit also included the financial statement schedule
listed in the Index at Item 16(a). These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.

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

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Musicmaker.com, Inc.
at December 31, 2001, and the results of its operations and its cash flows for
each of the two years in the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

         The accompanying financial statements and schedule have been prepared
assuming that Musicmaker.com, Inc. will continue as a going concern. As
described more fully in Note 1, on January 3, 2001, Musicmaker.com, Inc. ceased
operation of its Internet-based custom compact disc marketing business and has
no current substantive business operations. The Board of Directors continues to
review alternatives for the Company, but has not consummated any significant
transactions to date. As a result, the Company's business prospects remain
uncertain. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. The financial statements and schedule do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classifications
of liabilities that may result from the outcome of this uncertainty.

                                                           /s/ Ernst & Young LLP

McLean, Virginia
January 26, 2002


                                       17
<PAGE>


                               MM COMPANIES, INC.
                                 Balance Sheets
<TABLE>
<CAPTION>

                                                                                         December 31,
                                                                                ------------------------------
                                                                                     2002            2001
                                                                                ------------------------------
<S>                                                                             <C>              <C>
Assets
Current assets:
   Cash and cash equivalents ................................................   $     575,454    $   7,596,588

   Precious metals ..........................................................       4,028,115               --
   Prepaid expenses and other current assets ................................       1,220,756          192,479
                                                                                -------------    -------------
Total current assets ........................................................       5,824,325        7,789,067

Investments in partnership ..................................................         596,021               --
Investments in available-for-sale securities ................................       1,611,874        1,670,992
                                                                                -------------    -------------
Total assets ................................................................   $   8,032,220    $   9,460,059
                                                                                =============    =============

Liabilities and stockholders' equity
Current liabilities:
   Accounts payable and accrued expenses ....................................   $   1,185,272    $   3,285,275

   Other current liabilities ................................................       1,915,535          153,337
                                                                                -------------    -------------
Total current liabilities ...................................................       3,100,807        3,438,612

Long-term liabilities, accrued lease payments ...............................              --        1,326,403
                                                                                -------------    -------------

Commitments and contingencies ...............................................              --               --

 Stockholders' equity:
   Common stock, $0.01 par value, 10,000,000 shares authorized; 3,350,052 and
     3,314,042 shares issued at December 31, 2002 and 2001, respectively, and
     3,280,614 and 3,314,042 shares
     outstanding at December 31, 2002 and 2001, respectively ................          33,501           33,140
   Additional paid-in capital ...............................................     185,445,946      185,391,807
   Accumulated other comprehensive income ...................................         164,372          114,089
   Accumulated deficit ......................................................    (180,620,873)    (180,843,992)
   Treasury stock, 69,438 shares, at cost ...................................         (91,533)              --
                                                                                -------------    -------------
   Total stockholders' equity ...............................................       4,931,413        4,695,044
                                                                                -------------    -------------
Total liabilities and stockholders' equity ..................................   $   8,032,220    $   9,460,059
                                                                                =============    =============
</TABLE>


         See accompanying notes to these financial statements.



                                       18
<PAGE>



                               MM COMPANIES, INC.
                            Statements of Operations
<TABLE>
<CAPTION>

                                                                   Year Ended December 31,
                                                      -----------------------------------------------
                                                           2002               2001            2000
                                                      -----------------------------------------------
<S>                                                   <C>              <C>              <C>
Net sales .........................................   $          --    $   3,201,412    $   5,583,505
Cost of sales:
      Product .....................................              --        1,911,686        2,435,774
      Content .....................................              --           13,647        8,610,155
                                                      -------------    -------------    -------------
Gross margin ......................................              --        1,276,079       (5,462,424)

Operating expenses:
   Sales and marketing ............................              --         (647,685)      16,093,084
   Operating and development ......................              --           85,444        2,595,802
   General and administrative .....................         (74,521)       8,005,124       10,658,425
   Depreciation and amortization ..................              --        2,976,630      102,038,806
   Reorganization .................................              --        2,087,746          774,573
   Loss on investment .............................              --               --        1,200,000
                                                      -------------    -------------    -------------
                                                            (74,521)      12,507,259      133,360,690
                                                      -------------    -------------    -------------
Income (loss) from operations .....................          74,521      (11,231,180)    (138,823,114)

Other:
    Interest income ...............................         105,907          528,116        2,314,219
    Interest expense ..............................              --               --           (1,210)
    Gain (loss) on sale of available-for-sale
    securities ....................................          42,691
    Other income ..................................              --           27,898               --
                                                      -------------    -------------    -------------
Total other .......................................         148,598          556,014        2,313,009
                                                      -------------    -------------    -------------
Net income (loss) before extraordinary item .......         223,119      (10,675,166)    (136,510,105)
Gain on extinguishment of debt ....................              --          151,429               --
                                                      -------------    -------------    -------------
Net income (loss) available to common stockholders.        223,119      (10,523,737)   $(136,510,105)
                                                      =============    =============    =============
Basic and diluted net income (loss) before
   extraordinary item per common share ............   $         .07    $       (3.22)   $      (41.22)
                                                      =============    =============    =============
Basic and diluted gain on extinguishment of debt
    per share .....................................              --             0.04               --
                                                      =============    =============    =============
Basic and diluted net income (loss) per common
    share .........................................   $         .07    $       (3.18)   $      (41.22)
                                                      =============    =============    =============

Weighted average shares outstanding ...............       3,305,073        3,314,042        3,311,719
                                                      =============    =============    =============
</TABLE>

                See accompanying notes to these financial statements.


                                       19
<PAGE>



                               MM COMPANIES, INC.
                       Statements of Stockholders' Equity

<TABLE>
<CAPTION>

                                                                             Accumulated
                                        Common Stock          Additional        Other
                                    ---------------------       Paid-In     Comprehensive Accumulated    Treasury
                                      Shares       Amount       Capital        Income       Deficit        Stock         Total
                                    ----------    -------    -------------    --------   -------------    --------   -------------
<S>                                  <C>          <C>        <C>              <C>        <C>              <C>        <C>
Balance at December 31, 1999 .....   3,299,350    $32,994    $ 195,021,927    $     --   $ (33,810,150)   $     --   $ 162,244,771

 Issuance of common stock ........         823          8           49,992          --              --                      50,000
 Issuance of warrants and options           --         --          (13,171)         --              --                    (13,171)
 Exercise of options .............      13,869        138          187,975          --              --                     188,113
 Net loss ........................          --         --               --          --    (136,510,105)               (136,510,105)
                                    ----------    -------    -------------    --------   -------------    --------   -------------
Balance at December 31, 2000 .....   3,314,042     33,140      195,246,723          --    (170,320,255)                 24,959,608
 Distribution to shareholders ....          --         --       (9,941,988)         --              --                  (9,941,988)
 Amortization compensatory stock
   options .......................          --         --            4,572          --              --                       4,572
 Refund on excess distribution ...          --         --           82,500          --              --                      82,500
 Unrealized holding gain on
   available-for-sale securities .                                             114,089                                     114,089
 Net loss ........................          --         --               --          --     (10,523,737)                (10,523,737)
                                    ----------    -------    -------------    --------   -------------    --------   -------------
Balance at December 31, 2001 .....   3,314,042     33,140      185,391,807     114,089    (180,843,992)         --       4,695,044
 Common stock, issued to
   outside directors .............      36,010        361           54,139          --              --                      54,500
Purchase of treasury stock .......                                                                         (91,533)        (91,533)
Unrealized holding gain on
 available-for-sale securities ...          --         --               --      50,283              --                      50,283
Net Income .......................          --         --               --          --         223,119                     223,119
                                    ----------    -------    -------------    --------   -------------    --------   -------------
Balance at December 31, 2002 .....   3,350,052    $33,501    $ 185,445,946    $164,372   $(180,620,873)   $(91,533)  $   4,931,413
                                    ==========    =======    =============    ========   =============    ========   =============
</TABLE>

See accompanying notes to these financial statements.


                                       20
<PAGE>


                               MM COMPANIES, INC.
                            Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                                 Year ended December 31,
                                                                  -----------------------------------------------
                                                                       2002            2001              2000
                                                                  -----------------------------------------------
Cash flows from operating activities
<S>                                                              <C>              <C>              <C>
Net income (loss) ............................................   $     223,119    $ (10,523,737)   $(136,510,105)
Adjustments to reconcile net income (loss) to net cash
  provided by (used in) operating activities:
  Depreciation ...............................................              --        2,976,630        3,332,407
  Amortization ...............................................              --               --       98,706,399
  Loss (gain) on sale of available-for-sale securities .......         (42,691)              --               --
  Loss on investment .........................................              --               --          750,000
  Gain on disposition of liabilities .........................      (1,639,472)              --               --
  Gain on sale of fixed assets ...............................              --          (27,898)              --
  Gain on early extinguishment of debt .......................              --         (151,429)              --
  Services received in exchange for stock and warrants .......          54,500            4,572          (13,171)
  Changes in operating assets and liabilities:
    Accounts receivable ......................................              --          533,112           (4,154)
    Precious metals ..........................................      (4,028,115)              --               --
    Prepaid expenses and other current assets ................      (1,028,277)       1,925,444         (658,000)
    Related party account receivable .........................              --           88,041           (6,522)
    Other assets .............................................              --        1,000,902        2,183,983
    Accounts payable and accrued expenses ....................      (1,058,522)        (462,160)       1,257,675
    Deferred revenues ........................................              --       (3,100,779)       2,975,779
    Other current liabilities ................................       2,085,580           58,366           94,971
    Deferred rent and other ..................................              --         (140,424)          97,567
    Accrued lease payments ...................................      (1,051,794)              --               --
                                                                 -------------    -------------    -------------

Net cash used in operating activities ........................      (6,485,672)      (7,819,360)     (27,793,171)

Cash flows from investing activities
Proceeds from (purchase of) available - for -
sale securities, net ........................................          152,092       (1,556,903)              --
Purchase of investment in partnership ........................        (596,021)              --               --
Proceeds from sale of property and equipment .................              --          435,927               --
Purchases of property and equipment ..........................              --          (35,393)      (4,233,945)
                                                                 -------------    -------------    -------------
Net cash used in investing activities ........................        (443,929)      (1,156,369)      (4,233,945)

Cash flows from financing activities
Purchases of treasury stock ..................................         (91,533)              --               --
Payment on long-term obligations .............................              --          (20,000)              --
Payment of cash distribution to shareholders .................              --       (9,941,988)              --
Refund on excess distribution ................................              --           82,500               --
Proceeds from the exercise of options ........................              --               --          188,113
                                                                 -------------    -------------    -------------
Net cash (used in) provided by financing activities ..........         (91,533)      (9,879,488)         188,113
                                                                 -------------    -------------    -------------
Net (decrease) increase in cash and cash equivalents .........      (7,021,134)     (18,855,217)     (31,839,003)
Cash and cash equivalents at beginning of year ...............       7,596,588       26,451,805       58,290,808
                                                                 -------------    -------------    -------------
Cash and cash equivalents at end of year .....................   $     575,454    $   7,596,588    $  26,451,805

Non-cash investing and financing activities
Common stock issued for licensing agreement ..................   $          --    $          --    $      50,000
                                                                 =============    =============    =============
Issuance and modification of warrants ........................   $          --    $          --    $     292,944
                                                                 =============    =============    =============
Payment on account receivable with common stock ..............   $          --    $          --    $     450,000
                                                                 =============    =============    =============
</TABLE>



See accompanying notes to these financial statements.


                                       21
<PAGE>


                               MM COMPANIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                      FOR THE YEAR ENDED DECEMBER 31, 2002

1.       ORGANIZATION

THE COMPANY

On January 3, 2001, the Board of Directors of MM Companies, Inc. (formerly
musicmaker.com, Inc.) (the "Company"), as then constituted, voted unanimously to
cease the operations of its Internet-based custom CD-marketing business. The
then-Board concluded at that time that business no longer represented a viable
alternative to provide maximum value to the Company's stockholders.

         The accompanying financial statements as of December 31, 2002 and for
the year then ended have been prepared assuming the Company will continue as a
going concern, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. At December 31,
2002, the Company had $575,454 in cash and cash equivalents and $4,028,115 in
precious metals (see note 3) compared to $7,596,588 in cash and cash equivalents
at December 31, 2001. The Company expects to experience negative cash flows for
the foreseeable future. As of December 31, 2002, the Company has utilized cash
of approximately $6,486,000 and has not generated any revenue in the last twelve
months. Based on our current level of operations, the Company believes that it
has sufficient cash and cash equivalents to satisfy its obligations, although it
can give no assurance in that regard. The Company believes these obligations
will primarily relate to costs associated with the operation as a public company
(legal, accounting, insurance, etc.), as well as the satisfaction of any
potential legal judgments or settlements as well as the expenses associated with
any new business activities, which may be undertaken by the Company. These
factors, among others, indicate that the Company may be unable to continue
operations as a going concern. No adjustment has been made in the accompanying
financial statements to the amounts and classifications of assets and
liabilities which could result should the Company be unable to continue as a
going concern. The Company continues to consider future alternatives, including
the possible acquisition of other businesses. However, the Company has not
consummated any significant transactions to date and the Company's business
prospects remain uncertain. To the extent that management of the Company moves
forward on any alternative strategy, such strategy may have an impact on the
Company's liquidity.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

         The Company considers all highly-liquid investments with an original
maturity of three months or less when purchased to be cash equivalents. A
portion of the Company's cash balances is held in an account managed by
Barington Capital Group, L.P. ("Barington"). Barington and an affiliate are
members of BCG Strategic Investors, which together with certain affiliates
beneficially owns approximately 38% of the Company's Common Stock.

Intangible Assets

         Prior to the Company's cessation of its Internet-based custom CD
marketing business, the Company entered into license agreements with various
record labels. The Company recorded the assets based on the fair market value of
the consideration granted and was amortizing the assets over the life of the
license agreements. At December 31, 2000, the carrying value of the intangibles
was assessed at zero and the Company expensed $78,444,650, the remaining value
of their agreements, to amortization expense.

Investments

         Securities classified for accounting purposes as available-for-sale
securities consist of marketable equity securities not classified as either
held-to-maturity or trading securities. Available-for-sale securities are stated
at fair value with unrealized holding gains and losses reported as a separate
component of stockholders' equity as accumulated other comprehensive income.
Dividends on marketable equity securities are recognized in income



                                       22
<PAGE>

when declared. Realized gains and losses and declines in value deemed to be
other-than-temporary are included in other income (expense). The cost basis for
realized gains and losses is determined on the basis of the actual cost of the
securities sold.

         As of December 31, 2002 and 2001, the Company had available-for-sale
investments with a fair market value of $1,611,874 and $1,670,992, respectively
and a cost basis of $1,447,502 and $1,556,903, respectively. The gross
unrealized gains for the years ended December 31, 2002 and 2001 of $50,283 and
$114,089 have been recorded as a separate component of stockholders' equity as
accumulated other comprehensive income.

         As of December 31, 2002 and 2001 the Company held the following equity
positions:

                                                  2002              2001

      Liquid Audio Inc. (NASDAQ:  LQID)      654,900 shares     626,100 shares

      Fairmarket Inc. (NASDAQ:  FAIM)            500 shares                 --

      Clarus Corporation (NASDAQ:CLRS)                   --       6,195 shares

      Vulcan International Corp. (AMEX:VUL)              --       4,000 shares

         All investments are held in an account managed by Barington. Barington
and an affiliate are members of BCG Strategic Investors, which, together with
certain affiliates, beneficially owns approximately 38% of the Company's Common
Stock.

Impairment of Long-Lived Assets

         At each balance sheet date, management determines whether any property
and equipment or any other assets have been impaired based on the criteria
established in Statement of Financial Accounting Standards ("SFAS") No. 144.

Accounting for the Impairment of Long-lived Assets and Long-lived Assets to be
Disposed Of.

         The Company evaluates the carrying amount of long-lived assets to be
held and used, including property and equipment and intangible assets, when
events and circumstances warrant such a review. The carrying amount of a
long-lived asset is considered impaired when the estimated undiscounted cash
flow from each asset is less than its carrying amount. In that event, the
Company records a loss equal to the amount by which the carrying amount exceeds
the fair market value of the long-lived asset. Assets to be disposed of are
measured at the lower of carrying amount or fair value less cost to sell. For
the year ended December 31, 2001 and 2000 the Company recorded impairment
allowances of $2,276,731 and $2,000,000, respectively. At December 31, 2002, all
property and equipment had a carrying value of zero.

Fair Value of Financial Instruments

         The Fair Value of the Company's assets and liabilities which qualify as
financial instruments under statement of Financial Accounting Standards No. 107,
"Disclosures About Fair Value of Financial Instruments," approximate the
carrying amounts presented in the accompanying balance sheets.

Income Taxes

         The Company complies with Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes", which requires an asset and liability
approach to financial reporting for income taxes. Deferred income tax assets and
liabilities are computed for differences between the financial statement and tax
bases of assets and liabilities that will result in future taxable or deductible
amounts, based on enacted tax laws and rates applicable



                                       23
<PAGE>

to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred income
tax assets to the amount expected to be realized.

Stock-Based Compensation

         In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure," which amended SFAS No. 123,
"Accounting for Stock-Based Compensation." This Statement provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based compensation. It also amends the disclosure
provisions to require more prominent disclosure about the effects on reported
net income (loss) of an entity's accounting policy decisions with respect to
stock-based employee compensation. The provisions of this Statement are to be
applied to financial statements for fiscal years ending after December 15, 2002.
As permitted by the Statement, the Company does not plan to adopt the fair value
recognition provisions of SFAS No. 123 at this time. However, the Company has
adopted the disclosure provisions of the Statement as of December 31, 2002.

         The Company accounts for its stock-based employee compensation plans
under Accounting Principles Board Opinion No. 25, under which no compensation
cost has been recognized in the accompanying statements of operations, as all
options granted under those plans had an exercise price equal to or in excess of
the market value of the underlying common stock at the date of grant (see Note
7).

         Had compensation cost for these options been determined consistent with
the fair value method provided by Financial Accounting Standards Board Statement
No. 123 ("FASB No. 123"), the Company's net income (loss) and net income (loss)
per common share would have been the following pro forma amounts in each of the
years during the three year period ended December 31, 2002.
<TABLE>
<CAPTION>

                                        2002               2001               2000
<S>                                   <C>          <C>               <C>
Net income (loss):
As reported                           $ 223,119    $ (10,523,737)    $ (136,510,105)
Deduct:
Total stock based compensation
  expense determined under fair
  value method for all awards, net
  of related tax effect                 (98,398)                         (2,426,278)
                                      ----------   --------------    ---------------

Pro forma                             $ 124,721    $ (10,523,737)    $ (138,936,383)
                                      ==========   ==============    ===============

Basic and diluted EPS:
As reported                                0.07            (3.18)            (41.22)
Pro forma                                  0.04            (3.18)            (41.96)

</TABLE>



         The fair value of each option grant is estimated on the grant date
using the Black-Scholes option pricing model with the following assumptions:
Risk-free interest rate 4.0%, no dividend yield, expected life 5 years and
expected volatility of 373%.

Comprehensive Income (Loss)

         The Company separately reports net loss and comprehensive income or
loss pursuant to SFAS No. 130, "Reporting Comprehensive Income." Other
comprehensive income includes revenues, expenses, gains and losses that under
generally accepted accounting principles are recorded as an element of
stockholders' equity and are excluded from net income (loss). The Company's
comprehensive income (loss) for the years ended December 31, 2002 and 2001
totaled $273,402 and $10,409,648, respectively, and is comprised of the
Company's net income (loss) of $223,119, and ($10,523,737), respectively,
partially offset by $50,283 and $114,089, respectively, of unrealized gains
related to available-for-sale securities. Comprehensive loss equals net loss for
2000.

                                       24
<PAGE>

Net Income (Loss) Per Share

         The Company complies with SFAS No. 128, "Earnings Per Share." SFAS
No.128 requires dual presentation of basic and diluted income (loss) per share
for all periods presented. Basic income (loss) per share excludes dilution and
is computed by dividing income(loss) available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted
income per share reflects the potential dilution that could occur if securities
or other contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that then share in the income
of the Company. Diluted net loss per share excludes common equivalent shares,
unexercised stock options and warrants as the computation would be
anti-dilutive. Unexercised stock options to purchase 103,756 shares of the
Company's common stock as of December 31, 2002, were excluded in the computation
of diluted earning per share because the options' exercise price was greater
than the average market price of the Company's common stock. For the years ended
December 31, 2001 and 2000, since the effects of the outstanding options and
warrants are anti-dilutive in the respective periods, it has been excluded from
the computation of net loss per common share.

Revenue Recognition

         Net sales were recognized at the time merchandise was shipped to
customers for custom CDs and upon execution of orders for digitally downloaded
songs.

Significant Customers

         In February 2001, the Company fulfilled its contract with the
Pepsi-Cola Company. As a result, the Company recognized the remaining $3,100,779
of revenue under the contract, which represented approximately 97% of the
Company's total sales for the year ended December 31, 2001. For the year ended
December 31, 2000, two customers generated 50% of the Company's total sales.

Cost of Sales

         In accordance with Statement of Financial Accounting Standards No. 50,
"FINANCIAL REPORTING IN THE RECORD AND MUSIC INDUSTRY," royalty advances and
minimum guarantees to music labels were recorded as an asset if the past
performance and current popularity of the music to which the advance related
provided a sound basis for estimating the probable future recoupment of such
advances. Advances were then expensed as subsequent royalties were earned. Any
portion of advances that subsequently appeared not to be fully recoverable from
future royalties were charged to expense during the period in which the loss
became evident.

         The Company included in cost of sales royalty expenses incurred based
on usage per music track. Royalty charges resulted in cost of sales, related to
music content, of zero, $13,647 and $8,610,155 for the years ended December 31,
2002, 2001, and 2000, respectively. The Company has included in cost of sales
royalty advances that were paid upon signing of certain initial royalty
agreements with independent music labels, due to management's expectations of
minimal revenues expected during the one-year period following the signing of
the contracts. The Company may be required to make additional advances upon the
anniversaries of the signing of these initial contracts and expenses them as
incurred.

Operating and Development Costs

         Operating and development costs relating to the Company's proprietary
custom CD compilation software technology were expensed as incurred. The Company
has incurred research and development costs of approximately $nil, $72,000 and
$511,000 in the years ended December 31, 2002, 2001 and 2000, respectively.
Operating and development costs also include network and non-capitalized website
costs.

Advertising Costs

         The Company expenses all advertising costs as incurred. The Company
incurred approximately $nil, $(1,167,000) and $7,970,000 related to advertising
for the years ended December 31, 2002, 2001 and 2000, respectively.


                                       25

<PAGE>

Use of Estimates

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.

Reclassifications

         Certain amounts in the prior periods have been reclassified to conform
with the current period presentation.

New Accounting Pronouncements

         In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. This accounting standard, which is effective for fiscal years
beginning after May 15, 2002, requires, among other things, that debt
extinguishments used as a part of an entity's risk management strategy no longer
meet the criteria for classification as extraordinary items. The adoption of
SFAS No. 145 is not expected to have a material effect on the Company's
financial position or results of operations.

         In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or disposal Activities which nullifies Emerging Issues Task
Force (EITF) issued No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to exit an Activity (including Certain
Costs Incurred in a Restructuring). This accounting standard, which is effective
for exit or disposal activities that are initiated after December 31, 2002,
addresses financial accounting and reporting for costs associated with exit or
disposal activities. The adoption of SFAS No. 146 is not expected to have a
material effect on the Company's financial position or results of operations.

3.       PRECIOUS METAL

         In August 2002, the Company acquired 12,900 ounces of gold bullion for
a purchase price of $4,028,115. As of December 31, 2002, the Company borrowed
approximately $1.9 million secured by that gold bullion, which is included in
other current liabilities on the Company's balance sheet (see Note 18).

4.       PREPAID EXPENSES AND OTHER CURRENT ASSETS

         Included in prepaid expenses and other current assets at December 31,
2002 is approximately $1,024,000 of professional fees and filing costs,
associated with the since abandoned litigation and contested proxy solicitation
with respect to Liquid Audio, Inc.

5.       INVESTMENT PARTNERSHIP

         On February 27, 2002, the Company along with certain other entities
(together with the Company, the "Reporting Entities"), was party to a joint
filing on Schedule 13D reporting the purchase of 3,485,500 shares of common
stock of Fairmarket Inc. ("Fairmarket") (NASDAQ: FAIM) (such amount representing
approximately 12.0% of Fairmarket's outstanding common stock). Of the total
amount of outstanding common stock reported as beneficially owned by the
Reporting Entities, the Company may be deemed to account for 627,390 shares of
such common stock (such amount representing approximately 3.0% of Fairmarket's
outstanding common stock). This represents the Company's investment of $596,021
in JHC Investment Partners, LLC for the purchase of 627,390 shares of Fairmarket
common stock. JHC Investment Partners, LLC is the entity created to purchase
3,485,500 shares of Fairmarket common stock. The Company has accounted for this
investment as cost (which is not materially different under the equity method of
accounting). The Reporting


                                       26

<PAGE>

Entities  include,  in  addition  to the  Company,  Barington  Companies  Equity
Partners,  L.P.,  an  affiliate  of  Barington  and a major  shareholder  of the
Company,  and Jewelcor  Management,  Inc.,  an entity  whose  Chairman and Chief
Executive  Officer is Seymour  Holtzman,  the Chairman of the Company's Board of
Directors.

         On May 8, 2002, Fairmarket appointed Joseph Wright, Jr., to
Fairmarket's Board of Directors. Mr. Wright is also a director of MM Companies,
Inc. Mr. Wright was appointed to the Board of Fairmarket pursuant to an
agreement that fair market entered into with the Reporting Entities. The
agreement provides that the Reporting Entities will not proceed with their
proposed proxy contest and limit actions that the group may take with respect to
their ownership of Fairmarket common stock prior to January 22, 2005. In
addition, James Mitarotonda, President and Chief Executive Officer of MM
Companies, Inc., was granted observer status to Fairmarket's Board.

6.       ACCOUNTS PAYABLE AND ACCRUED EXPENSES

         Accounts payable and accrued expenses as of December 31, 2002 and 2001
         are comprised of the following:

                                                  December 31,
                                         ------------------------------
                                            2002                2001
                                         ----------          ----------

         Lease payments                  $     --            $1,487,302
         Accounts payable                   534,605             517,281
         Professional fees                   50,543             123,153
         License and royalty fees           520,000             919,000
         Taxes                                7,704              80,440
         Advertising expenses                    --              87,500
         Other                               72,420              70,599
                                         ----------          ----------
                                         $1,185,272          $3,285,275
                                         ==========          ==========

7.       COMMON STOCK AND WARRANTS

         In January 2000, the Company issued a warrant exercisable for 5,882
shares of our common stock to Cheap Trick Unlimited, in exchange for and in
connection with Cheap Trick's execution of a license agreement. The warrant is
exercisable for a period of five years at $59.50 per share, based upon the
average closing price of our common stock on the NASDAQ for a period of five
days prior to the execution of the Cheap Trick license agreement. The Company
valued the warrant using the Black-Scholes option-pricing model and recorded an
intangible asset of $292,922, which was fully amortized at December 31, 2000.

         In February 2000, the Company issued 823 shares of its common stock
valued at $50,000, estimating the fair value of the Company's common stock at
$60.80 per share in exchange for a license agreement with Metal Blade Records.

         In February 2000, the Company issued warrants exercisable for up to
15,000 shares of our common stock to each of two consultants, in exchange for
and in connection with their execution of consulting agreements, under which
they agreed to perform certain services in connection with obtaining rights and
access to additional sound recordings, obtaining marketing opportunities and
obtaining web casting and other broadcast opportunities on behalf of the
Company. The warrants expired unexercised in February 2003.

         On February 25, 2002, the Board of Directors authorized a stock
repurchase program for up to 500,000 shares of the Company's Common Stock.
Shares of Common Stock are expected to be purchased from time-to-time in open
market transactions and privately negotiated transactions, subject to
availability and price, prevailing market and business conditions and regulatory
compliance. In connection with the stock repurchase program, on June 11, 2002,
the Company's Board of Directors and a majority of the stockholders authorized a
one for one hundred reverse stock split followed by a hundred for one forward
stock split.


                                       27

<PAGE>

         As of December 31, 2002, the Company had repurchased 69,438 shares of
its Common Stock at an average market price of $1.32 per share.

         In 2002, the Board of Directors approved the issuance of an aggregate
of 36,010 shares of Company Common Stock and 35,000 stock options to Board
members for services provided in their role as directors.

8.       STOCK OPTION PLAN

         The 1996 Stock Option Plan (the "Plan") was adopted by the Board of
Directors and approved by the stockholders in 1996. The purpose of the Plan is
to promote the long-term growth and profitability of the Company by providing
key people with incentives to contribute to the growth and financial success of
the Company. The aggregate number of shares of common stock for which options
may be granted under the Plan shall not exceed 650,000 shares as voted on by a
majority of the stockholders during the 2000 annual stockholder meeting.
Additional information with respect to stock option activity is summarized as
follows:

<TABLE>
<CAPTION>

                                              2002                        2001                        2000
                                     ------------------------    -------------------------    -------------------------
                                                    Weighted                     Weighted                     Weighted
                                                    Average                      Average                      Average
                                                    Exercise                     Exercise                     Exercise
                                       Shares        Price        Shares          Price        Shares          Price
                                       ------      ---------      ------        ---------      ------        ---------

<S>                                  <C>          <C>           <C>           <C>            <C>             <C>
Outstanding at beginning of
   year                                68,756      $   42.93      258,713       $   39.35      234,445       $   40.20
Options granted                        35,000           2.08         --           --           214,289           42.73
Options exercised                        --          --              --           --           (13,869)          13.59
Options canceled or expired              --          --          (189,957)      $   38.04     (176,152)          46.62
                                     --------      ---------     --------       ---------     --------       ---------
Outstanding at end of year            103,756      $   29.15       68,756       $   42.93      258,713       $   39.35
                                     ========      =========     ========       =========     ========       =========
Exercisable at end of year            103,756      $   29.15       55,923       $   39.15      115,484       $   34.31
                                     ========      =========     ========       =========     ========       =========
</TABLE>

<TABLE>
<CAPTION>

                                        Options Outstanding                         Options Exercisable
                          -------------------------------------------------    ------------------------------
                             Number       Weighted-Average                        Number
                           Outstanding       Remaining          Weighted-       Exercisable      Weighted-
   Range of Exercise         as of          Contractual         Average           as of           Average
        Price               12/31/02      Life (In Years)    Exercise Price      12/31/02      Exercise Price
        -----               --------      ---------------    --------------      --------      --------------

<S>                        <C>               <C>              <C>                <C>              <C>
    $2.02 to $2.10           35,000            3.30              $ 2.08           35,000          $  2.08
   $20.00 to $23.00          30,256            2.69              $21.98           30,256           $21.98
   $35.01 to $60.00          38,500            2.04              $59.40           38,500           $59.40
                             ------            ----              ------           ------           ------
                            103,756            2.65              $29.15          103,756           $29.15
                            =======            ====              ======          =======           ======
</TABLE>


         On December 31, 2002, the Company issued a stock appreciation right for
185,000 shares to each of James Mitarotonda and Seymour Holtzman. The stock
appreciation right provides that it may be exercised for cash in an amount equal
to the excess value, if any, by which the market value of the shares on the date
of exercise exceeds $1.852, as adjusted from time to time. The stock
appreciation right is exercisable immediately and expires on December 31, 2007.
No compensation expense has been recorded during the year ended December 31,
2002, as the Company's stock price was lower than the stock appreciation right's
exercise price.


                                       28

<PAGE>

9.       WARRANTS

         The following table summarizes all common and preferred stock warrant
activity:

                                                  Year ended December 31,
                                            ------------------------------------
                                              2002         2001          2000
                                            --------    ---------      ---------
Outstanding at beginning of year             288,978      401,826       385,944
Warrants issued                                 --           --          35,882
Warrants exercised                              --           --            --
Warrants expired                                --       (112,848)      (20,000)
                                            --------     --------      --------
Outstanding at end of year                   288,978      288,978       401,826
                                            ========     ========      ========

10.      INCOME TAXES

         At December 31, 2002, the Company had net operating loss carry-forwards
of $142.2 million and capital loss carry-forwards of $1.2 million. The timing
and manner in which the remaining operating loss carry-forwards may be utilized
in any year will be limited to the Company's ability to generate future earnings
and by limitations imposed due to change in ownership. Current net operating
loss carry-forwards will expire principally in the years 2019 through 2021. The
capital loss carry-forwards will expire in 2005. As the Company has not
generated any revenues during 2002 and no assurance can be made of future
earnings, a valuation allowance in the amount of the deferred tax asset has been
recorded. The change in the valuation allowance was $946,876. There was no
current or deferred provision for income taxes for the years ended December 31,
2002, 2001 or 2000.

         The total net operating loss carry-forwards ("NOL") of $142.2 million
has been reduced, for financial reporting purposes, by $13.8 million, which is
unlikely ever to be utilized due to the operation of the Section 382 provisions.
The remainder of the NOL also likely might effectively be obviated if certain
future events were to occur that would invoke additional Section 382 provisions.
Future use of the NOLs therefore is extremely speculative and should not be
presumed absent extensive analysis of the complex Section 382 provisions.

         Net deferred tax assets consist of:

<TABLE>
<CAPTION>

                                                                     December 31,
                                                             ----------------------------
                                                                  2002           2001
                                                             ------------    ------------

<S>                                                          <C>             <C>
         Deferred tax assets:
            Start up expenses                                $       --      $    112,908
            Reserves and other                                    204,584         955,329
            Capital loss carry-forward                            447,600         447,600
            Net operating loss carry-forward                   47,938,842      48,022,065
                                                             ------------    ------------
            Deferred tax assets before valuation
              allowance                                        48,591,026      49,537,902
         Less valuation allowance                             (48,591,026)    (49,537,902)
                                                             ------------    ------------
         Net deferred tax assets                             $       --      $       --
                                                             ============    ============
</TABLE>

         The Company has not paid any income taxes since its inception.


                                       29

<PAGE>

         The provision for income taxes differed from the amount computed by
applying the U.S. federal statutory rate to the income (loss) before income
taxes due to the effects of the following:

<TABLE>
<CAPTION>

                                                                                      Year ended December 31,
                                                                      --------------------------------------------------
                                                                          2002               2001              2000
                                                                      ------------       ------------       ------------

<S>                                                                   <C>                <C>                <C>
Expected tax expense (benefit) at federal statutory tax rate          $     75,860       $ (3,578,071)      $(46,413,436)
Future state expense (benefit), net of federal expense (benefit)             7,363           (347,283)        (5,460,404)
Nondeductible expenses and other                                              --                 --              184,329
Utilization of NOL                                                         (83,223)              --                 --
Increase in valuation allowance                                               --            3,924,499         51,689,511
                                                                      ------------       ------------       ------------
                                                                      $       --         $       --         $       --
                                                                      ============       ============       ============
</TABLE>

11.      COMMITMENTS AND CONTINGENCIES

Royalty Agreements

         The Company has signed contracts with record labels for non-exclusive
rights to manufacture, advertise, market, promote, distribute and sell custom
CDs and to digitally download songs over the Internet. The agreements contain a
master use royalty rate of 15% of the selling price less any sales, excise or
similar taxes. If the Company enters into a more favorable royalty rate with
another licensor, the majority of these contracts contain clauses allowing the
licensor to also receive the more favorable royalty terms. As discussed in Note
1, many of the contracts require advances upon the anniversary dates of the
signing of the contracts. Several of the royalty agreements provide for the
Company to pay advances based on actual royalties earned by the label in the
previous year, as opposed to a fixed amount.

         In connection with the royalty agreement signed on October 11, 1999,
the Company advanced $500,000 to an independent record label. There is a note
receivable for this amount that was due on April 11, 2000 that earns interest at
7% per annum. In 2000, the Company established a reserve for the entire
receivable and is currently pursuing legal action to collect the note.

12.      LITIGATION

        In February 2000, the Company, amongst other parties, was named as
defendants in a purported securities class action complaint, including
subsequent amendments thereto. During 2002, final approval to the terms set
forth in a Stipulation of Settlement was granted whereby the Company would not
be obligated to contribute to the related settlement.

        The Company has been named as a defendant in three separate lawsuits
arising out of licensing agreements it had previously entered into with
Classicberry Limited and the Black Crowes partnership in the case of the first
lawsuit (the "Classicberry Lawsuit"), with Profile Publishing and Management
Corporation ApS in the case of the second lawsuit (the "Profile Lawsuit"), and
with Koch Entertainment LLC in the case of the third lawsuit (the "Koch
Lawsuit"). The lawsuits seek an aggregate of approximately $800,000,
representing what the respective plaintiffs allege is the balance owed by the
Company under the agreements. With respect to the Classicberry Lawsuit, the
Plaintiffs subsequently agreed to give the Company a satisfaction of judgment
and general release in exchange for the Company's payment to plaintiff of
$280,000, all of which was performed on December 23, 2002. With respect to the
Profile Lawsuit, no judgment has yet been entered against the Company. However,
based on information available to us, management believes that the judgment,
when entered, will be for approximately $330,000 and is accrued for in accounts
payable and accrued expenses at December 31, 2002. With respect to the Koch
Entertainment Lawsuit, the Plaintiff has agreed to discontinue this action in
exchange for the Company's payment of $190,000 to plaintiff which is accrued for
in accounts payable and accrued expenses at December 31, 2002 and was paid on
February 18, 2003.


                                       30

<PAGE>

         In May 2001, the Company settled its obligation of $171,429 to Music
Maker Relief Fund (the "Foundation") for $20,000 and recorded an extra ordinary
gain on the early extinguishment of debt of $151,429. Pursuant to the terms of
the settlement, the Company was released from the monetary claims that the
Foundation may have had against the Company under a contract dated July 1, 1998,
between the Company and the Foundation. Under the terms of the settlement, the
Company can no longer use the trademark "musicmaker" but can continue to use the
domain name MM Companies, Inc.

         The Company had leased space on Parkridge Boulevard in Reston, Virginia
(the "Parkridge Property"), which served as the Company's administrative offices
and production center. On February 22, 2002, Parkridge Five Associates (the
"Parkridge Five") filed a lawsuit against the Company captioned Parkridge Five
Associates Limited Partnership v. Musicmaker, Inc., Fairfax County Circuit Court
(Chancery No. 177001). The Bill of Complaint alleged claims for breach of
contract and declaratory judgment. The Company filed an Answer to the Complaint.
At the conclusion of discovery, the parties entered into settlement discussions,
which resulted in the settlement of the matter. The parties executed a
settlement agreement providing for lease termination and a cash payment from the
Company to Parkridge of $2.1 million (which was paid during 2002), and the case
was dismissed with prejudice by a consent order on September 25, 2002.

         On June 30, 2001, the Company closed its office located on Wiehle
Avenue in Reston, Virginia (the "Wiehle Property") and relocated its principal
offices to New York City. The Company sublet the Wiehle Property on July 1,
2001. The sub-lessee subsequently vacated the premises and, the Company
believes, is in default under the sublease. The Company retained legal counsel
to recover amounts due and owing under the sublease agreement. A summons was
filed in the Fairfax County General District Court on May 21, 2002. On July 10,
2002, counsel for the sub lessee advised the Company that it could apply the
security deposit to the unpaid rent. On the same date, our counsel withdrew the
action and the full security deposit was applied to the past due rent. On June
27, 2002, we executed a Lease Termination Agreement with Wiehle Limited
Partnership, the landlord, ending the Company's obligation and term of the lease
for the Wiehle Property. Pursuant to the terms of the lease termination
agreement, the Company made an approximate $129,000 payment to the landlord
during 2002.

13.      INFRASTRUCTURE REORGANIZATION

         On September 28, 2000, the Company announced an infrastructure
reorganization that reduced full-time staff levels by 30% or 27 individuals. The
$774,573 reorganization charge consisted of severance packages for the
involuntarily terminated employees. Employee terminations occurred within the
marketing, engineering, fulfillment, and administration departments. The Company
did not dispose of any assets or discontinue any products as a result of the
September 2000 reorganization. All amounts related to this charge were paid as
of December 31, 2000.

         On January 3, 2001, the Company's Board of Directors as then
constituted voted unanimously to cease the operations of its Internet-based
custom CD-marketing business. As a result, pending the present Board's ongoing
review of alternatives for the Company going forward, the Company suspended its
website, bought out several equipment leases and terminated 44 employees which
represented 83% of the work force. Severance packages, totaling approximately
$1,714,000, were granted to these employees based on length of service with the
Company. Additionally, the Company accrued the severance costs of approximately
$374,000 related to the remaining employees. As of June 30, 2001, the Company
had no employees other than its President and Chief Executive Officer and Chief
Financial Officer. All amounts related to this charge have been paid as of
December 31, 2001.

14.      RELATED PARTY TRANSACTIONS

         In connection with the Company's cessation of its Internet-based custom
CD-marketing business, effective as of July 1, 2001, the Company relocated its
principal executive offices to 888 Seventh Avenue, 17th Floor, New York, New
York 10019, an office maintained by Barington Capital Group, L.P. ("Barington"),
a limited partnership whose general partner is a corporation of which James
Mitarotonda is Chairman, President and Chief Executive Officer. Barington and an
affiliate are members, and Mr. Mitarotonda is one of the managing members, of
BCG Strategic Investors LLC, which, together with certain affiliates,
beneficially owns approximately 38% of the Company's Common Stock. Mr.
Mitarotonda is also the President and Chief Executive Officer of the Company.

                                       31

<PAGE>

         Effective July 1, 2001, Barington has made available to the Company the
services of a Barington employee to serve as the Chief Financial Officer and
Secretary of the Company, and began providing the Company with the assistance of
certain other Barington employees and the use of office space and administrative
services provided by Barington. In consideration of the foregoing, the Company
pays Barington a $5,000 monthly fee. Effective May 1, 2002, the Board of
Directors approved an increase of the fee to Barington to $23,500 per month.
This increase recognizes the salary and benefits costs of the two Barington
employees who devote 80% and 70% of their time to the Company. It includes the
provision for occupancy, computer, telephone, fax, Internet access, office
supplies and stationary, and printing expenses. In addition, the Company pays
$5,000 per month, each, to Mr. Mitarotonda and Mr. Holtzman for services
performed. For the year ended December 31, 2002 and 2001, the Company expensed
approximately $328,000 and $100,000, respectively in payments to related
parties, which is included in general and administrative expenses.

15.      NET INCOME (LOSS) PER SHARE

         The following equity instruments were not included in the diluted net
loss per share calculation because their effect would be anti-dilutive:

                                   Year ended December 31,
                              ----------------------------------
                                 2002       2001         2000
                              --------    --------     ---------

Stock options                      --         --        258,713
Warrants                           --      288,978      401,826

16.      401(k) PLAN

         The Company provided a 401(k) plan (the "Plan") for all employees.
Contributions were made through voluntary employee salary reductions and
discretionary matching by the Company. The Company did not make matching
contributions to the Plan on behalf of its employees during 2001 and 2000.

         On February 13, 2001, the Company's Board of Directors approved the
termination of the Plan. The Plan termination was effective on April 2, 2001.

17.      SHAREHOLDER DISTRIBUTION

         On February 15, 2001, the Company announced that the Board of Directors
had approved a cash distribution in the amount of $3.00 per share to the holders
of record of common stock as of March 1, 2001, the record date. The distribution
totaled $9,941,988, and was paid in March 9, 2001. The distribution included
$82,500 paid in error to a former stockholder of the Company whose stock was not
returned to the Company until after the establishment of the record date for the
distribution, which amount was subsequently returned by the former stockholder,
leading the Company to record a net distribution of $9,859,488 as a reduction of
stockholders' equity.

18.      SUBSEQUENT EVENT

         In February and March 2003, the Company sold an aggregate of 7,600
ounces of their gold bullion for approximately $2,683,000, of which
approximately $1.9 million was used to pay off their outstanding liability,
which was secured by the gold bullion as of December 31, 2002.



                                       32

<PAGE>

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

None.


                                    PART III

ITEM 10  DIRECTORS AND EXECUTIVE OFFICERS

         Set forth below is certain information regarding the directors and
executive officers of the Company.

<TABLE>
<CAPTION>

Name                                          Age      Position
----                                          ---      --------

<S>                                           <C>      <C>
Seymour Holtzman.........................     67       Director and Chairman of the Board of Directors
James Mitarotonda........................     48       Director, President and Chief Executive Officer
Jesse Choper.............................     67       Director
Devarajan S. Puthukarai..................     59       Director
Irwin Steinberg..........................     81       Director
Joseph Wright, Jr........................     64       Director
Melvyn Brunt.............................     59       Chief Financial Officer and Secretary
</TABLE>

         Seymour Holtzman has been a member of the Company's Board of Directors
and Chairman of the Board since January 2001. Mr. Holtzman has been involved in
the retail business for over 30 years. For many years he has been the President
and Chief Executive Officer of Jewelcor, Inc., formerly a New York Stock
Exchange company that operated a nationwide chain of retail stores. From 1986 to
1988, Mr. Holtzman was the Chairman of the Board and Chief Executive Officer of
Gruen Marketing Corp, an American Stock Exchange company involved in the
nationwide distribution of watches. For at least the last five (5) years, Mr.
Holtzman has been the Chairman and Chief Executive Officer of Jewelcor
Management, Inc, an entity primarily engaged in investment and management
services; C.D. Peacock, Inc., a prominent Chicago, Illinois retail jewelry
establishment; and S.A. Peck & Company, a retail and mail order jewelry company
based in Chicago, Illinois. Mr. Holtzman is currently the Chairman of the Board
of two public companies: Designs, Inc. (NASDAQ "DESI") and musicmaker.com, Inc.
(OTC bulletin board "HITS"). Mr. Holtzman is a former Chairman of the Board and
a current Director of Little Switzerland, Inc. (OTC bulletin board "LSVI"), a
leading jewelry retailer in the Caribbean, Alaska and Key West, Florida. Mr.
Holtzman is also on the Board of Directors of Northeast Pennsylvania Financial
Group, Inc. (AMEX "NEP"), the holding company for First Federal Bank, a $800
million bank based in Hazleton, Pennsylvania. As of January 2000, Mr. Holtzman
became one of ten outside advisors to Barington Companies Equity Partners, L.P.
James Mitarotonda is the President and Chief Executive Officer of Barington
Companies Investors, LLC, which is the General Partner of Barington Companies
Equity Partners, L.P. Jewelcor Management, Inc. is a limited partner in
Barington Companies Equity Partners, L.P. Mr. Holtzman has been an investor in
banks and savings and loans since 1972.

         James Mitarotonda is President, Chief Executive Officer and a director
of the Company and has served in such capacities since January 2001. Mr.
Mitarotonda is also the Chairman of the Board, President and Chief Executive
Officer of Barington Capital Group, L.P. He has held these positions at
Barington for at least the last five years. Mr. Mitarotonda co-founded Barington
Capital Group, L.P. in November 1991. Mr. Mitarotonda is also President and
Chief Executive Officer of Barington Companies Investors, LLC, the general
partner of Barington Companies Equity Partners, L.P., a small capitalization,
value fund in which the general partner seeks to be actively involved with its
portfolio companies in order to enhance shareholder value. In addition, Mr.
Mitarotonda is a member of the Board of Directors of Liquid Audio, Inc. and LP
Innovations, Inc., and is an observer to the Board of Fairmarket, Inc. In May
1988, Mr. Mitarotonda co-founded Commonwealth Associates, an investment banking,
brokerage and securities trading firm. Mr. Mitarotonda served as Chairman of the
Board and Co-Chief Executive Officer of JMJ Management Company Inc., the general
partner of Commonwealth Associates. From December 1984 to May 1988, Mr.
Mitarotonda was Senior Vice President/Investments of DH Blair & Co., Inc.
Earlier in his career, Mr. Mitarotonda was employed by Citibank, N.A. in an
executive capacity having management responsibility for two of Citibank's
business banking branches. During his tenure at Citibank, Mr. Mitarotonda became
Regional Director of Citibank's Home Equity Financing and Credit Services. Mr.
Mitarotonda is a member of the Alumni Advisory Council of New York University's
Stern School of Business and is a member of the

                                       33
<PAGE>

Gotham Chapter of the Young President's Organization, where he formerly served
on the Executive Committee and as the Co-Chairman of Membership. Mr. Mitarotonda
is also a member of the Board of Directors of The Friends of Green Chimneys, a
charitable organization. Mr. Mitarotonda graduated from New York University's
Leonard N. Stern School of Business with a Master of Business Administration
degree and from Queens College with a Bachelor of Arts degree in Economics.

         Jesse Choper has served as a member of the Company's Board of Directors
since May 2001. Mr. Choper is the Earl Warren Professor of Public Law at the
University of California at Berkeley School of Law where he has taught since
1965. Professor Choper was the Dean of the Law School from 1982 to 1992. He has
been a visiting professor at Harvard Law School, Fordham Law School, University
of Milan in Italy Law School and Universitad Autonoma Law School in Barcelona,
Spain. From 1960 to 1961, Professor Choper was a law clerk for Supreme Court
Chief Justice Earl Warren. He is widely recognized author, lecturer, consultant
and commentator on issues of Constitution Law and Corporation Law. Mr. Choper is
also a member of the Board of Director's of Designs, Inc. (NASDAQ "DESI").

         Devarajan S. Puthukarai has served as a member of the Company's Board
of Directors since April 1997. Mr. Puthukarai was the Company's President, Chief
Executive Officer, Chief Operating Officer until January 12, 2001 and served as
the Company's Co-Chief Executive Officer from April 1997 until December 1999.
From 1991 to April 1997, Mr. Puthukarai was President of Warner Music Media, a
division of Warner Music Enterprises, a Time Warner Inc. company engaged in the
business of promoting new and upcoming artists. From 1984 to 1990, Mr.
Puthukarai was President of RCA Direct Marketing Inc./BMG Direct Marketing Inc.,
launching one of the country's first CD music clubs and building the world's
largest classical music club. Mr. Puthukarai earned his Bachelor of Science and
Bachelor of Law degrees from Madras University in India. Mr. Puthukarai earned a
Master of Business Administration degree from the Indian Institute of
Management, a Harvard/Ford Foundation school in Ahemadabad, India.

         Irwin Steinberg has served as a Company director since January 1997.
Mr. Steinberg also serves as a consultant to the Company. Since 1982, Mr.
Steinberg has been President of HIS Corporation, a consulting firm specializing
in the music industry. From 1975 to 1982, Mr. Steinberg was Chairman and Chief
Executive Officer of PolyGram Records, Inc. Mr. Steinberg was co-founder of
Mercury Records Corporation. From 1946 to 1975, Mr. Steinberg was Vice President
and President, the later of which he held from 1968 to 1975. Mr. Steinberg
currently serves as an adjunct Professor at Columbia College of the Arts in
Chicago, where he teaches graduate courses in music business. Mr. Steinberg
holds a Bachelors degree from the University of Chicago Business School and a
Masters degree from the California State University at Domingo Hills.

         Joseph R. Wright, Jr. has served as a member of the Company's Board of
Directors since January 2001. Mr. Wright is President and Chief Executive
Officer of PanAmSat Inc., one of the world's largest providers of global
satellite-based communications services; servicing news organizations,
telecommunications companies, DirecTV services, Internet networks and others
around the globe. In the six years prior to this position in 2001, Mr. Wright
was Vice Chairman of Terremark Worldwide Inc., a public company that develops
and operates Network Access Point (NAP) centers in the U.S. and Brazil. Mr.
Wright was also Chairman and Director of GRC International, Inc., a public
company providing advanced IT, Internet, and software systems technologies to
government and commercial customers, which was sold to AT&T. He was also
Co-Chairman and Director of Baker & Taylor Holdings, Inc., an international
book/video/software distribution and e-commerce company that is majority owned
by the Carlyle Group. From 1989 to 1994, Mr. Wright was Executive Vice
President, Vice Chairman and Director of W.R. Grace & Co., Chairman of Grace
Energy Company, and President of Grace Environmental Company. Mr. Wright was
Deputy Director and Director of the Federal Office of Management and Budget and
a member of the President's Cabinet during the Reagan Administration from 1982
to 1989 and Deputy Secretary of the Department of Commerce from 1981 to 1982. He
previously held positions as President of two of Citibank's subsidiaries, as a
partner of Booze Allen and Hamilton and in various management/economic positions
in the Federal Departments of Commerce and Agriculture. In addition, Mr. Wright
serves on the Board of Directors/Advisors of Terremark Worldwide Inc., Titan
Corporation, Baker & Taylor, Verso Technologies Inc., Proxim Corporation and the
AT&T Washington Advisory Board. Mr. Wright graduated from Yale University with a
Master's Degree in Industrial Administration and from Colorado School of Mines
with a Professional Engineering Degree.

                                       34
<PAGE>

         Melvyn Brunt is Secretary and Chief Financial Officer and has served in
such capacity since January 2002. Before that Mr. Brunt was a Director and Chief
Financial Officer of Davies Turner & Co. an international freight forwarding
company with offices throughout the United States. From 1996 to 2001 he was
President of Air Mar Inc., located in Puerto Rico and a Director of TCX
International Inc., located in Miami. Both of those companies provide logistics
support services to a wide variety of importing and exporting client companies.

             Section 16(a) Beneficial Ownership Reporting Compliance

         Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than 10% of the Company's Common Stock to file reports of ownership and
changes in ownership of the Company's Common Stock with the Securities and
Exchange Commission. Based solely on a review of the copies of such reports and
written representations from the reporting persons that no other reports were
required, the Company believes that during the fiscal year ended December 31,
2002, its executive officers, directors and greater than 10% stockholders filed
on a timely basis all reports due under Section 16(a) of the Exchange Act.

Item 11  Executive Compensation.

         The following table sets forth all compensation awarded to, earned by,
or paid for the years ended December 31, 2002, 2001 and 2000 for services
rendered to the Company for each person who acted as the Company's chief
executive officer during the year ended December 31, 2002 and its most highly
compensated executive officer other than the chief executive officer serving as
executive officer at December 31, 2002 (the "Named Executive Officers").

                           Summary Compensation Table

<TABLE>
<CAPTION>

                                                                                       Long-Term
                                                                                     Compensation
                                                      Annual Compensation               Awards
                                                -------------------------------------------------
                                                                                        Number
                                                                                        Shares
                                                                                       Underlying
          Name and Principal Position             Year       Salary($)   Bonus($)        SARs
                     (a)                           (b)          (c)        (d)           (g)
          ---------------------------             ----       ---------   --------     -----------
<S>                                               <C>         <C>         <C>         <C>
James A. Mitarotonda                              2002        $60,000       --        185,000(2)
President and Chief Executive Officer (1)         2001        $46,923       --              --
                                                  2000             --       --              --
</TABLE>

(1)  Mr. Mitarotonda was appointed President and chief executive officer on
     January 18, 2001.

(2)  As of December 31, 2002, the Company granted Mr. Mitarotonda stock
     appreciation rights to purchase 185,000 shares of our common stock at an
     exercise price of $1.852 per share.

                               SAR Grants in 2002

        The following table sets forth information regarding the grant of SARs
to purchase the Company's common stock to each of the Named Executive Officers
during the fiscal year ended December 31, 2002. Potential realizable value
assumes that the common stock appreciates at the indicated annual rate
(compounded annually) from the grant date until the expiration of the option
term and is calculated based on the requirements of the Securities and Exchange
Commission. Potential realizable value does not represent the Company's estimate
of future stock price growth.


                                       35

<PAGE>

<TABLE>
<CAPTION>

                                                    Individual Grants
                               -----------------------------------------------------------
                                                 Percentage of                               Potential Realizable Value at
                                 Number of          Total                                    Assumed Annual Rates of Stock
                                Securities      Options/SARs                                 Price Appreciation for Option
                                Underlying       Granted to     Exercise of                            Term (1)
                                Options/SARs     Employees in     Base Price    Expiration    ------------------------------
            Name                  Granted        Fiscal 2002       ($/Sh)         Date          5% ($)           10% ($)
            (a)                     (b)              (c)            (c)           (e)            (f)               (g)
            ---                 -----------     -------------   ------------    ----------      -----            ------

<S>                               <C>               <C>          <C>            <C>            <C>              <C>
James A. Mitarotonda              185,000           100%         $ 1.852        12/19/07        17,131           34,262
</TABLE>

(1)  Potential Realizable Value assumes that the Common Stock appreciates at the
     indicated annual rate (compounded annually) from the grant date until the
     expiration of the option term and is calculated based on the requirements
     promulgated by the Securities and Exchange Commission. Potential Realizable
     Value does not represent the Company's estimate of future stock price
     growth.

(2)  As of December 31, 2002, the Company issued a stock appreciation right for
     185,000 shares to James Mitarotonda pursuant to the stockholder agreement.
     The stock appreciation right provides that it may be exercised for cash in
     an amount equal to the excess value, if any, by which the market value of
     the shares on the date of exercise exceeds $1.852 as adjusted from time to
     time.

                            Compensation of Directors

         Non-employee directors are granted an option to purchase 7,500 shares
of common stock upon their initial election or appointment to the board. Each
non-employee member of the board is to receive $3,000 worth of Company common
stock for each board meeting attended in person and $500 worth of Company common
stock for each board meeting attended via telephone.

         Board members are reimbursed for reasonable expenses incurred in
connection with attending meetings of the board and of committees of the board.

                 Employment Agreements and Consulting Agreements

         Effective July 1, 2001, Barington Capital Group, L.P. has made
available to the Company the services of a Barington employee to serve as the
chief financial officer and secretary of the Company, and began providing the
Company with the assistance of certain other Barington employees and the use of
office space and administrative services provided by Barington. In consideration
of the foregoing, the Company pays Barington a $5,000 monthly fee. Effective May
1,2002, the Board of Directors approved an increase of the fee to Barington to
$23,500 per month. This increase recognizes the salary and benefits cost of the
two Barington employees who devote 80% and 70% of their time to the Company. It
includes the provision for occupancy, computer, telephone, fax, Internet access,
office supplies and stationary and printing expenses. In addition, the Company
pays $5,000 per month, each, to Mr. Mitarotonda and Mr. Holtzman for services
performed in their capacity as President and Chairman of the Board,
respectively.

          Compensation Committee Interlocks and Insider Participation.

         Since the dissolution of the Company's Compensation Committee on
January 23, 2001, the Board of Directors has undertaken to review the
performance of the Company's management and recommend and approve the
compensation of and the issuance of stock options to executive officers and
employees under the Company's stock option plan. In addition, the Board reviews
compensation levels of other employees and reviews other compensation-related
issues.

         Devarajan S. Puthukarai is currently a member of our Board of Directors
who served previously as our chief executive officer.

                                       36
<PAGE>

         Report of the Compensation Committee of the Board of Directors.

         As disclosed above, our Board of Directors reviews the performance of
the Company's management.

         General Compensation Policy. The fundamental policy of the Board is to
provide the Company's executive officers with competitive compensation
opportunities based upon their contribution to the Company's development and
financial success and their personal performance. The compensation package for
each executive officer is comprised of three elements: (i) base salary, (ii)
bonus and (iii) equity incentive awards.

         Base Salary. The Board strives to offer salaries to its executive
officers, which are competitive with salaries offered by companies of similar
size and capitalization in the Company's industry. Base salaries are reviewed on
an annual basis and are subject to adjustment based upon the individual's
contribution to the Company and changes in salary levels offered by comparable
companies. Executive officers' salaries are determined by the Chief Executive
Officer, based on information from various sources, and approved by the Board of
Directors.

         Bonuses. The amount of awards granted to the executive officers are
contingent upon the Company achieving certain performance goals established by
the Board of Directors. For executive officers, awards are also contingent on
the achievement of individual performance objectives. Target and minimum amounts
of bonuses for each executive officer are set annually by the Board of Directors
and are specifically weighted for identified financial, management, strategic
and operational goals.

         Equity Incentives. The Board of Directors believes that employee equity
ownership is highly motivating, provides a major incentive to employees to build
stockholder value and serves to align the interests of employees with the
interests of the Company's stockholders. In determining the amount of equity
compensation to be awarded to executive officers in any fiscal year, the Board
considers the position of the officer, the current stock ownership of the
officer, the number of shares which continue to be subject to vesting under
outstanding options and the expected future contribution of the officer to the
Company's performance, giving primary weight to the officer's position and his
expected future contributions. In addition, the Board of Directors compares the
stock ownership and options held by each officer with the other officer's equity
positions and each officer's experience and value to the Company.

         CEO Compensation. Commencing July 1, 2001, Mr. Mitarotonda received
$5,000 per month for services rendered in his capacity as President and Chief
Executive Officer. See "Executive Compensation" above.

                         Company Stock Price Performance

         The graph below compares the cumulative total stockholder return on the
Company's common stock, the Wilshire Small Capital Index and the S&P 500
Industrial Index. Cumulative total stockholder return represents share value
appreciation through December 31, 2002, assuming the investment of $100 in the
Common Stock of the Company at the initial public offering on July 7, 1999 and
in each of the other indexes on the same date, and reinvestment to all
dividends. The Company's shareholder return illustrated below includes a cash
distribution of $3.00 per share paid to all stockholders of record on March 1,
2001. The comparisons in the graph below are based on historical data and are
not intended to forecast the possible future performance of our common stock.

         The data points used in the omitted graphical presentation is as
follows:


                                               Cumulative Total Return
                                              ----------------------------
                                              7/7/99            12/31/2002
                                              ------            ----------

MM COMPANIES, INC.                            100.00             (96.78%)
WILSHIRE SMALL CAP INDEX                      100.00              (7.69%)
S & P 500 INDEX                               100.00             (37.30%)


                                       37
<PAGE>

ITEM 12  SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
         STOCKHOLDERS MATTERS

         Security Ownership of Certain Beneficial Owners and Management

         The following table sets forth certain information known to us with
respect to the beneficial ownership of our common stock as of March 25, 2003, by
(1) all persons who are beneficial owners of 5% or more of our common stock, (2)
each director and nominee, (3) the Named Officers in the Summary Compensation
Table above, and (4) all directors and executive officers as a group.

         The number of shares beneficially owned is determined under rules
promulgated by the SEC, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under those rules, beneficial
ownership includes any shares as to which the individual has sole or shared
voting power or investment power and also any shares which the individual has
the right to acquire within 60 days of March 25, 2002, through the exercise or
conversion of any stock option, convertible security, warrant or other right.
Including those shares in the tables does not, however, constitute an admission
that the named stockholder is a direct or indirect beneficial owner of those
shares. Unless otherwise indicated, each person or entity named in the table has
sole voting power and investment power (or shares that power with that person's
spouse) with respect to all shares of capital stock listed as owned by that
person or entity. Except as otherwise indicated in the table, the address of the
stockholders listed below is that of the Company's principal executive office.
Directors or executive officers not included in the table below do not hold
Company securities.

<TABLE>
<CAPTION>

                                                                            Percent of Total
                                                                                Shares
Name and Address                                    Number of Shares         Outstanding(1)
----------------                                    ----------------         --------------

    Principal Stockholders

<S>                                                   <C>                        <C>
BCG Strategic Investors LLC                           1,271,466(2)               38.8%
c/o Barington Capital Group, LP
888 Seventh Avenue, 17th Floor
New York, NY  10019

Rho Management Trust I                                  288,432(3)                8.8%
152 West 57th Street, Floor 23
New York, NY  10019-3310

    Officers and Directors

Jesse Choper                                             14,159(4)                  *

Seymour Holtzman                                        185,000(5)                5.3%

James Mitarotonda                                       185,000(6)                5.3%

Devarajan S. Puthukarai                                 139,210(7)                4.1%

Irwin H. Steinberg                                       52,503(8)                1.6%

Joseph Wright, Jr.                                       16,461(9)                  *

All executive officers and directors as a group
  (6 persons)                                           592,333                   15.6%
</TABLE>

* Less than 1%

(1)  Percentage of beneficial ownership is calculated assuming 3,280,614 shares
     of common stock were outstanding on March 25, 2003.

(2)  Includes 18,500 shares held by Barington Capital Group L.P., a member of
     BCG Strategic Investors LLC, whose general partner is LNA Capital Corp.,
     and of which the Chairman, President and CEO is James Mitarotonda; 26,200
     shares acquired by dot com Investment Corp., a member of BCG Strategic
     Investors, LLC, and of which the President and sole director is Seymour
     Holtzman; and 16,900 shares held by Barington Companies Equity Partners,
     L.P., whose general partner is Barington Companies Investors, LLC, of which
     the managing member is James Mitarotonda.


                                       38

<PAGE>

(3)  Includes 78,790 shares of common stock issuable upon exercise of Series B
     warrants and 43,828 shares of common stock issuable upon exercise of Series
     C warrants. Rho Management Partners L.P., a Delaware limited partnership,
     may be deemed the beneficial owner of shares registered in the name of Rho
     Management Trust I, under an investment advisory relationship by which Rho
     Management Partners L.P. exercises sole voting and investment control over
     Rho Management Trust I's shares and warrants.

(4)  Includes options to purchase 7,500 shares of common stock; and 6,659 shares
     of restricted common stock. (5) As of December 19, 2002, the Company
     granted Mr. Holtzman a stock appreciation right to purchase 185,000 shares
     of our common stock. This number does not include shares of the Company
     owned by BCG Strategic Investors LLC or dot com Investment Corp. Mr.
     Holtzman is a managing member of BCG Strategic Investors LLC and the
     President and sole director of dot com Investment Corp.

(5)  As of December 31, 2002, the Company granted Mr. Holtzman a stock
     appreciation right to purchase 185,000 shares of our common stock. This
     number does not include shares of the Company owned by BCG Strategic
     Investors LLC or dot com Investment Corp. Mr. Holtzman is a managing member
     of BCG Strategic Investors LLC and the President and sole director of dot
     com Investment Corp.

(6)  As of December 31, 2002, the Company granted Mr. Mitarotonda a stock
     appreciation right to purchase 185,000 shares of our common stock. This
     number does not include shares of the Company owned by BCG Strategic
     Investors LLC, Barington Capital Group L.P., or Barington Equity Partners,
     L.P. Mr. Mitarotonda is a managing member of BCG Strategic Investors LLC,
     the Chairman, President and CEO of LNA Capital Corp., the general partner
     of Barington Capital Group L.P., and the managing member of Barington
     Company Investors, LLC, the general partner of Barington Companies Equity
     Partners, L.P.

(7)  Includes an option to purchase 22,997 shares of common stock; an option to
     purchase 63,756 shares of common stock; 35,825 shares of restricted common
     stock; an option to purchase 10,000 shares of common stock; and 6,632
     shares of restricted common stock.

(8)  Includes an option to purchase 5,000 shares of common stock; a warrant to
     purchase 16,940 shares of common stock; an option to purchase 10,000 shares
     of common stock; 8,541 shares of restricted common stock; and a warrant to
     purchase 6,048 shares of common stock held by Mr. Steinberg's spouse and
     three children.

(9)  Includes an option to purchase 7,500 shares of common stock and 8,961
     shares of restricted common stock.

                      Equity Compensation Plan Information

         The following table sets forth certain equity compensation plan
information with respect to both equity compensation plans approved by security
holders and equity compensation plans not approved by security holders.

<TABLE>
<CAPTION>

                                                               Number of                             Number of securities
                                                            securities to be     Weighted-average   remaining available for
                                                              issued upon         exercise price        future issuance
                                                              exercise of         of outstanding         under equity
                                                              outstanding           options,           compensation plans
                                                           options, warrants      warrants and       (excluding securities
                                                               and rights            rights         reflected in column (a))
Plan category                                                     (a)                  (b)                    (c)
-------------                                              -----------------      --------------    -----------------------
<S>                                                             <C>                  <C>                    <C>

Equity compensation plans approved by security
holders..............................................               --                  --                     --

Equity compensation plans not approved by security
holders(1)...........................................            370,000              1.852                    --

Total................................................            370,000              1.852                    --

</TABLE>

(1)  Issued to Mr. Mitarotonda and Mr. Holtzman in accordance with the terms of
     the stockholders agreement, dated as of January 12, 2001.


                                       39

<PAGE>

                    Indemnification of Directors and Officers

         The Company's Amended and Restated Certificate of Incorporation Charter
and Amended Bylaws provide that it shall indemnify all of its directors and
officers to the full extent permitted by the Delaware General Corporation Law.
Under these provisions, any director or officer who, in his or her capacity as
such, is made or threatened to be made a party to any suit or proceeding, may be
indemnified if the Board determines the director or officer acted in good faith
and in a manner the director reasonably believed to be in, or not opposed to,
the best interests of the Company. The Charter, Amended Bylaws, and Delaware law
further provide that indemnification is not exclusive of any other rights to
which directors and officers may be entitled under our Charter, Amended Bylaws,
any agreement, any vote of stockholders or disinterested directors, or
otherwise.

         The Company has the power to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee, or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, or other enterprise, against any expense, liability, or loss incurred by
that person in the capacity he served for the Company or arising out of his
status as such, whether or not the Company would have the power to indemnify
that person against similar liability under Delaware law. The Company has
director and officer insurance coverage. Our directors and officers are insured
against liability of up to $10,000,000 in the aggregate each policy year.

ITEM 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         None.

ITEM 14. CONTROLS AND PROCEDURES.

         Within 90 days prior to the filing date of this Annual Report on Form
10-K, the Company's management, including the Chief Executive Officer and Chief
Financial Officer, carried out an evaluation of the effectiveness of the
Company's disclosure controls and procedures as defined in Exchange Act Rule
13a-14. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer have concluded that the Company's current disclosure controls
and procedures are effective. There have been no significant changes in the
Company's internal controls or in other factors that could significantly affect
internal controls subsequent to the date of the evaluation by the Chief
Executive Officer and Chief Financial Officer.

         The design of any system of controls and procedures is based in part
upon certain assumptions about the likelihood of future events. There can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions, regardless of how remote.

ITEM 15. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

                                   Audit Fees

         Rothstein, Kass and Company, P.C. billed the Company $25,000 for the
independent audit of the Company's annual financial statements for the year
ended December 31, 2002 and for the review of the financial statements included
in the Company's quarterly report for the nine months ended September 30, 2002.
The Company's previous auditors, Ernst & Young LLP, billed the Company $19,700
for the independent review of the financial statements included in the Company's
quarterly reports for the three months ended March 31, 2002 and the six months
ended June 30, 2002. Ernst & Young LLP billed the Company $63,333 for the
independent audit of the financial statements included in the Company's annual
financial statements included in the annual report for the year ended December
31, 2001 and for the quarterly reports filed for the nine months ended September
30, 2001, six months ended June 30, 2001 and three months ended March 31, 2001.
In addition, Ernst & Young LLP billed the Company $16,000 for the independent
audit of the Company's financials for the six months ended June 30, 2001.



                                       40
<PAGE>

                                    Tax Fees

         Ernst & Young LLP billed the Company $11,000 for tax consultations
related to Section 382 provisions of the Internal Revenue Code.

                                 All Other Fees

         Ernst & Young LLP billed the Company $2,000 related to the transition
of the Company's auditors.


                                     PART IV

ITEM 16. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)(1)   Index to Financial Statements

         Please see the accompanying Index to Financial Statements, which
appears in Item 8 on page 16 of this report. The Report of Independent Auditors,
Financial Statements and Notes to Financial Statements which are listed in the
Index to Financial Statements and which appear beginning on page 17 of this
report are included in Item 8.

(a)(2)   Financial Statement Schedules

<TABLE>
<CAPTION>

                                   Schedule II
                        VALUATION AND QUALIFYING ACCOUNTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

Desc  ription                       Balance at         Additions
                                   Beginning of        Charged to       Deductions From     Balance at End
                                       Year              Expense           Reserves            of Year
                                   ------------        ----------       ---------------     --------------

<C>                                 <C>                <C>                <C>                  <C>
2002                                $    --            $     --           $      --            $    --
----
Deducted from accounts
receivable:
  For doubtful accounts

2001                                $40,000            $     --           $  40,000            $    --
----
Deducted from accounts
receivable:
  For doubtful accounts

2000                                $75,000            $ 55,000           $  90,000            $40,000
----
Deducted from accounts
receivable:
  For doubtful accounts
</TABLE>

(a)(3)   Exhibits

         Please see subsection (c) below.

(b) Reports on Form 8-K

         None.

(c) Exhibits.

1.1      Form of Underwriting Agreement between musicmaker.com, Virgin Holdings,
         Inc. and Ferris, Baker Watts, Incorporated, Fahnestock & Co. Inc. and
         C. E. Unterberg, Towbin as Representatives.(1)

3.1      Form of Amended and Restated Certificate of Incorporation.(1)

                                       41
<PAGE>

4.1      Form of Common Stock Certificate.(1)

5.1      Opinion of Venable, Baetjer and Howard, LLP regarding legality.(1)

10.1     Amended and Restated Employment Agreement between the Company and
         Robert P. Bernardi dated December 8, 1997, amended on February 12,
         1999.(1)

10.2     Amended and Restated Employment Agreement between the Company and
         Devarajan S. Puthukarai dated December 8, 1997, amended on February 12,
         1999 and on May 19, 1999.(1)

10.3     Consulting Agreement dated January 23, 1997, between the Company and
         Irwin H. Steinberg, amended on January 1, 1998, and amended by letters
         to the Company dated August 28, 1998 and August 31, 1998.(1)

10.4     Letter Agreement dated June 12, 1998, between the Company and The
         Columbia House Company.(1)

10.5     The Company's Amended Stock Option Plan.(1)

10.6     Marketing Agreement dated September 30, 1998, between Platinum
         Entertainment, Inc. and the Company.(1)

10.7     Memorandum of Understanding between the Company and Audio Book Club,
         Inc. dated January 18, 1999.(1)

10.8     Office/Warehouse/Showroom Lease dated January 15, 1998 between the
         Company and Century Properties Fund XX.(1)

10.9     Form of Lock-up Agreement.(1)

10.10.1  Loan and Security Agreement between the Company and Imperial Bank dated
         March 12, 1999.(1)

10.10.2  Standby Letter of Credit and Security Agreement dated March 9, 1999,
         and Addendum thereto dated March 5, 1999.(1)

10.11    Master Equipment Lease dated January 8, 1999 between the Company and
         Boston Financial & Equity Corporation.(1)

10.12    Agreement of Lease between 570 Lexington Company, L.P. and the Company
         dated February 26, 1999.(1)

10.13    License Agreement between the Company and Virgin Holdings, Inc. dated
         June 8, 1999.(1)

10.14    Agreement between the Company and Virgin Holdings, Inc. dated June 8,
         1999.(1)

10.15    Stockholders' Agreement between the Company, Virgin Holdings, Inc. and
         the other Stockholders listed on Schedule I dated June 8, 1999.(1)

10.16    Registration Rights Agreement between the Company, Virgin

         Holdings, Inc., Rho Management Trust I, The Columbia House Company and
         the other Stockholders listed on Schedules I and II dated June 8,
         1999.(1)

10.17    Co-Branding and Media Purchase Agreement between the Company and
         Spinner Networks, Inc. dated March 26, 1999.(1)

10.18    Note Purchase Agreement between Rho Management Trust I and the Company
         dated as of June 23, 1999.(1)

10.19    Demand Promissory Note in the aggregate principal amount of $1,000,000
         issued by the Company to Rho Management Trust I dated as of June 23,
         1999.(1)

10.20    Office Lease (1740 Broadway, 23rd Floor, New York, NY 10019) commencing
         January 15, 2000.(2)

10.21    Office Lease (10780 Parkridge Blvd., Suite 50, Reston, VA 20191)
         commencing January 15, 2000.(2)

10.22    Loan agreement between the Company and Devarajan Puthukarai.(2)

10.23    Interactive marketing agreement between the Company and American
         Online, Inc., dated September 15, 1999.(2)

                                       42
<PAGE>

10.24    Stockholders Agreement dated January 12, 2001, among musicmaker.com,
         Inc. and BCG Strategic Investors, LLC, Barington Capital Group, L.P.,
         Barington Companies Equity Partners, L.P. and Dot Com Investment
         Corporation.(3)

10.25    Stock appreciation rights agreement, dated as of December 31, 2002,
         between the Company and James Mitarotonda.(4)

10.26    Stock appreciation rights agreement, dated as of December 31, 2002,
         between the Company and Seymour Holtzman.(4)

23.1     Consent of Ernst & Young LLP.(4)

23.2     Consent of Rothstein, Kass & Company, P.C.(4)

99.1     Certification of the Chief Executive Officer pursuant to 18 U.S.C.
         Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
         Act.(4)

99.2     Certification of the Chief Financial Officer pursuant to 18 U.S.C.
         Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
         Act.(4)

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

(1)      Previously filed as an exhibit to the Company's registration statement
         on Form S-1, as amended and incorporated herein by reference.

(2)      Previously filed as an exhibit to the Company's annual report on Form
         10-K for the year ended December 31, 1999 and incorporated herein by
         reference.

(3)      Previously filed as an exhibit to the Company's annual report on Form
         10-K for the year ended December 31, 2000 and incorporated herein by
         reference.

(4)      Filed herewith.



                                       43
<PAGE>


                                   SIGNATURES

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

                                 MM COMPANIES, INC.

                                 /s/ James Mitarotonda
                                 President, Chief Executive Officer and Director
                                 March 31, 2003

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934,this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.

   Signature                             Title                      Date
   ---------                             -----                      ----

  /s/ JAMES MITAROTONDA             President, Chief Executive   March 31, 2003
   ---------------------------      Officer and Director
   James Mitarotonda

   /s/ SEYMOUR HOLTZMAN             Chairman of the Board of     March 31, 2003
   ---------------------------      Directors and Director
   Seymour Holtzman

   /s/ IRWIN H. STEINBERG           Director                     March 31, 2003
   ---------------------------
   Irwin H. Steinberg

   /s/ JOSEPH WRIGHT, JR.           Director                     March 31, 2003
   ---------------------------
   Joseph Wright, Jr.

   /s/ DEVARAJAN S. PUTHUKARAI      Director                     March 31, 2003
   ---------------------------
   Devarajan S. Puthukarai

   /s/ JESSE CHOPER                 Director                     March 31, 2003
   ---------------------------
   Jesse Choper

   /s/ MELVYN BRUNT                 Chief Financial Officer      March 31, 2003
   ---------------------------      and Secretary
   Melvyn Brunt



                                       44
<PAGE>

                                 CERTIFICATIONS

I, James A. Mitarotonda, certify that:

         1.       I have reviewed this annual report on Form 10-K of MM
                  Companies, Inc.;

         2.       Based on my knowledge, this annual report does not contain any
                  untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  annual report;

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this annual report, fairly
                  present in all material respects the financial condition,
                  results of operations and cash flows of the registrant as of,
                  and for, the periods presented in this annual report;

         4.       The registrant's other certifying officer and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the registrant and we have:

                  a)       designed such disclosure controls and procedures to
                           ensure that material information relating to the
                           registrant, including its consolidated subsidiaries,
                           is made known to us by others within those entities,
                           particularly during the period in which this annual
                           report is being prepared;

                  b)       evaluated the effectiveness of the registrant's
                           disclosure controls and procedures as of a date
                           within 90 days prior to the filing date of this
                           annual report (the "Evaluation Date"); and

                  c)       presented in this annual report our conclusions about
                           the effectiveness of the disclosure controls and
                           procedures based on our evaluation as of the
                           Evaluation Date;

         5.       The registrant's other certifying officer and I have
                  disclosed, based on our most recent evaluation, to the
                  registrant's auditors and the audit committee of registrant's
                  board of directors (or persons performing the equivalent
                  function):

                  a)       all significant deficiencies in the design or
                           operation of internal controls which could adversely
                           affect the registrant's ability to record, process,
                           summarize and report financial data and have
                           identified for the registrant's auditors any material
                           weaknesses in internal controls; and

                  b)       any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the registrant's internal controls; and

         6.       The registrant's other certifying officer and I have indicated
                  in this annual report whether or not there were significant
                  changes in internal controls or in other factors that could
                  significantly affect internal controls subsequent to the date
                  of our most recent evaluation, including any corrective
                  actions with regard to significant deficiencies and material
                  weaknesses.



                                           /s/ James A. Mitarotonda
                                           --------------------------------
                                           James A. Mitarotonda
                                           President and Chief Executive Officer
                                           March 31, 2003

<PAGE>

I, Melvyn Brunt, certify that:

         1.       I have reviewed this annual report on Form 10-K of MM
                  Companies, Inc.;

         2.       Based on my knowledge, this annual report does not contain any
                  untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  annual report;

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this annual report, fairly
                  present in all material respects the financial condition,
                  results of operations and cash flows of the registrant as of,
                  and for, the periods presented in this annual report;

         4.       The registrant's other certifying officer and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the registrant and we have:

                  a)       designed such disclosure controls and procedures to
                           ensure that material information relating to the
                           registrant, including its consolidated subsidiaries,
                           is made known to us by others within those entities,
                           particularly during the period in which this annual
                           report is being prepared;

                  b)       evaluated the effectiveness of the registrant's
                           disclosure controls and procedures as of a date
                           within 90 days prior to the filing date of this
                           annual report (the "Evaluation Date"); and

                  c)       presented in this annual report our conclusions about
                           the effectiveness of the disclosure controls and
                           procedures based on our evaluation as of the
                           Evaluation Date;

         5.       The registrant's other certifying officer and I have
                  disclosed, based on our most recent evaluation, to the
                  registrant's auditors and the audit committee of registrant's
                  board of directors (or persons performing the equivalent
                  function):

                  a)       all significant deficiencies in the design or
                           operation of internal controls which could adversely
                           affect the registrant's ability to record, process,
                           summarize and report financial data and have
                           identified for the registrant's auditors any material
                           weaknesses in internal controls; and

                  b)       any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the registrant's internal controls; and

  6.     The registrant's other certifying officer and I have indicated in this
         annual report whether or not there were significant changes in internal
         controls or in other factors that could significantly affect internal
         controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.

                                                /s/ Melvyn Brunt
                                                ---------------------------
                                                Melvyn Brunt
                                                Chief Financial Officer
                                                March 31, 2003