<PAGE>

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

                                  FORM 10-KSB

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

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

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

            FOR THE TRANSITION PERIOD FROM __________ TO __________

COMMISSION FILE NUMBER:  0-21711


                            THE MARQUEE GROUP, INC.
                (Name of Small Business Issuer in Its Charter)

<TABLE>

<S>                                                                             <C>
                           DELAWARE                                                          13-3878295
(State or Other Jurisdiction of Incorporation or Organization)                  (I.R.S. Employer Identification No.)

                888 SEVENTH AVENUE, 40TH FLOOR
                           NEW YORK, NEW YORK                                                   10019
                (Address of Principal Executive Offices)                                      (Zip Code)
</TABLE>

                                (212) 977-0300
               (Issuer's Telephone Number, Including Area Code)

SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT:

     Title of Each Class            Name of Each Exchange on Which Registered

 Common Stock, $.01 par value                 Boston Stock Exchange
           Warrants                           Boston Stock Exchange

SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:

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

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

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

The issuer's gross revenues for its fiscal year ended December 31, 1996 were
$2,868,788.

The aggregate market value of the Common Stock held by non-affiliates of the
registrant based on the closing price of $7.50 on March 27, 1997 was
$32,344,955.

The number of shares of Common Stock outstanding on March 27, 1997 was
8,769,162.

Transitional Small Business Disclosure Format (check one):  YES  [ ]  NO [X]

<PAGE>



                                    PART I


ITEM 1.  DESCRIPTION OF BUSINESS.

GENERAL

         The Marquee Group, Inc. ("Marquee" or the "Company") was organized in
July 1995 to provide comprehensive management, marketing, sales, consulting
and production services to sports and entertainment-related businesses,
events, athletes, broadcasters, journalists and executives. In recent years,
significant developments in mass media, including the growth of satellite
communications and cable television, have resulted in increased national and
global exposure for sports personalities and the events and projects in which
they participate, and have created national and international audiences for
sports personalities, products and events. In addition, the recent
proliferation of sports-related television and radio stations has created an
increased demand for sports-related programming. As a result, the promotion
and sponsorship of sports events has become a major area of corporate
advertising and product development. The Company believes that the successful
exploitation of this market by sports personalities and corporations requires
integrated marketing and management services.

         The Company was organized by Robert M. Gutkowski, the Company's
President and Chief Executive Officer, who has more than 20 years of
experience in the television, sports and entertainment industries and who
served as President of Madison Square Garden Corporation from November 1991
until September 1994, and The Sillerman Companies, Inc. ("TSC"), which invests
in and provides financial advisory, marketing and consulting services to media
companies and sports and entertainment related businesses. TSC is controlled
by Robert F.X. Sillerman, Chairman of the Company, whose principal occupation
is Executive Chairman of the Board of SFX Broadcasting, Inc., a
publicly-traded company which owns and operates radio stations and concert
promotion businesses.

         In furtherance of its business strategy, in December 1996 the Company
acquired Sports Marketing & Television International, Inc. ("SMTI"), which
provides production and marketing services to sporting events, sports
television shows and professional and collegiate leagues and organizations,
and Athletes and Artists, Inc. ("A&A"), a sports and media representation
firm. The Company has begun, and will continue to integrate these businesses
and expand into related areas in sports and events programming and promotion.
The funding for the acquisition of SMTI (the "SMTI Acquisition") and the
acquisition of A&A (the "A&A Acquisition" and, collectively with the SMTI
Acquisition, the "Acquisitions") was provided by the net proceeds the Company
received in December 1996 from the consummation of its initial public
offering. In such offering, the Company sold an aggregate of 3,852,500 Units
(the "Units"), each Unit consisting of one share of Common Stock, par value
$.01 per share (the "Common Stock"), of the Company and one Warrant (the
"Warrants"), each Warrant to purchase one share of Common Stock at an initial
purchase price of $7.50 per share, and received net proceeds of approximately
$15,586,000.

         In conjunction with SMTI's production and marketing services, SMTI
develops and implements corporate sponsorship campaigns which are designed to
promote an event, team or sponsor. SMTI's current and recently completed
principal projects include production and marketing of The Breeders' Cup
Championship and implementation of the balloting campaign for Major League
Baseball's 1996 All-Star Game. The Company acquired SMTI, which was formed in
1984 by Michael Trager and Michael Letis, for an aggregate cash purchase price
payable to Messrs. Trager and Letis of $8,000,000, of which $6,500,000 was
paid at the closing of the SMTI Acquisition and $1,500,000 is payable in five
equal annual installments, and the issuance of an aggregate of 1,292,308
shares of Common Stock to Messrs. Trager and Letis. Messrs. Trager and Letis
have entered into long-term employment agreements with the Company pursuant to
which they serve as executive officers and directors of the Company.

         A&A, which was founded in 1977 by Arthur C. Kaminsky, is a sports and
media representation firm whose roster of clients includes broadcasters
(including Al Michaels - ABC Sports, Forrest Sawyer - ABC News, Christiane
Amanpour - CNN and CBS News, Dan Dierdorf - ABC Sports and Chris Berman - ESPN
and ABC Sports), athletes (including Brian Leetch - New York Rangers, Eric
Heiden - U.S. Olympic five-time gold medalist in speed skating and


<PAGE>



Rico Brogna - Philadelphia Phillies), authors (including Dick Schaap - author
of Bo Knows Bo and Instant Replay, Rick Reilly - author of The Boz and Missing
Links and a writer for Sports Illustrated and John Powers - author of One Goal
and Mary Lou! and a sportswriter for The Boston Globe) and media executives
(including Terry O'Neil - a sports and news executive producer, Curt Gowdy,
Jr. - ABC Sports and John Faratzis - a sports programming producer who has
worked with ABC, CBS and NBC). The Company acquired A&A for an aggregate cash
purchase price payable to Mr. Kaminsky and Louis J. Oppenheim of $3,500,000,
of which $2,500,000 was paid at the closing of the A&A Acquisition and
$1,000,000 is payable in five equal annual installments, and the issuance to
Messrs. Kaminsky and Oppenheim of an aggregate of 969,230 shares of Common
Stock. Messrs. Kaminsky and Oppenheim have entered into long-term employment
agreements with the Company pursuant to which they serve as executive officers
and directors of the Company.

SPORTS PRODUCTION AND PROMOTION SERVICES

         The Company provides production and promotion services to major
sporting events, sports television shows and professional and collegiate
leagues and organizations. In addition, the Company provides services relating
to television production, sale of television rights, program packaging and
video production and distribution, through which it may derive revenue from
commissions on sales of broadcast rights to television networks and cable
stations, commissions for packaging an event for a particular corporate
sponsor, fees for production of television programs or videos and royalties
for video distribution.

         Although it may vary from event to event, the Company's activities in
events production include site selection, recruitment of athletes or
personalities, procurement of television coverage, merchandising, sale of
corporate sponsorship, creation of corporate hospitality programs and general
administrative duties, including contract negotiation and scheduling. For each
client, the Company generally receives a fixed fee and/or commission generally
ranging from 15% to 40% of the contracted amount, although these fees and
commissions are negotiated between the parties on an event-by-event basis and
the amount of fees and/or commissions the Company receives depends to a large
extent upon its performance. The Company's corporate sponsorship projects are
generally on a short-term basis and may not be evidenced by written agreements
in advance of Company expenditures or at all, which the Company believes is
common in its industry.

         The Company has agreed to provide certain production and promotional
services in the sports and events programming area, including agreements with
ESPN to produce professional and amateur boxing events, with the UPN
television network to produce the United States Open Professional Figure
Skating Championship and with the Outdoor Life Network to produce The National
Lumberjack Championships, and has entered into an agreement with the
Professional Bowlers Association (the "PBA") to serve as the PBA's exclusive
representative in connection with its negotiations with respect to television
broadcasting.

         The Company provides events management services for the following
events:

         -- The Breeders' Cup Championship -- In 1984, SMTI, together with the
Thoroughbred Racing Association and NBC Sports, created The Breeders' Cup
Championship, an annual series of thoroughbred horse races held at a rotating
series of racetracks, including Churchill Downs, Santa Anita and Belmont Park.
The Company has entered into a marketing agreement (the "Breeders' Cup
Agreement") with the Breeders' Cup Limited ("BCL"), pursuant to which SMTI was
granted the right to provide general marketing consultation, broadcast and
sponsorship rights sales, advertising production and media placement,
publicity and public relations, television and video production, production of
promotional materials and merchandising and licensing of BCL in connection
with The Breeders' Cup Championship. The Company also supervises the
televising of the event and has sold the television rights to NBC-TV, with
which it works to create a four-hour broadcast. The 1996 Breeders' Cup
Championship was held on October 22, 1996, at Woodbine Racetrack, Toronto,
Canada, the first time the event was held outside the United States.

         The Breeders' Cup Agreement terminates on December 31, 1997, unless
terminated earlier in accordance with the terms of the agreement, including
the termination, for any reason, of SMTI's employment of Michael Letis or the


                                     - 2 -

<PAGE>



unavailability of Mr. Letis to perform the services necessary to enable SMTI
to comply with the terms of the Breeders' Cup Agreement.

         -- Major League Baseball -- The Company represents Major League
Baseball in its negotiations with potential corporate sponsors and in creating
sponsorship campaigns. The Company's agreement with Major League Baseball
expires in December 1997.

         -- Celebrity Golf Association -- The Company and NBC have formed
Celebrity Golf Championship, LLC to conduct the annual golfing tournament
known as the Celebrity Golf Championship, an annual celebrity professional
golf tournament, where the competitors include well-known sports,
entertainment and media personalities. In connection therewith, SMTI organized
and conducted the 1996 Celebrity Golf Championship held in Lake Tahoe, Nevada.
SMTI also supervised the televising of the tournament and arranged for the
tournament to be televised on NBC.

         -- The Hambletonian -- The Company has entered into an agreement with
The Hambletonian Society to act as exclusive television agent for The
Hambletonian, a premier event in harness racing held annually at The
Meadowlands, which agreement, unless renewed by mutual agreement, will
terminate in March 1998.

         -- The Company has entered into an agreement with the PBA Tour
pursuant to which the Company agreed to serve as the exclusive representative
of the PBA in connection with its negotiations with respect to television
broadcasting through December 31, 1999.

         --In March 1996, the Company entered into a one-year agreement with
ESPN pursuant to which the Company provided production services with respect
to approximately 30 televised boxing matches which were broadcast on ESPN and
ESPN2. The agreement was extended for a one-year period and, during the term
of such extension, the Company anticipates that it will provide production
services for approximately 50 boxing matches which are to be broadcast on ESPN
and ESPN2. The Company's production services in connection with these boxing
matches include site reviewal, arranging for television cameras, lighting,
audio and video equipment and technical facilities and coordinating the use of
on-air broadcasters.

         --The Company has entered into a letter agreement with the
Professional Skaters Association pursuant to which the Professional Skaters
Association licensed to SMTI the rights to the United States Open Professional
Figure Skating Championship (the "Open") and SMTI became the exclusive
promoter of the Open, with full financial and management responsibility for
the operation of the Open. The term of the agreement expires in April 2001,
subject to the right of SMTI to renew for an additional five years. The
Company has also entered into an agreement with the UPN television network
pursuant to which Marquee agreed to produce and deliver annually to UPN one
television special. The television special will consist of the broadcast of
the Open. The agreement expires in January 1999, subject to the right of UPN
to renew for an up to an additional three years.

         -- The Company has entered into an agreement (the "PVI Agreement")
with PVI, Inc. ("PVI"), pursuant to which the Company was retained by PVI to
market the PVI System to advertisers and advertising agencies and to sports
teams, leagues and broadcasters. The PVI System allows a sponsor's logo to be
graphically inserted at strategic locations during a televised sporting event
apparent only to the broadcast audience and permits the sale of different
advertising for the same physical space to different audiences in different
geographic locations. The PVI Agreement has a term of two years, subject to
early termination by either party in March 1997 or September 1997.

         --The Company has begun producing two television programs for the
Lifetime television network. The programs deal with sports, sports
personalities and sports-related issues. The parties have not yet executed an
agreement relating to the production of the television programs but the
Lifetime television network has advanced the Company money in anticipation of
the Company's delivery of the television programs.

         -- The Company has entered into an oral joint venture program
development arrangement with Cosette Productions, which has developed
television, theatrical and movie productions such as The Grammy Awards, The
Will


                                     - 3 -

<PAGE>



Rogers Follies, television specials starring Harry Connick Jr. and Kathie Lee
Gifford, made-for-TV movies starring Valerie Bertinelli and Rick Schroeder and
the television mini-series Alcatraz. To date, no programs have been produced
pursuant to this agreement.

         -- The Company has entered into an agreement with a representative of
Subaru of America ("Subaru"), pursuant to which Subaru has engaged the Company
to produce Subaru American Outback, an outdoor programming series of 24
half-hour episodes which are expected to be televised commencing in thesecond
quarter of 1997 on ESPN2 and ESPN.

         -- The Company has agreed with The Outdoor Life Network, LLC ("OLN")
to provide production services with respect to 22 half-hour episodes of
Ironjack -- The National Lumberjack Championships for OLN, a new cable network
devoted to outdoor programming. The Company has delivered the finished product
to OLN.

         -- The Company organized and promoted a welterweight championship
boxing fight and the undercard fights which were held in October 1996 at the
Sports Arena in Los Angeles, California. Pursuant to an agreement the Company
had entered into with The Univision Network Limited Partnership ("Univision"),
an owner and operator of a Spanish-language television network, Univision was
granted the right to broadcast the fights.

	 The Company is in active negotiations for the production of a 52-week
half-hour sports magazine show which will most likely be hosted by talent
represented by the Company. Strategically, the Company intends to be active
in the production of sports events and feature-length sport-related movies,
as well as television programming.

         A significant portion of the Company's revenues have been derived
from a small number of clients or one-time events. On a pro forma basis,
giving effect to the Acquisitions as if they had occurred on January 1, 1995,
one client would have accounted for approximately 29% and 30% of the Company's
revenues for the years ended December 31, 1995 and 1996, respectively. On a
pro forma basis, three clients accounted for approximately 50% of the
Company's revenues for the year ended December 31, 1996. The Company may
continue to be dependent upon a limited number of customers or projects for a
significant portion of its revenues in future periods.

PERSONAL REPRESENTATION

         The Company provides personal representation services for well-known
and up-and-coming broadcasting, sports and entertainment personalities, which
services encompass the negotiation of primary employment agreements and
evaluation of business, promotional and endorsement opportunities for such
personalities. Fees for services can be fixed but ordinarily represent a
percentage of income realized by the Company's clients through its efforts,
typically ranging from three to ten percent. The Company's written
representation agreements with its clients are generally terminable on 30
days' notice and the Company does not have written agreements with many of its
clients, which the Company believes is common in its industry.

         At December 31, 1996, the Company represented 77 national
broadcasters, consisting of the following persons.

Al Michaels - ABC Sports
Forrest Sawyer - ABC News
Christiane Amanpour - CNN and CBS News
Dan Dierdorf - ABC Sports
Sean McDonough - CBS Sports and WABU-TV
  (Boston)
Chris Berman - ESPN and ABC Sports
Len Berman - NBC Sports and WNBC-TV (New York)
Jim Lampley - NBC Sports and Home Box Office
John Hockenberry - NBC News and MSNBC
Bill Geist - CBS News
Robert Krulwich - ABC News
Hannah Storm - NBC Sports
Al Trautwig - MSG and Classic Sports Network
Fred Hickman - CNN
Mark Jones - ABC Sports and ESPN
Andrea Joyce - CBS Sports
Bob McKeown - NBC News
Craig James - CBS Sports
Sam Wyche - NBC Sports
Willow Bay - ABC News and NBC Sports
Dick Schaap - ABC News and ESPN
Russ Mitchell - CBS News
Brad Nessler - ESPN
Bill Walton - NBC Sports
Antonio Mora - ABC News
John Spagnola - ABC Sports
Thom Brennaman - Fox Sports
Bob Carpenter - ESPN


                                     - 4 -

<PAGE>



John Naber - Television analyst
  (U.S. Olympic gold medalist in swimming)
Jane Whitney - Nationally-syndicated
  talk-show host
Bud Collins - NBC Sports
Kevin Harlan - Fox Sports
Vince Cellini - CNN and TNT Sports
Bill Clement - ESPN
Mike Emrick - Fox Sports and Sports Channel
Craig Masback - NBC Sports
Todd Blackledge - ABC Sports
Len Dawson - Home Box Office
John Dockery - NBC Sports
Terry Gannon - ABC Sports
Ken Albert - Fox Sports
Jim Gray - NBC Sports
Paul Crane - CNN
Kevin Kiley - TNT Sports
Marty Liquori - ABC Sports
Mike Tirico - ESPN
Joe Micheletti - Fox Sports
Anthony Munoz - Television analyst
  (formerly Fox Sports)
Jimmy Roberts - ESPN
Ted Robinson - CBS Sports and USA Network
Danny Sheridan - CBS Sports
Dwight Stones - NBC Sports
Reggie Theus - TNT Sports and NBC Sports
Eric Clemons - Fox Sports
Leon Harris - CNN
Madeline McFadden - Inside Edition
Elizabeth Kaledin - CBS News
Mark Litke - ABC News
Matt Meagher - Inside Edition
Beth Nissen - ABC News
Diana Olick - CBS News
Janice Lieberman - CNBC
Brian Holloway - ABC Sports
Steve Melnyk - ABC Sports
Frank Hannigan - ABC Sports
Larry Beil - ESPN
Gary Miller - ESPN
Lisa Kim - MSNBC
Dan Lothian - NBC News
Jim Axelrod - CBS News
Jody Davis - CNNfn
Craig Miller - MSNBC
Gary Matsumoto - NBC News
Scott Engler - CNN
Kathy Wolff - Fox News
Michael Kim - ESPN
Bill Maas - Fox Sports


         At December 31, 1996, the Company represented 30 professional
athletes, consisting of the following persons:

Brian Leetch - New York Rangers
Eric Heiden - U.S. Olympic five-time
  gold medalist in speed skating
Ken Dryden - Montreal Canadiens (retired)
  and member of the Hockey Hall of Fame
Sergei Zubov - Dallas Stars
Adam Oates - Boston Bruins
Rico Brogna - Philadelphia
Phillies Keith Elias - New York
Giants William Gaines - Washington Redskins
Darren Turcotte - San Jose Sharks
Jeff Blatnick - U.S. Olympic gold medalist
  in Greco-Roman wrestling
Sean Jones - Green Bay Packers
Mike Remlinger - Cincinnati Reds
Beth Heiden - U.S. Olympic gold medalist
  in speed skating
Joe Grahe - Montreal Expos
Quinn Buckner - Former National Basketball
  Association player and coach and CBS
  Sports commentator
Calle Johansson - Washington Capitals
Harry Carson - Former New York Giants
  linebacker and analyst for the MSG Network
Bernard King - Former National Basketball Association
  player and broadcaster on WFAN-FM (New York)
Tim Daggett - U.S. Olympic gold medalist in
  gymnastics and NBC Sports commentator
Jody Hull - Florida Panthers
Tommy Albelin - Calgary Flames
Jozef Stumpel - Boston Bruins
Nikolai Khabibulin - Phoenix Coyotes
Kris King - Phoenix Coyotes
Dainius Zubrus - Philadelphia Flyers
Andrei Zyuzin - San Jose Sharks
Alexander Volchkov - Washington Capitals
Sergei Samsonov - Detroit Vipers (International
  Hockey League) and projected top-pick in the
  1997 National Hockey League draft
Jerry Bailey - Jockey and member of the
  Horse Racing Hall of Fame


                                    - 5 -

<PAGE>



Mike Golic - Former National Football League
  player and ESPN analyst


         At December 31, 1996, the Company represented 37 local broadcasters,
consisting of the following persons:

Dave Jennings - WFAN-AM and MSG
  (New York)
Trish Brown - KMOV-TV (St. Louis)
Mike Harris - SportsChannel and WCBS-TV
  (New York)
Celeste Ford - WABC-TV (New York)
Eric Thomas - KGO-TV (San Francisco)
Paul Olden - WFAN-AM and WPIX-TV (New York)
Dr. Jay Adlersberg - WABC-TV (New York)
Tracey Neale - WTTG-TV (Washington, D.C.)
Carolyn Gusoff - WNBC-TV (New York)
Leo Alexander - WRC-TV (Washington)
Bob Papa - WOR-AM (New York), ESPN and NBC Sports
Tony Segreto - WTVJ-TV (Miami)
Roseanne Colletti - WNBC-TV (New York)
Monica Kaufman - WSB-TV (Atlanta)
Lara Spencer - WABC-TV (New York)
Vic Carter - WJZ-TV (Baltimore)
Sean Mooney - WWOR-TV (New York)
Kelly Ring - WTVT-TV (Tampa)
Tim Fleischer - WABC-TV (New York)
Beverly Burke - WUSA-TV (Washington, D.C.)
Krista Bradford - WWOR-TV (New York)
Bebe Emerman - KCAL-TV (Los Angeles)
Corey McPherrin - WFLD-TV (Chicago)
Walter Richards - KTLA-TV (Los Angeles)
Ukee Washington - KYW-TV (Philadelphia)
Ileana Varela - WFOR-TV (Miami)
Mike Bush - KSDK-TV (St. Louis)
Angela Davis - KSTP-TV (Minneapolis)
Marion Brooks - WSB-TV (Atlanta)
Randy Paige - KCAL-TV (Los Angeles)
Shern-Min Chow - KPRC-TV (Houston)
Noel Cisneros - KRON-TV (San Francisco)
Sonja Gantt - WGN-TV (Chicago)
Lyanne Melendez - KGO-TV (San Francisco)
Lila Orbach - WDIV-TV (Detroit)
Gretchen Carlson - WOIO-TV (Cleveland)
Michael Barkann - WLVI-TV (Boston), USA
 Network and CBS Sports


         At December 31, 1996, the Company represented six authors, consisting
of the following persons:

Dick Schaap - author of Bo Knows Bo and Instant Replay

Rick Reilly - author of The Boz and Missing Links and a writer for Sports
Illustrated

John Powers - author of One Goal and Mary Lou! and a sportswriter for The
Boston Globe

Gene Wojociechowski - author of Nothing but Net and I Love Being the Enemy and
a sportswriter for The Chicago Tribune

Ken Dryden - author of The Game and Home Game

Michael Silver - author of Sports with an Attitude and currently working with
Jerry Rice on a project for Sports Illustrated

         At December 31, 1996, the Company represented nine television
producers and directors, consisting of the following persons:

Terry O'Neil - executive producer of both sports and news programming

Curt Gowdy, Jr. - ABC Sports



                                     - 6 -

<PAGE>



John Faratzis - a sports-programming producer who has worked with ABC, CBS and
NBC

Craig Silver - CBS Sports

Andy Kindle - Fox Sports

Larry Cavolina - ESPN and NBC Sports

Rick Paiva - ESPN

Joel Feld - a sports-programming producer who has worked with ABC Sports and
Fox Sports

Michael Ireland - ESPN and KTLA-TV (Los Angeles), which broadcasts Los Angeles
Dodgers baseball games

CONSULTING

         The Company offers specialized consulting services to entities
engaged in sports- and entertainment-related businesses. The executive
officers of the Company have substantial experience in all aspects of sports
and entertainment management, marketing, sales and television and event
production. The executive officers of the Company also have numerous personal
contacts within the sports and entertainment business who work for companies
that are in need of consulting services or are in a position to refer clients
to the Company. The Company intends to capitalize on these contacts in order
to build its consulting business.

         Sports- and entertainment-related businesses often require expertise
in areas which are outside of their principal line of business. Such
businesses may seek consultants to advise them in connection with team and
event ticket sales, venue management of concert halls and sporting arenas,
sales of television rights, program development, and obtaining and maintaining
sponsorships. The Company will seek to enter into agreements with businesses
pursuant to which the Company will provide customized services in these and
other areas. As a consultant, the Company would advise its clients in planning
and selecting a course of action that helps the client realize its business
objective, hiring the necessary employees or contractors, obtaining and
allocating the material required in order for the client to realize its goal,
and/or monitoring results.

         The Company is in advanced negotiations with a major league baseball
team with respect to the negotiation of a television rights agreement. The
Company considers this to be typical of the consulting agreements for which
it is extremely well suited and which it will actively pursue.

OPERATING STRATEGY

         Offer Comprehensive Packages of Sports Related Services. The Company
intends to maximize the performance of its events production and corporate
sponsorship, personal representation and consulting businesses by constructing
comprehensive packages of sports events and sports personality endorsements.

         Seek Additional Acquisitions. The Company intends to explore
opportunities to acquire existing companies in its businesses. The Company
believes that the experience of its management team will allow it to identify
and capitalize on under-valued and/or under-performing companies. In
particular, the Company intends to focus primarily on consolidation
opportunities presented by privately-held competitors of moderate size. The
Company believes that it is the only significant publicly-traded company
within its industry and, as a result, will have certain advantages over its
competitors in negotiating and consummating acquisitions. To date, the Company
has not entered into any agreements relating to acquisitions of other
companies.

         Expand Consulting Business. The Company will seek to significantly
expand its existing consulting business in order to fully utilize management's
substantial expertise in all aspects of sports and entertainment management,
marketing, sales, television and event production. Various sports- and
entertainment-related businesses require such expertise in order to maximize
revenues from activities such as team and event ticket sales, venue
management, sales of television rights, program development and obtaining and
maintaining sponsorships. The management of the Company will work with these
businesses in developing and implementing strategies to meet their objectives.

                                     - 7 -

<PAGE>



COMPETITION

         Sports production and promotion and personal representation are
highly-competitive industries. The Company's competitors include several large
companies, such as International Management Group, ProServ, Inc. and Advantage
International Inc. in the sports industry and the William Morris Agency, Inc.
and Creative Artists Agency, Inc. in the entertainment industry, certain of
which have substantially greater financial and other resources than the
Company. In addition, the Company competes with many smaller regional and
local entities. The success of the Company will be dependent upon its ability
to obtain event, client and production and consulting opportunities and to
generate revenues from such activities. The Company believes that it competes
with other companies primarily on the basis of the experience of its
management and the breadth of the services that the Company offers, including
events production and corporate sponsorship, personal representation and
consulting services.

EMPLOYEES

         As of March 24, 1997, the Company had approximately 47 full-time
employees, none of whom were covered by a collective bargaining agreement. The
Company considers its relations with its employees to be good. In addition,
the Company engages independent contractors to provide many of the services
required by its business.

ITEM 2.  DESCRIPTION OF PROPERTY.

         The Company's executive offices are currently located at 888 Seventh
Avenue, New York, New York, and are occupied pursuant to a lease which
provides for an initial annual rent, commencing in October 1997, of
approximately $537,000, subject to certain increases, and expiring in October
2007. The Company is making certain capital improvements to furnish its new
office space, complete leasehold improvements and install television edit
facilities. The Company believes that its current facility will be sufficient
for its planned operations for the foreseeable future.

ITEM 3.  LEGAL PROCEEDINGS.

         The Company is a defendant in various legal actions, involving breach
of contract and various other claims, which are incidental to the conduct of
its business. In the opinion of management, there are no material threatened
or pending legal proceedings against the Company which if adversely decided,
would have a material effect on the financial condition or prospects of the
Company.

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

         The Company did not submit any matters to a vote of security holders
during the fourth quarter of the year ended December 31, 1996.

                                  PART II

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

         The Common Stock and Warrants of the Company are traded in the
over-the-counter market and are quoted on The Nasdaq Stock Market, Inc.'s
SmallCap Market ("Nasdaq") under the symbols "MRQE" and "MRQEW," respectively,
and are traded on the Boston Stock Exchange under the symbols "MRT" and
"MRT.WS," respectively.

         From December 6, 1996 (the first trading day after the effective date
of the registration statement relating to the Company's initial public
offering) until December 13, 1996, the shares of Common Stock and the Warrants
traded only as Units on Nasdaq and did not trade separately. On December 13,
1996, the Units were separated into their constituent parts and the shares of
Common Stock and Warrants began trading separately on Nasdaq. On March 13,
1997, the Common Stock and Warrants commenced trading on the Boston Stock
Exchange.



                                     - 8 -
<PAGE>


       The following table sets forth for the periods indicated, the high and
low bid information for the shares of Common Stock and the Warrants of the
Company, as reported by Nasdaq. Bid quotations represent high and low prices
quoted between dealers, do not reflect retail mark-up, mark-down or
commission, and may not represent actual transactions.
<TABLE>
<CAPTION>


                                               COMMON STOCK                 WARRANTS
                                         ----------------------          ------------------
                 1996                     HIGH            LOW            HIGH           LOW
                 ----                     ----            ---            ----           ---
<S>                                         <C>            <C>            <C>            <C>
December 13, 1996 to December 31, 1996      $6.00          $5.00          $2.00          $1.25
</TABLE>



       On March 25, 1997, the Company had 44 and 22 record holders of its
Common Stock and Warrants, respectively. The Company believes that there are
over 2,500 beneficial holders of its shares of Common Stock and Warrants.

       The Company has not paid any cash dividends on its Common Stock since
inception and does not anticipate paying any in the foreseeable future. The
Board of Directors intends to retain any earnings to support the growth of the
Company's business.

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

INTRODUCTION

       The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this report. The following
discussion contains certain forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, the limited operating history of the Company,
substantial competition and dependence on certain key contracts with third
parties.

       Marquee was formed in July 1995 for the purpose of providing
comprehensive management, marketing, sales, consulting and production services
to sports and entertainment related businesses, events, athletes,
broadcasters, journalists and executives. During 1996 Marquee engaged in
limited activities, primarily consisting of negotiating the agreements
relating to the SMTI Acquisition and the A&A Acquisition and engaging in
limited sports marketing, production and consulting activities.

       The primary sources of the Company's revenues are commissions from the
representation of sports and entertainment personalities and fees from
providing marketing, sales and event development, production and consulting
services in the sports and entertainment industry. Commissions from the
Company's personal representation services are recognized as revenue when they
become payable to the Company under the terms of the Company's agreements with
its clients. Generally, such commissions are payable by clients upon their
receipt of payments for performance of services or upon the delivery or use of
material created by them. Commissions on profit or gross receipt
participations are recorded upon the determination of such amounts. Revenues
from production services (television and video) are recognized when the
programs are available for broadcast. Licensing sponsorship and merchandise
revenues are recognized for guaranteed amounts when contractual obligations
thereunder are met.

       The Company's most significant costs and expenses are salaries and
production expenditures. Historically, selling, general and administrative
expenses have been impacted by the amount of compensation and related benefits
that the stockholders of A&A and SMTI received from their respective
businesses during the periods when the companies were entrepreneurially
managed.



                                      -9-


<PAGE>


       In addition to the four employment agreements entered into in December
1996 upon the completion of the Acquisitions, the Company has entered into
employment agreements with two officers, providing for aggregate annual
compensation in the first year of $725,000, of which $499,520 (based upon the
date employment commenced) has been charged to Marquee's operations for the
year ended December 31, 1996. In addition, the Company has entered into a
lease for office space which requires no payments until October 1997. The
annual minimum charge to operations for rent is $563,000 per year commencing
in October 1996. The Company has also entered into a six-year consulting
agreement with TSC, which is controlled by Robert F.X. Sillerman, the Chairman
of the Company, that provides for a monthly fee of $30,000 commencing in
September 1997. The minimum annual charge to operations for the consulting
arrangement will be $360,000.

       The Company's fourth fiscal quarter, during which the Company
recognizes its highest percentage of revenues from its production of The
Breeders' Cup Championship and receives revenues from its representation
agreements with professional hockey players upon the commencement of the
National Hockey League season, generally produces the Company's highest
revenues.

       In May 1996, the Company issued 50,000 shares of Common Stock to an
officer in partial consideration of such officer entering into an employment
agreement with the Company. The Company expects that it will recognize
non-cash compensation expense estimated at approximately $118,750 over the
15-month vesting period equal to the estimated fair market value of such
shares on the date of issuance. The Company incurred charges to operations
aggregating approximately $476,000 during the fourth quarter of 1996 as a
result of the automatic conversion of the Debentures issued in the Private
Placement (as such terms are defined in Item 12 hereof) into Units, consisting
of the write-off of the fees and expenses of $193,000 incurred by the Company
in connection with the Private Placement and interest expense of $283,000. In
connection with the Acquisitions, the Company will incur charges to operations
aggregating $530,000 over the five-year period commencing in December 1996
relating to the imputed interest on the indebtedness to be paid to the
stockholders of SMTI and A&A.

       The Company contemplates that the release of the Escrow Shares (as such
term is defined in Item 11 hereof) to officers, directors, employees and
consultants of the Company, should it occur, will result in a substantial
non-cash compensation charge to operations, based on the then fair market
value of the shares. Such charge could substantially increase the Company's
loss or reduce or eliminate the Company's net income, if any, for financial
reporting purposes for the period during which such shares are or become
probable of being released from escrow. Although the amount of compensation
expense recognized by the Company will not affect the Company's total
stockholders' equity, it may have a depressive effect on the market price of
the Company's securities.

RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED
DECEMBER 31, 1995

       Marquee commenced operations in January 1996 and during 1996 its
activities consisted of negotiating the agreements relating to the
A&A Acquisition and the SMTI Acquisition and engaging in limited sports
marketing, production and consulting activities. The consolidated financial
statements of the Company which appear at pages F-1 through F-19 include
the results of operations of SMTI and A&A for the period from December 12,
1996, their date of acquisition by the Company, through December 31, 1996.

       For the year ended December 31, 1996, Marquee generated revenue of
$2,869,000. The principal sources of such revenue were Marquee's performance
under its contract for the production of ballots for the Major League Baseball
All-Star Balloting Program and Marquee's production of boxing programs
broadcast on ESPN and ESPN2. Revenues were also derived from commissions
earned from talent representation and Marquee's productions of other programs
broadcast on various cable outlets.

       Marquee's total operating expenses for the year ended December 31, 1996
were approximately $2,563,000 and principally consisted of production expenses
for the Major League Baseball All-Star Balloting Program and ESPN boxing
production costs. General and administrative expenses of $2,260,000 included
salary and other employee benefit


                                     - 10 -


<PAGE>


expenses of $1,730,000, legal and professional fees of $130,000, office
expenses of $159,000 and other expenses of $241,000. Marquee's operating loss
for the year ended December 31, 1996 was approximately $1,955,000.

       For the year ended December 31, 1996, Marquee's loss before taxes was
approximately $2,430,000. Marquee had net interest expense of $283,000 and
financing expense of $193,000 related to the Private Placement of the
Debentures. For the year ended December 31, 1996, the Company had a net
loss of $2,410,000 after giving effect to an income tax benefit of $20,000.

       The following unaudited pro forma condensed combined statements of
operations for the years ended December 31, 1996 and 1995 present the
operation of the Company as though the Acquisitions and the consummation of
the Company's initial public offering had occurred on January 1, 1995.

                                                 Pro Forma for the Year Ended
                                                          December 31,
                                                -----------------------------
                                                    1996              1995
                                                    ----              ----

 Revenue                                        $15,184,589       $10,341,827

 Operating expenses                               9,485,513         5,549,887

 General and administrative expenses              5,950,762         3,154,710
                                                 ----------        ----------
 Operating income (loss)                          (251,686)         1,637,230

 Interest expense, net*                           (368,818)          (88,457)

 Financing expense*                               (192,501)                --
                                                 ---------         ----------
 Income before taxes                              (813,005)         1,548,773

 Income tax (provision) benefit                   (100,000)          (759,000)
                                                 ---------          ---------
 Net income (loss)                               ($913,005)          $789,773
                                                 =========           ========

 Net income (loss) per share                         ($.12)              $.10
                                                     =====               ====
----------------
*  Includes in 1996 one-time charges related to the Debentures of $254,000
for interest and $193,000 for financing expense, or $.06 per share.

       On a pro forma basis, the Company would have had revenues for the year
ended December 31, 1996 of $15,185,000, an increase of $4,843,000, or 46.8%,
over pro forma revenues for the year ended December 31, 1995. The increase is
partially due to Marquee-generated revenues of approximately $2,706,000, which
revenues were produced principally by Marquee's performance under its contract
for the production of ballots for the Major League Baseball All-Star Balloting
Program, Marquee's production of boxing programs broadcast on ESPN and ESPN2,
and Marquee's productions of other programs broadcast on various cable
outlets. The Company also experienced an increase of $256,000 in commissions
earned on talent representation, and production and consulting revenue
increased $1,943,000. These increases were partially offset by reduced
revenue of $62,000 from the Celebrity Golf Tournament. Media and sports
representation fees increased as a result of obtaining additional broadcast
personalities as new clients as well as from receiving increased fees from
the existing client base. Production and consulting fees increased on a pro
forma basis as a result of increased fees from the Breeders' Cup and the
addition of revenues from a consulting agreement pursuant to which the Company
handled sports marketing and advertising placement for the True Value
hardware stores.

       On a pro forma basis, total operating expenses for the year ended
December 31, 1996 would have been $15,436,000 as compared to $8,705,000
for 1995, an increase of $6,731,000. The increase is primarily the result
of increased production expenses ($3,936,000) resulting from the Company's
new business ventures for the Major League Baseball All-Star Balloting
Program, production expenses associated with the


                                    - 11 -


<PAGE>


True Value hardware stores' advertising campaign, and the production of ESPN
and ESPN2 boxing. General and administrative expenses increased $2,796,000.
The increase in general and administrative expenses was due to increased
costs and expenses associated with Marquee's operations ($2,100,000),
increased salary and commissions ($490,000), increased legal and professional
fees ($78,000) and increased office expenses ($128,000). The pro forma
adjustments for the year ended December 31, 1996 reflect contractually
required reductions in salaries and benefits of approximately $1,485,000.

       For the year ended December 31, 1996, the Company's pro forma loss
before taxes was $813,000 compared to pro forma income of $1,549,000 for the
year ended December 31, 1995. Pro forma income tax expense for the year ended
December 31, 1996 was $100,000, compared to an income tax expense of $759,000
for the year ended December 31, 1995. Pro forma net loss for the year ended
1996 was $913,000, compared to pro forma net income of $790,000 for the year
ended December 31, 1995.

LIQUIDITY AND CAPITAL RESOURCES

       Marquee's principal sources of working capital have been net proceeds
of approximately $1,363,000 from the Private Placement, which was completed in
August 1996, advances by shareholders aggregating $767,000 and net proceeds of
approximately $15,586,000 from Marquee's initial public offering, which was
completed in December 1996. Of the shareholder advances, approximately
$445,000 was exchanged for Debentures in the Private Placement, $75,000 was
repaid from working capital, $125,000 was repaid from the proceeds of the
Private Placement and $122,000 is payable on January 1, 1998. The net proceeds
of the Private Placement reflect the cancellation of the notes referred to
above and expenses and were used for working capital and certain expenses of
the Company's initial public offering. The Private Placement consisted of
$2,000,000 principal amount of Debentures which automatically converted into
666,662 Units upon the closing of the Company's initial public offering in
December 1996. At December 31, 1996, the Company had working capital of
approximately $7,235,000. The Company anticipates that its working capital
together with cash flow expected to be generated from operations will be
sufficient to fund its operations through the end of the 1997 calendar year.

       Of the net proceeds of approximately $15,586,000 which the Company
received from its initial public offering, $9,000,000 was paid to the
stockholders of SMTI and A&A. In addition, the Company has agreed to pay such
stockholders installment payments aggregating $2,500,000 over the four year
period commencing April 1, 1997. Further, the agreement relating to the SMTI
Acquisition provided that, SMTI is to distribute to its shareholders, by means
of a dividend, an amount equal to 40% of the accumulated adjustments account
of SMTI. The amount of such distribution will be approximately $382,000. In
connection with the conversion of the Debentures into Units upon the closing
of the Company's initial public offering in December 1996, the Company paid
interest of approximately $254,000. In connection with the Acquisitions, the
Company entered into five-year employment agreements with the stockholders of
A&A and SMTI, which employment agreements provide for annual salaries
aggregating $1,075,000.

       In October 1996, the Company entered into a lease for new facilities
which requires initial annual rent of $537,000 commencing nine months after
occupancy, subject to certain increases. The Company intends to incur capital
expenditures of approximately $700,000 to furnish its new office space,
complete leasehold improvements and install television edit facilities.

       The Company has entered into employment agreements with five officers
that provide for annual compensation aggregating $1,550,000 per year. In
August 1996 the Company entered into a six-year consulting agreement with
Sillerman Communications Management Corporation ("SCMC"), a company controlled
by Robert F.X. Sillerman, the Chairman of the Company. The consulting
agreement provides for the payment by the Company of a monthly fee of $30,000
commencing in September 1997 for regular periodic financial consulting
services. Such monthly fee will increase annually by the percentage increase
in the Consumer Price Index. If SCMC performs advisory services in the nature
of investment banking services, it is entitled to a fee (a "Special Advisory
Fee") for such services, the exact amount of which will be negotiated between
the parties to the consulting agreement. In March 1997, SCMC assigned


                                     - 12 -


<PAGE>


its rights, obligations and duties under the consulting agreement to TSC. In
February 1997, the Company advanced to SCMC the sum of $400,000 as an advance
against the Special Advisory Fee.

ITEM 7.  FINANCIAL STATEMENTS.

       The financial statements required by Item 7 are included at pages F-1
through F-19.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.
       None.

                                   PART III

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

       The following table sets forth the names, ages and positions of the
executive officers and directors of the Company:

<TABLE>
<CAPTION>

NAME                         AGE                POSITION
----                         ---                --------
<S>                           <C>               <C>
Robert M. Gutkowski           49                President, Chief Executive Officer and Director
Robert F.X. Sillerman         48                Chairman
Arthur C. Kaminsky            50                Director and Executive Vice President
Michael Letis                 56                Director and Executive Vice President
Louis J. Oppenheim            39                Director and Executive Vice President
Michael Trager                54                Director and Executive Vice President
James E. Sileo                43                Chief Financial Officer
Howard J. Tytel               50                Director
Arthur R. Barron              62                Director
Myles W. Schumer              50                Director
Kraig G. Fox                  28                Secretary
</TABLE>


     Robert M Gutkowski has served as President, Chief Executive Officer and
Director of the Company since December 1995. Mr. Gutkowski has more than 20
years of experience in the television, sports and entertainment industries.
From September 1994 until December 1995, Mr. Gutkowski was a consultant to
sports-related businesses. From November 1991 to September 1994, he served as
President and Chief Executive Officer of Madison Square Garden Corporation,
where he oversaw the operations of the New York Knicks, the New York Rangers,
the MSG Entertainment Group, the MSG Cable Network, Madison Square Garden and
the Paramount Theater. From July 1990 to November 1991, Mr. Gutkowski served
as President of MSG Communications Group, having served as Executive Vice
President thereof from September 1987 to July 1990. From October 1985 to
September 1987, he served as President of Madison Square Garden Network. Prior
to his tenure at Madison Square Garden, Mr. Gutkowski was Vice President-Sales
for Paramount Television Domestic Distribution. From February 1981 to
September 1983, Mr. Gutkowski was Vice President-Programming for ESPN. Mr.
Gutkowski earned a B.A. from Hofstra University.

     Robert F.X Sillerman has been Chairman of the Company since July 1995.
Mr. Sillerman has been Executive Chairman of SFX Broadcasting, Inc. ("SFX"), a
publicly-traded company which owns and operates radio stations and

                                    - 13 -


<PAGE>


concert venues, since 1995, and from 1992 through 1995 he served as Chairman
and/or Chief Executive Officer of SFX. Since 1985, Mr. Sillerman has been
Chairman of the Board and Chief Executive Officer of SCMC, a private
investment company which makes investments in and provides financial consulting
services to companies engaged in media and sports-related businesses and,
through privately-held entities, he controls the general partner of Sillerman
Communications Partners, L.P. ("SCP"), an investment partnership. Since 1985,
he has been Chairman and Chief Executive Officer of TSC, a private investment
company which provides financial advisory, marketing, consulting and investment
banking services to media companies and sports-related businesses, including
the Company, and which is a principal stockholder of the Company. Mr. Sillerman
earned a B.A. from Brandeis University. In 1993, Mr. Sillerman became the
Chancellor of the Southampton campus of Long Island University.

     Arthur C. Kaminski has been a Director of the Company since March 1996 and
an Executive Vice President of the Company since December 1996. Mr. Kaminsky
has served as President and Chief Executive Officer of A&A since 1977. From
1974 to 1990, Mr. Kaminsky was a partner with the law firm of Taft & Kaminsky.
Mr. Kaminsky earned a B.A. from Cornell University and a J.D. from Yale
University.

     Michael Letis became a Director and an Executive Vice President of the
Company in December 1996. Mr. Letis has served as President of SMTI since
1984. Mr. Letis earned a B.A. from Dartmouth College.

     Louis J. Oppenheim became a Director and an Executive Vice President of
the Company in December 1996. Mr. Oppenheim has served as Vice President of
A&A since 1985. From 1981 to 1985, he served as a talent representative for
A&A. Mr. Oppenheim earned a B.A. from The University of Pennsylvania and a
J.D. from Fordham University.

     Michael Trager has been a Director of the Company since March 1996 and an
Executive Vice President of the Company since December 1996. Mr. Trager has
served as Chairman of SMTI since 1984. From November 1994 to December 1995,
Mr. Trager served as a Director of Select Media Communications, Inc., which
filed a petition under the federal bankruptcy laws in October 1995. Mr. Trager
earned a B.A. and M.S. from Bucknell University.

       James E. Sileo has served as the Chief Financial Officer of the Company
since November 1995. From November 1994 to December 1995, Mr. Sileo served as
Chief Financial Officer and a Director of Select Media Communications, Inc.,
which filed a petition under the federal bankruptcy laws in October 1995. From
June 1985 to November 1994, Mr. Sileo held various positions at Madison Square
Garden Corporation, including Vice President-Finance and Network Operations
from April 1992 to November 1994, Vice President-Finance, Communications Group
from June 1988 to March 1992 and Director of Financial Planning for the MSG
Communications Group. Mr. Sileo earned a B.B.A. in accounting from Bernard M.
Baruch College.

     Howard J. Tytel has served as a Director of the Company since July 1995.
Mr. Tytel has been a Director, Executive Vice President and Secretary of SFX
since 1992. Mr. Tytel has also been Executive Vice President and General
Counsel of SCMC since 1985, a Director of SCMC since 1989, and Executive Vice
President and General Counsel of TSC since 1985. From March 1995 until March
1997, Mr. Tytel was a director of Interactive Flight Technologies, Inc., a
company providing computer-based in-flight entertainment. Mr. Tytel is Of
Counsel to the law film of Baker & McKenzie, which represents the Company,
SFX, SCMC and TSC. Mr. Tytel earned a B.A. and B.S. from Washington University
and a J.D. from New York University.

       Arthur R. Barron has served as a Director of the Company since December
1996. In May 1995, Mr. Barron retired from Time-Warner Inc. ("Time-Warner"),
where he served from February 1990 to May 1995 as Chairman of Time-Warner
International, which is engaged in international strategic development
activities in the media and entertainment industries, and as Chairman of
Time-Warner Enterprises, the strategic and business development unit of
Time-Warner. From 1984 until July 1989, Mr. Barron served as President of
Paramount Communications Inc.'s entertainment group, which includes Paramount
Pictures, Madison Square Garden, the New York Knicks and the New York Rangers.


                                    - 14 -


<PAGE>


       Myles W. Schumer has served as a Director of the Company since December
1996. For more than the past five years, Mr. Schumer has been a partner,
specializing in tax matters, of Cornick, Garber & Sandler, New York,
independent public accountants. From July 1993 until November 1996, Mr.
Schumer has served as a director of Multi-Market Radio, Inc., a
publicly-traded company engaged in the ownership and operation of radio
stations.

     Kraig G. Fox has served as Secretary of the Company since July 1995.
Since December 1993, Mr. Fox has been the Manager-Business and Legal Affairs
for TSC and SFX. From April 1995 until November 1996 and since July 1996, Mr.
Fox has been the Secretary of Multi-Market Radio, Inc. and Triathlon
Broadcasting Company, respectively, both of which are publicly-traded
companies engaged in the ownership and operation of radio stations. Mr. Fox
earned a J.D. from Hofstra University in 1993.

       Directors serve until the next annual meeting or until their successors
are elected and qualified subject to the provisions of the Stockholders'
Agreement Officers serve at the discretion of the Board of Directors, subject
to rights, if any, under contracts of employment with the Company.

       The lead underwriter in the Company's initial public offering, which
was consummated in December 1996, has the right to appoint an observer to be
present at the Company's Board of Directors meetings for a period of five years
from such date, although it has not yet selected any such observer. Such
observer may be a director, officer, partner, employee or affiliate of such
underwriter. In addition, the Company has agreed with the underwriters in its
initial public offering that for a period of five years commencing December 5,
1996 it will have at least two non-affiliated independent directors on its
Board of Directors.

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 directors and officers and persons who
own more than 10% of a class of the Company's equity securities which are
registered under the Exchange Act to file with the Commission initial reports
of ownership and reports of changes of ownership of such registered
securities. To the Company's knowledge, based solely on a review of the copies
of such reports furnished to the Company, no person required to file such a
report failed to file on a timely basis, except for Mr. Schumer, who failed to
timely file a report on Form 5 disclosing one transaction.

ITEM 10.       EXECUTIVE COMPENSATION.

       The table below sets forth information with respect to the compensation
paid to Robert M. Gutkowski, the President and Chief Executive Officer of the
Company, during the year ended December 31, 1996 and the next most highly
compensated executive officers, on an annual basis (collectively, the "Named
Executive Officers"). No executive officer of the Company, other than
Mr. Gutkowski, received compensation in excess of $100,000 during the year
ended December 31, 1996.

<TABLE>
<CAPTION>

                                                                                 LONG-TERM
                                              ANNUAL COMPENSATION               COMPENSATION
                                          ----------------------------       ---------------------
                                                                             SECURITIES UNDERLYING
               NAME                       SALARY ($)         BONUS ($)           OPTION/SARS (#)
               ----                       ---------          ---------           ---------------
<S>                                      <C>                <C>                    <C>
Robert M. Gutkowski,                     231,250            122,500                20,000
 President and Chief Executive Officer
Arthur C. Kaminsky                        12,500(1)            --                  20,000
 Executive Vice President
Michael Letis                             12,500(2)            --                  20,000
 Executive Vice President
Louis J. Oppenheim                         7,292(3)            --                  10,000
 Executive Vice President
</TABLE>



                                    - 15 -


<PAGE>

<TABLE>
<CAPTION>

                                                                                 LONG-TERM
                                              ANNUAL COMPENSATION               COMPENSATION
                                          ---------------------------        ---------------------
                                                                             SECURITIES UNDERLYING
               NAME                      SALARY ($)          BONUS ($)        OPTION/SARS (#)
               ----                      ---------           --------         ----------------
<S>                                       <C>                <C>                <C>
 Michael Trager                           12,500(4)            --                 20,000
  Executive Vice President
</TABLE>

(1) Mr. Kaminsky became an Executive Vice President of the Company effective
    December 11, 1996 upon the consummation of the A&A Acquisition and entered
    into an employment agreement providing for an initial annual salary of
    $300,000.
(2) Mr. Letis became an Executive Vice President of the Company effective
    December 11, 1996 upon the consummation of the SMTI Acquisition and
    entered into an employment agreement providing for an initial annual
    salary of $300,000.
(3) Mr. Oppenheim became an Executive Vice President of the Company effective
    December 11, 1996 upon the consummation of the A&A Acquisition and entered
    into an employment agreement providing for an initial annual salary
    of $175,000.
(4) Mr. Trager became an Executive Vice President of the Company effective
    December 11, 1996 upon the consummation of the SMTI Acquisition and
    entered into an employment agreement providing for an initial annual
    salary of $300,000.

       The table below sets forth information with respect to the grant of
stock options and stock appreciation rights ("SARs") to the Named Executive
Officers during the year ended December 31, 1996.

                           OPTION/SAR GRANTS IN 1996
<TABLE>
<CAPTION>

                        NUMBER OF
                        SECURITIES       PERCENT OF TOTAL
                        UNDERLYING       OPTIONS GRANTED
                       OPTIONS/SARS      TO EMPLOYEES IN     EXERCISE OR BASE
        NAME             GRANTED              1996               PRICE          EXPIRATION DATE
       ----              -------              ----               -----          ---------------
<S>                        <C>                 <C>               <C>                     <C>
Robert M. Gutkowski        20,000              8.7%              $6.25           October 1, 2001
Arthur C. Kaminsky         20,000              8.7%              $6.25           October 1, 2001
Michael Letis              20,000              8.7%              $6.25           October 1, 2001
Louis J. Oppenheim         10,000              4.3%              $6.25           October 1, 2001
Michael Trager             20,000              8.7%              $6.25           October 1, 2001
</TABLE>


       The table below sets forth information with respect to the exercise of
stock options and SARs by the Named Executive Officers during the year ended
December 31, 1996 and the value at December 31, 1996 of unexercised stock
options and SARs held by the Named Executive Officers.



                                     - 16 -


<PAGE>


                    AGGREGATED OPTION/SAR EXERCISES IN 1996
                     AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>

                                                               NUMBER OF
                                                               SECURITIES           VALUE OF
                                                               UNDERLYING         UNEXERCISED
                                                               UNEXERCISED        IN-THE-MONEY
                                                             OPTIONS/SARS AT    OPTIONS/SARS AT
                                                               FY-END (#);        FY-END ($);
                       SHARES ACQUIRED                         EXERCISABLE/       EXERCISABLE/
        NAME           ON EXERCISE (#)   VALUE REALIZED ($)   UNEXERCISABLE     UNEXERCISABLE(1)
        ----           ---------------   ------------------   -------------     ----------------
<S>                          <C>               <C>              <C>                   <C>
Robert M. Gutkowski          0                 0                0/20,000              0/0
Arthur C. Kaminsky           0                 0                0/20,000              0/0
Michael Letis                0                 0                0/20,000              0/0
Louis J. Oppenheim           0                 0                0/10,000              0/0
Michael Trager               0                 0                0/20,000              0/0
</TABLE>


(1)    The closing price of the Common Stock on December 31, 1996 was $6.00.


EMPLOYMENT AGREEMENTS

       The Company and Robert M. Gutkowski have entered into an employment
agreement dated as of March 21, 1996 pursuant to which Mr. Gutkowski agreed to
serve as the Company's President and Chief Executive Officer for an initial
term of five years. The employment agreement also provides that Mr. Gutkowski
shall serve as a director of each of A&A and SMTI at such time as the Company
causes his election to such positions. The employment agreement provides that
Mr. Gutkowski shall receive an annual base salary of $325,000 plus an annual
bonus of at least $ 150,000 (which bonus may be increased in the discretion of
the Board of Directors of the Company).

       The employment agreement provides that the Company may terminate Mr.
Gutkowski's employment agreement prior to the expiration of its term in the
event of his death, disability for a period of 26 consecutive weeks or for
"cause," which, for purposes of the employment agreement, is defined as the
conviction of a felony, the commission of an act of fraud or embezzlement upon
the Company, a material breach by Mr. Gutkowski of his agreement not to
compete with the Company or the wilful malfeasance or gross negligence by Mr.
Gutkowski in the performance of his duties under the employment agreement or
his failure to perform his duties thereunder, which malfeasance, negligence or
failure has a material adverse effect on the business of the Company and which
shall remain uncured for a period of 15 days following written notice from the
Company.

       Pursuant to his employment agreement, Mr. Gutkowski has agreed not to
compete with the Company or solicit any of the Company's clients or employees
(the "Prohibited Activities") during the term of the agreement. In addition,
the employment agreement provides that Mr. Gutkowski is prohibited from
engaging in the Prohibited Activities for certain periods of time in the event
he voluntarily terminates his employment agreement, the Company terminates his
employment agreement or the employment agreement is not extended on
substantially similar terms.

       Upon the consummation of the Company's initial public offering in
December 1996, the Company entered into employment agreements with each of
Messrs. Kaminsky, Letis, Oppenheim and Trager on substantially the same terms
and conditions as Mr. Gutkowski's employment agreement with the Company,
pursuant to which each such person has agreed to serve as an Executive Vice
President of the Company for an initial term of five years. In addition,
pursuant to such agreements, the Company has agreed to cause Messrs. Letis and
Trager to be elected to the Board of Directors


                                    - 17 -


<PAGE>


of SMTI, has agreed to cause Messrs. Kaminsky and Oppenheim to be elected to
the Board of Directors of A&A, and has agreed to use its best efforts to cause
each of such persons to be nominated to serve as a member of the Board of
Directors of the Company. The employment agreements provided that each of
Messrs. Kaminsky, Letis and Trager will receive an annual base salary of
$300,000 and the employment agreement with Mr. Oppenheim provides that he will
receive an annual base salary of $175,000.

DIRECTOR COMPENSATION

       Each Director who is not an employee of the Company receives, in
addition to reimbursement for travel expenses, $1,500 for each Board of
Directors' meeting attended and $750 for each committee meeting attended.

1996 STOCK OPTION PLAN

       The Company's Board of Directors has adopted and the stockholders have
approved the Company's 1996 Stock Option Plan (the "Plan"). The Plan, which
provides for grants of non-qualified and incentive stock options to purchase
up to 500,000 shares of Common Stock to eligible employees and consultants, is
designed to attract and retain the best available personnel for the positions
of substantial responsibility, to provide additional incentive to key
employees, officers, and consultants of the Company and its subsidiaries and
to promote the success of the Company's business.

       In October 1996, options to purchase an aggregate of 230,000 shares of
Common Stock were granted under the Plan. Of such options, 100,000 have been
granted to 14 employees of the Company and have an exercise price of $5.00 per
share, and 130,000 have been granted to the Company's executive officers and
directors and have an exercise price of $6.25 per share, all of which options
vest in annual installments over a three to five year period commencing one
year from the date of grant.


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

       The following table sets forth certain information regarding ownership
of Common Stock, including the Escrow Shares, by (i) each person known by the
Company to own beneficially more than five percent of the outstanding Common
Stock, (ii) each director of the Company and (iii) all executive officers and
directors of the Company as a group.
<TABLE>
<CAPTION>

          NAME AND ADDRESS                    NUMBER OF SHARES            PERCENTAGE OF SHARES
         OF BENEFICIAL OWNER (1)              BENEFICIALLY OWNED           BENEFICIALLY OWNED
         -----------------------              ------------------           ------------------
<S>                                            <C>                              <C>
Robert F.X. Sillerman (2)                       1,369,230(2)                     15.6%
Robert M. Gutkowski                               684,615(3)                      7.8
Arthur C. Kaminsky                                684,615(4)                      7.8
Louis J. Oppenheim                                342,306(5)                      3.9
Michael Letis                                     684,615(6)                      7.8
Michael Trager                                    684,615(7)                      7.8
Myles W. Schumer                                    3,000(8)                      *
Howard J. Tytel                                        --                         --
Arthur R. Barron                                       --                         --
All executive officers and directors of the
Company as a group (ten persons)                4,462,996(9)                     50.9%
</TABLE>

--------------
*   less than 1%


                                    - 18 -


<PAGE>


(1)    The address of each beneficial owner is c/o The Marquee Group, Inc.,
       888 Seventh Avenue, 40th Floor, New York, New York. Unless otherwise
       noted, the Company believes that all persons named in the table have
       sole voting and investment power with respect to all shares of Common
       Stock beneficially owned by them.

(2)    Robert F.X. Sillerman, the Chairman of the Company, is the Chairman,
       Chief Executive Officer and controlling stockholder of TSC, which
       beneficially owns 1,369,230 shares of Common Stock. Includes 392,308
       shares of Common Stock which are held in escrow but in respect of which
       TSC retains the power to vote. See "--Escrow Shares." Does not include
       76,922 shares of Common Stock issuable upon exercise of an equal number
       of Warrants, which are not exercisable until December 5, 1997. Does not
       include 40,000 shares of Common Stock issuable upon the exercise of
       options which are not exercisable within 60 days.

(3)    Includes 196,154 shares of Common Stock which are held in escrow but in
       respect of which Mr. Gutkowski retains the power to vote. See "--Escrow
       Shares." Does not include 38,461 shares of Common Stock which are
       issuable upon exercise of an equal number of Warrants, which are not
       exercisable until December 5, 1997. Does not include 20,000 shares of
       Common Stock issuable upon the exercise of options which are not
       exercisable within 60 days.

(4)    Includes 196,154 shares of Common Stock which Mr. Kaminsky placed in
       escrow but in respect of which he retains the power to vote. See
       "--Escrow Shares." Does not include 38,461 shares of Common Stock which
       are issuable upon exercise of an equal number of Warrants, which are
       not exercisable until December 5, 1997. Does not include 20,000 shares
       of Common Stock issuable upon the exercise of options which are not
       exercisable within 60 days.

(5)    Includes 98,076 shares of Common Stock Mr. Oppenheim placed in escrow
       but in respect of which he retains the power to vote. See "--Escrow
       Shares." Does not include 19,230 shares of Common Stock issuable upon
       exercise of an equal number of Warrants, which are not exercisable
       until December 5, 1997. Does not include 10,000 shares of Common Stock
       issuable upon the exercise of options which are not exercisable within
       60 days.

(6)    Includes 196,154 shares of Common Stock which Mr. Letis placed in
       escrow but in respect of which he retains the power to vote. See
       "--Escrow Shares." Does not include 38,461 shares of Common Stock which
       are issuable upon exercise of an equal number of Warrants, which are
       not exercisable until December 5, 1997. Does not include 20,000 shares
       of Common Stock issuable upon the exercise of options which are not
       exercisable within 60 days.

(7)    Includes 196,154 shares of Common Stock which Mr. Trager placed in
       escrow but in respect of which he retains the power to vote. See
       "--Escrow Shares." Does not include 38,461 shares of Common Stock which
       are issuable upon exercise of an equal number of Warrants, which are
       not exercisable until December 5, 1997. Does not include 20,000 shares
       of Common Stock issuable upon the exercise of options which are not
       exercisable within 60 days.

(8)    Includes 1,500 Shares of Common Stock issuable upon exercise of an
       equal number of Warrants, which are currently exercisable.

(9)    Includes 6,500 Shares of Common Stock issuable upon exercise of an
       equal number of Warrants, which are currently exercisable. Does not
       include 750,000 shares of Common Stock which are issuable upon exercise
       of an equal number of Warrants, which Warrants are not exercisable
       until December 5, 1997, or 137,500 shares of Common Stock issuable upon
       the exercise of options which are not exercisable within 60 days.


                                    - 19 -


<PAGE>


ESCROW SHARES

     Certain existing stockholders deposited or agreed to deposit an aggregate
of 1,275,000 shares of Common Stock into escrow (the "Escrow Shares"). The
Escrow Shares are not assignable or transferable. Of the Escrow Shares,

       (i) 425,000 shall be released from escrow if; for the fiscal year
ending December 31, 1997, the Company's income before provision for taxes (the
"Minimum Pretax Income") equals or exceeds $1,400,000;

       (ii) 425,000 Escrow Shares (or, if the condition set forth in (i) above
was not met, 850,000 Escrow Shares) shall be released, if; for the fiscal year
ending December 31, 1998, the Minimum Pretax Income equals or exceeds
$2,400,000;

       (iii) 425,000 Escrow Shares (or, if the conditions set forth in either
(i) or (ii) were not met, the remaining Escrow Shares) shall be released if;
for the fiscal year ending December 31, 1999, the Minimum Pretax Income equals
or exceeds $3,400,000; and

       (iv) all of the Escrow Shares will be released from escrow if one or
more of the following conditions is/are met:

       (a)     the Closing Price (as defined in the escrow agreement) of the
               Company's Common Stock averages in excess of $15.00 per share
               for 20 consecutive trading days during the period from December
               5, 1998 until December 31, 1999; or

       (b)     the Company is acquired by or merged into another entity in a
               transaction in which the value of the per share consideration
               received by the stockholders of the Company on the date of such
               transaction equals of exceeds $15.00 per share.

       The Minimum Pretax Income amounts set forth above shall be (i)
calculated exclusive of (x) any extraordinary earnings or charges (including
any charges incurred in connection with the release from escrow of the Escrow
Shares and any Escrow Property (as defined below) in respect thereof) and (y)
any interest expense relating to the Debentures issued by the Company in
connection with the Private Placement; (ii) derived solely from the businesses
owned and operated by the Company following completion of the Acquisitions and
shall not give effect to any operations relating to businesses or assets
acquired after such date, if any, and (iii) audited by the Company's
independent public accountants. The Closing Price amount set forth above is
subject to adjustment in the event of any stock splits, reverse stock splits
or other similar events.

       Any money, securities, rights or property distributed in respect of the
Escrow Shares shall be received by the escrow agent, including any property
distributed as dividends or pursuant to any stock split, merger,
recapitalization, dissolution or total or partial liquidation of the Company
(the "Escrow Property"); provided however, that with the exception of any
securities of the Company or any successor to the Company issued as a result
of any of the foregoing, such property shall be delivered to the holders of
the Escrow Shares promptly upon the escrow agent's receipt thereof. If the
applicable Minimum Pretax Income levels or Closing Price level set forth above
have not been met by March 31, 2000, the Escrow Shares, as well as any
dividends or other distributions made with respect thereto, will be canceled
and contributed to the capital of the Company. The Company expects that the
release of the Escrow Shares to officers, directors, employees and consultants
of the Company will be deemed compensatory and, accordingly, will result in a
substantial charge to operations, which would equal the then fair market value
of such shares. Such charge could substantially increase the loss or reduce or
eliminate the Company's net income for financial reporting purposes for the
period during which such shares are, or become probable of being, released
from escrow. Although the amount of compensation expense recognized by the
Company will not affect the Company's total stockholders' equity, it may have
a negative effect on the market price of the Company's securities.



                                     -20-


<PAGE>


       The Minimum Pretax Income and Closing Price levels set forth above were
determined by negotiation between the Company and the underwriters in the
Company's initial public offering and should not be construed to imply or
predict any future earnings by the Company or any increase in the market
price of its securities.

ITEM 12.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

FOUNDERS' STOCK

       In connection with the organization of the Company, in July 1995 the
Company sold 333 shares of Common Stock and in August 1995 the Company sold
666 shares of Common Stock, respectively, to Robert M. Gutkowski, the
Company's President and Chief Executive Officer, and to TSC, which is
controlled by Robert F.X. Sillerman, the Company's Chairman, for an aggregate
purchase price of $19,980, or approximately $.01 per share (on a post-Stock
Split basis). In May 1996, the Company sold one share of Common Stock to an
officer of the Company, for a purchase price of $500 or $.01 per share (on a
post-Stock Split basis). In August 1996, the Company increased by means of a
stock split (the "Stock Split") the number of shares held by Mr. Gutkowski to
646,154 shares, TSC to 1,292,308 shares and such officer to 50,000 shares.

PRIVATE PLACEMENT AND CORPORATE INDEBTEDNESS

       In August 1996 the Company consummated a private placement (the
"Private Placement") of $2,000,000 aggregate principal amount of debentures
(the "Debentures"). The $2,000,000 aggregate principal amount of Debentures
were converted into and aggregate of 666,662 Units upon the consummation of
the Company's initial public offering in December 1996.

       From January 3, 1996 through September 30, 1996, Robert M. Gutkowski
made loans to the Company in the aggregate principal amount of $437,000, which
loans accrued interest at the rate of 12% per annum. The funds advanced by Mr.
Gutkowski were used by the Company for working capital purposes. In August
1996, the Company repaid $125,000 of such amount to Mr. Gutkowski from the
proceeds of the Private Placement and Mr. Gutkowski purchased $115,385 in
principal amount of Debentures through the cancellation of an equal portion of
such indebtedness which Debentures automatically converted upon the
consummation of the Company's initial public offering into 38,461 shares of
Common Stock and 38,461 Warrants. In September 1996 the Company repaid $75,000
of its indebtedness to Mr. Gutkowski from working capital. The Company will
repay the balance of such indebtedness plus accrued interest at the rate of
12% per annum to Mr. Gutkowski on January 1, 1998. The investment by Mr.
Gutkowski in the Private Placement was on the same terms as the investments by
the non-affiliated investors, except that Mr. Gutkowski agreed not to sell the
securities issuable upon conversion of the Debentures during the two-year
period commencing on December 5, 1997.

       From May 15, 1996 through August 12, 1996, TSC incurred expenses and
made loans to the Company in the aggregate principal amount of $196,385, which
indebtedness accrued interest at the rate of 12% per annum and which interest
was waived by TSC, and which were used by the Company for working capital
purposes, including rent payable to TSC. In August 1996, TSC purchased
$230,768 in principal amount of Debentures through the payment of $34,383 and
the cancellation of such indebtedness, which Debentures automatically
converted upon the consummation of the Company's initial public offering into
76,924 shares of Common Stock and 76,924 Warrants. The investment by TSC in
the Private Placement was on the same terms as the investments by the
non-affiliated investors, except that TSC agreed not to sell the securities
issuable upon conversion of the Debentures during the two-year period
commencing on December 5, 1997.

       On May 30, 1996, Michael Trager, the Chairman of SMTI and a Director of
the Company, and Michael Letis, the President of SMTI, each of whom is an
Executive Vice President and a Director of the Company, made a loan to the
Company in the aggregate principal amount of $100,000, which loan accrued
interest at the rate of 12% per annum and which interest was waived by Messrs.
Trager and Letis, and which was used by the Company for working capital
purposes. In August 1996, Messrs. Trager and Letis each purchased $115,385 in
principal amount of Debentures through

                                    - 21 -


<PAGE>


the payment of an aggregate of $130,770 and the cancellation of such
indebtedness, which Debentures automatically converted upon the consummation
of the Company's initial public offering into an aggregate of 76,924 shares of
Common Stock and 76,924 Warrants. The investments by Messrs. Trager and Letis
in the Private Placement were on the same terms as the investments by the
non-affiliated investors, except that Messrs. Trager and Letis each agreed not
to sell the securities issuable upon conversion of the Debentures during the
two-year period commencing on December 5, 1997.

       On August 6, 1996, Louis J. Oppenheim, the Vice President of A&A and an
Executive Vice President and a Director of the Company, made a loan to the
Company in the aggregate principal amount of $33,334, which loan accrued
interest at the rate of 12% per annum and which interest was waived by Mr.
Oppenheim, and which was used by the Company for working capital purposes. In
August 1996, Mr. Oppenheim purchased $57,692 in principal amount of Debentures
through the payment of $24,358 and the cancellation of such indebtedness,
which Debentures automatically converted upon the consummation of the
Company's initial public offering into 19,230 shares of Common Stock and
19,230 Warrants. The investment by Mr. Oppenheim in the Private Placement was
on the same terms as the investments by the non-affiliated investors, except
that Mr. Oppenheim agreed not to sell the securities issuable upon conversion
of the Debentures during the two-year period commencing on December 5, 1997.

       In August 1996, Arthur C. Kaminsky, the President and Chief Executive
Officer of A&A and an Executive Officer and a Director of the Company,
purchased $115,385 principal amount of Debentures, which Debentures
automatically converted upon the consummation of the Company's initial public
offering into 38,461 shares of Common Stock and 38,461 Warrants. The
investment by Mr. Kaminsky in the Private Placement was on the same terms as
the investments by the non-affiliated investors, except that Mr. Kaminsky
agreed not to sell the securities issuable upon conversion of the Debentures
during the two-year period commencing on December 5, 1997.

SMTI ACQUISITION AGREEMENT

       The Company, SMTI, Michael Trager, Michael Letis, Robert M. Gutkowski
and TSC entered into an acquisition agreement amended and restated as of
March 21, 1996 (the "SMTI Acquisition Agreement"), pursuant to which a
wholly-owned subsidiary of the Company merged with and into SMTI on December
11, 1996, simultaneously with the closing of the Company's initial public
offering. The aggregate purchase price paid by the Company to Messrs. Trager
and Letis, the sole stockholders of SMTI, consisted of (i) $8,000,000 cash, of
which $6,500,000 was paid at the closing and an aggregate of $1,500,000 which
is payable in five equal annual installments commencing April 1, 1997 and (ii)
the issuance to each of Messrs. Trager and Letis of 646,154 shares of Common
Stock. The Company also entered into five-year employment agreements with each
of Messrs. Trager and Letis.

       The SMTI Acquisition Agreement provides that the representations and
warranties contained therein shall survive for a period of six months
following the closing, after which time the indemnification obligations for
breaches of representations and warranties will be limited to claims asserted
during such six-month period. Each of Messrs. Trager and Letis has agreed to
indemnify the Company against losses, claims and damages which the Company may
suffer or incur and which arise out of the breach by SMTI or Messrs. Trager or
Letis of any representation, warranty, covenant or agreement in the SMTI
Acquisition Agreement, provided, however, that the amount of each of Messrs.
Trager's and Letis' indemnity shall be limited to $1,000,000. Each of Mr.
Gutkowski and TSC has agreed to indemnify each of Messrs. Trager and Letis and
SMTI from any losses, claims or damages which either such party shall suffer
or incur and which arise out of the breach by Mr. Gutkowski, TSC or the
Company of any representation, warranty, covenant or agreement in the SMTI
Acquisition Agreement, provided that each of Mr. Gutkowski's and TSC's
indemnity shall be limited to $250,000.

       From its inception until immediately prior to the completion of the
SMTI Acquisition, SMTI was treated as a closely-held corporation under
Subchapter S of the Code, and, therefore, did not pay federal income taxes on
amounts earned during such period. Accordingly, SMTI distributed through
dividends to its shareholders substantially all of its earnings during such
period. Pursuant to the SMTI Acquisition Agreement, immediately prior to the
closing of the SMTI Acquisition SMTI declared a dividend to Messrs. Trager and
Letis of an amount equal to 40% of the increase in SMTI's

                                     -22-


<PAGE>


accumulated adjustments account, as defined in the Code, which amount
approximates the amount the shareholders of SMTI expected to pay personally
for income taxes based on such earnings. The amount of the dividend which
was declared was approximately $382,311.

       The SMTI Acquisition constituted a tax-free exchange to the extent of
the receipt of Common Stock under Section 351 of the Code.

A&A ACQUISITION AGREEMENT

       The Company, A&A, Arthur C. Kaminsky, Louis J. Oppenheim, Robert M.
Gutkowski and TSC entered into an acquisition agreement amended and restated
as of March 21, 1996 (the "A&A Acquisition Agreement"), pursuant to which a
wholly-owned subsidiary of the Company merged with and into A&A on December
11, 1996, simultaneously with the consummation of the Company's initial public
offering. The aggregate purchase price paid by the Company to Messrs. Kaminsky
and Oppenheim, the sole stockholders of A&A, consisted of (i) $3,500,000 cash,
of which $2,500,000 was payable at the closing and an aggregate of $1,000,000
which is payable in five equal annual installments commencing April 1, 1997
and (ii) the issuance to Messrs. Kaminsky and Oppenheim of an aggregate of
969,231 shares of Common Stock, 646,154 of which were issued to Mr. Kaminsky
and 323,076 of which were issued to Mr. Oppenheim. The Company also entered
into five-year employment agreements with each of Messrs. Kaminsky and
Oppenheim.

       The A&A Acquisition Agreement provides that the representations and
warranties contained therein shall survive for a period of six months
following the closing, after which time the indemnification obligations for
breaches of representations and warranties will be limited to claims asserted
during such six-month period. Each of Messrs. Kaminsky and Oppenheim has
agreed to indemnify the Company against losses, claims and damages which the
Company may suffer or incur and which arise out of the breach by A&A or
Messrs. Kaminsky or Oppenheim of any representation, warranty, covenant or
agreement in the A&A Acquisition Agreement, provided, however, that the amount
of Messrs. Kaminsky's and Oppenheim's indemnity shall be limited to $500,000
and $250,000, respectively. Each of Mr. Gutkowski and TSC has agreed to
indemnify each of Messrs. Kaminsky and Oppenheim and A&A from any losses,
claims or damages which either such party shall suffer or incur and which
arise out of the breach by Mr. Gutkowski, TSC or the Company of any
representation, warranty, covenant or agreement in the A&A Acquisition
Agreement, provided that each of Mr. Gutkowski's and TSC's indemnity shall be
limited to $250,000.

       The terms of the A&A Acquisition Agreement provided that Messrs.
Kaminsky and Oppenheim were to be permitted to withdraw from A&A an amount of
money equal to the amount that A&A recovers in pending lawsuits in which it is
the plaintiff, provided, however, that such amount shall not exceed $100,000.

       The A&A Acquisition constituted a tax-free exchange to the extent of
the receipt of Common Stock under Section 351 of the Code.

CONSULTING AGREEMENT

       The Company has entered into a Financial Consulting Agreement with
SCMC, dated as of August 1, 1996 (the "Consulting Agreement"). In March 1997,
SCMC assigned its rights, obligations and duties under the Consulting
Agreement to TSC. Pursuant to the Consulting Agreement, TSC has agreed to
serve for a period of six years as the Company's financial consultant to
provide customary financial and advisory services, which agreement may be
renewed by mutual agreement of the Company and TSC for an additional period of
four years. Robert F.X. Sillerman, the Chairman and a principal stockholder of
the Company, is the Chairman, Chief Executive Officer and controlling
stockholder of SCMC and TSC, and Howard J. Tytel, a Director of the Company,
is the Executive Vice President and General Counsel of SCMC and TSC. SCMC
and/or TSC have entered into similar agreements with other companies,

                                     -23-


<PAGE>


including companies in which Mr. Sillerman or his affiliates have substantial
interests. The Company has agreed to pay to TSC as compensation for its
services under the Consulting Agreement the sum of $30,000 per month from the
date commencing nine months from December 11, 1996 (the date of the closing of
the Company's initial public offering), which amount shall be increased
annually by an amount equal to the percentage increase in the Consumer Price
Index for New York, New York. Under the Consulting Agreement, TSC has agreed
to perform, or assist the Company in, among other things (i) production of
financial reports and other data for the Company's lenders and investors and as
required under the Securities Act of 1933, as amended, and the Exchange Act,
(ii) assistance with the preparation of the Company's books and records, (iii)
the maintenance of relationships with financial institutions participating in
Company financings, (iv) the design and implementation of the Company's
accounting systems, (v) the purchase, installation and implementation of
computer hardware and software for the Company's accounting systems, (vi) the
implementation of a cash management system, (vii) the establishment of
regularized procedures for the accumulation of cash balances available for
interest and other required debt service payments, (viii) the engagement of
bookkeeping, accounting and other personnel necessary for the implementation
of the Company's accounting systems and (ix) placement of financing. The
Consulting Agreement also provides for Special Advisory Fees to be paid to TSC
in the event of any financings or mergers and acquisitions, whether or not such
transactions are originated by TSC, although such fees are subject to the
approval of the Company's independent directors. The Company did not, however,
make any such payment to SCMC or TSC in connection with the Company's initial
public offering, the Acquisitions or the Private Placement. The Company has
also agreed to reimburse TSC for all reasonable out-of-pocket disbursements
incurred by TSC in connection with the performance of services under the
Consulting Agreement and to indemnify TSC and its affiliates for losses,
claims, damages or liabilities arising out of TSC's performance of its
obligations under the Consulting Agreement. In February 1997, the Company
advanced to SCMC the sum of $400,000 as an advance against the Special
Advisory Fee.

     Howard J. Tytel, a Director of the Company, is Of Counsel to the law firm
of Baker & McKenzie, which is counsel in certain matters to the Company, SCMC,
TSC and certain other affiliates of Mr. Sillerman, the Chairman of the
Company. Baker & McKenzie compensates Mr. Tytel based upon the fees it
receives for providing legal services to the Company and other clients
introduced by Mr. Tytel. Mr. Tytel's primary employment is as an officer of
SCMC.

       In January 1996, the Company entered into a month-to-month lease with
TSC providing for a monthly rent of approximately $4,000, which lease was
terminated in September 1996.

STOCKHOLDERS' AGREEMENT

       In March 1996, the Company entered into a stockholders' agreement with
each of TSC, Robert M. Gutkowski, Arthur C. Kaminsky, Louis J. Oppenheim,
Michael Trager and Michael Letis (the "Stockholders' Agreement"). The
Stockholders' Agreement generally covers certain corporate governance matters.
Pursuant to the Stockholders Agreement, TSC is entitled to nominate two
directors to the Company's Board of Directors, Messrs. Kaminsky and Oppenheim
are entitled to nominate two directors, Messrs. Trager and Letis are entitled
to nominate two directors, and Mr. Gutkowski is entitled to nominate one
director. Each of the stockholder parties to the Stockholders' Agreement (a
"Stockholder") has agreed to vote all of the shares of Common Stock owned by
such person for the election of the directors so nominated and not to take any
action to remove any director so elected (except for the director(s) nominated
by such Stockholder).

       The Stockholders' Agreement will terminate upon the mutual consent of
the parties to such agreement, when there is only one Stockholder bound
thereby or March 21, 2004. In addition, the Stockholders' Agreement will
terminate with respect to a Stockholder if he dies or a guardian is appointed
to oversee his affairs or he holds less than 65% of the shares of Common Stock
beneficially owned by him on December 11, 1996 (the date of the closing of the
Company's initial public offering), provided that such Stockholder shall
remain obligated to vote his shares of Common Stock in accordance with the
terms of the Stockholders' Agreement.




                                     -24-


<PAGE>


EMPLOYMENT AGREEMENTS

     The Company has entered into employment agreements with Messrs.
Gutkowski, Kaminsky, Letis, Oppenheim and Trager.

GENERAL

       The Company believes that transactions between the Company and its
officers, directors and principal stockholders or affiliates thereof have been
on terms no less favorable to the Company than could be obtained from
independent third parties. The Company expects that all future transactions
between the Company and its officers, directors and principal stockholders or
affiliates thereof will be subject to the approval of the Company's
independent directors.

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

       (a)     The following documents are filed as part of this report:

Exhibit
 No.    Description of Exhibit
 ---    ----------------------
3.1     Amended and Restated Certificate of Incorporation of The Marquee
        Group, Inc. (incorporated by reference to Exhibit 3.1 to the
        Registration Statement on Form SB-2 (Reg. No. 333-11287) filed with
        the Commission on September 3, 1996).

3.2     Amended and Restated By-Laws of The Marquee Group, Inc. (incorporated
        by reference to Exhibit 3.2 to Amendment No. 1 to the Registration
        Statement on Form SB-2 (Reg. No. 333-11287) filed with the Commission
        on October 25, 1996).


4.1*    Warrant Agreement, dated as of December 5, 1996, among The Marquee
        Group, Inc., Continental Stock Transfer & Trust Company, Royce
        Investment Group, Inc. and Continental Broker-Dealer Corporation.

4.2*    Unit Purchase Option, dated December 11, 1996, issued by The Marquee
        Group, Inc. to Royce Investment Group, Inc.

10.1    1996 Stock Option Plan (incorporated by reference to Exhibit 10.1 to
        Amendment No. 1 to the Registration Statement on Form SB-2 (Reg. No.
        333-11287) filed with the Commission on October 25, 1996).

10.2    Employment Agreement, dated as of March 21, 1996, between The Marquee
        Group, Inc. and Robert M. Gutkowski (incorporated by reference to
        Exhibit 10.2 to the Registration Statement on Form SB-2 (Reg. No.
        333-11287) filed with the Commission on September 3, 1996).

10.3*   Employment Agreement, dated as of December 11, 1996, between The
        Marquee Group, Inc. and Michael Trager.

10.4*   Employment Agreement, dated as of December 11, 1996, between The
        Marquee Group, Inc. and Michael Letis.

10.5*   Employment Agreement, dated as of December 11, 1996, between The
        Marquee Group, Inc. and Arthur Kaminsky.

10.6*   Employment Agreement, dated as of December 11, 1996, between The
        Marquee Group, Inc. and Louis J. Oppenheim.

10.7    Shareholders' Agreement, dated as of March 21, 1996, by and among The
        Sillerman Companies, Inc., Robert M. Gutkowski, Arthur Kaminsky, Louis
        J. Oppenheim, Michael Trager, Michael Letis and The Marquee Group, Inc
        (incorporated by reference to Exhibit 10.7 to the Registration
        Statement on Form SB-2 (Reg. No. 333-11287) filed with the Commission
        on September 3, 1996).


                                     -25-


<PAGE>


Exhibit
 No.    Description of Exhibit
---     ----------------------
10.8    Escrow Agreement, dated as of August 15, 1996, by and between The
        Marquee Group, Inc., Continental Stock Transfer & Trust Company, The
        Sillerman Companies, Inc., Robert M. Gutkowski, Arthur Kaminsky, Louis
        J. Oppenheim, Michael Trager and Michael Letis (incorporated by
        reference to Exhibit 10.8 to the Registration Statement on Form SB-2
        (Reg. No. 333-11287) filed with the Commission on September 3, 1996).

10.8A*  Amendment No. 1 to Escrow Agreement.

10.8B*  Amendment No. 2 to Escrow Agreement.

10.9    Financial Consulting Agreement, dated August 1, 1996, between The
        Marquee Group, Inc. and Sillerman Communications Management
        Corporation (incorporated by reference to Exhibit 10.9 to the
        Registration Statement on Form SB-2 (Reg. No. 333-11287) filed with
        the Commission on September 3, 1996).


10.10*  Amended and Restated Acquisition Agreement, dated as of March 21, 1996,
        by and among The Marquee Group, Inc., Athletes and Artists, Inc.,
        Arthur C. Kaminsky, Louis J. Oppenheim, Robert M. Gutkowski and The
        Sillerman Companies, Inc.

10.11*  Amended and Restated Acquisition Agreement, dated as of March 21, 1996,
        by and among The Marquee Group, Inc., Sports Marketing & Television
        International, Inc., Michael Trager, Michael Letis, Robert M.
        Gutkowski and The Sillerman Companies, Inc.

10.12   Marketing Agreement, dated as of July 29, 1994, by and between Sports
        Marketing & Television International, Inc. and Breeders' Cup Limited
        (incorporated by reference to Exhibit 10.12 of Amendment No. 1 to the
        Registration Statement on Form SB-2 (Reg. No. 333-11287) filed with
        the Commission on October 25, 1996).+

10.13*  Subscription Agreement, dated August 15, 1996, between The Marquee
        Group, Inc. and Robert Gutkowski. **

10.14   Promissory Note from The Marquee Group, Inc. to Robert M. Gutkowski
        (incorporated by reference to Exhibit 10.14 of Amendment No. 1 to the
        Registration Statement on Form SB-2 (Reg. No. 333-11287) filed with
        the Commission on October 25, 1996).

10.15*  Underwriting Agreement, dated December 5, 1997, between The Marquee
        Group, Inc. and Royce Investment Group, Inc.

21*     List of subsidiaries of the Registrant.

27*     Financial Data Schedule.

-----------------
*      Filed herewith.

**     The Company has entered into substantially similar agreements
       with other parties.

+      Portions of this agreement are subject to confidential treatment.

       (b) Reports on Form 8-K. No reports on Form 8-K were filed by the
Company during the last quarter of 1996.



                                     -26-


<PAGE>


                                           Signatures

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


                            THE MARQUEE GROUP, INC.


Dated: March 31, 1997
                                        /s/ Robert Gutkowski
                                   ------------------------------------------
                                   Name:   Robert Gutkowski
                                   Title:  President and Chief Executive
                                           Officer


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

<TABLE>
<CAPTION>
            SIGNATURE                             TITLE                           DATE
            ----------                            -----                           ----
<S>                              <C>                                          <C>
/s/ Robert Gutkowski             President, Chief Executive Officer and        March 31, 1997
-------------------------------     Director (principal executive officer)
   Robert M. Gutkowski

/s/ Robert F.X. Sillerman
 ------------------------------  Chairman                                      March 31, 1997
   Robert F.X. Sillerman

-------------------------------  Executive Vice President and Director         March __, 1997
    Arthur Kaminsky

/s/ Michael Letis                Executive Vice President and Director         March 27, 1997
------------------------------
    Michael Letis

------------------------------   Executive Vice President and Director         March __, 1997
    Louis J. Oppenheim

/s/ Michael Trager               Executive Vice President and Director         March 27, 1997
------------------------------
    Michael Trager

/s/ James E. Sileo               Chief Financial Officer (principal            March 31, 1997
------------------------------    financial and accounting officer)
   James E. Sileo

/s/ Howard J. Tytel
------------------------------   Director                                      March 31, 1997
   Howard J. Tytel

/s/ Arthur R. Barron             Director                                      March 27, 1997
------------------------------
    Arthur R. Barron

/s/ Myles W. Schumer
------------------------------   Director                                      March 27, 1997
    Myles W. Schumer

</TABLE>
                                      - 27 -




<PAGE>
                   The Marquee Group, Inc. and Subsidiaries

                       Consolidated Financial Statements

                Year ended December 31, 1996 and for the Period
                  from July 11, 1995 (Inception) to December
                                   31, 1995




                                                     CONTENTS

<TABLE>
<CAPTION>
<S>                                                                                                   <C>

Report of Independent Auditors....................................................................... F-1

Consolidated Balance Sheets.......................................................................... F-2
Consolidated Statements of Operations................................................................ F-3
Consolidated Statements of Stockholders' Equity...................................................... F-4
Consolidated Statements of Cash Flows................................................................ F-5
Notes to Consolidated Financial Statements........................................................... F-7
</TABLE>

<PAGE>











                        Report of Independent Auditors

To the Stockholders of
   The Marquee Group, Inc.

We have audited the accompanying consolidated balance sheet of The Marquee
Group, Inc. and Subsidiaries (the "Company"), as of December 31, 1996 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year ended December 31, 1996 and for the period from July 11,
1995 (Inception) to December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Company at
December 31, 1996, and the consolidated results of its operations and its cash
flows for the year ended December 31, 1996 and for the period from July 11,
1995 (Inception) to December 31, 1995, in conformity with generally accepted
accounting principles.

                                             /s/ Ernst & Young






February 14, 1997

                                       F-1
<PAGE>


                   The Marquee Group, Inc. and Subsidiaries

                          Consolidated Balance Sheet

                               December 31, 1996

<TABLE>
<CAPTION>
<S>                                                                                    <C>
ASSETS
Current assets:
   Cash and cash equivalents                                                            $    7,230,526
   Accounts receivable                                                                       1,295,894
   Due from related parties                                                                    138,699
   Due from Celebrity Golf Championship, LLC                                                   169,100
   Prepaid expenses and other current assets                                                   250,363
                                                                                     ----------------------
Total current assets                                                                         9,084,582

Property and equipment, net                                                                    218,604
Other assets                                                                                    57,612
                                                                                     ======================
Total assets                                                                            $    9,360,798
                                                                                     ======================

LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
   Accounts payable and accrued liabilities                                             $      866,442
   Income taxes payable                                                                        268,250
   Distribution payable to stockholders                                                        382,311
   Acquisition indebtedness--current portion                                                   332,500
                                                                                     ----------------------
Total current liabilities                                                                    1,849,503

Loan payable to officer/stockholder                                                            121,615
Acquisition indebtedness--stockholders                                                       1,637,500
Deferred taxes                                                                                 343,000

Commitments

Stockholders' equity:
   Preferred stock, $.01 par value; 5,000,000 shares authorized,
     no shares issued
   Common stock, $.01 par value; 25,000,000 shares authorized, 8,769,162 shares
     issued and outstanding                                                                     87,692
   Additional paid-in capital                                                                7,795,199
   Deferred compensation                                                                       (63,334)
   Accumulated deficit                                                                      (2,410,377)
                                                                                     ----------------------
                                                                                             5,409,180
                                                                                     ----------------------
Total liabilities and stockholders' equity                                              $    9,360,798
                                                                                     ======================
</TABLE>
See accompanying notes.

                                       F-2
<PAGE>


                                     The Marquee Group, Inc. and Subsidiaries

                                       Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                                    FOR THE PERIOD FROM
                                                                                     JULY 11, 1995
                                                             YEAR ENDED              (INCEPTION) TO
                                                            DECEMBER 31                DECEMBER 31,
                                                                1996                        1995
                                                       -------------------------------------------------
<S>                                                     <C>                     <C>
Revenue:
   Commissions and fee income                             $   2,868,788            $            -
   Income from joint venture                                          -                         -
                                                       -------------------------------------------------
                                                              2,868,788                         -

Operating expenses                                            2,563,682                         -
General and administrative expenses                           2,259,760                         -
                                                       -------------------------------------------------
Loss from operations                                         (1,954,654)                        -

Interest expense, net                                           283,222                         -
Financing expense                                               192,501                         -
                                                       -------------------------------------------------
Loss before income taxes                                     (2,430,377)                        -

Income tax benefit                                               20,000                         -
                                                       =================================================
Net loss                                                   $ (2,410,377)           $            -
                                                       =================================================

Net loss per share                                       $       (1.03)            $            -
                                                       =================================================

Weighted average common stock
   and common stock equivalents outstanding                   2,346,717                  2,066,662
                                                       =================================================



See accompanying notes.


                                       F-3

<PAGE>


                                  The Marquee Group, Inc. and Subsidiaries

                              Consolidated Statements of Stockholders' Equity

</TABLE>
<TABLE>
<CAPTION>

                                     NUMBER OF       COMMON           ADDITIONAL       DEFERRED       ACCUMULATED
                                      SHARES          STOCK         PAID-IN CAPITAL   COMPENSATION      DEFICIT      TOTAL
                                     ------------------------------------------------------------------------------------------
<S>                                  <C>            <C>            <C>                <C>              <C>       <C>
Issuance of common stock - July 1995 1,938,462     $  19,385      $       595         $       -     $        -    $      19,980
                                     -----------------------------------------------------------------------------------------
Balance--December 31, 1995           1,938,462        19,385              595                 -              -           19,980
Issuance of common stock:
   Issuance to employee                 50,000           500          118,750           (118,750)            -              500
   Conversion of Debentures            666,662         6,667        1,993,333                 -              -        2,000,000
   Public offering, net of offering
    costs                            3,852,500        38,525       15,547,001                 -              -       15,585,526
   Acquisition of Subsidiaries       2,261,538        22,615        1,487,831                 -              -        1,510,446
Distribution to acquired companies'
 stockholders                                -             -      (10,970,000)                -              -      (10,970,000)
S corporation dividend of subsidiary         -             -         (382,311)                -              -         (382,311)
Amortization of deferred compensation        -             -                -             55,416             -           55,416
Net loss for the year ended
 December 31, 1996                           -             -                -                  -      (2,410,377)    (2,410,377)
                                     -------------------------------------------------------------------------------------------
Balance--December 31, 1996           8,769,162     $  87,692       $7,795,199         $  (63,334)    $(2,410,377) $   5,409,180
                                     ===========================================================================================
</TABLE>

See accompanying notes.

                                       F-4
<PAGE>


                   The Marquee Group, Inc. and Subsidiaries

                     Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                                   FOR THE
                                                                                                 PERIOD FROM
                                                                                                JULY 11, 1995
                                                                           YEAR ENDED          (INCEPTION) TO
                                                                            DECEMBER              DECEMBER
                                                                            31, 1996              31, 1995
                                                                       -------------------------------------------

<S>                                                                     <C>                    <C>
OPERATING ACTIVITIES
Net loss                                                                  $   (2,410,377)      $            -
Adjustments to reconcile net loss to
   net cash used in operating activities:
     Depreciation                                                                  5,620                    -
     Non-cash compensation                                                        55,416                    -
     Deferred income taxes                                                       (40,000)
     Changes in operating assets and liabilities:
       Accounts receivable                                                       974,169                    -
       Due from related parties                                                  (67,810)                   -
       Prepaids and other current assets                                        (178,318)                   -
       Accounts payable and accrued liabilities                                 (192,630)                   -
       Income taxes payable                                                       20,250
                                                                       -------------------------------------------
Net cash used in operating activities                                         (1,833,680)                   -
                                                                       -------------------------------------------

INVESTING ACTIVITIES
Purchase of fixed assets                                                        (122,422)                   -
Other assets                                                                     (44,760)                   -
                                                                       -------------------------------------------
Net cash used in investing activities                                           (167,182)                   -
                                                                       -------------------------------------------

FINANCING ACTIVITIES
Proceeds from loans payable to related parties                                   766,718                    -
Repayments of loans payable to related parties                                  (200,000)                   -
Proceeds from private placement                                                1,554,897                    -
Issuance of common stock, net of offering costs                               15,586,026               19,980
Distribution to Subsidiary stockholders                                       (9,000,000)                   -
Cash acquired through acquisition of Subsidiaries                                503,767                    -
                                                                       -------------------------------------------
Net cash provided by financing activities                                      9,211,408               19,980
Increase in cash and cash equivalents                                          7,210,546               19,980
Cash and cash equivalents at beginning of year                                    19,980                    -
                                                                       ===========================================
Cash and cash equivalents at end of year                                  $    7,230,526       $       19,980
                                                                       ===========================================
</TABLE>
                                        F-5
<PAGE>


                    The Marquee Group, Inc. and Subsidiaries

                     Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                                   FOR THE
                                                                                                 PERIOD FROM
                                                                                                JULY 11, 1995
                                                                            YEAR ENDED         (INCEPTION) TO
                                                                             DECEMBER             DECEMBER
                                                                             31, 1996             31, 1995
                                                                       -------------------------------------------
<S>                                                                    <C>                      <C>
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Exchange of loans payable - related parties for debentures                $      445,103       $            -
                                                                       ===========================================
Conversion of debentures to common stock                                  $    2,000,000       $            -
                                                                       ===========================================
Issuance of acquisition indebtedness - stockholders                       $    1,970,000       $            -
                                                                       ===========================================
S Corporation dividend payable                                            $      382,311       $            -
                                                                       ===========================================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for :
   Income taxes                                                           $            -       $            -
                                                                       ===========================================
   Interest                                                               $      254,000       $            -
                                                                       ===========================================

</TABLE>


See accompanying notes.

                                       F-6
<PAGE>





                   The Marquee Group, Inc. and Subsidiaries

                         Notes to Financial Statements

                               December 31, 1996


1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS AND ORGANIZATION

The Marquee Group, Inc. (the "Company"), which began operations in 1996, was
organized in the State of Delaware on July 11, 1995 for the purpose of
providing comprehensive management, marketing, sales, consulting and
production services to sports and entertainment-related businesses, events,
athletes, broadcasters, journalists and executives,.

In furtherance of its business strategy, on December 12, 1996, the Company
acquired by merger, concurrently with the closing of its initial public
offering ("Offering"), Sports Marketing & Television International, Inc.
("SMTI") which provides production and marketing services to sporting events,
sports television shows and professional and collegiate leagues and
organizations, and Athletes and Artists, Inc. ("A&A"), a sports and media
representation firm. The SMTI stockholders received cash of $6,500,000 from
the Offering, an additional $1,500,000 payable in five equal installments over
five years and 1,292,307 shares of the Company's stock. The A&A stockholders
received cash of $2,500,000 from the Offering, miscellaneous reimbursements of
$80,000, an additional $1,000,000 payable in five equal installments over five
years and 969,231 shares of the Company's common stock.

BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of the
Company and its Subsidiaries from and after December 12, 1996. All significant
intercompany accounts and transactions have been eliminated in consolidation.

                                       F-7
<PAGE>




                   The Marquee Group, Inc. and Subsidiaries

                   Notes to Financial Statements (continued)




1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

REVENUE RECOGNITION

Fee revenue from production services (television, broadcast and video) is
recognized when the program is available for broadcast. Licensing, sponsorship
and merchandise revenues are recognized for guaranteed amounts when
contractual obligations thereunder are met (subsequent royalties are recorded
when received). Fee revenue from advertising services is recognized in the
month the advertisement is broadcast or printed. Consulting revenue is
recognized as services are provided.

The Company recognizes representation commissions as income when they become
due to the Company under terms of the Company's representation agreements with
its clients. Generally, commissions are payable by clients upon their receipt
of payments for performance of services or upon the delivery or use of
material created by them. Commissions on profit or gross receipt
participations are recorded upon determination of the amounts.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost and are depreciated on a
straight-line basis over their estimated useful lives ranging from five to
seven years. Leasehold improvements are amortized over the shorter of their
estimated useful lives or the remaining lease term.

INCOME TAXES

The Company accounts for income taxes using the liability method.

CASH EQUIVALENTS

The Company considers all highly liquid financial instruments with a maturity
of three months or less when purchased to be cash equivalents.

                                        F-8
<PAGE>


                   The Marquee Group, Inc. and Subsidiaries

                   Notes to Financial Statements (continued)



1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash investments and trade accounts
receivable.

At December 31, 1996, approximately 90% of the Company's cash and cash
equivalents is invested with one financial institution.

Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of entities comprising the Company's client
base.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:

Loan payable to officer stockholder: The carrying amount of the Company's
borrowings under its long-term debt agreement approximates fair value.

Acquisition indebtedness - stockholders: The carrying amount of the
Company's borrowings under its long-term debt agreement approximates
fair value.

                                       F-9
<PAGE>



                   The Marquee Group, Inc. and Subsidiaries

                   Notes to Financial Statements (continued)



1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

NET INCOME (LOSS) PER SHARE

Net income (loss) per share is based upon net income (loss) divided by
weighted average number of shares of common stock and common stock equivalents
outstanding during the year. Shares of common stock placed in escrow upon
completion of the public offering described in Note 6, which are common stock
equivalents, have been excluded from the calculation of earnings per share.
The shares of common stock issued upon the automatic conversion of the
debentures (see Note 5) are considered outstanding for all periods presented.

Supplementary net loss per share would have been $(.83) for the year ended
December 31, 1996 if the debentures had been converted at the beginning of the
year. In addition, all shares have been adjusted to give effect to the stock
split discussed in Note 4.

2. PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31, 1996:

<TABLE>
<CAPTION>
<S>                                                                                    <C>

      Furniture and fixtures                                                              $     118,172
      Leasehold improvements                                                                     79,413
      Vehicles                                                                                   26,639
                                                                                       -------------------
                                                                                                224,224
      Accumulated depreciation and amortization                                                   5,620
                                                                                       ===================
                                                                                          $     218,604
                                                                                       ===================
</TABLE>

3. RELATED PARTY TRANSACTIONS

At December 31, 1996, the Company has a loan payable of $121,615 to an
officer/stockholder which is due on January 1, 1998 with interest at 12% per
annum.

The Company provided services as a subcontractor for SMTI aggregating $724,000,
for the period from January 1, 1996 to December 12, 1996 (see Note 1), which
are included in revenues in the accompanying consolidated statement of
operations.

                                       F-10
<PAGE>



                   The Marquee Group, Inc. and Subsidiaries

                   Notes to Financial Statements (continued)



4. STOCKHOLDERS' EQUITY

COMMON STOCK

On July 17, 1996, the Board of Directors and stockholders of the Company
approved an increase in the authorized capitalization of the Company to
25,000,000 shares of common stock, par value $.01 per shares, and 5,000,000
shares of preferred stock, par value $.01 per share. Furthermore, in August
1996 the Board of Directors and stockholders of the Company approved a stock
split whereby 999 shares of the 1,000 shares of common stock outstanding at
that time were split on the basis of approximately 1,940-for-1 and the
remaining one share of common stock outstanding at that time was split on the
basis of 50,000-for-1. All share information in the financial statements has
been restated to reflect such stock split.

5. PRIVATE PLACEMENT

In August 1996, the Company issued debentures (the "Debentures"), in the
aggregate principal amount of $2,000,000, each Debenture consisted of $50,000
principal amount of 10% Convertible Debentures. Interest on the Debentures of
$254,000 was calculated for the period from the final closing of the Private
Placement to a date one year from the effective date of the Company's initial
public offering. The Debentures were automatically converted into Units (see
Note 6) identical in all respects to those offered in the initial public
offering at a rate of one Unit for each $3.00 principal amount of Debentures.

Stockholders of the Company and stockholders of the Subsidiaries purchased an
aggregate of $750,000 principal amount of Debentures, of which $445,103 was in
exchange for existing indebtedness of the Company to such stockholders. In
addition, the Company repaid $125,000 to one of the officer/stockholders from
the proceeds of the private placement.

                                      F-11
<PAGE>



                   The Marquee Group, Inc. and Subsidiaries

                   Notes to Financial Statements (continued)



6. INITIAL PUBLIC OFFERING AND ACQUISITIONS

In December 1996, the Company closed on an initial public offering of
3,852,500 units (the "IPO Units"), each unit consisting of one share of common
stock and one redeemable warrant, at a price of $5.00 per IPO Unit. Each
warrant entitles the holder to purchase one share of common stock at an
exercise price of $7.50, subject to adjustment, for a period up to five years
from the date the common stock and warrants are separately transferable. The
warrants are redeemable by the Company under certain circumstances at a
redemption price of $.05 per warrant.

The Company also granted to the underwriters or their designees options (the
"Unit Purchase Options") to purchase up to 335,000 units. The units
purchaseable upon exercise of the Unit Purchase Options are identical to the
units described above, except that the underlying warrants are redeemable only
by the Company under limited circumstances. The Unit Purchase Options are
exercisable during a three-year period commencing two years from the date of
the public offering at an exercise price of $8.25, subject to adjustment in
certain events.

Certain of the Company's stockholders and the stockholders of the Subsidiaries
have placed an aggregate of 1,275,000 of their shares of common stock in
escrow. These shares will not be assignable or transferable (but may be voted)
until such time as they are released from escrow based upon the Company
meeting certain annual earnings levels or the common stock attaining certain
price levels. All reserved shares remaining in escrow on March 31, 2000 will
be forfeited and contributed to the Company's capital. In the event the
Company attains any of the earnings thresholds or stock prices providing for
the release of the escrow shares to the stockholders, the Company will
recognize compensation expense at such time based on the fair market value of
the shares.

The acquisition by merger of the Subsidiaries was accounted for as a
consolidation at historical cost due to the significance of the equity
interests in the Company to be held by the stockholders of the Subsidiaries
following completion of the acquisitions. Accordingly, the acquired assets and
liabilities of the Subsidiaries were recorded at their historical amounts. The
capital stock of the Subsidiaries was included in additional paid-in capital.
In addition, the cash paid to the Subsidiaries' stockholders was recorded as a
dividend charged to additional paid-in capital.

                                      F-12
<PAGE>



                   The Marquee Group, Inc. and Subsidiaries

                   Notes to Financial Statements (continued)



6.    INITIAL PUBLIC OFFERING AND ACQUISITIONS (CONTINUED)

SMTI was an S Corporation prior to the merger. The SMTI stockholders
will receive a distribution of $382,000 which represents 40% of the taxable
earnings of SMTI prior to the merger.

The following unaudited pro forma information presents the results of
operations of the Company as though the aforementioned acquisitions and the
completion of the initial public offering had occurred as of the beginning
of 1996 and 1995.

<TABLE>
<CAPTION>

                                                                                YEAR ENDED
                                                                                DECEMBER 31,
                                                                          1996                 1995
                                                                  --------------------- --------------------
<S>                                                                <C>                  <C>
                 Pro forma revenue                                     $15,184,589           $10,341,827
                                                                  ===================== ====================
                 Pro forma net income (loss)                            $ (913,005)           $  789,773
                                                                  ===================== ====================
                 Pro forma net income (loss) per share            $          (.12)        $         .10
                                                                  ===================== ====================
                 Pro forma weighted average shares                       7,494,162             7,494,162
                                                                  ===================== ====================
</TABLE>

Included in the above unaudited pro forma information are the historical
results of operations of SMTI and A&A for the years ended December 31,
1996 and 1995 as follows:

<TABLE>
<CAPTION>

                                                                        YEAR ENDED DECEMBER 31, 1996
                                                                          SMTI                  A&A
                                                                  --------------------- --------------------
<S>                                                                <C>                  <C>
                 Revenues                                            $  9,193,000         $   4,103,000
                 Costs and expenses                                    (8,055,000)           (3,625,000)
                                                                  --------------------- --------------------
                 Income before income taxes                             1,138,000               478,000
                 Income tax provision                                    (112,000)             (229,000)
                                                                  --------------------- --------------------
                 Net income                                          $  1,026,000               249,000
                                                                  ===================== ====================
</TABLE>

                                  F-13
<PAGE>



                   The Marquee Group, Inc. and Subsidiaries

                   Notes to Financial Statements (continued)



6. INITIAL PUBLIC OFFERING AND ACQUISITIONS (CONTINUED)



<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31, 1995
                                                                          SMTI                  A&A
                                                                  --------------------- --------------------
<S>                                                               <C>                   <C>
                 Revenues                                             $ 6,495,000         $   3,846,000
                 Costs and expenses                                    (6,402,000)           (3,770,000)
                                                                  --------------------- --------------------
                 Income before income taxes                                93,000                76,000
                 Income tax provision                                     ( 9,000)              (77,000)
                                                                  --------------------- --------------------
                 Net income (loss)                                    $    84,000         $      (1,000)
                                                                  ===================== ====================
</TABLE>

In addition, the pro forma information for the years ended December 31, 1996
and 1995, include adjustments for the following transactions, as if they
had each occurred on January 1, 1995.

o    The terms of new employment contracts with key executives of SMTI and
     A&A provide for salaries which are $1,345,000 less than their historical
     salaries for the year ended December 31, 1995 and the reduction of
     benefit expenses of $140,000 for the termination of the employee benefit
     plans. Pursuant to the acquisition agreements, the key executives of SMTI
     and A&A have reduced their salaries and committed to terminate the
     employee benefit plans for the year ended December 31, 1996 (therefore no
     pro forma adjustment is required); and

o    At December 12, 1996, the public offering date, the status of SMTI as an
     S Corporation was terminated and accordingly, SMTI is subject to federal
     and local income taxes. The pro forma statement of operations reflect
     income taxes based upon the income of SMTI, as if SMTI had not been an S
     Corporation.

                                       F-14
<PAGE>



                   The Marquee Group, Inc. and Subsidiaries

                   Notes to Financial Statements (continued)



7. INCOME TAXES

The income tax benefit for the year ended December 31, 1996 consists of:

       Current:
         Federal                                             $          -
         State and local                                          (20,000)
                                                       -----------------------
                                                             $    (20,000)
                                                       -----------------------
       Deferred:
         Federal                                                   30,000
         State and local                                           10,000
                                                       -----------------------
                                                             $     40,000
                                                       -----------------------
                                                             $     20,000
                                                       ========================

A reconciliation of the federal statutory tax rate to the actual effective
rate for the year ended December 31, 1996 is as follows:


       Statutory rate                                            (34.0)%
       State and local income taxes, net of federal
         benefit                                                    .4
       Valuation allowance                                        31.8
       Permanent differences                                       1.0
                                                       =======================
                                                                   (.8)%
                                                       =======================


The net deferred tax liabilities is comprised of the following at December 31,
1996:

<TABLE>
<CAPTION>
<S>                                                                             <C>
       Cumulative effect of change in tax accounting basis                      $   (343,000)
       Compensation expense deducted for tax purposes, not for financial
         reporting purposes                                                          (29,000)
       Net operating losses                                                        1,051,000
       Valuation allowance                                                        (1,022,000)
                                                                                 ===========
                                                                                 $  (343,000)
                                                                                 ===========

</TABLE>
                                       F-15
<PAGE>



                   The Marquee Group, Inc. and Subsidiaries

                   Notes to Financial Statements (continued)



8. STOCK OPTION PLAN

The Company's Board of Directors has adopted and the stockholders have
approved the Company's 1996 Stock Option Plan (the "Plan"). The Plan provides
for the grant, at the discretion of the Board of Directors, of (i) options
that are intended to qualify as incentive stock options within the meaning of
Section 422A of the Internal Revenue Code to certain employees and consultants
and (ii) options not intended to so qualify. The total number of shares of
common stock for which options may be granted under the Plan is 500,000
shares. In October 1996, options to purchase an aggregate of 230,000
shares of common stock were granted under the Plan. Of such options,
100,000 were granted to 14 employees of the Company and have an exercise
price of $5 per share, and 130,000 were granted to the Company's executive
officers and directors and have an exercise price of $6.25 per share. The
options vest in annual installments over the three to five year period
commencing one year from the date of grant.

The Plan is administered by a Stock Option Committee (the "Committee") which
is appointed by the Board of Directors. The Committee determines who among
those eligible will be granted options, the time or times at which options
will be granted, the terms of the options, including the exercise price, the
number of shares subject to the options and the terms and conditions of
exercise.

The Company has elected to follow Accounting Principles Board opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation," requires use of
options valuation models that were not developed for use in valuing employee
stock options. The exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant and,
therefore, no compensation expense is recognized.

Pro forma information regarding net income and earnings per share is required
by Statement 123, and has been determined as if the Company had accounted for
its stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions: risk-free interest rates ranging from 5.45% to 6.18% and a
volatility factor of the expected market price of the Company's common


                                      F-16


<PAGE>



                   The Marquee Group, Inc. and Subsidiaries

                   Notes to Financial Statements (continued)



8. STOCK OPTION PLAN

stock of .718. The weighted-average expected life of the options is 3.6 years.
Dividends are not expected in the future.

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

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information for the year ended December 31, 1996 is as follows:

          Pro forma net loss                           $  (2,453,995)
                                                ======================
          Pro forma net loss per share                  $      (1.05)
                                                ======================


The weighted average fair value of options granted during 1996 is $2.57. The
exercise prices for options outstanding as of December 31, 1996 ranged from
$6.25 to $5.00. The weighted average remaining contractual life of those
options is 9.75 years. At December 31, 1996 none of the options are
exercisable.

                                       F-17
<PAGE>



                   The Marquee Group, Inc. and Subsidiaries

                   Notes to Financial Statements (continued)



9. COMMITMENTS AND CONTINGENCIES

The Company leases office space under operating leases which expire through
2008. These operating leases provide for basic annual rents plus escalation
charges. The aggregate future minimum lease payments required under these
leases are as follows:

<TABLE>
<CAPTION>
<S>                                                                <C>
                        1997                                          $     135,000
                        1998                                                404,000
                        1999                                                672,000
                        2000                                                696,000
                        2001                                                719,000
                        Thereafter                                        4,515,000
                                                                   ====================
                                                                         $7,141,000
                                                                   ====================
</TABLE>

The Company also rents office space on a month-to-month basis. Rent expense
amounted to $45,000 for the year ended December 31, 1996.

During March 1996, the Company entered into a five-year employment agreement
with a key executive that provides for an annual base salary plus bonus
aggregating $475,000. During December 1996 the Company entered into five-year
employment agreements with four key executives that provide for an annual base
salaries aggregating $1,075,000.

During May 1996, the Company entered into a three-year employment agreement
with a key executive that provides for an annual base salary ranging from
$250,000 to $350,000. Upon entering into the employment agreement, the Company
issued one share of common stock to this employee. Furthermore, the Company
agreed that prior to the public offering the employee's one share would be
converted into 50,000 shares of common stock, contingent upon the employee
remaining with the Company for fifteen months. The Company will recognize
non-cash compensation expense of $118,750 over the vesting period. The Company
recognized non-cash compensation expense of $55,416 in 1996, which is included
in general and administrative expense in the accompanying consolidated
statement of operations.

During August 1996, the Company entered into a six-year consulting agreement
with Sillerman Communications Management Corporation, which is controlled by
Robert F.X. Sillerman, the Chairman of the Company and the controlling
stockholder of The Sillerman Companies, Inc., a principal stockholder of the
Company, that provides for a monthly fee of $30,000 commencing nine months




                                       F-18
<PAGE>



                   The Marquee Group, Inc. and Subsidiaries

                   Notes to Financial Statements (continued)



9. COMMITMENTS AND CONTINGENCIES (CONTINUED)

from the closing of the public offering. The monthly fee shall be increased
annually by the percentage increase in the consumer price index.

The Company is subject to certain legal proceedings and claims which have
arisen in the ordinary course of its business. In the opinion of management,
settlement of these actions, when ultimately concluded, will not have a
material adverse effect on the results of operations, cash flows or the
financial condition of the Company.

10. INVESTMENT IN JOINT VENTURE

SMTI and NBC formed a limited liability corporation, Celebrity Golf
Championship, LLC ("CGC") the purpose of which is to conduct the annual
golfing tournament currently known as The Celebrity Golf Championship.
Earnings are allocated 75% to NBC and 25% to SMTI in accordance with the LLC
agreement. All profits from CGC are distributed.

Condensed financial information of CGC at December 31, 1996 is as follows:

<TABLE>
<CAPTION>
<S>                                                               <C>                  <C>
                 Cash                                                                   $    169,100
                                                                                        ============
                 Due to SMTI                                                            $   (169,100)
                                                                                        ============

                                                                        YEAR ENDED DECEMBER 31, 1995
                                                                          1996                 1995
                                                                  --------------------- --------------------

                 Revenues                                           $     2,743,700       $     2,875,600
                 Costs and expenses                                      (2,067,400)           (1,928,300)
                                                                  --------------------- --------------------
                 Net income                                         $       676,300       $       947,300
                                                                  ===================== ====================

</TABLE>

                                      F-19