<PAGE>   1
                                 UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

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



                          ANNUAL REPORT ON FORM 10-KSB



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


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

                  For the fiscal year ended December 31, 2000

                        Commission file number 0-26 197


                        STUDIO CITY HOLDING CORPORATION
             -----------------------------------------------------
             (Exact name of registrant as specified in it charter)


            New York                                            13-322-7032
---------------------------------                           -------------------
(State or other jurisdiction                                 (I.R.S. Employer
of incorporation or organization)                           Identification No.)



                   153 Stevens Avenue, Mount Vernon, NY 10550

          Issuer telephone number, including area code: (352) 347-3947

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

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

                    Common Stock, par value $.002 per share

                                (Title of Class)

         Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
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 1
0-KSB or any amendment to this Form 10-KSB. [X]

         The Issuer's revenues for the most recent fiscal year were $92,614.

         The aggregate market value of the Common Stock of the Registrant held
by non-affiliates of the Registrant on December 31, 2000, was approximately $0.

         The number of shares of the Registrant's Common Stock outstanding as
of December 31, 2000 was 32,557,001 shares.


                      DOCUMENTS INCORPORATED BY REFERENCE

                                     None.

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



<PAGE>   2

                        STUDIO CITY HOLDING CORPORATION

                          ANNUAL REPORT ON FORM lO-KSB

                                     INDEX



                                                                           Page
                                                                           ----
                                     PART I

Item 1.    Business                                                          3

Item 2.    Properties                                                        5

Item 3.    Legal Proceedings                                                 5

Item 4.    Submission of Matters to a Vote of Security Holders               5


                                    PART II

Item 5.    Market for Common Equity and Related Stockholder Matters          6

Item 6.    Management's Discussion and Analysis and Plan of Operations       6

Item 7.    Financial Statements                                              7

Item 8.    Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure                                          7


                                    PART III

Item 9.    Directors and Executive Officers of the Registrant                8

Item 10.   Executive Compensation                                           10

Item 11.   Security Ownership of Certain Beneficial Owners and Management   11

Item 12.   Certain Relationships and Related Transactions                   12

Item 13.   Exhibits, List and Reports on Form 8-K                           14

Signatures                                                                  15


                                       2

<PAGE>   3

                                     PART I



         This Annual Report on Form 10-KSB includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
These include the statements about Studio City Holding Corporation's plans and
strategies under the headings "Business" and "Management's Discussion and
Analysis and Plan of Operations." Although Studio City Holding Corporation
believes that its plans, intentions and expectations reflected in or suggested
by such forward looking statements are reasonable, it cannot assure that such
plans, intentions or expectations will be achieved. Actual results may differ
materially from the forward-looking statements made in this Annual Report on
Form 10-KSB.


ITEM 1.  BUSINESS

GENERAL

         Studio City Holding Corporation ("Studio City" or the "Company") is a
development stage media holding company specializing in the creation of
entertainment franchises and the development of its media subsidiaries. Except
for certain limited operations, primarily involving the publication of limited
first editions of "The Nicholas Stories" a continuing series of children's
books and minimal investment in the acquisition of gas and oil leases, the
Company's activities to date primarily have consisted of raising capital,
obtaining financing, acquiring intellectual properties, and administrative
activities relating to the foregoing. Each of its subsidiaries is in the
development stage with a limited or no operating history and have generated
little or no revenue.

         The Company's business is capital intensive and it expects to incur
losses for the foreseeable future as it seeks to develop and grow its business.
The Company's plan of operation for 2001 is dependent upon the availability of
necessary financing until operations generate sufficient funds to meet
anticipated costs and expenses, of which there can be no assurance. The Company
anticipates that it will continue to meet its cash requirements through the
private sale of securities and from loans and advances from stockholders and
management. The Company has no agreement, arrangement or understanding with any
person for any financing, so that there can be no assurance that the necessary
financing will be available at all or on favorable terms. If necessary
financing were not available, the Company's activities would have to be
curtailed and its financial position and condition would be adversely affected.

         The Company's corporate offices are located at 153 Stevens Avenue,
Mount Vernon, New York 10550, and its principal executive offices are located
at 14400 Southwest 46thh Court, Ocala, Florida 34484, where its telephone
number is (352) 347-3947. References to the "Company" herein include Studio
City Holding Corporation and its consolidated subsidiaries, unless the context
otherwise requires.

BACKGROUND

         The Company amended its Articles of Incorporation and By-Laws on June
29, 1996, and subsequently the following changes were made: (i) Name Change
from CVT Corporation of America to Studio City Holding Corporation, (ii) scope
of business enterprises was expanded, (iii) capitalization was increased from
40,000,000 shares to 75,000,000 shares, which included the authorization of
10,000,000 shares of Preferred Class A stock and 25,000,000 shares of Preferred
Convertible Class B, stock both of which having a par value of $1.00 per share,
(iv) service of process for the company as a limited liability company was
designated to be the Secretary of State, (v) rights to shares was expanded as
follows: each share of common has one vote, each share of preferred A has ten
votes, each share of preferred B has cumulative preferential dividends of 12%
per annum based on earnings, in liquidation each share of preferred A and B
shall receive $.06 per share with preferred A having preference over preferred
B,


                                       3

<PAGE>   4

preferred B is convertible to common at a ratio of I preferred to 10 common,
(vi) number of directors shall not be less than three nor more than ten, (vii)
shareholders have no preemptive or preferential right to subscribe or purchase
shares, and (viii) limitation of shareholder liability.

         The Company merged on July 1, 1996 with Studio City Incorporated. The
merger was duly filed and accepted and recorded by the Secretary of State of
the State of New York. The plan of merger was submitted to the shareholders of
both companies in December of 1994, and, after shareholder approval the merger
was duly completed on July 1, 1996. The company filed a Form SB-2 with the
Securities and Exchange Commission which became effective on May 26, 1999, and
filed a 10-Q on June 30, 1999.

         The Company is a Union based company with Signatory obligations as
follows: Alliance of Motion Picture and Television Producers, Writers Guild of
America, Directors Guild of America, National Association of Television Program
Executives, AFL-CIO, International Association of Stage and Theatrical
Employees, Teamsters, Screen Acts Guild, Screen Extras Guild, Cartoonist Guild,
American Federation of Television Actors, National Association of Broadcast
Engineers, and all other signatory unions and guilds.

         The Company owns a portfolio of intellectual properties and has
production rights to numerous other intellectual properties for the creation of
products for print, publication, television, recording, and cinematic
distribution. The Company has built its business plan through the creation of
an internal business incubator system, which creates, finances, develops,
produces, distributes and exploits products and product lines through each of
its subsidiary operations. Current operations include intellectual properties
and projects in various states of completion or development. The Company's
operations can be capsulated as follows:

         STUDIO CITY HOLDING CORPORATION provides initial capital,
         finds/locates/acquires intellectual properties for development,
         supervises the development of a management and product creation team,
         oversees the production of its product and product lines, provides
         business acumen, financial support, administrative logistics, and
         coordinates the marketing and distribution of the finished product and
         its ancillary spin-off products.

         ZWEIG KNIGHTS PUBLISHING CORPORATION A class "A" publisher with
         forty-four titles in its portfolio of intellectual properties to
         publish. In 1995, the Company contracted Calico Creations and
         Animation in California to create the "animation key cel art" and
         "master paintings" for an "entertainment franchise" entitled, "The
         Nicholas Stories," which is comprised of a continuing series of
         children's books entitled, "The Boy With a Wish," "The First Flight of
         St. Nicholas," "The Maiden Voyage of Kris Kringle", and, "Luigi and
         the Lost Wish".

         The Company has thirteen other subsidiaries that have limited activity
         in the publishing, motion picture, and software industries. Even
         though these subsidiaries are beginning to create product and revenue
         streams, the most important asset besides the intellectual properties
         is centralization of key personnel who have a vested interest in the
         development and maximum exploitation of their product lines. These key
         individuals work as per need and no overhead is carried at the present
         time for the development and distribution of products. Management
         feels that with proper capitalization, each subsidiary will stand on
         its own and create substantial revenues for the stockholders of the
         Company. Subsequent to the Company's registration with the SEC, which
         became effective on May 26, 1999, the Company and its subsidiaries
         have commenced development plans for various intellectual properties.


                                       4

<PAGE>   5

MARKETING AND PROMOTION

         From inception, the Company has marketed its product lines and
operations internally through its officers, directors and special advisors. The
Company expects to expand its marketing of the Company through financial
marketing companies in New York who are current stockholders of the Company.

         To date, no agreement for outside representation has been completed.

COMPETITION

         The filmed entertainment and television industries are extremely
competitive, however the Company expects to be competitive through its
intellectual property base. The Company has chosen to focus on the development
of single intellectual properties with broad base market potential.

EMPLOYEES

         As of December 31, 2000, Studio City has two salaried employees, each
receiving $24,000 per year. Currently, the Company has 9 unsalaried officers,
who provide services as needed. Other than Larry D. Faw, none of the Company's
officers are covered by a collective bargaining agreement. The Company believes
that it has a good relationship with its personnel.


ITEM 2.  DESCRIPTION OF PROPERTY

         The Company currently leases approximately 410 square feet for its
executive offices, at 14400 Southwest 46th Court, Ocala, Florida, for $400 per
month on a month-to-month basis from Larry D. Faw, its Chairman. The Company
believes that the terms of such leasing arrangement are no less favorable to
the Company than those that could have been obtained from an independent third
party.

         The Company also leases approximately 1700 square feet at $721 per
month for its television post production studio and insert stage at 4716 North
Lois Avenue, Tampa, Florida. The original lease expired in 1998, and has been
placed on a month-to-month basis since 1998.


ITEM 3.  LEGAL PROCEEDINGS

         The Company is not a party to any pending material legal proceeding.


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

         None.


                                       5

<PAGE>   6

                                    PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Studio City's Common Stock and Class B Preferred are registered stock,
which are not currently being traded. As of December 31, 2000, there were
approximately 550 holders of record of Studio City Common Stock. As of December
31, 2000, there were approximately 110 holders of record of Studio City Class B
Preferred Stock.

         Studio City has never declared or paid any cash dividends on its
capital stock and does not anticipate paying cash dividends on its Common Stock
in the foreseeable future. Studio City currently intends to retain future
earnings to finance its operations and fund the growth of its business. Any
payment of future dividends will be at the discretion of the Board of Directors
and will depend upon, among other things, Studio City's earnings, financial
condition, capital requirements, level of indebtedness, contractual
restrictions with respect to the payment of dividends and other factors that
Board of Directors deems relevant.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS

OVERVIEW

         The following information should be read in conjunction with the
consolidated condensed financial statements. The Company filed its first
Quarterly Report on August 15, 1999. The attached financial statements
represent annual reports from inception to December 31, 2000. The Company has
broadened its operations to include the development of non-entertainment
businesses. Management is currently reviewing and preparing updated business
plans to complement new business opportunities. The purpose of this effort is
to add value to the Company and its subsidiaries and to create core activities
that will increase and maintain revenues for an extended period of time.

RESULTS OF OPERATIONS

         Revenues. The Company's revenues are intended to be derived from
providing debt, equity, or debt/equity financing to its subsidiaries. The
operating results have fluctuated in the past and may fluctuate significantly
in the future as a result of a variety of factors, some of which are outside
the Company's control. The Company expects that it will continue to net losses
at least through and including the second quarter of 2001 and until December
31, 2001. There is no guarantee that the Company can fully capitalize its
operations.

REVENUES

         The Company has limited revenues and projects that revenues will
increase substantially if its products are accepted by consumers for the period
of January 1, 2001 through year ending December 31, 2001. The increase in
revenues will include significant increases in the sale of existing inventory
of the first four Limited First Editions of "The Nicholas Stories" through a
majority owned subsidiary, which is consolidated in the Company's financial
statements.

         The Company expects operation costs will continue to increase in
absolute dollars, as the Company capitalizes itself. There are no guarantees
that the Company can increase its capitalization, product lines and revenue
base.


                                       6

<PAGE>   7

PRODUCT DEVELOPMENT

         Total product development expenses for the periods ending December 31,
2000 and 1999 are $107,916 in 2000 and $129,810 in 1999.

GENERAL AND ADMINISTRATIVE

         General and administrative expenses decreased from $565,432 in 1999 to
$540,233 in 2000. This increase was primarily attributable to an increase in
consulting and professional fees and costs associated with the Company's
planned primary offering, which did not take place.

Net Loss

         The lack of significant revenues and higher operating expenditures
incurred in the year ending December 31, 2000 has resulted in a net loss of
$701,272 in 2000 and $649,651 in 1999. The net loss per share is computed as
$0.0209 in 1999 as compared to a net loss of $0.0219 in 2000.

INCOME TAXES

         There was no provision for income taxes for the year ended December
31, 2000 as the Company had a net loss. No provision for income taxes was
expected for 2000 other than state minimum taxes as the Company expected to
incur a loss for the year.

LIQUIDITY AND CAPITAL RESOURCES

         The Company has funded its operations primarily through short-term
indebtedness. The Company's operating activities provided cash of approximately
$420,805 in 2000 and $888,784 in 1999.

         The Company has curtailed its investing activities with no outside
investments. The Company's financing activities provided $420,805 in 2000 and
$888,784 in 1999. The term loan which is secured by substantially all of the
Company's assets, require that the Company maintain certain financial ratios
and requires that revenues produces will cover the costs associated with a
public offering.

         The Company is presently pursuing a credit facility and/or bridge
financing with several national banks and investment banks, some of which who
own shares in the Company.

ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The financial statements and supplemental data required by this Item 7
follow the index to financial statements appearing at Item 14 of this Annual
Report on Form 10-KSB.

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

         None.


                                       7

<PAGE>   8

                                    PART III



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

DIRECTORS AND EXECUTIVE OFFICERS

         The directors and executive officers of the Company are as follows:

Name                         Position
----                         --------

Larry D. Faw             53  Chairman of the Board and President
Vincent J. Neville       68  Vice Chairman of the Board /Chief Executive Officer
Genevieve H. Faw         40  Senior Vice President, Secretary and Director
Andrew C. Rigrod         58  Chief Operations Officer
Walter Johnson Williams  51  Chief Financial Officer
Harry B. Knights         54  Senior Vice President - Operations
Charles H. Flood         50  Senior Vice President - Sales
Wallis M. Spence         52  Senior Vice President - Financial Marketing
James W. Courchaine      69  Senior Vice President - Logistics
John A. Churchill, Jr.   61  Controller

         Each director is elected to hold office until the next annual meeting
of stockholders and until his successor is elected and qualified. All officers
serve at the discretion of the Board of Directors. Of all the directors and
executive officers of the Company, only Mr. Faw, Mrs. Faw and Mr. Knights
devote full time and attention to its affairs; the other directors and
executive officers devote only such (usually minimal) time to the Company's
affairs as is required from time to time.

         The following sets forth certain biographical information with respect
to the directors and executive officers of the Company.

         Larry D. Faw has served as Chairman of the Board of Directors and
President of the Company since inception of Studio City-Florida in 1991. Mr.
Faw has twenty-seven years of experience in the financing, production and
distribution of feature motion pictures, documentaries, television commercials,
and short films. Mr. Faw is the husband of Genevieve Faw.

         Vincent J. Neville was a director and Senior Vice President of the
Company from November 1995 until December 1997, when he became Vice Chairman
and Chief Executive Officer. He has served as President of Finest Security
Service, Inc., Flushing, New York since 1986, and as President of T. J.
Catering, Inc., Flushing, New York since June 1997. Also, Mr. Neville has over
twenty years experience in law enforcement as a former Detective with the New
York City Police Department, where for eleven years he served as an
Investigator and Personal Bodyguard for the District Attorney of Queens County.

         Genevieve H. Faw has served as a Senior Vice President, Secretary and
director of the Company since inception of Studio City-Florida in 1991. Mrs.
Faw's background includes accounting, business management, feature-length
motion picture production, and the publication of children's books and
specialty niche market publications. Mrs. Faw is the wife of Larry Faw.

         Andrew C. Rigrod has served as Chief Operations Officer since April
1998. Mr. Rigrod, who graduated from Cornell Law School in 1966 and was an
editor of the Cornell Law Review, has been


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<PAGE>   9

practicing law for 30 years, specializing in entertainment law exclusively for
the last 24 years, representing producers, writers, directors and actors.

         Walter Johnson Williams has served as Chief Financial Officer since
January 1998. Mr. Williams has served as an adviser to the Company since 1992.
Mr. Williams is the President of American Business Econometrics, Inc., an
economic consultancy firm he founded in 1983 which publishes The Straight
Shooter Newsletter and analyzes government reports through the Shadow Bureau of
Government Statistics. He also provides consulting services to major financial
institutions and Fortune 500 companies, as well as to private individuals and
provides economic commentary to financial newspapers, journals and other
publications and radio and television business and finance programs.

         Harry B. Knights has served as Senior Vice President-Operations since
March 1998. Mr. Knights also has served as Co-Publisher and Chief Operations
Officer of Zweig Knights Publishing Corporation, a majority owned subsidiary,
since May 1994. Mr. Knights authored "The Nicholas Stories: The Boy With A
Wish, The First Flight of St. Nicholas; The Maiden Voyage of Kris Kringle,"
"The Spirit of Christmas" and "The Homecoming".

         Charles H Flood has served as Senior Vice President-Sales since
October 1996. Mr. Flood also has served as Co-Publisher and President of
National Sales of the Eleemosynary/Traditional Publishing Division of Zweig
Knights Publishing Corporation since July 1994. Mr. Flood has over twenty years
of experience in sales management, product development, marketing, education
and publishing. His experience includes custom publishing, interactive CD ROM
development, sub-rights and co-publishing for animation, joint venture
television and publishing programs, and, eleemosynary publishing.

         Wallis M Spence has served as Senior Vice President-Financial
Marketing since February 1998. He owns The Striker Steel Co. (steel framed
homes), since February 1996, and is a self-employed financial consultant
specializing in portfolio/pension funds for long term investments, since 1989.

         James W. Courchaine has served as Senior Vice President-Logistics
since June 1998. In 1979, Mr. Courchaine retired from the United States Air
Force after twenty years and became a self-employed financial consultant
specializing in financial services and planning for insurance companies.

         John A. Churchill, Jr. serves as Controller. He owns Central Business
Services Corporation, a financial services company, since 1990. He served as
Treasurer of E.L. Trevena, Inc., a demolition company, since 1996 to 2000, and
was Chairman of Agrovit, Inc., a fertilizer brokerage, from 1991 to 1996.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who beneficially own more than
10% of a registered class of the Company's equity securities, to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and beneficial owners of more than 10% of the
Company's Common Stock are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms that they file. Based solely on review
of the copies of such forms furnished to the Company, or written
representations that no reports on Form 5 were required, the Company believes
that for the period through December 31, 2000, all officers, directors and
greater-than- 10% beneficial owners complied with all Section 16(a) filing
requirements applicable to them.


                                       9

<PAGE>   10

ITEM 10. EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION

         None of the executive officers of the Company received a total salary
and bonus in excess of $100,000 in any of five fiscal years ended December 31,
2000.

DIRECTORS' COMPENSATION

         Directors of the Company are not compensated for their services.

EMPLOYMENT AGREEMENTS

         On April 8, 1998, the Company entered into employment agreements with
all executive officers. The employment agreements provide for remuneration,
stock awards, and performance awards. Each executive officer will receive (i) a
sign-on award of 25,000 shares of stock, (ii) cash compensation at the end of
recapitalization level I ($1,000,000 in new capital) of $48,000 per annum;
(iii) stock award of 25,000 shares at the end of the 1st year of employment;
(iv) cash compensation at the end of capitalization level 2 ($10,000,000 in new
capital) of $75,000 per annum; (v) stock award of 25,000 shares at the end of
the 2nd year of employment; and (vi) stock award of 25,000 shares at the end of
the 3rd year of employment. Each employment agreement has been extended to
April 8, 2002.

         Pursuant to the employment agreements, Larry D. Faw serves as Chairman
of the Board of Directors and President, Vincent J. Neville serves as Vice
Chairman and Chief Executive Officer, Genevieve H. Faw serves as a Director,
Secretary and Senior Vice President-Children's Programming, Andrew C. Rigrod,
Esquire serves as Chief Operations Officer, Walter Johnson Williams serves as
Chief Financial Officer, Wallis M. Spence serves as Senior Vice
President-Financial Marketing, Harry B. Knights serves as a Senior Vice
President-Operations, Charles H. Flood serves as Senior Vice President-Sales,
James W. Courchaine serves as Senior Vice President-Logistics, and John A.
Churchill, Jr. serves as Controller. Each of the executive officers will be
entitled to receive reimbursement for all reasonable expenses incurred in
connection with the performance of any of his/her obligations pursuant to the
employment agreements. The employment agreements contain a covenant not to
compete and an agreement to keep confidential certain information.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

         The Certificate of Amendment and Restated Certificate of
Incorporation, and the By-Laws of the Company, as amended, provide that the
Company shall indemnify its officers and directors to the full extent permitted
by the Business Corporation Law of the State of New York.

         Reference is hereby made to Section 402(b) of the Business Corporation
Law of the State of New York relating to the indemnification of officers and
directors, which Section is hereby incorporated herein by reference.

         Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or others
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is
therefore unenforceable.


                                      10

<PAGE>   11

INCENTIVE STOCK OPTION PLAN

         In March 1993, the Board of Directors and shareholders approved in
principle an Employee Incentive Stock Option Plan (the "Plan") for full time
employees including executive officers. Under the Plan, the Company would issue
options to purchase shares of the Company's Common Stock, exercisable at 100%
of the current market value (110% of current market value only to 10% or
greater stockholders) up to $100,000 annually. The Plan will terminate on March
1, 2002, unless renewed. Under the Plan, any officer or director owning 10% of
the voting plan of the Company would be restricted from exercising his/her
options to three years after the receipt of such Grant. Additional provisions
would be as follows: (1) options terminated or expired, revert back to the
Plan, (2) unpurchased option shares remain in the Plan, (3) options are
exercisable by the optionee or his/her estate, (4) options are not
transferable, and, (5) carryover amounts from one year to the next year cannot
exceed 50% of the Plan. The Company has reserved 500,000 shares of Common Stock
for issuance under the Plan. The Plan has not been implemented and no options
have been granted under the Plan.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information regarding
beneficial ownership of the Company's Common Stock as of December 31, 2000, (a)
by each person who is known by the Company to own beneficially more than 5% of
the Company's Common Stock, (b) by each of the Company's Directors and (c) by
all officers and Directors of the Company as a group:

<TABLE>
<CAPTION>

                                         Amount and Nature of Beneficial
Name of Beneficial Owners                Ownership of Common Stock(1)(2)    Percent of Total Voting Power(2)
-------------------------                -------------------------------    --------------------------------
<S>                                      <C>                                <C>

Larry D. Faw                                      10,221,277(2)(3)                        83.1%
14400 Southwest 46th Court
Ocala, Florida 34473

Vincent J. Neville                                   467,000(4)                              *

Genevieve H. Faw                                  10,221,277(2)(3)                        83.1%
14400 Southwest 46th Court
Ocala, Florida 34473

Andrew C. Rigrod                                      50,000                                 *
Walter Johnson Williams                              551,000                                 *
Harry B. Knights                                     206,000(5)                              *
Charles H. Flood                                      55,000                                 *
Wallis M. Spence                                      50,000                                 *
James W. Courchaine                                  314,400(6)                              *
John A. Churchill, Jr.                             1,179,400(7)                              *
All directors and officers as a group             13,119,077                              85.2%
</TABLE>

---------------
* Less than one percent.

(1)  Except as otherwise indicated, each of the persons named has sole voting
     and investment power with respect to all shares of Common Stock
     beneficially owned. Beneficial ownership is calculated in accordance with
     Rule 13d-3(d) of the Securities Exchange Act of 1934.

(2)  The Company has two classes of voting securities, Common Stock and Class A
     Preferred Stock. Holders of Class A Preferred Stock vote together with
     holders of Common Stock and are entitled to ten votes for each share of
     Class A.


                                       11

<PAGE>   12

     Preferred Stock on all matters voted upon by the shareholders of the
     Company. Larry D. Faw, Chairman of the Board and President of the Company
     beneficially owns all outstanding shares of Class A Preferred Stock, or
     100 % of that class, and therefore is the beneficial owner of 83.1% of the
     voting power of the Company. The Class A Preferred Stock is included in
     the calculation of the percent of total voting power. The Class B
     Preferred Stock, each share of which is convertible into ten shares of
     Common Stock at the annual rate of 20% commencing two years after
     acquisition, are not included in the calculations.

(3)  Includes: 2,870,000 shares held by Larry D. Faw, Incorporated, of which
     Mr. Faw is the President; 401,277 shares held by the Von Falconbourg
     Family Trust, of which Mr. Faw is the Managing Trustee; 1,000,000 shares
     held by Morgan Rothchild Anzo, Inc. for the account and benefit of Mr.
     Faw; warrants to purchase 5,000,000 shares at $1.00 per share; and 925,000
     shares held by Genevieve H. Faw, Mr. Faw's wife. Does not include
     10,000,000 shares of Class A Preferred Stock held by Mr. Faw, or 1,000,000
     shares of Class B Preferred Stock held by each of Mr. Faw and the Von
     Falconbourg Family trust or 300,000 shares of Class B Preferred Stock held
     by Mrs. Faw. Each of Mr. Faw and Mrs. Faw disclaims beneficial ownership
     of the other's shares.

(4)  Includes 5,000 shares held by Mr. Neville's wife.

(5)  Includes 6,000 shares held jointly with Mr. Knights' wife. Does not
     include 35,000 shares of Class B Preferred Stock.

(6)  Includes 153,400 shares held by the Courchaine Family Partnership, of
     which Mr. Courchaine is the managing partner. Includes 10,000 shares held
     jointly with Mr. Courchaine's wife. Does not include 35,000 shares of
     Class B Preferred Stock held jointly with Mr. Courchaine's wife.

(7)  Includes 12,000 shares held by five members of Mr. Churchill's family.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

FAW PURCHASE AGREEMENT

         In February 1993, Studio City-Florida entered into an agreement with
Larry D. Faw, Chairman of the Board of Directors and President, to acquire
direct ownership of various intellectual properties having an estimated value
of $7,226,000, including 72 motion picture properties, four television pilot
programs, 48 books for publication, four inventions, one franchise program and
one specialty product design and marketing program, in exchange for a
promissory note payable in the amount of $1,554,027 and warrants to purchase
5,000,000 shares of Common Stock of Studio City-Florida exercisable at $1.00
per share until February 16, 2003.

         The principal amount was due and payable on February 16, 1995, with
interest at the annual rate of 2%. Since maturity, when the Company was unable
to pay the Faw Note, it has been extended for consecutive six month terms at an
annual interest rate of 9%. Since 1993, the Company has paid $130,000 in
interest on the Faw Note and accrued interest payable to Mr. Faw at December
31, 1998 was $395,833. The Faw Note is a demand obligation, but there is no
schedule for repayment of principal or interest.

         The estimated value of the intangible assets of $7,226,000 was
determined by Mr. Faw, without arm's length negotiations, by reference to
industry standards as detailed in the National Labor Relations Board's
Collective Bargaining Agreement between the Alliance of Motion Picture and
Television Producers and the Writers Guild of America which reflects the
minimum replacement costs and pass through financial obligations to
industry-wide motion picture and television producers and purchasers of
intellectual properties. The industry standards referred to in that agreement
may have no relationship to commercial, economic or fair market value of the
intangible assets.

         The purchase price of the intangible assets was determined by
reference to the industry standards as detailed in the National Labor Relations
Board's Collective Bargaining Agreement between the Alliance of Motion Picture
and Television Producers and the Writers Guild of America.


                                       12

<PAGE>   13

         For financial reporting purposes, in accordance with generally
accepted accounting principles, the recorded amount of the intellectual
properties was zero, by virtue of the lack of evidence of historical
predecessor cost.

OTHER

         Effective July 1, 1996, Studio City-Florida merged with and into the
Company, pursuant to the Plan of Merger. Pursuant to the Plan of Merger (i)
100,000,000 shares of Common Stock of Studio City-Florida held by Larry D. Faw
was converted into 10,000,000 shares of the Company's Class A Preferred Stock,
(ii) 10,000,000 shares of Common Stock of Studio City-Florida held by Mr. Faw
was converted into 1,000,000 shares of the Company's Class B Preferred Stock,
(iii) warrants to purchase 5,000,000 shares of Common Stock of Studio
City-Florida were converted into warrants to purchase 5,000,000 shares of
Common Stock of the Company, and (iv) each of the remaining issued and
outstanding shares of Common Stock of Studio City-Florida were converted into
one share of the Company's Common Stock. In addition, Mr. Faw received
1,000,000 shares of Class B Preferred Stock in connection with the merger.

         See Note 12 to Consolidated Financial Statements for information about
the potential profit participation of certain directors and executive officers
in certain literary properties of such subsidiaries. No amounts have been paid
to date to any director or executive officer in connection with any of those
interests and it is not possible to predict whether or when any amounts might
be paid in the future or the magnitude of any future amounts.

         Effective on July 21, 1999, the Company's subsidiary, Studio City
Amusements, Incorporated changed its name to SCA Global Resources,
Incorporated.

         On November 20, 1999, Studio City Holding entered into an agreement
with Problem Solvers, Incorporated, a Kansas corporation ("PSI") to establish
an irrevocable business royalty trust to receive contributions, revenue and to
hold residual interests of both Studio City and PSI in any oil and gas
ventures, and all other assets from which these companies may experience
financial benefits through SCA/Studio's control.

          On November 26, 1999, Studio City Holding and Problem Solvers created
The Hammer Trust, an irrevocable business royalty trust, which was to commence
operations in the year 2000. Initially, Studio City contributes the following
to the Trust: (1) cash of $1,000, (2) a promissory demand note made payable to
the Trust for an amount of $2,500,000, which shall be redeemed by Studio in a
future public or private offering, (3) 1,500,000 shares of common stock in
Studio, (4) 1,200,000 shares of Class B Preferred shares in Studio, and, any
other additional assets, cash, stock, corporate bonds and/or stock in
non-related companies; and PSI contributed the following: (1) cash of $1,000,
(2) 2,333,300 shares of Class B Preferred stock of SCA Global Resources, and,
any other additional assets, cash, stock, corporate bonds and/or stock in
non-related companies. Both Studio City and PSI shall receive equal
distributions from the Trust. Initial trustees representing Studio City Holding
is Larry D. Faw (Managing Trustee) and representing Problem Solvers is Hurschel
Buscher.


                                       13

<PAGE>   14

                                    PART 1V

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

         (a) Financial Statements.

         The audited consolidated financial statements of Studio City
Enterprises, Inc. and Subsidiaries filed as a part of this Annual Report on
Form 1 0-KSB are listed in the "Index to Consolidated Financial Statements"
preceding the Company's Consolidated Financial Statements, which directly
follow this Part IV of this Annual Report on Form 10-KSB, which "Index to
Consolidated Financial Statements" is hereby incorporated herein by reference.

         (b) Exhibits.

         See index to exhibits.

         (c) Reports on Form 8-K.

         None.


3.       EXHIBITS.

         None.



         (b)      REPORTS ON FORM 8-K.

                  None.


                                       14

<PAGE>   15

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1943, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                               STUDIO CITY HOLDING CORPORATION



                               By:  /s/ Larry D. Faw
                                   --------------------------------------------
                                        Larry D. Faw
                                        Chairman of the Board of Directors
                                                      President
                                        (Principal Financial/Accounting Officer)


Date: April 12, 2001


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated.


<TABLE>
<CAPTION>
Signature                                  Title                           Date
---------                                  -----                           ----
<S>                        <C>                                        <C>
/s/ Vincent J. Neville     Vice Chairman of the Board of Directors    April 12, 2001
----------------------           and Chief Executive Officer
    Vincent J. Neville


/s/ Genevieve H. Faw                Senior Vice President             April 12, 2001
----------------------              Secretary and Director
    Genevieve H. Faw
</TABLE>


                                       15
<PAGE>   16




















                        STUDIO CITY HOLDING CORPORATION
                                AND SUBSIDIARIES

                     Independent Accountant's Review Report
                                      and

                              Financial Statements

               October 21, 1991 (Inception) To December 31, 2000




<PAGE>   17


               STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES

               October 21, 1991 (Inception) To December 31, 2000



                               TABLE OF CONTENTS




INDEPENDENT ACCOUNTANT'S REVIEW REPORT                                        1


CONSOLIDATED FINANCIAL STATEMENTS

         CONSOLIDATED BALANCE SHEETS                                          2

         CONSOLIDATED STATEMENTS OF OPERATIONS                                3

         CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY         4-5

         CONSOLIDATED STATEMENTS OF CASH FLOWS                                5

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                           6



<PAGE>   18

                          INDEPENDENT AUDITOR'S REPORT



To the Board of Directors and Stockholders
Studio City Holding Corporation

We have audited the accompanying consolidated balance sheet of Studio City
Holding Corporation (a New York corporation) (a development stage company) and
subsidiaries (development stage companies) as of December 31, 2000 and 1999,
and the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for the years ended December 31, 1991 through 2000
(inception through December 31, 2000). These consolidated 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 audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of Studio City Holding Corporation
and subsidiaries as of December 31, 2000 and 1999, and the results of their
operations, changes in stockholders' equity and their cash flows for the years
ended December 31, 1991 through 2000 (inception through December 31, 2000) in
conformity with generally accepted accounting principles.

Peel, Schatzel & Wells, P.A.
St. Petersburg, Florida

March 26, 2001



                                       1
<PAGE>   19

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                        December 31,
                                                                                ---------------------------
                                                                                    1999            2000
                                                                                -----------     -----------
<S>                                                                             <C>             <C>
ASSETS

    Cash and cash equivalents                                                   $    55,843     $    27,329
    Intangible assets (Note 3)                                                       77,315          77,315
    Investment in joint ventures and stock                                           56,823       2,560,943
    Prepaid services                                                                  3,469           1,441
    Office equipment (cost $53,312 and $53,312 in 1999 and 2000;
      accumulated depreciation $40,480 and $46,187 in 1999 and 2000)                 12,832           7,125
    Organization costs (net of accumulated amortization)                                190              48
    Accounts receivable                                                               5,170          71,866
                                                                                -----------     -----------
TOTAL ASSETS                                                                    $   211,642     $ 2,746,067
                                                                                ===========     ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES

    Note payable-majority stockholder                                           $ 1,554,027     $ 1,554,027
    Loans from minority stockholders                                                888,784       1,309,584
    Note payable-Hammer Trust                                                                     2,500,000
    Accrued interest on majority stockholder note                                   415,952         439,774
    Accrued interest on minority stockholder loans                                   74,631         186,121
    Accrued interest on Hammer Trust note                                                           153,074
    Accrued expenses                                                                  7,417          30,808
CONTINGENT LIABILITIES--Collective Bargaining Agreement (Note 3)                         --              --
LEASE COMMITMENTS--(Note 15)                                                             --              --
                                                                                -----------     -----------
TOTAL LIABILITIES                                                                 2,940,811       6,173,388

EQUITY SECURITIES SUBJECT TO RESCISSION (Note 20)                                 1,003,100       1,006,220

STOCKHOLDERS' EQUITY
    Common stock - par value $.002 in 1999 and 2000; 150,000,000 shares
      authorized; 31,057,001 and 32,557,001
      shares issued and outstanding in 1999 and 2000                                 61,077          61,077
    Common stock warrants                                                         5,000,000       5,000,000
    Preferred stock--A - par value $.0001 in 1999 and 2000;
      10,000,000 shares authorized, issued and outstanding in 1999 and 2000           1,000           1,000
    Preferred stock--B - par value $.0001 in 1999 and 2000;
      10,000,000 shares authorized; 3,825,834 and 5,025,834
      shares issued and outstanding in 1999 and 2000                                    383             383
    Additional paid-in capital                                                    1,392,737       1,392,737
    Deficit accumulated during development stage                                 (2,959,466)     (3,660,738)
    Less treasury stock--cost of 400 shares                                          (2,000)         (2,000)
    Less special distribution to stockholder (Note 3)                            (7,226,000)     (7,226,000)
                                                                                -----------     -----------
TOTAL STOCKHOLDERS' EQUITY                                                       (3,732,269)     (4,433,541)

                                                                                -----------     -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                      $   211,642     $ 2,746,067
                                                                                ===========     ===========
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                       2
<PAGE>   20

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                               Cumulative
                                             From Inception     For The Year Ended
                                            October 21, 1991       December 31,
                                            to December 31,  -----------------------
                                                 2000          1999           2000
                                             -----------     ---------     ---------
<S>                                          <C>             <C>           <C>

INCOME                                       $   424,373     $  45,591     $  92,614

EXPENSES

    Accounting fees                              160,545        20,979        27,336
    Advertising                                   16,837                       1,045
    Amortization--organization costs               1,933           255           141
    Auto expenses                                189,182        13,797        12,740
    Bad debts                                    167,695
    Bank charges                                   2,092           511           439
    Commissions                                   36,906
    Consulting fees                              176,120        13,448        39,128
    Contributions                                  2,682           751           980
    Depreciation                                  46,189         7,162         5,706
    Dues and publications                         24,298         3,058         4,870
    Equipment rental                             384,418        95,027        64,181
    Insurance                                     23,414
    Interest                                   1,225,923       203,841       403,425
    Legal fees                                   348,174       111,579        38,575
    Licenses                                      27,141         2,860         2,746
    Meals                                         35,210         3,879         4,414
    Medical reimbursement--officer                27,448         8,119         5,168
    Miscellaneous expenses                        48,988         6,583         1,008
    Offering costs                                32,051
    Office expenses                              170,834        19,392        29,080
    Officer compensation                           5,000
    Postage                                       70,943        10,036        10,350
    Professional fees                             87,382           521           750
    Project costs                                401,939       129,810       107,916
    Rent                                         168,734        18,875        18,385
    Repairs and maintenance                        1,993           335           632
    Seminars                                         604
    Telephone expense                             87,350         6,016         6,526
    Travel                                        73,474        15,486         5,187
    Utilities                                     25,695         2,922         3,158
    Wages                                         13,917
                                             -----------     ---------     ---------
TOTAL EXPENSES                                 4,085,111       695,242       793,886
                                             -----------     ---------     ---------
NET LOSS                                     $(3,660,738)    $(649,651)    $(701,272)
                                             ===========     =========     =========
EARNINGS (LOSS) PER
    COMMON SHARE
    (Basic and Diluted Loss Per Share        -----------     ---------     ---------
    are the same--See Note 2)                $   (0.0185)    $ (0.0209)    $ (0.0219)
                                             ===========     =========     =========
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                       3

<PAGE>   21
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>

                                                                                  Common Stock
                                                          -----------------------------------------------------------
                                                                                          Additional        Common
                                                              Common                        Paid-In          Stock      Preferred
                                                              Shares          Amount        Capital         Warrants     Stock A
                                                          ------------     -----------     -----------     ----------    --------
<S>                                                       <C>              <C>             <C>             <C>           <C>

Issuance of common stock                                       748,000     $    11,920     $ 1,138,500     $       --    $     --
Special distribution (Note 3)
Common shareholder loss for period
     October 21, 1991 to December 31, 1991
                                                          ------------     -----------     -----------     ----------    --------
Balance at December 31, 1991                                   748,000          11,920       1,138,500             --          --
Issuance of common stock                                       610,201           1,662          72,770
Common shareholder loss for year
     ended December 31, 1992
                                                          ------------     -----------     -----------     ----------    --------
Balance at December 31, 1992                                 1,358,201          13,582       1,211,270             --          --
Stock split 1 to 100                                       134,461,899
Shares for properties                                                                       (1,151,004)
Special distribution (Note 3)
Issuance of common and preferred
     stock and common warrants                              16,749,900           1,675          56,976      5,000,000
Common shareholder loss for year
     ended December 31, 1993
                                                          ------------     -----------     -----------     ----------    --------
Balance at December 31, 1993                               152,570,000          15,257         117,242      5,000,000          --
Issuance of common stock                                   (13,420,000)         (1,342)        242,670
Common shareholder loss for year
     ended December 31, 1994
                                                          ------------     -----------     -----------     ----------    --------
Balance at December 31, 1994                               139,150,000          13,915         359,912      5,000,000          --
Issuance of common stock                                     4,150,000             415         406,095
Common shareholder loss for year
     ended December 31, 1995
                                                          ------------     -----------     -----------     ----------    --------
Balance at December 31, 1995                               143,300,000          14,330         766,007      5,000,000          --
Issuance of common stock                                     6,700,000             670         431,506
Equity securities subject to rescission (Note 20)                                 (670)       (431,506)
Common shareholder loss for year
     ended December 31, 1996
                                                          ------------     -----------     -----------     ----------    --------
Balance at December 31, 1996                               150,000,000          14,330         766,007      5,000,000          --
Issuance of common stock                                       155,000             310         481,113
Equity securities subject to rescission (Note 20)                                 (310)       (481,113)
Common shareholder loss for year
     ended December 31, 1997
Shares issued, exchanged or converted                     (119,126,500)        (11,000)          9,000                      1,000
Merger adjustments                                                              57,747         617,730
                                                          ------------     -----------     -----------     ----------    --------
Balance at December 31, 1997                                31,028,500          61,077       1,392,737      5,000,000       1,000
Issuance of common stock                                        28,501              57          89,444
Equity securities subject to rescission (Note 20)                                  (57)        (89,444)
Common shareholder loss for year
     ended December 31, 1998
                                                          ------------     -----------     -----------     ----------    --------
Balance at December 31, 1998                                31,057,001          61,077       1,392,737      5,000,000       1,000
Cost of  400 shares of common stock
Common shareholder loss for year
     ended December 31, 1999
                                                          ------------     -----------     -----------     ----------    --------
Balance at December 31, 1999                                31,057,001          61,077       1,392,737      5,000,000       1,000
Issuance of common and preferred stock                       1,500,000           3,000
Equity securities subject to rescission (Note 20)                               (3,000)
Common shareholder loss for year
     ended December 31, 2000
                                                          ------------     -----------     -----------     ----------    --------
Balance at December 31, 2000                                32,557,001     $    61,077     $ 1,392,737     $5,000,000    $  1,000
                                                          ============     ===========     ===========     ==========    ========
</TABLE>


The accompanying notes are an integral part of these financial statements.



                                       4
<PAGE>   22
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (continued)

<TABLE>
<CAPTION>

                                                                          Deficit
                                                                        Accumulated                  Special
                                                                           During                  Distribution        Total
                                                          Preferred     Development    Treasury         To         Stockholders'
                                                           Stock B         Stage         Stock      Stockholder        Equity
                                                          ----------    -----------     -------     -----------     -----------
<S>                                                       <C>           <C>             <C>         <C>             <C>

Issuance of common stock                                  $       --    $        --     $    --     $        --     $ 1,150,420
Special distribution (Note 3)                                                                          (150,000)       (150,000)
Common shareholder loss for period
     October 21, 1991 to December 31, 1991                                  (35,455)                                    (35,455)
                                                          ----------    -----------     -------     -----------     -----------
Balance at December 31, 1991                                      --        (35,455)         --      (1,150,000)        (35,035)
Issuance of common stock                                                                                                 74,432
Common shareholder loss for year
     ended December 31, 1992                                                (57,999)                                    (57,999)
                                                          ----------    -----------     -------     -----------     -----------
Balance at December 31, 1992                                      --        (93,454)         --      (1,150,000)        (18,602)
Stock split 1 to 100
Shares for properties
Special distribution (Note 3)                                                                                        (1,151,004)
Issuance of common and
preferred                                                                                            (6,076,000)     (6,076,000)
     stock and common warrants                               671,974                                                  5,730,625
Common shareholder loss for year
     ended December 31, 1993                                                (73,409)                                    (73,409)
                                                          ----------    -----------     -------     -----------     -----------
Balance at December 31, 1993                                 671,974       (166,863)         --      (7,226,000)     (1,588,390)
Issuance of common stock                                                                                                241,328
Common shareholder loss for year
     ended December 31, 1994                                               (172,174)                                   (172,174)
                                                          ----------    -----------     -------     -----------     -----------
Balance at December 31, 1994                                 671,974       (339,037)         --      (7,226,000)     (1,519,236)
Issuance of common stock                                                                                                406,510
Common shareholder loss for year
     ended December 31, 1995                                               (316,578)                                   (316,578)
                                                          ----------    -----------     -------     -----------     -----------
Balance at December 31, 1995                                 671,974       (655,615)         --      (7,226,000)     (1,429,304)
Issuance of common stock                                                                                                432,176
Equity securities subject to rescission (Note 20)                                                                      (432,176)
Common shareholder loss for year
     ended December 31, 1996                                               (558,211)                                   (558,211)
                                                          ----------    -----------     -------     -----------     -----------
Balance at December 31, 1996                                 671,974     (1,213,826)         --      (7,226,000)     (1,987,515)
Issuance of common stock                                                                                                481,423
Equity securities subject to rescission (Note 20)                                                                      (481,423)
Common shareholder loss for year
     ended December 31, 1997                                               (572,506)                                   (572,506)
Shares issued, exchanged or converted                          1,182                                                        182
Merger adjustments                                          (672,773)                                                     2,704
                                                          ----------    -----------     -------     -----------     -----------
Balance at December 31, 1997                                     383     (1,786,332)         --      (7,226,000)     (2,557,135)
Issuance of common stock                                                                                                 89,501
Equity securities subject to rescission (Note 20)                                                                       (89,501)
Common shareholder loss for year
     ended December 31, 1998                                               (523,483)                                   (523,483)
                                                          ----------    -----------     -------     -----------     -----------
Balance at December 31, 1998                                     383     (2,309,815)         --      (7,226,000)     (3,080,618)
Cost of  400 shares of common stock                                                      (2,000)                         (2,000)
Common shareholder loss for year
     ended December 31, 1999                                               (649,651)                                   (649,651)
                                                          ----------    -----------     -------     -----------     -----------
Balance at December 31, 1999                                     383     (2,959,466)     (2,000)     (7,226,000)     (3,732,269)
Issuance of common and preferred stock                           120                                                      3,120
Equity securities subject to rescission (Note 20)               (120)                                                    (3,120)
Common shareholder loss for year
     ended December 31, 2000                                               (701,272)                                   (701,272)
                                                          ----------    -----------     -------     -----------     -----------
Balance at December 31, 2000                              $      383    $(3,660,738)    $(2,000)    $(7,226,000)    $(4,433,541)
                                                          ==========    ===========     =======     ===========     ===========
</TABLE>



                                       5
<PAGE>   23

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                        Cumulative          For The Year Ended
                                                      From Inception            December 31,
                                                    October 21, 1991 to   -----------------------
                                                     December 31, 2000      1999            2000
                                                    -------------------   ---------     ---------
<S>                                                 <C>                   <C>           <C>

OPERATING ACTIVITIES
    Net loss                                          $(3,660,738)        $(649,651)    $(701,272)
    Amortization and depreciation                          48,122             7,417         5,847
    Changes in operating assets and liabilities:
      Decrease in prepaid services                          1,004                           2,028
      Increase in organizational costs                     (1,860)
      (Increase) decrease in accounts receivable          (71,866)            2,275       (66,696)
      Increase (decrease) in accrued expenses              29,804           (47,214)       22,388
      Increase in accrued interest payable                778,969           104,860       288,386
      Decrease in intangible assets                        19,750

                                                      -----------         ---------     ---------
Net cash used in operating activities                  (2,856,815)         (582,313)     (449,319)

INVESTING ACTIVITIES
    Investment in CVT Corporation of America              (12,000)
    Investment in joint ventures and stocks               (56,823)
    Acquisition of equipment                              (53,312)             (806)
    Acquisition of properties                             (97,066)

                                                      -----------         ---------     ---------
Net cash used in investing activities                    (219,201)             (806)           --

FINANCING ACTIVITIES
    Borrowings from stockholders                        1,382,326           560,784       420,805
    Proceeds for issuance of common stock               1,817,036
    Repayment of stockholders loans                       (72,737)
    Loan to affiliated company                            (21,280)
    Purchase of 400 shares of common stock                 (2,000)           (2,000)

                                                      -----------         ---------     ---------
Net cash provided by financing activities               3,103,345           558,784       420,805

                                                      -----------         ---------     ---------
Cash and cash equivalents - increase (decrease)            27,329           (24,335)      (28,514)

Cash and cash equivalents - Beginning                          --            80,178        55,843

                                                      -----------         ---------     ---------
Cash and cash equivalents - Ending                    $    27,329         $  55,843     $  27,329
                                                      ===========         =========     =========


Supplemental Disclosures of Cash Flow Information:
                                                      -----------         ---------     ---------
    Cash paid for interest                            $   447,955         $  98,979     $ 116,040
                                                      ===========         =========     =========
    Noncash financing transaction:
      Value of Studio City shares
                                                      -----------         ---------     ---------
      issued for services                             $     3,647         $      --     $      --
                                                      ===========         =========     =========
      Investment in Hammer Trust in the year 2000
      was financed with a $2,500,000 note,
      issuance of $3,000 common stock and $120
      preferred stock and a $1,000 deposit unpaid
     as of December 31, 2000
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                       6
<PAGE>   24

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (Inception) THROUGH DECEMBER 31, 2000


NOTE 1 -- ORGANIZATION, BACKGROUND INFORMATION AND BASIS OF PRESENTATION

Organization and Background Information

STUDIO CITY INCORPORATED HOLDING (the Company) was incorporated in the State of
Florida on October 25, 1991 as Studio City Incorporated. Prior to
incorporation, pre-incorporation operations commenced in February of 1991. The
Company is engaged in asset development, business management, production and
post-production studio operation, motion picture studio operation, tourist
attraction operation, the development of motion pictures for theatrical
exhibition, for television (i.e. network, cable, pay-per-view, etc.) and home
video, and in the development, production, and distribution of printed
publications. The Company owns a significant number of intellectual properties
and has a partial interest in other intellectual properties.

FAWNSWORTH INTERNATIONAL PICTURES CORPORATION (FIPC) was incorporated in the
State of Florida on October 21, 1991. Prior to incorporation, pre-incorporation
operations commenced in February of 1991. FIPC is a full service motion picture
and television production and distribution company. As a result of the
stockholders of FIPC receiving 491,150 shares of common stock of Studio City
with a par value of $1.00 in exchange for their ownership in the shares of
FIPC, FIPC became a wholly owned subsidiary of the Company on October 18, 1992.
The Company owns 100% of the voting stock of FIPC.

Prior to the stock exchange and transfer, the stockholders of Studio City
Incorporated voted unanimously to increase the amount of common stock
authorized from 1,000,000 shares to 1,500,000 to accommodate the exchange with
FIPC stockholders. The end result was that Studio City, Incorporated became the
parent company of FIPC (a wholly owned subsidiary) with both companies being
developmental stage companies. In a unanimous vote of the stockholders of the
Company, it was voted to change the name of the Company to Studio City
Incorporated Holding, which also operated under the name SCI Holding.

In a unanimous vote of its stockholders, the Company was instructed to execute
a stock split to fully dilute the stock of the Company. The 100 to 1 stock
split was executed on March 1, 1993. On that date, the total authorized common
stock of 150,000,000 shares includes all of the stock authorized including
500,000 shares reserved under the Company's Employee Incentive Stock Option
Plan. The common stock of the Company originally had a par value of $1.00 per
share and was amended to $.01 per share at the time of the stock split.
Subsequent to the stock split, the par value has again been amended to reflect
the par value at $.0001 per share, and this is the par value per share for each
of the subsidiaries subsequently formed.

Realizing the necessity for expansion, the Company created another subsidiary,
POC-IT PUBLISHERS, INCORPORATED (Poc-It). Poc-It was incorporated in the State
of Florida on May 3, 1993. The Company owns 100% of the voting stock. This
subsidiary was created to assemble, acquire, produce and publish various
literary properties owned by Studio City Incorporated Holding.


                                       7
<PAGE>   25
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (Inception) THROUGH DECEMBER 31, 2000


NOTE 1 -- ORGANIZATION, BACKGROUND INFORMATION AND BASIS OF PRESENTATION -
          continued

On December 14, 1993, the Company entered into an agreement to acquire 77.5% of
CVT CORPORATION OF AMERICA (CVT), an inactive New York based public company.
The cost of the stock was $12,000 plus the Company assumed certain debts. The
purpose of this acquisition was as follows: (i) to reactivate the operations of
CVT after a subsequent reorganization, (ii) prepare CVT for a merger, (iii)
merge the Company into CVT, thus becoming Studio City Holding Corporation, a
New York public company, (iv) prepare the merged entity for SEC and NASD
registration, and (v) prepare the merged entity for a Secondary Offering.

The Company and its subsidiaries are in the developmental stage and have not
generated significant revenues. In addition, the development of commercial
products using the Company's proprietary technology and inventory of
intellectual properties have not been completed and will require significant
additional financing. There is no assurance that commercially successful
products will be developed and that the Company will achieve a profitable level
of operations.

Realizing the necessity to develop certain intellectual properties and assets
through the expansion of operations, the Company created six subsidiaries in
1994. They are as follows:

The Company formed POC-IT COMICS, INCORPORATED on March 29, 1994 as a Florida
corporation. The Company owns 96.93% of the voting stock. Poc-It Comics has
three comic book franchises for development-- "THE EARTH WARRIORS" created by
Larry Faw; "MAGNET MAN" created by Paul Piterski; and "SHADOW RAVEN" created by
Frank Zanca. Poc-It Comics owns literary properties, as well as character
artwork. The first comic book--SHADOW RAVEN PREMIER EDITION was distributed in
May 1995.

The Company formed ZWEIG KNIGHTS PUBLISHING CORPORATION on March 29, 1994 as a
Florida corporation. The Company owns 64.30% of the voting stock. Zweig Knights
Publishing owns twenty six literary properties for future development and
publication. On November 11, 1997, Zweig Knights published its first in a
series of "Limited First Editions", The Nicholas Stories: The Boy With A Wish.
The second book of The Nicholas Stories series, The First Flight of St.
Nicholas, was released on November 1, 1998, and the third book in the series,
The Maiden Voyage of Kris Kringle, was released on October 1, 1999. An animated
television special of The Nicholas Stories: A Holiday Classic is currently in
pre-production.

The Company formed THE INTERNATIONAL CHILDREN'S TELEVISION NETWORK,
INCORPORATED on April 14, 1994 as a Florida corporation. The Company owns
99.96% of the voting stock. The International Children's Television Network has
fifteen literary properties, which is the equivalent of twelve hours of
children's programming.

The Company formed STUDIO CITY AMUSEMENTS, INC. on November 10, 1994 as a
Florida corporation. The Company owns 100% (99.9% in 2000) of the voting stock.
Studio City Amusements owns two theatrical musical productions entitled
"SLICING UP THE BIG APPLE" and "TINTYPES ON AN INTERGALACTICAL STAGE". Studio
City Amusements purpose is to develop and manage entertainment properties, and
to develop and produce Specialty Entertainment Projects. In 1999, this entity
changed its name to SCA GLOBAL RESOURCES, INC.



                                       8
<PAGE>   26
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (Inception) THROUGH DECEMBER 31, 2000


NOTE 1 -- ORGANIZATION, BACKGROUND INFORMATION AND BASIS OF PRESENTATION -
          continued

The Company formed NON-EXISTENT MAJOR LEAGUE FANTASY SPORTS ASSOCIATION,
INCORPORATED on November 10, 1994 as a Florida corporation. The Company owns
100% of the voting stock. Non-Existent Major League Fantasy Sports Association
owns "The 1994 Fan's Choice Fantasy World Championship of Baseball", the first
in a series of interactive radio and television fantasy sporting events. This
satirical 12 hour long radio play of a "fantasy world series of baseball" was
completed December 1, 1994 and is now ready for radio broadcast and/or
distribution.

The Company formed ZINGRR N-2-AKTIV TELEVISION NETWORK, INC. on November 22,
1994 as a Florida corporation. The Company owns 94.95% of the voting stock.
Zingrr N-2-Aktiv was created to serve as a partner in development, creation,
maintenance and programming of FCC Licensed Wireless Cable Stations and
Systems.

The following seven subsidiaries were formed subsequently for the purposes of
diversification and expansion. They are as follows:

The Company formed QUAGGA ENTERTAINMENT CORPORATION on March 30, 1995 as a
Florida corporation. The Company owns 93.33% of the voting stock. Quagga is in
the development stage and is engaged in the exploitation of motion picture and
television properties including the creation of revenue streams and profits
from captive intellectual and franchiseable properties. These activities would
include creating products for television, theatrical release, spin-off book
products, and ancillary spin-offs.

The Company formed ACCINEMATRON RELEASING CORPORATION on September 13, 1995 as
a Florida corporation. The Company owns 100% of the voting stock. Accinematron
was created to coordinate the distribution of various product lines which
include films, television programming, videocassettes, audio products, and
ancillary merchandise.

The Company formed THE MAGIC SHOP, INC. on October 7, 1995 as a Florida
corporation. The Company owns 100% of the voting stock. The Magic Shop was
created to serve as a production center and business incubator for
entertainment related companies.

The Company formed ZOLLIPE CYBERSPACE CORPORATION on June 14, 1996 as a Florida
corporation. The Company owns 100% of the voting stock. Zollipe was created to
develop computer programming and software for interactive games and information
from both the CD-ROM platform and worldwide web.

The Company formed ZZOONZUIT, INC. on June 14, 1996 as a Florida corporation.
The Company owns 100% of the voting stock. Zzoonzuit was created to design and
manufacture a new line of beachwear, swimwear, and athletic clothing.


                                       9
<PAGE>   27
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (Inception) THROUGH DECEMBER 31, 2000


NOTE 1 -- ORGANIZATION, BACKGROUND INFORMATION AND BASIS OF PRESENTATION -
          continued

The Company formed XENOMORPH DIGITAL POST, INC. on June 14, 1996 as a Florida
corporation. The Company owns 100% of the voting stock. Xenomorph was created
to be a digital broadcast and video post-production center and on-line producer
of television programming.

The Company formed PRO-SPORTS ENTERTAINMENT GROUP, INC. on November 1, 1996 as
a Florida corporation. The Company owns 100% of the voting stock. Pro-Sports
was created as a motion picture and television production group to produce
entertainment products focused on minority role models.


Basis of Presentation

The consolidated financial statements include the accounts of Studio City
Holding Corporation, and all subsidiaries. All significant intercompany
accounts and transactions have been eliminated.

These consolidated financial statements have been prepared to comply with
disclosure requirements of Securities and Exchange Commission Regulation S-X
and conform to S-B format.

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents: The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.

Office Furniture and Equipment: Office furniture and equipment is stated on the
basis of cost. Depreciation is computed by the straight-line method over useful
lives of 5-10 years.

Organization Costs: Costs to organize the corporations have been capitalized
and are stated on the basis of cost. Amortization is computed by the
straight-line method over 60 months.

Offering Costs: As discussed in Note 16, Quagga incurred specific incremental
costs in connection with a proposed Securities Act of 1993 Regulation D-504
offering. These offering costs were expensed in 1997 due to the expiration of
the offering on April 12, 1997.

Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and liabilities and
disclosures 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.


                                       10
<PAGE>   28
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (Inception) THROUGH DECEMBER 31, 2000


NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES - continued

Earnings (Loss) Per Common Share: Basic Earnings (Loss) Per Share is computed
by dividing income available to common stockholders by the weighted average
number of common shares outstanding during the year. Diluted Earnings (Loss)
Per Share is computed the same as Basic but also giving effect to all dilutive
potential common shares such as options, warrants and convertible preferred
stock. However, the computation of Diluted Earnings (Loss) Per Share does not
assume conversion of any potential common shares if that has an antidilutive
effect on earnings per share. Since there is a loss from operations, Diluted
Earnings (Loss) Per Share is computed the same as Basic Earnings (Loss) Per
Share. This is computed by dividing the net loss by weighted average number of
common shares outstanding during the year. The Earnings (Loss) Per Share are as
follows:

                                           Weighted            Loss
         Year          Net Loss         Average Shares       Per Share
         ----          --------          -----------          --------
         2000          $701,272           32,077,493          $(.0219)
         1999          $649,651           31,057,001          $(.0209)
         1998          $521,483           31,042,751          $(.0168)
         1997          $572,506           30,950,955          $(.0185)
         1996          $558,211          146,650,000          $(.0038)
         1995          $316,578          141,225,000          $(.0022)
         1994          $172,174          145,703,500          $(.0012)
         1993          $ 73,409          144,038,550          $(.0005)
         1992          $ 57,999            1,071,101          $(.0541)
         1991          $ 35,455              784,000          $(.0452)


NOTE 3 -- INTANGIBLE ASSETS AND RELATED OBLIGATIONS

Intangible assets consists of ownership of and rights to a significant number
of literary properties.

In October 1991, the date of incorporation of the Company and FIPC, stock was
issued for rights to several literary properties. 750,000 shares of Studio City
Incorporated Holding stock and 400,000 shares of Fawnsworth International
Pictures Corporation were issued at $1.00 per share in exchange for property
rights and exploitation. The recorded amount of these intangible assets for the
years 1991 and 1992 was zero based on the predecessor's cost. Larry D. Faw,
majority stockholder, was the predecessor owner. The total price of $1,150,000
has been reflected in the 1991 and 1992 financial statements as a reduction in
equity, specifically as a special distribution to stockholder.

Purchase Agreement: On February 16, 1993, the Company entered into an agreement
to acquire the direct ownership of various intellectual properties in the
amount of $7,226,000, which included 72 motion picture properties, 4 television
pilot properties, 48 books for publication, 4 inventions, 1 franchise program
and 1 Specialty Product Design and marketing program. The Company's Purchase
Agreement for these properties included an obligation in the form of a
promissory demand note in the amount of $1,554,027 payable to Larry D. Faw, the
majority stockholder. In addition, the Company granted to Larry D. Faw warrants
with the option to purchase 5,000,000 shares of common stock, which was
considered to be partial payment under


                                      11
<PAGE>   29
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (Inception) THROUGH DECEMBER 31, 2000


NOTE 3 -- INTANGIBLE ASSETS AND RELATED OBLIGATIONS - continued

the Purchase Agreement. These warrants are exercisable at $1.00 per share at a
maximum of 25% per year beginning the first anniversary of the effective date
of the grant and continues until one of the following occurs: (i) to the year
2003, or, (ii) when all warrants have been exercised, or, (iii) all rights to
such warrants have been terminated in a mutually agreed upon written agreement.

The Purchase Agreement additionally provided for the requirement that 51% of
the Company's preferred stock be issued to Larry D. Faw. The amount of
preferred stock was later decreased to 1,000,000 shares of redeemable
convertible and callable preferred B stock, with each share of preferred stock
being entitled to noncumulative dividends at 6% annual rate upon declaration of
the Board of Directors.

The preferred stock was recorded in the amount of $671,973, which was the
purchase price of the assets less the amount attributed to the promissory
demand note and the common stock warrants.

The Company, as part of the Purchase Agreement issued 1,000,000 shares of its
preferred B stock on February 15, 1995. The preferred stock can be converted to
common stock at market price, or, callable at any time by the Company at a
fixed price of $50 per share for preferred B stock and $105 per share for
preferred A stock, or in parts, on or after February 16, 1996, and will be
redeemable and/or callable until February 16, 2006.

In summary, the Purchase Agreement includes the $1,554,027 promissory demand
note, the $5,000,000 common stock warrants and $671,973 value of preferred
stock for a total price of $7,226,000. Management believes this Purchase
Agreement was at a significant discount which is evidenced by the Independent
Valuation as discussed below in Note 3. As previously stated, the recorded
amount of these intangible assets was zero based on the predecessor's cost.
Larry D. Faw, the majority stockholder, was the predecessor owner. The total
price of $7,226,000 has been reflected in the 1993 through 2000 financial
statements as a reduction in equity, specifically as a special distribution to
stockholder.

Pre-existing Rights: Ownership of certain literary properties were transferred
from the Company to its subsidiaries in 1993. Properties with a value of
$600,000 were transferred to Fawnsworth International Pictures Corporation,
increasing the intangible asset value from $400,000 to $1,000,000 (note:
properties were purchased in 1993 for $100, increasing intangible assets to
$1,000,100) and increasing its additional paid-in capital from $433,880 to
$1,033,880. Properties with a value of $1,200,000 were transferred to Poc-It
Publishers, Incorporated in exchange for its common stock. After these
transfers, the Company's intangible assets were $5,026,000. Incidental costs
have subsequently been incurred increasing the asset costs.

The purchase price of the intangible assets acquired from the majority
stockholder, Larry D. Faw, was determined by Industry Standards (i.e. Union
Minimums as detailed in the Writers


                                      12
<PAGE>   30
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (Inception) THROUGH DECEMBER 31, 2000


NOTE 3 -- INTANGIBLE ASSETS AND RELATED OBLIGATIONS - continued

Guild of America 1992 Minimum Basic Agreement as collectively bargained with
the Alliance of Motion Picture and Television Producers, Producers Guild of
America, Directors Guild of America, and all other signatory union business
franchise valuation methods, and other similar industry standards for product
and merchandise development).

Independent Valuation: In 1995, the Company engaged a major U.S. investment
banking firm to conduct an analysis of the Companies' intellectual properties
as an independent third party consultant. This Independent Valuation was in
direct response as a requirement of the Securities and Exchange Commission's
Chief Accounting Office. This Independent Valuation was prepared as a
Preliminary Valuation prior to a public offering and was created as an internal
document, which due to its sensitive contents, has been made available to the
Securities and Exchange Commission as a confidential sealed document. The
Preliminary Independent Valuation was prepared through the following:

(1)      Independent Research: (a) the investment banker's Research Analysts
Reports, (b) Standard & Poor's Industry Surveys, (c) Mergers and Acquisitions
from Securities Data Corporation, and, (d) financial reports from publicly
traded media holding companies and motion picture/television production
companies.

(2)      Industry Guidelines.

(3)      Analysis of the Collective Bargaining Agreements: The 1992 Writers
Guild of America-Alliance of Motion Picture & Television Producers Theatrical
and Television Basic Agreement, Amended and Effective May 2, 1992 through May
1, 1995; and the 1995 Writers Guild of America-Alliance of Motion Picture &
Television Producers Theatrical and Television Basic Agreement, Amended and
Effective May 2, 1995 through May 1, 1998, and ratified and amended on May 2,
1998 through May 1, 2001. All of which are Collective Bargaining Agreements
under the auspices of the National Labor Relations Board.

(4)      Management Interviews.

The Preliminary Valuation Summary was prepared utilizing two valuation
methodologies for 22 of the Companies' intellectual properties: (1) Cost
Approach projected as $9,700,000 and, (2) Discounted Cash Flow projected as
$46,000,000. Based on the two methodologies, the preliminary value achieved was
$9,659,980 for 22 intellectual properties having a projected
costs/obligations/value of $439,090 for each of the 22 intellectual properties.
At the time of the Independent Valuation, Studio City Holding Corporation and
its subsidiaries owned 152 intellectual properties, the majority of which were
not utilized in calculations of the Preliminary Valuation.

Contingent Liabilities-Collective Bargaining Agreement: Studio City Holding
Corporation, Fawnsworth International Pictures Corporation, the International
Children's Television Network, Incorporated, and Zingrr N-2-Aktiv Television
Network, Inc. are registered signatory companies to the 1995 Writer's Guild of
America-Alliance of Motion Picture & Television Producers


                                      13
<PAGE>   31
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (Inception) THROUGH DECEMBER 31, 2000


NOTE 3--INTANGIBLE ASSETS AND RELATED OBLIGATIONS - continued

Theatrical and Television Basis Agreement ("MBA"), Amended and Effective May 2,
1995 through May 1, 1998. Studio City Holding Corporation and its subsidiaries
are exclusively represented by the Alliance of Motion Picture & Television
Producers, Inc. The collective bargaining agreement is under the auspices of
the National Labor Relations Board and is deemed to be a contingent liability
for Studio City Holding Corporation and its subsidiaries in regards to all
literary properties owned by the companies for development and/or sale. All
aspects of intellectual properties represented by the "MBA" have been tabulated
and have pre-set financial obligations that pass through to the Company and/or
other type of ownership, and, directly passes through to any and all purchasers
of the intellectual properties. The contingent liabilities, requisite costs,
and expense calculations as determined under the 1995 "MBA" are restrictive and
compliance is dictated by law.

NOTE 4 -- INVESTMENT IN JOINT VENTURE AND STOCK

The Companies currently own (in entirety) literary properties whose
"replacement cost/value" and/or "1995 Minimum Basic Agreements" contingent
liabilities/obligation and/or associated direct pass-through costs for
production and distribution are tabulated under the Agreement as of December
31, 1996 as $811,931 per intellectual property. Studio City Holding Corporation
and its subsidiaries current portfolio of intellectual properties are required
to comply with all of the aspects pertaining to the collective bargaining
agreement in its most current form, and, those contingent liabilities pass
through to the owner of record.

This investment represents costs of $6,823 paid by FIPC on behalf of Florida
Screen Gems Partners, a partnership of which the FIPC is a partner. The
Partnership is in the development stage. The Company has also invested in two
Corporations--Environmental Production Systems and Florida Film Investment
Company. These investments are recorded at cost for a total of $50,000. In
April 2000, the investment in Hammer Trust in the amount of $2,504,120
increased this investment total to $2,560,943 (See Note 21).

NOTE 5 -- PREPAID SERVICES

The Company and FIPC issued common stock to several individuals in exchange for
future services and expertise. The asset values recorded were determined by
management. These services have been partially rendered and the expense
partially recognized.

NOTE 6 -- OFFICE FURNITURE AND EQUIPMENT AND NOTE PAYABLE-STOCKHOLDER

At the time of incorporation in October 1991, FIPC acquired office furniture
and equipment from a stockholder, Genevieve Faw in the amount of $13,600. The
Company became indebted for this amount plus $1,520 for supplies that was
expensed in 1991. Therefore, the total liability to the


                                      14
<PAGE>   32
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (Inception) THROUGH DECEMBER 31, 2000


NOTE 6 -- OFFICE FURNITURE AND EQUIPMENT AND NOTE PAYABLE-STOCKHOLDER -
          continued

stockholder for this transaction was $15,120 since 1991. In 1994 the liability
was satisfied. In 1995, the Company and Poc-It Comics acquired office furniture
and equipment. In 1996, 1997 and 1999, the Company acquired additional office
furniture and equipment. Office furniture and equipment is recorded at cost,
less accumulated depreciation. The provision for depreciation is computed on
the straight-line method over the estimated useful lives of the assets which
range from 5 to 7 years.

NOTE 7 -- NOTE PAYABLE-MAJORITY STOCKHOLDER

As discussed in Note 3 above, the Company became obligated under the Purchase
Agreement to its majority stockholder, Larry D. Faw. The promissory demand note
is dated the date of the Purchase Agreement, which is February 16, 1993. The
promissory demand note contains the following provisions: (i) due upon demand,
(ii) payments may be made at any time, and (iii) a balloon payment is due on
February 16, 1995. The note has an initial annual interest rate of 2%. On
February 16, 1995, the note became due and subsequently was extended for six
months at an annual interest rate of 9%. Since August 16, 1995, every six
months the note has been extended and is currently extended through August 16,
2001. No principal payments have been made on this note, but partial interest
payments have been made in 1995 through 2000. Accrued interest on this note was
$439,774 as of December 31, 2000, and $415,952, $375,069, $290,518, $194,456,
$108,593, $58,158 and $27,078 as of December 31, 1999, 1998, 1997, 1996, 1995,
1994 and 1993 respectively.

NOTE 8 -- RELATED PARTY TRANSACTIONS

In February of 1991, both the Company and FIPC started incurring
pre-incorporation expenses that were expensed by the companies and were paid by
its majority stockholder, Larry D. Faw. This practice has continued through the
present and both companies have reimbursed the stockholder for these expenses.

The nature of these expenses were automobile expense, office rent expense,
telephone expense, office supplies expense and other operational expenses.
These expenses were corporate expenses that were paid by the majority
stockholder, Larry D. Faw and charged to the companies. The Company incurred
automobile expenses and reimbursed Larry D. Faw at the mileage rates as
prescribed by the Internal Revenue Service. Additionally, the Company incurred
office rent and utilities and reimbursed Larry D. Faw $500 and $84 per month
respectively. Additional expenses were incurred and reimbursed to Larry D. Faw
such as telephone expenses, office supplies, and other operational expenses.

As discussed in Note 3, the Company acquired various intellectual properties
from the majority stockholder, Larry D. Faw, for $7,226,000 in exchange for a
promissory demand note, preferred stock and warrants to purchase common stock
at a fixed price.

                                      15
<PAGE>   33
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (Inception) THROUGH DECEMBER 31, 2000


NOTE 8--RELATED PARTY TRANSACTIONS - continued

The Company executed a statutory merger with CVT Corporation of America (name
changed to Studio City Holding Corporation) on July 1, 1996 with Studio City
Holding Corporation (a New York Corporation) being the surviving entity.
Subsequently, the operations of Studio City Incorporated Holding (a Florida
Corporation) were wound up and the corporation dissolved. (See Note
17--Merger).

Zweig Knights Publishing Corporation, a subsidiary of the Company, has earned
revenue from sale of four books of the Nicholas Stories series and a Christmas
audio CD. Total revenue earned was $92,614 and $45,591 for the years ended
December 31, 2000 and 1999. Of these amounts, $58,600 and $41,000 were from
sales to Harry Knights, Inc. in 2000 and 1999 respectively. And in 2000,
$27,250 were from sales to Larry D. Faw, Inc. Larry D Faw, Inc. is a
corporation 100% owned by Larry D. Faw, majority stockholder of the Company.
Harry Knights, Inc. is a corporation 100% owned by Harry Knights, the author of
the books, who is also a stockholder and officer of the Company as well as the
subsidiary, Zweig Knights Publishing Corporation. In 1997, the Company enlisted
Harry Knights, Inc. to serve as chief marketer and retail sales coordinator.
The Company sells to Harry Knights, Inc. as a wholesaler at a price of $10 per
unit/book. Harry Knights, Inc. markets the books within the guidelines of the
board of directors. Harry Knights coordinates advertising, public relations and
sales management at major trade and specialty products showcases and
conventions. Harry Knights receives no compensation for the duties he performs
on behalf of the Company. The Company does assist in providing reimbursements
for some expenses that are incurred above and beyond the requirements necessary
for retail sales.

NOTE 9 -- STOCKHOLDERS' EQUITY

Common Stock and Preferred Stock

Studio City Holding Corporation immediately after the Merger and as of December
31, 1996 (See Note 17) had 150,000,000 shares authorized, issued and
outstanding with a par value of $.01 per share. Upon the Merger, Larry D. Faw,
the principal stockholder converted 100,000,000 shares of common stock into
10,000,000 shares of Class A Preferred Stock and 10,000,000 shares of common
stock into 1,000,000 shares of Class B Preferred Stock. Additionally, the
former stockholders of CVT exchanged their shares for 9,123,250 shares of
common stock. Additionally, some shareholders elected the option to exchange
their common shares for Class B Preferred Stock (10 shares of common for 1
share of Class B Preferred Stock). 18,258,340 shares of common stock were
exchanged for 1,825,834 shares of Class B Preferred Stock. Additional shares of
common were issued during 1997, 1998 and 2000. As of December 31, 2000 and
1999, 32,557,001 and 31,057,001 shares were issued and outstanding
respectively. The par value was amended to $.002 per share.

As discussed above, Larry D. Faw, the principal stockholder, converted common
stock into 10,000,000 shares of Class A Preferred Stock. This is the amount of
shares issued and outstanding as of December 31, 2000 and December 31, 1999.
The par value is $.0001 per share.


                                      16
<PAGE>   34
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (Inception) THROUGH DECEMBER 31, 2000


NOTE 9 -- STOCKHOLDERS' EQUITY - continued

As discussed above, Larry D. Faw, the principal stockholder, converted common
stock into 1,000,000 shares of Class B Preferred Stock. He previously had
1,000,000 shares prior to this conversion. Additionally, other stockholders
exchanged common stock for 1,825,834 shares of Class B Preferred Stock. As of
December 31, 2000 and 1999, 5,025,834 and 3,825,834 shares were issued and
outstanding. The par value is $.0001 per share.

Fawnsworth International Pictures Corporation has 500,000 shares authorized.
The par value is $.01 per share. There were 491,150 shares issued and
outstanding as of December 31, 2000 and 1999 with Studio City being the
registered beneficial owner.

Poc-It Publishers, Incorporated has 10,000,000 shares authorized, issued and
outstanding. The par value is $.0001 per share.

Poc-It Comics, Incorporated has one class of common stock and it is voting (one
share, one vote). The par value is $.0001 per share with 10,000,000 authorized.
10,000,000 shares are issued and outstanding. Poc-It Comics has 5,000,000
shares authorized, issued and outstanding of Class A Preferred Stock at $.0001
par value per share which is callable, voting and convertible to common. There
are also 5,000,000 shares authorized, issued and outstanding Class B Preferred
Stock at $.0001 par value per share which is non-voting with preferential
dividends.

Quagga Entertainment Corporation has one class of common stock and it is voting
(one share, one vote). The par value is $.001 per share with 10,000,000 shares
authorized and 7,000,000 shares issued and outstanding. Quagga has 5,000,000
shares of Class A Preferred Stock authorized, issued, and outstanding. The par
value of the Class A shares is zero. The Class A shares (1) are voting--one
share, one vote (2) receive no dividends (3) are not convertible ( 4) are not
redeemable (5) are callable at $25.00 per share.

Quagga has 5,000,000 shares of Class B Preferred Stock of which 2,500,000 are
issued and outstanding. The par value of the Class B shares is zero. The Class
B shares (1) are non-voting (2) have special dividend rights based on earnings
(3) have the initial price of $6.00 (4) have a fixed dividend of 12% per annum
based on earnings (5) are callable at $7.50 per share after the first year's
dividend (6) are callable after 3 years at $10.00 per share (7) are convertible
to common (8) have preferential liquidation treatment above all other shares.
Additionally, Quagga has 500,000 shares of Class C Preferred Stock, however, no
shares have been issued. The par value of the Class C shares is zero. The Class
C shares (1) are non-voting (2) have special dividend rights based on earnings
(3) have the initial price of $2.00 (4) are callable any time after issuance
for $2.00 for a period up to two years (5) are callable for $2.50 after two
years (6) are convertible to common after three years on a one to one basis (7)
have preferential liquidation treatment over common stock and Class A Preferred
stock.

All other entities presented in these financial statements other than those
referred to above in this note, have one class of common stock and it is voting
(one share, one vote). The par value is $.0001 per share with 10,000,000
authorized, issued and outstanding. There are 5,000,000 shares authorized,
issued and outstanding each of Class A and B Preferred Stock at $.0001 par


                                      17
<PAGE>   35
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (Inception) THROUGH DECEMBER 31, 2000


NOTE 9 -- STOCKHOLDERS' EQUITY - continued

value per share. Class A is voting and convertible to common and Class B is
non-voting with preferential dividends.

NOTE 10 -- TRADEMARKS, COPYRIGHTS AND LICENSES

The Company uses its own and licensed trademarks from its subsidiaries for
spinoff product development and merchandising from its various intellectual
properties. The Company owns 126 copyrights and will seek patents for 4
products. Additionally, the Company will be purchasing new products and
literary properties for development, and/or, enter into joint ventures for the
development of intellectual properties or consumer products. Each such instance
will be earmarked by distinct contractual requirements and obligations by the
Company.

NOTE 11 -- EMPLOYEES, EMPLOYMENT AGREEMENTS AND EMPLOYEE BENEFITS

The Company has had no full-time employees from inception to date except for
Quagga Entertainment Corporation during 1995. The Company has had contractual
relationships with independent contractors. Operations are managed by officers,
directors, and stockholders who received no monetary compensation through 1999.
In the year 2000, the Company began paying consulting fees to certain officers
and stockholders. Through December 31, 2000, $20,000 has been paid to the
majority stockholder, Larry D. Faw, and $8,656 has been paid to other minority
stockholders. The Company has had no employment agreements with key officers
from inception to date. However, the Company anticipates entering into
employment agreements with key personnel and intends to obtain key-man
insurance when the Company emerges from the development stage.

The Company does maintain a medical reimbursement plan whereby the majority
stockholder, Larry D. Faw, is reimbursed for his medical costs. This does not
include any other family members.

NOTE 12 -- ADDITIONAL CONTINGENT PAYMENTS

As of December 31, 2000, the Company was obligated to make future contingent
payments under research and development contracts, which are based upon actual
utilization of certain intellectual properties in pre-publication, published or
cinematic form. These contingent payments will continue for an indeterminable
length of time, and will be payable in all cases at the time of funding for
each respective project. Under certain of these contracts, the Company is
obligated to pay royalties ranging from 1.5% to 5% of the gross net profits
which are distributable from the commercialization and merchandising of these
properties.

The Company has agreements with various individuals who will receive funds from
the initial distribution proceeds from the exploitation of certain literary
properties. These amounts are


                                      18
<PAGE>   36
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (Inception) THROUGH DECEMBER 31, 2000


NOTE 12 -- ADDITIONAL CONTINGENT PAYMENTS - continued

uncalculable because they are percentage rights in individual properties which
are identified in the Company's inventory analysis. These contracts and
percentage rights are as follows:

For the motion picture property "Bawdyhouse Bandits":

        Frederick G. Spriggs               1% profit participation
        Norman T. Godheim                  1% profit participation
        Heflar Family Trust                2% profit participation
        Darlene C. Barror                  1% profit participation
        Suzanne Quinonez                   1% profit participation
        Genevieve H. Faw                   2% profit participation

For each of the following motion picture properties-- "Return To Treasure
Island", "Bad News", "TampaVice or The Comic Misadventures of Nipit and Budd",
"Mistaken Identity", "Love Can Kill", "Billion Dollar Bunnies", "The Love
Bugs", "A Touch of Evil", "Eyes of Terror", "Rail Rider", "Swingtime", "Whooz
Choice", "The War Lords", "Captain J Ride Again", "Midnight Blues", "Belle of
Berry Hill", "Hells Revenge", "Vendetta", "A Miracle In Tibet", "The Junkyard
Gang", "Land of the GaNodds", "So Far From My Heart", "Water Drop Series",
"Damon Runyon Series", "Way Off Broadway", "Paparazzi", "Love Bugs-Television
Game Show", "Fright Night", "Fountain Blue", "The Worlds Greatest Escapes", and
"Seminole"--the following contractual agreements exist: Genevieve H. Faw--2%.

For each of the following motion picture properties under option--"Cut Throat
Ridge", "The Plunderers", "The Last Glider", "Silence Awaits", "Stihlman and
the Firestone", "The Orion Murders", "Battle of Buck Mountain", "A Delicate
Obsession", "Seven Eleven Sorority Street", "Happy Bob", "Ghost Rider", "Teeth
of Lions", "Dali", "The Hillsville Courthouse Murder Massacre", "The Last Great
Adventure", "Otto", "Wheels", "Freefalling", and "Like A Butterfly"-the
following contractual agreements exist: Genevieve H. Faw--1%.

For the following book rights and motion picture rights on "Cain and Abel
Revisited: The True Life Story of Earle Don Fagan, Jr."--the following
contractual agreement exists:

         The E. Don Fagan, Jr. Trust       $50,000 on contract to sale
                                           $25,000 new purchase
                                           1% net profit participation

The Company has separate contractual royalty agreements with Genevieve H. Faw
for deferred fees and royalties for each of the following inventions-- "Enviro
Tools"(tm), "Boot Valet"(r), "Book Lounge"(r), and "Radius Gauge"(r). The
following contracts exist: Genevieve H. Faw--1% royalty per number sold.

The Company has separate contractual agreements for royalties for books under
the research and development phase of the Company's wholly owned subsidiary,
Poc-It Publishers, Incorporated. All of the following book titles in each
series have royalty fees -- "Reward Series" (13 titles), "The Poc-It Mania
Series" (11 titles), "Self Help Manuals" (11 titles), and "Contemporary


                                      19
<PAGE>   37
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (Inception) THROUGH DECEMBER 31, 2000


NOTE 12 -- ADDITIONAL CONTINGENT PAYMENTS - continued

Career Guide Series" (10 titles): The following contracts exist: Genevieve H.
Faw--1% royalty per number sold.

There are separate contractual agreements in connection with the assignment of
Artistic Property Agreement between Fawnsworth International Pictures
Corporation and Michael Fields for ownership rights of original art for 4 comic
books characters created by Larry D. Faw. These 4 characters are "Taren",
"Mercer", "Shrieve", and "Quant", all from the "Earth Warrior" series. Poc-It
Comics, Incorporated issued 10,000 shares of common stock to Michael Fields in
addition to $100 cash per contract--$400 total. Additionally, Fields is to
receive a flat fee of $5,000 for each agreement payable when and if the art
design is utilized in the production of a movie or animation product--$20,000
total if all character art is utilized.

There is a separate Purchase & Profit Participation Agreement between
Fawnsworth International Pictures Corporation and Paul and Brahm Piterski for
the ownership of the literary rights and artwork of the comic book character
"Willy the Magnet Man". Poc-It Comics, Incorporated issued 50,000 shares of
common stock to Piterski in addition to $100 cash. Additionally, Piterski is to
receive a $15,000 consultant/production fee at time of movie production plus
10% of the net profits generated from the exploitation of the entertainment
franchise.

There is a separate Agreement between the Company, Roger H. Hefler, Larry D.
Faw and Frank Zanca/Wingspan Productions for the ownership rights of the
literary property "Shadow Raven", which are assigned to Poc-It Comics,
Incorporated. Poc-It Comics, Incorporated issued 50,000 shares of common stock
and 100,000 shares of Class B preferred stock to Zanca.

There is a separate Assignment of Artistic Property Agreement between
Fawnsworth International Pictures Corporation and Calvin B. Clarke for the
ownership rights of original art for the comic book character created by Larry
D. Faw. The character is "Hafro", another character from the "Earth Warrior"
series. Clarke received $100 cash plus he will receive a $5,000 consultant fee
if the art is utilized plus a pro rata percentage from 5% allocated to Talent
Pool.

There is a separate Assignment of Artistic Property Agreement between
Fawnsworth International Pictures Corporation and Ricardo Colon for the
ownership rights of original art for the comic book character "Un-named". Colon
received $100 cash plus he will receive a $5,000 consultant fee if the art is
utilized plus a pro rata percentage from 5% allocated to Talent Pool.

There is a separate Assignment of Artistic Property Agreement between
Fawnsworth International Pictures Corporation and Marco Antonio Nazario for the
ownership rights of original art for the comic book character created by Larry
D. Faw. The character is "Sunspot", another character from the "Earth Warrior"
series. Clarke received $100 cash plus he will receive a $5,000 consultant fee
if the art is utilized plus a pro rata percentage from 5% allocated to Talent
Pool.


                                      20
<PAGE>   38
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (Inception) THROUGH DECEMBER 31, 2000


NOTE 12 -- ADDITIONAL CONTINGENT PAYMENTS - continued

There is a separate Assignment of Artistic Property Agreement between
Fawnsworth International Pictures Corporation and Melissa Polizzi for the
ownership rights of original art for 3 comic book characters created by Larry
D. Faw. The characters are "Marilise", "Lilian", and "Renata", triplet
characters from the "Earth Warrior" series. Polizzi received $100 cash plus she
will receive a $5,000 consultant fee if the art is utilized plus a pro rata
percentage from 5% allocated to Talent Pool.

There is a separate Assignment of Rights and Profit Participation Agreement
between Fawnsworth International Pictures Corporation and Larry D. Faw for the
licensing rights of the literary property "Earth Warriors", which consists of
12 characters. This Agreement is for a 5 year period ending October 9, 1998.
Faw received no cash but did receive 50,000 shares of Poc-It Comics,
Incorporated on March 29, 1994. If the rights are utilized, Faw will receive
$15,000 for print format, $50,000 for motion picture and/or other multi-media
plus 5% of the net profits attributable to this entertainment franchise.

There is a separate Agreement between the Company and Harry B. Knights, the
author of "The Nicholas Stories", who serves as Senior Vice-President of the
Company and Chief Operations Officer of Zweig Knights Publishing Corporation, a
subsidiary of the Company. The contractual obligation to Harry B. Knights was
met by issuing to him 1,250,000 shares of Preferred A and 1,250,000 of shares
of Preferred B stock of Zweig Knights Publishing Corporation plus 100,000
shares of restricted common stock of the Company in April 1994. Additionally,
Harry B. Knights received a cash consulting fee of $5,000 on the 1997
production of "The Nicholas Stories".

There is a separate pass-through Agreement between Harry B. Knights which is
contingent upon the publication and/or cinematic adaptation of any of these
intellectual properties. He is to receive a consultant fee and a profit
participation in each of these properties.

On July 1, 1995, the Company entered into a joint venture with Quagga
Television Partners Limited Partnership for the production and distribution of
low budget motion pictures and television programming. Larry D. Faw is the
Managing Partner of Quagga Television Partners and is the largest contributor
as a limited partner. Quagga Television Partners furnished the majority of the
funding for the production of Zoo Toonz. Quagga Television Partners owns a
library of video footage of exotic animals for the creation of animal music
videos. As of this date, Quagga Television Partners has not licensed use of
this footage.

The Company has entered into a series of Joint Venture Agreements with Lisa
Moody/Tin Woman Music, Inc. for the creation of music for the first generation
of Zoo Toonz. Larry D. Faw and Quagga Television Partners Limited Partnership
have contributed capital for these joint ventures. To date, 5 contractual
arrangements have been made for the creation of 27 songs for the Zoo Toonz
project. The songwriter has been prepaid for the creation of these songs and
separate funds have been expended for the production of Recording Masters. The
Company owns all video rights for perpetuity and all audio rights for 35 years.


                                      21
<PAGE>   39
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (Inception) THROUGH DECEMBER 31, 2000


NOTE 12 -- ADDITIONAL CONTINGENT PAYMENTS - continued

The Company had entered into an Agreement for the use of 2 puppets, Clyde and
Alfred, for the utilization in volume one of Zoo Toonz, with John C. Cummings,
Jr. Additional puppet footage was shot at Disney-MGM Studios, however, the
footage was unacceptable. Due to contractual restrictions placed on the Company
by Disney for Volume one of Zoo Toonz, the release and distribution was
cancelled. The Joint Venture Agreement was terminated by John C. Cummings, Sr.
on October 2, 1996.

A Contingent Production Joint Venture was entered into by the Company with Marc
Rose and Radio Cinema for the creation of various products and merchandise
which could be created from the distribution and cinematic adaptation of a
series of radio shows entitled "Dry Smoke and Whispers". This contingent
agreement may be terminated.

On June 17, 1996, the Company purchased the patents and trademarks for "Uncle
Tuffy's French Security Window". The purchase was made between the Company and
Paul Piterski, the inventor and patent owner for $2,000 in cash plus 5% of the
gross profits attributable to the sale, licensing, or other profits due to the
Company for the exploitation of this patented product.

In July 1996, the Company placed a $10,000 option on the right to purchase
literary properties written by science fiction writer Andre Norton. The
properties which were optioned were "The Wraiths of Time" and "A New Property
Adaptation From The Screenplay of The Wraiths of Time". The option still
exists, however, original funding was to be realized from the public offering
of Quagga Entertainment Corporation's D-504, which expired. Publishing
Corporation, has entered into an Agreement to be a corporate general partner in
ZK Partners Limited Partnership. This Partnership is currently being formed for
the financing of an animation for "The Nicholas Stories", and is currently in
the development stage.

NOTE 13 -- EMPLOYEE INCENTIVE STOCK OPTION PLAN

On March 1, 1993, the Board of Directors adopted in Outline Form an Employee
Incentive Stock Option Plan for future full time employees and officers. Under
the Proposed Outline, the Company may issue options exercisable at the current
market value (110% of current market value only to 10% or greater stockholders)
up to $100,000 annually. The Proposed Plan was extended from March 1, 1998, to
terminate on March 1, 2002.

Under the Proposed Plan, any person owning 10% of the voting power of the
Company is restricted from exercising his/her options to three years after the
receipt of such grant. Additional stipulations are as follows: (1) options
terminated or expired revert back into the Plan, (2) unpurchased option shares
remain in the Plan, (3) options are only exercisable by the optionee or his/her
estate, (4) options are not transferable, (5) carryover amounts from one year
to the next year can not exceed 50% of the option, and (6) option shares are
restricted until SEC registration.

The Company has reserved 500,000 shares of common stock for issuance under the
Proposed Plan. No options have been granted under the Proposed Plan from
inception to date.


                                      22
<PAGE>   40
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (Inception) THROUGH DECEMBER 31, 2000


NOTE 14 -- INCOME TAXES

The Company and its subsidiaries have filed separate corporate income tax
returns since each corporation's inception through December 31, 2000. As of
December 31, 2000, there have been no timing differences in the recognition of
revenue and expense for financial reporting and income tax purposes. As of
December 31, 2000, the Company and its subsidiaries each have available net
operating loss carryforwards for federal and state income tax purposes (which
are the same amount) that will be available to offset future taxable income of
the Company. If unused, net operating loss carryforwards expire after 15 years
(20 years after 1997). The loss carryforwards are summarized as follows:

     Year          Year         Studio City           All
   Incurred      Expires       Holding Corp.      Subsidiaries       Combined
   --------      -------       -------------      ------------       --------
     1991          2006          $ 15,596          $ 19,859          $ 35,455
     1992          2007            24,000            33,999            57,999
     1993          2008            63,543             9,866            73,409
     1994          2009           158,468            13,706           172,174
     1995          2010           309,995             6,583           316,578
     1996          2011           496,761            61,450           558,211
     1997          2012           451,666           120,840           572,506
     1998          2018           489,105            34,378           523,483
     1999          2019           556,889            92,762           649,651
     2000          2000           678,192            23,080           701,272



NOTE 15 -- RENTALS UNDER OPERATING LEASES

The Company's leasing operations consist principally of the leasing of
broadcast television equipment, various computer, video and sound equipment
under operating leases that expire over the next three to five years. Due to a
cross default by a joint venture partner, a portion of the equipment under two
of the leases was reposessed by the lessor for late payment (see note 18
regarding "Zoo Toonz"). The Company has continued making monthly payments on
all lease obligations and expects to satisfy all obligations and obtain full
use of all equipment under lease.

The following is a schedule by years of future minimum rental payments required
under operating leases that have initial or remaining noncancelable lease terms
in excess of one year as of December 31, 2000:

         Year Ending December 31,                        Amount
         ------------------------                       --------
                   2001                                 $ 44,199
                   2002                                    2,177
               Later Years                                   -0-
                                                        --------
                                                        $ 46,376
                                                        ========


                                      23
<PAGE>   41
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (Inception) THROUGH DECEMBER 31, 2000


NOTE 16 -- CHANGING ECONOMIC CONDITIONS AND SUBSEQUENT EVENTS

From September 1995 to September 1996 Studio City Incorporated Holding entered
into a "First Right of Refusal/Space Lease Agreement" with The Walt Disney
Company on product produced on the Disney-MGM Studios by Studio City. The
Company entered into a one year space lease/first right of refusal/production
agreement to expend a minimum of $1,200,000 at the studio for its projects. The
Company entered into this agreement with Disney based on an agreement with a
New York investment banker taking a contractual (dated August 28, 1995) equity
position of $1,200,000 in Quagga Entertainment Corporation, the production arm
which was located with the Company at Disney/MGM Studios. Quagga Entertainment
Corporation was to achieve total capitalization in 1996 of $8,500,000 based on
a registered public offering in Connecticut. The Company was also qualified to
sell the offering in the state of New York as a registered broker/dealer. The
Company was represented by an investment banker/consultant in Connecticut, who
contractually committed to raising Quagga's capital needs through a registered
D-504 offering. Also, the Company had the option to create and market a "red
herring" D-506 private placement. The Company chose "Shadow Raven", a
low-budget feature motion picture, to be the first project. However, due to
expanded costs associated with the contingent joint venture production
partners, the project was postponed until sufficient capitalization was
realized. Quagga's D-504 offering was registered in Connecticut on April 12,
1996. The investment banker was to commence the financial marketing of the
offering, but failed to do so. The New York equity investor could not meet the
contractual commitment. As a result, the D-504 offering expired on April 12,
1997 and the "red herring" D-506 was withdrawn as a viable funding plan.
Accordingly, the offering costs of $32,051 have been expensed during 1997. With
the lack of alternative financing available to the Company, the contract with
Walt Disney Company expired on September 15, 1996 along with the contingent
joint venture production partnerships.

In April 1997, the Company expanded its operations by relocating to Tampa,
Florida into a facility that provides a small soundstage, office operations,
and edit suite. This new organization of its operations in Tampa is anticipated
to increase revenue production, while providing low costs to the Company for
its own projects.

NOTE 17 -- MERGER

On June 29, 1996, CVT Corporation of America restated and amended its articles
of incorporation to allow for a name change, the creation of Class A and B
Preferred Stock, the reorganization of operations, and limiting the liability
of its Directors and Officers. CVT Corporation changed its name to Studio City
Holding Corporation (a New York Corporation). 10,000,000 shares of Class A
Preferred Stock with special voting powers were created and 25,000,000 shares
of Class B Preferred Stock with preferential dividends and various rights were
created. The Company adopted a new set of By-Laws which streamlined its
operations as a public company and adopted a set of procedures which limited
the liability of its Directors and Officers.


                                      24
<PAGE>   42
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (Inception) THROUGH DECEMBER 31, 2000


NOTE 17 -- MERGER - continued

On July 1, 1996, Studio City Incorporated Holding (a Florida Corporation) and
its subsidiaries merged with and into Studio City Holding Corporation (a New
York Corporation) in a statutory merger. The merger transaction was executed in
a "like kind" stock exchange, share for share of common stock of Studio City
Incorporated Holding for common stock of Studio City Holding Corporation. On
October 24, 1996, Studio City Incorporated Holding was dissolved, with the
surviving entity being Studio City Holding Corporation. All of the assets and
liabilities of Studio City Incorporated Holding and its subsidiaries were
merged with and into Studio City Holding Corporation.

As per the Merger Agreement, Larry D. Faw, principal stockholder of Studio City
Incorporated Holding, was required to convert 100,000,000 shares of voting
common stock of Studio City Incorporated Holding into 10,000,000 shares of
Studio City Holding Corporation Class A Preferred Stock and was also required
to convert 10,000,000 shares of common stock into 1,000,000 shares of Class B
Preferred Stock.

On October 29, 1997, the Company called for a name change and exchange of
shares from both former CVT stockholders and Studio City Incorporated Holding
stockholders. This exchange was executed in a "like-kind" share for share
exchange. Additionally, all of the stockholders in the Merged Entity had the
option to convert any, all, or none of their shares of common stock into Class
B Preferred Stock at a ratio of 10 shares of common for 1 share of Class B
Preferred Stock.

NOTE 18 -- PENDING LITIGATION

When the merger occurred, there were no significant changes in the operations
of the Company and its subsidiaries. Studio City Holding Corporation and its
subsidiaries continued its operations as the merged entity. When the merger
occurred, there were no significant changes in the operations of the Company
and its subsidiaries. Studio City Holding Corporation and its subsidiaries
continued its operations as the merged entity.

The Company being an entertainment company is often required to defend its
rights and licenses for intellectual properties that the Company either owns or
serves as a joint venture partner. This type of litigation is common in the
entertainment industry, and considering that the Company owns numerous
intellectual properties and owns various types of licenses and joint
participations in intellectual properties, it can safely be assumed that the
Company will be required to defend its rights, presently and in the future.

Currently, the Company and its subsidiary, Poc-It Comics, Incorporated, are
defending their rights in the production and distribution of an entertainment
franchise based on a comic book story entitled "Shadow Raven". The principals
are currently attempting to resolve their issues in negotiation.


                                      25
<PAGE>   43
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (Inception) THROUGH DECEMBER 31, 2000


NOTE 18 -- PENDING LITIGATION - continued

Secondly, the Company and its subsidiary, Quagga Entertainment Corporation, are
defending a challenge to the Companies' rights associated with a joint venture
to create, produce, distribute and exploit an intellectual property entitled
"Zoo Toonz", a joint venture where the timeliness of the creation of finished
products are in question. Litigation is pending in this matter, and, it has
been determined that the products will be completed without the assistance of
the joint venture partner. The Company and its financial partners will seek to
recoup all of its investment.

In March 2000, the Company agreed to a mediated settlement. The Settlement
Agreement With Prejudice became effective April 11, 2000. In the settlement
agreement, the Company would have complete ownership of all video footage
associated with the "Zoo Toonz" video series with music. The project included
some original music created by other members of the joint venture. The Company
has the right and direct ownership of all compiled music videos, and the right
to exploit 28 musical compositions for a period which would end April 2030. The
Company and its joint venture partner will receive 100% of the revenues
produced from the sales associated with the musical products as originally
produced for a period ending in 2030, and 100% of the revenues from and for
perpetuity all Zoo Toonz products, including new music produced from various
new master recordings of Zoo Toonz recordings.

NOTE 19 -- LOANS FROM MINORITY STOCKHOLDERS

During 1998, 1999 and 2000, various minority stockholders loaned the Company
money. These unsecured, short-term (less than one year) loans accrue interest
at 10% per annum. The total amounts outstanding are $1,309,584, and $888,784 as
of December 31, 2000 and 1999 respectively. Accrued interest payable on these
loans are $186,121 and $74,631 as of December 31, 2000 and 1999 respectively.

NOTE 20 -- EQUITY SECURITIES SUBJECT TO RESCISSION

Common stock was issued during 1996, 1997, 1998 and 2000 without compliance
with registration requirements of the federal and state securities laws. As a
result, these securities may have rescission rights. Accordingly, the potential
rescission liability has been classified outside of permanent stockholders'
equity, under the caption "Equity Securities Subject To Rescission". This
amount is $432,176 as of December 31, 1996, $913,599 as of December 31, 1997,
$1,003,100 as of December 31, 1998, and 1999 and $1,006,220 as of December 31,
2000. The likelihood of the exercising of these rescission rights is considered
to be remote, and therefore, interest has not been accrued and included as an
additional liability amount. But the interest is considered to be a contingent
liability of the Company and based on a 10% annual interest rate, amounts to
approximately $36,000 as of December 31, 1996, $98,000 as of December 31, 1997,
$198,000 as of December 31, 1998, $298,000 as of December 31, 1999 and $398,000
as of December 31, 2000. When the rescission rights expire, the respective
amounts will be reclassified as permanent equity.


                                      26
<PAGE>   44
STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (Inception) THROUGH DECEMBER 31, 2000


NOTE 21 -- INVESTMENT IN HAMMER TRUST

In April 2000, Studio City Holding Corporation and Problem Solvers,
Incorporated established an irrevocable business royalty trust named "The
Hammer Trust-An Irrevocable Business Royalty Trust". Studio City and Problem
Solvers are the two principals, each receiving a 50% profit participation and
each having the authority to appoint a trustee. Studio City has appointed Larry
D. Faw, the majority stockholder of Studio City, as its trustee. The purpose of
this transaction is to expand the Company's business activities into the
management and operation in the production and distribution of crude oil,
natural gas, and petroleum products.

Studio City's initial contribution to the trust is the following: $1,000 cash,
$2,500,000 promissory demand note payable to the trust accruing interest at 9%
per annum, 1,500,000 shares of Studio City's common stock, and 1,200,000 shares
of Studio City's Class B Preferred Stock. This investment in trust asset is
recorded initially at its cost of $2,504,120 and is included in these financial
statements under investments in joint ventures and stock. The cost includes
$1,000 cash, $2,500,000 note payable, $3,000 par value of common stock and $120
par value of preferred stock.

Problem Solvers initial contribution to the trust is $1,000 cash plus 2,333,340
shares of Class B Preferred Stock of SCA Global Resources, Inc. Problem Solvers
was issued these preferred shares for its efforts in obtaining an agreement for
a swap of common stock between SCA Global Resources, Inc. and M & C Oil, Inc.
and the transfer of oil and gas reserves to SCA Global. In a related
transaction, SCA Global Resources, Inc. completed an acquisition of M & C Oil,
Inc. in a share-for-share stock exchange with Wellsprings Investments, Inc.,
owner of M & C Oil, Inc. The result of this transaction is SCA Global
Resources, Inc. received 10,000 shares (100%) of M & C Oil, Inc. and
Wellsprings Investments, Inc. received 10,000 shares (.10%) of SCA Global
Resources, Inc.

There has been no activity in The Hammer Trust to date.


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