SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   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, 2001

                                       OR

               [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                        For the transition period from to

                        Commission File Number 001-12885
                        AVENUE ENTERTAINMENT GROUP, INC.
                 (Name of Small Business Issuer in its charter)

            Delaware                                           95-4622429
----------------------------                                   ----------
(State or other jurisdiction                               (I.R.S. Employer
of incorporation or organization)                           Identification No.)

11111 Santa Monica Blvd., Suite 525, Los Angeles, CA               90025
----------------------------------------------------               -----
(Address of principal executive offices)                         (Zip Code)

Registrant's telephone number, including area code:           (310) 996-6800

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class                   Name of each exchange on which registered:
-------------------                   ------------------------------------------
Common Stock, $.01 Par Value                   OTCBB

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

Check whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No

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

State issuer's revenues for its most recent fiscal year:  $887,240

As of April 4, 2002, the aggregate market value of the voting and non-voting
common equity, held by non-affiliates (assuming for this calculation only that
all officers and directors are affiliates) was approximately $30,000 based on
the closing price of the Common Stock on the Over the Counter Bulletin Board on
April 4, 2002.

State the number of shares outstanding of each of the Registrant's classes of
common stock, as of the most recent practicable date.

Class                                          Outstanding at March 30, 2002
-----                                          -----------------------------
Common Stock, par value $.01 per share              5,371,030 shares

DOCUMENTS INCORPORATED BY REFERENCE:                      NONE


<PAGE>







                                TABLE OF CONTENTS
                                                                       Page
PART I

         Item 1.    Description of Business...............................2

         Item 2.    Description of Property..............................16

         Item 3.    Legal Proceedings....................................16

         Item 4.    Submission of Matters to a Vote of
                    Security Holders.....................................16

PART II

         Item 5.    Market for the Registrant's Common Equity
                    and Related Stockholder Matters......................17

         Item 6.    Management's Discussion and Analysis of
                    Financial Condition and Results of Operations........17

         Item 7.    Financial Statements.................................21

         Item 8.    Changes In and Disagreements with Accountants
                    on Accounting and Financial Disclosure...............42

PART III

         Item 9.    Directors, Executive Officers, Promoters
                    and Control Persons; Compliance with
                    Section 16(a) of the Exchange Act....................43

         Item 10.   Executive Compensation...............................45


         Item 11.   Security Ownership of Certain
                    Beneficial Owners and Management.....................49

         Item 12.   Certain Relationships and Related
                    Transactions.........................................52

         Item 13.   Exhibits and Reports on Form 8-K.....................54


<PAGE>



iv

                                     PART I.

ITEM 1.       DESCRIPTION OF BUSINESS

Organization

         Avenue Entertainment Group, Inc. (the "Company") was originally called
Wombat Productions when it was founded in 1969 by Gene Feldman and his wife,
Suzette St. John Feldman. Pursuant to the Business Combination described below,
the Company acquired Avenue Pictures from Cary Brokaw. At the time of this
acquisition, the Company's name was changed to Avenue Entertainment Group. Prior
to the Business Combination, the Company's primary focus had been the production
of one-hour profiles of Hollywood Stars. The Company is an independent
entertainment company that produces feature films, television films, series for
televisions, made-for-television/cable movies and one-hour-profiles of Hollywood
stars both domestically and internationally.

Share Exchange and Reincorporation

         Pursuant to a Share Exchange Agreement (the "Share Exchange
Agreement"), dated as of September 30, 1996, among Cary Brokaw, Avenue Pictures,
and The CineMasters Group, Inc. ("CineMasters"), CineMasters acquired all of the
outstanding capital stock of Avenue Pictures from Mr. Brokaw, then the sole
shareholder of Avenue Pictures, in exchange for 1,425,000 shares of CineMasters
common stock ("CineMasters Common Stock") (the "Business Combination").

         Following the Business Combination, the Board of Directors and
shareholders of CineMasters approved a transaction pursuant to which (i) all of
the assets of the Wombat Productions division (the "Wombat Division") of
CineMasters were transferred, subject to all related liabilities and
obligations, to its newly-formed, wholly-owned Delaware subsidiary, Wombat
Productions ("Wombat Productions"), (ii) CineMasters was merged with and into
the Company (its newly-formed, wholly-owned Delaware subsidiary) with the
Company being the surviving corporation in the merger (the "Reincorporation"),
and (iii) each stockholder of CineMasters received an equal number of shares of
the Company in exchange for each share of capital stock of CineMasters held by
such stockholder immediately prior to the effective time of the Reincorporation
(the "Effective Time"). As a result of the Reincorporation, Avenue Pictures
became a wholly-owned subsidiary of the Company.

General

         Mr. Brokaw has extensive experience in the motion picture industry. He
began his career in the marketing department at Twentieth Century Fox. He also
served as executive vice president at Cineplex Odeon and was president and chief
executive officer of Island Pictures. Mr. Brokaw has particular experience in
producing and releasing modestly budgeted independent films which appeal to the
more sophisticated theatergoer. He has enjoyed success with such films as Choose

<PAGE>

Me, El Norte, Kiss of the Spider Woman, The Trip to Bountiful, Mona Lisa and
Spike Lee's first film, She's Gotta Have It. Mr. Brokaw is responsible for the
production and release of Gus Van Sant's Drugstore Cowboy, James Foley's After
Dark, My Sweet, Michael Lindsay-Hogg's The Object of Beauty, Jane Campion's
Sweetie, and Jim Sheridan's The Field. Mr. Brokaw was the producer of Robert
Altman's The Player, the celebrated and successful comedy which was nominated
for five Academy awards, including Best Picture. Mr. Brokaw also produced Robert
Altman's Short Cuts, which was nominated for several Academy Awards. Mr. Brokaw
also produced Restoration, the Academy-Award winning and critically acclaimed
epic adventure directed by Michael Hoffman and released by Miramax Films. In
1996, Mr. Brokaw produced Sony Pictures' Voices from a Locked Room, directed by
Malcolm Clarke and starring Jeremy Northam. In February 1998, the Company
completed Finding Graceland starring Harvey Keitel, Johnathan Schaech, and
Bridget Fonda, which was fully financed by Largo Entertainment Corp., a wholly
owned subsidiary of JVC Entertainment, Inc. All domestic rights to the picture
were licensed to the Columbia/TriStar Motion Picture Group and Largo licensed
the picture internationally. In 1999, the Company completed Wayward Son starring
Harry Connick, Jr., Pete Postlethwaite, Patricia Clarkson and Vanessa Shaw.
Financed by way of an insurance backed bank loan, the Company has no financial
exposure with respect to the film's success. Subject to the bank's first
position lien, the Company holds the copyright to the film in perpetuity. The
Company is in the process of licensing the distribution rights to the film.

         The Company is in the business of producing feature films, television
films, series for television and one-hour-profiles of Hollywood Stars. As set
forth in greater detail below, Avenue Pictures is currently active in developing
and producing projects in each of its three areas of activity.


Feature Films

         Currently, Mr. Brokaw serves as the producer or executive producer of
all the Company's feature films with overall responsibility for their
development, financing, and production arrangements. The Company is paid a
producing fee for both the services of Mr. Brokaw and for the Company's services
in connection with the development and production of each feature film, in
addition to a negotiated profit participation. The nature of the profit
participation is a function of Mr. Brokaw's standing as a producer and the
Company's relative bargaining position with respect to each project. As set
forth above, the Company's bargaining position is enhanced by the development
and "packaging" of a project to the fullest possible extent before seeking the
financial assistance of a studio or distributor.

         The Company has one year remaining of a three year non-exclusive
multiple co-financing agreement with Intermedia. Intermedia is one of the
pre-eminent foreign sales companies in the film industry. Intermedia has
co-financed and licensed such films as Sliding Doors, Hilary and Jackie, The
Wedding Planner, KPAX and the upcoming K-19 starring Harrison Ford. The
agreement provides Avenue with favorable distribution terms for its films in the
international market, co-financing for its feature films providing for
co-ownership of the copyright of most films, favorable producing fees and
funding for the film development expenses of projects undertaken with
Intermedia.


<PAGE>

        Current feature film projects of the Company with Intermedia include the
following titles: Mindhunters and Phobic.

         In January 2002 the Company commenced production on Mindhunters which
is co-financed by Intermedia and Dimension Films. Dimension which is a division
of Miramax and a wholly owned subsidiary of the Walt Disney Company, will
release the film domestically. Intermedia will license the international rights.
Written by Wayne Kramer and Erhen Kruger and directed by Renny Harlin, the story
concerns a serial killer amidst the most elite unit of the FBI. Mindhunters
stars Val Kilmer, Christian Slater, LL Cool J and Kathryn Morris.

         Phobic is a highly charged and terrifying thriller written by Chris
Bertolet about a former New York homicide detective drawn back into the search
for a serial killer who kills his victims based on their worst feat. Intermedia
will co-finance the film and license it internationally. The Company is
currently in negotiations with a potential director. The Company hopes to
commence production in late 2002 or early 2003.

         Wages of Sin is a highly suspenseful thriller written by William Brown
and Antonella Osborne about a celebrated defense attorney whose life is turned
upside down when he is perfectly framed for his ex-wife's murder. The Company
hopes to commence production late this year.

         The Company is also developing Villa America, adapted by the celebrated
screenwriter/playwright John Guare, from the novel, Everybody Was So Young
written by Amanda Vaille for USA Films. The Company is also developing The
Moviegoer, adapted by acclaimed director Terrence Malick and based on the
renowned novel by Walker Percy, as well as The Courier, written by Michael
Brandt and Derek Haas with Jan DeBont (Speed, Twister) attached to direct which
will be financed by Splendid Films.

         The Company also has approximately 12 other feature film projects
currently in development including Stealing Cars, The Tiny Problems of White
People, Gulf Coast, Living Dangerously and War Story. However, no assurance can
be given as to when or if any of these projects will be completed.

         Although the Company continues to pursue vigorously the development
and/or production of these projects, there can be no assurance that each project
will be produced within the indicated time frame and budget due to the
contingencies of securing talent, financing, and distribution.


Made-for-Television/Cable Movies

         The Company has also successfully produced many made-for-television
movies and movies for cable television. Movies produced for television include:

<PAGE>

In The Eyes of a Stranger (CBS), See Jane Run (ABC), A Stranger in Town (CBS),
The Almost Perfect Bank Robbery (CBS), Two Mothers for Zachary (ABC) and Tell Me
No Secrets (ABC).

         The Company currently has approximately 6 other television movies and
mini-series in active development including Special Occasions (CBS), based on
the play by Bernard Slade and The Chimes written by Mark Medoff based on Charles
Dickens novella, The Chimes of Christmas........

         For cable television, the Company produced Amelia Earhart: The Final
Flight for TNT, starring Diane Keaton and Rutger Hauer, Path To Paradise: The
Untold Story of the World Trade Center Bombing for HBO, starring Peter Gallagher
and Marcia Gay Hardin, and The Timeshifters for TBS.

         In March 2001, the Company entered into a two year First Look Cable
Television Production Agreement with HBO Films. Under this agreement, HBO
contributes to the Company's overhead and provides enhanced producing fees for
films produced for HBO.

         The Company produced a cable television movie based on the Pulitzer
Prize winning play Wit for HBO. Directed by the Academy Award winning director
Mike Nichols, Wit stars Emma Thompson and Christopher Lloyd. The movie premiered
in March 2001 and earned seven Emmy nominations. Wit won three Emmy Awards
including the award for Best Made For Television Movie.

         The Company is currently in post production on Path to War, an original
movie for HBO starring Michael Gambon, Alec Baldwin and Donald Sutherland. Path
to War, which tells the story of the tragic escalation of the Vietnam War by the
Johnson administration, is directed by the acclaimed John Frankenheimer and is
scheduled to premiere in May 2002.

         The Company is currently in production on the two-part six hour movie
event Angels in America, based on the Pulitzer Prize and Tony Award winning
plays by Tony Kushner for HBO. Directed by the Academy Award winning director,
Mike Nichols, Angels in Amercia stars Al Pacino, Meryl Streep, Emma Thompson,
Mary Louise-Parker and Jeffrey Wright amongst many others.

          With HBO, the Company is developing a two-hour movie Normal, based on
the new play, Looking For Normal, by Emmy Award winning writer and Emmy
nominated director, Jane Anderson which will star Jessica Lange.

         With HBO, the Company is developing movies based on Stiffed, the
acclaimed book by Susan Faludi, which chronicles the state of men in
contemporary America, Vita and Virginia, written by Eileen Atkins and based on
the relationship between Virginia Wolfe and Vita Saville West, and Murder of
Napoleon, based on the novel by David Hapgood and Ben Weider which will be
co-produced with Mike Nichols.

         The Company is also currently developing two television series, The
Four Horsemen and Sold.


<PAGE>

         Although the Company is actively pursuing these projects, there can be
no assurance that each or any project will be produced due to the Company's
reliance upon the network and cable programmers who must approve and order the
films in order to provide adequate financing.

         Typically, the domestic broadcaster of a made-for-television movie pays
a license fee which entitles it to a limited number of airings of the movie over
a designated period of time (generally 2-5 years). The initial network/cable
license fees generally range from $2.5 -$3.5 million dependent upon the
broadcaster and the nature and content of the programming. Producers such as the
Company have historically been required to expend production costs in excess of
the initial domestic network/cable broadcast license fee. The practice of
incurring production costs in excess of the initial domestic network/cable
broadcast license fee is generally referred to as "deficit financing." This
deficit financing is generally recovered through sales of the
made-for-television movie in media and territories other than domestic
network/cable broadcasting, such as international free television, domestic
syndication (post initial broadcast license), domestic and international pay
television, and domestic and international home video. Unlike many television
producers who must seek licensing arrangements on a project-by-project basis to
cover its deficit financing, the Company has historically entered into output
arrangements which provide it the ability to assemble financing more easily and
enable it to move forward more efficiently with its television projects. The
Company had an output agreement which expired in October 1997 with RHI
Entertainment, Inc., a distribution company which is a wholly owned subsidiary
of Hallmark Entertainment, Inc. ("Hallmark") and more recently with Pearson
Television, a division of Pearson Plc.

         The Company does not currently have an output agreement in effect.
While much of its current development in long form television had been financed
under the Pearson Agreement, until such time as a new output agreement is
signed, the Company will pre sell its television movies on a title by title
basis.

        On occasion, Mr. Brokaw or other Company executives produce pursuant to
"for hire" arrangements with programmers. In such producer-for-hire
arrangements, Mr. Brokaw and the Company do not have financing responsibility or
ownership of the films. Mr. Brokaw receives a substantial producer's fee for
such services. Mr. Brokaw provided such services to HBO as a producer-for-hire
on Wit and Path to War.


One Hour-Profiles
The Hollywood Collection

         Through its subsidiary, Wombat Productions, the Company also produces
one-hour profiles of Hollywood's most important stars which have been aired by
PBS and major cable networks in the United States and by television stations
around the world. With the exception of Vivien Leigh: Scarlett And Beyond, all
programs are copyrighted and owned by the Company and available for license to
all media worldwide through Janson Associates, Inc. ("Janson"), with whom the

<PAGE>

company has entered into a distribution arrangement. Since 1982, the Company has
produced the following hour-length programs known as The Hollywood Collection:

"Hollywood's Children"                "Audrey Hepburn Remembered"
"The Horror Of It All"                "Mae West. And The Men Who Knew Her"
"Ingrid"                              "The Story Of Lassie"
"Marilyn Monroe: Beyond The Legend"   "Charlton Heston: For All Seasons"
"Steve McQueen: Man On The Edge"      "Roger Moore: A Matter Of Class"
"Grace Kelly: The American Princess"  "Yul Brynner: The Man Who Was King"
"Cary Grant: The Leading Man"         "Ingrid Bergman Remembered"
"Gregory Peck: His Own Man"           "Jack Lemmon: America's Everyman"
"Vivien Leigh: Scarlett And Beyond"*  "Joan Crawford: Always The Star"
"Anthony Quinn: An Original"          "Fred MacMurray: The Guy Next Door"
"Robert Mitchum: The Reluctant Star"  "Shirley MacLaine: Kicking Up Her Heels"
"Michael Caine: Breaking The Mold"    "Barbara Stanwyck: Straight Down The Line"
"Shirley Temple: America's Little
   Darling"                           "Gary Cooper: The Face Of A Hero"
"Clint Eastwood: the Man From
   Malpaso"**                         "Walter Matthau: Diamond In The Rough"
"Alan Ladd: The True Quiet Man"

* Copyright Owned by Turner Broadcasting System.
** Licensed to Warner Home Video


Other Entertainment Profiles

         In 1998, a new series of programs was begun by Wombat Productions for
the Art and Film Channel, Bravo, profiling entertainment figures outside the
motion-picture industry. The first of these productions was a
performance/profile of the Broadway diva, Betty Buckley: In Performance & In
Person, and presented on the series Bravo Profiles in the fall of 1999. Also
produced and presented the same year on Bravo Profiles was The Worlds of Harry
Connick, Jr., an hour-length profile on the gifted musician, composer, actor
Harry Connick, Jr.

         Recently, Wombat completed a program for the series, Bravo Profiles on
the master magician David Copperfield, with Mr. Copperfield's full cooperation.
The program was titled David Copperfield: The Magic of it All.


Distribution  Arrangement

         Pursuant to a Distribution Agreement (the "Distribution Agreement"),
dated July 1, 1995 and amended on April 28, 1996, between the Company and
Janson, Janson was granted the sole and exclusive right, subject to the
production arrangement, to license substantially all of the Company's Hollywood
Collection film library for all forms of television and video worldwide for a
period of ten years, subject to automatic renewals in three-year increments. In
consideration of Janson's services under the Distribution Agreement, Janson is
entitled to retain a distribution fee, ranging from 10% to 35%, depending upon

<PAGE>

whether such distribution is via domestic television network, syndication,
international television, or home video, of the gross receipts from the
licensing of each program. In addition, Janson is reimbursed for certain
distribution expenses out of gross receipts with the remaining balance remitted
to the Company as program licensor.

Business Approach

         As an independent producer of feature films and television programming,
the Company does not have sufficient capital to independently finance its own
productions. Accordingly, most of its financial resources are devoted to
financing development activities which include the acquisition of underlying
literary works such as books, plays, or newspaper articles and commissioning of
screenplays based upon such underlying literary works. A key element in the
success of the development process is Mr. Brokaw's reputation in the
entertainment business and his access to and relationships with creative talent.

         It is the ability to identify and develop attractive properties which
is instrumental to the success of independent producers such as the Company. In
particular, the feature film industry relies heavily on independent producers to
identify projects which are then developed further or produced and distributed
by the major studios. Independent producers serve a similar function in the
television industry. The Company employs a flexible strategy in developing its
motion picture and film properties. Wherever possible, it employs its own
capital and financial resources in developing a project to the point where it is
ready to go into production. Typically, this means putting together a "package"
which consists of the underlying property, a script that is ready for
production, and key talent, including a director and principal cast. The benefit
of developing a project to this advanced stage is that the Company will have
maximum leverage in negotiating production and financing arrangements with a
distributor. Nevertheless, there are occasions when the Company benefits from
the financial assistance of a studio at an earlier stage. These occasions may be
necessary as a result of lengthy development of a script, the desirability of
commissioning a script by a highly paid writer, the acquisition of an expensive
underlying work, or a significant financial commitment to a director or star.
Moreover, when developing a property for series television, it is almost
essential to involve a network at an earlier stage inasmuch as development and
production of a television series requires a much larger financial commitment
than production of a television movie.

         In addition to the development and production strategies described
above, the Company also considers various production financing alternatives
which are available whereby commitments from various end users such as
independent domestic distributors, foreign distributors, cable networks, and
video distributors can be combined to finance a project without a major studio
financial commitment.

         The Company's primary goal with respect to its documentary films is
significant and sustained growth through production activity and greater
exploitation of its wholly owned programs. Further revenues and profitability
will depend on the Company's ability to secure financing for new programs

<PAGE>

through its present relationship with Bravo or other cable or television entity.
In order to provide maximum exposure of the twenty-eight titles of The Hollywood
Collection available in the home-video market in the United States and Canada,
Wombat entered into an agreement with MPI, one of the premiere home-video
companies for documentary and performance programs. In June of 2000, the entire
available collection was offered to the vast special-interest market via
home-video stores, MPI's 800 number provided on its web sites, www.mpimedia.com
and www.hollywoodcollection.com, which are also connected through the Yahoo! and
Amazon web sites.

Competition

         The motion picture industry is extremely competitive. The competition
comes from both companies within the same business and companies in other
entertainment media which create alternative forms of leisure entertainment. The
Company competes with several "major" film studios which are dominant in the
motion picture industry, as well as with numerous independent motion picture and
television production companies, television networks, and pay television systems
for the acquisition of literary properties, the services of performing artists,
directors, producers, and other creative and technical personnel, and production
financing. Many of the organizations with which the Company competes have
significantly greater financial and other resources. In addition, the Company's
films compete for audience acceptance with motion pictures produced and
distributed by other companies. As a result, the success of the Company's
production is also heavily dependent on public taste, which is both
unpredictable and susceptible to change without warning.

         A limited number of independent production companies are as actively
involved in the production of both feature films and television movies.
Management believes that its established track record of high quality,
critically acclaimed films attracts some of the best writing, directing, and
acting talent in the industry. In addition, Mr. Brokaw's years of experience in
the business and strong reputation further enhance the Company's competitive
edge.

         The Company was one of the first production companies specializing in
the production of profiles of movie stars and for years had been an acknowledged
quality producer in this field. However, with the success of the biography
format on the cable outlet A&E, other cable companies have introduced similar
programs. Cable companies, often in association with major films studios, are
increasingly producing their own programs and securing ownership of each
program's copyright. Programs are being produced by staff producers or by
producers for hire for a specific project. Consequently, cable companies are
acquiring ownership of the back end (income deriving from the subsequent
licensing of programs) and are now licensing their programs to a world market.
Faced with these new circumstances, the Company had seen a significant drop in
sales to overseas buyers. This trend now seems to be reversing. Part of the
reason for this reversal may be that The Hollywood Collection profiles deal with
stars of special interest to older moviegoers and frequently involve on-camera
participation of the profiled star. Also, the development of digital video and
the increasing number of new delivery systems in new areas of the world are
creating a renewed hunger for this programming.


<PAGE>

Major Customers

         The Company's revenue has historically been derived from the production
of a relatively small number of programs and licensing revenues. Given this
fact, the limited number of outlets for the Company's productions, and the
individually significant license fees generated from certain of its sales,
certain customers have historically accounted for a significant portion of the
Company's revenue. The Company derived approximately 55% and 25% of its total
revenue for the year ended December 31, 2001 from HBO related to the made for
cable television movie Path to War and from Janson Associates related to the
licensing of the Hollywood Collection in secondary markets and Bravo,
respectively.

Employees

         The Company has 5 full time employees.

The Motion Picture Industry

General

         The motion picture industry consists of two principal activities:
production, which involves the development, financing, and production of motion
pictures; and distribution, which involves the promotion and exploitation of
feature-length motion pictures in a variety of media, including theatrical
exhibition, home video, television, and other ancillary markets, both
domestically and internationally. The United States motion picture industry is
dominated by the "major" studios, including The Walt Disney Company, Paramount
Pictures, Warner Brothers, Universal Pictures, Twentieth Century Fox,
Columbia/Tri-Star Pictures, and MGM/UA. The major studios are typically parts of
large diversified corporations that have strong relationships with creative
talent, exhibitors, and others involved in the entertainment industry and whose
non-motion picture operations provide a stable source of earnings and cash flow
which offset the variations in the financial performance of their new motion
picture releases and other aspects of their motion picture operations. The major
studios have historically produced and distributed the vast majority of high
grossing theatrical motion pictures released annually in the United States.

Independent Film

         At the same time that films released by the major studios have become
more expensive, currently with average budgets exceeding $40 million (as
reported by the Motion Picture Association of America ("MPAA")), low budget
"independent films" have successfully entered the market. Typically, such films
are more character driven than plot driven and originally they lacked major
stars. Miramax, originally an independent distributor (now owned by Disney),
broke ground in this area with films like My Left Foot and The Piano.

         Over the last several years there have been other notable
"independent-type" films such as Four Weddings and A Funeral, Pulp Fiction,

<PAGE>

Scream, The Full Monty and The Blair Witch Project. Indeed, given the relatively
small financial risk of producing and releasing such films, all of the major
studios have started or are studying the feasibility of production and
distribution units focusing on smaller, independent-type films.

         The growth of this product and market segment should provide
opportunities for the Company which is one of the pioneers in this area.

Motion Picture Production and Financing

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

         Upon completing the screenplay and arranging financing commitments,
pre-production of the motion picture begins. In this phase, the producer engages
creative personnel to the extent not previously committed; finalizes the filming
schedule and production budget; obtains insurance and secures completion
guaranties, if necessary; establishes filming locations and secures any
necessary studio facilities and stages; and prepares for the start of actual
filming. Principal photography (the actual filming of the screenplay) generally
extends from seven to twelve weeks, depending upon such factors as budget,
location, weather, and complications inherent to the screenplay.

         Following completion of principal photography in what is typically
referred to as post-production, the motion picture is edited; opticals,
dialogue, music, and any special effects are added; and voice, effects, and
music sound tracks and pictures are synchronized. This results in the production
of a fully edited negative from which release prints of the motion picture are
made.

         Production costs consist of acquiring or developing the screenplay,
film studio rental, principal photography, post-production, and the compensation
of creative and other production personnel. Distribution expenses, which consist
primarily of the costs of advertising and preparing release prints, are not
included in direct production costs and vary widely depending on the extent of
the release and promotional markets. Average studio budgets currently exceed $40
million. Average independents are far lower and are often less than $10 million.
The major studios generally fund production costs from cash flow generated by
motion picture and related activities or, in some cases, from unrelated
businesses or through off-balance sheet methods. Substantial overhead costs,
consisting largely of salaries and related costs of the production staff and
physical facilities maintained by the major studios, also must be funded.
Independent production companies generally avoid incurring overhead costs as
substantial as those incurred by the major studios by hiring creative and other
production personnel and retaining the other elements required for
pre-production, principal photography, and post-production activities on a
picture-by-picture basis. Sources of funds for independent production companies
include bank loans, "pre-licensing" of distribution rights, equity offerings,
and joint ventures. Independent production companies generally attempt to obtain

<PAGE>

all or a substantial portion of their financing of a motion picture prior to
commencement of principal photography, at which point substantial production
costs begin to be incurred and require payment.

         "Pre-licensing" of film rights is often used by independent film
companies to finance all or a portion of the direct production costs of a motion
picture. By "pre-licensing" film rights, a producer obtains amounts from third
parties in return for granting such parties a license to exploit the completed
motion picture in various markets and media. Production companies with
distribution divisions may retain the right to distribute the completed motion
picture either domestically or in one or more international markets. Other
production companies may separately license theatrical, home video, television
and all other distribution rights among several licensees.

         In connection with the production and distribution of a motion picture,
major studios and independent production companies generally grant contractual
rights to actors, directors, screenwriters, owners of rights, and other creative
and financial contributors to share in revenues or net profits (as defined in
their respective agreements) from a particular motion picture. Except for the
most sought-after talent, these third-party participants are generally payable
after all distribution fees, marketing expenses, direct production costs, and
financing costs are recouped in full.

         Major studios and independent film companies typically incur
obligations to pay residuals to various guilds and unions including the Screen
Actors Guild, the Directors Guild of America, and the Writers Guild of America.
Residuals are obligations arising from the exploitation of a motion picture in
markets other than the primary intended market for such picture. Residuals are
primarily calculated as a percentage of the gross revenues derived from the
exploitation of the picture in these secondary markets. The guilds and unions
typically obtain a security interest in all rights of the producer in the motion
picture which is usually subordinate to the financier of the motion picture, and
the completion bond company if any. The producer may transfer the residual
obligation to a distributor if the distributor executes the appropriate guild
assumption agreement.

Motion Picture Distribution

         General. Distribution of a motion picture involves domestic and
international licensing of the picture for (a) theatrical exhibition, (b)
non-theatrical exhibition, which includes airlines, hotels and armed forces
facilities, (c) videocassettes and video discs, (d) television, including
pay-per-view, pay, network, syndication or basic cable, and (e) marketing of the
other rights in the picture and underlying literary property, which may include
books, merchandising, and soundtrack albums. In recent years, revenues from the
licensing of rights to distribute motion pictures in secondary (i.e., other than
domestic theatrical) markets, particularly home video and international
theatrical pay and free television, have increased significantly.

         The distributor typically acquires rights from the producer to
distribute a motion picture in one or more markets and/or media. For its

<PAGE>

distribution rights, the distributor generally agrees to pay to the producer a
certain minimum advance or guarantee upon the delivery of the completed motion
picture, which amount is to be recouped by the distributor out of revenues
generated from the distribution of the motion picture in particular media or
territories. After the distributor's distribution fee is deducted from the gross
receipt of the picture, the distributor recoups the amount advanced (if any)
plus its distribution costs.

         Motion pictures may continue to play in theaters for up to six months
following their initial release. Concurrently with their release in the United
States, motion pictures generally are released in Canada and may also be
released in one or more other international markets. A motion picture is
typically available for distribution during its initial distribution cycle as
follows:

<TABLE>

<CAPTION>
                                                Months After Initial                  Approximate
        Marketplace                          Domestic Theatrical Release            Release Period
-------------------                          ---------------------------            --------------
<S>                                                                                      <C>
  Domestic theatrical                                  ----                              4-6 months
  International theatrical                             ----                             6-12 months
  Domestic home video (initial release)              4-6 months                            6 months
  Domestic pay-per-view                              6-9 months                            2 months
  International Video (initial release)             6-12 months                         6-12 months
  Domestic pay television                          12-15 months                           18 months
  International television (pay or free)           18-24 months                        12-36 months
  Domestic free television*                        30-33 months                           1-5 years
-----------------------
* Includes network, barter syndication, syndication, and basic cable.
</TABLE>

         A substantial portion of a film's ultimate revenues are generated in a
film's initial distribution cycle (generally the first five years after the
film's initial domestic theatrical release). Commercially successful motion
pictures, however, may continue to generate revenues after the film's initial
distribution cycle from the relicensing of distribution rights in certain media,
including television and home video, and from the licensing of distribution
rights with respect to new media and technologies.

         Theatrical. The theatrical distribution of a motion picture involves
the licensing and booking of the motion picture to theatrical exhibitors, the
promotion of the picture through advertising and publicity campaigns, and the
manufacture of release prints from the film negative. The size and success of
the promotional advertising campaign can materially affect the financial
performance of the film. Moreover, as the vast majority of these costs
(primarily advertising costs) are incurred prior to the first weekend of the
film's domestic theatrical release, there is not necessarily a correlation
between these costs and the film's ultimate box office performance. In addition,
the ability to distribute a picture during peak exhibition seasons, including
the summer months and the Christmas holidays, may affect the theatrical success
of the picture.

         The distributor and theatrical exhibitor generally enter into license
agreements providing for the exhibitor's payment to the distributor of a

<PAGE>

percentage of box office receipts after deducting the exhibitor's overhead or a
flat working amount. The percentage generally ranges from 45-60% and may change
for each week the film plays in a specific theatre, depending on the success of
the picture at the box office and other factors. The balance ("gross film
rentals") is remitted to the distributor. The distributor then retains a
distribution fee from the gross film rentals and recoups the costs of
distributing the film, which consist primarily of advertising, marketing, and
production cost, and the cost of manufacturing release prints. The balance of
film rentals, if any, after recouping any advance or minimum guarantee
previously paid to producer and interest thereon is then paid to the producer
based on a predetermined split between the producer and distributor.

         Home Video. A motion picture typically becomes available for
videocassette distribution within four to six months after its initial domestic
theatrical release. Home video distribution consists of the promotion and sale
of videocassettes to local, regional and national video retailers which rent or
sell videocassettes to consumers primarily for home viewing. The market for
videocassettes for home use has expanded rapidly over the past ten years,
although the rate of growth in this market has slowed in recent years. Most
films are initially made available in videocassette form at a wholesale price of
$55 to $60 and are sold at that price primarily to video rental stores, which
rent the cassettes to consumers. Owners of films generally do not share in
rental income. Following the initial marketing period, selected films are
remarketed at a wholesale price of $10 to $15 or less for sale to consumers.
These "sell-through" arrangements are used most often with films that will
appeal to a broad marketplace or to children. Some films are initially offered
at a price designed for sell-through rather than rental when it is believed that
the ownership demand by consumers will result in a sufficient level of sales to
justify the reduced margin on each cassette sold. Home video arrangements in
international territories are similar to those in domestic territories except
that the wholesale prices may differ.

         Television. Television rights are generally licensed first to
pay-per-view for an exhibition period within six to nine months following
initial domestic theatrical release, then to pay television approximately twelve
to fifteen months after initial domestic theatrical release, thereafter in
certain cases to free television for an exhibition period, and then to pay
television again. These films are then syndicated to either independent stations
or basic cable outlets. Pay-per-view television allows subscribers to pay for
individual programs, including recently released movies and live sporting, music
and other events on a per use basis. Pay television allows cable television
subscribers to view such services as HBO/Cinemax, Showtime/The Movie Channel,
Starz, or Encore Media Services offered by their cable system operators for a
monthly subscription fee. Since groups of motion pictures are typically packaged
and licensed for exhibition on television over a period of time, revenues from
these television licensing "packages" may be received over a period that extends
beyond five years from the initial domestic theatrical release of a particular
film. Motion pictures are also "packaged" and licensed for television broadcast
in international markets.

         Non-Theatrical and Other Rights. Films may be licensed for use by
airlines, schools, public libraries, community groups, the military,
correctional facilities, ships at sea, and others. Musical compositions

<PAGE>

contained in a film which have been commissioned for that film may be licensed
for sound recording, public performances, and sheet music publication. A
soundtrack album may be released including music contained in a film. Rights in
motion pictures may be licensed to merchandisers for the manufacturer of
products such as video games, toys, T-shirts, posters, and other merchandise.
Rights may also be licensed to create novelizations of the screenplay and other
related book publications.

         International Markets. Motion picture distributors and producers derive
revenue from international markets in the same media as domestic markets. The
growth of foreign revenues has been dramatic, now accounting for more than 50%
of the total revenues of many films. The increase in revenues is currently being
driven primarily from the growth of television abroad. The increase in foreign
television values and foreign revenues is likely to continue. Although the
increased level of foreign values affects the revenues of most films, the effect
is not uniform. Action films and films with major stars benefit most from
foreign revenues; films with uniquely American themes with unknown actors
benefit the least.

Regulation

         Distribution rights to motion pictures are granted legal protection
under the copyright laws of the United States and most foreign countries, which
laws provide substantial civil and criminal sanctions for unauthorized
duplication and exhibition of motion pictures. Motion pictures, musical works,
sound recordings, art work, still photography, and motion picture properties are
separate works subject to copyright under most copyright laws, including the
United States Copyright Act of 1976, as amended. The Company plans to take
appropriate and reasonable measures to secure, protect, and maintain or obtain
agreements to secure, protect, and maintain copyright protection for all Company
pictures under the laws of applicable jurisdictions. Motion picture piracy is an
industry-wide problem. The MPAA operates a piracy hotline and investigates all
reports of such piracy. Depending upon the results of such investigations,
appropriate legal action may be brought by the owner of the rights. Depending
upon the extent of the piracy, the Federal Bureau of Investigation may assist in
these investigations and related criminal prosecutions.

         Motion picture piracy is an international as well as a domestic
problem. Motion picture piracy is extensive in many parts of the world,
including South America, Asia (including Korea, China, and Taiwan), the
countries of the former Soviet Union, and other former Eastern bloc countries.
In addition to the MPAA, the Motion Picture Export Association, the American
Film Marketing Association, and the American Film Export Association monitor the
progress and efforts made by various countries to limit or prevent piracy. In
the past, these various trade associations have enacted voluntary embargoes of
motion picture exports to certain countries in order to pressure the governments
of those countries to become more aggressive in preventing motion picture
piracy. In addition, the United States government has publicly considered trade
sanctions against specific countries which do not prevent copyright infringement
of United States produced motion pictures. There can be no assurance that
voluntary industry embargoes or United States government trade sanctions will be
enacted. If enacted, such actions could impact the amount of revenue that the
Company realizes from the international exploitation of its motion pictures
depending upon the countries subject to such action and the duration of such
action. If not enacted or if other measures are not taken, the motion picture
industry (including the Company) may continue to lose an indeterminate amount of
revenues as a result of motion picture piracy.


<PAGE>

         The Code and Ratings Administration of the MPAA assigns ratings
indicating age-group suitability for theatrical distribution of motion pictures.
The Company has followed and will continue to follow the practice of submitting
its pictures for such ratings.

         United States television stations and networks, as well as foreign
governments, impose additional restrictions on the content of motion pictures
which may restrict in whole or in part theatrical or television exhibition in
particular territories. Management's current policy is to produce motion
pictures for which there will be no material restrictions on exhibition in any
major territories or media. This policy often requires production of "cover"
shots or different photography and recording of certain scenes for insertion in
versions of a motion picture exhibited on television or theatrically in certain
territories.

         There can be no assurance that current and future restrictions on the
content of the Company's pictures may not limit or affect the Company's ability
to exhibit certain of its pictures in certain territories and media.

ITEM 2.       DESCRIPTION OF PROPERTY

         The Company's philosophy on real estate investments is to lease
required properties and invest in the development of film and television
properties. The Company presently leases for itself and Avenue Pictures
approximately 4,000 square feet of office space at its corporate headquarters at
11111 Santa Monica Boulevard, Suite 525, Los Angeles, California 90025 pursuant
to a lease that expires October 18, 2004. The rent for such space is
approximately $11,000 per month.

         Management believes the properties herein described are adequate to
handle current and short term projected business.

ITEM 3.  LEGAL PROCEEDINGS

      The Company is not involved in any material legal proceedings.

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

         No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.


<PAGE>


                                     PART II

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

                          MARKET PRICE OF COMMON STOCK

        The Company's Common Stock commenced trading n the OTCBB on April 25,
2001 under the symbol "PIXG". The following table sets forth the high and low
sales prices for the Common Stock on the OTCBB for the years ended December 31,
2001 and on the American Stock Exchange for the year ended December 31, 2000.

            2001                   High Sale                   Low Sale
            ----                   ---------                   --------
         1st Quarter                 $0.75                       $0.20
         2nd Quarter                 $0.28                       $0.02
         3rd Quarter                 $0.16                       $0.03
         4th Quarter                 $0.06                       $0.02

            2000                   High Sale                   Low Sale
            ----                   ---------                   --------
         1st Quarter                 $2.88                       $0.63
         2nd Quarter                 $1.88                       $0.63
         3rd Quarter                 $2.38                       $0.38
         4th Quarter                 $0.75                       $0.13

         As of March 30, 2002, there were 162 holders of record of Common Stock.

         On April 4, 2002, the closing price of the Common Stock on the OTCBB
was $0.02.

                                 DIVIDEND POLICY

         The Company anticipates that, for the foreseeable future, earnings, if
any, will be retained for the development of its business. Accordingly, the
Company does not anticipate paying dividends on the Common Stock in the
foreseeable future. The payment of future dividends will be at the sole
discretion of the Company's Board of Directors and will depend on, among other
things, future earnings, capital requirements, the general financial condition
of the Company, and general business conditions. Payment of dividends may also
be limited by the terms of any Preferred Stock or debt the Company may issue or
incur. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources".


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

         The following discussion and analysis should be read in conjunction
with the Company's consolidated financial statements and related notes thereto.

<PAGE>

Liquidity and Capital Resources

         At December 31, 2001, the Company had approximately $73,000 of cash.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. However, revenues have been
insufficient to cover costs of operations in the past four years. The Company
has a working capital deficiency and has an accumulated deficit of $7,427,000
through December 31, 2001. The Company's continuation as a going concern is
dependent on its ability to ultimately attain profitable operations and positive
cash flows from operations. The Company's management believes that it can
satisfy its working capital needs based on its estimates of revenues and
expenses, together with improved operating cash flows, as well as additional
funding whether from financial markets, other sources or other collaborative
arrangements. The Company believes it will have sufficient funds available to
continue to exist through the next year, although no assurance can be given in
this regard. Insufficient funds will require the Company to scale back its
operations. The Independent Auditor's Report dated March 28, 2002 on the
Company's consolidated financial statements states that the Company has suffered
losses from operations, has a working capital deficiency and has an accumulated
deficit that raises substantial doubt about its ability to continue as a going
concern. The accompanying financial statements do not include any adjustments
that may result from the Company's inability to continue as a going concern.

Results of Operations

         For the year ended December 31, 2001 the Company had a loss before
income taxes of $1,688,000 as compared to a loss of $971,000 for the year ended
December 31, 2000.

Revenues

         Revenues for the year ended December 31, 2001 were $887,000 as compared
to $974,000 for the year ended December 31, 2000. Revenues for the year ended
December 31, 2001 were derived primarily from HBO related to producer fees for
Path to War and the HBO First Look Deal as well as from licensing of its
programming in secondary markets through Janson Associates. Revenues for the
year ended December 31, 2000 were derived primarily from licensing of rights to
its programming in secondary markets through Janson Associates and Bravo, as
well as producer fees related to the made for television movie Wit.

Film Production Costs

         Film production costs for the year ended December 31, 2001 were
$361,000 as compared to $207,000 for the year ended December 31, 2000. The
increased film production costs include reserves of approximately $198,000 taken
on development costs during the year.

<PAGE>

Selling, General, and Administrative

         Selling, general and administrative expenses ("SG&A") for the twelve
months ended December 31, 2001 and 2000 were $1,654,000 and $1,738,000,
respectively. Included in SG&A for the period is approximately $280,000 of
amortization of goodwill related to the Avenue Pictures acquisition on September
30, 1996. The remaining SG&A costs for 2001 and 2000 relate to salaries,
occupancy costs and professional fees.

Income Taxes

         For the years ended December 31, 2001 and 2000, the Company had income
tax expense of $7,650 and $5,300, respectively.

Recent Developments

         The shares of the Company's Common Stock are currently listed on the
OTC Bulletin Board ("OTCBB"). Due to the continued decline in the share price of
the Company's Common Stock and continued operating losses, the Company received
a letter from AMEX dated February 2001, stating that they have failed to meet
the criteria of AMEX's continued listing guidelines. The exchange noted that the
Company's operating results had been unsatisfactory and its financial condition
had been impaired, that they have had losses in two of its three most recent
fiscal years and losses in three of its four most recent fiscal years. In
addition, the exchange noted that the Company's public float is below the
exchange's minimum requirements, that they have not complied with the annual
shareholders' meeting requirements and have not paid the exchange's listing
fees. As a result, the Company's failure to meet AMEX's maintenance criteria
resulted in the discontinuance of the inclusion of its shares in the AMEX in
April 2001.

Recent Accounting Developments

         In June 2001, the FASB issued SFAS No. 141, "Business Combinations."
This statement addresses financial accounting and reporting for business
combinations and supersedes APB Opinion No. 16, "Business Combinations," and
SFAS No. 38, "Accounting for Pre-Acquisition Contingencies of Purchased
Enterprises." All business combinations in the scope of this statement are to be
accounted for using one method, the purchase method. The provisions of this
statement apply to all business combinations initiated after June 30, 2001. Use
of the pooling-of-interests method for those business combinations is
prohibited. This statement also applies to all business combinations accounted
for using the purchase method for which the date of acquisition is July 1, 2001
or later. The Company does not expect adoption of SFAS No. 141 to have a
material impact, if any, on its financial position or results of operations.

         In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets." This statement addresses financial accounting and reporting
for acquired goodwill and other intangible assets and supersedes APB Opinion No.
17, "Intangible Assets." It addresses how intangible assets that are acquired
individually or with a group of other assets (but not those acquired in a

<PAGE>

business combination) should be accounted for in financial statements upon their
acquisition. This statement also addresses how goodwill and other intangible
assets should be accounted for after they have been initially recognized in the
financial statements. It is effective for fiscal years beginning after December
15, 2001. Early application is permitted for entities with fiscal years
beginning after March 15, 2001, provided that the first interim financial
statements have not been issued previously. The Company does not expect adoption
of SFAS No. 142 to have a material impact, if any, on its financial position or
results of operations.

         In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." This statement applies to legal obligations associated
with the retirement of long-lived assets that result from the acquisition,
construction, development, and/or the normal operation of long-lived assets,
except for certain obligations of lessees. This statement is not applicable to
the Company.

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This statement addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
This statement replaces SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of," the accounting
and reporting provisions of APB No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual, and Infrequently Occurring Events and Transactions," for the disposal
of a segment of a business, and amends Accounting Research Bulletin No. 51,
"Consolidated Financial Statements," to eliminate the exception to consolidation
for a subsidiary for which control is likely to be temporary. The Company does
not expect adoption of SFAS No. 144 to have a material impact, if any, on its
financial position or results of operations.


Forward-Looking Statements

         This report contains certain forward-looking statements reflecting
management's current views with respect to future events and financial
performance. These forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements, including, but not limited to, the ability of
the Company to reverse its history of operating losses; the ability to obtain
additional financing and improved cash flow in order to meet its obligations and
continue to exist as a going concern; production risks; dependence on contracts
with certain customers; future foreign distribution arrangements; and dependence
on certain key management personnel. All of these above factors are difficult to
predict, and many are beyond the control of the Company.





<PAGE>




ITEM 7.                           FINANCIAL STATEMENTS


                                                                     Page
Avenue Entertainment Group, Inc.

        Independent Auditors' Reports                                22-23

        Consolidated Balance Sheet as of December 31, 2001           24

        Consolidated Statements of Operations for the years
          ended December 31, 2001 and 2000                           25

        Consolidated Statement of Stockholders' Equity (Deficit)
          for the years ended December 31, 2001 and 2000             26

        Consolidated Statement of Cash Flows for the years ended
          December 31, 2001 and 2000                                 27

        Notes to Consolidated Financial Statements                   29



<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

        The Board of Directors and Stockholders
        Avenue Entertainment Group, Inc.:

        We have audited the accompanying consolidated balance sheet of Avenue
        Entertainment Group, Inc. and subsidiaries as of December 31, 2001, and
        the related consolidated statements of operations, stockholders' equity
        (deficit), and cash flows for the year then ended. These financial
        statements are the responsibility of the Company's management. Our
        responsibility is to express an opinion on these financial statements
        based on our audit.

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

        In our opinion, the financial statements referred to above present
        fairly, in all material respects, the consolidated financial position of
        Avenue Entertainment Group, Inc. and subsidiaries as of December 31,
        2001, and the consolidated results of their operations and their
        consolidated cash flows for the year then ended in conformity with
        accounting principles generally accepted in the United States of
        America.

        The accompanying financial statements have been prepared assuming that
        the Company will continue as a going concern. As discussed in Note 2 to
        the financial statements, during the year ended December 31, 2001, the
        Company incurred a net loss of $1,695,759, and it had negative cash
        flows from operations of $216,373. In addition, the Company had an
        accumulated deficit of $7,427,392 as of December 31, 2001. These
        factors, among others, as discussed in Note 2 to the financial
        statements, raise substantial doubt about the Company's ability to
        continue as a going concern. Management's plans in regard to these
        matters are also described in Note 2. The financial statements do not
        include any adjustments that might result from the outcome of this
        uncertainty.


        SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

        Los Angeles, California
        March 28, 2002


<PAGE>



                          INDEPENDENT AUDITORS' REPORT


         The Board of Directors and Stockholders
         Avenue Entertainment Group, Inc.:

        We have audited the accompanying consolidated balance sheee of Avenue
        Entertainment Group, Inc. as of December 31, 2000 and the related
        consolidated statements of operations,statements of stockholders' equity
        and cash flows for each of the years in the two-year period ended
        December 31, 2000. These consolidated financial statements are the
        responsibility of the Company's management. Our responsibility is to
        express an opinion on these consolidated financial statements based on
        our audit.

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

        In our opinion, the consolidated financial statements referred to above
        present fairly, in all material respects, the financial position of
        Avenue Entertainment Group, Inc. as of December 31, 2000 and the results
        of its operations and its cash flows for each of the years in the two
        year peiord ended December 31, 2000 conformity with accounting
        principles generally accepted in the United States of America.

        The accompanying consolidated financial statements have been prepared
        assuming that Avenue Entertainment Group, Inc. will continue as a going
        concern. As discussed in Note 1 to the consolidated financial statements
        for the year ended December 31, 2000, the Company has suffered net
        losses from operations, has a working capital deficiency and has
        incurred accumulated losses through December 31, 2000. These factors
        raise substantial doubt about the Company's ability to continue as a
        going concern. Management's plans in regard to these matters are also
        described in Note 2. The accompanying consolidated financial statements
        do not include any adjustments that might result from the outcome of
        this uncertainty.

                                                          /s/  KPMG LLP

         New York, New York
         April 10, 2001


<PAGE>


                        AVENUE ENTERTAINMENT GROUP, INC.

                           CONSOLIDATED BALANCE SHEET

                                DECEMBER 31, 2001

                                     Assets

Cash                                                            $     72,729
Accounts receivable, net of allowance of $10,000                     102,794
Other receivable                                                     125,000
Film costs, net                                                      377,112
Property and equipment, net                                           37,338
Goodwill, net of accumulated amortization of $2,049,200              909,999
Other assets                                                          18,340
                                                              --------------

Total assets                                                     $ 1,643,312
                                                                 ===========

                      Liabilities and Stockholders' Deficit

Accounts payable and accrued expenses                              $ 609,578
Deferred income                                                      348,708
Loan payable                                                          80,000
Deferred compensation                                                812,959
Due to related party                                                 146,597
                                                                -------------

Total liabilities                                                  1,997,842
                                                                 -----------

Commitments and contingencies

Stockholders' Deficit:
 Common stock, par value $.01 per share, 15,000,000 shares
         Authorized, 5,371,030 shares issued and outstanding          53,710
 Additional paid-in capital                                        7,172,839
 Accumulated Deficit                                              (7,427,392)
 Treasury Stock, at cost                                              (3,687)
 Note receivable for common stock                                   (150,000)
                                                               --------------

Total stockholders' deficit                                         (354,530)
                                                               --------------

Total liabilities and stockholders' deficit                      $ 1,643,312
                                                                 ===========

          See accompanying notes to consolidated financial statements.


<PAGE>


                        AVENUE ENTERTAINMENT GROUP, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                                 Years ended December 31,
                                           2001                    2000
                                           ----                    ----

Operating revenues                     $    887,240              $   974,180
                                       ------------              -----------

Costs and expenses:
  Film production costs                     361,151                  207,484
  Selling, general and
   administrative expenses                1,651,841                1,737,846
  Impairment loss on goodwill               562,357                        0
                                     --------------       ------------------

Total costs and expenses                  2,575,349                1,945,330
                                      -------------             ------------

Loss before income tax                   (1,688,109)                (971,150)

Income tax expense                            7,650                    5,280
                                   ----------------           --------------

Net loss                               $ (1,695,759)              $ (976,430)
                                       ============               ==========

Basic and diluted loss
 per common share                  $         (0.32)             $       (.21)
                                   ================             =============

Weighted average common
   shares outstanding                     5,296,235                 4,589,808
                                     ==============               ===========

          See accompanying notes to consolidated financial statements.







<PAGE>


                        AVENUE ENTERTAINMENT GROUP, INC.

            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

                     YEARS ENDED DECEMBER 31, 2001 AND 2000


<TABLE>

<CAPTION>
                                             Common Stock                  Additional                       Stock
                                              Number of       Treasury      Paid-in     Accumulated    subscription
                                        Shares      Amount     Stock         capital     Deficit          receivable      Total
-----------------------------------------------------------------------------------------------------------------------------------
<S>               <C>                <C>          <C>          <C>       <C>           <C>              <C>            <C>
Balance, December 31,1999            4,589,030    $ 45,890     (3,687)   $ 6,947,894   $ (4,755,203)    $  (150,000)   $ 2,084,894
--------------------------------------------------------------------------------------------------------------------------------

Net loss                                                                                   (976,430)                      (976,430)
Stock option compensation expense                                             28,125                                        28,125
Exercise of option                       2,000          20                       620                                           640

----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000           4,591,030      45,910     (3,687)     6,976,639      (5,731,633)       (150,000)    1,137,229
-----------------------------------------------------------------------------------------------------------------------------------

Net loss                                                                                   (1,695,759)                  (1,695,759)
Issuance of common stock                50,000         500                    49,500                                        50,000
Acquisition of LCA                     730,000       7,300                   146,700                                       154,000
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2001           5,371,030       53,710    (3,687)     7,172,839       (7,427,392)       (150,000)    (354,530)
-------------------------------------------------------------------------------------------------------------------------------


</TABLE>

          See accompanying notes to consolidated financial statements.


<PAGE>




                        AVENUE ENTERTAINMENT GROUP, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>

<CAPTION>

                                                               Years ended December 31,
                                                            2001                  2000
                                                            ----                  ----

Cash flows from operating activities
<S>                                                     <C>                        <C>
     Net loss                                           $  (1,695,759)             (976,430)
Adjustments to reconcile net loss to net
     cash used in operating activities:
     Depreciation                                              18,025                24,406
     Amortization - film production costs                     379,746               167,527
     Amortization - goodwill                                  856,990               280,520
     Stock option compensation                                      0                28,125

Changes in assets and liabilities affecting net loss:
     Accounts receivable                                     (114,058)              538,693
     Film costs                                               (80,268)              115,733
     Other assets                                                (701)                  530
     Accounts payable and accrued expenses                    (98,339)             (443,128)
     Deferred compensation                                    293,099               179,077
     Deferred Income                                          206,709                (7,129)
     Due to related party                                        (449)               47,874
     Income tax receivable                                     18,632                11,071
                                                         ------------       ---------------

              Net cash used in operating
               activities                                    (216,373)              (33,131)

Cash flows from investing activities:
     Purchase of equipment                                     (3,267)               (3,838)
                                                         -------------       ---------------

     Net cash used in investing activities                     (3,267)               (3,838)
                                                         -----------------------------------

</TABLE>
                                   (Continued)



<PAGE>


                        AVENUE ENTERTAINMENT GROUP, INC.

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
                                                Years ended December 31,
<CAPTION>
                                                2001                  2000
                                                ----                  ----

Cash flows from financing activities:
   Proceeds from the issuance of
<S>                                       <C>                    <C>
    common stock                          $     50,000           $       640
   Repayment of long term debt                       0              (277,500)
   Loan payable                                 80,000                     0

                                          -------------          ------------
       Net cash (used in) provided by
          financing activities                 130,000              (276,860)

       Net decrease in cash                    (89,640)             (313,829)

Cash at beginning of year                      162,369               476,198
                                           -----------          ------------

Cash at end of year                        $    72,729          $    162,369
                                           ===========          ============


Supplemental cash flow information: Cash paid during the year for:
     Interest                              $     2,407         $       3,647
                                          ===========         =============
     Income taxes                          $     1,987         $       5,429
                                           ===========         =============
</TABLE>


Supplemental schedule of non-cash investing
   and financing activities:

   During the year ended December 31, 2001, the Company issued 730,000 shares of
common stock valued at $154,000 to purchase LCA Productions, Inc.






          See accompanying notes to consolidated financial statements.


<PAGE>


                        AVENUE ENTERTAINMENT GROUP, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 (1)   Description of Business

       Avenue Entertainment Group, Inc. (the "Company") is an independent
       entertainment company, that produces feature films, television films,
       series for television, made-for-television/cable movies and
       one-hour-profiles of Hollywood Stars. The Company develops and produces
       motion pictures for theatrical exhibition, television, and other
       ancillary markets, both domestically and internationally.

  (2)   Going Concern

       The accompanying financial statements have been prepared on a going
       concern basis, which contemplates the realization of assets and the
       satisfaction of liabilities in the normal course of business. Revenues
       have been insufficient to cover costs of operations for the year ended
       December 31, 2001. The Company has a working capital deficiency and has
       an accumulated deficit of $7,427,392 through December 31, 2001. The
       Company's continuation as a going concern is dependent on its ability to
       ultimately attain profitable operations and positive cash flows from
       operations. The Company's management believes that it can satisfy its
       working capital needs based on its estimates of revenues and expenses,
       together with improved operating cash flows, as well as additional
       funding whether from financial markets or other sources. The Company
       believes it will have sufficient funds available to continue to exist
       through the next year, although no assurance can be given in this regard.
       The accompanying financial statements do not include any adjustments that
       may result from the Company's inability to continue as a going concern.

(3)      Acquisition

       In February 2001, the Company concluded a merger with Double Bay
       Entertainment, Inc. ("DBE") for the purchase of LCA Productions, Inc.
       ("LCA"). In connection with the merger, 400,000 shares of the Company's
       common stock were exchanged at closing and an additional 330,000 shares
       were exchanged in March 2001 for total consideration of $154,000. The
       Company has accounted for this transaction as a purchase in which the
       fair value of the assets acquired and liability assumed was zero dollars.
       As a result, the Company recorded $154,000 of goodwill, subject to final
       adjustment, which is being amortized over 10 years.

(4)      Summary of Significant Accounting Policies

       Principles of Consolidation

       The Company's financial statements include the accounts of all wholly
       owned subsidiaries. All significant intercompany accounts and
       transactions have been eliminated in consolidation.


<PAGE>

       Unclassified Consolidated Balance Sheet

       In accordance with the provisions of the American Institute of Certified
       Public Accountants' Statement of Position No. 00-2 ("SOP 00-2"), the
       Company has elected to present an unclassified consolidated balance
       sheet.

       Cash and Cash Equivalents

       Cash and cash equivalents include all highly liquid debt instruments with
       original maturities of three months or less. Included in cash and cash
       equivalents is restricted cash amounting to $62,000 at December 31, 2001.

       Film Costs

       The Company capitalizes costs incurred to produce a film project,
       including the interest expense funded under the production loans. Such
       costs also include the actual direct costs of production and production
       overhead. These costs are amortized each period on an individual film
       program basis in the ratio that the current period's gross revenues from
       all sources for the program bear to management's estimate of anticipated
       total gross revenues for such film or program from all sources. Revenue
       estimates are reviewed periodically and adjusted where appropriate and
       the impact of such adjustments could be material.

       Film property costs are stated at the lower of unamortized cost or
       estimated net realizable value. Losses which may arise because
       unamortized costs of individual films exceed anticipated revenues are
       charged to operations through additional amortization.

       In June 2000, the Accounting Standards Executive Committee of the
       American Institute of Certified Public Accountants ("AcSEC") issued
       Statement of Position No. 00-2 ("SOP 00-2"), "Accounting by Producers or
       Distributors of Films." SOP 00-2 supersedes current film accounting
       standards related to the recognition of revenues, costs and film cost
       valuation and must be adopted by companies for fiscal years beginning
       after December 15, 2000. SOP 00-2 requires that advertising costs for
       theatrical and television product be expensed as incurred. Furthermore,
       revenue associated with the home video market must be recognized upon
       availability to customers (street date) and not the date the product is
       shipped. The Company adopted SOP 00-2 during the year ended December 31,
       2001, but did not have any charge as a result of the change in accounting
       principle.

       Property, Equipment and Depreciation

       Property and equipment are stated at cost. Major expenditures for
       property and those which substantially increase useful lives are
       capitalized. Maintenance, repairs and minor renewals are expensed as
       incurred. When assets are retired or otherwise disposed of, their costs
       and related accumulated depreciation are removed from the accounts and
       resulting gains or losses are included in income. Depreciation is
       provided by the straight-line method over the estimated useful lives of
       the assets.

       Goodwill

       Goodwill, representing the excess of the purchase prices of Avenue
       Pictures, Inc. and of LCA over the net assets acquired, is being

<PAGE>

       amortized over a ten-year period on a straight-line basis. Accumulated
       amortization at December 31, 2001 and 2000 was $2,049,200 and $1,192,210.
       Accumulated amortization at December 31, 2001, included a charge of
       $562,357 to recognize an impairment loss on the goodwill.

       Impairment of Long-Lived Assets

       The Company reviews its long-lived assets for impairment whenever events
       or changes in circumstances indicate that the carrying amount of an asset
       may not be recoverable. Recoverability of assets to be held and used is
       measured by a comparison of the carrying amount of the assets to future
       net cash flows expected to be generated by the assets. If the assets are
       considered to be impaired, the impairment to be recognized is measured by
       the amount by which the carrying amount exceeds the fair value of the
       assets. Based upon its most recent analysis, the Company recognized
       impairment losses in 2001 on goodwill recorded in connection with its
       acquisition of Avenue Pictures, Inc. and LCA of $422,470 and $139,887,
       respectively. The goodwill related to LCA was considered to be fully
       impaired since the Company determined that the rights to certain film
       titles that it had acquired from LCA had no future value.

       Fair Value of Financial Instruments

       The Company's carrying value of cash, accounts receivable and accounts
       payable and accrued expenses and due to related party approximate fair
       value because of the short-term maturity of these instruments.

       Revenue Recognition

       The Company recognizes revenue in accordance with the provisions of
       Statement of Financial Accounting Standards No. 139 and American
       Institute of Certified Public Accountants Statement of Position 00-2
       (collectively referred to as "SOP 00-2").

       Revenues from feature film distribution licensing agreements are
       recognized on the date the completed film is delivered or becomes
       available for delivery, is available for exploitation in the relevant
       media window purchased by that customer or licensee and certain other
       conditions of sale have been met pursuant to criteria specified by SOP
       00-2.

       Revenues from domestic television and video licensing contracts, which
       provide for the receipt of non-refundable guaranteed amounts, are
       recognized when the film is available for exhibition, provided that the
       other conditions of sale required by SOP 00-2 have been met. Until all
       conditions of sale have been met, amounts received on such licensing
       contracts are reflected in the accompanying financial statements as
       deferred income. International sales and other sales in the United States
       are recognized in the period in which payment is received.

       The market trend of each film is regularly examined to determine the
       estimated future revenues and corresponding lives. Due to the nature of
       the industry, management's estimates of future revenues may change within
       the next year and the change could be material.


<PAGE>

       Revenues from producer-for-hire contracts are recognized on a
       percentage-of-completion method, measured by the percentage of costs
       completed to date to estimated total cost for each contract. Provisions
       for estimated losses on uncompleted contracts are made in the period in
       which such losses are determined.

       Use of Estimates

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

       Significant estimates include those related to valuation of accounts
       receivable and inventories of released productions. It is at least
       reasonably possible that the significant estimates used will change
       within the next year.

       Loss per Common Share

       The Company has adopted Statement of Financial Accounting Standards
       (SFAS) No. 128, "Earnings per Share", which established standards for
       computing and presenting earnings per share (EPS). The statement
       simplifies the standards for computing EPS, replaces the presentation of
       primary EPS with a presentation of basic EPS and requires a dual
       presentation of basic and diluted EPS on the face of the income
       statement. Basic EPS are based upon the weighted average number of common
       shares outstanding during the period. Diluted EPS are based upon the
       weighted average number of common shares for all dilutive potential
       common shares outstanding. At December 31, 2000 and 1999, the Company did
       not include any potential common stock in its calculation of diluted EPS,
       because all options and warrants are anti-dilutive.

       The following potential common shares have been excluded from the
       computation of diluted net loss per share for all periods presented
       because the effect would have been anti-dilutive:

                                                             2001        2000
                                                            ------      ------
        Options outstanding under the Company's stock
            option plan                                     985,000     985,000
        Warrant issued in conjunction with a
            private placement                               500,000     500,000


       Concentration of Credit Risk

       The Company sells its products throughout the United States, Canada,
       Australia, and parts of Europe and South America and extends credit to
       its customers and performs ongoing credit evaluations of such customers.
       The Company evaluates its accounts receivable on a regular basis for
       collectability and provides for an allowance for potential credit losses
       as deemed necessary.


<PAGE>

       Two customers accounted for 55%, and 25% of the Company's net sales for
       the year ended December 31, 2001. At December 31, 2001, amounts due from
       these customers were 26%, and 4% of accounts receivable, respectively.

       Three customers accounted for 47%, 23%, and 13% of the Company's net
       sales for the year ended December 31, 2000. At December 31, 2000, amounts
       due from these customers were 22%, 28%, and 0% of accounts receivable.


       Stock Option Plan

       Prior to January 1, 1996, the Company accounted for its stock option plan
       in accordance with the provisions of Accounting Principles Board (APB)
       Opinion No. 25, "Accounting for Stock Issued to Employees," and related
       interpretations. As such, compensation expense would be recorded on the
       date of grant only if the current market price of the underlying stock
       exceeded the exercise price. On January 1, 1996, the Company adopted SFAS
       No. 123, "Accounting for Stock-Based Compensation," which permits
       entities to recognize as expense over the vesting period the fair value
       of all stock-based awards on the date of grant. Alternatively, SFAS No.
       123 also allows entities to continue to apply the provisions of APB
       Opinion No. 25 and provide pro forma net income and pro forma earnings
       per share disclosures for employee stock option grants made in 1995 and
       future years as if the fair-value-based method defined in SFAS No. 123
       had been applied. The Company has elected to continue to apply the
       provisions of APB Opinion No. 25 and provide the pro forma disclosure
       provisions of SFAS No. 123. Compensation cost will continue to be
       recorded for options granted below fair market value.

       Recently Issued Accounting Pronouncements

       In June 2001, the FASB issued SFAS No. 141, "Business Combinations." This
       statement addresses financial accounting and reporting for business
       combinations and supersedes APB Opinion No. 16, "Business Combinations,"
       and SFAS No. 38, "Accounting for Pre-Acquisition Contingencies of
       Purchased Enterprises." All business combinations in the scope of this
       statement are to be accounted for using one method, the purchase method.
       The provisions of this statement apply to all business combinations
       initiated after June 30, 2001. Use of the pooling-of-interests method for
       those business combinations is prohibited. This statement also applies to
       all business combinations accounted for using the purchase method for
       which the date of acquisition is July 1, 2001 or later. The Company does
       not expect adoption of SFAS No. 141 to have a material impact, if any, on
       its financial position or results of operations.

       In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
       Intangible Assets." This statement addresses financial accounting and
       reporting for acquired goodwill and other intangible assets and
       supersedes APB Opinion No. 17, "Intangible Assets." It addresses how
       intangible assets that are acquired individually or with a group of other
       assets (but not those acquired in a business combination) should be
       accounted for in financial statements upon their acquisition. This

<PAGE>

       statement also addresses how goodwill and other intangible assets should
       be accounted for after they have been initially recognized in the
       financial statements. It is effective for fiscal years beginning after
       December 15, 2001. Early application is permitted for entities with
       fiscal years beginning after March 15, 2001, provided that the first
       interim financial statements have not been issued previously. The Company
       does not expect adoption of SFAS No. 142 to have a material impact, if
       any, on its financial position or results of operations.

       In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
       Retirement Obligations." This statement applies to legal obligations
       associated with the retirement of long-lived assets that result from the
       acquisition, construction, development, and/or the normal operation of
       long-lived assets, except for certain obligations of lessees. This
       statement is not applicable to the Company.

       In August 2001, the FASB issued SFAS No. 144, "Accounting for the
       Impairment or Disposal of Long-Lived Assets." This statement addresses
       financial accounting and reporting for the impairment or disposal of
       long-lived assets. This statement replaces SFAS No. 121, "Accounting for
       the Impairment of Long-Lived Assets and for Long-Lived Assets to be
       Disposed of," the accounting and reporting provisions of APB No. 30,
       "Reporting the Results of Operations - Reporting the Effects of Disposal
       of a Segment of a Business, and Extraordinary, Unusual, and Infrequently
       Occurring Events and Transactions," for the disposal of a segment of a
       business, and amends Accounting Research Bulletin No. 51, "Consolidated
       Financial Statements," to eliminate the exception to consolidation for a
       subsidiary for which control is likely to be temporary. The Company does
       not expect adoption of SFAS No. 144 to have a material impact, if any, on
       its financial position or results of operations.


(5)    Film Costs

       Film costs consist of the following:

                                                                   December 31,
                                                                          2001
       In process or development                                   $     97,534
       Released, net of accumulated amortization of $16,888,750         279,578
                                                                      ---------
                                                                   $    377,112

       Net film costs at December 31 consisted of production, acquisition,
       interest and costs for the development of stories and scenarios. These
       costs were offset by accumulated amortization were stated at the lower of
       cost or estimated net realizable value.



<PAGE>


       The following is a summary of the changes in net film costs:

                  Net film costs, December 31, 1999              $    959,850
                  Additions                                           (115,733)
                  Amortization                                        (167,527)
                                                                    ----------

                  Net film costs, December 31, 2000                    676,590
                  Additions                                             80,268
                  Amortization                                       ( 379,746)
                                                                   -----------

                      Net film costs, December 31, 2001            $   377,112
                                                                  =============


       There are no capitalized interest costs included in each of the years
ended December 31, 2001 and 2000.

       SOP 00-2 requires the Company to prepare estimates of future film cost
       amortization and the amount of accrued participation and residual
       liabilities expected to be paid in the next operating cycle. Based on
       these estimates, the Company expects to amortize a minimum of $83,000 of
       completed film costs within the next year in addition to amortizing at
       least 90% of completed film costs within the next three years. The
       Company is not a distributor of films and therefore is not responsible
       for the payment of participations and residuals.


 (6)   Property and Equipment

       The major classes of property and equipment consist of the following:

                                                 Useful             December 31,
                                                  life                  2000
       Machinery and equipment                  4 to 5 years         $ 233,207
       Furniture and fixtures                   10 years                29,495
       Leasehold improvements                   3 to 4 years             3,267
                                                                    -----------
                                                                       260,969
       Less accumulated depreciation                                  (228,631)
                                                                   ------------
                                                                     $  37,338

       Depreciation expense was $18,025 and $24,406 for the year ended December
31, 2001 and 2000, respectively.

<PAGE>

  (7)   Loan Payable


       On April 9, 2001, the Company entered into an unsecured loan for $100,000
       at prime plus 1% with City National Bank which matured on January 1, 2002
       and was extended through April 1, 2002. Repayment of the loan is
       guaranteed personally by the Company's President. The balance of $80,000
       as of December 31, 2001 was paid in full in February 2002.


 (8)   Commitments and Contingencies

       Leases

       The Company is obligated under a lease for office space, which requires
       minimum annual rentals, plus increases based on real estate taxes and
       operating costs. In addition to a security deposit of $12,061, the
       Company delivered a letter of credit in the amount of $62,000 issued by
       City National Bank.

       Rent expense was $143,122 and $135,137 for the years ended December 31,
2001 and 2000, respectively.

       Minimum annual rental commitments at December 31, 2001 under the
noncancelable operating leases are as follows:

        2002                                               132,420
        2003                                               132,420
        2004                                               113,350
                                                         ----------
        Total minimum obligations                         $375,190
                                                          ==========


       Employment Agreements

       Effective September 30, 1996, the Company entered into five-year
       employment agreements with its President and its Chairman providing for
       an annual salary of $450,000, plus benefits and $150,000, plus benefits,
       respectively. Increases to base salaries and bonuses (limited to twice
       the base salary) will be determined at the discretion of the Compensation
       Committee of the Board of Directors. In 2001 and 2000, the President
       deferred $262,000 and $248,000 of his compensation, respectively. The
       Company is currently renegotiating a new five-year employment agreement
       with its President.

(9)      Stockholders' Equity

       Stock Options

       In March 1997, the Company adopted The Avenue Entertainment Group, Inc.
       Stock Option and Long Term Incentive Compensation Plan (the "Plan") which
       provides for the grant of an aggregate of 1,750,000 shares of common
       stock of the Company. The options may be exercised subject to continued
       employment and certain other conditions. The options vest over a
       five-year period and expire five to ten years from the date of grant. At
       December 31, 2001 and 2000, 985,000 and 896,000 options were exercisable,
       respectively.

<PAGE>


       Option activity under the Plan was as follows:

<TABLE>

<CAPTION>
                                                                                              Weighted
                                                                                               average
                                                         Number of         Price range       exercisable
                                                           shares           per share           price

<S>                                    <C> <C>           <C>               <C>   <C>               <C>
       Options Outstanding at December 31, 1999          1,356,500         .32 - 1.81              1.45
                                                        -----------        ----------           -------

         Options Exercised                                  (2,000)               .32               .32
                                                       ------------        ----------          ---------

       Options Cancelled                                  (369,500)        .32 - 1.81               .66
                                                         -----------       ----------           --------

       Options Outstanding at December 31, 2000            985,000        1.70 - 1.81              1.75
                                                        ------------      -----------           -------

       Options Cancelled                                   - 0 -              - 0-                -0-
                                                       -------------      -----------           --------

       Options Outstanding at December 31, 2001            985,000        1.70 - 1.81              1.75
                                                       -----------        -------------         ------
</TABLE>

       The Company recorded compensation expense related to stock options
       granted at prices less than market value totaling $28,125 for the year
       ended December 31, 2000.

        At December 31, 2001, the weighted average remaining contractual life of
        all outstanding options was 4.9 years.

        The following table summarizes information about options outstanding
        under the Plan at December 31, 2001:


                                                         Weighted
                                           Weighted      average
          Number        Range of            average       years       Number
        Outstanding  exercise prices    exercise price  remaining   exercisable
        -----------------------------------------------------------------------

           500,000          $1.70          $1.70           5           500,000
           485,000           1.81           1.81           5           485,000
        ----------------------------------------------------------------------
           985,000      1.70-1.81           1.75         4.9           985,000
        ----------------------------------------------------------------------

<PAGE>


       Had the Company determined compensation cost based on the fair value at
       the grant date for its stock options under SFAS No. 123, the Company's
       net loss would have been or increased to the pro forma amounts indicated
       below:

                                               December 31,    December 31,
                                                   2001            2000
                                                   ----            ----

        Net loss                               $ (1,695,759)      $(976,430)
                            Pro forma            (1,746,746)     (1,064,627)

        Basic and diluted
          loss per share    As reported            (.32)              (.21)
                            Pro forma               (.33)             (.23)


       Pro forma net loss reflects only options granted in the years ended
       December 31, 2001 and 2000. Therefore, the full impact of calculating
       compensation cost for stock options under SFAS No. 123 is not reflected
       in the pro forma net loss amounts presented above because compensation
       cost is reflected over the options' vesting period of five years and
       compensation cost for options granted prior to August 1, 1994 is not
       considered.

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

       Sale of Common Stock

       Pursuant to a stock subscription agreement between the Company and
       Robison Enterprises, Inc. ("REI"), upon closing in January 2001 REI
       received $50,000 shares of the Company's Common Stock (the "Subscription
       Shares") in exchange for $50,000. On or before the last day of each
       month, commencing on the month following the month of the closing, REI
       was to purchase at least 50,000 shares of $1.00 per share of the remaing
       550,000 shares until such time as all such remaining shares had been
       purchases by REI. In addition, REI was issued a Warrant to purchase an
       additional 600,000 shares at $2.00 per share, which may only be exercised
       after all of the Subscription Shares had been purchased by REI. No
       additional purchases under the stock subscription have been made
       subsequent to the closing.


<PAGE>




(10)  Income Taxes

       Components of income tax expense (benefit) are as follows:

                                           December 31,       December 31,
                                               2001               2000
                                               ----               ----
            Federal                        $    --               $  --
            State and local                   7,650                5,280
                                           ---------            --------
                                           $  7,650              $ 5,280
                                            ==========            =======


       Reconciliation of the statutory Federal income tax rate to the Company's
effective tax rate is as follows:

                                                     December 31,  December 31,
                                                        2001          2000
                                                        ----          ----
  Tax (benefit)
    at Federal statutory rate of 34%                 $ (564,318)   $ (330,191)
  Increase (decrease) in taxes resulting from:
  State and local income taxes, net of
    federal income tax benefit                          (46,370)      (10,810)
  Nondeductible goodwill amortization                   291,377        95,377
  Other                                                  10,098         1,266
  Change in valuation allowance                         316,863       249,638
                                                  -------------     ---------
  Total                                          $        7,650    $    5,280
                                                  ===============   ==========


       The tax effects of temporary differences between the financial reporting
and tax bases of assets and liabilities are as follows:

                                                                    2001
       Deferred tax assets
       Accrued expenses and other                                 $ 498,000
       Stock options                                                107,500
       NOLs                                                       1,481,690
                                                               ------------
                                                                  2,087,190
       Valuation allowance                                       (1,970,855)
                                                                ------------
       Total deferred tax assets                                    116,325
                                                               ============--

       Deferred tax liabilities

       Deferred state tax liabilities                              (116,325)
                                                                ------------
       Total deferred tax liabilities                              (116,325)
                                                                ------------
       Net tax assets                                        $            0
                                                            ===============

<PAGE>

        For Federal and State income tax purposes, the Company has unused net
        operating loss carryforwards of approximately $3,670,000 and $2,645,000,
        respectively expiring through 2020.


(11)   Related Party Transactions

       Transactions with GP Strategies

       At December 31, 2001, the Company owed GP Strategies, an affiliated
       company and major stockholder, $146,597 related to the payment of certain
       expenses of the Company by GP Strategies. The amount owed does not bear
       interest and does not have a maturity date.

       Transaction with Michael Hammer

       In August 1999, the Company sold 480,192 shares of Common Stock and a
       Warrant to purchase 500,000 shares of Common Stock which expires August
       2002 (the "Warrant") to Hammer International Foundation. Pursuant to a
       private placement transaction Michael Hammer is the President and CEO of
       the Hammer International Foundation and is a Director of the Company. The
       Warrant is exercisable at an exercise price of $2.00 per share. The
       shares of Common Stock and the shares of Common Stock issuable upon
       exercise of the Warrant cannot be sold, transferred, pledged or assigned
       for a one-year period. The Company claimed exemption from the
       registration requirements of the Securities Act of 1933 (the "Act")
       pursuant to Rule 506 of Regulation D. of the Act.

       Distribution Agreement

       On March 1, 1994, the Company entered into an agreement with Janson
       Associates whereby Janson Associates (the distributor) was granted sole
       and exclusive rights to license essentially all the programs of the
       Company's "Hollywood Collection" for all forms of television and video
       worldwide. The Hollywood Collection is a series of one-hour motion
       picture profiles of Hollywood's biggest stars, which are aired by a major
       cable network. The distributor also gained the exclusive right to execute
       all contracts for the exploitation of these rights. Revenues earned for
       the years ended December 31, 2001 and 2000 were $220,000 and $462,000,
       respectively. Included in operating expenses was $70,000 and $170,000, of
       commissions to Janson Associates incurred in the years ended December 31,
       2001 and 2000, respectively. The President of Janson Associates is
       related to the Company's Chairman through marriage.


  (12) Postretirement Benefit

       Pursuant to an agreement dated September 30, 1996, the Company is
       obligated to pay its Chairman, his spouse, or estate, as the case may be,
       commencing upon the termination of his employment, the lesser of monthly
       payments of $8,333 or an amount based on net income, for the greater of

<PAGE>

       five years or the remainder of his life. Under certain circumstance, a
       reduced benefit may be payable to the Chairman's wife for a period not to
       exceed five years from the date of his death, based upon an actuarial
       valuation performed in 1999.

       In the prior years the Company had determined that $640,000 was the
       present value of the expected benefit payments and was accruing such
       amount on a straight-line basis over the term of the Chairman's
       employment contract, which covers the period from September 30, 1996 to
       December 31, 2001. As a result of significant changes in the actual
       results of operations from the projected results which were utilized in
       the initial actuarial valuation, the Company had a new valuation
       performed in 2001. This valuation determined that the liability at
       December 31, 2001 would be $163,000. Accordingly, the Company has
       adjusted their liability as of December 31, 2000 to reflect the accrued
       balance based on the revised estimates.


       This agreement also gives the Chairman the option to purchase certain
       assets of the Wombat Product Division of the Company at book value
       following the termination of his employment, and a right of first refusal
       if the Company wishes to sell the Wombat film library for normal
       consideration, subject to reasonable producer fees, rights of licensees
       and existing distribution rights.

(13)  Recent Development

       The Company received a letter from the American Stock Exchange ("AMEX")
       notifying the Company that it has fallen below certain of AMEX's
       continued listing guidelines because of the Company's recurring losses.
       The Company attended a meeting with AMEX on November 16, 1999 to discuss
       its listing eligibility. As a result of this meeting AMEX informed the
       Company that they would be granted an extension until after the filing of
       the Company's December 31, 1999 year-end financial statements to enable
       the Company to satisfy the listing criteria. Due to the continued decline
       in the share price of the Company's common stock and continued operating
       losses, the Company received a follow up letter in February 2001 stating
       that they have failed to meet the criteria of AMEX's continued listing
       guideline. The Company had appealed the AMEX determination and a hearing
       was scheduled for April 17, 2001. However the Company decided not to
       pursue the appeal. As a result, the Company's failure to meet AMEX's
       maintenance criteria resulted in discontinuance of the inclusion of the
       Company's shares in AMEX.


<PAGE>



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

              None


<PAGE>



                                    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 following table sets forth certain information concerning the
directors and officers of the Company:

Name                  Age      Position
Gene Feldman          75       Chairman of the Board, President of Wombat
Cary Brokaw           50       President, Chief Executive Officer and Director
Michael Feldman       34       Executive Vice President and Director
Sheri L. Halfon       45       Senior Vice President, Chief Financial Officer
                               and Director
Doug Rowan            63       Director
Michael Hammer        46       Director

         Gene Feldman has served as Chairman of the Board of the Company and
President of Wombat since their respective formations on March 7, 1997. Prior to
the Reincorporation, Gene Feldman served as Chairman of the Board of CineMasters
and President of the Wombat Division for more than the past five years. Gene
Feldman is a Class III Director.

         Cary Brokaw has served as President, Chief Executive Officer and
Director of the Company since its formation on March 7, 1997. Prior to the
Reincorporation, Mr. Brokaw served as President, Chief Executive Officer and
Director of CineMasters from September 30, 1996 and Chairman and Chief Executive
Officer of Avenue Pictures since its formation in 1991. Mr. Brokaw is a Class
III Director.

         Michael Feldman has served as Executive Vice President and Director of
the Company since its formation on March 7, 1997. Prior to the Reincorporation,
Michael Feldman had served as Executive Vice President and Director of
CineMasters from September 30, 1996. Michael Feldman served as an officer of
General Physics Corporation from 1991 to 1996 and has been a Director of
International Business Development at GP Strategies since 1995. Michael Feldman
is a Class II Director.

         Sheri L. Halfon has served as Senior Vice President, Chief Financial
Officer and Director of the Company since its formation on March 7, 1997. Prior
to the Reincorporation, Ms. Halfon served as Senior Vice President, Chief
Financial Officer and Director of CineMasters from September 30, 1996 and Senior
Vice President and Chief Financial Officer of Avenue Pictures since its
formation in 1991. Ms. Halfon is a Class II Director.

<PAGE>


         Doug Rowan served as President and Chief Executive Officer of Corbis
Corporation, a company which is building a library of digital images, from April
1994 to July 1997. Prior to his position at Corbis, Mr. Rowan served as Senior
Vice President of Worldwide Customer Operations of Ungermann-Bass, Inc., a
networking product company, from November 1993 to April 1994, and President of
AXS, a software corporation for the new digital content industry, from April 1,
1991 through December 31, 1992. Mr. Rowan is a Class I Director.

        Michael Armand Hammer is Chairman and CEO of The Armand Hammer
Foundation and President and CEO of the Hammer International Foundation. Mr.
Hammer is Chairman of the Board and President of Hammer Galleries and Knoedler
Galleries in New York City. In Los Angeles, he is a director of the Armand
Hammer Museum of Art and Cultural Center and a Director of The Armand Hammer
United World College of the American West in Montezuma, New Mexico. Mr. Hammer
joined Occidental Petroleum Corporation in 1982 and served in various positions
in the company's foreign and domestic oil and gas subsidiaries. Prior to joining
Occidental, Mr. Hammer worked in the Corporate Finance Department of Kidder
Peabody, an investment banking firm in New York. Mr. Hammer is a Class I
Director.

         Directors of the Company are divided into three classes. At each annual
meeting of stockholders, directors are elected to succeed those directors whose
terms expire and are elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election. Under the
Company's bylaws, the number of directors constituting the entire Board of
Directors shall be fixed, from time to time, by the directors then in office,
who may decrease or increase the number of directors by majority action without
soliciting stockholder approval. The Company does not currently pay compensation
to directors for service in that capacity.

Section 16(a) Beneficial Ownership Reporting Compliance

         The Company believes that during the most recent fiscal year, all
filing requirements applicable to its officers, directors and greater than 10%
beneficial owners were complied with.



<PAGE>


ITEM 10.      EXECUTIVE COMPENSATION

Executive Compensation

         The following table sets forth the aggregate compensation paid or
accrued to the Company's executive officers for the services rendered in 2001,
2000, and 1999.

                           SUMMARY COMPENSATION TABLE

<TABLE>
                                                                         Long-Term
<CAPTION>
                                                                       Compensation
                                                                          Awards
                                              Annual Compensation          Stock               All Other
                                             Salary          Bonus        Options            Compensation
Name and Principal Position          Year      ($)            ($)           (#)                   ($)
---------------------------          ----   -------         ------       ---------          ---------------



<S>                                 <C>   <C>
Cary Brokaw                         2001  450,000(1)
President, Chief Executive          2000  450,000
Officer and Director                1999  450,000

Gene Feldman                         2001    150,000(2)
Chairman of the Board,               2000    150,000
President of Wombat                  1999    150,000
</TABLE>

(1) Mr. Brokaw's salary for the year pursuant to his employment agreement was
$450,000, of which $262,000 has been deferred by Mr. Brokaw.

(2) Mr. Feldman's salary for the year was $150,000.


Option Grants in 2001

No options were granted in 2001 to the named executive officers.






<PAGE>





         The following table sets forth information concerning the value of
unexercised options as of December 31, 2001 held by the executives named in the
Summary Compensation Table above. No options were exercised during 2001.


                AGGREGATED OPTION EXERCISES AT DECEMBER 31, 2000
                           AND YEAR-END OPTION VALUES

<TABLE>
                             Number of Securities                             Value of Unexercised
<CAPTION>
                            Underlying Unexercised                           In-the-Money Options at
                          Options at Fiscal Year End                             Fiscal Year End
Name                  Exercisable (E)/ Unexercisable (U)              Exercisable (E)/ Unexercisable (U)(1)
----                  ----------------------------------              -------------------------------------
<S>                        <C>                       <C>                        <C>                <C>
Gene Feldman               75,000(E)                 0(U)                       0(E)               $0(U)
Cary Brokaw               400,000(E)                 0(U)                       0(E)                0(U)
Sheri Halfon               75,000(E)                 0(U)                       0(E)                0(U)
----------
</TABLE>
(1) Calculated based on the closing price of the Common Stock $.04687 as
reported by the OTCBB on December 31, 2001.

Employment Contracts and Termination of Employment and Change in Control
Arrangements

         Brokaw Employment Agreement. In connection with the Business
Combination, Mr. Brokaw entered into a five-year employment agreement (the
"Brokaw Employment Agreement") with the Company pursuant to which, among other
things, Mr. Brokaw became the President and Chief Executive Officer of the
Company. The Brokaw Employment Agreement provides Mr. Brokaw with an annual base
salary of $450,000 (which base salary may be paid from any Company source other
than net cash flow generated by Wombat), subject to such increases as may be
made by the Compensation Committee of the Board of Directors. Mr. Brokaw is also
eligible for annual bonuses based upon the performance of Mr. Brokaw and the
Company during the previous fiscal year. Such annual bonuses will be determined
in the discretion of the Compensation Committee. The dollar amount of the annual
bonus will not exceed two times the annual base salary. The Brokaw Employment
Agreement provides that the Company may only terminate Mr. Brokaw's employment
with the Company for "cause." If Mr. Brokaw's employment is terminated due to
death or disability, he will receive his base salary through the date of
termination of employment. Any vested options not exercised prior to the
termination of employment for this reason will remain exercisable for the six
month period beginning on the date of termination. If his employment is
terminated for "Cause" as defined in the Brokaw Employment Agreement, he will be
entitled to the base salary and any accrued annual bonus that has been
determined and awarded, but not paid, through the date of termination of his
employment. Any vested options not exercised prior to the termination of
employment for Cause will remain exercisable until the end of the ninetieth day
following the date of termination. If Mr. Brokaw terminates his employment
following a "Change of Control" as defined in the Brokaw Employment Agreement,
he will receive (i) his earned but unpaid compensation as of the date of the

<PAGE>

Change of Control; (ii) continued benefits for the remaining unexpired
employment term; (iii) a lump sum payment on the date of the Change of Control
equal to the future base salary that he would have earned if he had continued
working for the remaining unexpired employment term; and (iv) bonus payments
that would have been made to Mr. Brokaw if he had continued working for the
Company during the remaining unexpired employment term. The Company is entitled
to seek to obtain, and has obtained, $2,000,000 in "key-man" life insurance on
his life. Pursuant to the Brokaw Employment Agreement, Mr. Brokaw was granted
options to purchase up to 300,000 shares of Common Stock for an exercise price
of $1.70 per share. Such stock options will vest in equal installments over the
first five years of Mr. Brokaw's employment with the Company and will be
exercisable for a period of ten years from the date of grant. The Brokaw
Employment Agreement provides for accelerated vesting of all of Mr. Brokaw's
stock options upon a "change of control" of the Company or upon a material
breach of the Brokaw Employment Agreement by the Company. As President and Chief
Executive Officer of the Company, Mr. Brokaw is entitled to certain customary
perquisites, including, without limitation, a car allowance, term life
insurance, and reimbursement of all reasonable travel and entertainment
expenses. In addition, Mr. Brokaw is entitled to participate in all employee
benefit plans offered to executive officers of the Company.

         Gene Feldman Employment Agreement. In connection with the Business
Combination, Gene Feldman entered into a five-year employment agreement (the
"Feldman Employment Agreement") with CineMasters pursuant to which, among other
things, Gene Feldman became the Chairman of CineMasters and President of its
Wombat Division. The Feldman Employment Agreement provides Gene Feldman with an
annual base salary of $150,000 (provided that such base salary is funded solely
out of net cash flow generated by the Wombat Division of CineMasters), subject
to such increases as may be made by the Compensation Committee of the Board of
Directors. Gene Feldman is also eligible for annual bonuses based upon the
performance of Gene Feldman and CineMasters during the previous fiscal year.
Such annual bonuses will be determined in the discretion of the Compensation
Committee. The dollar amount of the annual bonus will not exceed two times the
annual base salary. The Feldman Employment Agreement provides that CineMasters
may only terminate Gene Feldman's employment with CineMasters for "cause." If
Mr. Feldman's employment is terminated due to death or disability, he will
receive his base salary through the date of termination of employment.

Any vested options not exercised prior to the termination of employment for this
reason will remain exercisable for the six month period beginning on the date of
termination. If his employment is terminated for "Cause" as defined in the
Feldman Employment Agreement, he will be entitled to the base salary and any
accrued annual bonus that has been determined and awarded, but not paid, through
the date of termination of his employment. Any vested options not exercised
prior to the termination of employment will remain exercisable until the end of
the ninetieth day following the date of termination. If Mr. Feldman terminates
his employment following a "Change of Control" as defined in the Feldman
Employment Agreement, he will receive (i) his earned but unpaid compensation as
of the date of the Change of Control; (ii) continued benefits for the remaining
unexpired employment term; (iii) a lump sum payment on the date of the Change of
Control equal to the future base salary that he would have earned if he had
continued working for the remaining unexpired employment term; and (iv) bonus
payments that would have been made to Mr. Feldman if he had continued working
for the Company during the remaining unexpired employment term. As chairman of
CineMasters and President of the Wombat Division, Gene Feldman is entitled to
certain customary perquisites, including, without limitation, a car allowance,
term life insurance, and reimbursement of all reasonable travel and
entertainment expenses. In addition, Gene Feldman is entitled to participate in

<PAGE>

all employee benefit plans offered to executive officers of CineMasters. In
connection with the Reincorporation, the Gene Feldman Employment Agreement was
amended to indicate that Gene Feldman is the Chairman of the Board of the
Company and the President of Wombat.


ITEM 11.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                             PRINCIPAL STOCKHOLDERS

         The only persons known by the Board of Directors to be the beneficial
owner of more than five percent of the outstanding shares of Common Stock of the
Corporation, as of March 30, 2002, are indicated below:

<TABLE>
<CAPTION>

Name and Address                                  Amount and Nature
of Beneficial Owner                           of Beneficial Ownership*           Percent of Class
-------------------                           -----------------------            ----------------

<S>                                                <C>                                     <C>
Cary Brokaw                                        1,811,350(1)                            31%
c/o Avenue Pictures, Inc.
11111 Santa Monica Boulevard
Suite 525
Los Angeles, CA 90025

GP Strategies Corporation                          1,067,900                               20%
9 West 57th Street
New York, New York 10019

Hammer International Foundation                      980,192(2)                            17%
2425 Olympic Blvd., Suite140E
Santa Monica, CA  90404

Double Bay Entertainment                             730,000                               14%
c/o the Law Offices of A. Chandler Warren
7715 Sunset Blvd., Suite 208
Los Angeles, CA 90046
</TABLE>
---------------------
* As used in this Form 10-KSB, "beneficial ownership" means the sole or shared
power to vote, or to direct the voting of the Corporation's Common Stock of the
sole or shared investment power with respect to such Common Stock.

(1) Includes vested options to purchase up to 300,000 shares of Common Stock of
the Corporation at a price of $1.70 per share, exercisable until September 30,
2006 and vested options to purchase up to 100,000 shares of Common Stock of the
Corporation at a price of $1.8125 per share, exercisable until February 19,
2007.

(2) Includes Warrants to purchase 500,000 shares of Common Stock of the
Corporation at an exercise price of $2.00 per share until August 9, 2002. Mr.
Hammer, a director of the Company, disclaims beneficial ownership of these
shares, except to the extent of his pecuniary interest in these shares.



<PAGE>



          SECURITY OWNERSHIP OF DIRECTORS AND NAMED EXECUTIVE OFFICERS

         The following table sets forth, as of March 30, 2002, beneficial
ownership of shares of Common Stock of the Company by each director, each of the
named executive officers and all directors and executive officers as a group:

                                Total Number of Shares              Percent of
                                   of Common Stock                    Common
Name                              Beneficially Owned                 Stock(1)
----                              ------------------                 --------

Gene Feldman                            241,700(2)                      4

Cary Brokaw                           1,811,350(3)                     31

Michael Feldman                         242,000(4)(5)                   4

Sheri L. Halfon                          75,100(6)                      1

Doug Rowan                               11,000(7)                      *

Michael Hammer                          980,192 (8)                    17

Directors and Executive               3,361,342(9)                     57
  Officers as a Group
  (6 persons)
----------
* The number of shares owned is less than one percent of the outstanding shares.

(1) The percentage of class calculation assumes for each beneficial owner that
all of the options are deemed to be exercised in full only by the named
beneficial owner and that no other options are deemed to be exercised by any
other stockholder.

(2) Does not include 17,500 shares of Common Stock of the Corporation which are
owned by Mr. Feldman's wife, Suzette St. John Feldman, as to which Mr. Feldman
disclaims beneficial ownership. Includes vested options to purchase up to 75,000
shares of Common Stock of the Corporation at a price of $1.8125 per share,
exercisable until February 19, 2007

(3) See footnote 1 to Principal Stockholders table.

(4) Includes vested options to purchase up to 150,000 shares of Common Stock of
the Company at a price of $1.70 per share, which option is exercisable until
September 30, 2006 and vested options to purchase up to 75,000 shares of Common
Stock of the Company at a price of $1.8125 per share, exercisable until February
19, 2007.

(5) Michael Feldman is Gene Feldman's nephew.


<PAGE>

(6) Includes vested options to purchase up to 75,000 shares of Common Stock of
the Corporation at a price of $1.8125 per share, exercisable until February 19,
2007.

(7) Includes vested options to purchase up to 10,000 shares of Common Stock of
the Corporation at a price of $1.8125 per share, exercisable until February 19,
2007.

(8)      See footnote 2 to Principal Stockholders table.

(9) Includes 785,000 shares of Common Stock issuable upon exercise of currently
exercisable stock options, and a warrant to purchase 500,000 shares of Common
Stock.

Except for the shares of Avenue Common Stock subject to the options described in
footnotes 1 through 4, and 6 and 7 above, none of such shares is known by the
Corporation to be shares with respect to which such beneficial owner has the
right to acquire beneficial ownership. The Corporation believes the beneficial
holders listed above have sole voting and investment power regarding the shares
shown as being beneficially owned by them.

ITEM 12.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Transaction With Michael Hammer. In August 1999, the Company sold
480,192 shares of Common Stock and a Warrant to purchase 500,000 shares of
Common Stock which expires August 2002 (the "Warrant") to Hammer International
Foundation pursuant to a private placement transaction. Michael Hammer is
President and CEO of the Hammer International Foundation. The Warrant is
exercisable at an exercise price of $2.00 per share. The shares of Common Stock
and the shares of Common Stock issuable upon exercise of the Warrant cannot be
sold, transferred, pledged or assigned for a one-year period.

         Gene Feldman Exit Option Agreement. In connection with the Business
Combination, Gene Feldman entered into an exit option agreement with CineMasters
pursuant to which, among other things, he was given an option, exercisable
during the six-month period commencing on the date of termination of his
employment, to purchase the production assets of CineMasters for a cash purchase
price equal to the book value of such assets. This option does not include the
CineMasters film library. In addition, CineMasters retained the right to acquire
any future production of Mr. Feldman for nominal consideration, subject to (i)
the rights of Mr. Feldman to receive commercially reasonable producer fees, (ii)
the rights, if any, of A&E, as licensee, consistent with past practice, and
(iii) the distribution rights pursuant to the Distribution Agreement, dated July
1, 1995, as amended, between Janson and the Wombat Division. Upon the exercise
of such option, Gene Feldman will no longer be employed by CineMasters but will
be entitled to receive annual payments for the remainder of his life equal to
the lesser of (i) 25% of the annual net income (which shall be determined
without deduction for general and administrative expenses) derived by
CineMasters from the original CineMasters library and (ii) $100,000 annually. If

<PAGE>

Gene Feldman shall die prior to the exercise of such option, Gene Feldman's
wife, Suzette St. John Feldman, shall following Gene Feldman's death have the
right to exercise such option and to receive such annual payments for a period
of five years following the date of such exercise. If Gene Feldman shall die
after the exercise of such option but prior to the fifth anniversary of the date
of such exercise, Suzette St. John Feldman shall following Gene Feldman's death
be entitled to receive such annual payments for a period of five years following
the date of Gene Feldman's death; provided, however, that such annual payments
shall be reduced from $100,000 to $75,000 following the fifth anniversary of the
date of Gene Feldman's exercise of such option. In addition, if CineMasters
shall determine to sell its library during the first five years following the
exercise of such option by Gene Feldman, CineMasters shall first offer to sell
its library to Gene Feldman based upon a specific price and upon specific terms.
If Gene Feldman does not accept such offer within a reasonable period of time,
CineMasters will then have a limited period of time in which to sell its library
to a third party for a price and upon terms no less favorable to CineMasters
than those offered to Gene Feldman. In connection with the Reincorporation, the
Gene Feldman Exit Option Agreement was amended to replace CineMasters with the
Company.

         Stockholders Agreement. In connection with the Business Combination,
Mr. Brokaw entered into a stockholders agreement (the "Stockholders Agreement"),
amended in connection with the Reincorporation, with CineMasters and each of GP
Strategies Corporation, Gene Feldman, Jerome Feldman, Suzette St. John Feldman,
and Michael Feldman (collectively, the "Feldman Group"), pursuant to which,
among other things, the Board of Directors of CineMasters was reconstituted such
that Mr. Brokaw and the Feldman Group each have three designees on a six-person
Board of Directors and, except as may be mutually agreed upon, equal
representation on any committee of the Board of Directors. The Stockholders
Agreement provides that all extraordinary transactions (i.e., any merger or
consolidation involving CineMasters or any subsidiary, any public offering, any
sale or other disposition of a material portion of the assets of CineMasters
and/or its subsidiaries, any acquisition or investment in excess of $250,000,
etc.) shall require the prior approval of the Board of Directors of CineMasters.
In addition, the Stockholders Agreement provides that, except for ordinary
course (i) expenditures for office rent, (ii) expenditures for selling, general,
and administrative expenses, and (iii) out-of-pocket development expenditures
not in excess of $500,000 during each of the first two fiscal years following
consummation of the Business Combination, aggregate expenditures in excess of
$250,000 in any fiscal year will require the prior approval of the Board of
Directors of CineMasters. The Stockholders Agreement also provides each of Mr.
Brokaw and the members of the Feldman Group with reciprocal rights of first
negotiation and refusal and tag-along rights in the event that either party
wishes to dispose of some or all of his, her, or its shares of Common Stock in a
privately-negotiated transaction. In connection with the Reincorporation, the
Stockholders Agreement was amended to replace CineMasters with the Company.

         Distribution Agreement. On March 1, July 1, 1995 and April 28, 1996,
the Company entered into an agreement with Janson whereby Janson (the
distributor) was granted sole and exclusive rights to license essentially all
the programs of the Company's documentary film library for all forms of
television and video worldwide. The distributor also gained the exclusive right
to execute all contracts for the exploitation of these rights. The President of
Janson, Stephen Janson, is related to the Company's Chairman, Gene Feldman,
through marriage.

<PAGE>





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

(a) The Exhibits listed on the accompanying Index to Exhibits are incorporated
by reference as part of this Annual Report.

(b) There were no reports on Form 8-K filed by the Registrant duing the last
quarter of the period covered by this report.





<PAGE>



                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                        AVENUE ENTERTAINMENT GROUP, INC.


                                      Cary Brokaw
                                      President and Chief Executive Officer

Dated:   April 12, 2002

         In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.


Signature                        Title

Gene Feldman                     Chairman of the Board

Cary Brokaw                      President and Chief Executive Officer and
                                 Director

Sheri L. Halfon                  Senior Vice President, Chief Financial Officer
                                 and Director

Michael D. Feldman               Executive Vice President and Director

Michael Hammer                   Director


Dated: April 12, 2002


<PAGE>




(a)      INDEX TO EXHIBITS

  3       Restated Certificate of Incorporation. Incorporated herein by
          reference to Exhibit 3 (I) of the Company's Registration Statement on
          Form 10-SB, as amended, filed on April 9, 1997.

 3.1      By-Laws. Incorporated herein by reference to Exhibit 3(ii) of the
          Company's Registration Statement on Form 10-SB, as amended, filed on
          April 9, 1997.

 10       Share Exchange Agreement, dated as of September 30, 1996, among Cary
          Brokaw, Avenue Pictures, Inc. and The CineMasters Group, Inc.
          Incorporated herein by reference to Exhibit 10(a)(i) of the Company's
          Registration Statement on Form 10-SB, as amended, filed on April 9,
          1997.

  10.1    Stockholders Agreement, dated as of September 30, 1996, among Cary
          Brokaw, The CineMasters Group, Inc., National Patent Development
          Corporation, Gene Feldman, Jerome Feldman, Suzette St. John Feldman
          and Michael Feldman. Incorporated herein by reference to Exhibit 10(a)
          (ii) of the Company's Registration Statement on Form 10-SB, as
          amended, filed on April 9, 1997.

  10.2    Exit Option Agreement, dated as of September 30, 1996, between The
          CineMasters Group, Inc. and Gene Feldman. Incorporated herein by
          reference to Exhibit 10(a)(iii) of the Company's Registration
          Statement on Form 10-SB, as amended, filed on April 9, 1997.

  10.3    Distribution Agreement, dated April 28, 1996, between Janson
          Associates, Inc. and The CineMasters, Group, Inc. Incorporated herein
          by reference to Exhibit 10(b)(ii)(1) of the Company's Registration
          Statement on Form 10-SB, as amended, filed on April 9, 1997.


<PAGE>

  10.4    Avenue Entertainment Group, Inc. Stock Option and Long Term Incentive
          Compensation Plan. Incorporated herein by reference to Exhibit
          10(c)(i) of the Company's Registration Statement on Form 10-SB, as
          amended, filed on April 9, 1997.

  10.5    Employment Agreement, dated as of September 30, 1996, among The
          CineMasters Group, Inc., Avenue Pictures, Inc. and Cary Brokaw.
          Incorporated herein by reference to Exhibit 10(c)(ii) of the Company's
          Registration Statement on Form 10-SB, as amended, filed on April 9,
          1997.

  10.6    Employment Agreement, dated as of September 30, 1996, among The
          CineMasters Group, Inc., Avenue Pictures, Inc. and Gene Feldman.
          Incorporated herein by reference to Exhibit 10.(c)(iii) of the
          Company's Registration Statement on Form 10-SB, as amended, filed on
          April 9, 1997.

  10.7    Form of Option Grant Agreement, dated as of March 10, 1997 between
          Avenue Entertainment Group, Inc. and the Optionee. Incorporated herein
          by reference to Exhibit 10(c)(vi) of the Company's Registration
          Statement on Form 10-SB, as amended, filed on April 9, 1997.

  10.8    Amendment Number 1 dated January 8, 2001 to the Agreement and Plan of
          Merger dated November 21, 2000, by and among the Company, LCA
          Acquisition Subsidiary, Inc., LCA Inc. and Double Bay Entertainment,
          Inc. Incorporated herein by reference to Exhibit 10.1 of the Company's
          Form 8-K filed on January 29, 2001

  10.9    Subscription Agreement dated November 15, 2000 between Robison
          Enterprises, Inc. and the Company. Incorporated herein by reference to
          Exhibit 10.2 of the Company's Form 8-K filed on January 29, 2001.


<PAGE>

  10.10   Amendment Number 1 dated January 8, 2001 to the Subscription Agreement
          dated November 15, 2000 between Robison Enterprises, Inc. and the
          Company. Incorporated herein by reference to Exhibit 10.3 of the
          Company's Form 8-K filed on January 29, 2001.

  10.11   Amendment Number 2 dated January 8, 2001 to the Subscription Agreement
          dated November 15, 2000 between Robison Enterprises, Inc. and the
          Company. Incorporated herein by reference to Exhibit 10.4 of the
          Company's Form 8-K filed on January 29, 2001.

  10.12   Subscription Agreement between the Company and Hammer International
          Foundation dated August 10, 1999. Incorporated herein by reference to
          Exhibit 4.4 of the Company's Registration Statement on Form S-3 filed
          on February 1, 2001.

  10.13   Warrant issued by the Company to Robison Enterprises, Inc. dated
          November 15, 2000. Incorporated herein by reference to Exhibit 10.5 of
          the Registrant's Form 8-K filed on January 29, 2001

  10.14   Warrant issued by the Company to Hammer International Foundation dated
          August 10, 1999. Incorporated herein by reference to Exhibit 4.6 of
          the Company's Registration Statement on Form S-3 filed on February 1,
          2001.

  10.15   Form 8-K filed by the Registrant on April 10, 2002 reporting Item 4.
          Changes in Registrant's Certifying Accountants. Incorporated herein by
          reference.

  21       Subsidiaries of the Company *

  23.1     Consent of KPMG LLP*

  23.2     Consent of Singer Lewak Greenbaum & Goldstein LLP

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