<PAGE>

                            UNITED STATES OF AMERICA
                       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, 2004

                                       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 Identification No.)
of incorporation or organization)

10202 W. Washington Blvd., Lean 119, Culver City, CA        90232
----------------------------------------------------        -----
(Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, including area code:    (310) 244-6868

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

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:  $945,002

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 31, 2005
-----                                              -----------------------------
Common Stock, par value $.01 per share                   5,371,030 SHARES

DOCUMENTS INCORPORATED BY REFERENCE:                           NONE

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                                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......................................24

         Item 8.    Changes In and Disagreements with Accountants
                    on Accounting and Financial Disclosure....................44

         Item 8a.   Controls and Procedures...................................44

         Item 8b.   Other Information.........................................44

PART III

         Item 9.    Directors, Executive Officers, Promoters
                    and Control Persons; Compliance with
                    Section 16(a) of the Exchange Act.........................45

         Item 10.   Executive Compensation....................................47


         Item 11.   Security Ownership of Certain
                    Beneficial Owners and Management..........................50

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

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

         Item 14.   Principal Accountant Fees and Services....................54

<PAGE>


                                     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.

POTENTIAL SALE TRANSACTION

         The Company is contemplating entering into a series of transactions
pursuant to which the Company will sell a substantial portion of all the assets
(subject to certain liabilities) that it holds through its Avenue Pictures and
its Wombat Productions subsidiaries (such transactions are collectively referred
to herein in the report as the "Sale Transaction"). These transactions may
involve the Company's sale of these assets to companies affiliated with certain
officers and directors of the Company. It is anticipated that the assets that
may be sold by the Company will include:

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         o The Company's rights to certain theatrical and cable motion picture
and television projects (including rights under various producer agreements, and
all of Wombat Productions, Inc.'s rights to the "Hollywood Collection" of
documentary programming);

         o The Company's rights to various scripts and other literary properties
that may in the future become motion picture or other entertainment projects;

         o Various office equipment, furniture, film production equipment, and
fixtures currently used by the Company's Avenue Pictures, Inc. and Wombat
Productions, Inc. subsidiaries.

         If the Company consummates the potential Sale Transaction described
above, it is contemplated that, among other things, (1) the Company will receive
a portion of certain revenues generated by certain of the sold assets, (2) the
Company will redeem and cancel a substantial number of its shares of outstanding
common stock, and will cancel outstanding options to purchase a substantial
number of shares of its common stock, held by certain of its officers and
directors, and (3) the Company will issue replacement options to purchase shares
of its common stock for a lesser number of shares and/or at higher exercise
prices options.

         In connection with such potential Sale Transaction, the Company may
experience a substantial management restructuring. Any such restructuring may
include a loss of the services of one or more of the Company's key executive
officers.

         No determination has been made regarding any new business(es) that the
Company may develop or acquire following consummation of any Sale Transaction.
Any such business(es) would differ substantially from the Company's historical
business, and could involve substantial risks and uncertainties.

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
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


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1996, Mr. Brokaw produced Sony Pictures' VOICES FROM A LOCKED ROOM, directed by
Malcolm Clarke and starring Jeremy Northam. In 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. The film had been the subject of litigation
between the bank that financed it and the insurer who insured the bank from
loss. This litigation has now been settled. The Company does not currently know
when or if the film will be licensed for distribution.

         In the event that the Sale Transaction is completed, the Company is not
expected to continue to produce new feature film projects, made-for-television
or cable projects, or television programming. Accordingly, the foregoing summary
description, and the more detailed description of past projects that follows,
will relate solely to the historical business of the Company. The Company will
no longer likely derive substantial revenues from past film or television
projects or from new production engagements. The Company's future business in
the event of consummation of the Sale Transaction has not been determined and
may differ substantially from its historical business.

FEATURE FILMS

         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.

         In Summer 2003 the Company completed 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 Films, one of the industry's preeminent
foreign sales companies, 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 LL Cool
J, Val Kilmer, Christian Slater, and Kathryn Morris. The film is scheduled for
release in May 2005.

                                       4
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         In 2004 the Company produced a film adaptation of William Shakespeare's
classic play THE MERCHANT OF VENICE. Adapted and directed by Michael Radford (IL
POSTINO), and starring Al Pacino, Jeremy Irons, Joseph Fiennes and Lynn Collins.
Sony Classics released the film domestically in December 2004. Arclight Films
will distribute the film internationally.

             In 2004 the Company produced the feature film CLOSER in London.
Based on Patrick Marber's acclaimed play and directed by Academy Award winning
director Mike Nichols, the film stars Julia Roberts, Jude Law, Natalie Portman
and Clive Owen. The film was financed and is being distributed internationally
by Columbia Pictures, a subsidiary of Sony Pictures Entertainment. The film was
released domestically in December 2004 and received five Golden Globe
nominations including Best Feature Drama. CLOSER won two Golden Globe Awards for
Best Supporting Actor and Actress. The film was nominated for two Academy Awards
for Best Supporting Actor and Actress.

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:
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 two television movies in active development.
They are 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 THRILLSEEKERS 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 has extended this agreement for two
additional years as of March of 2003.

         The Company produced a cable television movie based on the Pulitzer
Prize winning play WIT for HBO. 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 also produced PATH TO WAR, an original movie for HBO,
starring Michael Gambon, Alec Baldwin and Donald Sutherland and was directed by
the acclaimed John Frankenheimer. The film premiered in May 2002 and received
Emmy nominations including Best Made for Television Movie.

         In October 2003 the Company completed 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


                                       5
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Thompson, Mary Louise-Parker and Jeffrey Wright amongst many others. The film
event was broadcast in December and won five Golden Globe Awards including Best
Movie or Mini-series as well as Best Actor and Best Actress. ANGELS IN AMERICA
is one of the most critically acclaimed film events of the last decade.

          In 2003 the Company also produced NORMAL for HBO which was written and
directed by Jane Anderson. The film stars Jessica Lange and Tom Wilkinson and
premiered at last year's Sundance Film Festival. The film had its broadcast
premiere in March 2003 and received six Emmy Award nominations and three Golden
Globe nominations.

         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 have produced
projects 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, PATH TO WAR and ANGELS IN AMERICA.

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ONE HOUR-PROFILES
THE HOLLYWOOD COLLECTION

         Through its subsidiary, Wombat Productions, the Company has also
produced 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 company has entered into a distribution arrangement. Since 1982, the
Company has produced the following hour-length programs known as THE HOLLYWOOD
COLLECTION:

<TABLE>
<S>                                                  <C>
"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"

</TABLE>

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

OTHER ENTERTAINMENT PROFILES

         In 1998, Wombat Productions began a new series of programs 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. Wombat also 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


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entitled to retain a distribution fee, ranging from 10% to 35%, depending upon
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 has not had sufficient capital to independently finance its own
productions. Accordingly, most of its financial resources have been 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 has been 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 has employed a flexible strategy in developing
its motion picture and film properties. Wherever possible, it has employed 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 it provides maximum
leverage in negotiating production and financing arrangements with a
distributor. Nevertheless, there are occasions when financial assistance of a
studio at an earlier stage can be beneficial. 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 has also considered 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.

         In the event that the potential Sale Transaction described above is
consummated, it is expected that the Company will withdraw from new film
production activities. The Company also may no longer have the benefit of Mr.
Brokaw's services following any such Sale Transaction.

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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 has historically competed 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 has competed 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 productions has also been 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 have further enhanced 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.

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 63% and 21% of its total
revenue for the year ended December 31, 2004 from Columbia Pictures for the
feature film CLOSER and from HBO related to the First Look Deal, respectively.

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EMPLOYEES

         As of December 31, 2004, the Company had 4 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,
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.

                                       10
<PAGE>

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
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.

                                       11
<PAGE>

         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
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:

                                       12
<PAGE>
<TABLE>

                                                      MONTHS AFTER INITIAL                  APPROXIMATE
        MARKETPLACE                                DOMESTIC THEATRICAL RELEASE            RELEASE PERIOD
        -----------                                ---------------------------            --------------
  <S>                                                    <C>                                  <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

</TABLE>
_______________________
* Includes network, barter syndication, syndication, and basic cable.

         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
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.

                                       13
<PAGE>

         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
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.

                                       14
<PAGE>

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
producers such as the Company realize from the international exploitation of
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 may continue to lose an indeterminate amount of revenues
as a result of motion picture piracy.

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

                                       15
<PAGE>

         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. The Company has tended 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 exhibition of certain
pictures in certain territories and media.

ITEM 2.       DESCRIPTION OF PROPERTY

         The Company's office space lease expired October 18, 2004. The Company
presently uses office space at 10202 W. Washington Boulevard, Culver City,
California 90232.

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.

                                       16
<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 is traded on the OTCBB since 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, 2004
and December 31, 2003.

                    2004                      HIGH SALE               LOW SALE
                    ----                      ---------               --------
                 1st Quarter                    $0.51                   $0.17
                 2nd Quarter                    $0.20                   $0.10
                 3rd Quarter                    $0.14                   $0.10
                 4th Quarter                    $0.17                   $0.10

                    2003                      HIGH SALE               LOW SALE
                    ----                      ---------               --------
                 1st Quarter                    $0.10                   $0.05
                 2nd Quarter                    $0.10                   $0.05
                 3rd Quarter                    $0.10                   $0.04
                 4th Quarter                    $0.32                   $0.05

         As of March 31, 2005, there were 155 holders of record of Common Stock.

         On March 31, 2005, the closing price of the Common Stock on the OTCBB
was $0.11.

                                 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.

                                       17
<PAGE>

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.

         The following discussion relates solely to the Company's historical
business of producing motion pictures and television programming, and any
forward-looking statements set forth herein assume that the Company will
continue to operate this business. As described above under Item 1, the Company
is currently contemplating a potential Sale Transaction. In the event that the
Company consummates such a Sale Transaction, the Company will cease production
of new film and television projects, and the revenues derived from completed
projects may be substantially reduced. The new business(es), if any, that the
Company may pursue may differ substantially from its historical business, and
may involve entirely different business and financial models. Accordingly, the
Company's historical financial performance will have little or no bearing on its
expected future performance.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates and judgments,
including those related to allowance for doubtful accounts, valuation of
long-lived assets and intangibles, including film costs, and accounting for
income taxes. We base our estimates on historical experience and on various
other assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions. Management believes the following critical accounting policies
affect our more significant judgments and estimates used in the preparation of
our consolidated financial statements.

         Critical accounting policies are those that are important to the
portrayal of the Company's financial condition and results, and which require
management to make difficult, subjective and/or complex judgments. Critical
accounting policies cover accounting matters that are inherently uncertain
because the future resolution of such matters is unknown. We have made critical
estimates in the following areas:

                                       18
<PAGE>

         ALLOWANCE FOR DOUBTFUL ACCOUNTS. We are required to make judgments,
based on historical experience and future expectations, as to the collectibility
of accounts receivable. The allowances for doubtful accounts and sales returns
represent allowances for customer trade accounts receivable that are estimated
to be partially or entirely uncollectible. These allowances are used to reduce
gross trade receivables to their net realizable value. The Company records these
allowances based on estimates related to the following factors: i) customer
specific allowances; ii) amounts based upon an aging schedule and iii) an
estimated amount, based on the Company's historical experience, for issues not
yet identified.

         VALUATION OF LONG-LIVED AND INTANGIBLE ASSETS, INCLUDING FILM COSTS.
Long-lived assets, consisting primarily of property, plant and equipment and
intangibles, including film costs comprise a significant portion of the
Company's total assets. Long-lived assets, including goodwill and intangibles
and film costs, are reviewed for impairment whenever events or changes in
circumstances have indicated that their carrying amounts may not be recoverable.
Recoverability of assets is measured by a comparison of the carrying amount of
an asset to future net cash flows expected to be generated by that asset. The
cash flow projections are based on historical experience, management's view of
growth rates within the industry and the anticipated future economic
environment.

         Factors we consider important which could trigger an impairment review
include the following:

         o        significant underperformance relative to expected historical
                  or projected future operating results;
         o        significant changes in the manner of our use of the acquired
                  assets or the strategy for our overall business;
         o        significant negative industry or economic trends;
         o        significant decline in our stock price for a sustained period;
                  and
         o        our market capitalization relative to net book value.

         When we determine that the carrying value of intangibles, long-lived
assets and related goodwill and enterprise level goodwill may not be recoverable
based upon the existence of one or more of the above indicators of impairment,
we measure any impairment based on a projected discounted cash flow method using
a discount rate determined by our management to be commensurate with the risk
inherent in our current business model. Net long-lived assets, goodwill and film
costs amounted to $257,000 as of December 31, 2003.

         In 2002, Statement of Financial Accounting Standards ("SFAS") No. 142,
"GOODWILL AND OTHER INTANGIBLE ASSETS" ("SFAS 142") became effective and as a
result, we ceased to amortize approximately $910,000 of goodwill beginning in
2002. We had recorded approximately $857,000 of amortization on this amount
during the year ended December 31, 2001. In lieu of amortization, we were
required to perform an impairment review of our goodwill in 2002 and an annual
impairment review thereafter. The test was performed as of September 30, 2002
which resulted in $688,000 of goodwill impairment. The fair market valuation
method used to evaluate goodwill impairment included cash flow estimates for
2003 and subsequent years. The test was performed as of September 30, 2003 which
resulted in $221,172 of goodwill impairment which brings the amount of goodwill
to zero.

                                       19
<PAGE>

         ACCOUNTING FOR INCOME TAXES. As part of the process of preparing our
consolidated financial statements, we are required to estimate our income taxes
in each of the jurisdictions in which we operate. This process involves us
estimating our actual current tax exposure together with assessing temporary
differences resulting from differing treatment of items, such as deferred
revenue, for tax and accounting purposes. These differences result in deferred
tax assets and liabilities, which are included within our consolidated balance
sheet. We must then assess the likelihood that our deferred tax assets will be
recovered from future taxable income and to the extent we believe that recovery
is not likely, we must establish a valuation allowance. To the extent we
establish a valuation allowance or increase this allowance in a period, we must
include an expense within the tax provision in the statement of operations.

         Significant management judgment is required in determining our
provision for income taxes, our deferred tax assets and liabilities and any
valuation allowance recorded against our net deferred tax assets. The Company
recorded a valuation allowance against its deferred tax assets as of December
31, 2004.

RESULTS OF OPERATIONS

         For the year ended December 31, 2004 the Company had a net loss of
$56,000 as compared to a loss of $884,000 for the year ended December 31, 2003.

REVENUES

         Revenues for the year ended December 31, 2004 were $945,000 as compared
to $637,000 for the year ended December 31, 2003. Revenues for the year ended
December 31, 2004 were derived primarily from producer fees for the theatrical
film CLOSER, the HBO First Look Deal and the licensing of its programming in
secondary markets through Janson Associates. Revenues for the year ended
December 31, 2003 were derived primarily from the licensing of its programming
in secondary markets through Janson Associates, the HBO First Look Deal,
producer fees for ANGELS IN AMERICA and from Intermedia for the theatrical film
MINDHUNTERS.

FILM PRODUCTION COSTS

         Film production costs for the year ended December 31, 2004 were $42,000
as compared to $208,000 for the year ended December 31, 2003.

SELLING, GENERAL, AND ADMINISTRATIVE

         Selling, general and administrative expenses ("SG&A") for the twelve
months ended December 31, 2004 and 2003 were $1,005,000 and $1,188,000,
respectively. The SG&A costs for 2004 and 2003 relate primarily to salaries,
occupancy costs and professional fees.

                                       20
<PAGE>

OTHER INCOME

         Other income for the year ended December 31, 2004 was $50,000 compared
to $113,000 for the year ended December 31, 2003. Other income for the year
represents a film festival award for the project WAYWARD SON. Other income for
the year ended December 31, 2003 primarily represents the return of a residuals
bond held in an escrow account by the Screen Actors Guild WAYWARD SON.

LIQUIDITY AND CAPITAL RESOURCES

         At December 31, 2004, the Company had approximately $7,000 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 five years. The Company has a working
capital deficiency and has an accumulated deficit of $9,002,621 through December
31, 2004. 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 31, 2005 on the Company's consolidated
financial statements states that the Company has suffered losses from operations
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.

         In the event that the potential Sale Transaction as described above is
consummated, the Company will likely experience a substantial decline in
operating revenues; however any reduction in revenues will be accompanied by a
substantial decline in outstanding liabilities and a decline in operating
expenses. In such event, the Company will likely elect to pursue one or more new
businesses, either through new business development activities or through
acquisition of one or more existing businesses. Any such activities may require
substantial additional capital. Additional capital may not be available to the
Company on reasonable terms, or at all, and raising additional capital could
involve significant dilution to existing stockholders. In addition, there would
be substantial uncertainty as to the nature and viability of any new business
the Company chooses to pursue. There is no assurance that any such business will
be able to achieve or maintain profitability or that the Company will be able to
continue as a going concern.

RECENT ACCOUNTING DEVELOPMENTS

         In November 2004, the FASB issued SFAS No. 151,"Inventory Costs". SFAS
No. 151 amends the accounting for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage) under the guidance in
ARB No. 43, Chapter 4, "Inventory Pricing". Paragraph 5 of ARB No. 43, Chapter
4, previously stated that "... under some circumstances, items such as idle


                                       21
<PAGE>

facility expense, excessive spoilage, double freight, and rehandling costs may
be so abnormal as to require treatment as current period charges..." This
Statement requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal." In addition,
this Statement requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the production
facilities. This statement is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005. Management does not expect adoption
of SFAS No. 151 to have a material impact on the Company's financial statements.

         In December 2004, the FASB issued SFAS No. 152,"Accounting for Real
Estate Time-Sharing Transactions". The FASB issued this Statement as a result of
the guidance provided in AICPA Statement of Position (SOP) 04-2,"Accounting for
Real Estate Time-Sharing Transactions". SOP 04-2 applies to all real estate
time-sharing transactions. Among other items, the SOP provides guidance on the
recording of credit losses and the treatment of selling costs, but does not
change the revenue recognition guidance in SFAS No. 66,"Accounting for Sales of
Real Estate", for real estate time-sharing transactions. SFAS No. 152 amends
Statement No. 66 to reference the guidance provided in SOP 04-2. SFAS No. 152
also amends SFAS No. 67, "Accounting for Costs and Initial Rental Operations of
Real Estate Projects", to state that SOP 04-2 provides the relevant guidance on
accounting for incidental operations and costs related to the sale of real
estate time-sharing transactions. SFAS No. 152 is effective for years beginning
after June 15, 2005, with restatements of previously issued financial statements
prohibited. This statement is not applicable to the Company.

         In December 2004, the FASB issued SFAS No. 153,"Exchanges of
Nonmonetary Assets," an amendment to Opinion No. 29,"Accounting for Nonmonetary
Transactions". Statement No. 153 eliminates certain differences in the guidance
in Opinion No. 29 as compared to the guidance contained in standards issued by
the International Accounting Standards Board. The amendment to Opinion No. 29
eliminates the fair value exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. Such an exchange has
commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. SFAS No. 153 is effective for
nonmonetary asset exchanges occurring in periods beginning after June 15, 2005.
Earlier application is permitted for nonmonetary asset exchanges occuring in
periods beginning after December 16, 2004. Management does not expect adoption
of SFAS No. 153 to have a material impact on the Company's financial statements.

         In December 2004, the FASB issued SFAS No. 123(R),"Share-Based
Payment". SFAS 123(R) amends SFAS No. 123,"Accountung for Stock-Based
Compensation", and APB Opinion 25,"Accounting for Stock Issued to Employees."
SFAS No.123(R) requires that the cost of share-based payment transactions
(including those with employees and non-employees) be recognized in the
financial statements. SFAS No. 123(R) applies to all share-based payment
transactions in which an entity acquires goods or services by issuing (or
offering to issue) its shares, share options, or other equity instruments
(except for those held by an ESOP) or by incurring liabilities (1) in amounts
based (even in part) on the price of the entity's shares or other equity


                                       22
<PAGE>

instruments, or (2) that require (or may require) settlement by the issuance of
an entity's shares or other equity instruments. This statement is effective (1)
for public companies qualifying as SEC small business issuers, as of the first
interim period or fiscal year beginning after December 15, 2005, or (2) for all
other public companies, as of the first interim period or fiscal year beginning
after June 15, 2005, or (3) for all nonpublic entities, as of the first fiscal
year beginning after December 15, 2005. Management is currently assessing the
effect of SFAS No. 123(R) on the Company's financial statement.

                                       23
<PAGE>


ITEM 7.       FINANCIAL STATEMENTS


                                                                           Page
                                                                           ----
AVENUE ENTERTAINMENT GROUP, INC.

        Report of Independent Registered Public Accounting Firm            25

        Consolidated Balance Sheet as of December 31, 2004                 26

        Consolidated Statements of Operations for the years ended
          December 31, 2004 and 2003                                       27

        Consolidated Statement of Stockholders' Equity (Deficit) for the
          years ended December 31, 2004 and 2003                           28

        Consolidated Statements of Cash Flows for the years ended
          December 31, 2004 and 2003                                       29

        Notes to Consolidated Financial Statements                         31

                                       24
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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, 2004, and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for the two years ended December 31, 2004. 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Avenue
Entertainment Group, Inc. and subsidiaries as of December 31, 2004, and the
consolidated results of their operations and their consolidated cash flows for
each of the two years in the period ended December 31, 2004 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, 2004, the Company
incurred a net loss of $56,242. In addition, the Company had an accumulated
deficit of $9,002,621 as of December 31, 2004. 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 25, 2005


                                       25
<PAGE>


                        AVENUE ENTERTAINMENT GROUP, INC.
                           CONSOLIDATED BALANCE SHEET

                                DECEMBER 31, 2004

                                     ASSETS

Cash                                                              $     6,852
Accounts receivable, net of allowance of $12,917                       32,116
Film costs, net                                                       176,405
Property and equipment, net                                             2,591
Goodwill, net of accumulated amortization of $2,805,199                     0
Other assets                                                            5,103
                                                                  ------------
Total assets                                                      $   223,067
                                                                  ============
                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Accounts payable and accrued expenses                             $   401,588
Deferred income                                                       332,970
Loan payable                                                           87,962
Deferred compensation                                               1,183,709
Due to related party                                                  146,597
                                                                  ------------
Total liabilities                                                   2,152,826
                                                                  ------------

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                                               (9,002,621)
 Treasury stock, at cost                                               (3,687)
 Note receivable for common stock                                    (150,000)
                                                                  ------------
Total stockholders' deficit                                        (1,929,759)
                                                                  ------------
Total liabilities and stockholders' deficit                       $   223,067
                                                                  ============

          See accompanying notes to consolidated financial statements.

                                       26
<PAGE>


                        AVENUE ENTERTAINMENT GROUP, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                                      YEARS ENDED DECEMBER 31,
                                                    2004                2003
                                                ------------        ------------

Operating revenues                              $   945,002         $   636,563
                                                ------------        ------------
Costs and expenses:
  Film production costs                              42,257             208,219
  Selling, general and
   administrative expenses                        1,004,766           1,188,351
  Other income                                      (45,944)           (113,174)
Impairment loss on goodwill                               0             221,172
                                                ------------        ------------

Total costs and expenses                          1,001,079           1,504,568
                                                ------------        ------------

Profit (loss) before income tax                     (56,077)           (868,005)
Income tax expense                                      165              16,492
                                                ------------        ------------

Net loss                                        $   (56,242)        $  (884,497)
                                                ============        ============

Basic and diluted loss per share:               $     (0.02)        $     (0.16)
                                                ============        ============
Weighted average common
   shares outstanding                             5,371,030           5,371,030
                                                ============        ============

          See accompanying notes to consolidated financial statements.

                                       27
<PAGE>

<TABLE>


                                                 AVENUE ENTERTAINMENT GROUP, INC.

                                     CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

                                              YEARS ENDED DECEMBER 31, 2004 AND 2003


                           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>
BALANCE,
DECEMBER 31, 2002      5,371,030     53,710     (3,687)       7,172,839          (8,061,882)       (150,000)       (989,020)
==============================================================================================================================
Net loss                                                                           (884,497)                       (884,497)
------------------------------------------------------------------------------------------------------------------------------
BALANCE,
DECEMBER 31, 2003      5,371,030     53,710     (3,687)       7,172,839          (8,946,379)       (150,000)     (1,873,517)
==============================================================================================================================
Net loss                                                                            (56,242)                        (56,242)
------------------------------------------------------------------------------------------------------------------------------
BALANCE,
DECEMBER 31, 2004      5,371,030     53,710     (3,687)       7,172,839          (9,002,621)       (150,000)     (1,929,759)
==============================================================================================================================


                                  See accompanying notes to consolidated financial statements.
</TABLE>
                                                                28
<PAGE>
<TABLE>

                                  AVENUE ENTERTAINMENT GROUP, INC.

                                CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                               YEARS ENDED DECEMBER 31,
                                                          ----------------------------------
                                                            2004                  2003
                                                            ----                  ----
<S>                                                       <C>                      <C>
Cash flows from operating activities
     Net loss                                             $   (56,242)             (884,497)
Adjustments to reconcile net loss to net
     cash used in operating activities:
     Depreciation                                               4,476                 8,633
     Amortization - film production costs                      13,492               148,823
     Impairment of goodwill                                         0               221,172

Changes in assets and liabilities affecting net loss:
     Accounts receivable                                      100,506               (77,687)
     Film costs                                                66,752               (85,278)
     Other assets                                              12,692                  (541)
     Accounts payable and accrued expenses                      5,281              (116,385)
     Deferred compensation                                     22,476               242,954
     Deferred income                                         (101,391)               32,216
                                                          ------------          ------------

              Net cash provided by (used in)
               operating activities                            68,042              (510,590)

Cash flows from investing activities:
     Disposal of equipment                                      3,222                     0
                                                          ------------          ------------
     Net cash used in investing activities                      3,222                     0
                                                          ------------          ------------

                                             (Continued)

                                                 29
<PAGE>


                                  AVENUE ENTERTAINMENT GROUP, INC.

                          CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)


                                                               YEARS ENDED DECEMBER 31,
                                                          ----------------------------------
                                                             2004                   2003
                                                             ----                   ----

Cash flows from financing activities:
      (Payments on), receipts from loan payable           $  (102,038)          $   190,000

       Net cash (used for) provided by
          financing activities                               (102,038)              190,000

       Net increase (decrease) in cash                        (30,774)             (320,590)

Cash at beginning of year                                      37,626               358,216
                                                          ------------          ------------

Cash at end of year                                       $     6,852           $    37,626
                                                          ============          ============

Supplemental cash flow information:
  Cash paid during the year for:
     Interest                                             $     4,599           $     5,241
                                                          ============          ============
     Income taxes                                         $       165           $    16,492
                                                          ============          ============
</TABLE>


                    See accompanying notes to consolidated financial statements.

                                                 30
<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, 2004. The Company has a working capital deficiency and has
       an accumulated deficit of $9,002,621 through December 31, 2004. 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)    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.

       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.

                                       31
<PAGE>

       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 AND OTHER INTANGIBLES

       In July 2001, the Financial Accounting Standards Board ("FASB") issued
       statement of Financial Accounting Standards No. 142 ("SFAS 142"),
       "Goodwill and Other Intangible Assets," which is effective for fiscal
       years beginning after December 15, 2001. SFAS 142 prohibits the
       amortization of goodwill and intangible assets with indefinite useful
       lives but requires that these assets be reviewed for impairment at least
       annually or on an interim basis if an event occurs or circumstances
       change that could indicate that their value has diminished or been
       impaired. Other intangible assets will continue to be amortized over
       their estimated useful lives. In addition, the standard includes
       provisions for the reclassification of certain existing recognized
       intangibles as goodwill, reassessment of the useful lives of existing
       recognized intangibles, reclassification of certain intangibles out of
       previously reported goodwill and the identification of reporting units
       for purposes of assessing potential future impairments of goodwill.

                                       32
<PAGE>

       The Company completed the transitional analysis of goodwill impairment as
       of September 30, 2002 and recorded an impairment of $688,827 as a
       cumulative effect of a change in accounting principle. The Company
       completed the annual analysis of goodwill impairment as of September 30,
       2003 and recorded an impairment of $221,172. As of December 31, 2004,
       Goodwill was fully impaired.

       IMPAIRMENT OF LONG-LIVED ASSETS

       The Company reviews its long-lived assets for impairment in accordance
       with SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived
       Assets" whenever events or changes in circumstances indicated that the
       carrying amount of an asset may not be recoverable. If events and
       circumstances indicate that the carrying amount of an asset may not be
       recoverable and the expected undiscounted future cash flow attributable
       to the asset is less than the carrying amount of the asset, an impairment
       loss equal to the excess of the asset's carrying value over its fair
       value is recorded. Fair value is determined based on the present value of
       estimated expected future cash flows using a discount rate commensurate
       with the risk involved, quoted market prices or appraised values,
       depending on the nature of the assets.

       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.

                                       33
<PAGE>

       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.

       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, 2004 and 2003, 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:

<TABLE>
                                                                  2004               2003
                                                                  ----               ----
<S>                                                            <C>                 <C>
           Options outstanding under the Company's stock
               option plan                                     2,235,000           2,235,000
</TABLE>

       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.

                                       34
<PAGE>

       Two customers accounted for 63%, and 21% of the Company's net sales for
       the year ended December 31, 2004. At December 31, 2004, amounts due from
       these customers were 0% of accounts receivable.

       Two customers accounted for 43%, and 37% of the Company's net sales for
       the year ended December 31, 2003. At December 31, 2003, amounts due from
       these customers were 75%, and 23% of accounts receivable, respectively.


       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 account for stock options using the
       intrinsic value method and provide the pro forma disclosure provisions of
       SFAS No. 123. SFAS No.123 was amended in December 2002 by SFAS No.148,
       "Accounting for Stock-Based Compensation--Transition and Disclosure."
       Compensation cost will continue to be recorded for options granted below
       fair market value.

       RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

       In November 2004, the FASB issued SFAS No. 151,"Inventory Costs". SFAS
       No. 151 amends the accounting for abnormal amounts of idle facility
       expense, freight, handling costs, and wasted material (spoilage) under
       the guidance in ARB No. 43, Chapter 4,"Inventory Pricing". Paragraph 5 of
       ARB No. 43, Chapter 4, previously stated that ". . . under some
       circumstances, items such as idle facility expense, excessive spoilage,
       double freight, and rehandling costs may be so abnormal as to require
       treatment as current period charges. . . ." This Statement requires that
       those items be recognized as current-period charges regardless of whether
       they meet the criterion of "so abnormal." In addition, this Statement
       requires that allocation of fixed production overheads to the costs of
       conversion be based on the normal capacity of the production facilities.
       This statement is effective for inventory costs incurred during fiscal
       years beginning after June 15, 2005. Management does not expect adoption
       of SFAS No. 151 to have a material impact on the Company's financial
       statements.

                                       35
<PAGE>

       In December 2004, the FASB issued SFAS No. 152,"Accounting for Real
       Estate Time-Sharing Transactions". The FASB issued this Statement as a
       result of the guidance provided in AICPA Statement of Position (SOP)
       04-2,"Accounting for Real Estate Time-Sharing Transactions". SOP 04-2
       applies to all real estate time-sharing transactions. Among other items,
       the SOP provides guidance on the recording of credit losses and the
       treatment of selling costs, but does not change the revenue recognition
       guidance in SFAS No. 66,"Accounting for Sales of Real Estate", for real
       estate time-sharing transactions. SFAS No. 152 amends Statement No. 66 to
       reference the guidance provided in SOP 04-2. SFAS No. 152 also amends
       SFAS No. 67, "Accounting for Costs and Initial Rental Operations of Real
       Estate Projects", to state that SOP 04-2 provides the relevant guidance
       on accounting for incidental operations and costs related to the sale of
       real estate time-sharing transactions. SFAS No. 152 is effective for
       years beginning after June 15, 2005, with restatements of previously
       issued financial statements prohibited. This statement is not applicable
       to the Company.

       In December 2004, the FASB issued SFAS No. 153,"Exchanges of Nonmonetary
       Assets," an amendment to Opinion No. 29,"Accounting for Nonmonetary
       Transactions". Statement No. 153 eliminates certain differences in the
       guidance in Opinion No. 29 as compared to the guidance contained in
       standards issued by the International Accounting Standards Board. The
       amendment to Opinion No. 29 eliminates the fair value exception for
       nonmonetary exchanges of similar productive assets and replaces it with a
       general exception for exchanges of nonmonetary assets that do not have
       commercial substance. Such an exchange has commercial substance if the
       future cash flows of the entity are expected to change significantly as a
       result of the exchange. SFAS No. 153 is effective for nonmonetary asset
       exchanges occurring in periods beginning after June 15, 2005. Earlier
       application is permitted for nonmonetary asset exchanges occuring in
       periods beginning after December 16, 2004. Management does not expect
       adoption of SFAS No. 153 to have a material impact on the Company's
       financial statements.

       In December 2004, the FASB issued SFAS No. 123(R),"Share-Based Payment".
       SFAS 123(R) amends SFAS No. 123,"Accountung for Stock-Based
       Compensation", and APB Opinion 25,"Accounting for Stock Issued to
       Employees." SFAS No.123(R) requires that the cost of share-based payment
       transactions (including those with employees and non-employees) be
       recognized in the financial statements. SFAS No. 123(R) applies to all
       share-based payment transactions in which an entity acquires goods or
       services by issuing (or offering to issue) its shares, share options, or
       other equity instruments (except for those held by an ESOP) or by
       incurring liabilities (1) in amounts based (even in part) on the price of
       the entity's shares or other equity instruments, or (2) that require (or
       may require) settlement by the issuance of an entity's shares or other
       equity instruments. This statement is effective (1) for public companies
       qualifying as SEC small business issuers, as of the first interim period
       or fiscal year beginning after December 15, 2005, or (2) for all other
       public companies, as of the first interim period or fiscal year beginning
       after June 15, 2005, or (3) for all nonpublic entities, as of the first
       fiscal year beginning after December 15, 2005. Management is currently
       assessing the effect of SFAS No. 123(R) on the Company's financial
       statement.

                                       36
<PAGE>

 (4)   FILM COSTS

       Film costs consist of the following:

                                                                    DECEMBER 31,
                                                                        2004
                                                                        ----
       In process or development                                    $   142,544
       Released, net of accumulated amortization of $17,183,912          33,861
                                                                    ------------
                                                                    $   176,405
                                                                    ============
       Net film costs at December 31, 2004 consisted of production, acquisition,
       interest and costs for the development of stories and scenarios. These
       costs were offset by accumulated amortization and were stated at the
       lower of cost or estimated net realizable value.

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

                  Net film costs, December 31, 2002             $     320,194
                  Additions                                            85,278
                  Amortization                                       (149,823)
                                                                --------------

                  Net film costs, December 31, 2003                   256,649
                  Additions (Decreases)                               (66,752)
                  Amortization                                        (13,492)
                                                                --------------
                      NET FILM COSTS, DECEMBER 31, 2004         $     176,405
                                                                ==============

       There are no capitalized interest costs included in each of the years
       ended December 31, 2004 and 2003.

       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 at least 100% of
       completed film costs within the next two years. The Company is not a
       distributor of films and therefore is generally not responsible for the
       payment of participations and residuals.

 (5)   PROPERTY AND EQUIPMENT

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

                                             USEFUL               DECEMBER 31,
                                              LIFE                   2004
                                              ----                   ----
       Machinery and equipment             4 to 5 years           $ 232,599
       Furniture and fixtures                10 years                26,273
       Leasehold improvements              3 to 4 years               3,267
                                                                  ----------
                                                                    262,139
       Less accumulated depreciation                               (259,548)
                                                                  ----------
                                                                  $   2,591
                                                                  ==========

                                       37
<PAGE>

       Depreciation expense was $4,476 and $8,633 for the year ended December
       31, 2004 and 2003, respectively.

  (6)   LOAN PAYABLE

       On April 15, 2003, the Company entered into an unsecured loan for
       $250,000 at prime plus 1% with City National Bank and the loan amount was
       increased to $350,000 on November 4, 2003. The loan matured on April 15,
       2004 and repayment of the outstanding amount was made in February 2004.
       On June 21, 2004 the Company entered into an unsecured loan for $200,000
       at prime plus 1% with City National Bank with a maturity date of June 15,
       2005. As of December 31, 2004 $87,962 had been borrowed under the loan.
       Subsequently, as of March 31, 2005 an additional amount of $37,038 has
       been borrowed for a total amount of $125,000.

 (7)   COMMITMENTS AND CONTINGENCIES

       LEASES

       The Company was obligated under a lease for office space, which required
       minimum annual rentals, plus increases based on real estate taxes and
       operating costs that expired in October 2004. The security deposit of
       $12,061 was applied to the last month of rent and the letter of credit in
       the amount of $21,000 issued by City National Bank was returned. The
       Company moved to office space in Culver City which has no lease or rental
       obligations.

       Rent expense was $72,796 and $123,797 for the years ended December 31,
       2004 and 2003, respectively.

       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 2004 and 2003, the Chairman
       deferred $74,000 and $122,000 of his compensation, respectively and the
       President deferred $0 and $121,000 of his compensation, respectively.

(8)    STOCKHOLDERS' DEFICIT

       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. During 2002 the plan has been amended to increase
       the authorized shares to 2,750,000 shares. 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, 2004 and 2003, 2,235,000 and 2,235,000 options
       were exercisable, respectively.

                                       38
<PAGE>

       Option activity under the Plan was as follows:
<TABLE>
                                                                                             WEIGHTED
                                                                                              AVERAGE
                                                        NUMBER OF         PRICE RANGE       EXERCISABLE
                                                          SHARES           PER SHARE           PRICE
                                                          ------           ---------           -----
<S>                                                     <C>               <C>   <C>             <C>
       Options Outstanding at December 31, 2003         2,235,000         .02 - 1.81            0.77
                                                        ---------         ----------            ----
       Options Outstanding at December 31, 2004         2,235,000         .02 - 1.81            0.77
                                                        ---------         ----------            ----
</TABLE>

       At December 31, 2004, the weighted average remaining contractual life of
       all outstanding options was 2.3 years.

       The following table summarizes information about options outstanding
       under the Plan at December 31, 2004:

<TABLE>
                                                                                    Weighted
                                                                                     average
                                                            Weighted                remaining
                   Number            Range of                average               contractual         Number
                 Outstanding      exercise prices        exercise price               life           exercisable
                 -----------------------------------------------------------------------------------------------
<S>               <C>                     <C>                <C>                     <C>              <C>
                  1,265,000               0.02               0.02                    2.5              1,265,000
                    500,000               1.70               1.70                    1.7                500,000
                    470,000               1.81               1.81                    2.5                470,000
                 -----------------------------------------------------------------------------------------------
                  2,235,000                                  0.77                    2.3              2,235,000
                 -----------------------------------------------------------------------------------------------

       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,
                                                                                      2004               2003
         Net loss
                      As reported                                               $    (56,242)   $    (884,497)
                      Add stock based employee compensation
                           expense included in net income, net of tax                      -                -
                      Deduct total stock based employee compensation
                           expense determined under fair value method
                           for all awards, net of tax                                      -                -
                                                                                -------------   --------------
                               Pro forma                                        $    (56,242)   $    (884,497)
                                                                                =============   ==============
</TABLE>

                                       39
<PAGE>

                  Earnings per common share
                      Basic - as reported           $     (0.02)    $     (0.16)
                      Basic - pro forma             $     (0.02)    $     (0.16)
                      Diluted - as reported         $     (0.02)    $     (0.16)
                      Diluted  pro forma            $     (0.02)    $     (0.16)

       Pro forma net loss reflects only options granted in the years ended
       December 31, 2004 and 2003. 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 fair value of each stock option granted is estimated on the date of
       grant using the Black-Scholes option pricing model with following
       assumptions used for grants in 2002.

                  Risk free interest rate                              4.59%
                  Expected volatility                                  100%
                  Expected life                                        3 years
                  Contractual life                                     5 years
                  Expected dividend yield                              0%
                  Fair value of options granted                        $0.02

       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 eash
       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
       remaining 550,000 shares until such time as all such remaining shares had
       been purchased 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.

                                       40
<PAGE>

(9)     INCOME TAXES

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

<TABLE>
                                                         DECEMBER 31,       DECEMBER 31,
                                                             2004               2003
                                                             ----               ----
<S>                                                      <C>                 <C>
            Federal                                      $        --         $       --
            State and local                                      800                800
                                                         -----------         ----------
                                                         $       800         $      800
                                                         ===========         ==========

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

                                                          December 31,       December 31,
                                                             2004               2003
                                                             ----               ----
       Tax (benefit)
         at Federal statutory rate of 34%                    (19,066)        $ (295,122)
       Increase (decrease) in taxes resulting from:
       State and local income taxes, net of
         federal income tax benefit                           (2,293)           (36,970)
       Nondeductible goodwill amortization                        --             75,198
       Other                                                   6,229              3,424
       Change in valuation allowance                          15,930            254,270
                                                         -----------         ----------
       Total                                             $       800         $      800
                                                         ===========         ==========
</TABLE>

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

                                                                    2004
                                                                    ----
       Deferred tax assets
       Accrued expenses and other                              $    654,573
       Stock options                                                107,500
       NOLs                                                       2,049,117
                                                               -------------
       Valuation allowance                                       (2,612,045)
                                                               -------------
       Total deferred tax assets                                    199,145
                                                               =============
       Deferred tax liabilities

       Deferred state tax liabilities                               199,145
                                                               -------------
       Total deferred tax liabilities                              (199,145)
                                                               -------------
       Net tax assets                                          $          0
                                                               =============

                                       41
<PAGE>

       For Federal and State income tax purposes, the Company has unused net
       operating loss carryforwards of approximately $4,766,280,and $4,648,000,
       as of December 31, 2004 and 2003, respectively expiring through 2021.


(10)   RELATED PARTY TRANSACTIONS

       TRANSACTIONS WITH GP STRATEGIES

       At December 31, 2004, 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.

       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 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, 2004 and 2003 were $103,000 and $271,000, respectively.
       Included in operating expenses were $36,000 and $78,000, of commissions
       to Janson Associates incurred in the years ended December 31, 2004 and
       2003, respectively. The President of Janson Associates is related to the
       Company's Chairman through marriage.

(11)   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
       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. A valuation was conducted in 2003
       and it was determined that the liability at December 31, 2004 would be
       $96,000. Accordingly, the Company has adjusted their liability as of
       December 31, 2004 to reflect the accrued balance based on the revised
       estimates.

                                       42
<PAGE>

       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.

(12)  SUBSEQUENT EVENTS (UNAUDITED)

       The Company is contemplating entering into a series of transactions
       pursuant to which the Company will sell a substantial portion of all the
       assets (subject to certain liabilities) that it holds through its Avenue
       Pictures, Inc. and its Wombat Productions, Inc. subsidiaries (such
       transactions are collectively referred to herein in the report as the
       "Sale Transaction"). These transactions may involve the Company's sale of
       these assets to companies affiliated with certain officers and directors
       of the Company. It is anticipated that the assets that may be sold by the
       Company will include:

         o        The Company's rights to certain theatrical and cable motion
                  picture and television projects (including rights under
                  various producer agreements, and all of Wombat Productions,
                  Inc.'s rights to the "Hollywood Collection" of documentary
                  programming);

         o        The Company's rights to various scripts and other literary
                  properties that may in the future become motion picture or
                  other entertainment projects;

         o        Various office equipment, furniture, film production
                  equipment, and fixtures currently used by the Company's Avenue
                  Pictures, Inc. and Wombat Productions, Inc. subsidiaries.

         If the Company consummates the potential Sale Transaction described
         above, it is contemplated that, among other things, (1) the Company
         will receive a portion of certain revenues generated by certain of the
         sold assets, (2) the Company will redeem and cancel a substantial
         number of its shares of outstanding common stock, and will cancel
         outstanding options to purchase a substantial number of shares of its
         common stock, held by certain of its officers and directors, and (3)
         the Company will issue replacement options to purchase shares of its
         common stock for a lesser number of shares and/or at higher exercise
         prices options.

         In connection with such potential Sale Transaction, the Company may
         experience a substantial management restructuring. Any such
         restructuring may include a loss of the services of one or more of the
         Company's key executive officers.

         No determination has been made regarding any new business(es) that the
         Company may develop or acquire following consummation of any Sale
         Transaction. Any such business(es) would differ substantially from the
         Company's historical business, and could involve substantial risks and
         uncertainties.

                                       43
<PAGE>


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

             None


ITEM 8A.     CONTROLS AND PROCEDURES

         Within 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on this
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective in timely alerting
them to material information required to be included in our periodic SEC
reports. It should be noted that the design of any system of controls is based
in part upon certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions, regardless of how remote.

            In addition, we reviewed our internal controls, and there have been
no significant changes in our internal controls or in other factors that could
significantly affect those controls subsequent to the date of their last
evaluation.


ITEM 8B.     OTHER INFORMATION

None

                                       44
<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            78          Chairman of the Board, President of Wombat
Cary Brokaw             53          President, Chief Executive and Financial
                                    Officer, and Director
Michael Feldman         37          Executive Vice President and Director
Sheri L. Halfon         48          Director
Michael Hammer          49          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 served as Senior Vice President, Chief Financial
Officer and Director of the Company since its formation on March 7, 1997. She
resigned as Chief Financial Officer as of January 1, 2004 and the Company
currently consults with her on financial and business affairs matters. 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.

                                       45
<PAGE>

         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. He also served
as Vice President and as a member of the Board of Directors and Executive
Committee for Occidental, from 1985 through 1991. 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.

                                       46
<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 2004,
2003, and 2002.

<TABLE>

                           SUMMARY COMPENSATION TABLE


                                                                         LONG-TERM
                                                                       COMPENSATION
                                              ANNUAL COMPENSATION         AWARDS
                                             ---------------------         STOCK               ALL OTHER
                                             SALARY          BONUS        OPTIONS            COMPENSATION
NAME AND PRINCIPAL POSITION          YEAR      ($)            ($)           (#)                   ($)
---------------------------          ----      ---            ---           ---                   ---
<S>                                  <C>     <C>                          <C>
Cary Brokaw                          2004    398,000                      1,000,000
President, Chief Executive           2003    450,000(1)
And Financial Officer and            2002    450,000
Director

Gene Feldman                         2004    150,000(2)                     100,000
Chairman of the Board,               2003    150,000(2)
President of Wombat                  2002    150,000
</TABLE>

___________________
(1) Mr. Brokaw's salary for the year ended 12/31/03 pursuant to his employment
agreement was $450,000, of which $121,154 has been deferred.

(2) Mr. Feldman's salary for the years ended 12/31/04 and 12/31/03 was $150,000
of which $74,400 and $121,800 has been deferred, respectively.

OPTION GRANTS IN 2004

 There were no options granted to executive officers in 2004.

                                       47
<PAGE>

         The following table sets forth information concerning the value of
unexercised options as of December 31, 2004 held by the executives named in the
Summary Compensation Table above. No options were exercised during 2004.

<TABLE>

                               AGGREGATED OPTION EXERCISES AT DECEMBER 31, 2004
                                          AND YEAR-END OPTION VALUES

                             NUMBER OF SECURITIES                             VALUE OF UNEXERCISED
                            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              175,000(E)                 0(U)                 100,000(E)               $0(U)
Cary Brokaw             1,400,000(E)                 0(U)               1,000,000(E)                0(U)

</TABLE>
__________
(1) Calculated based on the closing price of the Common Stock $.11 as reported
by the OTCBB on December 31, 2004.

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
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


                                       48
<PAGE>

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
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.

                                       49
<PAGE>

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 31, 2005, are indicated below:

<TABLE>

Name and Address                                  Amount and Nature
of Beneficial Owner                           of Beneficial Ownership*           Percent of Class
-------------------                           ------------------------           ----------------
<S>                                                <C>                                     <C>
Cary Brokaw                                        2,811,350(1)                            49%
c/o Avenue Pictures, Inc.
10202 W. Washington Blvd.
Culver City, CA 90232

GP Strategies Corporation                          1,067,900                               20%
777 Westchester Avenue, 4th Floor
White Plains, NY  10604

Hammer International Foundation                    1,080,192(2)                            18%
11111 Santa Monica Blvd, 12th Floor
Los Angeles, CA  90025

</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, 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
and vested options to purchase up to 1,000,000 shares of common stock of the
corporation at a price of $0.02 per share, exercisable until May 15, 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 and
vested options to purchase up to 100,000 shares of the common stock of the
corporation at a price of $0.02 per share, exercisable until May 15, 2007. Mr.
Hammer, a director of the Company, disclaims beneficial ownership of these
shares, except to the extent of his pecuniary interest in these shares.

                                       50
<PAGE>


          SECURITY OWNERSHIP OF DIRECTORS AND NAMED EXECUTIVE OFFICERS

         The following table sets forth, as of March 30, 2005, 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                            341,700(2)                      6

Cary Brokaw                           2,811,350(3)                     49

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

Sheri L. Halfon                         140,100(6)                      3

Michael Hammer                        1,080,192(7)                     18

Directors and Executive               4,615,342(8)                     70
  Officers as a Group
  (5 persons)
__________

(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 and vested options to purchase up to 100,000
shares of common stock of corporation at a price of $0.02 per share exercisable
until May 15, 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.

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<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 and vested options to purchase up to 65,000 shares of common stock of the
corporation at a price of $0.02 per share, exercisable until May 15, 2007.

(7) See footnote 2 to Principal Stockholders table.

(8) Includes 2,050,000 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 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
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


                                       52
<PAGE>

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.

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<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
                      during the last quarter of the period covered by this
                      report.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

(1)  Audit Fees

The aggregate fees billed for professional services rendered by Singer Lewak
Greenbaum & Goldstein, LLP for the audit of the Registrant's annual financial
statements and review of the financial statements included in the Registrant's
Forms 10-QSB or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for fiscal years
2004 and 2003 were $48,000 and $48,000, respectively.

(2)  Audit Related Fees

The aggregate fees billed for professional services rendered by Singer Lewak
Greenbaum & Goldstein, LLP for audit related fees for fiscal years 2004 and 2003
were $0 and $0, respectively.

(3)  Tax Fees

The aggregate fees billed for professional services rendered by Singer Lewak
Greenbaum & Goldstein, LLP for the preparation of the Registrant's tax returns,
including tax planning for fiscal years 2004 and 2003 were $0 and $0,
respectively.

(4)  All Other Fees

The aggregate fees billed for professional services rendered by Singer Lewak
Greenbaum & Goldstein, LLP for all other services for fiscal years 2004 and 2003
were $0 and $0, respectively.

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<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.

                                              /S/ Cary Brokaw
                                              ---------------------------------
                                              Cary Brokaw
                                              President and Chief Executive and
                                              Financial Officer

Dated:   March 31, 2005

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


/S/ Gene Feldman
-------------------------
Gene Feldman                   Chairman of the Board


/S/ Cary Brokaw
-------------------------
Cary Brokaw                    President, Chief Executive and Financial Officer
                               and Director

/S/ Sheri L. Halfon
-------------------------
Sheri L. Halfon                Director


/S/ Michael D. Feldman
-------------------------
Michael D. Feldman             Executive Vice President and Director


/S/ Michael Hammer
-------------------------
Michael Hammer                 Director


Dated: April 15, 2005


                                       55
<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 Corp, 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. ++
                                       i
<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 Jan. 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. ++

                                       ii
<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 Singer Lewak Greenbaum & Goldstein LLP

         31       Certification

         32       Written Statement of Cary Brokaw Pursuant to 18 U.S.C. ss.1350

++  Previously filed.

                                      iii