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, 2002

                                       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)

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

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

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

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

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

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

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

State issuer's revenues for its most recent fiscal year:  $1,516,083

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

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

Class                                             Outstanding at March 30, 2003
-----                                             -----------------------------
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.................................23

         Item 8.    Changes In and Disagreements with Accountants
                    on Accounting and Financial Disclosure...............43

PART III

         Item 9.    Directors, Executive Officers, Promoters
                    and Control Persons; Compliance with
                    Section 16(a) of the Exchange Act....................44

         Item 10.   Executive Compensation...............................46


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

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

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

         Item 14.   Controls and Procedures..............................54



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                                     PART I.

ITEM 1.       DESCRIPTION OF BUSINESS

Organization

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

Share Exchange and Reincorporation

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

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

General

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

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Spike Lee's first film, She's Gotta Have It. Mr. Brokaw is responsible for the
production and release of Gus Van Sant's Drugstore Cowboy, James Foley's After
Dark, My Sweet, Michael Lindsay-Hogg's The Object of Beauty, Jane Campion's
Sweetie, and Jim Sheridan's The Field. Mr. Brokaw was the producer of Robert
Altman's The Player, the celebrated and successful comedy which was nominated
for five Academy awards, including Best Picture. Mr. Brokaw also produced Robert
Altman's Short Cuts, which was nominated for several Academy Awards. Mr. Brokaw
also produced Restoration, the Academy-Award winning and critically acclaimed
epic adventure directed by Michael Hoffman and released by Miramax Films. In
1996, Mr. Brokaw produced Sony Pictures' Voices from a Locked Room, directed by
Malcolm Clarke and starring Jeremy Northam. In 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 has been the subject of litigation
between the bank that financed it and the insurer who insured the bank from
loss. The Company does not currently know when or if the film will be licensed
for distribution.

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


Feature Films

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

         In March 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

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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
national release in August 2003.

         Phobic, also in development with Intermedia Films, is a highly charged
thriller written by Chris Bertolet about a former New York homicide detective
drawn back into the search for a serial killer who kills his victims based on
their worst fear. Intermedia Films will co-finance the film and license it
internationally. The Company is currently in discussion with a potential
director.

         Wages of Sin is a highly suspenseful thriller written by William Brown
and Antonella Osborne about a celebrated defense attorney whose life is turned
upside down when he is perfectly framed for his ex-wife's murder. Stuart Baird
(Executive Decision) is attached to direct and the Company is in discussions
with a major studio to finance the film.

         The Company is developing A Life in the Day of Tom Rowan with
Constantin Films. The Company is also developing The Moviegoer, adapted by
acclaimed director Terrence Malick and based on the renowned novel by Walker
Percy to be directed by Tom Dey (Shanghi Noon), as well as The Courier, written
by Michael Brandt and Derek Haas with Jan DeBont (Speed, Twister) attached to
direct which will be financed by Splendid Films.

         The Company also has approximately 10 other feature film projects
currently in development including Everybody Was So Young, The Tiny Problems of
White People, Gulf Coast, Living Dangerously and Keys to Jones Harper. However,
no assurance can be given as to when or if any of these projects will be
completed.

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

         The Company has also successfully produced many made-for-television
movies and movies for cable television. Movies produced for television include:
In The Eyes of a Stranger (CBS), See Jane Run (ABC), A Stranger in Town (CBS),
The Almost Perfect Bank Robbery (CBS), Two Mothers for Zachary (ABC) and Tell Me
No Secrets (ABC).

         The Company currently has approximately 4 other television movies and
mini-series in active development including Special Occasions (CBS), based on
the play by Bernard Slade and The Chimes written by Mark Medoff based on Charles
Dickens novella, The Chimes of Christmas.

         For cable television, the Company produced Amelia Earhart: The Final
Flight for TNT, starring Diane Keaton and Rutger Hauer, Path To Paradise: The

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Untold Story of the World Trade Center Bombing for HBO, starring Peter Gallagher
and Marcia Gay Hardin, and The Timeshifters for TBS.

         In March 2001, the Company entered into a two year First Look Cable
Television Production Agreement with HBO Films. Under this agreement, HBO
contributes to the Company's overhead and provides enhanced producing fees for
films produced for HBO. The Company 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. Directed by the Academy Award winning director
Mike Nichols, Wit stars Emma Thompson and Christopher Lloyd. The movie premiered
in March 2001 and earned seven Emmy nominations. Wit won three Emmy Awards
including the award for Best Made For Television Movie.

         The Company also produced Path to War, an original movie for HBO,
starring Michael Gambon, Alec Baldwin and Donald Sutherland. Path to War, which
tells the story of the tragic escalation of the Vietnam War by the Johnson
administration, was directed by the acclaimed John Frankenheimer. The film
premiered in May 2002 and received Emmy nominations including Best Made for
Television Movie.

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

          The Company recently produced Normal for HBO which was written and
directed by Jane Anderson. The film stars Jessica Lange and Tom Wilkinson and
premiered at this year's Sundance Film Festival. The film had its broadcast
premiere on March 16th 2003.

         With HBO, the Company is developing movies based on Wayward Angel,
written by George Wethern and Vincent Colnett, Vita and Virginia, written by
Eileen Atkins and based on the relationship between Virginia Woolf and Vita
Saville West, and Murder of Napoleon, based on the novel by David Hapgood and
Ben Weider which will be co-produced with Mike Nichols.

         The Company is also currently developing several television series
including The Four Horsemen, The Swamp and Witness X.

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

         Typically, the domestic broadcaster of a made-for-television movie pays
a license fee which entitles it to a limited number of airings of the movie over
a designated period of time (generally 2-5 years). The initial network/cable

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

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

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

One Hour-Profiles
The Hollywood Collection

         Through its subsidiary, Wombat Productions, the Company also produces
one-hour profiles of Hollywood's most important stars which have been aired by
PBS and major cable networks in the United States and by television stations
around the world. With the exception of Vivien Leigh: Scarlett And Beyond, all
programs are copyrighted and owned by the Company and available for license to
all media worldwide through Janson Associates, Inc. ("Janson"), with whom the
company has entered into a distribution arrangement. Since 1982, the Company has
produced the following hour-length programs known as The Hollywood Collection:

"Hollywood's Children"                    "Audrey Hepburn Remembered"
"The Horror Of It All"                    "Mae West. And The Men Who Knew Her"
"Ingrid"                                           "The Story Of Lassie"
"Marilyn Monroe: Beyond The Legend"       "Charlton Heston: For All Seasons"
"Steve McQueen: Man On The Edge"          "Roger Moore: A Matter Of Class"
"Grace Kelly: The American Princess"      "Yul Brynner: The Man Who Was King"
"Cary Grant: The Leading Man"             "Ingrid Bergman Remembered"
"Gregory Peck: His Own Man"               "Jack Lemmon: America's Everyman"

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"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
"Michael Caine: Breaking The Mold"            Heels"
"Shirley Temple: America's Little         "Barbara Stanwyck: Straight Down
    Darling"                                  The Line"
"Clint Eastwood: the Man From Malpaso"**  "Gary Cooper: The Face Of A Hero"
"Alan Ladd: The True Quiet Man"           "Walter Matthau: Diamond In The Rough"

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

Other Entertainment Profiles

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

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

Distribution  Arrangement

         Pursuant to a Distribution Agreement (the "Distribution Agreement"),
dated July 1, 1995 and amended on April 28, 1996, between the Company and
Janson, Janson was granted the sole and exclusive right, subject to the
production arrangement, to license substantially all of the Company's Hollywood
Collection film library for all forms of television and video worldwide for a
period of ten years, subject to automatic renewals in three-year increments. In
consideration of Janson's services under the Distribution Agreement, Janson is
entitled to retain a distribution fee, ranging from 10% to 35%, depending upon
whether such distribution is via domestic television network, syndication,
international television, or home video, of the gross receipts from the
licensing of each program. In addition, Janson is reimbursed for certain
distribution expenses out of gross receipts with the remaining balance remitted
to the Company as program licensor.

Business Approach

         As an independent producer of feature films and television programming,
the Company does not have sufficient capital to independently finance its own
productions. Accordingly, most of its financial resources are devoted to
financing development activities which include the acquisition of underlying
literary works such as books, plays, or newspaper articles and commissioning of

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screenplays based upon such underlying literary works. A key element in the
success of the development process is Mr. Brokaw's reputation in the
entertainment business and his access to and relationships with creative talent.

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

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

         The Company's primary goal with respect to its documentary films is
significant and sustained growth through production activity and greater
exploitation of its wholly owned programs. Further revenues and profitability
will depend on the Company's ability to secure financing for new programs
through its present relationship with Bravo or other cable or television entity.
In order to provide maximum exposure of the twenty-eight titles of The Hollywood
Collection available in the home-video market in the United States and Canada,
Wombat entered into an agreement with MPI, one of the premiere home-video
companies for documentary and performance programs. In June of 2000, the entire
available collection was offered to the vast special-interest market via
home-video stores, MPI's 800 number provided on its web sites, www.mpimedia.com
and www.hollywoodcollection.com, which are also connected through the Yahoo! and
Amazon web sites.

Competition

         The motion picture industry is extremely competitive. The competition
comes from both companies within the same business and companies in other
entertainment media which create alternative forms of leisure entertainment. The

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

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

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

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 54% and 31% of its total
revenue for the year ended December 31, 2002 from HBO related to the First Look
Deal and the made for cable television movies Angels in America and Normal and
from Intermedia for the theatrical motion picture Mindhunters, respectively.


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Employees

         The Company has 6 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.

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

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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

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production companies may separately license theatrical, home video, television
and all other distribution rights among several licensees.

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

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

Motion Picture Distribution

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

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

<PAGE>

released in one or more other international markets. A motion picture is
typically available for distribution during its initial distribution cycle as
follows:

<TABLE>

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

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

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

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


<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

<PAGE>

driven primarily from the growth of television abroad. The increase in foreign
television values and foreign revenues is likely to continue. Although the
increased level of foreign values affects the revenues of most films, the effect
is not uniform. Action films and films with major stars benefit most from
foreign revenues; films with uniquely American themes with unknown actors
benefit the least.

Regulation

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

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

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

         United States television stations and networks, as well as foreign
governments, impose additional restrictions on the content of motion pictures

<PAGE>

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

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

ITEM 2.       DESCRIPTION OF PROPERTY

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

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

ITEM 3.  LEGAL PROCEEDINGS

      The Company is not involved in any material legal proceedings.

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

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


<PAGE>


                                     PART II

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

                          MARKET PRICE OF COMMON STOCK

         The Company's Common Stock is traded on the OTCBB on April 25, 2001
under the symbol "PIXG". The following table sets forth the high and low sales
prices for the Common Stock on the OTCBB for the years ended December 31, 2002
and on the American Stock Exchange for the year ended December 31, 2001.

             2002                        High Sale                   Low Sale
             ----                        ---------                   --------
          1st Quarter                      $0.75                       $0.20
          2nd Quarter                      $0.28                       $0.02
          3rd Quarter                      $0.16                       $0.03
          4th Quarter                      $0.06                       $0.02

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

         As of March 30, 2003, there were 163 holders of record of Common Stock.

         On March 26, 2003, the closing price of the Common Stock on the OTCBB
was $0.02.

                                 DIVIDEND POLICY

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


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

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


<PAGE>

Liquidity and Capital Resources

         At December 31, 2002, the Company had $358,000 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 $8,062,000 through December
31, 2002. The Company's continuation as a going concern is dependent on its
ability to ultimately attain profitable operations and positive cash flows from
operations. The Company's management believes that it can satisfy its working
capital needs based on its estimates of revenues and expenses, together with
improved operating cash flows, as well as additional funding whether from
financial markets, other sources or other collaborative arrangements. The
Company believes it will have sufficient funds available to continue to exist
through the next year, although no assurance can be given in this regard.
Insufficient funds will require the Company to scale back its operations. The
Independent Auditor's Report dated March 28, 2003 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.

Results of Operations

         For the year ended December 31, 2002 the Company had a net loss before
income taxes of $634,000 as compared to a loss of $1,688,000 for the year ended
December 31, 2001.

Revenues

         Revenues for the year ended December 31, 2002 were $1,516,000 as
compared to $887,000 for the year ended December 31, 2001. Revenues for the year
ended December 31, 2002 were derived primarily from HBO related to producer fees
for Angels in America, Normal and the HBO First Look Deal, from Intermedia for
the theatrical film Mindhunters as well as from licensing of its programming in
secondary markets through Janson Associates. Revenues for the year ended
December 31, 2001 were derived primarily from producer fees for Path to War and
the HBO First Look Deal and licensing of rights to its programming in secondary
markets through Janson Associates.

Film Production Costs

         Film production costs for the year ended December 31, 2002 were
$145,000 as compared to $361,000 for the year ended December 31, 2001. The
decrease in film production costs was primarily due to the reserves of
approximately $198,000 taken on development costs during 2001.

<PAGE>

Selling, General, and Administrative

         Selling, general and administrative expenses ("SG&A") for the twelve
months ended December 31, 2002 and 2001 were $1,316,000 and $1,652,000,
respectively. The remaining SG&A costs for 2002 and 2001 relate to salaries,
occupancy costs and professional fees.

Income Taxes

         For the years ended December 31, 2002 and 2001, the Company had income
tax expense of $685 and $7,650, respectively.

Cumulative Effect of a Change in Accounting Principle

         Pursuant to SFAS 142, we completed the transitional analysis of
goodwill impairment as of September 30, 2002 and recorded an impairment of
$688,827 as the cumulative effect of a change in accounting principle for the
year ended December 31, 2002.

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:

         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

<PAGE>

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 $560,000 as of December 31, 2002.

         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. If actual cash flow performance does not meet these
expectations due to factors cited above, any resulting potential impairment
could adversely affect reported goodwill asset values and earnings.

         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

<PAGE>

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, 2002.

Recent Accounting Developments

         In April 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of
FASB Statement No. 13, and Technical Corrections." SFAS No. 145 updates,
clarifies, and simplifies existing accounting pronouncements. This statement
rescinds SFAS No. 4, which required all gains and losses from extinguishment of
debt to be aggregated and, if material, classified as an extraordinary item, net
of related income tax effect. As a result, the criteria in Accounting Principles
Board No. 30 will now be used to classify those gains and losses. SFAS No. 64
amended SFAS No. 4 and is no longer necessary as SFAS No. 4 has been rescinded.
SFAS No. 44 has been rescinded as it is no longer necessary. SFAS No. 145 amends
SFAS No. 13 to require that certain lease modifications that have economic
effects similar to sale-leaseback transactions be accounted for in the same
manner as sale-lease transactions. This statement also makes technical
corrections to existing pronouncements. While those corrections are not
substantive in nature, in some instances, they may change accounting practice.
The Company does not expect adoption of SFAS No. 145 to have a material impact,
if any, on its financial position or results of operations.

         In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." This statement
requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. Under EITF Issue 94-3, a
liability for an exit cost, as defined, was recognized at the date of an
entity's commitment to an exit plan. The provisions of this statement are
effective for exit or disposal activities that are initiated after December 31,
2002 with earlier application encouraged. The Company does not expect adoption
of SFAS No. 146 to have a material impact, if any, on its financial position or
results of operations.

         In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions." SFAS No. 147 removes the requirement in SFAS No. 72 and
Interpretation 9 thereto, to recognize and amortize any excess of the fair value
of liabilities assumed over the fair value of tangible and identifiable
intangible assets acquired as an unidentifiable intangible asset. This statement
requires that those transactions be accounted for in accordance with SFAS No.

<PAGE>

141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." In addition, this statement amends SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," to include certain financial
institution-related intangible assets. The Company does not expect adoption of
SFAS No. 147 to have a material impact, if any, on its financial position or
results of operations.

         In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure," an amendment of SFAS No.
123. SFAS No. 148 provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require more prominent and more frequent disclosures in
financial statements about the effects of stock-based compensation. This
statement is effective for financial statements for fiscal years ending after
December 15, 2002. SFAS No. 148 will not have any impact on the Company's
financial statements as management does not have any intention to change to the
fair value method.


Forward-Looking Statements

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





<PAGE>




ITEM 7.                                         FINANCIAL STATEMENTS


                                                                            Page
Avenue Entertainment Group, Inc.

        Independent Auditor's Report                                        24

        Consolidated Balance Sheet as of December 31, 2002                  25

        Consolidated Statements of Operations for the years ended
          December 31, 2002 and 2001                                        26

        Consolidated Statement of Stockholders' Equity (Deficit) for the
          years ended December 31, 2002 and 2001                            27

        Consolidated Statements of Cash Flows for the years ended
          December 31, 2002 and 2001                                        28

        Notes to Consolidated Financial Statements                          30



<PAGE>


                          INDEPENDENT AUDITOR'S REPORT

        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, 2002, and
        the related consolidated statements of operations, stockholders' equity
        (deficit), and cash flows for the two years in the period ended December
        31, 2002. These financial statements are the responsibility of the
        Company's management. Our responsibility is to express an opinion on
        these financial statements based on our audit.

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

        In our opinion, the financial statements referred to above present
        fairly, in all material respects, the consolidated financial position of
        Avenue Entertainment Group, Inc. and subsidiaries as of December 31,
        2002, and the consolidated results of their operations and their
        consolidated cash flows for each of the two years in the period ended
        December 31, 2002 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, 2002, the
        Company incurred a net loss of $634,490. In addition, the Company had an
        accumulated deficit of $8,061,882 as of December 31, 2002. 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 7, 2003


<PAGE>


                        Avenue Entertainment Group, Inc.
                           CONSOLIDATED BALANCE SHEET

                                DECEMBER 31, 2002

                                     Assets

Cash                                                           $    358,216
Accounts receivable, net of allowance of $10,000                     54,935
Film costs, net                                                     320,194
Property and equipment, net                                          18,922
Goodwill, net of accumulated amortization of $2,584,027             221,172
Other assets                                                         17,254
                                                               ------------

Total assets                                                   $    990,693
                                                               ============

                      Liabilities and Stockholders' Deficit

Accounts payable and accrued expenses                             $ 512,692
Deferred income                                                     402,145
Deferred compensation                                               918,279
Due to related party                                                146,597
                                                               -------------

Total liabilities                                                 1,979,713
                                                                -----------

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                                             (8,061,882)
 Treasury stock, at cost                                             (3,687)
 Note receivable for common stock                                  (150,000)
                                                               -------------

Total stockholders' deficit                                        (989,020)
                                                               -------------

Total liabilities and stockholders' deficit                     $   990,693
                                                                 ===========

          See accompanying notes to consolidated financial statements.


<PAGE>


                        AVENUE ENTERTAINMENT GROUP, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>

<CAPTION>

                                                               Years ended December 31,
                                                         2002                    2001
                                                         ----                    ----

<S>                                                  <C>                      <C>
Operating revenues                                   $  1,516,083             $    887,240
                                                     ------------             ------------

Costs and expenses:
  Film production costs                                   144,719                  361,151
  Selling, general and
   administrative expenses                              1,316,342                1,651,841
  Impairment loss on goodwill                                 --                   562,357
                                              -------------------           --------------

Total costs and expenses                                1,461,061                2,575,349
                                                    -------------            -------------

Profit (loss) before income tax                            55,022               (1,688,109)

Income tax expense                                            685                    7,650
                                                -----------------         ----------------

Income (loss) before cumulative effect
     of a change in accounting principle                   54,337               (1,695,759)

Cumulative effect of change in accounting
     principle - goodwill valuation under
     SFAS 142                                            (688,827)                      --
                                                   ---------------     -------------------

Net profit (loss)                                   $    (634,490)            $ (1,695,759)
                                                    ==============            ============

Basic and diluted loss per share:
   Income (loss) before cumulative effect
      of a change in accounting principle        $            0.01             $       (0.32)
   Cumulative effect of a change in
      accounting principle - goodwill
      valuation under SFAS 142                               (0.13)                   --
                                                   ------------------          ---------------
                                                 $           (0.12)            $       (0.32)
                                                   ==================          ==============

Weighted average common
   shares outstanding                                     5,371,030                5,296,235
                                                     ==============            =============

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



<PAGE>


                        AVENUE ENTERTAINMENT GROUP, INC.

            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

                     YEARS ENDED DECEMBER 31, 2002 AND 2001


<TABLE>

<CAPTION>
                                 Common Stock                        Additional                        Stock
                                   Number of              Treasury     Paid-in     Accumulated      subscription
                                   Shares        Amount   Stock        capital     Deficit          receivable          Total
-----------------------------------------------------------------------------------------------------------------------------------
<S>               <C> <C>         <C>           <C>        <C>      <C>            <C>              <C>                 <C>
Balance, December 31, 2000        4,591,030     $ 45,910   (3,687)  $ 6,976,639    $ (5,731,633)    $  (150,000)        $1,137,229
-----------------------------------------------------------------------------------------------------------------------------------

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

Net loss                                                                               (634,490)                          (634,490)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2002        5,371,030       53,710   (3,687)    7,172,839      (8,061,882)       (150,000)          (989,020)
----------------------------------------------------------------------------------------------------------------------------------


</TABLE>

          See accompanying notes to consolidated financial statements.


<PAGE>




                        AVENUE ENTERTAINMENT GROUP, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>


                                                               Years ended December 31,
                                                            2002                  2001
                                                            ----                  ----

Cash flows from operating activities
<S>                                                      <C>                     <C>
     Net loss                                            $   (634,490)           (1,695,759)
Adjustments to reconcile net loss to net
     cash used in operating activities:
     Depreciation                                              19,882                18,025
     Amortization - film production costs                     120,058               379,746
     Impairment loss on goodwill                                    0               562,357
     Amortization - goodwill                                        0               294,633
      Cumulative effect of change in accounting
      principle-goodwill valuation under SFAS 142             688,827                     0

Changes in assets and liabilities affecting net loss:
     Accounts receivable                                      172,859              (114,058)
     Film costs                                               (63,140)              (80,268)
     Other assets                                               1,086                  (701)
     Accounts payable and accrued expenses                    (96,886)              (98,339)
     Deferred compensation                                    105,320               293,099
     Deferred Income                                           53,437               206,709
     Due to related party                                           0                  (449)
     Income tax receivable                                          0                18,632
                                                      ---------------       ---------------

              Net cash provided by (used in)
               operating activities                           366,953              (216,373)

Cash flows from investing activities:
     Purchase of equipment                                     (1,466)               (3,267)
                                                         -------------       ---------------

     Net cash used in investing activities                     (1,466)               (3,267)
                                                         --------------      ---------------

                                   (Continued)

</TABLE>


<PAGE>


                        AVENUE ENTERTAINMENT GROUP, INC.

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>
                                                               Years ended December 31,
                                                            2002                  2001
                                                            ----                  ----

Cash flows from financing activities:
   Proceeds from the issuance of
<S>                                                      <C>                   <C>
   common stock                                          $          0          $     50,000
   Loan payable                                               (80,000)               80,000
                                                          ------------         -------------

       Net cash (used in) provided by
          financing activities                                (80,000)              130,000

       Net increase (decrease) in cash                        285,487               (89,640)

Cash at beginning of year                                      72,729               162,369
                                                          -----------          ------------

Cash at end of year                                        $  358,216          $     72,729
                                                           ==========          ============


Supplemental cash flow information:
Cash paid during the year for:
     Interest                                             $     3,819         $       2,407
                                                          ===========         =============
     Income taxes                                         $        685        $       1,987
                                                          ============        =============

</TABLE>

Supplemental schedule of non-cash investing
   and financing activities:

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






          See accompanying notes to consolidated financial statements.


<PAGE>


                        AVENUE ENTERTAINMENT GROUP, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 (1)   Description of Business

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

  (2)   Going Concern

       The accompanying financial statements have been prepared on a going
       concern basis, which contemplates the realization of assets and the
       satisfaction of liabilities in the normal course of business. Revenues
       have been insufficient to cover costs of operations for the year ended
       December 31, 2002. The Company has a working capital deficiency and has
       an accumulated deficit of $8,061,882 through December 31, 2002. The
       Company's continuation as a going concern is dependent on its ability to
       ultimately attain profitable operations and positive cash flows from
       operations. The Company's management believes that it can satisfy its
       working capital needs based on its estimates of revenues and expenses,
       together with improved operating cash flows, as well as additional
       funding whether from financial markets or other sources. The Company
       believes it will have sufficient funds available to continue to exist
       through the next year, although no assurance can be given in this regard.
       The accompanying financial statements do not include any adjustments that
       may result from the Company's inability to continue as a going concern.

(3)      Acquisition

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

(4)      Summary of Significant Accounting Policies

       Principles of Consolidation

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


<PAGE>

       Unclassified Consolidated Balance Sheet

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

       Cash and Cash Equivalents

       Cash and cash equivalents include all highly liquid debt instruments with
       original maturities of three months or less. Included in cash and cash
       equivalents is restricted cash amounting to $42,000 at December 31, 2002.

       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"),

<PAGE>

       "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.

       Effective January 1, 2002, the Company adopted SFAS 142 and ceased
       amortization of goodwill recorded in business combinations prior to June
       30, 2001. The Company recorded amortization expenses of $294,633 on
       goodwill during the year ended December 31, 2001. The Company currently
       estimates that application of the non-amortization provisions of SFAS 142
       will reduce amortization expense and decrease net loss by approximately
       $303,333 during the year ended December 31, 2002. The Company evaluates
       the remaining useful lives of these intangibles on an annual basis to
       determine whether events or circumstances warrant a revision to the
       remaining period of amortization.

       Pursuant to SFAS 142, 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.

       Impairment of Long-Lived Assets

       During the year ended December 31, 2001, the Company reviewed its
       long-lived assets for impairment in accordance with SFAS 121, "Accounting
       for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
       Disposed Of" 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. The Company recognized impairment
       losses in 2001 on goodwill recorded in connection with its acquisition of
       Avenue Pictures, Inc. and LCA of $422,470 and $139,887, respectively. The
       goodwill related to LCA was considered to be fully impaired since the
       Company determined that the rights to certain film titles that it had
       acquired from LCA had no future value.

       Fair Value of Financial Instruments

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


<PAGE>

       Revenue Recognition

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

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

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

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

       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

<PAGE>

       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, 2002 and 2001, 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:

                                                             2002        2001
                                                         ---------     ---------
         Options outstanding under the Company's
             stock option plan                           2,235,000      985,000
         Warrant issued in conjunction with a
             private placement                             500,000      500,000


       Concentration of Credit Risk

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

       Two customers accounted for 54%, and 31% of the Company's net sales for
       the year ended December 31, 2002. At December 31, 2002, amounts due from
       these customers were 46%, and 0% of accounts receivable, respectively.

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


       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

<PAGE>

       Opinion No. 25 and provide pro forma net income and pro forma earnings
       per share disclosures for employee stock option grants made in 1995 and
       future years as if the fair-value-based method defined in SFAS No. 123
       had been applied. The Company has elected to continue to apply the
       provisions of APB Opinion No. 25 and provide the pro forma disclosure
       provisions of SFAS No. 123. Compensation cost will continue to be
       recorded for options granted below fair market value.

       Recently Issued Accounting Pronouncements

       In April 2002, the Financial Accounting Standards Board ("FASB") issued
       SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment
       of FASB Statement No. 13, and Technical Corrections." SFAS No. 145
       updates, clarifies, and simplifies existing accounting pronouncements.
       This statement rescinds SFAS No. 4, which required all gains and losses
       from extinguishment of debt to be aggregated and, if material, classified
       as an extraordinary item, net of related income tax effect. As a result,
       the criteria in Accounting Principles Board No. 30 will now be used to
       classify those gains and losses. SFAS No. 64 amended SFAS No. 4 and is no
       longer necessary as SFAS No. 4 has been rescinded. SFAS No. 44 has been
       rescinded as it is no longer necessary. SFAS No. 145 amends SFAS No. 13
       to require that certain lease modifications that have economic effects
       similar to sale-leaseback transactions be accounted for in the same
       manner as sale-lease transactions. This statement also makes technical
       corrections to existing pronouncements. While those corrections are not
       substantive in nature, in some instances, they may change accounting
       practice. The Company does not expect adoption of SFAS No. 145 to have a
       material impact, if any, on its financial position or results of
       operations.

       In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
       Associated with Exit or Disposal Activities." This statement addresses
       financial accounting and reporting for costs associated with exit or
       disposal activities and nullifies Emerging Issues Task Force ("EITF")
       Issue No. 94-3, "Liability Recognition for Certain Employee Termination
       Benefits and Other Costs to Exit an Activity (including Certain Costs
       Incurred in a Restructuring)." This statement requires that a liability
       for a cost associated with an exit or disposal activity be recognized
       when the liability is incurred. Under EITF Issue 94-3, a liability for an
       exit cost, as defined, was recognized at the date of an entity's
       commitment to an exit plan. The provisions of this statement are
       effective for exit or disposal activities that are initiated after
       December 31, 2002 with earlier application encouraged. The Company does
       not expect adoption of SFAS No. 146 to have a material impact, if any, on
       its financial position or results of operations.

       In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
       Financial Institutions." SFAS No. 147 removes the requirement in SFAS No.
       72 and Interpretation 9 thereto, to recognize and amortize any excess of
       the fair value of liabilities assumed over the fair value of tangible and
       identifiable intangible assets acquired as an unidentifiable intangible
       asset. This statement requires that those transactions be accounted for
       in accordance with SFAS No. 141, "Business Combinations," and SFAS No.
       142, "Goodwill and Other Intangible Assets." In addition, this statement
       amends SFAS No. 144, "Accounting for the Impairment or Disposal of
       Long-Lived Assets," to include certain financial institution-related
       intangible assets. The Company does not expect adoption of SFAS No. 147
       to have a material impact, if any, on its financial position or results
       of operations.


<PAGE>

       In December 2002, the FASB issued SFAS No. 148, "Accounting for
       Stock-Based Compensation - Transition and Disclosure," an amendment of
       SFAS No. 123. SFAS No. 148 provides alternative methods of transition for
       a voluntary change to the fair value based method of accounting for
       stock-based employee compensation. In addition, SFAS No. 148 amends the
       disclosure requirements of SFAS No. 123 to require more prominent and
       more frequent disclosures in financial statements about the effects of
       stock-based compensation. This statement is effective for financial
       statements for fiscal years ending after December 15, 2002. SFAS No. 148
       will not have any impact on the Company's financial statements as
       management does not have any intention to change to the fair value
       method.

(5)    Film Costs

       Film costs consist of the following:

                                                                    December 31,
                                                                           2002
       In process or development                                    $   123,795
       Released, net of accumulated amortization of $17,008,808         196,399
                                                                      ---------
                                                                    $   320,194

       Net film costs at December 31, 2002 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, 2000              $  676,590
                  Additions                                          80,268
                  Amortization                                    ( 379,746)
                                                                -----------

                  Net film costs, December 31, 2001                 377,112
                  Additions                                          63,140
                  Amortization                                    ( 120,058)
                                                                -----------

                      Net film costs, December 31, 2002         $   320,194
                                                                ===========

       There are no capitalized interest costs included in each of the years
       ended December 31, 2002 and 2001.

       SOP 00-2 requires the Company to prepare estimates of future film cost
       amortization and the amount of accrued participation and residual
       liabilities expected to be paid in the next operating cycle. Based on
       these estimates, the Company expects to amortize a minimum of $48,000 of
       completed film costs within the next year in addition to amortizing at
       least 90% of completed film costs within the next three years. The
       Company is not a distributor of films and therefore is generally not
       responsible for the payment of participations and residuals.

<PAGE>

 (6)   Property and Equipment

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

                                              Useful            December 31,
                                              life                  2002
       Machinery and equipment              4 to 5 years          $ 232,599
       Furniture and fixtures               10 years                 29,495
       Leasehold improvements               3 to 4 years              3,267
                                                                   -----------
                                                                    265,361
       Less accumulated depreciation                               (246,439)
                                                                   ------------
                                                                 $   18,922

       Depreciation expense was $19,882 and $18,025 for the year ended December
       31, 2002 and 2001, respectively.


  (7)   Loan Payable


       On April 9, 2001, the Company entered into an unsecured loan for $100,000
       at prime plus 1% with City National Bank which matured on January 1, 2002
       and was extended through April 1, 2002. Repayment of the loan was made in
       full in February 2002.


 (8)   Commitments and Contingencies

       Leases

       The Company is obligated under a lease for office space, which requires
       minimum annual rentals, plus increases based on real estate taxes and
       operating costs. In addition to a security deposit of $12,061, the
       Company delivered a letter of credit in the amount of $42,000 issued by
       City National Bank.

       Rent expense was $142,213 and $143,122 for the years ended December 31,
       2002 and 2001, respectively.

       Minimum annual rental commitments at December 31, 2002 under the
       noncancelable operating leases are as follows:

        2003                                                       135,223
        2004                                                       112,686
                                                                  --------
        Total minimum obligations                                 $247,909
                                                                  ========

       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

<PAGE>

       Committee of the Board of Directors. In 2002 and 2001, the President
       deferred $105,000 and $262,000 of his compensation, respectively. The
       Company is currently renegotiating a new five-year employment agreement
       with its President.

(9)    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, 2002 and 2001, 2,235,000 and 985,000 options
       were exercisable, respectively.

       Option activity under the Plan was as follows:

<TABLE>

<CAPTION>

                                                                                                     Weighted
                                                                                                      average
                                                                Number of         Price range       exercisable
                                                                  shares           per share           price

<S>                                    <C> <C>                    <C>              <C>    <C>             <C>
       Options Outstanding at December 31, 2000                   985,000          1.70 - 1.81            1.75
                                                                 ---------        ------------         ---------

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

       Options Outstanding at December 31, 2001                   985,000         1.70 - 1.81             1.75
                                                                ----------        -----------          ---------

       Options Issued                                           1,265,000                0.02             0.02

       Options Cancelled                                           15,000                1.81             1.81
                                                               -----------        ------------         ---------

       Options Outstanding at December 31, 2002                 2,235,000          .02 - 1.81            0.77
                                                                ---------          ----------           -------

</TABLE>

       At December 31, 2001, the weighted average remaining contractual life of
       all outstanding options was 4 years.

       The following table summarizes information about options outstanding
       under the Plan at December 31, 2002:

<TABLE>

<CAPTION>

                                                                                    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                    4.4              1,265,000
                    500,000               1.70               1.70                    3.7                500,000
                    470,000               1.81               1.81                    4.2                470,000
                 ----------------------------------------------------------------------------------------------
                  2,235,000                                  0.77                     4.2             2,235,000
               ------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>

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

<TABLE>
<CAPTION>
                                                           December 31,           December 31,
                                                               2002                   2001
                                                               ----                   ----

<S>                                                          <C>                   <C>
        Net loss                        As reported          $ (634,490)           $(1,695,759)
                                        Pro forma              (650,669)            (1,746,746)
        Basic and diluted
          loss per share                As reported            (.12)                     (.32)
                                        Pro forma              (.12)                     (.33)

</TABLE>

       Pro forma net loss reflects only options granted in the years ended
       December 31, 2002 and 2001. 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

<PAGE>

       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.

(10)  Income Taxes

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

                                           December 31,       December 31,
                                               2002               2001
                                               ----               ----
            Federal                         $  ----            $   ----
            State and local                  19,589              7,650
                                            --------             ------
                                            $ 19,589           $ 7,650
                                            ========            =======


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

<TABLE>
<CAPTION>
                                                      December 31,       December 31,
                                                          2002               2001
                                                          ----               ----
       Tax (benefit)
<S>                                   <C>              <C>                <C>
         at Federal statutory rate of 34%              $ (215,494)        $ (564,318)
       Increase (decrease) in taxes resulting from:
       State and local income taxes, net of
         federal income tax benefit                         3,666            (46,370)
       Nondeductible goodwill amortization                234,140            291,377
       Other                                                2,720             10,098
       Change in valuation allowance                       (5,443)           316,863
                                                     -------------         ---------
       Total                                         $     19,589         $    7,650
                                                     =============        ==========

</TABLE>

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

                                                                    2002
       Deferred tax assets
       Accrued expenses and other                                 $ 565,670
       Stock options                                                107,500
       NOLs                                                       1,836,237
                                                                  2,509,407
       Valuation allowance                                       (2,339,363)
                                                                ------------
       Total deferred tax assets                                    170,043
                                                               ============--

<PAGE>



       Deferred tax liabilities

       Deferred state tax liabilities                              (170,043)
                                                                ------------
       Total deferred tax liabilities                              (170,043)
                                                                ------------
       Net tax assets                                        $            0
                                                            ===============


       For Federal and State income tax purposes, the Company has unused net
       operating loss carryforwards of approximately $4,265,000 and $3,670,000,
       as of December 31, 2002 and 2001, respectively expiring through 2021.


 (11)  Related Party Transactions

       Transactions with GP Strategies

       At December 31, 2002, the Company owed GP Strategies, an affiliated
       company and major stockholder, $146,597 related to the payment of certain
       expenses of the Company by GP Strategies. The amount owed does not bear
       interest and does not have a maturity date.

       Transaction with Michael Hammer

       In August 1999, the Company sold 480,192 shares of Common Stock and a
       Warrant to purchase 500,000 shares of Common Stock which expires August
       2002 (the "Warrant") to Hammer International Foundation, pursuant to a
       private placement transaction. Michael Hammer is the President and CEO of
       the Hammer International Foundation and is a Director of the Company. The
       Warrant is exercisable at an exercise price of $2.00 per share. The
       shares of Common Stock and the shares of Common Stock issuable upon
       exercise of the Warrant cannot be sold, transferred, pledged or assigned
       for a one-year period. The Company claimed exemption from the
       registration requirements of the Securities Act of 1933 (the "Act")
       pursuant to Rule 506 of Regulation D. of the Act. At December 31, 2002,
       the warrant had not been exercised.

       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, 2002 and 2001 were $167,000 and $220,000, respectively.
       Included in operating expenses was $57,000 and $70,000, of commissions to
       Janson Associates incurred in the years ended December 31, 2002 and 2001,
       respectively. The President of Janson Associates is related to the
       Company's Chairman through marriage.
<PAGE>


  (12) Postretirement Benefit

       Pursuant to an agreement dated September 30, 1996, the Company is
       obligated to pay its Chairman, his spouse, or estate, as the case may be,
       commencing upon the termination of his employment, the lesser of monthly
       payments of $8,333 or an amount based on net income, for the greater of
       five years or the remainder of his life. Under certain circumstance, a
       reduced benefit may be payable to the Chairman's wife for a period not to
       exceed five years from the date of his death, based upon an actuarial
       valuation performed in 1999.

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


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



<PAGE>



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

              None


<PAGE>



                                    PART III

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

Directors and Executive Officers

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

Name                   Age     Position
Gene Feldman           76      Chairman of the Board, President of Wombat
Cary Brokaw            51      President, Chief Executive Officer and Director
Michael Feldman        35      Executive Vice President and Director
Sheri L. Halfon        46      Senior Vice President, Chief Financial Officer
                               and Director
Doug Rowan             64      Director
Michael Hammer         47      Director

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

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

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

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


<PAGE>

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

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

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

Section 16(a) Beneficial Ownership Reporting Compliance

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



<PAGE>


ITEM 10.      EXECUTIVE COMPENSATION

Executive Compensation

         The following table sets forth the aggregate compensation paid or
accrued to the Company's executive officers for the services rendered in 2002,
2001, 2000, and 1999.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

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

<S>                                  <C>     <C>            <C>
Cary Brokaw                          2002    450,000        1,000,000
President, Chief Executive           2001    450,000(1)
Officer and Director                 2000    450,000
                                     1999    450,000

Gene Feldman                         2002    150,000(2)       100,000
Chairman of the Board,               2001    150,000
President of Wombat                  2000    150,000
                                     1999    150,000
</TABLE>

-------------------
(1) Mr. Brokaw's salary for the year ended 12/31/01 pursuant to his employment
agreement was $450,000, of which $262,000 has been deferred by Mr. Brokaw.

(2) Mr. Feldman's salary for the year was $150,000 of which $105,320 has been
deferred.

Option Grants in 2002

The following 1,265,000 options were granted in 2002:

 -     Cary Brokaw, President and Chief Executive Officer  1,000,000
 -     Gene Feldman, Chairman of the Board  100,000
 -     Michael Hammer, Director  100,000
 -     Sheri Halfon, Senior Vice President and Chief Financial Officer  65,000


<PAGE>




         The following table sets forth information concerning the value of
unexercised options as of December 31, 2002 held by the executives named in the
Summary Compensation Table above. No options were exercised during 2002.

<TABLE>

                AGGREGATED OPTION EXERCISES AT DECEMBER 31, 2002
                           AND YEAR-END OPTION VALUES

<CAPTION>
                             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)
Sheri Halfon              140,000(E)                 0(U)                  65,000(E)                0(U)
----------
</TABLE>

(1) Calculated based on the closing price of the Common Stock $.065 as reported
by the OTCBB on December 31, 2002.

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

<PAGE>

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

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

Any vested options not exercised prior to the termination of employment for this
reason will remain exercisable for the six month period beginning on the date of
termination. If his employment is terminated for "Cause" as defined in the
Feldman Employment Agreement, he will be entitled to the base salary and any
accrued annual bonus that has been determined and awarded, but not paid, through
the date of termination of his employment. Any vested options not exercised
prior to the termination of employment will remain exercisable until the end of
the ninetieth day following the date of termination. If Mr. Feldman terminates
his employment following a "Change of Control" as defined in the Feldman
Employment Agreement, he will receive (i) his earned but unpaid compensation as
of the date of the Change of Control; (ii) continued benefits for the remaining
unexpired employment term; (iii) a lump sum payment on the date of the Change of
Control equal to the future base salary that he would have earned if he had
continued working for the remaining unexpired employment term; and (iv) bonus
payments that would have been made to Mr. Feldman if he had continued working
for the Company during the remaining unexpired employment term. As chairman of

<PAGE>

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.


ITEM 11.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                             PRINCIPAL STOCKHOLDERS

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

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

<S>                                                <C>                                     <C>
Cary Brokaw                                        2,811,350(1)                            49%
c/o Avenue Pictures, Inc.
11111 Santa Monica Boulevard
Suite 525
Los Angeles, CA 90025

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

Hammer International Foundation                    1,080,192(2)                            18%
2425 Olympic Blvd., Suite140E
Santa Monica, CA  90404

Double Bay Entertainment                             730,000                               14%
c/o the Law Offices of A. Chandler Warren
7715 Sunset Blvd., Suite 208
Los Angeles, CA 90046

</TABLE>
---------------------
* As used in this Form 10-KSB, "beneficial ownership" means the sole or shared
power to vote, or to direct the voting of the Corporation's Common Stock of the
sole or shared investment power with respect to such Common Stock.

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


<PAGE>

(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.



<PAGE>



          SECURITY OWNERSHIP OF DIRECTORS AND NAMED EXECUTIVE OFFICERS

         The following table sets forth, as of March 30, 2003, 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

Doug Rowan                               11,000(7)                      *

Michael Hammer                        1,080,192 (8)                    18

Directors and Executive               4,626,342(9)                     70
  Officers as a Group
  (6 persons)
----------
* The number of shares owned is less than one percent of the outstanding shares.

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

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


<PAGE>

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

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

(8) See footnote 2 to Principal Stockholders table.

(9) Includes 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 and 7 above, none of such shares is known by the
Corporation to be shares with respect to which such beneficial owner has the
right to acquire beneficial ownership. The Corporation believes the beneficial
holders listed above have sole voting and investment power regarding the shares
shown as being beneficially owned by them.

ITEM 12.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

         Gene Feldman Exit Option Agreement. In connection with the Business
Combination, Gene Feldman entered into an exit option agreement with CineMasters
pursuant to which, among other things, he was given an option, exercisable
during the six-month period commencing on the date of termination of his
employment, to purchase the production assets of CineMasters for a cash purchase
price equal to the book value of such assets. This option does not include the
CineMasters film library. In addition, CineMasters retained the right to acquire
any future production of Mr. Feldman for nominal consideration, subject to (i)
the rights of Mr. Feldman to receive commercially reasonable producer fees, (ii)

<PAGE>

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
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

<PAGE>

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.



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

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

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

ITEM 14. 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.


<PAGE>



                                   SIGNATURES

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

                                  AVENUE ENTERTAINMENT GROUP, INC.


                                  Cary Brokaw
                                  President and Chief Executive Officer

Dated:   March 26, 2003

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


Signature                     Title

Gene Feldman                 Chairman of the Board


Cary Brokaw                   President and Chief Executive Officer and
                              Director

Sheri L. Halfon               Senior Vice President, Chief Financial Officer
                              and Director
Michael D. Feldman            Executive Vice President and Director

Michael Hammer                Director


Dated: March 26, 2003


<PAGE>


       Statement Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
                                       By
                           Principal Executive Officer
       Regarding Facts and Circumstances Relating to Exchange Act Filings

I, Cary Brokaw, certify that:

1. I have reviewed this annual report on Form 10-KSB of Avenue Entertainment
Group;

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

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

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

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

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

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

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

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


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

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

Date: March 26, 2003          Cary Brokaw President and Chief Executive Officer


<PAGE>


       Statement Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
                                       By
                           Principal Financial Officer
       Regarding Facts and Circumstances Relating to Exchange Act Filings

I, Sheri Halfon, certify that:

1. I have reviewed this annual report on Form 10-KSB of Avenue Entertainment
Group;

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

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

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

         a) designed such disclosure controls and procedures to ensure that
         material information relating to the registrant, including its
         consolidated subsidiaries, is made known to us by others within those
         entities, particularly during the period in which this annual report is
         being prepared; b) evaluated the effectiveness of the registrant's
         disclosure controls and procedures as of a date within 90 days prior to
         the filing date of this annual report (the "Evaluation Date"); and c)
         presented in this annual report our conclusions about the effectiveness
         of the disclosure controls and procedures based on our evaluation as of
         the Evaluation Date;

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

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

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

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

Date:  March 26, 2003        Sheri Halfon
                             Senior Vice President and Chief Financial Officer



<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. ++


<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. ++

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

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

99.2                Written Statement of Sheri Halfon Pursuant to 18
                    U.S.C.ss.1350


++  Previously filed.