**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549




**FORM
      10-KSB**





**x**
            **ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**




For
      the
      fiscal year ended December 31, 2007




 ̈
            **TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**




For
      the
      transition period from  to





Commission
      File No.:  001-12885





**AVENUE
      ENTERTAINMENT GROUP, INC.**


(Name
      of
      small business issuer in its charter)




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




**120
                  White Plains Road**
              ******Tarrytown,
                  New York**
              **10591**(Address
                  of principal executive offices)
              (Zip
                  Code)




**(914)
      631-5265**


(Issuer’s
      telephone number, including area code)




Securities
      registered under Section 12(b) of the Exchange Act:




Name
                  of Each ExchangeTitle
                  of Each Class
              on
                  Which RegisteredNone
              None




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




Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o




Check
      whether the issuer: (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for past 90 days.




x Yes o No




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




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).




Yes x No o




The
      issuer’s revenues for its fiscal year ended December 31, 2007 were
      $11,404.




The
      aggregate market value of the voting stock held by non-affiliates of the issuer
      could not be computed because there was no bid or asked price reported on the
      OTC Bulletin Board as of April 10, 2008.




As
      of
      April 10, 2008, 11,582,000 shares of the issuer’s Common Stock were issued and
      outstanding.




Transitional
      Small Business Disclosure Format (check one):  Yes o No x




**Documents
      Incorporated by Reference:** None












**AVENUE
      ENTERTAINMENT GROUP, INC.**




**2007
      FORM 10-KSB**





**TABLE
      OF CONTENTS**




**PART
                  I.**Item
                  1.
              
              Description
                  of business
              
              1Item
                  1A.
              
              Risk
                  factors
              
              2Item
                  2.
              
              Description
                  of properties
              
              7Item
                  3.
              
              Legal
                  proceedings
              
              7Item
                  4.
              
              Submission
                  of matters to a vote of security holders
              
              7**PART
                  II.**Item
                  5.
              
              Market
                  for common equity, related stockholder matters and small business
                  issuer
                  purchase of equity securities
              
              7Item
                  6.
              
              Management’s
                  discussion and analysis or plan of operation
              
              8Item
                  7.
              
              Financial
                  statements
              
              11Item
                  8.
              
              Changes
                  in and disagreements with accountants on accounting and financial
                  disclosure
              
              11Item
                  8A(T).
              
              Controls
                  and procedures
              
              11Item
                  8B.
              
              Other
                  information
              
              13**PART
                  III.**Item
                  9.
              
              Directors,
                  executive officers, promoters, control persons and corporate governance;
                  compliance with Section 16(a) of the Exchange Act
              
              13Item
                  10.
              
              Executive
                  compensation
              
              15Item
                  11.
              
              Security
                  ownership of certain beneficial owners and management and related
                  stockholder matters
              
              17Item
                  12.
              
              Certain
                  relationships and related transactions, and director
                  independence
              
              19Item
                  13.
              
              Exhibits
              
              20Item
                  14.
              
              Principal
                  accountant fees and services
              
              20Signatures
              
              22Financial
                  Statements
              
              F-1Exhibits










**PART
      I.**




**ITEM
      1. Description of business**




*This
      report contains forward-looking statements regarding our business, financial
      condition, results of operations and prospects. Words such as “expects,”
“anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar
      expressions or variations of such words are intended to identify forward-looking
      statements, but are not the exclusive means of identifying forward-looking
      statements in this report. Additionally, statements concerning future matters
      such as revenue and expense levels and other statements regarding matters that
      are not historical are forward-looking statements.*




*Although
      forward-looking statements in this report reflect the good faith judgment of
      our
      management, such statements can only be based on facts and factors currently
      known by us. Consequently, forward-looking statements are inherently subject
      to
      risks and uncertainties and actual results and outcomes may differ materially
      from the results and outcomes discussed in or anticipated by the forward-looking
      statements. Factors that could cause or contribute to such differences in
      results and outcomes include without limitation those discussed under the
      heading “Risk Factors” below, as well as those discussed elsewhere in this
      report. Readers are urged not to place undue reliance on these forward-looking
      statements, which speak only as of the date of this report. We undertake no
      obligation to revise or update any forward-looking statements in order to
      reflect any event or circumstance that may arise after the date of this report.
      Readers are urged to carefully review and consider the various disclosures
      made
      in this report, which attempt to advise interested parties of the risks and
      factors that may affect our business, financial condition, results of operations
      and prospects.*




**Initial
      Business Development**




Avenue
      Entertainment Group, Inc. (“we,” “our,” “us” and similar phrases refer to Avenue
      Entertainment Group, Inc.), is a Delaware corporation. We were originally called
      Wombat Productions when our company was founded in 1969 by Gene Feldman and
      his
      wife, Suzette St. John Feldman. Until our September 1996 business combination
      described below, our primary focus had been the production of one-hour profiles
      of Hollywood stars.





In
      September 1996, pursuant to a Share Exchange Agreement among Cary Brokaw, Avenue
      Pictures, Inc. and The CineMasters Group, Inc., CineMasters acquired all of
      the
      outstanding capital stock of Avenue Pictures from Mr. Brokaw, who was then
      the
      sole stockholder of Avenue Pictures, in exchange for 1,425,000 shares of
      CineMasters common stock.





Following
      that business combination, the board of directors and stockholders of
      CineMasters approved a transaction pursuant to which (i) all of the assets
      of
      the Wombat Productions division of CineMasters were transferred, subject to
      all
      related liabilities and obligations, to its newly-formed, wholly-owned Delaware
      subsidiary Wombat Productions, Inc., (ii) CineMasters was merged with and into
      our company (its newly-formed, wholly-owned Delaware subsidiary), with our
      company being the surviving corporation in the merger, and (iii) each
      stockholder of CineMasters received an equal number of shares of common stock
      of
      our company in exchange for each share of capital stock of CineMasters held
      by
      such stockholder immediately prior to the effective time of the transaction.
      As
      a result of the transaction, Avenue Pictures became a wholly-owned subsidiary
      of
      ours. At the time of the business combination and transaction, we changed our
      name to Avenue Entertainment Group, Inc.





From
      September 1996 to September 2005, we were an independent entertainment company
      that produced feature films, television films, series for televisions,
      made-for-television/cable movies and one-hour-profiles of Hollywood stars both
      domestically and internationally.





**Discontinuance
      of Active Business Operations**





Our
      company cut back daily operations in late 2005 and essentially ceased daily
      operations in May 2006. In September 2005, we sold certain assets to Cary Brokaw
      Productions, and subsequently ceased the business of producing feature films,
      television films and made-for-television/cable movies. This sale was approved
      by
      our board of directors and stockholders owning more than 50% of our outstanding
      stock at the time of the sale. Cary Brokaw also resigned as a director and
      as
      our Chief Executive Officer, President and Chief Financial Officer. Gene Feldman
      assumed certain duties previously held by Mr. Brokaw, including becoming our
      Chairman of the Board. In May 2006, Gene Feldman was diagnosed with lymphoma
      and
      resigned from his position with us. On August 25, 2006, Gene Feldman passed
      away.




1




**Current
      Operations**




On
      September 1, 2006, Gene Feldman’s nephew, Michael D. Feldman, stepped in to
      become our Chief Executive Officer and Chairman of the Board, and Jerome I.
      Feldman, Gene Feldman’s brother and Michael D. Feldman’s father, became our
      Chief Financial Officer, Treasurer and Vice Chairman of the Board. Since Gene
      Feldman’s resignation, we have been substantially inactive. All monies disbursed
      by us from 2006 to date were used to pay the previously-incurred accounting
      fees
      and for the payment of directors and officers’ insurance premiums. During that
      period, we have had no employees and our board of directors has not
      met.




Effective
      May 2006, we sold our remaining assets to the estate of Gene Feldman, pursuant
      to an agreement between Gene Feldman and us in early 2006; however, the actual
      closing of the transaction did not occur until January 2007. This sale was
      approved by our board of directors and stockholders owning more than 50% of
      our
      outstanding stock at the time of the sale.





Our
      present focus is to acquire a target company or business seeking the perceived
      advantages of being a publicly-held corporation.





**ITEM
      1A. Risk factors**




*An
      investment in our company is highly speculative in nature and involves an
      extremely high degree of risk.* **** *You
      should carefully consider the following material risks, together with the other
      information contained in this report, before you decide to buy our common stock.
      If any of the following risks actually occur, our business, results of
      operations and financial condition would likely suffer. In these circumstances,
      the market price of our common stock could decline, and you may lose all or
      part
      of your investment.*




**Our
      business is difficult to evaluate because we have no recent operating
      history.**




As
      we
      have no recent operating history or current revenue and only minimal assets,
      there is a risk that we will be unable to continue as a going concern and
      consummate a business combination. We have no significant assets or financial
      resources. We will, in all likelihood, sustain operating expenses without
      corresponding revenues, at least until the consummation of a business
      combination. This may result in our incurring a net operating loss that will
      increase continuously until we can consummate a business combination with a
      profitable business opportunity. We cannot assure you that we can identify
      a
      suitable business opportunity and consummate a business
      combination.




**We
      are an inactive company, and our future success is highly dependent on the
      ability of our management to locate and attract a suitable
      acquisition.**




We
      are a
      company without any operations. The nature of our operations is highly
      speculative, and there is a consequent risk of loss of your investment. The
      success of our plan of operation will depend to a great extent on the
      operations, financial condition and management of any acquired business
      opportunity. While our management intends to seek a business combination with
      an
      entity having an established operating history, we cannot assure you that we
      will be successful in locating candidates meeting that criterion. In the event
      we complete a business combination, the success of our operations may be
      dependent upon management of the successor firm or venture partner firm and
      numerous other factors beyond our control.




**We
      have no existing agreement for a business combination or other
      transaction.**




We
      have
      no arrangement, agreement or understanding with respect to engaging in a merger
      with, joint venture with or acquisition of, a private or public entity. We
      cannot assure you that we will successfully identify and evaluate suitable
      business opportunities or that we will conclude a business combination. Our
      management has not identified any particular industry or specific business
      within an industry for evaluation. We cannot guarantee that we will be able
      to
      negotiate a business combination on favorable terms, and there is consequently
      a
      risk that funds allocated to the purchase of our shares will not be invested
      in
      a company with active business operations.




2




**Our
      management intends to devote only a limited amount of time to seeking a target
      company which may adversely impact our ability to identify a suitable
      acquisition candidate.**




While
      seeking a business combination, our management anticipates devoting very limited
      time to our company’s affairs. Our officers have not entered into written
      employment agreements with us and are not expected to do so in the foreseeable
      future. This limited commitment may adversely impact our ability to identify
      and
      consummate a successful business combination.




**There
      is competition for those private companies suitable for a merger transaction
      of
      the type contemplated by our management.**




We
      are in
      a highly competitive market for a small number of business opportunities which
      could reduce the likelihood of consummating a successful business combination.
      We are and will continue to be an insignificant participant in the business
      of
      seeking mergers with, joint ventures with and acquisitions of small private
      and
      public entities. A large number of established and well-financed entities,
      including small public companies and venture capital firms, are active in
      mergers and acquisitions of companies that may be desirable target candidates
      for us. Nearly all these entities have significantly greater financial
      resources, technical expertise and managerial capabilities than we do;
      consequently, we will be at a competitive disadvantage in identifying possible
      business opportunities and successfully completing a business combination.
      These
      competitive factors may reduce the likelihood of our identifying and
      consummating a successful business combination.




**The
      time and cost of preparing a private company to become a public reporting
      company may preclude us from entering into a merger or acquisition with the
      most
      attractive private companies.**




Target
      companies that fail to comply with U.S. Securities and Exchange Commission
      (“SEC”) reporting requirements may delay or preclude acquisition. Sections 13
      and 15(d) of the Exchange Act of 1934, as amended (the “Exchange Act”), require
      reporting companies to provide certain information about significant
      acquisitions, including certified financial statements for the company acquired,
      covering one, two or three years, depending on the relative size of the
      acquisition. The time and additional costs that may be incurred by some target
      entities to prepare these statements may significantly delay or essentially
      preclude consummation of an acquisition. Otherwise suitable acquisition
      prospects that do not have or are unable to obtain the required audited
      statements may be inappropriate for acquisition so long as the reporting
      requirements of the Exchange Act are applicable.




**We
      may be subject to further government regulation which would adversely affect
      our
      operations.**




Although
      we will be subject to the reporting requirements under the Exchange Act, our
      management believes we will not be subject to regulation under the Investment
      Company Act of 1940, as amended (the “Investment Company Act”), since we will
      not be engaged in the business of investing or trading in securities. If we
      engage in business combinations which result in our holding passive investment
      interests in a number of entities, we could be subject to regulation under
      the
      Investment Company Act. If so, we would be required to register as an investment
      company and could be expected to incur significant registration and compliance
      costs. We have obtained no formal determination from the SEC as to our status
      under the Investment Company Act and, consequently, violation of the Investment
      Company Act could subject us to material adverse consequences.




**Any
      potential acquisition or merger with a foreign company may subject us to
      additional risks.**




If
      we
      enter into a business combination with a foreign company, we will be subject
      to
      risks inherent in business operations outside of the United States. These risks
      include, for example, currency fluctuations, regulatory problems, punitive
      tariffs, unstable local tax policies, trade embargoes, risks related to shipment
      of raw materials and finished goods across national borders, and cultural and
      language differences. Foreign economies may differ favorably or unfavorably
      from
      the United States economy in growth of gross national product, rate of
      inflation, market development, rate of savings, capital investment, resource
      self-sufficiency, balance of payments positions and in other
      respects.




3




**There
      is currently no trading market for our common stock, and liquidity of shares
      of
      our common stock is limited.**




Our
      shares of common stock are not registered under the securities laws of any
      state
      or other jurisdiction, and accordingly there is no public trading market for
      our
      common stock. Further, no public trading market is expected to develop in the
      foreseeable future unless and until we complete a business combination with
      an
      operating business and we thereafter file a registration statement under the
      Securities Act of 1933, as amended (the “Securities Act”). Therefore,
      outstanding shares of our common stock cannot be offered, sold, pledged or
      otherwise transferred unless subsequently registered pursuant to, or exempt
      from
      registration under, the Securities Act and any other applicable federal or
      state
      securities laws or regulations. Shares of our common stock cannot be sold under
      the exemptions from registration provided by Rule 144 under or Section 4(1)
      of
      the Securities Act (“Rule 144”), in accordance with the letter from Richard K.
      Wulff, Chief of the Office of Small Business Policy of the Securities and
      Exchange Commission’s Division of Corporation Finance, to Ken Worm of NASD
      Regulation, dated January 21, 2000 (the “Wulff Letter”). The Wulff Letter
      provides that certain private transfers of the shares of common stock also
      may
      be prohibited without registration under federal securities laws. The SEC has
      proposed codifying certain aspects of the Wulff Letter and adjusting some of
      its
      provisions. The proposed adjustments include allowing stockholders of a
      company that was formerly a shell company to be able to utilize the exemption
      from registration under Rule 144 under certain circumstances following such
      time
      as the company is no longer a shell company and certain disclosures have been
      completed. There is no assurance that this proposal will ultimately be adopted
      by the SEC in its current form or any other form.




Compliance
      with the criteria for securing exemptions under federal securities laws and
      the
      securities laws of the various states is extremely complex, especially in
      respect of those exemptions affording flexibility and the elimination of trading
      restrictions in respect of securities received in exempt transactions and
      subsequently disposed of without registration under the Securities Act or state
      securities laws.




**There
      are issues impacting liquidity of our securities with respect to the SEC’s
      review of a future resale registration statement.**




Since
      our
      shares of common stock issued prior to a business combination or reverse merger
      cannot currently, nor will they for a considerable period of time after we
      complete a business combination, be available to be offered, sold, pledged
      or
      otherwise transferred without being registered pursuant to the Securities Act,
      we will likely file a resale registration statement on Form S-1, or some other
      available form, to register for resale such shares of common stock. We cannot
      control this future registration process in all respects as some matters are
      outside our control. Even if we are successful in causing the effectiveness
      of
      the resale registration statement, we cannot assure you that the occurrence
      of
      subsequent events may not preclude our ability to maintain the effectiveness
      of
      the registration statement. Any of the foregoing items could have adverse
      effects on the liquidity of our shares of common stock.




In
      addition, the SEC has recently disclosed that it has developed internal
      guidelines concerning the use of a resale registration statement to register
      the
      securities issued to certain investors in private investment in public equity
      (PIPE) transactions, where the issuer has a market capitalization of less than
      $75 million and, in general, does not qualify to file a registration statement
      on Form S-3 to register its securities. The SEC has taken the position that
      these smaller issuers may not be able to rely on Rule 415 under the Securities
      Act (“Rule 415”), which generally permits the offer and sale of securities on a
      continued or delayed basis over a period of time, but instead would require
      that
      the issuer offer and sell such securities in a direct or “primary” public
      offering, at a fixed price, if the facts and circumstances are such that the
      SEC
      believes the investors seeking to have their shares registered are underwriters
      and/or affiliates of the issuer. It appears that the SEC in most cases will
      permit a registration for resale of up to one-third of the total number of
      shares of common stock then currently owned by persons who are not affiliates
      of
      such issuer and, in some cases, a larger percentage depending on the facts
      and
      circumstances. Staff members also have indicated that an issuer in most cases
      will have to wait until the later of six months after effectiveness of the
      first
      registration or such time as substantially all securities registered in the
      first registration are sold before filing a subsequent registration on behalf
      of
      the same investors. Since, following a reverse merger or business combination,
      we may have little or no tradable shares of common stock, it is unclear as
      to
      how many, if any, shares of common stock the SEC will permit us to register
      for
      resale, but SEC staff members have indicated a willingness to consider a higher
      percentage in connection with registrations following reverse mergers with
      shell
      companies. The SEC may require as a condition to the declaration of
      effectiveness of a resale registration statement that we reduce or “cut back”
the number of shares of common stock to be registered in such registration
      statement. The result of the foregoing is that a stockholder’s liquidity in our
      common stock may be adversely affected in the event the SEC requires a cut
      back
      of the securities as a condition to allow us to rely on Rule 415 with respect
      to
      a resale registration statement, or, if the SEC requires us to file a primary
      registration statement.




4




**We
      have never paid dividends on our common stock.**




We
      have
      never paid dividends on our common stock and do not presently intend to pay
      any
      dividends in the foreseeable future. We anticipate that any funds available
      for
      payment of dividends will be re-invested into our company to further our
      business strategy.




**We
      may be subject to certain tax consequences in our business, which may increase
      our cost of doing business.**




We
      may
      not be able to structure our acquisition to result in tax-free treatment for the
      companies or their stockholders, which could deter third parties from entering
      into certain business combinations with us or result in being taxed on
      consideration received in a transaction. Currently, a transaction may be
      structured so as to result in tax-free treatment to both companies, as
      prescribed by various federal and state tax provisions. We intend to structure
      any business combination so as to minimize the federal and state tax
      consequences to both us and the target entity; however, we cannot assure you
      that the business combination will meet the statutory requirements of a tax-free
      reorganization or that the parties will obtain the intended tax-free treatment
      upon a transfer of stock or assets. A non-qualifying reorganization could result
      in the imposition of both federal and state taxes that may have an adverse
      effect on both parties to the transaction.




**Our
      business will have limited revenue unless and until we merge with or acquire
      an
      operating business.**




We
      are an
      inactive company with limited revenue. We may not realize any significant
      revenue unless and until we successfully merge with or acquire an operating
      business.




**We
      intend to issue more shares in a merger or acquisition, which will result in
      substantial dilution.**




Our
      certificate of incorporation authorizes the issuance of a maximum of
      15,000,000 shares of common stock, a maximum of 1,000,000 shares of
      class B common stock and a maximum of 2,000,000 shares of preferred stock.
      Any
      merger or acquisition effected by us may result in the issuance of additional
      securities without stockholder approval and may result in substantial dilution
      in the percentage of our common stock held by our then-existing stockholders.
      Moreover, the common stock issued in any such merger or acquisition transaction
      may be valued on an arbitrary or non-arm’s-length basis by our management,
      resulting in an additional reduction in the percentage of common stock held
      by
      our then-existing stockholders. Our board of directors has the power to issue
      any or all of such authorized but unissued shares without stockholder approval.
      To the extent that additional shares of common stock or preferred stock are
      issued in connection with a business combination or otherwise, dilution to
      the
      interests of our stockholders will occur and the rights of the holders of common
      stock might be materially adversely affected.




**We
      have conducted no market research or identification of business opportunities,
      which may affect our ability to identify a business to merge with or
      acquire.**




We
      have
      not conducted market research concerning prospective business opportunities,
      nor
      have others made the results of such market research available to us. Therefore,
      we have no assurances that market demand exists for a merger or acquisition
      as
      contemplated by us. Our management has not identified any specific business
      combination or other transactions for formal evaluation by us, such that it
      may
      be expected that any such target business or transaction will present such
      a
      level of risk that conventional private or public offerings of securities or
      conventional bank financing will not be available. We cannot assure you that
      we
      will be able to acquire a business opportunity on terms favorable to us.
      Decisions as to which business opportunity to participate in will be
      unilaterally made by our management, which may act without the consent, vote
      or
      approval of our stockholders.




5




**Because
      we may seek to complete a business combination through a “reverse merger,”
following such a transaction we may not be able to attract the attention of
      major brokerage firms.**




Additional
      risks may exist since we will assist a privately-held business to become public
      through a “reverse merger.” Securities analysts of major brokerage firms may not
      provide coverage of our company since there is no incentive to brokerage firms
      to recommend the purchase of our common stock. We cannot assure you that
      brokerage firms will want to conduct any secondary offerings on behalf of our
      post-merger company in the future.




**We
      cannot assure you that following a business combination with an operating
      business, our common stock will be listed on NASDAQ, the American Stock Exchange
      or any other securities exchange.**




Following
      a business combination, we may seek the listing of our common stock on NASDAQ
      or
      the American Stock Exchange. However, we cannot assure you that following such
      a
      transaction, we will be able to meet the initial listing standards of either
      of
      those or any other stock exchange, or that we will be able to maintain a listing
      of our common stock on either of those or any other stock exchange. After
      completing a business combination, until our common stock is listed on the
      NASDAQ, the American Stock Exchange or another stock exchange, we expect that
      our common stock would be eligible to trade on the OTC Bulletin Board, another
      over-the-counter quotation system or on the “pink sheets,” where our
      stockholders may find it more difficult to dispose of shares or obtain accurate
      quotations as to the market value of our common stock. In addition, we would
      be
      subject to an SEC rule that, if it failed to meet the criteria set forth in
      such
      rule, imposes various practice requirements on broker-dealers who sell
      securities governed by the rule to persons other than established customers
      and
      accredited investors. Consequently, such rule may deter broker-dealers from
      recommending or selling our common stock, which may further affect its
      liquidity. This would also make it more difficult for us to raise additional
      capital following a business combination.




**We
      could issue “blank check” preferred stock without stockholder approval with the
      effect of diluting then current stockholder interests and impairing their voting
      rights.**




Our
      certificate of incorporation authorizes the issuance of up to 2,000,000 shares
      of preferred stock with designations, rights and preferences determined from
      time to time by our board of directors. Accordingly, our board of directors
      is
      empowered, without stockholder approval, to issue preferred stock with dividend,
      liquidation, conversion, voting or other rights which could adversely affect
      the
      voting power or other rights of the holders of our common stock. In the event
      of
      issuance, the preferred stock could be utilized, under certain circumstances,
      as
      a method of discouraging, delaying or preventing a change in control of our
      company. Although we have no present intention to issue any shares of our
      authorized preferred stock, we cannot assure you that we will not do so in
      the
      future.




**You
      will have limited ability to influence corporate matters and any actions you
      may
      not agree with may be implemented by our management without your
      consent.**




Our
      executive officers and directors currently own approximately 62.9% of all the
      issued and outstanding common stock of our company. Consequently, our management
      has the ability to influence control of the operations of our company and will
      have the ability to influence or control substantially all matters submitted
      to
      stockholders for approval, including:





·
            Election
                of our board of directors,





·
            Removal
                of directors,





·
            Amendment
                to our certificate of incorporation or bylaws,
                and





·
            Adoption
                of measures that could delay or prevent a change in control or impede
                a
                merger, takeover or other business
                combination.




These
      stockholders thus have substantial influence over our management and affairs
      and
      other stockholders of ours possess no practical ability to remove our management
      or effect the operations of the business of our company. Accordingly, this
      concentration of ownership by itself may have the effect of impeding a merger,
      consolidation, takeover or other business consolidation, or discouraging a
      potential acquiror from making a tender offer for the common stock.




6




**ITEM
      2. Description of property**




We
      maintain an executive office in Tarrytown, New York, through a month-to-month
      arrangement with Michael D. Feldman and Jerome I. Feldman.




**ITEM
      3. Legal proceedings**




We
      are
      not the subject of any material pending legal proceedings and, to the knowledge
      of our management, no material proceedings are presently contemplated against
      us
      by any federal, state or local governmental agency. Further, to the knowledge
      of
      our management, no director or executive officer is party to any action which
      any has an interest adverse to us.





**ITEM
      4. Submission of matters to a vote of security holders**




No
      matters were submitted to a vote of our stockholders during the three months
      ended December 31, 2007.




**PART
      II.**




**ITEM
      5. Market for common equity, related stockholder matters and small business
      issuer purchases of equity securities**




**Market
      Information**




Our
      common stock was quoted on the OTCBB from April 25, 2001 to April 22, 2007,
      and
      then on the Pink Sheets, under the symbol “PIXG.” The following table sets forth
      the high and low closing prices for our common stock on the OTCBB and then
      the
      Pink Sheets for the years ended December 31, 2007 and December 31,
      2006.




Year
                  ended December 31,Quarter
              
              2007
              
              2006High
              
              Low
              
              High
              
              LowFirst
              
              
              .24
              
              
              .07
              
              
              .09
              
              
              .005Second
              
              
              .045
              
              
              .09
              
              
              .03
              
              
              .005Third
              
              
              .05
              
              
              .08
              
              
              .10
              
              
              .01Fourth
              
              
              .03
              
              
              .06
              
              
              .13
              
              
              .06





For
      the
      period from January 1, 2008 to April 10, 2008, the high and low closing prices
      for our common stock were $.035 and $.06, respectively.





**Holders**





The
      number of record holders of our common stock as of December 31, 2007 was 153.
      This number does not include an indeterminate number of stockholders whose
      shares are held by brokers in street name.





**Dividends**





We
      have
      not to date and do not expect to pay a dividend on our common stock in the
      foreseeable future.  The payment of dividends on our common stock is within
      the discretion of our board of directors ,
      subject
      to our certificate of incorporation .
      We
      intend to retain any earnings for use in our operations and any expansion of
      our
      business. Payment of dividends in the future will depend on our future earnings,
      future capital needs and our operating and financial condition, among other
      factors.




7




**Recent
      Sales of Unregistered Securities**





There
      were no sales of unregistered securities other than as reported in prior reports
      on Forms 10-KSB, 10-QSB or 8-K.





**Purchases
      of Equity Securities by the Small Business Issuer and Affiliated
      Purchasers**





We
      did
      not repurchase any shares of our common stock in the fourth quarter of the
      year
      ended December 31, 2007, or at any time before or after that
      quarter.





**ITEM
      6. Management’s discussion and analysis or plan of
      operation**




*The
      following discussion of our financial condition and results of operations should
      be read in conjunction with our financial statements and related notes included
      in this report. This discussion includes forward-looking statements that involve
      risks and uncertainties. As a result of many factors, our actual results may
      differ materially from those anticipated in these forward-looking statements.*




**Overview**




Our
      company cut back daily operations in late 2005 and essentially ceased daily
      operations in May 2006. In September 2005, we sold certain assets to Cary Brokaw
      Productions, and subsequently ceased the business of producing feature films,
      television films and made-for-television/cable movies. Cary Brokaw also resigned
      as a director and as our Chief Executive Officer, President and Chief Financial
      Officer. Gene Feldman assumed certain duties previously held by Mr. Brokaw,
      including becoming our Chairman of the Board.





In
      May
      2006, Gene Feldman was diagnosed with lymphoma and resigned from his position
      with us. On August 25, 2006, Gene Feldman passed away. On September 1, 2006,
      Mr.
      Feldman’s nephew, Michael D. Feldman, stepped in to become our Chief Executive
      Officer and Chairman of the Board, and Jerome I. Feldman, Gene Feldman’s brother
      and Michael D. Feldman’s father, became our Chief Financial Officer, Treasurer
      and Vice Chairman of the Board. Since Gene Feldman’s resignation, we have been
      substantially inactive. All monies disbursed by us from 2006 to date were used
      to pay the previously-incurred accounting fees and for the payment of directors
      and officers’ insurance premiums. During that period, we have had no employees
      and our board of directors has not met.




Effective
      May 2006, we sold our remaining assets to the estate of Gene Feldman, pursuant
      to an agreement between Gene Feldman and us in early 2006; however, the actual
      closing of the transaction did not occur until January 2007. We have no current
      operations and do not expect to have revenue from operations in the near future.
      Our present focus is to acquire a target company or business seeking the
      perceived advantages of being a publicly-held corporation.




**Results
      of Operations**




***Year
      ended December 31, 2007 Compared to Year Ended December 31, 2006***




Operations
      for the years ended December 31, 2007 and 2006 are not comparable because we
      sold most of our assets in the years ended December 31, 2006 and 2005, resulting
      in discontinued operations.





**Liquidity
      and Capital Resources**




As
      of
      December 31, 2007, we had negative working capital of $66,558 compared to
      working capital of $6,608 at December 31, 2006.





We
      do not
      have sufficient funds to continue our operating activities. Future operating
      activities are expected to be funded by loans from officers, directors and
      major
      shareholders.




8




**Off-** **b** **alance** **S** **heet** **A** **rrangements**




As
      of the
      date of this report, we have not entered into any transactions with
      unconsolidated entities in which we have financial guarantees, subordinated
      retained interests, derivative instruments or other contingent arrangements
      that
      expose us to material continuing risks, contingent liabilities or any other
      obligations under a variable interest in an unconsolidated entity that provides
      us with financing, liquidity, market risk or credit risk support.




**Impact
      of Inflation** ****




We
      believe that inflation has not had a material impact on our results of
      operations for the years ended December 31, 2007 and 2006. We cannot assure
      you
      that future inflation will not have an adverse impact on our operating results
      and financial condition.




**Application
      of C** **ritical** **A** **ccounting** **P** **olicies** **and Estimates**




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires our management to make
      estimates and assumptions that affect the amounts reported in the financial
      statements and the accompanying notes. These estimates and assumptions are
      based
      on our management’s judgment and available information and, consequently, actual
      results could be different from these estimates. The significant accounting
      policies that we believe are the most critical to aid in fully understanding
      and
      evaluating our reported financial results are as follows:




*Consolidated
      Financial Statements*




Our
      consolidated financial statements include the accounts our company and our
      wholly-owned subsidiaries. All material intercompany accounts and transactions
      have been eliminated.




*Fair
      Value of Financial Instruments*




Our
      carrying values of cash, loan payable and due to related party approximate
      their fair values because of the short-term maturity of these
      instruments.




*Revenue
      Recognition*




Prior
      to
      the sale of our film production assets, revenue from film production was
      recognized in accordance with the film forecast method. Cost of film production
      were capitalized and amortized in proportion to film revenues.




Prior
      to
      the sale of our licensing assets, revenues from film licensing arrangements
      were
      recognized as earned.




Participation
      rights related to both sales of assets are recognized as earned and reported
      by
      the purchasers of both assets.




*Use
      of Estimates*




The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires our 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 had included those had related to valuation of accounts receivable,
      film costs and accrued expenses.




9




*Income
      (Loss) per Common Share*




Basic
      net
      income (loss) per share was computed by dividing the net income (loss) for
      the
      period by the basic weighted average number of shares outstanding during the
      period. Diluted net income (loss) per share was computed by dividing the net
      income (loss) for the period by the weighted average number and any potentially
      dilutive securities outstanding during the period.




*Share-Based
      Compensation*




We
      recognize compensation expense for all share-based payment awards made to
      employees, directors and others based on the estimated fair values on the date
      of the grant. Options are valued using the Black-Scholes Option-Pricing Model
      using the market price of our common stock on the date of valuation, an expected
      dividend yield of zero, the remaining period or maturity date of the warrants
      and the expected volatility of our common stock.




On
      January 1, 2006, we adopted Statement of Financial Accounting Standards No.
      123
      (revised), “Share-Based Compensation-Revised,” without a material effect.




*Deferred
      Income Taxes*




Deferred
      income taxes are provided for temporary differences between financial statement
      and income tax reporting under the liability method, using expected tax rates
      and laws that are expected to be in effect when the differences are expected
      to
      reverse. A valuation allowance is provided when it is more likely than not,
      that
      the deferred tax asses will not be realized.




**Recently** **-i** **ssued** **A** **ccounting** **P** **ronouncements**




In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value
      Measurements” (“SFAS No. 157”), that defines fair value, establishes a framework
      for measuring fair value in generally accepted accounting principles (“GAAP”),
      and expands disclosures about fair value measurements. SFAS No. 157 applies
      under other accounting pronouncements that require or permit fair value
      measurements. Prior to SFAS No. 157, there were different definitions of fair
      value and limited guidance for applying those definitions in GAAP. Moreover,
      that guidance was dispersed among many accounting pronouncements that require
      fair value measurements. Differences in that guidance created inconsistencies
      that added to the complexity in applying GAAP. The changes to current practice
      resulting from the application of this statement relate to the definition of
      fair value, the methods used to measure fair value, and the expanded disclosures
      about fair value measurements. SFAS No. 157 is effective for financial
      statements issued for fiscal years beginning after November 15, 2007, and
      interim periods within those fiscal years. We have not determined the effect,
      if
      any, that may result from the adoption of SFAS No. 157 on our financial
      statements.




In
      February 2007, the FASB issued SFAS
      No.
      159, “The Fair Value Option for Financial Assets and Financial Liabilities”
(“SFAS No. 159”). SFAS No. 159 permits entities to choose, at specified election
      dates, to measure eligible items at fair value (the “fair value option”). A
      business entity shall report unrealized gains and losses on items for which
      the
      fair value option has been elected in earnings at each subsequent reporting
      date. The objective is to improve financial reporting by providing entities
      with
      the opportunity to mitigate volatility in reported earnings caused by measuring
      related assets and liabilities differently without having to apply complex
      hedge
      accounting provisions. SFAS No. 159 is effective as of the beginning of an
      entity’s first fiscal year that begins after November 15, 2007. Early adoption
      is permitted as of the beginning of a fiscal year that begins on or before
      November 15, 2007, provided the entity also elects to apply the provisions
      of
      SFAS No. 157, “Fair Value Measurements.”We
      have
      not determined the effect, if any, that may result from the adoption of SFAS
      No.
      159 on our financial statements.




In
      December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS
      141R”), which replaces SFAS No. 141, “Business Combinations.” SFAS 141R
      establishes principles and requirements for determining how an enterprise
      recognizes and measures the fair value of certain assets and liabilities
      acquired in a business combination, including noncontrolling interests,
      contingent consideration, and certain acquired contingencies. SFAS 141R also
      requires acquisition-related transaction expenses and restructuring costs be
      expensed as incurred rather than capitalized as a component of the business
      combination. SFAS 141R will be applicable prospectively to business combinations
      for which the acquisition date is on or after the beginning of the first annual
      reporting period beginning on or after December 15, 2008. SFAS 141R would have
      an impact on accounting for any businesses acquired after the effective date
      of
      this pronouncement.




10




In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements - An Amendment of ARB No. 51” (“SFAS 160”).
      SFAS 160 establishes accounting and reporting standards for the noncontrolling
      interest in a subsidiary (previously referred to as minority interests). SFAS
      160 also requires that a retained noncontrolling interest upon the
      deconsolidation of a subsidiary be initially measured at its fair value. Upon
      adoption of SFAS 160, we would be required to report any noncontrolling
      interests as a separate component of stockholders’ equity. We would also be
      required to present any net income allocable to noncontrolling interests and
      net
      income attributable to stockholders of ours separately in our consolidated
      statements of income. SFAS 160 is effective for fiscal years, and interim
      periods within those fiscal years, beginning on or after December 15, 2008.
      SFAS
      160 requires retroactive adoption of the presentation and disclosure
      requirements for existing minority interests. All other requirements of SFAS
      160
      shall be applied prospectively. SFAS 160 would have an impact on the
      presentation and disclosure of the noncontrolling interests of any non
      wholly-owned businesses acquired in the future.




**ITEM
      7. Financial statements**




Our
      audited financial statements for the years ended December 31, 2007 and 2006
      are
      included as a separate section of this report beginning on page
      F-1.




**ITEM
      8. Changes in and disagreements with accountants on accounting and financial
      disclosure**




On
      September 18, 2007, Eisner, LLP, our former auditors and accountants, resigned,
      effective immediately. Eisner has not prepared a report on our financial
      statements for the fiscal years ended December 31, 2007 and 2006. Eisner’s
      involvement has been limited to reviewing the interim financial statements
      for
      the quarterly period ended September 30, 2005. The decision to change
      accountants was approved by our board of directors.




During
      the period of their engagement, commencing on October 11, 2005, and through
      the
      date of resignation, there were no disagreements, resolved or not, with Eisner
      on any matters of accounting principles or practices, financial statement
      disclosure or auditing scope or procedures, which disagreements, if not resolved
      to the satisfaction of Eisner, would have caused Eisner to make reference to
      the
      subject matter of the disagreement in connection with their report on the
      financial statements for such years.




During
      the fiscal years ended December 31, 2006 and 2005, and in the subsequent interim
      periods through the date of resignation, there were no reportable events as
      described in Item 304(a)(1)(iv)(B) of Regulation S-B.




On
      September 14, 2007, we engaged Raich Ende Malter & Co. LLP as our
      independent registered public accounting firm for our company’s fiscal years
      ended December 31, 2007, 2006 and 2005. The decision to engage Raich Ende as
      our
      independent registered public accounting firm was approved by our board of
      directors.




During
      the years ended December 31, 2007 and 2006, and the subsequent interim periods
      through the date hereof, we have not, nor has any person on our behalf,
      consulted with Raich Ende regarding either the application of accounting
      principles to a specific completed or contemplated transaction, or the type
      of
      audit opinion that might be rendered on our financial statements, nor has Raich
      Ende provided to us a written report or oral advice regarding such principles
      or
      audit opinion on any matter that was the subject of a disagreement or reportable
      event set forth in Item 304(a)(1)(iv) of Regulation S-B with our former
      independent accountant.





**ITEM
      8A(T). Controls and procedures**





Our
      management, including our Chief Executive Officer and Chief Financial Officer,
      has evaluated the effectiveness of the design and operation of our disclosure
      controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
      15d-15(e)) as of the end of the period covered by this report. Based upon that
      evaluation, our Chief Executive Officer and Chief Financial Officer have
      concluded that the disclosure controls and procedures as of December 31, 2007
      were not effective, due
      to
      the material weaknesses discussed below, to
      ensure that information required to be disclosed in the reports we file or
      submit under the Exchange Act is recorded, processed, summarized and reported
      within the time periods specified in the Securities and Exchange Commission’s
      rules and forms and that such information is accumulated and communicated to
      our
      management, including our Chief Executive Officer and Chief Financial Officer,
      to allow timely decisions regarding disclosure.




11




**Management’s
      Annual Report on Internal Control Over Financial Reporting**





Our
      management is responsible for establishing and maintaining an adequate system
      of
      internal control over financial reporting. Our internal control over financial
      reporting includes those policies and procedures that:





·
            pertain
                to the maintenance of records that, in reasonable detail, accurately
                and
                fairly reflect the transactions and dispositions of our
                assets;





·
            provide
                reasonable assurance that transactions are recorded as necessary
                to permit
                preparation of our financial statements in accordance with generally
                accepted accounting principles in the United States, and that our
                receipts
                and expenditures are being made only in accordance with authorizations
                of
                our management and directors; and





·
            provide
                reasonable assurance regarding prevention or timely detection of
                unauthorized acquisition, use or disposition of our assets that could
                have
                a material effect on the financial
                statements.





Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Projections of any evaluation of effectiveness
      to future periods are subject to the risk that controls may become inadequate
      because of changes in conditions, or that the degree of compliance with the
      policies or procedures may deteriorate. All internal control systems, no matter
      how well designed, have inherent limitations. Therefore, even those systems
      determined to be effective can provide only reasonable assurance with respect
      to
      financial statement preparation and presentation. Because of the inherent
      limitations of internal control, there is a risk that material misstatements
      may
      not be prevented or detected on a timely basis by internal control over
      financial reporting. However, these inherent limitations are known features
      of
      the financial reporting process. Therefore, it is possible to design into the
      process safeguards to reduce, though not eliminate, this risk.





Our
      management assessed the effectiveness of our system of internal control over
      financial reporting as of December 31, 2007. In making this assessment, our
      management used the framework in *Internal
      Control — Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission
      (“COSO”). Based on our assessment and the criteria set forth by COSO, our
      management believes that we did not maintain effective internal control over
      financial reporting as of December 31, 2007 due
      to
      the material weaknesses discussed below .





The
      aforementioned evaluation identified material
      weaknesses that relate to the fact that that our overall financial reporting
      structure, internal accounting information systems and current staffing levels
      are not sufficient to support our financial reporting requirements. To
      address the weaknesses, we performed additional analyses and other post-closing
      procedures to ensure that our consolidated financial statements are prepared
      in
      accordance with generally accepted accounting principles. Accordingly, our
      management believes that the financial statements included in this report fairly
      present in all material respects our financial condition, results of operations
      and cash flows for the periods presented.





As
      noted
      above, the issues that resulted from these weaknesses were properly addressed
      before the completion of our consolidated financial statements. In addition,
      our
      management is working to identify and implement corrective actions where
      required to improve our internal controls, including the enhancement of our
      systems and procedures to assure that the weaknesses noted above are corrected.
      We are working to remedy our deficiency.





This
      annual report does not include an attestation report of our registered public
      accounting firm regarding internal control over financial reporting. Our
      management’s report was not subject to attestation by our registered public
      accounting firm pursuant to temporary rules of the Securities and Exchange
      Commission that permit us to provide only our management’s report in this annual
      report.




12




**ITEM
      8B. Other information**




None.





**PART
      III.**




**ITEM
      9. Directors, executive officers, promoters, control persons and corporate
      governance; compliance with Section 16(a) of the Exchange Act**




The
      following table shows the positions held by our board of directors and executive
      officers as well as certain key employees, and their ages, as of April 10 ,
      2008:




**Name**
            
            **Age**
            
            **Position**Michael
                D. Feldman
            
            40
            
            Chairman
                of the Board and Chief Executive OfficerSteven
                M. Payne
            
            54
            
            President
                and DirectorJerome
                I. Feldman
            
            79
            
            Vice
                Chairman of the Board, Chief Financial Officer and
                TreasurerGeorge
                McKeegan
            
            60
            
            Vice
                President, Secretary and Director





The
      principal occupations for the past five years (and, in some instances, for
      prior
      years) of each of our directors and executive officers are as
      follows:




**Michael
      D. Feldman** has been
      our Chairman of the Board and Chief Executive Officer since September 2006
      and
      served as our Executive Vice President and a director since our company’s
      formation in March 1997. Prior to that, Mr. Feldman served as Executive Vice
      President and a director of The CineMasters Group, Inc. from September 1996
      to
      February 1997. From 1991 to 1996, he served as an officer of General Physics
      Corporation and has been a Director of International Business Development at
      GP
      Strategies Corporation since 1995. He has a BA degree from Cornell University.
      Mr. Feldman is a Class II Director.




**Steven
      M. Payne** has been
      our President and a member of our board of directors since May 2006. Since
      1976,
      Mr. Payne served as President and CEO of Quatro Foods Inc., a food service
      enterprise. He is a director and past Board President of Carbondale Main Street,
      Inc., a local downtown redevelopment corporation, and a director of the Southern
      Illinois Entrepreneurship and Business Development Center at Southern Illinois
      University in Carbondale, Illinois. Mr. Payne is also President of 13 West
      LLC,
      a developer and operator of Mini Storage facilities. He attended Southern
      Illinois University. Mr. Payne is a Class I Director.




**Jerome
      I. Feldman** has been
      our Vice Chairman of the Board, Chief Financial Officer and Treasurer since
      September 2006. Mr. Feldman founded GP Strategies Corporation in 1959 and served
      as Chief Executive Officer from 1959 until April 2005, Chairman of the Board
      from 1999 until April 2005 and President from 1959 until 2001. He has been
      Chairman of the Board of Five Star from 1994 until June 2007, a director of
      GSE
      since 1994, Chairman of the Board of GSE since 1997 and Chairman of the Board
      and Chief Executive Officer of NPDC from 2004 until June 2007. He was a director
      of Valera from January 2005 until April 2007.  Mr. Feldman is also Chairman
      of the New England Colleges Fund and a Trustee of Northern Westchester Hospital
      Foundation. He has a BA degree from Indiana University and an LLB degree from
      New York University. Mr. Feldman is a Class III Director.




**George
      McKeegan** has been
      our Vice President , Secretary and a member of our board of directors since
      May
      2006. Since 1986, Mr. McKeegan has led McKeegan & Shearer, P.C., a law firm
      engaged in the general practice of civil law, and specializing in litigation
      and
      corporate counseling. Prior to that, he served as Vice President at Citibank,
      N.A. and as an Assistant District Attorney with the New York County District
      Attorney’s Office. He received a BA degree from Fordham College and a JD degree
      from the University of Michigan, Ann Arbor. Mr. McKeegan is a Class III
      Director.




Our
      directors 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 our 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. We do not currently pay compensation to directors for service in
      that
      capacity.




13




**Committees
      of the Board**




We
      have
      not established an audit committee, compensation committee or nominations and
      governance committee, and we are not required to do so since our shares are
      not
      listed on a national securities exchange.




**Indebtedness
      of Directors and Executive Officers**




None
      of
      our directors or executive officers or their respective associates or affiliates
      is indebted to us.




**Family
      Relationships**




There
      are
      no family relationships among our directors and executive officers, except
      that
      Michael D. Feldman is the son of Jerome I. Feldman.




**Legal
      Proceedings**




As
      of the
      date of this report, there is no material proceeding to which any of our
      directors, executive officers, affiliates or stockholders is a party adverse
      to
      us.




**Code
      of Ethics**





In
      December 2007, we adopted a Code of Ethics and Business Conduct that applies
      to
      all of our executive officers, directors and employees. The Code of Ethics
      and
      Business Conduct codifies the business and ethical principles that govern all
      aspects of our business. Our Code of Ethics and Business Conduct is available
      without charge to any stockholder who makes a written request for a
      copy.




**Section
      16(a) Beneficial Ownership Reporting Compliance**




Rules
      adopted by the SEC under Section 16(a) of the Exchange Act, require our
      officers and directors, and persons who own more than 10% of the issued and
      outstanding shares of our equity
      securities, to file reports of their ownership, and changes in ownership, of
      such securities with the SEC on Forms 3, 4 or 5, as appropriate. Such
      persons are required by the regulations of the SEC to furnish us with copies
      of
      all forms they file pursuant to Section 16(a).




Based
      solely upon a review of Forms 3, 4 and 5 and amendments thereto furnished
      to us during the year ended December 31, 2007, and any written
      representations provided to us, we believe that all of the officers, directors,
      and owners of more than ten percent of the outstanding shares of our common
      stock complied with Section 16(a) of the Exchange Act for the year ended
      December 31, 2007.




14




**ITEM
      10. Executive Compensation**





**Summary
      Compensation Table**




The
      following table sets forth, for the most recent fiscal year and prior fiscal
      year, all cash compensation paid, distributed or accrued, including salary
      and
      bonus amounts, for services rendered to us by our Chief Executive Officer,
      Chief
      Financial Officer and two other executive officers in such year who received
      or
      are entitled to receive remuneration in excess of $100,000 during the stated
      period and any individuals for whom disclosure would have been made in this
      table but for the fact that the individual was not serving as an executive
      officer as at December 31, 2007:




Name
                and Principal Position
            
            Year
            
            Salary
              ($)
            
            Bonus
              ($)
            
            Stock
                Awards
              ($)
            
            Option
                Awards
              ($)
            
            Non-Equity
                Incentive Plan Compen-
              sation
              (4)
            
            Nonqualified
                Deferred Compen-sation Earnings
              ($)
            
            All
                Other Compen-sation ($)
            
            Total
                ($)(a)
            
            (b)
            
            (c)
            
            (d)
            
            (e)
            
            (f)
            
            (g)
            
            (h)
            
            (i)
            
            (j)Michael
                D. Feldman
              Chief
                Executive Officer, Chairman of the Board
            
            
            2007
              2006
            
            
            —
              —
            
            
            —
                  —
            
            
            —
                  —
            
            
            —
                  —
            
            
            —
                  —
            
            
            —
                  —
            
            
            —
              —
            
            
            —
              —Steven
                M. Payne
              President
            
            
            2007
              2006
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —Jerome
                I. Feldman
              Chief
                Financial Officer, Treasurer, Vice Chairman of the Board
            
            
            2007
              2006
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —Gene
                Feldman
              former
                Chief Executive Officer, President, Chief Financial Officer, Chairman
                of
                the Board (1)
            
            
            2007
              2006
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            —
              50,000
            
            
            —
              —
            
            
            —
              50,000







(1)
            Gene
                Feldman served as our Chief Executive Officer, President and Chief
                Financial Officer until May 2006 and as our Chairman of the Board
                until he
                passed away in August 2006.




15




**Outstanding
      Equity Awards at Fiscal Year-End**




The
      following table summarizes equity awards outstanding at December 31, 2007
      for each of the executive officers named in the Summary Compensation Table
      above:




Option
                Awards
            
            Stock
                AwardsName
            
            Number
              of
              Securities
                Underlying Unexercised Options
              (#)
              Exercisable
            
            Number
                of Securities Underlying Unexercised Options
              (#)
              Unexercisable
            
            Equity
                Incentive Plan Awards: Number of Securities Underlying Unexercised
                Unearned Options
              (#)
            
            Option
                Exercise Price
              ($)
            
            Option
                Expiration Date
            
            Number
                of Shares or Units of Stock That Have Not Vested
              (#)
            
            Market
                Value of Shares or Units of Stock That Have Not Vested
              ($)
            
            Equity
                Incentive Plan Awards: Number of Unearned Shares, Units or Other
                Rights
                That Have Not Vested
              (#)
            
            Equity
                Incentive Plan Awards: Market or Payout Value of Unearned Shares,
                Units or
                Other Rights That Have Not Vested
              ($)(a)
            
            (b)
            
            (c)
            
            (d)
            
            (e)
            
            (f)
            
            (g)
            
            (h)
            
            (i)
            
            (j)Michael
                D. Feldman
              Chief
                Executive Officer, Chairman of the Board
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Steven
                M. Payne
              President
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Jerome
                I. Feldman
              Chief
                Financial Officer, Treasurer, Vice Chairman of the Board
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Gene
                Feldman
              former
                Chief Executive Officer, President, Chief Financial Officer, Chairman
                of
                the Board (1)
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —







(1)
            Gene
                Feldman served as our Chief Executive Officer, President and Chief
                Financial Officer until May 2006 and as our Chairman of the Board
                until he
                passed away in August 2006.




**Employment
      Agreements**





As
      of
      December 31, 2007 and through the date of this report, we have no employment
      agreements in place with any person.




16




**Director
      Compensation**




Directors
      currently receive no compensation for serving on our board of directors other
      than reimbursement of all reasonable expenses for attendance at board meetings.




**Director
      Compensation**




Name
            
            Fees
                Earned or Paid in Cash ($)
            
            Stock
                Awards
              ($)
            
            Option
                Awards
              ($)
            
            Non-Equity
                Incentive Plan Compen-
              sation
              ($)
            
            Nonqualified
                Deferred Compen-sation Earnings
              ($)
            
            All
                Other Compen-sation ($)
            
            Total
                ($)(a)
            
            (b)
            
            (e)
            
            (f)
            
            (g)
            
            (h)
            
            (i)
            
            (j)Michael
                D. Feldman
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Steven
                M. Payne
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Jerome
                I. Feldman
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —George
                McKeegan
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —





**ITEM
      11. Security ownership of certain beneficial owners and
      management**





The
      table
      below sets forth the beneficial ownership of our common stock, as of April
      10,
      2008, by:





·
            all
                of our directors and executive officers, individually,





·
            all
                of our directors and executive officers, as a group, and





·
            all
                persons who beneficially owned more than 5% of our outstanding common
                stock.





The
      beneficial ownership of each person was calculated based on 11,582,000 shares
      of
      our common stock outstanding as of April 10, 2008, according to the record
      ownership listings as of that date and the verifications we solicited and
      received from each director and executive officer. The SEC has defined
“beneficial ownership” to mean more than ownership in the usual sense. For
      example, a person has beneficial ownership of a share not only if he owns it
      in
      the usual sense, but also if he has the power to vote, sell or otherwise dispose
      of the share. Beneficial ownership also includes the number of shares that
      a
      person has the right to acquire within 60 days of April 10, 2008 pursuant
      to the exercise of options or warrants or the conversion of notes, debentures
      or
      other indebtedness, but excludes stock appreciation rights. Two or more persons
      might count as beneficial owners of the same share. Unless otherwise noted,
      the
      address of the following persons listed below is c/o Avenue Entertainment
      Group, Inc., 120
      White
      Plains Road, Tarrytown, New York 10591 .





Unless
      otherwise indicated, we believe that all persons named in the table below have
      sole voting and investment power with respect to all shares of common stock
      beneficially owned by them.




17




**Name**
            
            **Position**
            
            **Shares
                of stock beneficially owned**
            
            **Percent
                of common stock beneficially owned****Directors
                and Executive Officers:**Michael
                D. Feldman
            
            
            Chairman
                of the Board, Chief Executive Officer
            
            
            3,765,000
            
            
            32.5
            %Steven
                M. Payne
            
            
            President,
                Director
            
            
            2,483,142
            
            
            21.4
            %Jerome
                I. Feldman
            
            
            Vice
                Chairman of the Board, Chief Financial Officer, Treasurer
            
            
            1,035,802
            
            
            8.9
            %George
                McKeegan
            
            
            Vice
                President, Secretary, Director
            
            
            —
            
            
            *All
                directors and executive officers as a group (4 persons)
            
            
            
            
            
            7,283,944
            
            
            62.9
            %





*  Denotes
      less than 1%.




**Change
      in Control**




There
      are
      no arrangements currently in effect which may result in our “change in control,”
as that term is defined by the provisions of Item 403(c) of Regulation S-B.




**Equity
      Compensation Plan Information**




Under
      our
      Avenue Entertainment Group, Inc. Stock Option and Long Term Incentive
      Compensation Plan (the “Plan”), as amended, there are 2,750,000 shares reserved
      for issuance under the Plan to key employees, directors and consultants. Grants
      may be stock options, SAR’s, restricted stock or stock bonuses. Only employees
      may receive incentive awards. Exercise prices of incentive stock option grants
      shall not be less than the fair market value of our common stock on the date
      of
      the grant. Stock options may be exercised subject to continued employment and
      certain other conditions. We can determine all other terms of an award under
      the
      Plan, including vesting and term, provided, however, that the terms of a stock
      option grant under the Plan may not be for more than ten years from the date
      of
      grant. Based on our common stock outstanding as of April 10, 2008, 2,750,000
      stock options are available for issuance under the Plan and, as of that
      date, there are no outstanding grants under the Plan.




18




The
      following table provides information as of December 31, 2007 with respect to
      the
      shares of common stock that may have been issued under our existing equity
      compensation plan.




**Equity
      Compensation Plan Information**





Plan
                category
            
            Number
                of shares of common stock to be issued upon exercise of outstanding
                options, warrants and rights
              (a)
            
            Weighted-average
                exercise price of outstanding options, warrants and rights
              (b)
            
            Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))
              (c)Equity
                compensation plans approved by security holders
            
            
            —
            
            
            —
            
            
            2,750,000Equity
                compensation plans not approved by security holders
            
            
            —
            
            
            —
            
            
            —Total
            
            
            —
            
            
            —
            
            
            2,750,000




**ITEM
      12. Certain relationships and related transactions, and director
      independence**





**Related
      Party Transactions**




In
      September 2007, we issued to Jerome I. Feldman, our Vice Chairman, Chief
      Financial Officer and Treasurer, and Steven Payne, our President and a director,
      945,728 and 315,242, respectively, shares of our common stock for an aggregate
      purchase price of $25,000.




As
      of
      December 31, 2006, an affiliated company/major stockholder forgave $163,558
      which amount was credited to additional paid-in-capital as capital
      contributions.




Our
      subsidiary, Wombat
      Productions, Inc., had
      granted sole and exclusive rights to license all of its programs to a
      distributor whose president is related to the then Chairman of our company.
      The
      agreement was assumed by the purchaser of the assets of Wombat Productions.
      During the year ended December 31, 2006, Wombat Productions had revenues of
      $18,000 and paid commissions of $6,000 to the distributor.




During
      the year ended December 31, 2006, the purchaser of Wombat Productions paid
      expenses on our behalf of $32,169.




As
      of
      December 31, 2007, loan payable-officer was $47,568, payable on demand, at
      5%
      interest, per annum. For the year ended December 31, 2007 and 2006, interest
      expense due to the officer was $1,075 and none, respectively.




**Director
      Independence**





None
      of
      our directors is an “independent” director, as such term is defined in Rule
      10A-3(b)(1) under the Exchange Act. See Item 9 - Directors, Executive Officers,
      Promoters, Control Persons and Corporate Governance; Compliance with Section
      16(a) of the Exchange Act for more information on the independence of our
      directors.




19




**ITEM
      13. Exhibits**





(a)
      Exhibits





Exhibit
                No.
            
            Description21.1
            
            Subsidiaries
                of Avenue Entertainment Group, Inc.31.1
            
            Certification
                of Chief Executive Officer required by Rule
                13(a)-14(a).31.2
            
            Certification
                of Chief Financial Officer required by Rule
                13(a)-14(a).32.1
            
            Certifications
                pursuant to Sec. 906.





**ITEM
      14. Principal accountant fees and services**




Raich
      Ende Malter & Co. LLP served as our independent auditors for the years ended
      December 31, 2007 and 2006.




**Audit
      Fees**




Audit
      fees are those fees billed for professional services rendered for the audit
      of
      the annual financial statements and reviews of the financial statements included
      in Forms 10-QSB. For the year ended December 31, 2007, $16,722 in audit fees
      were billed by Raich Ende related to the audit and reviews of our financial
      statements in 2007 and 2006.




**Audit-related
      Fees**




Audit-related
      fees are fees billed for professional services other than the audit of our
      financial statements. For the year ended December 31, 2007, $500 in
      audit-related fees were billed by Raich Ende.




**Tax
      Fees**




Tax
      fees
      are those fees billed for professional services rendered for tax compliance,
      including preparation of corporate federal and state income tax returns, tax
      advice and tax planning. For the year ended December 31, 2007, $930 in tax
      fees
      were billed by Raich Ende.




**All
      Other Fees**




No
      other
      fees were billed by our independent auditors in 2007 and 2006.




**Audit
      Committee**




We
      have
      not established an audit committee. Our board of directors approved the services
      rendered and fees charged by our independent auditors. Our board of directors
      has reviewed and discussed our audited financial statements for the year ended
      December 31, 2007 with our management. In addition, our board of directors
      has
      discussed with Raich Ende, our independent registered public accountants, the
      matters required to be discussed by Statement of Auditing Standards No. 61
      (Communications with Audit Committee). Our board of directors also has received
      the written disclosures and the letter from as required by the Independence
      Standards Board Standard No. 1 (Independence Discussions with Audit Committees)
      and our board of directors has discussed the independence of Raiche Ende with
      that firm.




Based
      on
      our board of directors’ review of the matters noted above and its discussions
      with our independent auditors and our management, our board of directors
      approved that the audited financial statements be included in our annual report
      on Form 10-KSB for the year ended December 31, 2007.




20




**Policy
      for Pre-Approval of Audit and Non-Audit Services**





Our
      board
      of directors’ policy is to pre-approve all audit services and all non-audit
      services that our independent auditor is permitted to perform for us under
      applicable federal securities regulations. As permitted by the applicable
      regulations, our board of directors’ policy utilizes a combination of specific
      pre-approval on a case-by-case basis of individual engagements of the
      independent auditor and general pre-approval of certain categories of
      engagements up to predetermined dollar thresholds that are reviewed annually
      by
      our board of directors. Specific pre-approval is mandatory for the annual
      financial statement audit engagement, among others.





The
      pre-approval policy was implemented effective as of 2001. All engagements of
      the
      independent auditor to perform any audit services and non-audit services since
      that date have been pre-approved by our board of directors in accordance with
      the pre-approval policy. The policy has not been waived in any instance. All
      engagements of the independent auditor to perform any audit services and
      non-audit services prior to the date the pre-approval policy was implemented
      were approved by our board of directors in accordance its normal
      functions.


21


**SIGNATURES**




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




Dated:
       April 10, 2008




**AVENUE
                ENTERTAINMENT GROUP, INC.**By:
            /s/
              Michael
              D. FeldmanMichael
                D. FeldmanChairman,
                Chief Executive Officer
              (principal
                  executive officer)




By:
            /s/
              Jerome
              I. FeldmanJerome
                I. FeldmanVice
                Chairman, Chief Financial Officer, Treasurer
              (principal
                financial and accounting officer)




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
            
            Date/s/Michael
                D. Feldman
            
            Chief
                Executive Officer,
            
            April
                10, 2008Michael
                D. Feldman
            
            Chairman
                of the Board(principal
                executive officer)/s/Steven
                M. Payne
            
            President,
                Director
            
            April
                10, 2008Steven
                M. Payne/s/Jerome
                I. Feldman
            
            Chief
                Financial Officer,
            
            April
                10, 2008Jerome
                I. Feldman
            
            Treasurer,
                Vice Chairmanof
                the Board(principal
                financial and accounting officer)/s/George
                McKeegan
            
            Vice
                President, Secretary, Director
            
            April
                10, 2008George
                McKeegan




22


**AVENUE
      ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES**




**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**




PageReport
                  of Independent Registered Public Accounting Firm
              
              
              F-2Consolidated
                  Balance Sheet as of December 31, 2007
              
              
              F-3Consolidated
                  Statement of Operations for the years ended December 31, 2007 and
                  2006
              
              
              F-4Consolidated
                  Statement of Stockholders’ Equity (Deficit) for the years ended December
                  31, 2007 and 2006
              
              
              F-5Consolidated
                  Statement of Cash Flows for the years ended****December
                  31, 2007 and 2006
              
              
              F-6Notes
                  to Consolidated Financial Statements
              
              
              F-7


F-1




REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




The
      Board
      of Directors and Stockholders


Avenue
      Entertainment Group, Inc.




We
      have
      audited the accompanying consolidated balance sheet of Avenue Entertainment
      Group, Inc. (“Company”) as of December 31, 2007 and the related consolidated
      statements of operations, stockholders’ equity (deficit) and cash flows for the
      two years ended December 31, 2007. These consolidated financial statements
      are
      the responsibility of the Company’s management. Our responsibility is to express
      an opinion on these consolidated financial statements based on our
      audit.




We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement.  The Company is not required
      to have, nor were we engaged to perform, an audit of its internal control over
      financial reporting. Our audit included consideration of internal control over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting. Accordingly, we express no such opinion. An audit includes examining,
      on a test basis, evidence supporting the amounts and disclosures in the
      financial statements. An audit also includes assessing the accounting principles
      used and significant estimates made by management, as well as evaluating the
      overall financial statement presentation. We believe that our audit provides
      a
      reasonable basis for our opinion.




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Avenue
      Entertainment Group, Inc. as of December 31, 2007 and the consolidated results
      of its operations and its consolidated cash flows for the two years ended
      December 31, 2007 in conformity with accounting principles generally accepted
      in
      the United States.




The
      accompanying financial statements have been prepared assuming the Company will
      continue as a going concern. As discussed in Note 3 to the financial statements,
      the Company had operating losses, negative working capital, no operating cash
      flow and future losses are anticipated. The Company’s plan of operations, even
      if successful, may not result in cash flow sufficient to finance and expand
      its
      business which raises substantial doubt about its ability to continue as a
      going
      concern. Management’s plans in regard to these matters are also described in
      Note 3. The financial statements do not include any adjustments that might
      result from the outcome of this uncertainty.




/s/
                Raich Ende Malter & Co. LLPRaich
                Ende Malter & Co. LLPNew
                York, New YorkApril
                10, 2008




F-2


**Avenue
      Entertainment Group, Inc. and Subsidiaries**




**Consolidated
      Balance Sheet**


**December
      31, 2007**




ASSETSCurrent
                assetsCash
            
            $
            23,562Prepaid
                expenses
            
            
            12,351TOTAL
                ASSETS
            
            $
            35,913LIABILITIES
                AND STOCKHOLDERS’ DEFICITAccounts
                payable and accrued expenses
            
            $
            36,481Loan
                payable - officer
            
            
            47,568Due
                to related party
            
            
            18,422TOTAL
                LIABILITIES
            
            
            102,471STOCKHOLDERS’
                DEFICITPreferred
                stock, $.01 par value, 2,000,000 shares authorized;
                none issuedCommon
                stock, $.01 par value, 15,000,000 shares authorized;
                11,582,000 shares issued and outstanding
            
            
            115,820Class
                B common stock, no par value, 1,000,000 shares authorized;
                none issuedAdditional
                paid-in capital
            
            
            7,245,713Accumulated
                deficit
            
            
            (7,358,708
            )Treasury
                  stock, at cost (798,918 shares ofcommon
                  stock for 2007 and 2006)
            
            
            (69,383
            )TOTAL
                STOCKHOLDERS’ DEFICIT
            
            
            (66,558
            )TOTAL
                LIABILITIES AND STOCKHOLDERS’ DEFICIT
            
            $
            35,913




*See
        notes to consolidated financial statements*




F-3


**Avenue
      Entertainment Group, Inc. and Subsidiaries**




**Consolidated
      Statement of Operations**




Years
                  EndedDecember
                  31,2007
              
              2006Revenues
              
              $
              11,404
              
              $
              1,976General
                  and administrative expenses
              
              
              (109,570
              )
              
              (93,400
              )Loss
                  from continuing operations
              
              
              (98,166
              )
              
              (91,424
              )Discontinued
                  operationsIncome
                  from discontinued operations
              
              
              
              
              
              94,410Gain
                  on sale of assets
              
              
              
              
              
              722,334Income
                  from discontinued operations
              
              
              
              
              
              816,744Net
                  (loss) income
              
              $
              (98,166
              )
              $
              725,320Per
                  share data:Loss
                  from continuing operations - basic and diluted
              
              $
              (0.01
              )
              $
              (0.01
              )Income
                  from discontinued operations - basic and diluted
              
              
              
              
              $
              0.10Net
                  income per share - basic and diluted
              
              $
              (0.01
              )
              $
              0.09Weighted
                  average common shares outstanding - basic and diluted
              
              
              10,649,228
              
              
              7,878,781




*See
        notes to consolidated financial statements*




F-4


**Avenue
      Entertainment Group, Inc. and Subsidiaries**


**Consolidated
      Statement of Stockholders’ Equity (Deficit)**




Common
                  Stock
              
              Additional
              
              
              
              Treasury
                  StockNumber
                  of Shares
              
              Amount
              
              Paid-in
                  Capital
              
              Accumulated
                Deficit
              
              Number
                  of Shares
              
              Amount
              
              TotalBalance
                  at December 31, 2005
              
              
              5,321,030
              
              $
              53,210
              
              $
              7,021,765
              
              $
              (7,985,862
              )
              
              714,750
              
              $
              (67,700
              )
              $
              (978,587
              )Common
                  stock returned pursuant to sale of asset
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              84168
              
              
              (1,683
              )
              
              (1,683
              )Options
                  cancelled pursuant to sale of asset
              
              
              
              
              
              
              
              
              (3,500
              )
              
              
              
              
              
              
              
              
              
              
              (3,500
              )Options
                  granted pursuant to sale of asset
              
              
              
              
              
              
              
              
              1,500
              
              
              
              
              
              
              
              
              
              
              
              1,500Sale
                  of common stock
              
              
              5,000,000
              
              
              50,000
              
              
              50,000
              
              
              
              
              
              
              
              
              
              
              
              100,000Capitalization
                  of stockholder loan
              
              
              
              
              
              
              
              
              163,558
              
              
              
              
              
              
              
              
              
              
              
              163,558Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              725,320
              
              
              
              
              
              
              
              
              725,320Balance
                  at December 31, 2006
              
              
              10,321,030
              
              
              103,210
              
              
              7,233,323
              
              
              (7,260,542
              )
              
              798,918
              
              
              (69,383
              )
              
              6,608Sale
                  of common stock
              
              
              1,260,970
              
              
              12,610
              
              
              12,390
              
              
              
              
              
              
              
              
              
              
              
              25,000Net
                  (loss)
              
              
              
              
              
              
              
              
              
              
              
              (98,166
              )
              
              
              
              
              
              
              
              (98,166
              )Balance
                  at December 31, 2007
              
              
              11,582,000
              
              $
              115,820
              
              $
              7,245,713
              
              $
              (7,358,708
              )
              
              798,918
              
              $
              (69,383
              )
              $
              (66,558
              )




*See
        notes to consolidated financial statements*


F-5


**Avenue
      Entertainment Group, Inc. and Subsidiaries**




**Consolidated
      Statement of Cash Flows**




Years
                Ended December 31,2007
            
            2006Cash
                Flows From Continuing OperationsNet
                (loss) income
            
            $
            (98,166
            )
            $
            725,320Gain
                on sale of assets
            
            
            
            
            
            (722,334
            )Income
                from discontinued operations
            
            
            
            
            
            (94,410
            )Net
                loss from continuing operations
            
            
            (98,166
            )
            
            (91,424
            )Adjustments
                to reconcile net loss to net cash provided by(used
                in) operating activities:Changes
                in operating assets and liabilities:Prepaid
                expenses
            
            
            (12,351
            )Accounts
                payable and accrued expenses
            
            
            36,481Net
                cash (used in) operating activities
            
            
            (74,036
            )
            
            (91,424
            )Cash
                Flows From Financing ActivitiesSale
                of common stock (net of stock subscription of $34,986 in
                2006)
            
            
            59,986
            
            
            65,014Proceeds
                from loan payable - officer
            
            
            47,568Increase
                (decrease) in due to related party
            
            
            (11,404
            )
            
            29,826Net
                cash provided by financing activities
            
            
            96,150
            
            
            94,840Increase
                in cash from continuing operations
            
            
            22,114
            
            
            3,416Cash
                Flows Provided From Discontinued OperationsNet
                cash used in discontinued operating activities
            
            
            
            
            
            (1,689
            )Net
                cash used in discontinued investing activities
            
            
            
            
            
            (279
            )Decrease
                in cash from discontinued operations
            
            
            
            
            
            (1,968
            )Increase
                in cash
            
            
            22,114
            
            
            1,448Cash
                - Beginning of year
            
            
            1,448Cash
                - End of year
            
            $
            23,562
            
            $
            1,448Supplemental
                cash flow information:Capitalization
                of loan to stockholder
            
            
            
            
            $
            163,558




*See
        notes to consolidated financial statements*


F-6


**Avenue
      Entertainment Group, Inc. and Subsidiaries**




**Notes
      To Consolidated Financial Statements**




1.  Organization
      and Operations




Avenue
      Entertainment Group, Inc. (the “Company”) was incorporated in Delaware on March
      7, 1997 and had operated through its wholly-owned subsidiaries, Avenue Pictures,
      Inc. and its subsidiaries (“Avenue Pictures”) and Wombat Productions, Inc.
      (“Wombat”).




Avenue
      Pictures operated as an independent entertainment company that produced feature
      films, television films and series for television and made-for-television/cable
      movies through September 2, 2005, when it ceased operations upon the sale of
      its
      assets. Wombat operated as a licensor of its library of one-hour-profiles films
      of over 25 Hollywood stars, (the Hollywood Collection), both domestically and
      internationally, through May 2, 2006, when it ceased operations upon the sale
      of
      its assets.




From
      May
      2, 2006, the Company has been inactive.




2.  Summary
      of Significant Accounting Policies




Consolidated
      Financial Statements




The
      Company’s consolidated financial statements include the accounts of the Company
      and its wholly-owned subsidiaries. All material intercompany accounts and
      transactions have been eliminated.




Fair
      Value of Financial Instruments




The
      Company’s carrying values of cash, loan payable and due to related party
      approximate their fair values because of the short-term maturity of these
      instruments.




Revenue
      Recognition




Participation
      rights related to assets previously sold are recognized as earned and
      reported.




Prior
      to
      the sale of the Company’s licensing assets, revenues from film licensing
      arrangements were recognized as earned.




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.




Income
      (Loss) per Common Share




Basic
      net
      income (loss) per share was computed by dividing the net income (loss) for
      the
      period by the basic weighted average number of shares outstanding during the
      period. Diluted net income (loss) per share was computed by dividing the net
      income (loss) for the period by the weighted average number and any potentially
      dilutive securities outstanding during the period.




For
      the
      year ended December 31, 2007, there were no potentially dilutive securities.
      For
      the year ended December 31, 2006, there were no significant potentially dilutive
      securities.




F-7




Share-Based
      Compensation




The
      Company recognizes compensation expense for all share-based payment awards
      made
      to employees, directors and others based on the estimated fair values on the
      date of the grant. Common stock equivalents are valued using the Black-Scholes
      Option-Pricing Model using the market price of our common stock on the date
      of
      valuation, an expected dividend yield of zero, the remaining period or maturity
      date of the common stock equivalent and the expected volatility of our common
      stock.




On
      January 1, 2006, the Company adopted SFAS No. 123 (revised), “Share-Based
      Compensation-Revised”, without a material effect.




Deferred
      Income Taxes




Deferred
      income taxes are provided for temporary differences between financial statement
      and income tax reporting under the liability method, using expected tax rates
      and laws that are expected to be in effect when the differences are expected
      to
      reverse. A valuation allowance is provided when it is more likely than not,
      that
      the deferred tax asset will not be realized.




Income
      Taxes





Effective
      January 1, 2007, the Company adopted the provisions of Financial Accounting
      Standards Board (FASB) Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes, an interpretation of FASB Statement No. 109” (FIN 48). FIN 48
      clarifies the accounting for uncertainty in income taxes recognized in the
      Company’s financial statements in accordance with FASB Statement 109,
“Accounting for Income Taxes”, and prescribes a recognition threshold and
      measurement process for financial statement recognition and measurement of
      a tax
      position taken or expected to be taken in a tax return. FIN 48 also provides
      guidance on derecognition, classification, interest and penalties, accounting
      in
      interim periods, disclosure and transition.





The
      Company’s policy is to classify assessments, if any, for tax related interest as
      interest expenses and tax-related penalties as general and administrative
      expenses.




New
      Accounting Pronouncements




In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair
      value, establishes a framework for measuring fair value, and enhances
      disclosures about fair value measurements. SFAS 157 applies to other accounting
      pronouncements that require the use of fair value measurements. SFAS 157 is
      effective for interim and annual financial statements issued for fiscal years
      beginning after November 15, 2007. The Company is currently assessing the impact
      of adopting SFAS 157 on its financial condition, results of operations and
      cash
      flows.




In
      February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities—Including an amendment of FASB Statement 115”
(“SFAS 159”). SFAS 159 permits an entity to elect to measure various financial
      instruments and certain other items at fair value. It provides entities with
      the
      opportunity to mitigate volatility in reported earnings caused by measuring
      related assets and liabilities differently without having to apply complex
      hedge
      accounting provisions. SFAS 159 requires that a business entity report
      unrealized gains and losses, on items for which the fair value option has been
      elected, in earnings at each subsequent reporting date. SFAS 159 is effective
      as
      of the beginning of the first annual period beginning after November 15, 2007.
      The Company is currently assessing the impact of adopting SFAS 159 on its
      financial condition, results of operations and cash flows.





In
      December 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      141(R), “Business Combinations” (“SFAS 141R”), which replaces SFAS No. 141,
“Business Combinations.” SFAS 141R establishes principles and requirements for
      determining how an enterprise recognizes and measures the fair value of certain
      assets and liabilities acquired in a business combination, including
      noncontrolling interests, contingent consideration, and certain acquired
      contingencies. SFAS 141R also requires acquisition-related transaction expenses
      and restructuring costs be expensed as incurred rather than capitalized as
      a
      component of the business combination. SFAS 141R will be applicable
      prospectively to business combinations for which the acquisition date is on
      or
      after the beginning of the first annual reporting period beginning on or after
      December 15, 2008. SFAS 141R would have an impact on accounting for any
      businesses acquired after the effective date of this pronouncement.




F-8




In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements - An Amendment of ARB No. 51” (“SFAS 160”).
      SFAS 160 establishes accounting and reporting standards for the noncontrolling
      interest in a subsidiary (previously referred to as minority interests). SFAS
      160 also requires that a retained noncontrolling interest upon the
      deconsolidation of a subsidiary be initially measured at its fair value. Upon
      adoption of SFAS 160, the Company would be required to report any noncontrolling
      interests as a separate component of stockholders’ equity. The Company would
      also be required to present any net income allocable to noncontrolling interests
      and net income attributable to stockholders of the Company separately in its
      consolidated statements of income. SFAS 160 is effective for fiscal years,
      and
      interim periods within those fiscal years, beginning on or after December 15,
      2008. SFAS 160 requires retroactive adoption of the presentation and disclosure
      requirements for existing minority interests. All other requirements of SFAS
      160
      shall be applied prospectively. SFAS 160 would have an impact on the
      presentation and disclosure of the noncontrolling interests of any non
      wholly-owned businesses acquired in the future.




Management
      does not believe that any other recently issued, but not yet effective
      accounting pronouncements, if adopted, would have a material effect on the
      accompanying consolidated financial statements.




3.  Going
      Concern and Management’s Plans





The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern, which contemplates the realization
      of assets and the satisfaction of liabilities in the normal course of business.
      The Company had incurred operating losses, has negative working capital, and
      no
      operating cash flow and future losses are anticipated. The Company’s plan of
      operations, to raise equity financing, even if successful, may not result in
      cash flow sufficient to finance and expand its business. These factors raise
      substantial doubt about the Company’s ability to continue as a going concern.
      Realization of assets is dependent upon future operations of the Company, which
      in turn is dependent upon management’s plans to meet its financing requirements
      and the success of its future operations. These financial statements do not
      include any adjustments related to the recoverability and classification of
      asset amounts or the amounts and classification of liabilities that might be
      necessary should the Company be unable to continue in existence.




4.  Sale
      of
      Assets/Discontinued Operations




On
      May 2,
      2006, Wombat sold substantially all the assets, including rights under certain
      distribution agreements, to a company owned by a former officer of the Company
      in exchange for: (1) the assignment of certain of its liabilities, (2) the
      return of 84,168 shares of common stock of the Company, with a fair value $1,683
      and (3) for the cancellation of options to purchase 175,000 shares of common
      stock of the Company, with a fair value of $3,500. The Company also issued
      a
      fully vested, non-qualified option to purchase 56,500 shares of common stock
      of
      the Company, exercisable at $0.50, per share, through February 13, 2012, with
      fair value of $1,500.




The
      Company had been committed to its former president and chairman for salaries,
      bonuses and benefits under an employment agreement. Certain of these amounts
      had
      been deferred. As a result of the sale of assets, the agreement was cancelled
      and the deferred compensation amount was assumed by the purchaser of the assets.




The
      Company was also granted the right to receive future participation rights on
      certain revenues from certain film properties sold.




F-9




The
      Company has recorded a gain on the sale of the assets as follows:




Liabilities
                assumed
            
            $
            743,124Common
                stock cancelled
            
            
            1,683Options
                cancelled
            
            
            3,500Total
                proceeds
            
            
            748,307Assets
                sold
            
            
            18,215Options
                issued
            
            
            1,500Expenses
                of sale of assets
            
            
            6,258Total
                cost of sales
            
            
            25,973Gain
                on sale
            
            $
            722,334




The
      fair
      values of the options granted and cancelled were estimated on the date of grant
      or cancellation using the Black-Scholes Option Pricing Model based on the
      following assumptions:




AvenuePictures
              
              WombatRisk
                  free interest rate
              
              
              3.79
              %
              
              4.49
              %Expected
                  volatility
              
              
              187
              %
              
              187
              %Expected
                  life
              
              
              5
                  years
              
              
              5
                  3⁄4 yearsContractual
                  life
              
              
              5
                  years
              
              
              5
                  3⁄4 yearsExpected
                  dividend yield
              
              
              0
              %
              
              0
              %




For
      the
      year ended December 31, 2006, discontinued operations included the
      following:




Revenues
            
            $
            166,022Income
                from discontinued operations
            
            $
            94,410




5.  Common
      Stock




On
      September 27, 2007, the Company sold an aggregate of 5,000,000 shares of the
      Company’s common stock under a subscription agreement to two
      stockholders/officers of the Company, at $.02, per share, for aggregate proceeds
      of $100,000.




The
      Company did not have sufficient available shares of common stock to issue all
      of
      the subscribed shares and only an aggregate of 1,260,970 shares were issued.
      Through December 31, 2007, the Company collected $25,000 of the
      proceeds.




F-10




On
      May 3,
      2006, the Company sold 5,000,000 shares of the Company’s common stock under
      subscription agreements, at $.02, per share, to two officers of the Company
      for
      an aggregate of $100,000. These subscriptions were collected $65,014 in 2006
      and
      $34,986 in 2007.




As
      of
      December 31, 2007 and 2006, the Company has reserved the following shares of
      common stock for future issue:




Stock
                  Option Plan
              
              
              2,750,000Non-qualified
                  options
              
              
              756,5003,506,500




6.  Stock
      Option Plan




The
      Avenue Entertainment Group, Inc. Stock Option and Long Term Incentive
      Compensation Plan (“Plan”), as amended, provides for the grants up to 2,750,000
      shares of shares of common stock to key employees, directors and consultants.
      Grants may be options, SAR’s, restricted stock or stock bonuses. Only employees
      may receive incentive awards. Exercise prices of incentive grants shall not
      be
      less than the fair market value of the stock on the date of the grant. Options
      may be exercised subject to continued employment and certain other conditions.
      The Company may determine all other terms of an award, including vesting, term,
      etc. but not more than ten years from the date of grant. Awards that expired
      or
      were cancelled are available for future awards.




The
      following table summarizes the stock option activity under the Plan for the
      years ended December 31, 2007 and 2006:




Options
            
            Weighted-AverageExercise PriceOutstanding
                - January 1, 2006
            
            
            835,000
            
            $
            1.22Cancelled/expired
            
            
            (375,000
            )
            $
            1.27Outstanding
                - December 31, 2006
            
            
            460,000
            
            $
            1.17Cancelled/Expired
            
            
            (460,000
            )
            $
            1.17Outstanding
                - December 31, 2007
            
            
            None




Number
                ofshares
            
            Price
                range pershare
            
            Weighted
                      average exercisablepriceOptions
                Outstanding - December 31, 2006
            
            
            460,000
            
            $
            .02
                - $1.81
            
            $
            1.17Options
                Outstanding - December 31, 2007
            
            
            None




F-11




The
      following table summarizes information about options outstanding under the
      Plan
      at December 31, 2006:




Number
              Outstanding
            
            Range
                of exercise prices
            
            Weighted
                average exercise price
            
            Weighted
                average
              remaining
                contractual
              life
            
            Number
                exercisable165,000
            
            $
            .02
            
            $
            .02
            
            
            4.5
                months
            
            
            165,000295,000
            
            $
            1.81
            
            $
            1.81
            
            
            1.5
                months
            
            
            295,000460,000
            
            
            .$.02
                - $1.81
            
            $
            1.17
            
            
            2.5
            
            
            460,000




All
      options outstanding under the Plan expired in 2007 without being
      exercised.




As
      of
      December 31, 2007, options not under the Plan to purchase 756,500 shares of
      the
      Company’s common stock were outstanding at a weighted average exercise price of
      $0.50, per share, and a weighted average remaining life of 2.67 years for
      700,000 options and 4.12 years for 56,500 options.




7.  Income
      Taxes





Management
      has evaluated and concluded that there are no significant uncertain tax
      positions requiring recognition in the Company’s consolidated financial
      statements as of January 1, 2007 and December 31, 2007.




The
      Company filed consolidated tax returns through December 31, 2004 and anticipates
      filing consolidated returns for 2007, 2006 and 2005. The Company anticipates
      no
      income tax expense as a result of these filings.




As
      of
      December 31, 2007, the Company has net operating loss carryforwards of
      approximately $3,300,000 to reduce future Federal and state taxable income
      through 2027.




As
      of
      December 31, 2007, realization of the Company’s deferred tax assets of
      $1,272,000 was not considered more likely than not and, accordingly, a valuation
      allowance of $1,272,000 has been provided.




As
      of
      December 31, 2007 components of deferred tax assets were as
      follows:




Net
                operating loss
            
            $
            1,266,000Share-based
                payments
            
            
            6,000Valuation
                allowance
            
            
            ($1,272,000
            )-




For
      the
      years ended December 31, 2007 and 2006, deferred income tax expense consisted
      of
      the following:





2007
            
            2006Net
                operating loss
            
            $
            39,000
            
            $
            225,000Compensation
            
            
            
            
            
            210,000Revenue
            
            
            
            
            
            50,000Share-based
                payments
            
            
            (14,000
            )
            
            16,000Valuation
                allowance
            
            
            (25,000
            )
            
            (501,000
            )-
            
            
            -




F-12


For
      the
      years ended December 31, 2007 and 2006, the following is a reconciliation of
      the
      expected income tax benefit utilizing the statutory Federal tax rate to the
      income tax benefit reported on the statement of operations:




2007
            
            2006Tax
                benefit at Federal statutory rate of 33%
            
            $
            33,000
            
            $
            247,000State
                and local income taxes, net ofFederal
                income tax benefit
            
            
            6,000
            
            
            36,000Effect
                of deferred compensation
            
            
            (14000
            )
            
            218,000Change
                in valuation allowance
            
            
            (25,000
            )
            
            (501,000
            )Total
            
            
            -
            
            
            -




8.  Related
      Party Transactions




As
      of
      December 31, 2006 an affiliated company (major stockholder) forgave $163,558
      which was credited to additional paid-in-capital as capital
      contributions.




Wombat
      had granted sole and exclusive rights to license all of its programs to a
      distributor whose president is related to the then chairman of the Company.
      The
      agreement was assumed by the purchaser of the assets of Wombat. During the
      year
      ended December 31, 2006 Wombat had revenues of $18,000 from and paid commissions
      of $6,000 to the distributor.




During
      the year ended December 31, 2006, the purchaser of Wombat paid expenses on
      behalf of the Company of $32,169.




As
      of
      December 31, 2007, loan payable-officer was $47,568, payable on demand, at
      5%
      interest, per annum. For the year ended December 31, 2007 and 2006, interest
      expense due to the officer was $1,075 and none, respectively.




F-13