U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   FORM 10-KSB
(Mark One)
[x]ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                      For the year ended December 31, 2002

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

                         Commission files number 0-25037
                        Marx Toys and Entertainment Corp.
                        (formerly stereoscape.com, inc.)
                 (Name of small business issuer in its charter)

             Nevada                                  06-1469654
  (State or other jurisdiction           (IRS Employer identification no.)
of incorporation or organization)

     101 South 15th Street, Sebring, Ohio                    44672
   (Address of principal executive offices)               (Zip Code)

                                 (330) 938-1749
                           (Issuer's telephone number)
                        ---------------------------------
 Securities registered under section 12(b) of the Exchange Act:

Title of each class                Name of each exchange on which registered
___________________________      _____________________________________________


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

                         Common Stock, $0.001 par value
                         ------------------------------
                                (Title of class)

     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 the past 90 days. Yes ...X...
No.........

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

     Stateissuer's  revenues for its most recent  fiscal year:  Revenues for the
year ended December 31, 2002 were $220,970.

     State the aggregate market value of the voting stock held by non-affiliates
computed  by  reference  to the  price at which  the  stock  was  sold,  as of a
specified  date within the past 60 days.  (See  definition  of affiliate in Rule
12b-2 of the  Exchange  Act).  Note;  If  determining  whether  a  person  is an
affiliate will involve unreasonable effort and expense, the issuer may calculate
the aggregate  market value of the common equity held by  non-affiliates  on the
basis of reasonable  assumptions,  if the assumptions are stated.  The aggregate
market value of the voting stock held by  non-affiliates as of December 31, 2002
is $ 609,697

                    (PROCEEDINGS DURING THE PAST FIVE YEARS)
     Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d)of the  Exchange Act after the  distribution  of
securities under a plan confirmed by a court. Yes .......No ....... N/A

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)
     State the number of shares  outstanding of each of the issuer's  classes of
common equity as of the latest practicable date.

        Title of Each Class                      Number of Shares Outstanding
Common Stock, $.001 par value per share           (May 9, 2003)  26,342,432

                       DOCUMENTS INCORPORATED BY REFERENCE
     If the following documents are incorporated by reference,  briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated:  (1) any annual report to security  holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
rule 424(b) or (c) of the Securities Act of 1933 ("Securities  Act"). The listed
documents should be clearly described for identification  purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1990).

     Transitional  Small  Business  Disclosure  Format  (Check  one):  Yes ____;
No_____.
<PAGE>
         PART I
         Item 1.Business

                Description of Business

                Marx Toys and Entertainment Corp. (formerly stereoscape.com,
         inc.) ("Marx" or the "Company") was incorporated on June 8, 1988 as a
         corporate shell developed to generate capital resources which were to
         be used to acquire or participate in a business or business entity. The
         Company began as a Development Stage Company, and on April 17, 1997
         acquired 100% of the outstanding shares of American Buyers Club
         International, Inc., ("ABC") in a business combination accounted for as
         a purchase. ABC became a wholly owned subsidiary of the Company through
         the exchange of 10,980,000 shares of the Company's common stock for all
         of the outstanding shares of ABC.

                   On August 23, 2000 the Company entered into a stock purchase
         agreement with the principals of epiggybank.com, inc. ("epiggybank"), a
         financial and educational web site for children. The terms of the
         agreement included the transfer, to the Company, of the "epiggybank"
         name, trademarks, intellectual properties, and other assets being used
         in the seller's business. Since the sellers were unable to deliver a
         valid trademark for "epiggybank" the Company rescinded the transaction,
         and halted and cancelled the shares issued in the transaction.

                Effective October 1, 2000 the Company acquired 100% of the
         outstanding shares of Marx Toys, Inc.("Marx Toys") in a business
         combination accounted for as a purchase. Marx Toys became a wholly
         owned subsidiary of the Company through the exchange of 15,000,000
         shares of the Company's common stock for all of the outstanding shares
         of Marx Toys, Inc.

                On July 16, 2001 the Company acquired all of the issued and
         outstanding stock of Toontz Toyz, Inc. ("Toontz"), a New Jersey
         corporation. "Toontz" is involved in the development of intellectual
         properties, which they will license to other companies for the use in
         production of numerous products.

                On March 11, 2003 the parent company's name was changed to Mark
         Toys and Entertainment Corp.

                  Marx Toys was one of the world's largest toy brands through
         much of the 20th century. The Company acquired the right to use the
         "Marx Toys" name for the sale of collectable action figures and play
         sets. The Company has been selling Marx's collectibles and play sets
         primarily through the Internet and via telemarketing. In the future the
         Company plans to expand their sales to include major toy retailers. The
         Marx brand is synonymous with quality and value.

                References herein the "Marx" or "the Company" unless otherwise
         indicated include Marx Toys and Entertainment Corp., Marx Toys and
         Toontz.

                Products.
                The Marx products being sold include play sets, such as Fort
         Apache(TM), Battleground(TM), Cape Canaveral, Castle of the Noble
         Knights and Remember the Alamo! In addition, Marx sells action figures,
         which include the highly detailed Noble Knights, Vikings, the ever
         popular Johnny West(TM) series, Warriors of the World, and General
         Custer. The company is engaged in licensing the vintage Marx train
         line.
                "Toontz" is still in the developmental stage, and therefore, has
         not record any sales or income through December 31, 2002.

                                       2
<PAGE>

                  New Products and Expansion.

                  Marx is primarily bringing back many of their toys that were
         coveted throughout the years. The play sets and action figures are
         being sold for collectors and for children as play toys. In many cases,
         the buyer will purchase 2 similar toys, one for show and one for play.
         The Company is evaluating various alternatives to introduce additional
         Marx vintage toys while examining the potential of selling new toys
         under the Marx name. The Company has been discussing various licensing
         arrangement with several board game designers and manufacturers to
         promote and sell these new game boards under the Marx name. The company
         feels that this sector of the toy industry will open substantial
         revenue producing channels for the Company. In one particular game
         board under review the main character will be an original Marx
         creation. The exciting potential for these game boards are that they
         are designed for a larger audience that would include both children and
         adults. The company is also looking to utilize current technology to
         enhance the marketability of several Marx creations for today's market,
         and is the final stages of development of an interactive product to be
         licensed to a major internet provider .


                  Product Line Exclusivity License & Trademark Agreements.

                  Marx is currently licensing the rights to manufacture, and
         distribute, the well-known line of Marx Trains(TM). These are carefully
         crafted, scale trains made of qualified lithographed tin plate metal.
         They are made to the same specifications that Marx made their metal
         trains from 1933 to 1955. Marx has also entered into licensing and
         trademark agreements with several other companies to produce Marx Toy
         products.

                  Government Regulations.

                  The costs and effects of compliance with governmental
         regulations are not material to the operations of the consolidated
         group.


                  Research & Development.

                  Toontz is presently in negotiations for the licensing the
         development of its animation series that will provide exposure to the
         Toontz characters "Minook and the Brainbots". The company feels that
         the resources necessary to complete this project will require alliances
         with currently established groups in the entertainment and animation
         industry. The Company will expense research and development costs as
         incurred. There were no research and development costs for 2002.

                  Cost and Effects of Compliance with Environmental Laws

                  The costs and effects of compliance with environmental laws
         are not material to the operations of the consolidated group.

                                       3
<PAGE>

                  Current Employees

                  The Company currently employs 1 person, on a full time basis,
         and 3 on a part time basis. None of the Company's employees are members
         of unions.


         Item 2.  Description of Property

                  Marx entered into a lease agreement, effective April 15, 2001,
         for warehouse facilities in Sebring, Ohio. The lease is for a 14,000
         square foot space, which was subsequently modified to 12,000 square
         feet, with a basic rental of $42,000 annually. The lease expires in
         April 2005. During 2002 the Company also rented office space in New
         Jersey and warehouse space in Florida. Both of these leases terminated
         prior to December 31, 2003.


         Item 3.  Legal Proceedings

                  In February 2002, the Company was named as a defendant in a
         complaint filed by American Plastic Equipment "American." The complaint
         alleged that substantially all of the assets acquired in the
         acquisition of Marx Toys, Inc. were encumbered as collateral for an
         obligation due to American owed by the former owner of Marx Toys, Inc.
         In the complaint, American asserted that they had filed a security
         interest against certain assets of Marx Toys, Inc. including plastic
         toy molds and non-toy molds stored in two facilities in Mahoning
         County, Ohio. The security interest is in the sum of $675,000 and was
         recorded prior to the Company's acquisition of Marx Toys. The Complaint
         was pending in the Mahoning County Court of Common Pleas. A magistrate
         and Judge ruled against the Company and the assets were seized. At
         December 31, 2001 the Company provided for the impairment of these
         assets (see Note 6). The Company plans to seek recovery of these assets
         through a settlement, and the Company intends to seek to recover its
         lost assets from the former owner of Marx through all legal means
         necessary.

                  Three actions are pending against the Company in Florida State
         Court,in Miami-Dade County Florida. Jay Horowitz v. Stereoscape.com,
         Inc. and Marx Toys, Inc., Case No. 02-05 611 CC27. This action asserts
         various causes of action, including money lent ($35,000) and breach of
         contract ($38,220) American Plastic Equipment, Inc. v. Stereoscape.Com,
         Inc. and Marx Toys Inc., Case No. 02-04859 CC 05. This action
         asserts various causes of action, including breach of contract
         ($5,076), unjust enrichment ($5,076), conversion ($482), and breach of
         oral agreement ($798). Steven L. Horowitz v. Stereoscape. Com, Inc.,
         00001-29822 CA 11. This action asserts a claim for moneys owed under a
         promissory note in the amount of $50,000. The defendants have answered
         these complaints, asserting various affirmative defenses. To date, no
         discovery has been taken in the cases and the defendants' liability is
         as yet not determinable.


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

                  None


                                       4
<PAGE>

         PART II

         Item 5.  Market for Common Equity and Related Stockholder Matters

                  The Company's Common Shares are traded on the Electronic
         Bulletin Board under the symbol MRXT. The following table sets forth
         the range of high and low bid quotations for the common stock for the
         period indicated, as reported on the Electronic Bulletin Board. On
         October 14, 2002 the Company affected a 1 for 15 reverse stock split.
         All calculations and share amounts have been adjusted to reflect the
         post-split value.
                  The quotations are inter-dealer prices in the over-the-counter
         market without retail mark-ups, markdowns or commissions, and may not
         represent actual transactions.

                                        2002                   2001
                                   Common Shares          Common Shares
        Period                   High         Low        High         Low
                              -----------------------------------------------

January 1 - March 31            0.1900      0.0400      0.0500       0.0100

April 1 - June 30               0.1200      0.0200      0.0400       0.0200

July 1 - September 30           0.1300      0.0300      0.0400       0.0200

October 1 - December 31         0.0700      0.0100      0.0300       0.0100


                  As of May 9, 2003, there approximately 100 holders of record
         of the Company's common stock.

                  The Company has not paid a cash dividend on its common stock
         since its inception. The Company expects that for the foreseeable
         future, any earnings will be retained for use in the business or other
         corporate purposes, and it is not expected that cash or share dividends
         will be paid. However, there are no restrictions on the payment of
         dividends, either by contract or regulation.


                                       5
<PAGE>

         Item 6.   Management's Discussion and Analysis or Plan of Operation

                  Management's Discussion and Analysis of Financial Condition
         and Results of Operations should be read in conjunction with the
         Audited Consolidated Financial Statements and related notes, which are
         contained elsewhere in this report.

                  Results of operations for Marx Toys and Entertainment Corp.
         and subsidiaries are being presented on a consolidated basis.

         Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

                  Net sales for the year ended December 31, 2002 decreased 41.5%
         to $220,970 from $377,625 for the year ended December 31, 2001. The
         decrease was the result of reduction in consumer spending caused by
         outside economic factors, the effects of the downturn in the economy,
         and a restructuring of the product line.

                  Gross profit (loss) for the year ended December 31, 2002
        decreased 93.1% to $14,057 from $202,858 for the year ended December 31,
        2001. As a percentage of net sales, gross profit (loss) decreased to
        (6.4%) in 2002 compared to 53.7% in 2001. The decrease in gross profit
        was in part the result of a write-off of accounts receivable of
        approximately $93,000 as the result of the Company's decision to
        discontinue certain product lines, and a revaluation of inventory.

                  Selling, general and administrative expenses for year ended
         December 31, 2002 decreased 26.1% to $736,830 from $996,956 for the
         year ended December 31, 2001. The decrease in selling, general and
         administrative expense was the result of the Company's restructuring
         and downsizing to concentrate on the sale of Marx Toys collectables.

                  Net loss from continuing operations for the year ended
        December 31, 2002 increased to ($1,061,956) compared to a net loss of
        ($794,098) for the year ended December 31, 2001. The increase in net
        losses is due to in part to the write-off of obsolete inventory and raw
        material items in the Marx Toys, Inc. inventory, amounting to
        approximately $140,000 and an impairment of intellectual property of
        approximately $85,000.

                  The Company expects to require additional capital and at the
         present time has no definitive plans but it is exploring various
         opportunities. There can be no assurance of the ability of the Company
         to raise such capital. The Company has no agreements or commitments
         with any person to raise such capital.


                                       6
<PAGE>

         Liquidity and Capital Resources

                  At December 31, 2002 the Company had an equity deficiency of
         ($1,255,982), which represents a decrease of $1,269,093 in the net
         equity of $13,111 at December 31, 2001.
                  The Company has historically financed its business through
         cash flow from operations and borrowings from executives and third
         parties, which may be utilized from time to time.

         Anticipated Future Growth

                  Management believes that the future growth of the Company will
         be the result of restructuring of its core businesses. In this effort
         the Company intends to consider these four efforts; (1) expand the toy
         sales to major national and regional retailers, (2) pursue promotional
         deals for the sale of vintage Marx products on a large scale, (3)
         expand the toy line to include products licensed and sold under the
         Marx name, (4) entering into a strategic alliance with a strong partner
         in the entertainment and animation industry for animation and licensing
         prospects.

         Forward Looking Statements

              Management's Discussion and Analysis of Financial Condition and
         Results of Operations contain information regarding management's
         planned growth, financing and prospective business opportunities. These
         statements are forward looking statements that involve risks and
         uncertainties. The following is a list of factors, among others, that
         could cause actual results to differ materially from the forward
         looking statements: business conditions and growth in the Company's
         market and industry and in the general economy; competitive factors
         including increased competition and price pressures; availability of
         purchased products at competitive prices; and inadequate or
         unsatisfactory financing sources.


         Item 7.  Financial Statements

                  Response submitted as a separate section of this report
         commencing on page F-1.


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

                           None


                                       7
<PAGE>

         PART III

         Item 9.  Directors, Executive Officers, Promoters and Control Persons

                  This item is incorporated by reference from the proxy
         statement, which will be filed within 30 days of the filing of this
         report.


         Item 10. Executive Compensation

                  This item is incorporated by reference from the proxy
         statement, which will be filed within 30 days of the filing of this
         report.

         Item 11. Security Ownership of Certain Beneficial Owners and Management

                  This item is incorporated by reference from the proxy
         statement, which will be filed within 30 days of the filing of this
         report.


         Item 12. Certain Relationships and related Transactions

                  This item is incorporated by reference from the proxy
         statement, which will be filed within 30 days of the filing of this
         report.


                                       8
<PAGE>

         Item 13.          Exhibits and Reports on Form 8-K

         (a) (1) and (2) The response to this portion of Item 13 is submitted as
         a separate report commencing on Page F-1.

                           (a) (3)

 Exhibit No.          Description of Exhibit                               Note

    3.1         Certificate of Incorporation, as amended                     1
    3.2         By-laws, as amended                                          1
   10.1         1998 Incentive and Non-Qualified Stock Option Plan           1
   10.2         Acquisition Agreement of American Buyers Club Int'l, Inc.    1
   10.3         Employment Agreement for Steve Wise                          1
   10.4         Employment Agreement for Gary Hyman                          1
   10.5         Employment Agreement for Steven Campanella                   1
   10.6         Acquisition Agreement of Marx Toys, Inc.                     2
   10.7         Acquisition Agreement of Toontz Toyz, Inc.                   3
   21           Subsidiaries of the Registrant                               1

         Note 1: Filed with the Company's Form 10SB filed on November 6, 1998,
         and incorporated by reference herein.

         Note 2: Filed with the Company
         Form 8-K for the acquisition of Marx Toys, Inc. and incorporated by
         reference herein.

         Note 3: Filed with the Company Form 8-K for the acquisition of Toontz
         Toys, Inc. and incorporated by reference herein.

(b) Reports on Form 8-K.

         Form 8-K was filed on March 30, 2001, to report the acquisition of
Marx.


                                       9
<PAGE>

Item 4.  Controls and Procedures


(a) Evaluation of disclosure controls and procedures.

         The Company's principal executive officer and sole officer and
         director, based on his evaluation of the Company's disclosure controls
         and procedures (as defined in Exchange Act Rules 13a-14(c)) as of a
         date within 90 days prior to the filing of this Quarterly Report on
         Form 10-QSB, have concluded that the Company's disclosure controls and
         procedures are adequate and effective for the purposes set forth in the
         definition in Exchange Act rules..


(b) Changes in internal controls.

         There were no significant changes in the Company's internal controls or
         in other factors that could significantly affect the Company's internal
         controls subsequent to the date of their evaluation.


                                       10
<PAGE>

                                   SIGNATURES

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

                 Marx Toys and Entertainment Corp.
                 (Formerly stereoscape.com inc.


                 By:   /s/ Steve Wise                            May 13, 2003
                       ---------------------------
                       Steve Wise
                       Chief Executive Officer
                       Sole Officer and Director


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


                 By:   /s/ Steve Wise                            May 13, 2003
                       ---------------------------
                       Steve Wise
                       Chief Executive Officer (Principal Executive Officer)
                       Sole Officer and Director


                                       11
<PAGE>

                        Marx Toys and Entertainment Corp.
                         (Formerly stereoscape.com inc.)
                            CERTIFICATION PURSUANT TO
                   RULE 13-A-14 OF THE SECURITIES ACT OF 1934
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION

I, Steve Wise, certify that:

1.       I have reviewed this annual report on Form 10-KSB of Marx Toys and
         Entertainment Corp. (Formerly stereoscape.com, inc.)
2.       Based upon my knowledge,
         this annual report does not contain any untrue statement of material
         fact or omit to state a material fact necessary to make the statements
         made, in light of the circumstances under which such statements were
         made, not misleading with respect to the period covered by this annual
         report.
3.       Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the period presented in
         this annual report;
4.       I am responsible for establishing and maintaining disclosure controls
         and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
         the registrant and I have:
         (a)      designed such disclosure controls and
                  procedures to ensure the material information relating to the
                  registrant,
                  including its consolidated subsidiaries, is made known to me
                  by others within those entities, particularly during the
                  period in which this annual report is being prepared;
         (b)      evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and
         (c)      presented in this annual report my conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on my evaluation as of the Evaluation Date;
5.       I have disclosed, based upon my most recent evaluation, to the
         registrant's auditors:
         (a)      all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weakness in internal control; and
         (b)      any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control; and
6.       I have indicated in this annual report whether there are significant
         changes in internal controls or in other factors that could
         significantly affect internal controls subsequent to the date of our
         most recent evaluation, including any corrective actions with regard to
         significant deficiencies and material weaknesses.

Date:    May 13, 2003


/s/ Steve Wise
Steve Wise
Chief Executive Officer
Sole Officer and Director


                                       12
<PAGE>
                Marx Toys and Entertainment Corp. & Subsidiaries
                         (Formerly steroscape.com, inc.)

                                      Index

                              Financial Statements

         Included in Part II


         Independent Auditors' Report


         Consolidated Balance Sheet at December 31, 2002


         Consolidated Statements of Operations for the Years Ended
         December 31, 2002 and 2001


         Consolidated Statements of Changes in Stockholders' Equity for the
         Years Ended December 31, 2002 and 2001


         Consolidated Statements of Cash Flows for the Years Ended
         December 31, 2002 and 2001


         Notes to Consolidated Financial Statements


                                      F-1
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders of
Marx Toys and Entertainment Corp. and Subsidiaries
(Formerly stereoscape.com, inc.)
Sebring, Ohio 44672

We have audited the accompanying consolidated balance sheet of Marx Toys and
Entertainment Corp. and Subsidiaries (Formerly stereoscape.com, inc.)as of
December 31, 2002, and the related consolidated statements of operations,
changes in stockholders' deficit and cash flows for the years ended December 31,
2002 and 2001. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Marx Toys and
Entertainment Corp. and Subsidiaries (Formerly stereoscape.com, inc.) as of
December 31, 2002, and the results of its operations and cash flows for the
years ended December 31, 2002 and 2001 in conformity with accounting principles
generally accepted in the United States of America.

Certain conditions indicate that the Company may be unable to continue as a
going concern. As discussed in Note 3 to the financial statements, the Company
has suffered losses from operations and has a working capital deficiency. These
conditions raise substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty. Management plans with regards to
this matter are discussed in Note 3.

/s/ Ehrenkrantz Sterling & Co., LLC
Certified Public Accountants
Livingston, New Jersey
May 9, 2003

                                      F-2
<PAGE>

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
                         (Formerly stereoscape.com inc.)
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2002

                                     ASSETS
Current Assets

          Cash                                                        $     894
          Inventories                                                   330,393
                                                                     -----------
          Total Current Assets                                          331,287
                                                                     -----------

TOTAL ASSETS                                                          $ 331,287
                                                                     ===========

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities

          Accounts payable                                            $ 386,770
          Liabilities of discontinued business segment                  183,914
          Accrued expenses and other current liabilities                245,646
          Merchandise credits                                            80,939
          Notes and loans payable                                       690,000
                                                                     -----------
            Total Current Liabilities                                 1,587,269
                                                                     -----------

TOTAL LIABILITIES                                                     1,587,269
                                                                     -----------

Commitments and Contingencies                                                -

                         STOCKHOLDERS' EQUITY (DEFICIT)

Common Stock
          Par value, $.001, 200,000,000 shares authorized,
             15,242,432 shares issued and outstanding                    15,242
Additional paid in capital                                            2,720,438
Deficit                                                              (3,991,662)
                                                                     -----------
TOTAL STOCKHOLDERS EQUITY (DEFICIT)                                  (1,255,982)
                                                                     -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                  $ 331,287
                                                                     ===========

                 See notes to consolidated financial statements.


                                      F-3
<PAGE>

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
                        (Formerly stereoscape.com, inc.)
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                           Years Ended
                                                           December 31,
                                                      2002             2001
                                                  ------------------------------

Sales                                              $ 220,970        $ 377,625

Cost of sales                                        206,913          174,767
                                                  ------------------------------

Gross profit                                          14,057          202,858

Selling, General and Administrative expenses         736,830          996,956
                                                  ------------------------------

Loss from operations                                (722,773)        (794,098)

Other deductions:
      Interest expense                                55,140                -
      Loss on abandonment of assets                   59,323                -
      Impairment of long-lived assets                224,720                -
                                                  ------------------------------

Loss from continuing operations                   (1,061,956)        (794,098)

Loss from discontinued operations                   (307,476)        (399,117)
                                                  ------------------------------

Net Loss                                        $ (1,369,432)    $ (1,193,215)
                                                  ==============================

Loss Per Share, Basic and Diluted

Loss from continuing operations                       (0.081)          (0.082)

Loss from discontinued operations                     (0.024)          (0.041)
                                                  ------------------------------

Net Loss per share, basic and diluted               $ (0.105)        $ (0.123)
                                                  ==============================

Weighted average number of
   shares, basic and diluted                      13,055,355         9,702,947


                 See notes to consolidated financial statements.


                                      F-4
<PAGE>

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
                        (Formerly stereoscape.com, inc.)
     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

<table>
<caption>
                                                 Common Stock             Additional
                                        -------------------------------     Paid-in
                                             Shares          Amount         Capital          Deficit           Total
                                        ----------------------------------------------------------------------------------

                                          <c>               <c>          <c>              <c>                <c>
Balance at December 31, 2000                   7,945,241       $ 7,945      $ 2,223,584      $ (1,429,015)      $ 802,514

Issuance of stock for acquisition                666,667           667           99,333                 -         100,000

Issuance of common stock
under private placements                       2,839,333         2,839        1,126,661                 -       1,129,500

Issuances for options and other                  553,334           553           30,697                 -          31,250

Impariment relating to value of long-
     lived assets                                      -             -         (856,938)                -        (856,938)
Net loss                                               -             -                -        (1,193,215)     (1,193,215)
                                        ----------------------------------------------------------------------------------

Balance at December 31, 2001                  12,004,575        12,004        2,623,337        (2,622,230)         13,111

Issuance of common stock                       3,237,857         3,238           97,101                           100,339

Net loss                                                                                       (1,369,432)     (1,369,432)
                                        ----------------------------------------------------------------------------------

Balance at December 31, 2002                  15,242,432      $ 15,242      $ 2,720,438      $ (3,991,662)   $ (1,255,982)
                                        ==================================================================================
</table>
     All calculations and share amounts have been adjusted to reflect a 1 for 15
reverse stock split affected on October 14, 2002.

                 See notes to consolidated financial statements.


                                      F-5
<PAGE>

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
                        (Formerly stereoscape.com, inc.)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<table>
<caption>
                                                                                   YEARS ENDED
                                                                                   DECEMBER 31,
                                                                               2002            2001
                                                                         ---------------------------------

                                                                          <c>              <c>
          Net loss                                                           $ (1,369,432)    $(1,193,215)
Adjustments to reconcile net loss to net cash used in operations:
          Depreciation and amortization                                                 -          37,130
          Impairment of long-lived assets-continuing operations                   224,720               -
          Abandonment of assets                                                    59,323
     Changes in operating assets:
          Accounts and notes receivable                                            18,506           4,856
          Inventories                                                             372,477        (425,722)
          Other current assets                                                     87,087         (24,388)
          Other assets                                                             11,032               -
     Changes in operating liabilities:
          Accounts payable and accrued expenses                                    56,190         (14,771)
          Liabilities of discontinued business segment                            183,914               -
          Merchandise credits                                                      (2,806)        (16,476)
                                                                         ---------------------------------

Net cash used in operating activities                                            (358,989)     (1,632,586)
                                                                         ---------------------------------

Cash flow from investing activities:
          Purchases of fixed assets                                                     -          (6,850)
          Acquisition of other assets                                                   -         (54,500)
                                                                         ---------------------------------

Net cash used in investing activities                                                   -         (61,350)
                                                                         ---------------------------------

Cash flow from financing activities:
          Issuance of capital stock                                               100,339       1,160,749
          Notes and loans payable                                                 226,138         347,030
          Repayment of note receivable                                                  -           9,375
                                                                         ---------------------------------

Net cash provided by financing activities                                         326,477       1,517,154
                                                                         ---------------------------------

Increase (decrease) in cash                                                       (32,512)       (176,782)

Cash, beginning of year                                                            33,406         210,188
                                                                         ---------------------------------

Cash, end of year                                                                   $ 894        $ 33,406
                                                                         =================================

Supplemental disclosure of cash flow information:
          Interest paid                                                               $ -        $ 21,196
Supplementary Disclosure of Non-Cash Transactions:
</table>

Supplemental disclosure of non-cash transactions:

         In 2001 the Company issued 10,000,000 shares of common stock for the
         acquisition of Toontz Toyz, Inc., and the Company impaired assets
         totaling $856,938 and reduced additional paid-in-capital for the
         related value in excess of par value of the shares issued.

         In 2002 the Company issued 1,904,000 shares of common stock in payment
         for certain consulting services.

                 See notes to consolidated financial statements.


                                      F-6
<PAGE>

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
                        (Formerly stereoscape.com, inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         ORGANIZATION

                  Marx Toys and Entertainment Corp. (formerly stereoscape.com,
         inc.) ("Company") was established in 1988 under the name Alliance
         Health Enterprises, Inc. In April 1997 the Company's Board of Directors
         approved a change in the Company's name to Alliance Technologies, Inc.
         In December 1998 the Company's Board of Directors approved a change in
         the Company's name to stereoscape.com, inc., and on March 11, 2003 the
         Company's Board of Directors approved a change in the Company's name to
         Marx Toys and Entertainment Corp.
                  In April 1997the Company acquired American Buyers Club
         International, Inc. ("ABC"). A company engaged in the sale of high end
         home theater equipment via mail order and over the internet. In April
         1997 ABC formed Alpha Sound and Vision, Inc. ("Alpha") as a wholly
         owned subsidiary and retail division. In March of 2002 the Company
         determined that the operations of ABC and Alpha should be discontinued
         so that the direction of the Company could be changed to concentrate on
         the activities of its Marx Toys, Inc. subsidiary. (See Note 8)
                    On August 23, 2000 the Company entered into a stock purchase
         agreement with the principals of epiggybank.com, inc. ("epiggybank"), a
         financial and educational web site for children. The terms of the
         agreement included the transfer, to the Company, of the "epiggybank"
         name, trademarks, intellectual properties, and other assets being used
         in the seller's business. Since the sellers were unable to deliver a
         valid trademark for "epiggybank" the Company rescinded the transaction,
         and halted and cancelled the shares issued in the transaction.
                   Effective October 1, 2000 the Company acquired Marx Toys,
         Inc. ("Marx"). Marx" is located in Sebring, Ohio and sells collectible
         action figures and play sets primarily through the Internet and via
         telemarketing.
                  On July 16, 2001, the Company acquired all of the issued and
         outstanding shares of Toontz Toys Inc. ("Toontz"). Toontz is involved
         in the development of intellectual properties, which the Company intend
         to license to third parties for the manufacturer of various products
         and video presentations..



         FINANCIAL STATEMENT PRESENTATION

                  The accompanying consolidated financial statements include the
         accounts of the Company and its wholly owned subsidiary companies. All
         material inter-company transactions have been eliminated.


         USE OF ESTIMATES

                  The preparation of financial statements in conformity with
         accounting principles generally accepted in the United States 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 revenue and expenses during the accounting period.
         Actual results could differ from those estimates.


                                      F-7
<PAGE>

         REVENUE RECOGNITION AND FINANCIAL STATEMENTS

                  Net sales are recognized at the time merchandise is shipped to
         customers.

                  The Securities and Exchange Commissions (SEC) issued Staff
         Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
         Statements," which provides guidance related to revenue recognition.
         The Company has adopted SAB 101 and it has not had a material impact
         on the Company's consolidated financial position or results of
         operations, nor did it result in the Company reporting a change in
         accounting principles from its application.


         ADVERTISING COSTS

                  The Company expenses all advertising costs as incurred.


         INVENTORIES

                  Inventories are stated at the lower of cost or market as
         determined by the first-in, first-out method, and consist of
         collectable action figures held for distribution.


         EARNINGS PER COMMON SHARE

                  Earnings per common share is computed by dividing net income
         (loss) available to common shareholders by the weighted-average number
         of common shares outstanding during the period. On October 14, 2002 the
         Company affected a 1 for 15 reverse stock split. All calculations and
         share amounts have been adjusted to reflect the post-split value.
         Diluted earnings per share do not reflect the potential dilution that
         could occur if securities or other contracts to issue common shares
         were exercised or converted into common shares or resulted in the
         issuance of common shares as the impact of such would be antidilutive
         given the net losses incurred.


                                      F-8
<PAGE>

         RECENT ACCOUNTING PRONOUNCEMENTS

         In July, 2001, the Financial Accounting Standards Board (FASB) issued
         Statement of Financial Accounting Standards No. 141, "Business
         Combinations" (SFAS 141) and Statement of Financial Accounting
         Standards No. 142 "Goodwill and Other Intangible Assets" (SFAS 142).
         SFAS 141 requires that all business combinations initiated after June
         30, 2001 be accounted for using the purchase method of accounting,
         thereby eliminating use of the pooling of interests method. SFAS 141
         also requires that an intangible asset acquired in a business
         combination be recognized apart from goodwill if: (i) the intangible
         asset arises from contractual or other legal rights or (ii) the
         acquired intangible asset is capable of being separated from the
         acquired enterprise, as defined in SFAS 141. The adoption of SFAS 141
         did not have a material effect on the Company's financial position,
         results of operations, and cash flows.


                  In October 2001, the FASB issued Statement of Financial
         Accounting Standards No. 144 "Accounting for the Impairment or Disposal
         of Ling-Lived Assets" (SFAS 144). SFAS 144 supersedes Statement of
         Financial Accounting Standards No. 121 "Accounting for the Impairment
         of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and
         certain provisions of APB Opinion No. 30 "Reporting the Results of
         Operations - Reporting the Effects of Disposal of a Segment of a
         Business, and Extraordinary, Unusual and Infrequently Occurring Events
         and Transactions." SFAS 144 establishes standards for long-lived assets
         to be disposed of, and redefines the valuation and presentation of
         discontinued operations. SFAS 144 is effective for fiscal years
         beginning after December 15, 2001, and interim periods within those
         fiscal years. See Note 7 for impairment of assets.

                  In July, 2002, the Financial Accounting Standards Board, or
         FASB, issued SFAS No. 146, "Accounting for Costs Associated with Exit
         or Disposal Activities". SFAS No. 146 requires companies to recognize
         costs associated with exit or disposal activities when they are
         incurred rather than at the date of a commitment to an exit or disposal
         plan. Examples of costs covered by the standard include lease
         termination costs and certain employee severance costs that are
         associated with a restructuring, discontinued operation, plant closing
         or other exit or disposal activity. SFAS No. 146 is to be applied
         prospectively to exit of disposal activities initiated after September
         30, 2002. See Note 6 for effects on the Company's results of operations
         concerning various impairments. In addition the financial statements
         reflect a loss from discontinued operations that occurred prior to the
         effective date of SFAS No. 146 (See Note 8).


           LONG-LIVED ASSETS

                  Long-Lived Assets are reviewed to determine whether
         an event or change in circumstances indicates that the carrying amount
         of the asset may not be recoverable. For long-lived assets to be held
         and used, the Company bases its evaluation on such impairment
         indicators as the nature of the assets, the future economic benefit of
         the assets, any historical or future profitability measurements, as
         well as other external market conditions or factors that may be
         present. If such impairment indicators are present or other factors
         exist that indicate that the carrying amount of the asset may not be
         recoverable, the Company determines whether impairment has occurred
         through the use of an undiscounted cash flows analysis of assets at the
         lowest level for which identifiable cash flows exist. If impairment has
         occurred, the Company recognizes a loss for the difference between the
         carrying amount and the estimated value of the asset. The fair value of
         the asset is measured using discounted cash flow analysis or other
         valuation techniques. See Note 7 for impairment of assets.


                                      F-9
<PAGE>

           INCOME TAXES

                  The Company accounts for income taxes under the asset and
           liability method. Deferred tax assets and liabilities are recognized
           for the future tax consequences attributable to differences between
           the financial statements carrying amounts of existing assets and
           liabilities and their respective tax bases and operating loss and tax
           credit carryforwards. Deferred tax assets and liabilities are
           measured using enacted tax rates expected to apply to taxable income
           in the years in which those temporary differences are expected to be
           recovered or settled. The effect of a change in tax rates on deferred
           tax assets and liabilities is recognized in income in the period that
           includes the enactment date.


           CONCENTRATION OF CREDIT RISK

                  The Company maintains its cash with various financial
           institutions which are insured by the Federal Deposit Insurance
           Corporation up to $100,000.


           NOTE 2 - ACQUISITIONS

                  Effective July 16, 2001, the Company  acquired Toontz Toyz,
           Inc., which was accounted for as a purchase, whereby Toontz became a
           wholly owned subsidiary of the Company.  In connection with the
           accounting, the Company issued 666,667 restricted shares of common
           stock, for $.01 per share, valued at $100,000.  The Company  acquired
           intellectual properties including trademarks, domain names and
           copyrights. See Note 6 for impairment.  There were no material
           operations for Toontz Toyz Inc. prior to July 16, 2001, date of
           acquisition.


         NOTE 3 - GOING CONCERN

         The financial statements have been prepared assuming the Company will
         continue as a going concern. The Company has a net loss of ($1,369,432)
         and a working capital deficiency of approximately ($1,255,982) at
         December 31, 2002 which raises substantial doubt about the Company's
         ability to continue as a going concern. The Company intends to raise
         additional capital through short term and long term borrowings, a
         private placement or a public offering. The Company estimates that it
         will require $2,000,000 to fund initial marketing, R & D,
         manufacturing, and advertising for its planned growth.

         The Company believes that upon obtaining proceeds from additional
         financing and payments to be received from the sale of toy related
         product under a newly acquired licensing agreement, see Note 12, the
         substantial doubt about the Company's ability to continue as a going
         concern will be eliminated.


                                      F-10
<PAGE>

         NOTE 4 - NOTES AND LOANS PAYABLE

                    In April 2001 the Company received cash, totaling $375,000,
         for which promissory notes, due in April 2002, were issued. The notes
         are non-interest bearing. In consideration of the loan the Company has
         granted the payees options to purchase 260,000 shares of their common
         stock at an exercise price of $.60 per share. The right to exercise the
         options terminated in April 2003.
                  In January 2002 the Company borrowed $200,000 under a
         promissory note bearing 12% interest and maturing in January 2003. At
         December 31, 2002, unpaid accrued interest amounted to $24,000 and is
         included in accrued expenses.
                  In June 2002 the Company entered into an operating agreement
         with Michael Marx. LLC to sell toys. In November 2002 the agreement was
         rescinded. In connection with the rescinded agreement, the Company owes
         the current LLC member $115,000 which becomes payable on May 15, 2003
         with interest at 8%. At December 31, 2002 unpaid and accrued interest
         amounted to approximately $1,100 and is included in accrued expenses.


         NOTE 5 - COMMITMENTS AND CONTINGENCIES

         LEASES

                  A subsidiary leases a warehouse facility in Sebring, Ohio
         requiring minimum annual rent of approximately $42,000. The lease
         expires in April 2005. During 2002 the Company also rented office space
         in New Jersey and warehouse space in Florida. Both of the leases were
         terminated prior to year end without penalty. Rent expense totaled
         $79,650 and $39,633 for 2002 and 2001, respectively.

                  Future minimum commitments under operating lease arrangements
are due as follows:


Years Ending December 31,                               Amount
--------------------------------------------------------------------
2003                                                       $ 42,000
2004                                                         42,000
2005                                                         10,500
                                                   -----------------
                                                           $ 94,500
                                                   =================


                                      F-11
<PAGE>

         LITIGATION

               In February 2002, the Company was named as a
         defendant in a complaint filed by American Plastic Equipment
         "American." The complaint alleged that substantially all of the assets
         acquired in the acquisition of Marx Toys, Inc. were encumbered as
         collateral for an obligation due to American owed by the former owner
         of Marx Toys, Inc. In the complaint, American asserted that they had
         filed a security interest against certain assets of Marx Toys, Inc.
         including plastic toy molds and non-toy molds stored in two facilities
         in Mahoning County, Ohio. The security interest is in the sum of
         $675,000 and was recorded prior to the Company's acquisition of Marx
         Toys. The Complaint was pending in the Mahoning County Court of Common
         Pleas. A magistrate and Judge ruled against the Company and the assets
         were seized. At December 31, 2001 the Company provided for the
         impairment of these assets (see Note 6). The Company plans to seek
         recovery of these assets through a settlement, and the Company intends
         to seek to recover its lost assets from the former owner of Marx
         through all legal means necessary.

               Three  actions are pending  against the Company in Florida  State
          Court, in Miami-Dade County Florida. Jay Horowitz v.  Stereoscape.com,
          Inc. and Marx Toys, Inc., Case No. 02-05 611 CC27. This action asserts
          various causes of action, including money lent ($35,000) and breach of
          contract ($38,220)  American Plastic  Equipment,  Inc. v. Stereoscape.
          Com,  Inc.  and Marx Toys Inc.,  Case No.  02-04859 CC 05. This action
          asserts  various  causes  of  action,  including  breach  of  contract
          ($5,076), unjust enrichment ($5,076), conversion ($482), and breach of
          oral agreement ($798).  Steven L. Horowitz v. Stereoscape.  Com, Inc.,
          00001-29822 CA 11. This action asserts a claim for moneys owed under a
          promissory note in the amount of $50,000. The defendants have answered
          these complaints,  asserting various affirmative defenses. To date, no
          discovery has been taken in the cases and the defendants' liability is
          as yet not determinable.


         EMPLOYMENT AGREEMENT

                  As part of the acquisition of Toontz Toyz, Inc. the Company
         entered into an employment agreement. The agreement, which is for a
         period of three years, commencing June 1, 2001, includes a base salary
         of $100,000 per annum. In addition, the individual shall receive a one
         time incentive bonus, during the term of the agreement, in the amount
         of $125,000, if and when Toontz Toyz, Inc. achieves $5,000,000 in gross
         revenues. As of December 31, 2002, amounts due under the employment
         agreement has not been paid, but have been accrued in the financial
         statements.


                                      F-12
<PAGE>

         NOTE 6 - IMPAIRMENT WRITE-DOWN

                  During the year ended December 31, 2001, the Company's
         analysis of its long-lived assets indicated there was an impairment
         relating to molds acquired in the acquisition of Marx Toys, Inc.,
         accordingly, the Company has impaired this asset by reducing its
         additional paid in capital in the amount of $856,938. See Note 5 for
         related litigation.

                  During the year ended December 31, 2002, the Company's
         analysis of its long-lived assets indicated there was an impairment
         relating to the intellectual properties carried on the books of its
         Toontz subsidiary. Accordingly, the Company impaired this asset by
         writing the carrying value of the intellectual properties to $-0- and
         taking a charge to current operations of $71,250.

                  During the year ended December 31, 2002, the Company's
         analysis of its long-lived assets indicated there was an impairment
         relating to the intellectual properties carried on the books of its
         Marx Toys, Inc. subsidiary. Accordingly, the Company impaired this
         asset by writing the carrying value of the intellectual properties to
         $-0- and taking a charge to current operations of $3,445.

                  During the year ended December 31, 2002 the Company wrote-off
         raw materials $139,274 due to the loss of the use of the injection
         molds necessary to utilize the raw material.

                    On August 23, 2000 the Company entered into a stock purchase
         agreement with the principals of epiggybank.com, inc. ("epiggybank"), a
         financial and educational web site for children. The terms of the
         agreement included the transfer, to the Company, of the "epiggybank"
         name, trademarks, intellectual properties, and other assets being used
         in the seller's business. Since the sellers were unable to deliver a
         valid trademark for "epiggybank" the Company rescinded the transaction,
         and halted and cancelled the shares issued in the transaction.
         Accordingly, the Company recorded an impairment charge of $10,751.


         NOTE 7 - DISCONTINUED OPERATIONS

         In March 2002 the Company terminated its ABC and Alpha subsidiary
         operations. At that time, sales amounted to $28,208 and a net loss of
         $184,506 was realized for the quarter. In the fourth quarter the
         Company wrote-off all remaining inventory relating to these operations
         totaling $122,970.  Revenues for the year ended December 31, 2001 were
         $866,263.


                                      F-13
<PAGE>

         NOTE 8 - INCOME Taxes

The income tax provision is comprised of the following for the years ended:

                                                     December 31,
                                           2002                       2001
                                       -----------------------------------------
Current
     Federal                            $      -                   $      -
     State                                     -                          -
Deferred
     Federal                             (465,600)                  (405,693)
     State                               (123,250)                  (107,400)
                                       -----------------------------------------

Sub-total                                (588,850)                  (513,093)

Valuation allowance                       588,850                    513,093
                                       -----------------------------------------

Income tax provision                    $      -                   $      -
                                       =========================================

The difference between the U.S. federal statutory rate and the Company's
effective tax rate are as follows:
                                                Year Ended December 31,
                                           2002                       2001
                                       -----------------------------------------

Federal statutory tax rate                 34.0%                      34.0%
Valuation allowance                       -34.0%                     -34.0%
                                       -----------------------------------------

Effective tax rate                         0.00%                      0.00%
                                       =========================================

Deferred tax assets (liabilities) are comprised of the following:

                                         December 31, 2002
                                       ---------------------

Net operating loss carryforwards            $ 1,716,560

Less:  valuation allowance                   (1,716,560)
                                       ---------------------

                                            $        -
                                       =====================

         The Company has available net operating loss carry forwards of
         approximately $3,992,000 for federal and state income taxes expiring
         between 2003 and 2022 offset future taxable income.
                  A deferred tax asset results from the benefit of utilizing net
         operating loss carry forwards in future years. A valuation allowance
         has been provided for the entire benefit because management feels that
         it is not likely that the net operating losses will be used.
                  During the years ended December 31, 2002 and 2001, the
         valuation allowance was increased by $588,850 and $513,093
         respectively.
                  The Company will continue to assess the recoverability of its
         deferred income tax asset and adjustments may be necessary based on the
         evidence available at that time. The difference between the expected
         rate of tax and the actual tax expense relates entirely to state tax
         expense and the valuation allowance.


                                      F-14
<PAGE>

         NOTE 9 - STOCK PLANS

                  The Company's 1998 Incentive and Nonqualified Stock Option
         Plan provides for the granting of options to purchase shares of common
         stock to certain employees of the Company. Exercise and vesting terms
         for options granted under this plan are determined at each grant date.
         All options when granted will be granted at not less than fair market
         value at dates of grant. At the end of 2002, -0- options were available
         for grant under the plan and 1348,333 shares of common stock were
         reserved for issuance under the 1998 Incentive and Nonqualified Stock
         Option Plan. As of December 31, 2002 the following options were granted
         and exercised under this plan.

         Stock options transactions are summarized as follows:


                                                2002 Options        2001 Options
                                                  Weighted             Weighted
                                                   Average              Average
                                                  Exercise             Exercise
                                       Shares       Price      Shares    Price
--------------------------------------------------------------------------------

Outstanding, beginning of year       1,548,333    $ 0.5925   1,338,334 $ 0.4170

Granted                                500,000      0.0159     946,667   0.4380

Exercised                                    -           -    (553,334)  0.1845

Forfeited                             (200,000)     0.8825    (183,334)  1.0005
--------------------------------------------------------------------------------


Outstanding, end of year             1,848,333      0.4137   1,548,333   0.5925
                                   =============================================

Options and warrants
   exercisable at year-end           1,848,333    $ 0.4137   1,548,333 $ 0.5925
                                   =============================================

Weighted-average fair value of        $ 0.0159                $ 0.4380
   options granted during the year

                  SFAS No. 123 "Accounting for Stock-Based Compensation" ("SFAS
         No. 123") was effective for the Company for fiscal 1998. SFAS No. 123
         encourages (but does not require) compensation expense to be measured
         based on fair value of the equity instrument awarded. In accordance
         with APB No. 25 "Accounting for Stock Issued to Employees" no
         compensation cost has been recognized in the Consolidated Statements of
         Income for the Company's stock option plans. If compensation cost for
         the company's stock option plans had been determined in accordance with
         the fair value method prescribed by SFAS No. 123, the Company's net
         loss would have been $ 1,464,957 and $1,425,469 in 2002 and 2001
         respectively. This pro forma information may not be representative of
         the amounts to be expected in future years as the fair value method of
         accounting prescribed by SFAS No. 123 has not been applied to options
         granted prior to 1996.

                  The fair value of each option granted is estimated on the date
         of each grant using the Black-Scholes option-pricing model with the
         following weighted average assumptions used for grants in 2002 and
         2001`, respectively: Risk free interest rate 4.85% and 5.5%; vested
         immediately; expected life within 5 years and within 5 years; expected
         volatility of 199% and 335%; dividend yield 0% and 0%. The fair values
         generated by the Black-Scholes model may not be indicative of the
         future benefit, if the option holder may receive any that.


                                      F-15
<PAGE>

         During the last quarter of 2002 the Company issued 1,074,000 free
         trading and 830,000 restricted shares of common stock to consultants in
         lieu of cash for services. At December 31, 2002 the Company recorded an
         expense of approximately $36,000 relating to these shares, which
         approximates the value of the services performed, according to
         management.



NOTE 11 - SEGMENT INFORMATION

                  The Company adopted Statement Financial Accounting Standard
         No. 131 "Disclosures about Segments of an Enterprise and Related
         Information (SFAS 131)" in 2000.
                  The accounting policies and detail of operations of the
         operating segments are the same as those described in the summary of
         significant accounting policies. There are no material inter-segment
         sales or transfers. All revenues are generated within the United States
         and all revenue-producing assets are located therein. Management
         evaluates a segment's performance based upon profit or loss from
         operations before income taxes.

         Industry segment information at December 31, 2002 and 2001 is
summarized as follows:
<table>
<caption>
                                              Total Revenue                 Operating Profits (Loss)
                                      -------------------------------     -----------------------------
                                              2002           2001                 2002          2001
                                      -------------------------------     -----------------------------
   
                                     <c>             <c>                <c>           <c>
     Marx Toys                             $ 220,970       $ 377,625          $ (666,839)   $ (525,179)
     Toontz                                        -               -              (2,170)     (127,468)
                                      -------------------------------     -----------------------------
        Total Segment                        220,970         377,625            (669,009)     (652,647)
     Eliminations and other
     Corporate income(expenses)                                                  (53,764)     (141,451)
     ----------------------------------------------------------------     -----------------------------
     Consolidated                          $ 220,970       $ 377,625            (722,773)     (794,098)
                                      ===============================
     Other deductions                                                            339,183             -
                                                                          -----------------------------

     Income (loss) from continuing operations                                $(1,061,956)   $ (794,098)
                                                                          =============================
  </table>
                             Depreciation and
                           Amortization Expense        Identifiable Assets
                            2002         2001          2002           2001
                        --------------------------------------------------------

Marx Toys                   $ -       $ 27,384     $ 331,090       $ 700,100
Toontz                        -          2,500            74         201,652
Corporate                     -             -            123          81,518
Discontinued Op.              -             -             -          114,342
                        --------------------------------------------------------
Consolidated                $ -       $ 29,884     $ 331,287     $ 1,097,612
                        ========================================================


                                      F-16
<PAGE>

NOTE 12 - SUBSEQUENT EVENTS

Subsequent to the Balance Sheet Date the Company issued 4,000,000 shares of
common stock to its Chairman and CEO as and inducement to stay with the Company.
In addition, the Company issued 7,100,000 shares of common stock to various
individuals for consulting work to be completed in 2003.

In April 2003 the Company entered into a 3 year licensing agreement to market
certain toy related products. Minimum royalty payments to be paid over the term
of the contract are as follows:

                      First Year         $   125,000
                      Second Year            300,000
                      Third Year           1,000,000
                                          ----------

                                          $1,425,000
                                          ==========

                                      F-17