UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSSION
                             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 ending December 31, 2003

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

                        Commission file number: 000-25037

                        MARX TOYS AND ENTERTAINMENT CORP.
                 ----------------------------------------------
                 (Name of small business issuer in its charter)

Delaware                                    06-1469654
------------------------------              ------------------------------------
(State or other jurisdiction                (I.R.S. Employer Identification No.)
of incorporation or organization

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

Issuer's telephone number: (330) 938-1749

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

Common Share Par Value, $.0001
------------------------------
  (Title of each Class)

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

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 a 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. [X] Yes [ ] No

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

The issuer's revenues for its most recent fiscal year: $94,890

The aggregate market value of the voting and non-voting common equity held by
non-affiliates based on the average bid and asked price of such common equity,
as of March 31, 2004 was approximately $160,000

The number of shares of Common Stock outstanding, as of March 31, 2004 was:
72,053,000

Transitional Small Business Disclosure Format (check one): Yes [_]; No [X]

                                       1
<PAGE>

                        MARX TOYS AND ENTERTAINMENT CORP.
                          ANNUAL REPORT ON FORM 10-KSB

                   FOR FISCAL YEAR ENDED DECEMBER 31, 2003

                                      INDEX
                                                                        PAGE NO:

PART I......................................................................  3

ITEM 1.     DESCRIPTION OF BUSINESS.........................................  3
ITEM 2.     DESCRIPTION OF PROPERTY.........................................  6
ITEM 3.     LEGAL PROCEEDINGS...............................................  6
ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDEDRS............  8


PART II.....................................................................  8

ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED
            STOCKHOLDER MATTERS.............................................  8
ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
            OPERATION....................................................... 10
ITEM 7.     FINANCIAL STATEMENTS............................................ 16
ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
            ON ACCOUNTING AND FINANCIAL
            DISCLOSURE...................................................... 18
ITEM 8a.    CONTROLS AND PROCEDURES......................................... 18



PART III.................................................................... 18

ITEM 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
            CONTROL PERSONS; COMPLIANCE WITH SECTION 16 (a) OF
            THE EXCHANGE ACT................................................ 18
ITEM 10     EXECUTIVE COMPENSATION.......................................... 19
ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWERNS
            AND MANGAEMENT.................................................. 20
ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................. 21
ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K................................ 23
ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES.......................... 23

                                       2
<PAGE>

                       MARX TOYS AND ENTERTAINMENT CORP.

                                     PART I

ITEM 1.  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.

                                       3
<PAGE>

      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.


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 .

                                       4
<PAGE>

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.

                                       5
<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

                                       6
<PAGE>

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.

      The Company was named as a defendant in an action titled, Michael Tempura
v. Stereoscape.com, Inc., and Steven Wise, in the Supreme Court of the State of
New York, County of New York, Index No.: 02-127801. The Company has filed an
answer to the actions. The action seeks to recover for an investment into the
company and seeks a total of $25,000.00. The parties reached a resolution of the
action, calling for the payment of five payments of $5,000 per payment
commencing April 13, 2004 and ending on August 20, 2004. Upon failure to pay,
the Defendants consented to a Judgment in the amount of $30,000, without
pre-judgment interest. The Defendants failed to make a payment, as called for in
the Stipulation of Settlement. Therefore the Plaintiff filed a Judgment for the
entire amount, plus costs for a total of $30,495.00. If the Judgment is not
paid, the Plaintiff may seek to enforce his rights as a Judgment Creditor and
cause material harm to the Registrant.

The Securities and Exchange Commission on September 5, 2003 instituted public
administrative and cease-and-desist proceedings, pursuant to Section 8A of the
Securities Act of 1933 ("Securities Act") and Sections 15(b) and 21C of the
Securities Exchange Act of 1934 ("Exchange Act"), Steven Wise. He was also
arrested pursuant to e a complaint in United States District Court for the
Southern District of New York. He was the Chief Executive Officer and sole
director of the Company. It is alleged in the Administrative proceeding and the
criminal case that Wise and Larry Vindman have engaged in fraudulent and
manipulative practices to inflate artificially the demand for, and the share
price of, MRXT common stock. It is alleged that Wise and Vindman also engaged in
other conduct to manipulate the demand for, and share price of, MRXT common
stock, including paying undisclosed kickbacks to registered representatives of
at least one other registered broker-dealer as compensation for those registered
representatives selling shares of MRXT common stock to their retail customers.
MRXT filed, on August 29, 2003, a Form S-8, registering 8,000,000 shares of
common stock issuable under its 1998 Incentive and Non-qualified Stock Option
Plan.

                                       7
<PAGE>

Subsequent to this event he resigned as an officer and director of the Company.

      On February 11, 2004, the Company received a letter from the Securities
and Exchange Commission (the "Commission") with respect to its Form 10-KSB for
December 31, 2002, Form 10-QSB for June 30, 2003 and Form 10-QSB for September
30, 2003. The Commission set forth seventeen comments with respect to items
contained in the aforementioned Forms of the Company. The comments dealt mostly
with specific inquiries regarding accounting issues. The Company intends to
address these issues with the Commission and file amended Forms as soon as
practicable.


Indemnification of Officers and Directors

      At present we have not entered into individual indemnity agreements with
our Officer or Director. However, our By-Laws and Certificate of Incorporation
provide a blanket indemnification that we shall indemnify, to the fullest extent
under Delaware law, our director and officer against certain liabilities
incurred with respect to their service in such capabilities. In addition, the
Certificate of Incorporation provides that the personal liability of our
director and officer and our stockholders for monetary damages will be limited.


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

      None





                                    PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

General:

      We are authorized to issue 200,000,000 shares of Common Stock, at a par
value $.0001 per share. As of March 31, 2004, the latest practicable date, there
were approximately 72,053,000 shares of common stock outstanding. The number of
record holders of Common Stock as of March 31, 2004 is approximately 100.

                                       8
<PAGE>

COMMON STOCK:

      The holders of Common Stock are entitled to one vote for each share held
of record on all matters to be voted on by stockholders. There is no cumulative
voting with respect to the election of directors, with the result that the
holders of more than 50% of the shares voting for the election of directors can
elect all of the directors then up for election. The holders of Common Stock are
entitled to receive ratably such dividends when, as and if declared by the Board
of Directors out of funds legally available therefore. In the event we have a
liquidation, dissolution or winding up, the holders of Common Stock are entitled
to share ratably in all assets remaining which are available for distribution to
them after payment of liabilities and after provision has been made for each
class of stock, if any, having preference over the Common Stock. Holders of
shares of Common Stock, as such, have no conversion, preemptive or other
subscription rights, and there are no redemption provisions applicable to the
Common Stock

Price Ranges of  MARX TOYS AND ENTERTAINMENT CORP. Common Stock:

Market Information

      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. There is currently a limited trading market for the Company's
Common Stock. The following chart lists the high and low closing bid prices for
shares of the Company's Common Stock for each quarter within the last fiscal
year. These prices are between dealers and do not include retail markups,
markdowns or other fee and commissions, and may not represent actual
transactions.

                                       9
<PAGE>

QUARTER OF FISCAL YEAR 2003:        HIGH BID    LOW BID     HIGH ASK    LOW ASK
------------------------------      -------------------------------------------

First Quarter                         0.15        0.04        0.15        0.04
Second Quarter                        0.13        0.045       0.15        0.055
Third Quarter                         0.32        0.055        .039       0
Fourth Quarter                        0.0925      0.03        0.095       0.035


LIQUIDATION:

      In the event of a liquidation of the Company, all stockholders are
entitled to a pro rata distribution after payment of any claims.


DIVIDEND POLICY:

      The Company has never declared or paid cash dividends on its common stock
and anticipates that all future earnings will be retained for development of its
business. The payment of any future dividends will be at the discretion of the
Board of Directors and will depend upon, among other things, future earnings,
capital requirements, the financial condition of the Company and general
business conditions.


STOCK TRANSFER AGENT:

      Our transfer agent and registrar of the Common Stock is Florida Atlantic
Stock Transfer, Tamarac, Florida, 33313, (954) 726-4954.


RECENT SALES OF UNREGISTERED SECURITIES

      The information concerning the recent sales of unregistered securities
required by Item 5 is incorporated by reference to the information set forth in
Item 12 "Certain Relationships and Related Transactions" set forth hereafter


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

      This Annual Report on form 10-KSB contains certain forward-looking
statements within the meaning of the federal securities laws. Actual results and
the timing of certain events could differ materially from those projected in the

                                       10
<PAGE>

forward-looking statements due to a number of factors contained elsewhere
herein. This commentary should read in conjunction with our financial statements
that appear in this report.


Results of Operations:

For the Year Ending December 31, 2003 vs. December 31, 2002 Net sales for the
year ended December 31, 2003 decreased 42.9% to $94,890 from $220,970 for
December 31, 2002. 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, 2003 increased to $13,809
from ($145,943) for the year ended December 31, 2002. They had a negative gross
profit in 2002 which resulted from a reserve for obsolete inventory of $160,000.

Selling, general and administrative expenses for year ended December 31, 2003
increased 0.9% to $827,289 from $736,830 for the year ended December 31, 2002.
The increase 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, 2003
increased to ($2,473,420) compared to a net loss of ($1,630,172) for the year
ended December 31, 2002. The increase in net losses is due to in part to stock
compensation for services of $1,634,500, and Selling, general and administrative
expenses of $827,820

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.

                                       11
<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.

      Our auditors have included an explanatory paragraph in their report for
the year ended March 31, 2003, indicating that certain conditions raise
substantial doubt regarding our ability to continue as a going concern. The
financial statements included in this Form 10-KSB do not include any adjustment

                                       12
<PAGE>

to asset values or recorded amounts of liability that might be necessary in the
event we are unable to continue as a going concern. If we are in fact unable to
continue as a going concern, shareholders may lose their entire investment in
our common stock.


RISK FACTORS

We Have Limited Resources and No Revenues From Operations, and May Need
Additional Financing in Order to Execute our Business Plan; Our Auditors Have
Expressed Doubt as to our Ability to Continue Business as a Going Concern

      We have limited resources, no revenues from operations to date, and our
cash on hand may not be sufficient to satisfy our cash requirements during the
next twelve months. In addition, we will not achieve any revenues (other than
insignificant investment income) until, at the earliest, the consummation of a
merger and we cannot ascertain our capital requirements until such time. There
can be no assurance that determinations ultimately made by us will permit us to
achieve our business objectives. Our auditors have included an explanatory
paragraph in their report for the year ended December 31, 2003, indicating that
certain conditions raise substantial doubt regarding our ability to continue as
a going concern. The financial statements included in this Form 10-KSB do not
include any adjustment to asset values or recorded amounts of liability that
might be necessary in the event we are unable to continue as a going concern. If
we are in fact unable to continue as a going concern, shareholders may lose
their entire investment in our common stock.


"PennyStock" Rules May Restrict the Market for the Company's Shares

      Our common shares are subject to rules promulgated by the Securities and
Exchange Commission relating to "penny stocks," which apply to companies whose
shares are not traded on a national stock exchange or on the NASDAQ system,
trade at less than $5.00 per share, or who do not meet certain other financial
requirements specified by the Securities and Exchange Commission. These rules
require brokers who sell "penny stocks" to persons other than established
customers and "accredited investors" to complete certain documentation, make
suitability inquiries of investors, and provide investors with certain
information concerning the risks of trading in the such penny stocks. These
rules may discourage or restrict the ability of brokers to sell our common

                                       13
<PAGE>

shares and may affect the secondary market for our common shares. These rules
could also hamper our ability to raise funds in the primary market for our
common shares.


Possible Volatility of Share Prices

      Our common shares are currently publicly traded on the Over-the-Counter
Bulletin Board service of the National Association of Securities Dealers, Inc.
The trading price of our common shares has been subject to wide fluctuations.
Trading prices of our common shares may fluctuate in response to a number of
factors, many of which will be beyond our control. The stock market has
generally experienced extreme price and volume fluctuations that have often been
unrelated or disproportionate to the operating performance of companies with no
current business operation. There can be no assurance that trading prices and
price earnings ratios previously experienced by our common shares will be
matched or maintained. These broad market and industry factors may adversely
affect the market price of our common shares, regardless of our operating
performance.

      In the past, following periods of volatility in the market price of a
company's securities, securities class-action litigation has often been
instituted. Such litigation, if instituted, could result in substantial costs
for us and a diversion of management's attention and resources.


Indemnification of Directors, Officers and Others

      Our By-Laws  contain  provisions  with  respect to the
indemnification of our officers and directors against all expenses (including,
without limitation, attorneys' fees, judgments, fines, settlements, and other
amounts actually and reasonably incurred in connection with any proceeding
arising by reason of the fact that the person is one of our officers or
directors) incurred by an officer or director in defending any such proceeding
to the maximum extent permitted by Delaware law.

      Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
our company under Delaware law or otherwise, we have been advised the opinion of
the Securities and Exchange Commission is that such indemnification is against
public policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.

                                       14
<PAGE>

Anti-Takeover Provisions

      We do not currently have a shareholder rights plan or any anti-takeover
provisions in our By-Laws. Without any anti-takeover provisions, there is no
deterrent for a take-over of our company, which may result in a change in our
management and directors.


We Do Not Expect to Pay Cash Dividends

      We do not expect to pay dividends and we have no cash reserves. The
payment of dividends after consummating a merger will be contingent upon the
incoming management's views and our revenues and earnings, if any, capital
requirements, and general financial condition subsequent to consummation of the
merger. We presently intend to retain all earnings, if any, for use in business
operations and accordingly, the Board does not anticipate declaring any
dividends in the foreseeable future. It is probable that any post-merger
arrangement will have a similar philosophy.

                                       15
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS

                       MARX TOYS AND ENTERTAINMENT CORP.
                         INDEX TO FINANCIAL STATEMENTS
                                    CONTENTS

                                       16
<PAGE>


               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES

                                  CONSOLIDATED
                              FINANCIAL STATEMENTS

                               DECEMBER 31, 2003

<PAGE>

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES

                                     INDEX



                                                                            PAGE
                                                                            ----

INDEPENDENT AUDITORS' REPORT                                                 F2

CONSOLIDATED BALANCE SHEET                                                   F3

CONSOLIDATED STATEMENTS OF OPERATIONS                                        F4

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY                   F5

CONSOLIDATED STATEMENTS OF CASH FLOWS                                     F6-F7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                               F8-F20



                                       F1
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

Board of Directors
Marx Toys and Entertainment Corp. and Subsidiaries

We have audited the accompanying consolidated balance sheet of Marx Toys and
Entertainment Corp. and Subsidiaries as of December 31, 2003 and the related
statements of operations, changes in stockholders' equity and cash flows for the
two years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.


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


In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Marx Toys and Entertainment
Corp. and Subsidiaries at December 31, 2003 and the results of its' operations
and cash flows for the two years then ended in conformity with accounting
principles generally accepted in the United States of America.




The accompanying financial statements have been prepared assuming that Marx Toys
and Entertainment Corp. and Subsidiaries will continue as a going concern. As
more fully described in Note 3, the Company has incurred operating losses since
inception and requires additional capital to continue operations. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans regarding these matters are described in Note
3. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.



Kempisty & Company
Certified Public Accountants PC
New York, New York
May 13, 2004

                                       F2
<PAGE>

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

                               December 31, 2003



            ASSETS

Current Assets
     Cash                                                           $       335
     Inventory                                                           96,194
                                                                    -----------
          Total Current Assets                                           96,529

                                                                    -----------
          Total Assets                                              $    96,529
                                                                    ===========

          LIABILITIES AND CAPITAL

Current Liabilities
     Accounts payable and accrued expenses                          $   827,988
     Liabilities of discontinued business segment                       183,914
     Merchandise credits                                                 80,939
     Notes and loans payable                                            690,000
                                                                    -----------
          Total Current Liabilities                                   1,782,841

Stockholders' (Deficit)
  Common stock, 200,000,000 shares authorized at $.001
    par value; issued and outstanding 47,653,000 and 15,073,000
    at December 31 30, 2003 and 2002                                     47,653
Additional paid-in capital                                            5,846,901
Accumulated deficit                                                  (7,580,866)
                                                                    -----------
          Stockholders' (Deficit)                                    (1,686,312)
                                                                    -----------
          Total Liabilities and Capital                             $    96,529
                                                                    ===========


                       SEE NOTES TO FINANCIAL STATEMENTS

                                       F3
<PAGE>

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS


                                                           Years ended
                                                           December 31,
                                                       2003            2002
                                                   ------------    ------------


Sales revenues                                     $     94,890    $    220,970

Cost of sales                                            81,081         366,913
                                                   ------------    ------------

Gross profit (loss)                                      13,809        (145,943)

Stock compensation                                    1,634,500         100,740
Selling, general and administrative expenses            827,829         736,830
Loss on abandonment of assets                                --          59,323
Impairment of long-lived assets                              --         224,720
                                                   ------------    ------------

Loss from operations                                 (2,448,520)     (1,267,556)

Other expenses:
     Interest expense                                    24,900          55,140
                                                   ------------    ------------

Loss from continuing operations                      (2,473,420)     (1,322,696)

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

Net loss                                           $ (2,473,420)   $ (1,630,172)
                                                   ============    ============

Loss per share, basic and diluted

Loss from continuing operations                    $      (0.05)   $      (0.09)

Loss from discontinued operations                            --           (0.02)
                                                   ------------    ------------

Net (loss) per common
     share basic and diluted                       $      (0.05)   $      (0.11)
                                                   ============    ============

Weighted average shares
     outstanding                                     47,653,000      15,073,000
                                                   ============    ============


                       SEE NOTES TO FINANCIAL STATEMENTS.

                                       F4
<PAGE>

           MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES


          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



<TABLE>
<CAPTION>
                                     Common Stock                            Additional
                                                                               Paid-in
                                Shares          Amount          Capital        Deficit         Totals
                             ------------    ------------    ------------   ------------    ------------
<S>                            <C>           <C>             <C>            <C>             <C>
Balances at
  January 1, 2002              12,004,575    $     12,004    $  3,480,275   $ (3,479,168)   $     13,111

Adjustment of shares due
  to reverse stock split         (168,908)           (169)            169             --              --

Sale of shares                  1,333,333           1,334          97,101             --          98,435

Shares issued for services      1,904,000           1,904          98,836             --         100,740

Net loss                               --              --              --     (1,628,268)     (1,628,268)
                             ------------    ------------    ------------   ------------    ------------

Balances at
  December 31, 2002            15,073,000          15,073       3,676,381     (5,107,436)     (1,415,982)

Shares issued to officer
  for compensation              4,000,000           4,000         156,000             --         160,000

Stock options issued for
  consulting services                  --              --         720,000             --         720,000

Conversion of convertible
  notes                        15,930,000          15,930         302,670             --         318,600

Shares issued for services      4,850,000           5,850         748,650             --         754,500

Exercise of stock option        6,800,000           6,800         243,200             --         250,000

Net loss                               --              --              --     (2,473,430)   (2,473,430.00)
                             ------------    ------------    ------------   ------------    ------------

Balances at
  December 31, 2003            46,653,000    $     47,653    $  5,846,901   $ (7,580,866)   $ (1,686,312)
                             ============    ============    ============   ============    ============
</TABLE>


                       SEE NOTES TO FINANCIAL STATEMENTS.

                                       F5
<PAGE>

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                     Years ended
                                                                     December 31,
                                                                  2003          2002
                                                              -----------    -----------
<S>                                                           <C>            <C>
Operating Activities
   Net loss from continuing operations                        $(2,473,430)   $(1,628,268)
   Adjustments to reconcile net loss to net cash
      used by operating activities:
   Stock and option compensation                                1,634,500        100,740
   Inventory reserve                                                   --        160,000
   Impairment of long-lived assets-continuing operations               --        224,720
   Abandonment of assets                                               --         59,323
   Changes in operating assets and liabilities:
   Decrease in accounts and notes receivable                           --         18,506
   Decrease in inventory                                           74,199        372,477
   Decrease in other current assets                                    --         87,087
   Decrease in other assets                                            --         11,032
   Increase in accounts payable and accrued expenses              195,572         56,190
   Increase in liabilities of discontinued business segment            --        183,914
   (Decrease) in merchandise credits                                   --         (2,806)
                                                              -----------    -----------
   Net cash used by operating activities                         (569,159)      (357,085)

Financing Activities
   Issuance of convertible notes                                  318,600             --
   Issuance of capital stock                                      250,000         98,435
   Notes and loans payable                                             --        226,138
                                                              -----------    -----------
   Net cash provided by financing activities                      568,600        324,573
                                                              -----------    -----------

   Increase (decrease) in cash                                       (559)       (32,512)
   Cash at beginning of period                                        894         33,406
                                                              -----------    -----------
   Cash at end of period                                      $       335    $       894
                                                              ===========    ===========

Supplemental Disclosures of Cash Flow Information:
  Cash paid during year for:
     Interest                                                 $        --    $        --
                                                              ===========    ===========
     Income taxes                                             $        --    $        --
                                                              ===========    ===========
</TABLE>


                       SEE NOTES TO FINANCIAL STATEMENTS.

                                       F6
<PAGE>

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)



                                                             For the Year Ended
                                                                December 31,
                                                             2003         2002
                                                             ----         ----

Supplemental Disclosures of Cash Flow Information

Non-cash investing and financing activities:

Common stock issued for services                            $754,500    $100,740

Stock options issued for consulting services                 652,000          --

Stock options issued for investment banking services         680,000          --

Common stock issued to the CEO as an inducement to
   stay with the Company                                     160,000          --

Common stock issued due to conversion of
   convertible notes                                         238,600          --


                       SEE NOTES TO FINANCIAL STATEMENTS.

                                       F7
<PAGE>

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 2003


NOTE 1-    ORGANIZATION AND OPERATIONS

            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 January 2003, the Company merged with Cartoonz Corporation
            ("Cartoonz") after which the Company was the surviving corporation.
            Cartoonz's assets and liabilities were cash and convertible notes
            issued under the reliance on Rule 504 of Regulation D of the
            Securities Act.

            In April 1997 the Company acquired American Buyers Club
            International, Inc. ("ABC"). In April 1997 ABC formed Alpha Sound
            and Vision, Inc. ("Alpha") as a wholly owned subsidiary. 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.


            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
            intends to license to third parties for the manufacturer of various
            products and video presentations.

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

            FINANCIAL STATEMENT PRESENTATION

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

                                       F8
<PAGE>

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 2003


NOTE 2-     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

            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.


            REVENUE RECOGNITION AND FINANCIAL STATEMENTS

            Sales are recognized at the time merchandise is shipped to
            customers.

            In December 1999, 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.

            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.

                                       F9
<PAGE>

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003


NOTE 2-     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

            FAIR VALUE OF FINANCIAL INSTRUMENTS

            The fair value of a financial instrument represents the amount at
            which the instrument could be exchanged in a current transaction
            between willing parties, other than a forced sale or liquidation.
            Significant differences can arise between the fair value and
            carrying amount of financial instruments that are recognized at
            historical cost amounts. The Company in estimating fair value
            disclosures for financial instruments used the following methods and
            assumptions:

            Cash, trade accounts receivable and other receivables reported in
            the consolidated balance sheet approximate fair value.

            RECENT ACCOUNTING PRONOUNCEMENTS

            In May 2003, the Financial Accounting Standards Board (FASB) No.
            150, Accounting for Certain Financial Instruments with
            Characteristics of both Liabilities and Equity. This standard
            establishes how an issuer classifies and measures certain financial
            instruments with characteristics of both liabilities and equity.
            This standard becomes effective for any financial instruments
            entered into or modified after May 31, 2003. We do not expect the
            adoption of FAS No. 150, to have a material effect on our financial
            statements.


            In April 2003, the FASB issued FAS No. 149, Amendment of Statement
            133 on Derivative Instruments and Hedging Activities. This statement
            amends and clarifies financial accounting and reporting for
            derivative instruments, including certain derivative instruments
            embedded in other contracts (collectively referred to as
            derivatives) and for hedging activities under FAS No. 133,
            Accounting for Derivative Instruments and Hedging Activities entered
            into after June 30, 2003. We do not expect the adoption of FAS No.
            149 to have a material effect on our financial statements.

            In January 2003, the FASB issued FASB Interpretation No. 46 (FIN
            46), Consolidation of Variable Interest Entities. This
            interpretation gives guidance that determines whether consolidation
            of a Variable Interest Equity is required and is effective for all
            variable interest entities with which we become involved beginning
            in February 2003, and all pre-existing entities beginning after June
            15, 2003. We do not expect the adoption of FIN 46 to have a material
            effect on our financial statements.

                                       F10
<PAGE>

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 2003


NOTE 2-     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

            RECENT ACCOUNTING PRONOUNCEMENTS (continued)

            In December 2002, the Financial Accounting Standards Board issued
            Financial Accounting Standards No. 148, Accounting for Stock-Based
            Compensation - Transition and Disclosure ("SFAS No. 148"). SFAS No.
            148, amends SFAS No. 123, Accounting for Stock-Based Compensation,
            to provide alternative methods of transition for a voluntary change
            to the fair value based method of accounting for stock-based
            employee compensation. In addition, SFAS No. 148 amends the
            disclosure requirements of SFAS No. 123 to require prominent
            disclosures about the method of accounting for stock-based employee
            compensation and the effect of the method used on reported results.

            In November 2002, the FASB issued FAS Interpretation No. 45 (FIN
            45), Guarantor's Accounting and Disclosure Requirements for
            Guarantees, Including Guarantees of Indebtedness of Others, FIN 45
            requires that upon issuance of a guarantee, the guarantor must
            recognize a liability for the fair value of the obligation it
            assumes under that guarantee. The initial recognition and
            measurement should be applied on a prospective basis to guarantees
            issued or modified after December 31, 2002. Disclosure requirements
            are effective for financial statements of both interim and annual
            periods that end after December 15, 2002. We have no guarantees to
            unaffiliated third parties so the adoption of FIN 45 had no impact
            on our financial statements.


            In June 2002, the FASB issued FAS No. 146, Accounting for Costs
            Associated with Exit or Disposal Activities. This standard addresses
            the recognition, measurement and reporting of costs that are
            associated with exit or disposal activities. FAS No. 146 is
            effective for exit or disposal activities that are initiated after
            December 31, 2002. The adoption of FAS No. 146 had no impact on our
            financial statements.


            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.

                                       F11
<PAGE>

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 2003


NOTE 2-     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

            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 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
            $(2,473,430) and ($1,628,268) and a working capital deficiency of
            approximately $(1,686,312) and ($1,415,982) at December 31, 2003 and
            2002 respectively, 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
            believes that upon obtaining proceeds from additional financing the
            substantial doubt about the Company's ability to continue as a going
            concern will be eliminated.

NOTE 4-     INVENTORIES

            Inventories consist of the following at
            December 31:                                 2003            2002
                                                         ----            ----

            Finished goods                            $ 256,194       $ 330,393
            Less reserve for inventory obsolescence    (160,000)       (160,000)
                                                      ---------       ---------
                                                      $  96,194       $ 170,393
                                                      =========       =========

NOTE 5-     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 option terminated in April 2003. As of December 31,
            2003, the notes have not been repaid and the lenders did not
            exercise their options to acquire the common stock. See subsequent
            event Note 10.

            In January 2002 the Company borrowed $200,000 under a promissory
            note bearing 12% interest and maturing in January 2003. At December
            31, 2003, unpaid accrued interest amounted to $48,000 and is
            included in accrued expenses.

                                       F12
<PAGE>

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 2003


NOTE 5-     NOTES AND LOANS PAYABLE (CONTINUED0

            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, 2003 unpaid and
            accrued interest amounted to approximately $13,800 and is included
            in accrued expenses.


            On May 8, 2003 the Company amended its agreement with Michael Marx
            LLC whereby (1) the November 2002 agreement is extended for 90 days;
            (2) all of the toy business for the Company will be conducted
            through Michael Marx LLC until May 15, 2008; and (3) Michael Marx
            LLC will be paid 10% of the gross sales during the term of this
            agreement. Additionally, Michael Shalit received options to purchase
            10,000,000 shares of the Company's common stock for $0.05 per share
            for consulting services.


            The Company, through Cartoonz, (which merged into the Company in
            January 2003) issued $318,600 of convertible notes upon reliance on
            Rule 504 of Regulation D of the Securities Act. These notes were
            converted into 15,930,000 shares of Company common stock at a
            conversion price of $0.02 per share.

NOTE 6-     COMMITMENTS AND CONTINGENCIES

            LEASES

            The Company and a subsidiary lease warehouse facilities in Sebring,
            Ohio requiring minimum annual rent of approximately $78,576. The
            lease expires April 2006, and requires the Company to pay various
            operating expenditures of the facilities and contain provisions for
            rent escalations. Rent expense totaled $58,429 and $75,450 for 2003
            and 2002, respectively.

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

                Years ending December 31,
                -------------------------
                         2004                                      $     78,576

                         2005                                            78,576

                         2006                                            26,175
                                                                   ------------
                                                                   $    183,327
                                                                   ============

                                      F13
<PAGE>

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 2003


NOTE 6-     COMMITMENTS AND CONTINGENCIES (CONTINUED)

            The Company entered into a 5 year lease agreement on October 1, 2003
            for showroom space in New York requiring annual rent of
            approximately $30,000. As of December 31, 2003, this lease is in
            default and the landlord has evicted the Company.


            Additionally, the Company rented office space in New Jersey on a
            month to month basis for part of the year.

            LIENS

            In April and November 2001 the Internal Revenue Service filed liens
            against the Company's property for unpaid payroll taxes of
            approximately $53,000. The Internal Revenue Service is currently
            requesting that the Company liquidate its inventory to pay those
            unpaid taxes.

            LITIGATION


            The Company was named as a defendant in an action titled, mMichael
            Tempura v. Stereoscape.com, Inc., and Steven Wise, in the Supreme
            Court of the State of New York, County of New York, Index No.:
            02-127801. The Company has filed an answer to the actions. The
            action seeks to recover for an investment into the company and seeks
            a total of $25,000,000. The parties reached a resolution of the
            action, calling for the payment of five payments of $5,000 per
            payment commencing April 13, 2004 and ending on August 20, 2004.
            Upon failure to pay, the Defendants consented to a Judgement in the
            amount of $30,000, without pre-judgment interest. The Defendants
            failed to make a payment, as called for in the Stipulation of
            Settlement. Therefore the Plaintiff filed a Judgment for the entire
            amount, plus costs for a total of $30,495. If the Judgment is not
            paid, the Plaintiff may seek to enforce his rights as a Judgment
            Creditor and cause material harm to the Registrant.


            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 acquistion
            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. In December 2001 the company provided
            for the impairment of these assets. 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.

                                       F14
<PAGE>

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 2003


NOTE 6-     COMMITMENTS AND CONTINGENCIES (CONTINUED)


            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. However, the Company is currently in negotiations to
            settle these lawsuits.


            The Company is currently in negotiations to settle a lawsuit
            regarding its default under an employment agreement. As part of the
            acquisition of Toontz Toys, Inc. ("Toontz") 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 achieves $5,000,000 in gross
            revenues. As of December 31, 2003, amounts due under the employment
            agreement have not been paid, but have been accrued in the financial
            statements.

            LICENSING AGREEMENT


            In April 2003 the Company entered into a three year licensing
            agreement to market certain toy related products. This agreement was
            terminated July 31, 2003 for non-performance by the Company
            resulting in a $75,000 charge to license fee expense. A new
            agreement replacing the April 2003 agreement became effective
            October 1, 2003 for a five year licensing agreement with an option
            for five additional years.

            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
                            Fourth Year      1,000,000
                            Fifth Year       1,000,000
                                          ------------
                                          $  3,425,000
                                          ============

                                      F15

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 2003


NOTE 6-     COMMITMENTS AND CONTINGENCIES (CONTINUED)


            Additionally, a total of $200,000 in non-refundable license fees is
            payable over the 150 day period from the date of the agreement plus
            a $200,000 advance royalty payment is due no later than April 1,
            2004.

            The Company was notified by letter on December 8, 2003 that it was
            in default of the licensing agreement and the agreement was
            terminated on Deecember 18, 2003.

            AZTOR AGREEMENT

            On July 30. 2003 the Company agreed to acquire 100% of the
            outstanding stock of Aztor Corp. a privately held software company.
            The agreement was not completed and the Company does not intend to
            complete the transaction.

            EMPLOYMENT AGREEMENT

            As part of the acquisition of Toontz Toyz, Inc. the Company entered
            into an employment agreement with Steven Campanella dated June 1,
            2001. 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, he 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. See
            subsequent event footnote 10.

NOTE 7-     IMPAIRMENT WRITE-DOWN

            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 took a
            charge to 2002 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 2002 operations of $3,445. In addition, the
            analysis indicated an impairment relating to the property and
            equipment carried on the books of its Marx Toys, Inc. subsidiary.
            Accordingly, the Company impaired these assets by writing the
            carrying value of property and equipment to $-0- and taking a charge
            to 2002 operations of $59,324.

                                      F16

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003


NOTE 8-     COMMON STOCK

            During the quarter ended September 30, 2003 the Company received
            proceeds of $250,000 from the exercise of a stock option for
            6,800,000 shares of $0.001 par value of common stock.

            During the quarter ended September 30, 2003 the Company issued
            3,450,000 common shares for legal and consulting services valued at
            $611,000.


            On August 29, 2003 the Company granted an option to purchase
            6,800,000 $0.001 par value common shares at $0.20 per share for
            investment banking services rendered valued at $612,000.
            Subsequently on September 18, 2003 the option was changed to a flat
            $250,000 to purchase the 6,800,000 common shares or approximately
            $0.04 per share which resulted in an additional expense for services
            of $68,000.


            On May 8, 2003 as part of an amended loan and management agreement,
            Michael Shalit was granted an option to purchase 10,000,000 shares
            of the Company's common stock for $0.05 per share with no expiration
            date, for consulting services. Additionally, in the event of any
            major dilution, the Company agreed to issue additional options to
            Mr. Shalit so that he would retain the same percentage ownership
            interest granted under the stock option provision. These options
            were valued at $652,000 using the Black-Scholes option pricing
            method and were charged to expense. See subsequent event Note 10.

            In June of 2003 the Company issued 300,000 shares of common stock
            valued at $36,500 to individuals for consulting services.

            In January 2003 the Company issued 4,000,000 shares of common stock
            valued at $160,000 to its Chairman and CEO as an inducement to stay
            with the Company.

            In the first quarter of 2003 the Company issued 2,100,000 shares of
            common stock valued at $107,000 to various individuals for
            consulting work to be completed in 2003.

            During 2003, the Company issued 15,930,000 common shares as a result
            of the conversion of $318,600 of outstanding convertible notes into
            common stock. These convertible notes were previously issued under
            rule 504 of Regulation D of the Securities Act.

            During 2002, the Company issued 1,904,000 shares of common stock for
            consulting services valued at $100,740. Additionally, the Company
            sold 1,333,333 shares of common stock for $98,435.

                                      F17
<PAGE>

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 2003



NOTE 9-     INCOME TAXES

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

                                      December 31, 2003

                                        Current         Deferred        Total
                                        -------         --------        -----

            Federal                   $        --    $  (740,000)   $  (740,000)
            State and local                    --       (220,000)      (220,000)
                                      -----------    -----------    -----------
                                      $        --    $  (960,000)      (960,000)
                                      ===========    ===========    ===========

                                      December 31, 2002

                                        Current         Deferred        Total
                                        -------         --------        -----

            Federal                   $        --    $  (394,532)   $  (394,532)
            State and local                    --       (104,435)      (104,435)
                                      -----------    -----------    -----------
                                      $        --    $  (498,967)      (498,967)
                                      ===========    ===========    ===========

                                       F18
<PAGE>

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 2003


NOTE 9-     INCOME TAXES (CONTINUED)

            The difference between the U.S. federal statutory rate and the
            Company's effective tax rate are as follows:

                                                     Year ended December 31,
                                                     2003              2002
                                                     ----              ----

            Federal statutory rate                       34.0%             34.0%
            Valuation allowance                         -34.0%            -34.0%
                                               ---------------  ---------------
            Effective tax rate                            0.0%              0.0%
                                               ===============  ===============

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


                                                          December 31,
                                                     2003              2002
                                                     ----              ----

            Net operating loss carryforwards   $    2,246,084   $     1,286,084
            Less:Valuation allowance               (2,246,084)       (1,286,084)
                                               ---------------  ---------------
                                               $           --   $            --
                                               ===============  ===============

            The company has available net operating loss carry forwards of
            approximately $7,500,000 for federal and state income taxes expiring
            between 2004 and 2023 to 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.

            The Company will continue to assess the recoverability of its
            deferred income tax assets 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.

                                       F19
<PAGE>

               MARX TOYS AND ENTERTAINMENT CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 2003


NOTE 10-    SUBSEQUENT EVENTS

            In March 2004, the Company issued 17,500,000 shares of common stock
            for consulting services and interest and principle on the loans due
            April, 2102.

            During April 2004, the Company sold 300,000 shares of common stock
            for gross proceeds of $10,000.


            During April 2004, the Company entered into an agreement with the
            parties holding a lien on the toy molds, whereby they received
            400,000 shares of common stock and when they receive an additional
            $125,000 payment they will release the lien on the toy molds and the
            Company will then have good title to the toy molds.


            During April 2004, the Company defaulted on a litigation settlement
            and now has a judgment of approximately $30,000 against it (See Note
            ).

            In April 2004, the Company borrowed $30,000 from an investor with no
            interest or definite terms of repayment.


            During May 2004, the Company amended all of its agreements with
            Michael Shalit and Michael Marx LLC collectively ("Shalit") whereby
            Shalit relinquishes his option to purchase 10,000,000 shares of the
            Company and all rights awarded under the prior agreements for the
            following:

                  2,000,000 shares of the Company's free trading common stock to
                  be awarded no later than May 20, 2004.

                  1,000,000 shares of the Company's restricted common stock

            A note in the amount of $115,000 with interest at 6% compounded
            daily (to replace the existing note and interest payable) to be paid
            in installments of $10,000 with the first payment due February 1,
            2005 and each additional payment to be made every 90 days until the
            debt is paid in full. The last payment will include all interest
            due.


            The above agreement is secured by a lien on the Company's inventory.

            During May 2004 the Company has negotiated a settlement of the
            Toontz litigation whereby the Company will pay the Toontz legal fees
            of $136,000 and pay $100,000 to its former employee to settle the
            employment agreement.

                                      F20
<PAGE>

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

      None


ITEM 8A.  CONTROLS AND PROCEDURES

      We recently acquired the Company and are just developing and implementing
systems of internal and disclosure controls. Within the ninety-day period
preceding the filing of this report, our management evaluated the effectiveness
of the design and operation of its disclosure controls and procedures (the
"Disclosure Controls") as of the end of the period covered by this Form 10-KSB
and (ii) any changes in internal controls over financial reporting that occurred
during the last quarter of our fiscal year. This evaluation ("Controls
Evaluation") was done under the supervision and with the participation of
management, including the sole Executive Officer and Financial Officer.


Limitations on the Effectiveness of Controls

      A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system are met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, have been detected. Because
of the inherent limitations in a cost effective control system, misstatements
due to error or fraud may occur and not be detected. We will conduct periodic
evaluations of our internal controls to enhance, where necessary, our procedures
and controls.


Conclusions

      Based upon the Controls Evaluation, the sole Officer has concluded that
the Disclosure Controls are effective in reaching a reasonable level of
assurance that management is timely alerted to material information relating to
the Company during the period when its periodic reports are being prepared. In
accord with the U.S. Securities and Exchange Commission's requirements, the sole
Officer conducted an evaluation of the Company's internal control over financial

                                       18
<PAGE>

reporting (the "Internal Controls") to determine whether there have been any
changes in Internal Controls that occurred during the quarter which have
materially affected or which are reasonable likely to materially affect Internal
Controls. Based on this evaluation, there have been no such changes in Internal
Controls during the last quarter of the period covered by this report.

                                       17
<PAGE>



                                    PART III

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

      The following table sets forth information with respect to the directors
and executive officers as of March 31, 2004.

Name              Age         Position(s) Held
----------------------------------------------
Robert Bamberry   38          President and Director
Jay Horowitz      58          Director
Eric Ryan         53          Director


ROBERT  BAMBERRY, PRESIDENT/FINANCIAL OFFICER AND DIRECTOR

      Has been involved for over fifteen years in the financial industry. He has
held management positions in the securities industry and has managed millions of
dollars in individual portfolios. In the past five years, he has structured and
implemented financing on start-up and mezzanine and bridge loan stages of
funding. He has worked as an independent financial consultant for the three
years from 1999 to 2001. He worked for Retrac Medical in New York, New York, as
a financial and investment consultant.


JAY HOROWITZ, DIRECTOR

        Jay Horowitz has 35 previous years of toy industry experience, during
which time he has developed many important relationships throughout the world.
He was the owner of Marx Toys between 1982-2000. As a result, he is very
familiar with the history of the Company, how it became a major world toy
manufacturer in the middle of the 20th Century, and its products and molds. In
addition, his career includes years spent in injection molding, working with
plastic molds, related products development, and toy manufacturing. Jay is also

                                       18
<PAGE>

the author of Marx Western Playsets (1992, Greenberg Publishing Company, Inc.),
a nearly 200-page book on the history of Marx Toys.


ERIC RYAN, DIRECTOR

      Eric Ryen has 30 years experience in physics, electronics, and robotics.
He began his career as physicist at the Institute for Atomic Energy Kjeller,
working on experiments inside Atomic Reactor Hall. Subsequently, he invented
robots used on an international corporate level. He also brings three decades of
professional involvement with microcomputer programming, real-time process
control systems, disk-operating systems and display, and operator communication
systems.

      All directors will hold office until the next annual stockholder's meeting
and until their successors have been elected or qualified or until their death,
resignation, retirement, removal, or disqualification. Vacancies on the board
will be filled by a majority vote of the remaining directors. Officers of the
Company serve at the discretion of the Board of Directors


ITEM 10.  EXECUTIVE COMPENSATION

      For the fiscal year ended March 31, 2003, no Officer/Director has been
compensated with salaries or other form of remuneration except as set forth
below:

Name              Fiscal Year   Cash Compensation   Restricted Compensation (1)
--------------------------------------------------------------------------------
Robert Bamberry   2003          $0.00               0

(1) Paid in the form of restricted shares of common stock. There is no realistic
market valuation at this time

DIRECTOR COMPENSATION:

      Our director(s) receive no compensation for their services as director, at
this time, other than what has already been paid by the issuance of shares of
common stock.

                                       19
<PAGE>

DIRECTOR AND OFFICER INSURANCE:

      The Company has no directors and officers ("D & O") liability insurance.


ITEM  11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 31, 2004, by (i) each person
(including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934 (the "Exchange Act") who is known by the Company
to own beneficially 5% or more of the Common Stock, (ii) each director of the
Company, and (iii) all directors and executive officers as a group. Unless
otherwise indicated, all persons listed below have sole voting power and
investment power with respect to such shares. Total number of shares originally
authorized was 100,000,000 shares of common stock, each of which had a $.0001
per share par value.

      As of March 31, 2004, a total of approximately 72,053,000 shares of Common
Stock, have been issued and are outstanding.

Shareholder*                              Number of Shares  Percentage Ownership
--------------------------------------------------------------------------------
Salvatore Amato                           5,004,762          6.95%
      399 Barbor Road
      Morganville, NJ 07751
Jay Financial                             4,000,000          5.55%
      112 Clifton Avenue, Ste 84
      Lakewood, NJ 08701
Ultra Power, Inc.                         4,000,000          5.55%
      C/o the Company
Steven Wise                               4,510,680          6.26%
      3 Princess Court
      Perrinville, NJ 08535
Robert Bamberry                           0                  0%
      C/o the Company

Directors and Officers                    4,000,000          5.55%
      as a group (3 person)

*     Address of shareholder is c/o the Company, unless otherwise indicated
(1)   Director and/or Officer

                                       20
<PAGE>

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ISSUANCE OF STOCK:

During the quarter ended September 30, 2003 the Company received proceeds of
$250,000 from the exercise of a stock option for 6,800,000 shares of $0.001 par
value of common stock.


During the quarter ended September 30, 2003 the Company issued 3,450,000 common
shares for legal and consulting services valued at $611,000.


On August 29, 2003 the Company granted an option to purchase 6,800,000 $0.001
par value common shares at $0.20 per share for investment banking services
rendered valued at $612,000. Subsequently on September 18, 2003 the option was
changed to a flat $250,000 to purchase the 6,800,000 common shares or
approximately $0.04 per share which resulted in an additional expense for
services of $68,000.


On May 8, 2003 as part of an amended loan and management agreement, Michael
Shalit was granted an option to purchase 10,000,000 shares of the Company's
common stock for $0.05 per share with no expiration date, for consulting
services. Additionally, in the event of any major dilution, the Company agreed
to issue additional options to Mr. Shalit so that he would retain the same
percentage ownership interest granted under the stock option provision. These
options were valued at $652,000 using the Black-Scholes option pricing method
and were charged to expense.


In June of 2003 the Company issued 300,000 shares of common stock valued at
$36,500 to individuals for consulting services.


In January 2003 the Company issued 4,000,000 shares of common stock valued at
$160,000 to its Chairman and CEO as an inducement to stay with the Company.


In the first quarter of 2003 the Company issued 2,100,000 shares of common stock
valued at $107,000 to various individuals for consulting work to be completed in
2003.

                                       21
<PAGE>

During 2003, the Company issued 15,930,000 common shares as a result of the
conversion of $318,600 of outstanding convertible notes, issued by its Cartoonz
subsidiary, into common stock. These convertible notes were previously issued
under rule 504 of Regulation D of the Securities Act.


During 2002, the Company issued 1,904,000 shares of common stock for consulting
services valued at $100,740. Additionally, the Company sold 1,333,333 shares of
common stock for $98,435.


Subsequent Events

In March 2004, the Company issued 17,500,000 shares of common stock for
consulting services and interest and principle on the loans due April, 2102.


During April 2004, the Company sold 300,000 shares of common stock for gross
proceeds of $10,000.


During April 2004, the Company entered into an agreement with the parties
holding a lien on the toy molds, whereby they received 400,000 shares of common
stock and when they receive an additional $125,000 payment they will release the
lien on the toy molds and the Company will then have good title to the toy
molds.

                                       22
<PAGE>

ITEM 13.  EXHIBITS

                               INDEX TO EXHIBITS
--------------------------------------------------------------------------------
    SEC REFERENCE       TITLE OF DOCUMENT
       NUMBER
--------------------------------------------------------------------------------
        3.1             Articles of Incorporation                 (1)
--------------------------------------------------------------------------------
        3.2             Amendment to Articles of                  (1)
                        Incorporation
--------------------------------------------------------------------------------
        3.3             Additional Amendments to                  (1)
                        Articles of Incorporation
--------------------------------------------------------------------------------
        3.4             Bylaws                                    (1)
--------------------------------------------------------------------------------
        31              Certification of Chief Executive Officer
        32              Certification of President pursuant to
                        18 U.S.C. Section 1350, as adopted
                        Pursuant to section 906 of the
                        Sarbanes-Oxley act of 2002


(1) These documents are hereby incorporated by reference to Form 10-SB, as
    amended, filed on November 6, 1998




Reports on Form 8-K

The Following Reports on Form 8-k were filed during the last quarter covered by
this report: On January 17, 2003, we filed a Form 8-K for items 1, Change of
Control of Registrant, Item 2, Acquisition or Disposal of Assets and Item 5,
Appointment or Resignation of Directors.
On March 18, 2003, we filed an amendment to the previous Form 8-K.


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

      Fees for audit services provided by our principal accountant during the
years ended December 31, 2003 and 2002 were $12,500 and $21,000, respectively.
Audit services consisted primarily of the annual audits, review of our financial
statements, and services that are normally provided by our accountants in
connection with statutory and regulatory filings or engagements for those fiscal
years.

                                       23
<PAGE>

AUDIT-RELATED FEES

      There were no fees billed for services reasonably related to the
performance of the audit or review of our financial statements outside of those
fees disclosed above under the caption Audit Fees for fiscal years 2003 and
2002.

ALL OTHER FEES

There were no other fees billed for services.


SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Marx Toys and Entertainment Corp. has duly caused this
Report to be signed on behalf of the undersigned thereunto duly authorized on
April 30, 2004.


MARX TOYS AND ENTERTAINMENT CORP.

By /s/ Robert Bamberry
   -------------------
      Robert Bamberry, President/Financial Officer/Secretary and Director

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons in the capacities indicated and
on May 19, 2004.

Signature                     Title                   Date
------------                  ------                  ------
/s/ Robert Bamberry           President/Secretary     May 19, 2004
-------------------           and Director
    Robert Bamberry

                                       24