UNITED STATES
                  SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C. 20549

                              FORM 10-QSB
 (Mark One)

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

         For the quarterly period ended September 30, 2005

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

    For the transition period from  ___________ to ___________

                             0-51164
                     ----------------------
                    (Commission file number)

                 FILM AND MUSIC ENTERTAINMENT, INC.
  ---------------------------------------------------------------
 (Exact name of small business issuer as specified in its charter)

                 Nevada                      01-0802246
       ---------------------------          ------------
      (State or other jurisdiction         (IRS Employer
   of incorporation or organization)    Identification No.)

  5670 Wilshire Blvd., Suite 1690, Los Angeles, California  90036
  ---------------------------------------------------------------
             (Address of principal executive offices)

                          (323) 904-5200
                     -------------------------
                    (Issuer's telephone number)

                                 N/A
   --------------------------------------------------------------
  (Former name, former address and former fiscal year, if changed
                         since last report)

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

State  the  number of shares outstanding of each of the  issuer's
classes  of common equity, as of the latest practicable date:  As
of November 1, 2005 - 125,170,398 shares of common stock

Indicate by check mark whether the registrant is a shell  company
(as defined in Rule 12b-2 of the Exchange Act). Yes  [ ]  No [X]


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



<PAGE>



                 FILM AND MUSIC ENTERTAINMENT, INC.

                               Index

                                                                     Page
                                                                    Number

PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements

           Consolidated Balance Sheet as of September 30, 2005
           (unaudited)                                                  F-2

           Consolidated Statements of Operations for the three
           and nine months ended September 30, 2005  and  2004
           (unaudited)                                                  F-3

           Consolidated Statement of Stockholders' Equity for
           the nine months ended September 30, 2005 (unaudited)         F-4

           Consolidated Statements of Cash Flows for the nine
           months ended September 30, 2005 and 2004 (unaudited)         F-5

           Notes to Consolidated Financial Statements (unaudited)       F-6


Item 2.    Management's Discussion and Analysis or Plan of Operations    11

Item 3.    Controls and Procedures                                       15

PART II.   OTHER INFORMATION                                             16

Item  1.   Legal Proceedings                                             16

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds   17

Item 3.    Defaults Upon Senior Securities                               17

Item 4.    Submission of Matters to a Vote of Security Holders           17

Item  5.   Other Information                                             17

Item 6.    Exhibits                                                      17

SIGNATURES                                                               18



                                  1

<PAGE>



PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements




























<PAGE>



       Film and Music Entertainment, Inc. and Subsidiaries

                     Consolidated Balance Sheet


                                                               September
                                                               30, 2005
                                                               ---------
                                                              (unaudited)
                              ASSETS

CURRENT ASSETS

  Cash and cash equivalents                                 $    502,474
  Restricted cash                                                 40,518
  Loan receivable from Miracle Entertainment, Inc.                25,000
  Other current assets (including amounts due from
     related party of $17,797)                                   190,067
  Investment in equity securities                              1,840,710

                                                            ------------
TOTAL CURRENT ASSETS                                           2,598,769

PROPERTY AND EQUIPMENT, net of accumulated
   depreciation of $15,307                                        82,768
REAL ESTATE INVESTMENTS                                          430,000
FILM COSTS                                                       476,146
                                                            ------------
TOTAL ASSETS                                                $  3,587,683
                                                            ============

                   LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable                                          $     59,859
   Accrued expenses (including amounts due from related
      party of $2,848)                                            68,040
   Production advances                                             6,924

                                                            ------------
TOTAL CURRENT LIABILITIES                                        134,823
                                                            ------------

COMMITMENT AND CONTINGENCIES (Note 8)                                -

STOCKHOLDER'S EQUITY
   Common stock, $0.001 par value; 250,000,000 shares
     authorized; 125,170,398 shares issued and outstanding       125,170
   Additional paid-in capital                                 21,066,142
   Accumulated deficit                                       (17,738,452)

                                                            ------------
TOTAL STOCKHOLDERS' EQUITY                                     3,452,860
                                                            ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                  $  3,587,683
                                                            ============



       The accompanying notes are an integral part of these
            unaudited consolidated financial statements.


                                  F-2

<PAGE>



          Film and Music Entertainment, Inc. and Subsidiaries

               Consolidated Statements of Operations

<TABLE>
<CAPTION>

                                                      Three Months Ended                Nine Months Ended
                                                 ----------------------------      ---------------------------
                                                   September       September        September       September
                                                   30, 2005        30, 2004         30, 2005        30, 2004
                                                 ------------     -----------      -----------     -----------
                                                  (unaudited)     (unaudited)      (unaudited)     (unaudited)
<S>                                              <C>             <C>              <C>             <C>


REVENUE                                          $          -    $           -    $    162,024    $          -

OPERATING EXPENSES
  Production costs                                          -           26,417               -          90,599
  Advertising costs                                   108,366                -         279,845           8,937
  Compensation expense                                 92,672          130,982         249,275         206,814
  Consulting expense                                   16,241            2,000          39,875          28,920
  General and administrative expenses                 137,087           85,769         406,241         289,560

                                                 ------------     -----------      -----------     -----------
TOTAL OPERATING EXPENSES                              354,366          245,168         975,236         624,830
                                                 ------------     -----------      -----------     -----------

LOSS FROM OPERATIONS                                 (354,366)        (245,168)       (813,212)       (624,830)
                                                 ------------     -----------      -----------     -----------
OTHER INCOME (EXPENSE)
  Other income                                          8,999            5,000           9,184          10,000
  Investment income                                     6,921           11,079          17,125          13,170
  Unrealized loss on marketable equity
     securities                                       166,942                -         145,537               -
  Realized loss on sale of marketable
     equity securities                                (33,636)               -         (62,852)              -
  Gain on foreclosure of note receivable                    -                -          50,000               -
  Gain on disposition of real estate                        -                -         208,500               -
                                                 ------------     -----------      -----------     -----------
TOTAL OTHER INCOME (EXPENSE)                          149,226           16,079         367,494          23,170
                                                 ------------     -----------      -----------     -----------

LOSS BEFORE PROVISION FOR INCOME TAXES               (205,140)        (229,089)       (445,718)       (601,660)

PROVISION FOR INCOME TAXES                                  -                -               -               -
                                                 ------------     -----------      -----------     -----------

NET LOSS                                         $   (205,140)    $   (229,089)   $   (445,718)   $   (601,660)
                                                 ============     ============    ============    ============

NET LOSS PER SHARE - BASIC AND DILUTED           $      (0.00)    $      (0.00)   $      (0.00)   $      (0.00)
                                                 ============     ============    ============    ============
WEIGHTED AVERAGE SHARES OUTSTANDING -
  BASIC AND DILUTED                               125,170,398      151,957,898     126,810,142     128,322,141
                                                 ============     ============    ============    ============
</TABLE>


       The accompanying notes are an integral part of these
           unaudited consolidated financial statements.


                                  F-3

<PAGE>



           Film and Music Entertainment, Inc. and Subsidiaries

            Consolidated Statement of Stockholders' Equity

                               (unaudited)
<TABLE>
<CAPTION>


                                                                              Additional                    Total
                                                           Common Stock       Paid- in     Accumulated   Stockholders'
                                                      Shares       Amount      Capital       Deficit        Equity
                                                    -----------  ---------   -----------    ----------    ----------
<S>                                                 <C>          <C>         <C>            <C>           <C>
Balance, December 31, 2004                          140,970,398    140,970    21,596,617   (17,292,734)    4,444,853

Issuance of common stock for exercise of options      2,450,000      2,450        (1,225)                      1,225
Shares canceled in connection with non-payment on
   note receivable                                   (2,500,000)    (2,500)      (72,500)                    (75,000)
Shares canceled in connection with transfer of
   real estate investment to former owner           (15,750,000)   (15,750)     (456,750)                   (472,500)
Net loss                                                      -          -             -      (445,718)     (445,718)
                                                    -----------  ---------   -----------    ----------    ----------
Balance, June 30, 2005                              125,170,398  $ 125,170  $ 21,066,142  $(17,738,452)  $ 3,452,860
                                                    ===========  =========  ============  ============   ===========
</TABLE>








       The accompanying notes are an integral part of these
           unaudited consolidated financial statements.


                                  F-4

<PAGE>



          Film and Music Entertainment, Inc. and Subsidiaries

                Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                Nine Months Ended
                                                           ---------------------------
                                                            September       September
                                                             30, 2005        30, 2004
                                                           -----------     -----------
                                                            (unaudited)     (unaudited)

<S>                                                        <C>             <C>
CASH FLOW FROM OPERATING ACTIVITIES:
  Net loss                                                 $  (445,718)    $  (601,660)
  Adjustment to reconcile net loss to net cash
    used in operating activities:
      Depreciation expense                                       9,065           3,769
      Common stock issued for services                               -           3,700
      Unrealized loss on marketable equity securities         (145,537)              -
      Gain on disposition of real estate                      (208,500)              -
      Gain on foreclosure of note receivable                   (50,000)              -
      Purchase of marketable equity securities              (2,895,862)              -
      Sale of marketable securities                          1,860,638               -
   Changes in operating assets and liabilities:
      Other current assets                                    (181,633)        (23,891)
      Film costs                                              (401,146)              -
      Accounts payable                                         (24,629)         18,804
      Accrued expenses                                        (105,784)        147,239
      Production advances                                      (35,398)         12,123
                                                           -----------     -----------
Net cash used in operating activities                       (2,624,504)       (439,916)
                                                           -----------     -----------
CASH FLOW FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                           (52,680)        (32,065)
  Increase in restricted cash                                        -         (40,518)
  Investment in SMS Musicmaker Ltd.                                  -         (48,909)
  Purchase of real estate                                            -        (373,001)
                                                           -----------     -----------
Net cash used in investing activities                          (52,680)       (494,493)
                                                           -----------     -----------
CASH FLOW FROM FINANCING ACTIVITIES:
  Proceeds received from Miracle Entertainment                       -           6,347
  Proceeds from sale of common stock                                 -       5,000,000
  Proceeds from exercise of options                                  -             625
                                                           -----------     -----------
Net cash provided by financing activities                            -       5,006,972
                                                           -----------     -----------
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                                          (2,677,184)      4,072,563

CASH AND CASH EQUIVALENTS, Beginning of period               3,179,658         112,079
                                                           -----------     -----------

CASH AND CASH EQUIVALENTS, End of period                   $   502,474     $ 4,184,642
                                                           ===========     ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:

  Interest paid                                            $     2,217     $         -
                                                           ===========     ===========
  Income taxes paid                                        $         -     $         -
                                                           ===========     ===========
</TABLE>



       The accompanying notes are an integral part of these
           unaudited consolidated financial statements.


                                  F-5

<PAGE>



         FILM AND MUSIC ENTERTAINMENT, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            (UNAUDITED)


Note 1 - Basis of Presentation


The   unaudited  consolidated  financial  statements  have   been
prepared  by  Film and Music Entertainment, Inc. (the "Company"),
pursuant  to  the  rules and regulations of  the  Securities  and
Exchange  Commission. The information furnished  herein  reflects
all  adjustments  (consisting of normal  recurring  accruals  and
adjustments)  which are, in the opinion of management,  necessary
to  fairly  present  the  operating results  for  the  respective
periods.  Certain  information and footnote disclosures  normally
present  in annual consolidated financial statements prepared  in
accordance with accounting principles generally accepted  in  the
United States of America have been omitted pursuant to such rules
and  regulations. These consolidated financial statements  should
be  read  in conjunction with the audited consolidated  financial
statements  and  footnotes for the year ended December  31,  2004
included  in  the  Company's Annual Report  on  Form  10SB.   The
results  of  the  nine months ended September 30,  2005  are  not
necessarily indicative of the results to be expected for the full
year ending December 31, 2005.

Stock Options
-------------

SFAS   No.   123,   "Accounting  for  Stock-Based  Compensation,"
establishes and encourages the use of the fair value based method
of  accounting  for  stock-based compensation arrangements  under
which  compensation cost is determined using the  fair  value  of
stock-based compensation determined as of the date of  grant  and
is  recognized over the periods in which the related services are
rendered.  The  statement  also permits  companies  to  elect  to
continue  using  the  current intrinsic value  accounting  method
specified in Accounting Principles Board ("APB") Opinion No.  25,
"Accounting for Stock Issued to Employees," to account for stock-
based  compensation. The Company has elected to use the intrinsic
value  based  method and has disclosed the pro  forma  effect  of
using  the fair value based method to account for its stock-based
compensation  issued  to  employees.  For  options   granted   to
employees where the exercise price is less than the fair value of
the stock at the date of grant, the Company recognizes an expense
in   accordance  with  APB  25.   For  non-employee  stock  based
compensation the Company recognizes an expense in accordance with
SFAS  No. 123 and values the equity securities based on the  fair
value  of  the  security  on the date of grant.  For  stock-based
awards  the value is based on the market value for the  stock  on
the  date  of  grant  and  if the stock has  restrictions  as  to
transferability  a discount is provided for lack of  tradability.
Stock  option  awards are valued using the Black-Scholes  option-
pricing model.

The  pro  forma  information regarding the effects on  operations
that is required by SFAS 123 and SFAS 148 are not presented since
there is no pro forma expense to be shown for the three and  nine
months ended September 30, 2005 and 2004.

Note 2 - Loss Per Share

The  Company reports earnings (loss) per share in accordance with
SFAS  No.  128, "Earnings per Share." Basic earnings  (loss)  per
share  is computed by dividing income (loss) available to  common
shareholders  by  the weighted average number  of  common  shares
available. Diluted earnings (loss) per share is computed  similar
to basic earnings (loss) per share except that the denominator is
increased to include the number of additional common shares  that
would  have  been outstanding if the potential common shares  had
been  issued  and if the additional common shares were  dilutive.
Diluted  earnings (loss) per share has not been  presented  since
the  effect of the assumed conversion of options and warrants  to
purchase  common shares would have an anti-dilutive  effect.   At
September 30, 2005 there were 79,957,000 options outstanding that
have  been excluded from the computation of diluted net loss  per
share because the effect would have been anti-dilutive.



                                  F-6

<PAGE>



         FILM AND MUSIC ENTERTAINMENT, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              (UNAUDITED)


Note 3 -  Investments in Marketable Equity Securities

The  Company invests some of its excess cash in marketable equity
securities.  The marketable equity securities comprise of  common
stock  of  publicly  traded  companies.  These  investments   are
classified as trading securities as they are held principally for
the  purpose  of selling in the near term. They are  reported  at
fair value with unrealized gains and losses included in earnings.
The  fair  value  is  determined by using the  securities  quoted
market  price  as  obtained from stock exchanges  on  which  each
securities trades.

Investment  income,  principally  dividends,  is  recorded   when
earned. Realized capital gains and losses are calculated based on
the   cost  of  securities  sold,  which  is  determined  by  the
"identified cost" method.

The  unrealized  gains/(losses) in  the  Company's  portfolio  of
marketable  equity  securities as of September  30,  2005  is  as
follows:

               Historical costs basis          $   1,707,343
               Unrealized gains                      303,747
               Unrealized losses                    (170,380)
                                               -------------
               Fair value                      $   1,840,710
                                               =============

Note 4 - Loan Receivable from Miracle Entertainment, Inc.

As  of  December 31, 2003, Miracle Entertainment, Inc.  owed  the
Company,  $66,317. This amount        was considered a short-term
loan,  non-interest bearing and unsecured. During June 2004,  the
Company   executed  a  secured  promissory  note   with   Miracle
Entertainment  Inc.  The  repayment  terms  call  for  two  equal
payments  of $25,000.  The first payment is due April  15,  2005.
The  second payment is due December 15, 2005. The promissory note
is non-interest bearing and is secured by 5,000,000 shares of the
Company's  stock.  On April 15, 2005, Miracle did  not  make  the
required payment of $25,000; therefore the Company foreclosed  on
2,500,000 shares of its common stock used to secure the loan.  As
a  result of this foreclosure, the Company recognized a  gain  of
$50,000  since  the  value of the 2,500,000 shares  exceeded  the
required  payment by $50,000.  As of the September 30,  2005  the
market  value  of  the  remaining shares of the  Company's  stock
exceeded  the  remaining carrying value of the note  of  $25,000.
Therefore, no write down of the note was deemed necessary.

Note 5 - Property and Equipment

The  cost  of  property  and  equipment  at  September  30,  2005
consisted of the following:


                                                    September 30,
                                                        2005

         Computers                                   $    3,330
         Automobile                                      61,197
         Furniture and fixtures                          33,548
                                                     ----------
                                                         98,075
         Less accumulated depreciation                  (15,307)
                                                     ----------
                                                     $   82,768
                                                     ==========

                                  F-7

<PAGE>



         FILM AND MUSIC ENTERTAINMENT, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              (UNAUDITED)


Depreciation expense for the nine months ended September 30, 2005
and 2004 was $9,065 and $3,769, respectively.

Note 6 - Real Estate Investments

On February 3, 2005, the Company entered into an agreement with a
stockholder  whereby  the  stockholder  agreed  to  surrender  to
Company 15,750,000 shares of the Company's common stock owned  by
the stockholder and the Company agreed to give up any rights to a
hypothecated  money  interest relating  to  certain  real  estate
located  in Cochise County, Arizona that the Company has recorded
on  its  books at $264,000.  The Company removed the real  estate
investment  of  $264,000 from its books and  canceled  15,750,000
shares of its common stock valued at $0.03 per share or $472,500.
The  Company  recognized a gain of $208,500 as a result  of  this
transaction.

Note 7 - Stockholders' Equity

Common stock
------------

During the nine months ended September 30, 2005, the Company  has
the following transactions in its common stock:

    *  canceled 15,750,000 shares of its common stock valued  at
       $472,500 for a certain parcel of real estate;
    *  issued 2,450,000 share of its common stock for the exercise
       of stock options.  The exercise price was paid by reducing
       accrued expenses by $1,225; and
    *  canceled 2,500,000 shares of common stock valued at $75,000
       that was used to secure a loan receivable.

Note 8 - Commitments and Contingencies

Litigation
----------

In  the  ordinary  course of business, the Company  is  generally
subject  to  claims, complaints, and legal actions. At  September
30, 2005, management believes that the Company is not a party  to
any  action  which would have a material impact on its  financial
condition, operations, or cash flows.

Miracle   Entertainment,  Inc.  et.  al  v.  Filmstar   Releasing
Corporation  et.  al.,  Los  Angeles  Superior  Court,  Case  No.
BC302233:

This  is  a complaint for unlawful conversion, breach of contract
and fraud, commenced in September, 2003 by Miracle Entertainment,
Inc.,  a company of which John Daly was Chairman, against a  firm
and  several individuals who had previously contracted  to  raise
funds  for  productions  sponsored by Miracle  Entertainment.   A
counter-claim was filed by the defendants in March, 2004,  adding
the Company as a defendant.

On  May  2,  2005 a confidential Settlement Agreement and  Mutual
Release  was executed between the Company and remaining litigants
on  terms acceptable to all the parties resulting in no liability
and complete release of claims against the company.


Carol  Lefko  v. Film and Music Entertainment, Inc.,  Celebration
Pictures,  Inc., John Daly and Peter Beale, Los Angeles  Superior
Court, Case No. BC318753.



                                  F-8

<PAGE>



         FILM AND MUSIC ENTERTAINMENT, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              (UNAUDITED)

This  is  a  complaint  for breach of an alleged  oral  agreement
commenced  July 20, 2004 between the plaintiff and the defendants
whereby  the plaintiff would provide services as casting director
of  a  film  to  be  called  "Host" and produced  by  Celebration
Productions, Inc. which was added as a party to this  lawsuit  by
amendment  in  February  2005. The  plaintiff  alleges  that  she
performed  the services but was not paid and is owed $12,000  for
breach  of  contract  plus  $60,000  for  "waiting  time."    The
defendants have answered denying any liability, that no  contract
existed  and  that no services could have been  rendered  to  the
Company  since  the  film  never went into  pre-production.   The
Company  is  informed  and believes that Kevin  Lewis  and  Peter
Beale,  in their individual capacity, were to be co-producers  of
the  film "Host."  Mr. Lewis was also to be the director  of  the
film  and  that any agreement with plaintiff is between plaintiff
and  Mr.  Lewis.   The Company maintains that no contract  exists
between  Ms. Lefko and either FAME or Celebration or  both.   The
Company maintains that Ms. Lefko has never been employed  by  any
of  these  entities,  as indicated by Company  records  and  that
neither the Company nor Celebration Pictures, Inc. ever hired any
casting director.

All  the Defendants except Beale filed their general denial  with
affirmative  defenses  on  September 1,  2004.   Film  And  Music
responded  to  plaintiff's first set of written  discovery.   The
trial took place on July 13 and 14, 2005 and the court denied any
liability  on  the part of the defendants to the  plaintiff.  The
Company does not expect Ms. Lefko to appeal.


Sunset  Towers  Partnership v. First Miracle Group.  Los  Angeles
Superior  Court, Case No. SC072450.

This  is  a  motion  to  amend a judgment entered  against  First
Miracle Group by its former landlord in the amount of $300,000 to
include   Celebration  Productions,  Inc.  and  Film  and   Music
Entertainment,  Inc.  Sunset Towers is claiming that  Celebration
and  the  Company are in fact successors in interest  of  Miracle
Entertainment, Inc. and are therefore liable for the judgment.

The  Company  and  Celebration have filed an  opposition  to  the
motion denying any theory that the Company and/or Celebration are
successors-in-interest  of  First Miracle  Group  and/or  Miracle
Entertainment,  Inc.  in as much as only a portion  of  Miracle's
assets were acquired by the Company and fair consideration in the
amount  of  $3,000,000 worth of the Company's  stock;   that  the
Company  and  Miracle  are  separate,  distinct  publicly  traded
companies,  with  separate  shareholders,  boards,  officers  and
businesses  with the single exception that Mr. Daly  was  at  the
time of acquisition a Board member and officer of both companies;
that  neither  the Company or Celebration had the opportunity  to
defend  the litigation from which the judgment derived; and  that
neither  the  Company  nor  Celebration  expressly  assumed   the
liability of Miracles obligation under the judgment.

The  motion  was heard on May 17, 2005 and the Court  denied  the
plaintiff's  motion,  finding  on  the  evidence  presented  that
Miracle Entertainment did not transfer all of its assets  to  the
Company and that the Company was not the successor-in-interest of
Miracle. On July 8, 2005 Sunset Towers filed a motion to  appeal.
The  Company has no reason to believe an appeal will overturn the
earlier findings in its favor.


Note 8 - Subsequent Events
--------------------------

The Company executed a Letter of Intent in January 2006 with 100%
Entertainment  and  Red Hot Entertainment to produce  low  budget
Science  Fiction films in High Definition. The Letter  calls  for
the  Company  to  arrange 50% of the budget of the  features  for
which  the  Company  shall receive distribution  fees  world-wide
along  with  50%  of the profits. The Company shall  have  mutual
script  and  cast approval and in addition to the first  feature,
the  Company has the option to co-produce an additional 10  films
over four years.



                                  F-9

<PAGE>



         FILM AND MUSIC ENTERTAINMENT, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              (UNAUDITED)

On  December  15, 2005 the Company foreclosed on the security  of
2,500,000 shares of the Company's common stock held as collateral
against  the  balance of the note of $25,000. As of the  December
15,  2005 the market value of the foreclosed upon shares  of  the
Company's stock exceeded the remaining carrying value of the note
of  $25,000 by $275,000. Therefore, Company recognized a gain  in
this amount.

On  November 23, 2005, the Company issued 2,450,000 share of  its
common  stock  for the exercise of stock options.   The  exercise
price was paid by reducing accrued expenses by $1,225.



                                  F-10

<PAGE>



Item 2. Management's Discussion and Analysis or Plan of Operations

General

The  following discussion of our financial condition and  results
of  operations should be read in conjunction with (1) our interim
unaudited consolidated financial statements for the nine months
ended  September  30, 2005 and 2004 and their  explanatory  notes
included as part of this Form 10-QSB, and (2) our annual  audited
consolidated financial statements and explanatory notes  for  the
years ended
December 31, 2004 and 2003 included on Form 10-SB filed with  the
Securities and Exchange Commission on August 4, 2005.

Overview

Film  and  Music Entertainment, Inc. is a holding company  which,
through   its   subsidiaries,  develops,  produces,   sells   and
distributes films and associated entertainment.

Our   wholly-owned  Celebration  Productions,  Inc.   subsidiary,
provides    comprehensive   production   services   for    filmed
entertainment.   Celebration Productions has provided  production
service relating to the development of the film "The Harder  They
Fall"  and "The Disappeared" and production supervisory  services
to  the films "Played" and "Moonpie".  Revenue is recognized from
productions as earned and such revenue will usually be  partially
from  specific contractual fees and from contingent  compensation
paid   as  profits  are  earned.   Our  wholly-owned  Celebration
Pictures, Inc. provides sales and distribution services for North
America for our and third party productions. In 2005, Celebration
Pictures  has  been provided these services on  two  films,  "The
Aryan  Couple"  and "Waking Up Dead". Revenues are recognized  in
accordance  with  AICPA  SOP 00-2. Our  wholly-owned  subsidiary,
Celebration International Pictures, Ltd (BVI), provides sales and
distribution  services for the rest of the world excluding  North
America  for our and third party productions. The Company  ceased
its  sales  and  distribution efforts in "Waking Up  Dead  as  of
October  13, 2005 and has retained a lien against future earnings
of  the  film for all money spent in the marketing of  the  film.
The  Company also has two non-operating subsidiaries, East Mojave
Corporation and Myrob Properties, Inc., in which are held certain
real estate assets of the company.


Critical Accounting Policies and Estimates

Our  discussion  and  analysis  of our  financial  condition  and
results  of  operations are based upon our condensed consolidated
financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States  of
America.   The   preparation  of  these  consolidated   financial
statements  requires  us  to make estimates  and  judgments  that
affect the reported amounts of assets, liabilities, revenues  and
expenses,  and  related  disclosures  of  contingent  assets  and
liabilities.

On  an  ongoing basis, we evaluate our estimates, including those
related  to  impairment of production costs,  estimates  of  film
revenue,  any potential losses from pending litigation.  We  base
our  estimates  on  historical experience and  on  various  other
assumptions   that  we  believe  to  be  reasonable   under   the
circumstances,  the results of which form the  basis  for  making
judgments about the carrying value of assets and liabilities that
are  not readily apparent from other sources. Actual results  may
differ  from  these  estimates  under  different  assumptions  or
conditions;  however,  we believe that our  estimates,  including
those for the above-described items, are reasonable.



                                  11
<PAGE>



We  capitalize films in development as capitalized film costs  in
accordance  with AICPA SOP 00-2. These costs are  transferred  to
film  inventories  at the point that the film  is  scheduled  for
production.  On  a  quarterly  basis  we  review  each  film   in
development and/or production as to whether the capitalized costs
are in excess of their fair market value, and if so, we write off
the  excess  and  reflect the write-off in costs of  revenue.  If
after  three  years in development a film has not been  scheduled
for  production it is written off and reflected in the  costs  of
revenue.

Under  SOP  00-2 the costs of the film, including the capitalized
costs,  contingent compensation and residual costs (if  any)  are
amortized and included in costs of revenue in the proportion  the
revenue for that period for the film bears to the estimated total
revenue  from  all markets and territories under the  individual-
film-forecast-computation  method.  We   review   are   estimates
quarterly  and  they are revised if necessary.  A  revision  will
result   in  an  increase  or  decrease  to  the  percentage   of
amortization of the capitalized film costs relative to a previous
period.  Should the revision result in estimated revenues proving
insufficient  to  cover the unamortized film costs  remaining  on
that film, the difference will be written down to the fair market
value based upon its then net present value.


Results of Operations

Nine  Months  Ended September 30, 2005 Compared to September  30,
2004.

We  have  received minimum revenue from operations to  date.   We
believe  that  the main sources of our revenue will  be  revenues
from  domestic and foreign theatrical distribution, DVD and  home
video,  pay-per-view, pay cable and basic cable distribution  and
free  broadcast television. We have begun to receive income  from
foreign  sales of the movie "The Aryan Couple" under our contract
with  AV  Pictures Ltd. We anticipate this income  will  continue
through  next  year. The film has generated a minimal  amount  of
theatrical income in the US from festival showings in  the  first
half  of  2005.  Management  expects income  from  US  theatrical
revenues to increase substantially in the fourth quarter of  this
year as the film moves from festival showings to a wider release.
Management also anticipates revenues to commence from "Waking  Up
Dead" in the fourth quarter of 2005.

Revenues:   Revenue  for  the  nine-month  interim  period  ended
September  30,  2005  was $162,024, as compared  to  $0  for  the
corresponding interim period in fiscal 2004.

Our  revenues for the nine-months interim period ended  September
30, 2005 were principally derived from the screening of The Aryan
Couple,   production   services  rendered  by   our   Celebration
Productions  subsidiary  and the proceeds  of  the  sale  of  the
distribution rights to the film "Tournament of Dreams".

We  had no revenues for the nine months ended September 30,  2004
as  the  Company was in the process of solidifying contracts  for
productions.

Operating Expenses and loss from operations:  Operating  Expenses
and  loss  from  operations  for  the  nine-month  interim  ended
September  30, 2005 were $975,236 and $813,212, respectively,  as
compared  to $624,830 and $624,830 for the corresponding  interim
period in fiscal 2004.

The  decrease in production costs relates to the write-off  of  a
production  in of 2004. The increase in advertising cost  relates
to  the  increased  advertising for The Aryan Couple  during  the
first  nine-months  of  2005.  The increase  of  in  compensation
expense  is  mainly attributable to payments for the services  of
John Daly, which were $0 for the period in 2004. The increase  in
general  and  administrative expense  relates  primarily  to  the
increased costs relating to compliance and legal expense relating
in the court cases in which the company was involved.



                                  12
<PAGE>



Other Income(Expense):  Other Income(Expense) for the nine-months
ended   September  30,  2005   was  $367,494  as  compared   with
$23,170for  the  nine-months  ended  September  30,  2004.   This
increase was entirely due to a gain of $208,500 realized  on  the
disposition  of  real  estate  to a  stockholder  in  return  for
15,750,000  shares of the Company's common stock  and  net  gains
(realized  and unrealized) on our marketable securities portfolio
of $82,685.

Three  Months  Ended September 30, 2005 Compared to September 30,
2004.

Revenues:   Revenue  for  the  three-month  interim  period ended
September  30,  2005  was $0 as compared  to  $0  for  the
corresponding interim period in fiscal 2004.

Operating Expenses and loss from operations:  Operating  Expenses
and  loss  from  operations  for  the  three-month  interim ended
September  30, 2005 were $354,366 and $354,366, respectively,  as
compared  to $245,168 and $245,168 for the corresponding  interim
period in fiscal 2004.

The  decrease in production costs relates to the write-off  of  a
production  in of 2004. The increase in advertising cost  relates
to  the  increased  advertising for The Aryan Couple  during  the
first   three-months   of  2005.  The increase  in   general  and
administrative expense relates primarily to  the  increased costs
relating  to  compliance  and legal expense relating in the court
cases in which the company was involved.

Other Income(Expense):  Other Income(Expense) for the three-months
ended   September  30,  2005   was  $149,226  as  compared   with
$16,079 for  the  three-months  ended  September  30,  2004. This
increase was principally due to net gains realized and unrealized)
on our marketable securities portfolio of $133,306.


Three  Months  Ended September 30, 2005 Compared to September 30,
2004.

Revenues:   Revenue  for  the  three-month  interim  period ended
September  30,  2005  was $0 as compared  to  $0  for  the
corresponding interim period in fiscal 2004.

Operating Expenses and loss from operations:  Operating  Expenses
and  loss  from  operations  for  the  three-month  interim ended
September  30, 2005 were $354,366 and $354,366, respectively,  as
compared  to $245,168 and $245,168 for the corresponding  interim
period in fiscal 2004.

The  decrease in production costs relates to the write-off  of  a
production  in of 2004. The increase in advertising cost  relates
to  the  increased  advertising for The Aryan Couple  during  the
first  three-months  of  2005.  The increase  in general  and
administrative expense  relates  primarily  to  the increased costs
relating to compliance and legal expense relating in the court cases
in which the company was involved.


Liquidity and Capital Resources

Historical  Sources  of  Cash:  For the period  January  1,  2005
through September 30, 2005 we principally financed our operations
through cash on hand derived from the sale of common shares for
cash amounting $5,000,000 in April 2004.

Cash  Position and Sources and Uses Of Cash:  Our cash  and  cash
equivalents  position as of September 30, 2005  was  $502,474  as
compared  to $3,179,658 as of December 31, 2004. The decrease  in
our  cash and cash equivalents for the nine-month interim  period
ended September 30, 2005 was attributable to the net increase  in
equity  securities of $1,035,224 resulting from the purchase  and
sale of $2,895,862 and $1,860,638, respectively.

Our  operating  activities used cash in the amount of  $2,624,504
for  the  nine-month interim period ended September 30, 2005,  as
compared  to  $439,916 for the corresponding  interim  period  in
fiscal 2004.  The $2,624,504 in cash used in operating activities
for  the  nine-month  interim period  ended  September  30,  2005
reflected  our net loss of $445,718 for that period,  adjustments
for  non-cash deductions, such as depreciation, unrealized  gains
and  losses on equity securities and gain on the disposal of real
estate  and  foreclosure of a note receivable.  In  addition,  we
purchased (net) $1,035,224 in equity securities which is a use of
cash  from  operations and changes in other operating assets  and
liabilities resulted in use of cash of $748,590.  The $439,916 of
cash  used  in  operating activities for the  nine-month  interim
period  ended  September  30, 2004  reflected  our  net  loss  of
$601,660  for  that  period and increased  by  changes  in  other
operating assets and liabilities.

Capital  Resources Going Forward:  We have approximately $502,000
of  cash  on hand as of September 30, 2005 to fund our operations
going  forward.   The  Company also  has  on  hand  approximately
$1,841,000 of marketable equity securities as of this date  which
the  Company  is  holding as reserves for future operations.  Our
plan  of operation for the twelve month period following the date
of  this quarterly report is for the Company and its subsidiaries
to  continue  to  develop, produce, sell  and  distribute  motion
pictures.  The Company primarily uses third party investor  funds
for  such  activities; however the Company  may  provide  limited
funds for such activities where Management deems it prudent.   We
currently have budgeted approximately $1,100,000 in costs for the
twelve  month period following the date of this report, including
approximately  $200,000, in costs relating  to  the  development,
production,  sales  and  distribution of films  and  $900,000  in
general,  sales and marketing expenses.  The Company attempts  to
cash flow most costs relating to film production and distribution
from  third party direct investments.  Occasionally, the  Company
may  front certain costs to expedite a project to achieve certain
goals. The Company attempts to structure any such expenditure  so
that  they are recouped from any further funding in the  specific
project. If no such further finding occurs the Company may not be
able  to  recoup  these expenditures. To date,  the  Company  has
limited such expenditures as to be non-material.

Our  assets  are  reasonably liquid with a  substantial  majority
consisting   of   cash  and  cash  equivalents,  and   investment
securities.  Both  our  total assets as well  as  the  individual
components as a percentage of total assets may vary significantly
from  period to period because of changes relating to  production
and  distribution  schedules, sales  revenues,  customer  demand,



                                 13
<PAGE>



seasonal, economic and market conditions. Our total net assets at
September  30,  2005 were $3,587,683 compared  to  $4,746,712  at
December  31, 2004. The Company intends to increase employees  by
two in the first quarter of 2006; however, these additions should
not  substantially change its overhead structure. The only  other
current  plans  affecting overhead would be the costs  associated
with the addition of independent directors to the Board and D & O
Insurance  and  an  anticipated reduction in headquarters'  lease
expense  as  we intend to lease smaller premises at a lower  rate
when  the  current  lease  ends on March  1,  2006.   With  these
additional  expenses,  the Company would  still  have  sufficient
cash, cash equivalents and liquidateable investment securities to
cover operating expenses for the next 24 months.

We  believe that cash generated by operations in conjunction with
our  available working capital will be sufficient to continue our
business for the next twelve months. We believe that our  capital
structure  is adequate for our current operations. We continually
review  our overall capital and funding needs to ensure that  our
capital  base  can support the estimated needs of  the  business.
These reviews take into account current business needs as well as
the  Company's  future  capital requirements.  Based  upon  these
reviews,  to  take advantage of strong market conditions  and  to
fully  implement our expansion strategy, we believe that  we  may
continue  to increase our net capital by the proceeds of  private
sales of our securities. For more information on  the  cash flows
of the Company, please see the  statement  of cash flows included
in the Company's  financial statements appearing elsewhere herein.

Should  our  costs  and  expenses prove to  be  greater  than  we
currently  anticipate, or should we change our  current  business
plan in a manner that will increase or accelerate our anticipated
costs  and  expenses,  such  as through  an  acquisition  of  new
products,  the  depletion  of  our  working  capital   would   be
accelerated.   To  the  extent  it  become  necessary  to   raise
additional  cash  in the future as our current cash  and  working
capital  resources are depleted, we will seek to raise it through
the sale of the equity securities owned by the Company, public or
private  sale  of debt or equity securities, the  procurement  of
advances on contracts or licenses, funding from joint-venture  or
strategic  partners,  debt financing or short-term  loans,  or  a
combination  of  the  foregoing.  We may  also  seek  to  satisfy
indebtedness without any cash outlay through the private issuance
of  debt  or  equity securities.  We currently do  not  have  any
binding  commitments  for,  or  readily  available  sources   of,
additional financing.  We cannot give you any assurance  that  we
will be able to secure the additional cash or working capital  we
may require to continue our operations in such circumstances.

Our  anticipated costs described above are estimates  based  upon
our   current  business  plan.   Our  actual  costs  could   vary
materially  from those estimated.  Further, we could also  change
our   current  business  plan  resulting  in  a  change  in   our
anticipated costs.  See the discussion concerning forward-looking
statements.

To  date  we  have  financed our operations through  the  private
placement  of  equity securities. On May 4, 2004 we  completed  a
private placement of 50,000,000 shares of our Common Stock for  a
total  consideration  of $5,000,000. We  have  not  employed  any
significant leverage or debt.

The  Company  has no plans to purchase any assets at  this  time.
However, the Company constantly reviews industry opportunities to
acquire income producing assets for possible acquisition.



                                  14
<PAGE>



Off-Balance Sheet Arrangements

There  are  no guarantees, commitments, lease and debt agreements
or  other  agreements that could trigger adverse  change  in  our
credit  rating,  earnings, cash flows or stock  price,  including
requirements to perform under standby agreements.


Subsequent Events
-----------------

We  executed  a  Letter  of  Intent in  January  2006  with  100%
Entertainment  and  Red Hot Entertainment to produce  low  budget
Science Fiction films in High Definition. The Letter calls for us
to  arrange  50%  of  the budget of the features  for  which  the
Company shall receive distribution fees world-wide along with 50%
of the profits. We shall have mutual script and cast approval and
in  addition  to  the first feature, we have the  option  to  co-
produce an additional 10 films over four years.

On  December 15, 2005 we foreclosed on the security of  2,500,000
shares of our common stock held as collateral against the balance
of  the  note of $25,000. As of the December 15, 2005 the  market
value  of  the  foreclosed upon shares of our stock exceeded  the
remaining  carrying  value of the note of  $25,000  by  $275,000.
Therefore, we recognized a gain in this amount.

On November 23, 2005, the we issued 2,450,000 share of our common
stock for the exercise of stock options.  The exercise price  was
paid by reducing accrued expenses by $1,225.



FORWARD-LOOKING STATEMENTS

Certain  statements in this Quarterly Report on Form  10-QSB,  as
well  as  statements  made  by  the  company  in  periodic  press
releases,  oral  statements made by the  company's  officials  to
analysts  and  shareholders in the course of presentations  about
the   company,   constitute  "forward-looking  statements."   All
statements other than statements of historical facts included  or
incorporated  by  reference  in this report,  including,  without
limitation,  statements regarding our future financial  position,
business  strategy,  budgets,  projected  costs  and  plans   and
objectives  of  management  for future operations,  are  forward-
looking   statements.  In  addition,  forward-looking  statements
generally  can  be  identified  by  the  use  of  forward-looking
terminology such as "may," "will," "expect," "intend," "project,"
"estimate,"  "anticipate,"  "believe,"  or  "continue"   or   the
negative  thereof  or variations thereon or similar  terminology.
Although  we  believe  that the expectations  reflected  in  such
forward-looking  statements are reasonable, we  cannot  give  any
assurance that such expectations will prove to have been correct.
Important  factors  that  could cause actual  results  to  differ
materially from our expectations. All subsequent written and oral
forward-looking statements attributable to us, or persons  acting
on  our behalf, are expressly qualified in their entirety by  the
cautionary statements. We assume no duty to update or revise  our
forward-looking statements based on changes in internal estimates
or expectations or otherwise.


Item 3. Controls and Procedures

As  required by SEC rules, we have evaluated the effectiveness of
the   design  and  operation  of  our  disclosure  controls   and
procedures at the end of the period covered by this report.  This
evaluation  was carried out under the supervision  and  with  the
participation   of  our  management,  including   our   principal
executive officer and principal financial officer.  Based on this
evaluation,  these officers have concluded that  the  design  and
operation   of   our  disclosure  controls  and  procedures   are
effective.  There  were no changes in our internal  control  over



                                  15
<PAGE>



financial  reporting  or in other factors  that  have  materially
affected,  or  are  reasonably likely to materially  affect,  our
internal control over financial reporting.

Disclosure  controls and procedures are our  controls  and  other
procedures that are designed to ensure that information  required
to be disclosed by us in the reports that we file or submit under
the Exchange Act is recorded, processed, summarized and reported,
within  the time periods specified in the SEC's rules and  forms.
Disclosure  controls and procedures include, without  limitation,
controls  and  procedures  designed to  ensure  that  information
required to be disclosed by us in the reports that we file  under
the   Exchange  Act  is  accumulated  and  communicated  to   our
management,  including principal executive officer and  principal
financial  officer,  as  appropriate, to allow  timely  decisions
regarding required disclosure.



Part II.  OTHER INFORMATION

Item 1.   Legal Proceedings

Miracle   Entertainment,  Inc.  et.  al  v.  Filmstar   Releasing
Corporation  et.  al.,  Los  Angeles  Superior  Court,  Case  No.
BC302233:

This  is  a complaint for unlawful conversion, breach of contract
and fraud, commenced in September, 2003 by Miracle Entertainment,
Inc.,  a company of which John Daly was Chairman, against a  firm
and  several individuals who had previously contracted  to  raise
funds  for  productions  sponsored by Miracle  Entertainment.   A
counter-claim was filed by the defendants in March, 2004,  adding
the Company as a defendant.

On  May  2,  2005 a confidential Settlement Agreement and  Mutual
Release  was executed between the Company and remaining litigants
on  terms acceptable to all the parties resulting in no liability
and complete release of claims against the company.


Carol  Lefko  v. Film and Music Entertainment, Inc.,  Celebration
Pictures,  Inc., John Daly and Peter Beale, Los Angeles  Superior
Court, Case No. BC318753.

This  is  a  complaint  for breach of an alleged  oral  agreement
commenced  July 20, 2004 between the plaintiff and the defendants
whereby  the plaintiff would provide services as casting director
of  a  film  to  be  called  "Host" and produced  by  Celebration
Productions, Inc. which was added as a party to this  lawsuit  by
amendment  in  February  2005. The  plaintiff  alleges  that  she
performed  the services but was not paid and is owed $12,000  for
breach  of  contract  plus  $60,000  for  "waiting  time."    The
defendants have answered denying any liability, that no  contract
existed  and  that no services could have been  rendered  to  the
Company  since  the  film  never went into  pre-production.   The
Company  is  informed  and believes that Kevin  Lewis  and  Peter
Beale,  in their individual capacity, were to be co-producers  of
the  film "Host."  Mr. Lewis was also to be the director  of  the
film  and  that any agreement with plaintiff is between plaintiff
and  Mr.  Lewis.   The Company maintains that no contract  exists
between  Ms. Lefko and either FAME or Celebration or  both.   The
Company maintains that Ms. Lefko has never been employed  by  any
of  these  entities,  as indicated by Company  records  and  that
neither the Company nor Celebration Pictures, Inc. ever hired any
casting director.

All  the Defendants except Beale filed their general denial  with
affirmative  defenses  on  September 1,  2004.   Film  And  Music
responded  to  plaintiff's first set of written  discovery.   The
trial took place on July 13 and 14, 2005 and the court denied any



                                  16
<PAGE>



liability  on  the part of the defendants to the  plaintiff.  The
Company does not expect Ms. Lefko to appeal.


Sunset  Towers  Partnership v. First Miracle Group.  Los  Angeles
Superior  Court, Case No. SC072450.

This  is  a  motion  to  amend a judgment entered  against  First
Miracle Group by its former landlord in the amount of $300,000 to
include   Celebration  Productions,  Inc.  and  Film  and   Music
Entertainment,  Inc.  Sunset Towers is claiming that  Celebration
and  the  Company are in fact successors in interest  of  Miracle
Entertainment, Inc. and are therefore liable for the judgment.

The  Company  and  Celebration have filed an  opposition  to  the
motion denying any theory that the Company and/or Celebration are
successors-in-interest  of  First Miracle  Group  and/or  Miracle
Entertainment,  Inc.  in as much as only a portion  of  Miracle's
assets were acquired by the Company and fair consideration in the
amount  of  $3,000,000 worth of the Company's  stock;   that  the
Company  and  Miracle  are  separate,  distinct  publicly  traded
companies,  with  separate  shareholders,  boards,  officers  and
businesses  with the single exception that Mr. Daly  was  at  the
time of acquisition a Board member and officer of both companies;
that  neither  the Company or Celebration had the opportunity  to
defend  the litigation from which the judgment derived; and  that
neither  the  Company  nor  Celebration  expressly  assumed   the
liability of Miracles obligation under the judgment.

The  motion  was heard on May 17, 2005 and the Court  denied  the
plaintiff's  motion,  finding  on  the  evidence  presented  that
Miracle Entertainment did not transfer all of its assets  to  the
Company and that the Company was not the successor-in-interest of
Miracle. On July 8, 2005 Sunset Towers filed a motion to  appeal.
The  Company has no reason to believe an appeal will overturn the
earlier findings in its favor.



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None.

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

Not applicable

Item 5. Other Information

Not applicable

Item 6. Exhibits

(a)  Exhibits

---------------------------------------------------------------------
Regulation
S-B Number   Exhibit
---------------------------------------------------------------------
31.1   Rule 13a-14(a) Certification of Chief Executive Officer
---------------------------------------------------------------------
31.2   Rule 13a-14(a) Certification of Chief Financial Officer
---------------------------------------------------------------------
32.1   Certification Pursuant to 18 U.S.C. Section  1350,  as
       Adopted  Pursuant  to  Section 906 of the Sarbanes-Oxley
       Act  of 2002
---------------------------------------------------------------------


                                  17
<PAGE>



                              SIGNATURES

In  accordance  with the requirements of the  Exchange  Act,  the
registrant caused this report to be signed on its behalf  by  the
undersigned, thereunto duly authorized.


                              FILM AND MUSIC ENTERTAINMENT, INC.



January 23, 2006              By:  /s/ John Daly
                                 ----------------------------
                                 John Daly
                                 Chairman, President and CEO



January 23, 2006              By:  /s/ Lawrence S. Lotman
                                 ----------------------------
                                 Lawrence S. Lotman
                                 Chief Financial Officer



                                  18
<PAGE>