SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-KSB
                   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                     FOR THE FISCAL YEAR ENDED JUNE 30, 2003
                           COMMISSION FILE NO. 033-73276


                               Skyline Multimedia
                               Entertainment, Inc.
                 (Name of Small Business Issuer in Its Charter)

           New York                                   11-3182335
     -------------------------------     ---------------------------------------
     (State or Other Jurisdiction of     (I.R.S. Employer Identification Number)
      Incorporation or Organization)

      350 Fifth Avenue, New York, New York                     10118
   -----------------------------------------------------    -----------
    (Address of principal executive offices)                (Zip Code)

                                 (212) 564-2224
                 ----------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

    SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE EXCHANGE ACT: NONE

      SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT :

                     Common Stock, $.001 Par Value Per Share

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

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

Our revenues for our most recent fiscal year were $6,361,000.

The aggregate market value of the voting stock held by non-affiliates of Skyline
was $39,219 as of October 1, 2003, based on the average bid and asked price of
$.03 per share as of that date.

There were 2,095,000 shares of common stock, $.001 par value per share, issued
as of June 30, 2003. Additionally, there were 1,090,909 shares of Series A
Convertible Participating Preferred Stock, $.001 par value per share, issued and
outstanding, and 960,000 shares of class A common stock, $.001 par value, issued
as of June 30, 2003.
<PAGE>
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS.

GENERAL

Skyline Multimedia Entertainment, Inc. (the "Company") is a holding company
incorporated under the laws of the State of New York on November 2, 1993, which
owns all of the outstanding stock of its operating subsidiary, New York Skyline,
Inc. ("Skyline").We operate the New York Skyride, a state-of- the-art simulator
attraction located in the Empire State Building New York City, New York.

On December 22, 1994, we commenced operations of New York Skyride. New York
Skyride is an exhilarating simulated "aerial tour" of New York City in a
futuristic "spacecopter". New York Skyride features two 40 passenger flight
simulators and related computer-controlled projection technologies to provide
visitors with a complete "New York" experience, including an extensive pre-show
area featuring interactive multimedia exhibits depicting the various tourist
sites and attractions in and around the New York Metropolitan area, and
culminating in a ten minute aerial "adventure" in and around New York City.
Passengers not only experience the sensations of an actual aerial flight, but
also experience visual images projected on screens within the simulator that
envelop the viewer with a variety of sights and sounds. New York Skyride is
intended to provide visitors with a sensation of taking a "once in a lifetime"
aerial adventure around New York City.

Our revenues have been generated primarily from ticket sales for New York
Skyride with additional revenues generated from the sale of souvenir merchandise
and profit-sharing arrangements from the sale of tickets to other attractions.
We are also seeking to enter into corporate sponsorship and advertising
arrangements with certain consumer product companies to provide additional
revenues and marketing exposure.

Our principal executive office is located at the Empire State Building, 350
Fifth Avenue, New York, New York 10118 and our telephone number is (212)
564-2224.

THE NEW YORK SKYRIDE EXPERIENCE

New York Skyride is an adventure that captures and builds upon the New York City
tourist experience. We believe that New York Skyride enhances a visit to the
Empire State Building and to New York City by providing an exciting, bird's-eye
view of the landmarks and sites that cannot be seen from any other vantage
point.

Visitors to New York Skyride are treated as first-class passengers on a
futuristic helicopter flight around New York City. Upon entering, guests are
directed to the pre-show heliport area (approximately 7,500 sq. ft.) where they
are introduced to multimedia displays designed and installed by certain of our
prior sponsors. These displays depict major New York City tourist attractions as
well as provide informational and entertaining film clips. The exhibits provide
the visitor with their first feeling of participation in the New York Skyride
experience.

Following a preflight briefing about "spacecopter" travel passengers enter into
one of two spacecopters , which are 40 passenger computer-controlled flight
simulators. At the front of each simulator is a large 18' x 18' screen upon
which New York Skyride's super 35mm film is presented. The simulator also
contains an advanced 8-channel digital sound system, with 4 dual amplifiers, 400
watts per channel each (or 3,200 watts of total sound), to provide passengers
with an enhanced audio/visual experience.

Once the passengers are seated in the spacecopter, they begin a ten minute
simulated flight that treats them to a spectacular array of New York City
tourist attractions, scenes and adventures. For example, the spacecopter crashes
into FAO Schwarz, the world's largest toy store, passes directly under the
Brooklyn Bridge, "dives" into a tunnel, crashes into the East River and has a
run-in with a New York City traffic cop, among other exciting adventures. The
spacecopter also visits many of New York City's other tourist attractions. Since
New York Skyride is intended to be a family-oriented attraction, the film makes
the Empire State Building the focal point of the attraction, with a liftoff and
landing taking place from atop the Empire State Building, to appeal to the
broadest audience and not just the most adventurous thrill-seekers.

Once the spacecopter flight is complete, passengers exit the simulators and
proceed directly to a beverage, food and souvenir concession area. Passengers
are able to purchase souvenirs of their visit to New York Skyride.

                                       2
<PAGE>
SIMULATOR AND VIRTUAL REALITY TECHNOLOGIES

Our motion simulator attractions utilize computer-controlled aircraft flight
simulators. Simex, Inc. (formerly Interactive Simulation, Inc.), a Canadian
company experienced in simulation technology, provided the sophisticated
computer hardware and software that coordinates the movements of the simulator
platform with the images projected on the screen. The range of motion for the
simulators is along four axes (that is, the simulators can create up and down
motions, angled motions to simulate turning or banking while climbing or
descending at varying degrees and a spin motion, or some combination of the
above). The movable platforms on which

the simulators rest and which move in synchronization with the film were
developed by Moog, Inc., a large defense contractor experienced in the
adaptation of flight simulator technology to the entertainment market.

A key component of the simulator technology is the "show control system", which
is a PC-based computer program that coordinates and manages the motion and
gyration of the simulator with the digital video and audio elements of the
program. For example, when the digital image shows the spacecopter banking to
the right, there must be a precise, coordinated movement of the simulator in
that direction to both convince the passengers' senses that they are flying in a
spacecopter and prevent passenger disorientation. The projection equipment is a
fully automated digitalized system that eliminates the need for a projector
operator. The digital video was developed in conjunction with Live From Earth
Entertainment, Inc., a production studio with extensive experience in digital
video concepts.

                                       3
<PAGE>
THE EMPIRE STATE BUILDING LOCATION

New York Skyride is located on the second and third floors of the Empire State
Building, in a 21,800 square foot site that wraps around the south and west
sides of the building. The location's entrance is situated adjacent to the main
lobby escalator that takes all visitors to the waiting area for the Observatory
elevators. Signs in the Empire State Building's lobby and in the Observatory
ticket purchase area inform visitors to the Empire State Building about New York
Skyride. Most importantly, visitors who purchase tickets to the Observatory are
offered the choice of purchasing a combined Observatory/New York Skyride ticket
at a reduced price, as compared with the separate purchase of tickets to both
attractions. The cost of individual tickets to New York Skyride and the
Observatory are $14.50 and $10.00 for adults, respectively, and $12.50 and $7.00
for children under the age of 12, respectively. In comparison, the cost of a
combined ticket with the Observatory is $20.00 for adults and $12.00 for
children under the age of 12. Any discount resulting from combined ticket sales
are deducted from the admission price of a New York Skyride ticket. Children's
rates, group rates and senior discounts are also offered along with other
promotional discounts.

The Empire State Building is a focal point for the tourism industry in New York
City. The Observatory, which opened in 1934 and is located on the 86th floor,
has achieved worldwide recognition and publicity, and is a primary destination
for a large percentage of New York City's tourist traffic. Estimated paid
attendance figures provided by management of the Empire State Building for the
last five years for the Observatory are summarized below.

                        EMPIRE STATE BUILDING OBSERVATORY
                         ADMISSION TICKET SALES (1000'S)



         YEAR                       1998     1999     2000    2001     2002
                                    -----    -----    -----   -----    -----

TOTAL ATTENDANCE                    3,614    3,675    3,397   2,937   3,322



For the year ended June 30, 2003, our capture rate of Observatory visitorship
averaged approximately 17.59%, down from an average of approximately 18.49% for
the year ended June 30, 2002. We believe that the decrease in the capture rate
is a direct result of an decrease in international visitorship to the Empire
State Building observatory.

ADVERTISING AND PROMOTIONAL PLANS

New York Skyride's advertising and promotional support programs concentrate on
tourists to New York City, families with children in the Greater New York
metropolitan area, and youth groups from surrounding areas. We are also
continuing our efforts to attract attendees to the Empire State Building
Observatory by offering combined Observatory and Skyride admission tickets. In
addition, we co-market with other New York City tourist companies, including
Circle Line and Gray Line.

In addition, we continue to promote New York Skyride to tourist boards, travel
agents, managers of group activities and visitors to New York City. Special
volume discounts, travel agent packages, and other special programs are offered
to target group audiences, especially during the slower tourist periods in the
fall and winter months.

                                       4
<PAGE>
CORPORATE SPONSORS

Historically, we have solicited and maintained several corporate sponsorships
from consumer product companies. We currently have no such sponsorship
agreements. We are currently seeking new corporate sponsorships that will result
in greater market awareness and acceptance through the association of New York
Skyride with their products. There can be no assurance that we will be able to
successfully enter into new sponsorship agreements.

LICENSE AGREEMENTS

On February 26, 1993, we, through our wholly-owned subsidiary, New York Skyline,
Inc., entered into an exclusive license agreement (the "License Agreement") with
the Empire State Building Company ("ESBCo"), the operator of the Empire State
Building in New York City. The License Agreement provides for the joint sale of
tickets to the Observatory and New York Skyride so long as we make payments at
the following annual rates:

         (i)    $200,000 from April 1, 2002 through March 31, 2006;
         (ii)   $225,000 from April 1, 2006 through April 30, 2013; and
         (iii)  $186,000 from May 1, 2013 through June 30, 2016.

The License Agreement also requires us to reimburse certain costs and expenses
relating to the joint ticket sales and contains cross-default provisions in the
event of a default under the Lease. The term of the License agreement has been
extended from its original 20-year term to a term lasting through June 30, 2016,
which coincides with a new lease for space adjacent to the New York Skyride
location. For a description of the Lease, see "Item 2. Description of Property."

In December 1999, ESBCo and Skyline executed a Second Modification of License
Agreement ("SMLA"). This latest Amendment provides for a contingent license fee,
in addition to the flat annual fee noted above, in the event that the capture
rate at ESBCo's ticket window (number of Skyride tickets sold by ESBCo as a
percentage of Observatory tickets sold by ESBC) exceeds 10.5%. This provision
was added to the SMLA as an incentive for ESBCo to devote greater efforts to
promote the Skyride. Until the end of 1996, the capture rate at ESBCo's window
averaged approximately 15%. This rate was 8% in 2000, 7.9% in 2001, 8.94% in
2002 and 8.34% for the first nine months of 2003. The contingent license fee
ranges from an annual fee of $10,500 at 10.5% to $1,400,000 at 26%.

PATENTS AND TRADEMARKS

We do not hold any patents relating to New York Skyride or its related
technologies. Accordingly, our concept is not proprietary and is subject to
duplication and competition from entities with greater resources and strengths
than us. We have obtained a registered trademark for the name "New York
Skyride".

COMPETITION

New York Skyride competes with all other New York City tourist attractions and
cultural events such as museums, Broadway shows, shopping boutiques and cultural
and historic landmarks. While these attractions are quite different
"experiences" from New York Skyride's spacecopter trip (which we believe is the
first attraction of its type in New York City), they continue to present intense
competition for attendance and visitor dollars. Generally, these other
attractions are more established, and are owned and operated by entities that
have greater financial resources and managerial expertise than us.

In addition to competing with general New York City tourist attractions, New
York Skyride has direct competitors in the simulator markets. In September 1999,
ESPN Zone, a sports based entertainment attraction utilizing virtual reality and
simulator technologies, began operations in their Times Square location. There
can be no assurance that other virtual reality and simulator attractions will
not commence operations in the New York area in the future.

Insofar as motion simulation technologies, including show control systems (and
related projection and audio technologies), are subject to improvements and
enhancements, it is possible that competitive attractions will be able to offer
more technologically advanced "experiences" to customers than the experience
offered by New York Skyride. These attractions do not depend on motion
simulators for their special effects, and they are also likely to be developed
and operated by companies that have significantly greater financial, managerial
and promotional experience and resources than us. While these attractions may
not offer a directly competitive "product" to New York Skyride (i.e., an aerial
adventure in New York City), their presence will certainly create significant
competition for us to attract visitors to New York Skyride. We will compete with
these entities primarily on the basis of location, uniqueness of product,
marketing and price.

EMPLOYEES

As of September 26, 2003, we employed one management person and 19
non-management personnel on a full-time basis, and 52 non-management personnel
on a part-time basis.

                                       5
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY.

On March 7, 2001, we entered into a lease agreement for our office space with
the Empire State Building Company, to lease approximately 1,671 square feet on
the second floor of the Empire State Building for the period beginning March 1,
2001 through April 30, 2004 at an annual rate of $66,840, payable in equal
monthly installments.

In addition to the above office lease, we have a lease agreement for the
operating site of New York Skyride. This lease, which covers an aggregate of
approximately 21,800 square feet on the second and third floors of the Empire
State Building, is for a term of 20 years. This lease includes 4,000 square feet
that is used to accommodate the two large screens (18' X 18') on which the New
York Skyride film is shown. Our annual base rent under this lease is scheduled
in the following manner:


(i)  $545,100 from April 1, 2002 through March 31, 2006;
(ii) $610,502 from April 1, 2006 through March 31, 2009;
(iii) $654,120 from April 1, 2009 through April 30, 2013; and
(iv) $561,513 from May 1, 2013 through June 30, 2016.

The annual rent is payable monthly and subject to additional amounts for taxes
and utilities. We were not required to pay the first 21 months rent, which
benefit is being amortized over the term of the Lease.

We believe that our facility in the Empire State Building is adequate for our
current operations.

ITEM 3. LEGAL PROCEEDINGS

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.

None.

                                       6
<PAGE>
                                     PART II

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

                          PRICE RANGE OF COMMON EQUITY

Our common stock is currently traded on the Over The Counter Bulletin Board (the
"OTCBB"), under the symbol "SKYL".

The following table sets forth the high and low sales prices of our common stock
for the fiscal periods indicated as reported in the over-the-counter market. The
quotations shown represent inter-dealer prices without adjustment for retail
mark-ups, mark-downs or commissions, and may not necessarily reflect actual
transactions.



                                         Fiscal 2003             Fiscal 2002
                                         -----------             -----------

COMMON STOCK                           High       Low           High      Low
------------                           ----       ---           ----      ---

1st Quarter......................      .03        .02           .09       .05

2nd Quarter......................      .02        .005          .08       .03

3rd Quarter......................      .02        .01           .03       .03

4th Quarter......................      .01        .01           .03       .02



The per share closing sales price of the common stock as reported by the OTCBB
on October 1, 2003, was $0.03. As of October 1, 2003, we had approximately 270
beneficial shareholders and 28 shareholders of record.

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

INTRODUCTION

The following discussion of our financial condition and results of our
operations should be read in conjunction with the Financial Statements and Notes
thereto. This document contains certain forward-looking statements including,
among others, anticipated trends in our financial condition and results of
operations and our business strategy. These forward-looking statements are based
largely on our current expectations and are subject to a number of risks and
uncertainties. Actual results could differ materially from these forward-looking
statements. Important factors to consider in evaluating such forward-looking
statements include (i) changes in external factors or in our internal budgeting
process which might impact trends in our results of operations; (ii)
unanticipated working capital or other cash requirements; (iii) changes in our
business strategy or an inability to execute our strategy due to unanticipated
changes in the industries in which we operate; and (iv) various competitive
market factors that may prevent us from competing successfully in the
marketplace.

OVERVIEW

Skyline Multimedia Entertainment, Inc. (the "Company") is a holding company
incorporated under the laws of the State of New York on November 2, 1993, which
owns all of the outstanding stock of its operating subsidiary, New York Skyline,
Inc. ("Skyline").We operate the New York Skyride, a state-of- the-art simulator
attraction located in the Empire State Building New York City, New York.

On December 22, 1994, we commenced operations of New York Skyride. New York
Skyride is an exhilarating simulated "aerial tour" of New York City in a
futuristic "spacecopter". New York Skyride features two 40 passenger flight
simulators and related computer-controlled projection technologies to provide
visitors with a complete "New York" experience, including an extensive pre-show
area featuring interactive multimedia exhibits depicting the various tourist
sites and attractions in and around the New York Metropolitan area, and
culminating in a ten minute aerial "adventure" in and around New York City.
Passengers not only experience the sensations of an actual aerial flight, but
also experience visual images projected on screens within the simulator that
envelop the viewer with a variety of sights and sounds. New York Skyride is
intended to provide visitors with a sensation of taking a "once in a lifetime"
aerial adventure around New York City.

                                        7
<PAGE>
For the years ended June 30, 2003 and 2002, our New York Skyride facility was
visited by approximately 585,000 and 543,000 customers, respectively.

Our revenues have been generated primarily from ticket sales for New York
Skyride with additional revenues generated from the sale of souvenir merchandise
and profit-sharing arrangements from the sale of tickets to other attractions.
We are also seeking to enter into corporate sponsorship and advertising
arrangements with certain consumer product companies to provide additional
revenues and marketing exposure.

The Company's Profitability is Dependent Upon Tourism, Which May be Negatively
Impacted By Many Factors, Including the Weak Economy, Declining Tourism and
Potential Terrorist Attacks

The Company's operations and, in turn, its revenues are dependent upon tourism,
which may be negatively impacted by certain factors, including, but not limited
to, the failure of important seasonal business to materialize, the continued
softness in the tourism industry, the weak economy, the outbreak or spread of
illness (such as SARS), and the possibility of terrorist attacks.

The Company's operations and results may be impacted as a result of future
terrorist attacks. The Company's sole facility is located in New York City at
the Empire State Building, which may be considered a prime target for terrorist
activities. If terrorists were to attack the Empire State Building or New York
City, the Company's attendance and, in turn, its revenues may be negatively
impacted. Furthermore, if the Empire State Building were to be permanently
closed as a result of a terrorist attack, then the Company would, in all
likelihood, be forced to cease operations.

RESULTS OF OPERATIONS

Year Ended June 30, 2003 compared to Year Ended June 30, 2002

Reclassifications

Prior to September 30, 2002, the Company sold tickets to the Empire State
Building Observatory, which it had purchased at a discount from face amount and
included such sales with its revenues. Subsequent to September 30, 2002, these
tickets were purchased at face amount as part of a reciprocal arrangement with
the Empire State Building, where each party also sells tickets for the other's
attraction. Since the observatory tickets are no longer sold at a profit, the
Company is not recording either their cost or revenue in its financial
statements for periods after September 30, 2002. Also, in order to achieve a
more comparable presentation, prior period ticket costs have been reclassified
as a reduction of attraction sales so that such sales include only the Company's
gross profit on the observatory tickets sales. This reclassification results in
a $1,384,000 reduction of previously reported revenue for the year ended June
30, 2002.

Revenues

Revenues generated during the year ended June 30, 2003 aggregated $6,361,000 as
compared to $5,950,000 for the year ended June 30, 2002. The increase in
revenues for the year ended June 30, 2003 as compared to the revenues generated
for the year ended June 30, 2002 primarily resulted from an increase in Empire
State Building Observatory and New York Skyride co-marketing efforts with
respect to crowd control and the sale of combination tickets, as well as from
the fact that the Company did not experience any disruption in operations, which
resulted from the events of September 11, 2001.

Total Operating Expenses

Total operating expenses incurred for the year ended June 30, 2003 aggregated
$5,522,000, as compared to $4,811,000 for the year ended June 30, 2002. The
increase from the year ended June 30, 2002 was primarily due to an increase in
salary in connection with the creation of a new position and increases in real
estate taxes and operating cost escalations relating to the Company's leases, as
well as other general increases in connection with the increase in revenue.

Net Income (Loss) And Income (Loss) Per Share

The basic and diluted net loss and loss per share was ($1,578,000) and ($.69)
for the year ended June 30, 2003, as compared to ($610,000) and ($.27) for the
year ended June 30, 2002. This included interest expense of $2,460,000 and
$1,809,000 for the years ended June 30, 2003 and June 30, 2002, respectively.
For a complete description of the Company's outstanding notes payable please see
Note E of the Company's Financial Statements for the year ended June 30, 2003.

For the year ended June 30, 2003, we had income from operations (before interest
income and expense) of approximately $839,000, as compared to an income from
operations (before interest income and expense) of approximately $1,139,000 for
the year ended June 30, 2002.

                                        8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

Working Capital Deficiency

The working capital deficiency at June 30, 2003, was approximately ($12,994,000)
compared to a working capital deficiency of approximately ($10,485,000) at June
30, 2002. While the Company has generated cash from operations, such amount has
been offset by an increase in accrued interest on debt.

We have historically sustained our operations from the sale of debt and equity
securities, through institutional debt financing and through agreements or
arrangements for financing with certain key suppliers.

Financing Arrangements

As of the date hereof, we have the following financing arrangements in place:

Senior Credit Agreement

The Company entered into a Senior Credit Agreement, dated as of December 20,
1996 (the "Senior Credit Agreement"), with certain institutional lenders (the
"Lenders") pursuant to which the Company initially borrowed an aggregate of
$2,500,000 in the form of senior notes (the "Senior Notes"), which accrued
interest at 14% a year and required the payment of both principal and interest
on December 20, 2001. Subsequently, in February 1997 and March 1997, the parties
entered into a Amendments to the Senior Credit Agreement pursuant which provided
for (i) the borrowing of an aggregate of $4,450,000, and (ii) the acceptance of
funds from new additional lenders. In connection with the debt, the lenders
received warrants to purchase up to 434,143 shares of common stock at an
exercise price of $4.25 per share.

The Company is in default on the Senior Notes, which became due on December 20,
2001. As a result, effective December 20, 2001, the interest rate on the
principal and unpaid interest was increased to 21%.

Senior Secured Credit Agreement

The Company entered into a Senior Secured Credit Agreement (the " Senior Secured
Credit Agreement"), dated as of May 20, 1998, with certain of the Lenders
pursuant to which the Company initially borrowed an aggregate of $935,000 in the
form of senior secured demand notes (the "Demand Notes"). The Demand Notes
accrue interest at 14% a year and are collateralized by substantially all the
assets of the Company and its subsidiaries not otherwise pledged. Subsequently,
in May 1998 and July 2000, the parties entered into Amendments to the Senior
Secured Credit Agreement pursuant to which the Company's aggregate borrowings
were increased to $2,785,000 (the "Financing"), which included $500,000 of funds
that were accepted from a new additional lender. The additional $500,000 of
funds were loaned on a subordinated basis to all other debt secured under the
Senior Secured Credit Agreement.

In connection with the debt, the Lenders received Warrants that are exercisable
for an aggregate of 94% of the fully diluted Common Stock of the Company (after
issuance) at an exercise price of $.375 per share. The agreement provides for a
cashless exercise feature, whereby the holder has the option of reducing the
aggregate number of shares received based upon the fair market value (as
defined) of the Company's stock at date of exercise. Either exercise would
result in significant dilution to existing shareholders which could also result
in an annual limitation in the future utilization of the Company's net operating
loss carryforwards.

The Demand Notes and the obligations under the Senior Secured Credit Agreement
and the Warrants are also collateralized by a pledge of the stock of the
Company's subsidiaries. In connection with the Senior Secured Credit Agreement,
one of the lenders also received the right to appoint two members to the
Company's Board of Directors. Further, as a result of the issuance of Warrants
in connection with the Financing, the conversion rate of the Company's
outstanding Series A Preferred Stock (the "Preferred Stock") was adjusted from a
conversion rate of one share of Common Stock for each share of Preferred Stock
to a conversion rate of 6.91 shares of Common Stock for each share of Preferred
Stock.

Other Notes Payable

The Company has also borrowed an additional $500,000 of funds from one of the
Lenders, which is payable upon demand and bears interest at the rate of 14%.

                                        9
<PAGE>
Preferred Stock

As discussed above, the Company also has 1,090,909 shares of Series A
Convertible Participating Preferred Stock outstanding, which shares were
originally sold to one of the lenders in 1995. The following is a summary of the
rights, preferences, qualifications, limitations and restrictions of the
Preferred Stock:

o    The holders are entitled to an aggregate of up to 24.9% of the outstanding
     voting power of the Company on all matters which come before the
     shareholders.
o    A majority of the holders are entitled to elect two directors of the
     Company. Pursuant to this right, in August 2002, the SBA, as the Receiver
     for Prospect Street, elected Richard Stewart as a director of the Company;
o    Additionally, so long as 272,727 shares of Preferred Stock remain
     outstanding, the holders thereof will have the ability to elect a majority
     of the Board of Directors and obtain up to 50.1% of the outstanding voting
     power of the Company in the event that the holders of the Preferred Stock
     determine in good faith that such action is reasonably necessary for the
     protection of its investment;
o    As stated above, as a result of the issuance of Warrants in connection with
     the financing pursuant to the Credit Agreement, the conversion rate of the
     Preferred Stock held by Prospect Street was adjusted from a conversion rate
     of one share of Common Stock for each share of Preferred Stock to a
     conversion rate of 6.91 shares of Common Stock for each share of Preferred
     Stock. Thus, the Preferred Stock may be converted into an aggregate of
     7,538,181 shares of common stock of the Company; and
o    The Preferred Stock and underlying Common Stock into which it is
     convertible are subject to both demand and piggyback registration rights.

RECENT EVENTS - ACQUISITION OF DEBT, WARRANTS AND STOCK HELD BY LENDERS

In September 2003, an investor acquired from the Lenders all of (i) the Senior
Notes and Demand Notes (including all unpaid interest thereon), (ii) the
warrants issued in connection with the Senior Credit Agreement and the Senior
Secured Credit Agreement, (iii) the preferred and common stock held by the
Lenders, and (iv) all of the Lender's rights under the Senior Credit Agreement
and the Senior Secured Credit Agreement. In addition, following the acquisition
of the debt, the new investor notified the Company of its demand for repayment
of $3 million, to be applied against unpaid interest, which amount was paid in
September 2003.

CAPITAL COMMITMENTS

The following is a summary of the Senior Notes, Demand Notes, Other Notes and
warrants currently outstanding:
<TABLE>
<CAPTION>
<S>                                        <C>               <C>                <C>             <C>

                                            Principal                           Accrued
         Financing                          Amount of         Maturity          Interest as of   Number of
         Instrument                           Notes             Date             6/30/03(1)      Warrants
         ------------                       -----------       --------          --------------   ---------
         Senior Notes                       $4,450,000        12/20/01          $6,021,329       434,143
         Demand Notes                       $2,785,000        On Demand         $2,092,858             *
         Other Notes                        $  500,000        On Demand         $  251,418
                                            -----------                         -----------

         Totals                             $7,735,000                          $8,365,605
                                            ==========                          ==========
</TABLE>

* - As described above, in connection with the Credit Agreement, the Company
issued Warrants to the lenders that are exercisable for 94% of the fully diluted
Common Stock of the Company (after issuance) at an exercise price of $.375 per
share.

(1) As described above, following the acquisition of the debt, the new investor
notified the Company of its demand for repayment of $3 million, to be applied
against unpaid interest, which amount was paid in September 2003. Such payment
shall be allocated pro rata to the outstanding balances owed under the Senior
Notes, Demand Notes and Other Notes.

                                       10
<PAGE>
In addition to the foregoing, as of June 30, 2003, summarized below are our
general and contractual obligations:

                    Contractual Obligations at June 30, 2003
<TABLE>
<CAPTION>
<S>                                 <C>                   <C>                   <C>                   <C>
                                     Less than             One-Three             Four-Five             Over 5
     Contractual Obligations           1 year                years                 Years                years

     Long Term Debt           $              -       $             -       $            -       $           -

     Short Term Debt          $              -       $             -       $            -       $           -

     Operating Leases                  601,000             1,717,000            1,232,000           4,286,000

     Capital Leases                      7,000

     Licensing Fee                     200,000               631,000              450,000           1,452,000

     Total per Period         $        808,000           $ 2,348,000       $    1,682,000      $    5,738,000
</TABLE>

SUMMARY

Except for the financing facilities described above, the Company has no other
current arrangements in place with respect to financing. As stated in the report
on the Company's Financial Statements for the year ended June 30, 2003, the
Company's ability to continue as a going concern is dependent upon continued
forbearance of the Company's lenders because the Company currently does not have
available funds to repay these loans. Accordingly, the Company is in need of
either securing new financing, attaining profitable operations and/or
negotiating more favorable repayment terms on its outstanding debt.

Management is currently negotiating with the new holders of the Company's
outstanding debt obligations for more favorable repayment terms, and to arrange
for them to provide a $1 million working capital facility.

In the event that the Company is unable to sustain positive cash flow, the
Company will need additional capital. However, the Company has no assurance that
additional capital will be available on acceptable terms, if at all. In such an
event, this would have a materially adverse effect on the Company's business,
operating results and financial condition.

INFLATION

We believe that the impact of inflation on its operations since its inception
has not been material.

SEASONALITY

Our business is seasonal in nature, based in part, on higher volumes of tourists
in the New York City Metropolitan area during the spring and summer months and
during the December holiday season.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles require the appropriate application of certain accounting
policies, many of which require us to make estimates and assumptions about
future events and their impact on amounts reported in the financial statements,
and related notes. Since future events and their impact cannot be determined
with certainty, the actual results will inevitably differ from our estimates.
Such differences could be material to the financial statements.

We believe application of accounting policies, and the estimates inherently
required by the policies, are reasonable. These accounting policies and
estimates are constantly reevaluated, and adjustments are made when the facts
and circumstances dictate a change. Historically, we have found the application
of accounting policies to be appropriate, and the actual results have not
differed materially form those determined using necessary estimates.

Our accounting policies are more fully described in Note B to the consolidated
financial statements, located elsewhere in this 10-KSB. We have identified
certain critical accounting policies which are described below.

Deferred valuation allowance - We have recorded a valuation allowance equal to
our net deferred tax assets, due to the uncertainty of the Company being able to
use this benefit to offset future taxable income. If we were to determine that
the Company would be able to

                                       11
<PAGE>
realize the benefit of our net deferred tax assets in excess of its recorded
amount, an adjustment to the valuation allowance would increase the income in
the period such determination was made.

Long-lived assets - In evaluation the fair value and future benefits of
long-lived assets, we perform an analysis of the anticipated undiscounted future
net cash flows of the related long-lived assets, and reduce their carrying value
by the excess, if any, of the result of the calculation. We believe at this time
that the long-lived assets' carrying values and useful lives continues to be
appropriate. Future adverse changes in market conditions or poor operating
results of underlying investments could result in an inability to recover the
carrying value of the investments that may not be reflected in an investments
carrying value, thereby requiring an impairment charge in the future.

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The response to this item is set forth at the end of this report.

                                       12
<PAGE>
                                    PART III

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

None.

ITEM 8A. CONTROLS AND PROCEDURES

As of June 30, 2003, an evaluation was performed under the supervision and with
the participation of the Company's management, including the Chief Executive
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures. Based on that evaluation, the Company's
management, including the Chief Executive Officer, concluded that the Company's
disclosure controls and procedures were effective as of June 30, 2003. There
have been no significant changes in the Company's internal controls or in other
factors that could significantly affect internal controls subsequent to June 30,
2003

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

Our executive officers, directors and key employees and their ages and positions
with us as of September 26, 2003, are as follows:


Name                               Age      Position
----                               ---      --------

Steven Vocino                       48      Chairman of the Board of Directors

Michael Leeb                        44      President, Chief Operating Officer,
                                            Chief Financial Officer, Treasurer
                                            and Director

Alan D. Segars(1)                   59      Director

Renwick Day(1)                      61      Director

Fredrick Schulman(1)                51      Director


(1) Appointed as a director in September 2003 following the resignations of
Richard Stewart, Anne Jordan and Joseph Bodanza.

The following is a brief description of each officer and director listed above:

STEVEN VOCINO was appointed by our Board in of Directors as Chairman of the
Board in 1998 to fill a vacancy thereon. Mr. Vocino is the Founder and President
of WTLN-TV and founded in 1989 the Teaching Learning Network, an international
television program supplier. Mr. Vocino's background includes a variety of fully
sponsored internationally televised sporting events (i.e., 1984 Summer Olympic
Games, the Traveling Sportsman, Tour of America and the Pan Am Games). Apart
from sports programming, Mr. Vocino has established an excellent sponsor and
advertising following within the children's programming market. Productions
include Classroom of the Future, College Bound, Pets and Vets and Kids Cafe. Mr.
Vocino has established an excellent reputation within the broadcast, cable and
public television industry and has won numerous awards for programming,
including Telly, Emmy, Golden Globe, Golden Apple, Peabody, International Peace
Through Sports Awards and Children's Television Workshop Awards. In 1995, Mr.
Vocino assumed the responsibilities of president of New Media Inc., a television
production company focusing on the travel industry, and was instrumental in its
turnaround.

MICHAEL LEEB has been an employee of Skyline since February 1994. Mr. Leeb
currently holds the position of Chief Operating Officer, Chief Financial
Officer, President and Treasurer. Mr. Leeb started with us as the Director of
Operations in February of 1994. Mr. Leeb was promoted to Senior Vice President
of Operations in March of 1998. Mr. Leeb was then named Chief Operating Officer
in November 2000. Previously, Mr. Leeb was employed by W.M. Amusements from
February 1984 through December 1993. Mr. Leeb's last position held at W.M.
Amusements was Operations Manager for Splish Splash Water Park in Riverhead, New
York.

ALAN D. SEGARS was appointed to the Board of Directors in September 2003. Since
September 2002, Mr. Segars has been a Senior Portfolio Specialist for the ING
Managed Account Group's large cap equity growth portfolio. Mr. Segars joined
Furman Selz Capital Management LLC (FSCM) in 1993 as a Managing Director and
Portfolio Manager. He created the Furman Selz Capital Management Commodities
Composite, an indicator of the future trend for interest rates. His
responsibilities include portfolio

                                       13
<PAGE>
management, strategy, analysis, and client relationships. Before joining FSCM,
Mr. Segars was the managing partner responsible for institutional investments at
Grigsby Brandford Capital Partners. Prior to Grigsby Brandford, Mr. Segars was
senior vice president and head of fixed income at Irving Trust and Bank of New
York, where he was also a member of the Investment Policy Committee. He began
his career as an equity analyst at Manufacturers Hanover Trust, and later became
their head of fixed income. Mr. Segars holds a BA in Economics from The City
College of New York and an MBA in Finance and Investments from Bernard M. Baruch
College, City University of New York. He is also a Chartered Financial Analyst.

RENWICK DAY was appointed to the Board of Directors in September 2003. Mr. Day
has been the Senior Financial Consultant at Starategy, Inc., a worldwide
construction and environmental claims consulting firm, since 2002. Prior
thereto, Mr. Day was the Chief Operation/Financial officer at E.T.F.
Technologies, Inc. from 2000 to 2002. From 1999 to 2000, Mr. Day was a
management consultant with D&D Associates. From 1994 to 1998 Mr. Day was the
Finance Director and Company Secretary for High-Point Rendel, Ltd., a
privately-held company in the United Kingdom. Mr. Day has 30 years of
diversified financial and management experience, having held senior executive
positions with major international corporations. For the 11-year period between
1986 and 1997, his experience was applied to the consulting engineering
business, both nationally and internationally. Prior to entering the engineering
industry, the majority of his experience was in the transportation industry,
with major corporations such as Seatrain, Inc. and Hertz Corp. as well as other
privately held companies.

FREDRICK SCHULMAN was appointed to the Board of Directors in September 2003. Mr.
Schulman is currently President of East Coast Venture Capital, Inc., a
specialized Small Business Investment Company based in New York, NY. Mr.
Schulman is also Chairman of Gourmet Group, Inc., a dormant publicly traded
company. From September 1999 until April 2002, Mr. Schulman was President of Our
Food Products Group, Inc., d/b/a Jardine Foods, then the operating subsidiary of
Gourmet Group. During such period, Mr. Schulman also served as President of
Morgan Kent Group, Inc., a New York based venture capital firm, which had been
the majority shareholder of Gourmet Group. Prior to joining Morgan Kent, Mr.
Schulman was the Director of Investment Banking at RAS Securities Corp., a full
service, New York-based securities broker/dealer and investment banking firm.

Directors serve until the next annual meeting of stockholders or until their
successors are elected and qualified. Officers serve at the discretion of the
board of directors. The board of directors does not have any committees.
Non-employee directors are also entitled to reimbursement for reasonable
expenses incurred in attending any such meetings.

Steven Vocino receives an annual retainer of $10,000 for his services as
Chairman of the Board. In addition, Steven Vocino received options to purchase
25,000 shares of common stock in July 1998 in connection with his appointment to
the board of directors. Furthermore, in July 1998, Mr. Vocino received 600,000
shares of common stock of Skyline in consideration for services rendered to us
in connection with negotiation of favorable settlements with certain of our
creditors.

The Company currently has no standing committees.

Code of Ethics

The Company has adopted its Code of Ethics and Business Conduct for Officers,
Directors and Employees that applies to all of the officers, directors and
employees of the Company, filed as an exhibit to this Form 10-KSB.

ITEM 10. EXECUTIVE COMPENSATION.

The following table summarizes all compensation paid by us with respect to the
fiscal year ended June 30, 2003 paid by us to our President, and all other
executive officers whose total cash compensation exceeded $100,000 in the fiscal
year ended June 30, 2003 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>


                                          SUMMARY COMPENSATION TABLE
                              Annual Compensation                       Long-Term Compensation
                              -------------------                       ----------------------
                                                     Other       Restricted   Securities      LTIP Pay    All Other
Name and Principal      Year    Salary     Bonus     Annual      Stock        Underlying      outs ($)    Compensation
Position                         ($)        ($)      Compens     Award(s)     Options/                    ($)
                                                     -ation        ($)        SAR's (#)
<S>                     <C>     <C>        <C>       <C>         <C>          <C>             <C>         <C>

Michael Leeb,           2003    165,000    87,500    ---         ---          ---             ---         ---
President               2002    165,000    75,000    ---         ---          ---             ---         ---
                        2001    150,000    25,000    ---         ---          ---             ---         ---
</TABLE>

                                       14
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.


         The following table sets forth the number of shares of our common stock
beneficially owned by (i) each member of our board of directors; (ii) certain of
our executive officers (including all of our named executive officers); (iii)
all of our directors and executive officers as a group; and (iv) all those known
by us to be beneficial owners of more than five percent of the outstanding
shares of our common stock as of September 26, 2003. Unless otherwise indicated,
the shareholders listed in the table have sole voting and investment power with
respect to the shares indicated.
<TABLE>
<CAPTION>

                                                                      Common Stock             Percentage of
     Name of Beneficial Owner(1)                                   Beneficially Owned        Common Stock(2)*
     ------------------------                                      ------------------        ----------------
<S> <C>                                                                      <C>                          <C>

     Steven Vocino (3)                                                        625,000                   28.6%

     Michael Leeb                                                                   0                      0%

     Alan Segars(4)                                                                 0                      0%

     Renwick Day(4)                                                                 0                      0%

     Fredrick Schulman(5)                                                   4,522,912                   68.3%

     Skyline Associatess LLC(6)                                           176,179,898                   98.8%

     All Directors and Executive Officers as a Group (9)                    5,147,912                   77.8%
</TABLE>
* The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the stockholder has sole or shared voting power or investment power and also any
shares that the stockholder has the right to acquire within 60 days. Shares of
common stock subject to options, warrants or convertible preferred shares
currently exercisable or convertible, or exercisable or convertible within 60
days are deemed outstanding for computing the percentage of the person holding
such option, warrant or convertible preferred shares but are not deemed
outstanding for computing the percentage of any other person.

(1)  Unless otherwise noted, the address of each of these persons is c/o Skyline
     Multimedia Entertainment, Inc., 350 Fifth Avenue, New York, New York 10118.

(2)  Based on an aggregate of 2,095,000 shares of common stock issued and
     outstanding as of the September 26, 2003, and includes shares subject to
     currently exercisable options and warrants for each person or group named.

(3)  Includes options to purchase 25,000 shares of common stock held by such
     individual which are currently exercisable.

(4)  Does not include shares owned by Skyline Associates LLC, as to which
     Messrs. Segars and Day each have disclaimed beneficial ownership by virtue
     of the fact that they do not have sole voting or dispositive power with
     respect to the securities held by Skyline Associates LLCKeyspan. Messrs.
     Segars and Day have each been appointed to as designees to the Board of
     Directors by Skyline Associates LLC.

(5)  Includes 4,522,912 shares of Common Stock issuable upon conversion of
     654,546 shares of Series A Convertible Participating Preferred Stock
     acquired by Mr. Schulman on September 24, 2003. Each share of Series A
     Convertible Participating Preferred Stock is convertible at any time into
     6.91 shares of Common Stock of the Issuer. The holders of an aggregate of
     1,090,909 outstanding shares of the Issuer's Series A Convertible
     Participating Preferred Stock are entitled to 24.9% of the outstanding
     voting power of the Issuer on all matters which come before the
     shareholders. Accordingly, Mr. Schulman's ownership of 60% of the
     outstanding Series A Convertible Participating Preferred Stock entitles him
     to up to 14.94% of the outstanding voting power of the Company. Mr.
     Schulman disclaims beneficial ownership of the Issuer's securities owned by
     Skyride Associates, LLC. In addition, the Company's Certificate of
     Amendment to its Certificate of Incorporation relating to the Series A
     Preferred grants the majority holder of the Series A Preferred the right to
     elect by written consent of the Series A Preferred up to two members of the
     Company's Board of Directors. Such Certificate of Amendment states that the
     Company's Board shall be limited to six members unless the Series A
     Preferred otherwise agrees. By acquiring a majority of the outstanding
     Series A Preferred, Mr. Schulman acquired the right to elect two members of
     the Company's Board.

                                       15
<PAGE>
(6)  This figure represents:

     (i)  warrants to purchase such number of shares of Common Stock as would
          equal 94.334% of the total outstanding shares of Common Stock on a
          fully-diluted basis (after taking into account the full exercise of
          such warrants);

     (ii) warrants to purchase up to 434,143 shares of common stock;

     (iii) an aggregate of 52,700 shares of common stock;

     (iv) 290,000 shares of common stock which are issuable in exchange for
          290,000 shares of class A common stock; and

     (v)  436,363 shares of series A preferred stock held by Skyline Associates
          LLC which, in the aggregate, are convertible into approximately
          3,015,268 shares of common stock and which vote together with the
          common stock as a single class on all matters to be voted on by the
          holders of the common stock. The holders of an aggregate of 1,090,909
          outstanding shares of the Issuer's Series A Convertible Participating
          Preferred Stock are entitled to 24.9% of the outstanding voting power
          of the Issuer on all matters which come before the shareholders.
          Accordingly, Skline Associates LLC's ownership of 40% of the
          outstanding Series A Convertible Participating Preferred Stock
          entitles them to up to 9.96% of the outstanding voting power of the
          Company.

In addition, the Senior Secured Credit Agreement, dated May 20, 1998, which the
Company and its subsidiaries entered into with The Bank of New York as Trustee
for the Employment Retirement Plan of Keyspan Energy Corp. ("Keyspan") and
Propect Street NYC Discovery Fund, L.P. ("Prospect Street Discovery") provides
that, "[u]pon notice to the Company, Keyspan shall have the right to designate
two members to the Company's Board of Directors, provided, however, that such
designees shall be subject to the approval of the Company, which approval shall
not be unreasonably withheld." Through its acquisitions on September 15, 2003,
Skyline Associates LLC acquired Keyspan's rights to designate two members of the
Company's Board. Upon the resignations from the Board of Anne Jordan and Joseph
Bodanza, who were the Board designees of Keyspan, the Board, excluding Mr.
Schulman, elected Alan D. Segars and Renwick Day as replacement members of the
Board.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

In connection with the design, development and maintenance of the Company's web
site, the Company paid approximately $192,000 during the year ended June 30,
2002 and approximately $97,000 from July 1, 2002 through January 23, 2003 to
Site Trends, LLC. Mr. Jared D. Schulman, a former director of the Company
through January 23, 2003, was also a director of Site-Trends.

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

(a) Index to Exhibits:
<TABLE>
<CAPTION>
        Exhibit No.        Exhibit Name
        -----------        ------------
<S>     <C>                <C>

        31.1               Certification by Michael Leeb, Principal Executive Officer and Chief
                           Financial Officer , pursuant to Section 302 of the Sarbanes-Oxley Act
                           of 2002.

        32.1               Certification by Michael Leeb, Chief Executive Officer and Chief
                           Financial Officer, Pursuant to 18 U.S.C. Section 1350, As Adopted
                           Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

        99.1               Code of Ethics and Busienss Conduct for Officers, Directors and
                           Employees of Skyline Multimedia Entertainment, Inc.
</TABLE>
(b) Reports on Form 8-K:

None.

                                       16
<PAGE>
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Audit Fees. The aggregate fees billed by our auditors to date, for professional
services rendered for the audit of the Company's annual financial statements for
the years ended June 30, 2003 and June 30, 2002, and for the reviews of the
financial statements included in the Company's Quarterly Reports on Form 10-QSB
during those fiscal years were $23,625, and $42,500, for the respective years
ended June 30, 2003 and 2002. The amount for the year ended June 30, 2003 does
not include unbilled amounts for the year end audit which are estimated at
approximately $19,000

Tax Fees. Fees billed by our auditors for the preparation of corporate income
tax returns were $3,576 and $6,231 for the years ended June 30, 2003 and 2002,
respectively. Fees billed by our auditors for tax advice relating to a sales tax
audit were $1,575 and $12,650 for the years ended June 30, 2003 and 2002,
respectively


All Other Fees. For the fiscal year ended June 30, 2002, the Company incurred
fees to auditors of $4,875 for services rendered to the Company, other than the
services covered in "Audit Fees" or "Tax Fees."

The Audit Committee has considered whether the provision of non-audit services
is compatible with maintaining the principal accountant's independence

                                       17
<PAGE>
                                   SIGNATURES

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

                     SKYLINE MULTIMEDIA ENTERTAINMENT, INC.

                              By: /s/ MICHAEL LEEB
                              --------------------
                     MICHAEL LEEB, CHIEF OPERATING OFFICER,
                      CHIEF FINANCIAL OFFICER AND PRESIDENT





Dated: October 7, 2003


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



DATE: October __, 2003
                                            ------------------------------------
                                            STEVEN VOCINO, CHAIRMAN OF THE BOARD

DATE: October 7, 2003                       /s/ MICHAEL LEEB
                                            ------------------------------------
                                            MICHAEL LEEB, DIRECTOR

DATE: October 7, 2003                       /s/ ALAN D. SEGARS
                                            ------------------------------------
                                            ALAN D. SEGARS, DIRECTOR

DATE: October 7, 2003                       /s/  RENWICK DAY
                                            ------------------------------------
                                            RENWICK DAY, DIRECTOR

DATE: October 7, 2003                       /s/ FREDRICK SCHULMAN
                                            ------------------------------------
                                            FREDRICK SCHULMAN, DIRECTOR

                                       18
<PAGE>
                     SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
                                AND SUBSIDIARIES
                        CONSOLIDATED FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS


FINANCIAL STATEMENTS:

Independent Auditors' Report                                             F-2

Consolidated Balance Sheet - June 30, 2003                               F-3

Consolidated Statements of Operations - Year Ended June 30,
2003 and June 30, 2002;                                                  F-4

Consolidated Statement of Changes in Capital Deficency -
Year Ended June 30, 2003 and June 30, 2002;                              F-5

Consolidated Statements of Cash Flows - Year Ended
June 30, 2003 and June 30, 2002;                                         F-6

Notes to Consolidated Financial Statements                               F-7-16
<PAGE>
                          Independent Auditors' Report


To The Board of Directors and Stockholders
Skyline Multimedia Entertainment, Inc.


     We have  audited the  accompanying  consolidated  balance  sheet of SKYLINE
MULTIMEDIA  ENTERTAINMENT,  INC.  AND  SUBSIDIARIES  as at June 30, 2003 and the
related consolidated statements of operations, changes in capital deficiency and
cash flows for each of the two years in the period  ended June 30,  2003.  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 audits.

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

     In our opinion,  the financial statements referred to above present fairly,
in all  material  respects,  the  consolidated  financial  position  of  Skyline
Multimedia  Entertainment,  Inc. and  Subsidiaries  as at June 30, 2003, and the
consolidated  results of their operations and their  consolidated cash flows for
each of the two years in the period  ended June 30,  2003,  in  conformity  with
generally accepted accounting principles in the United States.

     The accompanying  financial statements have been prepared assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note A to the
financial statements,  the Company has experienced  significant losses in recent
years  and at June 30,  2003 has  substantial  negative  working  capital  and a
substantial capital deficiency. Also, since a substantial portion of the working
capital  deficiency  is comprised of notes payable that are due  currently,  the
Company is dependent upon the continued  forbearance of its principal  creditors
in not demanding  payment of the outstanding  indebtedness.  These factors raise
substantial  doubt about the Company's  ability to continue as a going  concern.
Management's  plans in regard to these matters are also described in Note A. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.


                                                _______________________________
                                                  CERTIFIED PUBLIC ACCOUNTANTS



New York, New York
September 16, 2003

                                      F-2
<PAGE>


             SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

                               AS AT JUNE 30, 2003

                                     ASSETS
                             (To the nearest $1,000)
<TABLE>
<CAPTION>
Current assets:
<S>                                                                                                  <C>
   Cash and money market funds                                                                       $  3,051,000
   Inventory                                                                                              127,000
   Prepaid expenses and other current assets                                                              428,000
                                                                                                     -------------
                  Total current assets                                                                  3,606,000

Property, equipment and leasehold improvements - net                                                    4,013,000
Security deposits                                                                                         151,000
Web site development costs                                                                                 75,000
                                                                                                     -------------
                  T O T A L                                                                          $  7,845,000
                                   LIABILITIES                                                       -------------

Current liabilities:
   Capital lease obligations - current portion                                                       $      7,000
   Notes payable                                                                                        7,735,000
   Accounts payable                                                                                       291,000
   Accrued expenses                                                                                       201,000
   Interest payable                                                                                     8,366,000
                                                                                                     -------------
                  Total current liabilities                                                            16,600,000

Deferred rent payable                                                                                   1,310,000
                                                                                                     -------------
                  Total liabilities                                                                    17,910,000
                                                                                                     -------------
Commitments and contingencies

                               CAPITAL DEFICIENCY

Preferred stock, par value $.001, 5,000,000 shares authorized,
   1,090,909 shares of Series A convertible participating preferred
   stock issued and outstanding (liquidating value $2.75 per share)                                         1,000
Common stock - $.001 par value; authorized 19,000,000 shares,
   issued 2,095,000 shares                                                                                  2,000
Class A common stock - $.001 par value; authorized 1,000,000 shares,
   issued 960,000 shares                                                                                    1,000
Treasury stock, 110,000 shares of common stock and 670,000 shares of
   Class A common stock at cost                                                                          (601,000)
Additional paid-in capital                                                                             10,848,000
Accumulated deficit                                                                                   (20,316,000)
                                                                                                     -------------
                  Total capital deficiency                                                            (10,065,000)
                                                                                                     -------------
                  T O T A L                                                                          $  7,845,000
                                                                                                     -------------
</TABLE>
            The notes to financial statements are made a part hereof.

                                      F-3
<PAGE>

             SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                             (To the nearest $1,000)

<TABLE>
<CAPTION>

                                                                                            Year Ended
                                                                                              June 30,
                                                                                             ----------
                                                                                     2003               2002
                                                                                  -------------      -------------
Revenues:
<S>                                                                               <C>                <C>
   Attraction sales                                                               $  5,311,000       $  4,919,000
   Concessions sales                                                                 1,050,000          1,031,000
                                                                                  -------------      -------------
                                                                                     6,361,000          5,950,000
                                                                                  -------------      -------------
Operating expenses:
   Cost of merchandise sold                                                            361,000            405,000
   Selling, general and administrative                                               4,561,000          3,801,000
   Depreciation and amortization                                                       600,000            605,000
                                                                                  -------------      -------------
                                                                                     5,522,000          4,811,000
                                                                                  -------------      -------------
Income from operations before interest income and
   expense                                                                             839,000          1,139,000

Interest income                                                                         43,000             60,000

Interest expense                                                                    (2,460,000)        (1,809,000)
                                                                                  -------------      -------------
NET (LOSS)                                                                         $(1,578,000)      $   (610,000)
                                                                                  =============      =============
Net loss per share of common stock - basic and diluted                             $      (.69)             $(.27)
                                                                                  =============      =============
Weighted number of average common shares outstanding                                 2,275,000          2,275,000
                                                                                  =============      =============
</TABLE>
            The notes to financial statements are made a part hereof.

                                       F-4
<PAGE>
         SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES

            CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL DEFICIENCY
                             (To the nearest $1,000)
<TABLE>
<CAPTION>

                                          Class A             Series A
                                  --------------------  -------------------
                 Common Stock          Common Stock       Preferred Stock                   Additional
          ---------------------- --------------------- ----------------------    Treasury    Paid-in      Accumulated
              Shares     Amount    Shares      Amount    Shares      Amount       Stock      Capital      Deficit         Total
          ----------- ---------- ---------- ---------- ---------- ----------- ------------  ------------ ------------- -------------
<S>               <C>        <C>       <C>      <C>        <C>         <C>     <C>        <C>           <C>           <C>
Balance -
 July 1,
 2001      2,095,000    $2,000    960,000     $ 1,000  1,090,909     $1,000   $ (601,000)   $10,848,000 $ (18,128,000)  $(7,877,000)

Net (loss)
 for the
 year ended
 June 30,
 2002                                                                                                        (610,000)     (610,000)
          ----------- ---------- ---------- ---------- ---------- ----------- ------------  ------------ ------------- -------------
Balance -
 June 30,
 2002      2,095,000     2,000    960,000       1,000  1,090,909      1,000     (601,000)    10,848,000   (18,738,000)   (8,487,000)

Net (loss)
 for the
 year ended
 June 30,
 2003                                                                                                      (1,578,000)   (1,578,000)
          ----------- ---------- ---------- ---------- ---------- ----------- ------------  ------------ ------------- -------------
BALANCE -
JUNE 30,
 2003      2,095,000    $2,000    960,000     $ 1,000  1,090,909     $1,000   $ (601,000)   $10,848,000  $(20,316,000) $(10,065,000)
          =========== ========== ========== ========== ========== =========== ============  ============ ============= =============
</TABLE>
            The notes to financial statements are made a part hereof.

                                      F-5
<PAGE>

             SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (To the nearest $1,000)

<TABLE>
<CAPTION>
                                                                                             Year Ended
                                                                                               June 30,
                                                                                          -----------------
INCREASE (DECREASE) IN CASH AND MONEY
   MARKET FUNDS                                                                         2003              2002
                                                                                    -------------    -------------
<S>                                                                                  <C>              <C>
Cash flows from operating activities:
   Net (loss)                                                                        $(1,578,000)     $  (610,000)
                                                                                    -------------    -------------
   Adjustments to reconcile results of operations
   to net cash effect of operating activities:
      Depreciation and amortization                                                      600,000          605,000
      Deferred rent payable                                                              (37,000)          27,000
       Net changes in assets and liabilities:
         Inventory                                                                       (12,000)         (15,000)
         Prepaid expenses and other current assets                                      (335,000)          68,000
         Accounts payable and accrued liabilities                                       (275,000)         163,000
         Interest payable - institutional lenders                                      2,459,000        1,708,000
                                                                                    -------------    -------------
           Total adjustments                                                           2,400,000        2,556,000
                                                                                    -------------    -------------
           Net cash provided by operating activities                                     822,000        1,946,000
                                                                                    -------------    -------------
Cash flows from investing activities:
   Purchase of fixed assets                                                           (1,464,000)        (322,000)
   Web site development costs                                                            (23,000)         (97,000)
                                                                                    -------------    -------------
           Net cash used for investing activities                                     (1,487,000)        (419,000)
                                                                                    -------------    -------------
Cash flows from financing activities:
   Repayment of capital lease obligations                                                 (6,000)         (17,000)
                                                                                    -------------    -------------
NET INCREASE (DECREASE) IN CASH AND MONEY
   MARKET FUNDS                                                                         (671,000)       1,510,000

Cash and money market funds - July 1                                                   3,722,000        2,212,000
                                                                                    -------------    -------------
CASH AND MONEY MARKET FUNDS - JUNE 30                                                 $3,051,000       $3,722,000
                                                                                    =============    =============
Supplemental disclosures of cash flow information:
   Cash paid for interest                                                            $   100,000      $     2,000
                                                                                    =============    =============
</TABLE>

            The notes to financial statements are made a part hereof.

                                      F-6
<PAGE>
             SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE A -  The Company

          Skyline Multimedia Entertainment,  Inc. is a holding company formed to
          develop and operate  state-of-the-art  entertainment  attractions  and
          together  with its  wholly-owned  subsidiaries  are referred to as the
          "Company."  Currently,  there  is only  one  active  subsidiary,  that
          operates its "New York Skyride" facility, a simulated "aerial tour" of
          New York City located in the Empire State Building in New York City.

          The Company's  business is somewhat seasonal in nature,  based in part
          on higher volumes of tourists  during the spring and summer months and
          holiday seasons.

          The  accompanying   financial  statements  have  been  prepared  on  a
          going-concern  basis.  As  reflected  in  the  accompanying  financial
          statements,   the  Company  has  experienced   recurring  losses  from
          operations and as of June 30, 2003, has a working  capital  deficiency
          of $12,994,000  and a capital  deficiency of  $10,065,000.  As further
          indicated  in Note E, the  Company's  borrowings  from its lenders and
          investors  is  either  past  due or  due on  demand.  The  Company  is
          dependent on the continued  forbearance  of these lenders  because the
          Company  currently does not have available  funds to fully repay these
          loans and the accrued interest on them. The above factors give rise to
          substantial  doubt as to the  ability of the  Company to continue as a
          going concern. Management plans to negotiate with the lenders for more
          favorable  repayment terms,  including the forbearance of a portion of
          the accrued interest charges.  The accompanying  financial  statements
          have not been adjusted to give effect to the amount or  classification
          of recorded  assets or the  classification  and amount of  liabilities
          should the Company be unable to continue as a going concern.


NOTE B -  Summary of Significant Accounting Policies

          Principles of Consolidation

          The  consolidated  financial  statements  include the  accounts of the
          Company  and  its  wholly-owned  subsidiaries.  Material  intercompany
          transactions   and  account   balances   have  been   eliminated   in
          consolidation.

          Reclassifications

          Prior to September  30,  2002,  the Company sold tickets to the Empire
          State Building Observatory,  which it had purchased at a discount from
          face amount and included such sales with its  revenues.  Subsequent to
          September  30, 2002,  these  tickets were  purchased at face amount as
          part of a reciprocal arrangement with the Empire State Building, where
          each party also sells  tickets for the other's  attraction.  Since the
          observatory tickets are no longer sold at a profit, the Company is not
          recording either their cost or revenue in its financial statements for
          periods  after  September  30, 2002.  Also, in order to achieve a more
          comparable   presentation,   prior  period   ticket  costs  have  been
          reclassified  as a reduction  of  attraction  sales so that such sales
          include only the  Company's  gross profit on the  observatory  tickets
          sales.  This  reclass-ification  results in a $1,384,000  reduction of
          previously reported revenue for the year ended June 30, 2002.

(Continued)

                                      F-7
<PAGE>

             SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE B -  Summary of Significant Accounting Policies (Continued)

          Loss Per Share

          Basic  loss  per  share  is  calculated  by  dividing  net loss by the
          weighted average number of outstanding  common shares during the year.
          Diluted per share data  includes the effects of options,  warrants and
          convertible securities,  when they are dilutive. Because all potential
          common shares were either  antidilutive  or nondilutive  for the years
          ended June 30, 2003 and 2002, they are not included in the calculation
          of diluted per share amounts.

          Inventory

          Inventory  consists of clothing,  souvenirs  and food and is stated at
          the lower of cost (first-in, first-out) or market.

          Property, Equipment and Leasehold Improvements

          Property and equipment is stated at cost less accumulated depreciation
          unless its value is considered to be impaired,  in which case a charge
          is  recognized  for the write down of such asset to its  estimated net
          realizable  amount.  Depreciation  is  provided  on the  straight-line
          method  over  the  estimated  useful  lives of the  assets.  Leasehold
          improvements  are amortized  using the  straight-line  method over the
          shorter of the lease term or the estimated useful life of the asset.

          Web Site Development Costs

          In accordance with Emerging  Issues Task Force Issue 00-2  "Accounting
          for Web Site Development Costs," the Company capitalizes certain costs
          related to the creation of its web site.  Web site  development  costs
          are amortized on a  straight-line  basis over the three year estimated
          useful life of the web site. Accumulated amortization at June 30, 2003
          was approximately $46,000 (see Note J).

          Rent Expense

          For financial  accounting  purposes,  the Company recognizes scheduled
          rent increases and rent holidays over the term of the lease using the
          straight-line method.

          Use of Estimates

          The  preparation of financial  statements in conformity with generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions  that  affect  the  reported  amounts  of assets  and
          liabilities and the disclosure of contingent assets and liabilities at
          the date of the  financial  statements  and the  reported  amounts  of
          revenues and expenses during the reported period. Actual results could
          differ from those estimates.

(Continued)
                                       F-8
<PAGE>
             SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE B -  Summary of Significant Accounting Policies (Continued)

          Stock-Based Compensation

          Stock-based   compensation  is  recognized  under  the  provisions  of
          Statement of Financial  Accounting  Standards No. 123, "Accounting for
          Stock-Based Compensation" ("SFAS No. 123"). The provisions of SFAS No.
          123 allow  companies  to either  expense the  estimated  fair value of
          employee  stock options or to continue to follow the  intrinsic  value
          method  set forth in  Accounting  Principles  Board  Opinion  No.  25,
          "Accounting  for Stock Issued to Employees"  ("APB 25"),  but disclose
          the pro forma effects on results of  operations  had the fair value of
          the  options  been  expensed.  The  Company has elected to continue to
          apply APB 25 in  accounting  for its employee  stock option  incentive
          plans (see Note G).

          Fair Value of Financial Instruments

          The Company's financial  instruments are comprised primarily of demand
          notes and senior  debt  payable.  In  September  2003,  the  Company's
          outstanding  loans payable and accrued interest  together with related
          stock purchase  warrants and other equity interests were sold by their
          holders to an unrelated party for $6,000,000.

          Impairment of Long-Lived Assets

          Effective  July 1, 2002,  the  Company  adopted  Financial  Accounting
          Standards Board  Statement No. 144,  "Accounting for the Impairment or
          Disposal of Long-Lived  Assets" ("SFAS No. 144"). While this statement
          supersedes SFAS No. 121 it retains the fundamental  provisions of SFAS
          No.  121  for   recognition  and  measurement  of  the  impairment  of
          long-lived  assets to be held and used and  measurement  of long-lived
          assets to be  disposed of by sale.  However,  SFAS No. 144 applies the
          fair value method for testing of  impairment,  which differs from SFAS
          No. 121.  The  adoption of SFAS No. 144 did not have any impact on the
          results of operations or financial position in 2003.

          Advertising

          Advertising  costs are expensed when incurred.  Advertising costs were
          $304,000  and  $209,000  for the years  ended June 30,  2003 and 2002,
          respectively.


(Continued)
                                       F-9
<PAGE>
             SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE C -  Concentration of Credit Risk

          The Company  maintains  all of its cash and money market fund with two
          highly capitalized  financial  institutions,  which are insured by the
          FDIC for $100,000 per financial institution.


NOTE D -  Property, Equipment and Leasehold Improvements

          Property,  equipment  and  leasehold  improvements  is  summarized  as
          follows:

                                                                      Estimated
                                                                     Useful Life
                                                                       (Years)
                                                                     -----------
                  Equipment and fixtures                 $   976,000      5-7
                  Simulation film                          2,194,000      10
                  Simulation equipment                     2,471,000      12
                  Leasehold improvements                   2,754,000     10-16
                                                         ------------
                         Total                             8,395,000

                  Less accumulated depreciation
                   and amortization                        4,382,000
                                                         ------------
                         Net                              $4,013,000
                                                         ============

NOTE E -  Notes Payable

          Notes payable at June 30, 2003 are summarized as follows:

           Senior notes (1)                                    $4,450,000

           Senior secured demand notes (2)                      2,785,000

           Other notes (3)                                        500,000
                                                               -----------
                 Total                                         $7,735,000
                                                               ===========

          (1)  In December 1996, the Company entered into a Senior Credit
               Agreement with certain institutional lenders ("the lenders").
               Under the terms of the agreement (as amended), interest on the
               notes accrued at 14% a year to December 20, 2001, at which time
               both the principal and unpaid interest became due. The Company
               defaulted on the repayment. As a result, effective December 20,
               2001, the interest rate on the principal and unpaid interest
               increased to 21%. In connection with the debt, the lenders
               received Warrants to purchase up to 434,143 shares of common
               stock at an exercise price of $4.25 per share.

(Continued)
                                       F-10
<PAGE>
             SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE E -  Notes Payable (Continued)

          (2)  In May 1998, the Company entered into a Senior Secured Credit
               Agreement with certain of the lenders. Under the terms of the
               agreement (as amended), the notes are payable on demand and
               accrue interest at 14% a year. In the event that the Company
               defaults on the repayment when demanded, the rate increases to
               21%.

               In connection with the debt, two of the lenders received Warrants
               that are exercisable for an aggregate of 94% of the fully diluted
               common stock of the Company (after issuance) at an exercise price
               of $.375 per share. The agreement provides for a cashless
               exercise feature, whereby the holders have the option of reducing
               the aggregate number of shares received based upon the fair
               market value (as defined) of the Company's stock at date of
               exercise. Either exercise would result in significant dilution to
               existing shareholders which could also result in an annual
               limitation of the future utilization of the Company's net
               operating loss carryforwards.

               The Notes and Warrants under the Senior Secured Credit Agreement
               are collateralized by substantially all of the Company's assets
               as well as the pledge of stock of the Company's subsidiaries. In
               connection with the Credit Agreement, one of the lenders received
               the right to appoint two members to the Company's Board of
               Directors. Further, as a result of the issuance of Warrants in
               connection with the financing, the conversion rate of the Series
               A Preferred Stock (see Note G) held by one of the lenders was
               adjusted from a conversion rate of one share of common stock for
               each share of preferred stock to a conversion rate of 6.91 shares
               of common stock for each share of preferred stock.

          (3)  The Company borrowed an additional $500,000 of funds from one of
               the lenders, which is payable upon demand and bears interest at
               the rate of 14%.

          In September  2003,  an investor  acquired from the lenders all of the
          outstanding  debt and unpaid interest,  the Warrants,  their preferred
          and common stock and all of their  rights under the Senior  Credit and
          Senior  Secured  Credit  Agreements.  The new  investor  notified  the
          Company of its  demand  for  repayment  of $3  million,  to be applied
          against unpaid interest, which amount was paid in September 2003.




(Continued)
                                       F-11
<PAGE>
             SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE F -  Income Taxes

          The principal  components of deferred tax assets,  liabilities and the
          valuation allowance are as follows:
<TABLE>
<CAPTION>
                                                                                    June 30,
                                                                          ------------------------------
                                                                            2003                2002
                 Deferred tax assets:                                    -------------      ------------
                 <S>                                                        <C>               <C>
                    Deferred rent payable                                 $   590,000       $   606,000
                    Net operating loss carryforwards                        9,475,000         8,503,000
                                                                         -------------      ------------
                                                                           10,065,000         9,109,000

                    Less valuation allowance                               (9,765,000)       (9,062,000)
                                                                         -------------      ------------
                    Total deferred tax assets                                 300,000            47,000

                 Less deferred tax liabilities for
                    depreciation differences                                 (300,000)          (47,000)
                                                                         -------------      ------------
                 Net deferred tax asset                                   $        --       $        --
                                                                         =============      ============
</TABLE>

          The  Company  has  provided  valuation  allowances  equal  to its  net
          deferred  tax  assets  at June  30,  2003  and  June  30,  2002 due to
          uncertainty  of the Company  being able to use this  benefit to offset
          future  taxable  income.  The Company will  periodically  evaluate the
          likelihood  of  realizing  such  asset  and will  adjust  such  amount
          accordingly.

          At June 30,  2003,  the  Company  has  available  net  operating  loss
          carryforwards to reduce future federal taxable income of approximately
          $21,100,000 for tax reporting  purposes which expire from 2010 through
          2023.  The  transaction  described in the last  paragraph of Note E is
          under  review by the Company  and its  counsel  and, if it is deemed a
          change in  ownership,  then,  pursuant to  provisions  of the Internal
          Revenue  Code,  the  amount  and  future  utilization  of  these  loss
          carryforwards  would be  subject  to annual  limitations  which  would
          materially restrict or eliminate their benefit to the Company.



(Continued)
                                      F-12
<PAGE>

             SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE G -  Stockholders' Equity

          In July 1995,  the  Company  sold to one of the  lenders  (see Note E)
          1,090,909  shares  of  Series A  convertible  participating  preferred
          stock, par value $.001 per share, for $3,000,000.  The preferred stock
          is  convertible  into  common  stock of the  Company  at any time at a
          conversion  rate of 6.91  shares  of common  stock  for each  share of
          preferred  stock.  The preferred shares are subject to both demand and
          piggyback  registration  rights. The preferred stock has a liquidation
          preference  equal to $2.75 per share,  but does not pay any  dividends
          unless declared by the Board of Directors.  The preferred stockholders
          are entitled to an aggregate of up to 24.9% of the outstanding  voting
          power of the Company  which can  increase to 50.1% of the voting power
          if in the holder's sole discretion it becomes reasonably necessary for
          the protection of its investment.

          At June 30,  2003,  the Company  has  outstanding  warrants,  expiring
          December 20, 2006,  for the purchase of 434,146 shares of common stock
          at a price of $4.25.

          The  Company has a stock  option  plan  ("Plan A") which,  as amended,
          provides for the issuance of incentive  stock options or  nonqualified
          options  to  key  employees  and  officers  to be  determined  by  the
          compensation committee of the Board of Directors. The aggregate number
          of shares  which may be issued  under Plan A is  2,500,000.  Incentive
          stock  options  under  Plan A may not be granted at less than the fair
          market value of the  underlying  shares at date of grant (110% of fair
          market  value for a 10% or  greater  stockholder).  Incentive  options
          granted under Plan A can be exercisable for a period not to exceed ten
          years. At June 30, 2003, no options are outstanding under Plan A.

          The Company has a stock option plan for nonemployee  directors  ("Plan
          B"). The aggregate  number of shares which may be issued under Plan B,
          as amended, is 500,000.

          A summary of stock option activity related to Plan B is as follows:
<TABLE>
<CAPTION>
                                                                                           Option
                                                                         Number of          Price
                                                                          Shares          Per Share
                                                                        ------------      ------------
           <S>                                                             <C>            <C>
           Outstanding - July 1, 2001                                       60,000        $.25 - $4.00
           Cancelled during the year ended June 30, 2002                    (5,000)          $4.00
                                                                        ------------
           Outstanding - June 30, 2002                                      55,000        $.25 - $1.50

           Cancelled during the year ended June 30, 2003                    (5,000)          $1.50
                                                                        ------------
           Outstanding June 30, 2003                                        50,000            $.25
                                                                        ============
</TABLE>
(Continued)
                                      F-13
<PAGE>

             SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE G -  Stockholders' Equity (Continued)

          The 50,000 Plan B options expired in July 2003.

          The Board of Directors  approved a stock  buy-back  program  where the
          Company is  authorized  to  purchase  up to  300,000  shares of common
          stock.  As of June 30, 2003, the Company has purchased  110,000 shares
          which is reflected as treasury stock.

          At June 30, 2003,  in addition to shares under  warrants,  pursuant to
          the senior secured Credit Agreement (Note E), the Company has reserved
          shares of common stock for issuance upon exercise of warrants, options
          and conversions of preferred stock as follows:

                 Plan "B" options                           50,000
                 Preferred stock                         7,538,181
                 Senior Credit Agreements                  434,143
                                                         ----------
                          Total                          8,022,324
                                                         ==========

          Pro  forma  information  regarding  net loss  and  loss  per  share as
          required  by SFAS  No.123 has been  determined  as if the  Company had
          accounted  for its employee  stock options under the fair value method
          of that  statement.  However,  on a pro forma  basis there would be no
          material  difference  to the  historical  amounts  of net  loss and no
          difference  to the  historical  net loss per share as  reported in the
          basic financial  statements for the years ended June 30, 2003 and June
          30, 2002. No options or warrants were issued during 2003 and 2002.

          The exercise price for warrants and options issued in connection  with
          services  rendered  by  nonemployees  or  financing   arrangements  is
          determined  by  negotiations  between the Company and the third party.
          Generally,  warrants  and  options  are  issued to  employees  with an
          exercise  price of not less than the quoted  market price of the stock
          on the date of grant.


NOTE H -  Commitments

          The  Company  leases  space for its Skyride  attraction  in the Empire
          State Building  pursuant to an operating  lease expiring in June 2016.
          Additionally,  the Company occupies office space under a lease,  which
          expires on April 30, 2004.

          Minimum  annual  rental  payments  required  for these  leases  are as
          follows:

                 Year Ending June 30:
                    2004                               $  601,000
                    2005                                  545,000
                    2006                                  561,000
                    2007                                  611,000
                    2008                                  611,000
                 Thereafter                             4,907,000
                                                       -----------
                                                       $7,836,000
(Continued)                                            ===========

                                      F-14
<PAGE>
             SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE H -  Commitments (Continued)

          The leases  include  escalation  clauses for  increases in real estate
          taxes, operating costs and certain cost of living adjustments.

          Rent  expense  for  the  years  ended  June  30,  2003  and  2002  was
          approximately $748,000 and $731,000, respectively (see Note B).

          The Company has a licensing  agreement  with the Empire State Building
          Company ("ESBC")  expiring on June 30, 2016 to have tickets to its New
          York Skyride facility sold by the licensor's  employees at the counter
          where licensor's  tickets to the observatory are sold. Under the terms
          of the licensing agreement,  the following future minimum payments are
          required:

                 Year Ending June 30:
                    2004                             $   200,000
                    2005                                 200,000
                    2006                                 206,000
                    2007                                 225,000
                    2008                                 225,000
                 Thereafter                            1,677,000
                                                     ------------
                                                      $2,733,000
                                                     ============

          In addition to the minimum  annual fee, the  agreement  provides for a
          contingent  license fee in the event that the  capture  rate at ESBC's
          ticket window (number of Skyride  tickets sold by ESBC as a percentage
          of ESBC  Observatory  tickets  sold)  exceeds  10.5%.  The  contingent
          license fee ranges from an annual fee of $10,500 at a capture  rate of
          10.5% to  $1,400,000  at a capture rate of 26%. The capture rates were
          below  10.5% in each of the  years  ended  June 30,  2003 and June 30,
          2002.


NOTE I -  401(K) Plan

          In July 2002, the Company adopted a 401(k) defined contribution profit
          sharing  plan,  which  provides  for a  discretionary  profit  sharing
          contribution  and a matching  contribution  equal to a percentage  (as
          determined each year) of the employee's elective salary deferral.  The
          Company's contribution  aggregated  approximately $46,000 for the year
          ended June 30, 2003.


(Continued)
                                      F-15
<PAGE>
             SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE J -  Related Party Transaction

          In connection with the design,  development and maintenance of the web
          site, the Company paid approximately $97,000 from July 1, 2002 through
          January 23, 2003 and approximately $192,000 during the year ended June
          30,  2002 to a  Limited  Liability  Company,  a member  and  executive
          officer of which was also a director  of the Company  through  January
          23, 2003.

                                      F-16