<PAGE>


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

                                    FORM 10-Q

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

     For quarterly period ended August 25, 2001
                                ---------------

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

     For the transition period from          to
                                       ----------

                         Commission file number 0-21634

                            METRO GLOBAL MEDIA, INC.
               --------------------------------------------------
              (Exact name of registrant specified in its charter)

          Delaware                                    65-0025871
------------------------------                   -------------------
(State or other jurisdiction of                  (IRS Employer
incorporation or organization)                  Identification No.)

                 1060 PARK AVENUE, CRANSTON, RHODE ISLAND 02910
                 ----------------------------------------------
                    (Address of principal executive offices)

                                 (401) 942-7876
                        -------------------------------
                        (Registrant's telephone number)



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



There were 9,380,223 shares of common stock outstanding as of November 9, 2001.

<PAGE>


PART I - FINANCIAL INFORMATION


ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

         Balance Sheets                                               F-1
         Statements of Operations                                     F-3
         Statements of Cash Flows                                     F-4
         Notes to Financial Statements                         F-7 to F-9


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
--------------------------------------------------------------------------------

OVERVIEW

     Metro Global Media, Inc. ("Metro Global") is engaged in the production and
distribution of erotic prerecorded videocassettes, magazines, CD-ROMs, digital
versatile discs ("DVD"), and other products. Metro Global operates through its
wholly owned subsidiaries and operating divisions: Metro West Studios, Inc.,
("Metro Studios"), Metro, Inc. - West Coast Division ("Metro West"), Metro
International Distributors ("Metro International"), Amazing Media Group, Inc.
("Amazing Media"), Amazing Direct, Inc. ("Amazing Direct"), Metro, Inc. - East
Coast Division ("Metro East"), Airborne for Men, LTD. ("Airborne"). Metro
Global and these subsidiaries and divisions are sometimes collectively referred
to as the "Company".

     The Company produces and distributes erotic motion picture entertainment,
in the form of feature films primarily on video cassettes and DVD, publishes
and distributes a variety of adult magazines and markets and distributes erotic
entertainment through direct mail order, e-commerce and over the Internet.
Wholesale distribution of the Company's home video and DVD products is
accomplished through a distribution network of wholesalers located throughout
the United States, Canada and Europe. Wholesale distribution of the Company's
publications is accomplished through a distribution network of wholesalers
located throughout the United States and Canada. In addition, Metro East
operates a regional distributorship center for the Company's motion picture
titles and magazines as well as the video/DVD titles, magazines and novelty
products of other companies. This 64,000 square foot Cranston, Rhode Island
distribution center services retail outlets located throughout the Northeast
region of the United States. Distribution for the Company's motion picture
titles throughout the rest of the United States is conducted from Metro West's
35,500 square foot Chatsworth, California facility and international
distribution is conducted through Metro International, located in Flensburg,
Germany.

RESULTS OF OPERATIONS

     The Company's revenues for the three months ended August 25, 2001
decreased by 7% to $5,602,600 as compared to $6,053,472 for the three months
ended August 26, 2000. The decrease of approximately $451,000 was primarily
attributable to reductions in the Company's planned production schedule during
fiscal 2001, which affected the quantity and type of new titles available for
release during the first quarter of fiscal 2002. As a result, revenues from the
distribution of video products decreased by approximately $637,000. This
decrease was partially offset by an increase in revenues from the distribution
of novelty products totaling $159,000.

     Changes to the fiscal 2001 production schedule were required because of an
unexpected reduction in excess of $500,000 in the availability of funds from
the Company's existing credit facility with Reservoir Capital Corporation (for
further discussion, see Liquidity and Capital Resources" below). In addition to
the quantity of new video titles being reduced, the mix of these new releases
was weighted more heavily towards compilations and low-end videos than in
previous periods. The Company's production expenditures for the three months
ended August 25, 2001 decreased by 17% to approximately $534,000, as compared
to $641,000 for the three months ended August 26, 2000.

     In response to this reduction in production revenue, management instituted
programs to reduce accounts receivable levels, negotiate extended payment terms
with suppliers of products and services, and reduce costs and control expenses.
As a result of these efforts, as well as the proceeds generated from a partial
disposition of its investment in securities, the Company was able to satisfy
the demands of its lender while maintaining minimal production levels in order
to meet its contractual obligations and maintain its established customer base
and revenue streams.

     In the last quarter of fiscal 2001, the Company obtained $1,000,000 in
alternative financing to fund the production of specific titles for release
later in fiscal 2002. Repayment of these advances is due over a period of 12
months beginning in

<PAGE>


January 2002, and a royalty will be due on these titles at
the rate of $1.00 for each DVD sold through June 2003, with monthly payments
beginning in January 2003 and ending in February 2004. However, the Company
needs additional financing to achieve its planned production schedule for
fiscal 2002. (For further discussion, see "Liquidity and Capital Resources"
below.)

         Cost of revenues (including amortization of film costs) as a percentage
of revenues was 64% for the three months ended August 25, 2001 compared to 63%
for the three months ended August 26, 2000. The increase resulted primarily from
a change in product mix more heavily weighted in lower margin magazines as
opposed to videos and DVD's which generally have higher margins. The shift in
product mix was attributable to the reduced production schedule discussed above.
If the Company obtains adequate financing to fund its planned production
schedule, management believes that gross margins will improve as a result of
increased revenues and a shift back to a more favorable product mix. However,
there is no assurance the Company will be able to secure the additional
financing and/or generate the cost savings necessary to fund its planned
production. (See "Liquidity and Capital Resources".)

         Selling, general and administrative expenses decreased by 5% to
approximately $2,336,000 (42% of revenues) for the three months ended August 25,
2001as compared to approximately $2,452,000 (41% of revenues) for the three
months ended August 26, 2000. The reduction of approximately $116,000 was
primarily attributable to: (1) reductions in promotional activities and trade
show participation; and (2) the absence of first quarter 2001 expenses
associated with internet development costs.

         A significant portion of the reduction in selling, general and
administrative expenses during the first quarter of fiscal 2002 was attributable
to cost reduction and expense control programs implemented by management during
fiscal 2001 in response to unexpected reductions to its line of credit as
discussed above. Management will continue to focus on identifying and
implementing operating improvements, procedures and controls that reduce costs,
increase efficiency and enhance profit margins.

         The Company reported a net loss of $438,630 for the three months ended
August 25, 2001 as compared to $297,643 for the three months ended August 26,
2000. In addition to the shift in the Company's production schedule due to
reduced availability of funds, as discussed above, the increase of approximately
$141,000 was also attributable to a decrease in interest income of approximately
$58,000 for the first quarter of fiscal 2002. The reduction was attributable to
the repayment in fiscal 2001 of the note receivable to the sale of the Company's
publication segment in September 1999.

LIQUIDITY AND CAPITAL RESOURCES

         As a result of continuing losses, the Company is experiencing cash flow
problems and is in default under a note payable owed to an unrelated third party
(see below for further discussion). The Company's line of credit is also in
default as a result of failure to comply with certain financial ratio
requirements. The Company has a significant unpaid tax liability for the year
ended May 27, 2000. The Company is currently in annual renewal negotiations and
has not received a commitment from the lender to renew the line of credit which
expires in November 2001 and has not obtained replacement or supplemental
financing, and there can be no assurance of such renewal or new financing. The
Company's accounts receivable balance from Capital Video Corporation ("CVC"),
its primary customer and a related party was approximately $4,120,000 at August
25, 2001, of which approximately $1,596,000 was over ninety days. At November
13, 2001, the accounts receivable balance due from CVC was approximately
$3,289,000 (61% of the Company's total accounts receivable) of which
approximately $674,000 was over 90 days.

         These factors create an uncertainty regarding the Company's ability to
continue as a going concern. The Company's management has developed a business
plan that includes a reduction in product costs, improved inventory control, and
personnel restructuring. In addition, management plans selected price increases
and business development. Cash flow improvements are planned through a reduction
of the related party accounts receivable over a thirty-six week period. The
ability of the Company to continue as a going concern is dependent on the
success of these plans.

           Accounts receivable from related parties increased as a result of
extended payment terms granted in fiscal 2001 at the request of CVC, a related
party and the Company's major customer. Payment terms were extended to
accommodate CVC's major expansion into three additional states with 10 new
retail locations. The commitment to provide extended payment terms was made to
CVC prior to Reservoir Capital Corporation's demands for reductions in funding
levels available under its line of credit with the Company as discussed above
under "Results of Operations". As a condition of the arrangement, CVC agreed to
a charge back of $244,843 from Metro for all pricing discounts allowed from
December 2000 through March 2001. In addition, CVC's discount program was
reduced effective April 2001.

         The Company has implemented a plan with CVC and its related parties
whereby remittances and shipments against open orders will be monitored over a
36-week period ending in April 2002. At the end of that period CVC and its


<PAGE>


related parties have committed to reduce their accounts receivable to
approximately $2,000,000 or between 60 to 75 days of billing.

         Of the Company's total accounts receivable at August 26, 2001,
$4,120,357 (68%) as compared to $3,545,765 (56%) at May 26, 2001 was owed by CVC
and related parties. CVC, which is wholly owned by Kenneth Guarino who is also
the principal shareholder of the Company, operates 41 retail locations either
directly or through management service contracts with related parties. Because
of the amount of this receivable and the concentration of business with CVC,
this receivable is monitored very closely. All amounts due from CVC are
maintained within the agreed upon extended terms and are deemed collectible by
the Company. Accordingly, no allowance for related party receivables and no
related party bad debt expense has been recorded in the Company's financial
statements.

         The Company's primary sources of capital have historically been cash
provided by operations and proceeds available from its line of credit. During
the first quarter of fiscal 2002, operating activities used cash of
approximately $55,000 while financing activities provided cash of approximately
$254,000. Cash provided from financing activities consisted of proceeds from
production funding totaling $430,000 which were primarily offset by payments on
the line of credit and capitalized lease obligations totaling approximately
$176,000.

         In addition to financing activities, the primary source of cash was
proceeds from the sale of investment securities. During the first quarter of
fiscal 2002, the Company sold 207,850 shares of New Frontier Common Stock for a
total of $555,758. At August 25, 2001, the investment in the remaining 92,150
shares totaled $221,160. As of the close of trading on November 9, 2001, New
Frontier's Common Stock was trading on the NASDAQ's Small Cap Market at a price
of $2.63 per share.

         During the three months ended August 25, 2001, the Company invested
approximately $534,000 in new films and videos. Financing for these activities
has and will continue to be generated through operating cash flows, funds
received from its line of credit, as well as alternate financing sources as
described below.

         Capital expenditures during the first quarter of fiscal 2002 totaled
approximately $14,000 as compared to approximately $79,000 for the same period
in fiscal 2001.

         On October 28, 1998, the Company entered into an unsecured note payable
with an unrelated third party for $1,100,000. The note, which bore no interest,
was due in quarterly installments of $275,000 commencing December 31, 1998. In
consideration of the loan and part of an investment banking consultant
agreement, the Company issued the lender 150,000 restricted shares of the
Company's Common Stock. The Company used $507,500 of the proceeds to repurchase
198,242 shares of its outstanding Common Stock from Metro Plus, a company owned
by a principal stockholder. For fiscal 1999, the Company made one payment of
$275,000. In September 1999, the Company and lender agreed to a preliminary
extension of the note. In October 1999, the Company made a $275,000 payment.
Effective August 8, 2000, the Company renegotiated the terms for the final
$550,000 due on the note payable. Under the terms of the Forbearance and
Modification agreement, the note was to be paid in equal monthly installments of
$50,000 each. Payments on the note have been in default since October 2000 and
the loan balance of $450,000 bears interest at the default rate of 11% per
annum. As of August 25, 2001, the balance due on the note payable, including
accrued interest was $492,583. At November 12, 2001, the note balance of
$472,583 including accrued interest remained in default.

         On July 21, 1999, Metro Global entered into a seven year Licensing
Agreement with New Frontier Media, Inc. ("New Frontier"). Metro Global received
500,000 restricted shares of New Frontier common stock plus warrants to purchase
an additional 100,000 shares of New Frontier common stock per year for five
years. Metro Global valued the common stock and warrants at $4,787,474. The
deferred revenue is being amortized over seven years. Metro accounts for the
stock received as securities available for sale, in accordance with SFAS 115. At
August 25, 2001, Metro Global recorded a comprehensive loss of $29,488 on the
remaining investment of 92,150 shares. The stock is periodically reviewed for
permanent impairment.

         As part of the Licensing Agreement, in consideration of certain
services, Metro Global issued New Frontier 250,000 restricted shares of its
Common Stock and warrants to purchase 50,000 shares of Common Stock per year for
five years. Metro Global valued the Common Stock and warrants at $716,752. The
deferred expense is being amortized over five years.

         In September 1999, the Company signed a $4,000,000 Loan and Security
Agreement with Reservoir Capital Corporation which, in November 2000 was renewed
until November 2001. The Company is currently in negotiations with the lender
for the annual renewal through November 2002. The Company may borrow up to 70%
of accounts receivable less than ninety day old, up to a maximum of $3,000,000.
The accounts receivable borrowing base excludes foreign receivables and
receivables where more than 50% of the balance is over ninety days old. Also,
the borrowing base on accounts receivable owed by CVC is limited to the lesser
of 30% of total accounts receivable or $1,300,000. Additionally, the Company can
borrow 40% of inventory, up to a maximum of $700,000. The Company must pay a
service fee of .35% per month on the average daily


<PAGE>

loan balance. The Company must pay an under utilization fee of .25% on the
amount of the borrowings under $2,000,000. The loan is secured by substantially
all of the assets of the Company. The CVC accounts receivable are guaranteed by
the sole shareholder of CVC, who is also a significant shareholder of the
Company. In addition, CVC has pledged its inventory to secure the loan.

          In January 2001, certain terms of the loan agreement were revised at
the demand of the lender. These revisions included a reduction of the borrowing
base on accounts receivable owed by CVC from $1,600,000 to $1,300,000 and a
reduction of the maximum inventory borrowings from $1,000,000 to $700,000. The
reductions were implemented on a pro rata monthly basis from January 2001
through June 2001. In addition, effective January 2001, the interest rate on
borrowings changed from prime plus 3.5% to prime plus 5.0% per annum. The loan
agreement is currently in default as a result of the Company's failure to comply
with certain financial ratio requirements. As of November 10, 2001 borrowings
under the line of credit totaled $2,493,069.

         During the last quarter of fiscal 2001, the Company was able to obtain
an alternate financing source to supplement the funding requirements of its film
production schedule. On April 24, 2001 a limited partnership, Metro Media
Investors I, LP ("Media Investors") was formed with Metro International as its
General Partner. Media Investors was funded with $1,000,000 from its Limited
Partner. At August 25, 2001, the Company had received $930,000 in advances from
Media Investors to fund the production of specific titles. Repayment of the
advances is structured to coincide with the anticipated cash flow stream from
the specific titles being produced. The Company is obligated to repay these
advances over a period of twelve months beginning in January 2002. In addition,
a royalty will be paid to Media Investors for the specific titles financed at
the rate of $1.00 for each DVD sold through June 2003 with monthly payments
beginning January 2003 and ending February 2004. The royalty payment is
guaranteed to yield a minimum return of 15% per annum to the Limited Partner.

         As discussed above, the Company is experiencing cash flow problems and
factors exist that create an uncertainty regarding the Company's ability to
continue as a going concern. The Company's credit facility under the
above-described Loan and Security Agreement with Reservoir Capital Corporation
is renewable on an annual basis and is currently being negotiated for the next
renewal due in November 2001. The Company is also exploring additional sources
of short term borrowing, but has no commitments, understandings or agreements
and there can be no assurance that such additional financing will be available.
If the Company lost, or sustained additional reductions to, its existing credit
line financing with Reservoir Capital Corporation and was unable to replace it
with suitable alternative capital sources, there would be a materially adverse
effect on its contemplated production of new films and videos and, potentially,
its financial condition. The Company's Common Stock was delisted from the NASDAQ
Small Cap Market on December 7, 1999. The light and sporadic trading volume of
the Company's Common Stock on the "pink sheets" materially and adversely affects
the Company's ability to raise capital through new issuances of equity or
convertible securities.

FORWARD LOOKING STATEMENTS

         This Form 10-Q Report contains "forward-looking statements," including
statements in "Management's Discussion and Analysis of Financial Condition and
Results of Operations," as to expectations, beliefs, plans, objectives and
future financial performance, and assumptions underlying or concerning the
foregoing. Such forward-looking statements involve risks and uncertainties,
which could cause actual results or outcomes to differ materially from those
expressed in the forward-looking statements. Among factors that could cause
actual results or outcomes to differ materially from those discussed in the
forward-looking statements would be the Company's failure to obtain additional
sources of financing, as discussed above; government actions or initiatives,
such as attempts to limit or otherwise regulate the sale of adult-oriented
materials, including print, video and online materials; nonpayment or materially
late payment by the Company's largest customer, CVC, or a material decline or
interruption in sales to CVC; possible legal action on present or future overdue
obligations, such as the above-described default on $450,000 in aggregate
payments due in October, 2000 through June, 2001.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is subject to market risk from exposure to changes in interest rates
based on its line of credit financing. In the event that interest associated
with this debt was to increase 100 basis points, the annual impact on future
cash flows would be approximately $25,000.


<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS AT AUGUST 25, 2001 AND MAY 26, 2001



                                     ASSETS

<TABLE>
<CAPTION>
                                           August 25, 2001       May 26, 2001
                                           ----------------     --------------
                                             (unaudited)
<S>                                        <C>                  <C>
Current Assets
--------------
 Cash                                        $   206,669         $          -
 Accounts receivalbe, less allowance for
 doubtful accounts of $276,864 and
 $274,220 respectively                         1,954,182            2,848,237
 Accounts receivable, related party            4,120,357            3,545,765
 Investment in securities                        221,160              806,406
 Inventory                                     4,295,456            3,843,660
 Prepaid expense and other current assets        319,900              330,097
                                              -----------          ----------
Total Current Assets                          11,117,724           11,374,165
--------------------

 Motion pictures and other films at cost,
 less accumulated amortization of
 $13,930,169 and $13,424,575, respectively     4,827,540            4,799,452

 Property and equipment at cost, less
 accumulated depreciation of $3,641,068 and
 $3,486,359, respectively                      1,532,109            1,672,426

Other Assets                                     174,311              117,070
                                             -----------          -----------

Total Assets                                 $17,651,684          $17,963,113
------------                                 ===========          ===========
</TABLE>


                 See Notes to Consolidated Financial Statements



                                      F-1
<PAGE>

METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
AS AT AUGUST 25, 2001 AND MAY 26, 2001



                      LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                           August 25, 2001       May 26, 2001
                                           ----------------     --------------
                                             (unaudited)
<S>                                        <C>                  <C>
Current Liabilities
-------------------
 Current portion of capital lease
 obligations                                 $    212,617        $    229,679
 Short-term borrowings                          3,897,730           3,583,213
 Accounts payable                               3,955,967           3,781,119
 Accrued expenses                               1,804,316           1,940,818
 Income taxes payable                             448,668             451,318
                                               ----------          ----------
Total Current Liabilities                      10,319,298           9,986,147
-------------------------

Deferred revenue                                3,362,631           3,533,612
Capital lease obligations, less current
portion                                           43,832              87,255
                                              -----------          -----------

Total Liabilities                              13,725,761          13,607,014
-----------------                             -----------          -----------

Commitments and contingencies

Shareholders' Equity
--------------------
 Preferred stock, no par value; authorized
 2,000,000 shares; issued and outstanding,
 none
 Common Stock, $.0001 par value; authorized
 10,000,000 shares; issued 8,828,465 shares
 and outstanding, 8,630,223 shares                   883                 883
 Additional paid in capital                   16,826,372          16,790,535
 Accumulated deficit                         (12,290,089)        (11,851,459)
 Accumulated other comprehensive loss           (103,743)            (76,360)
                                             -----------         -----------
                                               4,433,423           4,863,599

 Less cost of treasury stock
 (198,242 common shares)                        (507,500)           (507,500)
                                             ------------        -----------

Total Shareholders' Equity                     3,925,923           4,356,099
--------------------------                    -----------         -----------

Total Liabilities and Shareholders' Equity   $17,651,684         $17,963,113
------------------------------------------   ===========         ===========
</TABLE>

                 See Notes to Consolidated Financial Statements


                                      F-2
<PAGE>
METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED AUGUST 25, 2001 AND AUGUST 26, 2000 (UNAUDITED)

<TABLE>
<CAPTION>
                                                2001                 2000
                                           ----------------     --------------
<S>                                        <C>                  <C>

Revenues                                       $5,602,600          $6,053,472

Cost of revenues, incliding amortization
 of motion pictures and other films of
 $505,594 and $578,814, respectively             3,558,156           3,798,091

Selling, general and administrative
expenses                                        2,336,071           2,451,942
                                              ------------        ------------
                                                 (291,627)           (196,561)

Other income and (expenses)
----------------------------
 Interest expense                                (159,625)           (167,563)
 Interest income                                        -              57,904
 Other income                                      12,622               8,577
                                                  --------            --------

Net loss                                        $(438,630)          $(297,643)
                                                =========           =========
Comprehensive loss
------------------

Net Loss                                        $(438,630)          $(297,643)

Other comprehensive loss                          (27,383)           (914,954)
                                               ------------       -------------
Net comprehensive loss                          $(466,013)        $(1,212,597)
                                               ===========        ============

Loss Per Share:
 Basic and diluted                                 $(0.05)             $(0.03)


Weighted average number of shares:
Basic and diluted                               8,630,223           8,630,223
</TABLE>

                 See Notes to Consolidated Financial Statements

                                      F-3
<PAGE>

METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED AUGUST 25, 2001 AND AUGUST 26, 2000 (UNAUDITED)


<TABLE>
<CAPTION>
                                                2001                 2000
                                           ----------------     --------------
<S>                                        <C>                  <C>

Cash flows from operating activities:
 Net loss                                     $(438,630)           $(297,643)
                                               ---------            ---------

Adjustments to reconcile net loss to net
cash (used in) provided by operating
activities:
 Depreciation expense                           154,709              173,639
 Amortization of motion pictures and other
 films                                          505,594              578,814
 Amortization of deferred rent                   (3,503)              (3,503)
 Amortization of unearned compensation                -                  500
 Amortization of deferred revenue              (170,981)            (170,981)
 Amortization of deferred expense                35,837               54,356
 Amortization of discount on debenture                -               13,142
 Allowance for doubtful accounts                  2,644               45,000
 Foreign Exchange                                 2,105               31,296
(Increase) decrease in assets:
 Accounts receivable                            316,819              432,544
 Inventory                                     (451,796)            (588,646)
 Recoverable income tax                               -              183,436
 Prepaid expenses and other current assets       10,197              (89,019)
 Other assets                                   (57,241)             (27,568)
Increase (decrease) in liabilities;
Accounts payable and accrued expenses            41,849               36,907
Income taxes payable                             (2,650)                   -
                                               --------             --------
Total adjustments                               383,583              669,917
-----------------                              --------             --------

Net cash (used in) provided by operating
activities                                     $(55,047)            $372,274
---------------------------------------        ---------            ---------
</TABLE>

                 See Notes to Consolidated Financial Statements

                                      F-4
<PAGE>
METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE THREE MONTHS ENDED AUGUST 25, 2001 AND AUGUST 26, 2000 (UNAUDITED)

<TABLE>
<CAPTION>
                                                2001                 2000
                                           ----------------     --------------
<S>                                        <C>                  <C>
Cash flows from investing activities:
 Payments from notes receivable                $       -         $965,649
 Investments in motion pictures and
 other films                                    (533,682)        (641,327)
 Purchase of property and equipment              (14,392)         (79,320)
 Proceeds from sale of securities                555,758                -
                                               ----------        ---------
Net cash provided by investing activities:         7,684          245,002
-----------------------------------------      ----------        ---------

Cash flows from financing activitie:s
 Net payments on line of credit                 (115,483)        (375,576)
 Proceeds on notes payable                       430,000                -
 Payments on notes payable                             -         (425,000)
 Principal payments on capital lease
 obligations                                     (60,485)         (74,846)
                                               ----------        ---------
Net cash provided by (used in)
------------------------------
financing activities                             254,032         (875,422)
--------------------                           ---------         ---------

Net increase (decrease) in cash                 $206,669        $(258,146)

Cash, beginning of period                              -          361,539

Cash, end of period                             $206,669        $ 103,393
                                                ========        =========

Supplemental disclosures of cash flow
information:

Cash paid during the periods for:

    Interest                                    $103,587         $147,831
                                                ========         ========
    Income taxes                                  $2,650         $      -
                                                ========         ========
</TABLE>

                 See Notes to Consolidated Financial Statements

                                      F-5
<PAGE>



METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE THREE MONTHS ENDED AUGUST 25, 2001 AND AUGUST 26, 2000 (UNAUDITED)
--------------------------------------------------------------------------------


Supplemental schedule of non-cash investing and financing activities:

         On July 21, 1999, Metro Global entered into a seven year Licensing
Agreement with New Frontier Media, Inc. Metro Global received 500,000 restricted
shares of New Frontier Common Stock plus warrants to purchase an additional
500,000 shares of New Frontier Common Stock (100,000 shares per year for five
years). Metro Global valued the common stock and warrants at $4,787,474. The
deferred revenue is being amortized over seven years.

         As part of the Licensing Agreement, in consideration of certain
services, Metro Global issued New Frontier 250,000 restricted shares of its
Common Stock and warrants to purchase 250,000 shares of Common Stock (50,000
shares per year for five years). Metro Global valued the Common Stock and
warrants at $716,752. The deferred expense is being amortized over five years.

         Metro East leases its Rhode Island warehouse and office facilities from
Castle Properties, LLC ("Castle"), which is principally owned by the wife of
Kenneth Guarino, the Company's principal shareholder. In May 2001, CVC agreed to
assume back rents and property taxes due to Castle for the period through May
2001. In addition, CVC agreed to assume rents and property taxes due for the
period June through September 2001. During the three months ended August 25,
2001, $71,376 in rent and property taxes were assumed by CVC and the accounts
receivable due from CVC was reduced accordingly.

                 See Notes to Consolidated Financial Statements

                                      F-6
<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED AUGUST 25, 2001 AND AUGUST 26, 2000 (UNAUDITED)
--------------------------------------------------------------------------------

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

         The consolidated financial statements include the accounts of Metro
Global and its majority owned and controlled subsidiaries. All intercompany
balances and transactions have been eliminated in consolidation.

Financial Statements

         The interim financial statements are prepared pursuant to the
requirements for reporting on Form 10-Q. The interim financial information
included herein is unaudited; however, such information reflects all adjustments
(consisting of normal recurring adjustments) that are, in the opinion of
management, necessary to a fair presentation of the financial position, results
of operations, and changes in financial position for the interim periods. The
interim financial statements and notes thereto should be read in conjunction
with the financial statements and notes included in Metro Global's latest annual
report on Form 10-KSB. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted. The current period results of operations are not
necessarily indicative of results, which ultimately will be reported for the
full year ending May 25, 2002.

Use of Estimates

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires the use
of estimates based on management's knowledge and experience. Due to their
prospective nature, it is reasonable to expect actual results to differ from
those estimates.

2.  GOING CONCERN

         The accompanying consolidated financial statements of Metro Global
reflect net losses of $438,630 and $297,643 during the quarters ended August 25,
2001 and August 26, 2000, respectively. Metro Global is experiencing cash flow
problems and is in default under a note payable and its line of credit. Metro
Global also has a significant unpaid tax liability for the year ended May 27,
2000. Metro Global's accounts receivable balance from a related party, Capital
Video Corporation ("CVC") was approximately $4,120,000 at August 25, 2001, of
which approximately $1,596,000 was over 90 days. Metro Global's line of credit,
which is in default, expires in November 2001. Metro Global is currently in
negotiations with the lender for the annual renewal through November 2002. Metro
Global has not yet obtained replacement financing. These factors create an
uncertainty about Metro Global's ability to continue as a going concern.
Management of Metro Global has developed a business plan that includes a
reduction in product costs, improved inventory control, and personnel
restructuring. In addition, management plans selected price increases and
business development. Metro Global plans to improve its cash flow through a
reduction of related party accounts receivable over a 36-week period. The
ability of Metro Global to continue as a going concern is dependent on the
success of these plans. The financial statements do not include any adjustments
that might be necessary if Metro Global is unable to continue as a going
concern.

3.  INVESTMENT IN SECURITIES

         On July 21, 1999, Metro Global entered into a seven year Licensing
Agreement with New Frontier Media, Inc. ("New Frontier"). Metro Global received
500,000 restricted shares of New Frontier Common Stock plus warrants to purchase
an additional 500,000 shares of New Frontier Common Stock (100,000 shares per
year for five years). Metro Global valued the common stock and warrants at
$4,787,474. The deferred revenue is being amortized over seven years. Metro
accounts for the stock received as securities available for sale, in accordance
with SFAS 115. The stock is periodically reviewed for permanent impairment.

         As part of the Licensing Agreement, in consideration of certain
services, Metro Global issued New Frontier 250,000 restricted shares of its
Common Stock and warrants to purchase 250,000 shares of Common Stock (50,000
shares per year for five years). Metro Global valued the Common Stock and
warrants at $716,752. The deferred expense is being amortized over five years.

                                      F-7
<PAGE>


METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE THREE MONTHS ENDED AUGUST 25, 2001 AND AUGUST 26, 2000 (UNAUDITED)
--------------------------------------------------------------------------------

3.  INVESTMENT IN SECURITIES (CONTINUED)

         During fiscal 2002, Metro Global sold 207,850 of its 300,000 remaining
shares of New Frontier Common Stock for a total of $555,758. Metro Global
recorded comprehensive losses of $29,488 and $946,250 on the investment at
August 25, 2001 and August 26, 2000, respectively.

4.  DEBT

         On October 28, 1998, Metro Global entered into a note payable with an
unrelated third party for $1,100,000. The note, which bore no interest, was due
in quarterly installments of $275,000 commencing December 31, 1998. In
consideration of the loan and part of an investment banking consultant
agreement, Metro Global issued the lender 150,000 restricted shares of Metro
Global's Common Stock. Metro Global used $507,500 of the proceeds to repurchase
198,242 shares of its outstanding Common Stock from Metro Plus, a company owned
by a significant shareholder. For the year ended May 29, 1999, Metro Global made
one payment of $275,000. In September 1999, Metro Global and the lender agreed
to a preliminary extension of the note. Metro Global made a payment of $275,000
in October 1999. Effective August 8, 2000, Metro Global, renegotiated the terms
for the final $550,000 due on the note payable. Under the terms of the
Forbearance and Modification agreement, Metro Global was to make monthly
payments of $50,000. Payments on the note have been in default since October
2000 and the loan balance of $450,000 bears interest at the default rate of 11%
per annum. As of August 25, 2001, the balance due on the note payable, including
accrued interest was $492,583.

         During the last quarter of fiscal 2001, Metro Global was able to obtain
an alternate financing source to supplement the funding requirements of its film
production schedule. On April 24, 2001 a limited partnership, Metro Media
Investors I, LP ("Media Investors") was formed with Metro International, Metro
Global's foreign subsidiary, as its General Partner. Media Investors was funded
with $1,000,000 from its Limited Partner. At August 25, 2001, Metro Global had
received $930,000 in advances from Media Investors to fund the production of
specific titles. Repayment of the advances is structured to coincide with the
cash flow stream generated from the specific titles being produced. The advances
will be repaid over a period of twelve months beginning in January 2002. In
addition, a royalty will be paid to Media Investors for the specific titles
financed at the rate of $1.00 for each DVD sold through June 2003 with monthly
payments beginning January 2003 and ending February 2004. The royalty payment is
guaranteed to yield a minimum of 15% per annum to the Limited Partner.

5. SHORT-TERM BORROWINGS

         In September 1999, Metro Global signed a $4,000,000 Loan and Security
Agreement with Reservoir Capital Corporation. Pursuant to the original terms of
the agreement, Metro Global could borrow up to 70% of accounts receivable less
than ninety day old, up to a maximum of $3,000,000. The accounts receivable
borrowing base excludes foreign receivables and receivables where more than 50%
of the balance is over ninety days old. Also, the borrowing base on accounts
receivable owed by CVC is limited to the lesser of 30% of total accounts
receivable or $1,600,000. Additionally, Metro Global could borrow 40% of
inventory, up to a maximum of $1,000,000. Metro Global must pay a service fee of
 .35% per month on the average daily loan balance. Metro Global must pay an under
utilization fee of .25% on the amount of the borrowings under $2,000,000. The
loan is secured by substantially all of the assets of Metro Global. The CVC
accounts receivable are guaranteed by the sole shareholder of CVC, who is also a
significant shareholder of Metro Global. In addition, CVC has pledged its
inventory to secure the loan.

          In January 2001, certain terms of the loan agreement were revised at
the demand of the lender. These revisions included a reduction of the borrowing
base on accounts receivable owed by CVC from $1,600,000 to $1,300,000 and a
reduction of the maximum inventory borrowings from $1,000,000 to $700,000. The
reductions were implemented on a pro rata monthly basis from January 2001
through June 2001. In addition, effective January 2001, the interest rate on
borrowings changed from prime plus 3.5% to prime plus 5.0% per annum. The loan
agreement is currently in default as a result of the Company's failure to comply
with certain financial ratio requirements. As of August 25, 2001 borrowings
under the line of credit totaled $2,517,730.


                                      F-8
<PAGE>

METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE THREE MONTHS ENDED AUGUST 25, 2001 AND AUGUST 26, 2000 (UNAUDITED)
--------------------------------------------------------------------------------

5. SHORT-TERM BORROWINGS (CONTINUED)

   The following schedule summarizes short-term borrowings as of August 25,
2001:

         Note payable (Note 4)                           $     450,000
         Production advances (Note 4)                          930,000
         Line of credit (Note 5)                             2,517,730
                                                           -------------
                                                         $   3,897,730


                                      F-9
<PAGE>

PART II - OTHER INFORMATION
---------------------------

ITEM 1.  LEGAL PROCEEDINGS
--------------------------

George Kinney v. Metro Global Media, Inc., et al.
C.A. No. 99-579 (U.S.D.C.,D.R.I.)

         On November 22, 1999, George Kinney, on behalf of himself and all other
similarly situated, commenced a putative class action in the United States
District Court for the District of Rhode Island against Metro Global and certain
of its present or former officers and directors. Plaintiff seeks to represent a
class of all persons who acquired securities of Metro Global between September
13, 1996 and September 13, 1999. The Complaint alleges violations of section
10(b) of the Securities Exchange Act of 1934. Plaintiff alleges that the
defendants made a series of false and misleading statements concerning Metro
Global's reported financial results during the class period that violated
generally accepted accounting principles and ultimately caused Metro Global to
restate certain financial statements. On March 15, 2000, Metro Global and
certain defendants filed a motion to dismiss the complaint. The plaintiffs filed
an amended complaint dated May 15, 2000 and Metro Global moved to dismiss the
amended complaint on July 5, 2000. Plaintiffs filed an opposition to Metro
Global's motion to dismiss on August 15, 2000. Metro Global replied to the
plaintiffs' opposition on September 1, 2000. By order dated January 16, 2001,
the Court denied Metro Global's motion to dismiss the amended complaint. On
April 5, 2001, Metro Global retained new legal counsel for representation in the
action. Metro Global filed an answer to the complaint on May 4, 2001. At a Court
conference on November 13, 2001, it was agreed that the discovery process begin
to determine whether the plaintiff is a proper class representative. Metro
Global believes it has meritorious defenses that will enable it to secure a cost
effective settlement before trial or, in the event of trial, that it will
prevail.

New England Phoenix Co., Inc. vs. Metro Global Media Inc., and United Stock
Transfer, Inc. C. A. 01CV11544GAO (U.S. D. C.., D MA)

         On September 7, 2001, a Complaint was filed against Metro Global and
its stock transfer agent in the United States District Court for the District of
Massachusetts. The Complaint alleges that Metro Global improperly canceled
certain shares of stock standing in the name of the plaintiff's predecessor in
interest and that Metro Global engaged in other tortious behavior. Metro Global
has obtained an extension of time to respond to the Complaint. Metro Global
denies any wrongdoing and believes it has meritorious defenses that will enable
it to secure a cost effective settlement before trial or, in the event of trial,
that it will prevail.

         Except for the actions described above, there are no material legal
proceedings pending against Metro Global or its subsidiaries other than routine
litigation that is incidental to the business.

ITEM 2.  CHANGES IN SECURITIES
------------------------------

         On September 17, 2001, the Company issued 750,000 restricted shares of
its Common Stock in payment of $100,000 in consulting services provided during
the year ended May 26, 2001. The services, which related to mail order,
marketing and general business consulting, were provided by the mother of Greg
Alves, President of Metro Global.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
----------------------------------------

                  None

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

                  None

ITEM 5.  OTHER INFORMATION
--------------------------

                  None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------

         (a)   Exhibits
               None

         (b)   Reports on Form 8-K
               None

<PAGE>


                                   SIGNATURE



Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                      METRO GLOBAL MEDIA, INC.

                                      November 20, 2001



                                      By: /s/ Gregory N.Alves
                                         --------------------
                                            Gregory N. Alves
                                            President and Director


                                      By: /s/ Louis T. Turcotte
                                         -----------------------
                                            Louis T. Turcotte
                                            Chief Financial Officer, Treasurer
                                            (principal financial and accounting
                                            Officer), Secretary and Director