<PAGE>


                    U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB

                                   (Mark One)

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

                FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2000

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

          For the transition period from _____________ to _____________

                         Commission File Number: 0-26443

                           FALCON ENTERTAINMENT CORP.

        (Exact name of Small Business Issuer as specified in its Charter)

                 DELAWARE                               22-281-1783

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

                459 COLUMBUS AVENUE, NO. 712, NEW YORK, NY 10024

                    (Address of principal executive offices)

                                 (800) 972-3093

                           (Issuer's telephone number)

                675 THIRD AVENUE, 12TH FLOOR, NEW YORK, NY 10017

        (Former Name, former address and former fiscal year, if changed
                              since last Report.)

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 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
                                         ---

                      APPLICABLE ONLY TO CORPORATE ISSUERS

   State the number of shares outstanding of each of the issuer's classes of
               common equity, as of the latest practicable date:
           13,400,724 shares of Common Stock as of February 15, 2001.

           TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):

                                    YES     NO  X
                               -----------------------


<PAGE>


                           FALCON ENTERTAINMENT CORP.

                                      INDEX

PART I.           FINANCIAL INFORMATION

Item 1.           Financial Statements (unaudited)

                  Condensed Consolidated Balance Sheets as of  November 30, 2000
                  and May 31, 2000

                  Condensed Consolidated Statements of Operations for the Six
                  Months Ended November 30, 2000 and 1999, and for the Period
                  from Inception (November 6, 1997) through November 30, 2000

                  Condensed Consolidated Statements of Cash Flows for the Six
                  Months Ended November 30, 2000 and 1999, and for the Period
                  from Inception (November 6, 1997) through November 30, 2000

                  Notes to Condensed Consolidated Financial Statements

Item 2.           Plan of Operation

PART II           OTHER INFORMATION

Item 1.           Legal Proceedings

Item 2.           Changes in Securities and Use of Proceeds

Item 6.           Exhibits and Reports on Form 8-K



<PAGE>


            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

       CERTAIN STATEMENTS CONTAINED IN THIS REPORT REGARDING MATTERS THAT ARE
NOT HISTORICAL FACTS ARE FORWARD-LOOKING STATEMENTS. BECAUSE SUCH
FORWARD-LOOKING STATEMENTS INCLUDE RISKS AND UNCERTAINTIES, ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. ALL STATEMENTS WHICH ADDRESS OPERATING PERFORMANCE, EVENTS OR
DEVELOPMENTS THAT MANAGEMENT EXPECTS OR ANTICIPATES TO OCCUR IN THE FUTURE,
INCLUDING STATEMENTS RELATING TO SALES AND EARNINGS GROWTH, STATEMENTS
EXPRESSING GENERAL OPTIMISM ABOUT FUTURE OPERATING RESULTS, AND STATEMENTS
REGARDING THE COMPANY'S STRATEGY OR REVENUE SOURCES, ARE FORWARD-LOOKING
STATEMENTS. THE FORWARD-LOOKING STATEMENTS ARE BASED ON MANAGEMENT'S CURRENT
VIEWS AND ASSUMPTIONS REGARDING FUTURE EVENTS AND OPERATING PERFORMANCE. MANY
FACTORS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM ESTIMATES CONTAINED
IN MANAGEMENT'S FORWARD-LOOKING STATEMENTS INCLUDING, BUT NOT LIMITED TO, THOSE
SET FORTH UNDER THE HEADING "RISK FACTORS" IN ITEM 2 OF THIS REPORT. THE
DIFFERENCES MAY BE CAUSED BY A VARIETY OF FACTORS, INCLUDING, BUT NOT LIMITED
TO, ADVERSE ECONOMIC CONDITIONS, COMPETITIVE PRESSURES, INADEQUATE CAPITAL,
UNEXPECTED COSTS, LOWER REVENUES, NET INCOME AND FORECASTS, THE POSSIBILITY OF
FLUCTUATION AND VOLATILITY OF THE COMPANY'S OPERATING RESULTS AND FINANCIAL
CONDITION, INABILITY TO CARRY OUT MARKETING AND SALES PLANS AND LOSS OF KEY
EXECUTIVES, AMONG OTHER THINGS. READERS ARE URGED TO CAREFULLY REVIEW AND
CONSIDER THE VARIOUS DISCLOSURES MADE BY THE COMPANY IN THIS REPORT AND IN THE
COMPANY'S OTHER REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE
"SEC"), INCLUDING THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR
ENDED MAY 31, 2000, AS FILED WITH THE SEC ON SEPTEMBER 13, 2000, THAT ATTEMPT TO
ADVISE INTERESTED PARTIES OF CERTAIN RISKS AND FACTORS THAT MAY AFFECT THE
COMPANY'S BUSINESS. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THOSE
FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES OCCURRING AFTER
THE DATE HEREOF.


<PAGE>


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

FALCON ENTERTAINMENT CORPORATION & SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                        NOVEMBER 30, 2000
ASSETS                                                                                     (UNAUDITED)             May 31, 2000
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>                      <C>
CURRENT ASSETS
     Cash and equivalents                                                                  $      669               $1,829,580
     Certificates of deposit                                                                   65,582                  150,928
     Prepaid recording costs                                                                  200,000                        -
     Prepaid expenses                                                                          27,490                  396,209
-----------------------------------------------------------------------------------------------------------------------------------
         Total current assets                                                                 293,741                2,376,717

PREPAID ARTIST FEES                                                                           195,084                  255,084

CERTIFICATE OF DEPOSIT                                                                        360,042                  348,499

PROPERTY AND EQUIPMENT, NET                                                                   453,523                  444,535

OTHER ASSETS                                                                                    9,126                   90,900
-----------------------------------------------------------------------------------------------------------------------------------

     TOTAL ASSETS                                                                          $1,311,516               $3,515,735
-----------------------------------------------------------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
-----------------------------------------------------------------------------------------------------------------------------------

CURRENT LIABILITIES
     Note payable - stockholder                                                            $  604,957               $  393,834
     Accounts payable and accrued expenses                                                  1,238,044                1,112,943
     Distribution payable - stockholder                                                        50,000                   50,000
-----------------------------------------------------------------------------------------------------------------------------------
         Total current liabilities                                                          1,893,001                1,556,777
-----------------------------------------------------------------------------------------------------------------------------------

STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
     Common stock, par value $.00005 per share; 20,000,000 shares authorized;
         13,400,724 and 13,247,307 issued and outstanding                                         670                      662
     Additional paid-in capital                                                             8,301,620                7,927,143
     Deficit accumulated during the development stage                                     ( 8,883,775)             ( 5,968,847)
-----------------------------------------------------------------------------------------------------------------------------------
         Total stockholders' equity (deficiency in assets)                                (   581,485)               1,958,958
-----------------------------------------------------------------------------------------------------------------------------------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)                     $1,311,516               $3,515,735
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                       See accompanying notes - unaudited.
<PAGE>


FALCON ENTERTAINMENT CORPORATION & SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------------
                                                     Six Months Ended               Three Months Ended         Period From Inception
                                                       November 30,                     November 30,             (November 6, 1997)
                                         ----------------------------------- ---------------------------------      through
                                                 2000             1999             2000              1999         November 30, 2000
---------------------------------------- ----------------- ----------------- ----------------- --------------- ---------------------
<S>                                         <C>                <C>             <C>                <C>          <C>
REVENUES
     Dividend Income                         $     2,916        $    3,042       $       283       $    1,181        $    96,831
     Interest Income                              14,509                 -             6,812                -             19,386
---------------------------------------- ----------------- ----------------- ----------------- ----------------   ----------------
         Total revenues                           17,425             3,042             7,095            1,181            116,217
---------------------------------------- ----------------- ----------------- ----------------- ----------------   ----------------

EXPENSES
     Advertising                                 283,505                 -            34,014                -          3,851,461
     Broadcasting fees                           527,841                 -           110,692                -            753,841
     Compensation                                854,020                 -           216,993                -          1,603,600
     Consulting                                  109,534                 -            31,036                -            513,601
     General and administrative                  645,846           230,103           266,650          194,555            896,544
     Interest                                     33,157             9,167            18,522            3,818            106,927
     Production costs                            280,091                 -            75,930                -            586,965
     Professional fees                           153,359                 -            50,692                -            292,053
     Matrix agreement costs                       45,000                 -                 -                -            395,000
---------------------------------------- ----------------- ----------------- ----------------- ----------------   ----------------
         Total expenses                        2,932,353           239,270           804,529          198,373          8,999,992
---------------------------------------- ----------------- ----------------- ----------------- ----------------   ----------------

NET LOSS                                    ($ 2,914,928)      ($  236,228)     ($   797,434)     ($  197,192)      ($ 8,883,775)
---------------------------------------- ----------------- ----------------- ----------------- ----------------   ----------------

NET LOSS PER SHARE                          ($      0.22)      ($     0.02)     ($      0.06)     ($     0.02)      ($      0.85)
---------------------------------------- ----------------- ----------------- ----------------- ----------------   ----------------

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
   OUTSTANDING                                13,379,002         9,666,393        13,383,780        9,691,475         10,452,988
---------------------------------------- ----------------- ----------------- ----------------- ----------------   ----------------
</TABLE>


                       See accompanying notes - unaudited.
<PAGE>


FALCON ENTERTAINMENT CORPORATION & SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                                                    Period From
                                                                                     Six Months Ended                Inception
                                                                                       November 30,                 (November 6,
                                                                           --------------------------------------   1997) through
                                                                                   2000              1999         November 30, 2000
-------------------------------------------------------------------------- ------------------ ------------------- ------------------
<S>                                                                        <C>                <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                                  ($2,914,928)          ($236,228)       ($8,883,775)
-------------------------------------------------------------------------- ------------------ ------------------- ------------------
    Adjustments to reconcile net loss to net cash used in operating
      activities:
       Depreciation and amortization                                               67,201                   -             73,918
       Common stock and options issued for compensation                           304,485                   -            919,065
       Common stock issued for professional services                               25,000             162,500            300,000
       Common stock issued for talent acquisition agreement                        45,000                   -             45,000
       Common stock issued for rent                                                     -                   -             12,500
       Changes in operating assets and liabilities:
          Prepaid expenses                                                        368,718                   -        (    27,490)
          Prepaid recording costs                                             (   200,000)                  -        (   200,000)
          Prepaid artist fees                                                      60,000                   -        (   195,084)
          Other assets                                                             81,775           (  26,980)       (     9,126)
          Accounts payable and accrued expenses                                   125,101              13,537          1,238,044
-------------------------------------------------------------------------- ------------------ ------------------- ------------------
              Total adjustments                                                   877,280             149,057          2,156,827
-------------------------------------------------------------------------- ------------------ ------------------- ------------------
                 Net cash used in operating activities                        ( 2,037,648)          (  87,171)       ( 6,726,948)
-------------------------------------------------------------------------- ------------------ ------------------- ------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Cash balances of company acquired                                                   -                   -             54,725
    Purchase of certificate of deposit                                        (    24,984)                  -        (   524,411)
    Maturity of certificate of deposit                                             98,787                   -             98,787
    Purchases of property and equipment                                       (    76,189)                  -        (   527,441)
-------------------------------------------------------------------------- ------------------ ------------------- ------------------
                 Net cash used in investing activities                        (     2,386)                  -        (   898,340)
-------------------------------------------------------------------------- ------------------ ------------------- ------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Loans from (repayment to) stockholder, net                                    211,123           ( 127,463)           229,957
    Net proceeds from issuance of common stock                                          -                   -          7,396,000
-------------------------------------------------------------------------- ------------------ ------------------- ------------------
                 Net cash provided by (used in) financing activities              211,123           ( 127,463)         7,625,957
-------------------------------------------------------------------------- ------------------ ------------------- ------------------

DECREASE IN CASH AND EQUIVALENTS                                              ( 1,828,911)          ( 214,607)               669

CASH AND EQUIVALENTS - BEGINNING                                                1,829,580             262,215                  -
-------------------------------------------------------------------------- ------------------ ------------------- ------------------

CASH AND EQUIVALENTS - ENDING                                                  $      669            $ 47,608         $       669
-------------------------------------------------------------------------- ------------------ ------------------- ------------------

</TABLE>


                       See accompanying notes - unaudited.
<PAGE>


         Notes to Condensed Consolidated Financial Statements (Unaudited)

         BASIS OF PRESENTATION

         The accompanying unaudited consolidated condensed financial
statements of Falcon Entertainment Corp. and its subsidiaries (collectively,
the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and the rules and regulations of the SEC.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments considered
necessary for a fair presentation (consisting of normal recurring accruals)
have been included. Operating results for the six-month period ended
November 30, 2000 are not necessarily indicative of the results that may be
expected for the year ending May 31, 2001. These unaudited condensed
consolidated financial statements should be read in conjunction with the
audited annual consolidated financial statements and notes thereto included
in the Company's Annual Report on Form 10-KSB for the fiscal year ended
May 31, 2000.

         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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

         NET LOSS PER SHARE

         Net loss per share is computed in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share," based on the
weighted average number of common shares outstanding, restated to give effect to
the recapitalization. Outstanding stock options and warrants were not considered
in the calculation of weighted average number of common shares outstanding, as
their effect would have been anti-dilutive.

         GOING CONCERN

         The Company has incurred significant operating losses and negative cash
flows from operations since inception. The Company's ability to continue as a
going concern is dependent upon achieving profitable operations and positive
cash flows from operations or obtaining debt or equity financing. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of these uncertainties.

         Management is attempting to raise additional capital to assist the
Company in funding operations and provide the opportunity for the Company to
continue as a going concern. Management believes, but cannot provide any
assurance that, it will be successful in raising capital sufficient to continue
operations.

         LEGAL PROCEEDINGS

         In November 2000, OlympuSAT, Inc. filed suit against the Company, James
Fallacaro and Anthony Escamilla in Circuit Court in Palm Beach County, Florida.
OlympuSAT alleges breach of contract, fraudulent inducement and breach of an
implied duty of good faith and fair dealing arising out of the Network Carriage
Agreement entered into between the Company and OlumpuSAT on December 6, 1999,
which Agreement was terminated in November 2000. The complaint filed by
OlympuSAT indicates that it is seeking an indeterminate amount of damages. The
Company believes that the claims asserted in the complaint are without merit,
and plans to vigorously defend its position. However, the Company is unable to
predict the outcome of the matter at this time.

         NOTE PAYABLE -- STOCKHOLDER

         Note payable -- stockholder bears interest at 10% per annum, is
secured by substantially all assets of the Company and is due on demand.

         STOCK OPTIONS

         On November 1, 2000, the Company granted options to puchase an
aggregate of one million shares of common stock to various employees and a
consultant. The options are exercisable immediately at $1.00 per share and
expire on October 31, 2010.

         SUBSEQUENT EVENTS

         In January 2001, the Company defaulted on its rental lease and
stipulated to relinquish a certificate of deposit in the amount of
approximately $360,000 to the landord. This amount was comprised principally
of unpaid rent of approximately $150,000, brokers' fees of approximately
$113,000, construction fees of approximately $48,000 and other legal and
professional fees.

         Item 2. Plan of Operation

         GENERAL

         Falcon Entertainment Corp. (collectively with its subsidiaries,
"Falcon" or the "Company") is a diversified entertainment company that webcasts
music videos of amateur and professional artists over the Internet through its
web site, www.IMNTV.com, and that intends to broadcast those videos over cable
and


<PAGE>


direct satellite television on a corresponding television channel, IMNTV. It
also operates a record label, InVision Records, and intends to commence
operations of a second record label, Ecity Records. Through these labels, the
Company intends to produce and mass market the music of artists and bands,
including certain of those who submit videos for broadcast over IMNTV. It
further intends to develop its web site into a web portal to promote the
Company's products and services, promote the musicians signed to its record
labels, provide music news and related informational services and provide links
to related web sites.

         To date, the Company has not generated revenues from the operation of
its current business model. In March 2000, the Company completed a private
offering of its common stock, raising approximately $7,395,000 after deductions
for commissions, fees and offering expenses.

         The Company was incorporated in March 1986 under the laws of the State
of Delaware under the name AVTR Systems, Inc. In April 1999, the Company changed
its name to Independent Music Group, Inc., and in December 1999 it changed its
name to Falcon Entertainment Corp. In April 1999, the Company acquired all of
the issued and outstanding capital stock of Independent Music Network, Inc., a
Delaware corporation, from the Company's President, Chief Executive Officer and
Chairman.

         The Company is considered to be in the development stage, and the
accompanying financial statements represent those of a development stage
company.

         PLAN OF OPERATION

         Our current plan of operation for the next twelve months includes the
development of our broadcast strategy and the re-launch of our programming over
national cable television, the continued design and development of our corporate
web site, and the development of our record labels, InVision Records and Ecity
Records.

         We originally began broadcasting content over our IMNTV music
channel, in a limited number of markets and during a limited number of time
periods, on June 1, 2000. As previously announced, in November 2000 we
terminated our original network carriage agreement for the distribution of
our programming, and our channel has not been broadcast in any television
markets since approximately September 2000. We are currently seeking
alternative arrangements to distribute our television programming so that we
can re-launch our cable television channel.

         We expect that our primary sources of revenue will be derived from our
IMNTV music channel and web site, and from InVision Records. We anticipate that
IMNTV will generate revenues primarily from advertising sales, video broadcasts
and merchandising opportunities. We anticipate that revenue streams from
InVision will be generated from the sales and licensing of musical recordings,
representation and ownership of music publishing, licensing of published and
non-published musical compositions and the licensing and merchandising of
products related to the artists and musicians we sign. We solicit videotapes
from amateur and professional musicians for broadcast over IMNTV, with the
expectation of producing and mass marketing certain of this music under our
record labels. To accomplish our goal, we plan to conduct and coordinate all
advertising, band recruiting and video editing as well as facilitate the
broadcast of the music videos, production and mass marketing the music of bands
we sign.

         Our ability to continue as a going concern is dependent upon our
ability to generate sufficient revenues from operations to meet our working
capital requirements. We expect to distribute our first musical recording in
April 2001. Until we begin to produce substantive revenues, to sustain our
short term capital needs we intend to seek additional financing. Our
independent public accountants have raised substantial doubt as to our
ability to continue as a going concern if we are unable to obtain such
funding in the near future. To meet our immediate working capital
requirements, we have from time to time borrowed funds from our Chief
Executive Officer. As of November 30, 2000, we owed approximately $730,000 to
our Chief Executive Officer, and we have borrowed an additional amount of
approximately $273,000 since that date (as of February 20, 2001). $700,000 of
this loan is represented by a secured promissory note and corresponding
security agreement executed by the Company in October 2000, which provide
that such amount is due on demand, and is secured by all of our assets.

<PAGE>


         We may experience significant fluctuations in future operating results
due to a variety of factors, including:

         - our ability to re-launch the distribution of our IMNTV television
         channel;

         - commercial acceptance of, and our ability to sell advertising time
         on, IMNTV;

         - the level of traffic on our Internet sites;

         - the amount and timing of capital expenditures and other costs
         relating to the expansion of our operations;

         - technical difficulties or system downtime;

         - general economic conditions and economic conditions specific to the
         Internet; and

         - consumer acceptance of the artists and musicians signed by our record
         labels.

         RISK FACTORS

         IN ADDITION TO THE OTHER INFORMATION IN THIS FORM 10-QSB, THE FOLLOWING
FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE COMPANY AND ITS
BUSINESS. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES
FACING THE COMPANY AND THERE MAY BE ADDITIONAL RISKS THAT THE COMPANY DOES NOT
PRESENTLY KNOW OF OR THAT IT MAY CURRENTLY DEEM IMMATERIAL. ALL OF THESE RISKS
MAY IMPAIR THE COMPANY'S BUSINESS, PROSPECTS AND RESULTS OF OPERATIONS.

         RISKS GENERALLY RELATED TO OUR BUSINESS

         IF WE ARE UNABLE TO OBTAIN ADDITIONAL CAPITAL IN THE NEAR FUTURE, WE
MAY HAVE TO CURTAIL OR CEASE OPERATIONS.

         We have historically financed our operations primarily through the
sale of our securities. As of November 30, 2000, we had cash and cash
equivalents of $669 and an accumulated deficit of $8,883,775. To meet our
immediate working capital needs, we have from time to time borrowed funds
from our Chief Executive Officer. As of November 30, 2000 we owed
approximately $730,000 to our Chief Executive Offficer, and we have borrowed
an additional amount of approximately $273,000 since that date (as of
February 20, 2001). $700,000 of this loan is represented by a secured
promissory note and corresponding security agreement executed by the Company
in October 2000, which provide that such amount is due on demand, and is
secured by all of our assets. We need to raise additional funds in the
immediate future in order to meet our working capital requirements. In this
regard, our independent public accountants have raised substantial doubt as
to our ability to continue as a going concern. We may not be able to obtain
additional financing on terms favorable to us, if at all. If adequate funds
are not available to us, we may have to curtail or cease operations, which
would materially harm our business and financial results. To the extent we
raise additional funds through further issuances of equity or convertible
debt or equity securities, our existing stockholders could suffer significant
dilution, and any new equity securities we issue could have rights,
preferences and privileges superior to those of holders of our common stock.
Furthermore, any debt financing secured by us in the future could involve
restrictive covenants relating to our capital raising activities and other
financial and operational matters, which may make it more difficult for us to
obtain additional capital and to pursue business opportunities.

         WE HAVE A LIMITED OPERATING HISTORY THAT MAKES AN EVALUATION OF OUR
BUSINESS DIFFICULT.

Although we incorporated in March 1986, we did not begin developing our current
business model until 1999. We only began broadcasting content over our music
channel, in a limited number of markets and during a limited number of time
periods, on June 1, 2000. In November 2000 we terminated our original


<PAGE>


network carriage agreement for the distribution of our programming, and our
channel has not been broadcast in any television markets since approximately
September 2000. In addition, as of November 30, 2000 we had signed only three
artists to our record labels, and we do not anticipate distributing any our
first musical recording until April 2001. Our extremely limited operating
history makes it difficult to evaluate our current business and prospects or
to accurately predict our future revenues or results of operations. Our
business model, and accordingly our revenue and income potential, is new and
unproven. In addition, we are subject to risks and difficulties frequently
encountered by early-stage companies in new and rapidly evolving markets.

         WE NEED TO ENTER INTO SATISFACTORY DISTRIBUTION ARRANGEMENTS FOR THE
BROADCAST OUR PROGRAMMING OVER TELEVISION.

         In November 2000 we terminated our original network carriage
agreement for the distribution of our programming over cable television
channels, and our IMNTV television channel has not been broadcast in any
markets since approximately September 2000. In order to achieve our goal of
creating a new cable television music channel, we will need to enter into
arrangements with one or more third parties to place our programming on cable
and direct satellite systems, or we will need to enter into arrangements
directly with cable and direct satellite systems to broadcast our
programming. There can be no assurance that we will be able to do so. If we
are not successful in entering into such arrangements on terms satisfactory
to us, we may never be able to develop our business as anticipated.

         WE HAVE A NEW AND UNPROVEN BUSINESS MODEL AND MAY NOT GENERATE
SUFFICIENT REVENUES FOR OUR BUSINESS TO SURVIVE OR BE SUCCESSFUL.

         Our business model is based on the commercial viability of a new
national cable television channel devoted to the broadcast of music videos of
amateur and professional artists, as well as of two new record labels. In order
for our business to be successful, we must not only develop services that
directly generate revenues, but also provide content and services that attract
consumers to our cable television channel and our web site. Our business model
assumes that a large audience will develop for our cable television channel,
that cable operators in many markets will air our programming, and that we will
be able to generate significant revenues through the sale of advertising time on
our channel. Our model further assumes that we will be able to generate
significant revenues through the sale of recordings by our musical artists, as
well as related merchandise. Each of these assumptions is unproven, and if any
of the assumptions is incorrect, we may be unable to generate sufficient
revenues to sustain our business or to obtain profitability.

         WE HAVE A HISTORY OF LOSSES AND EXPECT TO INCUR LOSSES IN THE FUTURE.

         We incurred net losses of $2,914,928 in the six month period ended
November 30, 2000 and $5,866,842 in the fiscal year ended May 31, 2000. Our
accumulated deficit as of November 30, 2000 was $8,883,775. We have not
achieved profitably and expect to continue to incur losses for the
foreseeable future. We expect those losses to increase from current levels as
we continue to incur expenses to develop our products and services. We
believe that our business depends on our ability to significantly increase
revenues and to limit our operating expenses. If our revenues fail to grow at
anticipated rates or our operating expenses increase without a commensurate
increase in our revenues, or we fail to adjust operating expense levels
appropriately, we may never be able to achieve profitability.

         OUR QUARTERLY OPERATING RESULTS ARE LIKELY TO BE VOLATILE, AND MAY
CAUSE OUR STOCK PRICE TO FLUCTUATE.

         Our future revenues and operating results are likely to vary
significantly from quarter to quarter due to a number of factors, many of which
are outside of our control. Accordingly, quarter-to-quarter comparisons of our
results of operations may not be indicative of future performance. It is
possible that in some future periods our operating results will be below the
expectations of public market analysts and investors. In this event, the price
of our common stock will likely decline. Factors which may cause our revenues
and operating results to fluctuate include the following:


<PAGE>


         - our ability to attract and retain advertisers;

         - the willingness of cable operators to broadcast our programming;

         - market acceptance of our music channel and our music releases;

         - the timing and uncertainty of sales cycles;

         - our ability to sign additional artists to our record labels;

         - our ability to enter into satisfactory manufacturing and distribution
         arrangements for our music recordings;

         - new services offered by current or future competitors; and

         - general economic conditions, as well as economic conditions specific
         to the music industry.

         WE FACE INTENSE COMPETITION FROM BUSINESSES THAT HAVE SIGNIFICANTLY
MORE RESOURCES THAN WE DO.

         We face intense competition for a finite amount of consumer
discretionary spending from numerous other entertainment companies and other
businesses in the entertainment industry, including television networks such as
MTV and VH1, major recording companies such as Sony, Time Warner, Universal and
EMI, and a wide variety of music- and entertainment-related web sites. All of
these businesses have substantially greater resources, histories of attracting
and retaining talent, obtaining properties and hiring key employees.

         There are a number of television channels already on the market that
offer music entertainment to their viewers. These channels are backed by large
organizations that have more resources than we do. We expect to compete,
directly and indirectly, with these and other channels for viewers, consumers,
content and service providers, advertisers and sponsors. To be competitive, we
must enhance our services and content on a timely and cost-effective basis.
There can be no assurance that we will be successful in attracting viewers,
advertisers, sponsors or adapting our web site or, if re-launched, our
television channel to user requirements or emerging industry standards.
Similarly, the market for recorded music is dominated by the major record
companies, certain of which are a part of larger entertainment conglomerates,
and have recording divisions with significant financial resources and
promotional budgets and large artist and repertoire staffs to compete for a
limited number of promising recording artists, producers and writers. Although
we intend to use our web site and, if re-launched, our television channel to
promote the videos of our artists, there is also intense competition within the
recording industry for "air time" by radio disc jockeys, which is essential to
gain attention and create demand for recordings. There can be no assurance that
any of our labels' artists, recordings or music videos will gain the exposure
required to generate significant market interest or that we will be able to
compete successfully.

         We expect to compete with various forms of entertainment which provide
similar value, including movies, video and audio cassettes, broadcast
television, cable programming, special pay-per-view events, sporting events and
other forms of entertainment which may be less expensive or provide other
advantages to our targeted viewers. We also expect to compete for advertising
dollars with traditional media. In addition, there can be no assurance that
other companies are not developing or will not seek to develop similar networks.
If our network is successful, it is possible that other companies may seek to
enter or capitalize on such a market and compete directly with us. Many of these
companies may have substantially greater financing, personnel, technical and
other resources than we do and may have well-established reputations for success
in the development, promotion and marketing of entertainment events. There can
be no assurance that we will be able to compete successfully with these other
entities.

         SUCCESS BY OLYMPUSAT IN ITS LAWSUIT AGAINST US RELATING TO OUR
TERMINATION OF OUR NETWORK CARRIAGE AGREEMENT COULD HARM OUR BUSINESS.


<PAGE>


         In November 2000, OlympuSAT, Inc. filed suit against us, James
Fallacaro and Anthony Escamilla in Circuit Court in Palm Beach County, Florida.
OlympuSAT alleges breach of contract, fraudulent inducement and breach of an
implied duty of good faith and fair dealing arising out of the Network Carriage
Agreement entered into between us and OlympuSAT on December 6, 1999, which
Agreement was terminated in November 2000. The complaint filed by OlympuSAT
indicates that it is seeking an indeterminate amount of damages.

         In connection with this lawsuit, we have incurred, and expect to
continue to incur, substantial legal fees and expenses. This lawsuit has
diverted, and is expected to continue to divert, the efforts and attention of
our management. As a result, our defense of this lawsuit, regardless of its
eventual outcome, has been, and will continue to be, costly and time consuming.
If we are unable to successfully defend this lawsuit, we could be required to
pay significant monetary damages to OlympuSAT and our business could be harmed.

         WE ARE SUBJECT TO ALL OF THE RISKS AND UNCERTAINTIES ASSOCIATED WITH
THE ENTERTAINMENT INDUSTRY GENERALLY, ANY OF ALL OF WHICH MAY HAVE AN ADVERSE
IMPACT ON OUR BUSINESS AND RESULTS OF OPERATIONS.

         Content acquisition costs, as well as promotion and marketing expenses
and third-party participation payable to producers and others, which reduce
potential revenues derived from programming events and musical recordings, have
increased significantly in recent years. Our future operating results will
depend upon numerous factors beyond our control, including the popularity, price
and timing of programming and special events being released and distributed,
national, regional, and local economic conditions, changes in demographics, the
availability of alternative forms of entertainment, critical reviews and public
tastes and preferences, which change rapidly and cannot be predicted. If we are
unable to successfully anticipate and respond to relatively rapid changes in
consumers' tastes and preferences, our business and operating results will be
adversely affected.

         OUR ABILITY TO ACHIEVE OR MAINTAIN PROFITABILITY WILL BE CONSTRAINED IF
WE DO NOT EFFECTIVELY MANAGE OUR ANTICIPATED RAPID GROWTH.

         We expect to significantly increase our employee base as we implement
our business model and develop our product and service offerings. We currently
have only four employees. If we expand our operations as anticipated, we expect
to significantly increase the size of our employee base. Our management and
operations are likely to be strained by this anticipated growth. To compete
effectively and to manage future growth, we must improve our financial and
management controls, reporting systems and procedures on a timely basis. We must
also expand, train and manage our employee base. If we are not successful in
managing our growth, our ability to achieve or maintain profitability may be
harmed.

         WE MAY BE UNABLE TO ATTRACT AND RETAIN KEY PERSONNEL, WHICH WOULD
ADVERSELY AFFECT OUR ABILITY TO DEVELOP AND EFFECTIVELY MANAGE OUR BUSINESS.

         Our future performance will depend largely on the efforts and abilities
of our senior executives and other key personnel. Our success will depend on our
ability to attract and retain these key employees in the future. The market for
such persons is extremely competitive and we may not find qualified replacements
for personnel who leave us. In addition, we do not maintain key person life
insurance on any of our key personnel, and have no plans to do so. The loss of,
or the inability to attract, any one or more of our key personnel may harm our
ability to develop and effectively manage our business.

         CURRENT OR FUTURE GOVERNMENT REGULATION MAY ADD TO OUR OPERATING COSTS.

         We may face unanticipated operating costs because of the current
uncertainty surrounding potential government regulation of the Internet and
e-commerce. We believe that we are not currently


<PAGE>


subject to direct regulation of our current and expected activities, other than
regulations applicable to businesses generally. However, the Internet has
rapidly emerged as a commerce medium, and governmental agencies have not yet
been able to adapt all existing regulations to the Internet environment. Laws
and regulations may be introduced and court decisions reached that affect the
Internet or other online services, covering issues such as user pricing, user
privacy, freedom of expression, access charges, content and quality of products
and services, advertising, intellectual property rights and information
security. Complying with new regulations would increase our operating costs.
Furthermore, as a company with a significant Internet presence, it is unclear in
which jurisdictions we are actually conducting business. Our failure to qualify
to do business in a jurisdiction that requires us to do so could subject us to
fines or penalties and could result in our inability to enforce contracts in
that jurisdiction.

         In addition, if we are able to enter into arrangements with one or
more cable operators or other third parties to distribute our programming
over cable and/or direct satellite television, we may become indirectly
subject to regulation by the Federal Communications Commission in connection
with operations of cable television systems, satellite distribution systems
and television broadcasters. From time to time there are pending before
Congress various proposals which provide, among other things, for increased
rate regulation of cable systems, some form of "must carry" regime for local
broadcast stations, limits on the size of multiple system operators and
limits on carriage of affiliated program services. In addition, legislation
is periodically before Congress which would restore local authority to set
cable rates, to require the Federal Communications Commission to determine
whether and/or how to limit cable system ownership, and to require cable
programmers to sell their product to non-cable distributors under certain
circumstances. It is impossible to predict with accuracy whether any of these
legislative proposals will be enacted, or, if enacted, the form they will
take; however, any legislation which increases rate regulation or effects
structural changes in the cable industry could have a material adverse impact
on our business and operations.

         WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS, WHICH
COULD RESULT IN THEIR UNAUTHORIZED USE BY OUR COMPETITORS AND HAVE AN ADVERSE
IMPACT ON OUR REVENUES.

         Our success depends in part on our ability to protect our proprietary
rights. There can be no assurance that the measures taken by us to protect our
proprietary rights will be adequate to prevent misappropriation or independent
development by others of programming and media concepts based upon, or otherwise
similar to, those of our network. In addition, although we believe that our
programming and concepts have been independently developed and do not infringe
on the proprietary rights or trade secrets of others, there can be no assurance
that our methods and concepts do not and will not so infringe or that third
parties will not assert infringement claims, trade secret violations,
competitive torts or other proprietary rights violations against us in the
future. In the case of infringement, we could, under certain circumstances, be
required to modify our programming or obtain a license. There can be no
assurance that we would be able to do either in a timely manner or upon
acceptable terms and conditions, and such failure could have a material adverse
effect on our operations, cash flows and financial condition. There can also be
no assurance that we will have the resources to defend or prosecute proprietary
rights infringement action.

         In addition, our record label business could be adversely affected by
the unauthorized reproduction of recordings for commercial sale and by home
taping. Unauthorized recordings of our products could result in the loss of
substantial revenues. We may in the future file lawsuits, either on our own
behalf or in conjunction with other music publishers, copyright owners and
publishing organizations seeking injunctive relief and/or monetary damages from
persons and companies who interfere with our property rights. Future actions
could be costly and time consuming and may divert management's attention from
our business affairs which could have a material adverse effect on our
operations. Similarly, new technologies, including digital audio tape and
recordable CD technology, may increase the opportunity for contraband
reproduction for distribution as well as the opportunity for consumers to make
high quality home copies of recordings. In the absence of adequate copyright or
other protections, new recording technologies could adversely affect the sale of
our music and consequently adversely affect our operating results.


<PAGE>


         We have filed U.S. trademark applications with respect to a number of
our names and marks, including "IMC," "Independent Music Channel," "IMNTV" and
"InVision." We cannot assure you that we will be able to secure registration of
any of these trademarks. In addition, we do not have any trademarks registered,
nor do we have any trademark applications pending, outside of the United States.
The laws of some foreign countries do not protect proprietary rights to the same
extent as do the laws of the United States. Effective copyright and trademark
protection may not be available in other jurisdictions. If we cannot adequately
protect our proprietary rights, our competitors could benefit from the
unauthorized use of such rights, resulting in an adverse impact on our revenues.
Even if we are able to protect our proprietary rights, we could incur
significant costs to defend our rights.

         RISKS RELATED TO OUR TELEVISION BUSINESS

         WE ARE DEPENDENT ON OUR AGREEMENT WITH YAHOO! TO PROVIDE OUR NATIONAL
TELEVISION MUSIC VIDEO PROGRAMMING TO THE INTERNET, AND WE ARE CURRENTLY IN
BREACH OF THIS AGREEMENT.

         Completion of our business plan of distribution of music video
programming on the Internet is dependent upon Yahoo's performance of its
obligations under the television station agreement with Yahoo! Inc. Similarly,
completion of the business plan is also dependent upon our ability to perform
our obligations under the television station agreement. We are currently in
breach of our payment obligations. Although we are working to cure this breach,
we cannot assure you that we will be able to, or that Yahoo will not cease
providing services under the agreement.

         IF WE FAIL TO ATTRACT A LARGE AUDIENCE FOR OUR MUSIC CHANNEL AND WEB
SITE, WE MAY NOT BE ABLE TO ATTRACT ADVERTISERS OR STRATEGIC ALLIANCES.

         Attracting and maintaining a large audience is critical to selling
advertising and to otherwise generating revenues. If we cannot attract and
maintain a large audience for our web site and, if re-launched, our television
channel, then we may be unable to attract advertisers. In addition, we may be at
a relative disadvantage to other media companies with larger audiences that may
be able to leverage their audiences to access more advertisers and enter into
significant strategic alliances. To attract and maintain a large audience, we
must:

         -        offer compelling music content;

         -        conduct effective marketing campaigns to acquire new users
                  and consumers;

         -        develop and maintain existing distribution relationships with
                  other web sites;

         -        update and enhance the features of our web site; and

         -        offer targeted, relevant products and services.

         Our failure to achieve one or more of these objectives could adversely
affect our business, and we cannot assure you that we will be successful in
these efforts.

         A significant element of our strategy is to build a loyal community of
members on our web site and web portal because we believe community features
help retain actively engaged users. If we are not successful in developing such
a community, then it may be more difficult to increase the size of our audience.

         We also depend on establishing and maintaining relationships with
high-traffic web sites to increase our audience. There is intense competition
for placements on these sites, and we may not be able to establish such
relationships on commercially reasonable terms or at all. Even if we enter into
agreements with these web sites, they themselves may not attract significant
numbers of users. Therefore, our web site may not obtain additional users from
these relationships.


<PAGE>


         OUR BUSINESS IS DEPENDENT UPON THE DISTRIBUTION OF OUR PROGRAMMING
THROUGH CABLE TELEVISION SYSTEMS.

         IMNTV must compete for a limited amount of broadcast space on cable
television systems with a large number of well-established programmers supplying
a variety of alternative programming. We expect that our ability to generate
revenues through sales of advertising time on IMNTV will be dependent in large
part on our ability to distribute our television programming to a large
audience. We do not know how many cable televisions systems have channels
available for, or any interest in, programming featuring independent music
interests or whether we will be able to secure available channels for our
programming on a profitable basis. Accordingly, we cannot assure you that we
will be able to secure channel space in any markets or be able to expand our
operations as planned. If we are unable to distribute our channel and its
programming in a large number of markets, our ability to generate revenues and
our results of operations would be adversely affected.

         IF WE ARE UNABLE TO ATTRACT ADVERTISERS AND SPONSORS TO IMNTV, OUR
BUSINESS WOULD BE HARMED.

         We expect to rely heavily upon the sale of advertising time on IMNTV to
generate revenues. Such sales will likely be dependent upon our ability to
demonstrate that our programming is able to reach the demographics that
advertisers and sponsors seek to target. Our success in these efforts will be
affected by a number of factors including, among others, our ability to deliver
high quality, entertaining programming that is appealing to our targeted
viewers. There can be no assurance, however, that we will be successful in our
endeavors or that we will receive sufficient advertising revenues to obtain or
maintain profitability.

         Our ability to generate advertising revenues also may be adversely
affected by economic downturns which, if prolonged, might have an adverse impact
on television advertising, in general, and on our results of operations, cash
flows and financial condition. Additionally, advertising revenues may be
adversely impacted by many other factors beyond our control, including the
amount of funds that advertisers dedicate to television advertising and
sponsorship in general and to our programming in particular, the number of
advertisers seeking audiences within the demographic groups to which our
programming is targeted, competition within national and regional markets from
other media, and regulatory restrictions on advertising and sponsorships such as
liquor or cigarette advertising. There can be no assurance that we will be able
to attract advertisers. The inability to attract advertisers or to maintain
these relationships once obtained would have an adverse affect on our results of
operations, cash flows and financial condition.

         IF IMNTV DOES NOT ATTRACT LOYAL SUPPORT FROM ITS TARGETED VIEWING
AUDIENCE, OUR BUSINESS WILL BE ADVERSELY AFFECTED.

         Our business plan is predicated on IMNTV attracting active and loyal
support from the community of music fans that have an interest in independent
music. There can be no assurance that there will be significant support from our
anticipated viewership segment or that sufficient public acceptance of our
programming will enable IMNTV to operate profitably. Moreover, there can be no
assurance that a sufficient number of advertisers will support our programming
because it may be considered too far outside mainstream programming, or it may
not reach a large enough audience. If we do not engender such support from our
targeted audience or advertisers, our results of operations, cash flows and
financial condition would be adversely affected.

         SEASONALITY IN REVENUES IN THE TELEVISION INDUSTRY MAY HAVE AN ADVERSE
AFFECT ON OUR RESULTS OF OPERATIONS, CASH FLOWS AND FINANCIAL CONDITION.

         Advertising revenues in the television industry fluctuate due to
seasonality. Television network revenues are typically lower in the third
quarter due to the number of reruns broadcast during the summer


<PAGE>


months. In the future, our results of operations may fluctuate from quarter to
quarter, which could have a material adverse affect on our results of
operations, cash flows and financial condition.

         WE MAY NOT BE ABLE TO ESTABLISH THE IMNTV BRAND.

         We are new and little known in the entertainment sector and, although
we were incorporated in 1986, our efforts in the entertainment industry only
commenced in 1999. In order to generate traffic to our web site and web portal
and attract an audience to our entertainment channel, we will need to spend
significant resources on marketing and promoting our record label, music
programming and our web site. If we are unable to establish brand recognition in
the areas in which we operate, our business may be negatively affected.

         DELIVERY OF OUR CONTENT VIA TELEVISION OR THE INTERNET MAY BE
INTERRUPTED DUE TO SYSTEMS FAILURES, NATURAL DISASTERS OR OTHER CAUSES.

         We are subject to the risk that delivery of our services via cable
television or the Internet may be interrupted as a result of satellite failure,
communications and/or network equipment damage caused by natural disasters such
as earthquakes and fires, hardware failures, increased stress on communications
and/or network hardware, local power losses or other telecommunications failures
and/or capacity constraints on us or our vendors' or suppliers' hardware. Any
such interruptions may cause us to lose viewers and, accordingly, may adversely
affect our business and results of operations.

         RISKS RELATED TO OUR RECORDING BUSINESS

         WE HAVE A LIMITED ARTIST ROSTER AND IT IS UNCERTAINTY THAT THESE
ARTISTS WILL EVER GAIN MARKET ACCEPTANCE, WHICH COULD SUBSTANTIALLY HARM OUR
BUSINESS.

         The success of our business model will depend, in large part, on our
ability to generate significant revenues in the future from the exploitation of
a limited number of new and unknown recording artists in limited musical genres.
At present we have only three artists signed to our label. Accordingly, our
continued success will be dependent upon our ability to sign and retain
promising artists who will appeal to popular taste over a significant period of
time. As is typically the case in the record industry, demand and market
acceptance for newly introduced and unknown artists and recordings is subject to
a high level of uncertainty. Achieving market acceptance for new artists and
recordings will require us to spend significant efforts and expenditures for
advertising, marketing and promotional activities, including obtaining access to
television and radio "air time" to create awareness of and demand for our
recordings by consumers. We currently have limited marketing capabilities,
resources and personnel. There can be no assurance that we will be able, for
financial or other reasons, to successfully promote and market our newly
recorded music or that any of our efforts will result in initial or continued
market acceptance for our products.

         WE ARE SUBJECT TO BUSINESS RISKS ASSOCIATED WITH TALENT DEVELOPMENT.

         Currently, we have entered into recording contracts with only three
artists. There can be no assurance that we will be able to attract other
artists, or, if we are able to attract such talent, that we will be able to
develop that talent successfully or in such a manner that significant sales of
artist product will result. There can be no assurance that any artist developed
by us will not request a release from his or her agreement with us. Because of
the highly personal and creative nature of a recording artist's contractual
obligations, it is not feasible to force an unwilling artist to perform the
terms of his or her contract. The failure to enter into recording contracts with
additional talented artists, or the loss of an artist with whom we have signed a
recording contract, could have a materially adverse effect on our results of
operations.

         RECORD PRODUCTION AND PROMOTION ACTIVITIES ARE SPECULATIVE AND ARE
SUBJECT TO ALL OF THE RISKS GENERALLY ASSOCIATED WITH THE RECORDING INDUSTRY.


<PAGE>


         Many commercial recordings released in the United States do not earn
sufficient gross receipts to cover the costs of production, promotion, marketing
and distribution and to return initial investments. Production costs and
promotion, marketing and distribution expenses, as well as third-party
participation costs payable to producers, recording artists and others, which
reduce potential revenues derived from record sales, have increased
significantly in recent years. Our future operating results will depend on
numerous factors beyond our control, such as the popularity and timing of other
recordings being released, retail prices, national, regional and local economic
conditions, changes in consumer demographics and critical reviews and public
tastes and preferences, which change rapidly and cannot be accurately predicted.
Our ability to plan for record production and promotional activities will be
significantly affected by our ability to anticipate and respond to changes in
consumer tastes and preferences, primarily those consumers comprising our target
market. A decline in the popularity of pre-recorded music, in the recording
industry generally or in our particular market segments could materially
adversely affect our business prospects and financial results. In addition, the
initial recording we expect to release is a motion picture soundtrack. If the
release date of the motion picture is delayed or cancelled, or if the motion
picture is not a commercial success, this recording may not be successful and
our business and operating results may be harmed.

         Record production activities are also subject to unforeseen events,
unanticipated production cost overruns and technical and operating difficulties.
Significant up-front expenses associated with record production and promotion
could adversely affect our future operating results. Although we expect to seek
to reduce the financial risk of individual recordings by limiting our initial
production runs, actual production costs may exceed production budgets and the
occurrence of material cost overruns could have a material adverse effect on our
operating results.

         WE WILL BE DEPENDENT ON AGREEMENTS WITH DISTRIBUTORS TO DISTRIBUTE
MUSIC RECORDED FOR OUR RECORD LABELS.

         Our success will be largely dependent upon the marketing efforts of our
distributors. To date, we have entered into only one distribution agreement, and
this agreement applies only to the motion picture soundtrack that we expect will
be our initial musical recording available for distribution. The distributor we
have engaged, and any other distributors we may engage, will continue to
distribute other recordings, including recordings in which they may have a large
financial interest and, accordingly, more incentive to actively distribute. If
we are unable to enter into distribution agreements with recognized distributors
on terms satisfactory to us, or if such distribution agreements are cancelled
after inception, our business and results of operations will be adversely
affected.

         ADVANCES IN NEW TECHNOLOGIES MAY INCREASE THE LIKELIHOOD FOR CONTRABAND
REPRODUCTION, WHICH COULD HARM OUR BUSINESS.

         New technologies, including digital audio tape and recordable CD
technology, may increase the opportunity for contraband reproduction for
distribution as well as the opportunity for consumers to make high quality home
copies of recordings. New recording technologies could adversely affect the sale
of CDs and tapes. We expect that our labels' recordings will initially be
produced primarily for CDs. A leveling off or a decline in sales of CDs as a
result of the introduction of new technologies could adversely affect our
business, operating results, cash flows and financial condition.

         OUR MUSIC PRODUCTS WILL BE SUBJECT TO RETURN IF NOT SOLD TO CONSUMERS.

         At the time of product sales, we may establish a reserve for future
returns based primarily on historical return rates and recognize revenues net of
estimated product returns. We anticipate that the agreements we may enter into
with distributors will permit the distributors to withhold up to approximately
35% of revenues for product returns. Product returns which significantly exceed
our reserves would materially adversely affect our operating results.

         WE WILL RELY ON THIRD-PARTY VENDORS FOR THE MANUFACTURE OF CDS AND
TAPES. WE DO NOT YET, AND MAY NEVER, MAINTAIN AGREEMENTS WITH ANY PRODUCT


<PAGE>


MANUFACTURERS AND MAY NEED TO PURCHASE CDS AND TAPES PURSUANT TO PURCHASE ORDERS
PLACED FROM TIME TO TIME IN THE ORDINARY COURSE OF BUSINESS.

         We will be dependent on the ability of third-party manufacturers and
other vendors to provide adequate supplies of CDs and tapes on a timely basis
and on favorable terms. Several of these manufacturers may require that we
purchase certain minimum quantities of CDs and tapes with each purchase order.
Although we believe that alternative manufacturing sources are currently
available, there can be no assurance that manufacturers will have sufficient
production capacity or incentive to satisfy our product and scheduling
requirements during any period of sustained demand or that we will not be
subject to price fluctuations or periodic delays. Failure or delay by our
manufacturers in supplying CDs and tapes to us on favorable terms could result
in material interruptions in our operations and adversely affect our ability to
deliver our products on a timely and competitive basis.

         WE ANTICIPATE THAT A PORTION OF OUR SALES OF CDS AND TAPES WILL BE MADE
IN INTERNATIONAL MARKETS, WHICH WILL SUBJECT US TO SPECIAL RISKS.

         We expect that a portion of our sales of CDs and tapes will be to
foreign countries. Accordingly, we will be subject to increased credit risks,
customs duties and other trade restrictions, fluctuations in foreign currency
exchange rates, shipping delays and international political and economic
developments. A decline in the economic prospects of emerging foreign markets
could adversely affect our ability to initiate, and once initiated, expand,
international sales. Foreign sales also involve potential difficulties in
enforcing foreign license arrangements in the event of non-performance by the
licensee.

         RISKS RELATED TO OUR COMMON STOCK

         OUR COMMON STOCK IS TRADED ON THE "OVER THE COUNTER BULLETIN BOARD AND
THERE IS CURRENTLY ONLY A LIMITED TRADING MARKET FOR OUR SHARES.

         Because of the limited trading market for shares of our common stock,
historic market prices may not be indicative of the prices at which our shares
can be bought or sold. The market price of our common stock may fall due to a
number of factors, including:

         - actual or anticipated fluctuations in our operating results;

         - changes in expectations as to our future financial performance;

         - availability of additional shares of common stock for public sale;

         - changes in securities analysts' financial estimates; and

         - the operating and stock price performance of our competitors and
         other comparable companies.

         THE HOLDINGS OF OUR CONTROLLING STOCKHOLDER MAY LIMIT YOUR ABILITY TO
INFLUENCE THE OUTCOME OF DIRECTOR ELECTIONS AND OTHER MATTERS SUBJECT TO A
STOCKHOLDER VOTE, INCLUDING A SALE OF OUR COMPANY ON TERMS THAT MAY BE
ATTRACTIVE TO YOU.

         James Fallacaro, our Chief Executive Officer and President and Chairman
of our Board of Directors, currently owns approximately 63% of our outstanding
common stock. Mr. Fallacaro's stock ownership and management positions enable
him to exert considerable influence over us, including the election of directors
and the approval of other actions submitted to our stockholders. In addition,
without the consent of Mr. Fallacaro, we may be prevented from entering into
transactions that could be viewed as beneficial to other stockholders, including
a sale of our company. This could prevent you from selling your stock to a
potential acquiror at prices that exceed the market price of our stock.


<PAGE>


         SHARES OF OUR COMMON STOCK ELIGIBLE FOR PUBLIC SALE COULD DEPRESS OUR
STOCK PRICE.

         The market price of our common stock could decline as a result of sales
by our existing stockholders of shares of common stock in the market, or the
perception that these sales could occur. In addition to shares of our common
stock that may be eligible for sale under Rule 144 or other exemptions from
registration under U.S. securities laws, we are obligated to register a total of
4,190,000 shares of our common stock, including shares issuable upon the
exercise of outstanding warrants, for resale.


         PART II. OTHER INFORMATION

         Item 1. Legal Proceedings.

         In November 2000, OlympuSAT, Inc. filed suit against the Company, James
Fallacaro and Anthony Escamilla in Circuit Court in Palm Beach County, Florida.
OlympuSAT alleges breach of contract, fraudulent inducement and breach of an
implied duty of good faith and fair dealing arising out of the Network Carriage
Agreement entered into between the Company and OlumpuSAT on December 6, 1999,
which Agreement was terminated in November 2000. The complaint filed by
OlympuSAT indicates that it is seeking an indeterminate amount of damages. The
Company believes that the claims asserted in the complaint are without merit,
and plans to vigorously defend its position. However, the Company is unable to
predict the outcome of the matter at this time.

         Item 2. Changes in Securities and Use of Proceeds

         (c) On November 1, 2000, the Company granted options to purchase an
aggregate of 1,000,166 shares of common stock to employees and a consultant
of the Company. Each such option had an exercise price of $1.00 per share, and
were exercisable in full as to all shares subject thereto. These issuances were
intended to be exempt from registration under Section 5 of the Securities Act of
1933 in reliance upon Section 4(2) thereof and/or Rule 701 thereunder. The
recipients of securities in each such transaction represented their intentions
to acquire the securities for investment only and not with a view to, or for
sale in connection with, any distribution thereof.

         Item 6. Exhibits and Reports on Form 8-K

         (a)      Exhibits required by Item 601 of Regulation S-B

         Exhibits:

         None.

         (b)      Reports on Form 8-K

         On November 7, 2000, the Company filed a Current Report on Form 8-K
reporting the Company's issuance of a press release announcing, among other
things, that it had terminated its network carriage agreement with OlympuSAT,
Inc.


<PAGE>

                                   SIGNATURES

         In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                             Falcon Entertainment Corp., a Delaware corporation


                             BY:  /s/ JAMES FALLACARO
                                 --------------------------------------------
                                  James Fallacaro, Chairman and President
                                  (Principal Executive Officer and Principal
                                  Financial Officer)

                             Date:  February 20, 2001