<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 AUGUST 31, 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)

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

                    (Address of principal executive offices)

                                 (212) 557-5557

                           (Issuer's telephone number)

                                      NONE

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

         Check mark 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:  13,375,724 Common Stock as
of October 18, 2000.

         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 August 31, 2000
                  and May 31, 2000

                  Condensed Consolidated  Statements of Operations for the Three
                  Months Ended August 31, 2000 and 1999, and for the Period from
                  Inception (November 6, 1997) through August 31, 2000

                  Condensed Consolidated  Statements of Cash Flows for the Three
                  Months Ended August 31, 2000 and 1999, and for the Period from
                  Inception (November 6, 1997) through August 31, 2000

                  Notes to Condensed Consolidated Financial Statements

Item 2.           Plan of Operation

PART II.          OTHER INFORMATION

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-QSB 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>

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

                                                                                      AUGUST 31, 2000
ASSETS                                                                                  (UNAUDITED)             May 31, 2000

--------------------------------------------------------------------------------- ------------------------ -----------------------
<S>                                                                                 <C>                      <C>

CURRENT ASSETS

     Cash and equivalents                                                           $               -        $       1,829,580
     Certificates of deposit                                                                   51,156                  150,928
     Prepaid expenses                                                                          30,488                  396,209
--------------------------------------------------------------------------------- ------------------------ -----------------------
         Total current assets                                                                  81,644                2,376,717

PREPAID ARTIST FEES                                                                           225,084                  255,084

CERTIFICATE OF DEPOSIT                                                                        374,307                  348,499

PROPERTY AND EQUIPMENT                                                                        488,099                  444,535

OTHER ASSETS                                                                                   99,900                   90,900
--------------------------------------------------------------------------------- ------------------------ -----------------------

     TOTAL ASSETS                                                                   $       1,269,034        $       3,515,735
--------------------------------------------------------------------------------- ------------------------ -----------------------

LIABILITIES AND STOCKHOLDERS' EQUITY

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

CURRENT LIABILITIES

     Bank overdraft                                                                 $           3,826        $               -
     Note payable - stockholder                                                               395,844                  393,834
     Accounts payable and accrued expenses                                                    656,858                1,112,943
     Distribution payable - stockholder                                                        50,000                   50,000
--------------------------------------------------------------------------------- ------------------------ ------------------------
         Total current liabilities                                                          1,106,528                1,556,777
--------------------------------------------------------------------------------- ------------------------ ------------------------

STOCKHOLDERS' EQUITY

     Common stock, par value $.00005 per share; 20,000,000 shares authorized;
         13,375,724 issued and outstanding                                                        668                      662
     Additional paid-in capital                                                             8,248,179                7,927,143
     Deficit accumulated during the development stage                             (         8,086,341)     (         5,968,847)
--------------------------------------------------------------------------------- ------------------------ ------------------------
         Total deficiency in assets                                                           162,506                1,958,958
--------------------------------------------------------------------------------- ------------------------ ------------------------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                     $       1,269,034        $       3,515,735
--------------------------------------------------------------------------------- ------------------------ ------------------------


</TABLE>


<PAGE>


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

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

                                                                 Three Months Ended August 31,               Period From Inception
                                                                                                              (November 6, 1997)
                                                         --------------------------------------------------        through
                                                                  2000                      1999                August 31, 2000
-------------------------------------------------------- ------------------------ ------------------------- ------------------------
<S>                                                        <C>        <C>           <C>         <C>           <C>

REVENUES

     Dividend Income                                       $           2,633        $           1,861         $          96,548
     Interest Income                                                   7,697                         -                   12,574
-------------------------------------------------------- ------------------------ ------------------------- ------------------------
         Total revenues                                               10,330                     1,861                  109,122
-------------------------------------------------------- ------------------------ ------------------------- ------------------------

EXPENSES

     Advertising                                                     249,491                         -                3,817,447
     Broadcasting fees                                               417,149                         -                  643,149
     Compensation                                                    637,027                         -                1,386,607
     Consulting                                                       78,498                    17,345                  482,565
     General and administrative                                      379,196                     8,733                  629,894
     Interest                                                         14,635                     5,349                   88,405
     Production costs                                                204,161                         -                  511,035
     Professional fees                                               102,667                     9,470                  241,361
     Matrix agreement costs                                           45,000                         -                  395,000
-------------------------------------------------------- ------------------------ ------------------------- ------------------------
         Total expenses                                            2,127,824                    40,897                8,195,463
-------------------------------------------------------- ------------------------ ------------------------- ------------------------

NET LOSS                                                 ( $       2,117,494)     ( $          39,036)      ( $       8,086,341)
-------------------------------------------------------- ------------------------ ------------------------- ------------------------

NET LOSS PER SHARE                                       ( $            0.16)       $               -       ( $            0.79)
-------------------------------------------------------- ------------------------ ------------------------- ------------------------

WEIGHTED AVERAGE NUMBER OF
     COMMON SHARES OUTSTANDING                                    13,374,313                 9,641,310               10,193,810
-------------------------------------------------------- ------------------------ ------------------------- ------------------------

</TABLE>


<PAGE>




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

<TABLE>
<CAPTION>

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

                                                                                                                    Period From
                                                                                                                     Inception
                                                                                                                    (November 6,
                                                                               Three Months Ended August 31,       1997) through
                                                                                 2000                1999         August 31, 2000

-------------------------------------------------------------------------- ------------------ ------------------- -----------------
<S>                                                                        <C>                <C>                 <C>

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss                                                                   ( $  2,117,494)    ( $      39,036)    ( $ 8,086,341)
-------------------------------------------------------------------------- ------------------ ------------------- -----------------
Adjustments to reconcile net loss to net cash used in operating activities:

    Depreciation and amortization                                                  32,625                   -            39,342
    Common stock issued for compensation                                          276,042                   -           890,622
    Common stock issued for consulting services                                         -                   -           275,000
    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                                                           365,721                   -     (      30,488)
       Prepaid artist fees                                                         30,000                   -     (     225,084)
       Other assets                                                        (        9,000)    (         1,980)    (      99,900)
       Accounts payable and accrued expenses                               (      456,085)             22,649           656,858
-------------------------------------------------------------------------- ------------------ ------------------- -----------------
          Total adjustments                                                       284,303              20,669         1,563,850
-------------------------------------------------------------------------- ------------------ ------------------- -----------------
              Net cash used in operating activities                        (    1,833,191)    (        18,367)    (   6,522,491)
-------------------------------------------------------------------------- ------------------ ------------------- -----------------

CASH FLOWS FROM INVESTING ACTIVITIES:

Cash balances of company acquired                                                       -                   -            54,725
Purchase of certificate of deposit                                         (       19,984)                  -     (     519,411)
Maturity of certificate of deposit                                                 93,948                   -            93,948
Purchases of property and equipment                                        (       76,189)                  -     (     527,441)
-------------------------------------------------------------------------- ------------------ ------------------- -----------------
              Net cash used in investing activities                        (        2,225)                  -     (     898,179)
-------------------------------------------------------------------------- ------------------ ------------------- -----------------

CASH FLOWS FROM FINANCING ACTIVITIES:

Increase in bank overdraft                                                          3,826                   -             3,826
Loans from (repayment to) stockholder, net                                          2,010     (        69,935)           20,844
Net proceeds from issuance of common stock                                              -                   -         7,396,000
-------------------------------------------------------------------------- ------------------ ------------------- -----------------
              Net cash provided by (used in) financing activities                   5,836     (        69,935)        7,420,670
-------------------------------------------------------------------------- ------------------ ------------------- -----------------

DECREASE IN CASH AND EQUIVALENTS                                           (    1,829,580)    (        88,302)                -

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

CASH AND EQUIVALENTS - ENDING                                                $          -       $    173,913        $         -
-------------------------------------------------------------------------- ------------------ ------------------- -----------------

</TABLE>

                                        6
<PAGE>



         Notes to Condensed Consolidated Financial Statements

         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.  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.
Operating  results  for the  three-month  period  ended  August 31, 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  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  of  up  to
$5 million  through  a  private  placement on  a best efforts basis,  which will
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.

         SUBSEQUENT EVENTS

         In  October 2000, the majority shareholder loaned the Company $700,000.
The  loan  bears  interest  at  10%  per  annum, is secured by all assets of the
Company, and is due on demand.

                                        7

<PAGE>


Item 2.  Plan of Operation

         GENERAL

         Falcon   Entertainment  Corp.   (collectively  with  its  subsidiaries,
"Falcon"  or  the  "Company")  is  a  diversified   entertainment  company  that
broadcasts  music  videos of amateur  and  professional  artists  over cable and
direct satellite television on its television channel,  IMNTV, and that webcasts
those  videos over the  Internet  through its web site,  www.IMNTV.com.  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
continued   development  of  our  broadcast   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 expect  that our  primary  sources of revenue  will be derived  from
Independent Music Network and InVision  Records.  We anticipate that Independent
Music Network will  generate  revenues  primarily  from  television  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 video tapes from amateur and  professional  musicians for broadcast over
our  IMNTV  television  channel,  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 commence the sale of television  advertising
time on our  network  during  the  first  quarter  of  2001,  and we  expect  to
distribute our first musical  recording in early 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  recently  borrowed $700,000 from our Chief Executive Officer.
This loan is due on demand, and is secured by all of our assets.

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

         - 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.

                                       8

<PAGE>

                                  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 August 31, 2000, we had cash and cash equivalents of $0
and an accumulated deficit of $8,086,341.  To meet our immediate working capital
needs, we recently borrowed $700,000 from our Chief Executive Officer. This loan
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 addition,  as of August 31, 2000 we had signed
only three artists to our record labels,  and we do not anticipate  distributing
any of our artists' recordings until early 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  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 $2,117,494 in the three month period ended
August 31, 2000 and $5,866,842 in the fiscal year ended May 31, 2000. Our
accumulated deficit as of August 31, 2000 was $8,086,341. 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

                                       9

<PAGE>

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:

         - 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 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  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  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 will 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 will also compete for advertising dollars
with  traditional  media.  While we  believe  that IMNTV is  currently  the only
network of its kind,  there can be no  assurances  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.

         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.


                                       10
<PAGE>

         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 7 employees.  As we expand our operations,  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 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, through our agreement with OlympuSAT, Inc . ("OlympuSAT"),
we are indirectly subject to regulation by the Federal Communications Commission
inconnection 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.


                                       11
<PAGE>


         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.

         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  CONTRACT  WITH  OLYMPUSAT, INC. TO PROVIDE
NATIONAL  CABLE  BROADCASTING  SERVICES,  AND WE ARE CURRENTLY IN BREACH OF THIS
CONTRACT.

         Completion of our business plan of national television  broadcasting is
dependent  upon  OlympuSAT,  Inc.'s  performance  of its  obligations  under the
broadcast  agreement  between  us and  OlympuSAT  to place  our  programming  on
additional  cable  systems.  Similarly,  completion of our business plan is also
dependent  upon our  ability  to perform  our  obligations  under the  broadcast
agreement.  Our obligations  include payment of certain monthly  transport fees,
monthly playback  fees and monthly  subscriber  fees. We are currently in breach
of  these  obligations.  Accordingly,  OlympuSAT  might  discontinue  performing
services under the broadcast agreement,  which would materially adversely affect
our  business.  Although we are working to cure our breach, we cannot assure you
that we will be able to do so in a manner satisfactory to OlympuSAT.

         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.  Our obligations include
payment of  approximately  $8,000 per month to Yahoo!  to utilize its  streaming
software  and  hardware  to  transmit  our  audio  and video programming. 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 INCREASE THE SIZE OF THE  AUDIENCE FOR OUR MUSIC  CHANNEL
AND WEB SITE, WE MAY NOT BE ABLE TO ATTRACT ADVERTISERS OR STRATEGIC ALLIANCES.

         Increasing the size of our audience is critical to selling  advertising
and to  otherwise  generating  revenues.  If we cannot  increase the size of our
audience,  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 increase the size of our 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


                                       12
<PAGE>

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.

         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 OlympuSAT 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 a large number of markets or be able to
expand our  operations as planned.  If we are unable to broaden and maintain the
distribution  of our  channel  and its  programming,  our  ability  to  generate
revenues and our results of operations would be adversely affected.

         IF WE ARE UNABLE TO ATTRACT ADVERTISERS AND SPONSORS TO OUR INDEPENDENT
MUSIC NETWORK, 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 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


                                       13
<PAGE>



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


                                       14
<PAGE>


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.

         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.

         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 HAVE NOT ENTERED INTO ANY AGREEMENTS WITH DISTRIBUTORS TO DISTRIBUTE
MUSIC RECORDED FOR OUR RECORD LABELS.

         Our success will be largely dependent upon the marketing efforts of our
distributors.  Any  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
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


                                       15
<PAGE>

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.

         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.



                                       16
<PAGE>


PART II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

<TABLE>
<CAPTION>

         <S>      <C>

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

         Exhibits:

         3.1      Certificate of Incorporation as filed with the State of Delaware Secretary of State on March 10, 1986.*

         3.2      Certificate of Amendment to the Certificate of Incorporation as filed with the State of Delaware Secretary of
                  State and dated June 17, 1986.*

         3.3      Certificate of Amendment to the Certificate of Incorporation as filed with the State of Delaware Secretary of
                  State on March 19, 1999.*

         3.4      Certificate of Amendment to the Certificate of Incorporation as filed with the State of Delaware Secretary of
                  State on April 9, 1999.*

         3.5      Certificate of Amendment to the Certificate of Incorporation as filed with the State of Delaware Secretary of
                  State on December 9, 1999.**

         3.6      Bylaws.*

         10.1     Stock Purchase Agreement between Independent Music Group, Inc. and James Fallacaro dated March 26, 1999.*

         10.2     Network Carriage Agreement by and between Independent Music Group, Inc. and OlympuSAT, Inc. dated December 6,
                  1999.**

         10.3     Employment Agreement between the Company and Mark Eddinger dated February 15, 2000.***+

         10.4     Consulting Agreement between the Company and Star West LLC dated February 15, 2000.***

         10.5     Television Station Agreement between Yahoo!, Inc. and the Company dated March 20, 2000.***

         10.6     Income and Talent Acquisition Agreement by and between InVision Records, Inc. and Harlan Productions, Inc., d/b/a
                  Matrix Music Works, dated May 8, 2000.***

         10.7     Right of First Refusal Agreement by and between InVision Records, Inc. and Harlan Productions, Inc., d/b/a Matrix
                  Music Works, dated May 8, 2000.***

         10.8     Agreement of Lease between Royal Realty Corp. and the Company dated April 14, 2000.***

         10.9     Promissory Note made by the Company in favor of James Fallacaro and Corinne Fallacaro, dated October 3,  2000.

         10.10    Security Agreement executed by the Company in favor of James Fallacaro and Corinne Fallacaro, dated October 3,
                  2000.

         27.1     Financial Data Schedule

         *        Incorporated by reference to the Company's Registration
                  Statement on Form 10-SB filed with the SEC on June 21, 1999.


                                       17
<PAGE>


         **       Incorporated by reference to the Company's Quarterly Report on
                  Form 10-QSB for the period ended November 30, 1999, filed with
                  the SEC on January 14, 2000.

         ***      Incorporated  by reference to the  Company's  Annual Report on
                  Form 10-KSB for the period ended May 31, 2000,  filed with the
                  SEC on September 13, 2000.

         +        Management contract.

         (b)      Reports on Form 8-K

                  None.


</TABLE>

                                       18
<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                             Date:  October 20, 2000
------------------------
James Fallacaro, Chairman and
President (Principal Executive Officer
and Principal Financial Officer)



                                       19
<PAGE>




                                INDEX TO EXHIBITS


<TABLE>
<CAPTION>




EXHIBIT
  NO.:   DESCRIPTION:
<S>      <C>

3.1      Certificate of Incorporation as filed with the State of Delaware Secretary of State on March 10, 1986.*

3.2      Certificate of Amendment to the Certificate of Incorporation as filed with the State of Delaware Secretary of State and
         dated June 17, 1986.*

3.3      Certificate of Amendment to the Certificate of Incorporation as filed with the State of Delaware Secretary of State on
         March 19, 1999.*

3.4      Certificate of Amendment to the Certificate of Incorporation as filed with the State of Delaware Secretary of State on
         April 9, 1999.*

3.5      Certificate of Amendment to the Certificate of Incorporation as filed with the State of Delaware Secretary of State on
         December 9, 1999.**

3.6      Bylaws.*

10.1     Stock Purchase Agreement between Independent Music Group, Inc. and James Fallacaro dated March 26, 1999.*

10.2     Network Carriage Agreement by and between Independent Music Group, Inc. and OlympuSAT, Inc. dated December 6, 1999.**

10.3     Employment Agreement between the Company and Mark Eddinger dated February 15, 2000.***+

10.4     Consulting Agreement between the Company and Star West LLC dated February 15, 2000.***

10.5     Television Station Agreement between Yahoo!, Inc. and the Company dated March 20, 2000.***

10.6     Income and Talent Acquisition Agreement by and between InVision Records, Inc. and Harlan Productions, Inc., d/b/a Matrix
         Music Works, dated May 8, 2000.***

10.7     Right of First Refusal Agreement by and between InVision Records, Inc. and Harlan Productions, Inc., d/b/a Matrix Music
         Works, dated May 8, 2000.***

10.8     Agreement of Lease between Royal Realty Corp. and the Company dated April 14, 2000.***

10.9     Promissory Note made by the Company in favor of James Fallacaro and Corinne Fallacaro, dated October 3, 2000.

10.10    Security Agreement executed by the Company in favor of James Fallacaro and Corinne Fallacaro, dated October 3, 2000.

27.1     Financial Data Schedule

*   Incorporated by reference to the Company's Registration Statement on Form
    10-SB filed with the SEC on June 21, 1999.

**  Incorporated by reference to the Company's Quarterly Report on Form 10-QSB
    for the period ended November 30, 1999, filed with the SEC on January 14,
    2000.

*** Incorporated by reference to the Company's Annual Report on Form 10-KSB for
    the period ended May 31, 2000, filed with the SEC on September 13, 2000.

+   Management contract.

</TABLE>

                                       20