AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 14, 1997

REGISTRATION NUMBER 333-26307
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 2

FORM SB-2
------------------------
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

TEAM COMMUNICATIONS GROUP, INC.
EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN THE CHARTER

CALIFORNIA 3652 95-5419215
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)

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

TEAM COMMUNICATIONS GROUP, INC.
12300 WILSHIRE BOULEVARD, SUITE 400
LOS ANGELES, CALIFORNIA 90025
(310) 442-3500

(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES.)
------------------------

DREW S. LEVIN
12300 WILSHIRE BOULEVARD, SUITE 400
LOS ANGELES, CALIFORNIA 90025
(310) 442-3500

(NAMES, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:

BRUCE P. VANN, ESQ. THOMAS J. POLETTI, ESQ.
KELLY LYTTON MINTZ & VANN LLP KATHERINE J. BLAIR, ESQ.
1900 AVENUE OF THE STARS, SUITE 1450 FRESHMAN, MARANTZ, ORLANSKI, COOPER & KLEIN
LOS ANGELES, CALIFORNIA 90067 9100 WILSHIRE BLVD., 8E
TELEPHONE NO: (310) 277-5333 BEVERLY HILLS, CALIFORNIA
FACSIMILE NO: (310) 277-5953 TELEPHONE NO: (310) 273-1870
FACSIMILE NO: (310) 274-8357

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

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: as soon as practicable after
the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. [X]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE
================================================================================

PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED TO BE REGISTERED PER SHARE(1) PRICE(1) FEE

- --------------------------------------------------------------------------------------------------------------------------
Common Stock, no par value................... 1,725,000(2) $ 7.00 $ 12,075,000 $ 3,659.09
Common Stock Underlying Warrants............. 193,870 $ 1.00 $ 193,870 $ 64.00
Underwriter's Warrant........................ 1 $ 5.00 $ 5 --
Common Stock Underlying Underwriter's
Warrant.................................... 150,000 $ 9.80 $ 1,470,000 $ 445.00
------------
TOTAL........................................ $ 4,168*
==========================================================================================================================

* $4,150 Previously paid.

(1) Estimated pursuant to Rule 457(a) solely for the purpose of calculating the
registration fee.

(2) Includes 225,000 shares which may be purchased by the Underwriter to cover
over-allotments, if any.

THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.

================================================================================
2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

PRELIMINARY PROSPECTUS DATED OCTOBER 14, 1997

TEAM COMMUNICATIONS GROUP, INC.

1,500,000 SHARES

Team Communications Group, Inc. (the "Company") hereby offers 1,500,000
shares of Common Stock, no par value, ("Common Stock"). Prior to this offering
(the "Offering"), there has been no public market for the Common Stock of the
Company, and there can be no assurance that an active market will develop. The
offering price is expected to be between $5.50 and $7.00 per share. The offering
price of the Common Stock has been determined by negotiation between the Company
and H.J. Meyers & Co., Inc. ("H.J. Meyers" or the "Underwriter"), and is not
necessarily related to the Company's asset value or any other established
criterion of value. For the method of determining the initial offering price of
the Common Stock, see "Risk Factors" and "Underwriting." Application has been
made to have the Common Stock approved for listing on the Nasdaq SmallCap Market
under the symbol "TMTV."

Simultaneously with the Offering made hereby, the Company is registering
shares of Common Stock issuable upon exercise of certain outstanding warrants
that may be resold from time to time in the future by certain securityholders
(the "Selling Securityholders"). The shares of Common Stock underlying such
warrants are subject to a 12 month lock-up beginning on the date of this
Prospectus. The Company has covenanted to use its best efforts to keep the
Registration Statement of which this Prospectus is a part effective in order to
permit such resales, and it is expected that such resales will be made from time
to time in the over-the-counter market or otherwise. Such resales are subject to
prospectus delivery and other requirements of the Securities Act of 1933, as
amended. The Company will not receive any proceeds from the market sales of the
shares of Common Stock issuable upon exercise of such warrants other than
proceeds relating to the exercise price of such warrants. See "Concurrent
Offering by Selling Securityholders."

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

THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
IMMEDIATE AND SUBSTANTIAL DILUTION AND SHOULD BE CONSIDERED ONLY BY INVESTORS
WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" BEGINNING
ON PAGE 8.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

====================================================================================================
PROCEEDS TO
PRICE TO PUBLIC COMPANY(2)
UNDERWRITING
DISCOUNTS AND
COMMISSIONS(1)
- ----------------------------------------------------------------------------------------------------

Per Share...................................... $ $ $
- ----------------------------------------------------------------------------------------------------
Total(3)....................................... $ $ $
====================================================================================================

(1) Does not include additional compensation to be received by the Underwriter
in the form of (i) a non-accountable expense allowance of $ (or $ if
the Underwriter's over-allotment option described in footnote (3) is
exercised in full) and (ii) a warrant to purchase up to 150,000 shares of
Common Stock at $8.75 per share (based upon an assumed initial public
offering price of $6.25 per share), exercisable over a period of four years,
commencing one year from the date of this Prospectus (the "Underwriter's
Warrant"). In addition, the Company has agreed to indemnify the Underwriter
against certain civil liabilities under the Securities Act of 1933. See
"Underwriting."

(2) Before deducting expenses of the Offering payable by the Company, estimated
at $ , including the Underwriter's non-accountable expense
allowance.

(3) The Company and Mr. Joseph Cayre (the "Selling Shareholder") have granted
the Underwriter an option (together, the "Underwriter's over-allotment
option"), exercisable within 30 business days of the date of this
Prospectus, to purchase up to 225,000 additional shares of Common Stock on
the same terms and conditions as set forth above to cover over-allotments,
if any. If all such additional shares of Common Stock are purchased, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be increased to $ , $ and $ , respectively, and the
proceeds to the Selling Shareholder will be $ . See "Underwriting"
and "Principal Shareholders."

The shares of Common Stock offered hereby are offered on a "firm commitment"
basis by the Underwriter subject to prior sale when, and if delivered to and
accepted by the Underwriter, and subject to the right of the Underwriter to
reject any order in whole or in part. It is expected that delivery of the
certificates representing the shares of Common Stock will be made at the offices
of H.J. Meyers & Co., Inc., 1895 Mt. Hope Avenue, Rochester, New York 14620 on
or about , 1997.

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

H.J. MEYERS & CO., INC.

The date of this Prospectus is October , 1997.
3

PICTURES

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITER MAY OVERALLOT IN CONNECTION WITH THE OFFERING AND
MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

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

The Company intends to furnish its shareholders with annual reports containing
audited financial statements with a report thereon by independent accountants
and quarterly reports containing unaudited financial information for each of the
first three quarters of each fiscal year.
4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data appearing
elsewhere in this Prospectus. Each prospective investor is urged to read this
Prospectus in its entirety. This Prospectus contains forward-looking statements
that involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this Prospectus.

THE COMPANY

Since its formation in February 1995, Team Communications Group, Inc. (the
"Company") has focused its efforts on the development, production and
distribution of a variety of television programming, including series, specials
and made-for-television movies for exploitation in the domestic and
international television market. The Company derives substantially all of its
revenues from production fees earned in connection with Company-originated
productions, distribution fees from the exploitation of product acquired from
others, and the exploitation of Company-owned programming.

The Company's production activities have focused on (i) family programming
produced for U.S. cable and network television channels such as The Discovery
Channel, The Family Channel, USA Network, and the Public Broadcasting System
("PBS"), and (ii) "how-to" instructional series, such as "Simply Style," a
60-episode series which debuted during the third quarter of 1995 on The Learning
Channel. In addition, the Company co-developed and is co-producing a reality
based five-day per week ("strip") syndicated series, called "Strange Universe,"
with United/Chris-Craft television stations and Rysher Entertainment. This
series is currently airing on United/Chris-Craft stations and a commitment for
the production of a second 13-week run (65 episodes) has been received from
United/Chris-Craft. The Company has also recently completed the production of a
series of 22 half hour episodes entitled "Amazing Tails," a reality based series
focusing on extraordinary pets, which has been financed in conjunction with
Friskies Pet Foods, a division of Nestles Food, and advertising leader The
Interpublic Group of Companies ("Interpublic"). All episodes of this series have
been produced and delivered to Interpublic, and the series is currently airing
on Discovery Communications newest channel, Animal Planet. The Company has
recently entered into an agreement with Discovery Communications for a second
season of 26 new episodes of Amazing Tails, which is currently in production.
The Company also has entered into a joint venture agreement with Interpublic for
the production, subject to certain criteria, of a minimum of four pilots over
the next year for non-fiction and light entertainment programming. The Company
maintains a drama production unit which is developing and will produce movies-
of-the-week for exhibition on network television, cable or ad hoc networks of
independent stations which sometimes form to air special programming.

In July 1996, the Company acquired the rights to produce a weekly dramatic
television series based on the motion picture "Total Recall," which in 1990
grossed over $320 million in worldwide box office receipts. The Company has
entered into an agreement with Alliance Production Ltd. ("Alliance"), a leading
Canadian production company, pursuant to which Alliance, subject to certain
conditions, will co-produce and finance an initial 22 episodes of the series
with the Company. The Company has also entered into an agreement with Polygram
Television, L.L.C. ("PolyGram"), pursuant to which PolyGram will co-finance and
acquire television distribution rights to the series in the United States.
Miramax Film Corp. ("Miramax"), which acquired the theatrical sequel rights to
"Total Recall," has also acquired worldwide home video rights to the series from
the Company. Based upon the initial pre-sales of the series with PolyGram,
Miramax and various international broadcasters, the financial conditions
contained in the co-production agreement with Alliance have been satisfied. In
addition to reducing the Company's financial exposure, the Company anticipates
that by co-producing the series with Alliance, the series will qualify for
certain Canadian co-production and tax benefits. It is the intention of the
parties that each episode will be produced for approximately $1,100,000 per
episode, with the Company receiving a guaranteed producing fee of $25,000 per
episode, as well as 50% of the profits derived from the exploitation of
worldwide television, home video and merchandising rights to the series. The
Company expects to produce 22 one-hour episodes for this series in 1998, and Ron
Shusett, the

3
5

writer of the original film as well as the feature film "Alien," has written the
basic treatment (i.e., story outline) for the pilot.

The Company is also developing a wide variety of family, dramatic,
reality-based and children's programing including a new pre-school series,
tentatively entitled "LoCoMoTioN," which the Company hopes to place on domestic
and international television in 1998. Although no assurance can be given that
the Company will obtain a domestic timeslot, the Company is currently
interviewing potential female celebrities to co-host this series, which will
introduce toddlers to dance and exercise through contemporary urban music.

The Company also maintains an international sales force and currently has
distribution rights to over 335 half-hours of family and documentary series and
specials, and 156 hours of dramatic series.

The global television market has experienced substantial growth since 1985
and the Company believes this market will continue to experience substantial
growth during the foreseeable future as state television monopolies end and
commercial broadcast outlets expand to provide increasingly varied and
specialized content to consumers throughout the world. In the United States
alone, 60 new television channels have commenced operation since 1985. Such
growth has led to the development and commercialization of specialized channels
and distribution outlets, which, in turn, has led to increased demand for top
quality and cost efficient programming in many categories and subjects. Europe,
Latin America and the Pacific Rim are all experiencing similar growth with
respect to satellite and cable channels.

The Company's operating strategy is to fulfill the demand for programming
by (i) expanding the activities of each of its operating divisions, (ii)
implementing strategic acquisitions of libraries and smaller production
companies and (iii) entering into joint ventures with, or acquisitions of,
unaffiliated third parties which are intended to lower the Company's financial
risk as it expands into related activities, such as direct marketing and
interactive programming. The Company intends to acquire, co-produce and
co-finance other series, movies and specials from third party producers in order
to increase its programming library and self distribute this product on an
worldwide basis.

The Company believes that there are business opportunities to acquire other
emerging companies, as well as more established production and distribution
entities, which are engaged in programming development, production, distribution
and other related media investments. While the number of distribution channels
has been increasing, the Company believes there are economic incentives,
including economies of scale and depth of financial and programming capability,
for programmers and distribution entities to consolidate. No assurance can be
given that the Company will be successful in obtaining the financing necessary
for these acquisitions or that the acquisitions will prove financially
successful.

The Company was incorporated under the laws of the State of California in
February 1995. The Company's executive offices are located at 12300 Wilshire
Boulevard, Suite 400, Los Angeles, California 90025, and its telephone number is
(310) 442-3500.
------------------------

NOTICE TO CALIFORNIA AND OREGON INVESTORS

Each purchaser of shares of Common Stock in California and Oregon must meet
one of the following suitability standards: (i) a liquid net worth (excluding
home, furnishings and automobiles) of $250,000 or more and gross annual income
during 1996, and estimated during 1997, of $65,000 or more from all sources or
(ii) a liquid net worth (excluding home, furnishing and automobiles) of $500,000
or more. Each California and Oregon resident purchasing shares of Common Stock
offered hereby will be required to execute a representation that it comes within
one of the aforementioned categories.

4
6

SUMMARY OF FINANCIAL INFORMATION

FOR THE
PERIOD FROM
FOR THE SIX FOR THE SIX FOR THE FEBRUARY 27, 1995
MONTHS ENDED MONTHS ENDED YEAR ENDED TO
STATEMENT OF OPERATIONS DATA: JUNE 30, 1997 JUNE 30, 1996 DECEMBER 31, 1996 DECEMBER 31, 1995
------------- ------------- ----------------- -----------------
(UNAUDITED)

Revenues...................... $3,473,100 $3,314,600 $5,749,800 $1,245,300
Cost of revenues.............. 984,300 1,549,600 2,895,900 946,900
----------- ----------
Gross profit.................. 2,488,800 1,765,000 2,853,900 298,400
General and administrative
expenses.................... 987,400 976,300 2,323,800 1,288,200
Bad debt expense.............. 660,000 -- -- --
----------- ----------
Net income from operations.... 841,400 788,700 530,100 (989,800)
Interest expense.............. 523,400 152,500 582,700 42,700
Interest income............... 102,700 -- 58,300 --
Other income.................. -- -- 90,100 --
----------- ----------
Net income (loss) before
income taxes................ 420,700 636,200 95,800 (1,032,500)
Provision for income taxes.... -- -- -- --
----------- ----------
Net income (loss)............. $ 420,700 $ 636,200 $ 95,800 $(1,032,500)
=========== ==========
Net income (loss) per
share(1).................... $ 0.23 $ 0.35 $ 0.05 $ (0.57)
=========== ==========
Weighted average number of
shares outstanding(1)....... 1,821,800 1,821,800 1,821,800 1,821,800
=========== ==========

JUNE 30, 1997
-------------------------------
BALANCE SHEET DATA: ACTUAL AS ADJUSTED(2)
----------- ---------------

Liquidity capital (deficit)(3)........................... $(3,896,800) $ 3,595,340
Total assets............................................. 10,559,500 14,952,190
Notes payable(4)(5)...................................... 4,414,000 1,938,050
Accrued interest(4)(5)................................... 557,400 173,900
Shareholder loan and note payable(4)(5).................. 740,000 500,000
Accumulated deficit(5)................................... (516,000) (884,400)
Shareholders' equity..................................... 620,100 8,112,240

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

(1) See Note 2 of Notes to Consolidated Financial Statements for information
regarding the calculation of net income (loss) per share.

(2) As adjusted to reflect (i) the estimated net proceeds of the Offering, based
upon an assumed initial public offering price of $6.25 per share, after
deducting Underwriter's discounts and commissions and estimated offering
expenses, (ii) the conversion of a note (the "Conversion Note"), in the
principal amount of $322,000 into approximately 105,000 shares of Common
Stock upon the closing of the Offering, (iii) interest of approximately
$100,800 which accrued from July 1, 1997 through October 31, 1997 from the
debt to be repaid from the Offering, and (iv) the Extraordinary Loss (see
footnote 5 below). See "Use of Proceeds," "Capitalization" and "Description
of Securities."

(3) Represents (i) cash and cash equivalents plus accounts receivables (net),
and the amount due from officer less (ii) accounts payable, accrued expenses
and other liabilities, deferred revenue, accrued participations, notes
payable, shareholder loan and note payable, and accrued interest.

(4) See Notes 5 and 7 of Notes to Consolidated Financial Statements.

5
7

(5) An aggregate of $3,084,350 principal amount of indebtedness outstanding as
of June 30, 1997 will be repaid with the proceeds of the Offering. Since
said indebtedness was issued concurrently with warrants, the notes are
recorded on the Company's financial statements at a lesser value and a value
is ascribed to the warrants which management believes reflects the market
value of the warrants; this value is reflected as a debt issuance discount
and is amortized over the term of all such notes resulting in an effective
interest rate of approximately 25%. Upon repayment of such debt, the Company
will recognize an extraordinary loss equal to the value ascribed to such
warrants. While the entire $3,084,350 principal amount of indebtedness will
actually be repaid from the Offering, as adjusted reflects the repayment of
the recorded value of such debt as of October 31, 1997 -- a value of
$2,625,200 will be ascribed to said debt and a value of $368,400 will be
ascribed to the warrants, resulting in the recognition of extraordinary loss
of $368,400 (the "Extraordinary Loss") which becomes part of accumulated
deficit. To the extent that other debt issued with warrants is extinguished
upon the closing of the Proposed Bank Facility, the Extraordinary Loss for
the fiscal year ended December 31, 1997 will be increased.

6
8

THE OFFERING

Common Stock Offered by the
Company............................. 1,500,000 shares

Common Stock Outstanding after this
Offering............................ 2,831,092(1) shares

Use of Proceeds..................... Repayment of loans, accrued interest on
loans, acquisition of foreign
distribution rights to made for
television movies, acquisition of
foreign distribution rights to existing
television series and corporate
overhead and working capital, including
salaries and wages.

Proposed Nasdaq SmallCap Symbol..... "TMTV"
- ---------------

(1) Includes up to 199,748 shares which will be issued to a shareholder upon
satisfaction of certain contractual dilution rights. See "Certain
Transactions -- Transactions with Morris Wolfson and Others."

RISK FACTORS

THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. SEE "RISK FACTORS" BELOW.
------------------------

Except as otherwise specified, all information in this Prospectus (i)
assumes no exercise of the Underwriter's over-allotment option, the
Underwriter's Warrant, outstanding warrants to purchase 595,278 shares of Common
Stock, 173,000 stock options outstanding or 164,500 stock options reserved for
issuance under the Company's stock option plans, (ii) assumes no conversion of
outstanding convertible notes except the Conversion Note and (iii) gives effect
to a 2.2776-for-1 reverse stock split which occurred in January 1997 and a
1.0277-for-1 reverse stock split which occurred in April 1997. See "Management,"
"Description of Securities" and "Underwriting."

7
9

RISK FACTORS

In addition to the other information in this Prospectus, each prospective
investor should carefully consider the following factors in evaluating the
Company and its business before purchasing the shares of Common Stock offered
hereby. No investor should participate in the Offering unless such investor can
afford a complete loss of his or her investment. This Prospectus contains
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ materially from those anticipated in these forward-
looking statements as a result of certain factors, including those set forth in
the following risk factors and elsewhere in this Prospectus.

GOING CONCERN ASSUMPTION. The Company's independent accountants' report on
the Company's financial statements for the fiscal years ended December 31, 1995
and December 31, 1996 and for the six months ended June 30, 1997 contains an
explanatory paragraph indicating that the Company's losses raise substantial
doubt as to the Company's ability to continue as a going concern. There can be
no assurance that future financial statements will not include a similar
explanatory paragraph if the Company is unable to raise sufficient funds or
generate sufficient cash flow from operations to cover the cost of its
operations. The existence of such an explanatory paragraph, which will state
that there exists doubt as to the Company's ability to operate as a going
concern, may have a material adverse effect on the Company's relationship with
third parties who are concerned about the ability of the Company to complete
projects that it is contractually required to develop or produce, and could also
impact the ability of the Company to complete future financings.

LIMITED OPERATING HISTORY; LIQUIDITY DEFICIT. The Company, which was formed
in February 1995, has a limited operating history. Accordingly, prospective
purchasers hereunder have limited information upon which an evaluation of the
Company's business and prospects can be based. Although the Company has
generated profitable operations during the fiscal year ended December 31, 1996
and the six months ended June 30, 1997, it has experienced a negative cash flow
from operations during such period. No assurance can be given that the Company
will continue to be profitable in the foreseeable future or that it will be able
to generate positive cash flow from its operations. The Company will be unable
to implement its business plan without the proceeds of the Offering.
Implementation of the Company's business plan is subject to all the risks
inherent in the establishment of a new business enterprise, including potential
operating losses. In addition, the Company will be subject to certain factors
affecting the entertainment industry generally, such as sensitivity to general
economic conditions, critical acceptance of its products and intense
competition. The likelihood of the success of the Company must be considered in
light of the problems, expenses, difficulties, complications and delays
frequently encountered in connection with the formation of a new business;
accordingly a purchase of the shares of Common Stock offered hereby should be
considered to be a highly speculative investment.

As of June 30, 1997, the Company had an accumulated deficit of ($516,000)
and had a liquidity deficit of ($3,896,800), such deficit being defined as (i)
cash and cash equivalents plus accounts receivables (net), and the amount due
from officer less (ii) accounts payable, accrued expenses and other liabilities,
deferred revenue, accrued participations, notes payable, shareholder loan and
note payable, and accrued interest.

ADDITIONAL CAPITAL REQUIREMENTS; ENCUMBRANCE OF ASSETS; NO ASSURANCE OF
FUTURE FINANCINGS. The entertainment industry is highly capital intensive.
Management believes that if the Offering is completed, the net proceeds thereof,
together with projected cash flow from operations, will be sufficient to permit
the Company to conduct its operations as currently contemplated for the next 12
months. Such belief is based upon certain assumptions, including assumptions
regarding (i) anticipated level of operations, (ii) the sales of the Company's
original and acquired programming and (iii) anticipated expenditures required
for the development and production of additional programming, including "Total
Recall." However, if anticipated operations require additional financing, or the
anticipated level of sales does not materialize, the Company will seek
additional financing during this 12 month period. There can be no assurance that
any additional financing will be available on acceptable terms, or at all, when
required by the Company. Moreover, if additional financing is not available, the
Company could be required to reduce or suspend its operations, seek an
acquisition partner or sell securities on terms that may be highly dilutive or
otherwise disadvantageous to investors purchasing the shares of Common Stock
offered hereby. Certain of these transactions would require

8
10

the approval of the Underwriter if they occurred within 24 months from the
effective date of this Offering. The Company has in the past, and may continue
to experience, operational difficulties or delays in the development or
production due to working capital constraints. Any such difficulties or delays
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Risk Factors -- Going Concern
Assumption," "Capitalization," "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and Note 12 of Notes to Consolidated Financial Statements.

At the conclusion of the Offering, the Company will have approximately
$2,438,050 of indebtedness, which indebtedness is secured by substantially all
of the assets of the Company. The Company intends to enter into multiple lines
of credit with Mercantile National Bank (the "Proposed Bank Facility"), which
lines of credit would permit borrowings pursuant to specified borrowing bases
made up of the value of the library, accounts receivable and other assets,
including cash. The Company currently intends to repay the $2,438,050 of
indebtedness remaining after the Offering with proceeds from the Proposed Bank
Facility. No assurance can be given that the Proposed Bank Facility will be
entered into or that the Company will be able to use proceeds from such facility
as indicated herein.

COMPETITION. The entertainment industry is highly competitive. The Company
competes with, and will compete with, many organizations, including major film
studios, independent production companies, individual producers, and others,
including networks, who are seeking the rights to literary properties, the
services of creative and technical personnel, the financing for production of
film and television projects, and favorable arrangements for the distribution of
completed films. Many of the Company's present and future competitors are
organizations of substantially larger size and capacity, with far greater
financial, human and other resources and longer operating histories than the
Company. Moreover, the entertainment industry is currently evolving into an
industry in which certain multi-national, multi-media entities, including
Viacom/Paramount Pictures, The News Corporation, The Walt Disney Company/Cap
Cities-ABC, Time Warner/Turner Broadcasting and Westinghouse/CBS are anticipated
to be in a position, by virtue of their control over key film, magazine, and/or
television content, and their control of key network and cable outlets, to
dominate certain communications industries activities. These competitors have
numerous competitive advantages, including the ability to acquire and attract
superior properties, personnel and financing.

DEPENDENCE ON EMERGING MARKETS; DEPENDENCE ON FOREIGN SALES. A substantial
portion of the Company's revenues to date have been, and for the foreseeable
future may be, derived from the sale or license of its products to domestic
television or cable networks such as the WB Network, UPN, The Discovery Channel
and The Learning Channel which have been recently established, (i.e., not the
traditional free network markets of CBS, NBC, ABC and Fox) and the growing
specialized pay market, as well as the foreign television networks. The
Company's success will depend in large part upon the development and expansion
of these markets. The Company cannot predict the size of such markets or the
rate at which they will grow. If the television market serviced by the Company
fails to grow, grows more slowly than anticipated, or becomes saturated with
competitors, the Company's business, financial condition, and results of
operations would be materially adversely affected.

In addition to the foregoing, a substantial portion of the Company's
revenues are dependent on sales to sub-licensees and sub-distributors not
domiciled in the United States. The marketing and distribution efforts of these
entities could impact the ability of the Company to realize overages with
respect to its product. Moreover, the collectibility of receivables from these
customers is subject to all of the risks associated with doing business with
foreign companies including rapid changes in the political and economic climates
of such countries. Should the Company be involved in a protracted dispute with
respect to the manner in which its product is distributed, or should the Company
be forced to initiate collection activities in order to enforce the terms of the
applicable sub-license or sub-distributor agreement, the potential profitability
of any particular product may be adversely effected.

ACCOUNTS RECEIVABLE; RELIANCE ON SIGNIFICANT CUSTOMERS. Revenues for the
first six months of 1997 included approximately $3,241,000 from Beyond
Distribution Pty., Ltd., which accounted for 93% of the revenue for the six
months ended June 30, 1997. Revenues in fiscal 1996 included approximately
$680,000

9
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recognized from the license and related guaranty from The Gemini Corporation and
Mel Giniger and Associates (collectively, the "Giniger Entities"), relating to
the Company's current library and certain future product for Latin America and
Europe. The revenues attributable to the guaranty (the "Giniger Guaranty") were
12% of the applicable revenues for the year ended December 31, 1996. Should the
Company be unable to collect on the portion of the guaranty which was recognized
in such period the Company would be forced to incur a significant write-down of
its accounts receivable with respect to such account. Alliance, which licenses a
variety of product from the Company's library for Canada, and King Records
Company, Ltd., which acquired various library products for Japan, are obligated
to pay the Company the sums of $764,100 and $996,300 respectively, or 13% and
17% of revenues, respectively, for fiscal 1996.

Revenues in fiscal 1996 also included the license from Interpublic of
$1,441,700 and the license from Eurolink of $618,400, both such licenses
relating to the series "Amazing Tails." Revenues attributed to the Interpublic
and Eurolink agreements respecting "Amazing Tails" constituted 25% and 11%,
respectively, of revenues during the year ended December 31, 1996. The Eurolink
receivable was written off as a bad debt expense in the six months ended June
30, 1997.

Neither the revenues relating to the Giniger Guaranty nor the revenues
related to the production of "Amazing Tails" should be considered to be
recurring revenues. If the Company does not produce a series in fiscal 1997, or
obtain other significant foreign sales, the Company's revenues will be
materially reduced.

PRODUCTION RISKS. There can be no assurance that once the Company commits
to fund the production of a series licensed to a network, the network will order
and exhibit a sufficient number of episodes to enable the Company to syndicate
the series. Typically, at least 65 episodes of a series must be produced for it
to be "stripped" or syndicated in the daily re-run market. Networks generally
can cancel a series at stated intervals and, accordingly, do not commit in
advance to exhibit a series for more than a limited period. If a series is
canceled (or not carried for the period necessary to create enough episodes for
syndication purposes), there is a significant chance that the production costs
of the project will not be fully recovered. In that event, the financial
condition of the Company could be materially and adversely affected. Similar
risks apply even if a series is produced for a non-network medium. See
"Business -- Operations" for a discussion of the financing of series and how
deficits are potentially recouped. In addition, for the six months ended June
30, 1997 and the fiscal year ended December 31, 1996, respectively, the Company
incurred approximately $1,462,000 and $1,977,000, respectively, in development
costs associated with projects for which the Company is actively pursuing
production commitments, but which have not been set for principal photography.
See "Risk Factors -- Development Costs" for a discussion of the potential impact
if such costs were to be written off or otherwise amortized on an accelerated
basis.

FLUCTUATIONS IN OPERATING RESULTS. The Company's revenues and results of
operations are significantly dependent upon the timing and success of the
television programming it distributes, which cannot be predicated with
certainty. Revenues may not be recognized for any particular program until such
program has been delivered to the licensee and is available (i.e., there are no
holdbacks) for exploitation in the market it has been licensed for. Production
delays may impact the timing of when revenues may be reported under generally
accepted accounting principles. Moreover, the sale of existing programming is
heavily dependent upon the occurrence of major selling markets, the most
important of which are MIP-TV and MIPCOM-TV (the International Film and Program
Market for TV, Video, Cable & Satellite) which take place in France in the
second and fourth quarters, respectively. Finally, production commitments are
typically obtained from networks in the spring (second) quarter, although
production activity and delivery may not occur until subsequent periods. As a
result of the foregoing, the Company may experience significant quarterly
variations in its operations, and results in any particular quarter may not be
indicative of results in subsequent periods.

SPECULATIVE NATURE OF ENTERTAINMENT BUSINESS. Substantially all of the
Company's revenues are derived from the production and distribution of its
television series and made-for-television features. The entertainment industry
in general, and the development, production and distribution of television
programs, in particular, is highly speculative and involves a substantial degree
of risk. Since each project is an individual artistic work and its commercial
success is primarily determined by audience reaction, which is volatile and
unpredictable, there can be no assurance as to the economic success of any
entertainment property. Even if a production is a critical or artistic success,
there is no assurance that it will generate sufficient audience acceptance.

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DEPENDENCE UPON KEY PERSONNEL. The Company is, and will be, heavily
dependent on the services of Drew S. Levin, its Chairman of the Board, President
and Chief Executive Officer. The loss of the services of Mr. Levin for any
substantial length of time would materially adversely affect the Company's
results of operations and financial condition. Mr. Levin is party to an
employment agreement with the Company which expires in the year 2002. See
"Management -- Employment Agreements." The Company has obtained a "key-man"
insurance policy in respect of Mr. Levin in the amount of $1,000,000.

In addition, the Company is highly dependent upon its ability to attract
and retain highly qualified personnel. Competition for such personnel is
intense. There can be no assurance that persons having the requisite skills and
experience will be available on terms acceptable to the Company or at all.

ABILITY TO MANAGE GROWTH. Subject to obtaining sufficient financing, the
Company intends to pursue a strategy which management believes may result in
rapid growth. As the Company's anticipated development, production and
distribution activities increase, it is essential that the Company maintain
effective controls and procedures regarding critical accounting and budgeting
areas, as well as obtain and/or retain experienced personnel. There can be no
assurance that the Company will be able to attract qualified personnel or
successfully manage such expanded operations.

DEVELOPMENT COSTS. Included in the Company's assets as of June 30, 1997 and
December 31, 1996, are approximately $1,462,000 and $1,977,000, respectively, in
television program costs in respect of projects which the Company is actively
pursuing production commitments but which have not been set for principal
photography. As of June 30, 1997, approximately $912,000 of this amount relates
to the acquisition of the rights to produce a television series based on the
feature film "Total Recall" and approximately $451,000 relates to expenditures
in respect of "LoCoMoTioN." The Company intends, consistent with the standards
set by the Financial Accounting Standards Board, including Statement of
Financial Accounting Standards ("SFAS") No. 53, to write off the costs of all
development projects when they are abandoned or, even if still being developed,
if they have not been set for principal photography within three years of their
initial development activity. In the event the Company is unable to produce
either "Total Recall" or "LoCoMoTioN," the Company would incur a significant
write-down with respect to the development costs of such projects, which, in
turn, may adversely effect ongoing financing activities.

REPAYMENT OF INSIDER DEBT; PROCEEDS OF OFFERING TO BENEFIT AFFILIATES OR
SHAREHOLDERS. Upon the closing of the Offering, a non-management shareholder of
the Company will receive approximately $240,000 for repayment of indebtedness.
Concurrently with, or shortly after the closing of the Offering, other
shareholders are also anticipated to receive approximately $1,743,900 to
eliminate all other shareholder debt, such amounts to be obtained from the
Proposed Bank Facility. See "Use of Proceeds" and "Certain Transactions."

PREFERRED STOCK; POSSIBLE ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER
PROVISIONS. Certain provisions of the Company's Articles of Incorporation and
Bylaws and certain other contractual provisions could have the effect of making
it more difficult for a third party to acquire, or of discouraging a third party
from attempting to acquire control of the Company. Such provisions could limit
the price that certain investors might be willing to pay in the future for
shares of the Company's Common Stock. Certain of these provisions allow the
Company to issue preferred stock with rights senior to those of the Common Stock
without any further vote or action by the shareholders, and impose various
procedural and other requirements which could make it more difficult for
shareholders to affect certain corporate actions. These provisions could also
have the effect of delaying or preventing a change in control of the Company.
The issuance of preferred stock could decrease the amount of earnings and assets
available for distribution to the holders of Common Stock or could adversely
affect the rights and powers, including voting rights, of the holders of the
Common Stock. In certain circumstances, such issuance could have the effect of
decreasing the market price of the Common Stock. The Company has agreed that for
a two year period following the closing of the Offering it will not, without the
prior written consent of the Underwriter, issue any shares of preferred stock.

ABSENCE OF PUBLIC MARKET; DETERMINATION OF OFFERING PRICE;
VOLATILITY. Prior to the Offering, there has been no public market for the
Common Stock, and there can be no assurance that an active trading market will
develop for such securities or, if any such market develops, that it will be
sustained. The initial public

11
13

offering price of the Common Stock will be determined by negotiations between
the Company and the Underwriter and may not necessarily bear any relationship to
the Company's asset value, book value, financial condition, or any other
recognized indicia of value. No assurance can be given that the initial offering
price will be sustained or that, in the absence of an active trading market,
that shareholders will have sufficient liquidity to readily dispose of their
shares. The trading price of the Common Stock could be subject to significant
fluctuations in response to variations in quarterly operating results, changes
in earnings estimates by analysts following the Company, if any, and general
factors affecting the entertainment industry, as well as general economic,
political and market conditions, and other factors and such factors could cause
the market price of the Common Stock to fluctuate substantially. Due to
analysts' expectations of continued growth, if any, and the high price/earnings
ratio at which the Common Stock may trade, any shortfall in expectations could
have an immediate and significant adverse effect on the trading price of the
Common Stock. In addition the stock markets of the United States have, from time
to time, experienced significant price and volume fluctuations that are
unrelated or disproportionate to the operating performance of any individual
company. Such fluctuations could adversely affect the price of the Company's
Common Stock. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Underwriting."

CONTINUED QUOTATION ON THE NASDAQ SMALLCAP MARKET; POSSIBLE ILLIQUIDITY OF
TRADING MARKET; POSSIBLE INABILITY OF H.J. MEYERS TO MAKE A MARKET IN THE
COMPANY'S COMMON STOCK. The Company has applied for listing to have the Common
Stock quoted on the Nasdaq SmallCap Market upon consummation of the Offering.
However, there can be no assurance that the Company will be able to satisfy the
criteria for continued quotation on the Nasdaq SmallCap Market following the
Offering. Failure to meet the maintenance criteria in the future may result in
the Common Stock not being eligible for quotation in such market or otherwise.
In such event, a holder of the Company's Common Stock may find it more difficult
to obtain accurate quotations as to the market value of, the Common Stock.
Trading, if any, in the Common Stock would therefore be conducted in the
over-the-counter market on an electronic bulletin board established for
securities that do not meet the Nasdaq SmallCap Market Listing requirements, or
in what are commonly referred to as the "pink sheets." As a result, an investor
would find it more difficult to dispose of, or to obtain accurate quotations as
to the price of, the Company's Common Stock. Nasdaq has recently promulgated new
rules which make continued listing of companies on the Nasdaq SmallCap Market
more difficult and has significantly increased its enforcement efforts with
regard to Nasdaq standards for such listing. In addition, if the Company's
Common Stock were removed from the Nasdaq SmallCap Market, the Common Stock
would be subject to so-called "penny stock" rules that impose additional sales
practice and market making requirements on broker-dealers, who sell and/or make
a market in such securities. Consequently, removal from the Nasdaq SmallCap
Market, if it were to occur, could affect the ability or willingness of
broker-dealers to sell and/or make a market in the Company's Common Stock and
the ability of purchasers of the Company's Common Stock to sell their securities
in the secondary market. In addition, if the market price of the Company's
Common Stock is less than $5.00 per share, the Company may become subject to
certain penny stock rules even if still quoted on the Nasdaq SmallCap Market.
While such penny stock rules should not affect the quotation of the Company's
Common Stock on the Nasdaq SmallCap Market, such rules may further limit the
market liquidity of the Common Stock and the ability of purchasers in the
Offering to sell such Common Stock in the secondary market.

Any limitation on the ability of the Underwriter to make a market in the
Company's Common Stock could adversely effect the liquidity or trading price of
the Company's Common Stock, which could have a material adverse effect on the
market price of the Company's Common Stock. The Company believes that the
Chicago office of the Securities and Exchange Commission is conducting a
private, nonpublic investigation of H.J. Meyers, the Underwriter, pursuant to a
Formal Order of Investigation issued by the Commission as to whether H.J. Meyers
may have violated applicable securities laws and the rules and regulations
thereunder, with respect to sales of certain securities. The Company is
currently unable to assess the potential impact of the outcome of the Staff's
investigation on H.J. Meyers' ability to make a market in the Company's Common
Stock after the Offering or trading in the Company's securities.

IMMEDIATE SUBSTANTIAL DILUTION; DISPARITY OF SHARE CONSIDERATION; NO
DIVIDENDS ANTICIPATED. Assuming an initial public offering price of $6.25 per
share, purchasers of the shares of Common Stock offered

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hereby will experience immediate substantial dilution of $3.38 per share or 54%
of their investment, based upon the net tangible book value of the Company at
June 30, 1997. As a result, the purchasers of the shares of Common Stock offered
hereby will bear a disproportionate part of the financial risk associated with
the Company's business while effective control will remain with the existing
shareholders and management. Also, there will be a substantial disparity based
upon an assumed initial public offering price of $6.25 per share, between the
total consideration and the average price per share paid by the Company's
existing shareholders ($1,136,000 and $0.85, respectively), and that paid by new
investors in the Offering ($9,375,000 and $6.25, respectively). See "Dilution."

The Company has not paid dividends since its inception and does not intend
to pay any dividends to its shareholders in the foreseeable future. No assurance
can be given that it will pay dividends at any time. The Company presently
intends to retain future earnings, if any, in the development and expansion of
its business. See "Dividend Policy."

SHARES ELIGIBLE FOR ADDITIONAL SALE; EXERCISE OF REGISTRATION RIGHTS. Sale
of substantial amounts of the Company's Common Stock in the public market or the
prospect of such sales could materially adversely affect the market price of the
Common Stock. Upon completion of the Offering, the Company will have outstanding
approximately 2,831,092 shares of Common Stock. Of these shares, approximately
1,331,092 shares are restricted shares ("Restricted Shares") under the
Securities Act of 1933, as amended (the "Securities Act"). The 1,500,000 shares
of Common Stock offered hereby will be immediately eligible for sale in the
public market without restriction on the date of this Prospectus, subject to the
lockups agreements set forth below. In addition, the Company has issued options
and warrants which entitle the holders thereof to purchase 768,278 shares of
Common Stock (collectively referred to herein as the "Warrant Shares") including
193,870 Warrant Shares which are being currently registered (the "Registered
Warrant Shares"). Holders of the Restricted Shares and the Warrant Shares (other
than the Registered Warrant Shares, which are subject to a 12 month lock-up) are
subject to lockup agreements under which the holders of such shares have agreed
not to sell or otherwise dispose of any of their shares for 18 months after the
date of this Prospectus without the prior written consent of the Underwriter.
The Underwriter may release some or all of the shares from the lockup at its
discretion from time to time without notice to the public. The Underwriter has
no formal policy with respect to such determinations, and may elect to release
such shares or decline to release such shares as it may determine in its sole
and absolute discretion. Additionally, the Underwriter's Warrant may be
exercised at any time during the four year period beginning 12 months after the
closing of the Offering in which case up to 150,000 shares of Common Stock would
be eligible for sale in the public markets. The Company intends to file a
registration statement on Form S-8 under the Securities Act to register the sale
of approximately 337,500 shares of Common Stock reserved for issuance under its
1995 and 1996 Stock Plans. Shares of Common Stock issued upon exercise of
options after the effective date of the registration statement on Form S-8 will
be available for sale in the public market, subject in some cases to volume and
other limitations, including the lockup agreements referred to above. Sales in
the public market of substantial amounts of Common Stock (including sales in
connection with an exercise of certain registration rights by one or more
holders) or the perception that such sales could occur could depress prevailing
market prices for the Common Stock. See "Shares Eligible for Future Sale,"
"Underwriting" and "Description of Securities."

No prediction can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sales, will have on the market
price of the Common Stock prevailing from time to time, should the Company
complete the Offering and a market price for its securities be established.
Should a market in the Company's securities develop, sales of substantial
amounts of Common Stock, or the perception that such sales may occur, could
adversely affect prevailing market prices for the Common Stock in the event a
market does develop.

FORWARD-LOOKING STATEMENTS. Although not applicable as a safe harbor to
limit the Company's liability for sales made in the Offering, this Prospectus
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934
(the "Exchange Act"). Such forward-looking statements may be deemed to include
the Company's plans to produce "Total Recall" and "LoCoMoTioN" in 1997 and 1998,
and establish new strategic alliances and business relationships and acquire
additional libraries or companies. Such forward-looking statements also

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may include the Company's planned uses of the proceeds of the Offering. Actual
results could differ from those projected in any forward-looking statements for
the reasons detailed in the other sections of this "Risk Factors" portion of
this Prospectus. The forward-looking statements are made as of the date of this
Prospectus and the Company assumes no obligation to update the forward-looking
statements, or to update the reasons why actual results could differ from those
projected in the forward-looking statements.

USE OF PROCEEDS

The net proceeds of the Company from the sale of the 1,500,000 shares
offered by the Company hereby at an assumed initial public offering price of
$6.25 per share, are estimated to be approximately $7,860,540, after deducting
underwriting discounts and commissions and estimated offering expenses. The
Company currently intends to use the estimated net proceeds of the Offering as
follows:

APPROXIMATE PERCENTAGE
NET PROCEEDS OF NET PROCEEDS
------------- ---------------

Repayment of loans*........................... $ 3,084,350 39%
Accrued interest on loans..................... 383,500 5%
Acquisition of foreign distribution rights to
made for television movies.................. $ 2,000,000 26%
Acquisition of foreign distribution rights to
existing television series.................. $ 1,275,000 16%
Corporate overhead and general working
capital, including salaries and wages....... $ 1,117,690 14%

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

* The Company currently has outstanding approximately $5,154,000 of
indebtedness. Approximately $3,084,350 of such indebtedness will be repaid
from the proceeds of the Offering as follows: $969,350 for repayment of the
10% convertible secured notes issued between February and April 1997 (the
"February 1997 Notes"), $900,000 for repayment of the 12% secured notes issued
between February and June 1996 (the "February 1996 Notes"), $975,000 for
repayment of the 10% convertible secured notes issued between June and October
1996 (the "June 1996 Notes"), and $240,000 for repayment of indebtedness owed
to Joseph Cayre, a shareholder of the Company. The February 1997 Notes, the
February 1996 Notes and the June 1996 Notes are referred to herein as the
"Bridge Notes." The maturity date on the February 1996 Notes has been extended
until November 15, 1997 or the completion of an initial public offering. Prior
to effectiveness of the Offering, the balance of Company indebtedness (or
approximately $2,438,050) will be extended through June 30, 1998, although it
is anticipated that this balance will be repaid from the proceeds of the
Proposed Bank Facility. As described in footnote (2) to "Capitalization," the
ascribed value of the indebtedness to be repaid from the proceeds of the
Offering on the Company's financial statements is less than the outstanding
principal balance of said indebtedness. The foregoing repayment schedule
assumes conversion of the Conversion Note as well as the waiver of all
conversion rights by the holders of Bridge Notes which have convertibility
rights. See "Risk Factors -- Additional Capital Requirements; Encumbrance of
Assets; No Assurance of Future Financings" and "Certain Transactions." The
loan proceeds which are being repaid through the funds being raised hereby
were used primarily by the Company for working capital, the acquisition of
library product and the acquisition of the right to produce television product
based on the feature film "Total Recall."

The Company believes that there are a number of libraries and single or
multiple television series, movies or special programming owned by unrelated
third parties of which the Company may be able to acquire either ownership of,
or long-term distribution rights to. At this date, the Company has not entered
into discussion with respect to any such acquisition with any such third
parties.

The Company anticipates that the net proceeds of the Offering, together
with projected cash flow from operations will be sufficient to permit the
Company to conduct its operations as currently contemplated for at least the
next 12 months. Such belief is based upon certain assumptions, including
assumptions regarding the sales of the Company's original programming and
anticipated expenditures required for the development and production of
additional programming, and there can be no assurance that such resources will
be sufficient for

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such purpose. The Company will be required to raise substantial additional
capital in the future in order to further expand its production and distribution
capabilities. There can be no assurances that additional financing will be
available, or if available, that it will be on acceptable terms. In addition,
contingencies may arise which may require the Company to obtain additional
capital prior to such planned expansion.

The foregoing use of proceeds are estimates only, and there may be
significant variations in the use of proceeds due to changes in current economic
and industry conditions, as well as changes in the Company's business and
financial conditions. The amount and timing of expenditures will vary depending
on a number of factors, including changes in the Company's contemplated
operations and industry conditions. Pending use of the proceeds from the
Offering as set forth above, the Company intends to invest all or a portion of
such proceeds in short-term certificates of deposit, U.S. Government
obligations, money market investments and short-term investment grade
securities.

These contingencies could include a changing environment for the production
of syndicated television series and a deterioration in the anticipated pricing
structure with respect to the sales of the Company's products in certain foreign
territories. In addition, to the extent that favorable acquisition opportunities
present themselves, both with respect to the acquisition of product or entities
in allied fields, the use of proceeds contemplated hereunder may be varied
significantly.

DIVIDEND POLICY

The Company has not paid any dividends on its Common Stock since its
inception and does not intend to pay any dividends in the foreseeable future.
The Company currently intends to retain earnings, if any, in the development and
expansion of its business. The declaration of dividends in the future will be at
the election of the Board of Directors and will depend upon the earnings,
capital requirements, cash flow and financial condition, general economic
conditions, and other pertinent factors, including any contractual prohibition
with respect to the payment of dividends.

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CAPITALIZATION

The following table sets forth the short-term debt and capitalization of
the Company (A) at June 30, 1997, and (B) as adjusted to reflect (i) the sale of
1,500,000 shares of Common Stock pursuant to the Offering at an assumed initial
public offering price of $6.25 and the application of the estimated net proceeds
therefrom and (ii) the conversion of the Conversion Note and the Extraordinary
Loss. See "Use of Proceeds."

JUNE 30, 1997
--------------------------
ACTUAL AS ADJUSTED
----------- -----------

Short-term debt(1)................................................. $ 4,442,700 $ 2,438,050
========== ===========
Long-term debt(2).................................................. 711,300 --
---------- -----------
Shareholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares authorized; no
shares issued and outstanding actual, pro forma and as
adjusted...................................................... -- --
Common stock, no par value; 18,000,000 shares authorized,
1,131,344 issued and outstanding actual, and 2,831,092 issued
and outstanding as adjusted................................... 1,000 1,000
Paid-in capital(2)............................................ 1,135,100 8,995,640
Accumulated deficit(2)........................................ (516,000) (884,400)
---------- -----------
Total shareholders' equity............................... 620,100 8,112,240
---------- -----------
Total capitalization............................................... $ 5,774,100 $10,550,290
========== ===========

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

(1) See Notes 5 and 7 of Notes to Consolidated Financial Statements.

(2) An aggregate of $3,084,350 principal amount of indebtedness outstanding as
of June 30, 1997 will be repaid with the proceeds of the Offering. Since
said indebtedness was issued concurrently with warrants, the notes are
recorded on the Company's financial statements at a lesser value and a value
is ascribed to the warrants which management believes reflects the market
value of the warrants; this value is reflected as a debt issuance discount
and is amortized over the term of all such notes resulting in an effective
interest rate of approximately 25%. Upon repayment of such debt, the Company
will recognize an extraordinary loss equal to the value ascribed to such
warrants. While the entire $3,084,350 principal amount of indebtedness will
actually be repaid from the Offering, as adjusted reflects the repayment of
the recorded value of such debt as of October 31, 1997 -- a value of
$2,625,000 will be ascribed to said debt and a value of $368,400 will be
ascribed to the warrants, resulting in the recognition of the Extraordinary
Loss of $368,400 which becomes part of accumulated deficit. To the extent
that other debt issued with warrants is extinguished upon the closing of the
Proposed Bank Facility, the Extraordinary Loss for the fiscal year ended
December 31, 1997 will be increased.

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DILUTION

At June 30, 1997, the Company had an adjusted net tangible book value of
$620,100 or $.55 per share of Common Stock. After giving effect (i) to the sale
by the Company of 1,500,000 shares of Common Stock offered hereby at an assumed
initial public offering price of $6.25 per share, and the initial application of
the estimated net proceeds therefrom, (ii) the issuance of an additional 199,748
shares to an investor upon satisfaction of certain contractual dilution rights
(See "Certain Transactions -- Transactions with Morris Wolfson and Others"),
(iii) the conversion of the Conversion Note and (iv) the Extraordinary Loss, the
net tangible book value of the Company at such date would have been
approximately $8,112,240 or $2.87 per share. This represents an immediate
increase in net tangible book value of $2.32 per share to the current
shareholders and an immediate dilution of $3.38 per share to new shareholders.
Dilution represents the difference between the initial public offering price
paid by purchasers in the Offering and the net tangible book value per share
immediately after completion of the Offering. The following table illustrates
this per share dilution:

Assumed initial public offering price per share.............................. $ 6.25
Pro forma net tangible book value per share before the Offering............ $ 0.55
Increase in net tangible book value per share attributable to the sale
of the Common Stock offered hereby..................................... 2.32
-----
Adjusted net tangible book value per share after the Offering................ 2.87
-----
Dilution per share to new shareholders*...................................... $ 3.38
-----

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

* Represents dilution of approximately 54% to purchasers of Common Stock
offered hereto.

The following table sets forth, (i) the number of shares of Common Stock
purchased from the Company by new shareholders pursuant to the Offering and
acquired from the Company by the current shareholders of the Company (including
the shares to be obtained upon conversion of the Conversion Note), (ii) the
total consideration paid to the Company and (iii) the respective average
purchase price per share.

SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ----------------------- AVERAGE
NUMBER PERCENT AMOUNT PERCENT PRICE PER SHARE
---------- ------- ------------ ------- ---------------

Current shareholders.............. 1,331,092 47.0% $ 1,136,100 10.8% $0.85
New shareholders.................. 1,500,000 53.0 9,375,000 89.2 $6.25
--------- ------ ---------- ------
Total................... 2,831,092 100.0% $ 10,511,100 100.0%
========= ====== ========== ======

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

(1) The information set forth above does not reflect 337,500 shares of Common
Stock reserved for issuance under the Company's stock option plans (of which
approximately 173,000 shares are issuable upon exercise of stock options
outstanding as of the date of this Prospectus) and 150,000 shares of Common
Stock issuable upon exercise of the Underwriter's Warrant. See
"Management -- Stock Option Plans" and "Underwriting."

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SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated statement of operations data for the period ended
December 31, 1995, the year ended December 31, 1996, the six months ended June
30, 1997 and the consolidated balance sheet data at such dates are derived from
the Company's Consolidated Financial Statements included elsewhere in this
Prospectus that have been audited by Price Waterhouse LLP, for 1995 and by
Stonefield Josephson, Inc., for 1996 and the six month period ended June 30,
1997, both independent accountants, as indicated in their respective reports
which are also included elsewhere in this Prospectus. Such selected consolidated
financial data should be read in conjunction with those Consolidated Financial
Statements and Notes thereto. For a discussion of the appointment of Stonefield
Josephson, Inc., see "Experts."

FOR THE PERIOD
FOR THE FROM
SIX MONTHS FOR THE SIX FOR THE FEBRUARY 1995
ENDED MONTHS ENDED YEAR ENDED THROUGH
STATEMENT OF OPERATIONS DATA: JUNE 30, 1997 JUNE 30, 1996 DECEMBER 31, 1996 DECEMBER 31, 1995
------------- ------------- ----------------- -----------------
(UNAUDITED)

Revenues............................ $ 3,473,100 $ 3,314,600 $ 5,749,800 $ 1,245,300
Cost of revenues.................... 984,300 1,549,600 2,895,900 946,900
---------- ---------- ---------- -----------
Gross profits....................... 2,488,800 1,765,000 2,853,900 298,400

General and administrative
expenses.......................... 987,400 976,300 2,323,800 1,288,200
Bad debt expense.................... 660,000 -- -- --
---------- ---------- ---------- -----------

Net income from operations.......... 841,400 788,700 530,100 (989,800)

Interest expense.................... 523,400 152,500 582,700 42,700
Interest income..................... 102,700 -- 58,300 --
Other income........................ -- -- 90,100 --
---------- ---------- ---------- -----------
Net income (loss) before income
taxes............................. 420,700 636,200 95,800 (1,032,500)
Provision for income taxes.......... -- -- -- --
---------- ---------- ---------- -----------
Net income (loss)................... $ 420,700 $ 636,200 $ 95,800 $(1,032,500)
========== ========== ========== ===========

Net income (loss) per share......... $ 0.23 $ 0.35 $ 0.05 $ (0.57)
========== ========== ========== ===========

Weighted average number of shares
outstanding....................... 1,821,800 1,821,800 1,821,800 1,821,800
========== ========== ========== ===========

JUNE 30, 1997
------------------------------
BALANCE SHEET DATA: ACTUAL AS ADJUSTED(2)
----------- --------------

Liquidity capital (deficit)(3)................................... $(3,896,800) $ 3,595,340
Total assets..................................................... 10,559,500 14,952,190
Notes payable(4)(5).............................................. 4,414,000 1,938,050
Accrued interest(4)(5)........................................... 557,400 173,900
Shareholder loan and note payable(4)(5).......................... 740,000 500,000
Accumulated deficit(5)........................................... (516,000) (884,400)
Shareholders' equity............................................. 620,100 8,112,240

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

(1) See Note 2 of Notes to Consolidated Financial Statements for information
regarding the calculation of net income (loss) per share.

(4) See Notes 5 and 7 of Notes to Consolidated Financial Statements.

(5) An aggregate of $3,084,350 principal amount of indebtedness outstanding as
of June 30, 1997 will be repaid with the proceeds of this Offering. Since
said indebtedness was issued concurrently with warrants, the notes are
recorded on the Company's financial statements at a lesser value and a value
is ascribed to the warrants which management believes reflects the market
value of the warrants; this value is reflected as a debt issuance discount
and is amortized over the term of all such notes resulting in an effective
interest rate of approximately 25%. Upon repayment of such debt, the Company
will recognize an extraordinary loss equal to the value ascribed to such
warrants. While the entire $3,084,350 principal amount of indebtedness will
actually be repaid from the Offering, as adjusted reflects the repayment of
the recorded value of such debt as of October 31, 1997 -- a value of
$2,625,200 will be ascribed to said debt and a value of $368,400 will be
ascribed to the warrants, resulting in the recognition of extraordinary loss
of $368,400 (the "Extraordinary Loss") which becomes part of accumulated
deficit. To the extent that other debt issued with warrants is extinguished
upon the closing of the Proposed Bank Facility, the Extraordinary Loss for
the fiscal year ended December 31, 1997 will be increased.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the following and elsewhere in this Prospectus. The
following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.

GENERAL

The Company derives substantially all of its revenues from production fees
earned in connection with Company originated productions, distribution fees from
the exploitation of product acquired from others, and the exploitation of
Company-owned programming. The Company was incorporated in February 1995 and
commenced operations in March 1995.

The Company is engaged in developing concepts and acquiring literary and
other story properties, the most promising of which serve as the basis for the
production of series, pilot films, or made-for-television features. If a script
is accepted for production as a television feature or pilot, or if a pilot is
accepted for production as a series, the Company and the network or distributor
negotiate a license fee or distribution advance. This fee is a flat sum payment
through which the Company generally attempts to cover a significant portion of
its production costs and overhead. If programming is produced for an entity like
PBS, which does not pay significant license fees or distribution advances (and
in fact, may not pay any fee), the Company attempts to provide corporate
sponsors or agreements for the license of ancillary rights such as foreign or
home video distribution.

With respect to series for the networks or pay cable channels, the Company
generally attempts to negotiate significant license fees for both series and
movies of the week. In many cases, the Company may invest additional sums in
excess of network license fees to produce the best possible made-for-television
feature, as such features are an essential sales tool in gaining network
acceptance of a projected series, if applicable. In these cases, the Company
will attempt to cover the excess of production costs from working capital,
third-party financing, sales of the episodes in the foreign marketplace, or a
combination of these financing techniques. Where necessary or desirable, the
Company may seek to obtain funding in excess of network license fees from a
studio or a third party who will provide such financing in return for a share of
the profits from the syndication of such programming. Similarly, for television
series, the Company may invest amounts in excess of network license fees in
order to gain audience acceptance for the series and to enhance the potential
value of future syndication rights.

The Company recognizes revenues from licensing agreements covering
entertainment product when the product is available to the licensee for
telecast, exhibition or distribution, and other conditions of the licensing
agreements have been met in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 53 "Financial Reporting by Producers and Distributors of
Motion Picture Films."

The Company, as required by SFAS No. 53, values its film cost at the lower
of unamortized cost or net realizable value on an individual title basis. Film
costs represent those costs incurred in the development, production and
distribution of television projects. These costs have been capitalized in
accordance with SFAS No. 53. Amortization of film cost is charged to expense and
third party participations are accrued using the individual film forecast method
whereby expense is recognized in the proportion that current year revenues bear
to an estimate of ultimate revenues. These estimates of revenues are prepared
and reviewed by management. The Company anticipates that a majority of its
production or acquisition costs for its projects will be amortized within three
years from the completion or acquisition of such project, with the balance
amortized over an additional two years.

RESULTS OF OPERATIONS

The six months ended June 30, 1997 versus the six months ended June 30,
1996. Revenues for the six months ended June 30, 1997 were $3,473,100 compared
with $3,314,600 for the six months ended June 30,

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1996. Approximately 67% of revenues for the six months ended June 30, 1996 were
primarily from the completion and delivery of "Amazing Tails."

Cost of revenues was $984,300 for the six months ended June 30, 1997 as
compared to $1,549,600 for the six months ended June 30, 1996, such decrease
principally attributable to the decrease in amortization of product produced and
acquired by the Company.

Gross profit margin improved from 53% for the six months ended June 30,
1996 to 72% for the six months ended June 30, 1997, primarily because of the
profit margin on produced and acquired product.

General and administrative expenses were $987,400 for the six months ended
June 30, 1997 as compared to $976,300 for the six months ended June 30, 1996.

Bad debt expense was $660,000 for the six months ended June 30, 1997 as
compared to no bad debt expense for the six months ended June 30, 1996. The bad
debt expense was a result of the write off of the Eurolink receivable.

Interest expense was $523,400 for the six months ended June 30, 1997 as
compared to $152,500 for the six months ended June 30, 1996, reflecting the
issuance of Bridge Notes in the period.

Net income for the six months ended June 30, 1997 was $420,700 compared
with net income of $636,200 for the six months ended June 30, 1996. This
decrease relates primarily to the write-off of the Eurolink receivable.

Year ended December 31, 1996 versus the period from inception (February 27,
1995) to December 31, 1995. Revenues for the year ended December 31, 1996 were
$5,749,800 compared with $1,245,300 in the period from inception (February 27,
1995) through December 31, 1995 (the "95 Period"). The revenues from the 95
Period were primarily attributable to the completion and delivery of "Simply
Style." Revenues for the year ended December 31, 1996 included $1,441,700 from
the recognition of revenues from Interpublic for the completion of the series
"Amazing Tails," which revenues accounted for 25% of revenues during such
period, a revenue guarantee received from the sale of certain library rights and
revenue from the sales generated by the existing library. Included in this
amount are revenues of approximately $680,000 arising from a license of a
certain portion of the Company's film library to the Giniger Entities, with
respect to the sale of a certain portion of the Company's library in certain
Latin America countries and Europe. These revenues were 12% of revenues in that
period. Finally, revenues in the period included $618,400 from Eurolink
respecting additional sales of "Amazing Tails." This sale was approximately 11%
of the Company's revenue during the period. Revenue from the Giniger Entities,
Eurolink, and the production of "Amazing Tails" should not be considered to be
recurring. If the Company does not produce a series in fiscal 1997, or obtain
other significant foreign sales, the Company's revenues will be materially
reduced. See "Risk Factors -- Accounts Receivable; Reliance on Significant
Customers" for a further discussion of the non-recurring nature of these
revenues, and recognition of future revenues from the Giniger Entities.

Cost of revenues was $2,895,900 for the year ended December 31, 1996 as
compared to $946,900 for the 95 Period, such increase being principally
attributable to the increase in amortization of the product produced and
acquired by the Company.

Gross profit margin improved from 24% for the 95 Period to 50% for the year
ended December 31, 1996 primarily because the profit margin on "Amazing Tails"
and revenues recognized from the Giniger Entities was greater than the profit
margin on "Simply Style."

General and administrative expenses were $2,323,800 for the year ended
December 31, 1996 as compared to $1,288,200 for the 95 Period, resulting
primarily from increased personnel costs. As a percentage of revenues, however,
general and administrative expenses decreased from 103% to 40%. The debt
issuance costs were expensed and not capitalized because the expected maturity
dates were within one year. See "-- Liquidity and Capital Resources."

Interest expense was $582,700 as compared to $42,700 for the 95 Period
reflecting the issuance of Bridge Notes in the period.

Net income for the year ended December 31, 1996 was $95,800 compared with a
net loss of ($1,032,500) incurred during the 95 Period, resulting primarily from
an increase in sales activity in 1996. The 95 Period had

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23

limited sales activity, as the Company was in a start-up phase, but it included
the costs associated with the Company's initial exhibition at trade shows,
acquisition costs for programming and distribution, professional costs, and
increases in personnel to accommodate future production activities and
distribution.

LIQUIDITY AND CAPITAL RESOURCES

The entertainment industry is highly capital intensive. As of June 30,
1997, the Company had a liquidity deficit of ($3,896,800). Liquidity deficit is
defined as (i) cash and cash equivalents, accounts receivable (net), and the
amount due from officer less (ii) accounts payable, accrued expenses and other
liabilities, deferred revenues, accrued participations, notes payable,
shareholder loan and note payable and accrued interest.

Included in the Company's assets as of June 30, 1997, is approximately
$1,462,000 relating to projects under development but which have not been set
for principal photography. As of June 30, 1997, approximately $912,000 of this
amount relates to the acquisition of the rights to produce a television series
based on the feature film "Total Recall" and approximately $451,000 relates to
expenditures for "LoCoMoTioN."

Included in the Company's assets as of December 31, 1996, are approximately
$1,977,000 relating to projects which the Company is developing but which have
not been set for principal photography. Approximately $1,200,000 of this amount
relates to the acquisition of the rights to produce a television series based on
the feature film "Total Recall" and approximately $500,000 relates to
expenditures in respect of "LoCoMoTioN." The Company intends, consistent with
the standards set by the Financial Accounting Standards Board, including SFAS
No. 53, to write off the costs of all development projects when they are
abandoned or, even if not abandoned, if they have not been set for principal
photography within three years of their initial development activity.
Development activity with respect to LoCoMoTioN began in September 1995 and with
respect to Total Recall in July 1996. In the event the Company is unable to
produce either "Total Recall" or "LoCoMoTioN," the Company would incur a
significant write-down with respect to the development costs of such projects,
which, in turn, may effect ongoing financing activities.

The Company has received a commitment letter from Mercantile National Bank
for multiple lines of credit of up to $8,175,000 (the "Proposed Bank Facility"),
which lines of credit would permit borrowings pursuant to specified borrowing
bases made up of the value of the library (including a value for "Total
Recall"), accounts receivable and other assets, including cash. The Company
currently intends to repay the $2,069,650 of indebtedness remaining after the
Offering with proceeds from the Proposed Bank Facility. The Proposed Bank
Facility will contain covenants relating to the Company's tangible net worth,
debt to equity ratio and profitability. No assurance can be given that the
Proposed Bank Facility will be entered into or that the Company will be able to
use proceeds from such facility as indicated herein.

The Company has financed its operations from its own sales and production
activities, loans from its shareholders aggregating $1,872,000, the sale of the
Bridge Notes aggregating $2,844,350, and the special financing obtained with
respect to "Total Recall" (the "Total Recall Financing") in the principal amount
of $650,000.

A portion of the shareholder loans are from (i) Joseph Cayre (two loans
aggregating $750,000), (ii) Morris Wolfson, entities which may be affiliates of
Mr. Wolfson and other parties to which Mr. Wolfson disclaims a beneficial
ownership interest in or control of $822,000 (as more fully described below) and
(iii) Affida Bank ($300,000). The Cayre loans, which were made in February and
August 1995, bear interest at 14% and 10%, respectively, and are subject to an
agreement requiring the payment of $250,000 from the net proceeds of the
Offering and the pledge of certain assets to cover the unpaid amount due
thereunder. Prior to the effectiveness of the Offering, the Company anticipates
obtaining the consent from Mr. Cayre, subject to certain conditions, to extend
the maturity date of any remaining amounts due to him to June 30, 1998. See
"Certain Transactions -- Transactions with Joseph Cayre."

A loan in the principal amount of $322,000 was made in January 1996 from
AMAE Ventures, an affiliate of Mr. Wolfson, which was used by the Company for
general overhead purposes and bears interest at 12%. This note is due on the
earlier to occur of December 31, 1997 or the closing of the Offering. The holder
of such note has the right to convert the principal amount into approximately
105,000 shares of the Company's Common Stock on a fully diluted basis through
the completion of the Offering, and has indicated that it intends to convert
such note. An April 1996 loan by South Ferry #2 L.P., a Delaware limited
partnership, in

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the principal amount of $500,000 was used for the pre-production of
"LoCoMoTioN." This loan bears interest at 10% and is currently due on December
31, 1997. Prior to the effectiveness of the Offering, the Company anticipates
obtaining an extension of the maturity date of this obligation to June 30, 1998.
Finally, the Chana Sasha Foundation, an entity controlled by Mr. Wolfson,
extended the Company a $400,000 line of credit on a secured basis in November
1996, which credit line has been used and subsequently repaid by funds from the
Company's operations. This line of credit bears interest at 10%. See "Certain
Transactions" for additional information regarding these transactions.

The July 1996 proceeds from the sale of the notes in the Total Recall
Financing were used to acquire the rights to produce a television series based
on "Total Recall." These notes, which are secured by the Company's underlying
rights to the "Total Recall" series, bear interest at 10% and are due on the
earlier of the closing of the Offering or June 30, 1997. The holders of these
notes have agreed to extend the maturity date thereto through June 30, 1998. In
addition, the holders of these notes received an aggregate of 53,403 shares of
Common Stock, warrants to acquire 21,362 shares of Common Stock at an exercise
price of $.43 and a 15% net profit participation in the Company's interest in
the series. As of the date hereof, this amount has been completely repaid. See
"Certain Transactions" for a description of the consideration paid to the Morris
Wolfson Family Limited Partnership in connection with this transaction.

In November 1996, the Company obtained a $300,000 loan from Affida Bank,
which loan carries interest at 8%, and matures upon the earlier of the closing
of the Offering or December 31, 1997. Affida Bank also received warrants to
acquire 25,634 shares of the Company's Common Stock at an exercise price of $.43
in connection with this loan. Prior to the effectiveness of the Offering, the
Company anticipates obtaining an extension of the maturity date of this
obligation to June 30, 1998. The proceeds of this loan were used for working
capital.

In February 1996, the Company commenced a private placement of its secured
notes and sold to accredited investors $900,000 in principal amount of secured
promissory notes which bear interest at 12% and are due at the earlier to occur
of the Offering or November 15, 1997. This offering was changed pursuant to its
original terms with respect to subsequent investors in June 1996 when the
Company completed the sale to accredited investors of $975,000 principal amount
of secured notes which bear interest at 10% and are due at the earlier of the
closing of the Offering or May 31, 1998. In December 1996, the Company obtained
a $150,000 loan from an outside investor, which loan carries interest at 10% and
matures upon the earlier of the closing of the Offering or December 31, 1997.
Prior to the effectiveness of the Offering, the Company anticipates obtaining an
extension of the maturity date of this obligation to June 30, 1998. The proceeds
of this loan were used for working capital. In February and March 1997, the
Company completed the sale of $969,350 of convertible secured notes to
accredited investors (the "February 1997 Notes"). Each of the foregoing notes
are secured, pro-rata and pari passu, by liens on substantially all of the
Company's assets, except that the February 1997 Notes are junior to the other
bridge notes.

Assuming the repayment of short-term indebtedness as specified under the
caption "Use of Proceeds," at the conclusion of the Offering, the Company will
have approximately $2,438,050 of indebtedness, which indebtedness is due between
October 15, 1997 and December 31, 1997 and is secured by substantially all of
the assets of the Company.

Management believes that if the Offering is completed, the net proceeds
thereof, together with projected cash flow from operations, will be sufficient
to permit the Company to conduct its operations as currently contemplated for at
least the next 12 months. Such belief is based upon certain assumptions,
including assumptions regarding (i) the sales of the Company's original and
acquired programming and (ii) anticipated expenditures required for the
development and production of additional programming, including "Total Recall."
After such time period, the Company has assumed that its operations will be
financed by cash flow from operations, proceeds from the Proposed Bank Facility
(if obtained) and/or additional financings. See "Risk Factors -- Going Concern
Assumption," "-- Additional Capital Requirements; Encumbrance of Existing
Assets; No Assurance of Future Financing," "Capitalization" and "Description of
Securities."

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BUSINESS

The following Business section contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this Prospectus.

GENERAL

Since its formation in February 1995, the Company has focused its efforts
on the development, production and distribution of a variety of television
programming, including series, specials and made-for-television movies for
exploitation in the domestic and international television market. The Company
derives substantially all of its revenue from production fees earned in
connection with Company-originated productions, distribution fees from the
exploitation of product acquired from others, and the exploitation of
Company-owned programming. References to the Company after December 1995 refers
to Team Communications Group, Inc. (formerly known as DSL Entertainment, Inc.)
and its wholly-owned subsidiaries. In December 1995, two companies under common
control of the shareholders of the Company were contributed to the Company
without additional consideration. References to the Company prior to December
1995 refer to those three entities on a combined basis.

The Company's development and production activities have focused on (i)
family programming produced for U.S. cable and network television channels such
as The Discovery Channel, The Family Channel, USA Network, and PBS, (ii)
"how-to" instructional series, such as "Simply Style," a 60-episode series which
debuted during the third quarter of 1995 on The Learning Channel, and (iii)
reality based weekly and five-day per week ("strip") syndicated programming,
such as "Strange Universe," which the Company is currently co-producing with the
United/Chris-Craft television stations and Rysher Entertainment. This series is
currently airing on United/Chris-Craft stations and a commitment for the
production of a second 13-week run (65 episodes) has been received from
United/Chris-Craft. The Company has also recently completed a production of a
series of 22 half hour episodes entitled "Amazing Tails," a reality based series
focusing on extraordinary pets, which has been financed in conjunction with
Friskies Pet Foods, a division of Nestles Food, and advertising leader
Interpublic. All episodes of this series have been produced and delivered to
Interpublic, and the series is airing on Discovery Communications newest
channel, Animal Planet. The Company has recently entered into an agreement with
Discovery Communications for a second season of 26 new episodes of Amazing
Tails, which is currently in production. The Company has entered into a joint
venture agreement with Interpublic for the production of a minimum of four
pilots over the next year for non-fiction and light entertainment programming.
The Company also maintains a dramatic development and production unit which is
developing and will produce movies-of-the-week for exhibition on network
television, cable or ad hoc networks of independent stations which sometimes
form to air special programming.

In July 1996, the Company has acquired the rights to produce a weekly
dramatic television series based on the motion picture "Total Recall," which in
1990 grossed over $320 million in worldwide box office receipts. The Company has
entered into an agreement with Alliance, a leading Canadian production company,
pursuant to which Alliance, subject to certain conditions, will co-produce and
co-finance an initial 22 episodes of the series with the Company. The Company
has also entered into an agreement with PolyGram Television, L.L.C.
("PolyGram"), pursuant to which PolyGram will acquire television distribution
rights to the series in the United States. Miramax Film Corp. ("Miramax"), which
acquired the theatrical sequel rights to "Total Recall," has also acquired
worldwide home video rights to the series from the Company.

The Company is also developing a wide variety of family, dramatic,
reality-based and children's programming including a new pre-school series,
tentatively entitled "LoCoMoTioN," which the Company hopes to place on domestic
and international television in 1998. Although no assurance can be given that
the Company will obtain a domestic timeslot, the Company is currently
interviewing for female celebrities to co-host this series, which will introduce
toddlers to dance and exercise through contemporary urban music.

The Company also maintains a fully staffed international sales force and
currently has distribution rights to over 335 half-hours of family and
documentary series and specials, and 156 hours of dramatic series.

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The global television market has experienced substantial growth since 1985
and the Company believes this market will continue to experience substantial
growth during the foreseeable future as state television monopolies end and
commercial broadcast outlets expand to provide increasingly varied and
specialized content to the consumer. In the United States alone, 60 new
television channels have commenced operation since 1985. Such growth has led to
the development and commercialization of specialized channels and distribution
outlets, which, in turn, has led to increased demand for top quality and cost
efficient programming in many categories and subjects.

The Company's operating strategy is to fulfill the demand for programming
by (i) expanding the activities of each of its operating divisions, (ii)
implementing strategic acquisitions of libraries and smaller production
companies, and (iii) entering into joint ventures with, or acquisitions of,
unaffiliated third parties which are intended to lower the Company's financial
risk as it expands into related activities, such as direct marketing and
interactive programming. The Company intends to acquire, co-produce and
co-finance other series, movies and specials from third party producers in order
to increase its programming library and self distribute this product on a
worldwide basis.

The Company believes that there are unique business opportunities to
acquire other emerging companies, as well as more established production and
distribution entities, which are engaged in programming development, production,
distribution and other related media investments. While the number of
distribution channels has been increasing, the Company believes there are
powerful economic incentives, including economies of scale and depth of
financial and programming capability, for programmers and distribution entities
to consolidate. No assurance can be given that the Company will be successful in
obtaining the financing necessary for these acquisitions or that the
acquisitions will prove financially successful. No specific acquisitions have
been identified and no assurance can be given that any transactions will be
affected or if such acquisitions are consummated that they will be successful.
In addition, a significant acquisition of product or another company could
require the Company to obtain additional financing. No assurance can be given
that such financing will be available or that it will be on terms that are
favorable to the Company.

The Company anticipates that the net proceeds of the Offering, together
with projected cash flows from operations, will be sufficient to permit the
Company to conduct its operations as currently contemplated for the next 12
months. Such belief is based upon certain assumptions, including assumptions
regarding (i) the sales of the Company's original and acquired programming, and
(ii) anticipated expenditures required for the development and production of
additional programming, including "Total Recall." After such time period, the
Company has assumed that its operations will be financed by internally generated
funds and proceeds from additional financings. See "Risk Factors -- Going
Concern Assumption," "-- Additional Capital Requirements, Encumbrance of
Existing Assets; No Assurance of Future Financing," "Capitalization,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Description of
Securities -- Notes."

OPERATIONS

The Company currently operates three principal divisions: (i) production;
(ii) distribution; and (iii) licensing, merchandising, and direct-marketing.

PRODUCTION

The production of television programming involves the development of a
creative concept into a television script or teleplay, the selection of talent
(including actors, directors, and other creative personnel), and the filming,
technical, and post-production work necessary to create a finished product ready
for exhibition. Such programming is generally produced for initial prime-time
exhibition on one of the major U.S. networks, which include CBS, NBC, ABC and
Fox, however, such programming may also be produced for new channels like United
Paramount ("UPN"), and Warner Bros. ("WB") first-run pay television exhibition
or directly for syndication (i.e., independent or non-network) television,
including PBS, as well as a number of basic and pay cable channels or services,
including HBO, Showtime, the Disney Channel, The Learning Channel, The Discovery
Channel, Arts and Entertainment Network and the History Channel.

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The Company is engaged in developing concepts and acquiring literary and
other story properties, the most promising of which serve as the basis for the
production of series, pilot films, or made-for-television features. Once an idea
has been commissioned, it is presented to the network or other distributor for
acceptance. If a script is accepted for production as a television feature or
pilot, or if a pilot is accepted for production as a series, the Company and the
network or distributor negotiate a license fee or distribution advance. This fee
is a flat sum payment through which the Company generally attempts to cover a
significant portion of its production costs and overhead.

Entertainment companies in general attempt to finance the development costs
for television programming from their working capital and seek to cover a
substantial portion of their production costs, including overhead, through the
license fees. If programming is produced for an entity like PBS, which does not
pay significant license fees or distribution advances (and in fact, may not pay
any fee), the Company attempts to provide corporate sponsors or agreements for
the license of ancillary rights such as foreign or home video distribution. Even
without a fee or advance, the Company believes that it can defray a significant
portion of the production costs of PBS programming using these alternative
financing methods, thus availing itself of the key demographics of PBS
viewership, particularly in children's programming.

There can be no assurance, however, that once the Company commits to fund
production of a series licensed to a network, the network will order and exhibit
sufficient episodes to enable the Company to syndicate the series. Typically, at
least 65 episodes of a series must be produced for it to be "stripped" or
syndicated in the daily re-run market. Generally, networks can cancel a series
at stated intervals and, accordingly, do not commit in advance to exhibit a
series for more than a limited period. If a series is canceled (or not carried
for the period necessary to create enough episodes for syndication purposes),
there is a significant chance that the production costs of the project will not
be fully recovered. Similar risks apply even if the series is produced for a
non-network medium. The Company believes, however, that foreign pre-sales and
international co-production opportunities will provide sufficient options to
obtain production financing and additional revenue potential. Moreover, basic
cable channels continue to provide outlets of series of between 13 to 26
episodes per season.

The Company intends to focus its production activity in the following areas
or genres:

MOW ("Movies of the Week") and Mini-Series; Drama Series. It is the
Company's intention to expand the production of dramatic programming, over the
next 24 months, which programming if any, will be licensed, where the Company
does not have foreign partners, in foreign markets through the Company's sales
personnel. The Company has acquired the rights to produce a weekly dramatic
television series based on the motion picture "Total Recall," which generated
over $320 million in world-wide box office receipts in 1990. The Company has
entered into an agreement with Alliance, a leading Canadian production company,
pursuant to which Alliance, subject to certain conditions, will co-produce and
co-finance an initial 22 episodes of the series with the Company. The Company
has also entered into an agreement with PolyGram, pursuant to which PolyGram
will co-finance and acquire television distribution rights to the series in the
United States only. The domestic deal with Polygram includes a 22 episode
commitment in exchange for a license fee and a percentage of the net profits of
the series. Miramax, which acquired the theatrical sequel rights to "Total
Recall," has also acquired worldwide home video rights to the series from the
Company. Based upon the initial

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pre-sales of the series with Polygram, Miramax and various international
broadcasters, the financial conditions contained in the co-production agreement
with Alliance have been satisfied. In addition to reducing the Company's
financial exposure, the Company anticipates that by co-producing the series with
Alliance, the series will qualify for certain Canadian co-production and tax
benefits. The proceeds from the foreign distribution of the series, after
recoupment of production costs, will be allocated 50% to the Company and 50% to
Alliance. It is the intention of the parties that each episode will be produced
for approximately $1,100,000 per episode, with the Company receiving a
guaranteed producing fee of $25,000 per episode as well as 50% of the profits
derived from the exploitation of worldwide television, home video and
merchandising rights to the series. The Company expects to produce 22 one-hour
episodes for this series in 1998, and Ron Shusett, the writer of the original
film as well as the feature film "Alien," has written the basic treatment (i.e.,
story outline) for the pilot.

As of the date hereof, television and home video pre-sales of approximately
$15 million have been made with respect to "Total Recall" for the United States
(Polygram), all of Asia and the Middle East, and parts of Europe, Latin America
and Canada. Still remaining for licensing are most of the European territories,
and parts of Latin America, among others.

The Company has entered into an agreement with the Family Channel for the
development of two MOWs, "Quake," a story about an earthquake in New York City,
and "Down Fall," a story about an avalanche in an exclusive ski resort. The
scripts for "Quake" and "Down Fall" have recently been completed and paid for by
the Family Channel, with the projects having been in development for
approximately six months. According to the terms of the agreement with the
Family Channel, upon the final approval of such projects, the Family Channel
will provide 85% of the financing necessary for the projects. The Company will
contribute the remaining 15% of the financing, in return for which the Company
will receive the Canadian rights in perpetuity as well as 35% of the net profits
worldwide in perpetuity.

The acquisition of the one hour dramatic series "Water Rats" (52 episodes
delivered for the first and second season, and the one hour dramatic series
"Cover Story" (26 episodes delivered), both series from the Australian
production company Southern Star, is an example of the Company's strategy to
acquire this type of programming from third parties. The Company has the rights
for distribution in all Latin American countries, including Mexico and Puerto
Rico, and has cumulative sales of approximately $1 million for Mexican broadcast
television and pan-Latin American satellite broadcast television with the
majority of terrestrial broadcast rights remaining available for sale.

The Company has recently acquired Latin American home video and television
distribution rights to 78 hours of dramatic series from Beyond Distribution PTY
Ltd., a leading Australian production company. This brings the total hours of
dramatic programming licensed by the Company in Latin America to 156.

Live Action and Animated Children's Programming. To take advantage of what
it believes is a significant television market for children's programming, the
Company intends to develop and produce inventive and original shows, including
both animated series and live-action series. The Company has commenced
pre-production of "LoCoMoTioN," and hopes to place the show on domestic and
international television in 1998. If the show is successful, it is anticipated
that it will provide the Company with licensing and merchandising opportunities.

The Company continues to acquire programming on an ongoing basis. As of
October 1996 the Company acquired certain additional foreign distribution rights
to three family movies from Feature Films for Families. As of December 19, 1996,
the Company acquired thirteen 1/2 hour episodes for international distribution
of the children's series "Jelly Bean Jungle."

Non-Fiction/Light Entertainment Programming. With the rapid expansion of
national cable and network programming outlets, consumer demand for non-fiction,
reality based docudrama programming has increased. Channels such as Fox, United
Paramount, the Warners' Brothers Network, TBS, The Discovery Channel, The
Learning Channel and Lifetime have found quality non-fiction programming to be a
mainstay of their programming portfolio. The Company intends to capitalize upon
its programming expertise developed by management prior to the formulation of
the Company, including the work by Mr. Levin in producing and

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distribution of "Future Quest," a 22 episode, half-hour PBS-TV series which
explores technology, science and pop culture, to develop innovative programming
of this genre. "Future Quest" was hosted by film actor Jeff Goldblum and
presents, on a weekly basis, a gallery of futurists, scientists and social
commentators. The show was underwritten with a corporate grant from AT&T Corp.
Other programming previously produced by Mr. Levin and previously distributed by
the Company in this genre includes "Hollywood Stuntmakers," "FX Masters,"
"Legends of Hollywood" and "Mysterious Forces Beyond."

The Company has an extensive development slate of new series which are
currently being pre-sold in the international marketplace. Such new programs
include "Strange Universe," a 130 half-hour 5 day per week ("strip") syndicated
series being produced in association with United/Chris-Craft television stations
and Rysher Entertainment. A commitment for the production of a second 13-week
run (65 episodes) has been received from United/Chris Craft. "Amazing Tails," a
weekly series of 22 half hours featuring people and their pets, was initially
financed by a presale for approximately $1,441,700 to Interpublic for domestic
distribution and broadcast. To date, the Company has also licensed "Amazing
Tails" in the foreign territories of Japan for $300,000 and the U.K., France,
Italy, Spain, Portugal and Greece for an additional $595,000. The Company has
recently entered into an agreement with Discovery Communications for a second
season of 26 new episodes of Amazing Tails, which is currently in production.

The Company has entered into a "first look" arrangement with Interpublic
pursuant to which the Company and Interpublic have agreed to fund, subject to
the conditions contained therein, a minimum of four non-fiction or light
entertainment pilots. Series which are developed from the pilots will be
co-financed by each entity, and Interpublic will use its best efforts to seek an
advertising sponsor for each series.

Current co-productions include "America's Scenic Railway Journeys," a six
hour documentary mini-series devoted to famous railway journeys. The Company has
co-produced this series with Oregon Public Television for the PBS Network and
has paid Oregon Public Television an advance for the international distribution
rights to the mini-series.

Syndicated Strip Shows. The Company is making a significant creative and
development effort to provide syndicated daily programming, especially talk
shows and reality series. The Company is currently developing a talk show
"strip" anticipated for the 1998 season entitled "Chrystal Rose." Ms. Rose is a
noted British talk show personality whose series was aired in the United
Kingdom's ITV Network. No assurance can be given that the Company will be able
to obtain sufficient station clearances to produce this show in the United
States. The Company has also successfully licensed formats for such game shows
as "Young Matchmakers,"which has been successfully launched on Holland's RTL4
channel, and is now being presented to domestic broadcasters.

"How To"/Instructional Programming. From gardening and style to cooking and
home repair, "how to" and instructional programming is an expanding market in
which the Company has strived to develop, produce, and distribute a variety of
programs which both entertain and educate. "Simply Style," a 60 episode "strip"
created by the Company for The Discovery Channel and hosted by fashion expert
Leah Feldon, is the first such series produced by the Company. Mr. Levin has
previously produced "Laurie Cooks Light and Easy," 65 one-half hour episodes
previously distributed by the Company. Hosted by Laurie Burrows Grad, this daily
strip presented simple recipes prepared in a healthy manner. The show attracted
celebrities such as Jill St. John, Steve Sax, Dom Deluise, Wolfgang Puck,
Michael Tucker and Jill Eikenberry.

DISTRIBUTION

An active part of the Company's business is the presentation of its own
product and product acquired from third-party producers to the international
marketplace. The Company's current library includes 335 half hours of reality
based series, mini-series and specials and 156 hours of dramatic series
programming. This includes drama and non-fiction programming as well as Movies
of the Week, and children's animation. With the rapid increase of networks and
channels, there is an expanding demand for top-quality programming. To access
these markets, the Company's distribution personnel attend such major
international trade shows as MIPCOM-TV, Monte Carlo Television Festival, MIP-TV
and NATPE.

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In certain territories like Latin America, the Company uses subdistributors
like the Giniger Entities. The Company believes that these agents typically have
long-standing relationships in territories the Company would have difficulty
accessing or in obtaining favorable prices.

The Company has also recently entered into an agreement with Australia's
Southern Star to distribute its successful drama series "Water Rats" in Latin
America, including Mexico and Puerto Rico, through the Giniger Entities.

In addition, the Company has an active "format" business oversees, where it
represents and "reformats" successful foreign shows for the domestic
marketplace, and vice versa. The Company also currently represents several other
custom formats which are under consideration in numerous territories.

LICENSING, MERCHANDISING AND DIRECT MARKETING

The Company's strategic objectives encompasses the exploitation of
additional revenue streams through licensing and merchandising efforts. The
Company hopes to generate new profit centers from toy, publishing, CD-ROM,
housewares, stationary, video, apparel, and other product category licenses.
Although no assurance can be given that this strategy can be successfully
implemented, the Company and Alliance, the co-producer of "Total Recall," have
begun to focus on the marketing and merchandising rights that are available with
respect to the "Total Recall" series.

The Company also intends to focus on certain types of instructional or "how
to" programming that can be translated into direct marketing opportunities. By
their design, aspects of each how to/instructional program can be extended into
a continuity club, infomercial, and retail products. For example, should it have
sufficient financing, the Company intends to develop from the series "Amazing
Tails" a pet "fan" club, with commercial tie-ins with its sponsors.

POSSIBLE ACQUISITIONS; JOINT VENTURES

The Company believes that there are numerous opportunities to acquire other
production and distribution companies, as well as existing programming
libraries. The Company believes that these acquisitions, if successful, will
result in synergistic opportunities, and may increase the Company's revenue and
income growth. No specific acquisition candidates have been identified, and no
assurance can be given that any transactions will be effected, or if effected,
will be successful.

The Company is also committed to establishing joint ventures with strategic
partners in order to expand the Company's operations without significantly
expanding its overhead. For example, the Company has completed a "first
negotiation" arrangement with Interpublic which would give Interpublic the first
opportunity to provide sponsorship, commercial underwriting, and financing of
the Company's children's and "how to" series.

COMPETITION

The entertainment industry is highly competitive. The Company competes
with, and will compete with, many organizations, including major film studios,
independent production companies, individual producers and others, including
networks, who are seeking the rights to attractive literary properties, the
services of creative and technical personnel, the financing for production of
film and television projects and favorable arrangements for the distribution of
completed films. Many of the Company's present and future competitors are
organizations of substantially larger size and capacity, with far greater
financial and personnel resources and longer operating history than the Company.
Moreover, the entertainment industry is currently evolving into an industry in
which certain multinational, multi-media entities, including Viacom/Paramount
Pictures, The News Corporation/Twentieth Century Fox, The Walt Disney
Company/Cap Cities-ABC, Time Warner/Turner Broadcasting and Westinghouse/CBS are
anticipated to be in a position, by virtue of their control over key film,
magazine, and/or television content and their control of key network and cable
outlets, to dominate certain communications industries activities. These
competitors have numerous competitive advantages, including the ability to
acquire and attract superior properties, personnel and financing.

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EMPLOYEES

The Company currently employs 12 full time employees, five of whom are
members of senior management. From time to time, as projects go into production,
temporary employees are employed.

PROPERTIES

The Company currently rents its office space at 12300 Wilshire Boulevard,
Los Angeles, California from an unaffiliated third party, pursuant to a 36 month
lease that commenced on May 15, 1995. The Company currently rents approximately
4,600 square feet at a monthly rate of $1.75 per square foot. Mr. Levin has
personally guaranteed the obligations under the lease. The Company believes that
its current offices are adequate for its requirements, and that additional
space, if required, is available throughout the Los Angeles area at reasonable
rates.

LEGAL PROCEEDINGS

In April 1997 the Company has been purportedly served with a judgment in
the amount of $85,540 in a matter styled Levy Entertainment, Inc. vs. DSL
Entertainment, Inc. filed in Franklin Superior Court, State of Vermont. The
Company was not served with any papers relating to the case, did not enter any
defense, and disputed the amounts allegedly owed to Plaintiff. The Company has
recently agreed to settle this litigation by paying $30,000 to Levy
Entertainment, Inc. ("Levy"). In addition, as part of the settlement, the
Company has agreed to pay Levy approximately $60,000 for 15 years of additional
rights in certain programs owned by Levy.

In April 1997 the Company was served with a complaint in a matter styled
Allen vs. Team Communications Group, Inc. filed in Superior Court for the
Central District of California. In the complaint, Allen, a former employee of
the Company, alleges that the Company has breached an agreement to pay her 2% of
the proceeds derived from any series she "brought" to the Company. The Company
intends to file an answer to the complaint and to vigorously defend itself.

In May 1997, the Company filed and served a complaint in a matter styled
Team Communications Group, Inc. vs. Michael Jacobs. This action is against a
former employee for, inter alia, unfair competition and breach of fiduciary
duty. Mr. Jacobs filed a complaint on the same day, styled Jacobs vs. Team
Communications Group, Inc. alleging breach of employment contract, fraud, and
also seeking an accounting. The Company intends to vigorously pursue its action,
and to defend itself in the counter-suit. The two actions have been consolidated
by the Court.

In March 1997, the Company was served with a complaint in a matter styled
Ayckroyd vs. Barosse, et al., against all of the producers and production
entities involved in the development and production of the television series
"Strange Universe" (the "Series"). In this action, Peter Ayckroyd, a television
producer, alleges that proprietary ideas and concepts belonging to him were
incorporated into the Series without his permission. The Company intends to
vigorously defend this action.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company, together with their
respective ages and positions with the Company, are as follows:

NAME AGE POSITION
- ------------------- --- -------------------------------------------------------------------

Drew S. Levin 43 President, Chief Executive Officer and Chairman of the Board
Paul Yamamoto 43 Executive Vice President and Director
Eric Elias 42 Senior Vice President, Business and Legal Affairs
Todd C. Jackson 43 Senior Vice President, Domestic and International Sales
Michael Latiner 27 Vice President, Controller and Secretary
Bruce P. Vann 41 Nominated Director(1)(2)
Seth M. Willenson 50 Nominated Director(1)(2)

- ---------------
(1) Member of the Compensation Committee

(2) Member of the Audit Committee

Drew S. Levin has been President and Chairman of the Board of the Company
since its founding in 1995. From 1987 through 1994, he was President of DSL
Productions, Inc. ("DSP"), a privately held company that was sold to The
Producer's Entertainment Group, Inc. ("TPEG") in 1994. Through February 1995, he
continued to act as president of DSP, which operated as a subsidiary of TPEG.
Mr. Levin has produced and co-produced hundreds of hours of programming,
including "Pop Culture Meets Pure Science" for which Mr. Levin received an Emmy
Award, "Laurie Cooks Light & Easy," "Future Quest" and "Simply Style." Mr. Levin
has extensive experience in international co-productions, including co-producing
a domestic and international version of "Top of the Pops" with the BBC for the
CBS network.

Paul Yamamoto has been Executive Vice President since September 1996 and a
Director since December 1996. Mr. Yamamoto was a managing partner of the Favored
Artists Agency from 1989 through 1992. From 1992 through July 1995, Mr. Yamamoto
was self employed and ran his own management/production company. In August 1995,
Mr. Yamamoto became the executive vice president of the Larry Thompson
Organization, where he served until September 1996. Mr. Yamamoto intends to
resign upon effectiveness of the Offering and the reconstitution of the Board of
Directors, as described herein.

Eric Elias has served in the capacity as Senior Vice President, Business
and Legal Affairs since the Company's incorporation. Mr. Elias has previously
served as corporate counsel and general manager for a retail/wholesale leisure
electronics firm and for the past twelve years, has been in general private
practice, providing business and legal affairs services for similarly situated
television production entities.

Todd C. Jackson has been Senior Vice President, Domestic and International
Sales since May, 1997. From 1995, until he joined the Company, he served as
Senior Vice President, Worldwide Distribution for Kinnevik Media Properties,
Ltd. In 1993, Mr. Jackson founded California Concert Network, serving as its
President and Chief Executive Officer until Prime Ticket Network was acquired by
Liberty Media, a subsidiary of Tele-Communications, Inc. in May 1995. From 1989
to 1992, he served as Vice President, Program Distribution for Broadway Video
Entertainment, and prior to that was Vice President, International and Cable
Television at All American Television for two years. Mr. Jackson holds a Master
of Arts in Law and Diplomacy from The Fletcher School at Tufts University and
received his Bachelor of Arts from Northwestern University.

Michael Latiner has been Vice President, Controller and Secretary since
August 1997. From 1991 to 1994 Mr. Latiner was with Deloitte & Touche where he
was a member of the audit group. From 1994 to 1995 Mr. Latiner was with Price
Waterhouse where he was a member of the Entertainment, Media, and Communications
Group. From 1995 to 1997 Mr. Latiner was with 20th Century Fox where he served
as the Manager of Financial Reporting.

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Bruce P. Vann, who has agreed to become a member of the Board of Directors
upon the conclusion of the Offering and the completion of certain other matters
(including the appointment of a Chief Financial Officer and the placement of
directors and officers insurance), is a 1980 graduate of Duke Law School. Mr.
Vann is an attorney who has been in practice in Los Angeles for over 16 years.
From 1989 to 1994, Mr. Vann was a partner in the Los Angeles office of Keck,
Mahin & Cate. He is currently a partner in the firm of Kelly Lytton Mintz & Vann
LLP, counsel to the Company. Mr. Vann also serves as Senior Vice President,
Business and Legal Affairs of Largo Entertainment, Inc., a subsidiary of The
Victor Company of Japan. Mr. Vann is a member of the board of directors of J2
Communications.

Seth Willenson, who has agreed to become a member of the Board of Directors
upon the conclusion of the Offering and the completion of certain other matters
(including the appointment of a Chief Financial Officer and the placement of
directors and officers insurance), has over 25 years experience in the
entertainment business. For the past 7 years, he has been the president of Seth
Willenson, Inc., a marketing and management consulting firm in Los Angeles,
California. Mr. Willenson has produced 9 films, including; "Jezebel's Kiss,"
"Delusion," "Gas, Food and Lodging," "Top Dog" and 'Pocahontas: The Legend." He
has lectured extensively on the entertainment business, including speaking at
The Sundance Film Festival, the Sundance Producer's Workshop, the University of
California at Los Angeles, the University of Southern California and The Aspen
Institute. Mr. Willenson was graduated from Cornell University in 1968 and
attended the Annenburg School of Communications at the University of
Pennsylvania.

Directors are elected for one year terms at the Company's annual meeting of
shareholders and serve until the due election and qualification of their
successors. Officers are appointed by the Board of Directors and serve at the
discretion of the Board.

Although the Company's directors do not receive any compensation for their
services as directors, it is anticipated that, following the Offering,
non-management directors will receive a fee for each Board of Directors meeting
attended, plus reimbursement for expenses. Additionally, certain non-management
board members will receive mandatory stock option grants pursuant to the
Company's 1996 Directors Plan.

EXECUTIVE COMPENSATION

The following table provides certain summary information concerning the
compensation earned for services rendered in all capacities to the Company for
the fiscal years ended December 31, 1995 and 1996, by the Company's Chief
Executive Officer (the "Named Officer"):

SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------

STOCK ALL OTHER
NAME AND PRINCIPAL POSITION(1) YEAR SALARY BONUS OPTIONS COMPENSATION
- ----------------------------------------- ---- -------- ------- ------- ------------

Drew S. Levin
Chairman of the Board, President and 1996 $350,000 $45,000(2) (3) $15,000(4)
Chief Executive Officer 1995 $350,000 $ -- $13,750(4)

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

(1) Other than salary described herein, the Company did not pay the Named
Officer any compensation, including incidental personal benefits, in excess
of 10% of such individual's salary. No other executive officer of the
Company had a total annual salary and bonus which exceeded $100,000 during
fiscal 1995 or 1996.

(2) For the fiscal year ended December 31, 1996, Mr. Levin was entitled,
pursuant to the terms of his prior agreement, to a bonus equal to certain
producer's fees relating to the series "Amazing Tales." During such period
Mr. Levin received $45,000 and, pursuant to the terms of his new employment
agreement (which will be effective upon the closing of the Offering), has
agreed to apply the balance of such accrued but unpaid bonus ($175,000) to
repay certain loans made to him by the Company. See "Certain Transactions."
This amount ($175,000) will be reflected in Mr. Levin's compensation for
fiscal 1997. In the future, Mr. Levin will not receive production bonuses.
The loan balance was $186,000 at December 31, 1996 and approximately
$130,000 at September 30, 1997. See "Certain Transactions."

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(3) Pursuant to the terms of Mr. Levin's restated employment agreement, Mr.
Levin will be granted options to acquire 85,000 shares of the Company's
Common Stock, exercisable at the Company's initial offering price. These
options shall be deemed fully vested.

(4) Mr. Levin was entitled to receive a car allowance of $1,250 each month for
all or a portion of the year. In lieu of these payments, Mr. Levin applied
such amounts to reduce his loan balance.

EMPLOYMENT AGREEMENTS

Mr. Levin has entered into a new employment agreement with the Company (the
"Levin Agreement") providing for his services as President and Chief Executive
Officer effective January 1, 1997 through December 31, 2001. Pursuant to the
Levin Agreement, Mr. Levin will receive a salary of $240,000, plus $125,000 per
annum as an advance against a pro-rata portion of producer's fees earned by Mr.
Levin. Producer's fees in excess of $125,000 will be retained by the Company.
Mr. Levin has agreed that any producer's fees relating to Company produced
programming shall be allocated to the Company. Pursuant to the Levin Agreement,
Mr. Levin will receive (i) from 5% to 7.5% of the Company's pre-tax profit
beginning in 1997 pursuant to a formula based on specified earnings levels and
(ii) options to acquire an aggregate of 85,000 shares of the Company's Common
Stock at a per share exercise price equal to the initial public offering price,
which options shall be deemed fully vested. The Levin Agreement also provides
that certain unpaid bonus compensation owing to Mr. Levin will be applied to his
loan from the Company. See "Certain Transactions."

Mr. Paul Yamamoto entered into an employment agreement with the Company,
providing for his services as an Executive Vice President from January 20, 1997
to June 30, 1997, which agreement was amended as of October 4, 1997 (the
"Yamamoto Agreement"). Pursuant to the Yamamoto Agreement, Mr. Yamamoto's
compensation will be as follows: (a) from January 20, 1997 to June 30, 1997, it
will be based on an annual rate of $125,000 plus a performance bonus based on an
annual rate of up to $25,000 to be paid weekly; (b) from July 1, 1997 to
December 31, 1997, it will be based on an annual rate of $125,000 plus a
performance bonus at a rate of up to $50,000 to be paid weekly; and (c) from
January 1, 1998 to June 20, 1999, it will be based on an annual rate of
$200,000; this is in addition to a further bonus of 2 1/2% of the Company's
pre-tax profits up to $3,000,000 and then 4% thereafter pursuant to a formula
based upon specified earnings levels, payable annually at the end of each
calendar year. Mr. Yamamoto will also receive options to acquire 20,000 shares
of Common Stock per year at $1.00 per share, such options to vest over the
course of employment on terms no less favorable than granted to other employees.

Mr. Todd Jackson entered into an employment agreement with the Company,
providing for his services as Senior Vice President, Domestic and International
Sales from May 19, 1997 to May 18, 1999, which agreement was amended as of
October 4, 1997 (the "Jackson Agreement"). Pursuant to the Jackson Agreement,
Mr. Jackson's compensation will be as follows: (a) from May 19, 1997 to May 18,
1998, an annual salary of $100,000, plus a performance bonus of up to $75,000
per year, both payable weekly; and (b) from May 19, 1998 to May 18, 1999, an
annual salary of $200,000. In the event the Company elects to exercise its
option for a third year of the Jackson Agreement, Mr. Jackson will receive a
base salary of $225,000. In addition, Mr. Jackson will also receive a minimum
guaranteed bonus at the rate of $25,000 per year, based upon the pre-tax profits
of the Company. Mr. Jackson has also been given an option to terminate his
agreement if the Company has not consummated an initial public offering by
September 19, 1997. Since the Company did not consummate an initial public
offering by such date, Mr. Jackson has the right to terminate his agreement upon
60 days prior written notice. Mr. Jackson also will receive 10,000 stock options
per year of employment, such options to vest after each year of employment,
pursuant to the terms of the Company's employee stock option plan.

STOCK OPTION PLANS

On December 14, 1995, the Company's Board of Directors approved, and
recommended for adoption by the shareholders, who adopted such plans in March
1996, the 1995 Stock Option Plan and the 1995 Stock Option Plan for Non-Employee
Directors (collectively, the "1995 Plans"). As of the date hereof, 78,000
options were outstanding under the 1995 Plans. In January 1997, the Company's
shareholders voted to freeze the

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1995 Plans and adopt two new plans, the Team Communications Group, Inc. Stock
Awards Plan (the "1996 Employee Plan") and the Team Communications Group, Inc.
Directors' Stock Option Plan (the "1996 Directors Plan," and together with the
1996 Employee Plan, (the "1996 Option Plans").

The following summary is qualified in its entirety by reference to the full
text of the 1996 Option Plans. Unless otherwise indicated, the summary is
applicable to each plan, as well as to the 1995 Plans.

The 1996 Plans. The 1996 Option Plans provide for the granting of awards of
incentive stock options ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), nonqualified stock
options ("NSOs"), and stock appreciation rights ("SARs") (awards of ISOs, NSOs,
and SARs are sometimes hereinafter collectively referred to herein as "Awards").

Purpose. The purpose of the 1996 Option Plans is to provide key employees,
officers, and directors with an additional incentive to promote the success of
the Company's business and to encourage employees to remain in the employ of the
Company.

Administration-Employee Plan. The 1996 Employee Plan is to be administered
by a committee of two or more directors of the Company; provided however, that
if the Company becomes subject to Section 12 of the Exchange Act, such directors
shall be "non-employee directors" as such term is used in Rule 16b-3 and, if
feasible, such directors shall be "Outside Directors;" and provided further that
if there are not at least two such "non-employee directors," any grants or
awards hereunder to an individual subject to Section 16 of the Exchange Act
shall also be approved by the Board of Directors of the Company. "Outside
Director" shall have the meaning set forth in Treasury Regulation
sec. 1.162-27(e)(3) as amended from time to time and as interpreted by the
Internal Revenue Service.

1996 Directors Plan. Directors who are not employees of the Company will,
on the effective date of this offering and each annual anniversary thereof,
receive options to purchase 2,500 shares of Common Stock. The option price per
share of Common Stock purchasable upon exercise of such stock options shall be
100% of the fair market value on the date of grant. Such options shall be
exercisable immediately on the date of grant by payment in full of the purchase
price in cash. The aggregate number of shares of Common Stock that may be
granted pursuant to the 1996 Directors Plan is 20,000.

1996 Employee Stock Plan. The aggregate number of shares of Common Stock
that may be granted under the 1996 Employee Plan is 180,000. The Employee Plan
provides for the authority by the Employee Plan Committee to grant ISOs to any
key employee of the Company or any affiliate of the Company and to determine the
terms and conditions of each grant, including without limitation, the number of
shares subject to each ISO. The ISO exercise price will also be determined by
the Committee and will not be less than the fair market value of the Common
Stock on the date of grant. The exercise price will not be less than 110% of
such fair market value and the exercise period will not exceed five years if the
participant was the holder of more than 10% of the Company's outstanding voting
securities.

The Manner of Exercise. The exercise price for options granted under the
1996 Option Plans may be paid in cash or shares of Common Stock, including
shares of Common Stock which the participants received upon the exercise of one
or more options provided that, with respect to ISOs, such shares have been held
by the participant for at least the greater of two years from the date the
option was granted or one year after the shares of Common Stock were transferred
to the participant.

The option exercise price may also be paid by the participant's delivery of
an election directing the Company to withhold shares of Common Stock from the
Common Stock otherwise due upon exercise of the option.

CERTAIN TRANSACTIONS

EMPLOYMENT AGREEMENT WITH DREW LEVIN; SHORT TERM BORROWINGS BY MR. LEVIN

See "Management -- Employment Agreements" for a description of the
arrangements between the Company and Mr. Levin relevant to his employment
agreement and the amendment thereof.

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From time to time, Mr. Levin has borrowed funds from the Company on a
short-term basis. As of June 30, 1997, these borrowings amounted to
approximately $104,900. Any future borrowings by any officer of the Company will
require the approval of a majority of the disinterested members of the Board.

In connection with the Company's facilities, Mr. Levin has personally
guaranteed the obligations under the Company's lease. See
"Business -- Properties."

TRANSACTIONS WITH JOSEPH CAYRE

As of the date hereof, the Company was indebted to Joseph Cayre, one of its
original shareholders, in respect of loans made in April and August 1995 in the
amount of $500,000 and $240,000, respectively. Interest on the loans currently
accrues at the rate of 12% and 14%, respectively. Mr. Cayre has waived interest
that accrued on the loans prior to December 31, 1996. Mr. Cayre's loans are
currently secured by Mr. Levin's shares and all of the assets of the Company.

Mr. Cayre and Mr. Levin have agreed, subject to documentation, that as of
the closing date of this Offering, Mr. Cayre will receive payment of $240,000 in
respect of the amounts owed to him, and the remaining debt, subject to adequate
collateralization (which may include cash collateral) shall be extended until
June 30, 1998. Subject to the foregoing, Mr. Levin and Mr. Cayre have also
agreed, to restructure Mr. Cayre's investment in the Company. Mr. Cayre agreed
that upon the closing of the Offering, Mr. Cayre's interest in the Company would
be reduced to 164,874 shares of the Company's Common Stock by transferring to
Mr. Levin 195,774 shares of the Company's common stock held by Mr. Cayre. Mr.
Cayre will also be entering into a consulting agreement with the Company
pursuant to which he will be paid $200,000 through September 30, 1998. In
February 1996, in connection with a prior restructuring of this indebtedness,
Mr. Cayre received options to purchase 48,743 shares of Common Stock at a price
of $.43 per share.

TRANSACTIONS WITH MORRIS WOLFSON AND OTHERS

In January 1996, the Company entered into a transaction with AMAE Ventures,
an affiliate of Mr. Wolfson, pursuant to which AMAE Ventures acquired 4% of the
Company's outstanding Common Stock and lent to the Company the sum of $322,000,
which amount was used by the Company for general overhead purposes and bears
interest at 12%. This note is due on the earlier to occur of December 31, 1997
or the closing of the Offering. Interest on this line accrues at 10% per year.
The holder of such note has the right to convert the principal amount into 3% of
the Company's Common Stock on a fully diluted basis through the completion of
the Offering, and has indicated that it intends to convert such note. An April
1996 loan by South Ferry #2 L.P., a Delaware limited partnership, in the
principal amount of $500,000 was used for the pre-production of "LoCoMoTioN."
This loan bears interest at 10% and is due on the earlier to occur of December
31, 1997 or upon the closing of the Offering. In connection with such loan,
South Ferry #2 L.P. received 29,905 warrants exercisable at $.43 per share.
Finally, the Chana Sasha Foundation, an entity controlled by Mr. Wolfson,
extended the Company a $400,000 line of credit on a secured basis in November
1996, which credit line has been used and subsequently repaid by funds from the
Company's operations. In addition the Company issued to Chana Sasha Foundation
and others 6,408 shares of the Company's Common Stock with respect to such
extension of credit.

The terms of AMAE Ventures' original agreement with the Company, as
indicated above, enables such entity (or its investors) to receive up to an
additional 199,748 shares of Common Stock upon the completion of the Offering.

The July 1996 proceeds from the sale of the notes in the Total Recall
Financing were used to acquire the rights to produce a television series based
on "Total Recall." These notes, which are secured by the Company's underlying
rights to the "Total Recall" series, bear interest at 10% and are due at the
first to occur of June 30, 1997 or the closing of the Offering. The holders of
these notes, ACA Equities, D&M Investments and Gilbert Karsenty, have agreed to
extend the maturity date thereto through June 30, 1998. In addition, the holders
of these notes received an aggregate of 53,403 shares of common stock, warrants
to acquire 21,361 shares of Common Stock at an exercise price of $.43 and a 15%
net profit participation in the Company's interest in the series. This loan has
been repaid through an advance from Alliance.

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TPEG AGREEMENTS

Beginning in early 1995, The Producer's Entertainment Group, Inc. ("TPEG")
and Mr. Levin entered into a series of agreements (the "TPEG Agreements") which
provided among other things, (i) for the formation of the Company and the
retention by TPEG of a 19.9% ownership interest in the Company, (ii) the grant
to the Company of distribution rights to certain product produced by DSP
Productions, Inc. ("DSP"), (DSP was sold by Mr. Levin and other shareholders to
TPEG in 1994), (iii) the assignment to the Company of certain of DSP's entire
new production and development distribution portfolio, and (iv) production
financing for the series "Simply Style." Certain disputes arose between Mr.
Levin and Mr. Cayre, on the one hand, and TPEG on the other hand, which resulted
in the execution of a settlement agreement (the "TPEG Settlement Agreement")
with TPEG pursuant to which TPEG was obligated to complete the transfer of
"Simply Style" to the Company. The Company also agreed to repurchase from TPEG,
for $178,000, a sufficient number of Company shares to reduce TPEG's holding in
the Company to 5%, on a fully diluted basis through the completion of the
Offering. On June 28, 1996, the Company's Board of Directors determined that, in
light of the Company's liquidity position at that time and its inability to
complete the TPEG Settlement Agreement pursuant to its terms, it was advisable
to assign the obligation to effectuate the TPEG Settlement Agreement to Mr.
Levin. Consequently, Mr. Levin and a group of investors repurchased the entire
holdings of TPEG in the Company.

LOAN FROM AFFIDA BANK

In November 1996, the Company obtained a $300,000 loan from Affida Bank,
which loan carries interest at 8%, and matures upon the earlier of the closing
of the Offering or December 31, 1997. Affida Bank also received warrants to
acquire 25,634 shares of the Company's Common Stock at an exercise price of
$0.43 in connection with this loan. Prior to the effectiveness of the Offering,
the Company anticipates obtaining an extension of the maturity date of this
obligation to June 30, 1998. The proceeds of this loan were used for working
capital. Affida Bank is domiciled in Switzerland, is a merchant bank and has an
arms length relationship with the Company.

TRANSACTIONS WITH BRUCE P. VANN

Mr. Vann, who has agreed to become a member of the Board of Directors upon
the consummation of the Offering, is the holder of options to purchase 10,000
shares of Common Stock at a price of $1.00 per share which he acquired in
October 1996, plus 4,273 shares of Common Stock which he received in October
1996 in lieu of fees relating to the acquisition of "Total Recall." Kelly Lytton
Mintz & Vann LLP, where Mr. Vann is a partner, is counsel to the Company, has
received fees from the Company through December 31, 1996 of approximately
$46,000, and has received approximately $71,000 during the first two quarters of
1997.

The Company believes that the foregoing transactions were on terms no less
favorable to the Company than those available from unaffiliated parties. It is
the Company's current policy that all transactions with officers, directors, 5%
shareholders and their affiliates will be entered into only if such transactions
are approved by a majority of the disinterested independent directors, and on
terms no less favorable to the Company than could be obtained from unaffiliated
parties and are reasonably expected to benefit the Company.

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PRINCIPAL SHAREHOLDERS

The following table sets forth, as of September 30, 1997, as adjusted to
reflect the sale of the shares of Common Stock offered hereby and the conversion
of the Conversion Note, the ownership of the Common Stock by (i) each person who
is known by the Company to own of record or beneficially more than 5% of the
outstanding Common Stock, (ii) each of the Company's directors and (iii) all
directors and executive officers of the Company as a group. Except as otherwise
indicated, the shareholders listed in the table have sole voting and investment
power with respect to the shares indicated.

PERCENTAGE BENEFICIALLY OWNED
NAME AND ADDRESS NUMBER ----------------------------------
OF BENEFICIAL OWNER(1) OF SHARES(2) BEFORE OFFERING AFTER OFFERING
- -------------------------------------------------- ------------ --------------- --------------

Drew S. Levin(3).................................. 685,123 48.4% 23.5%
Joe Cayre(4)...................................... 263,617 19.1% 9.2%
Morris Wolfson(5)................................. 110,777 8.3% 4.0%
Aaron Wolfson(6).................................. 108,642 8.1% 3.8%
Abraham Wolfson(7)................................ 102,233 7.7% 3.6%
Affida Bank(8).................................... 82,305 6.2% 2.9%
Bruce P. Vann(9).................................. 14,273 1.1% *
Paul Yamamoto(10)................................. 10,000 * *
All officers and directors as a group (seven
persons, including nominee directors)........... 709,396 49.4% 24.2%

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

* Less than 1%

(1) Address is c/o Team Communications Group, Inc., 12300 Wilshire Boulevard,
Suite 400, Los Angeles, California 90025.

(2) Gives effect to the anti-dilution provisions of the sale of 2.5% of the
Company's Common Stock from Mr. Drew Levin to Mr. Morris Wolfson, Mr.
Abraham Wolfson, Mr. Aaron Wolfson and Mr. Edward Nagel and the conversion
of the Conversion Note computed on a fully diluted basis.

(3) Includes 249,488 shares which Mr. Cayre has agreed to transfer to Mr. Levin
pursuant to Mr. Levin's arrangements with Mr. Cayre. Mr. Levin has pledged
his shares and his options to Mr. Cayre pursuant to Mr. Cayre's loan
transaction with the Company. Includes options to acquire 85,000 shares of
Common Stock which the Company has agreed to grant to Mr. Levin
concurrently with the execution of his new Employment Agreement. Mr. Levin
has agreed to vote all shares held by him for a period of thirty six (36)
months following the closing of the Offering for election to the Company's
Board of Directors of one designee of H.J. Meyers reasonably acceptable to
the Company. See "Certain Transactions" and "Employment Agreements."

(4) Includes options to purchase 48,743 shares of the Company's Common Stock at
an exercise price of $0.43 per share. Mr. Cayre has granted the Underwriter
a 30-day option to purchase up to 30,000 additional shares to cover
over-allotments, if any. If the Underwriter's over-allotment option is
exercised in full, Mr. Cayre will own 7.6% of the outstanding shares of
Common Stock of the Company after the Offering.

(5) Includes 59,966 shares to be issued upon conversion of certain convertible
debt upon the closing of the Offering. Does not include 210,875 shares
owned by Abraham and Aaron Wolfson, Mr. Morris Wolfson's brothers, of which
Mr. Morris Wolfson disclaims beneficial ownership. Also does not include
20,506 shares owned by Chana Sasha Foundation, of which Mr. Morris Wolfson
is the president, and of which Mr. Morris Wolfson disclaims beneficial
ownership.

(6) Includes 59,966 shares to be issued upon conversion of certain convertible
debt upon the closing of the Offering. Does not include 213,010 shares
owned by Morris or Abraham Wolfson, Mr. Aaron Wolfson's brothers, of which
Mr. Aaron Wolfson disclaims beneficial ownership.

(7) Includes 59,966 shares to be issued upon conversion of certain convertible
debt upon the closing of the Offering. Does not include 219,419 shares
owned by Morris or Aaron Wolfson, Mr. Abraham Wolfson's brothers, of which
Mr. Abraham Wolfson disclaims beneficial ownership.

(8) Includes options to purchase 3,268 shares of Common Stock at an exercise
price of $0.43 per share.

(9) Includes options to purchase 10,000 shares of Common Stock at an exercise
price of $1.00 per share.

(10) Includes options to purchase 10,000 shares of Common Stock at an exercise
price of $1.00 per share.

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CONCURRENT OFFERING BY SELLING SECURITYHOLDERS

An additional 193,870 outstanding shares (the "Securityholder Shares") of
Common Stock issuable upon exercise of warrants held by the Selling
Securityholders have been registered pursuant to the registration statement
under the Securities Act, of which this Prospectus forms a part, for sale by
such holders. The Securityholders Shares may be sold on or about the effective
date of the Offering if a current prospectus relating to the Securityholder
Shares is in effect and the Securityholder Shares are qualified for sale. The
shares of Common Stock underlying any such warrants are subject to a 12 month
lock-up beginning on the date of this Prospectus. The Company will not receive
any proceeds from the market sales of the Securityholder Shares, although it
will receive the proceeds from the exercise of the warrants held by the Selling
Securityholders. Sales of the Securityholder Shares or the potential of such
sales could have an adverse effect on the market price of the Company's Common
Stock. See "Risk Factors -- Shares Eligible for Future Sale."

The Selling Securityholders and the number of Securityholder Shares held by
each are as listed below.

SECURITYHOLDER
SELLING SECURITYHOLDERS SHARES
---------------------------------------------------------------- --------------

Alan Parnes..................................................... 5,000
Arab International Trust Co..................................... 10,000
Duck Partners, LP............................................... 20,000
Gary & Paula Wayton............................................. 10,000
Michael Rosenbaum............................................... 20,000
RMK Financial LLC............................................... 15,000
Robert Bain..................................................... 20,000
Robert Frankel.................................................. 7,470
Roger Triemstra................................................. 10,000
Roland McAbee................................................... 6,400
Swan Alley (Nominees) Limited................................... 20,000
Van Moer Santerre & Cie......................................... 50,000
-------
Total................................................. 193,870
=======

There are no other material relationships between any of the Selling
Securityholders and the Company, nor have any such material relationships
existed within the past three years. The Company has been informed by the
Underwriter that there are no agreements between the Underwriter and any Selling
Securityholder regarding the distribution of the Securityholder Shares.

The sale of the Securityholder Shares by the Selling Securityholders may be
effected from time to time in transactions (which may include block transactions
by or for the account of the Selling Securityholders) in the over-the-counter
market or in negotiated transactions, a combination of such methods of sale or
otherwise. Sales may be made at fixed prices which may be changed, at market
prices prevailing at the time of sale, or at negotiated prices.

Selling Securityholders may effect such transactions by selling their
securities directly to purchasers, through broker-dealers acting as agents for
the Selling Securityholders or to broker-dealers who may purchase shares as
principals and thereafter sell the securities from time to time in the
over-the-counter market, in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders and/or the
purchasers from whom such broker-dealer may act as agents or to whom they may
sell as principals or otherwise (which compensation as to a particular
broker-dealer may exceed customary commissions).

At the time a particular offer of Securityholder Shares is made by or on
behalf of a Selling Securityholder, to the extent required, a prospectus will be
distributed which will set forth the number of Securityholder Shares being
offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, if any, the purchase price paid by any
underwriter for any Securityholder

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Shares purchased from the Selling Securityholder and any discounts, commissions
or concessions allowed or reallowed or paid to dealers, and the proposed selling
price to the public.

If any of the following events occurs, this Prospectus will be amended to
include additional disclosure before offers and sales of the Securityholder
Shares are made: (a) to the extent such securities are sold at a fixed price or
by option at a price other than the prevailing market price, such price would be
set forth in this Prospectus; (b) if the securities are sold in block
transactions and the purchaser wishes to resell, such arrangements would be
described in this Prospectus; and (c) if the compensation paid to broker-dealers
is other than usual and customary discounts, concessions or commissions,
disclosure of the terms of the transaction would be included in this Prospectus.
This Prospectus would also disclose if there are other changes to the stated
plan of distribution, including arrangements that either individually or as a
group would constitute an orchestrated distribution of the Securityholder
Shares.

Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of Securityholder Shares may not simultaneously
engage in market making activities with respect to any securities of the Company
for a period of at least two (and possibly nine)business days prior to the
commencement of such distribution. Accordingly, in the event that the
Underwriter is engaged in a distribution of the Securityholder Shares, they will
not be able to make a market in the Company's securities during the applicable
restrictive period. However, the Underwriter has not agreed to nor are they
obligated to act as broker-dealer in the sale of the Securityholder Shares and
the Selling Securityholders may be required, and in the event that the
Underwriter is a market maker, will likely be required, to sell such securities
through another broker-dealer. In addition, each Selling Securityholder desiring
to sell Securityholder Shares will be subject to the applicable provisions of
the Exchange Act and the rules and regulations thereunder, including without
limitation Rules 10b-6 and 10b-7, which provisions may limit the timing of the
purchases and sales of shares of the Company's securities by such Selling
Securityholders.

The Selling Securityholders and broker-dealers, if any, acting in
connection with such sales might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act and any commission received by
them and any profit on the resale of the securities may be deemed underwriting
discounts and commissions under the Securities Act.

DESCRIPTION OF SECURITIES

COMMON STOCK

The Company is authorized to issue up to 18,000,000 shares of Common Stock,
no par value. Holders of Common Stock are entitled to one vote for each share
held of record on each matter submitted to a vote of shareholders. There is
cumulative voting for election of directors. Subject to the prior rights of any
series of preferred stock which may from time to time be outstanding, if any,
holders of Common Stock are entitled to receive ratably, dividends when, as and
if declared by the Board of Directors out of funds legally available therefor
and, upon the liquidation, dissolution, or winding up of the Company, are
entitled to share ratably in all assets remaining after payment of liabilities
and payment of accrued dividends and liquidation preferences on the preferred
stock, if any. Holders of Common Stock have no preemptive rights and have no
rights to convert their Common Stock into any other securities. The outstanding
shares of Common Stock are validly authorized and issued, fully paid, and
nonassessable.

PREFERRED STOCK

The Company is authorized to issue up to 2,000,000 shares of Preferred
Stock. The Preferred Stock may be issued in one or more series, the terms of
which may be determined at the time of issuance by the Board of Directors,
without further action by shareholders and may include voting rights (including
the right to vote as a series on particular matters), preferences as to
dividends and liquidation, conversion rights, redemption rights and sinking fund
provisions. The Company has no present plans for the issuance of shares of
Preferred Stock and any issuance of such Preferred Stock for a period of two
years from the date of this Prospectus will require the consent of the
Underwriter prior to such issuance. The issuance of any Preferred Stock could

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adversely affect the rights of the holders of Common Stock and therefore, reduce
the value of the Common Stock. The ability of the Board of Directors to issue
Preferred Stock could also discourage, delay or prevent a takeover of the
Company. See "Risk Factors -- Preferred Stock; Possible Anti-Takeover Effects of
Certain Charter Provisions."

WARRANTS

In connection with the issuance of its prior secured notes, the Company
issued an aggregate of 447,354 warrants, each warrant entitling the holder
thereof to acquire one share of Common Stock; 224,293 warrants are exercisable
at an exercise price equal to $0.43 per share, 29,191 warrants are exercisable
at an exercise price equal to $0.97 per share and 193,870 warrants are
exercisable at $0.97 per share, subject to adjustment as hereinafter provided.
The warrants may be exercised, at the option of the holder thereof, at any time
from the date of this Prospectus and terminating on the earlier to occur of the
third anniversary of the effective date of the Offering or June 30, 2000,
whichever is earlier (the "Termination Date"). Unless previously exercised, the
right to exercise the warrants will terminate on the Termination Date.

The Company has also issued 147,924 warrants to other consultants and
investors in connection with prior financings of the Company. Of these warrants,
21,362 are exercisable at $1.07 per share and 126,562 are exercisable at $0.43
per share.

The warrantholders have the opportunity to profit from a rise in the market
price of the Common Stock without assuming the risk of ownership of the shares
of Common Stock issuable upon the exercise of the warrants, with a resulting
dilution in the interests of the Company's shareholders by reason of exercise of
warrants at a time when the exercise price is less than the market price for the
Common Stock. Further, the terms on which the Company could obtain additional
capital during the life of the warrants may be adversely affected. The warrant
holders may be expected to exercise their warrants at a time when the Company
would, in all likelihood, be able to obtain any needed capital by an offering of
Common Stock on terms more favorable than those provided for by the warrants.

The holders of the warrants will not have any of the rights or privileges
of shareholders of the Company, including voting rights and rights to receive
dividends, prior to exercise of the warrants. The Company will reserve out of
its authorized but unissued shares a sufficient number of shares of Common Stock
for issuance on exercise of the warrants. The Common Stock issuable on exercise
of the warrants will be, when issued, duly authorized and validly issued, fully
paid, and nonassessable.

For a holder to exercise the warrants, there must be a current registration
statement in effect with the Commission and registration or qualification with,
or approval from, various state securities agencies with respect to the shares
or other securities underlying the warrants, or an opinion of counsel for the
Company that there is an exemption from registration or qualification.

Antidilution. In the event that the Company shall at any time (i) declare a
dividend, or make a distribution, on the outstanding Common Stock payable in
shares of its capital stock (ii) subdivide the outstanding Common Stock into a
greater number of shares of Common Stock, (iii) combine the outstanding Common
Stock into a smaller number of shares, or (iv) issue any shares of its capital
stock by reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then, in each case, the exercise price
per warrant share in effect at the time of the record date for the determination
of shareholders entitled to receive such dividend or distribution or of the
effective date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying such
exercise price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such action, and the
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action. Upon such adjustments to the exercise price,
the number of warrant shares issuable upon exercise of each warrant shall
simultaneously be adjusted by multiplying the number of warrant shares
theretofore issuable upon exercise of such warrant by the exercise price
theretofore in effect and dividing the product so obtained by the exercise
price, as adjusted.

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Reorganizations. In the event of any reclassification, capital
reorganization or other similar change of outstanding Common Stock, any
consolidation or merger involving the Company (other than a consolidation or
merger which does not result in any reclassification, capital reorganization, or
other similar change in the outstanding Common Stock), or a sale or conveyance
to another corporation of the property of the Company as, or substantially as,
an entirety, each warrant will thereupon become exercisable only for the kind
and number of shares of stock or other securities, assets or cash to which a
holder of the number of shares of Common Stock issuable (at the time of such
reclassification, reorganization, consolidation, merger or sale) upon exercise
of such warrant would have been entitled upon such reclassification,
reorganization, consolidation, merger or sale. In the case above, the effect of
these provisions would be that the holder of a warrant would thereafter be
limited to exercising such warrant at the exercise price in effect at such time
for the amount of cash per share that a warrant holder would have received had
such holder exercised such warrant and received Common Stock immediately prior
to the effective date of such cash merger or transaction. Depending upon the
terms of such cash merger or transaction, the aggregate amount of cash so
received could be more or less than the exercise price of the warrant.

Exercise Procedure. Each holder of a warrant may exercise such warrant by
surrendering the certificate evidencing such warrant, with the subscription form
on the reverse side of such certificate properly completed and executed,
together with payment of the exercise price, to the Company at its executive
offices. Such offices will initially be located at 12300 Wilshire Blvd., Los
Angeles, California 90025. The exercise price will be payable by cash or by
certified or official bank check payable in United States dollars to the order
of the Company. If fewer than all of the warrants evidenced by a warrant
certificate are exercised, a new certificate will be issued for the remaining
number of warrants. Certificates evidencing the warrants may be exchanged for
new certificates of different denominations by presenting the warrant
certificates at the office of the Company.

UNDERWRITER'S WARRANT

At the closing of the Offering, the Company will issue to the Underwriter
the Underwriter's Warrant to purchase for investment a maximum of 150,000 shares
of Common Stock. The Underwriter's Warrant will be exercisable for a four-year
period commencing one year from the date of this Prospectus. The exercise price
of the Underwriter's Warrant will be $8.75 per share (based upon an assumed
initial public offering price of $6.25 per share). The Underwriter's Warrant
will not be saleable, transferable, assignable or hypothecatable prior to its
exercise date except to officers of the Underwriter and members of the selling
group and officers and partners thereof. The Underwriter's Warrant will contain
anti-dilution provisions. The Underwriter's Warrant does not entitle the
Underwriter to any rights as a stockholder of the Company until such Warrant is
exercised and shares are purchased thereunder. The Underwriter's Warrant and the
shares of Common Stock thereunder may not be offered for sale except in
compliance with the applicable provisions of the Securities Act. The Company has
agreed that, if it shall cause to be filed with the Securities and Exchange
Commission either an amendment to the Registration Statement of which this
Prospectus is part or a separate registration statement, the Underwriter shall
have the right during the four-year period commencing on the date of this
Prospectus to include in such amendment or Registration Statement the
Underwriter's Warrant and the shares of Common Stock issuable upon its exercise
at no expense to the Underwriter. Additionally, the Company has agreed that,
upon written request by a holder or holders of 50% or more of the Underwriter's
Warrant which is made during the period prior to the exercise of the
Underwriter's Warrant, the Company will, on two separate occasions, register the
Underwriter's Warrant and the shares of Common Stock issuable upon exercise
thereof. The initial such registration will be at the Company's expense and the
second such registration will be at the expense of the holder(s) of the
Underwriter's Warrant.

BRIDGE NOTES

To finance its working capital needs, the Company has issued three separate
series of bridge notes. In February 1997, the Company commenced the placement of
Units consisting off $50,000 principal amount of 10% Convertible Notes (the
"February 1997 Notes") and 10,000 common stock purchase warrants. The Company
sold an aggregate of $969,350 principal amount of the February 1997 Notes. The
principal amount

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of, and interest on, the February 1997 Notes shall be due and payable on the
earlier to occur of (i) five business days after the completion of either a
public offering of the Company's Common Stock (the "Initial Public Offering") or
(ii) the public or private placement of debt or equity securities with gross
proceeds to the Company in excess of $5,000,000 (together with an Initial Public
Offering, a "Financing Event") or the second anniversary of the Closing Date (as
defined therein). The February 1997 Notes are convertible into shares of Common
Stock (the "Conversion Shares") of the Company during the period commencing 60
days after the Closing Date and continuing through the effective date of the
Initial Public Offering, at which time any February 1997 Notes not so converted
will be repaid. The conversion price (the "Conversion Price") is $5.00 per
share, subject to an adjustment in certain events. The holders of these notes
will waive, prior to the effective date of this Offering, their right to so
convert.

In June 1996 the Company commenced the placement of Units consisting of
$50,000 principal amount of 10% Secured Convertible Notes (the "June 1996
Notes") and 10,000 common stock purchase warrants. The Company sold an aggregate
of $975,000 principal amount of the June 1996 Notes. The principal amount of,
and interest on, the June 1996 Notes shall be due and payable, if the holders
thereof do not otherwise notify the Company that they wish to redeem their
conversion feature, on the completion of the Offering. The June 1996 Notes are
secured by substantially all of the assets of the Company. To the extent not
otherwise repaid, the June 1996 Notes are convertible into shares of Common
Stock of the Company, beginning 12 months after the completion of an Initial
Public Offering, at a conversion price of $5.00 per share, subject to an
adjustment in certain events. The holders of these notes will waive, prior to
the effective date of the Offering, their right to so convert.

In February 1996, the Company commenced the placement of Units consisting
of $50,000 principal amount of 12% Secured Notes (the "February 1996 Notes") and
10,000 common stock purchase warrants. The Company sold an aggregate of $900,000
principal amount of the February 1996 Notes. The principal amount of, and
interest on, the February 1996 Notes shall be due and payable on the second
anniversary of the initial closing date thereof, and were secured by
substantially all of the assets of the Company. These notes were not
convertible.

TRANSFER AGENT

The transfer agent for the Company's Common Stock is U.S. Stock Transfer
Corporation, Glendale, California, which also is responsible for record keeping
functions in connection with the same.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering, there has been no public market for the Common Stock
of the Company. Sales of substantial amounts of Common Stock of the Company in
the public market or the perception that such sales could occur could materially
adversely affect the prevailing market price and the ability of the Company to
raise equity capital in the future.

Upon completion of the Offering, the Company will have outstanding
approximately 2,831,092 shares of Common Stock. Of these shares, 1,331,092 are
Restricted Shares. The 1,500,000 shares of Common stock that are sold by the
Company to the public in the Offering will be freely tradeable without
restriction under the Securities Act, unless purchased by "affiliates" of the
Company as that term is defined in Rule 144 under the Securities Act.

The remaining shares of Common Stock outstanding upon completion of the
Offering, determined as if all outstanding warrants have been exercised, will be
held by approximately 60 holders and will be "restricted securities" as that
term is defined in Rule 144 under the Securities Act ("Restricted Stock").
Restricted Stock may be sold in the public market only if registered or if
qualified for an exemption from registration under Rule 144 or 701 promulgated
under the Securities Act, which are summarized below, or other exemptions. Sales
of the Restricted Stock in the public market, or the availability of such shares
for sale, could materially adversely affect the market price of the Common
Stock. In general, under Rule 144, which was amended and became effective on
April 29, 1997, beginning 90 days after the date of this Prospectus, a person

42
44

(or persons whose shares are aggregated) who has beneficially owned Restricted
Stock for at least one year (including the holding period of any prior owner
other than an affiliate of the Company) would be entitled to sell within any
three month period a number of shares that does not exceed the greater of (i)
one percent of the number of shares of Common Stock then outstanding or (ii) the
average weekly trading volume of the Common Stock during the four calendar weeks
preceding the filing of notice of such sale. Sales under Rule 144 are also
subject to certain manner of sale provisions and notice requirements and to the
availability of current public information about the Company. Under amended Rule
144(k), a person who is not deemed to have been an affiliate of the Company at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years (including the
holding period of any prior owner except an affiliate of the Company) is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Unless
otherwise restricted, such shares of Restricted Stock may therefore be sold
immediately upon the completion of this Offering.

Any employee, officer or director of or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or contract
may be entitled to rely on the resale provisions of Rule 701. Rule 701 permits
affiliates of the Company to sell their Rule 701 shares under Rule 144 without
complying with the holding period requirements of Rule 144. Rule 701 further
provides that nonaffiliated shareholders may sell such shares in reliance on
Rule 144 without having to comply with the public information, volume limitation
or notice provisions of Rule 144. In both cases, a holder of Rule 701 shares is
required to wait until 90 days after the date of this Prospectus before selling
such shares.

The holders of substantially all shares of Restricted Stock have entered,
or are anticipated to enter, into contractual "lock-up" agreements providing
that they will not offer, sell, contract to sell or grant any option to purchase
or otherwise dispose of the shares of stock owned by them or that could be
purchased by them through the exercise of options to purchase stock of the
Company for 18 months after the date of this Prospectus without the prior
written consent of the Underwriter.

Taking into account the lock-up agreements and the restrictions of Rules
144 and 701 described above, approximately no Restricted Shares or Warrant
Shares will be eligible for sale immediately after the Offering and
approximately all Restricted Shares will be eligible for sale beginning 18
months after the date of this Prospectus, subject, in some cases, to the volume
restrictions of Rule 144.

The Company has agreed that for a period of 12 months from the date of this
Prospectus, it will not sell any securities, with the exception of the shares of
Common Stock issued upon exercise of currently outstanding options, without the
Underwriter's prior written consent, which consent shall not be unreasonably
withheld. In addition, for a period of 24 months from the date of this
Prospectus, the Company will not issue any shares of Preferred Stock or sell or
issue any securities pursuant to Regulation S or Regulation D under the
Securities Act without the Underwriter's prior written consent.

The Company intends to file a registration statement on Form S-8 under the
Securities Act covering shares of Common Stock reserved for issuance under the
1995 Plans and the 1996 Plans. Based on the number of shares reserved for
issuance under such Plans, such registration statement would cover approximately
337,500 shares. Such registration statement will automatically become effective
upon filing. Accordingly, shares registered under such registration statement
will, subject to Rule 144 volume limitations applicable to affiliates of the
Company, be available for sale in the open market, subject to vesting
restrictions and the lock-up agreements described above.

43
45

UNDERWRITING

The Underwriter has agreed to purchase from the Company, subject to the
terms and conditions of the Underwriting Agreement between the Company and the
Underwriter, the number of shares of Common Stock set forth opposite its name.
The underwriting discount set forth on the cover page of this Prospectus will be
allowed to the Underwriter at the time of delivery to the Underwriter of the
shares so purchased.

NUMBER OF
SHARES TO BE
NAME OF UNDERWRITER PURCHASED
------------------------------------------------ -------------

H.J. Meyers & Co., Inc. ........................ 1,500,000

The Underwriter has advised the Company that it proposes to offer the
shares to the public at an offering price of between $5.50 and $7.00 per share
and that the Underwriter may allow certain dealers who are members of the
National Association of Securities Dealers, Inc. ("NASD") a concession of not in
excess of $ per share. After completion of the Offering, the public offering
price and concession may be changed.

Each of the Company and the Selling Shareholder has granted to the
Underwriter an option, exercisable during the 30 business-day period from the
date of this Prospectus, to purchase up to an aggregate of 225,000 additional
shares on the same terms set forth above. The Underwriter may exercise such
rights only to satisfy over-allotments in the sale of the shares.

The Company has agreed to pay to the Underwriter a non-accountable expense
allowance equal to 3% of the total proceeds of the Offering, or $281,250 at an
assumed initial public offering price of $6.25 per share (or $ payable
by the Company and $ payable by the Selling Shareholder if the
Underwriter exercises the over-allotment option in full). Of such
non-accountable expense allowance, $60,000 has been paid to date. In addition to
the Underwriter's commission and the Underwriter's non-accountable expense
allowance, the Company is required to pay the costs of qualifying the shares of
Common Stock, under federal and state securities laws, together with legal and
accounting fees, printing and other costs in connection with the Offering,
estimated to total approximately $365,000.

At the closing of the Offering, the Company will issue to the Underwriter
the Underwriter's Warrant to purchase for investment a maximum of 150,000 shares
of Common Stock. The Underwriter's Warrant will be exercisable for a four-year
period commencing one year from the date of this Prospectus. The exercise price
of the Underwriter's Warrant, at an assumed initial offering price of $6.25,
will be $8.75 per share (140% of the initial public offering price). The
Underwriter's Warrant will not be saleable, transferable, assignable or
hypothecatable prior to its exercise date except to officers of the Underwriter
and members of the selling group and officers and partners thereof. The
Underwriter's Warrant will contain anti-dilution provisions. The Underwriter's
Warrant does not entitle the Underwriter to any rights as a shareholder of the
Company until such Warrant is exercised and the shares of Common Stock are
purchased thereunder. The Underwriter's Warrant and the shares of Common Stock
thereunder may not be offered for sale except in compliance with the applicable
provisions of the Securities Act. The Company has agreed that, if it shall cause
to be filed with the Commission either an amendment to the Registration
Statement of which this Prospectus is a part or a separate registration
statement, the Underwriter shall have the right during the five-year period
commencing on the date of this Prospectus to include in such amendment or
Registration Statement the Underwriter's Warrant and the shares of Common Stock
issuable upon its exercise at no expense to the Underwriter. Additionally, the
Company has agreed that, upon written request by a holder or holders of 50% or
more of the Underwriter's Warrant which is made during the exercise period of
the Underwriter's Warrant, the Company will on two separate occasions, register
the Underwriter's Warrant and the shares of Common Stock issuable upon exercise
thereof. The initial such registration will be at the Company's expense and the
second such registration will be at the expense of the holder(s) of the
Underwriter's Warrant.

For the period during which the Underwriter's Warrant is exercisable, the
holder or holders will have the opportunity to profit from a rise in the market
value of the Company's Common Stock, with a resulting dilution in the interests
of the other shareholders of the Company. The holder or holders of the
Underwriter's

44
46

Warrant can be expected to exercise it at a time when the Company would, in all
likelihood, be able to obtain any needed capital from an offering of its
unissued Common Stock on terms more favorable to the Company than those provided
for in the Underwriter's Warrant. Such facts may materially adversely affect the
terms on which the Company can obtain additional financing. To the extent that
the Underwriter realizes any gain from the resale of the Underwriter's Warrant
or the securities issuable thereunder, such gain may be deemed additional
underwriting compensation under the Securities Act.

The Company has agreed to enter into a consulting agreement with H.J.
Meyers under the terms of which H.J. Meyers has agreed to perform consulting
services related to corporate finance and will be paid a non-refundable fee of
$6,000 per month for 12 months. The Company has agreed to pay H.J. Meyers the
entire one year fee upon closing of the Offering.

Holders of all of the Company's capital stock outstanding prior to the
Offering are subject to lock-up agreements under which the holders of such
shares will agree not to sell or dispose of any shares owned by them prior to
the Offering, or subsequently acquired under any option, warrant or convertible
security owned prior to the Offering, for a period of 18 months after the date
of this Prospectus without prior written consent of the Underwriter.

The Company has agreed that for a period of 12 months from the date of this
Prospectus, it will not sell or otherwise dispose of any securities, with the
exception of the shares of Common Stock issued upon exercise of currently
outstanding options, without the Underwriter's prior written consent, which
consent shall not be unreasonably withheld. In addition, for a period of 24
months from the date of this Prospectus, the Company will not sell or issue any
securities pursuant to Regulation S or Regulation D under the Securities Act
without the Underwriter's prior written consent.

In addition, the Company has agreed that, for the three years following the
Offering, it will not implement a "poison pill" or other device designed to
prevent a hostile takeover of the Company, or increase the size of the Company's
Board of Directors, without the approval of those members of the Company's Board
of Directors who are not employees of the Company. Moreover, the Company has
agreed, for three years following the Offering, that it will not increase the
compensation of or introduce severance packages for, its directors and officers,
without the consent of the Compensation Committee of the Company's Board of
Directors.

The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriter against certain liabilities in connection with
the Registration Statement, including liabilities under the Securities Act.

In connection with the Offering, the Company has agreed that for a period
of 36 months from the closing of the Offering, H.J. Meyers shall have the right
to designate one member to the Company's Board of Directors, provided that the
designee is acceptable to the Company.

The Underwriter has advised the Company that the Underwriter does not
intend to confirm sales to any account over which they exercise discretionary
authority.

Prior to the Offering, there has been no public market for the shares of
Common Stock. The initial public offering price has been negotiated among the
Company and the Underwriter. Among the factors considered in determining the
initial public offering price of the Common Stock, in addition to prevailing
market conditions, are estimates of the business potential and earnings
prospects of the Company, an assessment of the Company's management and the
consideration of the above factors in relation to market valuation of companies
in related businesses.

Any limitation on the ability of the Underwriter to make a market in the
Company's Common Stock could adversely impact the liquidity or trading price of
the Company's Common Stock, which could have a material adverse impact on the
market price of the Company's Common Stock. The Chicago office of the Securities
and Exchange commission is conducting a private, nonpublic investigation of H.J.
Meyers, the Underwriter, pursuant to a Formal Order of Investigation issued by
the Commission. The investigation is focused on whether H.J. Meyers may have
violated applicable securities laws and the rules and regulations

45
47

thereunder, with respect to sales of certain securities. The Company is
currently unable to assess the potential impact of the outcome of the Staff's
investigation on H.J. Meyers' ability to make a market in the Company's Common
Stock after the Offering or trading in the Company's securities.

In connection with the Offering, the Underwriter may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock.
Specifically, the Underwriter may overallot the Offering, creating a syndicate
short position. In addition, the Underwriter may bid for and purchase shares of
Common Stock in the open market to cover syndicate short positions or to
stabilize the price of the Common Stock. Finally, the underwriting syndicate may
reclaim selling concessions from syndicate members in the Offering, if the
syndicate repurchases previously distributed Common Stock in syndicate covering
transactions, in stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of the Common Stock above
independent market levels. The Underwriter is not required to engage in these
activities, and may end any of these activities at any time.

LEGAL MATTERS

Certain legal matters in connection with the validity of the shares of
Common Stock being offered hereby will be passed upon for the Company by Kelly
Lytton Mintz & Vann LLP, 1900 Avenue of the Stars, Suite 1450, Los Angeles,
California 90067. Bruce P. Vann, a member of Kelly Lytton Mintz & Vann LLP, is a
nominee director of the Company and the beneficial owner of 4,273 and options to
acquire 10,000 shares of the Company's Common Stock. Certain legal matters will
be passed upon for the Underwriter by Freshman, Marantz, Orlanski, Cooper &
Klein, Beverly Hills, California.

EXPERTS

The consolidated financial statements as of December 31, 1995, December 31,
1996 and the six months ended June 30, 1997 included in the Prospectus have been
so included in reliance on the report of Price Waterhouse LLP, for 1995 and by
Stonefield Josephson, Inc., for 1996, both independent accountants, and are so
included in reliance upon their reports given on their respective authority as
experts in auditing and accounting.

On July 1, 1997, Price Waterhouse LLP (the "Prior Accountants") resigned as
independent accountants and withdrew their report on the Company's Financial
Statements for the year ended December 31, 1996. On or about August 7, 1997, the
Company agreed to accept the resignation of the Prior Accountants. In connection
with such decision, the Company appointed Stonefield Josephson, Inc. (the "the
Stonefield Firm" or "New Accountants") to audit the fiscal year ended December
31, 1996, and review and audit subsequent periods on a going forward basis. The
decision to accept the resignation of the Prior Accountants was approved by the
board of directors of the Company. There were no disagreements with Prior
Accountants on any matters of accounting principle or practices, financial
statement disclosure or auditing scope or procedure which if not resolved to the
Prior Accountant's satisfaction would have caused it to make reference to the
subject matter of the disagreement in connection with its report.

The Company's decision to restate its results relates to the existence of a
provision of a clause in a security agreement which was provided to the Prior
Accountants subsequent to the date of their audit opinion, which had the
potential of creating a contingency with respect to revenue from a related
licensing agreement which the Company had included in its 1996 financial
statements. In light of the Company's intention to restate its results for
fiscal 1996, the Company determined to appoint the New Accountants to complete
such audit as well as to audit the six month period ending June 30, 1997.

The Prior Accountants' opinion for 1995 contained an explanatory paragraph
relating to the ability of the Company to function as a going concern.

The engagement of the Stonefield Firm is effective as of August 7, 1997. No
discussion was made with the Stonefield Firm as to application of any specific
accounting principle. The Company has authorized the Prior Accountants to
respond fully to any inquiries of the New Accountants. A copy of the letter from
the

46
48

Prior Accountants relating to this disclosure is attached as Exhibit 23.2 to the
Registration Statement of which this Prospectus is a part.

ADDITIONAL INFORMATION

The Company has filed with the Commission, Washington D.C. 20549 a
Registration Statement on Form SB-2 (including all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act with respect to
the Common Stock offered hereby. This Prospectus, which constitutes part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock, reference is hereby made to the Registration Statement, including
exhibits, schedules and reports filed as a part thereof. Statements contained in
this Prospectus as to the contents of any contract or other document filed as an
exhibit to the Registration Statement referred to herein set forth the material
terms of such contract or other document but are not necessarily complete, and
in each instance reference is made to the copy of such document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. The Registration Statement, including the
exhibits and schedules thereto, may be inspected without charge at the principal
office of the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington D.C. 20549, and at the Commission's
Regional Offices located at The Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material can also be obtained at
prescribed rates by mail from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549. The Registration Statement,
including the exhibits and schedules thereto, can also be accessed through the
EDGAR terminals in the Commission's Public Reference Rooms in Washington,
Chicago and New York or through the World Wide Web at http://www.sec.gov.

47
49

INDEX TO FINANCIAL STATEMENTS

PAGE
-----

Report of Stonefield Josephson, Inc., Independent Auditors............................ F-2
Report of Price Waterhouse LLP, Independent Accountants............................... F-3
Consolidated Balance Sheet at December 31, 1995, December 31, 1996, and for the six
months ended June 30, 1997.......................................................... F-4
Consolidated Statement of Operations for the period from February 27, 1995 to December
31, 1995, for the year ended December 31, 1996, for the six months ended June 30,
1996 and for the six months ended June 30, 1997..................................... F-5
Consolidated Statement of Cash Flows for the period from February 27, 1995 to December
31, 1995, for the year ended December 31, 1996, for the six months ended June 30,
1996 and for the six months ended June 30, 1997..................................... F-6
Consolidated Statement of Cash Flows Supplemental Schedule of Non Cash Activities for
the period from February 27, 1995 to December 31, 1995, for the year ended December
31, 1996, for the six months ended June 30, 1996 and for the six months ended June
30, 1997............................................................................ F-7
Consolidated Statement of Shareholders' Equity (Deficit) for the period from February
27, 1995 to December 31, 1995, for the year ended December 31, 1996, and for the six
months ended June 30, 1997.......................................................... F-8
Notes to Consolidated Financial Statements............................................ F-9

F-1
50

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders

Team Communications Group, Inc.

We have audited the consolidated balance sheets of Team Communications
Group, Inc. and subsidiaries as of December 1, 1996 and June 30, 1997, and the
related consolidated statements of operations, shareholders' equity and cash
flows for the year and six month period then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of its
operations and its cash flows for the year and six month period ended December
31, 1996 and June 30, 1997, respectively, in conformity with generally accepted
accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 12, the Company
has had significant losses in the past, has been dependent on outside equity
investors to finance its operations, and certain notes payable are past due.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans with respect to these matters are described
in Note 12 to the financial statements. The financial statements do not include
any adjustments that might result from the outcome of these uncertainties.

STONEFIELD JOSEPHSON, INC.

CERTIFIED PUBLIC ACCOUNTANTS

Santa Monica, California

September 19, 1997

F-2
51

REPORT OF INDEPENDENT ACCOUNTANTS

May 28, 1996, except as to Note 10, which is as of September 27, 1996

To the Board of Directors and

Shareholders of DSL Entertainment Group, Inc.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of shareholders' deficit and of cash
flows present fairly, in all material respects, the consolidated financial
position of DSL Entertainment Group, Inc. and its subsidiaries at December 31,
1995 and the results of their operations and their cash flows for the period
from February 27, 1995 to December 31, 1995 in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audit of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 12 to the
financial statements, the Company's recurring losses from operations and limited
capital resources raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 12. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

PRICE WATERHOUSE LLP

F-3
52

TEAM COMMUNICATIONS GROUP, INC.

CONSOLIDATED BALANCE SHEET

ASSETS

JUNE 30, DECEMBER 31, DECEMBER 31,
1997 1996 1995
----------- ------------- ------------

Cash and cash equivalents............................... $ 105,900 $ 214,300 $ 39,000
Trade receivables, less allowance for doubtful accounts
of $63,800, $63,800 and $0, respectively (Note 2)..... 5,831,800 3,342,100 53,100
Television program costs, less accumulated amortization
of $1,908,900, $1,599,691 and $490,600, respectively
(Note 3).............................................. 4,174,000 3,555,900 596,100
Due from officer (Note 5)............................... 104,900 11,300 42,200
Fixed assets, net (Note 2).............................. 35,400 42,100 18,200
Organizational costs and other assets (Note 2).......... 307,500 144,900 24,500
---------- -----------
Total assets.................................. $10,559,500 $ 7,310,600 $ 773,100
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, accrued expenses and other liabilities
(Note 2).............................................. $ 2,549,000 $ 1,220,200 $ 458,800
Deferred revenue (Note 2)............................... 255,200 4,500 498,000
Accrued participations (Note 2)......................... 1,423,800 1,428,400 126,100
Notes payable (Note 7).................................. 4,414,000 3,762,900 18,500
Accrued interest (Note 5 and 7)......................... 557,400 242,000 40,200
Shareholder loan and note payable (Note 5).............. 740,000 740,000 750,000
---------- -----------
Total liabilities............................. $ 9,939,400 $ 7,398,000 $ 1,891,600
========== ===========
Commitments and contingencies (Notes 6 and 10)
Shareholders' deficit:
Preferred stock, no par value; 2,000,000 shares
authorized; no shares issued and outstanding
(Note 11)........................................ 0 0 0
Common stock, no par value; 18,000,000 shares
authorized; 1,131,344, 1,131,344 and 1,024,059
shares issued and outstanding (Note 2)........... 1,000 1,000 1,000
Paid in capital.................................... 1,135,100 848,300 0
Treasury stock receivable (Note 10)................ 0 0 (87,000)
Accumulated deficit................................ (516,000) (936,700) (1,032,500)
---------- -----------
Total shareholders' equity (deficit).......... 620,100 (87,400) (1,118,500)
---------- -----------
Total liabilities and shareholders' equity
(deficit)................................... $10,559,500 $ 7,310,600 $ 773,100
========== ===========

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

F-4
53

TEAM COMMUNICATIONS GROUP, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE PERIOD FROM
FOR THE SIX MONTHS FOR THE SIX MONTHS FOR THE YEAR ENDED FEBRUARY 27, 1995
ENDED JUNE 30, 1997 ENDED JUNE 30, 1996 DECEMBER 31, 1996 TO DECEMBER 31, 1995
------------------- ------------------- ------------------ --------------------
(UNAUDITED)

Revenues (Note 2)..................... $ 3,473,100 $ 3,314,600 $5,749,800 $ 1,245,300
Cost of revenues...................... 984,300 1,549,600 2,895,900 946,900
---------- ---------- ---------- -----------
Gross profit.......................... 2,488,800 1,765,000 2,853,900 298,400

General and administrative expense.... 987,400 976,300 2,323,800 1,288,200
Bad debt expense...................... 660,000 -- -- --
---------- ---------- ---------- -----------
Net income from operations............ 841,400 788,700 530,100 (989,800)

Interest expense (Note 5)............. 523,400 152,500 582,700 42,700
Interest income....................... 102,700 -- 58,300 --
Other income.......................... -- -- 90,100 --
---------- ---------- ---------- -----------
Net income (loss) before income
taxes............................... 420,700 636,200 95,800 (1,032,500)
Provision for income taxes (Note 4)... -- -- -- --
---------- ---------- ---------- -----------
Net income (loss)..................... $ 420,700 $ 636,200 $ 95,800 $ (1,032,500)
========== ========== ========== ===========
Net income (loss) per share (Note
2).................................. $ 0.23 $ 0.35 $ 0.05 $ (0.57)
========== ========== ========== ===========
Weighted average number of shares
outstanding (Note 2)................ 1,821,800 1,821,800 1,821,800 1,821,800
========== ========== ========== ===========

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

F-5
54

TEAM COMMUNICATIONS GROUP, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

OPERATING ACTIVITIES:
Net income (loss)................... $ 420,700 $ 636,200 $ 95,800 $ (1,032,500)
Adjustments to reconcile net income
to cash used for operating
activities:
Depreciation and amortization.... 6,700 6,600 15,600 4,500
Loss on TPEG settlement (Note
10)............................ -- 53,700 -- 180,000
Provision for doubtful accounts
receivable..................... 63,800 10,600
Amortization of television
program costs.................. 309,200 950,900 1,100,800 490,700
Additions to television program
costs.......................... (927,300) (2,982,100) (4,060,600) (1,045,800)
Amortization of notes payable
discount....................... -- -- 353,300 --
Changes in assets and
liabilities:
Increase in trade
receivables................. (2,489,700) (2,436,300) (3,352,900) (193,700)
Increase in organization costs
and other assets............ (162,600) (28,900) (123,000) (25,400)
Increase in accounts payable,
accrued expense and other
liabilities................. 1,328,800 1,920,400 939,500 280,800
Increase (decrease) in deferred
revenue..................... 250,700 (319,700) (343,500) 498,000
Increase in accrued
participations.............. (4,600) 472,500 1,302,300 126,100
Increase in accrued interest... 315,400 98,400 201,800 40,200
---------- ----------
Net cash used for operating
activities................ (952,700) (1,628,300) (3,807,100) (666,500)
---------- ----------
INVESTING ACTIVITIES:
Purchase of fixed assets............ (27,000) (36,900) (21,800)
Increase in due to officer.......... -- -- 175,000 --
Increase in due from officer........ (93,600) (113,000) (144,100) (42,200)
---------- ----------
Net cash used for investing
activities................ (93,600) (140,000) (6,000) (64,000)
---------- ----------
FINANCING ACTIVITIES:
Proceeds from shareholder loan and
notes payable.................... -- 1,872,000 -- 750,000
Proceeds from issuance of note
payable and warrants............. 937,900 (10,000) 4,747,000 67,500
Principal payment on loan due to
stockholder...................... -- (18,500) (10,000) --
Principal payment of notes
payable.......................... -- -- (748,600) (49,000)
Issuance of common stock............ -- -- -- 1,000
---------- ----------
Net cash provided by
financing activities...... 937,900 1,843,500 3,988,400 769,500
---------- ----------
Net change in cash.................... (108,400) 75,200 175,300 39,000
Cash at beginning of period........... 214,300 39,000 39,000 --
---------- ----------
Cash at end of period................. $ 105,900 $ 114,200 $ 214,300 $ 39,000
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid....................... $ -- $ -- $ 15,100 $ 2,500
========== ==========
Income taxes paid................... $ -- $ -- $ 4,000 $ 2,400
========== ==========

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

F-6
55

TEAM COMMUNICATIONS GROUP, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS
SUPPLEMENTAL SCHEDULE OF NON CASH ACTIVITIES

FOR THE SIX
MONTHS ENDED
FOR THE SIX JUNE 30, 1996 FOR THE PERIOD FROM
MONTHS ENDED ------------- FOR THE YEAR ENDED FEBRUARY 27, 1995
JUNE 30, 1997 DECEMBER 31, 1996 TO DECEMBER 31, 1995
------------- (UNAUDITED) -------------------- ---------------------

TPEG settlement (Note 10):
Treasury stock receivable........... $ -- $ -- $ -- $ 87,000
Television program costs received... -- -- -- 41,000
Receivable assigned to TPEG......... -- -- -- 130,000
Assumption of payable associated
with settlement.................. -- -- -- 178,000
Extinguishment of TPEG settlement
payable by assignment of the
treasury stock receivable........... -- 178,000 178,000 --
Issuance of warrants in conjunction
with notes payable (Note 7):........ -- -- 602,700 --
Transfer of shares by principal
shareholder to notes payable holder
(Note 7)............................ -- -- 45,700 --
Issuance of shares in connection with
notes payable (Note 7).............. -- -- 84,200 --
Issuance of shares in connection with
services provided to Company........ -- -- 24,700 --

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

F-7
56

TEAM COMMUNICATIONS GROUP, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

PREFERRED STOCK COMMON STOCK
-------------------- -------------------- TREASURY
NUMBER NUMBER PAID IN STOCK ACCUMULATED
OF SHARES AMOUNT OF SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT
--------- ------ --------- ------ ---------- ----------- -----------

Balance at February 27,
1995................. 0 $ 0 0 $ 0 $ 0 $ 0 $ 0
Common stock issued.... 1,024,059 1,000
TPEG settlement (Note
10).................. (87,000)
Net loss for period
from February 27,
1995 to December 31,
1995................. (1,032,500)
----- ----- --------- ------ -------- ----- ----------
Balance at December 31,
1995................. 0 0 1,024,059 1,000 0 (87,000) (1,032,500)
Transfer of shares by
principal shareholder
to notes payable
holder (Note 7)...... 45,700
Exchange of treasury
stock receivable with
related party for
extinguishment of
TPEG settlement
payable (Note 10).... 91,000 87,000
Issuance of shares in
connection with notes
payable (Note 7)..... 79,708 0 84,200
Issuance of warrants in
connection with
private placements
(Note 7)............. 602,700
Issuance of shares in
connection with anti-
dilution provisions
of convertible
promissory note (Note
7)................... 4,292
Issuance of shares in
connection with
services provided to
the Company.......... 23,285 24,700
Net income for year
ended December 31,
1996................. 95,800
----- ----- --------- ------ -------- ----- ----------
Balance at 12/31/96.... 1,131,344 1,000 848,300 0 (936,700)
Issuance of warrants in
connection with
private placement.... 286,800
Net income for six
months ended June 30,
1997................. 420,700
----- ----- --------- ------ -------- ----- ----------
Balance at June 30,
1997................. 0 $ 0 1,131,344 $1,000 $1,135,100 $ 0 $ (516,000)
===== ===== ========= ====== ======== ===== ==========

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

F-8
57

TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- DESCRIPTION OF THE COMPANY:

Team Communications Group, Inc. (formerly known as DSL Entertainment Group,
Inc.) and its wholly owned subsidiaries (collectively, the "Company") are
primarily engaged in developing, producing, and distributing television series,
programs and specials, and made-for-television movies in the domestic and
foreign television markets. The Company's focus is on developing and producing
children's programming and reality based programming for PBS and alternative
cable channels such as the Learning Channel and the Discovery Channel.

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated statements include the accounts of Team
Communications Group, Inc. and subsidiaries. All significant intercompany
transactions and accounts have been eliminated.

REVENUE RECOGNITION

Revenue from licensing agreements covering entertainment product owned by
the Company is recognized when the entertainment product is available to the
licensee for telecast, exhibition or distribution, and other conditions of the
licensing agreements have been met in accordance with Statement of Financial
Accounting Standard ("SFAS") No. 53, "Financial Reporting by Producers and
Distributors of Motion Picture Films." The portion of recognized revenue which
is to be shared with the producers and owners of the license program material
(participations payable and due to producers) is accrued as the revenue is
recognized. Deferred revenues consist principally of advance payments received
on television contracts for which program materials are not yet available for
broadcast or exploitation. Such amounts are normally repayable by the Company
only if it fails to deliver the related product to the licensee.

Sales to one major customer accounted for approximately 91% of the
Company's total operating revenue for the six months ended June 30, 1997. Sales
to two major customers accounted for approximately 57% of the Company's total
operating revenue for the six months ended June 30, 1996. Sales to six major
customers accounted for approximately 81% of the Company's total operating
revenue for the year ended December 31, 1996. Sales to two major customers
accounted for approximately 73% of the Company's total operating revenue for
1995.

CASH

The Company maintains its cash in bank deposit accounts which, at times,
may exceed federally insured limits. The Company has not experienced any losses
in such accounts.

TELEVISION PROGRAM COSTS

Television program costs are valued at the lower of unamortized cost or net
realizable value on an individual title basis. Television program costs
represent those costs incurred in the development, production and distribution
of television projects. These costs have been capitalized in accordance with
SFAS No. 53. Amortization of television program costs is charged to expense and
third-party participations are accrued using the individual film forecast method
whereby expense is recognized in the proportion that current year revenues bear
to an estimate of ultimate revenue. Such estimates of ultimate revenue are
prepared and reviewed by management, and estimated losses, if any, are provided
for in full. Development costs are reviewed by management and charged to expense
when abandoned or, even if still being actively developed, if not set for
principal photography within three years of initial development activity.

F-9
58

TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
FIXED ASSETS

Fixed assets include office furnishings, fixtures and equipment. Office
furnishings, fixtures and equipment are depreciated over a useful life of five
years. All depreciation expense is calculated using Modified Accelerated Cost
Recovery System. Fixed assets are net of $23,400, $16,700 and $3,600 in
accumulated depreciation at June 30, 1997, December 31, 1996 and December 31,
1995, respectively.

ORGANIZATIONAL COSTS AND OTHER ASSETS

The balance represents security deposits, prepaid expenses and the
unamortized portion of the original costs relating to the incorporation of the
Company. Organizational costs are amortized using the straight-line method over
five years and are net of $1,500, $2,600 and $900 in accumulated amortization at
June 30, 1997, December 31, 1996 and at December 31, 1995, respectively.

UNCLASSIFIED BALANCE SHEET

In accordance with the provisions of SFAS No. 53, the Company has elected
to present an unclassified balance sheet.

FINANCIAL INSTRUMENTS

The carrying amounts of financial instruments including cash and cash
equivalents, short term accounts receivable, accounts payable, loans payable,
and deferred revenue approximated fair value as of June 30, 1997 and December
31, 1996 because of the relatively short maturity of these instruments. The
carrying value of long term accounts receivable and notes payable approximated
fair value as of June 30, 1997 and December 31, 1996 because the instruments are
valued at the Company's effective borrowing rate.

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.

COMMON STOCK

In January 1996 the Company effected a 2,397.004 for one stock split for
shareholders of record on February 23, 1996. In addition, authorized shares were
increased from 1,000 to 18,000,000. In January and April of 1997, the Company
effected a 2.2776 and 1.0277 for one share reverse stock splits, respectively.
All share and per share data in the financial statements reflect the stock split
and subsequent reverse stock split for all periods presented.

CONCENTRATION OF CREDIT RISK

Approximately 89% and 72% of the trade receivable balance at June 30, 1997
and December 31, 1996, respectively, were represented by four customers.

EARNINGS PER SHARE

Earnings per share is based on the weighted average number of common shares
and common stock equivalents outstanding during each period, after retroactive
adjustment for the stock splits (see above).

F-10
59

TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Pursuant to requirements of the Staff of the Securities and Exchange Commission,
shares related to stock sold and options issued subsequent to February 6, 1996
have been shown as outstanding for all periods presented. Fully diluted earnings
per common and common equivalent shares are not presented as such amounts are
the same as primary earnings per share.

The Financial Accounting Standards Board (FASB) has issued a new statement
recently (FASB No. 128) which requires companies to report "basic" earnings per
share, which will exclude options, warrants, and other convertible securities.
The accounting and disclosure requirements of this statement are effective for
financial statements for fiscal years beginning after December 15, 1997, with
earlier adoption encouraged. Management does not believe that the adoption of
this pronouncement will have a material impact on the financial statements.

The convertible debt was not included in the calculation of weighted
average shares because the President and principal shareholder has personally
guaranteed to the Company that he will assume any convertible debt where the
debt holder wishes to convert in exchange for his own personal shares. The total
number of shares that the convertible debt may convert into is approximately
199,748.

IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF:

On April 1, 1997, the Company adopted the provision of FASB No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of. This statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amounts of the assets exceed the fair values of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell. Adoption of this statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.

NOTE 3 -- TELEVISION PROGRAM COSTS:

Television program costs consist of the following:

JUNE 30, DECEMBER 31, DECEMBER 31,
1997 1996 1995
---------- ------------ ------------

In process and development................ $1,462,000 $1,977,000 $213,700
Released, less accumulated amortization... 2,712,000 1,578,900 382,400
---------- ---------- --------
Total television program
costs......................... $4,174,000 $3,555,900 $596,100
========== ========== ========

Based on management's estimates of future gross revenue as of June 30,
1997, approximately 60% of the $2,598,000 in unamortized released television
program costs will be amortized during the three years ending June 30, 1999 and
80% will be amortized during the four years ending June 30, 2000.

NOTE 4 -- INCOME TAXES:

During the period ended December 31, 1995, the Company generated a net loss
before taxes on a consolidated basis, however, since the individual subsidiaries
were not eligible for consolidation until December 31, 1995, the tax provision
is calculated on the individual companies, separately. One company's loss does
not offset another company's income, as the companies are not consolidated for
tax purposes. For the period ended June 30, 1997 and December 31, 1996, the tax
provision is calculated on the consolidated basis.

F-11
60

TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4 -- INCOME TAXES: (CONTINUED)
Deferred tax expense results from temporary differences in the recognition
of expense for tax and financial statement reporting purposes.

A reconciliation of the difference between the statutory federal income tax
rate and the Company's effective income tax rate applied to income (loss) before
income taxes are as follows for the periods ending:

JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1997 1996 1996 1995
-------- -------- ------------ ------------

Statutory federal tax (benefit)
rate............................... 34% 34% 34% (34)%
State income tax provision, net of
federal benefit.................... 0% 0% 0% 0%
Benefits of operating loss
carryforward....................... (34)% (34)% (34)% 0%
Increase in valuation reserve against
deferred tax asset................. 0% 0% 0% 34%
----- ---- - ---- - ---- -
Effective tax rate................... 0% 0% 0% 0%
===== ===== ===== =====

The Company accounts for taxes under SFAS No. 109, which requires
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in financial statements or tax
returns. Under this method, deferred tax liabilities and assets are determined
based on the difference between the financial statement and tax basis of assets
and liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.

The components of the net deferred tax asset are as follows:

JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1997 1996 1996 1995
--------- --------- ------------ ------------

Net operating loss
(carryforward)................ $ 168,900 $ 216,315 $ 311,855 $ 348,225
Valuation allowance............. $(168,900) $(216,315) (311,855) (348,225)
-------- --------
Net deferred tax
asset............... $ 0 $ 0 $ 0 $ 0
======== ========
Total current and deferred taxes
payable....................... $ 0 $ 0 $ 0 $ 0
======== ========

At June 30, 1997, December 31, 1996, and December 31, 1995 respectively,
the Company has a federal net operating loss carryforward of $496,521, $917,221,
and $990,858 respectively, which will begin to expire in 2010.

NOTE 5 -- RELATED PARTY TRANSACTIONS:

The due from officer balances of $104,900, $11,300, and $42,200 at June 30,
1997, December 31, 1996, and December 31, 1995 respectively, represent payments
made by the Company on behalf of and loans made to the President and principal
shareholder, less producer's fees earned by the president and principal
shareholder for services on a company production.

F-12
61

TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5 -- RELATED PARTY TRANSACTIONS: (CONTINUED)
The shareholder loan and note payable balance are comprised of the
following:

DECEMBER
JUNE 30, DECEMBER 31, 31,
1997 1996 1995
------------ ------------ --------

Promissory notes:
12% secured promissory note due July 1, 1996(i)........... $500,000 $500,000 $500,000
14% secured promissory note due July 1, 1996(ii).......... 240,000 240,000 250,000
-------- -------- --------
$740,000 $740,000 $750,000
======== ======== ========

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

(i) In April 1995, the Company entered into a $500,000 promissory note with a
shareholder. The notes accrued interest at 10% through December 31, 1995
and at 12% thereafter. The note and all unpaid interest was due by July 1,
1996. The Company did not make the required payment and has received a
notice of default. The Company is negotiating a wavier and extension of the
payment terms. The note is secured by all of the President and principal
shareholders' shares and the assets of the Company. The shareholder has
waived all accrued interest relating to this note totaling $121,300 and
$91,300 as of June 30, 1997 and as of December 31, 1996, respectively.

(ii) In August 1995, the Company entered into a $250,000 promissory note with a
shareholder. The notes accrued interest at 12% through November 1, 1995 and
at 14% thereafter. The note and all unpaid interest was due by July 1,
1996, as amended. The Company did not make the required payment and has
received a notice of default. The note is secured by all of the President
and principal shareholders' shares and the assets of the Company. The
shareholder has waived all accrued interest relating to this note totaling
$62,300 and $37,100 as of June 30, 1997 and December 31, 1996,
respectively. The Company issued 48,743 warrants exercisable at $0.43 in
connection with the extension of the maturity date of the loan to July 1,
1996.

NOTE 6 -- COMMITMENTS AND CONTINGENCIES:

The Company has entered into a new employment agreement with the president
of the Company requiring payment, effective January 1, 1997 through December 31,
2001, of annual compensation of $240,000 plus $125,000 per annum as an advance
against a pro-rata portion of producer's fees earned by Mr. Levin.

The Company has obtained a distribution guarantee from Mel Giniger &
Associates for the Latin American territories and The Gemini Corporation for the
European territories (collectively the "Giniger Entities"). This guarantee
relates to the Company's current library and certain future product for Latin
America and Europe. For the year ended December 31, 1996, revenue of $680,000,
was recognized against this guarantee, which represents 11% of revenue for 1996.
The Company believes that the Giniger Entities ability to deliver on this
distribution guarantee is predicate on its licensing the Company's product to
unaffiliated third parties. As such, at December 31, 1996, the Company only
recognized the portion of the guarantee for which the Giniger Entities have
entered into sales agreements with unaffiliated third parties for such rights
and for which program materials were available to the Giniger Entities. As of
June 30, 1997, all rights held by the Giniger Entities have been conveyed back
to the Company, and no revenue was recognized through this transaction as of
June 30, 1997.

The Company leases office space and certain office equipment. The total
lease expense was $48,200, $55,745, $113,700 and $82,200 for the periods ended
June 30, 1997, June 30, 1996, December 31, 1996 and

F-13
62

TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6 -- COMMITMENTS AND CONTINGENCIES: (CONTINUED)
for the period ended December 31, 1995, respectively. The various operating
leases to which the Company is presently subject require minimum lease payments
for the years ending December 31, as follows:

1997.............................................. $110,300
1998.............................................. 44,600
1999.............................................. 5,600
2000.............................................. 4,600
2001.............................................. 0
--------
$165,100
========

The Company has been purportedly served with a judgment in the amount of
$85,540 in a matter styled Levy Entertainment, Inc. vs. DSL Entertainment, Inc.
filed in Franklin Superior Court, State of Vermont. The plaintiff in this action
has obtained a writ of attachment against the Company in California and has
attempted to levy against assets of the Company. The Company was not served with
any papers relating to the case, did not enter any defense, and disputes the
amounts allegedly owed to Plaintiff. The Company is attempting to obtain counsel
in Vermont to overturn the judgment. No assurance can be given that the Company
will be successful in seeking to have the judgment reversed.

NOTE 7 -- NOTE PAYABLE:

Notes payable consists of the following at June 30, 1997 and December 31,
1996:

JUNE 30, 1997 DECEMBER 31, 1996
----------------- -----------------

Private placements:
12% secured notes due November and December 1997(i)........ $ 900,000 $ 900,000
10% secured convertible notes due May 1998(ii)............. 773,900 657,000
10% secured convertible notes due February 1999(iii)....... 711,300
Promissory notes:
12% convertible secured promissory note due December 31,
1997(iv)................................................ 322,000 322,000
10% secured promissory note due December 1997(v)........... 500,000 500,000
10% secured promissory note due June 1997(vi).............. 0 885,000
8% secured note due December 1997(vii)..................... 281,300 239,900
10% secured note due December 1997(viii)................... 140,600 124,100
11% unsecured promissory note past due..................... 134,900 134,900
10% secured note due on October 1997(x).................... 650,000 0
---------- ----------
$ 4,414,000 $ 3,762,900
========== ==========

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

(i) During February - June 1996, the Company participated in a private
placement offering. The Company sold 18 placement units to the following
investors: Matthew and Barbara Geisser, Central Scale Co., Vijaya Kani
Rehala, Vijay-Kumar Rekhala, M.D., United Congregation Mesorah, Samuel
Marinelli, Mildred Geiss, Jon Kastendieck, Bank Leumi-Affida Bank,
Cooperative Holding Corporation, Aaron Wolfson, Abraham Wolfson, Arielle
Wolfson, and LEVPOL. Each unit consisted of a $50,000 note payable with
interest of 12% per annum, compounded quarterly, and 6,408 Common Stock
Purchase warrants. The accrued interest balance was $148,600 and $88,400
at June 30, 1997 and December 31, 1996 respectively. Each warrant entitles
the holder to buy one share of common stock at an exercise price of $0.43.
The warrants are exercisable commencing two business days following the
effective date of the registration statement relating to an initial public
offering and terminating on the third

F-14
63

TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7 -- NOTE PAYABLE: (CONTINUED)

anniversary of that date. Through this private offering, the Company
raised $900,000 and issued 115,351 warrants. Principal and interest are
due no later than November 15, 1997, as amended. The notes are secured by
substantially all of the assets of the Company. The fair value of the
notes and the carrying amount and fair value of the associated warrants
were determined by the market rate, approximately 25%, for a financial
instrument of this risk. The notes were discounted at this market rate,
the value of the warrants amounted to $127,600 and is included in paid in
capital.

(ii) During June - October 1996, the Company participated in a second private
placement offering. The Company sold 19.5 placement units to the following
investors: Wellington Corporation, Crescent Capital Company, LLC, Arthur
Steinberg IRA Rollover, Robert Steinberg IRA Rollover, Robert Ram
Steinberg, A Partnership, Heiko Theime, Alpha Ventures, Tuch Family Trust,
Third World Trust Company LTD., Alfred Ross, Fred Chanowski, Allen
Goodman, Felix Paige, Rogal America, Mark Levine, Joseph Sullivan, Robert
Gopen, Colony Financial Services, John Carberry, Daniel and Thalia
Federbush, and Michael Berlin. Each unit consisted of a $50,000 senior
convertible note payable with interest of 10% per annum, compounded
quarterly, and 4,272 Common Stock Purchase warrants. The notes are
convertible at their principal amount into common stock of the Company at
any time one year after the initial public offering through maturity at
the conversion price of $5.00 per share subject to adjustment in certain
circumstances. Each warrant entitles the holder to buy one share of common
stock at an exercise price of $0.43. The warrants are exercisable
commencing two business days following the effective date of the
registration statement relating to an initial public offering and
terminating on the third anniversary of that date. As of December 31,
1996, the Company raised $975,000 and issued 83,308 warrants. Principal
and interest are due no later than May 31, 1998. The accrued interest
balance was $36,800 at December 31, 1996. The notes are secured by
substantially all of the assets of the Company. The carrying amount and
fair value of the notes and associated warrants were determined by the
market rate, approximately 25%, for a financial instrument of this risk.
The notes were discounted at this market rate, the value of the warrants
amounted to $254,400 and is included in paid in capital.

(iii) During January 1997, the Company participated in a third private
placement offering. The Company sold 19.4 placement units to the
following investors: Alan Parness, Arab International Trust Co., Duck
Partners, LP, Gary and Paula Wayton, Michael Rosenbaum, RMK Financial
LLC, Robert Bain, Robert Frankel, Roger Triemstra, Roland McAbee, Swan
Alley Limited, and Van Moer Santerr & Cie. Each unit consisted of a
$50,000 senior convertible note payable with interest of 10% per annum,
payable at six month intervals, and 10,000 Common Stock Purchase
warrants. The notes are convertible at their principal amount into common
stock of the Company at any time before the initial public offering at
the conversion price of $5.00 per share subject to adjustment in certain
circumstances. The maturity date of the notes will be no later than two
years. Each warrant entitles the holder to buy one share of common stock
at an exercise price of $.97. The warrants are exercisable commencing two
business days following the effective date of the registration statement
relating to an initial public offering and terminating on the third
anniversary of that date. As of June 30, 1997, the Company raised
$969,000 and issued 193,870 warrants. Principal and interest are due no
later than February 1999. The accrued interest balance was $32,700 at
June 30, 1997. The notes are secured by substantially all of the assets
of the Company. The carrying amount and fair value of the notes and
associated warrants were determined by the market rate, approximately
25%, for a financial instrument of this risk. The notes were discounted
at this marekt rate, the value of the warrants amounted to $258,100 and
is included in paid-in capital.

(iv) In January 1996, the Company entered into an agreement with AMAE Ventures,
an outside investor. The Company received $322,000 in exchange for (i) a
convertible secured promissory note, convertible into 3% of the Company's
outstanding stock on a fully diluted basis through an initial public
offering and (ii) the transfer from the principal shareholder of 4% of the
Company's issued and outstanding

F-15
64

TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7 -- NOTE PAYABLE: (CONTINUED)

stock on a fully diluted basis through an initial public offering. The
note accrues interest at 12% per annum and is due December 31, 1997, as
amended. The note is secured by certain receivables and television
distribution rights. The accrued interest balance was $54,158 at June 30,
1997 and $36,200 at December 31, 1996. The fair value of the note and
carrying value and fair value of the associated shares were determined by
the market rate for a financial instrument of this risk.

(v) In April 1996, the Company entered into a $500,000 promissory note with
South Ferry #2, L.P., an outside investor, to finance a television
program. The note accrues interest at 10% per annum and is due on December
31, 1997, as amended. The accrued interest balance was $54,600 at June 30,
1997 and $29,600 at December 31, 1996. The note is secured by certain
assets and rights associated with the television program. There were
29,906 warrants (exercisable at $0.43 per warrant) issued in connection
with this note. The fair value of the note was estimated using discounted
cash flow methods based on the Company's borrowing rates, approximately
25%, for similar types of borrowing arrangements with comparable terms and
maturities.

(vi) In July 1996, the Company entered into a $1,200,000 promissory note with 3
outside investors, ACA Equities, V&M Investments and Gilbert Karsenty, to
acquire the television rights to "Total Recall." The note accrues interest
at 10% per annum and is due on June 30, 1997, as amended. As of June 30,
1997, there had been $1,200,000 repaid in respect to this debt. As of
December 31, 1996 there has been $315,000 repaid in respect to this debt.
The accrued interest balance was $83,100 at June 30, 1997 and $47,800 at
December 31, 1996. There were 53,403 shares of common stock issued in
connection with the origination of this debt and 21,362 warrants
(exercisable at $0.43 per warrant) were issued to extend the loan. The
outside investors are also entitled to 15% of any net profits earned from
the exploitation of these rights. The fair value of the notes was
estimated using discounted cash flow methods based on the Company's
borrowing rates, approximately 25%, for similar types of borrowing
arrangements with comparable terms and maturities.

(vii) In November 1996, the Company entered into a $300,000 promissory note
with Affida Bank. The note bears interest at 8% per annum, compounding
quarterly, and is due the sooner of an initial public Offering or
December 31, 1997. The accrued interest balance was $15,000 at June 30,
1997 and $2,800 at December 31, 1996. The note is secured by
substantially all of the assets of the Company. There were 25,634 Common
Stock Purchase warrants issued in connection with this note. Each warrant
entitles the note holder to buy one share of common stock at an exercise
price of $.43. The warrants are currently exercisable and terminate on
the earlier to occur of the third anniversary of the effective date of an
initial public offering or June 30, 2000. The note is secured by
substantially all of the assets of the Company. The carrying amount and
fair value of the notes and associated warrants were determined by the
market rate, approximately 25%, for a financial instrument of this risk.
The notes were discounted at this market rate, the value of the warrants
amounted to $66,000 and is included in paid in capital.

(viii) In December 1996, the Company entered into a $150,000 promissory note
with Phillip Tewel. The note bears interest at 10% per annum, compounding
quarterly, and is due the sooner of an initial public offering or
December 31, 1997. The accrued interest balance was $7,800 at June 30,
1997 and $400 at December 31, 1996. The note is secured by substantially
all of the assets of the Company. There were 29,191 Common Stock Purchase
warrants issued in connection with this note. Each warrant entitles the
note holder to buy one share of common stock at an exercise price of
$.43. The warrants are currently exercisable and terminate on the earlier
to occur of the third anniversary of the effective date of an initial
public offering or June 30, 2000. The note is secured by substantially
all of the assets of the Company. The carrying value of the warrants
amounted to $26,500 and is included in paid-in capital.

(ix) In September 1996, the Company entered into a $150,000 unsecured
promissory note with Time Life to repay an advance provided to the Company
in October 1995. The note bears interest at 11% per annum

F-16
65

TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7 -- NOTE PAYABLE: (CONTINUED)
from October 1995 and required payments such that the note would be repaid
by March 31, 1997. As of December 31, 1996, there was no accrued interest
balance. During 1996, the Company made a $15,125 principal payment and a
$15,125 interest payment. The holder of the note has not filed a notice of
default and the Company is negotiating an extension of the payment terms.

(x) In June 1997, the Company entered into a $650,000 secured promissory note
with Alliance. The note bears interest at the prime rate plus one per cent
per annum from June 1996 and required payments such that the note would be
repaid by October 18, 1997. As of June 30, 1997 there was $2,170 of accrued
interest. The note is secured by all the television rights and interest
owned with regards to the "Total Recall" project. The Company intends to
enter into a line of credit with Mercantile National Bank in order to repay
this outstanding note.

NOTE 8 -- GEOGRAPHIC INFORMATION:

The Company operates in a single industry segment, the development,
production and distribution of television programming. All of the Company's
operations are conducted in the United States.

A summary of the Company's revenues by geographic area is presented below:

JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1997 1996 1996 1995
---------- ---------- ------------ ------------

North America............. $ 180,000 $1,480,000 $2,221,900 $ 768,000
Europe.................... 307,100 994,600 1,332,900 185,000
South America............. 1,600,000 400,000 732,400 25,000
Asia...................... 136,000 300,000 1,306,500 196,300
Australia and Africa...... 1,250,000 140,000 156,100 71,000
---------- ----------
Total........... $3,473,100 $3,314,600 $5,749,800 $1,245,300
========== ==========

NOTE 9 -- STOCK OPTION PLANS:

The Company has established stock option plans for its employees and
consultants (the "1995 Stock Option Plan") and for its non-employee directors
(the "1995 Stock Option Plan for Non-Employee Directors").

The 1995 Stock Option Plan allows for options (including Incentive Stock
Options) to be granted to employees and consultants at less than fair market
value at date of grant. These options may be immediately exercisable and expire
over a period determined by the Stock Option Committee of the Board of Directors
(the "Committee"). The Committee is comprised of two members of the Board of
Directors. The total number of options available to grant under this plan is
270,000.

The 1995 Stock Option Plan for Non-Employee Directors allows for a set
number of immediately exercisable options to be granted at fair market value to
non-employee members of the Board of Directors. The total number of options
available to grant under this plan is 67,500. There were no options granted
exercised, forfeited, expired or outstanding pursuant to the Director Plan for
the six months ended June 30, 1997 and the year ended December 31, 1996.

F-17
66

TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9 -- STOCK OPTION PLANS: (CONTINUED)

A summary of the Key Employee Plan as of and for the six months ended June
30, 1997 and the year ended December 31, 1996 is presented below:

WEIGHTED AVERAGE
KEY EMPLOYEE PLAN SHARES EXERCISE PRICE
----------------------------------------------------- ------- ----------------

Outstanding as of January 1, 1996.................... -- --
Granted............................................ 35,000 $ 1.14
Exercised.......................................... -- --
Forfeited/Expired.................................. -- --
-------
Outstanding as of June 30, 1997 and December 31,
1996............................................... 35,000
=======
Weighted-average fair value of options granted during
the year........................................... $ 1.14
=======

The following table summarizes information about options outstanding at
June 30, 1997 and December 31, 1996:

SHARES EXERCISABLE AT
JUNE 30, 1997 AND DATE
TOTAL SHARES EXERCISE PRICE DECEMBER 31, 1996 OPTIONS EXPIRE
- ------------ -------------- --------------------- --------------

30,000 $ 1.00 10,000 July 1, 2006
5,000 $ 2.00 5,000 June 6, 2006
- ------------ -------
35,000 15,000
========= ===============

The Company has elected, as permitted by FASB Statement No. 123,
"Accounting for Stock Based Compensation" ("FASB 123"), to account for its stock
compensation arrangements under the provisions of Accounting Principles Board
No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). Accordingly,
because the exercise price of the Company's employee stock options equals or
exceeds the market price of the underlying stock on the date of grant, no
compensation expense is recognized.

Pro forma information regarding net income and earnings per share is
required by FASB 123 and has been determined as if the Company had accounted for
its employee stock options under the fair value method of such pronouncement.
The fair value for these options was estimated at the date of grant using the
binomial option pricing model with the following weighted average assumptions:
risk-free interest rate of 6.33%, no dividend yield, expected lives of two and a
half years, and volatility of 0%.

For purposes of pro forma disclosure, the estimated fair value of the
options is zero, hence neither proforma net income on earnings per share are
presented.

During the period, the Company issued 21,362 warrants exercisable at $1.07
and 20,934 warrants exercisable at $0.43 to two outside parties for services
provided in raising outside debt. The Company also issued 23,000 warrants
exercisable at $1.00 and 20,000 warrants exercisable at $2.50 to two outside
parties for services rendered to the Company. The Company recognized $5,000 in
compensation related to these warrants during the year ended December 31, 1996.

In January 1997, the Company's shareholders voted to freeze the 1995 Stock
Option Plans and adopt two new plans, the Team Communications Group, Inc. Stock
Awards plan (the "1996 Employee Plan") and the Team Communications Group, Inc.
Directors' Stock Option Plan (the "1996 Director's Plan").

The 1996 Directors Plan allows Directors who are not employees of the
Company, on the effective date of an initial public offering and each annual
anniversary thereof, to receive options to purchase 2,500 shares. The option
price per share of Common Stock purchasable upon exercise of such stock options
shall be 100% of the

F-18
67

TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9 -- STOCK OPTION PLANS: (CONTINUED)
fair market value on the date of grant. Such options shall be exercisable
immediately on the date of grant by payment in full of the purchase price in
cash. The aggregate number of shares of Common Stock that may be granted
pursuant to the 1996 Directors Plan is 20,000.

The aggregate number of shares of Common Stock that may be granted under
the 1996 Employee Plan is 180,000. The Employee Plan provides for the authority
by the Employee Plan Committee to grant ISO's to any key employee of the Company
or any affiliate of the Company and to determine the terms and conditions of
each grant, including without limitation, the number of shares subject to each
ISO. The ISO exercise price will also be determined by the Committee and will
not be less than the fair market value of the Common Stock on the date of grant.
The exercise price will not be less than 110% of such fair market value and the
exercise period will not exceed five years if the participant was the holder of
more than 10% of the Company's outstanding voting securities.

NOTE 10 -- TPEG SETTLEMENT:

The Company was a cross complainant and a defendant in an action entitled
The Producer's Entertainment Group ("TPEG") v. Drew S. Levin. In the action,
which arose from disputes over the February 1995 separation agreements between
TPEG and Drew S. Levin, the Company and TPEG sought, among other things, damages
and a court order regarding the copyright interest in the series "Simply Style."
Effective December 1995, this action was settled, pending final payment as per
the terms of the TPEG Litigation Settlement Agreement. Pursuant to the TPEG
Litigation Settlement Agreement TPEG agreed to (i) transfer to the Company all
rights, title and interest to the series "Simply Style;" and (ii) sell back to
the Company a sufficient number of shares of the Company's common stock, such
that TPEG would own five percent of the Company's common stock issued and
outstanding. In connection with the TPEG settlement agreement, the Company
agreed to pay TPEG $258,000, of which $130,000 was paid by the assignment of a
certain receivable. The Company incurred an additional $50,000 obligation to
TPEG when it was unable to pay the remaining balance as of February 28, 1996.

The resulting balance was payable on June 30, 1996. The Company's agreement
to repurchase 152,585 shares of the Company's common stock (14.9% of the
Company's common stock issued and outstanding) resulted in a treasury stock
receivable as of December 31, 1995. After giving value to the other elements of
the settlement, the treasury stock was attributed a value of $87,000 or $0.10
per share.

The Company recorded a loss on the settlement of $180,000. On June 27, 1996
the Company assigned to its President and principal shareholder the rights and
obligations pursuant to the TPEG Settlement Agreement. The President and
principal shareholder paid the final payment due on June 30, 1996 and received
the 14.9% of outstanding common stock pursuant to the settlement agreement. In
conjunction with the assignment, the President and principal shareholder sold
79,037 of the 152,585 shares acquired in this transaction to an outside investor
for $185,000. The President and principal shareholder subsequently agreed to
acquire the remaining five percent owned by TPEG. In conjunction therewith, the
President and principal shareholder arranged for the sale of one-half of this
stock to an outside investor. This stock was sold on the agreement that the
President and principal shareholder, through transfers from his personal stock
holdings, would see that this holding represents 2.5% of the Company's common
stock on a fully diluted basis.

NOTE 11 -- SUBSEQUENT EVENTS:

In January 1997, the Board of Directors reduced the authorized common stock
shares from 20,000,000 to 18,000,000 and authorized 2,000,000 shares of
preferred stock. All references in the financial statements to number of shares
of the Company's common stock and preferred stock have been retroactively
restated.

F-19
68

TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11 -- SUBSEQUENT EVENTS: (CONTINUED)

The Company has signed a letter of intent with an underwriter for the sale
of its common stock to the public. The underwriter expects to sell 1,500,000
shares of common stock at $5.50 to $7.00 per share.

NOTE 12 -- GOING CONCERN:

The Company's financial statements for the six months ended June 30, 1997
and the year ended December 31, 1996 have been prepared on a going concern basis
which contemplates the realization of assets and the settlement of liabilities
and commitments in the normal course of business. The Company expects to incur
substantial expenditures to produce television programs and/or acquire
distribution rights to television programs produced by third parties. The
Company's working capital plus limited revenue from the licensing of its current
inventory of television programs will not be sufficient to fund the Company's
ongoing operations, including completing projects that the Company is
contractually required to develop or produce.

Management recognizes that the Company must generate additional resources
to enable it to continue operations. Management's plans include the sale of
additional equity securities. Towards this goal management has engaged an
underwriter to assist in the initial public offering of the Company's common
stock. However, no assurance can be given that the Company will be successful in
raising additional capital. Further, there can be no assurance, assuming the
Company successfully raises additional equity, that the Company will achieve
profitability or positive cash flow.

F-20
69

======================================================

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.

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

TABLE OF CONTENTS

PAGE
-----

Prospectus Summary.................... 3
Risk Factors.......................... 8
Use of Proceeds....................... 14
Dividend Policy....................... 15
Capitalization........................ 16
Dilution.............................. 17
Selected Consolidated Financial
Data................................ 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 20
Business.............................. 24
Management............................ 31
Certain Transactions.................. 34
Principal Shareholders................ 37
Concurrent Offering by Selling
Securityholders..................... 38
Description of Securities............. 39
Shares Eligible for Future Sale....... 42
Underwriting.......................... 44
Legal Matters......................... 46
Experts............................... 46
Additional Information................ 47
Index to Consolidated Financial
Statements.......................... F-1
------------------------
UNTIL , 1997 (25 CALENDAR DAYS
AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
=============================================

======================================================

1,500,000 SHARES

TEAM COMMUNICATIONS GROUP, INC.

COMMON STOCK
------------------------

PROSPECTUS
------------------------
H.J. MEYERS & CO., INC.

, 1997

======================================================
70

PART II

EXHIBITS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Directors of the Company are presently entitled to indemnification as
expressly authorized under Section 317 of the California General Corporation Law
("Section 317") and the Bylaws of the Company (which generally authorize the
Company to indemnify its Agents where such indemnification is authorized by
Section 317). Section 317 provides a detailed statutory framework covering
indemnification of any agent of a corporation who is threatened to be made a
party to any legal proceeding by reason of his or her actions on behalf of the
corporation.

Article 5 of the Company's Articles of Incorporation (exhibit 3.1) provides
that a director will not be liable for monetary damages arising out of the
director's breach of his or her fiduciary duties to the Company and the
shareholders to the fullest extent permissible under the California Law.
Liability for breach of a director's fiduciary duty arises when the director has
failed to exercise sufficient care in reaching decisions or otherwise attending
to his responsibilities as a director and in other circumstances. Article V does
not eliminate these duties; it only eliminates monetary damage awards occasioned
by a breach of these duties. Accordingly, a breach of fiduciary duty is still a
valid basis for a suit seeking to stop a proposed transaction from occurring.
However, after a transaction has occurred, the Shareholders do not have a claim
against directors for monetary damages based on a breach of fiduciary duty, even
if that breach involves negligence on the part of the directors. Additionally,
as a practical matter, equitable remedies such as rescission may not be
available after a transaction has already been consummated or in other
circumstances.

The Company intends to enter into indemnification agreements with the
Company that attempt to provide the maximum indemnification allowed under the
California Law. The Indemnification Agreements will make mandatory
indemnification which is permitted by California Law in situations in which the
Indemnitee would otherwise be entitled to indemnification only if the Board of
Directors, the Shareholders, independent legal counsel retained by the Company
or a court in which an action was or is pending made a discretionary
determination in a specific case to award such indemnification. However, in part
because the California Law was only recently enacted, the extent to which the
indemnification permitted by the California Law may be expanded by
indemnification agreements is unsettled and has yet to be the subject of any
judicial interpretation.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The expenses in connection with the issuance and distribution of the
securities being registered are as follows (estimated except as noted):

SEC registration fee (actual)..................................... $ 4,168
NASD filing fee (actual).......................................... 1,874
Nasdaq SmallCap Market listing fee (actual)....................... 20,000
Printing and engraving expenses................................... 100,000
Legal fees and expenses........................................... 90,000
Accounting fees and expenses...................................... 90,000
Transfer agent and registration fees and expenses................. 10,000
Underwriter's non-accountable expense allowance(1)................ 281,250
Blue sky qualification fees and expenses.......................... 35,000
Miscellaneous..................................................... 14,708
--------
Total................................................... $ 647,000
========

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

(1) $323,438 if the Underwriter exercises the over-allotment option in full.

II-1
71

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

1. A loan in the principal amount of $322,000 was made in January 1996 from
AMAE Ventures, an affiliate of Mr. Wolfson, which was used by the Company for
general overhead purposes and bears interest at 12%. This note is due on the
earlier to occur of December 31, 1997 or the closing of the Offering. The holder
of such note has the right to convert the principal amount into 3% of the
Company's common stock on a fully diluted basis through the completion of the
Offering, and has indicated that it intends to convert such note.

2. Mr. Cayre and Mr. Levin have agreed, subject to documentation, that as
of the closing date of the Offering, Mr. Cayre will receive payment of $250,000
in respect of the amounts owed to him, and the remaining debt, subject to
adequate collateralization (which may include cash collateral) shall be extended
until June 30, 1998. Subject to the foregoing, Mr. Levin and Mr. Cayre have also
agreed, to restructure Mr. Cayre's investment in the Company. Mr. Cayre agreed
that upon the closing of the Offering, Mr. Cayre's interest in the Company would
be reduced to 164,874 shares of the Company's Common Stock by transferring to
Mr. Levin 195,774 shares of the Company's common stock held by Mr. Cayre. In
February 1996, in connection with a prior restructuring of this indebtedness,
Mr. Cayre received options to purchase 48,743 shares of Common Stock of $.43 per
share.

3. In June 1996, South Ferry #2, L.P., an entity controlled by Mr.
Wolfson's brother, advanced to the Company the sum of $500,000 in respect of
"LoCoMoTioN" in consideration of which such entity received options to acquire
29,906 shares of Common Stock at $.43 per share. This loan bears interest at 10%
and is due on the earlier to occur of December 31, 1997 or upon the closing of
the Offering.

4. The Chana Sasha Foundation, an entity controlled by Mr. Wolfson,
extended the Company a $400,000 line of credit on a secured basis in November
1996, which credit line has been used and subsequently repaid by funds from the
Company's operations In October 1996 Mr. Wolfson extended the Company
approximately $400,000 of credit on a secured basis in November 1996, which
credit line has been used and subsequently repaid by funds from the Company's
operations. Mr. Wolfson received 6,408 shares of the Company's Common Stock with
respect to such extension of credit.

5. The July 1996 proceeds from the sale of the notes in the Total Recall
Financing were used to acquire the rights to produce a television series based
on "Total Recall." These notes, which are secured by the Company's underlying
rights to the "Total Recall" series, bear interest at 10% and are due at the
first to occur of June 30, 1997 or the Offering. The holders of these notes have
agreed to extend the maturity date thereto through June 30, 1998. In addition,
the holders of these notes received an aggregate of 53,403 shares of common
stock , warrants to acquire 14,954 shares of Common Stock at an exercise price
of $.43 and a 13% net profit participation in the Company's interest in the
series. As of the date hereof, $502,500 has been repaid in respect to this
obligation. Mr. Wolfson received 8,544 shares of the Company's Common Stock and
2% of the net profits of the series with respect to the Total Recall Financing.

6. The Company commenced two private placements under Rule 506 of
Regulation D of its Secured Notes in February and in May, 1996. In February
1996, the Company sold to 14 accredited investors $900,000 in principal amount
of secured promissory notes which bear interest at 12% and are due at the
earlier to occur of the Offering or November 15, 1997. In June through November
1996, the Company sold to 22 accredited investors $975,000 principal amount of
secured notes which bear interest at 10% and are due at the earlier of this
Offering or May 31, 1998. An aggregate of 198,659 warrants to purchase a like
number of shares of Common Stock at an exercise price of $.43 per share were
issued in connection with such placements. The holders of these notes have
waived all conversion rights with respect thereto.

7. In October 1996, the Company obtained a loan from Affida Bank in the
amount of $300,000 and, in connection therewith, issued warrants to acquire
29,191 shares of Common Stock at an exercise price of $.97 per share.

8. In January, February and March 1997, the Company completed the sale of
$969,000 of convertible secured notes to 13 accredited investors (the "February
1997 Notes") pursuant to Rule 506 of Regulation D. Each of the foregoing notes
are secured, pro-rata and pari passu, by liens on substantially all of the
Company's assets, except that the February 1997 Notes are junior to the prior
notes. An aggregate of 193,970 warrants to purchase a like number of shares of
Common Stock at an exercise price of $1.00 per share were issued in connection
with such placements.

II-2
72

The above securities were offered by the Registrant in reliance upon an
exemption from registration under either (i) Section 4(2) of the Securities Act
as transactions not involving any public offering or (ii) Rule 701 under the
Securities Act. No underwriters were involved in connection with the sales of
securities referred to in this Item 15.

ITEM 27. (a) EXHIBITS

1.0 Form of Underwriting Agreement(1)
3.1 Articles of Incorporation(1)
3.2 By-laws of the Company(1)
4.1 Form of Warrant Agreement March 1996(1)
4.2 Form of Warrant Agreement May 1996(1)
4.3 Form of Warrant Agreement February 1997(1)
4.4 Form of Convertible Note March 1996 and related Security Agreement(1)
4.5 Form of Convertible Note May 1996 and related Security Agreement(1)
4.6 Form of Convertible Note February 1997(1)
4.7 Extensions relating to South Ferry #2, L.P. Indebtedness*
4.8 Restated Joe Cayre Agreement(2)
4.9 Agreement with AMAE Ventures, related note and Security Agreement(3)
4.10 Agreements re Total Recall Financing July 1996(3)
4.11 Agreements re LoCoMoTioN Financing(3)
4.12 1996 Employee Stock Option Plan(1)
4.13 1996 Directors Stock Option Plan(1)
4.14 Form of Consulting Agreement between H.J. Meyers & Co., Inc. and the
Company(2)
4.15 Specimen Certificate(2)
4.16 Form of Underwriter's Warrant(1)
5.0 Opinion and Consent of Kelly Lytton Mintz & Vann LLP regarding legality of
securities (to be filed by amendment)*
10.1 Agreement with Mel Giniger(3)
10.2 Agreement with Beyond Distribution PTY. Limited(2)
10.3 Interpublic Group of Companies Contract(3)
10.4 Employment Agreement, dated as of June 1, 1997, between the Company and Drew
Levin(1)
10.5 Lease between the Company and TCW(3)
10.6 Agreement with Alliance Production Ltd. re Total Recall*
10.7 Interpublic -- Team Co-financing Agreement(3)
10.8 Miramax Term Sheet(3)
10.9 Agreement with Leucadia Film Corp.(2)
10.10 Agreements with the Family Channel re Quake and Down Fall(2)
10.11 Agreements with Discovery Communications, Inc., re Amazing Tails II(2)
10.12 Employment Agreement, dated March 19, 1997, amended as of October 4, 1997,
between the Company and Todd C. Jackson(2)
10.13 Employment Agreement, dated as of January 20, 1997, amended as of October 4,
1997, between the Company and Paul Yamamoto(2)
10.14 Consulting Agreement, dated October 9, 1997, between the Company and Joseph
Cayre(2)
11 Statement re: Computation of per share earnings(1)
21 Subsidiaries of the Registrant(1)
23.1 Consent of experts and named counsel*
23.2 Consent of Price Waterhouse LLP to disclosure re Prior Accountants*
23.3 Consent of Bruce P. Vann, Esq. (Nominated Director)(1)
23.4 Consent of Seth M. Willenson (Nominated Director)(2)
24 Power of Attorney (included in the signature pages)

- ---------------
* To be filed by Amendment.
(1) Previously filed.
(2) Filed herewith.

(3) Previously filed documents being filed herewith with conformed signatures.

II-3
73

ITEM 28. UNDERTAKINGS

The Registrant hereby undertakes to provide to the Underwriter at the
closing specified in the underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the California General Corporation Law, the Articles of
Incorporation of the Registrant, the Underwriting Agreement, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act, and is, therefore, unenforceable. In the event that a claim of or
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the Registrant will,
unless in the opinion of counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

The Registrant hereby undertakes that:

(1) For the purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
Prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

The Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration Statement;

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration Statement.

(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration Statement
or any material change to such information in the registration
Statement."

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such posteffective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

II-4
74

SIGNATURES

In accordance with the requirement of the Securities Act of 1933, the
Registrant certifies that it has reasonable ground to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Amendment No. 2
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Los Angeles, State of California, on
this 14th day of October, 1997.

Team Communications Group, Inc.

By: /s/ DREW LEVIN
------------------------------------
DREW LEVIN
Chairman of the Board, President,
and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.

SIGNATURE CAPACITY DATE
- --------------------------------------------- --------------------------- ------------------

/s/ DREW LEVIN Chairman of the Board, October 14, 1997
- --------------------------------------------- President, Chief Executive
DREW LEVIN Officer and Director

* Director October 14, 1997
- ---------------------------------------------
PAUL YAMAMOTO

/s/ MICHAEL LATINER Vice President, October 14, 1997
- --------------------------------------------- Controller and Secretary
MICHAEL LATINER

*By: /s/ DREW LEVIN

---------------------------------
DREW LEVIN
Attorney-in-Fact

II-5
75

TEAM COMMUNICATIONS GROUP, INC.

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

FOR THE PERIOD FROM FEBRUARY 27, 1995 TO DECEMBER 31, 1995,

THE YEAR ENDED DECEMBER 31, 1996

AND THE SIX MONTHS ENDED JUNE 30, 1997

1997
----------------------------------------------------------------
OTHER
BALANCE ADDITIONS DEDUCTIONS ADJUSTMENTS BALANCE AT
AT BEGINNING CHARGED FROM DURING END OF
DESCRIPTION OF PERIOD TO INCOME RESERVE PERIOD PERIOD
- ------------------------------------------ ------------ --------- ---------- ----------- ----------

Deducted from accounts receivable for
doubtful accounts and returns........... $ 63,800 $ 660,000 $ (660,000) $ 0 $ 63,800

1996
----------------------------------------------------------------

Deducted from accounts receivable for
doubtful accounts and returns........... $ 0 $ 71,300 $ (7,500) $ 0 $ 63,800

1995
----------------------------------------------------------------

Deducted from accounts receivable for
doubtful accounts and returns........... $ 0 $ 10,600 $ (10,600) $ 0 $ 0

S-1
76

INDEX TO EXHIBITS

SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ------------------------------------------------------------------------- ------------

1.0 Form of Underwriting Agreement(1)........................................
3.1 Articles of Incorporation(1).............................................
3.2 By-laws of the Company(1)................................................
4.1 Form of Warrant Agreement March 1996(1)..................................
4.2 Form of Warrant Agreement May 1996(1)....................................
4.3 Form of Warrant Agreement February 1997(1)...............................
4.4 Form of Convertible Note March 1996 and related Security Agreement(1)....
4.5 Form of Convertible Note May 1996 and related Security Agreement(1)......
4.6 Form of Convertible Note February 1997(1)................................
4.7 Extensions relating to South Ferry #2, L.P. Indebtedness*................
4.8 Restated Joe Cayre Agreement(2)..........................................
4.9 Agreement with AMAE Ventures, related note and Security Agreement(3).....
4.10 Agreements re Total Recall Financing July 1996(3)........................
4.11 Agreements re LoCoMoTioN Financing(3)....................................
4.12 1996 Employee Stock Option Plan(1).......................................
4.13 1996 Directors Stock Option Plan(1)......................................
4.14 Form of Consulting Agreement between H.J. Meyers & Co., Inc. and the
Company(2)...............................................................
4.15 Specimen Certificate(2)..................................................
4.16 Form of Underwriter's Warrant(1).........................................
5.0 Opinion and Consent of Kelly Lytton Mintz & Vann LLP regarding legality
of securities (to be filed by amendment)*................................
10.1 Agreement with Mel Giniger(3)............................................
10.2 Agreement with Beyond Distribution PTY. Limited(2).......................
10.3 Interpublic Group of Companies Contract(3)...............................
10.4 Employment Agreement, dated as of June 1, 1997, between the Company and
Drew Levin(1)............................................................
10.5 Lease between the Company and TCW(3).....................................
10.6 Agreement with Alliance Production Ltd. re Total Recall*.................
10.7 Interpublic -- Term Co-financing Agreement(3)............................
10.8 Miramax Term Sheet(3)....................................................
10.9 Agreement with Leucadia Film Corp.(2)....................................
10.10 Agreements with the Family Channel re Quake and Down Fall(2).............
10.11 Agreements with Discovery Communications, Inc., re Amazing Tails II(2)...
10.12 Employment Agreement, dated March 19, 1997, amended as of October 4,
1997, between the Company and Todd C. Jackson(2).........................

SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ------------------------------------------------------------------------- ------------

10.13 Employment Agreement, dated as of January 20, 1997, amended as of October
4, 1997, between the Company and Paul Yamamoto(2)........................
10.14 Consulting Agreement, dated October 9, 1997 between the Company and
Joseph Cayre(2)..........................................................
11 Statement re: Computation of per share earnings(1).......................
21 Subsidiaries of the Registrant(1)........................................
23.1 Consent of experts and named counsel*....................................
23.2 Consent of Price Waterhouse LLP to disclosure re Prior Accountants*
23.3 Consent of Bruce P. Vann, Esq. (Nominated Director)(1)...................
23.4 Consent of Seth M. Willenson (Nominated Director)(2).....................
24 Power of Attorney (included in the signature pages)......................

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

* To be filed by Amendment.

(1) Previously filed.

(2) Filed herewith.

(3) Previously filed documents being filed herewith with conformed signatures.